##### 



Exhibit 99.3

EXECUTION COPY

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AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION

BY AND AMONG

TELLABS, INC.,

VENICE ACQUISITION CORP.,

VIVACE NETWORKS, INC.,

KENNETH KOENIG, AS
STOCKHOLDER REPRESENTATIVE AND, WITH RESPECT
TO ARTICLE VII ONLY, LASALLE BANK NATIONAL
ASSOCIATION, AS ESCROW AGENT

Dated as of May 12, 2003



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TABLE OF CONTENTS

|                                                         |      |  |    |                                                      |  |      |    | 
|-------------------------------------------------------- | ---- |  | -- | ---------------------------------------------------- |  | ---- | -- | 
|                                                         |      |  |    |                                                      |  | Page
|                                                         |      |  |    |                                                      |  |     
|ARTICLE I THE MERGER                                     |      |  | 1  |                                                     
|                                                         | 1.1  |  |    | Definitions                                          |  |      | 1  | 
|                                                         | 1.2  |  |    | The Merger                                           |  |      | 10 | 
|                                                         | 1.3  |  |    | Effective Time; Closing                              |  |      | 10 | 
|                                                         | 1.4  |  |    | Effect of the Merger                                 |  |      | 10 | 
|                                                         | 1.5  |  |    | Certificate of Incorporation; Bylaws                 |  |      | 11 | 
|                                                         | 1.6  |  |    | Directors and Officers                               |  |      | 11 | 
|                                                         | 1.7  |  |    | Effect on Capital Stock                              |  |      | 11 | 
|                                                         | 1.8  |  |    | Dissenting Shares                                    |  |      | 13 | 
|                                                         | 1.9  |  |    | Surrender of Certificates                            |  |      | 14 | 
|                                                         | 1.10 |  |    | No Further Ownership Rights in Company Capital Stock |  |      | 15 | 
|                                                         | 1.11 |  |    | Lost, Stolen or Destroyed Certificates               |  |      | 15 | 
|                                                         | 1.12 |  |    | Taking of Necessary Action; Further Action           |  |      | 16 | 
|                                                         | 1.13 |  |    | Tax Matters                                          |  |      | 16 | 
|ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY |      |  | 16 |                                                     
|                                                         | 2.1  |  |    | Organization, Standing and Power                     |  |      | 16 | 
|                                                         | 2.2  |  |    | Subsidiaries                                         |  |      | 16 | 
|                                                         | 2.3  |  |    | Capital Structure                                    |  |      | 17 | 
|                                                         | 2.4  |  |    | Authority                                            |  |      | 19 | 
|                                                         | 2.5  |  |    | No Violation; Consents and Approvals                 |  |      | 20 | 
|                                                         | 2.6  |  |    | Financial Statements                                 |  |      | 21 | 
|                                                         | 2.7  |  |    | No Dividends; Absence of Certain Changes or Events   |  |      | 22 | 
|                                                         | 2.8  |  |    | Permits; Compliance                                  |  |      | 25 | 
|                                                         | 2.9  |  |    | Information Statement                                |  |      | 26 | 
|                                                         | 2.10 |  |    | Tax Matters                                          |  |      | 26 | 
|                                                         | 2.11 |  |    | Actions and Proceedings                              |  |      | 28 | 
|                                                         | 2.12 |  |    | Certain Agreements                                   |  |      | 29 | 
|                                                         | 2.13 |  |    | Employee Benefits                                    |  |      | 29 | 
|                                                         | 2.14 |  |    | Worker Safety and Environmental Laws                 |  |      | 32 | 
|                                                         | 2.15 |  |    | Intellectual Property and Technology                 |  |      | 33 | 
|                                                         | 2.16 |  |    | Availability of Assets and Legality of Use           |  |      | 40 | 
|                                                         | 2.17 |  |    | Real Property                                        |  |      | 40 | 
|                                                         | 2.18 |  |    | Real Property Leases                                 |  |      | 40 | 
|                                                         | 2.19 |  |    | Personal Property Leases                             |  |      | 41 | 
|                                                         | 2.20 |  |    | Title to Assets                                      |  |      | 41 | 
|                                                         | 2.21 |  |    | Contracts                                            |  |      | 41 | 
|                                                         | 2.22 |  |    | Status of Contracts                                  |  |      | 42 | 
|                                                         | 2.23 |  |    | Insurance                                            |  |      | 43 | 
|                                                         | 2.24 |  |    | Section 2115                                         |  |      | 43 | 
|                                                         | 2.25 |  |    | Required Vote of Company Stockholders                |  |      | 43 | 
|                                                         | 2.26 |  |    | Brokers                                              |  |      | 43 | 

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TABLE OF CONTENTS

(continued)


|                                                                    |      |  |    |                                                                              |  |      |    | 
|------------------------------------------------------------------- | ---- |  | -- | ---------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                    |      |  |    |                                                                              |  | Page
|                                                                    |      |  |    |                                                                              |  |     
|                                                                    | 2.27 |  |    | Hart-Scott-Rodino                                                            |  |      | 43 | 
|                                                                    | 2.28 |  |    | No Shop Provisions                                                           |  |      | 43 | 
|                                                                    | 2.29 |  |    | Certain Business Relationships with the Company                              |  |      | 43 | 
|                                                                    | 2.30 |  |    | Product Warranty                                                             |  |      | 44 | 
|                                                                    | 2.31 |  |    | Books and Records                                                            |  |      | 44 | 
|                                                                    | 2.32 |  |    | Accounts Receivable                                                          |  |      | 44 | 
|                                                                    | 2.33 |  |    | Inventory                                                                    |  |      | 44 | 
|                                                                    | 2.34 |  |    | Employees                                                                    |  |      | 44 | 
|                                                                    | 2.35 |  |    | Termination of Certain Agreements                                            |  |      | 45 | 
|                                                                    | 2.36 |  |    | Indemnification Obligations                                                  |  |      | 45 | 
|                                                                    | 2.37 |  |    | Representations Complete                                                     |  |      | 45 | 
|ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |      |  | 45 |                                                                             
|                                                                    | 3.1  |  |    | Organization, Standing and Power                                             |  |      | 45 | 
|                                                                    | 3.2  |  |    | Authority                                                                    |  |      | 45 | 
|                                                                    | 3.3  |  |    | No Violation; Consents and Approvals                                         |  |      | 46 | 
|                                                                    | 3.4  |  |    | SEC Documents and Other Reports                                              |  |      | 46 | 
|                                                                    | 3.5  |  |    | Actions and Proceedings                                                      |  |      | 47 | 
|                                                                    | 3.6  |  |    | Information Statement                                                        |  |      | 47 | 
|ARTICLE IV CONDUCT PRIOR TO CLOSING; NONSOLICITATION                |      |  | 48 |                                                                             
|                                                                    | 4.1  |  |    | Conduct of Business of the Company                                           |  |      | 48 | 
|                                                                    | 4.2  |  |    | No Solicitation                                                              |  |      | 49 | 
|ARTICLE V ADDITIONAL AGREEMENTS                                     |      |  | 50 |                                                                             
|                                                                    | 5.1  |  |    | Stock Options and Warrants                                                   |  |      | 50 | 
|                                                                    | 5.2  |  |    | Registration Statement on Form S-8                                           |  |      | 51 | 
|                                                                    | 5.3  |  |    | Stockholder Approval                                                         |  |      | 52 | 
|                                                                    | 5.4  |  |    | Access to Information                                                        |  |      | 52 | 
|                                                                    | 5.5  |  |    | Confidentiality                                                              |  |      | 52 | 
|                                                                    | 5.6  |  |    | Public Disclosure                                                            |  |      | 53 | 
|                                                                    | 5.7  |  |    | Consents; Notices                                                            |  |      | 53 | 
|                                                                    | 5.8  |  |    | Warrants                                                                     |  |      | 53 | 
|                                                                    | 5.9  |  |    | Legal Conditions to the Merger                                               |  |      | 53 | 
|                                                                    | 5.10 |  |    | HSR Regulatory Filings                                                       |  |      | 54 | 
|                                                                    | 5.11 |  |    | Commercially Reasonable Efforts; Additional Documents and Further Assurances |  |      | 54 | 
|                                                                    | 5.12 |  |    | Notification of Certain Matters                                              |  |      | 55 | 
|                                                                    | 5.13 |  |    | Termination of Certain Benefit Plans                                         |  |      | 55 | 
|                                                                    | 5.14 |  |    | Employee Benefits                                                            |  |      | 55 | 
|                                                                    | 5.15 |  |    | Indemnification and Insurance                                                |  |      | 55 | 
|                                                                    | 5.16 |  |    | Closing Date Payment Schedule                                                |  |      | 56 | 
|                                                                    | 5.17 |  |    | Certificate of Status of Foreign Corporation                                 |  |      | 56 | 

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TABLE OF CONTENTS

(continued)


|                                                               |      |  |    |                                                        |  |      |    | 
|-------------------------------------------------------------- | ---- |  | -- | ------------------------------------------------------ |  | ---- | -- | 
|                                                               |      |  |    |                                                        |  | Page
|                                                               |      |  |    |                                                        |  |     
|                                                               | 5.18 |  |    | Releases                                               |  |      | 56 | 
|                                                               | 5.19 |  |    | Certain Agreements                                     |  |      | 56 | 
|                                                               | 5.20 |  |    | 280G Stockholder Approval                              |  |      | 57 | 
|ARTICLE VI CONDITIONS TO CLOSING                               |      |  | 57 |                                                       
|                                                               | 6.1  |  |    | Conditions to Obligations of the Company               |  |      | 57 | 
|                                                               | 6.2  |  |    | Conditions to the Obligations of Parent and Merger Sub |  |      | 58 | 
|ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW |      |  | 60 |                                                       
|                                                               | 7.1  |  |    | Survival of Representations, Warranties and Covenants  |  |      | 60 | 
|                                                               | 7.2  |  |    | Escrow Arrangements                                    |  |      | 60 | 
|                                                               | 7.3  |  |    | Stockholder Representative                             |  |      | 67 | 
|ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER                 |      |  | 68 |                                                       
|                                                               | 8.1  |  |    | Termination                                            |  |      | 68 | 
|                                                               | 8.2  |  |    | Effect of Termination                                  |  |      | 69 | 
|                                                               | 8.3  |  |    | Amendment                                              |  |      | 69 | 
|                                                               | 8.4  |  |    | Extension; Waiver                                      |  |      | 69 | 
|ARTICLE IX GENERAL PROVISIONS                                  |      |  | 69 |                                                       
|                                                               | 9.1  |  |    | Notices                                                |  |      | 69 | 
|                                                               | 9.2  |  |    | Expenses                                               |  |      | 70 | 
|                                                               | 9.3  |  |    | Interpretation; Definitions                            |  |      | 70 | 
|                                                               | 9.4  |  |    | Counterparts                                           |  |      | 71 | 
|                                                               | 9.5  |  |    | Entire Agreement; Third Party Beneficiaries            |  |      | 71 | 
|                                                               | 9.6  |  |    | Severability                                           |  |      | 71 | 
|                                                               | 9.7  |  |    | Other Remedies; Specific Performance                   |  |      | 71 | 
|                                                               | 9.8  |  |    | Governing Law                                          |  |      | 71 | 
|                                                               | 9.9  |  |    | Rules of Construction                                  |  |      | 72 | 
|                                                               | 9.10 |  |    | Assignment                                             |  |      | 72 | 

INDEX OF EXHIBITS

|            |  |                                         
|----------- |  | ----------------------------------------
|Exhibit A-1 |  | Stockholders Executing Voting Agreements
|Exhibit A-2 |  | Form of Voting Agreement                
|Exhibit B   |  | Release                                 
|Exhibit C   |  | Schedule of Escrow Contributions        
|Exhibit D   |  | Employee Retention Incentive Program    
|Exhibit E   |  | Form of Legal Opinion                   
|Exhibit F   |  | Escrow Agent Fee Schedule               

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EXECUTION COPY

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (Agreement) is made
and entered into as of May 12, 2003, among Tellabs, Inc., a Delaware
corporation (Parent), Venice Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent (Merger Sub), Vivace Networks, Inc., a
Delaware corporation (the Company), Kenneth Koenig as Stockholder
Representative (the Stockholder Representative) and, with respect to Article
VII only, La Salle Bank National Association as Escrow Agent. Parent, the
Company, and Merger Sub are sometimes referred to herein individually as a
Party and collectively as the Parties.

RECITALS

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable the merger of Merger Sub with and
into the Company (the Merger), upon the terms and subject to the conditions
set forth herein;

WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in the best interest of their respective
stockholders;

WHEREAS, in order to induce Parent and Merger Sub to enter into this
Agreement, concurrently herewith (a) the directors of the Company and the
Company Stockholders set forth on Exhibit A-1(the Voting Agreement
Stockholders) are entering into agreements with Parent dated as of the date
hereof (the Voting Agreements), in the form of the
attached Exhibit A-2,
pursuant to which, among other things, each such director and stockholder has
agreed to vote in favor of the adoption of this Agreement and the approval of
the Merger, and (b) each officer and director of the Company, and certain
stockholders of the Company, are entering into Releases, in the form of the
attached Exhibit B.

NOW,
THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties agree as follows:

ARTICLE I

THE MERGER


1.1 Definitions.

(a) The following terms are defined in the text of this Agreement:





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|                                                         |  |            |      |    
|-------------------------------------------------------- |  | ---------- | ---- | ---
|                                                         |  | Section   
|Defined Terms                                            |  | Reference 
|                                                         |  |           
|2001 Audited Financial Statements                        |  |            | 2.6  |    
|2002 Audited Financial Statements                        |  |            | 6.2  | (k)
|Accounts Receivable                                      |  |            | 2.32 |    
|Acquired Company Agreements                              |  |            | 2.22 |    
|Acquired Company Business                                |  |            | 2.15 | (a)
|Acquired Company Intellectual Property                   |  |            | 2.15 | (a)
|Acquired Company Permits                                 |  |            | 2.8  |    
|Acquired Company Products                                |  |            | 2.15 | (a)
|Acquired Company Registered Intellectual Property Rights |  |            | 2.15 | (b)
|Acquisition Proposal                                     |  |            | 4.2  |    
|Agreement                                                |  | Preamble  
|Ancillary Agreements                                     |  |            | 2.4  | (a)
|Assumed Warrant                                          |  |            | 5.1  | (b)
|Audited Financial Statements                             |  |            | 2.6  |    
|Balance Sheet                                            |  |            | 2.6  |    
|Balance Sheet Date                                       |  |            | 2.6  |    
|Basket Amount                                            |  |            | 7.2  | (h)
|Certificate of Merger                                    |  |            | 1.3  |    
|Closing                                                  |  |            | 1.3  |    
|Closing Date                                             |  |            | 1.3  |    
|Company                                                  |  | Preamble  
|Company Charter                                          |  |            | 2.1  |    
|Company Charter Documents                                |  |            | 2.1  |    
|Company Indemnified Parties                              |  |            | 5.15 |    
|Company Letter                                           |  | Article II
|Company Proprietary Information Agreement                |  |            | 2.15 | (g)
|Company Stock Option Plan                                |  |            | 2.3  | (c)
|Company Stockholder Vote                                 |  |            | 5.3  |    
|Company Subsidiary                                       |  |            | 2.2  |    
|Confidentiality Agreement                                |  |            | 5.5  |    
|Continuing Employees                                     |  |            | 5.14 |    
|Copyrights                                               |  |            | 2.15 | (a)
|Covered Event or Covered Events                          |  |            | 7.2  | (a)
|Covered Parties                                          |  |            | 7.2  | (a)
|December 31 Financial Statements                         |  |            | 1.8  | (a)
|Dissenting Shares                                        |  |            | 1.8  | (a)
|Dissenting Stockholder                                   |  |            | 1.8  | (b)
|DOJ                                                      |  |            | 5.10 |    
|Effective Time                                           |  |            | 1.3  |    
|Employee Retention Incentive Program                     |  |            | 6.1  | (i)
|Environmental Claim                                      |  |            | 2.14 |    
|Environmental Laws                                       |  |            | 2.14 |    
|Escrow Agent                                             |  |            | 7.2  | (b)
|Escrow Cash                                              |  |            | 1.7  | (c)
|Escrow Distribution Notice                               |  |            | 7.2  | (c)
|Escrow Fund                                              |  |            | 7.2  | (b)

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|                                        |  |           |      |    
|--------------------------------------- |  | --------- | ---- | ---
|                                        |  | Section  
|Defined Terms                           |  | Reference
|                                        |  |          
|Escrow Period                           |  |           | 7.2  | (c)
|Escrow Termination Time                 |  |           | 7.1  |    
|Excess Appraisal Payments               |  |           | 1.8  | (d)
|Excess Transaction Expenses             |  |           | 7.2  | (a)
|Financial Statements                    |  |           | 2.6  |    
|FTC                                     |  |           | 5.10 |    
|Hazardous Materials                     |  |           | 2.14 |    
|Information Statement                   |  |           | 2.9  |    
|Insurance Policies                      |  |           | 2.23 |    
|Intellectual Property Rights            |  |           | 2.15 | (a)
|Interim Financing                       |  |           | 4.3  |    
|Leased Real Property                    |  |           | 2.18 |    
|Loss or Losses                          |  |           | 7.2  | (a)
|March 31 Financial Statements           |  |           | 2.6  |    
|Maskworks                               |  |           | 2.15 | (a)
|Merger                                  |  | Recitals 
|Merger Sub                              |  | Preamble 
|Merger Sub Common Stock                 |  |           | 1.7  | (f)
|Officers Certificate                   |  |           | 7.2  | (e)
|Open Source Materials                   |  |           | 2.15 | (w)
|Parent                                  |  | Preamble 
|Parent SEC Documents                    |  |           | 3.4  |    
|Party and Parties                       |  | Preamble 
|Patents                                 |  |           | 2.15 | (a)
|Payment Agent                           |  |           | 1.9  | (a)
|Permitted Lien                          |  |           | 2.7  | (c)
|PTO                                     |  |           | 2.15 | (b)
|Registered Intellectual Property Rights |  |           | 2.15 | (a)
|Remaining Portion                       |  |           | 7.2  | (b)
|Replacement Option                      |  |           | 5.1  | (a)
|Returns                                 |  |           | 2.10 | (b)
|Stockholder Meeting                     |  |           | 2.9  |    
|Stockholder Representative              |  | Preamble 
|Surviving Corporation                   |  |           | 1.2  |    
|Tax or Taxes                            |  |           | 2.10 | (a)
|Technology                              |  |           | 2.15 | (a)
|Third Party Expenses                    |  |           | 9.2  |    
|Trademarks                              |  |           | 2.15 | (a)
|Trade Secrets                           |  |           | 2.15 | (a)
|Unaudited Financial Statements          |  |           | 2.6  |    
|Voting Agreement Stockholders           |  | Recitals 
|Voting Agreements                       |  | Recitals 

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(b) As used in this Agreement, the following terms have the following
meanings (terms defined in this Agreement in the singular to have a correlative
meaning when used in the plural and vice versa).

Acquired Companies means the Company and the Company Subsidiaries,
collectively.

Affiliate means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.

Aggregate Liquidation Preference means the sum of:

(A)  the product of (1) the Series A Share Number and (2) the Series A
Liquidation Preference, plus

(B)  the product of (1) the Series B Share Number and (2) the Series B
Liquidation Preference, plus

(C)  the product of (1) the Series C Share Number and (2) Series C
Liquidation Preference.

Blue Sky Law means any securities law of any state.

Business Day means any day other than a Saturday or Sunday or a day on
which banks in Chicago, Illinois are closed.

California Law means the California Corporations Code to the extent
applicable to the Company by virtue of Section 2115 thereof.

Certificate means a certificate which immediately prior to the Effective
Time represented outstanding shares of Company Capital Stock.

COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended and as codified in Section 4980B of the Code and Section 601 et.
seq. of ERISA.

Code means the Internal Revenue Code of 1986, as amended.

Common Share Number means, as of immediately prior to the Effective
Time, the sum of (A) the number of shares of Company Common Stock then
outstanding (other than any shares of Company Common Stock to be canceled
pursuant to Section 1.7(d)), plus (B) the number of shares of Company Common
Stock underlying then outstanding Lower-Priced Company Stock Options, plus (C)
the number of shares of Company Common Stock underlying other then outstanding
rights (whether or not Vested) to purchase or subscribe for Company Common
Stock (other than the conversion rights associated with Company Preferred
Stock).

Common Stock Exercise Proceeds means cash in an aggregate amount equal
to the sum of (A) with respect to Lower-Priced Company Stock Options
outstanding immediately prior to the Effective Time exercised after the date of
this Agreement and before the Effective Time, the amount of any cash that is
paid or required to be paid to the Company upon the exercise of such
Lower-

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Priced Company Stock Options, plus (B) the amount of any cash that would
be payable to the Company if all Lower-Priced Company Stock Options outstanding
immediately prior to the Effective Time that remain issued and outstanding
immediately prior to the Effective Time were fully exercised.

Common Stock Price means the quotient (rounded to the nearest
ten-thousandth of a cent) obtained by dividing (A) the sum of (x) Twenty
Million Dollars ($20,000,000) plus (y) the Common Stock Exercise Proceeds, by
(B) the Common Share Number.

Company Capital Stock means Company Common Stock and/or Company
Preferred Stock.

Company Common Stock means common stock of the Company, $0.001 par value
per share.

Company Employee Plan means any plan, program, policy, practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise, funded or
unfunded, including each employee benefit plan, within the meaning of Section
3(3) of ERISA which is or has been maintained, contributed to, or required to
be contributed to, by the Acquired Companies or any ERISA Affiliate for the
benefit of any Employee, or with respect to which the Acquired Companies or any
ERISA Affiliate has or may have any liability or obligation, including any and
all International Employee Plans.

Company Optionholder means a holder of a Company Stock Option.

Company Preferred A Stock means the Series A Preferred Stock of the
Company, $0.001 par value per share.

Company Preferred B Stock means the Series B Preferred Stock of the
Company, $0.001 par value per share.

Company Preferred C Stock means the Series C Preferred Stock of the
Company, $0.001 par value per share.

Company Preferred Stock means, collectively, Company Preferred A Stock,
Company Preferred B Stock, and Company Preferred C Stock.

Company Rightholder means a holder of a Company Stock Option or a
Company Warrant.

Company Stockholder means a stockholder of record of the Company, as
determined in accordance with the stock transfer records of the Company.

Company Stock Option means any stock option to purchase Company Capital
Stock, whether or not Vested, granted pursuant to the Company Stock Option
Plan.

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Company Warrant means any warrant to purchase Company Capital Stock,
whether or not Vested.

Company Warrantholder means a holder of a Company Warrant.

Contract means any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan, commitment
or undertaking of any nature, as of the date hereof or as may hereafter be in
effect.

Delaware Law means the General Corporation Law of the State of Delaware.

DOL means the Department of Labor.

Employee means any current or former or retired employee, consultant or
director of the Acquired Companies or any ERISA Affiliate.

Employee Agreement means each management, employment, severance,
consulting, relocation, repatriation, expatriation, visa, work permit or other
agreement, contract or understanding between the Company or any ERISA Affiliate
and any Employee.

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

ERISA Affiliate means each subsidiary of the Acquired Companies and any
other person or entity under common control with the Acquired Companies within
the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
issued thereunder.

Escrow Contributors means the Company Stockholders immediately prior to
the Effective Time.

Escrow Percentage means the product of (a) fifteen percent (15%), and
(b) a fraction (not less than one (1)) whose numerator is 95% and whose
denominator is the percentage of the holders of the shares of Company Capital
Stock outstanding immediately prior to the Effective Time (based on the amount
of Merger Cash payable with respect thereto in the Merger, not on the number of
outstanding shares of such Company Capital Stock) who have voted in favor of
the adoption of this Agreement and approval of the Merger or shall otherwise
have waived or lost their respective rights to exercise appraisal or
dissenters rights under Delaware Law or California Law with respect to the
Merger.

Exchange Act means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

FMLA means the Family Medical Leave Act of 1993, as amended.

GAAP means generally accepted accounting principles in the United
States.

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Governmental Body means any:

(a) nation, province, state, county, city, town, village, district, or
other jurisdiction of any nature;

(b) federal, provincial, state, local, municipal, foreign, or other
government;

(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);

(d) multi-national organization or body; or

(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.

HSR Act means the Hart-Scott-Rodino Anti-trust Improvements Act of 1976,
as amended.

International Employee Plan means each Company Employee Plan that has
been adopted or maintained by the Company or any ERISA Affiliate, whether
informally or formally, or with respect to which the Company or any ERISA
Affiliate will or may have any liability,for the benefit of Employees who
perform services outside of the United States.

IRS means the Internal Revenue Service.

Knowledge  an individual will be deemed to have Knowledge of a
particular fact or other matter if: (A) such individual is actually aware of
such fact or other matter; or (B) such fact or other matter is contained in one
or more documents (whether written or electronic, including emails sent to or
by such individual) that are in, or that have been in, such individuals
possession, including personal files of such individual, or (C) such fact or
other matter is reflected in one or more documents (whether written or
electronic) contained in the books and records of such individuals employer
that would reasonably be expected to be reviewed by such individual in the
customary performance of such individuals duties and responsibilities. Parent
will be deemed to have Knowledge of a particular fact or other matter if an
officer or director of Parent has Knowledge (as defined above) of such fact or
other matter. The Company will be deemed to have Knowledge of a particular
fact or other matter if an officer, director or any current Employee who
reports directly to an officer of any Acquired Company has Knowledge (as
defined above) of such fact or other matter.

Legal Requirement means any law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, order, judgment, decree,
injunction, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Body.

Lien means, with respect to any property, any security interest,
mortgage, pledge, lien, claim, easement, defect in title, covenant, charge or
other encumbrance in, of, or on such property or the income therefrom,
including the interest of a vendor or lessor under a conditional sale
agreement,
capitalized lease obligation or other title retention agreement, and the
filing of any financing

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statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.

Lower-Priced Company Stock Option means any Company Stock Option having
an exercise price per share that is lower than the Common Stock Price.

Material Adverse Effect means, when used in connection with a Person,
any adverse change, event, circumstance or effect (or when used in connection
with a breach of a representation, warranty or covenant set forth herein,
inaccuracy or violation) that is, or is reasonably likely in the future to be,
materially adverse to the business, assets, liabilities, financial condition or
results of operations of such Person and such Persons subsidiaries, taken as a
whole; provided,however, that none of the following shall be deemed to
constitute a Material Adverse Effect: (A) any adverse change, event,
circumstance, effect, inaccuracy or violation resulting solely from general
business or economic conditions; (B) any adverse change, event, circumstance,
effect, inaccuracy or violation resulting solely from conditions generally
affecting the industry in which such Person competes (other than any adverse
change, event, circumstance, effect, inaccuracy or violation resulting directly
or indirectly from any action or inaction taken by or on behalf of the
Company); (C) any adverse change, event, circumstance, effect, inaccuracy or
violation resulting solely from any action or inaction required of the Company
by Parent by Section 4.1; or (D) any adverse change, event, circumstance,
effect, inaccuracy or violation resulting from any breach by any other Party to
this Agreement of any provision of this Agreement.

Merger Cash means cash consideration paid or payable pursuant to Section
1.7(a).

Multiemployer Plan means any Pension Plan which is a multiemployer
plan, as defined in Section 3(37) of ERISA.

Option Exchange Ratio means the quotient obtained by dividing (A) the
Common Stock Price by (B) the Parent Stock Price.

Option Shares means the shares of Parent Common Stock issued or issuable
pursuant to the exercise of Replacement Options under
Section 5.1(a)(i).

Ordinary Course of Business means an action taken by a Person only if:
(A) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such
Person; and (B) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person.

Organizational Documents means: (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any
amendment to any of the foregoing.

Parent Common Stock means common stock of Parent, $0.01 par value per
share.

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Parent Stock Price means the average closing price of Parent Common
Stock on The Nasdaq National Market over the five trading days up to and
including the second trading day preceding the Closing. In the event that
Parent at any time between the date of this Agreement and the Effective Time
declares or pays any dividend on Parent Common Stock payable in Parent Common
Stock or in any right to acquire Parent Common Stock, or effects a subdivision
of the outstanding shares of Parent Common Stock into a greater number of
shares of Parent Common Stock (by stock dividends, combinations, splits,
recapitalizations and the like), or in the event the outstanding shares of
Parent Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Parent Common Stock, which
dividend, subdivision or other action would become effective during the five
trading days during which the Parent Stock Price is calculated, then the Parent
Stock Price shall be appropriately adjusted.

Pension Plan means each Company Employee Plan which is an employee
pension benefit plan, within the meaning of Section 3(2) of ERISA.

Person means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity

or Governmental Body.

Preferred Stock Payment Percentagemeans the quotient obtained by
dividing (A) One Hundred Eleven Million Dollars ($111,000,000) by (B) the
Aggregate Liquidation Preference.

Restricted means, with respect to shares of Company Capital Stock or
Merger Cash payable upon the conversion of shares of Company Capital Stock,
that such shares or cash are subject to a right of repurchase, forfeiture or
divestment in favor of the party that issued such shares or paid such cash.

Securities Act means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

Series A Price means the product (rounded to the nearest ten-thousandth
of a cent) of (A) the Preferred Stock Payment Percentage and (B) the Series A
Liquidation Preference.

Series A Liquidation Preference means $0.60.

Series A Share Numbermeans the aggregate number of shares of Company
Preferred A Stock outstanding immediately prior to the Effective Time.

Series B Price means the product (rounded to the nearest ten-thousandth
of a cent) of (A) the Preferred Stock Payment Percentage and (B) the Series B
Liquidation Preference.

Series B Liquidation Preference means $2.67.

Series B Share Numbermeans the aggregate number of shares of Company
Preferred B Stock outstanding immediately prior to the Effective Time.

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Series C Price means the product (rounded to the nearest ten-thousandth
of a cent) of (A) the Preferred Stock Payment Percentage and (B) the Series C
Liquidation Preference.

Series C Liquidation Preference means $9.72.

Series C Share Numbermeans the aggregate number of shares of Company
Preferred C Stock outstanding immediately prior to the Effective Time.

Stock Restriction Agreement means an agreement between (i) the Company
and a holder of Company Capital Stock or (ii) between Parent and a holder of
Parent Common Stock issued in connection with the Merger, which, in the case of
either (i) or (ii) above, provides for a right of repurchase, forfeiture or
divestment in favor of the Company or Parent, as the case may be.

Unrestricted means, with respect to shares of Company Capital Stock or
Merger Cash payable upon the conversion of shares of Company Capital Stock,
that such shares or cash are not Restricted.

Vest or Vesting means, with respect to an option or warrant, such
option or warrant being or becoming exercisable for shares of Company Capital
Stock or Option Shares, or Merger Cash, that would be Unrestricted and, with
respect to Restricted Shares, such Shares becoming Unrestricted; and Vested,
with respect to an option or warrant, refers to the shares underlying the
portion of such option or warrant that is exercisable for shares of Company
Capital Stock or Option Shares, or Merger Cash, that would be Unrestricted and,
with respect to Shares issued pursuant to a Stock Restriction Agreement, those
Shares that are Unrestricted.

1.2 The Merger. At the Effective Time (as defined in Section 1.3) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law and California Law, Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation.
The Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the Surviving Corporation.

1.3 Effective Time; Closing. Subject to the provisions of this Agreement,
the Parties shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of the State of Delaware in accordance with
the relevant provisions of Delaware Law (the Certificate of Merger) (the time
of such filing (or such later time as may be agreed in writing by the Company
and Parent and specified in the Certificate of Merger) being the Effective
Time) as soon as practicable on or after the Closing Date (as herein defined).
Immediately prior to the filing of the Certificate of Merger, a
closing (the Closing) shall take place at the offices of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto, California or at such
other location as the Parties may agree. The date on which the Closing shall
occur is referred to herein as the Closing Date.

1.4 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers

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and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the Surviving
Corporation.

1.5 Certificate of Incorporation; Bylaws.

(a) At the Effective Time the certificate of incorporation of the
Surviving Corporation shall be amended in its entirety so that, subject to
Section 5.15, it is identical to the certificate of incorporation of Merger Sub
in effect immediately prior to the Effective Time, until thereafter amended as
provided by law and such certificate of incorporation of the Surviving
Corporation; provided,however, that at the Effective Time, Article I of the
certificate of incorporation of the Surviving Corporation shall be amended and
restated in its entirety to read as follows: The name of the corporation is
Vivace Networks, Inc.

(b) At the Effective Time the bylaws of the Surviving Corporation shall be
amended in their entirety so that, subject to Section 5.15, they are identical
to the bylaws of Merger Sub in effect immediately prior to the Effective Time,
until thereafter amended.

1.6 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.

1.7 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holders of any of the
following securities, the following shall occur:

(a) Conversion of Company Capital Stock. Each share of Company Capital
Stock issued and outstanding immediately prior to the Effective Time, other
than any Dissenting Shares and any shares of Company Capital Stock to be
canceled pursuant to Section 1.7(d), will be canceled and extinguished and
automatically converted, subject to the conditions set forth below and
throughout this Agreement, including the escrow provisions set forth in Article
VII, into the right to receive, upon surrender of the Certificate representing
such share of Company Capital Stock in the manner provided in Section 1.9(or
in the case of a lost, stolen or destroyed Certificate, upon delivery of an
affidavit (and bond, if required) in the manner provided in Section 1.11), cash
as set forth below:

(i) Company Preferred A Stock. Each share of Company Preferred A Stock
shall convert into an amount of cash equal to the Series A Price (with the
aggregate amount payable to any holder of Company Preferred A Stock rounded
down to the nearest whole cent);

(ii) Company Preferred B Stock. Each share of Company Preferred B Stock
shall convert into an amount of cash equal to the Series B Price (with the
aggregate amount payable to any holder of Company Preferred B Stock rounded
down to the nearest whole cent);

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(iii) Company Preferred C Stock. Each share of Company Preferred C Stock
shall convert into an amount of cash equal to the Series C Price (with the
aggregate amount payable to any holder of Company Preferred C Stock rounded
down to the nearest whole cent); and

(iv) Company Common Stock. Each share of Company Common Stock shall
convert into an amount of cash equal to the Common Stock Price (with the
aggregate amount payable to any holder of Company Common Stock rounded down to
the nearest whole cent).

(b) Restricted Merger Cash.

(i) If any shares of Company Common Stock outstanding immediately prior to
the Effective Time are Restricted, then the Merger Cash paid upon conversion of
such Restricted shares of Company Common Stock will also be Restricted and
subject to the same right of repurchase, risk of forfeiture or risk of
divestment in favor of Parent as previously existed in favor of the Company;
provided, however, that Parent shall exercise its right of repurchase with
respect to the Restricted Merger Cash payable upon conversion of each
Restricted share of Company Common Stock converted in the Merger by paying an
amount of cash, without interest, equal to the repurchase price that was
applicable to such Restricted share of Company Common Stock immediately prior
to the Effective Time. Merger Cash that is Restricted shall be held by Parent
until it is no longer Restricted and thereafter, subject to
Section 1.7(c),
shall be promptly paid by Parent to the applicable former Company Stockholder.

(ii) The Company shall take all action that may be necessary to ensure
that, from and after the Effective Time, Parent is entitled to exercise any
right of repurchase or other right set forth in any Stock Restriction
Agreement.

(c) Escrow. Of the Merger Cash payable pursuant to Section 1.7(a)in
respect of each share of Company Capital Stock issued and outstanding
immediately prior to the Effective Time, a portion thereof equal to the Escrow
Percentage will, without any act of any Company Stockholder, be deposited with
the Escrow Agent, such deposit to constitute an Escrow Fund (as defined in
Section 7.2) to be governed by the terms of Section 7.2(such Merger Cash
deposited in the Escrow Fund, the Escrow Cash). Set forth opposite each
Company Stockholders name on Exhibit Cis a preliminary schedule showing the
Escrow Cash to be contributed on behalf of each such Company Stockholder,
subject to adjustment for occurrences between the date of this Agreement and
the Closing Date that affect the allocation of Merger Cash. With respect to
each Company Stockholder who will receive Merger Cash pursuant to Section
1.7(a)that is Restricted, (i) the contributions on behalf of such Company
Stockholder to the Escrow Cash shall be comprised of Merger Cash that is
Restricted and Merger Cash that is Unrestricted in the same proportion that the
total amount of
Merger Cash such Company Stockholder is entitled to receive is comprised
of Merger Cash that is Restricted and Merger Cash that is Unrestricted and (ii)
the Restricted Merger Cash contributed on behalf of such Company Stockholder
included in the Escrow Cash shall be allocated among the amounts of Restricted
Merger Cash that Vest at different times in the same proportions as the total
amount of such Company Stockholders Restricted Merger Cash that Vests at each
such time. Any fraction of a cent of Merger Cash that would otherwise result
from the payment of Merger Cash to be deposited into Escrow Fund pursuant to
this Section 1.7(c)by virtue of ownership of outstanding shares of Company
Capital Stock shall be rounded up to the nearest whole

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cent, and any fraction
of a cent that would otherwise result from the payment of the remaining Merger
Cash which each such Company Stockholder would otherwise be entitled to receive
under Section 1.7(a)by virtue of ownership of outstanding shares of Company
Capital Stock shall be rounded down to the nearest whole cent. As soon as
practicable after the Effective Time, and subject to and in accordance with the
provisions of Section 7.2, Parent shall cause to be distributed to the Escrow
Agent a wire transfer in the aggregate amount of Merger Cash included in the
Escrow Cash. The Escrow Cash deposited in the Escrow Fund shall be available
to compensate Parent as provided in Article VII. Any income, gains, losses and
expenses of the Escrow Fund shall be reported by the parties for all income tax
purposes in a manner consistent with Proposed Treasury Regulation Section
1.468B-8. Within ten (10) days following the end of each calendar quarter,
Parent shall be entitled to a disbursement of 2% of the income earned for such
quarter on the Escrow Fund that is treated as income of Parent.

(d) Cancellation of Parent-Owned Stock. Each share of Company Capital
Stock held by the Company or owned by Merger Sub, Parent or any direct or
indirect wholly-owned subsidiary of the Company or of Parent immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.

(e) Stock Options and Warrants. At the Effective Time, each outstanding
Lower-Priced Company Stock Option shall be substituted with an option granted
by Parent pursuant to the 2003 Merger and Employment Inducement Stock Option
Plan of Parent, and all outstanding Company Warrants shall be assumed by Parent
in accordance with Section 5.1. At the Effective Time all Company Stock
Options that are not Lower-Priced Company Stock Options will not be substituted
with Parent stock options or assumed.

(f) Capital Stock of Merger Sub. Each share of common stock, $0.001 par
value per share, of Merger Sub (the Merger Sub Common Stock) issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, $0.001 par
value per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.

1.8 Dissenting Shares.

(a) Notwithstanding any other provision of this Agreement to the contrary,
shares of Company Capital Stock that have not been voted in favor of adoption
of this Agreement and with respect to which a demand for payment and appraisal
have been properly made in accordance with
Section 262 of Delaware Law or Chapter 13 of California Law (Dissenting
Shares), will not be converted into the right to receive the Merger Cash
otherwise payable with respect to such shares of Company Capital Stock after
the Effective Time but will be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to Delaware Law or California Law, as applicable.

(b) If a holder of Dissenting Shares (a
Dissenting Stockholder)
withdraws such holders demand for such payment and appraisal or becomes
ineligible for such payment and appraisal then, as of the Effective Time or the
occurrence of such event of withdrawal or ineligibility,

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|whichever last occurs,
such holders Dissenting Shares will cease to be Dissenting Shares and will be
converted into the right to receive, and will be exchangeable for, the Merger
Cash into which such Dissenting Shares would have been converted pursuant to
Section 1.7(a), subject to the escrow provisions described in Section 1.7(c)
and Article VIIof this Agreement.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(c) The Company will give Parent prompt notice of any written demand
received by the Company from a holder of Dissenting Shares for appraisal of
shares of Company Capital Stock, and Parent shall have the right to participate
in all negotiations and proceedings with respect to such demand. The Company
agrees that, except with the prior written consent of Parent, or as required
under Delaware Law or California Law, as applicable, it will not voluntarily
make any payment with respect to, or settle or offer or agree to settle, any
such demand for appraisal. Each Dissenting Stockholder who, pursuant to
Section 262 of Delaware Law or Chapter 13 of California Law, as applicable,
becomes entitled to payment of the value of the Dissenting Shares will receive
payment therefor (but only after the value therefor has been agreed upon or
finally determined pursuant to such provisions).

(d) The aggregate amount required by a court of law (and not through any
voluntary settlement or agreement by Parent) to be paid by Parent or the
Surviving Corporation to any Dissenting Stockholders for Dissenting Shares
pursuant to Section 262 of Delaware Law or Chapter 13 of California Law, as
applicable, in excess of the aggregate value such Dissenting Stockholders would
have received in the Merger for such Dissenting Shares shall constitute Excess
Appraisal Payments. Each of Parent and the Company agree that the amount of
the Excess Appraisal Payments and all reasonable costs, fees and expenses
(including attorneys fees and expenses) associated with the adjudication
thereof shall constitute Losses and, without regard for the limitations set
forth in Section 7.2(i), Parent shall be entitled to recover such amount from
the Escrow Fund.

1.9 Surrender of Certificates.

(a) Payment Agent. Parent shall select a bank or trust company reasonably
acceptable to the Company to act as the payment agent (the Payment Agent) in
the Merger.

(b) Parent to Provide Merger Cash. At the Closing, Parent shall make
available to the Payment Agent for payment in accordance with this Article I,
the Merger Cash payable pursuant to
Section 1.7(subject to the escrow provisions of Section 1.7(c)) upon
conversion of outstanding shares of Company Capital Stock.

(c) Exchange Procedures. At the Closing, Parent shall cause the Payment
Agent to deliver to each holder of record (as of the Effective Time) of a
Certificate or Certificates: (i) a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Payment Agent and shall contain such other customary provisions as Parent
may reasonably specify); and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for Merger Cash. Upon surrender of
Certificates for cancellation to the Payment Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed, validly executed and properly delivered in accordance with the
instructions thereto, the holders of such

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Certificates shall be entitled to
receive in exchange therefor (subject in each case to the escrow provisions of
Section 1.7(c)) the Merger Cash into which their shares of Company Capital
Stock were converted at the Effective Time, and the Certificates so surrendered
shall forthwith be canceled or terminated, as applicable. Until so
surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, to evidence only the ownership of
the Merger Cash into which such shares of Company Capital Stock shall have been
so converted.

(d) No Interest With Respect to Unexchanged Shares. No interest shall
accrue on the Merger Cash payable with respect to any unsurrendered
Certificates. Following surrender of any such Certificates, the Payment Agent
shall deliver to the record holders thereof, in exchange therefor, without
interest, the Merger Cash payable pursuant to Sections 1.7(a)or 5.1(b), as
applicable.

(e) Transfers of Ownership. If Merger Cash is to be paid to a Person,
other than the Person in whose name the Certificates surrendered in exchange
therefor are registered, it will be a condition of the issuance and payment
thereof that the Certificates so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the Persons requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other Taxes required by reason of payment of Merger Cash to any Person other
than that of the registered holder of the Certificates surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such Tax has been paid or is not payable.

(f) Required Withholding. Each of the Payment Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement and
the transactions contemplated hereby to any holder or former holder of Company
Capital Stock or any Person to whom Merger Cash shall be paid or payable such
amounts as may be required to be deducted or withheld therefrom under the Code
or under any provision of state, local or foreign Tax law or under any other
applicable Legal Requirement. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the person to whom such amounts would otherwise have
been paid.

(g) No Liability. Notwithstanding anything to the contrary in this
Section 1.9, neither the Payment Agent, the Surviving Corporation nor any Party
hereto shall be liable to a holder of
Merger Cash or shares of Company Capital Stock for any amount properly
paid to a public official or Government Body pursuant to any applicable
abandoned property, escheat or similar law.

1.10 No Further Ownership Rights in Company Capital Stock. All Merger
Cash paid in accordance with the terms hereof shall be deemed to have been paid
in full satisfaction of all rights pertaining to such shares of Company Capital
Stock, and there shall be no further registration of transfers on the records
of the Surviving Corporation of shares of Company Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this
Article I.

1.11 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or

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destroyed, the Payment Agent shall
pay in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the Merger Cash into
which the shares of Company Capital Stock represented by such Certificates were
converted pursuant to Section 1.7; provided, however, that Parent may, in its
discretion and as a condition precedent to the payment of such Merger Cash
require the owner of such lost, stolen or destroyed Certificates to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim
that may be made against Parent, the Surviving Corporation or the Payment Agent
with respect to the Certificates alleged to have been lost, stolen or
destroyed.

1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of the
Surviving Corporation will take all such lawful and necessary action.

1.13 Tax Matters. The Parties acknowledge and agree that the Merger will
be a taxable transaction, and agree to report the Merger as a taxable
transaction for all tax purposes.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed in writing in the
disclosure letter, dated as of the date hereof, and certified by a duly
authorized officer of the Company (the Company Letter), which exceptions
shall specifically identify a Section, subsection, paragraph or clause of a
single Section or subsection hereof, as applicable, to which such exception
relates, except where it is readily apparent that an exception with respect to
one Section, subsection, paragraph or clause of a single Section or
subsection also applies to another Section, subsection, paragraph or
clause of a single Section or subsection, as follows:

2.1 Organization, Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on its
business as now being conducted. The Company is duly qualified to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or
licensed and in good standing would not have a Material Adverse Effect on the
Company. Section 2.1 of the Company Letter lists every state or foreign
jurisdiction in which the Company has employees or facilities or otherwise
carries on business. The Company has delivered to Parent a true and complete
copy of its certificate of incorporation (the Company Charter) and bylaws
(together with the Company Charter, the Company Charter Documents), each as
amended to date and in full force and effect on the date hereof.

2.2 Subsidiaries.

(a) Section 2.2(a) of the Company Letter lists each corporation, limited
liability company, partnership, association, joint venture or other business
entity in which the Company owns

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any shares of capital stock or otherwise has
an ownership interest in, directly or indirectly, as of the date of this
Agreement. Section 2.2(a) of the Company Letter also lists each corporation,
limited liability company, partnership, association, joint venture or other
business entity of which the Company owns, directly or indirectly, more than
50% of the stock or other equity interest entitled to vote on the election of
the members of the board of directors or similar governing body or with respect
to which the Company has the power to direct the business and policies (each, a
Company Subsidiary). Except as set forth in Section 2.2(a) of the Company
Letter, the Company has never had any subsidiaries and has never otherwise
owned any shares of capital stock or any interest in, or had the power to
direct the business and policies of, directly or indirectly, any other
corporation, limited liability company, partnership, association, joint venture
or other business entity. Except as set forth in Section 2.2(a) of the Company
Letter, all of the outstanding shares of capital stock of or interests in each
Company Subsidiary are owned of record and beneficially by the Company or
another Company Subsidiary. All outstanding shares of capital stock of each
Company Subsidiary are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Organizational Documents of the Company Subsidiary, or any Contract to which
the Company Subsidiary is a party or by which it is bound, and have been issued
in compliance with U.S. federal, Blue Sky and foreign laws. There are no
options, warrants, calls, rights, commitments or Contracts of any character,
written or oral, to which any Company Subsidiary is a party or by which it is
bound obligating such Company Subsidiary to issue, deliver, sell, repurchase or
redeem, or cause to be issued, sold, repurchased or redeemed, any shares of the
capital stock, partnership interests or similar ownership interests of the
Company Subsidiary or obligating the Company Subsidiary to grant, extend,
accelerate the Vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call right, commitment or Contract. There are no
outstanding
or authorized stock appreciation, phantom stock, profit participation, or
other similar rights with respect to any Company Subsidiary.

(b) Each Company Subsidiary is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized and
has the requisite corporate (in the case of a Company Subsidiary that is a
corporation) or other power and authority to carry on its business as now being
conducted. Each Company Subsidiary is duly qualified to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or licensed and in good
standing would not have a Material Adverse Effect on the Company. Section
2.2(b) of the Company Letter lists every state or foreign jurisdiction in which
each Company Subsidiary has employees or facilities or otherwise carries on
business. The Company has delivered to Parent a true and complete copy of the
Organizational Documents of each Company Subsidiary, each as amended to date
and in full force and effect on the date hereof.

2.3 Capital Structure.

(a) The authorized capital stock of the Company consists of (i) seventy
million (70,000,000) shares of Company Common Stock, of which seventeen million
six hundred thirteen thousand four hundred six (17,613,406) shares are issued
and outstanding as of the date of this Agreement; and (ii) thirty-four million
seventy-nine thousand three hundred sixty-two (34,079,362) shares of Company
Preferred Stock, of which (1) fifteen million eight

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hundred twenty five
thousand (15,825,000) shares are designated as Company Preferred A Stock, of
which fifteen million eight hundred twenty four thousand nine hundred eighty
nine (15,824,989) shares are issued and outstanding as of the date of this
Agreement; (2) nine million six hundred thousand (9,600,000) shares are
designated as Company Preferred B Stock, of which nine million five hundred
sixty nine thousand nine hundred ninety three (9,569,993) shares are issued and
outstanding as of the date of this Agreement; and (3) nine million (9,000,000)
shares are designated as Company Preferred C Stock, of which eight million six
hundred eighty-four thousand three hundred eighty (8,684,380) shares are issued
and outstanding as of the date of this Agreement. There are no other
outstanding shares of capital stock or voting securities of the Company as of
the date of this Agreement. No shares of Company Capital Stock are held in
treasury by the Company. Section 2.3(a) of the Company Letter sets forth a
complete list, as of the date of this Agreement, of (i) the name and domicile
address of all holders of Company Capital Stock, (ii) the number of shares held
by each such holder, and (iii) whether any of such shares are Restricted and
the Vesting of any such Restricted shares, including the extent to which any
such Vesting has occurred as of the date hereof and whether (and to what
extent) the Vesting will be accelerated by the transactions contemplated by
this Agreement.

(b)  Each issued and outstanding share of Company Preferred A Stock,
Company Preferred B Stock, and Company Preferred C Stock is convertible into
one (1) share of Company Common Stock. All preferential rights of the Company
Preferred Stock in connection with a merger involving the Company are set forth
in the Company Charter. All outstanding shares of Company Capital Stock are
duly authorized, validly issued, fully paid and non-assessable and were issued
in
accordance with applicable U.S. federal, Blue Sky and foreign securities
laws and all requirements set forth in applicable Contracts. All outstanding
shares of Company Capital Stock are free and clear of all Liens except for
Permitted Liens and are not subject to preemptive rights or rights of first
refusal created by statute, the Company Charter Documents or any applicable
Contract. The Acquired Companies are not, and to the Companys Knowledge, none
of their stockholders are, party to (i) any agreement or other commitment (oral
or written) that directly or indirectly requires any Acquired Company or any
stockholder thereof to provide any right of negotiation, right of first
refusal, right of last offer or similar arrangement in connection with the
possible sale of such Acquired Company or its assets, or (ii) any voting trust,
proxy, rights plan, anti-takeover plan or other agreement or understanding with
respect to any equity securities of any Acquired Company.

(c)  All issued and outstanding Company Stock Options have been issued to
Employees pursuant to the Companys 1999 Equity Incentive Plan
(the Company
Stock Option Plan). The Company has reserved 31,377,000 shares of Company
Common Stock for issuance pursuant to the Company Stock Option Plan, of which
7,851,836 shares are subject to outstanding Company Stock Options that are
Vested as of the date of this Agreement, 7,740,822 shares are subject to
outstanding Company Stock Options that are not Vested as of the date of this
Agreement and 1,219,925 shares remain available as of the date of this
Agreement for future grant pursuant to the Company Stock Option Plan. Section
2.3(c) of the Company Letter sets forth for each outstanding Company Stock
Option as of the date of this Agreement the name and domicile address of the
holder of such option, the number of shares of Company Common Stock subject to
such option, the exercise price of such option and the Vesting schedule for
such option, including the extent Vested to date and whether the exercisability
of such option by its terms is subject to acceleration (in whole or in part)
due to the transactions contemplated by this Agreement or any

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event subsequent
to the Merger. As of the date of this Agreement, Company Warrants are issued
and outstanding to acquire no shares of Company Preferred A Stock, Company
Preferred B Stock or Company Preferred C Stock, and 20,576 shares of Company
Common Stock. Section 2.3(c) of the Company Letter sets forth for each
outstanding Company Warrant as of the date of this Agreement the name and
domicile address of the holder of such warrant, the exercise price for and
number of shares of Company Preferred Stock or Company Common Stock issuable,
as the case may be, upon the exercise of such warrant, the expiration date of
such warrant, the Vesting schedule, if any, for such warrant, including the
extent Vested to date and whether the exercisability of such Warrant by its
terms is subject to acceleration (in whole or in part) due to the transactions
contemplated by this Agreement or any event subsequent to the Merger. The
Company has provided or made available to Parent correct and complete copies of
all Contracts evidencing Company Stock Options and Company Warrants outstanding
as of the date of this Agreement. All outstanding Company Stock Options and
Company Warrants were issued in accordance with applicable U.S. federal, Blue
Sky and foreign securities laws, other applicable Legal Requirements and all
requirements set forth in applicable Contracts.

(d) Except for the Company Stock Options and the Company Warrants
described in Section 2.3(c) of the Company Letter, there are no options,
warrants, calls, rights, rights of first refusal, rights of negotiation,
commitments, transactions or Contracts of any character, written or oral, to
which Company is a party or by which it is bound as of the date of this
Agreement obligating Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold,
repurchased or redeemed, any shares of Company Capital Stock or obligating
Company to grant, extend, accelerate the Vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or Contract. As a result of the Merger and assuming that Parent is and remains
the record and beneficial owner of all the shares of Merger Sub through the
Effective Time, Parent will be the record and beneficial owner of all
outstanding capital stock of the Surviving Corporation and there will be no
outstanding rights to acquire capital stock of the Company other than any
rights created by or through Parent.

2.4 Authority.

(a) The Board of Directors of the Company has unanimously (i) declared the
Merger advisable and fair to and in the best interest of the Company and its
stockholders, (ii) approved this Agreement in accordance with the Delaware Law,
(iii) approved any other Contracts and instruments to be delivered pursuant
hereto (the Ancillary Agreements) to which it is a party, (iv) resolved to
recommend the adoption of this Agreement by the Company Stockholders and (v)
directed that this Agreement be submitted to the Company Stockholders for
adoption. The Company has the requisite corporate power and authority to enter
into this Agreement and the Ancillary Agreements to which it is a party, to
consummate the transactions contemplated by the Ancillary Agreements to which
it is a party and, subject to approval by the Company Stockholders of this
Agreement, to consummate the transactions contemplated hereby. The execution
and delivery by the Company of this Agreement and the Ancillary Agreements to
which it is a party and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of this
Agreement, to (x) adoption of this Agreement by the Company Stockholders of the
Company and (y) the filing of the Certificate of Merger as required by the
Delaware Law. This Agreement has been duly executed and delivered by the
Company and no other corporate action on the part of the Company is necessary
in order for the Company to perform its obligations pursuant to this Agreement
other than the adoption of this Agreement by the Company Stockholders. Each
Ancillary Agreement to which the Company is a party has been or will be duly
executed and delivered by

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the Company and no other corporate action on the part
of the Company is necessary in order for the Company to perform its obligations
pursuant thereto other than the adoption of this Agreement by the Company
Stockholders. Assuming the valid authorization, execution and delivery by the
other Parties hereto and thereto and the validity and binding effect of this
Agreement and the Ancillary Agreements to which the Company is a party on the
other Parties hereto and thereto, this Agreement and the Ancillary Agreements
to which the Company is a party constitute the valid and binding obligations of
the Company enforceable against it in accordance with their respective terms,
except to the extent enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors rights generally and by the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

(b) This Agreement constitutes the valid and binding obligation of the
Stockholder Representative, enforceable against the Stockholder Representative
in accordance with its terms, except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors rights generally and
by the effect of general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law). The
Stockholder Representative has the requisite power and authority to enter into
this Agreement and to fulfill the Stockholder Representatives obligations
hereunder. The provisions of this Agreement with respect to the funding and
administration of the Escrow Fund are binding on the Escrow Contributors (but
only with respect to and to the extent to their respective interests in the
Escrow Fund) in accordance with their terms.

(c) Each director and Voting Agreement Stockholder has duly executed and
delivered a Voting Agreement. Each such Voting Agreement constitutes the valid
and binding obligation of such director or Voting Agreement Stockholder, as the
case may be, enforceable against such director or Voting Agreement Stockholder,
as the case may be, in accordance with its terms, except to the extent
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law). Voting Agreements have been delivered by all directors of the Company
and by holders in the aggregate of not less than 13,020,847 shares of Preferred
A Stock, 8,880,209 shares of Preferred B Stock, 3,370,205 shares of Preferred C
Stock and 9,360,150 shares of Company Common Stock.

2.5 No Violation; Consents and Approvals.

(a) Except as set forth in Section 2.5 of the Company Letter, the
execution and delivery by the Company of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by the Company of the
transactions contemplated hereby and thereby and the Companys compliance with
the provisions hereof and thereof will not (with or without notice or lapse of
time, or both) conflict with, result in any violation of or default under, or
give to others a right of termination, cancellation or acceleration of any
obligation under, or result in the creation of

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any Lien except for Permitted
Liens upon any of the properties or assets of the Acquired Companies pursuant
to, any provision of (i) the Organizational Documents of the Acquired
Companies, (ii) subject to obtaining the approval of the adoption of this
Agreement and the approval of the Merger by the Company Stockholders and
compliance with the requirements set forth in Section 2.5(b)below, any Legal
Requirement applicable to the Acquired Companies or any of their respective
properties or assets, (iii) any Contract applicable to the Acquired Companies
or any of their respective properties or assets, or (iv) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Acquired
Companies or any of their respective properties or assets; provided that if any
consents, waivers or approvals are required to avoid the consequences noted in
(i)-(iv), such consents, waivers or approvals are listed in Section 2.5(a) of
the Company Letter along with an indication of whether such consents, waivers
or approvals have been obtained.

(b) No filing or registration with, or authorization, consent or approval
of, any Governmental Body is required by or with respect to the Acquired
Companies in connection with the execution and delivery by the Company of this
Agreement or the Ancillary Agreements to which it is a party or is necessary
for the consummation by the Company of the Merger and the other transactions
contemplated by this Agreement and the Ancillary Agreements, except for (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, (ii) applicable
requirements, if any, of U.S. federal securities laws and Blue Sky Laws,
and (iii) such filings, authorizations, orders or approvals as may be required
by the HSR Act, if any.

2.6 Financial Statements. Section 2.6 of the Company Letter contains (i)
the audited consolidated balance sheet of the Company as of December 31, 2001
and the related statements of income, stockholders equity and cash flow for
the year then ended, together with the appropriate notes to such financial
statements, accompanied by the report thereon of PricewaterhouseCoopers, LLC,
independent public accountants (the 2001 Audited Financial Statements), (ii)
the unaudited consolidated balance sheet of the Company as of December 31, 2002
and the related unaudited statements of income, stockholders equity and cash
flow for the year then ended (the December 31 Financial Statements), and
(iii) the unaudited consolidated balance sheet of the Company (the Balance
Sheet) as of March 31, 2003 (the Balance Sheet Date) and the related
unaudited statements of income, stockholders equity and cash flow for the
three months then ended (the March 31 Financial Statements and together with
the 2001 Audited Financial Statements and the December 31 Financial Statements,
the Financial Statements). Except as disclosed in the notes thereto, the
Financial Statements have been prepared in conformity with GAAP consistently
applied and fairly present the financial position of the Company at the dates
of such balance sheets and the results of its operations and cash flows for the
respective periods indicated (subject, in the case of the December 31 Financial
Statements and March 31 Financial Statements, to normal year-end adjustments,
the absence of notes and any other adjustments described therein). The 2002
Audited Financial Statements (as defined in Section 6.2(l)) will, when
delivered, have been prepared in conformity with GAAP consistently applied and
fairly present the financial position of the Company at the date of the balance
sheet included therein and the results of its operations and cash flows for the
period indicated therein.

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2.7 No Dividends; Absence of Certain Changes or Events.

(a) None of the Acquired Companies has ever declared or made, or agreed to
declare or make, any payment of dividends or distributions to their
stockholders (and no record date with respect to any of the foregoing has
occurred) or purchased or redeemed, or agreed to purchase or redeem, any of its
capital stock or other equity interest (except the repurchase or redemption by
the Company of shares of Company Common Stock from Employees pursuant to
agreements approved by the Companys Board of Directors under which the Company
has the right to repurchase such shares upon termination of employment or
services). There are no accrued but unpaid dividends with respect to any
capital stock of the Acquired Companies.

(b) Since the Balance Sheet Date there has been:

(i) no Material Adverse Effect on the Company;

(ii) no material damage, destruction, loss or claim, whether or not
covered by insurance, or condemnation or other taking adversely affecting any
material assets, properties or business of any Acquired Company; and,

(iii) no change in any Acquired Companys authorized capital stock.

(c) Since the Balance Sheet Date, the Acquired Companies have conducted
their respective businesses in all material respects only in the Ordinary
Course of Business. Without limiting the generality of the foregoing, since
the Balance Sheet Date, except as set forth in Section 2.7(c) of the Company
Letter, none of the Acquired Companies has:

(i) pledged, issued, delivered or agreed (conditionally or
unconditionally) to pledge, issue or deliver, or granted any capital stock or
option, warrant or other right to purchase, any of its capital stock or other
equity interest or any security convertible into its capital stock or other
equity interest, or purchased, redeemed, retired or otherwise acquired any
shares of its capital stock, except for Company Stock Options granted under the
terms of the Stock Option Plan or Company Common Stock issued upon the exercise
of Company Stock Options or Company Warrants;

(ii) amended its Organizational Documents;

(iii) issued, delivered or agreed (conditionally or unconditionally) to
issue or deliver any bond, note or other debt security;

(iv) paid any obligation or liability (absolute or contingent) other than
current liabilities reflected on the Balance Sheet and current liabilities
incurred since the Balance Sheet Date in the Ordinary Course of Business;

(v) reduced the amount of any insurance coverage in any material respect
or failed to renew any existing insurance policies;

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(vi) undertaken or committed to undertake capital expenditures exceeding
$25,000 for any single project or related series of projects or $100,000 in the
aggregate;

(vii) made charitable donations in excess of $10,000 in the aggregate;

(viii) sold, leased (as lessor), transferred or otherwise disposed of
(including any transfers from such Acquired Company to any of its stockholders,
or owners of ownership interests, and any of such stockholders or holders
respective Affiliates), or mortgaged or pledged, or imposed or suffered to be
imposed any Lien on, any of its assets or properties, whether tangible or
intangible, including any Acquired Company Intellectual Property or accounts
receivable except for inventory and minor amounts of personal property sold or
otherwise disposed of for fair value in the Ordinary Course of Business and
except for (A) Liens for Taxes and other governmental charges and assessments
which are not yet due and payable, (B) Liens of landlords and Liens of
carriers, warehousemen, mechanics and materialmen and other like Liens arising
in the Ordinary Course of Business for sums not yet due and payable and (C)
other Liens or imperfections on property which are not material in amount, do
not interfere with, and are not violated by the consummation of the
transactions contemplated by, this Agreement, and do not materially detract
from the value or marketability of, or materially impair the existing use of,
the property affected by such lien or imperfection (each, a Permitted Lien);

(ix) commenced or settled any lawsuit, or settled any threatened lawsuit
or proceeding or other investigation against it;

(x) revalued any of its assets, including writing down the value of
capitalized inventory or writing off notes or accounts receivable;

(xi) entered into, assumed or become bound under or obligated by, or
extended or modified the terms of, any Contract which (1) involves the payment
of more than $25,000 per annum or extends more than one year, (2) involves any
payment or obligation to any of its Affiliates other than in the Ordinary
Course of Business, (3) involves the sale of any material assets or properties,
tangible or intangible, (4) involves any license or sublicense of Acquired
Company Intellectual Property or (5) grants to any other party of marketing,
distribution or similar rights of any type or scope with respect to any
products or technology of such Acquired Company;

(xii) accelerated, terminated, made modifications to, or canceled any
material Contract to which it is a party or by which it is bound, nor has any
other party accelerated, terminated, made modifications to, or canceled any
material Contract to which such Acquired Company is a party or by which such
Acquired Company is bound;

(xiii) made any capital investment in, or any loan to, any other Person,
other than travel and related advances to Employees in the Ordinary Course of
Business;

(xiv) suffered any adverse change or (to the Companys Knowledge) threat
of any adverse change in its relations with, or any loss or (to the Companys
Knowledge) threat of loss of, any of its licensors, distributors, suppliers,
customers or other business partners;

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(xv) entered into any strategic alliance, affiliate agreement or joint
development agreement;

(xvi) entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such contract
or agreement, or received notice of or have Knowledge of any actual or
threatened labor trouble or strike, or any other occurrence, event or condition
of similar character;

(xvii) acquired or agreed to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association, joint venture or other
business organization or division thereof, or otherwise acquire or agree to
acquire outside of the Ordinary Course of Business any assets in any amount;

(xviii) modified, waived, settled or canceled any debts owed to or claims
or rights held by it (including the settlement of any claims or litigation)
other than write-offs of less than $25,000 in each instance, and $100,000 in
the aggregate, of accounts receivable in the Ordinary Course of Business;

(xix) waived any stock repurchase rights, accelerated, amended, or changed
the period of exercisability of any outstanding stock options, taken any action
to accelerate the
Vesting of any stock options, or otherwise modified or amended the terms
thereof, or repriced or replaced stock options or authorized cash payments in
exchange for any such options;

(xx) created, incurred or assumed, or agreed to create, incur or assume,
any indebtedness for borrowed money or guaranteed such indebtedness of another
Person or entered into, as lessee, any capitalized lease obligations (as
defined in Statement of Financial Accounting Standards No. 13);

(xxi) waived, accelerated or delayed collection of notes or accounts
receivable, in any material amount, in advance of or beyond their regular due
dates or the dates when the same would have been collected in the Ordinary
Course of Business;

(xxii) delayed or accelerated payment of any account payable or other
liability, in any material amount, beyond or in advance of its due date, except
in the Ordinary Course of Business;

(xxiii) instituted any increase in the compensation of, paid any bonuses
(except pursuant to the terms of pre-existing obligations described in Section
2.7(c) of the Company Letter) to, or modified the terms of employment or
service of any employee, director or consultant of the Acquired Companies
(including granting or modifying severance obligations), or adopted, amended,
increased the payments or benefits under, modified or terminated any
profit-sharing, bonus, incentive, deferred compensation, insurance, pension,
retirement, medical, hospital, disability, welfare or other plan, Contract or
commitment for the benefit of employees, directors or consultants of the
Acquired Companies, except as required by this Agreement;

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(xxiv) made or changed any Tax election, settled or compromised any
federal, state, local or foreign Tax liability, or consented to the extension
or waiver of the limitations period applicable to any claim or assessment in
respect of Taxes;

(xxv) prepared or filed any Tax Return inconsistent with past practice or,
on any such Tax Return, took any position, made any election, or adopted any
method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Tax Returns in prior periods;

(xxvi) made any change in the accounting methods, principles and practices
used by the Acquired Companies (including any change in depreciation or
amortization policies or rates) from those applied in the preparation of the
Financial Statements; or

(xxvii) entered into any agreement or otherwise become obligated to do any
of the foregoing.

(d) None of the Acquired Companies is subject to any liability including
unasserted claims, whether known or unknown and whether absolute, contingent,
accrued or otherwise, which is not shown or which is in excess of amounts shown
or reserved for in the Balance Sheet, except for (i) liabilities disclosed in
Section 2.7(d) of the Company Letter, (ii) accounts payable or accrued balances
that have been incurred by the Acquired Companies in the Ordinary Course of
Business since the Balance Sheet Date, (iii) liabilities pursuant to the
Contracts identified in Section 2.21 of the
Company Letter, to the extent that the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Contract and (iv) liabilities that, individually or in the aggregate, do not
exceed $25,000.

2.8 Permits; Compliance.

(a) Each of the Acquired Companies owns, holds or possesses all licenses,
franchises, permits, privileges, immunities, approvals and other authorizations
from Governmental Bodies which are necessary to entitle it to own or lease,
operate and use its assets and to carry on and conduct its business
substantially as conducted as of the date of this Agreement (herein
collectively called Acquired Company Permits), and each of the Acquired
Companies will own, hold or possess all licenses, franchises, permits,
privileges, immunities, approvals and other authorizations from Governmental
Bodies which are necessary to entitle it to own or lease, operate and use its
assets and to carry on and conduct its business substantially as conducted as
of the Closing Date. Complete and correct copies of all of the Acquired
Company Permits have been delivered by the Company to Parent.

(b) Each of the Acquired Companies has fulfilled and performed its
obligations in all material respects under each of the Acquired Company
Permits, and each of the Acquired Company Permits is valid, subsisting and in
full force and effect.

(c) None of the Acquired Companies is in conflict with, or in default or
violation of, any Legal Requirement applicable to it or by which any of its
properties are bound or affected.

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(d) The Acquired Companies are not in violation of any provisions of their
respective Organizational Documents.

2.9 Information Statement. None of the information supplied or to be
supplied by the Company for inclusion in the information statement to be sent
to the Company Stockholders in connection with the meeting of Company
Stockholders to consider the adoption of this Agreement and approval of the
Merger (the Stockholder Meeting) (such information statement as amended or
supplemented is referred to herein as the Information Statement) shall, on
the date it is first mailed to the Company Stockholders, at the time of the
Stockholder Meeting or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholder Meeting which
has become misleading. If at any time prior to the Effective Time, any event
relating to the Company or any Acquired Company or any of their respective
Affiliates, officers or directors should be discovered by the Company which
should be set forth in a supplement to the Information Statement, the Company
shall promptly inform Parent. Notwithstanding the foregoing, the Company makes
no
representation or warranty with respect to any information supplied by
Parent which is contained in the Information Statement.

2.10 Tax Matters. Except as set forth in Section 2.10 of the Company
Letter:

(a) Definition of Taxes. For the purposes of this Agreement, the term
Tax or, collectively, Taxes means (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed
with respect to such amounts, (ii) any liability for the payment of any amounts
of the type described in clause (i) of this Section 2.10(a)as a result of
being a member of an affiliated, consolidated, combined or unitary group for
any period, and (iii) any liability for the payment of any amounts of the type
described in clauses (i) or (ii) of this Section 2.10(a)as a result of any
express or implied obligation to indemnify any other Person or as a result of
any obligations under any agreements or arrangements with any other Person with
respect to such amounts and including any liability for taxes of a predecessor
entity.

(b) Tax Returns and Audits.

(i) Each of the Acquired Companies has prepared and timely filed all
material required federal, state, local and foreign returns, estimates,
information statements and reports (Returns) for which the deadline
(including extensions) has passed relating to any and all Taxes concerning or
attributable to the Acquired Companies or their respective operations and such
Returns are true and correct in all material respects and have been completed
in accordance with applicable law in all material respects.

(ii) Each of the Acquired Companies has (A) timely paid all material Taxes
it is required to pay and (B) timely paid or withheld with respect to its
Employees (and paid

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any withheld amounts over to the appropriate Taxing
authority) all federal and state income taxes, Federal Insurance Contribution
Act, Federal Unemployment Tax Act and other Taxes required to be paid or
withheld.

(iii) None of the Acquired Companies has been delinquent in the payment of
any Tax, nor is there any material Tax deficiency outstanding, assessed or
proposed against any of the Acquired Companies, nor has any of the Acquired
Companies executed any waiver of any statute of limitations on or extended the
period for the assessment or collection of any Tax.

(iv) No audit or other examination of any Return of any of the Acquired
Companies is, to the Knowledge of those Employees of the Company responsible
for Tax matters of the Company, presently in progress, and none of the Acquired
Companies has been notified in writing or, to the Knowledge of those Employees
of the Company responsible for Tax matters of the Company, informally, of any
request for such an audit or other examination.

(v) As of the Balance Sheet Date, none of the Acquired Companies had any
material liabilities for unpaid Taxes which were not accrued or reserved on the
Balance Sheet, whether asserted or unasserted, contingent or otherwise, and, to
the Knowledge of those Employees of the Company responsible for Tax matters of
the Company, none of the Acquired Companies has incurred any liability for
Taxes since that date other than in the Ordinary Course of Business.

(vi) Each of the Acquired Companies has made available to Parent or its
legal counsel, copies of all Tax Returns for the Acquired Companies filed for
all periods since its inception.

(vii) There are (and immediately following the Effective Time there will
be) no Liens on the assets of any of the Acquired Companies relating to or
attributable to Taxes other than Liens for Taxes not yet due and payable. To
the Knowledge of those Employees of the Company responsible for Tax matters of
the Company, there is no basis for the assertion of any claim relating or
attributable to Taxes that, if adversely determined, would result in any Lien
for Taxes on the assets of any of the Acquired Companies.

(viii) None of the assets of any of the Acquired Companies is treated as
tax-exempt use property, within the meaning of Section 168(h) of the Code.

(ix) None of the Acquired Companies has filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by such Acquired Company.

(x) None of the Acquired Companies is, or has been at any time, a United
States Real Property Holding Corporation within the meaning of Section
897(c)(2) of the Code.

(xi) No adjustment relating to any Return filed by any of the Acquired
Companies has been proposed in writing or, to the Knowledge of those Employees
of the Company responsible for Tax matters of the Company, informally by any
tax authority to any of the Acquired Companies or any representative thereof.

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(xii) None of the Acquired Companies has (a) ever been a member of an
affiliated group (within the meaning of Code §1504(a)) filing a consolidated
federal income Tax Return (other than a group the common parent of which was
the Company), (b) ever been a party to any Tax sharing, indemnification or
allocation agreement, nor does any of the Acquired Companies owe any amount
under any such agreement, (c) any liability for the Taxes of any Person (other
than the Acquired Companies) under Treas. Reg. § 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise and (d) ever been a party to any joint venture,
partnership or other agreement that, to the Knowledge of those Employees of the
Company responsible for Tax matters of the Company, could be treated as a
partnership for Tax purposes.

(xiii) None of the Acquired Companies has constituted either a
distributing corporation or a controlled corporation in a distribution of
stock intended to qualify for tax-free
treatment under Section 355 of the Code (x) in the two years prior to the
date of this Agreement or (y) in a distribution which could otherwise
constitute part of a plan or series of related transactions (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.

(c) Executive Compensation Tax. There is no contract, agreement, plan or
arrangement to which any of the Acquired Companies is a party, including the
provisions of this Agreement, covering any Employee, which, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 404 or 162(m) of the Code (other than the
temporary disallowance of a deduction under Section 404(a)(5) of the Code).

2.11 Actions and Proceedings. Except as set forth in Section 2.11 of the
Company Letter, as of the date of this Agreement there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Body
against or involving the Acquired Companies or any of their properties, assets
or business or any Company Employee Plan. Except as set forth in Section 2.11
of the Company Letter, as of the date of this Agreement there are no actions,
suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the Knowledge of the Company, threatened against
or involving the Acquired Companies or any of their properties, assets or
business or any Company Employee Plan. As of the date hereof, there are no
actions, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the Knowledge of the
Company, threatened against the Acquired Companies or any of their properties,
assets or business relating to the transactions contemplated by this Agreement
and the Ancillary Agreements. To the Knowledge of the Company, (a) as of the
date of this Agreement there are no outstanding orders, judgments, injunctions,
awards or decrees of any Governmental Body against or involving any of the
present or former directors, officers, employees, consultants, agents or
stockholders of the Acquired Companies and (b) as of the date of this Agreement
there are no actions, suits, or claims, or legal, administrative or arbitration
proceedings or investigations pending or threatened against or involving any of
the present or former directors, officers, employees, consultants, agents or
stockholders of the Acquired Companies, in each case where it is reasonably
likely that any Acquired Company would have an indemnification or contribution
obligation, or where it is reasonably likely that such order, judgment,
injunction, award or decree, or such action, suit, claim, proceeding or
investigation, would have a Material Adverse Effect on the Company.

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2.12 Certain Agreements. Except as set forth in Section 2.12 of the
Company Letter, none of the Acquired Companies is a party to any oral or
written contract or plan, including any employment agreement, severance
agreement, stock option plan, stock appreciation rights plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the Vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.

2.13 Employee Benefits.

(a) Schedule. Section 2.13(a) of the Company Letter (a) contains an
accurate and complete list of each Company Employee Plan and, as of the date of
this Agreement, each Employee Agreement. Neither the Acquired Companies nor
any ERISA Affiliate has any plan or commitment to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or
as required by this Agreement), or to adopt or enter into any Company Employee
Plan or Employee Agreement.

(b) Documents. The Acquired Companies have provided to Parent correct and
complete copies of: (i) all documents embodying each Company Employee Plan and,
as of the date of this Agreement, each Employee Agreement including in each
case all amendments thereto and all related trust documents, administrative
service agreements, group annuity contracts, group insurance contracts, and
policies pertaining to fiduciary liability insurance covering the fiduciaries
for each Company Employee Plan; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) the three
(3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the
Code in connection with each Company Employee Plan; (iv) if the Company
Employee Plan is funded, the most recent annual and periodic accounting of
Company Employee Plan assets; (v) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and all applications
and correspondence to or from the IRS or the DOL with respect to any such
application or letter; (vii) all written communications material to any
Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company; (viii) all correspondence to or from any Governmental Body
relating to any Company Employee Plan; (ix) all COBRA forms and related notices
(or such forms and notices as required under comparable law); (x) the three (3)
most recent plan years discrimination tests for each Company Employee Plan; and
(xi) all registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with each Company Employee
Plan.

(c) Employee Plan Compliance. The Acquired Companies and their ERISA
Affiliates have performed in all respects all obligations required to be
performed by them under, are not in material default or material violation of,
and have no Knowledge of any material default or

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material violation by any
other party to each Company Employee Plan, and each Company Employee Plan has
been established and maintained in all material respects in accordance with its
terms and in material compliance with all applicable laws, statutes, orders,
rules and regulations, including but not limited to ERISA or the Code. Any
Company Employee Plan intended to be qualified under Section 401(a) of the Code
and each trust intended to qualify under Section 501(a) of the Code (i) has
either applied for, prior to the expiration of the requisite period under
applicable Treasury Regulations or IRS
pronouncements, or obtained a favorable determination, notification,
advisory and/or opinion letter, as applicable, as to its qualified status from
the IRS or still has a remaining period of time under applicable Treasury
Regulations or IRS pronouncements in which to apply for such letter and to make
any amendments necessary to obtain a favorable determination, and (ii)
incorporates, has been amended to incorporate or still has a remaining period
of time under applicable Treasury Regulations or IRS pronouncements in which to
amend to incorporate all provisions required to comply with the Tax Reform Act
of 1986 and subsequent legislation. For each Company Employee Plan that is
intended to be qualified under Section 401(a) of the Code there has been no
event, condition or circumstance that has adversely affected or is likely to
adversely affect such qualified status. No prohibited transaction, within
the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and
not otherwise exempt under Section 408 of ERISA, has occurred with respect to
any Company Employee Plan. As of the date of this Agreement, there are neither
any actions, suits or claims pending, or, to the Knowledge of the Company,
threatened or reasonably anticipated (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan nor have there ever been any actions, suits or claims (other than routine
claims for benefits) asserted with respect to any Company Employee Plan. Each
Company Employee Plan can be amended, terminated or otherwise discontinued
after the Effective Time in accordance with its terms, without liability to
Parent, the Acquired Companies or any ERISA Affiliates (other than ordinary
administration expenses). There are no audits, inquiries or proceedings
pending or, to the Knowledge of the Company, threatened by the IRS or DOL, or
any other Governmental Body with respect to any Company Employee Plan. Neither
the Acquired Companies nor any ERISA Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code. The Acquired Companies and each ERISA
Affiliate have timely made all contributions and other payments required by and
due under the terms of each Company Employee Plan.

(d) No Pension Plans. Neither the Acquired Companies nor any ERISA
Affiliate has ever maintained, established, sponsored, participated in, or
contributed to, any (i) Pension Plan which is subject to Title IV of ERISA or
Section 412 of the Code, (ii) Multiemployer Plan, (iii) multiple employer
plan as defined in ERISA or the Code, or (iv) a funded welfare plan within
the meaning of Section 419 of the Code.

(e) No Self-Insured Plans. Neither the Acquired Companies nor any ERISA
Affiliate has ever maintained, established, sponsored, participated in or
contributed to any self-insured plan that provides benefits to Employees
(including any such plan pursuant to which a stop-loss policy or contract
applies).

(f) No Post-Employment Obligations. No Company Employee Plan provides, or
reflects or represents any liability to provide post-termination or retiree
welfare to any Person for any reason, except as may be required by COBRA or
other applicable statute, and neither the Acquired

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Companies nor any ERISA
Affiliate has ever represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
or any other Person that such Employee(s) or other Person would be provided
with post-termination or retiree welfare benefits, except to the extent
required by statute.

(g) Health Care Compliance. To the Companys Knowledge, neither the
Acquired Companies nor any ERISA Affiliate has, prior to the Effective Time and
in any material respect, violated any of the health care continuation
requirements of COBRA, the requirements of FMLA, the requirements of the Health
Insurance Portability and Accountability Act of 1996, the requirements of the
Womens Health and Cancer Rights Act of 1998, the requirements of the Newborns
and Mothers Health Protection Act of 1996, or any amendment to each such act,
or any similar provisions of state law applicable to its Employees.

(h) Past Acquisitions. Neither the Acquired Companies nor any ERISA
Affiliate is currently obligated to provide an Employee with any compensation
or benefits pursuant to an agreement (e.g., an acquisition agreement) with a
former employer of such Employee.

(i) Effect of Transaction.

(i) Except as set forth in Section 2.13(i)(i) of the Company Letter, the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.

(ii) Except as set forth in Section 2.13(i)(ii) of the Company Letter, no
payment or benefit which will or may be made by the Acquired Companies or its
ERISA Affiliates with respect to any Employee or any other disqualified
individual (as defined in Code Section 280G and the regulations thereunder)
will be characterized as a parachute payment, within the meaning of Section
280G(b)(2) of the Code.

(j) Employment Matters. Except as set forth in Section 2.13(j) of the
Company Letter, the Acquired Companies: (i) are in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions
of employment and wages and hours, in each case, with respect to Employees;
(ii) have withheld and reported all amounts required by law or by agreement to
be withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) are not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) are not
liable for any payment to any trust or other fund governed by or maintained by
or on behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, threatened
or reasonably anticipated claims or actions against the Acquired Companies
under any workers compensation policy or long-term disability policy. Neither
the Acquired Companies nor any ERISA Affiliate has direct or indirect liability
with respect to any
-31-misclassification of any Person as an independent
contractor rather than as an employee, or with respect to any employee leased
from another employer.(k) Labor. No work stoppage or labor strike against the Acquired
Companies or any ERISA Affiliate is pending, or to the Companys Knowledge,
threatened or reasonably anticipated.
The Company does not have Knowledge of any activities or proceedings of
any labor union to organize any Employees. There are no actions, suits,
claims, labor disputes or grievances pending, or, to the Knowledge of the
Company, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in any material liability to
the Acquired Companies. The Acquired Companies have not engaged in any unfair
labor practices within the meaning of the National Labor Relations Act. Except
as set forth in Section 2.13(k) of the Company Letter, the Acquired Companies
are not presently, nor have they been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to Employees and
no collective bargaining agreement is being negotiated with respect to any
Employees. The Acquired Companies have not triggered or incurred any liability
or obligation under the Worker Adjustment and Retraining Notification Act or
any similar state or local law.(l) International Employee Plan. Neither the Acquired Companies nor any
ERISA Affiliate currently has or have they ever had the obligation to,
maintain, establish, sponsor, participate in, or contribute to any
International Employee Plan.2.14 Worker Safety and Environmental Laws. The properties, assets and
past and present operations of the Acquired Companies have been and are in all
material respects in compliance with all applicable federal, state, local and
foreign laws, rules and regulations, orders, decrees, judgments, permits and
licenses relating to public and worker health and safety. Each Acquired
Company (i) has obtained all applicable permits, licenses and other
authorizations that are required under Environmental Laws (as defined below)
the absence of which would have a Material Adverse Effect on it; (ii) is in
compliance (and has complied) in all material respects with all material terms
and conditions of such required permits, licenses and authorizations, and also
is in compliance in all material respects with all other material limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in such laws or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder; (iii) has no Knowledge of and has not
received notice of any event, condition, circumstance, activity, practice,
incident, action or plan that is reasonably likely to interfere with or prevent
continued compliance or that would form the basis of any material environmental
liability with respect to such Acquired Company; (iv) has not disposed of,
released, discharged or emitted any Hazardous Materials (as defined below) into
the soil or groundwater at any properties owned or leased by the Company, or
exposed any Employee or other individual to any Hazardous Materials or
condition in such a manner as would be reasonably likely to result in any
material liability; and (v) has taken all actions necessary under Environmental
Laws to register any products or materials required to be registered by such
Acquired Company (or any of its agents) thereunder. To the Companys
Knowledge, no Hazardous Materials are present in, on or under any properties
owned, leased or used at any time (including both land and improvements
thereon) by any Acquired Company. For the purposes of this
Section 2.14,
Environmental Claim means any-32-notice, claim, act, cause of action or
investigation by any Person alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (i) the presence, or release into
the environment, of any Hazardous Materials or (ii)
any violation, or alleged violation, of any Environmental Laws.
Environmental Laws means all federal, state, local and foreign laws and
regulations relating to pollution of the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) or the
protection of human health and worker safety, including laws and regulations
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials. Hazardous Materials means chemicals, pollutants, contaminants,
wastes, toxic substances, radioactive and biological materials,
asbestos-containing materials, hazardous substances, petroleum and petroleum
products or any fraction thereof, excluding, however, Hazardous Materials
contained in products typically used for office and janitorial purposes
properly and safely maintained in accordance with Environmental Laws.2.15 Intellectual Property and Technology.(a) Definitions.(i) Acquired Company Business means all activities conducted by an
Acquired Company in the design, development, manufacture, production, testing,
marketing, licensing, distribution, and sale of Acquired Company Products.(ii) Acquired Company Intellectual Property means Intellectual Property
Rights, including Acquired Company Registered Intellectual Property Rights (as
defined below), that: (1) are embodied in Acquired Company Products; or (2)
were developed by or for an Acquired Company for use in the conduct of the
Acquired Company Business; or (3) are used in or necessary to the conduct of
the Acquired Company Business; or (4) are necessary to use Acquired Company
Products; or (5) are owned or exclusively licensed by any of the Acquired
Companies.(iii) Acquired Company Products means any product or service (including
products and services under development) of the Acquired Companies, including
any Technology comprising such products or services.(iv) Intellectual Property Rights means all of the following: (1)
United States, foreign, and international patent applications, utility model
applications and patents, as well as related applications and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations,
and continuations-in-part, and equivalent or similar rights anywhere in the
world in inventions and discoveries including invention disclosures
(Patents); (2) trade secrets and other rights in know-how and confidential or
proprietary information (Trade Secrets); (3) copyrights, copyrights
registrations and applications, and all other corresponding rights throughout
the world (Copyrights); (4) mask works, mask work applications, mask work
registrations, and any equivalent or similar rights in semiconductor masks,
layouts, architectures, or topology (Maskworks); (5) industrial designs and
any related registrations and applications throughout the world; (6) rights in
World Wide Web addresses and domain names and any related-33-applications and
registrations, all trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications and all associated
goodwill throughout the world
(Trademarks); and (7) any similar, corresponding or equivalent rights to
any of the foregoing anywhere in the world.(v) Registered Intellectual Property Rights means all United States,
international, and foreign: (1) Patents, excluding invention disclosures for
which there are no associated filed applications; (2) registered Trademarks and
applications to register Trademarks, including intent-to-use applications; (3)
Copyrights registrations and applications to register Copyrights; (4) Maskwork
registrations and applications to register Maskworks; and (5) any other
Intellectual Property Rights that are the subject of an application,
certificate, filing, registration, or other document issued by, filed with, or
recorded by, any state, government, or other public legal authority for the
purpose of creating, obtaining, perfecting or registering such Intellectual
Property Rights.(vi) Technology means all of the following: (1) works of authorship,
including computer programs, source code, executable code, documentation,
designs, files, net lists, records, data, and mask works; (2) inventions
(whether or not patentable), improvements, and technology; (3) proprietary and
confidential information, including technical data, customer and supplier
lists, trade secrets, and know-how; (4) databases, data compilations, data
collections, and technical data; (5) logos, trade names, trade dress,
trademarks, service marks, World Wide Web addresses, domain names, tools,
methods, and processes; and (6) all instantiations of the foregoing in any form
and embodied in any media.(b) Section 2.15(b) of the Company Letter lists all Registered
Intellectual Property Rights owned by, filed in the name of, applied for by, or
subject to a valid obligation of assignment to any of the Acquired Companies as
of the date of this Agreement (Acquired Company Registered Intellectual
Property Rights) and lists any actual or threatened proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (PTO) or equivalent authority anywhere in the world) related to any of
the Acquired Company Registered Intellectual Property Rights as of the date of
this Agreement. For each item of Acquired Company Registered Intellectual
Property Rights, Section 2.15(b) of the Company Letter identifies if the item
of Acquired Company Registered Intellectual Property Rights is not owned
exclusively by any of the Acquired Companies.(c) To the Knowledge of the Company, as of the date of this Agreement,
each item of Acquired Company Registered Intellectual Property Rights, other
than pending applications, is valid and subsisting. No item of Acquired
Company Registered Intellectual Property Rights that consists of a pending
Patent application fails to identify all pertinent inventors. Except as set
forth in Section 2.15(c) of the Company Letter, no item of Acquired Company
Registered Intellectual Property Rights has been abandoned, withdrawn, or
permitted to lapse. All necessary registration, maintenance, and renewal fees
in connection with Acquired Company Registered Intellectual Property Rights
have been paid and all necessary documents and certificates in connection with
Acquired Company Registered Intellectual Property Rights have been filed with
the relevant patent, copyright, trademark, or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining the Acquired Company Registered Intellectual Property-34-Rights.
Except as set forth on Section 2.15(c) of the Company Letter, and except for
any actions prompted by acts of Governmental Bodies or by potentially
infringing acts of third parties of which the Company does not have
Knowledge, after due consultation with employees and/or third party agents
of Company responsible for the administration of such Acquired Company
Registered Intellectual Property, as of the date of this Agreement, there are
no actions that must be taken by any of the Acquired Companies within one
hundred eighty (180) days of July 12, 2003, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to PTO
actions, documents, applications, or certificates for the purposes of
obtaining, maintaining, perfecting, or preserving or renewing any Acquired
Company Registered Intellectual Property Rights. Except as set forth on
Section 2.15(c) of the Company Letter, in each case in which an Acquired
Company has acquired any Intellectual Property Right from any Person used in or
necessary for the conduct of the Acquired Company Business, such Acquired
Company has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in the Intellectual Property Rights (including
the right to seek past and future damages) to such Acquired Company.(d) Except as set forth in Section 2.15(d) of the Company Letter, as of
the date of this Agreement, the Company does not have Knowledge of information,
materials, facts, or circumstances that would constitute prior art or that
would render any of the Acquired Company Registered Intellectual Property
Rights invalid or unenforceable. No Acquired Company has misrepresented, or
failed to disclose, or knows of any misrepresentation or failure to disclose,
any fact or circumstances in any application for any Acquired Company
Registered Intellectual Property Right that would constitute fraud or a
misrepresentation with respect to the application or that would otherwise, as a
matter of law, cause any Acquired Company Registered Intellectual Property
Right to be rendered unenforceable.(e) Except as set forth in Section 2.15(e) of the Company Letter, each
item of Acquired Company Intellectual Property owned or exclusively licensed by
an Acquired Company is free and clear of any license grants or other Liens,
except for Permitted Liens and: (i) non-exclusive software licenses granted to
end-user customers in written Contracts for end-user customer use of Acquired
Company Products provided to the end-user customer by an Acquired Company in
the Ordinary Course of Business; (ii) any additional non-exclusive licenses
implied by law to end-user customers for use of Acquired Company Products; and
(iii) any rights retained by the owner of any Acquired Intellectual Property
that is exclusively licensed to an Acquired Company. Except as set forth in
Section 2.15(e) of the Company Letter (which will distinguish between
nonexclusive and exclusive licenses), the Acquired Companies are the exclusive
owners of all Acquired Company Intellectual Property. The Acquired Companies
have the sole and exclusive right to bring actions for management or
unauthorized use of the Acquired Company Intellectual Property owned or
exclusively licensed by such Acquired Companies (including the right to seek
past and future damages). Except as set forth in Section 2.15(e) of the
Company Letter, no item of Acquired Company Intellectual Property owned or
exclusively licensed by an Acquired Company is subject to any offer or
commitment to offer, arising from participation in any technical standards
consortium or other standards body, to license such Acquired Company
Intellectual Property.(f) Except as set forth on Section 2.15(f) of the Company Letter, all
Acquired Company Intellectual Property used in or necessary to the conduct of
the Acquired Company Business as presently conducted and all Acquired Company
Products were created solely by either-35-(i)  employees of the Acquired Companies
acting within the scope of their employment or (ii) by third parties who have
validly and irrevocably assigned all of their rights in such Acquired Company
Intellectual Property, including all Intellectual Property Rights, to an
Acquired Company, and no third party owns or has any such rights to any of the
Acquired Company Intellectual Property. Section 2.15(f) of the Company Letter
lists all Acquired Company Intellectual Property that the Company expects to be
used in or necessary to the conduct of the Acquired Company Business as
currently contemplated to be conducted by the Acquired Companies within the six
(6) month period immediately following the date of this Agreement, but that is
not owned or licensed by the Acquired Companies as of the date of this
Agreement.(g) The Acquired Companies have taken steps that are reasonably required
to protect the Acquired Companies Intellectual Property Rights in confidential
information or proprietary information owned or exclusively licensed by
Acquired Companies or provided by any other Person to an Acquired Company under
an obligation of confidentiality. Without limiting the foregoing, each of the
Acquired Companies has, and enforces, a policy requiring each employee to
execute, prior to commencing employment, a proprietary information,
confidentiality, and assignment agreement, substantially in the form attached
as Section 2.15(g) of the Company Letter (the Company Proprietary Information
Agreement), and all current and former employees of the Acquired Companies
executed the Company Proprietary Information Agreement prior to commencing
employment. The Company Proprietary Information Agreement is sufficient to
vest in an Acquired Company title to all Technology and related Intellectual
Property Rights created by an employee within the scope of employment with the
Acquired Company. No Acquired Company is in material breach of the terms of
any of the foregoing agreements and, to the Companys Knowledge, no other party
to any such agreement is in material breach of the Company Proprietary
Information Agreement.(h) Except as set forth on Section 2.15(h) of the Company Letter, no
Acquired Company has transferred ownership of, or granted any exclusive license
of or right to use, or authorized the retention of any exclusive rights to use
or joint ownership of, any Technology or Intellectual Property Right that is
Acquired Company Intellectual Property owned or exclusively licensed by such
Acquired Company, or any Acquired Company Products or portion thereof, to any
other Person.(i) Except as set forth on Section 2.15(i) of the Company Letter, Acquired
Company Intellectual Property constitutes all the Intellectual Property Rights
used in or necessary to the conduct of the Acquired Company Business as it is
currently conducted.(j) The Contracts listed in Section 2.15(j) of the Company Letter are all
written Contracts to which any of the Acquired Companies is a party pursuant to
which any Acquired Company acquires rights to the Acquired Company Intellectual
Property. Except as set forth in Section 2.15(j) of the Company Letter,
Acquired Company is not in material breach of any of the foregoing Contracts
and, to the Companys Knowledge, no other party to any Contract is in material
breach of the foregoing Contracts.(k) Except as set forth on Section 2.15(k) of the Company Letter, and
except for mass-market licenses for software that is both not incorporated into
the Acquired Company Products-36-and not used in the manufacture of the Acquired
Company Products, no Person, who has licensed to any of the Acquired Companies
any Technology used in the Acquired Company Business or any
Acquired Company Intellectual Property, has ownership rights, license
rights, or any other claim to improvements made by such Acquired Company to
such Technology or Acquired Company Intellectual Property.(l) Section 2.15(l) of the Company Letter lists all written Contracts
between any of the Acquired Companies and any other Person under which any of
the Acquired Companies has, with respect to any infringement or
misappropriation of the Intellectual Property Rights of any third-party Person,
either: (i) made a representation or warranty; (ii) agreed to, or assumed, any
obligation or duty to defend, indemnify, reimburse, or hold harmless any
Person; or (iii) assumed or incurred any other obligation or liability. No
Acquired Company is currently discharging, or has been called upon to
discharge, any such obligation or liability.(m) Except as set forth on Section 2.15(m) of the Company Letter, the
Acquired Company Business as conducted in the past has not, or as currently
conducted does not, or as contemplated to be conducted by the Acquired
Companies will not to the extent conducted by Parent in the same manner
following the Closing, infringe or misappropriate any Intellectual Property
Right of any Person, violate any right to privacy or publicity of any Person,
violate any moral rights of any Person, or constitute unfair competition or
trade practices. Except as set forth on Section 2.15(m) of the Company Letter,
and except for any infringement that arises only as a result of a network-level
combination of the Acquired Company Products with equipment not provided by an
Acquired Company to the extent there exist substantial non-infringing uses for
such Acquired Company Products apart from such combination, the use of any or
all Acquired Company Products has not, does not, and will not, infringe or
misappropriate any Intellectual Property Right of any Person.(n) Except as set forth on Section 2.15(n) of the Company Letter, no
Acquired Company has received notice of any claim, or any basis for any claims,
that the operation of the Acquired Company Business or any Acquired Company
Products infringes or misappropriates any Intellectual Property Right of any
Person or constitutes unfair competition or trade practices under the laws of
any jurisdiction.(o) There are no Contracts between any of the Acquired Companies and any
other Person with respect to Acquired Company Intellectual Property under which
there is any material dispute regarding the scope of the Contract or regarding
performance under the Contract.(p) Except as set forth on Section 2.15(p) of the Company Letter, to the
Knowledge of the Company, no person is infringing or misappropriating any
Acquired Company Intellectual Property owned or exclusively licensed by an
Acquired Company.(q) No Acquired Company Intellectual Property owned or exclusively
licensed by the Acquired Companies or any Acquired Company Products is subject
to any proceeding or outstanding decree, order, judgment or settlement
agreement, or stipulation that restricts in any manner its use, transfer, or
licensing by the Acquired Companies or affects the validity, use, or
enforceability of such Acquired Company Intellectual Property. To the
Knowledge of the Company, no Acquired Company Intellectual Property or Acquired
Company Products is subject to any outstanding decree,-37-order, judgment or
settlement agreement, or stipulation that restricts in any manner its use,
enforcement,
transfer, or licensing by the Acquired Companies as authorized by the
Contracts identified in Section 2.15(j) of the Company Letter.(r) No (i) Acquired Company Products or publications, (ii) material
published or distributed by any Acquired Company, or (iii) conduct or statement
of any Acquired Company constitutes obscene material, a defamatory statement or
material, false advertising, or otherwise violates in any material respect any
applicable law or regulation.(s) All Acquired Company Intellectual Property owned or exclusively
licensed by an Acquired Company is fully transferable, alienable, or licensable
without restriction and without payment of any kind to any third party. Except
as set forth in the Contracts identified in Section 2.15(j) of the Company
Letter, all Acquired Company Products are fully transferable, alienable, or
licensable by the Acquired Companies, without restriction and without payment
of any kind to any third party.(t) Except as disclosed in Section 2.15(t) of Company Letter, neither this
Agreement nor the completion of the transactions contemplated by this
Agreement, including the assignment to Parent, by operation of law or
otherwise, of any Contracts to which the Acquired Companies are parties, will
result in (i) any Acquired Company or Surviving Corporation granting to any
third party any right to any Technology or Intellectual Property Right owned
by, or licensed to, the Acquired Companies or Surviving Corporation, which
right would not have been granted in the absence of this Agreement or the
completion of the transactions contemplated hereby, (ii) any Acquired Company
or Surviving Corporation becoming bound by, or made subject to, any non-compete
or other restriction on the operation or scope of their respective businesses
to which any Acquired Company or Surviving Corporation, as applicable, would
not have been bound or subject to in the absence of this Agreement or the
completion of the transactions contemplated hereby, or (iii) any Acquired
Company or Surviving Corporation being obligated to pay any royalties or other
amounts to any third party in excess of those payable by the Acquired Company
or Surviving Corporation, respectively, prior to the Closing in the absence of
this Agreement or the completion of the transactions contemplated hereby.(u) Except as disclosed in Section 2.15(u) of the Company Letter, there
are no material design defects in any Acquired Company Products. Except as
disclosed in Section 2.15(u) of the Company Letter (i) each individual version,
model and line of the Acquired Company Products will operate substantially in
conformance with all material specifications for such version, model or line;
and (ii) to the Knowledge of the Company, each such version, model or line is
free from material systemic defects.(v)  Except as set forth in Section 2.15(v) of the Company Letter, no
government funding, facilities, or resources of a university, college, other
educational institution or research center or funding from third parties were
used in the development of Acquired Company Products or Acquired Company
Intellectual Property, and no Governmental Body, university, college, other
educational institution, or research center has any claim or right in or to
Acquired Company Intellectual Property owned or exclusively licensed by an
Acquired Company or to any Acquired Company Products. Except as set forth in
Section 2.15(v) of the Company Letter, to the Knowledge-38-of the Company, no
current or former employee of any of the Acquired Companies who contributed to
the creation or development of any Acquired Company Intellectual Property has
performed
services for the government, a university, college or other educational
institution, or a research center, during a period of time during which the
employee was also performing services for such Acquired Company. Except as set
forth in Section 2.15(v) of the Company Letter, neither Acquired Company
Intellectual Property owned or exclusively licensed by the Acquired Companies
nor any Acquired Company Product has been licensed or otherwise provided to a
Governmental Body, nor does any Acquired Company have any current obligation to
license or assign an Acquired Company Product or other Acquired Company
Intellectual Property to any Governmental Body.(w) Section 2.15(w) of the Company Letter sets forth all software that is
distributed as open source software or under a similar licensing or
distribution model (including but not limited to the GNU General Public License
(GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL),
BSD licenses, the Artistic License, the Netscape Public License, the Sun
Community Source License (SCSL), the Sun Industry Standards Source License
(SISSL) and the Apache License) used by the Acquired Companies in the conduct
of the Acquired Company Business (Open Source Materials). Section 2.15(w) of
the Company Letter describes the manner in which these Open Source Materials
were used, including whether and how the Open Source Materials were modified or
distributed by the Acquired Companies. Except as set forth in Section 2.15(w)
of the Company Letter, no Acquired Company has (i) incorporated Open Source
Materials into, or combined Open Source Materials with, any Acquired Company
Products, any Acquired Company Intellectual Property owned or exclusively
licensed by the Acquired Company, or any Acquired Company Intellectual Property
that otherwise comprises non-Open Source Materials portions of Acquired Company
Intellectual Property; (ii) distributed Open Source Materials in conjunction
with any Acquired Company Products, any Acquired Company Intellectual Property
owned or exclusively licensed by the Acquired Company, or any Acquired Company
Intellectual Property that otherwise comprises non-Open Source Materials
portions of Acquired Company Intellectual Property; or (iii) used Open Source
Materials in a manner that grants, or purports to grant, to any third party,
any rights or immunities under any Acquired Company Products, any Acquired
Company Intellectual Property owned or exclusively licensed by the Acquired
Company, or any Acquired Company Intellectual Property that otherwise comprises
non-Open Source Materials portions of Acquired Company Intellectual Property
(including, but not limited to, requiring that any such Acquired Company
Products or such Acquired Company Intellectual Property be (1) disclosed or
distributed in source code form, (2) licensed for the purpose of making
derivative works, or (3) redistributable at no charge).(x) Except as set forth in Section 2.15(x) of the Company Letter, the
Acquired Company Intellectual Property and Acquired Company Products do not
contain any computer code that (i) is designed to disrupt, disable, harm, or
otherwise impede in any manner, including aesthetical disruptions or
distortions, the operation of the Acquired Company Intellectual Property or
Acquired Company Products (e.g., viruses or worms); (ii) is designed to disable
the Acquired Company Intellectual Property or Acquired Company Products or any
computer system or impair in any way their operation based on the elapsing of a
period of time, the exceeding of an authorized number of copies, or the
advancement to a particular date or other numeral (e.g., time bombs, time
locks, or drop dead devices); (iii) would permit any Acquired Company or any
third party to access-39-the Acquired Company Intellectual Property or Acquired
Company Products or any computer system (e.g., traps, access codes, or trap
door devices); or (iv) would permit any Acquired Company or any
third party to track, monitor, or otherwise report the operation and use
of the Acquired Company Intellectual Property or Acquired Company Products.(y) Except as disclosed in Section 2.15(y) of Company Letter, Acquired
Company nor any Person acting on its behalf has disclosed or delivered to any
third-party Person (other than employees and independent contractors operating
for such Acquired Companys benefit), or permitted the disclosure or delivery
to any escrow agent or other third-party Person (other than employees and
independent contractors operating for the Acquired Companys benefit) of, any
source code portion of the Acquired Company Intellectual Property owned or
exclusively licensed by the Acquired Company or Acquired Company Products.
Except as disclosed in Section 2.15(y) of Company Letter, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time, or both) will, or would reasonably be expected to, result in
the disclosure or delivery of any source code portion of the Acquired Company
Intellectual Property owned or exclusively licensed by the Acquired Company to
any third-party Person (other than employees and independent contractors
operating for such Acquired Companys benefit). No Acquired Company nor any
Person acting on its behalf has disclosed or delivered to any third-party
Person (other than employees and independent contractors operating for such
Acquired Companys benefit) any Trade Secrets without a legal obligation to
maintain the confidentiality of such Trade Secrets, wherein such legal
obligation is memorialized in a written Contract identified in Section 2.21 of
the Company Letter.2.16 Availability of Assets and Legality of Use. The assets owned, leased
or licensed by the Acquired Companies constitute all the assets used in their
businesses (including, but not limited to, all books, records, computers and
computer programs and data processing systems) and are in good condition
(subject to normal wear and tear and immaterial impairments of value and
damage) and serviceable condition and are generally suitable for the uses for
which intended. There are no material services provided by any of the
stockholders of, or holders of ownership interests in, any Acquired Company or
any of their Affiliates to the Acquired Companies utilizing either (i) assets
not owned by the Acquired Companies as of the Effective Time or (ii) Persons
not employed by the Acquired Companies.2.17 Real Property. No Acquired Company owns any real property or holds
any option to acquire any real property.2.18 Real Property Leases. Section 2.18 of the Company Letter sets forth
a list and brief description of each lease or similar agreement under which
each Acquired Company is lessee of, or holds or operates, any real property
owned by any third Person (the Leased Real Property). Each of the Acquired
Companies has the right to quiet enjoyment of all the real property described
in such Section of which it is the lessee for the full term of each such lease
or similar agreement (and any related renewal option) relating thereto, and the
leasehold or other interest of the Acquired Company in such real property is
not subject or subordinate to any Lien except for Permitted Liens. Complete
and correct copies of each such lease or similar agreement has been delivered
by the Company to Parent.-40-2.19 Personal Property Leases. Section 2.19 of the Company Letter
contains a brief description of each lease or other agreement or right, whether
written or oral, under which each Acquired Company is lessee of, or holds or
operates, any machinery, equipment, vehicle or other tangible personal property
owned by a third party, except for any such lease, agreement or right that is
terminable by the Acquired Company without penalty or payment on notice of 30
days or less, or which involves the payment by the Acquired Company of rentals
of less than $25,000 per year.2.20 Title to Assets. Each of the Acquired Companies has good title to
all of its assets and properties, free and clear of all Liens, except for
Permitted Liens.2.21 Contracts. Except as set forth in Section 2.21 of the Company
Letter, no Acquired Company is a party to or bound by:(i) any Contract for the purchase, sale or lease of assets or properties
other than in the Ordinary Course of Business;(ii) any Contract for the purchase of goods or raw materials requiring one
or more payments by it in excess of $100,000;(iii) any Contract for the sale of goods or services involving one or more
payments in excess of $100,000;(iv) any Contract relating to the marketing, distribution or manufacturing
of products, services, processes or technology, or any OEM contract;(v) any Contract with respect to Technology or Intellectual Property
Rights other than Contracts for the purchase or licensing of shrink-wrap,
off-the-shelf software not involving the payment of more than $25,000 in the
aggregate;(vi) any guarantee of the obligations or liabilities of its Affiliates,
customers, suppliers, Employees, or any other Persons;(vii) any Contract which provides for, or relates to, the incurrence by it
of debt for borrowed money or the extension of credit by it to any other
Person;(viii) any Contract or understanding with a third party that restricts it
from carrying on its business at any time with respect to any class of
customers, any products or services or in any geographic area in the world;(ix) any Contract which provides for, or relates to, any confidentiality
arrangement entered into in connection with any possible business combination
involving such
Acquired Company, or any non-competition arrangement with any Person,
including any of such Acquired Companys current or former officers or
employees;(x) any Contract or group of related Contracts for capital expenditures in
excess of $100,000 for any single project or related series of projects;-41-(xi) any partnership, joint venture or other similar arrangement or
Contract involving a sharing of profits or losses;(xii) any Contract which involves payments or receipts by it of more than
$100,000;(xiii) any employment or consulting Contract other than the Company
Proprietary Information Agreement;(xiv) any Contract pursuant to which it has any ownership interest in, or
has any obligation or commitment to obtain any ownership interest in, any
corporation, partnership, joint venture or other business enterprise;(xv) any agreement in settlement of pending or threatened litigation
entered into prior to the date of this Agreement;(xvi) any Contract of indemnification or any guaranty other than any
Contract of indemnification entered into in connection with the sale, license,
distribution and development of software products and advertising in the
Ordinary Course of Business;(xvii) any Contract with any of its Affiliates, stockholders or any
Affiliates of its stockholders (other than the Acquired Companies);(xviii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement
for the benefit of its Employees;(xix) any collective bargaining agreement;(xx) any executory Contract under which it has advanced or loaned any
amount to any of its Employees; and(xxi) any executory Contract pursuant to which it is obligated to provide
maintenance, support or training for its services or products.2.22 Status of Contracts. Except as set forth in Section 2.22 of the
Company Letter, each of the Contracts listed or described in Section 2.21
(collectively, the Acquired Company Agreements) constitutes a valid and
binding obligation of the Acquired Company which is a party to such Acquired
Company Agreement and, to the Knowledge of the Company, the other parties
thereto, and is in full force and effect as of the date of this Agreement and
(except for those Acquired Company Agreements which
by their terms will expire prior to the Effective Time or are otherwise
terminated prior to the Effective Time in accordance with the provisions
thereof) will be in full force and effect immediately prior to the Effective
Time. Each of the Acquired Companies has fulfilled and performed in all
material respects its obligations under each of the Acquired Company
Agreements, and no Acquired Company is in, or to the Companys Knowledge, is
alleged to be in, breach or default under, nor, to the Knowledge of the
Company, is there alleged to be any basis for termination of, any of the
Acquired Company Agreements and, to the Knowledge of the Company, no other
party to any of the Acquired Company Agreements has breached or defaulted
thereunder,-42-and no event has occurred and no condition or state of facts exists
which, with the passage of time or the giving of notice or both, would
constitute such a default or breach by the Acquired Company or, to the
Knowledge of the Company, by any such other party. Complete and correct copies
of each of the Acquired Company Agreements have heretofore been delivered or
made available to Parent.2.23 Insurance. Each of the Acquired Companies maintains the policies of
fire and casualty, liability (general, products and other liability), workers
compensation and other forms of insurance and bonds set forth in Section 2.23
of the Company Letter (the Insurance Policies). The Company shall cause the
Acquired Companies to keep such insurance or comparable insurance in full force
and effect through the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms. Each of the Acquired Companies has
complied with such insurance policies and has not failed to give any notice or
to present any claim thereunder in a due and timely manner and each such policy
is in full force and effect. There is no claim by the Acquired Companies
pending under any of the Insurance Policies nor any claims as to which coverage
has been questioned, denied or disputed by the underwriters of such policies.2.24 Section 2115. The Company is subject to the provisions of the
California Corporations Code pursuant to Section 2115 thereof.2.25 Required Vote of Company Stockholders. The affirmative votes of the
holders of (a) a majority of the outstanding shares of Company Common Stock,
(b) the holders of a majority of the outstanding shares of Company Common
Stock, Company Preferred A Stock, Company Preferred B Stock and Company
Preferred C Stock, voting together as one class and (c) the holders of a
majority of the outstanding shares of Company Preferred A Stock, Company
Preferred B Stock and Company Preferred C Stock voting together as one class
are required to adopt this Agreement. No other vote of the security holders of
the Company is required by law, the Company Charter Documents or otherwise in
order for the Company to consummate the Merger and the transactions
contemplated hereby and by the Ancillary Agreements to which the Company is a
party.2.26 Brokers. Except as set forth in Section 2.26 of the Company Letter, no broker,
investment banker or other Person is entitled to any brokers, finders or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
any Acquired Company.2.27 Hart-Scott-Rodino. The Company is its own sole ultimate parent
entity (as defined in 16 C.F.R. § 801.1(a)(3) (1998)).2.28 No Shop Provisions. The Company has not violated any of its
obligations under the letter of intent between the Company and Parent dated
April 9, 2003.2.29 Certain Business Relationships with the Company. None of the
Acquired Companies directors or officers, nor any member of their immediate
families, nor any Affiliate of any of the foregoing, owns, directly or
indirectly, or has an ownership interest (other than an ownership interest of
less than three percent (3%) of the outstanding capital stock of a publicly
traded company) in any business (corporate or otherwise) which is a party to,
or in any property-43-which is the subject of, any business arrangement or
relationship of any kind with an Acquired Company or engages in competition
with an Acquired Company.2.30 Product Warranty. The technologies or products licensed, sold,
leased, and delivered and all services provided by the Acquired Companies have
conformed in all material respects with all applicable contractual commitments
and all express and implied warranties, and the Acquired Companies have no
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) for replacement or modification
thereof or other damages in connection therewith. Parent has been given a copy
of the standard terms and conditions of sale, subscription, license or lease
for each of the Acquired Companies products and services and copies of the
Acquired Companies standard forms of merchant agreements and professional
services agreements. No such product or service is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale, license or lease or beyond that implied or imposed by applicable law.2.31 Books and Records. The books of account, minute books, stock record
books, and other records of the Acquired Companies, all of which have been made
available to Parent, have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal
controls. The respective minute books of the Acquired Companies contain
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Boards of Directors, and committees of the
Boards of Directors of the Acquired Companies, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books.2.32 Accounts Receivable. All accounts receivable of the Acquired
Companies that are reflected on the Balance Sheet (collectively, the Accounts
Receivable) represent valid obligations arising from sales actually made or
services actually performed in the Ordinary Course of Business. There is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Section 2.32
of the Company Letter contains a complete and accurate list of all Accounts
Receivable as of April 30, 2003, which list sets forth the aging of such
Accounts Receivable.2.33 Inventory. From the Balance Sheet Date, to the Knowledge of the
Company, no event (including the passage of time) has occurred that could
reasonably require the Company pursuant to GAAP to revalue any of its assets,
including writing down the value of capitalized inventory.2.34 Employees.(a) Section 2.34 of the Company Letter contains a complete and accurate
list of the following information for each employee or director of the Acquired
Companies as of April 30, 2003, including each employee on leave of absence or
layoff status: employer; name; job title; current compensation paid or payable
and any change in compensation since the Balance Sheet Date; vacation accrued;
and service credited for purposes of vesting and eligibility to participate
under any Company Employee Plan.-44-(b) Section 2.34 of the Company Letter contains a list, and the Company
has heretofore provided to Parent a true and complete copy, of all (i)
severance, employment and consulting agreements with employees and consultants
of the Acquired Companies and each of their ERISA Affiliates and (ii) severance
programs and policies of the Acquired Companies and each of their ERISA
Affiliates with or relating to their employees.2.35 Termination of Certain Agreements. Immediately prior to or at the
Effective Time, that certain amended and restated Investors Rights Agreement
dated September 8, 2000 by and among the Company and the Investors identified
on Exhibit A thereto will terminate and no provision of any such agreement
shall in any way apply to (and no rights thereunder of any party thereto shall
in any way be affected by) either the execution of this Agreement or the
consummation of the Merger.2.36 Indemnification Obligations. The Company has no Knowledge of any action, proceeding or other event
pending or threatened against any officer or director of any Acquired Company
which would give rise to any indemnification obligation of such Acquired
Company to its officers and directors under its Organizational Documents or any
agreement between the Acquired Company and any of its officers or directors.2.37 Representations Complete. Neither any of the representations or
warranties made by the Company in this Agreement, nor any statements made in
any exhibit, schedule or certificate furnished by the Company pursuant to this
Agreement contains as of the date of this Agreement any untrue statement of a
material fact.ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:3.1 Organization, Standing and Power. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted, except where the failure to
do so would not, individually or in the aggregate, have a Material Adverse
Effect on Parent or Merger Sub. Parent is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on Parent.3.2 Authority. Each of Parent and Merger Sub has the requisite corporate
power and authority to enter into this Agreement and the Ancillary Agreements
to which it is a party, and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by each of Parent and
Merger Sub of
this Agreement and the Ancillary Agreements to which it is a party, and the
consummation by each of Parent and Merger Sub of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
on the part of each of Parent and-45-Merger Sub, subject to the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware.
This Agreement and the Ancillary Agreements to which it is a party and that
have been executed and delivered contemporaneously with this Agreement, have
been duly executed and delivered by each of Parent and Merger Sub. Assuming
the due authorization, execution and delivery by the other Parties hereto and
thereto and the validity and binding effect hereof and thereof on the other
Parties hereto and thereto, this Agreement and the Ancillary Agreements to
which it is a party constitute valid and binding obligations of each of Parent
and Merger Sub enforceable against it in accordance with their respective
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the
enforcement of creditors rights generally and by the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).3.3 No Violation; Consents and Approvals.(a) The execution and delivery by Parent and Merger Sub of this Agreement
and the Ancillary Agreements to which they are parties and the performance by
Parent and Merger Sub of their respective obligations pursuant hereto and
thereto will not (with or without notice or lapse of time, or both) conflict
with or result in any violation of any provision of (i) the Organizational
Documents of Parent or Merger Sub, or (ii) any Legal Requirement applicable to
Parent or Merger Sub or any of their respective properties or assets other than
compliance with the requirements set forth in Section 3.3(b)below, (iii) any
Contract applicable to Parent or any of its properties or assets, or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or any of its properties or assets, other than in the case of clauses
(i), (ii), (iii) and (iv) any such violation, default, right of termination,
cancellation or acceleration or Lien that individually or in the aggregate
would not impair in any material respect the ability of Parent to perform its
obligations under this Agreement, or prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.(b) No filing or registration with, or authorization, consent or approval
of, any Governmental Body is required by or with respect to Parent or Merger
Sub in connection with the execution and delivery by each of Parent or Merger
Sub of this Agreement or the Ancillary Agreements to which it is a party or is
necessary for the consummation by each of Parent or Merger Sub of the Merger
and the other transactions contemplated by this Agreement or the Ancillary
Agreements to which it is a party, except for (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware (ii) applicable
requirements, if any, of U.S. federal securities laws, Blue Sky Laws and the
Nasdaq Stock Market, (iii) such filings, authorizations, orders or approvals as
may be required under the HSR Act, if any, (iv) applicable requirements, if
any, under foreign laws and (v) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse
Effect on Parent, materially impair the ability of Parent or Merger Sub to
perform its obligations hereunder or under the Ancillary Agreements, or prevent
the consummation of any of the transactions contemplated hereby or thereby.3.4 SEC Documents and Other Reports. Parent has filed all documents
required to be filed by it with the SEC since December 27, 2002 (the Parent
SEC Documents). As of their respective filing dates, the Parent SEC Documents
complied in all material respects with the requirements of-46-the Securities Act
or the Exchange Act, as the case may be and, at the respective times they were
filed, none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent corrected in a
subsequently filed Parent SEC Document prior to the date hereof. The
consolidated financial statements (including, in
each case, any notes thereto) of Parent included in the Parent SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP (except, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented in all material respects
the consolidated financial position of Parent and its consolidated subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).3.5 Actions and Proceedings. As of the date of this Agreement, there are
no actions, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the Knowledge of
Parent, threatened against Parent or any of its properties, assets or business
relating to the transactions contemplated by this Agreement and the Ancillary
Agreements. Except as set forth in the Parent SEC Documents, to the Knowledge
of Parent (a) as of the date of this Agreement there are no standing orders,
judgments, injunctions, awards or decrees of any Governmental Body against or
involving any of the present or former directors, officers, employees,
consultants, agents or stockholders of Parent and (b) as of the date of this
Agreement there are no actions, suits, or claims, or legal, administrative or
arbitration proceedings or investigations pending or threatened against or
involving any of the present or former directors, officers, employees,
consultants, agents or stockholders of Parents, in each case where it is
reasonably likely that such order, judgment, injunction, award or decree, or
such action, claim, suit, claim, proceeding or investigation, would adversely
affect Parents ability to consummate the transactions contemplated by this
Agreement.3.6 Information Statement. None of the information supplied or to be
supplied by Parent for inclusion in the Information Statement shall, on the
date it is first mailed to the Company Stockholders, at the time of the
Stockholder Meeting or at the Effective Time, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statement therein, in light of circumstances
under which they are made, not misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholder Meeting which has become
misleading. If at any time prior to the Effective Time, any event relating to
Parent or any of its Affiliates, officers or directors should be discovered by
Parent which should be set forth in a supplement to the Information Statement,
Parent shall promptly inform the Company. Notwithstanding the foregoing,
Parent makes no representation or warranty with respect to any information
supplied by the Company which is contained in the Information Statement.-47-ARTICLE IV
CONDUCT PRIOR TO CLOSING; NONSOLICITATION4.1
Conduct of Business of the Company. Subject to Section 4.3, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, the Company agrees (except to the
extent that Parent shall otherwise consent in writing) to, and will cause each
Acquired Company to, carry on its business in the Ordinary Course of Business,
pay its debts and Taxes when due, pay or perform their respective other
obligations when due, and, to the extent consistent with such business, use all
reasonable efforts consistent with past practice and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others having
business dealings with it. In addition, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company shall, and
shall cause each Acquired Company to, confer with Parent concerning operational
matters of a material nature and otherwise report periodically to Parent
concerning the status of such Acquired Companys business, operations and
finances. Subject to Section 4.3, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, the Company will not, and will not
permit any Acquired Company to, without the prior consent of Parent, take any
affirmative action, or fail to take any reasonable action within its control,
as a result of which any of the changes or events listed in Section 2.7is
likely to occur.In addition, except as permitted by the terms of this Agreement or as
specifically set forth in Section 4.1 of the Company Letter or Section 4.3,
without the prior written consent of Parent, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company shall not,
nor shall the Company permit any Acquired Company to, do any of the following:(a) Amend or otherwise modify (or agree to do so), except in the Ordinary
Course of Business, or violate the terms of, any of the Acquired Company
Agreements, including any material change in the pricing or royalties charged
to the Acquired Company by Persons who have licensed Intellectual Property to
such Acquired Company;(b) Adopt or amend any employee benefit plan, or enter into any employment
contract, extend employment offers, pay or agree to pay any special bonus or
special remuneration (cash, equity or otherwise) to any Employee, or increase
the salaries, wage rates, fringe benefits or other compensation (including
equity-based compensation) payable or to become payable to any Employee
(including rights to severance or indemnification of its Employees or the
modification of any existing compensation or equity arrangements with such
individuals or the change of Vesting terms of any stock options), except in
accordance with existing Contracts and as previously disclosed in writing or
made available to Parent or as required by this Agreement;(c) Commence or settle any lawsuit, or settle any threat of any lawsuit or
proceeding or other investigation against it, other than (i) for the routine
collection of bills, (ii) in such cases where it, in good faith, determines
that failure to commence suit would result in the material-48-impairment of a
valuable aspect of its business, provided that it consults with Parent prior to
the filing of such a suit, or (iii) to enforce its rights hereunder or under
any Ancillary Agreements related hereto;(d) Take, or agree in writing or otherwise to take, any of the foregoing
actions or any other action that would or could reasonably be expected to
prevent the Acquired Companies from performing or cause the Acquired Companies
not to perform its covenants hereunder or cause or result in any of its
representations or warranties contained herein to be untrue or incorrect.4.2 No Solicitation. From and after the date of this Agreement until the
earlier to occur of the Effective Time of the Merger or termination of this
Agreement pursuant to its terms, the Company will not, and the Company will
cause the Acquired Companies and each of their directors, officers,
representatives, investment bankers, agents and affiliates not to, and the
Company will instruct any other employees of the Acquired Companies not to,
directly or indirectly, (a) solicit or encourage submission of any Acquisition
Proposal (as defined herein) by any Person, entity or group (other than Parent
and its Affiliates, agents, and representatives) or (b) participate in any
discussions or negotiations with, or disclose any non-public information
concerning any Acquired Company to, or afford access to the properties, books,
or records of any Acquired Company, or otherwise assist or facilitate, or enter
into any agreement or understanding with, any Person, entity or group (other
than Parent and its affiliates, agents, and representatives) in connection with
any Acquisition Proposal with respect to any Acquired Company. For purposes of
this Agreement, an Acquisition Proposal means any proposal or offer relating
to (i) any merger or consolidation, any sale, transfer or exclusive license of
substantial assets of the Company, or similar transactions involving any
Acquired Company, or (ii) any sales or issuances by any Acquired Company of any
capital stock, debt or options, warrants or other rights with respect thereto
(including in a financing transaction or by way of a tender offer or an
exchange offer), other than issuances of Company Stock Options in the Ordinary
Course of Business, debt incurred in Ordinary Course of Business, and issuances
of Company Capital Stock upon exercise of Company Stock Options and Company
Warrants not issued in violation of this Agreement. The Company will
immediately cease, and will cause each Acquired Company to immediately cease,
any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. Notwithstanding
the foregoing, the Company may, and each Acquired Company and each of its
officers, directors, officers, representatives, investment bankers, agents and
affiliates may, communicate with a Person that initiates an Acquisition
Proposal regarding such Acquisition Proposal solely to the extent necessary to
inform such Person that any further communication regarding such Acquisition
Proposal is prohibited pursuant to the terms of this Agreement. The Company
will within one Business Day of receipt (x) notify Parent if, on or after the
date of this Agreement and prior to the Effective Time or the termination of
this Agreement pursuant to its terms, it or any Acquired Company receives any
proposal or inquiry or request for information in connection with an
Acquisition Proposal or potential Acquisition Proposal and (y) notify Parent of
the significant terms and conditions of any such Acquisition Proposal including
the identity of the party making or proposing to make an Acquisition Proposal.
In addition, from and after the date of this Agreement, until the earlier to
occur of the Effective Time of the Merger or termination of this Agreement
pursuant to its terms, the Company will not, and will cause each Acquired
Company and each of its directors, officers, representatives, investment
bankers, agents and affiliates not to, and the Company-49-will instruct any other
employees of the Acquired Companies not to, directly or indirectly, make or
authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any Person, entity or group (other than
Parent). The Parties hereto agree that
irreparable damage would occur in the event that the provisions of this
Section 4.2were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed by the Parties hereto that Parent
shall be entitled to an injunction or injunctions, without the necessity of
proving the inadequacy of money damages as a remedy and without the necessity
of posting any bond or other security, to prevent breaches of the provisions of
this Section 4.2and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which Parent may be entitled at law or in
equity. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth above by any Acquired Company or any officer,
director, agent, representative or affiliate thereof shall be deemed to be a
breach of this Agreement by the Company.4.3 Financing. Notwithstanding anything to the contrary in this Agreement,
at any time after the date hereof and prior to the Effective Time, the Company
shall, with the prior written consent of the Parent (such consent not to be
unreasonably withheld or delayed), be permitted to incur unsecured borrowings,
for the purpose of financing the ongoing business operations of the Acquired
Companies, from one or more Company Stockholders or their respective affiliates
or from unaffiliated third parties (which may include the Parent), in an amount
not to exceed $2,500,000 for each month (or portion thereof) commencing July 1,
2003 (Interim Financing). Any such Interim Financing, if obtained from one or
more Company Stockholders or their respective affiliates, shall be on terms
comparable to those available from unaffiliated lenders, and all such Interim
Financing shall be due and payable in full, together with accrued and unpaid
interest, not later than the Effective Time.ARTICLE VADDITIONAL AGREEMENTS
5.1 Stock Options and Warrants(a) Stock Options. Effective as of the Effective Time, each Lower-Priced
Company Stock Option whether or not vested, shall be replaced by Parent. Each
Lower-Priced Company Stock Option so replaced by Parent under this Agreement
will be substituted with an option granted pursuant to the 2003 Merger and
Employment Inducement Stock Option Plan of Parent (a Replacement Option).
Each Replacement Option will continue to have, and be subject to, equivalent
principal terms and conditions as provided in the respective Stock Plan and
option agreement governing the Lower-Priced Company Stock Option it replaced,
as in effect immediately prior to the Effective Time (including vesting
schedules and vesting commencement dates), except that:(i) Shares Issuable Upon Exercise. Each Replacement Option will be
exercisable for that number of whole shares of Parent Common Stock equal to the
product (rounded down to the nearest whole share) of (1) the number of shares
of Company Common Stock that were-50-issuable upon exercise of such Lower-Priced
Company Stock Option immediately prior to the Effective Time, and (2) the
Option Exchange Ratio.(ii) Option Per Share Exercise Price. The per share exercise price for
the shares of Parent Common Stock issuable upon exercise of each Replacement
Option will be equal to the quotient (rounded up to the nearest whole cent)
determined by dividing (X) the exercise price per
share of Company Common Stock at which such Replacement Option was
exercisable immediately prior to the Effective Time by (Y) the Option Exchange
Ratio.(iii) Each Replacement Option shall be subject to and governed by the
administrative terms and provisions of Parents 2003 Merger and Employment
Inducement Stock Option Plan and the standard form of agreement thereunder;
provided, that each Replacement Option shall have the acceleration provisions
as set forth in the applicable Company stock option plan and its related
standard form of option agreement.(iv) Compliance with Section 424 of the Code. In the case of any
Lower-Priced Company Stock Option to which Section 421 of the Code applies by
reason of its qualification under Section 422 of the Code, the exercise price
of the option, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with Section 424 of the Code.(b) Warrants. Effective as of the Effective Time, each Company Warrant
whether or not Vested, shall be assumed by Parent (an Assumed Warrant). Each
Assumed Warrant will continue to have, and be subject to, the same terms and
conditions as provided in the respective warrant agreement governing such
Company warrant immediately prior to the Effective Time, except that:(i) Shares Issuable Upon Exercise. Each Assumed Warrant will be
exercisable for that number of whole shares of Parent Common Stock equal to the
product (rounded down to the nearest whole share) of (1) the number of shares
of Company Common Stock that were issuable upon exercise of such Company
Warrant immediately prior to the Effective Time, and (2) the Option Exchange
Ratio.(ii) Warrant Per Share Exercise Price. The per share exercise price for
the shares of Parent Common Stock issuable upon exercise of each Assumed
Warrant will be equal to the quotient (rounded up to the nearest whole cent)
determined by dividing (X) the exercise price per share of Company Common Stock
at which such Assumed Warrant was exercisable immediately prior to the
Effective Time by (y) the Option Exchange Ratio5.2 Registration Statement on Form S-8. As soon as practicable, but in no
event later than forty-five (45) days after the Closing Date, Parent will file,
if available for use by Parent, with the SEC a registration statement on Form
S-8 registering that number of shares of Parent Common Stock equal to the
maximum number of shares of Parent Common Stock issuable pursuant to the
Employee Retention Incentive Program.-51-5.3 Stockholder Approval. As promptly as practicable after the execution
of this Agreement and at such time as Parent may request, the Company shall
prepare and deliver to the Company Stockholders the Information Statement and
shall use commercially reasonable efforts, in accordance with Delaware Law and
California Law, as applicable, and the Company Charter Documents, to obtain the
adoption by the Company Stockholders of this Agreement and the approval by the
Company Stockholders of the
Merger (the Company Stockholder Vote). The Company shall use
commercially reasonable efforts to ensure that the stockholder approval is
solicited in compliance with Delaware Law and California Law, as applicable,
the Company Charter Documents and all other applicable Legal Requirements. The
Company agrees to use commercially reasonable efforts and to take all action
necessary or advisable to secure the necessary votes required by Delaware Law
and California Law to effect the Merger. The Company agrees to submit this
Agreement to the Company Stockholders for approval whether or not the Board of
Directors of the Company determines at any time subsequent to the date hereof
that this Agreement is no longer advisable and recommends that the stockholders
of the Company reject it. The Company agrees to deliver to the Company
Stockholders and Company Rightholders all notices required to be delivered to
them in connection with the Merger.5.4 Access to Information. The Company shall afford Parent and its
accountants, legal counsel and other representatives reasonable access to, and
permit them to make such inspections as they may reasonably require of, during
normal business hours during the period from and after the date this Agreement
until the earlier of the Effective Time or the termination of this Agreement
pursuant to its terms (a) all of the properties, books, Contracts, employee
commitments and records of the Acquired Companies (including the work papers of
independent accountants, if available and subject to the consent of such
independent accountants) and (b) all other information concerning the business,
properties, and personnel of the Acquired Companies as Parent may reasonably
request. The Company agrees to, and will cause each Acquired Company to,
provide Parent and its accountants, legal counsel and other representatives
copies of internal financial statements promptly upon request. In addition,
during the period from and after the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, the Company shall,
and will cause each Acquired Company to, and Parent shall, furnish promptly to
the other Party hereto all information concerning its business, properties and
personnel as the other Party may reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 5.4shall
affect or be deemed to modify any representation or warranty contained herein
or the conditions to the obligations of the parties to consummate the Merger.5.5 Confidentiality. The Parties acknowledge that the Company and Parent
have previously executed a confidentiality and non-disclosure agreement dated
February 12, 2003 (the Confidentiality Agreement), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms.
Notwithstanding anything to the contrary in this Agreement, the Confidentiality
Agreement or any other agreement or understanding with respect to the
transactions contemplated herein, any party to this Agreement (and any current
Employee, representative, shareholder or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided however, that no party shall-52-be permitted to disclose such
tax treatment or tax structure to the extent that such disclosure would
constitute a violation of federal or state securities laws; and provided
further, that for this purpose, (i) the tax treatment of a transaction means
the purported or claimed federal income tax treatment of the transaction, and
(ii)the tax structure of a transaction means any fact that may be relevant
to understanding the purported or claimed federal income tax treatment of the
transaction. For the avoidance of doubt, the parties acknowledge and agree
that (x) the tax treatment and tax structure of any transaction does not
include the name of any party to a transaction or any sensitive business
information (including, without limitation, specific information about any
partys intellectual property or other proprietary assets) unless such
information may be related or relevant to the purported or claimed federal
income tax treatment of the transaction, and (y) notwithstanding anything to
the contrary herein, this Agreement contains no restrictions on the ability of
any party to consult with any (or multiple) legal or tax advisors for legal or
tax advice (including, without limitation, legal or tax advisors not otherwise
involved with the transaction) regarding the tax treatment or tax structure of
the transaction, or to disclose the tax treatment or tax structure of the
transaction to the federal and state taxing authorities.5.6 Public Disclosure. Unless otherwise required by law (including
securities laws) or, as to Parent, by the rules and regulations of the Nasdaq
National Market, prior to the Effective Time, no disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement shall be made
by any Party hereto (other than disclosures to Company Stockholders pursuant to
Section 5.3) unless approved by Parent and the Company prior to release,
provided that such approval shall not be unreasonably withheld. If any such
press release or public announcement is so required by law, the party making
such disclosure shall consult with the other party prior to making such
disclosure, and the Parties shall use all reasonable efforts, acting in good
faith, to agree upon a text for such disclosure that is satisfactory to the
Parties.5.7 Consents; Notices. The Company shall (i) promptly apply for or
otherwise seek and use its commercially reasonable efforts to obtain all
consents, waivers and approvals set forth in Sections 2.5 and 5.7 of the
Company Letter, (ii) promptly provide all notices set forth in Section 2.5 of
the Company Letter, (iii) terminate prior to the Effective Time all Contracts
set forth in Sections 2.3(d) and 2.5(a) of the Company Letter which the Company
has represented therein shall be terminated, and (iv) obtain the consent of
Parent prior to authorizing any expenditures relating to tenant improvements as
set forth in Section 2.7(c)(vi) of the Company Letter. The Company shall not
take any further action with respect to the matters set forth in Section 2.2(b)
of the Company Letter.5.8 Warrants. The Company shall use commercially reasonable efforts to
terminate Company Warrants prior to the Effective Time.5.9 Legal Conditions to the Merger. Each of Parent, Merger Sub and the
Company will take all reasonable actions necessary to comply promptly with all
Legal Requirements which may be imposed on such Party with respect to the
Merger and will promptly cooperate with and furnish information to any other
Party hereto in
connection with any such requirements imposed upon such other Party in
connection with the Merger. Each Party will take all reasonable actions to
obtain (and will cooperate with the other Parties in obtaining) any consent,
authorization, order or approval of or any registration, declaration or filing
with, or an exemption by, any Governmental Body required to-53-be obtained or made
by such Party or its subsidiaries in connection with the Merger or the taking
of any action contemplated thereby or by this Agreement; provided, however,
that Parent shall not be required to agree to any divestiture by Parent or the
Company or any of Parents subsidiaries or Affiliates of shares of capital
stock or of any business, assets or property of Parent or its subsidiaries or
Affiliates or of the Company or its Affiliates or the imposition of any
material limitation on the ability of any of them to conduct their businesses
or to own or exercise control of such assets, properties and stock.5.10 HSR Regulatory Filings. As soon as reasonably practicable following
the execution of this Agreement, the Company and Parent each shall file with
the U.S. Federal Trade Commission (the FTC) and the Antitrust Division of the
U.S. Department of Justice (the DOJ) Notification and Report Forms relating
to the transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any other applicable jurisdiction. The Company
and Parent each shall promptly (a) supply the other with any information which
may be required in order to effectuate such filings and (b) supply any
additional information which reasonably may be required by the FTC, the DOJ or
the competition or merger control authorities of any other jurisdiction and
which the parties may reasonably deem appropriate. Each of the Company and
Parent will notify the other promptly upon the receipt of (i) any comments from
any officials of the FTC or the DOJ in connection with any filings made
pursuant hereto and (ii) any request by any officials of the FTC or the DOJ for
amendments or supplements to any filings made pursuant to, or information
provided to comply in all material respects with, any legal requirements,
including the requirements of the HSR Act. Whenever any event occurs that is
required to be set forth in an amendment or supplement to any filing made
pursuant to this Section 5.10, the Company or Parent, as the case may be, will
promptly inform the other of such occurrence and cooperate in filing with the
applicable governmental entity such amendment or supplement. Each of the
Company and Parent shall give the other party prompt notice of the commencement
or known threat of commencement of any proceeding by or before any Governmental
Body with respect to the Merger or any of the other transactions contemplated
by this Agreement, keep the other party informed as to the status of any such
proceeding or threat, and in connection with any such proceeding, each of the
Company or Parent will permit authorized representatives of the other party to
be present at each meeting or conference relating to any such proceeding and to
have access to and be consulted in connection with any document, opinion or
proposal made or submitted to any Governmental Body in connection with any such
proceeding.5.11 Commercially Reasonable Efforts; Additional Documents and Further
Assurances. Each of the Parties agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other Parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using commercially reasonable effects
to accomplish the following: (a) the
taking of all acts necessary to cause the conditions precedent set forth
in Article VI to be satisfied; (b) the obtaining of all necessary consents,
approvals or waivers from third parties; (c) the defending of any suits,
claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Body
vacated or-54-reversed; and (d) the execution or delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.5.12 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (a)
the occurrence or non-occurrence of any event of which the Company or Parent,
as the case may be, has Knowledge which is likely to cause any representation
or warranty of the Company and Parent or Merger Sub, respectively, contained in
this Agreement to be untrue or inaccurate in any material respect at or prior
to the Effective Time, (b) any failure of the Company or Parent, as the case
may be, to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it hereunder, and
(c) with respect to the Company only, the Company obtaining Knowledge that any
party to a Voting Agreement intends to breach such agreement; provided,
however, that the delivery of any notice pursuant to this Section 5.12 shall
not limit or otherwise affect any remedies available to the Party receiving
such notice or affect the representations, warranties, covenants or agreements
of the Parties or conditions to the obligation of the Parties under this
Agreement.5.13 Termination of Certain Benefit Plans. No later than five (5)
business days prior to the Closing Date, the Acquired Companies shall provide
Parent with evidence that any and all group severance, separation or salary
continuation plans, programs or arrangements and any and all plans intended to
include a Code Section 401(k) arrangement have been terminated (effective as of
the day immediately preceding the Closing Date) pursuant to resolutions of the
Acquired Companies Board of Directors (the form and substance of which
resolutions shall be subject to the reasonable review and approval of Parent),
unless Parent provides written notice to the Acquired Companies that such
Company Employee Plans shall not be terminated. Unless Parent provides such
written notice to the Acquired Companies no later than five (5) business days
prior to the Closing Date, effective immediately prior to the Effective Time,
the Acquired Companies shall terminate such Company Employee Plans. The
Acquired Companies also shall take such other actions in furtherance of
terminating such plans as Parent may reasonably require.5.14 Employee Benefits. From and after the Effective Time, Parent shall
provide the employees of the Company who continue their employment with the
Surviving Corporation or who become employees of Parent or any subsidiary of
Parent (Continuing Employees) with substantially similar types and levels of
employee benefits as those provided to similarly situated employees of Parent.
Without limiting the generality of the foregoing, Parent will, or will cause
the Surviving Corporation to, recognize the
prior service with the Company of each of the Continuing Employees in
connection with all employee benefit plans of Parent or its affiliates in which
employees of Parent similarly situated to the Continuing Employees are eligible
to participate following the Effective Time, for purposes of eligibility,
vesting and levels of benefits, except to the extent that such service credit
will result in benefit accrual or the duplication of benefits.5.15 Indemnification and Insurance.(a) Parent will, or will cause the Surviving Corporation to, fulfill and
honor in all respects the obligations of the Company pursuant to (i) each
indemnification agreement listed in Section 5.15 of the Company Letter in
effect between the Company and each person who is a director or officer of any
of the Acquired Companies immediately prior to the Effective Time and-55-(ii)  any
indemnification provision under the Company Charter Documents as in effect on
the date of this Agreement (the persons to be indemnified pursuant to the
agreements and provisions referred to in clauses (i) and (ii) of this Section
5.15(a) shall be referred to as, collectively the Company Indemnified
Parties). The certificate of incorporation and bylaws of the Surviving
Corporation shall contain provisions with respect to indemnification and
exculpation from liability substantially similar to those set forth in the
Company Charter Documents as in effect on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period of
six (6) years after the Effective Time in any manner that would materially
adversely affect the rights thereunder of any Company Indemnified Party.(b) For a period of six (6) years after the Effective Time, Parent shall
cause the Surviving Corporation to cause to be maintained in effect, for the
benefit of all officers and directors of the Acquired Companies prior to the
Effective Time, policies of directors and officers and fiduciary liability
insurance providing for such coverages as the Company may determine in its sole
discretion prior to the Effective Time (provided that the Surviving Corporation
may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not materially less advantageous to
former officers and directors of Company), but only with respect to claims
arising from facts or events which occurred at or before the Effective Time.5.16 Closing Date Payment Schedule. Immediately prior to the Effective
Time, Parent and the Company shall each review and approve and the Company
shall execute and deliver a schedule reflecting, as of the Effective Time (i)
for each holder of the Company Capital Stock, the number of shares of Company
Capital Stock held of record, the aggregate amount of Merger Cash payable to
such holder in the Merger (classified as Restricted or Unrestricted), the stock
certificate numbers held by each such person and such persons federal tax
identification number to the extent such number is known and (ii) for each
holder of Capital Stock Options, the number of shares of the Company Common
Stock issuable upon exercise thereof immediately prior to the Effective Time,
the number of shares of Parent Common Stock issuable upon exercise thereof
following their assumption by Parent (in accordance with Section 5.1(a)
(classified as Vested or Unvested) and the per share exercise price thereof
upon such assumption and (iii) for each holder of Company Warrants, the number
of shares of Company
Capital Stock issuable upon exercise thereof immediately prior to the
Effective Time, the number of shares of Parent Common Stock issuable upon
exercise thereof following their assumption by Parent (in accordance with
Section 5.1(b)), and the exercise price thereof per share of Parent Common
Stock upon such assumption.5.17 Certificate of Status of Foreign Corporation. With respect to each
Acquired Company, Parent shall have obtained a Certificate of Status of Foreign
Corporation, or other comparable document, from each foreign jurisdiction in
which it is qualified to conduct business and which is dated within five (5)
Business Days prior to the Closing.5.18 Releases. The Releases in the form attached hereto as Exhibit B shall
be in full force and effect.5.19 Certain Agreements. At or prior to the Effective Time, the Company
shall make (and shall be permitted to make) all payments required to be made
under the agreements listed on Section 5.19 of the Company Letter.-56-5.20 280G Stockholder Approval. The Company shall submit to the Company
Stockholders for their approval or disapproval, in the manner provided for
under the Code and applicable regulations, any payments of cash or sales and
purchases of stock or Vesting of Company Stock Options, Company Warrants or
other rights to purchase Company Capital Stock or any other benefits that may
be deemed to constitute parachute payments pursuant to Section 280G of the
Code, unless the Company and Parent mutually determine that such amounts are
exempt from such treatment under Code Section 280G and the excise tax provided
for pursuant to Code Section 4999. The form and substance of any materials
provided to the Companys Stockholders in connection with such a vote shall be
subject to the review and approval of Parent.ARTICLE VI
CONDITIONS TO CLOSING6.1 Conditions to Obligations of the Company. The obligations of the
Company to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:(a) Representations, Warranties and Covenants. The representations and
warranties of Parent set forth in this Agreement shall be true and correct in
all material respects (determined without regard to any materiality qualifiers,
including Material Adverse Effect) (i) as of the date hereof and (ii) as of the
Closing Date, as though made on and as of the Closing Date (provided that in
the cases of clauses (i) and (ii) any such representation and warranty made as
of a specific date shall be true and correct in all material respects as of
such specific date).(b) Agreements and Covenants. Parent and Merger Sub shall have performed
or complied in all material respects with each agreement and covenant required
by this Agreement to be
performed or complied with by them on or prior to the Closing Date, and
the Company shall have received a certificate to such effect signed by a duly
authorized officer of Parent and Merger Sub.(c) Officers Certificate. An executive officer of Parent shall deliver
to the Company at the Closing a certificate certifying (i) that conditions
specified in Sections 6.1(a) and (b) have been fulfilled, and (ii) the
conditions to the obligations of the Company set forth in this Section 6.1 have
been satisfied unless otherwise waived in accordance with their terms.(d) Stockholder Approval. This Agreement shall have been adopted, and the
Merger and the transactions contemplated hereby shall have been approved, by
the Company Stockholders by the requisite vote under applicable law and the
Company Charter.(e) Secretarys Certificate. Each of Parent and Merger Sub shall have
delivered to the Company a copy of (i) the text of the resolutions adopted by
the Board of Directors of Parent and Merger Sub authorizing the execution,
delivery and performance of this Agreement and the Certificate of Merger and
the consummation of all of the transactions contemplated by this Agreement and
the Certificate of Merger and (ii) the certificate of incorporation and bylaws
of Parent and Merger Sub, along with certificates executed on behalf of each of
Parent and Merger Sub by such entitys corporate secretary certifying to the
Company that such copies are true, correct and-57-complete copies of such
resolutions, certificate of incorporation, and bylaws, respectively, and that
such resolutions, certificate of incorporation and bylaws were duly adopted and
have not been amended or rescinded except as has been disclosed to the Company.(f) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by any Governmental Body seeking any of the foregoing be
pending.(g) No Order or Illegality. No Governmental Body shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger.(h) Hart-Scott-Rodino Act. All waiting periods under the HSR Act relating
to the transactions contemplated hereby will have expired or terminated early
and all material foreign antitrust approvals required to be obtained prior to
the Merger in connection with the transactions contemplated hereby will have
been obtained.(i) Employee Retention Incentive Program. Parent shall have adopted the
Employee Retention Incentive Program in the form attached hereto as Exhibit D
(the Employee Retention Incentive Program).6.2 Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by Parent:(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in all
material respects (determined without regard to any materiality qualifiers,
including Material Adverse Effect) (i) as of the date hereof and (ii) as of the
Closing Date, as though made on and as of the Closing Date (provided that in
the cases of clauses (i) and (ii) any such representation and warranty made as
of a specific date shall be true and correct in all material respects as of
such specific date).(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with each agreement and covenant required by
this Agreement to be performed or complied with by it on or prior to the
Closing Date.(c) Officers Certificate. The chief executive officer of the Company
shall deliver to Parent and Merger Sub at the Closing a certificate certifying
(i) that the conditions specified in Sections 6.2(a) and (b) have been
fulfilled, and (ii) the conditions to the obligations of the Parent and Merger
Sub set forth in this Section 6.2 have been satisfied unless otherwise waived
in accordance with their terms.-58-(d) Stockholder Approval. This Agreement shall have been adopted, and the
Merger and the transactions contemplated hereby shall have been approved, by
the Company Stockholders by the requisite vote under applicable law and the
Company Charter.(e) Third Party Consents. Parent shall have been furnished with evidence
reasonably satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Section 6.2(e) of the Company Letter.(f) Legal Opinion. Parent shall have received a legal opinion from Cooley
Godward, LLP, legal counsel to the Company, in substantially the form attached
hereto as Exhibit E.(g) No Material Adverse Change. There shall not have occurred any
Material Adverse Effect since the date of this Agreement with respect to the
Company.(h) Termination of Company Investor Rights. Parent shall have been
furnished evidence reasonably satisfactory to it that all investor rights
granted by the Company to its stockholders and in effect prior to the Closing,
including but not limited to rights of co-sale, voting, registration, first
refusal, pre-emption, board observation or information or operational
covenants, shall have terminated as of the Closing.(i) Secretarys Certificate. The Company shall have delivered to Parent a
copy of (i) the text of the resolutions adopted by the Companys Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the Certificate of Merger and the consummation of all of the transactions
contemplated by this Agreement and the Certificate of Merger, (ii) the text of
the resolutions adopted by the Company Stockholders adopting this Agreement and
approving the Merger and the transactions contemplated hereby, and (ii) the
Company Charter Documents, along with a certificate executed on behalf of the
Company by its corporate secretary certifying to Parent that such copies are
true, correct and complete copies of such resolutions and such Company Charter
Documents, and that such resolutions and Company Charter
Documents were duly adopted and have not been amended or rescinded except
as has been disclosed to and approved by Parent.(j) Certificates of Good Standing. Parent shall have received a long-form
certificate of good standing from the Secretary of State of the State of
Delaware which is dated within a reasonable period prior to Closing with
respect to the Company. With respect to each Company Subsidiary, Parent shall
have received a certificate of good standing, or other comparable document,
from the jurisdiction in which such Acquired Company is organized and which is
dated within a reasonable period prior to the Closing.(k) Financial Statements. Parent shall have received from the Company the
audited consolidated balance sheet of the Company as of December 31, 2002 and
the related audited statements of income, stockholders equity and cash flow
for the year then ended (the 2002 Audited Financial Statements).-59-(l) FIRPTA Statement. The Company shall have delivered to Parent a
properly executed statement in a form reasonably acceptable to Parent for
purposes of satisfying Parents obligations under Treasury Regulation Section
1.1445-2(c)(3).(m) No Proceedings or Injunctions. No action, suit or proceeding shall be
pending before any court of competent jurisdiction or other Governmental Body
or before any arbitrator in which it is likely that an unfavorable injunction
(preliminary or permanent), judgment, order, decree, ruling or charge will be
issued that could (i) prevent, delay or otherwise interfere with the
consummation of the Merger or any other transactions contemplated by this
Agreement, (ii) cause the Merger or any other transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect materially the
right of Parent to control the Acquired Companies following the Effective Time,
(iv) affect materially the right of Parent or the Acquired Companies to own the
assets of the Acquired Companies (including Acquired Company Intellectual
Property) and to operate the Acquired Companies respective businesses, or (v)
affect in a materially adverse manner the business, assets, liabilities,
financial condition or results of operations of the Acquired Companies taken as
a whole, and no such injunction (preliminary or permanent), judgment, order,
decree, ruling or charge shall be in effect.(n) No Order or Illegality. No Governmental Body shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has caused or could
cause any of the effects under clause (i), (ii), (iii), (iv) or (v) of Section
6.2(m) above.(o) Hart-Scott-Rodino Act. All waiting periods under the HSR Act relating
to the transactions contemplated hereby will have expired or terminated early
and all material foreign antitrust approvals required to be obtained prior to
the Merger in connection with the transactions contemplated hereby have been
obtained.ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW7.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of the Company contained in this Agreement, or
in any certificate, schedule or other instrument delivered pursuant to this
Agreement, shall terminate at 11:59 p.m. California time on the eighteen (18)
month anniversary of the Closing Date (the Escrow
Termination Time). The
representations and warranties of Parent and Merger Sub contained in this
Agreement, or in any certificate, schedule or other instrument delivered by
Parent or Merger Sub pursuant to this Agreement, shall terminate at the
effective Time.7.2 Escrow Arrangements.(a) Escrow Fund. The Escrow Fund shall be available to compensate Parent
and its officers, directors, employees, agents, representatives, stockholders,
controlling Persons and affiliates, including the Company after the Effective
Time (the Covered Parties), or any of them, for any losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys fees
and expenses of investigation and defense relating to such loss, liability,
damage, deficiency,-60-cost or expense (hereinafter individually a Lossand
collectively Losses) incurred or suffered by the Covered Parties, or any of
them, directly or indirectly, including as a result of claims by third parties,
as a result of (i) any breach or inaccuracy of a representation, warranty,
covenant or agreement of the Company contained in this Agreement (or in any
certificate, schedule or other instrument delivered by the Company pursuant to
this Agreement), (ii) any failure by the Company to perform or comply with any
covenant required to be performed by it prior to the Effective Time and
contained in this Agreement or any Company Ancillary Agreement to which it is a
party, (iii) the incurrence by the Company of third party transaction expenses
in connection with this Agreement and the Merger, in excess of $8,825,000
(Excess Transaction Expenses), (iv) any Excess Appraisal Payments and (v) any
of the matters set forth in Sections 7.2(a)-1 and 7.2(a)-2 of the Company
Letter (hereinafter individually a Covered Eventand collectively, the
Covered Events). Except for claims for equitable relief and claims with
respect to fraud solely against the person or persons committing or alleged to
have committed such fraud, recovery pursuant to this Section 7.2(a)shall be
the sole and exclusive remedy of Parent and Merger Sub for any Covered Event if
the Merger contemplated hereby is consummated. If the Merger contemplated
hereby is not consummated, nothing in this Agreement shall limit the liability
of the Company with respect to the representations, warranties or covenants of
the Company contained herein, and nothing in this Agreement shall limit the
liability of Parent with respect to the representations, warranties or
covenants of Parent contained herein.(b) Deposit of Escrow Fund. Promptly after the Closing, the Escrow Cash,
without any act of the Escrow Contributors, will be deposited with LaSalle Bank
National Association, as escrow agent hereunder, or another institution
acceptable to Parent and the Stockholder Representative (the Escrow Agent),
such deposit of the Escrow Cash to constitute an escrow fund (the Escrow
Fund) to be governed by the terms set forth herein. The Escrow Agent shall
have no duty to confirm or verify the accuracy or correctness of the amount of any
Escrow Cash deposited with it hereunder.(c) Escrow Period; Distribution upon Termination of Escrow Period.(i) Subject to the other provisions of this Section 7.2the Escrow Fund
shall be in existence immediately following the Effective Time and shall
terminate at the Escrow Termination Time (the Escrow
Period).At the Escrow Termination Time, the Escrow Fund shall terminate with
respect to any amounts of Escrow Cash remaining in the Escrow Fund at that
time; provided, however, that the Escrow Period and the Escrow Fund shall not
terminate with respect to any amount which, in the good faith judgment of
Parent, subject to the good faith objection of the Stockholder Representative,
is necessary to satisfy any then pending and unsatisfied claims specified in
any Officers Certificate (as defined below) delivered to the Escrow Agent
prior to the fifth (5th) Business Day following the Escrow Termination Time
with respect to pending and unsatisfied claims existing prior to such time.
Promptly after all such claims have been resolved, the Escrow Agent shall
deliver to the Escrow Contributors subject to the provisions of Section
7.2(c)(iii) below, the remaining portion of Escrow Cash, without interest, in
the Escrow Fund, if any, not required to satisfy such claims (the Remaining
Portion).-61-(ii) If Escrow Cash that is Restricted is released upon termination of the
Escrow Period pursuant this Section 7.2(c)(ii), such Escrow Cash shall be
released to Parent to be held by Parent pursuant to the terms of the Stock
Restriction Agreement governing such Escrow Cash.(iii) Within twenty (20) Business Days following the Escrow Termination
Time, Parent will notify the Stockholder Representative and the Escrow Agent in
writing of the portion of the Escrow Fund that may be distributed pursuant to
this Section 7.2(c) (an Escrow Distribution Notice), and the allocation of
such distribution. The Stockholder Representative shall have ten (10) Business
Days following receipt of such notice from Parent during which to object to the
contents thereof by sending written notice of such objection to Parent and to
the Escrow Agent. If the Escrow Agent does not timely receive any such written
objection from the Stockholder Representative, the Escrow Agent shall
distribute Escrow Cash from the Escrow Fund in accordance with the Escrow
Distribution Notice and will incur no liability, and shall be fully protected,
in relying on such Escrow Distribution Notice and shall have no obligation to
take any action until it has received such notice.(d) Protection of Escrow Fund.(i) The Escrow Agent shall hold and safeguard the Escrow Fund during the
Escrow Period, and shall hold and dispose of the Escrow Fund only in accordance
with the terms hereof.(ii) At the direction in writing of Parent, the Escrow Cash will be
invested in money market funds or government securities. In the absence of
written instructions from Parent,
the Escrow Agent shall invest as soon as reasonably practicable all
balances for which it has not received specific written investment direction,
including income earned, in the Federated Treasury Obligations Fund. All
income earned on the Escrow Cash shall be part of the Escrow Fund, other than
distributions to Parent pursuant to Section 1.7(c) hereof.(e) Claims for Losses.(i) Upon receipt by the Escrow Agent at any time on or before the fifth
(5th) Business Day following the Escrow Termination Time of an Officers
Certificate (as defined below), subject to the last sentence of this Section
7.2(e) and the provisions of Section 7.2(f), the Escrow Agent shall deliver to
Parent out of the Escrow Fund, as promptly as practicable, such amount of
Escrow Cash as are set forth in the Officers Certificate. For purposes
hereof, Officers Certificate means a certificate signed by any officer of
Parent and delivered to the Escrow Agent, and such certificate shall (A) state
that the Covered Party claiming compensation has paid or incurred or reasonably
anticipates that it will have to pay or incur Losses; (B) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid or incurred, or the basis for such
anticipated liability, and the nature of the misrepresentation, breach of
warranty or covenant to which such item is related, and (C) the amount of
Escrow Cash to be delivered to Parent in compensation for such Losses.
Notwithstanding the foregoing, in no event shall any amounts be paid to any
Covered Party out of the Escrow Fund with respect to any Loss that has not yet
been paid or incurred, even if Parent has submitted an Officers-62-Certificate
indicating that it reasonably anticipates paying or incurring such Loss, it
being understood that any such amounts claimed on such Officers Certificate
shall be held in the Escrow Fund pending final resolution of the claim
notwithstanding the passing of the Escrow Termination Time.(ii) Deliveries of Escrow Cash pursuant to Section 7.2(e)(i) above shall
be made pro rata from the Escrow Fund contributions made by each Escrow
Contributor based on the original contributions of Escrow Cash of each Escrow
Contributor to the Escrow Fund.(iii) With respect to any Escrow Contributor that contributed Escrow Cash
that is Restricted, the delivery of Escrow Cash out of the Escrow Fund shall be
allocated between Restricted and Unrestricted Escrow Cash in the same
proportions as such Escrow Contributors entire contribution to the Escrow Fund
is then allocated between Restricted and Unrestricted Escrow Cash. With
respect to the Escrow Cash that is Restricted, the delivery out of the Escrow
Fund shall be allocated among the different portions that Vest at different
times in the same proportion as such Escrow Contributors entire contribution
of Escrow Cash to the Escrow Fund is then allocated among such different
portions that Vest at different times.(iv) Notwithstanding the foregoing, the Escrow Agents sole duty with
respect to the delivery of the Escrow Cash hereunder is to deliver the Escrow
Cash to Parent or the Stockholder Representative, as the case may be, in
accordance with the written instructions provided for in this Section 7.2, and
the Escrow Agent has no duty to monitor or enforce compliance with this
section, including determining whether or not the Escrow Cash to be released is
Restricted.(f) Objection to Claims; Resolution of Conflicts. At the time of delivery
of any Officers Certificate to the Escrow Agent, Parent shall deliver a
duplicate copy of such certificate to
the Stockholder Representative, and for a period of ten (10) Business Days
after such delivery, the Escrow Agent shall make no delivery to Parent of any
portion of the Escrow Cash pursuant to Section 7.2(e) with respect to such
Officers Certificate unless and until the Escrow Agent shall have received
written authorization from the Stockholder Representative to make such
delivery. After the expiration of such ten (10) Business Day period, the
Escrow Agent shall make delivery of the Escrow Cash from the Escrow Fund in
accordance with Section 7.2(e); provided, however, that no such payment or
delivery may be made until resolution of any objection to the delivery of any
Escrow Cash made pursuant to this Section 7.2(f) if the Stockholder
Representative shall, in a written statement, make a good faith objection to
the claim made in the Officers Certificate, and such written objection shall
have been delivered to the Escrow Agent prior to the expiration of such ten
(10) Business Day period. If the Escrow Agent does not timely receive any such
written objection from the Stockholder Representative, the Escrow Agent shall
distribute Escrow Cash from the Escrow Fund in accordance with the Officers
Certificate and will incur no liability, and shall be fully protected, in
relying on such Officers Certificate. Such failure by the Stockholder
Representative to so object shall be an irrevocable acknowledgment by the
Stockholder Representative that the Covered Party claiming a Loss or Losses is
entitled to the full amount of the claim for Losses set forth in such Officers
Certificate. If the Stockholder Representative has delivered such a written
objection, the Stockholder Representative and Parent shall attempt in good
faith to agree upon the rights of the respective parties with respect to each
of such claims. If the Stockholder Representative and Parent should so agree,
a memorandum setting forth such agreement shall be prepared and signed by the
Stockholder Representative and the Covered Parties and-63-furnished to the Escrow
Agent. Such memorandum shall state the amount of Escrow Cash to be released
from the Escrow Fund in connection with such Losses. The Escrow Agent shall be
entitled to rely on any such memorandum and distribute the Escrow Cash from the
Escrow Fund in accordance with the terms thereof.(g) Third Party Claims. In the event Parent becomes aware of a
third-party claim which Parent reasonably believes may result in a demand for
recovery of Losses, Parent shall notify the Stockholder Representative of such
claim, and the Stockholder Representative shall be entitled on behalf of the
Escrow Contributors, at its expense, to participate in, but not to determine or
conduct, the defense of such claim. Parent shall have the right in its sole
discretion to conduct the defense of and settle any such claim; provided,
however, that (i) Parent shall first consult with the Stockholder
Representative regarding such settlement, (ii) Parent shall not, without the
prior written consent of the Stockholder Representative, settle any demand for
appraisal of or dissenters rights with respect to Company Capital Stock for an
amount that exceeds the amount of Merger Consideration payable pursuant to
Section 1.7 to the Company Stockholder making such demand and (iii) except with
the consent of the Stockholder Representative, no settlement of any such claim
with third-party claimants shall be determinative of whether Parent or any
other party is entitled to compensation pursuant to this Article VII or the
amount of such compensation, if any. In the event that the Stockholder
Representative has consented to any such settlement, the Escrow Contributors
shall have no power or authority to object under any provision of this Article
VII to the amount of any claim by Parent with respect to such settlement.(h) Limitations on Claims from Escrow Fund. The Covered Parties shall not
be entitled to recovery of Losses under this Section 7.2 unless and until the
Covered Parties have paid
or incurred Losses in excess of $500,000 in the aggregate (the Basket
Amount), in which case the Covered Parties shall be entitled to recover all
Losses so identified including the Basket Amount; provided however, that claims
for recovery of Losses in respect of any breach of the representations and
warranties set forth in Section 2.10, Excess Transaction Expenses, Excess
Appraisal Payments and any of the matters set forth in Section 7.2(a)-1 of the
Company Letter shall not be subject to the Basket Amount limitation, and such
claims shall not count toward satisfaction of the Basket Amount for purposes of
other claims for recovery of Losses.(i) Escrow Agents Duties.(i) The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth in Section 1.7(c) hereof and this Section
7.2, and as set forth in any additional written escrow instructions which the
Escrow Agent may receive after the date of this Agreement which are signed by
an officer of Parent and the Stockholder Representative (and which are
acceptable to the Escrow Agent), and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed to be genuine
and to have been signed or presented by the proper party or parties.(ii) The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the Parties hereto or by any other person,
excepting only orders or process of courts of law, and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case the Escrow Agent obeys or complies with any such order,-64-judgment or
decree of any court, the Escrow Agent shall be fully protected and shall not be
liable to any of the Parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.(iii) The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of the Parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.(iv) The Escrow Agent shall not be liable for the expiration of any rights
under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.(v) In performing any duties under this Agreement, the Escrow Agent shall
not be liable to any person or entity for damages, losses, liabilities,
penalties, claims, settlements, judgments, costs or expenses, except for gross
negligence or willful misconduct on the part of the Escrow Agent (each as may
be finally determined by a court of competent jurisdiction). The Escrow Agent
shall not incur any liability for any action taken, suffered or omitted in
reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall reasonably believe
to be genuine, nor will the Escrow Agent be liable or responsible for
forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the Escrow Agent may consult with legal
counsel (whether such counsel shall be regularly retained or specifically
employed) in connection with performing the Escrow Agents duties under this
Agreement and shall be fully protected and shall incur no liability with
respect to
any action taken, suffered, or omitted to be taken by it in accordance
with the advice of counsel. The Escrow Agent is not responsible for
determining and verifying the authority of any person acting or purporting to
act on behalf of any Party to this Agreement.(vi) If any controversy arises between the Parties to this Agreement, or
with any other Party, concerning the subject matter of this Agreement, its
terms or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow Agent may hold all
documents and the Escrow Cash and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agents discretion, may be required, despite what may be set forth
elsewhere in this Agreement. In such event, the Escrow Agent will not be
liable for damages. Furthermore, the Escrow Agent may at its option, file an
action of interpleader requiring the parties to answer and litigate any claims
and rights among themselves. The Escrow Agent is authorized to deposit with
the clerk of the court all documents and the Escrow Cash held in escrow, except
all costs, expenses, charges and reasonable attorney fees incurred by the
Escrow Agent due to the interpleader action, which the Parties jointly and
severally agree to pay. Upon initiating such action, the Escrow Agent shall be
fully released and discharged of and from all obligations and liability imposed
by the terms of this Agreement.(vii) The Parties (other than the Escrow Agent) and their respective
successors and assigns agree jointly and severally to indemnify and hold Escrow
Agent harmless against any and all losses, claims, damages, liabilities,
penalties, claims, settlements, judgments, costs or expenses, including
reasonable costs of investigation, counsel fees, including allocated costs-65-of
in-house counsel and disbursements that may be imposed on Escrow Agent or
incurred by Escrow Agent in connection with the performance of its duties under
this Agreement, including but not limited to any litigation arising from this
Agreement or involving its subject matter, other than those arising out of the
gross negligence or willful misconduct of the Escrow Agent (each as may be
finally determined by a court of competent jurisdiction). The indemnity
provided herein shall survive the termination of this Agreement and the
termination and expiration of the Escrow Fund. The costs and expenses of
enforcing this right of indemnification shall be paid half by the Parent and
half by deduction from the Escrow Fund, unless there are not sufficient moneys
remaining in the Escrow Fund, in which case Parent will pay such costs and
expenses. The foregoing indemnities in this paragraph shall survive the
resignation or substitution of the Escrow Agent or the termination of this
Agreement.(viii) The Escrow Agent may resign at any time upon giving not fewer than
thirty (30) days written notice to the Parent and the Stockholder
Representative; provided, however, that no such resignation shall become
effective until the appointment of a successor escrow agent which shall be
accomplished as follows: Parent and the Stockholder Representative shall use
their commercially reasonable efforts to mutually agree on a successor escrow
agent within thirty (30) days after receiving such notice. If the parties fail
to agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business in
the State of Illinois or to petition a court of competent jurisdiction to
appoint a successor escrow agent. The successor escrow agent shall execute and
deliver an instrument accepting such appointment and it shall, without further
acts, be vested with all the estates, properties, rights, powers, and duties of
the predecessor escrow agent as if originally named as escrow agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be discharged
from any further duties and liability under this Agreement. The Escrow
Agent shall be paid any outstanding fees and expenses prior to transferring
assets to a successor escrow agent(j) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent in accordance with Exhibit F of this
Agreement. It is understood that the fees and usual charges agreed upon for
services of the Escrow Agent shall be considered compensation for ordinary
services as contemplated by this Agreement. In the event that the conditions
of this Agreement are not promptly fulfilled, or if the Escrow Agent renders
any service not provided for in this Agreement, or if the parties request a
substantial modification of its terms (which modification is consented to by
the Escrow Agent), or if any controversy arises, or if the Escrow Agent is made
a party to, or intervenes in, any litigation pertaining to the Escrow Fund or
its subject matter, the Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs, attorneys fees and
expenses occasioned by such default, delay, controversy or litigation.(k) Consequential Damages. Anything to the contrary notwithstanding, in
no event shall the Escrow Agent be liable for special, punitive, indirect,
consequential or incidental loss or damage of any kind whatsoever (including
but not limited to lost profits), even if the Escrow Agent has been advised of
the likelihood of such loss or damage and regardless of the form of action.(l) Successor Escrow Agents. Any person into which the Escrow Agent in
its individual capacity may be merged or converted or with which it may be
consolidated, or any person resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual-66-capacity shall be a
party, or any person to which substantially all the business of the Escrow
Agent in its individual capacity may be transferred, shall be the Escrow Agent
thereunder without further act.7.3 Stockholder Representative.(a) In the event that the Merger is approved, effective upon such vote,
and without further act of any Escrow Contributor or Company Rightholder,
Kenneth Koenig shall be appointed as the agent and attorney-in-fact, as the
Stockholder Representative for and on behalf of the Escrow Contributors, to
give and receive notices and communications, to authorize delivery or payment
to Parent of Escrow Cash from the Escrow Fund in satisfaction of claims by
Parent, to object to such payments, to agree to, negotiate, enter into
settlements and compromises of, and comply with orders of courts with respect
to such claims, and to take all other actions that are either (i) necessary or
appropriate in the judgment of the Stockholder Representative for the
accomplishment of the foregoing or (ii) specifically mandated by the terms of
this Agreement. Such agency may be changed by the Escrow Contributors from
time to time upon not less than thirty (30) days prior written notice to Parent
and the Escrow Agent; provided, however, that the Stockholder Representative
may not be removed unless holders of a two-thirds interest of the Escrow Fund
agree to such removal and to the identity of the substituted agent. Upon any
change in the Stockholder Representative, such successor Stockholder
Representative shall promptly provide the Escrow Agent with a signature
specimen. Any vacancy in the position of Stockholder Representative may be
filled by the holders of a majority in interest of the Escrow Fund. No bond
shall be required of the Stockholder Representative, and the Stockholder
Representative shall not receive compensation for its services. Notices or
communications to or from the Stockholder Representative shall constitute
notice to or from the Escrow Contributors.(b) The Stockholder Representative shall not be liable for any act done or
omitted hereunder as the Stockholder Representative while acting in good faith.
The Escrow Contributors on whose behalf the Escrow Cash was contributed to the
Escrow Fund shall indemnify the Stockholder Representative and hold the
Stockholder Representative harmless against any loss, liability or expense
incurred without bad faith on the part of the Stockholder Representative and
arising out of or in connection with the acceptance or administration of the
Stockholder Representatives duties hereunder, including the reasonable fees
and expenses of any legal counsel retained by the Stockholder Representative.
After all claims for Losses by Parent set forth in Officers Certificates
delivered to the Escrow Agent and the Stockholder Representative have been
satisfied, or reserved against, the Stockholder Representative, with the
consent of the majority in interest in the Escrow Fund, may recover from the
Escrow Fund at the end of the Escrow Period payments not yet paid for any
expenses incurred in connection with the Stockholder Representatives
representation hereby.(c) A decision, act, consent or instruction of the Stockholder
Representative pursuant to this Agreement shall be final, binding and
conclusive upon the Escrow Contributors and Company Rightholders; and the
Escrow Agent and Parent may rely upon any such decision, act, consent or
instruction of the Stockholder Representative as being the decision, act,
consent or instruction of the Escrow Contributors and Company Rightholders.
The Escrow Agent and Parent are hereby relieved from any liability to any
Person for any acts done by them in accordance with such decision, act, consent
or instruction of the Stockholder Representative and the Escrow Agent and
Stockholder-67-Representative are hereby relieved from any liability to any Person
for any acts done by them in accordance with such decision, act, consent or
instruction of Parent.(d) Subject to Parents prior claims against the Escrow Fund, the
Stockholder Representative shall be entitled to receive payment for its
reasonable and documented expenses therefrom, prior to any payments to the
Escrow Contributors.ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Closing
Date:(a) by mutual written consent executed and delivered by each party hereto
and duly authorized by the Board of Directors of the Company and Parent;(b) by either Parent or the Company if: (i) the Closing Date has not
occurred by September 30, 2003 as a result of a condition to Closing not having
been satisfied prior to such date or otherwise (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to
any Party whose failure to fulfill any agreement or covenant required hereunder
to be performed by such Party at or prior to the Effective Time has been the
cause of, or resulted in, the
failure of the Effective Time to occur on or before such date and such
action or failure constitutes a breach of this Agreement); (ii) there shall be
a final nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental Body that would make consummation of the Merger
illegal;(c) by Parent if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger, by any Governmental Body, which would: (i) prohibit Parents or the
Companys ownership or operation of any portion of the business of the Company
or (ii) compel Parent or the Company to dispose of or hold separate, as a
result of the Merger, any portion of the business or assets of the Company or
Parent that would be material to the Company or Parent;(d) by Parent if it is not in material breach of its representations,
warranties, covenants or agreements under this Agreement and there has been a
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of the Company and as a result of such breach the
conditions set forth in Section 6.2(a) or 6.2(b), as the case may be, would not
then be satisfied; provided, however, that if such breach is curable by the
Company within fifteen (15) days through the exercise of its commercially
reasonable efforts, then for so long as the Company continues to exercise such
commercially reasonable efforts Parent may not terminate this Agreement under
this Section 8.1(d) unless such breach is not cured within fifteen (15) days
(but no cure period shall be required for a breach which by its nature cannot
be cured); and(e) by the Company if it is not in material breach of its representations,
warranties, covenants or agreements under this Agreement and there has been a
breach of any representation,-68-warranty, covenant or agreement contained in this
Agreement on the part of Parent or Merger Sub and as a result of such breach
the conditions set forth in Section 6.1(a) or 6.1(b), as the case may be, would
not then be satisfied; provided, however, that if such breach is curable by
Parent or Merger Sub within fifteen (15) days through the exercise of its
commercially reasonable efforts, then for so long as Parent or Merger Sub
continues to exercise such commercially reasonable efforts the Company may not
terminate this Agreement under this Section 8.1(e) unless such breach is not
cured within fifteen (15) days (but no cure period shall be required for a
breach which by its nature cannot be cured).8.2 Effect of Termination. Except as set forth in Sections 8.1(d) and
8.1(e), any termination of this Agreement under Section 8.1 above will be
effective immediately upon the delivery of written notice of the terminating
Party to the other parties hereto. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect, except (a) as set forth in this Section 8.2 and Article IX
(general provisions, including expenses), each of which shall survive the
termination of this Agreement, and (b) nothing herein shall relieve any Party
from liability for any willful breach of this Agreement. No termination of
this Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination
of this Agreement.8.3 Amendment. Except as is otherwise required by applicable law, prior
to the Closing, this Agreement may be amended at any time by execution of an
instrument in writing signed by Parent and the Company; provided, however, that
(i) any amendment that affects the rights, duties or responsibilities of the
Escrow Agent set forth in Section 7.2 hereunder may not be amended without the
consent of the Escrow Agent, (ii) any amendment that affects the rights, duties
or responsibilities of the Stockholder Representative set forth in Section 7.3
hereunder may not be amended without the consent of the Stockholder
Representative and (iii) after the adoption of this Agreement by the Company
Stockholders, no amendment may be made which reduces the Merger Cash or which
effects any changes which would materially adversely affect the Company
Stockholders without the further approval of the Company Stockholders.8.4 Extension; Waiver. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations of the other Party hereto, (b) waive any inaccuracies in the
representations and warranties made to such Party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such Party contained herein. Any
agreement on the part of a Party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such
Party.ARTICLE IX
GENERAL PROVISIONS9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, next day delivery, or sent via facsimile (receipt confirmed)
to the parties at the following addresses or facsimile numbers (or at such
other address or facsimile numbers for a party as shall be specified by like
notice):-69-

| |                                                             |  |                                      
| | ----------------------------------------------------------- |  | -------------------------------------
| | (a) if to Parent or Merger Sub, to:                        
| |                                                             |  |                                      
| |                                                             |  | Tellabs, Inc.                        
| |                                                             |  | 1415 West Diehl Road                 
| |                                                             |  | Naperville, IL 60563                 
| |                                                             |  | Attention: Edward Kennedy            
| |                                                             |  | James M. Sheehan                     
| |                                                             |  | Facsimile No.: (630) 798-3231        
| |                                                             |  |                                      
| |                                                             |  | with a copy to:                      
| |                                                             |  |                                      
| |                                                             |  | Wilson Sonsini Goodrich & Rosati     
| |                                                             |  | Professional Corporation             
| |                                                             |  | 5300 Carillon Point                  
| |                                                             |  | Kirkland, Washington 98033           
| |                                                             |  | Attention: Mark J. Handfelt, Esq.    
| |                                                             |  | Patrick J. Schultheis, Esq.          
| |                                                             |  | Facsimile No.: (425) 576-5899        
| |                                                             |  |                                      
| | (b) if to the Company or the Stockholder
Representative to:
| |                                                             |  |                                      
| |                                                             |  | Vivace Networks, Inc.                
| |                                                             |  | Worldwide Corporate Headquarters     
| |                                                             |  | 2730 Orchard Parkway                 
| |                                                             |  | San Jose, CA 95134                   
| |                                                             |  | Attention: President                 
| |                                                             |  | Facsimile No.: (408) 432-3495        
| |                                                             |  |                                      
| |                                                             |  | with a copy to:                      
| |                                                             |  |                                      
| |                                                             |  | Cooley Godward LLP                   
| |                                                             |  | Five Palo Alto Square                
| |                                                             |  | 3000 El Camino Real                  
| |                                                             |  | Palo Alto, California 94306-2155     
| |                                                             |  | Attention: Vincent P. Pangrazio, Esq.
| |                                                             |  | Facsimile No.: (650) 849-7400        

9.2 Expenses. In the event that the Merger is not consummated, all fees
and expenses incurred in connection with the Merger including all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties (Third Party Expenses) incurred by a Party in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective Party incurring such fees and expenses.

9.3 Interpretation; Definitions. When a reference is made in this
Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement
unless otherwise indicated. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement. Unless

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otherwise indicated the words include, includes and including when used
herein shall be deemed in each case to be followed by the words without
limitation. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to the
business of an entity, such reference shall be deemed to include the business
of all direct and indirect subsidiaries of such entity. Reference to the
subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.

9.4 Counterparts. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not
sign the same counterpart.

9.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the Parties hereto as
contemplated by or referred to herein, including the Company (a) constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, it being
understood that the Confidentiality Agreement shall continue in full force and
effect until the Closing and shall survive any termination of this Agreement;
and (b) are not intended to confer upon any other Person (including any of the
Company Stockholders or Company Rightholders) any rights or remedies hereunder;
provided, however, that the provisions of Section 7.2 are intended for the
benefit of the Covered Parties.

9.6 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.

9.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.

9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
Each of the Parties hereto irrevocably consents to

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the exclusive jurisdiction
and venue of any court within DuPage County, State of Illinois in connection
with any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner authorized by the laws of the State of
Illinois for such Persons and waives and covenants not to assert or plead any
objection that they might otherwise have to such jurisdiction, venue and
process.

9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the Party drafting such agreement or document.

9.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

*****

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.

|                                          |  |                                           |  |  |  | 
|----------------------------------------- |  | ----------------------------------------- |  |  |  | 
|TELLABS, INC.                             |  | ESCROW AGENT(with respect to Article VII)
|                                          |  |                                           |  |  |  | 
|By:                                       |  | By:                                       |  | 
|                                          |  |                                           |  |  | 
|                                          |  |                                           |  |  |  | 
|Name: Michael J. Birck                    |  | Name:                                     | 
|                                          |  |                                           |  |  |  | 
|                                          |  |                                           |  |  |  | 
|Title: Chairman & Chief Executive Officer |  | Title:                                    |  | 
|                                          |  |                                           |  |  | 

|                                  |  | 
|--------------------------------- |  | 
|VENICE ACQUISITION
CORP.          | 
|                                  |  | 
|By:                               | 
|                                  |  | 
|                                  |  | 
|Name: James M. Sheehan            | 
|                                  |  | 
|Title: Vice President & Secretary | 

|                                           |  |  |                             | 
|------------------------------------------ |  |  | --------------------------- | 
|VIVACE NETWORKS,
INC.                      |  |  | STOCKHOLDER REPRESENTATIVE:
|                                           |  |  |                             | 
|By:                                        |  |  |                             | 
|                                           |  |  |                             | 
|                                           |  |  |                             | 
|Name: Kenneth Koenig                       |  |  | Kenneth Koenig             
|                                           |  |  |                             | 
|Title: President & Chief Executive Officer |  |  |