Document:

Prepared by MERRILL CORPORATION www.edgaradvantage.com

QuickLinks
 -- Click here to rapidly navigate through this document

 
 

PANSTERA, INC.
  SHAREHOLDERS AGREEMENT    
  

    This Shareholders Agreement (the "Agreement") is made and entered into as of January 15, 2001, among Pixelworks, Inc., an Oregon corporation
("Acquiror"), Panstera, Inc., a California corporation ("Target") and each of the shareholders of Target signatories hereto (each a "Shareholder" and collectively, the "Shareholders"). 

    This
Agreement is entered into in connection with that certain Agreement and Plan of Merger dated as of December 13, 2000 (as the same may be amended or modified, the "Merger
Agreement") by and among Acquiror, Panther Acquisition Inc., Target and the Shareholders. The Merger Agreement provides for the merger of Panther Acquisition Inc. with and into Target
(the "Merger") in a transaction in which the issued and outstanding shares of capital stock of Target (the "Target Stock") will be converted into the right to receive shares of Common Stock, par value
$.001, of Acquiror (the "Acquiror Stock") as provided by, and on the terms and conditions set forth in, the Merger Agreement. Capitalized terms used herein but not defined herein shall have their
defined meanings as set forth in the Merger Agreement. 

    1.  Reliance Upon Representations, Warranties and Covenants.  Each Shareholder has been informed that the
treatment of the Merger as a tax-free reorganization for federal income tax purposes requires, among other factors, the accuracy of the representations contained herein. Each Shareholder
understands that the representations and warranties and covenants of such Shareholder set forth herein will be relied upon by Acquiror, Target, their respective counsel and accounting firms and other
shareholders of Target. 

    2.  Representations, Warranties and Covenants of Each Shareholder.  Each Shareholder represents, warrants
and covenants as follows: 

    (a) Each
Shareholder has full power and authority to execute the Merger Agreement, if applicable, and this Agreement, to make the representations and warranties and
covenants herein contained and to perform such Shareholder's obligations hereunder. 

    (b) Appendix A attached hereto sets forth all shares of Target Stock owned by each Shareholder, including all
Target Stock as to which such Shareholder has sole or shared voting or investment power and all rights, options and warrants to acquire Target Stock (provided, however, that if any Shareholder who
hold Series A Preferred Stock or Series B Preferred Stock of Target elects before the Effective Time to convert the same into Common Stock of Target by delivery to Target before the
Effective Time of an executed Notice of Voluntary Conversion and Waiver of Liquidation Preference and all certificates and documents required in connection therewith,  Appendix A shall be deemed to
be modified to reflect such Shareholder as the owner of an equal number of shares of Common Stock issued to such
Shareholder before the Effective Time in conversion of such Shareholder's Preferred Stock). Except as
contemplated by the Merger Agreement, no other person or entity not a signatory to this Agreement has a beneficial interest in or right to acquire all or any portion of the shares of Target Stock set
forth in Appendix A). 

    (c) Each
Shareholder is acquiring the Acquiror Stock solely for the Shareholder's own account, for investment and not with a view to any resale or other distribution
thereof in violation of the Securities Act. 

    (d) Each
Shareholder acknowledges and understands that the terms of the Merger have not been reviewed by the SEC or by any state securities authorities, that the
Acquiror Stock has not been registered under the Securities Act, any state or foreign jurisdiction securities law or registered or qualified under any other securities laws, based on, among other
factors, that no distribution or public offering has been effected and the Acquiror Stock will be issued by Acquiror in connection with a transaction that does not involve any public offering within
the meaning of Section 4(2) of the Securities Act. Each Shareholder understands that Acquiror is relying on such Shareholder's representations as set forth herein for purposes of claiming such
exemption, including the bona fide nature of such Shareholder's investment intent as expressed above. Each 

Shareholder acknowledges that, except as is set forth in Section 6 of this Agreement, Acquiror is under no obligation to register the Acquiror Stock under the Securities Act. As a result,
unless an exemption from such registration is then available, such Shareholder must hold the Acquiror Stock until such time as Acquiror has registered the Acquiror Stock for resale under the
Securities Act and qualified the Acquiror Stock for resale under applicable state or foreign jurisdiction securities laws. 

    (e) Each
Shareholder is familiar with Regulation D promulgated under the Securities Act and is an "accredited investor" as defined in Rule 501(a) of such
Regulation D or such Shareholder, either alone or together with such Shareholder's representative, has such knowledge and experience in financial, investment and business matters that the
Shareholder is capable of evaluating the merits and risks of an investment in the Acquiror Stock. Each Shareholder acknowledges that the Acquiror Stock are volatile securities that involve a high
degree of risk. Each Shareholder represents that it is capable of determining what documents and information are necessary to evaluate the Merger and/or an investment in the Acquiror Stock, and has
the capacity to protect its own interests in connection with the Merger and the acquisition of the Acquiror Stock. 

    (f)  Each
Shareholder represents that its financial condition is such that the Shareholder is able to bear any and all economic risks associated with investment in the
Acquiror Stock, including the risk of holding the Acquiror Stock for an indefinite period of time. Each Shareholder represents that it can also afford a complete loss of its investment in the Acquiror
Stock, and has adequate means of providing for the Shareholder's current needs and possible personal contingencies; provided, however, that nothing
contained herein shall relieve Acquiror from strict adherence to the terms of Section 6. 

    (g) Until
such time as the Acquiror Stock has been registered for resale, each Shareholder understands and acknowledges that each stock certificate representing the
Acquiror Stock shall bear a legend in, or substantially in, the following form: 

"THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS CONTAINED IN A SHAREHOLDERS AGREEMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY STATE SECURITIES LAWS. NEITHER SUCH SHARES NOR ANY PORTION THEREOF OR INTEREST THEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF (I) EXCEPT AS SET FORTH IN THE
SHAREHOLDERS AGREEMENT AND (II) UNLESS THE SAME ARE REGISTERED UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
AND THE CORPORATION SHALL HAVE RECEIVED EVIDENCE OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION)." 

    (h) Each
Shareholder understands that Acquiror may maintain a "stop transfer order" against the Acquiror Stock for the purpose of ensuring compliance with applicable
securities laws. Acquiror shall not be required (a) to transfer or have transferred on its books any Acquiror Stock that has been sold or otherwise transferred in violation of any of the
provisions of this Agreement or (b) to treat as an owner of such Acquiror Stock or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Acquiror Stock
shall have been so transferred in violation of any provision of this Agreement. Acquiror agrees that such stop transfer instructions and legends will be promptly removed and transfers of Acquiror
Common Stock will be processed if the provisions of this Agreement and the Securities Act are complied with. 

    (i)  Each
Shareholder has received a copy of the Panstera, Inc. Information Statement dated January  , 2001, including copies of Acquiror's
Registration Statement on Form S-1 with filing 

date of February 25, 2000, Acquiror's Prospectus on Form 424B4 filed on May 19, 2000 and Acquiror's Quarterly Reports on Form 10-Q for the quarters ending
June 30, 2000 and September 30, 2000 (collectively, the "Disclosure Materials"). Each Shareholder acknowledges receipt of the Notice of Special Meeting of Shareholders of Target and
waives any other right to notice in connection with the proposed Merger or the other transactions contemplated by the Merger Agreement. The Shareholder, either alone or together with the Shareholder's
representative, has made such further investigation as the Shareholder deems appropriate as to, and is fully familiar with, and knowledgeable regarding, the financial condition, business affairs and
prospects of Acquiror. The Shareholder has been given the opportunity to ask questions of, and receive answers from, the principal officers of Acquiror concerning the business and financial affairs of
Acquiror, and has had further opportunity to obtain any additional information necessary to verify the accuracy of the foregoing information. To the extent any Shareholder has not sought information
regarding any particular matter, the Shareholder represents that Shareholder had no interest in doing so and that such matters are not material to the Shareholder in connection with this investment. 

    3.  Negative Covenants of Shareholder.  

    (a) Each
Shareholder covenants and agrees that it will not sell, transfer, exchange, pledge, or otherwise dispose of, or make any offer or agreement relating to any of
the foregoing with respect to, any and all shares and other securities of Acquiror (collectively referred to as "Restricted Securities"), or any option, right or other interest with respect to any
Restricted Securities, unless (i) such transaction is permitted pursuant to Rule 144 under the Securities Act, (ii) counsel representing such Shareholder, which counsel is
reasonably satisfactory to Acquiror, shall have advised Acquiror in a written opinion letter satisfactory to Acquiror and Acquiror's legal counsel, and upon which Acquiror and its legal counsel may
rely, that no registration under the Securities Act would be required in connection with the proposed sale, transfer or other disposition, (iii) a registration statement under the Securities
Act covering the Acquiror Stock proposed to be sold, transferred or otherwise disposed of, describing the manner and terms of the proposed sale, transfer or other disposition, and containing a current
prospectus, shall have been filed with the SEC and made effective under the Securities Act, or (iv) an authorized representative of the SEC shall have rendered written advice to such
Shareholder (sought by such Shareholder or counsel to such Shareholder, with a copy thereof and all other related communications delivered to Acquiror) to the effect that the SEC would take no action,
or that the staff of the SEC would not recommend that the SEC take action, with respect to the proposed disposition if consummated. In addition to, and without limiting the foregoing, each Shareholder
covenants and agrees that it shall not, directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, grant any option, right, or warrant to purchase, lend,
or otherwise transfer or dispose of, any Restricted Securities or enter into any swap or other arrangement that transfers to any other person, in whole or in part, any of the economic consequences of
ownership of such Restricted Securities; provided, however, that such holders of Restricted Securities may (i) from and after the Registration Effective Date (defined below), transfer, sell, or
otherwise dispose of up to 25% of the Restricted Securities received pursuant to the terms of the Merger Agreement; (ii) from and after the 60th day after the Registration
Effective Date, transfer, sell, or otherwise dispose of up to 50% of the Restricted Securities received pursuant to the terms of the Merger Agreement; (iii) from and after the
120th day after the Registration Effective Date, transfer, sell or otherwise dispose of up to 75% of the Restricted Securities received pursuant to the terms of the Merger Agreement; and
(iv) from and after the 180th day after the Registration Effective Date, transfer, sell, or otherwise dispose of all the Restricted Securities received pursuant to the terms of
the Merger Agreement. 

    (b) Each
Shareholder represents and warrants that it has no plan or intention to sell, exchange or otherwise dispose of shares of Acquiror Stock received in connection
with the Merger. 

    4.  Rule 144.  From and after the Effective Time of the Merger and for so long as is necessary in
order to permit each Shareholder to sell the Acquiror Stock held by it pursuant to Rule 144 under the 

Securities Act, Acquiror will file on a timely basis all reports required to be filed by it pursuant to Section 13 of the Exchange Act referred to in Paragraph (c)(1) of Rule 144
under the Securities Act, in order to permit each Shareholder to sell the Acquiror Stock held by it pursuant to the terms and conditions of Rule 144. Each Shareholder understands that, except
as provided in this Section 4 and in
Section 6 of this Agreement, Acquiror is under no obligation to register the sale, transfer or other disposition of any Restricted Securities by or on behalf of any Shareholder or to take any
other action necessary in order to make compliance with an exemption from registration available. 

    5.  Restrictions on Resales.  Each Shareholder agrees and acknowledges that, in addition to the
restrictions imposed under Sections 3 and 6(d) of this Agreement, the provisions of the Securities Act prohibit the public resale of Restricted Securities (except in a transaction registered under the
Securities Act) until such time as such Shareholder has beneficially owned, within the meaning of SEC Rule 144(d), the Restricted Securities for a period of at least one (1) year after
the date of the Merger. Each Shareholder acknowledges that such Shareholder is familiar with Rule 144 and agrees to comply with the provisions of such rule as applicable to the Restricted
Securities. 

    6.  Registration of Shares Issued in the Merger.  

    (j)  Registrable Shares.  For purposes of this Agreement, "REGISTRABLE SHARES" shall mean the shares of
Acquiror Common Stock issued in the Merger to shareholders of Target (collectively, the "HOLDERS"); provided, however, that Registrable Shares shall not
include shares of Acquiror Common Stock issuable upon exercise of Target Options. Notwithstanding the foregoing, a distribution of shares of Acquiror Common Stock issued in the Merger without
additional consideration, to underlying beneficial owners (such as the general and limited partners, shareholders or trust beneficiaries of a Holder) shall not be deemed such a sale or transfer for
purposes of this Section 6 and such underlying beneficial owners shall be entitled to the same rights under this Section 6 as the initial Holder from which the Registrable Shares were
received and shall be deemed a Holder for the purposes of this Section 6. 

    (k)  Required Registration.  Acquiror shall prepare and file with the Commission a shelf registration
statement on Form S-3 (or such successor or other appropriate form) under the Securities Act with respect to the Registrable Shares (the "REGISTRATION STATEMENT") and will effect
all such registrations, qualifications and compliances (including, without limitation, obtaining appropriate qualifications under applicable state securities or "blue sky" laws and compliance with any
other applicable governmental requirements or regulations) as any selling Holder may reasonably request and that would permit or facilitate the sale of Registrable Shares (provided however that
Acquiror shall not be required in connection therewith to qualify to do business or to file a general consent to service of process in any such state or jurisdiction). The Registration
Statement shall be filed with the Commission not later than ninety (90) days following the date the Acquiror becomes eligible to file a registration statement on
Form S-3 with the Commission. Acquiror will maintain the effectiveness of the Registration Statement and other applicable registrations, qualifications and compliances up to one
year from the Effective Date (the "REGISTRATION EFFECTIVE PERIOD"). Following the date the Registration Statement is first declared effective (the "Registration Effective Date"), the Holders will be
permitted (subject in all cases to the provisions of paragraphs (c) and (d) of this Section 6) to offer and sell Registrable Shares during the Registration Effective Period in the
manner described in the Registration Statement provided that the Registration Statement remains effective and has not been suspended. 

    (l)  Suspension Right.  Notwithstanding any other provision of this Section 6, Acquiror shall have
the right at any time to require that all Holders suspend further open market offers and sales of Registrable Shares whenever, and for so long as, in the reasonable judgment of Acquiror after
consultation with counsel, the use of the Registration Statement and the prospectus related thereto must be suspended due to the happening of any event as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements 

therein not misleading in the light of the circumstances then existing (the "SUSPENSION RIGHT"). In the event Acquiror exercises the Suspension Right, such suspension will continue for the period of
time reasonably necessary for disclosure to occur at a time that is not detrimental to Acquiror and its shareholders or, if earlier, until such time as the information or event is no longer material,
each as determined in good faith by Acquiror after consultation with counsel. Notwithstanding the foregoing, Acquiror shall not impose the Suspension Right at any time for more than thirty
(30) consecutive days. Acquiror will promptly give the Holders written notice of any such suspension and will use all reasonable efforts to minimize the length of the suspension. The
Registration Effective Period shall be extended by a period of time equal to the duration of any period during which the Suspension Right is imposed. 

    (d)  Resale Restriction.  No holder of Registrable Shares shall, directly or indirectly, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, grant any option, right, or warrant to purchase, lend, or otherwise transfer or dispose of, any Registrable Shares or enter into any
swap or other arrangement that transfers to any other person, in whole or in part, any of the economic consequences of ownership of such Registrable Shares; provided, however, that such holders of
Registrable Shares may (i) from and after the date such Registration Statement becomes effective (the "Registration Effective Date"), transfer, sell, or otherwise dispose of up to 25% of the
Registrable Shares received pursuant to the terms of the Merger Agreement; (ii) from and after the 60th day after the Registration Effective Date, transfer, sell, or otherwise
dispose of up to 50% of the Registrable Shares received pursuant to the terms of the Merger Agreement; (iii) from and after the 120th day after the Registration Effective Date,
transfer, sell or otherwise dispose of up to 75% of the Registrable Shares received pursuant to the terms of the Merger Agreement; and (iv) from and after the 180th day after the
Registration Effective Date, transfer, sell, or otherwise dispose of all the Registrable Shares received pursuant to the terms of the Merger Agreement 

    (e)  Further Obligations of Acquiror.  

     (i) Acquiror
shall furnish to the Holders such reasonable number of copies of the Registration Statement, each amendment and supplement thereto, the prospectus included
in the Registration Statement (including each preliminary prospectus), any documents incorporated by reference into the Registration Statement and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Shares owned by them. 

    (ii) Acquiror
will use its best efforts to diligently prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration
Statement. 

    (iii) Acquiror
shall file on a timely basis with the SEC all information that the SEC may require under either of Section 13 or Section 15(d) of the
Exchange Act and, so long as it is required to file such information, shall take all action that may be required as a condition to the availability of Rule 144 under the Securities Act (or any
successor exemptive rule hereinafter in effect) with respect to Acquiror Stock. Acquiror shall furnish to any Holder forthwith upon request (i) a written statement by Acquiror as to its
compliance with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of Acquiror as filed with the SEC, and (iii) any other reports
and documents that a Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing a Holder to sell any such Registrable Shares without registration. 

    (iv) Acquiror
shall notify the Holders promptly (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and
with respect to the Registration Statement or post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any other federal or state governmental
authority for amendments or 

supplements to the Registration Statement or prospectus or for additional information, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of any proceeding for that purpose, and (iv) of the receipt by Acquiror of any notification with respect to the
suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for that purpose. 

    (v) Acquiror
shall use commercially reasonable efforts to prevent the issuance of any stop order suspending the effectiveness of the Registration Statement, and if one
is issued, will use commercially reasonable efforts to obtain the withdrawal of any stop order suspending the effectiveness of the Registration Statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any Registrable Securities for sale in any jurisdiction at the earliest possible time. 

    (f)  Obligations of Holders.  

     (i) Each
Holder covenants and agrees that it shall promptly furnish to Acquiror such information regarding themselves or the Registrable Securities held by them, and
the intended method of disposition of such securities, as shall be reasonably requested by Acquiror in order to effect the registration of its Registrable Securities. Each Holder agrees that it will
not effect any disposition of its Registrable Securities that would constitute a sale within the meaning of the Securities Act (including a disposition which qualifies for an exemption from
registration thereunder) except in compliance with
the Securities Act and the regulations thereunder, including all applicable prospectus delivery requirements. 

    (ii) Each
Holder covenants and agrees that it will promptly advise the Company of any changes in the information concerning each Holder contained in the Registration
Statement and that such Holder will not make any sale of Registrable Securities pursuant to the Registration Statement without complying with the prospectus delivery requirements of the Securities
Act. 

    (iii) Each
Holder acknowledges that occasionally there may be times (as described in paragraph (c) of this Section 6) when Acquiror must temporarily
suspend the use of the prospectus forming a part of the Registration Statement until such time as an amendment to the Registration Statement has been filed by Acquiror and declared effective by the
SEC, the relevant prospectus supplemented by Acquiror or until such time as Acquiror has filed an appropriate report with the SEC pursuant to the 1934 Act. During any period in which sales are
suspended, each Holder covenants and agrees that it will not offer or sell any such Registrable Securities pursuant to the Registration Statement or any such prospectus. 

    (iv) Each
Holder acknowledges and agrees to be bound by the terms set forth in Section 7.2(q) of the Merger Agreement, including the release of any and all
claims to Intellectual Property rights, and the indemnification of the Target and the Acquiror for any losses suffered or incurred by the Target or the Acquiror with respect to any matters involving
Intellectual Property rights of the Target or any of the Target's technology, and will execute any documents necessary to effect the same. 

    (v) Each
Holder acknowledges and agrees to be bound by the terms set forth in Article 9 of the Merger Agreement, including the appointment of a Shareholder
Agent, and the authority granted to such Shareholder Agent. 

    (g)  Expenses.  Acquiror agrees to bear the costs and expenses for any registration pursuant to this
Section 6. The costs and expenses to be borne by Acquiror for purposes of this Section 6 shall include, without limitation, printing expenses (including a reasonable number of
prospectuses for circulation by the selling Holders), legal fees and disbursements of counsel for Acquiror, legal fees and disbursements of one counsel for the Holders in an amount not to exceed
$25,000, "blue sky" expenses, accounting fees and filing fees, but shall not include underwriting commissions or similar charges. 

    (h)  Indemnification.  

     (i) Acquiror
will indemnify and hold harmless each Holder, its officers, directors, shareholders or partners and each person, if any, who controls such Holder within
the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a
"VIOLATION"): (A) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (B) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (C) any violation or alleged violation by Acquiror of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law; and Acquiror will pay to each such Holder (and its officers, directors, employees, shareholders or partners), or controlling person, any
legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement
contained in this paragraph (h)(1) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of
Acquiror; nor shall Acquiror be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon (a) a Violation which occurs
in reliance upon and in conformity with written information furnished expressly for use in the Registration Statement by any such Holder, or (b) a Violation that would not have occurred if such
Holder had delivered to the purchaser the version of the Prospectus most recently provided by Acquiror to the Holder prior to the date of such sale. 

    (ii) Each
selling Holder will indemnify and hold harmless Acquiror, each of its directors, each of its officers who has signed the Registration Statement, each person,
if any, who controls Acquiror within the meaning of the Securities Act, any other Holder selling securities pursuant to the Registration Statement and any controlling person of any such other Holder,
against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation (which includes without limitation the failure of the Holder
to comply with the prospectus delivery requirements under the Securities Act, and the failure of the Holder to deliver the most current prospectus provided by Acquiror prior to such sale), in each
case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in the Registration
Statement or such Violation is caused by the Holder's failure to deliver to the purchaser of the Holder's Registrable Shares a prospectus (or amendment or supplement thereto) that had been made
available to the Holder by Acquiror prior to such sale; and each such Holder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this
paragraph (h)(2) in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this
paragraph (h)(2) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder. 

    (iii) Each
person entitled to indemnification under this paragraph (h) (the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought and shall permit the Indemnifying Party to assume
the defense of any such claim and any litigation resulting 

therefrom, provided that counsel for the Indemnifying Party who conducts the defense of such claim or any litigation resulting therefrom shall be
approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, and  provided further that the
failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations
under this paragraph (h) unless the Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation, shall (except with the consent of
each Indemnified Party) consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. 

    (iv) To
the extent that the indemnification provided for in this paragraph (h) is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other
relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 

    7.  Termination of Prior Agreements.  Each party hereto agrees and consents to the termination of certain
agreements and rights as set forth in Section 7.2(p) of the Merger Agreement, and will execute any documents necessary to effect the same. 

    8.  Notices.  All notices, requests, demands or other communications which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given (i) upon receipt, if delivered by hand, (ii) one (1) business day after
deposit with a nationally-recognized overnight courier service, with delivery charges prepaid or otherwise satisfied, or (iii) three (3) days after deposit in the United States mail,
postage prepaid, certified or registered mail, addressed to a party as follows: 

if
to Acquiror or Sub: 

Pixelworks, Inc.

7700 SW Mohawk Street

Tualatin, OR 97062

Facsimile No.: (503) 612-6713

Attention: Chief Financial Officer 

with
a copy to: 

Ater
Wynne LLP

222 S.W. Columbia, Suite 1800

Portland, OR 97201

Attention: William C. Campbell, Esq.

Fax No: 503-226-0079 

if
to Target, to: 

Panstera, Inc.

2360 Qume Drive, Suite A

San Jose, CA 95131

Attention: President

Fax No: 408-456-0811 

with
a copy to: 

Law &
Partner

 

Attention: Charles Law, Esq.

Fax No: [            ] 

if
to Shareholders: 

    At
the address set forth beneath each Shareholders' signature below or to such other address as any part may designate for itself by notice given as provided in this Agreement, except
that notices of change of address shall only be effective upon receipt. 

    9.  Termination.  This Agreement shall terminate and shall be of no further force and effect upon the
termination of the Merger Agreement. 

    10.  Counterparts.  This Agreement shall be executed in one or more counterparts, any of which may be a
facsimile copy, each of which shall be deemed an original, and all of which together shall constitute one instrument. 

    11.  Binding Agreement.  This Agreement will inure to the benefit of and be binding upon and enforceable
against the parties and their successors and assigns, including administrators, executors, representatives, heirs, legatees and devisees of each Shareholder and any pledgee holding Restricted
Securities as collateral. 

    12.  Waiver.  No waiver by any part hereto of any condition or of any breach of any provision of this
Agreement shall be effective unless in writing and signed by each party hereto. 

    13.  Governing Law.  This Agreement shall be governed by and construed, interpreted and enforced in
accordance with the laws of the State of Oregon. Each Shareholder hereby irrevocably submits to the exclusive personal jurisdiction of either (i) the Circuit Court of Multnomah County of the
State of Oregon or (ii) the United States District Court in Portland, Oregon, and all courts from which an appeal may be taken, solely for the purpose of any suit, action, or other proceeding
arising out of or based upon this Agreement, or any document, instrument, agreement or matter related thereto, and hereby waives to the extent not prohibited by law, and agrees not to assert, by way
of motion, as a defense, or otherwise, in any such proceeding, any claim that he, she or it is not subject personally to the jurisdiction of the above-named courts for such proceedings. Process in any
suit, action or other proceeding referred to in this section may be served on any Shareholder through the procedures for notice under Section 8. 

    14.  Integration.  This Agreement constitutes the entire understanding of the parties hereto with respect
to the subject matter of the Agreement. 

    15.  Attorneys' Fees.  In the event of any legal action or proceeding to enforce or interpret the
provisions hereof, the prevailing party shall be entitled to reasonable attorneys' fees, and disbursements whether or not the proceeding results in a final judgment. 

    16.  Effect of Headings.  The section headings herein are for convenience only and shall not affect the
construction or interpretation of this Agreement. 

    17.  Third-Party Reliance.  Counsel to and accountants for the parties shall be entitled to rely upon
this Agreement. 

    18.  Representations and Warranties.  The representations and warranties by Shareholders made in this
Agreement shall be deemed to have been made as of the date hereof and as of immediately prior to the Effective Time of Merger. 

    IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the day and year first written above. 

	PANSTERA, INC.	 	PIXELWORKS, INC.
	

By:	
 	

/s/ Yukuang Wang
 Yukuang Wang
 President	
 	

By:	
 	

/s/ Allen H. Alley
 Allen Alley
 President and Chief Executive Officer
	
PANTHER ACQUISITION INC.	
 	

 	
 	

 
	

By:	
 	

/s/ Allen H. Alley
 Allen Alley
 President and Chief Executive Officer	
 	

 	
 	

 
	
SHAREHOLDERS	
 	

 	
 	

 
	

/s/ Yukuang Wang
Yukuang Wang

2017 Skyline Drive

Milpitas, CA 95035	
 	

/s/ Guojin Liang
Guojin Liang

529 Bayview Park Drive

Milpitas, CA 95035
	

/s/ Wade Chang
Wade Chang

No. 11, Li Hsing Road

Science-Based Industrial Park

HsinChu, Taiwan R.O.C.	
 	

 	
 	

 
	
OPTOMA CORP.	
 	

CHAILEASE FINANCE CO.
	

By:	
 	

/s/ Wade Chang
	
 	

By:	
 	

/s/ Mona Chien

	 	 	Wade Chang	 	Name:	 	Mona Chien

	 	 	Chairman, President and CEO	 	Title:	 	Chairman

	No. 11, Li Hsing Rd

Science-Based Industrial Park

Hsinchu, Taiwan, R.O.C.	 	4F., 56, Tun-Hwa N. Road

Taipei, Taiwan

	
SHENG YANG CONSTRUCTION CO., LTD.	
 	

YUAN SUN INVESTMENT CO., LTD.
	

By:	
 	

/s/ Jackson Mai
	
 	

By:	
 	

/s/ Jackson Mai

	Name:	 	Jackson Mai
	 	Name:	 	Jackson Mai

	Title:	 	Chairman
	 	Title:	 	Chairman

	9th Floor, No. 289 Chung-Hsiao E. Rd., Sec. 4

Taipei, Taiwan, R.O.C.	 	12th Floor, No. 289 Chung-Hsiao E. Rd., Sec. 4

Taipei, Taiwan, R.O.C.

	

 	
 	

 	
 	
SUNSINO INTERNATIONAL INC.

[Sunsino International Development Associate Inc.]
	

/s/ Wu Min Hsien
	
 	

By:	
 	

/s/ Cheng Sang Huang

	Wu Min-Hsien	 	Name:	 	Cheng Sang Huang

	9th Floor, No. 289 Chung-Hsiao E. Rd., Sec. 4	 	Title:	 	President

	Taipei, Taiwan, R.O.C.	 	6F, No. 184, Sec. 4, Hsin-Yi Road

Taipei, Taiwan
	
HWA NAN VENTURE CAPITAL CO., LTD.	
 	

HWA CHUNG VENTURE CAPITAL CO., LTD.
	

By:	
 	

/s/ Cheng Sang Huang
	
 	

By:	
 	

/s/ Cheng Sang Huang

	Name:	 	Cheng Sang Huang
	 	Name:	 	Cheng Sang Huang

	Title:	 	President
	 	Title:	 	President

	6F, No. 184, Sec. 4, Hsin-Yi Road

Taipei, Taiwan	 	6F, No. 184, Sec. 4, Hsin-Yi Road

Taipei, Taiwan
	
HWA YI VENTURE CAPITAL CO., LTD.	
 	

HWA HSIN VENTURE CAPITAL CO., LTD.
	

By:	
 	

/s/ Cheng Sang Huang
	
 	

By:	
 	

/s/ Cheng Sang Huang

	Name:	 	Cheng Sang Huang
	 	Name:	 	Cheng Sang Huang

	Title: 6F, No. 184, Sec. 4, Hsin-Yi Road

Taipei, Taiwan	 	Title: 6F, No. 184, Sec. 4, Hsin-Yi Road

Taipei, Taiwan
	

/s/ Wei-Jung Chang
Wei-Jung Chang

6F, No. 184, Sec. 4, Hsin-Yi Road

Taipei, Taiwan	
 	

/s/ Dieter Tien
Dieter Tien

5th Floor, No. 9, Chi-Nan Road, Sec. 3

Taipei, Taiwan

	
WELL UNITED TECHNOLGY COMPANY	
 	

 	
 	

 
	

By:	
 	

/s/ Eric Wu
	
 	

/s/ Tsai Eng Rung

	Name:	 	Eric Wu
	 	Eng Rung Tsai
	Title:	 	General Partner
	 	No. 72, Sec. 1, Chen-The Road

Taipei, Taiwan
	19433 East Walnut Drive South

City of Industry, CA 91748	 	 	 	 
	

 	
 	

 	
 	
POWERWORLD FUND, INC.
	

/s/ Wendy Lee
	
 	

By:	
 	

/s/ Frank C. Huang

	Wendy W. Lee	 	Name:	 	Frank C. Huang

	4012 Island Crest Way

Mercer Island, WA 98040	 	Title:	 	President

	 	 	 	 	8F, 70, Sec. 3, Nanking E. Road

Taipei, Taiwan R.O.C.
	
UNIVERSAL VENTURE FUND, INC.	
 	

 	
 	

 
	

By:	
 	

/s/ Frank C. Huang
	
 	

 	
 	

 
	Name:	 	Frank C. Huang
	 	 	 	 
	Title:	 	President
	 	 	 	 
	8F, 70, Sec. 3, Nanking E. Road

Taipei, Taiwan R.O.C.	 	 	 	 

 
 

APPENDIX A    
  

	Common Shareholders	 	 
	Wang, Yukuang	 	1,220,000
	Liang, Guojin	 	1,220,000
	Chang, Wade	 	360,000
	 	 	

	 	 	2,800,000
	Preferred Series A Shareholders	 	 
	Optoma Corp.*	 	1,800,000
	Preferred Series B Shareholders	 	 
	Chailease Finance Co., Ltd.	 	700,000
	Sheng Yang Construction Co., Ltd.	 	500,000
	Yuan Sun Investment Co., Ltd.	 	500,000
	WU, MIN HSIEN	 	100,000
	SUNSINO International Inc.	 	125,000
	Hwa Nan Venture Capital Co., Ltd.	 	100,000
	Hwa Chung Venture Capital Co., Ltd.	 	100,000
	Hwa Yi Venture Capital Co., Ltd.	 	125,000
	Hwa Hsin Venture Capital Co., Ltd.	 	125,000
	WEI-JUNG CHANG	 	90,000
	DIETER TIEN	 	135,000
	Well United Technology Company	 	100,000
	TSAI, ENG RUNG	 	100,000
	WENDY W. LEE	 	100,000
	PowerWorld Fund, Inc.	 	100,000
	Universal Venture Fund, Inc.	 	200,000
	 	 	

	 	 	3,200,000

QuickLinks

PANSTERA, INC. SHAREHOLDERS AGREEMENT

APPENDIX APrepared by MERRILL CORPORATION www.edgaradvantage.com

QuickLinks
 -- Click here to rapidly navigate through this document

Exhibit 4.1  

 
 

STOCK PURCHASE AGREEMENT    
  

The
J. Jill Group, Inc.

4 Batterymarch Park

Quincy, Massachusetts 02169-7468 

    The
undersigned (the "Investor"), hereby confirms its agreement with you as follows: 

    1.  This
Stock Purchase Agreement (the "Agreement") is made as of the date set forth below among The J. Jill
Group, Inc., a Delaware corporation (the "Company"), and the Investor. 

    2.  The
Company has authorized the sale and issuance of up to 1,710,000 shares (the "Shares") of common stock of the
Company, $.01 par value per share (the "Common Stock") to certain investors in a private placement (the
"Offering"). 

    3.  The
Company and the Investor agree that the Investor will purchase from the Company and the Company will issue and sell to the Investor            Shares at
a purchase price of $18.00 per Share, or an aggregate purchase price of $            , pursuant to the Terms and Conditions for Purchase of Shares attached hereto as Annex I and incorporated
herein by this reference as if fully set forth herein. Unless otherwise requested by the Investor in Exhibit A, certificates representing the Shares purchased by the Investor will be registered
in the Investor's name and address as set forth below. 

    4.  The
Investor represents that, except as set forth below, (a) it has had no position, office or other material relationship within the past three years with
the Company or its affiliates, (b) neither it, nor any group of which it is a member or to which it is related, beneficially owns (including the right to acquire or vote) any securities of the
Company and (c) it has no direct or indirect affiliation or association with any National Association of Securities Dealers, Inc. ("NASD")
member. Exceptions: 

(If no exceptions, write "none." If left blank, response will be deemed to be "none.") 

    Please
confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose. 

	

 	
 	
Dated as of: January 31, 2001
	

 	
 	

 "INVESTOR"
	

 	
 	

By:

	

 	
 	

Print Name:

	

 	
 	

Title:

	

 	
 	

Address:

	

 	
 	

	AGREED AND ACCEPTED:	 	 
	THE J. JILL GROUP, INC.	 	 
	

By: /s/ Olga L. Conley
	
 	

 
	

Title: Chief Financial Officer
	
 	

 

 
 

ANNEX I    
  

 
  TERMS AND CONDITIONS FOR PURCHASE OF SHARES    
  

    1.  Agreement to Sell and Purchase the Shares; Subscription Date.  

     1.1 Purchase and Sale. At the Closing (as defined in Section 2), the Company will sell to the Investor, and the Investor will purchase
from the Company, upon the terms and conditions hereinafter set forth, the number of Shares set forth on the signature page to which these Terms and Conditions for Purchase of Shares are attached as
Annex I (the "Signature Page") at the purchase price set forth on such Signature Page. 

    1.2 Other Investors. As part of the Offering, the Company proposes to enter into this same form of Stock Purchase
Agreement with certain other investors (the "Other Investors"), and the Company expects to complete sales of Shares to them. (The Investor and the Other
Investors are hereinafter sometimes collectively referred to as the "Investors," and this Agreement and the Stock Purchase Agreements executed by the
Other Investors are hereinafter sometimes collectively referred to as the "Agreements.") The Company will accept executed Agreements from Investors for
the purchase of Shares commencing upon the date on which the Company provides the Investors with the proposed purchase price per Share and concluding upon the date (the
"Subscription Date") on which the Company has notified U.S. Bancorp Piper Jaffray Inc. (in its capacity as Placement Agent for the Shares, the
"Placement Agent") in writing that it is no longer accepting Agreements for the purchase of Shares in the Offering. 

    1.3 Placement Agent Fee. Investor acknowledges that the Company intends to pay the Placement Agent a fee in respect of
the sale of Shares to the Investor. 

    2.  Delivery of the Shares at Closing. The completion of the purchase and sale of the Shares (the
"Closing") shall occur at a place and time, no later than Wednesday, February 7, 2001, (the "Closing
Date") to be specified by the Company and the Placement Agent, and of which the Investors will be notified in advance by the Placement Agent. At the Closing, the Company shall
deliver to the Investor one or more stock certificates representing the number of Shares set forth on the signature page hereto, each such certificate to be registered in the name of the Investor or,
if so indicated on the Stock Certificate Questionnaire attached hereto as Exhibit A, in the name of a nominee designated by
the Investor provided that, if requested by the Investor, stock certificates representing such Shares shall be delivered in escrow to such Investor's agent prior to the Closing, to be held until the
completion of the Closing. In addition, on or prior to the Closing Date, the Company shall cause counsel to the Company to deliver to the Investors a legal opinion in the form attached hereto as
Exhibit D. 

    The
Company's obligation to issue and sell the Shares to the Investor shall be subject to the following conditions, any one or more of which may be waived by the Company:
(a) receipt by the Company of the purchase price for the Shares being purchased hereunder as set forth on the Signature Page hereto; (b) completion of purchases and sales under the
Agreements with the Other Investors; and (c) the accuracy of the representations and warranties made by the Investors and the fulfillment of those undertakings of the Investors to be fulfilled
prior to the Closing. 

    The
Investor's obligation to purchase the Shares shall be subject to the following conditions, any one or more of which may be waived by the Investor: (a) The Company's
agreement to issue and sell, and the Investors' agreement to purchase, on the Closing Date, not less than one million (1,000,000) shares of Common Stock; (b) the delivery to the Investor by
counsel to the Company of a legal opinion in the form attached hereto as Exhibit D; (c) The representations and warranties of the Company contained in Section 3 being true and
correct on and as of such Closing with the same effect as though such representations and warranties had been made on and as of the date of such Closing; (d) The absence of any order, writ,
injunction, judgment or decree that questions the validity of the Agreements or the right of the Company to enter into such agreements or to consummate the transactions contemplated hereby and
thereby; and (e) the delivery to the Investor by the Secretary or and Assistant Secretary of the Company of a certificate stating that the condition specified in part (c) of this
paragraph has been fulfilled. 

 

    3.  Representations, Warranties and Covenants of the Company. Except as otherwise described in the Company's Annual
Report on Form 10-K for the year ended December 25, 1999 (and any amendments thereto filed prior to the date hereof), the Company's Proxy Statement for its 2000 Annual
Meeting of Stockholders, or the Company's Quarterly Reports on Form 10-Q for the quarters ended March 25, 2000, June 24, 2000 and September 23, 2000 or any of
the Company's Current Reports on Form 8-K filed since January 1, 2000 (collectively, the "SEC Reports"), the Company hereby
represents and warrants to, and covenants with, the Investor as of the date hereof and the Closing Date, as follows: 

    3.1 Organization. Each of the Company and its Subsidiaries (as defined in Rule 405 under the Securities Act of
1933, as amended (the "Securities Act")) is duly incorporated and validly existing in good standing under the laws of the jurisdiction of its
organization. Each of the Company and its Subsidiaries has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted and is registered or
qualified to do business and in good standing in
each jurisdiction in which it owns or leases property or transacts business and where the failure to be so qualified would have a material adverse effect upon the Company and its subsidiaries taken as
a whole, or the business, financial condition, properties, operations or assets of the Company and its Subsidiaries, taken as a whole, or the Company's ability to perform its obligations under the
Agreements ("Material Adverse Effect"), and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification. 

    3.2 Due Authorization. The Company has all requisite power and authority to execute, deliver and perform its obligations
under the Agreements, and the Agreements have been duly authorized and validly executed and delivered by the Company and constitute legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their terms, except as rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, except
as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 

    3.3 Non-Contravention. The execution and delivery of the Agreements, the issuance and sale of the Shares to
be sold by the Company under the Agreements, the fulfillment of the terms of the Agreements and the consummation of the transactions contemplated thereby will not (A) conflict with or
constitute a violation of, or default (with the passage of time or otherwise) under, (i) any bond, debenture, note or other evidence of indebtedness, or any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective properties are bound, where such conflict, violation or default is reasonably expected to result in a Material Adverse Effect, (ii) the certificate of incorporation,
by-laws or other organizational documents of the Company or any of its Subsidiaries, or (iii) any law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority binding upon the Company or any of its Subsidiaries or their respective properties, where such conflict, violation or default is likely to result in (A) a
Material Adverse Effect or (B) the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the
Company or any of its Subsidiaries or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of
indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them is bound or to
which any of 

2

 

the property or assets of the Company or any of its Subsidiaries is subject. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body in the United States is required for the execution and delivery of the Agreements by the Company and the valid issuance of sale of the Shares by the
Company pursuant to the Agreements, other than such as have been made or obtained, and except for any filings required to be made under federal or state securities laws. 

    3.4 Capitalization. The capitalization of the Company as of September 23, 2000 is as described in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 23, 2000. The Company has not issued any capital stock since September 23, 2000 other than pursuant to
the exercise of employee stock options under the stock option plans and rights under the Company's Employee Stock Purchase Plan disclosed in the SEC Reports. The Shares to be sold pursuant to the
Agreements have been duly authorized, and when issued and paid for in accordance with the terms of the Agreements, will be duly and validly issued, fully paid and nonassessable. The outstanding shares
of capital stock of the Company have been duly and validly issued and are fully paid and nonassessable, have been issued in compliance with the registration requirements of federal and state
securities laws, and were not issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except for options issued under the Company's stock option plans
and rights under the Company's Employee Stock Purchase Plan, there are no outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company or any of its Subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind, in either case to which the Company or any of its Subsidiaries is a party and providing for the issuance or sale of any capital stock of the Company or any of its
Subsidiaries, any such convertible or exchangeable securities or any such rights, warrants or options. Without limiting the foregoing, no preemptive right, co-sale right, registration
right, right of first refusal or other similar right exists with respect to the issuance and sale of the Shares, except as provided in the Agreements. There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Common Stock to which the Company is a party. The Company owns the entire equity interest in its Subsidiaries, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest. 

    3.5 Legal Proceedings. There is no material legal or governmental proceeding pending, or to the knowledge of the
Company, threatened, to which the Company or any of its Subsidiaries is a party or of which the business or property of the Company or any of its Subsidiaries is subject. Neither the Company nor any
Subsidiary is a party to the provisions of any injunction, judgment, decree or order of any court, regulatory body, administrative agency or other government body which is material to the business or
operation of the Company and its subsidiaries, taken as a whole. 

    3.6 No Violations. Neither the Company nor any of its Subsidiaries is in violation of its certificate of incorporation,
bylaws or other organizational documents, or in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to
the Company or any of its Subsidiaries, which violation, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect, nor is the Company or any of its Subsidiaries in
default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in the performance of any bond, debenture, note or any other evidence of indebtedness
or any indenture, mortgage, deed of trust or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or by which the property of 

3

 

the Company or any of its Subsidiaries is bound, which is reasonably likely to have a Material Adverse Effect. 

    3.7 Governmental Permits, Etc. Each of the Company and its Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department or body that are currently necessary for the operation of the business of
the Company and its Subsidiaries as currently conducted, except where the failure to currently possess such franchises, licenses, certificates and other authorizations is not reasonably be expected to
have a Material Adverse Effect. 

    3.8 Intellectual Property.  

     (a) Except for matters which are not reasonably likely to have a Material Adverse Effect, (i) each of the Company and its Subsidiaries
has ownership of, or a license or other legal right to use, all patents, copyrights, trade secrets, trademarks, customer lists, designs, manufacturing or other processes, computer software, systems,
data compilation, research results or other proprietary rights used in the business of the Company or its Subsidiaries (collectively, "Intellectual
Property") and (ii) all of the Intellectual Property owned by the Company or its Subsidiaries consisting of patents, registered trademarks and registered copyrights have
been duly registered in, filed in or issued by the United States Patent and Trademark Office, the United States Register of Copyrights or the corresponding offices of other jurisdictions and have been
maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and/or such other jurisdictions. 

    (b) Except for matters which are not reasonably likely to have a Material Adverse Effect, all material licenses or other
material agreements under which (i) the Company or any of its Subsidiaries employs rights in Intellectual Property, or (ii) the Company or any of its Subsidiaries has granted rights to
others in Intellectual Property owned or licensed by the Company or any of its Subsidiaries, are in full force and effect, and there is no default by the Company or any of its Subsidiaries thereto. 

    (c) The Company believes that it has taken all steps required in accordance with sound business practice and business
judgment to establish and preserve the Company's ownership of all material Intellectual Property owned by the Company or its Subsidiaries. 

    (d) Except for matters which are not reasonably likely to have a Material Adverse Effect, to the knowledge of the
Company, (i) the present business, activities and products of the Company and its Subsidiaries do not infringe any intellectual property of any other person; (ii) neither the Company nor
any of its Subsidiaries is making unauthorized use of any confidential information or trade secrets of any person; and (iii) the activities of any of the employees on behalf of the Company or
any of its Subsidiaries do not violate any agreements or arrangements related to confidential information or trade secrets of persons other than the Company or its Subsidiaries or restricting any such
employee's engagement in business activities of any nature. 

    (e) No proceedings are pending, or to the knowledge of the Company, threatened, which challenge the rights of the
Company or any of its Subsidiaries in respect of the Company's or any of its Subsidiaries' right to the use of the Intellectual Property, except for matters which are not reasonably likely to have a
Material Adverse Effect. 

    3.9 Financial Statements. The consolidated financial statements of the Company and the related notes contained in the
SEC Reports present fairly, in accordance with generally accepted accounting principles, the consolidated financial position of the Company and its Subsidiaries as of the dates indicated, and the
results of their operations, cash flows and the changes in stockholders' equity for the periods therein specified, subject, in the case of unaudited financial statements for 

4

 

interim periods, to normal year-end audit adjustments. Such consolidated financial statements (including the related notes) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods therein specified, except that unaudited financial statements may not contain all footnotes required by generally accepted
accounting principles. 

    3.10 No Material Adverse Change. Since September 23, 2000, there has not been (i) a change that has had or
is reasonably likely to have a Material Adverse Effect, (ii) any obligation, direct or contingent, that is material to the Company or any of its Subsidiaries considered as one enterprise,
incurred by the Company or any of its Subsidiaries, except obligations incurred in the ordinary course of business, (iii) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its Subsidiaries, or (iv) any loss or damage (whether or not insured) to the physical property of the Company or any of its Subsidiaries which has been
sustained which has a Material Adverse Effect. 

    3.11 Nasdaq Compliance. The Company's Common Stock is registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is listed on the Nasdaq
National Market (the "Nasdaq Stock Market"), and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the Nasdaq Stock Market. The issuance of the shares does not require shareholder approval,
including, without limitation, pursuant to the Nasdaq Marketplace Rules. 

    3.12 Reporting Status. The Company has timely made all filings required under the Exchange Act during the
12 months preceding the date of this Agreement, and all of those documents complied in all material respects with the SEC's requirements as of their respective filing dates, and the information
contained therein as of the respective dates thereof did not contain an untrue statement of a material fact or omit 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. The Company is currently eligible to register the resale of Common Stock in a secondary offering on a
registration statement on Form S-3 under the Securities Act. 

    3.13 No Manipulation of Stock. The Company has not taken and will not, in violation of applicable law, take any action
outside the ordinary course of business designed to or that might reasonably be expected to cause or result in unlawful manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares. 

    3.14 Accountants. PricewaterhouseCoopers LLP, who expressed their opinion with respect to the consolidated financial
statements to be incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 25, 1999 into the Registration Statement (as defined
below) and the prospectus which forms a part thereof (the "Prospectus"), have advised that Company that they are, and to the best knowledge of the Company they are, independent accountants as required
by the Securities Act and the rules and regulations promulgated thereunder (the "Rules and Regulations"). 

    3.15 Contracts. Except for matters which are not reasonably likely to have a Material Adverse Effect, the contracts
listed as exhibits to the SEC Reports that are material to the Company, other than those contracts that are substantially or fully performed or expired by their terms, are in full force and effect on
the date hereof, and none of the Company, its Subsidiaries nor, to the Company's knowledge, any other party to such contracts is in breach of or default under any of such contracts. 

    3.16 Taxes. Except for matters which are not reasonably expected to have a Material Adverse Effect, the Company has
filed all necessary federal, state and foreign income and franchise tax 

5

 

returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company. 

    3.17 Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income taxes) which are required
to be paid in connection with the sale and transfer of the Shares hereunder will be, or will have been, fully paid or provided for by the Company and the Company will have complied with all laws
imposing such taxes. 

    3.18 Investment Company. The Company is not an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for an investment company, within the meaning of the Investment Company Act of 1940, as amended. 

    3.19 Insurance. The Company and its Subsidiaries maintain insurance of the types and in the amounts that the Company
reasonably believes is adequate for the their businesses, including, but not limited to, insurance covering real and personal property owned or leased by the Company and its Subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect. 

    3.20 Offering Materials. The Company has not in the past nor will it hereafter take any action to sell, offer for sale
or solicit offers to buy any securities of the Company which would bring the offer or sale of the Shares as contemplated by this Agreement within the provisions of Section 5 of the Securities
Act. 

    3.21 Listing. The Company shall comply with all requirements of the NASD with respect to the issuance of the Shares and
the listing thereof on the Nasdaq Stock Market. 

    3.22 Related Party Transactions. Except as disclosed in the SEC Reports, no transaction has occurred between or among
the Company, any of the Subsidiaries and their affiliates, officers or directors or any affiliate or affiliates of any such officer or director that with the passage of time will be required to be
disclosed pursuant to Section 13, 14 or 15(d) of the Exchange Act 

    3.23 Books and Records. The books, records and accounts of the Company and the Subsidiaries accurately and fairly
reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the operations of, the Company and the Subsidiaries. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 

    4.  Representations, Warranties and Covenants of the Investor.  

     4.1 Investor Knowledge and Status. The Investor represents and warrants to, and covenants with, the Company that: (i) the Investor is an
"accredited investor" as defined in Regulation D under the Securities Act and has requested, received, reviewed and considered all information it deemed relevant in making an informed decision
to purchase the Shares; (ii) the Investor understands that the Shares are "restricted securities" and have not been registered under the Securities Act and is acquiring the number of Shares set
forth on the Signature Page hereto in the ordinary course of its business and for its own account for investment only, has no present intention of distributing any of such Shares and has no
arrangement or understanding with any other persons regarding the distribution of such Shares (this representation and warranty not limiting the Investor's right to sell Shares pursuant to the
Registration Statement or otherwise, or other than with respect to any claim arising out of a breach of this representation and warranty, 

6

 

the Investor's right to indemnification under Section 6.3); (iii) the Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any
offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; (iv) the Investor has answered all questions on the Signature Page hereto and the Investor Questionnaire attached hereto as Exhibit B for use in
preparation of the Registration Statement and the answers thereto are true and correct as of the date hereof and will be true and correct as of the Closing Date; (v) the Investor will notify
the Company immediately of any change in any of such information until such time as the Investor has sold all of its Shares or until the Company is no longer required to keep the Registration
Statement effective; and (vi) the Investor has, in connection with its decision to purchase the number of Shares set forth on the signature page hereto, relied only upon the representations and
warranties of the Company contained herein. Investor understands that the issuance of the Shares to the Investor has not been registered under the Securities Act, or registered or qualified under any
state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Investor's investment intent as expressed herein.
The Placement Agent is not authorized to make any representation or use any information in connection with the placement, purchase and sale of the Shares, and no person is authorized to provide any
representation which is inconsistent or in addition to those in the SEC Reports. The Investor acknowledges that it has not received or relied on any such representations. 

    4.2 International Actions. The Investor acknowledges, represents and agrees that no action has been or will be taken in
any jurisdiction outside the United States by the Company or the Placement Agent that would permit an offering of the Shares, or possession or distribution of offering materials in connection with the
issue of the Shares, in any jurisdiction outside the United States. If the Investor is located outside the United States, it has or will take all actions necessary for the sale of the Shares to comply
with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Shares or has in its possession or distributes any offering material, in all
cases at its own expense. 

    4.3 Registration Required. The Investor hereby covenants with the Company not to make any sale of the Shares without
complying with the provisions of this Agreement, including Section 6.2 hereof, and without effectively causing the prospectus delivery requirement under the Securities Act to be satisfied
(unless the Investor is selling such Shares in a transaction not subject to the prospectus delivery requirement), and the Investor acknowledges that the certificates evidencing the Shares will be
imprinted with a legend that prohibits their transfer except in accordance therewith. The Investor acknowledges that as set forth in, and subject to the provisions of, Section 6.2, there may
occasionally be times when the Company, based on the advice of its counsel, determines that it must suspend the use of the Prospectus forming a part of the Registration Statement until such time as an
amendment to the Registration Statement has been filed by the Company and declared effective by the SEC or until the Company has amended or supplemented such Prospectus. 

    4.4 Power and Authority. The Investor further represents and warrants to, and covenants with, the Company that
(i) the Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, and (ii) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights
generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in 

7

 

equity or at law) and except as the indemnification agreements of the Investors herein may be legally unenforceable. 

    4.5 No Dispositions. Except with the prior written consent of the Company, the Investor will not, prior to the
effectiveness of the Registration Statement, or, if earlier, 60 days from the Closing Date, sell, offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any right with respect
to (collectively, a "Disposition"), the Common Stock of the Company, nor will Investor engage in any hedging or other transaction which is designed to
or could reasonably be expected to lead to or result in a Disposition of
Common Stock of the Company by the Investor or any other person or entity. Such prohibited hedging or other transactions would include, without limitation, effecting any short sale or having in effect
any short position (whether or not such sale or position is against the box and regardless of when such position was entered into) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to the Common Stock of the Company or with respect to any security (other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from the Common Stock of the Company. 

    4.6 No Tax or Legal Advice. The Investor understands that nothing in this Agreement, or any other materials presented to
the Investor in connection with the purchase and sale of the Shares constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase of Shares. 

    5.  Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this
Agreement or by the Placement Agent, all covenants, agreements, representations and warranties made by the Company and the Investor herein shall survive the execution of this Agreement, the delivery
to the Investor of the Shares being purchased and the payment therefor. 

    6.  Registration of the Shares; Compliance with the Securities Act.  

     6.1 Registration Procedures and Expenses. The Company shall: 

    (a) subject to receipt of necessary information from the Investors, prepare and file with the SEC, as soon as
practicable, but in no event later than five (5) business days after the Closing Date, a registration statement on Form S-3 (the "Registration
Statement") to enable the resale of the Shares by the Investors from time to time through the automated quotation system of the Nasdaq Stock Market or in privately-negotiated
transactions; 

    (b) use its reasonable efforts, subject to receipt of necessary information from the Investors, to cause the
Registration Statement to become effective as soon as practicable, but in no event later than sixty (60) days after the Registration Statement is filed by the Company; 

    (c) use its reasonable efforts to prepare and file with the SEC such amendments and supplements to the Registration
Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement current and effective for a period not exceeding, with respect to each
Investor's Shares purchased hereunder, the earlier of (i) the second anniversary of the Closing Date, (ii) the date on which the Investor may sell all Shares then held by the Investor
without restriction by the volume limitations of Rule 144(e) of the Securities Act or (iii) such time as all Shares purchased by such Investor in this Offering have been sold pursuant to
a registration statement; 

8

  

    (d) furnish to the Investor with respect to the Shares registered under the Registration Statement such number of copies
of the Registration Statement, Prospectuses (including supplemental prospectuses) and preliminary versions of the Prospectus filed with the Securities Exchange Commission
("Preliminary Prospectuses") in conformity with the requirements of the Securities Act and such other documents as the Investor may reasonably request,
in order to facilitate the public sale or other disposition of all or any of the Shares by the Investor, provided, however, that unless waived by the Company in writing, the obligation of the Company
to deliver copies of Prospectuses or Preliminary Prospectuses to the Investor shall be subject to the receipt by the Company of reasonable assurances from the Investor that the Investor will comply
with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such Prospectuses or Preliminary Prospectuses; 

    (e) file documents required of the Company for normal blue sky clearance in states reasonably specified in writing by
the Investor prior to the effectiveness of the Registration Statement, provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented; 

    (f)  bear all expenses (other than underwriting discounts and commissions, if any) in connection with the procedures in
paragraph (a) through (e) of this Section 6.1 and the registration of the Shares pursuant to the Registration Statement; and 

    (g) advise the Investors, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order
by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation of any proceeding for that purpose; and it will promptly use its commercially reasonable efforts
to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued. 

    (h) With a view to making available to the Investor the benefits of Rule 144 (or its successor rule) and any
other rule or regulation of the SEC that may at any time permit the Investor to sell Shares to the public without registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144, until the earlier of (A) such date as all of the Investor's Shares may be resold pursuant to
Rule 144(k) or any other rule of similar effect or (B) such date as all of the Investor's Shares shall have been resold; (ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and under the Exchange Act; and (iii) furnish to the Investor upon request, as long as the Investor owns any Shares,
(A) a written statement by the Company that it has complied with the reporting requirements of the Securities Act and the Exchange Act, (B) a copy of the Company's most recent Annual
Report on
Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail the Investor of any rule or
regulation of the SEC that permits the selling of any such Shares without registration. 

    It
shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 6.1 that the Investor shall furnish to the Company such
information regarding itself, the Shares to be sold by Investor, and the intended method of disposition of such securities as shall be required to effect the registration of the Shares. 

    The
Company understands that the Investor disclaims being an underwriter, but the Investor being deemed an underwriter by the SEC shall not relieve the Company of any obligations it
has hereunder. 

9

 

    6.2 Transfer of Shares After Registration; Suspension.

    (a) The Investor agrees that it will not effect any Disposition of the Shares or its right to purchase the Shares that
would constitute a sale within the meaning of the Securities Act, other than transactions exempt from the registration requirements of the Securities Act, except as contemplated in the Registration
Statement referred to in Section 6.1 and as described below, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the
Investor or its plan of distribution. 

    (b) Except in the event that paragraph (c) below applies, the Company shall: (i) if deemed necessary by
the Company, prepare and file from time to time with the SEC a post-effective amendment to the Registration Statement or a supplement to the related Prospectus or a supplement or amendment
to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the Shares being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit 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; (ii) provide the Investor copies of any documents filed pursuant to Section 6.2(b)(i); and (iii) upon request, inform
each Investor who so requests that the Company has complied with its obligations in Section 6.2(b)(i) (or that, if the Company has filed a post-effective amendment to the
Registration Statement which has not yet been declared effective, the Company will notify the Investor to that effect, will use its reasonable efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the Investor pursuant to Section 6.2(b)(i) hereof when the amendment has become effective). 

    (c) Subject to paragraph (d) below, in the event: (i) of any request by the SEC or any other federal or
state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a Registration Statement or related Prospectus or for additional
information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the
Shares for sale in any jurisdiction or the initiation of any proceeding for such purpose; or (iv) of any event or circumstance which necessitates the making of any changes in the Registration
Statement or Prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; then the Company shall promptly deliver a certificate in writing to the Investor (the "Suspension Notice")
to the effect of the foregoing and, upon receipt of such Suspension Notice, the Investor will refrain from selling any Shares pursuant to the Registration Statement (a
"Suspension") until the Investor's receipt of copies of a supplemented or amended Prospectus prepared and filed by the Company, or until it is advised
in writing by the Company that the current Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated 

10

 

by reference in any such Prospectus. In the event of any Suspension, the Company will use its reasonable efforts to cause the use of the Prospectus so suspended to be resumed as soon as reasonably
practicable within 30 days after delivery of a Suspension Notice to the Investors. In addition to and without limiting any other remedies (including, without limitation, at law or at equity)
available to the Investor, the Investor shall be entitled to specific performance in the event that the Company fails to comply with the provisions of this Section 6.2(c). 

    (d) Notwithstanding the foregoing paragraphs of this Section 6.2, the Investor shall not be prohibited from
selling Shares under the Registration Statement as a result of Suspensions on more than two occasions of not more than 30 days each in any twelve month period, and any such Suspension must be
separated by a period of at least thirty (30) days from a prior Suspension. 

    (e) Provided that a Suspension is not then in effect the Investor may sell Shares under the Registration Statement,
provided that it arranges for delivery of a current Prospectus to the transferee of such
Shares. Upon receipt of a request therefor, the Company will provide an adequate number of current Prospectuses to the Investor and to any other parties requiring such Prospectuses. 

    (f)  In the event of a sale of Shares by the Investor, unless such requirement is waived by the Company in writing, the
Investor must also deliver to the Company's transfer agent, with a copy to the Company, a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit C, so that the
shares may be properly transferred. 

    6.3 Indemnification. For the purpose of this Section 6.3 

    (a) the term "Selling Stockholder" shall include the Investor and each
person, if any, who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act; 

    (b) the term "Registration Statement" shall include any final
Prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated by reference in, the Registration Statement (or deemed to be a part thereof) referred to in
Section 6.1; and 

    (c) the term "untrue statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading. 

(d)  (i) The Company agrees to indemnify and hold harmless each Selling Stockholder from
and against any losses, claims, damages or liabilities to which such Selling Stockholder may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon (i) any untrue statement of a material fact contained in the Registration Statement (ii) any
inaccuracy in the representations and warranties of the Company contained in the Agreement or the failure of the Company to perform its obligations hereunder, or (iii) any failure by the
Company to fulfill any undertaking included in the Registration Statement, and the Company will reimburse such Selling Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or claim, provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim,
damage or liability arises out of, or is based upon, an untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or
on behalf of such Selling Stockholder 

11

 

specifically for use in preparation of the Registration Statement or the failure of such Selling Stockholder to comply with its covenants and agreements contained in Sections 4.1, 4.2, 4.3 or 6.2
hereof or any statement or omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Investor prior to the pertinent sale or sales by the Investor. 

    (ii) The Investor agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims,
damages or liabilities to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any failure to comply with the covenants and agreements contained in Section 4.1, 4.2, 4.3
or 6.2 hereof, or (ii) any untrue statement of a material fact contained in the Registration Statement if such untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Investor specifically for use in preparation of the Registration Statement, and the Investor will reimburse the Company (or such officer, director or
controlling person), as the case may be, for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim. The obligation to
indemnify shall be limited to the net amount of the proceeds received by the Investor from the sale of the Shares pursuant to the Registration Statement. 

    (iii) Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect
of which indemnity is to be sought against an indemnifying person pursuant to this Section 6.3, such indemnified person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party under this Section 6.3
(except to the extent that such omission materially and adversely affects the indemnifying party's ability to defend such action) or from any liability otherwise than under this Section 6.3.
Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof (unless it
has failed to assume the defense thereof and appoint counsel reasonably satisfactory to the indemnified party), such indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the defense thereof, provided, however, that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the reasonable opinion of counsel to the indemnified person, for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided, however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel (together with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying
person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided that such consent shall not be 

12

 

unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any
indemnified person is or could reasonably have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of
such indemnified person from all liability on claims that are the subject matter of such proceeding. 

    (iv) If the indemnification provided for in this Section 6.3 is unavailable to or insufficient to hold harmless
an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Investor on the other in connection with the statements or omissions or other matters which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among
other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or the Investor on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Investor agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if the Investor were treated as one entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), the Investor shall not be required to contribute any amount in excess of the amount by which
the gross amount received by the Investor from the sale of the Shares to which such loss relates exceeds the amount of any damages which the Investor has otherwise been required to pay by reason of
such untrue statement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. 

    (v) The parties to this Agreement hereby acknowledge that they are sophisticated business persons who were represented
by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 6.3, and are fully informed regarding said provisions. They
further acknowledge that the provisions of this Section 6.3 fairly allocate the risks in light of the ability of the parties to investigate the Company and its business in order to assure that
adequate disclosure is made in the Registration Statement as required by the Securities Act and the Exchange Act. 

    6.4 Termination of Conditions and Obligations. The conditions precedent
imposed by Section 4 or this Section 6 upon the transferability of the Shares shall cease and terminate as to any particular number of the Shares when such Shares shall have been
effectively registered under the Securities Act and sold or otherwise disposed of in accordance with the intended method of disposition set forth in the Registration Statement covering such Shares or
at such time as an opinion of counsel satisfactory to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act. 

13

 

    6.5 Information Available. So long as the Registration Statement is effective covering the resale of Shares owned by the
Investor, the Company will furnish to the Investor: 

    (a) as soon as practicable after it is available, one copy of (i) its Annual Report to Stockholders (which Annual
Report shall contain financial statements audited in accordance with generally accepted accounting principles by a national firm of certified public accountants) and (ii) if not included in
substance in the Annual Report to Stockholders, its Annual Report on Form 10-K (the foregoing, in each case, excluding exhibits); 

    (b) upon the reasonable request of the Investor, all exhibits excluded by the parenthetical to subparagraph
(a)(ii) of this Section 6.5 as filed with the SEC and all other information that is made available to stockholders; and 

    (c) upon the reasonable request of the Investor, an adequate number of copies of the Prospectuses to supply to any other
party requiring such Prospectuses; and the Company, upon the reasonable request of the Investor, will meet with the Investor or a representative thereof at the Company's headquarters to discuss all
information relevant for disclosure in the Registration Statement covering the Shares and will otherwise cooperate with the Investor conducting an investigation for the purpose of reducing or
eliminating the Investor's exposure to liability under the Securities Act, including the reasonable production of information at the Company's headquarters; provided, that the Company shall not be
required to disclose any confidential information to or meet at its headquarters with the Investor until and unless the Investor shall have entered into a confidentiality agreement in form and
substance reasonably satisfactory to the Company with the Company with respect thereto. 

    6.6 Public Statements. The Company will not issue any public statement, press release or any other public disclosure
listing Investor as one of the purchasers of the Shares without Investor's prior written
consent, except as may be required by applicable law or rules of any exchange on which the Company's securities are listed. 

    7.  Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed
(A) if within domestic United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (B) if
delivered from outside the United States, by International Federal Express (or comparable service) or facsimile, and shall be deemed given (i) if delivered by first-class registered or
certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one (1) business day after so mailed, (iii) if
delivered by International Federal Express (or comparable service), two (2) business days after so mailed, (iv) if delivered by facsimile, upon electric confirmation of receipt and shall
be delivered as addressed as follows: 

    (a) if to the Company, to:  

The
J. Jill Group, Inc.

4 Batterymarch Park

Quincy, MA 02169-7468

Attn: Gordon R. Cooke

Chief Executive Officer

Phone: (617) 376-4300

Telecopy: (617) 769-0177 

14

 

with a copy mailed to: 

Foley,
Hoag & Eliot LLP

One Post Office Square

Boston, MA 02109

Attn: David R. Pierson, Esq.

Phone: (617) 832-1000

Telecopy: (617) 832-7000 

    (b) if to the Investor, at its address on the Signature Page hereto, or at such other address or addresses as may have
been furnished to the Company in writing. 

    8.  Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the
Company and the Investor. 

    9.  Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement. 

    10. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 

    11. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the
Commonwealth of Massachusetts, without giving effect to the principles of conflicts of law. 

    12. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to
the other parties. 

    13. Confidential Disclosure Agreement. Notwithstanding any provision of this Agreement to the contrary, any confidential
disclosure agreement previously executed by the Company and the Investor in connection with the transactions contemplated by this Agreement shall remain in full force and effect in accordance with its
terms following the execution of this Agreement and the consummation of the transactions contemplated hereby. 

15

QuickLinks

STOCK PURCHASE AGREEMENT

ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SHARES

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}]]