Document:

Exhibit
10.19

 

CREDIT AGREEMENT

Dated as of February 8, 2002

by and between

Griffin Land & Nurseries, Inc.

and

Fleet National Bank

TABLE
OF CONTENTS

	
  1.   DEFINITIONS AND RULES OF
  INTERPRETATION.

  	
   

  
	
  1.1.
    Definitions.

  	
   

  
	
  1.2.
    Rules of Interpretation.

  	
   

  
	
  2.
    THE REVOLVING CREDIT FACILITY.

  	
   

  
	
  2.1.
    Commitment to Lend.

  	
   

  
	
  2.2.
    Commitment Fee.

  	
   

  
	
  2.3.
    Reduction of Commitment.

  	
   

  
	
  2.4.
    The Revolving Credit Note.

  	
   

  
	
  2.5.
    Interest on Loans.

  	
   

  
	
  2.6.
    Requests for Loans.

  	
   

  
	
  2.7.
    Conversion Options.

  	
   

  
	
  2.7.1.
    Conversion to Different Type of Loan.

  	
   

  
	
  2.7.2.
    Continuation of Type of Loan.

  	
   

  
	
  2.7.3.
    LIBOR Rate Loans.

  	
   

  
	
  3.
    REPAYMENT OF THE REVOLVING CREDIT LOANS.

  	
   

  
	
  3.1.
    Maturity.

  	
   

  
	
  3.2.
    Mandatory Repayments of Loans.

  	
   

  
	
  3.3.
    Optional Repayments of Loans.

  	
   

  
	
  4.
    LETTERS OF CREDIT.

  	
   

  
	
  4.1.
    Letter of Credit Commitments.

  	
   

  
	
  4.1.1.
    Commitment to Issue Letters of Credit.

  	
   

  
	
  4.1.2.
    Letter of Credit Applications.

  	
   

  
	
  4.1.3.
    Terms of Letters of Credit.

  	
   

  
	
  4.2.
    Reimbursement Obligation of the Borrower.

  	
   

  
	
  4.3.
    Letter of Credit Payments.

  	
   

  
	
  4.4.
    Obligations Absolute.

  	
   

  
	
  4.5.
    Reliance by Issuer.

  	
   

  
	
  4.6.
    Letter of Credit Fee.

  	
   

  
	
  5.
    CERTAIN GENERAL PROVISIONS.

  	
   

  
	
  5.1.
    Closing Fee.

  	
   

  
	
  5.2.
    Funds for Payments.

  	
   

  
	
  5.2.1.
    Payments to Bank.

  	
   

  
	
  5.2.2.
    No Offset, etc.

  	
   

  
	
  5.3.
    Computations.

  	
   

  
	
  5.4.
    Inability to Determine LIBOR Rate.

  	
   

  
	
  5.5.
    Illegality.

  	
   

  
	
  5.6.
    Additional Costs, etc.

  	
   

  
	
  5.7.
    Capital Adequacy.

  	
   

  
	
  5.8.
    Certificate.

  	
   

  
	
  5.9.
    Indemnity.

  	
   

  
	
  5.10.
    Interest After Default.

  	
   

  
	
  5.10.1.
    Overdue Payments.

  	
   

  
	
  5.10.2.
    Interest After Default.

  	
   

  
	
  6.
    COLLATERAL SECURITY.

  	
   

  

 

	
  6.1.
    Security of Borrower.

  	
   

  
	
  7.
    REPRESENTATIONS AND WARRANTIES.

  	
   

  
	
  7.1.
    Authority.

  	
   

  
	
  7.1.1.
    Incorporation; Good Standing.

  	
   

  
	
  7.1.2.
    Authorization.

  	
   

  
	
  7.1.3.
    Enforceability.

  	
   

  
	
  7.2.
    Governmental Approvals.

  	
   

  
	
  7.3.
    Title to Properties; Leases.

  	
   

  
	
  7.4.
    Financial Statements and Projections.

  	
   

  
	
  7.4.1.
    Fiscal Year.

  	
   

  
	
  7.4.2.
    Financial Statements.

  	
   

  
	
  7.5.
    No Material Changes, etc.

  	
   

  
	
  7.6.
    Litigation.

  	
   

  
	
  7.7.
    No Materially Adverse Contracts, etc.

  	
   

  
	
  7.8.
    Compliance with Other Instruments, Laws, etc.

  	
   

  
	
  7.9.
    Tax Status.

  	
   

  
	
  7.10.
    No Event of Default.

  	
   

  
	
  7.11.
    Intentionally Omitted.

  	
   

  
	
  7.12.
    Absence of Financing Statements, etc.

  	
   

  
	
  7.13.
    Certain Transactions.

  	
   

  
	
  7.14.
    Use of Proceeds.

  	
   

  
	
  7.14.1.
    General.

  	
   

  
	
  7.14.2.
    Regulations U and X.

  	
   

  
	
  7.15.
    Environmental Compliance.

  	
   

  
	
  7.16.
    Subsidiaries, etc.

  	
   

  
	
  7.17.
    Bank Accounts.

  	
   

  
	
  7.18.
    Chief Executive Office.

  	
   

  
	
  7.19.
    Insurance.

  	
   

  
	
  8.
    AFFIRMATIVE COVENANTS OF THE BORROWER.

  	
   

  
	
  8.1.
    Punctual Payment.

  	
   

  
	
  8.2.
    Maintenance of Office.

  	
   

  
	
  8.3.
    Records and Accounts.

  	
   

  
	
  8.4.
    Financial Statements, Certificates and Information.

  	
   

  
	
  8.5.
    Notices.

  	
   

  
	
  8.5.1.
    Defaults.

  	
   

  
	
  8.5.2.
    Environmental Events.

  	
   

  
	
  8.5.3.
    Notification of Claim against Collateral.

  	
   

  
	
  8.5.4.
    Notice of Litigation and Judgments.

  	
   

  
	
  8.6.
    Existence; Maintenance of Properties.

  	
   

  
	
  8.7.
    Insurance.

  	
   

  
	
  8.8.
    Taxes.

  	
   

  
	
  8.9.
    Inspection of Properties and Books, etc.

  	
   

  
	
  8.10.
    Compliance with Laws, Contracts, Licenses, and Permits.

  	
   

  
	
  8.11.
    Use of Proceeds.

  	
   

  
	
  8.12.
    Depository Bank.

  	
   

  
	
  8.13.
    Further Assurances.

  	
   

  

 

ii

 

	
  9.
    CERTAIN NEGATIVE COVENANTS OF THE BORROWER.

  	
   

  
	
  9.1.
    Restrictions on Indebtedness.

  	
   

  
	
  9.2.
    Restrictions on Liens.

  	
   

  
	
  9.3.
    Restrictions on Investments.

  	
   

  
	
  9.4.
    Distributions.

  	
   

  
	
  9.5.
    Merger, Consolidation and Disposition of Assets.

  	
   

  
	
  9.5.1.
    Mergers and Acquisitions.

  	
   

  
	
  9.5.2.
    Disposition of Assets.

  	
   

  
	
  9.6.
    Sale and Leaseback.

  	
   

  
	
  9.7.
    Compliance with Environmental Laws.

  	
   

  
	
  9.8.
    Fiscal Year.

  	
   

  
	
  9.9.
    Transactions with Affiliates.

  	
   

  
	
  9.10.
    Subordinated Debt.

  	
   

  
	
  10.
    FINANCIAL COVENANTS OF THE BORROWER.

  	
   

  
	
  10.1.
    Net Worth.

  	
   

  
	
  10.2.
    Fixed Charge Coverage Ratio.

  	
   

  
	
  10.3.
    Liabilities to Net Worth.

  	
   

  
	
  10.4.
    Consolidated Net Loss.

  	
   

  
	
  11.
    CLOSING CONDITIONS.

  	
   

  
	
  11.1.
    Loan Documents etc.

  	
   

  
	
  11.1.1.
    Loan Documents.

  	
   

  
	
  11.2.
    Certified Copies of Charter Documents.

  	
   

  
	
  11.3.
    Corporate Action.

  	
   

  
	
  11.4.
    Validity of Liens.

  	
   

  
	
  11.5.
    Certificates of Insurance.

  	
   

  
	
  11.6.
    Opinion of Counsel.

  	
   

  
	
  12.
    CONDITIONS TO ALL BORROWINGS.

  	
   

  
	
  12.1.
    Representations True; No Event of Default.

  	
   

  
	
  12.2.
    No Legal Impediment.

  	
   

  
	
  12.3.
    Governmental Regulation.

  	
   

  
	
  12.4.
    Proceedings and Documents.

  	
   

  
	
  13.
    EVENTS OF DEFAULT; ACCELERATION; ETC.

  	
   

  
	
  13.1.
    Events of Default and Acceleration.

  	
   

  
	
  13.2.
    Termination of Commitment.

  	
   

  
	
  13.3.
    Remedies.

  	
   

  
	
  14.   SETOFF.

  	
   

  
	
  15.
    EXPENSES AND INDEMNIFICATION.

  	
   

  
	
  15.1.
    Expenses.

  	
   

  
	
  15.2.
    Indemnification.

  	
   

  
	
  15.3.
    Survival.

  	
   

  
	
  16.
    TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.

  	
   

  
	
  17.
    SURVIVAL OF COVENANTS, ETC.

  	
   

  
	
  18.
    ASSIGNMENT AND PARTICIPATION.

  	
   

  
	
  18.1.
    Conditions to Assignment by Bank.

  	
   

  
	
  18.2.
    Participations.

  	
   

  
	
  18.3.
    Disclosure.

  	
   

  

 

iii

 

	
  18.4.
    Assignment by Borrower.

  	
   

  
	
  19.   NOTICES,
  ETC.

  	
   

  
	
  20.
    GOVERNING LAW.

  	
   

  
	
  21.   HEADINGS.

  	
   

  
	
  22.
    COUNTERPARTS.

  	
   

  
	
  23.
    ENTIRE AGREEMENT, ETC.

  	
   

  
	
  24.
    WAIVER OF JURY TRIAL.

  	
   

  
	
  25.
    CONSENTS, AMENDMENTS, WAIVERS, ETC.

  	
   

  
	
  26.
    PREJUDGMENT REMEDY WAIVER.

  	
   

  
	
  27.
    USURY.

  	
   

  
	
  28.
    SEVERABILITY.

  	
   

  

 

iv

 

CREDIT AGREEMENT

This CREDIT AGREEMENT is made as
of February 8, 2002, by and between Griffin Land & Nurseries, Inc., a
Delaware corporation having its principal place of business at 204 West
Newberry Road, Bloomfield, Connecticut 06002 (the “Borrower”) and Fleet
National Bank (the “Bank”), a national banking association, with an office at
777 Main Street, Hartford, Connecticut 06115.

1.  DEFINITIONS
AND RULES OF INTERPRETATION.

1.1.  Definitions.

The following terms shall
have the meanings set forth in this §1 or elsewhere in the provisions of this
Credit Agreement referred to below:

Adjustment Date. 
The first day of the month immediately following the month in which a
Compliance Certificate is to be delivered by the Borrower pursuant to §8.4(d).

Affiliate. 
Any Person that would be considered to be an affiliate of the Borrower
under Rule 144(a) of the Rules and Regulations of the Securities and Exchange
Commission, as in effect on the date hereof, if the Borrower were issuing
securities.

Applicable Margin. 
For each period commencing on an Adjustment Date through the date
immediately preceding the next Adjustment Date (each a “Rate Adjustment
Period”), the Applicable Margin shall be the applicable margin set forth
below with respect to the Debt Service Coverage Ratio, as determined for the
Debt Service Reference Period of the Borrower and its Subsidiaries ending on
the fiscal quarter ended immediately prior to the applicable Rate Adjustment
Period.

 

	
  Level

  	
  Debt
  Service Coverage

  Ratio

  	
  Base
  Rate Loans

  	
  LIBOR
  Rate Loans

  
	
   

  	
   

  	
   

  	
   

  
	
  I

  	
  Less than 2.00:1.00

  	
  0.50%

  	
  2.50%

  
	
  II

  	
  Greater than or equal to 2.00:1.00 but less than or equal to
  3.00:1.00

  	
  0.00%

  	
  1.75%

  
	
  III

  	
  Greater than 3.00:1.00

  	
  –0.50%

  	
  1.50%

  

Notwithstanding the
foregoing, (a) for the Loans outstanding during the period commencing on the
Closing Date through the date immediately preceding the first Adjustment Date
to occur after the fiscal quarter ending June 1, 2002, the Applicable Margin shall
be the Applicable Margin set forth in Level I above, and (b) if the Borrower
fails to deliver any Compliance Certificate pursuant to §8.4(d) hereof then,
for the period commencing on the next Adjustment Date to occur subsequent to
such failure through the 

 

date immediately
following the date on which such Compliance Certificate is delivered, the
Applicable Margin shall be the highest Applicable Margin set forth above.

Assignments of Leases and
Rents.  The Assignments of Leases and Rents, dated
or to be dated on or prior to the Closing Date, from the Borrower and River
Bend to the Bank and each in form and substance satisfactory to the Bank.

Balance Sheet Date. 
September 1, 2001.

Bank. 
As defined in the preamble hereto.

Base Rate. The variable per annum rate of interest
so designated from time to time by the Bank as its Prime Rate.  The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate being charged to any
customer.  Changes in the rate of
interest resulting from changes in the Prime Rate shall take place immediately
without notice or demand of any kind.

Base Rate Loans. 
Any Loans bearing interest calculated by reference to the Base Rate.

Borrower. 
As defined in the preamble hereto.

Business Day. 
Any day other than a Saturday, Sunday or day which shall be in the State
of Connecticut a legal holiday on which banking institutions are required or
authorized to close and, in the case of LIBOR Rate Loans, also a day which is a
LIBOR Business Day.

Capital Assets.  Fixed assets, both tangible (such as land, buildings, fixtures,
machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets
shall not include any item customarily charged directly to expense or
depreciated over a useful life of twelve (12) months or less in accordance with
generally accepted accounting principles.

Capital Expenditures. 
Amounts paid or Indebtedness incurred by the Borrower or any of its
Subsidiaries in connection with (a) the purchase or lease by the Borrower or
any of its Subsidiaries of Capital Assets that would be required to be
capitalized and shown on the balance sheet of such Person in accordance with
generally accepted accounting principles or (b) the lease of any assets by the
Borrower or any of its Subsidiaries as lessee under any Synthetic Lease to the
extent that such assets would have been Capital Assets had the Synthetic Lease
been treated for accounting purposes as a Capitalized Lease.

Capitalized Leases. 
Leases under which the Borrower or any of its Subsidiaries is the lessee
or obligor, the discounted future rental payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with generally accepted accounting principles; provided, however,
that any leases entered into by the Borrower prior to the date hereof shall be
treated by the Borrower as the Borrower has treated such leases consistent with
past principles regardless of whether such treatment is in accordance with
generally accepted accounting principles.

 

2

 

Cash Flow Positive. 
With respect to any fiscal period, any Real Estate owned by the Borrower
and which is encumbered by a Non-Recourse Mortgage and as to which the
operating revenues received by the Borrower from such Real Estate during such
fiscal period exceeds the sum of (a) the aggregate amount of reasonable and
necessary operating expenses which are incurred and paid or accrued by the
Borrower during such period in connection with the ownership, maintenance and
operation of such Real Estate, plus (b) the principal, interest and
other amounts payable in respect of Indebtedness incurred by the Borrower or
any of its Subsidiaries which is secured by the Non-Recourse Mortgage on such
Real Estate during such period each as determined in accordance with generally
accepted accounting principles.

Centaur. 
Centaur Communications Ltd.

CERCLA. 
See §7.15(a).

Change of Control.  An event or series of events by which (a)
the Cullman Group ceases to own at least forty percent (40%) of the outstanding
shares of any class of voting stock of the Borrower; and (b) members of the
Cullman Group cease to hold thirty percent (30%) of the seats on the board of
directors of the Borrower.

Closing Date. 
The first date on which the conditions set forth in §11 have been
satisfied and any Loans are to be made or any Letter of Credit is to be issued
hereunder.

Code. 
The Internal Revenue Code of 1986, as amended from time to time.

Collateral. 
All of the property, rights and interests of the Borrower and its
Subsidiaries that are or are intended to be subject to the security interests
and mortgages created by the Security Documents.

Commitment. 
The obligation of the Bank to make Loans to, and to issue, extend and
renew Letters of Credit for the account of, the Borrower up to an aggregate
outstanding principal amount not to exceed the result of (a) $19,380,000, minus
(b) the sum of the Commitment Reduction Amounts, as the same may be reduced
from time to time; or if such commitment is terminated pursuant to the
provisions hereof, zero.

Commitment Reduction
Amount.  With respect to any Released Property, the
amount set forth on Schedule 1 hereto opposite the applicable Released
Property.

Compliance Certificate. 
See §8.4(d) hereof.

Consolidated or
consolidated.  With reference to any term defined herein,
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.

Consolidated Net Income
(or Loss).  The consolidated net income (or loss) of the
Borrower and its Subsidiaries, determined in accordance with generally accepted
accounting principles, after eliminating therefrom (a) all extraordinary
nonrecurring items of income of the Borrower and its Subsidiaries and all
extraordinary nonrecurring non-cash losses with respect to the real estate
business of the Borrower and its Subsidiaries and (b) any and all 

 

3

 

non-cash earnings or
losses from Investments by the Borrower in Centaur, Shemin Acquisition Corp.
and/or Linguaphone.

Consolidated Net Worth: 
The excess of Consolidated Total Assets over Consolidated Total Liabilities.

Consolidated Total Assets. 
All assets of the Borrower and its Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting principles
and classified as such on the consolidated balance sheet of the Borrower and its
Subsidiaries.

Consolidated Total Debt
Service.  For any fiscal period with respect to the
Borrower and its Subsidiaries, the sum of (a) Consolidated Total Interest
Expense for such period, plus (b) any and all scheduled repayments of
principal in respect of Indebtedness of the Borrower and its Subsidiaries made
or required to be made during such period other than the prepayment of
Indebtedness owed by the Borrower to Webster Bank; provided, that for
the purpose of calculating the Fixed Charge Coverage Ratio only (x) any and all
interest required to be paid or accrued and any and all scheduled repayments of
principal in respect of Non-Recourse Debt incurred by the Borrower or any of
its Subsidiaries which is secured by any Non-Recourse Mortgage on Real Estate
which is Cash Flow Positive for the fiscal period with respect to which the
Fixed Charge Coverage Ratio is being determined, shall be excluded from clauses
(a) and (b) hereof so long as the Borrower or such Subsidiary is not in default
under any of such Indebtedness at the time that the Fixed Charge Coverage Ratio
is being calculated; otherwise, all such interest and all such scheduled
repayments of principal on such Indebtedness during such fiscal period shall be
included in such calculation and (y) any and all interest in respect of
Indebtedness incurred by the Borrower or such Subsidiary in connection with any
construction projects of the Borrower or its Subsidiaries which is capitalized
in accordance with generally accepted accounting principles shall also be
excluded from the calculation of “Consolidated Total Interest Expense”.

Consolidated Total
Interest Expense.  For any period, (a) for the purpose of
calculating the Debt Service Coverage Ratio, the aggregate amount of interest
paid or required to be paid in cash or property by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period and (b) for all
other purposes, the aggregate amount of interest required to be paid or accrued
by the Borrower and its Subsidiaries during such period on all Indebtedness of
the Borrower and its Subsidiaries outstanding during all or any part of such
period, in the case of clauses (a) and (b) whether such interest was or is
required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of any Capitalized Lease or any
Synthetic Lease.

Consolidated Total
Liabilities.  All liabilities of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and classified as such on the consolidated
balance sheet of the Borrower and its Subsidiaries.

Conversion Request. 
A notice given by the Borrower to the Bank of the Borrower’s election to
convert or continue a Loan in accordance with §2.7.

 

 

4

 

Credit Agreement. 
This Credit Agreement, including the Schedules and Exhibits hereto.

Culbro. 
Culbro Homes II, Inc.

Cullman Group. 
The individuals composing the Reporting Persons with respect to the
Schedule 13D filed with the Securities and Exchange Commission on July 14,
1997.

Debt Service Coverage
Ratio.  As at any date of determination, the ratio
of (a) the result of (i) EBITDA for the Debt Service Reference Period
ended on such date, minus (ii) Distributions made by the Borrower during
such Debt Service Reference Period, to (b) the sum of (i) Consolidated Total
Debt Service for such Debt Service Reference Period, plus (ii) cash
taxes paid by the Borrower and its Subsidiaries during such Debt Service
Reference Period other than (x) any cash taxes paid by the Borrower with
respect to income earned prior to December 1, 2001 and (y) any cash taxes paid
by the Borrower prior to December 31, 2002 in connection with the sale of the
service centers to Shemin Nurseries, Inc.

Debt Service Reference
Period.  As of any date of determination, the period
of four (4) consecutive fiscal quarters of the Borrower and its Subsidiaries ending
on the relevant date.

Default. 
See §13.1.

Distribution. 
The declaration or payment of any dividend or other distribution on or
in respect of any shares of any class of capital stock of the Borrower other
than dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise or the return of capital by the Borrower to its shareholders.

Dollars or $.  Dollars in lawful currency of the United States of America.

Drawdown Date. 
The date on which any Loan is made or is to be made, and the date on
which any Loan is converted or continued in accordance with §2.7.

EBITDA. 
With respect to any fiscal period, an amount equal to the sum of (a)
Consolidated Net Income (or Loss) for such fiscal period, plus (b) in
each case to the extent deducted in the calculation of Consolidated Net Income
(or Loss) and without duplication, (i) depreciation and amortization for such
fiscal period, plus (ii) income tax expense for such fiscal period,
plus (iii) Consolidated Total Interest Expense for such fiscal period, plus
(iv) any other non-cash charges for such fiscal period, all as determined in accordance
with generally accepted accounting principles. 
For the purpose of calculating the Fixed Charge Coverage Ratio only, any
operating income from any Real Estate owned by the Borrower or any of its
Subsidiaries which is encumbered by a Non-Recourse Mortgage as to which no
default exists at the time that the Fixed Charge Coverage Ratio is being
determined and which is Cash Flow Positive for the fiscal period as to which
the Fixed Charge Coverage Ratio is being determined shall be excluded from the
calculation of “EBITDA” up to and including the amount necessary to satisfy the
corresponding debt service for the relevant 

 

5

 

period in respect of the
Indebtedness incurred by the Borrower or such Subsidiary which is secured by
such Non-Recourse Mortgage (including all principal and interest).

Environmental Indemnity
Agreements.  The Environmental Indemnity Agreements,
dated or to be dated on or prior to the Closing Date, by and between the Bank
and each of the Borrower and River Bend and each in form and substance
satisfactory to the Bank.

Environmental Laws. 
See §7.15(a).

EPA. 
See §7.15(b).

ERISA. 
The Employee Retirement Income Security Act of 1974.

Eurocurrency Reserve Rate. 
For any day with respect to a LIBOR Rate Loan, the maximum rate
(expressed as a decimal) at which any lender subject thereto would be required
to maintain reserves under Regulation D of the Board of Governors of the
Federal Reserve System (or any successor or similar regulations relating to
such reserve requirements) against “Eurocurrency Liabilities” (as that term is
used in Regulation D), if such liabilities were outstanding.  The Eurocurrency Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurocurrency Reserve Rate.

Event of Default. 
See §13.1.

Fixed Charge Coverage
Ratio.  As at any date of determination, the ratio
of (a) the result of (i) EBITDA for the Reference Period ended on such
date, minus (ii) Distributions made by the Borrower during such
Reference Period, to (b) the sum of (i) Consolidated Total Debt Service
for the Reference Period ended on such date, plus (ii) cash taxes paid
by the Borrower and its Subsidiaries during such Reference Period other than
any cash taxes paid by the Borrower with respect to income earned prior to
December 1, 2001.

Generally accepted
accounting principles.  (a) When used in §10,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal period ended on the Balance Sheet Date,
and (ii) to the extent consistent with such principles, the accounting practice
of the Borrower reflected in its financial statements and the notes thereto for
the year ended on the Balance Sheet Date, and (b) when used in general,
other than as provided above, means principles that are (i) consistent
with the principles promulgated or adopted by the Financial Accounting
Standards Board and its predecessors, as in effect from time to time, and
(ii) consistently applied with past financial statements of the Borrower
adopting the same principles, provided that in each case referred to in this
definition of “generally accepted accounting principles” a certified public
accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles) as
to financial statements in which such principles have been properly applied.

Guarantors. 
Collectively, Imperial, River Bend and any Subsidiary Guarantor.

 

6

 

Guaranties. 
Collectively, the Guaranties made by each of the Guarantors in favor of
the Bank, and each in form and substance satisfactory to the Bank.

Hazardous Substances. 
See §7.15(b).

Imperial. 
Imperial Nurseries, Inc., a Delaware corporation and wholly-owned
Subsidiary of the Borrower.

Indebtedness. 
As to any Person and whether recourse is secured by or is otherwise
available against all or only a portion of the assets of such Person and
whether or not contingent, but without duplication:

(a)                                   every
obligation of such Person for money borrowed,

(b)                                  every
obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses,

(c)                                   every
reimbursement obligation of such Person with respect to letters of credit,
bankers’ acceptances or similar facilities issued for the account of such
Person,

(d)                                  every
obligation of such Person issued or assumed as the deferred purchase price of
property or services (including securities repurchase agreements but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business which are not overdue or which are being contested in good faith),

(e)                                   every
obligation of such Person under any Capitalized Lease,

(f)                                     every
obligation of such Person under any lease (a “Synthetic Lease”) treated as an
operating lease under generally accepted accounting principles and as a loan or
financing for U.S. income tax purposes,

(g)                                  all
sales by such Person of (i) accounts or general intangibles for money due or to
become due, (ii) chattel paper, instruments or documents creating or evidencing
a right to payment of money or (iii) other receivables (collectively
“receivables”), whether pursuant to a purchase facility or otherwise, other
than in connection with the disposition of the business operations of such
Person relating thereto or a disposition of defaulted receivables for
collection and not as a financing arrangement, and together with any obligation
of such Person to pay any discount, interest, fees, indemnities, penalties,
recourse, expenses or other amounts in connection therewith,

(h)                                  every
obligation of such Person (an “equity related purchase obligation”) to
purchase, redeem, retire or otherwise acquire for value any shares of capital
stock of any class issued by such Person, any warrants, options or other rights
to acquire any such shares or similar interests, or any rights measured by the
value of such shares, warrants, options or other rights,

 

7

 

(i)                                      every
obligation of such Person under any forward contract, futures contract, swap,
option or other financing agreement or arrangement (including, without
limitation, caps, floors, collars and similar agreements), the value of which
is dependent upon interest rates, currency exchange rates, commodities or other
indices (a “derivative contract”),

(j)                                      every
obligation in respect of Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent that such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent that the terms of
such Indebtedness provide that such Person is not liable therefor and such
terms are enforceable under applicable law,

(k)                                   every
obligation, contingent or otherwise, of such Person guaranteeing, or having the
economic effect of guarantying or otherwise acting as surety for, any
obligation of a type described in any of clauses (a) through (j) (the “primary
obligation”) of another Person (the “primary obligor”), in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
of) any security for the payment of such primary obligation, (ii) to purchase
property, securities or services for the purpose of assuring the payment of
such primary obligation, or (iii) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so
as to enable the primary obligor to pay such primary obligation.

The “amount” or
“principal amount” of any Indebtedness at any time of determination represented
by (u) any Indebtedness, issued at a price that is less than the principal
amount at maturity thereof, shall be the amount of the liability in respect
thereof determined in accordance with generally accepted accounting principles,
(v) any Capitalized Lease shall be the principal component of the aggregate of
the rentals obligation under such Capitalized Lease payable over the term
thereof that is not subject to termination by the lessee, (w) any sale of
receivables shall be the amount of unrecovered capital or principal investment
of the purchaser (other than the Borrower or any of its wholly-owned
Subsidiaries) thereof, excluding amounts representative of yield or interest
earned on such investment, (x) any Synthetic Lease shall be the stipulated loss
value, termination value or other equivalent amount, (y) any derivative
contract shall be the maximum amount of any termination or loss payment
required to be paid by such Person if such derivative contract were, at the
time of determination, to be terminated by reason of any event of default or
early termination event thereunder, whether or not such event of default or
early termination event has in fact occurred and (z) any equity related
purchase obligation shall be the maximum fixed redemption or purchase price
thereof inclusive of any accrued and unpaid dividends to be comprised in such
redemption or purchase price.

Interest Payment Date. 
(a) As to any Base Rate Loan, the last day of the calendar month with
respect to interest accrued during such calendar month, including, without
limitation, the calendar month which includes the Drawdown Date of such Base
Rate Loan; and (b) as to any LIBOR Rate Loan in respect of which the
Interest Period is (i) 3 months or less, the last day of such Interest Period
and (ii) more than 3 months, the date that is 3 

 

8

 

months from the first day
of such Interest Period and, in addition, the last day of such Interest Period.

Interest Period. 
With respect to each Loan, (a) initially, the period commencing on the
Drawdown Date of such Loan and ending on the last day of one of the periods set
forth below, as selected by the Borrower in a Loan Request or as otherwise
required by the terms of this Credit Agreement (i) for any Base Rate Loan, the
last day of the calendar month; (ii) for any LIBOR Rate Loan, 1, 2, 3 or 6
months; and (b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Loan and ending on the last
day of one of the periods set forth above, as selected by the Borrower in a
Conversion Request; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:

(a)                                  if any Interest Period with respect to a
LIBOR Rate Loan would otherwise end on a day that is not a LIBOR Business Day,
that Interest Period shall be extended to the next succeeding LIBOR Business
Day unless the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end on
the immediately preceding LIBOR Business Day;

(b)                                 if any Interest Period with respect to a
Base Rate Loan would end on a day that is not a Business Day, that Interest
Period shall end on the next succeeding Business Day;

(c)                                  if the Borrower shall fail to give notice
as provided in §2.7, the Borrower shall be deemed to have requested a
conversion of the affected LIBOR Rate Loan to a Base Rate Loan and the
continuance of all Base Rate Loans as Base Rate Loans on the last day of the
then current Interest Period with respect thereto;

(d)                                 any Interest Period relating to any LIBOR
Rate Loan that begins on the last LIBOR Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last LIBOR Business Day of
a calendar month; and

(e)                                  any Interest Period that would otherwise
extend beyond the Maturity Date shall end on the Maturity Date.

Interest Rate Agreement. 
Any interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate futures contract, interest rate option
agreement or other similar agreement or arrangement to which the Borrower is a
party, designed to protect the Borrower against fluctuations in interest rates.

Investments. 
All expenditures made and all liabilities incurred (contingently or
otherwise) for the acquisition of stock, membership interests or similar
interests or Indebtedness of, or for loans, advances, capital contributions or
transfers of property to, or in respect of any guaranties (or other commitments
as described under Indebtedness) of, any Person.  In determining the aggregate amount of Investments outstanding at
any particular time: (a) the amount of any Investment represented by a
guaranty shall be equal to the maximum amount to be paid under such guaranty
with respect to the principal amount of the 

 

9

 

obligations actually
covered by such guaranty and still outstanding; (b) there shall be
included as an Investment all interest accrued with respect to Indebtedness
constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital; and (d) there shall not be deducted from the
aggregate amount of Investments any decrease in the value thereof.

Letter of Credit. 
See §4.1.1.

Letter of Credit
Application.  See §4.1.1.

Letter of Credit Fee.  See §4.6.

LIBOR Business Day. 
Any day on which commercial banks are open for international business
(including dealings in Dollar deposits) in the London interbank market.

LIBOR Lending Office. 
Initially, the office of the Bank, if any, that shall be making or
maintaining LIBOR Rate Loans.

LIBOR Rate. 
For any Interest Period with respect to a LIBOR Rate Loan, the rate of
interest equal to (a) the rate determined by the Bank at which Dollar deposits
for such Interest Period are offered based on information presented on Telerate
Page 3750 as of 11:00 a.m. London time on the second LIBOR Business Day prior
to the first day of such Interest Period, divided by (b) a number equal to 1.00
minus the Eurocurrency Reserve Rate.  If
the rate described above does not appear on the Telerate System on any
applicable interest determination date, the LIBOR Rate shall be the rate
(rounded upward, if necessary, to the nearest one hundred-thousandth of a
percentage point), determined on the basis of the offered rates for deposits in
Dollars for a period of time comparable to such LIBOR Rate Loan which are
offered by four major banks in the London interbank market at approximately
11:00 a.m. London time, on the second LIBOR Business Day prior to the first day
of such Interest Period as selected by the Bank.  The principal London office of each of the four major London
banks will be requested to provide a quotation of its Dollar deposit offered
rate.  If at least two such quotations
are provided, the rate for that date will be the arithmetic mean of the
quotations.  If fewer than two
quotations are provided as requested, the rate for that date will be determined
on the basis of the rates quoted for loans in Dollars to leading European banks
for a period of time comparable to such Interest Period offered by major banks
in New York City at approximately 11:00 a.m. New York City time, on the second
LIBOR Business Day prior to the first day of such Interest Period.  In the event that the Bank is unable to
obtain any such quotation as provided above, it will be considered that LIBOR
Rate pursuant to a LIBOR Rate Loan cannot be determined.

LIBOR Rate Loans. 
All or any portion of the Loans bearing interest calculated by reference
to the LIBOR Rate.

Loan Documents. 
This Credit Agreement, the Note, the Guaranties, the Letter of Credit
Applications, the Letters of Credit, the Environmental Indemnity Agreements,
the Security Documents and any document, agreement and/or instrument executed
and/or delivered in connection therewith.

 

 

10

 

Linguaphone. 
Linguaphone Group Plc.

Loan Request. 
See §2.6.

Loans. 
Revolving credit loans made or to be made by the Bank to the Borrower
pursuant to §2.

Material Adverse Effect. 
With respect to any event or occurrence of whatever nature (including
any adverse determination in any litigation, arbitration or governmental
investigation or proceeding):

(a) a material adverse
effect on the business, properties, condition (financial or otherwise),
Collateral, operations or income of the Borrower and its Subsidiaries, taken as
a whole;

(b) an adverse effect on
the ability of the Borrower and its Subsidiaries taken as a whole, to perform
any of their respective Obligations under any of the Loan Documents to which it
is a party; or

(c) any impairment of the
validity, binding effect or enforceability of this Credit Agreement or any of
the other Loan Documents, any impairment of the rights, remedies or benefits
available to the Bank under any Loan Document or any impairment of the
attachment, perfection or priority of any lien, mortgage or security interest
of the Bank under the Security Documents.

Maturity Date. 
February 8, 2005.

Maximum Drawing Amount. 
The maximum aggregate amount that the beneficiaries may at any time draw
under outstanding Letters of Credit, as such aggregate amount may be reduced
from time to time pursuant to the terms of the Letters of Credit.

Mortgages. 
The Open-End Mortgage and Security Agreements, dated or to be dated on
or prior to the Closing Date, from the Borrower and River Bend to the Bank with
respect to the fee interests of the Borrower and River Bend and each in form
and substance satisfactory to the Bank.

Non-Recourse Debt. 
Any Indebtedness of the Borrower or any of its Subsidiaries the holder
of which has the right to collect such Indebtedness from the proceeds of a lien
on Real Estate owned by the Borrower or such Subsidiary but has no right to
attach or execute upon any other asset of the Borrower, such Subsidiary or any
other Subsidiary of the Borrower in order to collect such Indebtedness unless
an event or circumstance described therein has occurred.

Non-Recourse Mortgage. 
Any mortgage, deed of trust or similar instrument that encumbers any
Real Estate owned by the Borrower or any of its Subsidiaries which secures
Non-Recourse Debt.

Note Record. 
A Record with respect to the Note.

 

 

11

 

Note. 
See §2.4.

Obligations. 
All indebtedness, obligations and liabilities of the Borrower and its
Subsidiaries to the Bank, individually or collectively, existing on the date of
this Credit Agreement or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, arising or incurred under this Credit Agreement or any of the other
Loan Documents or any Interest Rate Agreement or in respect of any of the Loans
made or Reimbursement Obligations incurred or any of the Note, Letter of Credit
Applications, Letters of Credit, interest rate protection arrangement or other
instruments at any time evidencing any thereof.

Outstanding. 
With respect to the Loans, the aggregate unpaid principal thereof as of
any date of determination.

Permitted Liens. 
Liens, security interests and other encumbrances permitted by §9.2.

Person. 
Any individual, corporation, limited liability company, partnership,
trust, unincorporated association, business, or other legal entity, and any government
or any governmental agency or political subdivision thereof.

RCRA. 
See §7.15(a).

Real Estate. 
All real property at any time owned or leased (as lessee or sublessee)
by the Borrower or any of its Subsidiaries.

Record. 
The grid attached to the Note, or the continuation of such grid, or any
other similar record, including computer records, maintained by the Bank with
respect to any Loan referred to in the Note.

Reference Period. 
For the period ending June 1, 2002, the period of two (2) consecutive fiscal
quarters ending on June 1, 2002. For the period ending August 31, 2002, the
period of three (3) consecutive fiscal quarters ending on August 31, 2002.  With respect to any other date of
determination, the period of four (4) consecutive fiscal quarters of the
Borrower and its Subsidiaries ending on the relevant date.

Reimbursement Obligation. 
The Borrower’s obligation to reimburse the Bank on account of any
drawing under any Letter of Credit as provided in §4.2.

Released Property. 
Real Estate that is included in the Collateral as to which the lien held
by the Bank is released by the Bank at the request or with the consent of the
Borrower.

River Bend. 
River Bend Associates, Inc., a Connecticut corporation and wholly-owned
Subsidiary of the Borrower.

SARA. 
See §7.15(a).

SEC. 
The Securities and Exchange Commission or any governmental authority
succeeding to any of its principal functions.

 

 

12

 

Security Documents. 
The Mortgages, the Assignments of Leases and Rents and all other
instruments and documents, including without limitation Uniform Commercial Code
financing statements, required to be executed or delivered pursuant to any
Security Document.

Subordinated Debt. 
Unsecured Indebtedness of the Borrower to any of its Subsidiaries that
is expressly subordinated and made junior to the payment and performance in
full of the Obligations, and evidenced as such by a written instrument
containing subordination provisions in form and substance reasonably satisfactory
to the Bank.

Subsidiary. 
Any corporation, limited liability company, association, trust, or other
business entity of which the designated parent shall at any time own directly
or indirectly through a Subsidiary or Subsidiaries at least a majority (by
number of votes) of the outstanding Voting Stock (other than Walden Woods
Conservancy).

Subsidiary Guarantor. 
Any Subsidiary of the Borrower that guaranties the Obligations pursuant
to the terms of a Guaranty substantially in the form of Exhibit B attached
hereto.  Contemporaneously with the
execution and delivery of such guaranty, the Borrower shall deliver to the Bank
appropriate corporate backup documentation and a legal opinion, in each case,
in form and substance satisfactory to the Bank, as to each such guaranty.

Synthetic Lease. 
As defined in paragraph (f) of the definition of “Indebtedness”.

Type. 
As to any Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.

Uniform Customs. 
With respect to any Letter of Credit, either the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Bank in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit, or the International
Standby Practices (ISP98), International Chamber of Commerce Publication No.
590, or any successor code of standby letter of credit practices among banks
adopted by the Bank in the ordinary course of its business as a standby letter
of credit issuer and in effect at the time of issuance of such Letter of
Credit.

Unpaid Reimbursement
Obligation.  Any Reimbursement Obligation for which the
Borrower does not reimburse the Bank on the date specified in, and in
accordance with, §4.2.

Voting Stock. 
Stock or similar interests, of any class or classes (however
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, limited liability company, association,
trust or other business entity involved, whether or not the right so to vote
exists by reason of the happening of a contingency.

 

 

13

 

1.2.  Rules
of Interpretation.

(a)           A reference to any document or
agreement shall include such document or agreement as amended, modified or
supplemented from time to time in accordance with its terms and the terms of
this Credit Agreement.

(b)           The singular includes the plural and
the plural includes the singular.

(c)           A reference to any law includes any
amendment or modification to such law.

(d)           A reference to any Person includes
its permitted successors and permitted assigns.

(e)           Accounting terms not otherwise
defined herein have the meanings assigned to them by generally accepted
accounting principles applied on a consistent basis by the accounting entity to
which they refer.

(f)            The words “include”, “includes” and
“including” are not limiting.

(g)           All terms not specifically defined
herein or by generally accepted accounting principles, which terms are defined
in the Uniform Commercial Code as in effect in the State of Connecticut, have
the meanings assigned to them therein, with the term “instrument” being that
defined under Article 9 of the Uniform Commercial Code.

(h)           Reference to a particular “§” refers
to that section of this Credit Agreement unless otherwise indicated.

(i)            The words “herein”, “hereof”,
“hereunder” and words of like import shall refer to this Credit Agreement as a
whole and not to any particular section or subdivision of this Credit
Agreement.

(j)            Unless otherwise expressly
indicated, in the computation of periods of time from a specified date to a
later specified date, the word “from” means “from and including,” the words
“to” and “until” each mean “to but excluding,” and the word “through” means “to
and including.”

(k)           This Credit Agreement and the other
Loan Documents may use several different limitations, tests or measurements to
regulate the same or similar matters. 
All such limitations, tests and measurements are, however, cumulative
and are to be performed in accordance with the terms thereof.

(l)            This Credit Agreement and the other
Loan Documents are the result of negotiation among, and have been reviewed by
counsel to, among others, the Bank and the Borrower and are the product of
discussions and negotiations among all parties.  Accordingly, this Credit Agreement and the other Loan Documents
are not intended to be construed against the Bank merely on account of the
Bank’s involvement in the preparation of such documents.

 

14

 

2.  THE
REVOLVING CREDIT FACILITY.

2.1.  Commitment to Lend.
Subject to the terms and
conditions set forth in this Credit Agreement, the Bank agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time
from the Closing Date up to but not including the Maturity Date upon notice by
the Borrower to the Bank given in accordance with §2.6, such sums as are
requested by the Borrower, provided that the sum of the outstanding
amount of the Loans (after giving effect to all amounts requested) plus
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not
at any time exceed the Commitment.  Each
request for a Loan hereunder shall constitute a representation and warranty by
the Borrower that the conditions set forth in §11 and §12, in the case of the
initial Loans to be made on the Closing Date, and §12, in the case of all other
Loans, have been satisfied on the date of such request.

2.2.  Commitment Fee.
The Borrower agrees to pay to the Bank a
commitment fee calculated at the rate of one-quarter of one percent (0.25%) per
annum of the average daily amount during each calendar quarter or portion
thereof from the Closing Date to the Maturity Date by which the Commitment minus
the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations
exceeds the outstanding amount of Loans during such calendar quarter.  The commitment fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the date hereof, with a final payment on the Maturity Date or any
earlier date on which the Commitment shall terminate.

2.3.  Reduction of Commitment.
The Borrower shall have
the right at any time and from time to time upon three (3) Business Days prior
written notice to the Bank to reduce by $100,000 or an integral multiple
thereof or terminate entirely the Commitment, whereupon the Commitment shall be
reduced in accordance with the amount specified in such notice or, as the case
may be, terminated.  Upon the effective
date of any such reduction or termination, the Borrower shall pay to the Bank
the full amount of any commitment fee then accrued on the amount of the
reduction.

2.4.  The Revolving Credit Note.
The Loans shall be
evidenced by a promissory note of the Borrower in the original principal amount
of $19,380,000 (the “Note”), dated as of the Closing Date and completed with
appropriate insertions.  The Borrower
irrevocably authorizes the Bank to make or cause to be made, at or about the
time of the Drawdown Date of any Loan or at the time of receipt of any payment
of principal on the Bank’s Note, an appropriate notation on the Bank’s Note
Record reflecting the making of such Loan or (as the case may be) the receipt
of such payment.  The outstanding amount
of the Loans set forth on the Bank’s Note Record shall be prima facie
evidence of the principal amount thereof owing and unpaid to the Bank, but the
failure to record, or any error in so recording, any such amount on the Bank’s
Note Record shall not limit or otherwise affect the obligations of the Borrower
hereunder or under the Note to make payments of principal of or interest on the
Note when due.

2.5.  Interest on Loans.
Except as otherwise
provided in §5.10,

(a)           Each Loan which is a Base Rate Loan
shall bear interest for the period commencing with the Drawdown Date thereof
and ending on the last day of the 

 

15

 

Interest
Period with respect thereto at the rate per annum equal to the Base Rate plus
the Applicable Margin.

(b)           Each Loan which is a LIBOR Rate Loan
shall bear interest for the period commencing with the Drawdown Date thereof
and ending on the last day of the Interest Period with respect thereto at the
rate per annum equal to the LIBOR Rate determined for such Interest Period plus
the Applicable Margin.

(c)           The Borrower promises to pay interest
on each Loan in arrears on each Interest Payment Date with respect thereto.

2.6.  Requests for Loans.
The Borrower shall give to
the Bank written notice (or telephonic notice confirmed in a writing) of each
Loan requested hereunder (a “Loan Request”) (a) no later than 2:00 p.m.
(Hartford time) on the proposed Drawdown Date of any Base Rate Loan and (b) no
less than three (3) LIBOR Business Days prior to the proposed Drawdown Date of
any LIBOR Rate Loan.  Each such notice
shall specify (i) the principal amount of the Loan requested, (ii) the proposed
Drawdown Date of such Loan, (iii) the Interest Period for such Loan, if a Libor
Rate Loan, and (iv) the Type of such Loan. 
Each Loan Request shall be irrevocable and binding on the Borrower and
shall obligate the Borrower to accept the Loan requested from the Bank on the
proposed Drawdown Date.  Each Loan
Request shall be in a minimum aggregate amount of $100,000 or integral
multiples of $25,000 in excess thereof.

2.7.  Conversion Options.

2.7.1.  Conversion
to Different Type of Loan.The Borrower may elect from time to time to
convert any outstanding Loan to a Loan of another Type, provided that
(a) with respect to any such conversion of a Loan to a Base Rate Loan, the
Borrower shall give the Bank written notice of such election no later than 2:00
p.m. (Hartford time) on the day of such election; (b) with respect to any such
conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall give the
Bank at least three (3) LIBOR Business Days prior written notice of such
election; (c) with respect to any such conversion of a LIBOR Rate Loan into a
Loan of another Type, such conversion shall only be made on the last day of the
Interest Period with respect thereto and (d) no Loan may be converted into a
LIBOR Rate Loan when any Default or Event of Default has occurred and is
continuing.  All or any part of
outstanding Loans of any Type may be converted into a Loan of another Type as
provided herein, provided that (a) any partial conversion shall be in an
aggregate principal amount of $100,000 or a whole multiple of $25,000 in excess
thereof and (b) with respect to LIBOR Rate Loans, there shall be no more than
six (6) separate Interest Periods in effect at any one time.  Each Conversion Request relating to the
conversion of a Loan to a LIBOR Rate Loan shall be irrevocable by the Borrower.

2.7.2.  Continuation
of Type of Loan.Any Loan of any Type may be continued as a Loan of the same Type upon
the expiration of an Interest Period with respect thereto by compliance by the
Borrower with the notice provisions contained in §2.7.1; provided that
no LIBOR Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically converted to
a Base Rate Loan on the last day of the first Interest 

 

16

 

Period relating thereto
ending during the continuance of any Default or Event of Default of which
officers of the Bank active upon the Borrower’s account have actual
knowledge.  In the event that the
Borrower fails to provide any such notice with respect to the continuation of
any LIBOR Rate Loan or as such, then such LIBOR Rate Loan shall be
automatically converted to a Base Rate Loan on the last day of the Interest
Period relating thereto.

2.7.3.  LIBOR
Rate Loans. Any conversion to or from LIBOR Rate Loans
shall be in such amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of all LIBOR Rate Loans
having the same Interest Period shall not be less than $500,000 or a whole
multiple of $50,000 in excess thereof.

3.  REPAYMENT
OF THE REVOLVING CREDIT LOANS.

3.1.  Maturity.
The Borrower
promises to pay on the Maturity Date, and there shall become absolutely due and
payable on the Maturity Date, all of the Loans outstanding on such date,
together with any and all accrued and unpaid interest thereon.

3.2.  Mandatory Repayments of Loans.
If at any time the
sum of the outstanding amount of the Loans, the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations exceeds the Commitment, then the Borrower
shall immediately pay the amount of such excess to the Bank for application:  first, to any Unpaid Reimbursement
Obligations; second, to the Loans; and third, to provide to the bank cash
collateral for Reimbursement Obligations as contemplated by §4.2(b) and (c).

3.3.  Optional Repayments of Loans.
The Borrower shall have
the right, at its election, to repay the outstanding amount of the Loans, as a
whole or in part, at any time without penalty or premium (but subject to
§5.9).  The Borrower shall give the
Bank, no later than 11:00 a.m., Hartford, Connecticut time, prior written
notice of any proposed prepayment pursuant to this §3.3 of Base Rate Loans, and
at least three (3) LIBOR Business Days notice of any proposed prepayment
pursuant to this §3.3 of LIBOR Rate Loans, in each case specifying the proposed
date of prepayment of Loans and the principal amount to be prepaid.  Each such partial prepayment of the Loans
shall be in an integral multiple of $100,000, shall be accompanied by the
payment of accrued interest on the principal prepaid to the date of prepayment
and shall be applied, in the absence of instruction by the Borrower, first to
the principal of Base Rate Loans and then to the principal of LIBOR Rate Loans.

4.  LETTERS
OF CREDIT.

4.1.  Letter of Credit Commitments.

4.1.1.  Commitment
to Issue Letters of Credit. Subject to the terms and conditions hereof
and the execution and delivery by the Borrower of a letter of credit
application on the Bank’s customary form (a “Letter of Credit Application”),
the Bank in reliance upon the representations and warranties of the Borrower
contained herein, agrees, in its sole and absolute discretion, to issue, extend
and renew for the account of the Borrower one or more standby letters of credit
(individually, a “Letter 

 

17

 

of Credit”), in such form
as may be requested from time to time by the Borrower and agreed to by the
Bank; provided, however, that, after giving effect to such
request, (a) the sum of the aggregate Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $500,000 at any one time and (b) the
sum of (i) the Maximum Drawing Amount on all Letters of Credit, (ii) all Unpaid
Reimbursement Obligations, and (iii) the amount of all Loans outstanding shall
not exceed the Commitment  Notwithstanding
the foregoing, the Bank shall not issue any Letter of Credit to support or
secure any Indebtedness of the Borrower or any of its Subsidiaries to the
extent that such Indebtedness was incurred prior to the proposed issuance date
of such Letter of Credit, unless in any such case the Borrower demonstrates to
the satisfaction of the Bank that (x) such prior incurred Indebtedness were
then fully secured by a prior perfected and unavoidable security interest in
collateral provided by the Borrower or such Subsidiary to the proposed
beneficiary of such Letter of Credit or (y) such prior incurred Indebtedness
were then secured or supported by a letter of credit issued for the account of
the Borrower or such Subsidiary and the reimbursement obligation with respect
to such letter of credit was fully secured by a prior perfected and unavoidable
security interest in collateral provided to the issuer of such letter of credit
by the Borrower or such Subsidiary.

4.1.2.  Letter
of Credit Applications. Each Letter of Credit Application shall be
completed to the reasonable satisfaction of the Bank.  In the event that any provision of any Letter of Credit
Application shall be inconsistent with any provision of this Credit Agreement,
then the provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.

4.1.3.  Terms
of Letters of Credit. Each Letter of Credit issued, extended or
renewed hereunder shall, among other things, (a) provide for the payment of
sight drafts for honor thereunder when presented in accordance with the terms
thereof and when accompanied by the documents described therein, and (b) have
an expiry date no later than the date which is fourteen (14) days (or, if the
Letter of Credit is confirmed by a confirmer or otherwise provides for one or
more nominated persons, forty-five (45) days) prior to the Maturity Date.  Each Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs.

4.2.  Reimbursement Obligation of the
Borrower. In order to induce the Bank to issue, extend and
renew each Letter of Credit in the Bank’s sole and absolute discretion, the
Borrower hereby agrees to reimburse or pay to the Bank, with respect to each
Letter of Credit issued, extended or renewed by the Bank hereunder,

(a)           except as otherwise expressly
provided in §4.2(b) and (c), on each date that any draft presented under such
Letter of Credit is honored by the Bank, or the Bank otherwise makes a payment
with respect thereto, (i) the amount paid by the Bank under or with respect to
such Letter of Credit, and (ii) the amount of any taxes, fees, charges or other
costs and expenses whatsoever incurred by the Bank in connection with any
payment made by the Bank under, or with respect to, such Letter of Credit,

 

18

 

(b)           upon the reduction (but not
termination) of the Commitment to an amount less than the Maximum Drawing
Amount, an amount equal to such difference, which amount shall be held by the
Bank as cash collateral for all Reimbursement Obligations, and

(c)           upon the termination of the
Commitment, or the acceleration of the Reimbursement Obligations with respect
to all Letters of Credit in accordance with §13, an amount equal to the then
Maximum Drawing Amount on all Letters of Credit, which amount shall be held by
the Bank as cash collateral for all Reimbursement Obligations.

Interest on any and all
amounts remaining unpaid by the Borrower under this §4.2 at any time from the
date such amounts become due and payable (whether as stated in this §4.2, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to the Bank on demand at the rate specified in §5.10
for overdue principal on the Loans.

4.3.  Letter of Credit Payments.
If any draft shall
be presented or other demand for payment shall be made under any Letter of
Credit, the Bank shall notify the Borrower of the date and amount of the draft
presented or demand for payment and of the date and time when it expects to pay
such draft or honor such demand for payment. 
The responsibility of the Bank to the Borrower shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit.

4.4.  Obligations Absolute.
The Borrower’s obligations
under this §4 shall be absolute and unconditional under any and all
circumstances and irrespective of the occurrence of any Default or Event of
Default or any condition precedent whatsoever or any setoff, counterclaim or
defense to payment which the Borrower may have or have had against the Bank or
any beneficiary of a Letter of Credit. 
The Borrower further agrees with the Bank that the Bank shall not be
responsible for, and the Borrower’s Reimbursement Obligations under §4.2 shall
not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, fraudulent or forged, or any dispute
between or among the Borrower, the beneficiary of any Letter of Credit or any
financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of the Borrower against the
beneficiary of any Letter of Credit or any such transferee.  The Bank shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of
Credit.  The Borrower agrees that any
action taken or omitted by the Bank under or in connection with each Letter of
Credit and the related drafts and documents, if done in good faith, shall be
binding upon the Borrower and shall not result in any liability on the part of
the Bank to the Borrower.

4.5.  Reliance by Issuer.
To the extent not
inconsistent with §4.4, the Bank shall be entitled to rely, and shall be fully
protected in relying upon, any Letter of Credit, draft, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document believed by it to
be 

 

19

 

genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Bank.

4.6.  Letter of Credit Fee.
The Borrower shall
pay a fee (in each case, a “Letter of Credit Fee”) to the Bank in the amount of
the Bank’s customary letter of credit fees per annum of the face amount of such
Letter of Credit.  Such Letter of Credit
Fees shall be due and payable quarterly in arrears.  In respect of each Letter of Credit, the Borrower shall also pay
to the Bank, at such other time or times as such charges are customarily made
by the Bank, the Bank’s customary issuance, amendment, negotiation or document
examination and other administrative fees as in effect from time to time.

5.  CERTAIN
GENERAL PROVISIONS.

5.1.  Closing
Fee. On the
Closing Date, the Borrower agrees to pay to the Bank a closing fee in the
amount of $69,800.00.

5.2.  Funds
for Payments.

5.2.1.  Payments
to Bank. All payments of principal, interest,
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any other
amounts due hereunder or under any of the other Loan Documents shall be made to
the Bank, at 777 Main Street, Hartford, Connecticut 06115 or at such other
location in the Connecticut, area that the Bank may from time to time designate,
in each case in immediately available Dollars, on or before 11:00 a.m.
(Hartford, Connecticut time) on the due date thereof.  The Bank shall be entitled (but shall not be obligated) to charge
any account of the Borrower with the Bank for any sum due and payable by the
Borrower to the Bank hereunder or under any of the other Loan Documents.  All payments shall be applied first to the
payment of all fees, expenses and other amounts due to the Bank (excluding
principal and interest), then to accrued interest, and the balance on account
of outstanding principal.

5.2.2.  No Offset, etc. All payments by the Borrower hereunder and
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such
deduction or withholding.  If any such
obligation is imposed upon the Borrower with respect to any amount payable by
it hereunder or under any of the other Loan Documents, the Borrower will pay to
the Bank, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Bank to receive the same net amount which it would have
received on such due date had no such obligation been imposed upon the
Borrower.  The Borrower will deliver
promptly to the Bank certificates or other valid vouchers for all taxes or
other charges deducted from or paid with respect to payments made by the
Borrower hereunder or under such other Loan Document.

 

20

 

5.3.  Computations.
All computations of
interest on the Loans and of commitment fees, Letter of Credit Fees or other
fees shall, unless otherwise expressly provided herein, be based on a 360-day
year and paid for the actual number of days elapsed.  Except as otherwise provided in the definition of the term
“Interest Period” with respect to LIBOR Loans, whenever a payment hereunder or
under any of the other Loan Documents becomes due on a day that is not a
Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension.  The outstanding amount of the Loans as
reflected on the Note Record from time to time shall be considered correct and
binding on the Borrower, absent manifest error.

5.4.  Inability to Determine LIBOR Rate.
In the event, prior
to the commencement of any Interest Period relating to any LIBOR Rate Loan, the
Bank shall determine that adequate and reasonable methods do not exist for
ascertaining the LIBOR Rate that would otherwise determine the rate of interest
to be applicable to any LIBOR Rate Loan during any Interest Period, the Bank
shall forthwith give notice of such determination (which shall be conclusive
and binding on the Borrower) to the Borrower. 
In such event (a) any Loan Request or Conversion Request with respect to
LIBOR Rate Loans shall be automatically withdrawn and shall be deemed a request
for Base Rate Loans, (b) each LIBOR Rate Loan will automatically, on the last
day of the then current Interest Period relating thereto, become a Base Rate
Loan, and (c) the obligations of the Bank to make LIBOR Rate Loans shall be
suspended until the Bank determines that the circumstances giving rise to such
suspension no longer exist, whereupon the Bank shall so notify the Borrower.

5.5.  Illegality.
Notwithstanding any
other provisions herein, if any present or future law, regulation, treaty or
directive or in the interpretation or application thereof shall make it
unlawful for the Bank to make or maintain LIBOR Rate Loans, the Bank shall
forthwith give prompt notice of such circumstances to the Borrower and
thereupon (a) the commitment of the Bank to make LIBOR Rate Loans or convert
Loans of another Type to LIBOR Rate Loans shall forthwith be suspended and (b)
the Bank’s Loans then outstanding as LIBOR Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such LIBOR Rate Loans or within such earlier period as may
be required by law.  The Borrower hereby
agrees promptly to pay the Bank, upon demand by the Bank, any additional
amounts necessary to compensate the Bank for any costs incurred by the Bank in
making any conversion in accordance with this §5.5, including any interest or
fees payable by the Bank to lenders of funds obtained by it in order to make or
maintain its LIBOR Rate Loans hereunder.

5.6.  Additional Costs, etc.
If any present or
future applicable law, which expression, as used herein, includes statutes,
rules and regulations thereunder and interpretations thereof by any competent
court or by any governmental or other regulatory body or official charged with
the administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon
or otherwise issued to the Bank by any central bank or other fiscal, monetary
or other authority (whether or not having the force of law), shall:

(a)           subject the Bank to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature with respect
to this Credit Agreement, the other Loan 

 

21

 

Documents, any Letters of
Credit, the Bank’s Commitment or the Loans (other than taxes based upon or
measured by the income or profits of the Bank), or

(b)           materially change the basis of
taxation (except for changes in taxes on income or profits) of payments to the
Bank of the principal of or the interest on any Loans or any other amounts
payable to the Bank under this Credit Agreement or any of the other Loan
Documents, or

(c)           impose or increase or render
applicable (other than to the extent specifically provided for elsewhere in
this Credit Agreement) any special deposit, reserve, assessment, liquidity,
capital adequacy or other similar requirements (whether or not having the force
of law) against assets held by, or deposits in or for the account of, or loans
by, or letters of credit issued by, or commitments of an office of the Bank, or

(d)           impose on the Bank any other
conditions or requirements with respect to this Credit Agreement, the other
Loan Documents, any Letters of Credit, the Loans, the Bank’s Commitment, or any
class of loans, letters of credit or commitments of which any of the Loans or
the Bank’s Commitment forms a part, and the result of any of the foregoing is:

(i)            to
increase the cost to the Bank of making, funding, issuing, renewing, extending
or maintaining any of the Loans or the Bank’s Commitment or any Letter of
Credit, or

(ii)           to
reduce the amount of principal, interest, Reimbursement Obligation or other
amount payable to the Bank hereunder on account of the Bank’s Commitment, any
Letter of Credit or any of the Loans, or

(iii)          to
require the Bank to make any payment or to forego any interest or Reimbursement
Obligation or other sum payable hereunder, the amount of which payment or
foregone interest or Reimbursement Obligation or other sum is calculated by
reference to the gross amount of any sum receivable or deemed received by the
Bank from the Borrower hereunder,

then, and in each such
case, the Bank shall give prompt notice thereof to the Borrower, and the
Borrower will, upon demand made by Bank at any time and from time to time and
as often as the occasion therefor may arise, pay to the Bank such additional
amounts as will be sufficient to compensate the Bank for such additional cost,
reduction, payment or foregone interest or Reimbursement Obligation or other
sum.

5.7.  Capital Adequacy.
If after the date
hereof the Bank determines that (a) the adoption of or change in any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) regarding capital requirements for banks or bank holding
companies or any change in the interpretation or application thereof by a court
or governmental authority with appropriate jurisdiction, or (b) compliance by
the Bank or any corporation controlling the Bank with any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) of any such entity regarding capital adequacy, has the effect of
reducing the return on the Bank’s commitment with 

 

22

 

respect to any Loans to a level below that which the Bank could have
achieved but for such adoption, change or compliance (taking into consideration
the Bank’s then existing policies with respect to capital adequacy and assuming
full utilization of such entity’s capital) by any amount deemed by the Bank to
be material, then the Bank shall notify the Borrower of such fact.  To the extent that the amount of such
reduction in the return on capital is not reflected in the Base Rate, the
Borrower and the Bank shall thereafter attempt to negotiate in good faith,
within thirty (30) days of the day on which the Borrower receives such notice,
an adjustment payable hereunder that will adequately compensate the Bank in
light of these circumstances.  If the
Borrower and the Bank are unable to agree to such adjustment within thirty (30)
days of the date on which the Borrower receives such notice, then commencing on
the date of such notice (but not earlier than the effective date of any such
increased capital requirement), the fees payable hereunder shall increase by an
amount that will, in the Bank’s reasonable determination, provide adequate
compensation.  The Bank shall allocate
such cost increases among its customers in good faith and on an equitable
basis.

5.8.  Certificate.
A certificate
setting forth any additional amounts payable pursuant to §§5.6 or 5.7 and a
brief explanation of such amounts which are due, submitted by the Bank to the
Borrower, shall be conclusive, absent manifest error, that such amounts are due
and owing.

5.9.  Indemnity.
The Borrower shall
pay to Bank, upon request of Bank, such amount or amounts as shall be
sufficient (in the reasonable opinion of Bank) to compensate it for any loss,
cost, or expense incurred as a result of: 
(a) any payment of a LIBOR Rate Loan on a date other than the last day
of the Interest Period for such Loan; (b) any failure by Borrower to borrow a
LIBOR Rate Loan on the date specified by Borrower’s written notice; and/or (c)
any failure by Borrower to pay a LIBOR Rate Loan on the date for payment
specified in Borrower’s written notice. Without limiting the foregoing,
Borrower shall pay to Bank a “yield maintenance fee” in an amount computed as
follows: The current rate for United States Treasury securities (bills on a
discounted basis shall be converted to a bond equivalent) with a maturity date
closest to the term chosen pursuant to the LIBOR Rate Election (as defined
below) as to which the prepayment is made, shall be subtracted from the LIBOR
Rate in effect at the time of prepayment. 
If the result is zero or a negative number, there shall be no yield
maintenance fee.  If the result is a
positive number, then the resulting percentage shall be multiplied by the
amount of the principal balance being prepaid. 
The resulting amount shall be divided by 360 and multiplied by the
number of days remaining in the term chosen pursuant to the LIBOR Rate Election
as to which the prepayment is made. 
Said amount shall be reduced to present value calculated by using the
above referenced United States Treasury securities rate and the number of days
remaining in the term chosen pursuant to the LIBOR Rate Election as to which
prepayment is made.  The resulting
amount shall be the yield maintenance fee due to Bank upon the prepayment of a
LIBOR Rate Loan.  Each reference in this
paragraph to “LIBOR Rate Election” shall mean the election by Borrower of the
LIBOR Rate.  If by reason of an Event of
Default, Bank elects to declare the Note to be immediately due and payable,
then any yield maintenance fee with respect to a LIBOR Rate Loan shall become
due and payable in the same manner as though Borrower had exercised such right
of prepayment.

5.10.  Interest After Default.

 

23

 

5.10.1.  Overdue
Payments. If a payment of principal (but only with
respect to principal due and owing on the Maturity Date) and/or interest due
hereunder or under the Note is not made within ten (10) days of when due, the
Borrower shall pay a late payment charge to the Bank equal to three and
one-half percent (3.5%) of the amount then due and owing.  Nothing contained herein shall affect Bank’s
right to demand the Obligations upon the occurrence of an Event of Default.

5.10.2.  Interest
After Default. While a Default or Event of Default is
continuing, amounts payable under any of the Loan Documents shall bear interest
(compounded monthly and payable on demand) at a rate per annum which is equal
to (i) the rate of interest in effect on such amounts immediately preceding
such Default or Event of Default and (ii) two percent (2%) until such amount is
paid in full or (as the case may be) such Default or Event of Default has been
waived in writing by the Bank (after as well as before judgement).

6.  COLLATERAL
SECURITY.

6.1.  Security of Borrower.
The Obligations
shall be secured by a perfected first priority security interest (subject only
to Permitted Liens entitled to priority under applicable law) in the
Collateral, pursuant to the terms of the Security Documents.

7.  REPRESENTATIONS
AND WARRANTIES.

The Borrower represents
and warrants to the Bank as follows:

7.1.  Authority.

7.1.1.  Incorporation;
Good Standing. The Borrower and its Subsidiaries (a) are
corporations duly organized, validly existing and in good standing under the
laws of their states of incorporation, (b) have all requisite corporate power
to own their property and conduct their business as now conducted and as
presently contemplated, and (c) are in good standing as foreign corporations,
and are duly authorized to do business in each jurisdiction where such
qualification is necessary except where a failure to be so qualified would not
have a Material Adverse Effect.

7.1.2.  Authorization. The execution, delivery and performance of
this Credit Agreement and the other Loan Documents to which the Borrower or any
of its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the corporate authority of such
Person, (b) have been duly authorized by all necessary corporate proceedings,
(c) do not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which the Borrower or any of
its Subsidiaries is subject or any judgment, order, writ, injunction, license
or permit applicable to the Borrower or any of its Subsidiaries and (d) do not
conflict with any provision of the corporate charter, bylaws, articles of
organization or operating agreement of, or any agreement or other instrument
binding upon, the Borrower or any of its Subsidiaries.

7.1.3.  Enforceability. The execution and delivery of this Credit
Agreement and the other Loan Documents to which the Borrower or any of its
Subsidiaries is or 

 

24

 

is to become a party will
result in valid and legally binding obligations of such Person enforceable
against it in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors’ rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.

7.2.  Governmental Approvals.
The execution,
delivery and performance by the Borrower and any of its Subsidiaries of this
Credit Agreement and the other Loan Documents to which the Borrower or any of
its Subsidiaries is or is to become a party and the transactions contemplated
hereby and thereby do not require the approval or consent of, or filing with,
any governmental agency or authority other than filing any Security Document to
perfect the security interest granted therein and those already obtained.

7.3.  Title to Properties; Leases.
Except as indicated
on Schedule 7.3 hereto and as indicated on the title
policies received by the Bank with respect to the Collateral, the Borrower and
its Subsidiaries own all of the assets reflected in the consolidated balance
sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date or
acquired since that date (except property and assets sold or otherwise disposed
of in the ordinary course of business since that date), subject to no rights of
others, including any mortgages, leases, conditional sales agreements, title
retention agreements, liens or other encumbrances except Permitted Liens.

7.4.  Financial
Statements and Projections.

7.4.1.  Fiscal
Year. The Borrower and each of its Subsidiaries has
a fiscal year which is 52 or 53 weeks ending on the Saturday nearest to
November 30th of each calendar year.

7.4.2.  Financial
Statements. There has been furnished to the Bank a
consolidated balance sheet of the Borrower and its Subsidiaries as at the Balance
Sheet Date, and a consolidated statement of income of the Borrower and its
Subsidiaries for the fiscal quarter then ended, certified by the
Borrower’s Chief Financial Officer. Such balance sheet and statement of
income have been prepared in accordance with generally accepted accounting
principles and fairly present the financial condition of the Borrower and its
Subsidiaries as at the close of business on the date thereof and the results of
operations for the fiscal year then ended. 
There are no contingent liabilities of the Borrower or any of its
Subsidiaries as of such date involving material amounts, known to the officers
of the Borrower which were not disclosed or reserved against in such balance
sheet or the notes related thereto.  The
Bank acknowledges that financial statements of the Borrower issued prior to the
Closing Date may require restatement. 
This potential restatement would be for the amounts reported as equity
income from Centaur and the related balance sheet effects.

7.5.  No Material Changes, etc.
Since the Balance
Sheet Date there has been no event or occurrence which has had a Material
Adverse Effect.  Since the Balance Sheet
Date, the Borrower has not made any Distributions.

 

 

25

 

7.6.  Litigation.
Except as set forth
in Schedule 7.6 hereto, there are no actions, suits,
proceedings or investigations of any kind pending or, to the Borrower’s
knowledge, threatened against the Borrower or any of its Subsidiaries before
any court, tribunal or administrative agency or board that, if adversely
determined, would, in the aggregate, have a Material Adverse Effect, or result
in any substantial liability not adequately covered by insurance or for which
adequate reserves are not maintained on the consolidated balance sheet of the
Borrower and its Subsidiaries, or which question the validity of this Credit
Agreement or any of the other Loan Documents, or any action taken or to be
taken pursuant hereto or thereto.

7.7.  No Materially Adverse Contracts,
etc. Neither the Borrower nor any of its Subsidiaries is
subject to any charter, corporate, or other legal restriction, or any judgment,
decree, order, rule or regulation that has or will have in the future a
Material Adverse Effect.  Neither the
Borrower nor any of its Subsidiaries is a party to any contract or agreement
that has or will have, in the judgment of the Borrower’s officers, a Material
Adverse Effect.

7.8.  Compliance with Other Instruments,
Laws, etc. Neither the Borrower nor any of its Subsidiaries is
in violation of any provision of its charter documents, operating agreement,
bylaws, or any agreement or instrument to which it may be subject or by which
it or any of its properties may be bound or any decree, order, judgment,
statute, license, rule or regulation, including, without limitation, ERISA, in
any of the foregoing cases in a manner that would result in the imposition of
substantial penalties or have a Material Adverse Effect.

7.9.  Tax
Status. The Borrower and its Subsidiaries (a) have made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (b)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have set
aside on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply.  There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Borrower know of no basis for any such
claim.

7.10.  No Event of Default.
No Default or Event
of Default has occurred and is continuing.

7.11.  Intentionally Omitted.

7.12.  Absence of Financing Statements,
etc. Except as described in the title policies with
respect to the Collateral and except with respect to Permitted Liens, there is
no financing statement, security agreement, chattel mortgage, real estate
mortgage or other document filed or recorded with any filing records, registry
or other public office, that purports to cover, affect or give notice of any
present or possible future lien on, or security interest in, any assets or
property of the Borrower or any of its Subsidiaries or any rights relating
thereto.

 

26

 

7.13.  Certain Transactions.
Except as set forth
on Schedule 7.13 and except for arm’s length transactions pursuant to
which the Borrower or any of its Subsidiaries makes payments upon terms no less
favorable than the Borrower or such Subsidiary could obtain from third parties,
none of the officers, members, directors, or employees of the Borrower or any
of its Subsidiaries is presently a party to any transaction with the Borrower
or any of its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, member, director or such employee or, to the knowledge of the Borrower,
any corporation, limited liability company, partnership, trust or other entity
in which any officer, member, director, or any such employee has a substantial
interest or is an officer, member, director, trustee or partner.

7.14.  Use of Proceeds.

7.14.1.  General. The proceeds of the Loans
shall be used (a) to refinance existing Indebtedness of the Borrower and
Imperial to the Bank, (b) for real estate development by the Borrower, (c) for
working capital and general corporate purposes of the Borrower and (d) to make
capital contributions and/or loans to Imperial or any other Subsidiary
Guarantor for the working capital and general corporate purposes of Imperial
and such Subsidiary Guarantor; provided that no more than an amount equal to
the Commitment outstanding at such time of determination minus $5,000,000 shall
be used for the purposes set forth in clauses (a), (b) and (c) of this section
7.14.1.  The Borrower will obtain
Letters of Credit solely for working capital and general corporate purposes.

7.14.2.  Regulations
U and X. No portion of any Loan is
to be used, and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any “margin security” or “margin stock” as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.

7.15.  Environmental Compliance.
The Borrower has
determined that:

(a)           neither the Borrower, its
Subsidiaries nor any operator of the Collateral or any operations thereon is in
violation, or alleged violation, of any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act
(“RCRA”), the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 as amended (“CERCLA”), the Superfund Amendments and Reauthorization
Act of 1986 (“SARA”), the Federal Clean Water Act, the Federal Clean Air Act,
the Toxic Substances Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter “Environmental Laws”), which violation would have a Material
Adverse Effect;

(b)           neither the Borrower nor any of its
Subsidiaries has received written notice from any third party including,
without limitation, any federal, state or local governmental authority, (i)
that any one of them has been identified by the United 

 

27

 

States Environmental
Protection Agency (“EPA”) as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C. §6903(5),
any hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or
contaminant as defined by 42 U.S.C. §9601(33) and any toxic substances, oil or
hazardous materials or other chemicals or substances regulated by any
Environmental Laws (“Hazardous Substances”) which any one of them has
generated, transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or has
ordered that the Borrower or any of its Subsidiaries conduct a remedial
investigation, removal or other response action pursuant to any Environmental
Law; or (iii) that it is or shall be a named party to any claim, action, cause
of action, complaint, or legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third party’s incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances;

(c)           except as set forth on Schedule 7.15
attached hereto: (i) no portion of the Collateral has been used for the
handling, processing, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on any
portion of the Collateral; (ii) in the course of any activities conducted by
the Borrower, its Subsidiaries or operators of its properties, no Hazardous
Substances have been generated or are being used on the Collateral except in
accordance with applicable Environmental Laws; (iii) there have been no
releases (i.e. any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping) or threatened releases of Hazardous Substances on, upon, into or from
the properties of the Borrower or its Subsidiaries, which releases would have a
material adverse effect on the value of any of the Collateral or adjacent
properties; (iv) to the best of the Borrower’s knowledge, there have been no
releases on, upon, from or into any real property in the vicinity of any of the
Collateral which, through soil or groundwater contamination, may have come to
be located on, and which would have a material adverse effect on the value of,
the Collateral; and (v) in addition, any Hazardous Substances that have been
generated on any of the Collateral have been transported offsite only by
carriers having an identification number issued by the EPA, treated or disposed
of only by treatment or disposal facilities maintaining valid permits as
required under applicable Environmental Laws, which transporters and facilities
have been and are, to the best of the Borrower’s knowledge, operating in
compliance with such permits and applicable Environmental Laws; and

(d)           Neither the Borrower nor any of its
Subsidiaries is subject to any applicable environmental law requiring the
performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the transactions
set forth herein and contemplated hereby with respect to the Collateral.

 

28

 

7.16.  Subsidiaries, etc.  Schedule 7.16 sets forth the Subsidiaries of the Borrower.  Except as set forth on Schedule 7.16
hereto, neither the Borrower nor any Subsidiary of the Borrower is engaged in
any joint venture or partnership with any other Person.

7.17.  Bank
Accounts.  Schedule 7.17 sets forth the account numbers of all
bank accounts of the Borrower or any of its Subsidiaries.

7.18.  Chief Executive Office.
The chief executive
office of the Borrower is at One Rockefeller Plaza, New York, New York
10020.  The Borrower keeps its books and
records at 204 West Newberry Road, Bloomfield, Connecticut 06002.

7.19.  Insurance.
The Borrower and
each of its Subsidiaries maintain with financially sound and reputable insurers
insurance with respect to their properties and businesses against such
casualties and contingencies as are in accordance with sound business
practices.

8.  AFFIRMATIVE
COVENANTS OF THE BORROWER.

The Borrower covenants
and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter
of Credit or Note is outstanding or the Bank has any obligation to make any
Loans or any obligation to issue, extend or renew any Letters of Credit:

8.1.  Punctual Payment.
The Borrower will
duly and punctually pay or cause to be paid the principal and interest on the
Loans, all Reimbursement Obligations, the Letter of Credit Fees, the commitment
fees and all other amounts provided for in this Credit Agreement and the other
Loan Documents to which the Borrower or any of its Subsidiaries is a party, all
in accordance with the terms of this Credit Agreement and such other Loan
Documents.

8.2.  Maintenance of Office.
The Borrower will
maintain its chief executive office at One Rockefeller Plaza, New York, New
York 10020 or at such other place in the United States of America as the
Borrower shall designate upon written notice to the Bank, where notices,
presentations and demands to or upon the Borrower in respect of the Loan
Documents to which the Borrower is a party may be given or made.

8.3.  Records and Accounts.
The Borrower will
(a) keep, and cause each of its Subsidiaries to keep, true and accurate records
and books of account in which full, true and correct entries will be made in
accordance with generally accepted accounting principles, (b) maintain adequate
accounts and reserves for all taxes (including income taxes), depreciation,
depletion, obsolescence and amortization of its properties and the properties
of its Subsidiaries, contingencies, and other reserves, and (c) at all times
engage PricewaterhouseCoopers LLP or any other nationally-recognized
independent certified public accounting firm reasonably satisfactory to the
Bank as the independent certified public accountants of the Borrower and its
Subsidiaries and will not permit more than thirty (30) days to elapse between
the cessation of such firm’s (or any successor firm’s) engagement as the
independent certified public accountants of the Borrower and its Subsidiaries
and the appointment in such capacity of a successor firm as shall be reasonably
satisfactory to the Bank.

 

29

 

8.4.  Financial Statements, Certificates and
Information. The Borrower will deliver to the Bank:

(a)           as soon as practicable, but in any
event not later than one hundred (100) days after the end of each fiscal year
of the Borrower (unless the Borrower is granted an extension by the SEC for the
filing of its 10K for such fiscal year, then for such additional period of time
as granted in such extension but in any event not later than one hundred
fifteen (115) days after the end of each fiscal year of the Borrower), the
consolidated balance sheet of the Borrower and its Subsidiaries and the
consolidating balance sheet of the Borrower and its Subsidiaries, each as at
the end of such year, and the related consolidated statements of income and
consolidated statements of cash flow and consolidating statements of income and
consolidating statements of cash flow for such year, each setting forth in
comparative form the figures for the previous fiscal year and all such
consolidated and consolidating statements to be in reasonable detail, prepared
in accordance with generally accepted accounting principles, and with respect
to the consolidated balance sheet and related consolidated statements of income
and consolidated statements of cash flow, certified without qualification by a
nationally-recognized independent certified public accounting firm reasonably
satisfactory to the Bank together with a written statement from such
accountants to the effect that they have read a copy of this Credit Agreement,
and that, in making the examination necessary to said certification, they have
obtained no knowledge of any Default or Event of Default, or, if such
accountants shall have obtained knowledge of any then existing Default or Event
of Default they shall disclose in such statement any such Default or Event of
Default; provided, that such accountants shall not be liable to the Bank for
failure to obtain knowledge of any Default or Event of Default;

(b)           as soon as practicable, but in any
event not later than fifty (50) days after the end of each of the fiscal
quarters of the Borrower (unless the Borrower is granted an extension by the
SEC for the filing of its 10Q for such fiscal quarter, then for such additional
period of time as granted in such extension but in any event not later than
sixty five (65) days after the end of each fiscal quarter of the Borrower),
copies of the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries and the unaudited consolidating balance sheet of the Borrower and
its Subsidiaries, each as at the end of such quarter, and the related
consolidated statements of income and consolidated statements of cash flow and
consolidating statements of income and consolidating statements of cash flow
for the portion of the Borrower’s fiscal year then elapsed, all in reasonable
detail and prepared in accordance with generally accepted accounting
principles, together with a certification by the principal financial or
accounting officers of the Borrower that the information contained in such
financial statements fairly presents the financial position of the Borrower and
its Subsidiaries on the date thereof (subject to year-end adjustments and the
absence of footnotes);

(c)           promptly upon the filing thereof,
copies of all reports on Forms 10-K and 10-Q which the Borrower shall file with
the Securities and Exchange Commission;

 

 

30

 

(d)           with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement certified
by the principal financial or accounting officers of the Borrower in
substantially the form of Exhibit A hereto (the “Compliance
Certificate”) and setting forth in reasonable detail computations evidencing
compliance with the covenants contained in §10 and (if applicable)
reconciliations to reflect changes in generally accepted accounting principles
since the Balance Sheet Date;

(e)           not later than sixty (60) days after
the commencement of each fiscal year, annual projections of the Borrower and
its Subsidiaries for such fiscal year, updating those projections previously
delivered to the Bank and prepared in form and detail consistent with those
previously delivered to the Bank; and

(f)            from time to time such other
financial data and information (including accountants, management letters) as
the Bank may reasonably request.

8.5.  Notices.

8.5.1.  Defaults. The Borrower will promptly notify the Bank in
writing of the occurrence of any Default or Event of Default.  If any Person shall give any notice or take
any other action in respect of a Default under this Credit Agreement or any
other note, evidence of indebtedness, indenture or other obligation to which or
with respect to which the Borrower or any of its Subsidiaries is a party or
obligor, whether as principal, guarantor, surety or otherwise, the Borrower
shall forthwith give written notice thereof to the Bank, describing the notice
or action and the nature of the claimed Default.

8.5.2.  Environmental
Events. The Borrower will promptly give notice to the
Bank (a) of any material violation of any Environmental Law that the Borrower
or any of its Subsidiaries reports in writing or is reportable by such Person
in writing (or for which any written report supplemental to any oral report is
made) to any federal, state or local environmental agency and (b) upon becoming
aware thereof, of any inquiry, proceeding, investigation, or other action,
including a written notice from any agency of potential environmental liability,
of any federal, state or local environmental agency or board, that would have a
Material Adverse Effect.

8.5.3.  Notification
of Claim against Collateral. The Borrower will, promptly (but in any event
within three (3) Business Days) upon becoming aware thereof, notify the Bank in
writing of any setoff, claims (including, with respect to the Real Estate,
environmental claims), withholdings or other defenses to which any of the
Collateral, or the Bank’s rights with respect to the Collateral, are subject.

8.5.4.  Notice
of Litigation and Judgments. The Borrower will, and will cause each of its
Subsidiaries to, give notice to the Bank in writing within fifteen (15) days of
becoming aware of any litigation or proceedings threatened in writing or any pending
litigation and proceedings affecting the Borrower or any of its Subsidiaries or
to which the Borrower or any of its Subsidiaries is or becomes a party
involving an uninsured claim against the Borrower or any of its Subsidiaries
that would reasonably be expected to have a Material Adverse Effect and stating
the 

 

31

 

nature and status of such
litigation or proceedings.  The Borrower
will, and will cause each of its Subsidiaries to, give notice to the Bank, in
writing, in form and detail satisfactory to the Bank, within ten (10) days of
any judgment not covered by insurance, final or otherwise, against the Borrower
or any of its Subsidiaries in an amount in excess of $100,000.

8.6.  Existence; Maintenance of
Properties. The Borrower will do or cause to be done all things
necessary in its reasonable business judgment to preserve and keep in full
force and effect its corporate existence, rights and franchises and those of
its Subsidiaries.  It (a) will cause all
of its properties and those of its Subsidiaries used or useful in the conduct
of its business or the business of its Subsidiaries to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment, (b) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses except, in
the cases of clauses (a), (b) or (c) such failures that would not have a Material
Adverse Effect; provided that nothing in this §8.6 shall prevent the
Borrower from discontinuing the operation and maintenance of any of its
properties or any of those of its Subsidiaries if such discontinuance is, in
the judgment of the Borrower, desirable in the conduct of its or their business
and that do not in the aggregate have a Material Adverse Effect.

8.7.  Insurance.
The Borrower will,
and will cause each of its Subsidiaries to, maintain with financially sound and
reputable insurers insurance with respect to its properties and business
against such casualties and contingencies as shall be in accordance with the
general practices of businesses engaged in similar activities in similar
geographic areas and in amounts, containing such terms, in such forms and for
such periods as may be reasonable and prudent and in accordance with the terms
of the Security Documents.

8.8.  Taxes.
The Borrower will,
and will cause each of its Subsidiaries to, duly pay and discharge, or cause to
be paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon it and its real
properties, sales and activities, or any part thereof, or upon the income or
profits therefrom, as well as all claims for labor, materials, or supplies that
if unpaid might by law become a lien or charge upon any of its property; provided
that any such tax, assessment, charge, levy or claim need not be paid if the
validity or amount thereof shall currently be contested in good faith by
appropriate proceedings and if the Borrower or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto; and provided further
that the Borrower and each Subsidiary of the Borrower will pay all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor.

8.9.  Inspection of Properties and Books,
etc. The Borrower shall permit the Bank or any of the
Bank’s other designated representatives, to visit and inspect any of the
Collateral of the Borrower or any of its Subsidiaries, to examine the books of
account of the Borrower and its Subsidiaries (and to make copies thereof and
extracts therefrom), and to discuss the affairs, finances and accounts of the
Borrower and its Subsidiaries with, and to 

 

32

 

be advised as to the same by, its and their officers, all at such
reasonable times and intervals  after
reasonable notice to the Borrower (unless a Default or Event of Default shall
have occurred and be continuing, whereupon no such notice shall be required) as
the Bank may reasonably request.

8.10.  Compliance with Laws, Contracts,
Licenses, and Permits. The Borrower will, and will cause each of its
Subsidiaries to, comply with (a) the applicable laws and regulations wherever
its business is conducted, including ERISA and all Environmental Laws, except
where such noncompliance would not reasonably be expected to have a Material
Adverse Effect, (b) the provisions of its charter documents, operating
agreement, articles or organization and by-laws, (c) all agreements and
instruments by which it or any of its properties may be bound, except where
such noncompliance would not reasonably be expected to have a Material Adverse
Effect and (d) all applicable decrees, orders, and judgments, except where such
noncompliance would not reasonably be expected to have a Material Adverse
Effect.  If any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the Borrower or any
of its Subsidiaries may fulfill any of their obligations hereunder or any of
the other Loan Documents to which the Borrower or such Subsidiary is a party,
the Borrower will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
the Borrower or such Subsidiary to obtain such authorization, consent,
approval, permit or license and furnish the Bank with evidence thereof.

8.11.  Use of Proceeds.
The Borrower will
use the proceeds of the Loans and obtain the Letters of Credit solely for the
purposes set forth in §7.14.

8.12.  Depository Bank.
The Borrower will,
and will cause each of its Subsidiaries to, maintain its primary operating and
depository bank account at the Bank.

8.13.  Further Assurances.
The Borrower will,
and will cause each of its Subsidiaries to, cooperate with the Bank and execute
such further instruments and documents as the Bank shall reasonably request to
carry out to its reasonable satisfaction the transactions contemplated by this
Credit Agreement and the other Loan Documents.

9.  CERTAIN
NEGATIVE COVENANTS OF THE BORROWER.

The Borrower covenants
and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter
of Credit or Note is outstanding or the Bank has any obligation to make any
Loans or any obligations to issue, extend or renew any Letters of Credit:

9.1.  Restrictions on Indebtedness.
The Borrower will
not, nor will it permit any of its Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to
any Indebtedness other than:

(a)           Indebtedness to the Bank arising
under any of the Loan Documents;

(b)           endorsements for collection, deposit
or negotiation and warranties of products or services, in each case incurred in
the ordinary course of business;

 

33

 

(c)           Indebtedness in respect of Interest
Rate Agreements;

(d)           Indebtedness incurred in connection
with the acquisition after the date hereof of any real or personal property by
the Borrower or such Subsidiary or under any Capitalized or Synthetic Leases, provided
that the aggregate principal amount of such Indebtedness of the Borrower and
its Subsidiaries shall not exceed the aggregate amount of $250,000 at any one
time;

(e)           Non-Recourse Debt incurred after the
Closing Date so long as prior to incurring such Indebtedness the Borrower has
provided the Bank with evidence of compliance with the financial covenants set
forth in §10 hereof both before and (on a pro forma basis, based on the most
recent financial statements delivered to the Bank before the incurrence of such
Indebtedness) after giving effect to incurring such Indebtedness;

(f)            Indebtedness existing on the date
hereof and listed and described on Schedule 9.1 hereto and
any refinancings, refundings, renewals or extensions thereof, provided, with
respect to each such refinancing, refunding, renewal or extension, that the
maximum aggregate principal amount of each such Indebtedness does not exceed
the maximum principal amount of the refinanced, refunded, renewed or extended
Indebtedness, is used for similar business purposes, and is not subject to
restrictions on Distribution that are more restrictive than those to which the
refinanced, refunded, renewed or extended Indebtedness was subject;

(g)           unsecured Indebtedness of the
Borrower consisting of guaranties of Indebtedness incurred by its Subsidiaries
permitted under §§9.1(d) and (f);

(h)           unsecured Indebtedness of the
Borrower to its Subsidiaries not to exceed $500,000 in the aggregate at any
time;

(i)            unsecured Indebtedness of the
Borrower to Culbro in the form of a one time loan from Culbro to the Borrower
in an amount not to exceed $5,000,000;

(j)            Subordinated Debt;

(k)           unsecured Indebtedness of the
Borrower consisting of guaranties of Indebtedness incurred by its Subsidiaries
permitted under §9.1(e) but only on terms and conditions reasonably
satisfactory to the Bank; and

(l)            (i) unsecured Indebtedness of
Imperial to the Borrower, (ii) unsecured Indebtedness of Subsidiary Guarantors
(other than Imperial) to the Borrower not to exceed $1,000,000 to any
individual Subsidiary Guarantor at any time and $5,000,000 to all such
Subsidiary Guarantors in the aggregate at any time and (iii) other unsecured
Indebtedness of Subsidiaries of the Borrower (other than Subsidiary Guarantors)
to the Borrower not to exceed $1,000,000 to any individual Subsidiary of the
Borrower at any time and $2,000,000 to all such Subsidiaries of the Borrower in
the aggregate any time; provided that the amount of such Indebtedness
outstanding at any time under clauses (ii) and (iii) hereof shall not exceed
$5,000,000 in the aggregate at any time.

 

 

34

 

9.2.  Restrictions on Liens.
The Borrower will
not, nor will it permit any of its Subsidiaries to, (a) create or incur or
suffer to be created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any kind upon any of
its property or assets of any character whether now owned or hereafter
acquired, or upon the income or profits therefrom; (b) transfer any of such
property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (c) acquire, or
agree or have an option to acquire, any property or assets upon conditional
sale or other title retention or purchase money security agreement, device or
arrangement; (d) suffer to exist for a period of more than thirty (30) days
after the same shall have been incurred any Indebtedness or claim or demand
against it that if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors; (e)
sell, assign, pledge or otherwise transfer any “receivables” as defined in
clause (g) of the definition of the term “Indebtedness,” with or without
recourse; or (f) enter into or permit to exist any arrangement or agreement,
enforceable under applicable law, which directly or indirectly prohibits the
Borrower or any of its Subsidiaries from creating or incurring any lien,
encumbrance, mortgage, pledge, charge, restriction or other security interest
other than in favor of the Bank under the Loan Documents and other than
customary anti-assignment provisions in leases and licensing agreements entered
into by the Borrower or such Subsidiary in the ordinary course of its business,
provided that the Borrower or any of its Subsidiaries may create or
incur or suffer to be created or incurred or to exist:

(i)  liens to
secure taxes, assessments and other government charges in respect of
obligations not overdue or liens on properties to secure claims for labor,
material or supplies in respect of obligations not overdue, except those being
contested in good faith and by appropriate proceedings in accordance with the
terms of this Credit Agreement;

(ii)  deposits
or pledges made in connection with, or to secure payment of, workmen’s
compensation, unemployment insurance, old age pensions or other social security
obligations;

(iii)  liens of
carriers, warehousemen, mechanics and materialmen, and other like liens on
properties in existence less than 120 days from the date of creation thereof in
respect of obligations not overdue;

(iv)  encumbrances
on Real Estate consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and irregularities in the
title thereto, landlord’s or lessor’s liens under leases to which the Borrower
or a Subsidiary of the Borrower is a party, and other minor liens or
encumbrances none of which in the opinion of the Borrower interferes materially
with the use of the property affected in the ordinary conduct of business of
the Borrower and its Subsidiaries, which defects do not have a Material Adverse
Effect;

(v)  liens
existing on the date hereof and listed on Schedule 9.2
hereto;

(vi)  purchase
money security interests in or purchase money mortgages on real or personal
property acquired after the date hereof to secure purchase money 

 

35

 

Indebtedness of the type
and amount permitted by §9.1(d), incurred in connection with the acquisition of
such property, which security interests or mortgages cover only the real or
personal property so acquired and liens in favor of lessors under any
Capitalized or Synthetic Lease on the assets subject to such Capitalized or
Synthetic Lease permitted by §9.1(d);

(vii)  Non-Recourse
Mortgages on Real Estate other than the Collateral to secure Non-Recourse Debt,
provided that such mortgages do not secure any Indebtedness except for such
Non-Recourse Debt. Upon ten (10) Business Days prior written notice by Borrower
to Bank and so long as no Default or Event of Default has occurred and is
continuing (or would result therefrom), the Bank agrees to release the lien and
security interests of the applicable Mortgages and other Loan Documents on any
Real Estate of the Borrower or any of its Subsidiaries to be secured by such
Non-Recourse Mortgage.  Contemporaneously
with any such release, the Commitment shall be automatically and permanently
reduced by the applicable Commitment Reduction Amount;

(viii)  liens
on each piece of Collateral which is Real Estate as and to the extent permitted
by the Mortgage applicable thereto;

(ix)  liens on
Real Estate other than Collateral consisting of leases entered into in the
ordinary course of business consistent with past practices; and

(x)  liens in
favor of the Bank under the Loan Documents.

9.3.  Restrictions on Investments.
The Borrower will
not, nor will it permit any of its Subsidiaries to, make or permit to exist or
to remain outstanding any Investment except Investments in:

(a)           marketable direct or guaranteed
obligations of the United States of America that mature within one (1) year
from the date of purchase by the Borrower;

(b)           demand deposits, certificates of
deposit, bankers acceptances and time deposits of United States banks having
total assets in excess of $1,000,000,000;

(c)           securities commonly known as
“commercial paper” issued by a corporation organized and existing under the
laws of the United States of America or any state thereof that at the time of
purchase have been rated and the ratings for which are not less than “P 1”
if rated by Moody’s Investors Service, Inc., and not less than “A 1” if
rated by Standard and Poor’s Rating Group;

(d)           Investments consisting of the
Guaranties;

(e)           extensions of trade credit in the
ordinary course of business;

(f)            So long as no Default or Event of
Default has occurred and is continuing, Investments by the Borrower in any
Subsidiary consisting solely of transfers of Real Estate other than Collateral;

 

36

 

(g)           So long as no Default or Event of
Default has occurred and is continuing, Investments by the Borrower and/or any
Subsidiary Guarantor in any Subsidiary Guarantor consisting solely of transfers
of any Collateral so long as such Subsidiary Guarantor assumes all of the
Borrower’s obligations under the Security Documents and Environmental Indemnity
Agreement applicable to such Collateral;

(h)           an Investment by Culbro in the
Borrower consisting of a one time loan by Culbro to the Borrower in an amount
not to exceed $5,000,000;

(i)            Investments (other than transfers of
Real Estate) (i) by the Borrower in Imperial, (ii) by the Borrower in an amount
not to exceed $1,000,000 in any individual Subsidiary Guarantor (other than
Imperial) at any time and in an aggregate amount not to exceed $5,000,000 in
all Subsidiary Guarantors (other than Imperial) at any time and (iii) by the
Borrower in an amount not to exceed $1,000,000 in any individual Subsidiary
(other than Subsidiary Guarantors) at any time and in an aggregate amount not
to exceed $2,000,000 in all Subsidiaries (other than Subsidiary Guarantors) at
any time; provided, that the amount of Investments outstanding under clauses
(ii) and (iii) hereof shall not exceed $5,000,000 in the aggregate at any time;
and

(j)            Investments existing on the date
hereof and listed on Schedule 9.3 hereto.

9.4.  Distributions.
The Borrower will
not make any Distributions; provided, that so long as no Default or Event of
Default has occurred or is continuing (or would result therefrom), the Borrower
may make Distributions during any fiscal quarter in an amount not to exceed
fifty percent (50%) of the Borrower’s Consolidated Net Income for the
immediately preceding fiscal quarter.

9.5.  Merger,
Consolidation and Disposition of Assets.

9.5.1.  Mergers
and Acquisitions. The Borrower will not, nor will it permit any
of its Subsidiaries to, become a party to any merger or consolidation without
the prior written consent of the Bank, such consent not to be unreasonably
withheld, or agree to or effect any asset acquisition or stock acquisition
(other than the acquisition of assets in the ordinary course of business
consistent with past practices), except the merger or consolidation of one or
more of the Subsidiaries of the Borrower with and into the Borrower, or the
merger or consolidation of two or more Subsidiaries of the Borrower.

9.5.2.  Disposition
of Assets. The Borrower will not, nor will it permit any
of its Subsidiaries to, become a party to or agree to or effect any disposition
of any assets; provided, that the Borrower and its Subsidiaries may dispose of
assets for an amount equal to the fair value of such asset, determined by board
of directors of the Borrower or such Subsidiary, in each case in the ordinary
course of business consistent with past practices and the Borrower and any of
its Subsidiaries may dispose of Collateral upon ten (10) Business Days prior
written notice by Borrower to Bank so long as no Default or Event of Default
has occurred and is continuing (or would result therefrom).  The Bank agrees to release its mortgage on
any Real Estate 

 

37

 

of the Borrower or any of
its Subsidiaries to be sold. 
Contemporaneously with any such release, the Commitment shall be
automatically and permanently reduced by the applicable Commitment Reduction
Amount.  In addition to the foregoing, the
Bank agrees that the Borrower shall have the right, without the consent of the
Bank, to subdivide in accordance with all applicable laws and regulations
(hereinafter, the “Subdivision”) the portions of the Real Estate located in
Bloomfield, Connecticut and known by the street address of 310-350 West
Newberry Road into separate and distinct parcels substantially in accordance
with the plan of subdivision entitled “310-350 West Newberry Road  Subdivision Plan prepared for Griffin
Land   Parcel 6002 — West Newberry Road
& Griffin Road South  Bloomfield,
Connecticut” prepared by Alford Associates, Inc. and dated January 21, 2002,
Sheets 1 of 3, Sheet 2 of 3, and Sheet 3 of 3 (the “Subdivision Plan”), so that
following the Subdivision, 310-350 West Newberry Road will be comprised of
three separate and distinct parcels known by the street addresses of (i)
310-330 West Newberry Road (the “310-330 Parcel”), (ii) 340 West Newberry Road
(the “340 Parcel”), and (iii) 350 West Newberry Road (the “350 Parcel”).  Notwithstanding the foregoing, the Borrower
shall not be entitled to undertake the Subdivision if it would  cause the 310-330 Parcel or the 340 Parcel
to be in violation or non-conformance in any respect with applicable planning,
zoning, land use or building laws or regulations or if it would materially
adversely affect access or utilities to the 310-330 Parcel or 340 Parcel.  The Bank further agrees that, upon the
written request of the Borrower following the occurrence of the Subdivision,
the Bank shall release the lien and security interests of its mortgage on the
350 Parcel and any easements and other rights appurtenant to the 350 Parcel
granted pursuant to the Subdivision and benefiting the 350 Parcel.  The Bank agrees that there shall be no
Commitment Reduction Amount attributable to the aforesaid release of the 350
Parcel.  The Bank further agrees that,
in connection with the subsequent release of any or both of the 310-330 Parcel
and/or the 340 Parcel as permitted by the terms of this Agreement, such release
shall include a release of any lien the Bank may have on any easements and
other rights appurtenant to and benefiting such released parcel.

9.6.  Sale and Leaseback.
The Borrower will
not, nor will it permit any of its Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower
shall sell or transfer any property owned by it in order then or thereafter to
lease such property or lease other property that the Borrower or any Subsidiary
of the Borrower intends to use for substantially the same purpose as the
property being sold or transferred without the prior written consent of the
Bank, such consent not to be unreasonably withheld.

9.7.  Compliance with Environmental Laws.
The Borrower will
not, nor will it permit any of its Subsidiaries to, (a) use any of the
Real Estate or any portion thereof for the handling, processing, storage or
disposal of Hazardous Substances, (b) cause or permit to be located on any
of the Real Estate any underground tank or other underground storage receptacle
for Hazardous Substances, (c) generate any Hazardous Substances on any of
the Real Estate, (d) conduct any activity at any Real Estate or use any
Real Estate in any manner so as to cause a release (i.e. releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping) or threatened release of Hazardous
Substances on, upon or into the Real Estate or (e) otherwise conduct 

 

38

 

any activity at any Real
Estate or use any Real Estate, in each case of clauses (a) through (e) hereof
in any manner that would violate any Environmental Law or bring such Real
Estate in violation of any Environmental Law.

9.8.  Fiscal
Year. The
Borrower will not, nor will it permit any of its Subsidiaries to, change the
date of the end of its fiscal year from that set forth in §7.4.1.

9.9.  Transactions with
Affiliates. Except
as set forth on Schedule 7.13, the Borrower will not, nor will it
permit any of its Subsidiaries to, engage in any transaction with any Affiliate
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any such Affiliate or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any such Affiliate has a substantial interest or is an officer,
director, trustee or partner, on terms more favorable to such Person than would
have been obtainable on an arm’s-length basis.

9.10.  Subordinated
Debt. The
Borrower will not, and will not permit any of its Subsidiaries to, amend,
supplement or otherwise modify the terms of any of the Subordinated Debt or
prepay, redeem or repurchase any of the Subordinated Debt without the prior
written consent of the Bank.

10.  FINANCIAL
COVENANTS OF THE BORROWER.

The Borrower covenants
and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter
of Credit or Note is outstanding or the Bank has any obligation to make any
Loans or any obligation to issue, extend or renew any Letters of Credit:

10.1.  Net
Worth. As of the end of each fiscal quarter of the
Borrower, the Borrower will not permit Consolidated Net Worth to be less than
an amount equal to (a) the sum of (i) $95,000,000, plus (ii) on a
cumulative basis, seventy-five percent (75%) of positive Consolidated Net Income
for each fiscal year of the Borrower commencing with the fiscal year ending
November 30, 2002, less (b) the aggregate of any reductions after the
Balance Sheet Date in the value, as included in the Consolidated Total Assets
of the Borrower’s Investment in Centaur and/or Linguaphone, including any
reduction in the value of Centaur and/or Linguaphone as the result of any
currency fluctuation after the Balance Sheet Date.

10.2.  Fixed Charge Coverage Ratio. The Borrower will not
permit the Fixed Charge Coverage Ratio to be less than (a) 1.10:1.00 as of the
last day of each fiscal quarter of the Borrower ending on and after June 1,
2002 through and including March 1, 2003 and (b) 1.25:1.00 as of the last day
of each fiscal quarter of the Borrower ending after March 1, 2003.

10.3.  Liabilities to Net Worth. The Borrower will not
permit the ratio of (a) Consolidated Total Liabilities to (b) Consolidated Net
Worth to exceed 0.75:1.00 at any time.

 

39

 

10.4.  Consolidated Net Loss.
The Borrower will
not permit the Consolidated Net Loss to be greater than $1,500,000 for the
fiscal quarter ending March 1, 2002.

11.  CLOSING
CONDITIONS.

The obligations of the
Bank to make the initial Loans and to issue any initial Letters of Credit shall
be subject to the satisfaction of the following conditions precedent on or
prior to the Closing Date:

11.1.  Loan
Documents etc.

11.1.1.  Loan
Documents.Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to the
Bank.  The Bank shall have received a
fully executed copy of each such document.

11.2.  Certified Copies of Charter
Documents. The Bank shall have received from the Borrower and
each of its Subsidiaries a copy, certified by a duly authorized officer or
member of such Person, as the case may be, to be true and complete on the
Closing Date, of each of (a) its charter or other incorporation documents as in
effect on such date of certification, and (b) its by-laws as in effect on such
date.

11.3.  Corporate Action.
All corporate action
necessary for the valid execution, delivery and performance by the Borrower and
each of its Subsidiaries of this Credit Agreement and the other Loan Documents
to which it is or is to become a party shall have been duly and effectively
taken, and evidence thereof satisfactory to the Bank shall have been provided
to the Bank.

11.4.  Validity of Liens.
The Security Documents
shall be effective to create in favor of the Bank a legal, valid and
enforceable first (except for Permitted Liens entitled to priority under
applicable law) security interest in and lien upon the Collateral.  All filings, recordings, deliveries of instruments
and other actions necessary or desirable in the opinion of the Bank to protect
and preserve such security interests shall have been duly effected.  The Bank shall have received evidence
thereof in form and substance satisfactory to the Bank.

11.5.  Certificates of Insurance.
The Bank shall have
received a certificate of insurance from an independent insurance broker dated
as of the Closing Date, identifying insurers, types of insurance, insurance
limits, and policy terms, and otherwise describing the insurance obtained in
accordance with the provisions of the Security Documents.

11.6.  Opinion of Counsel.
The Bank shall have
received a favorable legal opinion addressed to the Bank, dated as of the
Closing Date, in form and substance satisfactory to the Bank, from counsel to
the Borrower and its Subsidiaries.

 

40

 

12.  CONDITIONS
TO ALL BORROWINGS.

The obligations of the
Bank to make any Loan, and to issue, extend or renew any Letter of Credit, in
each case whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:

12.1.  Representations True; No Event of
Default. Each of the representations and warranties of any of
the Borrower and its Subsidiaries contained in this Credit Agreement, the other
Loan Documents or in any document or instrument delivered pursuant to or in
connection with this Credit Agreement shall be true as of the date as of which
they were made and shall also be true at and as of the time of the making of
such Loan or the issuance, extension or renewal of such Letter of Credit, with
the same effect as if made at and as of that time (except to the extent of
changes resulting from transactions contemplated or permitted by this Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that do not have a Material Adverse Effect, and to the
extent that such representations and warranties relate expressly to an earlier
date) and no Default or Event of Default shall have occurred and be continuing.

12.2.  No Legal Impediment.
No change shall have
occurred in any law or regulations thereunder or interpretations thereof that
in the reasonable opinion of the Bank would make it illegal for the Bank to
make such Loan or to participate in the issuance, extension or renewal of such
Letter of Credit or in the reasonable opinion of the Bank would make it illegal
for the Bank to issue, extend or renew such Letter of Credit.

12.3.  Governmental Regulation.
The Bank shall have
received such statements in substance and form reasonably satisfactory to the
Bank as the Bank shall require for the purpose of compliance with any
applicable regulations of the Comptroller of the Currency or the Board of
Governors of the Federal Reserve System.

12.4.  Proceedings and Documents.
All proceedings in
connection with the transactions contemplated by this Credit Agreement, the
other Loan Documents and all other documents incident thereto shall be
satisfactory in substance and in form to the Bank and its counsel, and the Bank
and such counsel shall have received all information and such counterpart
originals or certified or other copies of such documents as the Bank may
reasonably request.

13.  EVENTS
OF DEFAULT; ACCELERATION; ETC.

13.1.  Events of Default and Acceleration.
If any of the
following events (“Events of Default” or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice or lapse of time,
“Defaults”) shall occur:

(a)           the Borrower shall fail to pay any
principal of the Loans or any Reimbursement Obligation when the same shall
become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;

(b)           the Borrower or any of its
Subsidiaries shall fail to pay any interest on the Loans, the commitment fee,
any Letter of Credit Fee or other sums due hereunder 

 

41

 

or under any of the other
Loan Documents when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment and such failure continues for a period of five (5)
Business Days;

(c)           the Borrower or any of its
Subsidiaries shall fail to comply with any of its covenants contained in §§8.1,
8.2, 8.4, 8.5.1, 8.7, 8.8, 8.9, 8.11, 8.12, 9 or 10;

(d)           the Borrower or any of its
Subsidiaries shall fail to comply with any of its covenants contained in
§§8.5.2, 8.5.3 or 8.5.4 for fifteen (15) days after the sooner to occur of
written notice of such failure has been given to the Borrower by the Bank or
the date on which such failure first becomes known to any officer of the
Borrower;

(e)           the Borrower or any of its
Subsidiaries shall fail to perform any term, covenant or agreement contained
herein or in any of the other Loan Documents (other than those specified
elsewhere in this §13.1) for sixty (60) days after the sooner to occur of
written notice of such failure has been given to the Borrower by the Bank or
the date on which such failure first becomes known to any officer of the
Borrower;

(f)            any representation or warranty of
the Borrower or any of its Subsidiaries in this Credit Agreement or any of the
other Loan Documents or in any other document or instrument delivered pursuant
to or in connection with this Credit Agreement shall prove to have been false
in any material respect upon the date when made or deemed to have been made or
repeated;

(g)           the Borrower or any of its
Subsidiaries shall fail to pay at maturity, or within any applicable period of
grace, any obligation for borrowed money or credit received or in respect of
any Capitalized Leases in an amount in excess of $100,000, or fail to observe
or perform any material term, covenant or agreement contained in any agreement
by which it is bound, evidencing or securing borrowed money or credit received
or in respect of any Capitalized Leases, in an amount in excess of $100,000,
for such period of time as would permit (assuming the giving of appropriate
notice if required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof;

(h)           the Borrower or any of its
Subsidiaries shall make an assignment for the benefit of creditors, or admit in
writing its inability to pay or generally fail to pay its debts as they mature
or become due, or shall petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of the Borrower or any of its
Subsidiaries or of any substantial part of the assets of the Borrower or any of
its Subsidiaries or shall commence any case or other proceeding relating to the
Borrower or any of its Subsidiaries under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, or shall take any
action to authorize or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other proceeding shall
be commenced against the Borrower or any of its Subsidiaries and the Borrower
or any of its 

 

42

 

Subsidiaries shall
indicate its approval thereof, consent thereto or acquiescence therein or such
petition or application shall not have been dismissed within sixty (60) days
following the filing thereof;

(i)            a decree or order is entered
appointing any such trustee, custodian, liquidator or receiver or adjudicating
the Borrower or any of its Subsidiaries bankrupt or insolvent, or approving a
petition in any such case or other proceeding, or a decree or order for relief
is entered in respect of the Borrower or any Subsidiary of the Borrower in an
involuntary case under federal bankruptcy laws as now or hereafter constituted;

(j)            there shall remain in force,
undischarged, unsatisfied and unstayed, for more than sixty (60) days, whether
or not consecutive, any final judgment against the Borrower or any of its
Subsidiaries that, with other outstanding final judgments, undischarged,
against the Borrower or any of its Subsidiaries exceeds in the aggregate
$100,000;

(k)           if any of the Loan Documents shall be
cancelled, terminated, revoked or rescinded or the Bank’s security interests,
mortgages or liens in a substantial portion of the Collateral shall cease to be
perfected, or shall cease to have the priority contemplated by the Security
Documents, in each case otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of the Bank, or
any action at law, suit or in equity or other legal proceeding to cancel,
revoke or rescind any of the Loan Documents shall be commenced by or on behalf
of the Borrower or any of its Subsidiaries party thereto or any of their respective
officers, members or stockholders, as the case may be, or any court or any
other governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order, decree or ruling
to the effect that, any one or more of the Loan Documents is illegal, invalid
or unenforceable in accordance with the terms thereof;

(l)            the Borrower or any of its
Subsidiaries shall be indicted for a state or federal crime, or any civil or
criminal action shall otherwise have been brought or threatened against the
Borrower or any of its Subsidiaries, a punishment for which in any such case
could include the forfeiture of any assets of the Borrower or such Subsidiary
having a fair market value in excess of $100,000; or

(m)          a Change of Control shall occur;

then, and in any such
event, so long as the same may be continuing, the Bank may, by notice in
writing to the Borrower declare all amounts owing with respect to this Credit
Agreement, the Note and the other Loan Documents and all Reimbursement
Obligations to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower; provided that
in the event of any Event of Default specified in §§13.1(h), 13.1(i) or
13.1(k), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from the Bank.

 

43

 

13.2.  Termination of Commitment.
If any one or more
of the Events of Default specified in §13.1(h), §13.1(i) or §13.1(k) shall
occur, any unused portion of the credit hereunder shall forthwith terminate and
the Bank shall be relieved of all further obligations to make Loans to the
Borrower and the Bank shall be relieved of all further obligations to issue,
extend or renew Letters of Credit.  If
any other Event of Default shall have occurred and be continuing, the Bank may,
by notice to the Borrower, terminate the unused portion of the credit
hereunder, and upon such notice being given such unused portion of the credit
hereunder shall terminate immediately and the Bank shall be relieved of all
further obligations to make Loans and issue, extend or renew Letters of
Credit.  No termination of the credit
hereunder shall relieve the Borrower or any of its Subsidiaries of any of the
Obligations.

13.3.  Remedies.
In case any one or
more of the Events of Default shall have occurred and be continuing, and
whether or not the Bank shall have accelerated the maturity of the Loans
pursuant to §13.1, the Bank, if owed any amount with respect to the Loans or
the Reimbursement Obligations, may, proceed to protect and enforce its rights
by suit in equity, action at law or other appropriate proceeding, whether for
the specific performance of any covenant or agreement contained in this Credit
Agreement and the other Loan Documents or any instrument pursuant to which the
Obligations to the Bank are evidenced, including as permitted by applicable law
the obtaining of the ex parte appointment of a receiver, and, if
such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of the
Bank.  No remedy herein conferred upon
the Bank is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.

14.  SETOFF.

The Borrower hereby
grants to Bank a lien, security interest and right of setoff as security for
all liabilities and obligations to Bank, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now
or hereafter in the possession, custody, safekeeping or control of Bank or any
entity under the control of FleetBoston Financial Corporation or in transit to
any of them.  At any time, without
demand or notice, the Bank may set off the same or any part thereof and apply
the same to any liability or obligation of Borrower even though unmatured and
regardless of the adequacy of any other collateral securing the Loans.  ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

15.  EXPENSES
AND INDEMNIFICATION.

15.1.  Expenses. The
Borrower agrees to pay (a) the reasonable costs of producing and reproducing
this Credit Agreement, the other Loan Documents and the other agreements and
instruments mentioned herein, (b) any taxes (including any interest and
penalties in 

 

 

44

 

respect thereto) payable by the Bank (other than taxes based upon the
Bank’s net income) on or with respect to the transactions contemplated by this
Credit Agreement (the Borrower hereby agreeing to indemnify the Bank with
respect thereto), (c) the reasonable fees, expenses and disbursements of the
Bank’s counsel or any local counsel to the Bank incurred in connection with the
preparation, administration or interpretation of the Loan Documents and other
instruments mentioned herein, each closing hereunder, any amendments,
modifications, approvals, consents or waivers hereto or hereunder, or the
cancellation of any Loan Document upon payment in full in cash of all of the
Obligations or pursuant to any terms of such Loan Document for providing for
such cancellation, (d) the fees, expenses and disbursements of the Bank or any
of its affiliates reasonably incurred by the Bank or such affiliate in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, (e) any fees, costs, expenses
and bank charges, including bank charges for returned checks, reasonably
incurred by the Bank in establishing, maintaining or handling agency accounts,
lock box accounts and other accounts for the collection of any of the
Collateral; (f) all reasonable out-of-pocket expenses (including without
limitation reasonable attorneys’ fees and costs, which attorneys may be
employees of the Bank, and reasonable consulting, accounting, appraisal,
investment banking and similar professional fees and charges) incurred by the
Bank in connection with (i) the enforcement of or preservation of rights under
any of the Loan Documents against the Borrower or any of its Subsidiaries or
the administration thereof after the occurrence of a Default or Event of
Default and (ii) any litigation, proceeding or dispute whether arising
hereunder or otherwise, in any way related to the Bank’s or the Bank’s relationship
with the Borrower or any of its Subsidiaries and (g) all reasonable fees,
expenses and disbursements of the Bank incurred in connection with UCC
searches, UCC filings or mortgage recordings. The amount of all such reasonable
fees and expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate) and be an Obligation secured
by the Collateral.

15.2.  Indemnification. The
Borrower agrees to indemnify and hold harmless the Bank and its affiliates from
and against any and all claims, actions and suits whether groundless or
otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of this Credit Agreement or
any of the other Loan Documents or the transactions contemplated hereby
including, without limitation, (a) any actual or proposed use by the Borrower
or any of its Subsidiaries of the proceeds of any of the Loans or Letters of
Credit, (b) the reversal or withdrawal of any provisional credits granted by
the Bank upon the transfer of funds from lock box, bank agency or concentration
accounts or in connection with the provisional honoring of checks or other
items, (c) any actual or alleged infringement of any patent, copyright, trademark,
service mark or similar right of the Borrower or any of its Subsidiaries
comprised in the Collateral, (d) the Borrower or any of its Subsidiaries
entering into or performing this Credit Agreement or any of the other Loan
Documents or (e) with respect to the Borrower and its Subsidiaries and their
respective properties and assets, the violation of any Environmental Law, the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Hazardous Substances or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to, claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and allocated
costs of internal counsel incurred in connection with any such 

 

45

 

investigation, litigation or other proceeding.  In litigation, or the preparation therefor,
the Bank and its affiliates shall be entitled to select their own counsel and,
in addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. 
If, and to the extent that the obligations of the Borrower under this
§15.2 are unenforceable for any reason, the Borrower hereby agrees to make the
maximum contribution to the payment in satisfaction of such obligations which
is permissible under applicable law.

15.3.  Survival. The covenants contained in this §15 shall
survive payment or satisfaction in full of all other Obligations.

16.  TREATMENT
OF CERTAIN CONFIDENTIAL INFORMATION.

The Bank agrees, on
behalf of itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential
information of the same nature and in accordance with safe and sound banking
practices, any non-public information supplied to it by the Borrower or any of
its Subsidiaries pursuant to this Credit Agreement that is identified by such
Person as being confidential at the time the same is delivered to the Bank, provided
that nothing herein shall limit the disclosure of any such information (a)
after such information shall have become public other than through a violation
of this §16, (b) to the extent required by statute, rule, regulation or
judicial process, (c) to counsel for the Bank, (d) to bank examiners or any
other regulatory authority having jurisdiction over the Bank, or to auditors or
accountants, (e) in connection with any litigation to which the Bank is a
party, or in connection with the enforcement of rights or remedies hereunder or
under any other Loan Document, (f) to a Subsidiary or affiliate of the Bank or
(g) to any assignee or participant (or prospective assignee or participant) so
long as such assignee or participant agrees to be bound by the provisions of
§18.3.

17.  SURVIVAL
OF COVENANTS, ETC.

All covenants,
agreements, representations and warranties made herein, in the Note, in any of
the other Loan Documents or in any documents or other papers delivered by or on
behalf of the Borrower or any of its Subsidiaries pursuant hereto shall be deemed
to have been relied upon by the Bank, notwithstanding any investigation
heretofore or hereafter made by any of them, and shall survive the making by
the Bank of any of the Loans and the issuance, extension or renewal of any
Letters of Credit, as herein contemplated, and shall continue in full force and
effect so long as any Letter of Credit or any amount due under this Credit
Agreement or the Note or any of the other Loan Documents remains outstanding or
the Bank has any obligation to make any Loans or the Bank has any obligation to
issue, extend or renew any Letter of Credit, and for such further time as may
be otherwise expressly specified in this Credit Agreement.  All statements contained in any certificate
or other paper delivered to the Bank at any time by or on behalf of the
Borrower or any of its Subsidiaries pursuant hereto or in connection with the
transactions contemplated hereby shall constitute representations and
warranties by the Borrower or such Subsidiary hereunder.  Upon receipt of an affidavit of an officer
of Bank as to the loss, theft, destruction or mutilation of the Note or any
other security document which is not of public record, and, in the case of any
such loss, theft, destruction or mutilation, upon cancellation 

 

46

 

of the Note or other security document, Borrower will issue, in lieu
thereof, a replacement note or other security document in the same principal
amount thereof and otherwise of like tenor.

18.  ASSIGNMENT
AND PARTICIPATION.

18.1.  Conditions to Assignment by Bank.
The Bank may assign
all or a portion of its interests, rights and obligations under this Credit
Agreement (including all or a portion of the Commitment and the same portion of
the Loans at the time owing to it, the Note held by it and the risk relating to
any Letters of Credit).  In addition,
the Bank may at any time pledge or assign all or any portion of its rights
under the Loan Documents including any portion of the Note to any of the twelve
(12) Federal Reserve Banks organized under Section 4 of the Federal Reserve
Act, 12 U.S.C. Section 341.  No such
pledge or assignment or enforcement thereof shall release Bank from its
obligations under any of the Loan Documents nor shall any such pledge or
assignment be at any cost or expense to the Borrower or its Subsidiaries.

18.2.  Participations.
The Bank may sell
participations to one or more banks or other entities in all or a portion of
the Bank’s rights and obligations under this Credit Agreement and the other Loan
Documents; provided that any such sale or participation shall not affect
the rights and duties of the Bank hereunder to the Borrower and shall be at no
cost or expense to the Borrower and its Subsidiaries.

18.3.  Disclosure.
The Borrower agrees
that in addition to disclosures made in accordance with standard and customary
banking practices the Bank may disclose information obtained by the Bank
pursuant to this Credit Agreement to assignees or participants and potential
assignees or participants hereunder; provided that such assignees or
participants or potential assignees or participants shall agree (a) to treat in
confidence such information unless such information otherwise becomes public
knowledge, (b) not to disclose such information to a third party, except as
required by law or legal process and (c) not to make use of such information
for purposes of transactions unrelated to such contemplated assignment or
participation.

18.4.  Assignment by Borrower.
The Borrower shall
not assign or transfer any of its rights or obligations under any of the Loan
Documents without the prior written consent of the Bank.

19.  NOTICES,
ETC.

Except as otherwise
expressly provided in this Credit Agreement, all notices and other
communications made or required to be given pursuant to this Credit Agreement
or the Note or any Letter of Credit Applications shall be in writing and shall
be delivered in hand, mailed by United States registered or certified first
class mail, postage prepaid, sent by overnight courier, or sent by telegraph,
telecopy, facsimile or telex and confirmed by delivery via courier or postal
service, addressed as follows:

(a)           if to the Borrower, at 90 Salmon
Brook Street, Granby, Connecticut 
06035, Attention: Anthony Galici, or at such other address for notice as
the Borrower shall last have furnished in writing to the Person giving the
notice; and

 

47

 

(b)           if to the Bank, at 777 Main Street,
Hartford, Connecticut 06115, Attention: Matthew E. Hummel, Senior Vice
President, or such other address for notice as the Bank shall last have
furnished in writing to the Person giving the notice.

Any such notice or demand
shall be deemed to have been duly given or made and to have become effective
(i) if delivered by hand, overnight courier or facsimile to a responsible
officer of the party to which it is directed, at the time of the receipt
thereof by such officer or the sending of such facsimile and (ii) if sent by
registered or certified first-class mail, postage prepaid, on the third
Business Day following the mailing thereof.

20.  GOVERNING
LAW.

THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY
PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS
OF THE STATE OF CONNECTICUT AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF CONNECTICUT
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).  THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT
OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN
THE COURTS OF THE STATE OF CONNECTICUT OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS
IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED
IN §19.  THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

21.  HEADINGS.

The captions in this Credit
Agreement are for convenience of reference only and shall not define or limit
the provisions hereof.

22.  COUNTERPARTS.

This Credit Agreement and
any amendment hereof may be executed in several counterparts and by each party
on a separate counterpart, each of which when executed and delivered shall be
an original, and all of which together shall constitute one instrument.  In proving this Credit Agreement it shall
not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.

23.  ENTIRE
AGREEMENT, ETC.

The Loan Documents are
intended by the parties as the final, complete and exclusive statement of the
transactions evidenced by the Loan Documents. All prior or contemporaneous
promises, agreements and understandings, whether oral or written, are deemed to
be superceded by the Loan Documents, and no party is relying on any promise,
agreement or understanding not set forth in the Loan Documents.  Neither this Credit 

 

48

 

Agreement, nor any of the other Loan Documents or any term hereof or
thereof may be changed, waived, discharged or terminated, except as provided in
§25.

24.  WAIVER
OF JURY TRIAL.

BORROWER AND BANK
MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED
TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY,
INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF BANK RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT
OF THE LOAN DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES.  THE BORROWER CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF BANK HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BANK TO
ACCEPT THIS CREDIT AGREEMENT AND MAKE THE LOANS.

25.  CONSENTS,
AMENDMENTS, WAIVERS, ETC.

Any consent or approval
required or permitted by this Credit Agreement to be given by the Bank may be
given, and any term of this Credit Agreement, the other Loan Documents or any
other instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrower or any of its Subsidiaries of any
terms of this Credit Agreement, the other Loan Documents or such other
instrument or the continuance of any Default or Event of Default may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Borrower and the
written consent of the Bank.  No waiver
shall extend to or affect any obligation not expressly waived or impair any
right consequent thereon.  No course of
dealing or delay or omission on the part of the Bank in exercising any right
shall operate as a waiver thereof or otherwise be prejudicial thereto.  No notice to or demand upon the Borrower
shall entitle the Borrower to other or further notice or demand in similar or
other circumstances.

26.  PREJUDGMENT
REMEDY WAIVER.

THE BORROWER ACKNOWLEDGES
THAT THE FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE
MEANING OF CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES.  THE BORROWER HEREBY WAIVES ITS RIGHT TO
NOTICE AND PRIOR COURT HEARING OR 

 

49

 

COURT ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET.
SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND
ALL PREJUDGMENT REMEDIES THE BANK MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES
HEREUNDER.  MORE SPECIFICALLY, THE
BORROWER ACKNOWLEDGES THAT THE BANK’S ATTORNEY MAY, PURSUANT TO CONN. GEN.
STAT. §52-278F, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT
ORDER.  THE BORROWER ACKNOWLEDGES AND
RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT
FOR PREJUDGMENT REMEDY AS AFORESAID AND THE BANK ACKNOWLEDGES BORROWER’S RIGHT
TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.  THE BORROWER FURTHER WAIVES ITS RIGHTS TO
REQUEST THAT BANK POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT THE BORROWER
AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED
BY BANK.

27.  USURY.

All agreements between
the Borrower and the Bank are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration of maturity
of the indebtedness evidenced hereby or otherwise, shall the amount paid or
agreed to be paid to the Bank for the use or the forbearance of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law.  As used herein, the term
“applicable law” shall mean the law in effect as of the date hereof provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then this Credit Agreement shall be
governed by such new law as of its effective date.  In this regard, it is expressly agreed that it is the intent of
the Borrower and the Bank in the execution, delivery and acceptance of this
Credit Agreement to contract in strict compliance with the laws of the State of
Connecticut from time to time in effect. 
If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the Loan Documents at the time of performance of
such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled
shall automatically be reduced to the limits of such validity, and if under or
from circumstances whatsoever the Bank should ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance
evidenced hereby and not to the payment of interest.  This provision shall control every other provision of all
agreements between the Borrower and the Bank.

 

50

 

28.  SEVERABILITY.

The provisions of this
Credit Agreement are severable and if any one clause or provision hereof shall
be held invalid or unenforceable in whole or in part in any jurisdiction, then
such invalidity or unenforceability shall affect only such clause or provision,
or part thereof, in such jurisdiction, and shall not in any manner affect such
clause or provision in any other jurisdiction, or any other clause or provision
of this Credit Agreement in any jurisdiction.

IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as of the date first set forth above.

 

	
   

  	
  GRIFFIN
  LAND & NURSERIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anthony J. Galici

  
	
   

  	
   

  	
  Anthony J.
  Galici

  Vice President

  204 West Newberry Road

  Bloomfield, CT 
  06002

  
	
   

  	
   

  	
   

  
	
   

  	
  FLEET NATIONAL BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Matthew E. Hummel

  
	
   

  	
   

  	
  Matthew E.
  Hummel

  Senior Vice President

  

 

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Exhibit 10.28    
  

 
 

GRIC Communications, Inc.
  
    Series A Preferred Stock And Warrant
  Purchase Agreement    
  

        This Series A Preferred Stock and Warrant Purchase Agreement (the "Agreement") is made as of
January 30, 2002, by and among GRIC Communications, Inc., a Delaware corporation (the "Company") and the parties listed on the Schedule of
Investors attached to this Agreement as Exhibit A (each investor hereinafter individually referred to as a "Purchaser" and collectively as the
"Purchasers"). 

 
 

RECITALS    
  

        In connection with this Agreement the Purchasers and the Company will execute the Financing Agreements and the Warrants (as respectively defined below). The
Company acknowledges that the Financing Agreements and the Warrants constitute a material inducement to the Purchasers to enter into this Agreement and the transactions contemplated hereby. 

        In
consideration of the mutual promises, representations, warranties, covenants, and conditions set forth in this Agreement, the parties to this Agreement mutually agree as follows: 

 
 

ARTICLE 1
  DEFINITIONS    
  

        The following terms are used in this Agreement with the meanings indicated or referred to below. 

        "1995 Plan"—See Section 3.4 

        "1997 Plan"—See Section 3.4 

        "1999 Plan"—See Section 3.4 

        "Change of Control"—See Section 3.15(d). 

        "Charter"—See Section 2. 1. 

        "Closing"—See Section 2.4. 

        "Closing Date"—See Section 2.4. 

        "Code"—See Section 3.16. 

        "Common Stock"—See Section 3.4. 

        "Company SEC Reports"—See Section 3.5. 

        "Conversion Stock"—See Section 2.1. 

        "Disclosure Letter"—See introductory paragraph to Article 3. 

        "Environmental Laws"—See Section 3.21. 

        "ESPP"—See Section 3.4. 

        "Exchange Act"—See Section 3.5. 

        "Financing Agreements" means this Agreement, the Investors' Rights Agreement, the Voting Agreement and the Stockholder Agreement. 

        "Financial Statements"—See Section 3.5. 

        "GRIC Malaysia"—See Section 3.3(a). 

        "GRIC Singapore"—See Section 3.3(a). 

 

        "H&QA" means Asia Pacific Growth Fund III, L.P. 

        "Investor Designees"—See Section 7.2 

        "Investors' Rights Agreement" means the Investors' Rights Agreement substantially in the form of  Exhibit B hereto. 

        "material adverse effect"—See Section 3.1, except that "material adverse effect" as used in Section 5.17 is
defined in Section 5.17. 

        "NASDAQ" means The Nasdaq National Market or SmallCap Market. 

        "Permits"—See Section 3. 9. 

        "Preferred Stock"—See Section 3.4. 

        "Price Per Share"—See Section 2.2. 

        "Rule 144"—See Section 7.5. 

        "SEC"—See Section 3.5. 

        "Securities"—means the Shares, the Warrants, the Warrant Stock and the Conversion Stock. 

        "Securities Act"—See Section 3.5. 

        "Shares"—See Section 2.1. 

        "Stockholder Agreement" means the Stockholder Agreement in the form of Exhibit C  hereto. 

        "Subsidiaries"—See Section 3.3. 

        "Unaudited 12/31/01 Financial Statements"—See Section 3.5. 

        "Vertex" means, collectively, Vertex Technology Fund (II) Ltd. and Vertex Technology Fund (III) Ltd. 

        "Voting Agreement" means the Voting Agreement among the Company and certain of its stockholders dated as of the date of this Agreement. 

        "Warrants"—See Section 2.3 

        "Warrant Stock"—See Section 2.3 

 
 

ARTICLE 2
  AUTHORIZATION AND SALE OF PREFERRED STOCK AND WARRANTS    
  

        2.1.    Authorization; Sale; Closing; and Delivery.    The Company has authorized the issuance and sale of up to
12,801,205 shares of its Series A Preferred Stock (the "Shares") having the rights, preferences, and privileges set forth in the Certificate of
Amendment of Second Amended and Restated Certificate of Incorporation of the Company attached hereto as Exhibit D (the
"Charter"). The aggregate number of shares of Common Stock issued or issuable upon conversion of the Shares are referred to in this Agreement as the
"Conversion Stock." 

        2.2.    Sale of the Shares.    Subject to the terms and conditions hereof, on the Closing Date, the Company will issue
and sell to each Purchaser, and each Purchaser will purchase from the Company, the number of Shares set forth beside such Purchaser's name in the column entitled "Shares" on  Exhibit A hereto at a
purchase price of $1.66 per share ("Price Per Share") payable in cash.
Notwithstanding the forgoing, the Purchasers shall have the right to substitute additional Purchasers who may purchase some or all of such number of Shares at the Closing, subject to the approval of
the Company, which approval shall not be unreasonably withheld, in which event Exhibit A hereto and the 

2

 

remaining Financing Agreements and the Warrants shall be modified accordingly and each such substituted purchaser shall be deemed a "Purchaser" hereunder and thereunder. 

        2.3    Warrants.    Subject to the terms and conditions hereof, on the Closing Date, the Company shall issue to each
Purchaser (i) a warrant exercisable at a purchase price per share of $1.66 for a number of Shares equal to ten percent of the number of Shares which such Purchaser purchased under this
Agreement and (ii) a warrant exercisable at a purchase price per share of $2.49 for a number of Shares equal to fifteen percent of the number of Shares which such Purchaser purchased under this
Agreement (the warrants described in clauses (i) and (ii), each individually, a "Warrant" and collectively, the
"Warrants"), in both cases as more specifically detailed on Exhibit E hereto. The aggregate
number of Shares issued or issuable upon exercise of the Warrants are referred to in this Agreement as the "Warrant Stock". 

        2.4.    Closing Date.    The closing of the purchase and sale of the Shares hereunder (the
"Closing") shall be held at the law offices of counsel to the Company, Fenwick & West, LLP, Two Palo Alto Square, Palo Alto, CA 94036, at a time
and date that the Company and the Purchasers shall agree upon (which time and date are referred to in this Agreement as the "Closing Date"). 

        2.5.    Delivery.    Subject to the terms of this Agreement, at the Closing or as soon as possible thereafter, the
Company shall deliver to each Purchaser (a) a certificate representing the number of Shares purchased by such Purchaser as designated on  Exhibit A hereto, against payment of the purchase price
for the Shares by check or wire transfer of immediately available funds and
(b) the amount of cash such Purchaser is entitled for reimbursement of expenses pursuant to Section 8.13(a) hereunder. 

 
 

ARTICLE 3
  REPRESENTATIONS AND WARRANTIES OF THE COMPANY    
  

        As used in this Article 3 "knowledge" or "belief" of the Company refers to the current actual knowledge or reasonable belief of the Chief Executive
Officer, Chief Financial Officer, Chief Operating Officer and General Counsel of the Company after reasonable inquiry. For purposes of this Article 3, all references to the Company shall be
deemed to include each of the Company and each of its Subsidiaries except where context clearly otherwise requires, provided however that all representations and warranties as to each Subsidiary are
made to the Company's knowledge, and no breach of any such representation or warranty as to a Subsidiary shall be deemed to occur unless the inaccuracy of the representations or warranties as to the
Subsidiaries individually or in the aggregate could reasonably be expected to have a material adverse effect. Except as set forth on the Disclosure Letter delivered to Purchasers concurrently with
this Agreement (the "Disclosure Letter"), the Company hereby represents and warrants to the Purchasers as follows: 

        3.1.    Organization and Standing: Charter of Incorporation and Bylaws.    The Company is a corporation duly organized
and validly existing under, and by virtue of, the laws of the State of Delaware, is in good standing under such laws and is authorized to exercise all of its corporate powers, rights and privileges.
The Company has the requisite corporate power and authority to own, lease and operate its properties and assets and to conduct its business as presently conducted and as currently proposed to be
conducted. The Company is qualified to do business as a foreign corporation in each jurisdiction where the failure to be so qualified would have a material adverse effect on the business of the
Company as now conducted and as currently proposed to be conducted. True, correct and complete copies of the Company's certificate of incorporation and Bylaws, each as will be in effect at the
Closing, have been delivered to counsel for the Purchasers. As used in this Agreement, "material adverse effect" means any material adverse effect on
the business, properties, assets, operations, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or on the Company's ability to
consummate the transactions contemplated hereby or to enter 

3

 

into the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under the Financing Agreements. 

        3.2.    Corporate Power; Authorization.    (a) The Company has the requisite corporate power to execute and
deliver the Financing Agreements and the Warrants, to issue and sell the Securities hereunder, and to carry out and perform its obligations under the terms of the Financing Agreements. 

        (b)  All
corporate action on the part of the Company, its officers and directors necessary for the authorization, execution, delivery and performance of the Financing
Agreements and Charter and for the authorization, sale, issuance (or reservation for issuance) and delivery of the Securities, and the performance of the Company's obligations hereunder and
thereunder, has been taken, other than stockholder approval. The Financing Agreements have been duly authorized, executed and delivered by the Company, constitute legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application affecting the enforcement of creditors' rights and as may be limited by public policy. The Securities, when issued in compliance with the provisions of this Agreement, will
be validly issued, fully paid and nonassessable, and free of any liens or encumbrances; provided, however, that the Securities may be subject to restrictions on transfer under state and federal
securities laws as set forth herein. The Securities will be, assuming the accuracy of the representations of the Purchasers set forth in Article 4 hereof, issued in compliance with all
applicable state and federal securities laws. The Securities are not subject to any preemptive rights or rights of first refusal except as have been waived or satisfied. 

        3.3.    Subsidiaries.    Schedule 3.3 of the Disclosure Letter sets forth the subsidiaries of the Company (the
"Subsidiaries"). Each of the Subsidiaries is duly organized and existing under the laws of jurisdiction set forth on Schedule 3.3 of the
Disclosure Letter. The Company's beneficial ownership of each Subsidiary is set forth on Schedule 3.3 of the Disclosure Letter and, other than as set forth therein, there is no obligation or
commitment of the Company or any Subsidiary to issue shares, options, warrants or other rights with respect to any Subsidiary to any person. The Company has no subsidiaries or affiliated companies
other than the Subsidiaries and does not otherwise own or control, directly or indirectly, any equity interest in any other corporation, partnership, association or other business entity. The Company
is not a party to any partnership or joint venture. 

        3.4.    Capitalization.    (a) The authorized capital stock of the Company consists of (A) 50,000,000
shares of Common Stock, $0.001 par value per share (the "Common Stock"), of which 19,897,986 were issued and outstanding as of January 29, 2002
and (B) 5,000,000 shares of Preferred Stock, $0.001 par value per share (the "Preferred Stock"), of which no shares are issued and outstanding.
All such issued and outstanding shares have been duly authorized and validly issued, are fully paid and nonassessable, and were issued in compliance with all applicable federal and state securities
laws. Except as set forth in this Agreement, the Investors' Rights Agreement, the Stockholder Agreement, the Voting Agreement and the Warrants and except for stock pledges for margin accounts,
(i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances; (ii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company binding on the Company
or, to Company's knowledge, binding on any Company stockholder, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional
shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing
indebtedness of the Company or by which the Company is or may become bound; (iv) there are no amounts outstanding under, and there will be no 

4

 

amounts due upon termination of, any credit agreement or credit facility; (v) there are no financing statements securing obligations in any amounts greater than Five Hundred Thousand Dollars
($500,000) in the aggregate, filed in connection with the Company; (vi) there are no agreements or arrangements under which the Company is obligated to register the sale of any of its
securities under the Securities Act that are inconsistent with the rights of the Purchasers under the Investors' Rights Agreement; (vii) there are no outstanding securities or instruments of
the Company or which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a
security of the Company; (viii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as
described in this Agreement; (ix) the Company does not have any stock appreciation rights or "phantom" stock plans or agreements or any similar plan or agreement; and (x) to the
Company's knowledge, (A) no current or former officer or director who individually owns one percent (1%) or more of the Company's outstanding capital stock, or (B) other beneficial owner
of five percent (5%) or more of the Company's outstanding capital stock, has pledged shares of the Company's capital stock in connection with a margin account or other loan secured by such capital
stock; except for (1) the rights provided to Silicon Valley Bank pursuant to those warrants issued by the Company dated November 5, 1998 and December 31, 1998, to purchase 19,509
shares (subject to adjustment pursuant to their terms), respectively, of Common Stock; (2) the rights provided to America Online, Inc. pursuant to that warrant issued by the Company
dated November 12, 1998 to purchase 102,699 shares (subject to adjustment pursuant to its terms) of Common Stock; (3) 535,714 shares of Common Stock reserved for issuance pursuant to the
Company's 1995 Stock Option Plan ("1995 Plan") of which options to purchase 6,531 shares of Common Stock are outstanding; (4) 2,678,571 shares of
Common Stock reserved for issuance pursuant to the Company's 1997 Stock Option Plan ("1997 Plan") of which options to purchase 659,773 shares of Common
Stock are outstanding; (5) 6,474,685 shares of Common Stock reserved for issuance pursuant to the Company's 1999 Equity Incentive Plan ("1999
Plan") of which options to purchase 3,876,024 shares of Common Stock are outstanding; and (6) 894,937 shares reserved for issuance pursuant to the Company's 1999
Employee Stock Purchase Plan (the "ESPP"). 

                (b)    Issuance of Securities.    As of the Closing, at least 12,801,205 shares of Common Stock will have been duly
authorized and reserved for issuance upon conversion of the Shares and Warrant Stock. Subject to the accuracy of the representations and warranties of each of the Purchasers in this Agreement, the
issuance by the Company of the Securities is exempt from registration under the Securities Act and applicable state securities laws. 

        3.5.    SEC Filings; Financial Statements.    

        (a)  The
Company has filed all forms, reports and documents required to be filed by the Company with the Securities and Exchange Commission (the
"SEC") since the filing of the Company's most recent annual report on Form 10-K and has made available to Purchasers such forms,
reports and documents in the form filed with the SEC. All such required forms, reports and documents are referred to herein as the "Company SEC
Reports". As of their respective dates, the Company SEC Reports, as of the date filed and as they may have been subsequently amended, (i) were prepared in accordance
with all requirements of the Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act of 1934 (the "Exchange
Act"), as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 

5

  

        (b)  Each
of the financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports (collectively, the
"Financial Statements") (i) complied as to form in all material respects with the published rules and regulations of the SEC with respect
thereto, (ii) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated and with each other, and
(iii) fairly presented the financial position of the Company at the respective dates thereof and for the periods indicated, except in each case for the omission of certain footnotes and subject
to normal and recurring year-end adjustments. The unaudited financial statements of the Company for the period ending December 31, 2001, in the form provided to the Purchasers (the  "Unaudited 12/31/01 Financial
Statements"), (i) have been prepared in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other, and (ii) represent in all material respects the financial position of the Company at the respective dates thereof and for
the periods indicated, except in each case for the omission of certain footnotes and subject to normal and recurring year-end adjustments. Except as set forth in the Financial Statements
or the Unaudited 12/31/01 Financial Statements, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business and
(ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial
Statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is not aware of any material liability of any nature,
direct or indirect, contingent or otherwise, or in any amount not adequately reflected or reserved against in the Financial Statements and notes thereto. The Company maintains and will continue to
maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles. 

        (c)  No
other written information provided by or on behalf of the Company to the Purchasers which is not included in the Company's SEC Reports contains any untrue statement
of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they are or were made, not misleading to the
extent that it would have a material adverse effect, provided that no representation or warranty is made as to projections except that they were prepared in good faith and based on all information
reasonably available to management. The Company satisfies the requirements for use of Form S-3 for registration of the resale of Registrable Securities (as defined in the Investors
Rights Agreement) and does not have any knowledge or reason to believe that it does not satisfy such requirements or any knowledge of any fact which would reasonably result in its failure to satisfy
such requirements. The Company is not required to file and will not be required to file any agreement, note, lease, mortgage, deed or other instrument entered into prior to the date hereof and to
which the Company is a party or by which the Company is bound which has not been previously filed as an exhibit to its reports filed with the Commission under the Exchange Act or which was not entered
into in the ordinary course of business since the date of the last periodic report on Form 10-Q. Except for the issuance of the Shares and the Warrants contemplated by this
Agreement, no event, liability, development or circumstance has occurred or exists, or is currently contemplated to occur, with respect to the Company or its business, properties, operations or
financial condition, that would be required to be disclosed by the Company under applicable securities laws and which has not been publicly disclosed. 

        3.6.    Title to Properties; Liens and Encumbrances.    The Company has good and marketable title to, or in the case
of leased properties and assets, valid and enforceable leaseholds or licensed interests in, all of its material properties and assets. Such properties and assets are not subject to any mortgage,
pledge, lien, security interest, conditional sales agreement, encumbrance or charge, except liens for current taxes not yet due and payable and mechanics liens incurred in the ordinary course of
business. The Company's properties and assets are in good condition and repair in all material respects. 

6

 

        3.7.    Intellectual Property Rights.    The Company (a) owns or has the right to use, free and clear of all
liens, claims and restrictions, all material patents, trademarks, service marks, trade names, copyrights and other intangible or intellectual property rights (and licenses with respect to the
foregoing) needed for or used in the conduct of its business as now conducted and as proposed to be conducted without infringing upon or otherwise acting adversely to the right or claimed right of any
person or entity under or with respect to any of the foregoing, and (b) is not obligated or under any liability whatsoever to make any material payments by way of royalties, fees or otherwise
to any owner of, licensor of, or other claimant to, any patent, trademark, trade name, copyright or other intangible assets, with respect to the use thereof or in connection with the conduct of its
business or otherwise; provided that representations and warranties as to infringement of third party patents are made to Company's knowledge. The Company owns and has the unrestricted right to use
all trade secrets, including know-how, inventions, designs, processes and technical data required for or incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company. All of the material patents, trademarks, service marks, trade names, copyrights and trade secrets of the Company are held by the Company free and
clear of any rights, liens or claims of others, including, without limitation, current and former employees, former employers of all current and former employees, consultants, officers, directors and
stockholders of the Company. To its knowledge, the Company is not infringing upon or otherwise acting adversely to the right or claimed right of any person under or with respect to any of the
foregoing. The Company has not received any written or, to the Company's knowledge, oral communications alleging that the Company has violated or, by conducting its business as proposed to be
conducted would violate, any patent, trademark, service mark, trade name, copyright or trade secret or other proprietary right of any other person or entity, which, singly or in the aggregate, if the
subject of any unfavorable decision, ruling or finding, would have a material adverse effect on the Company. The Company has no knowledge of any infringement or improper use by any third party of any
patent, trademark or copyright held by it, and the Company has not instituted any action, suit or proceeding in which an act constituting an infringement of any such patent, trademark or copyright was
alleged to have been committed by a third party. There is no claim, action or proceeding being made by the Company regarding any of the foregoing intellectual property rights of the Company or, to the
Company's knowledge, brought or currently threatened in writing against the Company regarding any of the foregoing intellectual property rights of the Company or the use of any intellectual property
of any third party by the Company that, if the subject of an unfavorable decision, ruling or finding would have a material adverse effect. 

        3.8.    Proprietary Information Agreements.    All employees and consultants of the Company are parties to a written
confidentiality and inventions agreement or a nondisclosure agreement substantially in the respective forms previously delivered to counsel for the Purchasers. To the Company's knowledge, none of the
Company's employees is or is alleged to be in violation of any employment agreement,
non-competition agreement, patent or proprietary information disclosure agreement, or other contract or agreement to which any of them is a party which violation or alleged violation
relates to their relationship to the Company, its business or operations, or is in violation of the Confidentiality and Inventions Agreement with the Company to which such employee is a party. To the
Company's knowledge, none of the Company's employees is obligated under any contract (including any license, covenant or commitment of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with the employee's obligation to use his or her best efforts to promote the interests of the Company or that would conflict
with the Company's business as conducted or as proposed to be conducted. To the Company's knowledge, neither the execution nor delivery of the Financing Agreements, nor the carrying on of the
Company's business as currently conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under
which any of the Company's employees is now obligated. The Company does not believe it is utilizing or that it will 

7

 

be necessary to utilize, and will not utilize, any inventions, assets or rights of any of the Company's employees or consultants made or owned prior to their employment with or engagement by the
Company, in violation of any limitations or restrictions to which any such employee or consultant is a party or to which any of such inventions, assets or rights may be subject. To the Company's
knowledge, none of the Company's employees has taken, removed or made use of any proprietary documentation, manuals, products, materials, or any other tangible item from his or her previous employer,
and the Company will not make use of any such proprietary items in the business of the Company. 

        3.9.    Governmental Permits.    The Company has all governmental permits, operating authority, licenses, franchises,
certificates, consents, rights and privileges as are necessary to the operation of its business as currently conducted and as currently proposed to be conducted, the absence of which would have a
material and adverse effect on the business of the Company (collectively, "Permits"). Such Permits are in full force and effect, no violations have been
or are expected to have been recorded in respect of any such Permits, and no proceeding is pending or threatened that could result in the revocation or limitation of any of such Permits. The Company
has not received any written notice of proceedings relating to the revocation or modification of any such Permits. The Company has conducted its business in material compliance with all Permits. 

        3.10.    Compliance with Other Instruments.    The Company is not in violation, breach or default of any term of the
Charter or Bylaws, or, in any material respect, of any term or provision of any material mortgage, indenture, contract, agreement or instrument to which the Company is a party, or of any provision of
any foreign or domestic state or federal judgment, decree, order statute, rule or regulation applicable to or binding upon the Company. The execution, delivery and performance of, and compliance with,
the Financing Agreements, and the issuance of the Securities, have not and will not (with or without notice or lapse of time, or both) result in any such violation, or be in conflict with, or
constitute a default, under any such term or provision or the Company's Charter or Bylaws, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company pursuant to any such term or provision, or result in the suspension, revocation, impairment, forfeiture or non-renewal of any Permit applicable to the Company's
operations or any of its assets or properties. The execution, delivery and performance of the Financing Agreements by the Company and the consummation by the Company of the transactions contemplated
hereby and thereby will not (a) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement, mortgage, indenture or instrument to which the Company is a
party; or (b) result in a violation by the Company of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and
regulations of NASDAQ) applicable to the Company or by which any property or asset of the Company is bound or affected. The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity that would have a material adverse effect. The Company is not in violation of the listing requirements of NASDAQ, and has no actual knowledge of any
facts which would reasonably lead to delisting or suspension of the Common Stock by NASDAQ in the foreseeable future; provided that no assurance is given that such a delisting will not result from a
decline in the Company's stock price. 

        3.11.    Litigation.    There are no actions, suits, proceedings or investigations pending or overtly threatened in
writing against the Company or its properties before any court or governmental agency other than ordinary course litigation that, if determined adversely to the Company, would have a material adverse
affect on the Company's finances or business. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or governmental agency or
instrumentality which questions the validity of the Financing Agreements or any action to be taken in connection with the Financing Agreements. There is no litigation initiated by the Company
currently pending or which the Company intends to initiate. 

8

 

        3.12.    Employees.    The Company SEC Reports accurately describe, as of the date of this Agreement, the employee
benefit plans and arrangements of the Company therein described. The Company is not bound by or subject to (and none of its assets is bound by or subject to) any arrangement with any labor union and
does not have any collective bargaining agreements covering any of its employees. There is no pending or, to the best of the Company's knowledge, threatened union organizing effort or labor dispute
involving the Company and any group of its employees. Subject to applicable law, the employment of each officer and employee of the Company or any of its subsidiaries is terminable at the will of the
Company. To its knowledge, the Company and its Subsidiaries have complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related
to employment. None of the Company's U.S. based employees is a member of a union which relates to such employee's relationship with the Company. No executive officer (as defined in Rule 501(f)
of the Securities Act) has notified the Company in writing that such officer intends to leave the Company or otherwise terminate such officer's employment with the Company. The Company is in
compliance in all material respects with all federal, state, local and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and
hours. 

        3.13.    Insurance.    The Company has obtained and maintains in full force and effect fire, casualty, directors' and
officers' liability and other and liability insurance policies with recognized insurers with such coverages as are customary for companies in businesses similarly situated sufficient in amount to
allow replacement of the tangible properties of the Company that might be damaged or destroyed. The Company has not been refused any insurance coverage sought or applied for and has no reason to
believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a material adverse effect. 

        3.14.    Governmental Consent, etc.    No consent, approval or authorization of, or designation, declaration or filing
with, any person, including any governmental authority on the part of the Company is required in connection with the valid execution, delivery, and performance of the Financing Agreements or the
offer, sale or issuance of the Securities, or the consummation of any other transaction contemplated by this Agreement except (i) certain filings as may be required under the Securities Act,
(ii) certain filings with the Nasdaq National Market, and (iii) the filing of the Charter with the Secretary of State of the State of Delaware. 

        3.15.    Material Contracts and Obligations.    

        (a)  The
Company SEC Reports list all agreements required to be filed as "material contracts" under Rule 601 of Regulation SK as of the time of such filings and
reports. All of such agreements and contracts (including any additional material contracts that are otherwise listed on the Disclosure Letter) are valid, binding and in full force and effect in all
material respects, assuming due execution by the other parties to such agreements and contracts. 

        (b)  There
are no material agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or
by which the Company is bound which may involve indemnification by the Company with respect to infringement or misappropriation of proprietary rights. 

        (c)  The
Company has not declared or paid any dividends or authorized or made any distribution upon, or with respect to, any class or series of its capital stock. 

        (d)  The
Company is not presently engaged in any discussion (i) with any representative of any individuals(s), entity or entities regarding a Change of Control of the
Company, or (ii) regarding any other form of acquisition, liquidation, dissolution or winding up of the Company. "Change of Control" means
(i) a consolidation or merger of the Company with or into any other corporation or corporations 

9

 

in which the holders of the Company's outstanding shares immediately before such consolidation or merger do not, immediately after such consolidation or merger, retain stock representing a majority
of the voting power of the surviving corporation of such consolidation or merger or (ii) the consummation of a sale of all or substantially all of the assets of the Company. 

        3.16.    Tax Returns and Payments.    The Company has accurately prepared and timely filed all tax returns (foreign,
federal, state and local) required to be filed by it. All taxes shown to be due and payable on said returns, any assessments received, and all other taxes due and payable by the Company on or before
the date hereof have been paid or will be paid prior to the time they become delinquent. The
federal income and state income franchise tax, sales or use tax returns of the Company have not been audited by any governmental authority. No material deficiency assessment or proposed adjustment of
the Company's foreign or federal income tax or state or local taxes is pending and the Company has no knowledge of any proposed material liability for any tax to be imposed upon its properties or
assets for which the Company has not adequately reserved. The provision for taxes of the Company as shown in the Financial Statements is materially adequate for taxes due or accrued as of the date
thereof. The Company has not elected pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code and has not made any other elections pursuant to the Code (other than elections which relate solely to methods of accounting,
depreciation or amortization) which would have an adverse effect on the Company, the financial condition, businesses as presently conducted or proposed to be conducted or any of the properties or
assets. 

        3.17.    No Other Agreements Relating to Voting or Transfer.    Except as contemplated by the Financing Agreements and
the Company's certificate of incorporation, there is no agreement between the Company, any of its officers or Directors that affects or relates to the voting of or giving of consents or approvals with
respect to any voting security. 

        3.18.    Certain Transactions.    The Company is not directly or indirectly indebted to any officers or directors of
the Company, or to any member of his or her family, in any amount whatsoever. To the Company's knowledge, no stockholder of the Company, or officer or director of the Company, or member of his or her
family, is indebted to the Company or has any direct or indirect ownership interest in any firm or corporation with which the Company has a business relationship, or any firm or corporation that
currently competes with the Company. None of the officers or directors of the Company, or member of his or her family, is directly or indirectly, interested in any contract with the Company. The
Company is not a guarantor or indemnitor of any material indebtedness of any other person, firm or corporation. 

        3.19.    Changes.    Since December 31, 2001 there has not been: 

        (a)  any
material change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements or the Unaudited
12/31/01 Financial Statements, except changes in the ordinary course of business which have not been, in the aggregate, materially adverse; 

        (b)  any
damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results,
prospects or business of the Company (as such business is presently conducted); or 

        (c)  any
satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business; 

        (d)  any
waiver by the Company of a material right or of a material debt owed to it; 

10

 

        (e)  any
change or amendment to a material contract or material arrangement by which the Company or any of its assets or properties is bound or subject, except in the
ordinary course of business which have not been in the aggregate materially adverse; 

        (f)    any
material change in any compensation arrangement or agreement with any employee of the Company; 

        (g)  any
sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets of the Company; 

        (h)  any
resignation or termination of employment of any key officer of the Company; and the Company does not know of the impending resignation or termination of employment
of any such officer; 

        (i)    receipt
of notice that there has been a loss of, or order cancellation by, any major customer of the Company; 

        (j)    any
mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its properties or assets, except liens for taxes not
yet due or payable; 

        (k)  any
loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel
advances and other advances made in the ordinary course of its business; 

        (l)    any
declaration, setting aside or payment or other distribution in respect of any of the Company's capital stock, or any direct or indirect redemption, purchase or other
acquisition of any of such stock by the Company; 

        (m)  any
other event or condition of any character that the Company believes could adversely affect the assets, properties, financial condition, operating results or business
of the Company (as such business is presently conducted and as it is proposed to be conducted); or 

        (n)  any
agreement or commitment by the Company to do any of the things described in this Section 3.19. 

        3.20    Employee Benefit Plans.    The Company and its subsidiaries have materially complied with all applicable
local, state and federal regulations with respect to each employment contract, deferred compensation agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement and employee
benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended. 

        3.21    Environmental and Safety Laws.    The Company (a) is in compliance with any and all Environmental Laws,
(b) has received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct its business, (c) is in compliance with all terms and conditions
of any such permit, license or approval and (d) to Company's knowledge, no material expenditures are or will be required in order to comply with any such Environmental Laws. The term
"Environmental Laws" means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) as they currently exist, including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes into the environment, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of hazardous materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or
notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder. 

11

  

        3.22    Disclosure.    The Company has provided the Purchasers with all the information which the Purchasers have
requested for deciding whether to acquire the Securities. No representation or warranty of the Company or its Subsidiaries contained in the Financing Agreements and the exhibits attached hereto, nor
any certificate furnished or to be furnished to Purchasers at the Closing (when read together) contains any untrue statement of a material fact or omits to state a material fact necessary in order to
make the statements contained herein or therein not misleading in light of the circumstances under which they were made. 

        3.23    No Third Party Violation.    To Company's knowledge, no third party is in violation of or default under any
contract listed on the Disclosure Letter or referenced in Section 3.15(a) to which the Company or its Subsidiaries is a party. 

        3.24    Corporate Records.    The books and records of the Company and, to the Company's knowledge, its Subsidiaries
have been fully, properly and accurately maintained in all respects, and such books and records are true, correct and complete in all material respects. 

        3.25    No Integrated Offering.    Neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations
of any exchange or automated quotation system on which any of the securities of the Company are listed or designated, nor will the Company take any action or steps that would cause the offering of the
Securities to be integrated with other offerings. 

        3.26    Foreign Corrupt Practices.    Neither the Company nor any director, officer, agent, employee or other person
acting on behalf of the Company has, in the course of his actions for, or on behalf of, the Company used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of
any provision of the United States Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee. 

 
 

ARTICLE 4
  REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS    
  

        Each Purchaser represents and warrants to the Company with respect to the purchase of the Shares (and upon conversion thereof, the Conversion Stock) and Warrants
(and upon exercise thereof the Warrant Stock and the Common Stock issuable upon conversion thereof) as follows: 

        4.1.    Authorization.    All action on the part of such Purchaser necessary for the authorization, execution,
delivery and performance by Purchaser of the Financing Agreements has been taken, and the Financing Agreements, when executed and delivered by the Purchaser, will constitute valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general
application affecting the enforcement of creditor's rights and as may be limited by public policy. 

        4.2.    Experience; Accredited Investor.    Purchaser (i) has such knowledge and experience in financial or
business matters that Purchaser is capable of evaluating the merits and risks of the investment in the Securities and protecting its own interests in connection with such investment, or
(ii) has a preexisting personal or business relationship with the Company, or with one or more of the officers, directors or controlling persons of the Company, of a nature and duration that
enables Purchaser to be aware of the character, business acumen and general business and financial circumstances of such persons. Purchaser is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act. 

12

  

        4.3.    Investment.    Purchaser is acquiring the Securities for investment for such Purchaser's own account, not
as a
nominee or agent and not with a view to, or for resale in connection with, any distribution thereof, and such Purchaser has no present intention of selling, granting participation in, or otherwise
distributing any of the Securities. By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person, with respect to any of the Securities. Purchaser understands that the Securities to be purchased by Purchaser have not been and
will not be (except as contemplated by the Investors' Rights Agreement) registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment intent as expressed herein. 

        4.4.    Rule 144.    Purchaser acknowledges that the Securities are restricted securities within the meaning of
applicable securities laws, have not been registered under the Securities Act, and must be held indefinitely unless subsequently registered under the Securities Act and applicable state and other
securities laws or unless an exemption from such registration is available. Purchaser is aware of the provisions of Rule 144 promulgated under the Securities Act that permit limited resale of
shares purchased in a private placement subject to the satisfaction of certain conditions. The Securities will bear a legend reflecting these conditions on transferability thereof. 

        4.5.    No Public Market.    Purchaser understands that no public market now exists for the Shares or the Warrants and
that it is uncertain whether a public market will ever exist for the Shares or the Warrants. 

        4.6.    Access to Data.    Purchaser believes it has had an opportunity to discuss the Company's business, management
and financial affairs with the Company's management and an opportunity to review the Company's facilities. Purchaser understands that such discussions, as well as the written information issued by the
Company, were intended to describe the aspects of the Company's business and prospects which it believes to be material but were not necessarily a thorough or exhaustive description. Purchaser
represents and acknowledges that it believes it has been furnished with or has had access to such information as Purchaser would customarily require to evaluate the merits and risks of the proposed
investment. Purchaser represents and acknowledges that it believes it has had an opportunity to ask questions and receive answers from the Company's officers, employees and directors regarding the
terms and conditions of the offering of the Securities. Purchaser has acted solely in its own interest and neither Purchaser nor any of its agents or employees has acted as an agent, employee, partner
or fiduciary of any other Purchaser as an underwriter, broker, dealer or investment adviser. The foregoing sentence, however, does not limit or modify any Purchaser's rights under this Agreement
including, without limitation, the representations and warranties of the Company in this Agreement or the right of the Purchasers to rely thereon. 

        4.7.    Further Limitations on Dispositions.    Without in any way limiting the representations set forth above,
Purchaser further agrees that, if at the time of any transfer of any Securities, such Securities shall not be registered under the Securities Act, prior to any disposition of all or any portion of the
Securities, the Company may require, as a condition of allowing such transfer, that the holder or transferee furnish to the Company (i) such information as is appropriate to establish that such
transfer may be made without registration under the Securities Act; and (ii) at the expense of the holder or transferee, an opinion by legal counsel designated by such holder or transferee and
reasonably satisfactory in form and substance to the Company, to the effect that such transfer may be made without registration under the Securities Act. Notwithstanding the foregoing, no such opinion
of counsel shall be necessary for a transfer pursuant to Rule 144 of the Securities and Exchange Commission or to any person or entity that is deemed to be an "affiliate" of the Purchasers for
purposes of the Securities Act, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if the transferee were an original Purchaser hereunder. Notwithstanding the
foregoing, the Securities may be pledged in connection with a bona fide margin account or other loan 

13

 

secured by the Securities and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Purchaser effecting a pledge of Securities shall
be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other agreement arising hereunder; provided that in order to
make any sale, transfer or assignment of Securities, such Purchaser and its pledgee must make such disposition in accordance with or pursuant to a registration statement or an exemption under to
Securities Act. 

        4.8.    Tax Consequences.    Purchaser has reviewed with Purchaser's own tax advisors the federal, state, local and
foreign tax consequences of this investment and the transactions contemplated by this Agreement (including any tax consequences that may result under recently enacted tax legislation). Purchaser is
relying solely on such advisors and not on any statements or representations of the Company or any of its agents and understands that Purchaser (and not the Company) shall be responsible for the
Purchaser's own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 

        4.9.    Residence.    Purchaser is incorporated and has its principal place of business in the geographic location
identified on Exhibit A.  

        4.10.    Confidentiality.    Purchaser shall not disclose or provide to any other person or
entity any non-public information or materials, or copies thereof, whatsoever about the Company, disclosed or made available to the Purchasers in connection with the transactions
contemplated hereby, or in Purchaser's capacity as stockholder of the Company; provided, however, that Purchaser may disclose such information to the Purchasers' legal and financial advisors in
connection with advice to be rendered by them to the Purchasers, or to Purchaser's investors or potential investors or affiliates, or to any transferee or potential transferee of the Securities if
such transfer is made in compliance with all the terms and conditions of this Agreement. Prior to such disclosure, Purchasers shall advise such legal and financial advisors or Purchaser's investors or
potential investors or affiliates, or transferees or potential transferee, as the case may be, that each of them shall not further disclose such information or materials to any other person or entity
or utilize such information or materials for the benefit of any
person or entity other than the Company or the Purchasers, or such transferee, in the capacity of a stockholder of the Company, or in connection with the transactions contemplated hereby. The
nondisclosure obligations set forth above shall not apply to any information which the Company determines in writing shall not be the subject of such nondisclosure obligations, nor shall such
obligations apply to any information which, by applicable law, the Company may not prohibit the Purchasers from disclosing. The Purchasers may disclose any information to any governmental authority
having jurisdiction over it, provided that the Company when reasonably possible shall be given reasonable advance written notice of Purchaser's intent to disclose any information covered under this
Section 4.10 unless Purchaser is precluded from doing so by applicable law. 

 
 

ARTICLE 5
  CONDITIONS TO PURCHASERS'S OBLIGATIONS AT THE CLOSING    
  

        The obligations of each Purchaser to purchase the Securities at the Closing is subject to the fulfillment on or prior to the Closing Date of each of the following
conditions, any of which may be waived in whole or in part by such Purchaser at any time in its sole discretion by providing the Company with written notice thereof. 

        5.1.    Representations and Warranties Correct.    The representations and warranties made by the Company in
Article 3 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if
they had been made on and as of the same date. 

14

 

        5.2.    Covenants.    All covenants, agreements, and conditions in this Agreement required to be performed or complied
with by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects by the Company. 

        5.3.    Proceedings and Documents.    All corporate and other proceedings in connection with the transactions
contemplated hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Purchasers. 

        5.4.    Permits.    All governmental and third party Permits, filings and waivers necessary for consummation of the
transactions to be consummated at the Closing shall have been obtained. 

        5.5.    Certificate of Amendment of Second Amended and Restated Certificate of Incorporation.    The Company shall
have filed the Charter with the Secretary of State of the State of Delaware. 

        5.6.    Good Standing Certificates.    The Company shall have delivered a certificate of status dated as of a recent
date issued by the Secretary of State of the State of Delaware to the effect that the Company is legally existing and in good standing. 

        5.7.    Secretary's Certificate.    The Company shall have delivered a certificate executed by the Secretary or
Assistant Secretary of the Company dated the Closing Date, certifying the following matters: (a) the resolutions adopted by the Company's Board of Directors and stockholders relating to the
transactions contemplated by this Agreement; (b) the Charter; (c) the Bylaws of the Company; and (d) incumbency of the officers of the Company. 

        5.8.    Stock Certificate.    The Company shall have delivered to each Purchaser a certificate for the number of
Shares, and a Warrant to purchase the number of shares of Warrant Stock, next to such Purchaser's name on Exhibit A hereto. 

        5.9.    Financing Agreements.    The Financing Agreements and Warrants shall have been approved and executed by the
Company and such number of other parties thereto as is sufficient to make such agreements and Warrants binding on the Company and its stockholders. 

        5.10.    Compliance Certificate.    The President of the Company shall deliver to the Purchasers at the Closing a
certificate certifying that the conditions specified in Sections 5.1, 5.2, and 5.4 have been fulfilled. 

        5.11.    Stockholder Approval.    At a meeting duly called, the stockholders of the Company shall have (i) duly
approved the adoption of the Charter to establish the rights, preferences and privileges of the Series A Preferred Stock and (ii) duly approved the issuance of the Securities
transactions in satisfaction of Nasdaq Stock Market rules. 

        5.12.    Board of Directors.    The size of the Board of Directors of the Company shall have been increased to ten
effective upon the Closing, and the Purchasers shall have received definitive documentation which memorializes the appointment of the Investor Designees to the Company's Board of Directors effective
no later than the first day immediately following the Closing. 

        5.13.    Opinion of Counsel.    The Purchasers shall have received an opinion of Fenwick & West LLP, counsel to
the Company, in substantially the form of Exhibit F hereto. 

        5.14.    No Delisting of Common Stock.    The Common Stock (a) shall be designated for quotation or listed on
NASDAQ, and (b) shall not have been suspended by the Commission or NASDAQ from trading on
NASDAQ nor shall suspension by the Commission or NASDAQ have been threatened either (i) in writing by the Commission or NASDAQ, or (ii) by falling below the minimum listing maintenance
requirements of NASDAQ. 

15

  

        5.15.    Reservation of Common Stock.    Effective as of the Closing Date, the Company shall have reserved out of
its
authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Shares and Warrant Stock, 12,801,205 shares of Common Stock. 

        5.16    No Injunctions.    No temporary restraining order, preliminary or permanent injunction or other order or
decree, and no other legal restraint or prohibition shall exist which prevents or arguably prevents the consummation of the transactions contemplated by the Financing Agreements and the Warrants, nor
shall any proceeding have been commenced or threatened with respect to the foregoing. 

        5.17    No Material Adverse Effect.    Between the time of the execution of this Agreement and the Closing Date, there
shall have been no material adverse effect. For purposes of this Section 5.17, "material adverse effect" means any material adverse effect on the
business, properties, assets, operations, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, except to the extent that any such material
adverse effect is caused by any act or omission of a Purchaser or results from (i) changes in general economic conditions, (ii) changes affecting the industry generally in which the
Company operates (provided that such changes do not affect such entity in a substantially disproportionate manner), (iii) changes in the trading prices for the Common Stock, (iv) the
Company's failure to achieve the consensus estimates of analysts for the Company's financial results in the first quarter of 2002, (v) employee attrition of less than 15%, (vi) the
effect of the public announcement or pendency of the transactions contemplated by the Financing Agreements on the Company, (vii) the cancellation of customer orders comprising less than 25% of
projected revenues for the then current quarter, or (viii) acts of terrorism, natural disasters or similar events constituting a force majeure event. 

        5.18    Lockup Agreement.    H&QA, Vertex and Dr. Hong Chen shall have entered into the lockup agreement
described in Section 12 of the Voting Agreement and such executed lockup agreement shall be in full force and effect. 

 
 

ARTICLE 6
  CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING    
  

        The Company's obligation to issue, sell and deliver the Securities at the Closing is subject to the fulfillment at or prior to the Closing Date of the following
conditions, any of which may be waived in whole or in part by the Company at any time in its sole discretion by providing the Purchasers with written notice thereof. 

        6.1.    Representations and Warranties Correct.    The representations and warranties made by the Purchasers in
Article 4 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if
they had been made on or as of the same date. 

        6.2.    Payment of the Purchase Price.    The Purchasers shall have delivered to the Company the purchase price for
the Shares to be purchased thereby. 

        6.3.    Stockholder Approval.    At a meeting duly called, the stockholders of the Company shall have (i) duly
approved the adoption of the Charter to establish the rights, preferences and privileges of the Series A Preferred Stock and (ii) approved the issuance of the Securities in satisfaction
of Nasdaq Stock Market rules. 

16

  

 
 

ARTICLE 7
  COVENANTS    
  

        The parties hereby covenant and agree as follows: 

        7.1.    Confidentiality and Inventions Agreement.    The Company shall require each person employed by the Company
who, in the ordinary course of his or her employment, has access to the Company's confidential and proprietary information, to execute a Confidentiality and Inventions Agreement, as the same may be
revised from time to time on advice of Company's counsel. 

        7.2.    Stockholder and Board of Directors Matters.    The Board of Directors of the Company shall call for a meeting
of the stockholders of the Company for the purpose of approving the filing of the Charter and the issuance of the Securities and shall recommend that the stockholders approve the filing of the Charter
and the issuance of the Securities. The Company shall (i) increase the size of its Board of Directors from eight to ten effective no later than the Closing and shall (ii) appoint to the
Company's Board of Directors two individuals designated by H&QA and one individual designated by Vertex (the "Investor Designees") as Directors of the
Corporation. 

        7.3    Obligations.    Each party shall timely satisfy each of the conditions to be satisfied by it as provided in
Sections 5 and 6 of this Agreement. 

        7.4    Form D and Blue Sky.    The Company agrees to file timely a Form D with the SEC with respect to
the Securities as required under Regulation D and to provide a copy thereof to each Purchaser promptly after such filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the
Purchasers on or prior to the Closing Date. The Company shall make all timely filings and reports relating to the offer and sale of the Securities required under applicable securities or "Blue Sky"
laws of the states of the United States following the Closing Date. 

        7.5    Reporting Status.    With a view to making available to the Purchasers the benefits of Rule 144
promulgated under the Securities Act or any similar rule or regulation of the Commission that may at any time permit the Purchasers to sell securities of the Company to the public without registration
("Rule 144"), the Company shall: (1) make and keep public information available, as those terms are understood and defined in
Rule 144; (2) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (3) furnish to
each Purchaser, so long as such Purchaser owns Common Stock issued upon conversion of the Shares or the Warrant Stock, promptly upon request, (A) a written statement by the Company, if true,
that it has complied with the applicable reporting requirements of Rule 144, the Securities Act and the Exchange Act, (B) a copy of the most recent annual or quarterly report of the
Company and copies of such other reports and documents so filed by the Company, (C) the information required by Rule 144A(d)(4) (or any successor rule) under the Securities Act, and
(D) such other information as may be reasonably requested to permit the Purchasers to sell such securities pursuant to Rule 144 without registration. 

        7.6    Reservation of Shares.    The Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than one hundred percent (100%) of the number of shares of Common Stock needed to provide for the issuance of the Conversion Shares upon conversion of all
of the Shares and the Warrant Stock without regard to any limitations on conversions or exercise. 

        7.7    Listing.    The Company shall promptly secure the listing of all of the Common Stock issuable upon conversion
of the Shares and the Warrant Stock upon each national securities exchange and 

17

 

automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all of the shares of Common Stock issuable from time to time under the terms of the Financing Agreements. So long as any Securities are outstanding, the Company shall
maintain the Common Stock's authorization for quotation or listing on the NASDAQ. The Company shall pay all fees and expenses in connection with satisfying its obligations under this
Section 7.7. 

        7.8    Pledge of Securities.    The Company acknowledges and agrees that the Securities may be pledged in compliance
with applicable securities laws by a Purchaser in connection with a bona fide margin agreement or other loan secured by the Securities. The pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Purchaser effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the
Company pursuant to this Agreement or any other Financing Agreement; provided that in order to make any sale, transfer or assignment of Securities, such Purchaser and its pledgee must make such
disposition in accordance with or pursuant to a registration statement or an exemption under the Securities Act. The Company hereby agrees to execute and deliver such reasonable documentation as a
pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by a Purchaser. 

        7.9    Transfer Agent Matters.    The Company and the Purchasers shall agree, prior to Closing, on a form of letter of
instruction to be delivered to the Company's transfer agent regarding the issuance of the
Securities. The Company shall, promptly after the Closing, deliver to the transfer agent an executed copy of such letter authorizing the transfer agent to issue, pursuant to the instructions in the
letter, the Securities. 

        7.10    Certain Tax Matters.    The Purchasers and the Company shall, prior to the Closing, agree in writing on how to
allocate the aggregate purchase price hereunder among the Shares and the Warrants. 

 
 

ARTICLE 8
  MISCELLANEOUS    
  

        8.1.    Waivers and Amendments.    Neither this Agreement nor any term hereof may be amended except by a written
instrument signed by all parties hereto. This Agreement may not be waived except by an instrument in writing executed by the party entitled to the benefits thereby waived. No waiver of any term,
provision or condition of this Agreement, in any one or more instances, shall be deemed to be, or construed to be, a further or continuing waiver of any such term, provision or condition, or as a
waiver of any other term, provision or condition of this Agreement. 

        8.2.    Governing Law.    This Agreement shall be governed in all respects by the laws of the State of California as
such laws are applied to agreements between California residents entered into and to be performed entirely within California. Each party hereto irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the Northern District of California for the adjudication of any dispute hereunder. 

        8.3.    Survival.    The representations, warranties, covenants and agreements made herein shall survive any
investigation made by the Purchasers and the closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto or in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder as of the date of such
certificate or instrument. 

        8.4.    Successors and Assigns.    Except as otherwise expressly provided herein, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 

18

 

        8.5.    Entire Agreement.    This Agreement (i) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and supercedes all prior understandings and agreements relating to the subjects hereof, whether written or oral between the parties hereof and
(ii) terminates any and all rights the parties may have had that arose under or in connection with all prior understanding and agreements, including in each case all prior term sheets between
the Company and any or all of the Purchasers. 

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

        8.7.    Finder's Fees.    The Company represents and warrants that it has retained no finder or broker in connection
with the transactions contemplated by this Agreement and hereby agrees to indemnify and to hold the Purchasers harmless of and from any liability for commissions or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which the Company, or any of its employees or
representatives, is responsible. Each Purchaser represents and warrants that it has retained no finder or broker in connection with the transactions contemplated by this Agreement and hereby agrees to
indemnify and to hold the Company harmless of and from any liability for any commission or compensation in the nature of a finder's fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which the Purchaser, or any of its employees or representatives, is responsible. 

        8.8.    Legends.    Each certificate representing the Shares and the Conversion Stock shall be endorsed with a legend
referencing such restrictions of such rules and regulations of the Securities and Exchange Commission and such contractual restrictions as the Company deems appropriate and a legend in substantially
the following form: 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR RULE UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. 

Each
certificate representing the Shares and the Conversion Stock shall also bear any legend required by any applicable state or foreign securities laws. The Company need not register a transfer of
Shares or Conversion Stock unless the conditions specified in the foregoing legends are satisfied. The Company may also instruct its transfer agent not to register the transfer of any of the Shares or
Conversion Stock unless the conditions specified in the foregoing legend is satisfied. 

        8.9.    Removal of Legends and Transfer Restrictions.    The legend relating to the Securities Act endorsed on a stock
certificate pursuant to Section 8.8 of this Agreement and the stop transfer instructions with respect to the Shares and the Conversion Stock represented by such certificate shall be removed and
the Company shall issue a certificate without such legend to the holder of such Shares or Conversion Stock if such Shares or Conversion Stock are registered under the Securities Act and a prospectus
meeting the requirements of Section 10 of the Securities Act is available or if such holder provides to the Company an opinion of counsel reasonably satisfactory to the Company to the effect
that a public sale, transfer or assignment may be made without registration or if the Shares or the Conversion Stock may be sold pursuant to Rule 144(k) of the Securities Act. 

19

 

        8.10.    Titles, Subtitles and Materiality.    The titles of the Charter, Sections and subsections of this Agreement
are for convenience of reference only and are not to be considered in construing this Agreement. For purposes of this Agreement "material" shall mean or refer to an amount of liability or an
obligation exceeding $50,000 (annually, if appropriate) or having a material adverse effect on the Company's intellectual property rights or its business or operations. 

        8.11.    Counterparts.    This Agreement may be executed in counterparts, each of which shall be an original, but all
of which together shall constitute one instrument. 

        8.12.    Delays or Omissions.    It is agreed that no delay or omission to exercise any right, power or remedy
accruing to the Purchasers, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or
default therefore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by the Purchasers of any breach or default under this Agreement,
or any waiver by the Purchasers of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies,
either under this Agreement, or by law or otherwise afforded to the Purchasers, shall be cumulative and not alternative. 

        8.13    Expenses.    (a)    Except as set forth below in this paragraph and in subsections 8.13(b) and
8.13(c), each party will bear its respective costs, fees and expenses (including legal and auditors' fees) incurred in connection with the Financing Agreements and the transactions contemplated hereby
and thereby, provided that the Company will pay the first $60,000 of such reasonable expenses incurred by H&QA and the first $40,000 of such reasonable expenses incurred by Vertex in connection with
the Financing Agreements and the transactions contemplated hereby and thereby. 

        (b)  If
the conditions set forth in Section 5.11 (Stockholder Approval) are not satisfied before June 30, 2002, then each of H&QA and Vertex shall have the
right to elect to have the payment by the Company of their reasonable costs, fees and expenses (pursuant to the proviso of Section 8.13(a)) satisfied in full by the issuance to each of them of
a warrant to purchase 50,000 shares of Common Stock of the Company at the Price Per Share. 

        (c)  In
the event that any action, suit or other proceeding is instituted concerning or arising out of the Financing Agreements or the transactions contemplated hereby and
thereby, the prevailing party shall recover all of such party's reasonable costs, fees and expenses (including legal fees) incurred in each such action, suit or other proceeding, including any and all
appeals or petitions therefrom. 

        8.14.    Notices.    Any notice, instruction, or communication required or permitted to be given under this Agreement
to any party shall be in writing (which may include telex, telegram, telecopier, or other similar form of reproduction followed by a mailed hard copy) and shall be deemed given when actually received
or, if earlier, five days after deposit in the United States Mail by certified or express mail, return receipt requested, postage prepaid, (or for foreign addresses by Federal Express, DHL or other
comparable delivery service) addressed to the principal office of such party or to such other address as such party may request by written notice. Each party shall make an ordinary, good faith effort
to ensure that the person to be given notice actually receives such notice. The address of the Purchasers shall be as set forth at Exhibit A  hereto or at such other address as the Purchasers shall
have furnished to the Company in writing; or if to any other holder of any Shares, at such address as such holder shall
have furnished the Company in writing or, until any such holder so furnishes an address to the Company, at the address of the last holder of such Shares who has so furnished an 

20

 

address to the Company. Notice of change of address shall be given in accordance herewith. For ease of reference, a current business address for the Company is as follows: 

	 	To Company:	 	GRIC Communications, Inc.

1421 McCarthy Boulevard

Milpitas, CA 95035

Attn.: General Counsel

Tel: (408) 955-1920

Fax: (408) 435-8687
	

A copy of any notice to the Company shall be given to:
	

 	
 	

Fenwick & West LLP

Two Palo Alto Square

Palo Alto, CA 94036

Attn.: David W. Healy

Tel: (650) 858-7266

Fax: (650) 494-1417
	 	

To Vertex:	
 	

Vertex Technology Fund (II) Ltd

Vertex Technology Fund (III) Ltd.

77 Science Park Drive

#02-15 Cintech III

Singapore Science Park

Singapore 118256

Attention: Kheng Nam Lee, President

Tel: 011-65-777-0122

Fax: 011-65-777-1878 or 011-65-773-2628
	

 	
 	

and
	

 	
 	

Vertex Management, Inc.

Three Lagoon Drive, Suite 220

Redwood City, CA 94065

Attention: Hock Chuan Tam, Senior Vice President

Tel: (650) 591-9300

Fax: (650) 591-5926
	

A copy of any notice to Vertex shall be given to:	
 	

 
	

 	
 	

Carr & Ferrell LLP

2225 E. Bayshore Road, Suite 200

Palo Alto, CA 94303

Attn: Barry Carr, Esq.

Fax: (650) 812-3444
	 	

To H&QA:	
 	

Asia Pacific Growth Fund III, L.P.

156 University Avenue

Palo Alto, California 94301

Attn: Ms. Shawn M. Soderberg

Fax: (650) 838-0801  

21

 

	

A copy of any notice to H&QA shall be given to:	
 	

 
	

 	
 	

O'Melveny & Myers LLP

Embarcadero Center West

275 Battery Street, Suite 2600

San Franciso, CA 94111

Attn: Peter T. Healy, Esq.

Fax: (415) 984-8701

22

        IN WITNESS WHEREOF, the parties have executed and delivered or caused this Series A Preferred Stock and Warrant Purchase Agreement
to be duly executed and delivered by their proper and duly authorized officers as of the day and year first written above. 

"COMPANY"  

GRIC Communications, Inc.  

	

By:	
 	

/s/  DR. HONG CHEN      
	
 	

 	
 	

 
	

Printed Name: Dr. Hong Chen	
 	

 	
 	

 
	

Title: Chief Executive Officer	
 	

 	
 	

 

"PURCHASERS"  

Asia Pacific Growth Fund III, L.P.  

	

By:	
 	

/s/  DR. TA-LIN HSU      
	
 	

 	
 	

 
	

Printed Name: Dr. Ta-Lin Hsu	
 	

 	
 	

 
	

Title:	
 	

 	
 	

 
	
Vertex Technology Fund (II) Ltd.	
 	

Vertex Technology Fund (III) Ltd.
	

By:	
 	

/s/  KHENG NAM LEE      
	
 	

By:	
 	

/s/  KHENG NAM LEE      

	

Printed Name: Kheng Nam Lee	
 	

Printed Name: Kheng Nam Lee
	

Title: Director	
 	

Title: Director

[Signature page to Series A Preferred Stock and Warrant Purchase Agreement]

 
 

List of Exhibits    
  

	Exhibit A	 	Schedule of Investors
	Exhibit B	 	Form of Investors' Rights Agreement
	Exhibit C	 	Form of Stockholder Agreement
	Exhibit D	 	Form of Certificate of Amendment of Second Amended and Restated Certificate of Incorporation
	Exhibit E	 	Form of Warrants
	Exhibit F	 	Form of Legal Opinion of Fenwick & West LLP

 
 

Exhibit A
  Schedule of Investors    
  

	Purchasers and Address
	 	Purchase Price

($)
	 	Shares
	 	# Shares of

Warrant Stock
	 
	Asia Pacific Growth Fund III, L.P. 	 	$	10,000,000	 	6,024,096	 	1,506,024	 
	(a Cayman entity)

156 University Avenue

Palo Alto, California 94301	 	 	 	 	 	 	 	 
	
 Vertex Technology Fund (II) Ltd. 	
 	
$	

2,500,000	
 	

1,506,024	
*	

376,506	
**
	(a Singapore limited liability company)

Three Lagoon Drive, Suite 220

Redwood City, California 94065	 	 	 	 	 	 	 	 
	
 Vertex Technology Fund (III) Ltd. 	
 	
$	

2,500,000	
 	

1,506,024	
*	

376,506	
**
	(a Singapore limited liability company)

Three Lagoon Drive, Suite 220

Redwood City, California 94065	 	 	 	 	 	 	 	 

	*
	These
Purchasers have the right to elect to purchase up to an aggregate of 2,108,433 Shares each.

	**
	If
this Purchaser elects to purchase more than the 1,506,024 Shares set forth above, then the number of shares of Warrant Stock subject to this electing Purchaser's Warrant shall be
the product of the number of shares purchased multiplied by .25 (rounded down to the nearest whole share) up to a maximum of 527,108 shares of Warrant Stock each. 

  

 
 

Exhibit B
  
    INVESTORS' RIGHTS AGREEMENT    
  

        This Investors' Rights Agreement (the "Agreement") is entered into as
of                        , 2002 (the
"Effective Date") by and among GRIC Communications, Inc., a Delaware corporation (the "Company"),
Asia Pacific Growth Fund III, L.P., a Cayman entity ("Asia Pacific"), Vertex Technology Fund (II) Ltd. and Vertex Technology Fund
(III) Ltd. (the later two being entities formed under the laws of Singapore and collectively referred to as "Vertex"). Hereinafter, Asia Pacific
and Vertex will be collectively referred to as the "Investors". 

RECITALS  

        A.    The Investors have agreed to purchase from the Company, and the Company has agreed to sell to the Investors, shares of the
Company's Series A Preferred Stock (the "Series A Preferred Stock") and warrants to purchase shares of the Company's Series A
Preferred Stock (the "Warrants") on the terms and conditions set forth in that certain Series A Preferred Stock and Warrant Purchase Agreement,
dated as of January 30, 2002, by and among the Company and the Investors, as amended from time to time (the "Series A Agreement"). 

        B.    The Series A Agreement provides that the Investors shall be granted certain information, registration and
participation rights, all as more fully set forth herein. 

        NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as
follows: 

        1.    INFORMATION RIGHTS.    

                1.1    SEC Filings.    The Company covenants and agrees that, commencing on the Effective Date, for so long as any
Investor holds shares of Series A Preferred Stock issued under the Series A Agreement or issued pursuant to the exercise of any Warrants issued under the Series A Agreement, the
Company will timely file all reports required under the Exchange Act of 1934, as amended. 

                1.2    Monthly and Budget Financial Information.    The Company covenants and agrees that, commencing on the
Effective Date, for so long as an Investor holds at least twenty-five percent (25%) of the shares of Series A Preferred Stock issued on the Effective Date to the Investor under the
Series A Agreement, the Company will: 

                        (a)    Monthly Reports.    Upon request by an Investor, furnish to such Investor monthly unaudited financial
statements (except for the last month of the Company's fiscal year), including an unaudited Balance Sheet, an unaudited Statement of Operations and an unaudited Statement of Cash Flows; and 

                        (b)    Annual Budget and Operating Plan.    Furnish to such Investor as soon as practicable and in any event no later
than thirty (30) days after the close of each fiscal year of the Company, an annual operating plan and budget, prepared on a monthly basis, for the next immediate fiscal year. The Company shall
also furnish to such Investor, within a reasonable time of its preparation, amendments to the annual budget, if any. 

                1.3    Confidentiality; Non-public Information.    Each Investor agrees to hold all information received
pursuant to this Section 1 in confidence, and not to use or disclose any of such information to any third party, except to the extent such information may be made publicly available by the
Company. Each Investor agrees that it will not trade the Company's securities if it has non-public Company information that could be material. 

1

 

                1.4    Inspection Rights.    The Company shall permit each Investor holding at least twenty-five percent
(25%) of the shares of Series A Preferred Stock issued on the Effective Date to the Investor under the Series A Agreement, at such Investor's request and expense, to visit and inspect
the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by
such Investor. 

        2.    REGISTRATION RIGHTS.    

                2.1    Definitions.    For purposes of this Section 2 

                        (a)    Registration.    The terms "register,"
"registration" and "registered" refer to a registration effected by preparing and filing a registration
statement in compliance with the U.S. Securities Act of 1933, as amended (the "Securities Act"), and the declaration or ordering of effectiveness of the
S-3 Registration Statement. 

                        (b)    Registrable Securities.    The term "Registrable Securities"
means: 

        (1)  all
the shares of Common Stock of the Company issued or issuable upon the conversion of any shares of Series A Preferred Stock that were purchased by any Investor
under the Series A Agreement or may hereafter be acquired by any Investor or any Investor's permitted successors and assigns upon exercise of any of the Warrants; and 

        (2)  any
shares of Common Stock of the Company issued (or issuable upon the conversion or exercise of any warrant, right or other security which is issued) as a dividend or
other distribution with respect to, or in exchange for or in replacement of, all such shares of Common Stock described in clause (1) of this subsection 2.1(b);  excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which rights under this Section 2 are not
assigned in accordance with this Agreement or any Registrable Securities sold to the public or sold pursuant to Rule 144 promulgated under the Securities Act. 

                        (c)    Registrable Securities Then Outstanding.    The number of shares of "Registrable
Securities then outstanding" shall mean the number of shares of Common Stock which are Registrable Securities that are then (1) issued and outstanding or
(2) issuable pursuant to the exercise of the Warrants and conversion of the Preferred Stock issued thereunder or issuable upon conversion of other then outstanding Preferred Stock. 

                        (d)    Holder.    The term "Holder" means any person owning of record
Registrable Securities or any assignee of record of such Registrable Securities to whom rights set forth herein have been duly assigned in accordance with this Agreement;  provided, however, that for
purposes of this Agreement, a record holder of shares of Series A Preferred Stock convertible into such Registrable
Securities shall be deemed to be the Holder of such Registrable Securities; and provided further, that the Company shall in no event be obligated to
register shares of Series A Preferred Stock, and that Holders of Registrable Securities will not be required to convert their shares of Series A Preferred Stock into Common Stock in
order to exercise the registration rights granted hereunder, until immediately before the closing of the offering to which the registration relates. 

                        (e)    Form S-3.    The term
"Form S-3" means such form under the Securities Act as is in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. 

                        (f)    SEC.    The term "SEC" means the U.S. Securities and Exchange
Commission. 

2

 

                        (g)    The S-3 Registration Statement.    The term "S-3 Registration
Statement" means a registration statement on Form S-3 described in Section 2.2 hereof. 

                2.2    Form S-3 Registration.    Within thirty (30) days of the Effective Date, the Company
shall file with the SEC a registration statement on Form S-3 and any related qualification or compliance with respect to all of the Registrable Securities then outstanding or
thereafter issued upon conversion of Series A Preferred Stock issued upon exercise of the Warrants; provided, however, that the Company shall not
be obligated to effect such registration, qualification or compliance pursuant to this Section 2.2 in any particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such registration, qualification or compliance. The Company shall use best efforts to have the S-3 Registration
Statement declared effective by the SEC within one hundred twenty (120) days of the Effective Date and shall leave such Registration Statement in effect until the second anniversary of the
Effective Date, by which time the Company shall use best efforts to have a second S-3 Registration Statement declared effective by the SEC and shall leave such S-3 Registration
Statement in effect until the fourth anniversary of the Effective Date. The Company's obligations to keep any S-3 Registration Statement effective shall cease as to any shares that become
saleable under Rule 144(k) promulgated under the Securities Act. If for any reason either registration statement is suspended, the Company shall use best efforts to cause such registration
statement to become effective again at the earliest possible date following the request of either of the Investors. 

        In
the event the that the S-3 Registration Statement is not declared effective by the SEC within one hundred twenty (120) days of the Effective Date, as relief for the
damages to the Holders by reason of any such delay in or reduction of their ability to sell any of their Registrable Securities (which remedy shall not be exclusive of any other remedies available at
law and in equity), the Company shall pay to the Holders on a pro rata basis relative to the number of Registrable Securities held by each Holder an aggregate amount in cash equal to fifty thousand
dollars ($50,000) and an additional fifty thousand dollars ($50,000) for each of the following full months that elapse thereafter during which the S-3 Registration Statement declared is
not declared effective by the SEC, provided that in no event shall all such payments pursuant to this paragraph exceed two hundred fifty thousand dollars ($250,000). Such payment shall be paid on the
last day of the calendar month after which such payment is incurred. 

        The
Company shall pay all expenses incurred in connection with the registrations required pursuant to this Section 2.2, including without limitation all filing, registration and
qualification, printers' and accounting fees and the reasonable fees and disbursements of one (1) counsel for each Asia Pacific, Vertex and any other selling Holders (not to exceed $15,000),
which may be counsel for the Company, and counsel for the Company (but excluding underwriters' discounts and commissions). Each Holder participating in the registration pursuant to this
Section 2.2 shall bear such Holder's proportionate share (based on the number of shares sold by such Holder over the total number of shares included in such
registration at the time it goes effective) of all discounts, commissions or other amounts payable to underwriters or brokers in connection with such offering. 

                2.3    Obligations of the Company.    Whenever required to effect the registration of any Registrable Securities
under this Agreement, the Company shall, as expeditiously as reasonably possible: 

                      (a)    Prepare
and file with the SEC such amendments and supplements to the S-3 Registration Statement and the prospectus used in connection with the
S-3 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 S-3
Registration Statement. 

                      (b)    Furnish
to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other 

3

 

documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration. 

                      (c)    Use
reasonable efforts to register and qualify the securities covered by the S-3 Registration Statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states or jurisdictions. 

                      (d)    In
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form,
with the managing underwriter(s) of such offering. Each Holder participating in such underwriting hereby agrees to also enter into and perform its obligations under such an agreement. 

                      (e)    Notwithstanding
any other provision of this Agreement, from and after the time the S-3 Registration Statement is declared effective, the
Company shall have the right to suspend the S-3 Registration Statement and the related prospectus in order to prevent premature disclosure of any material non-public
information related to corporate developments by delivering notice of such suspension to the Holders; provided, however, that the Company may exercise
the right to such suspension only twice in each calendar year for an aggregate of ninety (90) days in each calendar year. From and after the date of a notice of suspension under this
Section 2.3(e), each Holder agrees not to use the S-3 Registration Statement or the related prospectus for resale of any Registrable Security until the notice from the Company that
such suspension has been lifted. 

                2.4    Furnish Information.    It shall be a condition precedent to the obligations of the Company to take any action
pursuant to Section 2.2 hereof that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely effect the registration of their Registrable Securities. 

                2.5    Delay of Registration.    No Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2. 

        2.6    Indemnification.    

                        (a)    By the Company.    To the extent permitted by law, the Company will indemnify and hold harmless each Holder,
the partners, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Securities Exchange Act of 1934, as amended, (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, the "Violations" and,
individually, a "Violation"): 

        (1)  any
untrue statement or alleged untrue statement of a material fact contained in the S-3 Registration Statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto; or 

        (2)  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 

        (3)  any
violation or alleged violation by the Company of the Securities Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated 

4

 

under the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by the S-3 Registration Statement. 

        The
Company will reimburse each such Holder, partner, officer or director, underwriter or controlling person for any legal or other expenses reasonably incurred by them, within one
(1) month after a request for reimbursement has been received by the Company, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 2.60 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 Company (which consent shall not be unreasonably
withheld), nor shall the Company 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 Violation which occurs in
reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person
of such Holder. 

                        (b)    By Selling Holders.    To the extent permitted by law, each selling Holder will severally, but not jointly,
indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the S-3 Registration Statement, each person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter and any other Holder selling securities under the S-3 Registration Statement or any of such other Holder's partners, directors or
officers or any person 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 the Company
or any such director, officer, controlling person, underwriter or other such Holder, partner or director, officer or controlling person of such other Holder 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 of subsections
2.6(a)(1) and 2.6(a)(2) above, 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 with
respect to the Holder (and none other) for use in connection with such registration. Each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action within three months after a request for reimbursement has been received by the indemnifying Holder; provided,
however, that the indemnity agreement contained in this subsection 2.60 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, which consent shall not be unreasonably withheld; and provided further, that the total
amounts payable in indemnity by a Holder under this subsection 2.60 in respect of any Violation shall not exceed the net proceeds received by such Holder in the registered offering out of which such
Violation arises. 

                        (c)    Notice.    Promptly after receipt by an indemnified party under this Section 2.6 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.6,
deliver to the indemnifying party a written notice of the commencement thereof. The indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to 

5

 

its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.6, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.6. 

                        (d)    Defect Eliminated in Final Prospectus.    The foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the
S-3 Registration Statement becomes effective or the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any person if a copy of the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. 

                        (e)    Contribution.    If the indemnification provided for in this Section 2.6 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
the indemnified party, shall contribute to the amount paid or payable by such indemnified party with respect to such loss, liability, claim, damage or expense in the proportion that is appropriate to
reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions that 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 the indemnified party shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of material fact or the 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. In any such case, (A) no such Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to the S-3 Registration Statement; and (B) no person or entity guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent
misrepresentation. 

                        (f)    Survival.    The obligations of the Company and Holders under this Section 2.6 shall survive the
completion of any offering of Registrable Securities in the S-3 Registration Statement, and otherwise. 

6

   
        3.    PARTICIPATION RIGHTS.    

                3.1    General.    Each Holder (as defined in subsection (d) hereof) and any party to whom such Holder's
rights under this Section 3 have been duly assigned in accordance with subsection 0 hereof (each such Holder or assignee being hereinafter referred to as a "Rights
Holder") has the right to purchase such Rights Holder's Pro Rata Share (as defined below), of all (or any part) of any "New Securities" (as defined in Section 3.2
hereof) that the Company may from time to time issue after the Effective Date, provided, however, such Rights Holder shall have no right to purchase any
such New Securities if such Rights Holder cannot demonstrate to the Company's reasonable satisfaction that such Rights Holder is at the time of the proposed issuance of such New Securities an
"accredited investor" as such term is defined in Regulation D under the Securities Act. A Rights Holder's "Pro Rata Share" for purposes of this
participation right is the ratio of (a) the number of Registrable Securities as to which such Rights Holder is the Holder (and/or is deemed to be the Holder under subsection (d) hereof),
to (b) a number of shares of Common Stock of the Company equal to the sum of (1) the total number of shares of Common Stock of the Company then outstanding plus (2) the total
number of shares of Common Stock of the Company into which all then outstanding shares of Preferred Stock of the Company are then convertible plus (3) the total number of shares of Common Stock
of the Company subject to then outstanding options and warrants (including options and warrants exercisable for securities which are ultimately convertible into Common Stock). 

                3.2    New Securities.    "New Securities" shall mean any Common
Stock or Preferred Stock of the Company, whether now authorized or not, and rights, options or warrants to purchase such Common Stock or Preferred Stock, and securities of any type whatsoever that
are, or may become, convertible or exchangeable into such Common Stock or Preferred Stock; provided, however, that the term "New Securities" does not include: 

        (a)  shares
of Common Stock issued or issuable upon conversion of the outstanding shares of Preferred Stock; 

        (b)  any
shares of Common Stock (or options, warrants or rights therefor) granted or issued hereafter to employees, officers, directors, contractors, consultants or advisers
to, the Company or any Subsidiary pursuant to incentive agreements, stock purchase or stock option plans, stock bonuses or awards, warrants, contracts or other arrangements that are approved by a
majority of the Board of Directors; 

        (c)  shares
of Common Stock or Preferred Stock issued pursuant to the acquisition of another corporation or entity by the Company by consolidation, merger, purchase of all or
substantially all of the assets, or other reorganization in which the Company acquires, in a single transaction or series of related transactions, all or substantially all of the assets of such other
corporation or entity or fifty percent (50%) or more of the voting power of such other corporation or entity or fifty percent (50%) or more of the equity ownership of such other entity; provided that
such transaction or series of transactions has been approved by the Company's Board of Directors or pursuant to the purchase of less than a fifty percent (50%) equity ownership in connection with a
joint venture or other strategic arrangement or other commercial relationship, provided such an arrangement is approved by the Board of Directors; 

        (d)  any
shares of Series A Preferred Stock issued under the Series A Agreement, as such agreement may be amended; 

        (e)  shares
of Common Stock or Preferred Stock issuable upon exercise of any options, warrants or rights to purchase any securities of the Company outstanding as of the
Effective Date and any securities issuable upon the conversion thereof; and 

        (f)    shares
of the Company's Common Stock or Preferred Stock issued in connection with any stock split or stock dividend or recapitalization. 

7

 

                3.3    Procedures.    In the event that the Company proposes to undertake an issuance of New Securities, it shall
give to each Rights Holder a written notice of its intention to issue New Securities (the "Notice"), describing the type of New Securities and the price
and the general terms upon which the Company proposes to issue such New Securities given in accordance with Section 5(a) hereof. Each Rights Holder shall have thirty (30) days from the
date such Notice is effective, as determined pursuant to Section 5.1 hereof based upon the manner or method of notice, to agree in writing to purchase such Rights Holder's Pro Rata Share of
such New Securities for the price and upon the general terms specified in the Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to
exceed such Rights Holder's Pro Rata Share). If any Rights Holder fails to so agree in writing within such thirty (30) day period to purchase such Rights Holder's full Pro Rata Share of an
offering of New Securities (a "Nonpurchasing Holder"), then such Nonpurchasing Holder shall forfeit the right hereunder to purchase that part of his Pro
Rata Share of such New Securities that he, she or it did not so agree to purchase and the Company shall promptly give each Rights Holder who has timely agreed to purchase his full Pro Rata Share of
such offering of New Securities (a "Purchasing Holder") written notice of the failure of any Nonpurchasing Holder to purchase such Nonpurchasing Rights
Holder's full Pro Rata Share of such offering of New Securities (the "Overallotment Notice"). Each Purchasing Holder shall have a right of overallotment
such that such Purchasing Holder may agree to purchase a portion of the Nonpurchasing Holders' unpurchased Pro Rata Shares of such offering on a pro rata basis according to the relative Pro Rata
Shares of the Purchasing Rights Holders, at any time within ten (10) days after receiving the Overallotment Notice. 

                3.4    Failure to Exercise.    In the event that any Rights Holder fails to exercise in full the participation right
within such thirty (30) plus ten (10) day period, then the Company shall have ninety (90) days thereafter to sell the New Securities with respect to which such Rights Holder's
rights of first refusal hereunder were not exercised, at a price and upon general terms not materially more favorable to the purchasers thereof than specified in the Company's Notice to the Rights
Holders. In the event that the Company has not issued and sold the New Securities within such ninety (90) day period, then the Company shall not thereafter issue or sell any New Securities
without again first offering such New Securities to the Rights Holders pursuant to this Section 3. 

                3.5    Termination.    This participation right shall terminate upon (1) any reorganization, consolidation,
merger or similar transaction or series of related transactions (each, a "combination transaction") in which the Company is a constituent corporation or
is a party if, as a result of such combination transaction, the voting securities of the Company that are outstanding immediately prior to the consummation of such combination transaction
(other than any such securities that are held by an "Acquiring Stockholder", as defined below) do not represent, or are not converted into, securities
of the surviving corporation of such combination transaction (or such surviving corporation's parent corporation if the surviving corporation is owned by the parent corporation) that, immediately
after the consummation of such combination transaction, together possess at least a majority of the total voting power of all securities of such surviving corporation (or its parent corporation, if
applicable) that are outstanding immediately after the consummation of such combination transaction, including securities of such surviving corporation (or its parent corporation, if applicable) that
are held by the Acquiring Stockholder; or (2) a sale of all or substantially all of the assets of the Company, that is followed by the distribution of the proceeds to the Company's stockholders
or (3) as to each Rights Holder, when all shares of Series A Preferred Stock and Series A Preferred Stock issued upon exercise of the Warrants have been converted and exercised,
respectively, into Common Stock. For purposes of this Section 3.5, an "Acquiring Stockholder" means a stockholder or stockholders of the Company
that (1) merges or combines with the Company in such combination transaction or (2) owns or controls a majority of another corporation that merges or combines with the Company in such
combination transaction. 

8

 

        4.    ASSIGNMENT AND AMENDMENT.    

                4.1    Assignment.    Notwithstanding anything herein to the contrary: 

                        (a)    Information Rights.    The rights of an Investor under Section 1 hereof may be assigned only to an
affiliate of an Investor or another party who acquires from an Investor (or an Investor's permitted assigns) at least that minimum number of shares of Series A Preferred Stock described in
Section 1.2 hereof. 

                        (b)    Registration Rights; Participation Rights.    The registration rights of a Holder under Section 2
hereof and the participation right of a Rights Holder under Section 3 hereof may be assigned only to an affiliate of an Investor or another party who acquires at least twenty-five
percent (25%) of the shares of Series A Preferred Stock issued under the Series A Agreement to such Holder, or thirty-five percent (35%) of the shares issued pursuant to the
exercise of any Warrants issued under the Series A Agreement, and/or the equivalent number (on an as-converted basis) of shares of Common Stock; provided,
however that no party may be assigned any of the foregoing rights unless the Company is given written notice by the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; provided further  that any such assignee of such rights is not deemed
by the Board of Directors of the Company, in its reasonable judgment, to be a competitor of the Company; and  provided further that any such assignee shall receive such assigned rights subject to all the
terms and conditions of this Agreement, including without
limitation the provisions of this Section 4. 

                4.2    Amendment and Waiver of Rights.    Any provision of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company, Asia Pacific, Vertex and the Investors (and/or any
of their permitted successors or assigns) holding shares of Series A Preferred Stock and/or shares of Common Stock issued upon conversion thereof representing and/or convertible into a majority
of all the Investors' Shares (as defined below). As used herein, the term "Investors' Shares" shall mean the shares of Common Stock then issuable upon
conversion of all then outstanding shares of Series A Preferred Stock issued under the Series A Agreement and, in the event any of the Warrants has been exercised, all shares of Common
Stock issuable upon conversion of Series A Preferred Stock issued upon exercise of such Warrants. Any amendment or waiver effected in accordance with this Section 4.2 shall be binding
upon each Investor, each Holder, each permitted successor or assignee of such Investor or Holder and the Company. 

        5.    GENERAL PROVISIONS.    

                5.1    Notices.    Any notice, request or other communication required or permitted hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered or if deposited in the U.S. mail by registered or certified mail, return receipt requested, postage prepaid, as follows: 

        (a)  if
to the Company, at: 

GRIC
Communications, Inc.

1421 McCarthy Boulevard

Milpitas, California 95035

Attention: David Teichmann, Esq.

Telephone: (408) 965-1309

Facsimile: (408) 435-8687 

9

 

        with
a copy to: 

Fenwick &
West LLP

Two Palo Alto Square

Palo Alto, CA 94306

Attention: David Healy, Esq.

Telephone: (650) 494-0600

Facsimile: (650) 494-1417 

        (b)  if
to Asia Pacific, at 

Asia
Pacific Growth Fund III, L.P.

156 University Avenue Palo Alto, CA 94301

Attention: Mark Hsu

Telephone: (650) 838-8088

Facsimile: (650) 838-0801 

        with
a copy to: 

O'Melveny &
Myers LLP

Embarcadero Center West

275 Battery Street

San Francisco, CA 94111-3305

Attention: Peter Healy, Esq.

Telephone: (415) 984-8833

Facsimile: (415) 984-8701 

        (c)  if
to Vertex, at: 

Vertex
Technology Fund (II) Ltd

Vertex Technology Fund (III) Ltd.

77 Science Park Drive

#02-15 Cintech III

Singapore Science Park

Singapore 118256

Attention: Kheng Nam Lee, President

Telephone: 011-65-777-0122

Facsimile: 011-65-777-1878 or 011-65-773-2628 

and

Vertex
Management, Inc.

Three Lagoon Drive, Suite 220

Redwood City, CA 94065

Attention: Hock Chuan Tam, Senior Vice President

Telephone: (650) 591-9300

Facsimile: (650) 591-5926 

with
a copy to: 

Carr &
Ferrell LLP

2225 E. Bayshore Road, Suite 200

Palo Alto, CA 94303

Attention: Barry Carr, Esq.

Telephone: (650) 812-3400

Facsimile: (650) 812-3444 

10

 

Any
party hereto (and such party's permitted successors, assigns or transferees) may by notice so given provide and change its address for future notices hereunder. Notice shall conclusively be deemed
to have been given when personally delivered or when deposited in the mail in the manner set forth above. 

                5.2    Entire Agreement.    This Agreement and the documents referred to herein constitute the entire agreement and
understanding of the parties with respect to the subject matter of this Agreement, and supersede any and all prior understandings and agreements, whether oral or written, between or among the parties
hereto with respect to the specific subject matter hereof. 

                5.3    Governing Law.    This Agreement shall be governed by and construed exclusively in accordance with the
internal laws of the State of California as applied to contracts made and to be performed entirely within the State of California, excluding that body of law relating to conflict of laws and choice of
law. 

                5.4    Severability.    If any provision of this Agreement is determined by any court or arbitrator of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision
cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had
(to the extent not enforceable) never been contained in this Agreement. Notwithstanding the forgoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is
materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good
faith negotiations. 

                5.5    Third Parties.    Nothing in this Agreement, express or implied, is intended to confer upon any person, other
than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement. 

                5.6    Successors And Assigns.    Subject to the provisions of Section 4.1 hereof, this Agreement, and the
rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. 

                5.7    Titles and Headings.    The titles, captions and headings of this Agreement are included for ease of reference
only and will be disregarded in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to "Sections," "subsections" and "exhibits" will mean "Sections,"
"subsections" and "exhibits" to this Agreement. 

                5.8    Counterparts.    This Agreement may be executed in any number of counterparts, each of which when so executed
and delivered will be deemed an original, and all of which together shall constitute one and the same agreement. 

                5.9    Costs and Attorneys' Fees.    In the event that any action, suit or other proceeding is instituted concerning
or arising out of this Agreement or any transaction contemplated hereunder, the prevailing party shall recover all of such party's costs and attorneys' fees incurred in each such action, suit or other
proceeding, including any and all appeals or petitions therefrom. 

                5.10    Adjustments for Stock Splits, Etc.    Wherever in this Agreement there is a reference to a specific number of
shares of Common Stock or Preferred Stock of the Company of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the affect on the outstanding shares of such class or series of stock by such
subdivision, combination or stock dividend. 

11

 

                5.11    Further Assurances.    The parties agree to execute such further documents and instruments and to take such
further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement. 

                5.12    Facsimile Signatures.    This Agreement may be executed and delivered by facsimile and upon such delivery the
facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other party. 

[Remainder of page intentionally left blank.]

12

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement as of the date and year first above written. 

	GRIC COMMUNICATIONS, INC.	 	ASIA PACIFIC GROWTH FUND III, L.P.
	

By:	
 	

	
 	

By:	
 	

	

Name:	
 	

	
 	

Name:	
 	

	

Title:	
 	

	
 	

Title:	
 	

	
VERTEX TECHNOLOGY FUND (II) LTD.	
 	

VERTEX TECHNOLOGY FUND (III) LTD.
	

By:	
 	

	
 	

By:	
 	

	

Name:	
 	

Kheng Nam Lee
	
 	

Name:	
 	

Kheng Nam Lee

	

Title:	
 	

Attorney-in-Fact
	
 	

Title:	
 	

Attorney-in-Fact

[SIGNATURE PAGE TO GRIC COMMUNICATIONS, INC. INVESTORS' RIGHTS AGREEMENT]

 
 

EXHIBIT A
  Schedule of Investors    
  

Asia
Pacific Growth Fund III, L.P.

156 University Avenue

Palo Alto, CA 94301

Attention: Mark Hsu

Telephone: (650) 838-8088

Facsimile: (650) 838-0801 

Vertex
Technology Fund (II) Ltd.

Vertex Technology Fund (III) Ltd.

77 Science Park Drive

#02-15 Cintech III

Singapore Science Park

Singapore 118256

Attention: Kheng Nam Lee, President

Telephone: 011-65-777-0122

Facsimile: 011-65-777-1878 or 011-65-773-2628

Email: leekn@vertex.st.com.sg  

  

 
 

Exhibit C
  
    STOCKHOLDER AGREEMENT    
  

        This Stockholder Agreement (the "Agreement") is entered into as
of                        , 2002 (the
"Effective Date") by and among GRIC Communications, Inc., a Delaware corporation (the "Company"),
Asia Pacific Growth Fund III, L.P., a Cayman entity ("Asia Pacific"), Vertex Technology Fund (II) Ltd. and Vertex Technology Fund
(III) Ltd. (the later two being entities formed under the laws of Singapore and collectively referred to as "Vertex"). Hereinafter, Asia Pacific
and Vertex will be collectively referred to as the "Investors". 

W I T N E S S E T H:  

        WHEREAS, the Company and the Investors have entered into that certain Series A Preferred Stock and Warrant Purchase Agreement (the
"Series A Agreement") dated as of January 30, 2002 pursuant to which the Company has agreed to sell to the Investors, and the Investors
have agreed to purchase from the Company, shares of the Company's Series A Preferred Stock (the "Series A Preferred Stock") and warrants
to purchase shares of Series A Preferred Stock (the "Warrants"); and 

        WHEREAS,
the Company and the Investors deem it to be in their best interests to provide for certain matters with respect to the governance of the Company and desire to enter into this
Agreement in order to effectuate that purpose. 

        NOW,
THEREFORE, in consideration of the mutual agreements and understandings set forth herein, the parties hereto hereby agree as follows: 

        1)    Definitions.    As used in this Agreement, the following terms shall have the meanings set forth below: 

        a)    "Board" shall mean the board of directors of the Company. 

        b)    "Change of Control" shall mean (a) any reorganization, consolidation, merger or similar transaction or series of
related transactions (each, a "combination transaction")) in which the Company is a constituent corporation or is a party if, as a result of such
combination transaction, the voting securities of the Company that are outstanding immediately prior to the consummation of such combination transaction (other
than any such securities that are held by an "Acquiring Stockholder", as defined below) do not represent, or are not converted into, securities of the surviving corporation of
such combination transaction (or such surviving corporation's parent corporation if the surviving corporation is owned by the parent corporation) that, immediately after the consummation of such
combination transaction, together possess at least a majority of the total voting power of all securities of such surviving corporation (or its parent corporation, if applicable) that are outstanding
immediately after the consummation of such combination transaction, including securities of such surviving corporation (or its parent corporation, if applicable) that are held by the Acquiring
Stockholder; or (b) a sale of all or substantially all of the assets of the Company, that is followed by the distribution of the proceeds to the Company's stockholders. For purposes of this
subsection 1(b), an "Acquiring Stockholder" means a stockholder or stockholders of the Company that (i) merges or combines with the Company in
such combination transaction or (ii) owns or controls a majority of another corporation that merges or combines with the Company in such combination transaction. 

        c)    "Common Stock" shall mean the common stock, par value $0.001 per share, of the Company and any securities of the Company
into which such Common Stock may be reclassified, exchanged or converted. 

        d)    "Common Stockholders" shall mean the holders of the Company's Common Stock. 

1

 

        e)    "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder. 

        f)    "Group" means two or more individuals and/or entities that are a "person" (within the meaning of Section 13(d) of
the Exchange Act) formed for the purpose of acquiring, holding, voting or disposing of Common Stock and/or Preferred Stock (as defined herein). 

        g)    "Investors' Rights Agreement" shall mean that certain Investors' Rights Agreement dated of even date herewith by and among
the Company and the Investors. 

        h)    "Preferred Stock" shall mean any series of preferred stock, par value $0.001 per share, of the Company and any securities
of the Company into which such Preferred Stock may be reclassified, exchanged or converted. 

        i)    "SEC" shall mean the United States Securities and Exchange Commission. 

        j)    "Standstill Period" shall mean the period from the Effective Date until the earliest to occur of the following:
(i) the fifth anniversary of the Effective Date, (ii) the date the Company enters into an agreement which if consummated would result in a Change of Control of the Company,
(iii) a third party tender offer for the Company, (iv) a Change of Control of the Company, or (v) a reduction of the collective beneficial ownership of the Common Stock and/or
Preferred Stock of the Company by the Investors and their respective affiliates to below twenty percent (20%) of the Total Voting Power (as defined below) of the Company. 

        k)    "Total Voting Power" shall mean the total number of votes which may be cast in the election of members of the Board of the
Company if all securities entitled to vote thereon are present and voted. 

        l)    "Voting Agreement" shall mean that certain Voting Agreement dated of even date herewith by and among the Company, the
Investors and certain other Company stockholders. 

        2)    Voting.    During the Standstill Period, the Investors (and their respective transferees who are their
affiliates ("Affiliated Transferees")) shall cause all shares of Preferred Stock and Common Stock held by the Investors or their Affiliated Transferees
to be voted in favor of any of the following proposals submitted to a vote of the Company's stockholders: (i) any transaction contemplating a Change of Control (including any amendment to the
Company's Certificate of Incorporation required to effect any such transaction, so long as same does not change the liquidation preference of the Series A Preferred Stock),  provided that the
monetary value to be received pursuant to such Change of Control transaction by any Investors or Affiliated Transferees is at least
$3.32 per share of Preferred Stock held immediately prior to the Change of Control, on an as converted to Common Stock basis (such figure to be adjusted for stock splits, stock dividends,
recapitalizations and the like) and provided further that the Investors and Affiliated Transferees shall not be required to provide any representation or warranties in respect of the transaction,
(ii) the sale and issuance of Common Stock in a public offering (including any amendment to the Company's Certificate of Incorporation required to effect any such transaction, so long as same
does not change the liquidation preference of the Series A Preferred Stock), or (iii) an acquisition by the Company of another corporation or entity utilizing Common Stock as the form of
consideration; provided, however, that this Section 2 shall only apply when the shares voted by the stockholders of the Company (excluding the
shares held by the Investors) in favor of the proposal to implement one of the transactions described above constitute a majority of the outstanding shares of Common Stock and Preferred Stock of the
Company voting together as a single class. 

        3)    No Dissent.    During the Standstill Period, Asia Pacific and Vertex shall not exercise any statutory
dissenter's or appraisal rights with respect to a Change of Control; further, Affiliated Transferees of Vertex shall not exercise any statutory dissenter's or appraisal rights with respect to any 

2

 

Change of Control, provided that at least 1 of the directors who represents Vertex on the Board has voted in favor of such transaction. 

        4)    Standstill.    During the Standstill Period, the Investors and their Affiliated Transferees shall not directly
or indirectly, nor shall the Investors or their Affiliated Transferees authorize or direct any of their respective representatives (excluding directors who represent any Investor on the Board acting
in their capacity as members of the Board) to, in each case unless specifically authorized to do so or consented to in writing in advance by the Board of the Company: 

        a)    acquire
or agree, offer, seek or propose to acquire, or cause to be acquired, beneficial ownership of any voting stock of the Company or any options, warrants or other
rights (including, without limitation, any convertible or exchangeable securities) to acquire any voting stock of the Company, except pursuant to the
Investors' Rights Agreement, the Voting Agreement or upon the exercise of any options, warrants or other rights (including, without limitation, any convertible or exchangeable securities) held by the
Investors; 

        b)    make,
or in any way participate in, any "solicitation" of "proxies" (as such terms are used in the proxy rules of the SEC) with respect to the voting of any securities of
the Company; provided, however, that the limitation contained in this clause (b) shall not restrict the Investors from communicating their views
on any transaction proposed by the Company to the stockholders of the Company; 

        c)    deposit
any securities of the Company held by such Investor in a voting trust or subject any such securities to any arrangement or agreement with any person; 

        d)    form,
join, or in any way become a member of a Group (involving parties or entities other than Asia Pacific and/or Vertex, with the understanding that Vertex and any of
its affiliates may not form a Group that includes Asia Pacific or any of Asia Pacific's affiliates and that Asia Pacific and any of its affiliates may not form a Group that includes
Vertex or any of Vertex's affiliates) with respect to any voting securities of the Company; 

        e)    seek
to propose or propose, whether alone or in concert with others, any tender offer, exchange offer, merger, business combination, restructuring, liquidation,
recapitalization or similar transaction involving the Company; 

        f)    nominate
any person as a director of the Company who is not nominated by the then incumbent directors, or propose any matter to be voted upon by the stockholders of the
Company, except for nominations of the representatives of the Preferred Stock on the Board contemplated by the Voting Agreement and/or the Certificate
of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company (the "Certificate of Amendment") to become effective on or
about the Effective Date; 

        g)    seek,
either alone or in concert with others, to elect a majority of the directors of the Board in order to control the policies of the Company; 

        h)    sell
securities of the Company to any person (other than an Affiliated Transferee) that is known (without any duty of investigation) by the selling party to be seeking
control of the Company; provided that this clause shall not apply if Hong Chen or Lynn Ya-Lin Liu has sold, or has entered into any agreement to sell his or her shares of Common Stock to
such party seeking control of the Company; 

        i)    sell
securities of the Company constituting more than twenty percent (20%) of the Total Voting Power at a price that is more than ten percent (10%) above the then current
trading price of the Common Stock as most recently reported in the Wall Street Journal ("Current Price"); provided that this clause shall not apply if
Hong Chen or Lynn Ya-Lin Liu has sold, or has entered 

3

 

into any agreement to sell, a majority of his or her shares of Common Stock at a price that is more than ten percent (10%) above the Current Price; or 

        j)    publicly
announce or disclose any intention, plan or arrangement inconsistent with the foregoing restrictions. 

        5)    Fiduciary Duties.    Notwithstanding anything set forth under this Agreement with respect to an Investor that
has representation on the Board, nothing herein shall limit or change the fiduciary duties or rights of any director of the Board acting in such capacity, or require such director to act in a manner
inconsistent with the fiduciary duties of a director of the Board. 

        6)    General Provisions.    

                a)    Notices.    Any notice, request or other communication required or permitted hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered or if deposited in the U.S. mail by registered or certified mail, return receipt requested, postage prepaid, as follows: 

        i)    if
to the Company, at: 

GRIC
Communications, Inc.

1421 McCarthy Boulevard

Milpitas, California 95035

Attention: David Teichmann, Esq.

Telephone: (408) 965-1309

Facsimile: (408) 435-8687 

with
a copy to: 

Fenwick &
West LLP

Two Palo Alto Square

Palo Alto, CA 94306

Attention: David Healy, Esq.

Telephone: (650) 494-0600

Facsimile: (650) 494-1417 

        ii)    if
to Asia Pacific, at 

Asia
Pacific Growth Fund III, L.P.

156 University Avenue Palo Alto, CA 94301

Attention: Mark Hsu

Telephone: (650) 838-8088

Facsimile: (650) 838-0801 

with
a copy to: 

O'Melveny &
Myers LLP

Embarcadero Center West

275 Battery Street

San Francisco, CA 94111-3305

Attention: Peter Healy, Esq.

Telephone: (415) 984-8700 Facsimile: (415) 984-8701 

4

 

        iii)  if
to Vertex, at: 

Vertex
Technology Fund (II) Ltd

Vertex Technology Fund (III) Ltd.

77 Science Park Drive

#02-15 Cintech III

Singapore Science Park

Singapore 118256

Attention: Kheng Nam Lee, President

Telephone: 011-65-777-0122

Facsimile: 011-65-777-1878 or 011-65-773-2628 

and 

Vertex
Management, Inc.

Three Lagoon Drive, Suite 220

Redwood City, CA 94065

Attention: Hock Chuan Tam, Senior Vice President

Telephone: (650) 591-9300

Facsimile: (650) 591-5926 

with
a copy to: 

Carr &
Ferrell LLP

2225 E. Bayshore Road, Suite 200

Palo Alto, CA 94303

Attention: Barry Carr, Esq.

Telephone: (650) 812-3400

Facsimile: (650) 812-3444 

Any
party hereto (and such party's permitted successors, assigns or transferees) may by notice so given provide and change its address for future notices hereunder. Notice shall conclusively be deemed
to have been given when personally delivered or when deposited in the mail in the manner set forth above. 

                b)    Entire Agreement.    This Agreement constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties respecting the
subject matter hereof. 

                c)    Amendment; Waiver.    Any provision of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company, Asia Pacific, Vertex and the Investors (and/or any of their permitted successors or assigns) holding shares of Series A Preferred Stock and/or
shares of Common Stock issued upon conversion thereof representing and/or convertible into a majority of all the Investors' Shares (as defined below). As used herein, the term
"Investors' Shares" shall mean the shares of Common Stock then issuable upon conversion of all then outstanding shares of Series A Preferred
Stock issued under the Series A Agreement and, in the event any of the Warrants has been exercised, all shares of Common Stock issuable upon conversion of Series A Preferred Stock issued
upon exercise of such Warrants. Any amendment or waiver effected in accordance with this subsection 6(c) shall be binding upon each Investor, each permitted successor or assignee of such Investor and
the Company. 

                d)    Governing Law.    This Agreement shall be governed by and construed exclusively in accordance with the internal
laws of the State of California as applied to contracts made and to be 

5

 

performed entirely within the State of California, excluding that body of law relating to conflict of laws and choice of law. 

                e)    Severability.    If one or more provisions of this Agreement are held to be unenforceable under applicable law,
then such provision(s) shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with
its terms. 

                f)    Third Parties.    Nothing in this Agreement, express or implied, is intended to confer upon any person, other
than the parties hereto (and their successors and assigns), any rights or remedies under or by reason of this Agreement. 

                g)    Successors and Assigns.    The provisions of this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto. 

                h)    Counterparts.    This Agreement may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. 

        [Remainder of this page intentionally left blank.]

6

        IN WITNESS WHEREOF, the parties hereto have executed this Stockholder Agreement as of the date and year first above written. 

	
GRIC COMMUNICATIONS, INC.	
 	

ASIA PACIFIC GROWTH FUND III, L.P.
	

By:	
 	

	
 	

By:	
 	

	

Name:	
 	

	
 	

Name:	
 	

	

Title:	
 	

	
 	

Title:	
 	

	
VERTEX TECHNOLOGY

FUND (II) LTD.	
 	

VERTEX TECHNOLOGY

FUND (III) LTD.
	

By:	
 	

	
 	

By:	
 	

	

Name:	
 	
KHENG NAM LEE
	
 	

Name:	
 	
KHENG NAM LEE

	

Title:	
 	
ATTORNEY-IN-FACT
	
 	

Title:	
 	
ATTORNEY-IN-FACT

[SIGNATURE PAGE TO GRIC COMMUNICATIONS, INC. STOCKHOLDER AGREEMENT]  

  
 

    EXHIBIT A
  Schedule of Investors    
  

Asia
Pacific Growth Fund III, L.P.

156 University Avenue

Palo Alto, CA 94301

Attention: Mark Hsu

Telephone: (650) 838-8088

Facsimile: (650) 838-0801 

Vertex
Technology Fund (II) Ltd.

Vertex Technology Fund (III) Ltd.

77 Science Park Drive

#02-15 Cintech III

Singapore Science Park

Singapore 118256

Attention: Kheng Nam Lee, President

Telephone: 011-65-777-0122

Facsimile: 011-65-777-1878 or 011-65-773-2628

Email: leekn@vertex.st.com.sg

  

 
 

Exhibit D
  
    CERTIFICATE OF AMENDMENT
  OF
  SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
  OF
  GRIC COMMUNICATIONS, INC.    
  

        GRIC Communications, Inc., a Delaware corporation, (the "Corporation"), does hereby certify that the
following amendment to the Corporation's Second Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Section 242 of the Delaware General
Corporation Law, with the approval of such amendment by the Corporation's stockholders: 

        Article IV
of the Second Amended and Restated Certificate of Incorporation is amended to read in its entirety as follows: 

 
 

Article IV    
  

        This corporation is authorized to issue two (2) classes of shares, designated "Common Stock" and "Preferred Stock". The total number of shares of Common
Stock authorized to be issued is 50,000,000 shares, $0.001 par value per share. The total number of shares of Preferred Stock authorized to be issued is 17,801,205 shares, $0.001 par value per share,
12,801,205 of which are designated as "Series A Preferred Stock" and 5,000,000 of which shall remain undesignated. 

        The
Board of Directors is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or
more series, and, by filing a Certificate of Designation pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof, and to increase or decrease the number of
shares of any such series (but not below the number of shares of such series then outstanding). The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the corporation entitled to vote, unless a vote of any other holders is required
pursuant to a Certificate or Certificates establishing a series of Preferred Stock. 

        Except
as otherwise expressly provided herein or in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this
Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board of Directors without approval of the holders of Common Stock or the holders
of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including, without limitation, voting rights, dividend rights, liquidation rights,
redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, the Preferred Stock, or any future class or series of Preferred Stock or Common Stock. 

        The
rights, preferences, privileges and restrictions granted to and imposed on the Series A Preferred Stock are as follows: 

        1.    Definitions.    For purposes of this Article IV, the following definitions apply: 

                1.1    "Board" shall mean the Board of Directors of the Corporation. 

                1.2    "Corporation" shall mean this corporation. 

                1.3    "Common Stock" shall mean the Common Stock, par value $0.001 per share, of the Corporation. 

1

 

                1.4    "Common Stock Dividend" shall mean a stock dividend declared and paid on the Common Stock that
is payable in shares of Common Stock. 

                1.5    "Original Issue Date" for the Series A Preferred Stock shall mean the date on which the
first share of Series A Preferred Stock is issued by the Corporation. 

                1.6    "Original Issue Price" shall mean $1.66 per share for the Series A Preferred Stock (as
adjusted for any stock splits, stock dividends, recapitalizations or the like, with respect to such series of Preferred Stock). 

                1.7    "Permitted Repurchases" shall mean the repurchase by the Corporation of shares of Common Stock
held by employees, officers, directors, consultants, independent contractors, advisors, or other persons performing services for the Corporation or a subsidiary that are subject to restricted stock
purchase agreements or stock option exercise agreements under which the Corporation has the option to repurchase such shares: (i) at cost, upon the occurrence of certain events, such as the
termination of employment or services; or (ii) at any price pursuant to the Corporation's exercise of a right of first refusal to repurchase such shares. 

                1.8    "Series A Preferred Stock" shall mean the Series A Preferred Stock, $0.001 par
value per share, of the Corporation. 

                1.9    "Subsidiary" shall mean any corporation of which at least fifty percent (50%) of the outstanding
voting stock is at the time owned directly or indirectly by the Corporation or by one or more of such subsidiary corporations. 

        2.    Dividend Rights.    

                2.1    Series A Preferred Stock.    The holders of the then outstanding Series A Preferred Stock shall
be entitled to receive, when, as and if declared by the Board, out of any funds and assets of the Corporation legally available therefor, noncumulative dividends in such amounts as may be determined
by the Board. No dividends (other than a Common Stock Dividend) shall be paid with respect to the Common Stock during any calendar year unless dividends in an equal or greater amount per share shall
have first been paid or declared and set apart for payment to the holders of the Series A Preferred Stock during that calendar year; provided,
however, that this restriction shall not apply to Permitted Repurchases. Dividends on the Series A Preferred Stock shall not be mandatory or cumulative, and no rights or
interest shall accrue to the holders of the Series A Preferred Stock by reason of the fact that the Corporation shall fail to declare or pay dividends on the Series A Preferred Stock in
any amount in any calendar year or any fiscal year of the Corporation, whether or not the earnings of the Corporation in any calendar year or fiscal year were sufficient to pay such dividends in whole
or in part. 

                2.2    No Participation Rights.    If, after dividends for the Series A Preferred Stock have been paid or
declared and set apart in any calendar year of the Corporation, the Board shall declare additional dividends out of funds legally available therefor in that calendar year, then none of such additional
dividends shall be declared on the Series A Preferred Stock. 

                2.3    Non-Cash Dividends.    Whenever a dividend provided for in this Section 2 shall be payable
in property other than cash, the value of such dividend shall be deemed to be the fair market value of such property as determined in good faith by the Board, provided that dividends payable in
securities (other than Common Stock Dividends and dividends declared and paid on the Series A Preferred Stock that are payable in shares of Series A Preferred Stock) shall be valued in
the manner set forth in Section 3.4(a) and (b) hereof. 

                2.4    Payment on Conversion.    If the Corporation shall have declared and unpaid dividends with respect to any
Series A Preferred Stock, then immediately prior to, and upon a conversion of any of such Preferred Stock as provided in Section 5, the Corporation shall, subject to the legal
availability of funds and assets therefor and subject to any liquidation preference rights which may have been previously invoked under Section 3 hereof, pay in cash to the holder of the shares
of Series A Preferred Stock being converted the full amount of any dividends declared and unpaid on such shares. 

2

 

        3.    Liquidation Rights.    In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary, the funds and assets that may be legally distributed to the Corporation's stockholders (the
"Available Funds and Assets") shall be distributed to stockholders in the following manner: 

                3.1    Series A Preferred Stock.    The holders of each share of Series A Preferred Stock then
outstanding shall be entitled to be paid, out of the Available Funds and Assets, and prior and in preference to any payment or distribution (or any setting apart of any payment or distribution) of any
Available Funds and Assets on any shares of Common Stock, an amount per share equal to the Original Issue Price of the Series A Preferred Stock plus all declared but unpaid dividends on the
Series A Preferred Stock. If upon any liquidation, dissolution or winding up of the Corporation, the Available Funds and Assets shall be insufficient to permit the payment to holders of the
Series A Preferred Stock of their full preferential amount described in this subsection, then all of the remaining Available Funds and Assets shall be distributed among the holders of the then
outstanding Series A Preferred Stock pro rata, according to the number of outstanding shares of Series A Preferred Stock held by each holder thereof. 

                3.2    Participation Rights.    If there are any Available Funds and Assets remaining after the payment or
distribution (or the setting aside for payment or distribution) to the holders of the Series A Preferred Stock of their full preferential amounts described above in this Section 3, then
all such remaining Available Funds and Assets shall be distributed among the holders of the then outstanding Common Stock and the Series A Preferred Stock pro rata according to the number of
shares of Common Stock held by such holders, where, for this purpose, holders of shares of Series A Preferred Stock will be deemed to hold (in lieu of their Series A Preferred Stock) the
greatest whole number of shares of Common Stock then issuable upon conversion in full of such shares of Series A Preferred Stock pursuant to Section 5 until such time as each holder of
then outstanding Series A Preferred Stock shall have received, in distributions made under this Section 3, an aggregate amount equal to $5.81 per share of Series A Preferred Stock
held (such aggregate dollar amount to include all amounts previously paid to such holder pursuant to Section 3.1) ("Maximum Participation
Threshold") after which time the holders of then outstanding Common Stock shall be entitled to receive all the remaining Available Funds and Assets (if any) pro rata according
to the number of outstanding shares of Common Stock then held by each of them; provided, however, that in the event that each holder of then outstanding
Series A Preferred Stock would receive, in distributions made under Section 3.1 and the foregoing provisions of this Section 3.2, an aggregate amount of less than $3.32 per share
of Series A Preferred Stock held, then, notwithstanding the foregoing, each holder of then outstanding Series A Preferred Stock shall be entitled to receive from the remaining Available
Funds and Assets, prior to any
distribution on Common Stock, and in addition to the amount specified in Section 3.1, an amount per share of Series A Preferred Stock held equal to the product of $0.166 per share of
Series A Preferred Stock multiplied by the number of calendar years (including any fraction thereof) elapsed from the Original Issue Date to the time of distribution, and thereafter, any
remaining Available Funds and Assets shall be distributed among the holders of the outstanding Common Stock and Series A Stock as set forth above, subject to the Maximum Participation
Threshold. All dollar figures in this Section 3.2 shall be proportionately adjusted for any stock splits, stock dividends, recapitalizations or the like with respect to Series A
Preferred Stock. 

                3.3    Merger or Sale of Assets.    Each of the following transactions shall be deemed to be a liquidation,
dissolution or winding up of the Corporation as those terms are used in this Section 3 (and in such case the Available Funds and Assets shall be the consideration paid by the acquiror in the
Combination Transaction (as defined below)): (a) any reorganization, consolidation or merger approved by the Board of Directors of the Corporation (each, a "Combination
Transaction") in which the Corporation is a constituent corporation or is a party if, as a result of such Combination Transaction, the voting securities of the Corporation that
are outstanding immediately prior to the consummation of such Combination Transaction (other than any such securities that are held by an "Acquiring 

3

 

Stockholder", as defined below) do not represent, or are not converted into, securities of the surviving corporation of such combination transaction (or such surviving corporation's parent
corporation if the surviving corporation is owned by the parent corporation) that, immediately after the consummation of such Combination Transaction, together possess at least a majority of the total
voting power of all securities of such surviving corporation (or its parent corporation, if applicable) that are outstanding immediately after the consummation of such Combination Transaction,
including securities of such surviving corporation (or its parent corporation, if applicable) that are held by the Acquiring Stockholder; or (b) a sale of all or substantially all of the assets
of the Corporation approved by the Board of Directors of the Corporation, that is followed by the distribution of the proceeds to the Company's stockholders. For the avoidance of doubt, neither a
tender offer nor other stock purchase transaction (other than a reorganization, consolidation or merger approved by the Board of Directors of the Corporation) pursuant to which securities of the
Corporation are purchased by a third party nor an issuance of securities by the Corporation that results in a change of control, is or shall be deemed a Combination Transaction. For purposes of this
Section 3.3, an "Acquiring Stockholder" means a stockholder or stockholders of the Corporation that (i) merges or combines with the
Corporation in such Combination Transaction or (ii) owns or controls a majority of another corporation that merges or combines with the Corporation in such Combination Transaction. 

        Notwithstanding
the foregoing or the provisions of Section 5.7 below, if any of the above described transactions are approved by a vote sufficient under the Delaware General
Corporation Law, this Certificate and the Bylaws of the Corporation, then such transaction and the rights of the holders of Common Stock and Preferred
Stock will be governed by the documents to be entered into in connection with such transaction. 

                3.4    Non-Cash Consideration.    If any assets of the Corporation distributed to stockholders in
connection with any liquidation, dissolution, or winding up of the Corporation are other than cash, then the value of such assets shall be their fair market value as determined by the Board of
Directors in good faith,  except that any securities to be distributed to stockholders in a liquidation, dissolution, or winding up of the Corporation shall be valued as follows: 

        (a)  The
method of valuation of securities not subject to investment letter or other similar restrictions on free marketability shall be as follows: 

        (i)    unless
otherwise specified in a definitive agreement for the acquisition of the Corporation, if the securities are then traded on a national securities exchange or the
Nasdaq National Market (or a similar national quotation system), then the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirty
(30) day period ending three (3) days prior to the distribution; and 

        (ii)  if
(i) above does not apply but the securities are actively traded over-the-counter, then, unless otherwise specified in a definitive
agreement for the acquisition of the Corporation, the value shall be deemed to be the average of the closing bid prices over the thirty (30) calendar day period ending three (3) trading
days prior to the distribution; and 

        (iii)  if
there is no active public market as described in clauses (i) or (ii) above, then the value shall be the fair market value thereof, as determined in
good faith by the Board of Directors of the Corporation. 

        (b)  The
method of valuation of securities subject to investment letter or other restrictions on free marketability shall be to make an appropriate discount from the market
value determined as above in subparagraphs (a)(i),(ii) or (iii) of this subsection to reflect the approximate fair market value thereof, as determined in good faith by the Board of
Directors. 

4

   
        4.    Voting Rights.    

                4.1    Series A Preferred Stock.    Each holder of shares of Series A Preferred Stock shall be entitled
to the number of votes equal to the number of whole shares of Common Stock into which such shares of Preferred Stock could be converted pursuant to the provisions of Section 5 below at the
record date for the determination of the stockholders entitled to vote on such matters or, if no such record date is established, the date such vote is taken or any written consent of stockholders is
solicited. 

                4.2    General.    Subject to the other provisions of this Certificate of Incorporation, each holder of
Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of the Corporation (as in effect at the time in question) and applicable law, and shall be entitled to vote, together with the holders of Common Stock, with
respect to any question upon which holders of Common Stock have the right to vote, except as may be otherwise provided by applicable law. Except as otherwise expressly provided herein or as required
by law, the holders of Series A Preferred Stock and the holders of Common Stock shall vote together and not as separate classes. 

                4.3    Board of Directors Election and Removal.    

                        (a)    Election of Directors.    So long as: (i) the total number of outstanding shares of Series A
Preferred Stock is equal to or greater than 75% of the number of shares of Series A Preferred Stock issued on the Original Issue Date, the holders of the Series A Preferred Stock, voting
as a separate series, shall be entitled to elect three (3) directors of the Corporation; (ii) the total number of outstanding shares of Series A Preferred Stock is equal to or
greater than 50% of the number of shares of Series A Preferred Stock issued on the Original Issue Date, the holders of the Series A Preferred Stock, voting as a separate series, shall be
entitled to elect two (2) directors of the Corporation; and (iii) the total number of outstanding shares of Series A Preferred Stock is equal to or greater than 25% of the number
of shares of Series A Preferred Stock issued on the Original Issue Date, the holders of the Series A Preferred Stock, voting as a separate series, shall be entitled to elect one
(1) director of the Corporation. The foregoing share amounts shall be subject to proportional adjustments to reflect combinations or subdivisions of Series A Preferred Stock or dividends
declared in shares of such stock. The directors of the Corporation which the holders of Series A Preferred Stock are entitled to elect pursuant to this Section 4.3 shall be collectively
referred to herein as the "Series A Directors." The holders of the Common Stock, voting as a separate class, shall be entitled to elect all
directors of the Corporation not entitled to be elected by the holders of Series A Preferred Stock pursuant to this Section 4.3. 

                        (b)    Quorum; Required Vote.    

                                (i)    Quorum.    At any meeting held for the purpose of electing the Series A Directors, the presence in
person or by proxy of the holders of a majority of the shares of the Series A Preferred Stock then outstanding shall constitute a quorum for the election of the Series A Directors. 

                                (ii)    Required Vote.    With respect to the election of the Series A Directors by the holders of the
outstanding shares of Series A Preferred Stock (the "Specified Stock"), that candidate or those candidates (as applicable) shall be elected who
either: (i) in the case of any such vote conducted at a meeting of the holders of such Specified Stock, receive the highest number of affirmative votes (on an as-converted basis) of
the outstanding shares of such Specified Stock; or (ii) in the case of any such vote taken by written consent without a meeting, are elected by the written consent of the holders of a majority
of outstanding shares of such Specified Stock. 

                        (c)    Vacancy.    If there shall be any vacancy in the office of a Series A Director, then a director to hold
office for the unexpired term of such directorship may be elected by the required vote 

5

 

of holders of the shares of Specified Stock specified in Section 4.3(b)(ii) above that are entitled to elect such director. 

                                (d)    Removal.    Subject to Section 141(k) of the Delaware General Corporation Law, any director who shall
have been elected to the Board by the holders of Specified Stock, or by any director or directors elected by holders of Specified Stock as provided in Section 4.3, may be removed during his or
her term of office, without cause, by, and only by, the affirmative vote of shares representing a majority of the voting power, on an as-converted basis, of all the outstanding shares of
such Specified Stock entitled to vote, given either at a meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders without a meeting, and any vacancy
created by such removal may be filled only in the manner provided in Section 4.3(c). 

                                (e)    Procedures.    Any meeting of the holders of Specified Stock, and any action taken by the holders of Specified
Stock by written consent without a meeting, in order to elect or remove a director under this Section 4.3, shall be held in accordance with the procedures and provisions of the Corporation's
Bylaws, the Delaware General Corporation Law and applicable law regarding stockholder meetings and stockholder actions by written consent, as such are then in effect (including but not limited to
procedures and provisions for determining the record date for shares entitled to vote). 

                                (f)    Termination.    Notwithstanding anything in this Section 4.3 to the contrary, the provisions of this
Section 4.3 shall cease to be of any further force or effect upon the earliest to occur of: (i) upon the
merger or consolidation of the Corporation with or into any other corporation or corporations if such consolidation or merger is approved by the stockholders of the Corporation in compliance with
applicable law and the Certificate of Incorporation and Bylaws of the Corporation in which the holders of the Corporation's outstanding shares immediately before such consolidation or merger do not,
immediately after such consolidation or merger, retain stock representing a majority of the voting power of the surviving corporation (or its parent corporation if the surviving corporation is wholly
owned by the parent corporation); or (ii) a sale of all or substantially all of the Corporation's assets. 

                4.4    Protective Provisions.    So long as any shares of Series A Preferred Stock remain outstanding, the
Corporation shall not, without the approval, by vote or written consent, of the holders of a majority of the Series A Preferred Stock then outstanding, voting as a separate series: 

        (a)  amend
its Certificate of Incorporation or Bylaws in any manner that would alter or change the rights, preferences, privileges or restrictions of Series A
Preferred Stock so as to adversely affect such series of Preferred Stock; 

        (b)  reclassify
any outstanding shares of securities of the Corporation into shares having rights, preferences or privileges senior to or on a parity with the Series A
Preferred Stock; 

        (c)  authorize
any other equity security, including any other security convertible into or exercisable for any equity security, having rights or preferences senior to or
being on a parity with Series A Preferred Stock as to dividend or voting rights or liquidation preferences; or 

        (d)  increase
the total number of authorized shares of Preferred Stock or Common Stock. 

        5.    Conversion Rights.    The outstanding shares of Series A
Preferred Stock shall be convertible into Common Stock as follows: 

                5.1    Optional Conversion.    

        (a)  At
the option of the holder thereof, each share of Series A Preferred Stock shall be convertible, at any time or from time to time, into fully paid and
nonassessable shares of Common Stock as provided herein. 

6

 

        (b)  Each
holder of Series A Preferred Stock who elects to convert the same into shares of Common Stock shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or any transfer agent for the Series A Preferred Stock or Common Stock, and shall give written notice to the Corporation at such office that such
holder elects to convert the same and shall state therein the number of shares of Series A Preferred Stock being converted. Thereupon the Corporation shall promptly issue and deliver at such
office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled upon such conversion. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the certificate or certificates representing the shares of Series A Preferred Stock to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. 

                5.2    Automatic Conversion.    

        (a)  Each
share of Series A Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock, as provided herein on the
earlier to occur of (i) the fifth anniversary of the Original Issue Date or (ii) the date which is the ninetieth consecutive trading day on which the closing price of the Corporation's
Common Stock (as reported by a national securities exchange or the Nasdaq National Market or a similar national quotation system on which the Common Stock is then traded) equaled or exceeded $8.30 per
share, provided that the average daily trading volume calculated over such ninety day period equaled or exceeded 200,000 shares (such amounts as adjusted for any stock splits, stock dividends,
recapitalizations or the like, with respect to the Common Stock). 

        (b)  Upon
the occurrence of any event specified in subparagraph 5.2(a)(i) or (ii) above, the outstanding shares of Series A Preferred Stock shall be
converted into Common Stock automatically without the need for any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion unless the certificates evidencing such shares of Series A Preferred Stock are either delivered to the Corporation or its transfer agent as provided below,
or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation and/or its transfer
agent to indemnify the Corporation and/or its transfer agent from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series A
Preferred Stock, the holders of Series A Preferred Stock shall surrender the certificates representing such shares at the office of any transfer agent for the Series A Preferred Stock or
Common Stock. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of Series A Preferred Stock surrendered were convertible on the date on which such automatic conversion occurred. 

7

   
                5.3    Conversion Price.    Each share of Series A Preferred
Stock shall be convertible in accordance with
Section 5.1 or Section 5.2 above into the number of shares of Common Stock which results from dividing the Original Issue Price for such series of Preferred Stock by the conversion price
for such series of Preferred Stock that is in effect at the time of conversion (the "Conversion Price"). The initial Conversion Price for such series of
Preferred Stock shall be the Original Issue Price for such series of Preferred Stock. The Conversion Price of the Series A Preferred Stock shall be subject to adjustment from time to time as
provided below. Following each adjustment of the Conversion Price, such adjusted Conversion Price shall remain in effect until a further adjustment of such Conversion Price hereunder. 

                5.4    Adjustment Upon Common Stock Event.    Upon the happening of a Common Stock Event (as hereinafter defined),
the Conversion Price of Series A Preferred Stock shall, simultaneously with the happening of such Common Stock Event, be adjusted by multiplying the Conversion Price of such series of Preferred
Stock in effect immediately prior to such Common Stock Event by a fraction, (i) the numerator of which shall be the number of shares of Common Stock issued and outstanding immediately prior to
such Common Stock Event, and (ii) the denominator of which shall be the number of shares of Common Stock issued and outstanding immediately after such Common Stock Event, and the product so
obtained shall thereafter be the Conversion Price for such series of Preferred Stock. The Conversion Price for Series A Preferred Stock shall be readjusted in the same manner upon the happening
of each subsequent Common Stock Event. As used herein, the term the "Common Stock Event" shall mean at any time or from time to time after the Original
Issue Date, (i) the issue by the Corporation of additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock, or (iii) a combination of the outstanding shares of Common Stock into a smaller number of shares of Common Stock. 

                5.5    Adjustments for Other Dividends and Distributions.    If at any time or from time to time after the Original
Issue Date the Corporation pays a dividend or makes another distribution to the holders of the Common Stock payable in securities of the Corporation, other than an event constituting a Common Stock
Event, then in each such event provision shall be made so that the holders of the Series A Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable upon conversion thereof, the amount of securities of the Corporation which they would have received had their Series A Preferred Stock been converted into Common Stock on the
date of such event (or such record date, as applicable) and had they thereafter, during the period from the date of such event (or such record date, as applicable) to and including the conversion
date, retained such securities receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 5 with respect to the rights
of the holders of the Series A Preferred Stock or with respect to such other securities by their terms. 

                5.6    Adjustment for Reclassification, Exchange and Substitution.    If at any time or from time to time after the
Original Issue Date the Common Stock issuable upon the conversion of the Series A Preferred Stock is changed into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than by a Common Stock Event or a stock dividend, reorganization, merger, or
consolidation provided for elsewhere in this Section 5), then in any such event each holder of Series A Preferred Stock shall have the right thereafter to convert such stock into the
kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which such
shares of Series A Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with
respect to such other securities or property by the terms thereof. 

                5.7    Reorganizations, Mergers and Consolidations.    If at any time or from time to time after the Original Issue
Date there is a reorganization of the Corporation (other than a recapitalization, 

8

 

subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 5) or a merger or consolidation of the Corporation with or into another corporation
(except an event which is governed under Section 3.3), then, as a part of such reorganization, merger or consolidation, provision shall be made so that the holders of the Series A
Preferred Stock thereafter shall be entitled to receive, upon conversion of the Series A Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of
such successor corporation resulting from such reorganization, merger or consolidation, to which a holder of Common Stock deliverable upon conversion would have been entitled on such reorganization,
merger or consolidation. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of the Preferred
Stock after the reorganization, merger or consolidation to the end that the provisions of this Section 5 (including adjustment of the Conversion Price then in effect and number of shares
issuable upon conversion of the Series A Preferred Stock) shall be applicable after that event and be as nearly equivalent to the provisions hereof as may be practicable. This
Section 5.7 shall similarly apply to successive reorganizations, mergers and consolidations. 

                5.8    Sale of Shares Below Conversion Price.    

                        (a)    Adjustment Formula.    If at any time or from time to time after the Original Issue Date the Corporation
issues or sells, or is deemed by the provisions of this Section 5.8 to have issued or sold, Additional Shares of Common Stock (as hereinafter defined), otherwise than in connection with a
Common Stock Event as provided in Section 5.4, a dividend or distribution as provided in Section 5.5 or a recapitalization, reclassification or other change as provided in
Section 5.6, or a reorganization, merger or consolidation as provided in section 5.7, for an Effective Price (as hereinafter defined) that is less than the Conversion Price for the
Series A Preferred Stock in effect immediately prior to such issue or sale (or deemed issue or sale), then, and in each such case, the Conversion Price for such series of Preferred Stock shall
be reduced, as of the close of business on the date of such issue or sale, to the price obtained by multiplying such Conversion Price by a fraction: 

        (i)    The
numerator of which shall be the sum of (A) the number of Common Stock Equivalents Outstanding (as hereinafter defined) immediately prior to such issue or sale
of Additional Shares of Common Stock plus (B) the quotient obtained by dividing the Aggregate Consideration Received (as hereinafter defined) by the Corporation for the total number of
Additional Shares of Common Stock so issued or sold (or deemed so issued and sold) by the Conversion Price for such series of Preferred Stock in effect immediately prior to such issue or sale; and 

        (ii)  The
denominator of which shall be the sum of (A) the number of Common Stock Equivalents Outstanding immediately prior to such issue or sale plus (B) the
number of Additional Shares of Common Stock so issued or sold (or deemed so issued and sold). 

        Notwithstanding
any other provision hereof, in no event shall the Conversion Price for Series A Preferred Stock be reduced pursuant to this Section 5.8 to below the closing
price of the Corporation's Common Stock on January 30, 2002 as reported by the Nasdaq National Market (such price as adjusted for any stock splits, stock dividends, recapitalizations or the
like, with respect to Common Stock). 

9

 

                        (b)    Certain Definitions.    For the purpose of making any adjustment required under this Section 5.8: 

        (i)    The
"Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Corporation, or deemed issued
as provided in Section 5.8(c) below, whether or not subsequently reacquired or retired by the Corporation, other than: 

        (A)  shares
of Common Stock issued or issuable upon conversion of any outstanding shares of the Preferred Stock; 

        (B)  any
shares of Common Stock or Preferred Stock (or options, warrants or rights therefor) granted or issued hereafter to employees, officers, directors, contractors,
consultants or advisers to, the Corporation or any Subsidiary pursuant to incentive agreements, stock purchase or stock option plans, stock bonuses or awards, warrants, contracts or other arrangements
approved by the Board of Directors; 

        (C)  any
shares of the Corporation's Common Stock or Preferred Stock (and/or options or warrants therefor) issued to parties that are (i) strategic partners investing
in connection with a commercial relationship with the Corporation or (ii) providing the Corporation with equipment leases, real property leases, loans, credit lines, guaranties of indebtedness,
cash price reductions or similar transactions, under arrangements, in each case, approved by the Board of Directors; 

        (D)  shares
of Common Stock or Preferred Stock issued pursuant to the acquisition of another corporation or entity by the Corporation by consolidation, merger, purchase of
all or substantially all of the assets, or other reorganization in which the Corporation acquires, in a single transaction or series of related transactions, all or substantially all of the assets of
such other corporation or entity or fifty percent (50%) or more of the voting power of such other corporation or entity or fifty percent (50%) or more of the equity ownership of such other entity;
provided that such transaction or series of transactions has been approved by the Corporation's Board of Directors or pursuant to the purchase of less than a fifty percent (50%) equity ownership in
connection with a joint venture or other strategic arrangement or other commercial relationship, provided such an arrangement is approved by the Board of Directors; 

        (E)  shares
of Common Stock or Preferred Stock issuable upon exercise of any options, warrants or rights to purchase any securities of the Company outstanding as of the date
of this Certificate of Amendment and any securities issuable upon the conversion thereof; 

        (F)  shares
of Common Stock issued pursuant to a transaction described in Section 5.4 hereof; and 

        (G)  any
shares of Common Stock or Preferred Stock (or options, or warrants or rights to acquire same), issued or issuable hereafter that are unanimously approved by the
Board as being excluded from the definition of "Additional Shares of Common Stock" under this subsection 5.8(b)(i). 

        (ii)  The
"Aggregate Consideration Received" by the Corporation for any issue or sale (or deemed issue or sale) of securities
shall (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Corporation before deduction of any underwriting or similar commissions, compensation or
concessions paid or allowed by the Corporation in connection with such issue or sale and without deduction of any expenses payable by the Corporation; (B) to the extent it consists of property
other than 

10

 

cash, be computed at the fair value of that property as determined in good faith by the Board of Directors; and (C) if Additional Shares of Common Stock, Convertible Securities or Rights or
Options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration
which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock,
Convertible Securities or Rights or Options. 

        (iii)  The
"Common Stock Equivalents Outstanding" shall mean the number of shares of Common Stock that is equal to the sum of
(A) all shares of Common Stock of the Corporation that are outstanding at the time in question, plus (B) all shares of Common Stock of the Corporation issuable upon conversion of all
shares of Preferred Stock or other Convertible Securities that are outstanding at the time in
question, plus (C) all shares of Common Stock of the Corporation that are issuable upon the exercise of Rights or Options that are outstanding at the time in question assuming the full
conversion or exchange into Common Stock of all such Rights or Options that are Rights or Options to purchase or acquire Convertible Securities into or for Common Stock. 

        (iv)  The
"Convertible Securities" shall mean stock or other securities convertible into or exchangeable for shares of Common
Stock. 

        (v)  The
"Effective Price" of Additional Shares of Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold, by the Corporation under this Section 5.8, into the Aggregate Consideration Received, or
deemed to have been received, by the Corporation under this Section 5.8, for the issue of such Additional Shares of Common Stock; and 

        (vi)  The
"Rights or Options" shall mean warrants, options or other rights to purchase or acquire shares of Common Stock or
Convertible Securities. 

                        (c)    Deemed Issuances.    For the purpose of making any adjustment to the Conversion Price of Series A
Preferred Stock required under this Section 5.8, if the Corporation issues or sells any Rights or Options or Convertible Securities and if the Effective Price of the shares of Common Stock
issuable upon exercise of such Rights or Options and/or the conversion or exchange of Convertible Securities (computed without reference to any additional or similar protective or antidilution
clauses) is less than the Conversion Price then in effect for a series of Preferred Stock, then the Corporation shall be deemed to have issued, at the time of the issuance of such Rights, Options or
Convertible Securities, that number of Additional Shares of Common Stock that is equal to the maximum number of shares of Common Stock issuable upon exercise or conversion of such Rights, Options or
Convertible Securities upon their issuance and to have received, as the Aggregate Consideration Received for the issuance of such shares, an amount equal to the total amount of the consideration, if
any, received by the Corporation for the issuance of such Rights or Options or Convertible Securities, plus, in the case of such Rights or Options, the minimum amounts of consideration, if any,
payable to the Corporation upon the exercise in full of such Rights or Options, plus, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Corporation
(other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion or exchange thereof; provided
that: 

        (i)    if
the minimum amounts of such consideration cannot be ascertained, but are a function of antidilution or similar protective clauses, then the Corporation shall be
deemed to have received the minimum amounts of consideration without reference to such clauses; 

11

 

        (ii)  if
the minimum amount of consideration payable to the Corporation upon the exercise of Rights or Options or the conversion or exchange of Convertible Securities is
reduced over time or upon the occurrence or non-occurrence of specified events other than by reason of antidilution or similar protective adjustments, then the Effective Price shall be
recalculated using the figure to which such minimum amount of consideration is reduced; and 

        (iii)  if
the minimum amount of consideration payable to the Corporation upon the exercise of such Rights or Options or the conversion or exchange of Convertible Securities
is subsequently increased, then the Effective Price shall again be recalculated using the increased minimum amount of consideration payable to the Corporation upon the exercise of such Rights or
Options or the conversion or exchange of such Convertible Securities. 

        No
further adjustment of the Conversion Price, adjusted upon the issuance of such Rights or Options or Convertible Securities, shall be made as a result of the actual issuance of shares
of Common Stock on the exercise of any such Rights or Options or the conversion or exchange of any such Convertible Securities. If any such Rights or Options or the conversion rights represented by
any such Convertible Securities shall expire without having been fully exercised, then the Conversion Price as adjusted upon the issuance of such Rights or Options or Convertible Securities shall be
readjusted to the Conversion Price which would have been in effect had an adjustment been made on the basis that the only shares of Common Stock so issued were the shares of Common Stock, if any, that
were actually issued or sold on the exercise of such Rights or Options or rights of conversion or exchange of such Convertible Securities, and such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such Rights or Options,
whether or not exercised, plus the consideration received for issuing or selling all such Convertible Securities actually converted or exchanged, plus the consideration, if any, actually received by
the Corporation (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion or exchange of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Preferred Stock. 

                5.9    Certificate of Adjustment.    In each case of an adjustment or readjustment of the Conversion Price for the
Series A Preferred Stock, the Corporation, at its expense, shall cause its Chief Financial Officer to compute such adjustment or readjustment in accordance with the provisions hereof and
prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of the Series A Preferred Stock
at the holder's address as shown in the Corporation's books. 

                5.10    Fractional Shares.    No fractional shares of Common Stock shall be issued upon any conversion of
Series A Preferred Stock. In lieu of any fractional share to which the holder would otherwise be entitled, the Corporation shall pay the holder cash equal to the product of such fraction
multiplied by the closing price of the Corporation's Common Stock (as reported by a national securities exchange or the Nasdaq National Market or a similar national quotation system on which the
Common Stock is then traded) on the date of conversion. 

                5.11    Reservation of Stock Issuable Upon Conversion.    The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation will take such corporate action as may, in 

12

 

the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 

                5.12    Notices.    Any notice required by the provisions of these Certificate of Incorporation to be given to the
holders of shares of the Series A Preferred Stock shall be deemed given upon the earlier of actual receipt or three business days after deposit in the United States mail, by certified or
registered mail, return receipt requested, postage prepaid, or delivery by a recognized express courier, fees prepaid, addressed to each holder of record at the address of such holder appearing on the
books of the Corporation. 

                5.13    No Impairment.    The Corporation shall not avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order
to protect the conversion rights of the holders of the Series A Preferred Stock against impairment. 

        6.    Miscellaneous.    

                6.1    No Reissuance of Preferred Stock.    No share or shares of Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to
issue. 

                6.2    Preemptive Rights.    No stockholder of the Corporation shall have a right to purchase shares of capital stock
of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and a stockholder. 

                6.3    Preferred Stock Written Consent.    Notwithstanding any other provision of this Certificate of Incorporation,
with respect to matters involving only the Preferred Stock and the rights, preferences, privileges and restrictions granted to and imposed on the Preferred Stock, the holders of Preferred Stock may
take action without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the holders of majority of the Preferred Stock then outstanding. 

        IN
WITNESS WHEREOF, said corporation has caused this Certificate of Amendment to be signed by its duly authorized officer
this                        , 2002 and the foregoing facts stated herein
are true and correct. 

GRIC
Communications, Inc.

By: 

      Bharat Davé, President 

13

 
 

Exhibit E    
  

        THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE
OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.

        THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
ANY STATE SECURITIES LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THESE SECURITIES UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

                            , 2002  

WARRANT TO PURCHASE SERIES A PREFERRED STOCK

OF

GRIC COMMUNICATIONS, INC.  

No.                          
Void after                         , 2007 

CUSIP
No.:              Number of shares: [            ] 

        GRIC
Communications, Inc., a Delaware corporation (the "Company"), with principal offices at 1421 McCarthy Blvd., Milpitas, CA
95035, hereby acknowledges that                        is entitled, subject to the terms and conditions of this Warrant, to
purchase from the Company at any time after the above specified date of this
Warrant and prior to the Expiration Date (as defined below), up to that number of shares of Warrant Stock (as defined below) as may be purchased for the Maximum Purchase Amount (as defined below) at a
price per share equal to the Warrant Price (as defined below), upon surrender of this Warrant at the principal offices of the Company, together with a duly executed subscription form in the form
attached hereto as Exhibit 1 and simultaneous payment of the full Warrant Price for each share of Warrant Stock so purchased in lawful money of the United States. The Warrant Price and the
number and character of shares of Warrant Stock purchasable under this Warrant are subject to adjustment as provided herein. 

        This
Warrant is issued pursuant to that certain Series A Preferred Stock and Warrant Purchase Agreement dated as of January 30, 2002 (the "Purchase
Agreement"), by and among the Company, the original holder of this Warrant and certain other investors listed on the Schedule of Investors attached to the Purchase Agreement as
Exhibit A, and is subject to the provisions thereof. 

        1.    Definitions.    The following definitions shall apply for purposes of this Warrant: 

        1.1
"Company" means the "Company" as defined above and includes any corporation which
shall succeed to or assume the obligations of the Company under this Warrant. 

        1.2  "Expiration Date" means the earliest to occur of (i) the fifth anniversary of the date first written above, (ii) the
consummation of a consolidation or merger of the Company with or into any other corporation or corporations in which the holders of the Company's outstanding shares immediately before such
consolidation or merger do not, immediately after such consolidation or 

 

merger, retain stock representing a majority of the voting power of the surviving corporation of such consolidation or merger, (iii) the consummation of a sale of all or substantially all of
the assets of the Company or (iv) the date of any liquidation, dissolution or winding up of the Company. 

        1.3
"Holder" means any person who shall at the time be the registered holder of this Warrant. 

        1.4
"Maximum Number" means [10% multiplied by the number of shares of Preferred Stock purchased by the
Holder at the closing of the financing] [15% multiplied by the number of shares of Preferred Stock purchased by the Holder at the closing of the
financing]. 

        1.5
"Maximum Purchase Amount" means the product of the Maximum Number multiplied by the Warrant Price. 

        1.6
"Net Exercise" means an exercise of this Warrant pursuant to Section 2.6. 

        1.7
"Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization or association and a government or any department or agency thereof. 

        1.8
"Purchase Amount" means, at a given time, an amount equal to the Maximum Purchase Amount less the aggregate amount previously paid to
the Company for the purchase of Warrant Stock upon exercise of this Warrant. 

        1.9
"Warrant" means this Warrant and any warrant(s) delivered in substitution or exchange therefor, as provided herein. 

        1.10
"Warrant Price" means [$1.66]
[$2.49]. The Warrant Price is subject to adjustment as provided herein. 

        1.11
"Warrant Stock" means fully paid, non-assessable shares of Series A Preferred Stock of the Company. The number and
character of shares of Warrant Stock are subject to adjustment as provided herein and the term "Warrant Stock" shall include stock and other securities
and property at any time receivable or issuable upon exercise of this Warrant in accordance with its terms. 

        2.    Exercise.    

                2.1    Method of Exercise.    Subject to the terms and conditions of this Warrant, the Holder may exercise this
Warrant in whole or in part, at any time or from time to time, on any business day before the Expiration Date, for up to that number of shares of Warrant Stock that is obtained by dividing
(a) the Purchase Amount by (b) the then effective Warrant Price, by surrendering this Warrant at the principal offices of the Company, with the subscription form attached hereto duly
executed by the Holder, and
payment of an amount equal to the product obtained by multiplying (i) the number of shares of Warrant Stock to be purchased by the Holder by (ii) the Warrant Price or adjusted Warrant
Price therefor, if applicable, as determined in accordance with the terms hereof. 

                2.2    Form of Payment.    Payment may be made by (i) a check payable to the Company's order, (ii) wire
transfer of funds to the Company, (iii) cancellation of indebtedness of the Company to the Holder, or (iv) any combination of the foregoing. 

                2.3    Partial Exercise.    Upon a partial exercise of this Warrant: (i) the Purchase Amount immediately prior
to such exercise shall be reduced by the aggregate amount paid to the Company upon such exercise of this Warrant, and (ii) this Warrant shall be surrendered by the Holder and replaced with a
new Warrant of like tenor in which the Maximum Purchase Amount is the Purchase Amount as so reduced. In no event may the cumulative aggregate purchase price paid to the Company upon all exercises of
the Warrant exceed the Maximum Purchase Amount. 

2

 

                2.4    No Fractional Shares.    No fractional shares may be issued upon any exercise of this Warrant, and any
fractions shall be rounded down to the nearest whole number of shares. If upon any exercise of this Warrant a fraction of a share results, the Company will pay the cash value of any such fractional
share, calculated on the basis of the Warrant Price. 

                2.5    Restrictions on Exercise.    This Warrant may not be exercised if the issuance of the Warrant Stock upon such
exercise would constitute a violation of any applicable federal or state securities laws or other laws or regulations. As a condition to the exercise of this Warrant, the Holder shall execute the
subscription form attached hereto, confirming and acknowledging that the representations and warranties of the Holder set forth in Section 4 of the Purchase Agreement are true and correct as of
this date of exercise. 

                2.6    Net Issue Election.    The Holder may elect to convert this Warrant, without the payment by the Holder of any
additional consideration, into shares of Warrant Stock having a value equal to the Purchase Amount or any portion thereof by the surrender of this Warrant or such portion to the Company, with the net
issue election selected in the subscription form attached hereto duly executed by the Holder, at the principal offices of the Company. Thereupon, the Company will issue to the Holder such number of
shares of Warrant Stock as is computed using the following formula: 

X = Y (A-B)

A  

where                        X =
the number of shares to be issued to the Holder pursuant to this Section 2.6. 

                                  Y =
the number of shares covered by this Warrant in respect of which the net issue election is made pursuant to this Section 2.6. 

                                  A =
the fair market value of one share of Warrant Stock, as determined in good faith by the Company's Board of Directors, as at the time the net issue election is
made pursuant to this Section 2.6. 

                                  B =
the Warrant Price in effect at the time the net issue election is made pursuant to this Section 2.6. 

        The
Company's Board of Directors will promptly respond in writing to an inquiry by the Holder as to the fair market value of one share of Warrant Stock. 

        3.    Issuance of Stock.    

        3.1    This
Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Warrant Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. In
the event of any exercise of the rights represented by this Warrant, the Company shall promptly following the date of its receipt of the exercise notice, the Purchase Amount (or notice of a Net
Exercise) and this Warrant (or an indemnification undertaking or other form of security reasonably satisfactory to the Company with respect to this Warrant in the case of its loss, theft or
destruction) (the "Exercise Delivery Documents"), (1) in the case of a public resale of such Warrant Stock, at the holder's request, credit such aggregate number of shares of Warrant Stock to
which the holder shall be entitled to the holder's or its designee's balance account with the Depositary Trust Company ("DTC") through its Deposit Withdrawal Agent Commission system, or
(2) issue and deliver to the address as specified in the exercise notice, a certificate or certificates in such denominations as may be requested by the holder in the exercise notice,
registered in the name of the holder or its designee, for the number of shares of Warrant Stock to which the holder shall be entitled upon such exercise. Upon delivery of the exercise notice, this
Warrant and Purchase Amount or 

3

 

notification to the Company of a Net Exercise, the holder of this Warrant shall be deemed for all corporate purposes to have become the holder of record of the Warrant Stock with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Stock. 

        3.2    In
the case of a dispute as to the determination of the Warrant Price or the arithmetic calculation of the number of shares of Warrant Stock, the Company shall promptly
issue to the holder the number of shares of Warrant Stock that is not disputed and shall promptly submit the disputed determination or arithmetic calculation to the holder via facsimile. If the holder
and the Company are unable to promptly agree upon the determination of the Warrant Price or arithmetic calculation of the number of shares of Warrant Stock, then the Company shall immediately submit
via facsimile (x) the disputed determination of the Warrant Price to an independent, reputable investment banking firm selected jointly by the Company and the holder, or (y) the disputed
arithmetic calculation of the number of shares of Warrant Stock to its independent, outside auditor. The Company shall cause the investment banking firm or the auditor, as the case may be, to promptly
perform the determination or calculation and notify the Company and the holder of the results. Such investment banking firm's or auditor's determination or calculation, as the case may be, shall be
deemed conclusive absent manifest error. All fees and expenses of such determinations shall be borne solely by the Company. 

        4.    Adjustment Provisions.    The number and character of shares of Warrant Stock issuable upon exercise of this
Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price therefor, are subject to adjustment solely upon
the occurrence of the following events: 

                4.1    Adjustment for Stock Splits, Stock Dividends, etc.    The Warrant Price of this Warrant and the number of
shares of Warrant Stock issuable upon exercise of this Warrant shall each be proportionally adjusted to reflect any stock dividend, stock split, reverse stock split, combination of shares or other
similar event affecting the number of outstanding shares of Warrant Stock (or such other stock or securities) that occurs after the date of the Warrant. 

                4.2    Adjustment for Other Dividends and Distributions.    In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a dividend or other distribution payable respect to the Warrant Stock that is payable in securities of the Company (other
than issuances with respect to which adjustment is made under Section 4.1), then, and in each such case, the Holder, upon exercise of this Warrant at any time after the consummation, effective
date or record date of such event, shall receive, in addition to the shares of Warrant Stock issuable upon such exercise prior to such date, the securities or such other assets of the Company to which
the Holder would have been entitled upon such date if the Holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant). 

                4.3    Adjustment for Reorganization or Recapitalization.    After the date of this Warrant, in case of any
reorganization or recapitalization of the Company (or of any other corporation, the stock or other securities of which are at the time receivable on the exercise of this Warrant), other than
transactions described in Section 1.2 above, then the Holder, upon the exercise of this Warrant (as provided in Section 2), at any time after the consummation of such reorganization or
recapitalization, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other
securities or property to which the Holder would have been entitled upon the consummation of such reorganization or recapitalization if the Holder had exercised this Warrant immediately prior thereto,
all subject to further adjustment as provided in this Section 4, and the successor or purchasing corporation in such reorganization or recapitalization (if other than the Company) shall duly
execute and deliver to the Holder a supplement hereto acknowledging such corporation's obligations under this Warrant; and in each such case, the 

4

 

terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such reorganization or
recapitalization. 

                4.4    Conversion of Stock.    In case all the authorized Warrant Stock of the Company is converted, pursuant to the
Company's Certificate of Incorporation, into Common Stock or other securities or property, or the Warrant Stock otherwise ceases to exist, then, in such case, the Holder, upon exercise of this Warrant
at any time after the date on which the Warrant Stock is so converted or ceases to exist (the "Termination Date"), shall receive, in lieu of the number
of shares of Warrant Stock that would have been issuable upon such exercise immediately prior to the Termination Date (the "Former Number of Shares of Warrant
Stock"), the stock and other securities and property to which the Holder would have been entitled to receive upon the Termination Date if the Holder had exercised this Warrant
with respect to the Former Number of Shares of Warrant Stock immediately prior to the Termination Date (all subject to further adjustment as provided in this Warrant). 

                4.5    Notice of Adjustments.    The Company shall promptly give written notice of each adjustment or readjustment of
the Warrant Price or the number of shares of Warrant Stock or other securities issuable upon exercise of this Warrant. The notice shall describe the adjustment or readjustment and show in reasonable
detail the facts on which the adjustment or readjustment is based. 

                4.6    No Change Necessary.    The form of this Warrant need not be changed because of any adjustment in the Warrant
Price or in the number of shares of Warrant Stock issuable upon its exercise. 

                4.7    Reservation of Stock.    If at any time the number of shares of Warrant Stock or other securities issuable
upon exercise of this Warrant shall not be sufficient to effect the exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Warrant Stock or other securities issuable upon exercise of this Warrant as shall be sufficient for such purpose. 

        5.    Covenants.    The Company hereby covenants and agrees as follows: 

                5.1    Issuance of Warrants and Warrant Stock.    This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issuance thereof, and shall
not be subject to preemptive rights or other similar rights of stockholders of the Company. All Warrant Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon
issuance and payment hereof or net exercise in accordance with the terms hereof, be validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by or
through the Company with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Warrant Stock. 

                5.2    Reservation of Shares.    During the period within which the rights represented by this Warrant may be
exercised, the Company will take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than one hundred percent (100%) of the number of shares of
(a) Common Stock needed to provide for the conversion of the Warrant Stock, and (b) Warrant Stock needed to provide for the exercise of all of the Warrants, without regard to any
limitations on conversions or exercise. 

                5.3    Listing.    The Company shall promptly secure the listing of the shares of Common Stock issuable upon
conversion of the Warrant Stock upon each national securities exchange or market and automated quotation system, if any, upon which shares of Common Stock are then listed and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall list on each such
exchange or market or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of 

5

 

this Warrant if and so long as any shares of the same class shall be listed on such exchange or market or automated quotation system. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 5.3. 

                5.4    Certain Actions.    The Company will not, by amendment of its certificate of incorporation (the "Charter") or
through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by it hereunder. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Warrant Stock
issuable upon the exercise of this Warrant above the Warrant Price then in effect, (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of Warrant Stock upon the exercise of this Warrant, and (iii) will not take any action which results in any adjustment of the
Warrant Price if the total number of shares of Warrant Stock issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Warrant Stock then authorized
by the Charter and available for the purpose of issue upon such exercise. 

                5.5    Obligations Binding on Successors.    This Warrant will be binding upon any entity succeeding to the Company
in one or a series of transactions by merger, consolidation or acquisition of all or substantially all of the Company's assets or other similar transactions. 

                6.    Taxes.    The Company shall pay any and all documentary, stamp, transfer and other similar taxes which may be
payable with respect to the issuance and delivery of Warrant Stock upon exercise of this Warrant. 

        7.    Ownership and Transfer.    

        7.1    The
Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a
register for this Warrant (the "Warrant Register"), in which the Company shall record the name and address of the Person in whose name this Warrant has been issued, as well as the name and address of
each transferee. The Company may treat the Person in whose name any Warrant is registered on the Warrant Register as the owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with the terms of this Warrant. 

        7.2    Subject
to restrictions set forth in the Purchase Agreement and the Stockholder Agreement, this Warrant and all rights hereunder shall be assignable and transferable by
the holder hereof without the consent of the Company upon surrender of this Warrant with a properly executed assignment at the principal executive offices of the Company (or such other office or
agency of the Company as it may designate in writing to the holder hereof). 

        7.3    The
Company is obligated to register the Common Stock issuable upon conversion of the Warrant Stock for resale under the Securities Act pursuant to the Investors Rights
Agreement. The shares of Warrant Stock issuable upon exercise of this Warrant shall constitute Registrable Securities (as such term is defined in the Investors Rights Agreement). Each holder of this
Warrant shall be entitled to all of the benefits afforded to a holder of any such Registrable Securities under the Investors Rights Agreement and such holder, by its acceptance of this Warrant, agrees
and shall agree to be bound by and to comply with the terms and conditions of the Investors Rights Agreement applicable to such holder as a holder of such Registrable Securities. 

6

   
        8.    Effect of Reclassification, Consolidation, Merger or Sale.    If any of the following events occur, namely
(a) any reclassification or change of the outstanding shares of Common Stock, (b) any statutory exchange, as a result of which holders of Common Stock generally shall be entitled to
receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock (such transaction, a "Statutory Exchange"), (c) the closing of any
consolidation, merger or combination of the Company with another person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock (other than as a result of a change in name, a change in par value or a change in the jurisdiction of incorporation),
(d) voluntary or involuntary dissolution, liquidation or winding-up of the Company, or (e) the closing of any sale or conveyance of the properties and assets of the Company
as, or substantially as, an entirety to any other person (each of the events described in the foregoing clauses (a), (b), (c), (d) and (e), a "Special Event"), as a result of which holders of
Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, then the Warrant shall be deemed
exercised immediately prior to such Special Event, and such shares of Warrant Stock issuable upon such exercise shall be deemed converted to Common Stock immediately prior to such Special Event. 

        9.    Notice to Holders Prior to Certain Actions.    In case: 

        (a)  the
Company shall declare a dividend (or any other distribution) on its Common Stock; 

        (b)  the
Company shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any share of any class or any other rights
or warrants; or 

        (c)  of
any Special Event; 

        the
Company shall mail to each holder of Warrants at its address appearing on the Warrant Register as promptly as possible but in any event at least ten (10) days prior to the
applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such Special
Event is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such Special Event. 

        10.    Lost, Stolen, Mutilated or Destroyed Warrants.    If this Warrant is lost, stolen, mutilated or destroyed, the
Company shall promptly, on receipt of an indemnification undertaking or other form of security reasonably acceptable to the Company (or in the case of a mutilated Warrant, the Warrant), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed. Notwithstanding the foregoing, if this Warrant is lost by, stolen from or destroyed by the original
holder hereof, the affidavit of such original holder setting forth the circumstances of such loss, theft or destruction shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be required by the Company as a condition to the execution and delivery by the Company of a new Warrant to such original holder other than such original holder's unsecured
written agreement to indemnify the Company solely for losses actually incurred by the Company as a direct consequence of the loss, theft or destruction of the Warrant. 

        11.    No Rights or Liabilities as Stockholder.    This Warrant does not by itself entitle the Holder to any voting
rights or other rights as a stockholder of the Company. In the absence of affirmative action by the Holder to purchase Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no
enumeration herein of the rights or privileges of the Holder, shall cause the Holder to be a stockholder of the Company for any purpose. 

7

 

        12.    No Impairment.    The Company will not, by amendment of its Certificate of Incorporation or Bylaws, or through
reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, willfully avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against wrongful impairment. Without limiting the generality of the foregoing, the Company will take all such action as may be necessary or appropriate in order that the
Company may duly and validly issue fully paid and nonassessable shares of Warrant Stock upon the exercise of this Warrant. 

        13.    Attorneys' Fees.    In the event any party is required to engage the services of any attorneys for the purpose
of enforcing this Warrant, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Warrant, including attorneys' fees. 

        14.    Transfer.    Neither this Warrant nor any rights hereunder may be assigned, conveyed or transferred, in whole
or in part, without the Company's prior written consent, which the Company may withhold in its sole discretion. 

        15.    Governing Law.    This Warrant shall be governed in all respects by the laws of the State of California as such
laws are applied to agreements between California residents entered into and to be performed
entirely within California. The parties hereto irrevocably submit to the jurisdiction of the state and federal courts sitting in the Northern District of California. 

        16.    Headings.    The headings and captions used in this Warrant are used for convenience only and are not to be
considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto,
all of which exhibits are incorporated herein by this reference. 

        17.    Notices.    Unless otherwise provided, any notice required or permitted under this Warrant shall be given in
writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid
and addressed to the party to be notified at the address indicated for such party on Exhibit A to Purchase Agreement or, in the case of the
Company, at the principal offices of the Company, or at such other address as any party or the Company may designate by giving ten (10) days' advance written notice to all other parties. 

        18.    Amendment; Waiver.    Any term of this Warrant may be amended, and the observance of any term of this Warrant
may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of Warrants representing at least a
majority of the aggregate shares of Warrant Stock issuable upon exercise of all the Warrants at the time outstanding (and such majority shall include Asia Pacific Growth Fund, III, L.P., Vertex
Technology Fund (II) Ltd. and Vertex Technology Fund (III) Ltd.). Any amendment or waiver effected in accordance with this Section shall be binding upon the Company, each holder of any
Notes at the time outstanding, each future holder of such securities, and the Company. 

        19.    Severability.    If one or more provisions of this Warrant are held to be unenforceable under applicable law,
such provision(s) shall be excluded from this Warrant and the balance of the Warrant shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its
terms. 

        20.    Terms Binding.    By acceptance of this Warrant, the Holder accepts and agrees to be bound by all the terms and
conditions of this Warrant. 

[Rest of Page Intentionally Left Blank]  

8

 

	GRIC COMMUNICATIONS, INC.	 	ACCEPTED BY HOLDER:
	

 	
 	

 	
 	

Name of Holder:
	 	 	 	 	 	 	

	

By:	
 	

	
 	

By:	
 	

	

Name:	
 	

	
 	

Name:	
 	

	

Title:	
 	

	
 	

Title:	
 	

 [SIGNATURE PAGE TO WARRANT]  

9

 
 

Exhibit 1    
  

FORM OF SUBSCRIPTION

(To be signed only upon exercise of Warrant)  

To:
GRIC Communications, Inc. 

	(1)
	The
undersigned Holder hereby elects to purchase            shares of Series A Preferred Stock of GRIC Communications, Inc. (the "Warrant
Stock"), pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full.

	{(1)
	Net
Issue Election. The undersigned Holder elects to convert the Warrant into such shares of Warrant Stock by net issue election pursuant to Section 2.6 of the Warrant. This
conversion is exercised with respect to            shares of Series A Preferred Stock of GRIC Communications, Inc. (the"Warrant
Stock") covered by the Warrant. 

[STRIKE PARAGRAPH ABOVE THAT DOES NOT APPLY]}  

	(2)
	In
exercising the Warrant, the undersigned Holder hereby confirms and acknowledges that the representations and warranties set forth in Section 4 of the Purchase Agreement (as
defined in the Warrant) as they apply to the undersigned Holder are true and correct as of this date.

	(3)
	Please
issue a certificate or certificates representing such shares of Warrant Stock in the name or names specified below:

	
 (Name)	 	
 (Name)
	

 (Address)	
 	

 (Address)
	

 (Address)	
 	

 (Address)
	

 (City, Country, Postal Code)	
 	

 (City, Country, Postal Code)
	

 (Date)	
 	

 (Signature of Holder)

 
 

Exhibit F    
  

                        ,
2002 

To
each of the investors (the "Investors") named in the Schedule of Investors attached as  Exhibit A to the Series A Preferred Stock and
Warrant Purchase Agreement dated January 30, 2002 (the
"Agreement") among the Investors and GRIC Communications, Inc., a Delaware corporation (the
"Company"). 

Ladies
and Gentlemen: 

        We
have acted as counsel to the Company in connection with the issuance and sale by the Company to the Investors pursuant to the Agreement of up to 10,240,964 shares (the
"Purchased Shares") of the Company's Series A Preferred Stock (the "Series A Stock") and
warrants (the "Warrants") to purchase up to 2,560,241 shares (the "Warrant Shares") of Series A
Stock. This opinion is furnished to you pursuant to Section 5.13 of the Agreement. Unless otherwise indicated in this letter, which includes  Attachment A hereto, all capitalized terms used
herein have the meanings given to those terms in the Agreement. As used herein
"Conversion Shares" shall mean shares of the Company's Common Stock issuable upon conversion of the Purchased Shares or Warrant Shares. 

        In
order to render this opinion we have examined such questions of law as we deem advisable under the circumstances. As to questions of fact, we have relied solely upon our examination
of the documents referred to on Attachment A and our actual knowledge. We have not examined any document other than those described on  Attachment A or made any independent factual investigation. No bring-down certificate, telegram or telephonic advice of the public
officials referred to on Attachment A were obtained as of the date hereof, nor, except as described on  Attachment A, have we caused the search of
any docket of any court, tribunal, agency or similar authority or any other record of any governmental
agency or third party. 

        In
our examination of documents referred to on Attachment A, we have assumed the current accuracy and completeness of
(a) the information obtained from public officials and records included in the documents referred to on Attachment A, and (b) the
representations and warranties made by representatives of the Company to us, including without limitation, those set forth in the Management
Certificate. We have also assumed that all the representations and warranties made by the Company and the Investors in, or pursuant to, any of the Closing Agreements to which the Company or any
Investor is a party or any Closing Documents provided by any such person or entity are, accurate and complete in all material respects. We have made no attempt to verify the accuracy of any of such
information, representations or warranties or to determine the existence or non-existence of any factual matters other than those described above;  however, we are not aware of any facts or circumstances
that would cause us to believe that any of the opinions expressed herein are not accurate. 

        In
our examination of documents for purposes of this opinion, we have assumed, and express no opinion as to, (a) the genuineness of all signatures on original documents,
(b) the authenticity and completeness of all documents submitted to us as originals, (c) the conformity to originals and completeness of all documents submitted to us as copies,
(d) the lack of any undisclosed termination, modification, waiver or amendment to any document reviewed by us, (e) the legal competence or capacity of all persons or entities (other than
the Company) executing the same and (f) except with respect to due authorization, execution and delivery of the Closing Agreements by the Company and the due authorization by the Company of the
Certificate of Amendment, the due authorization, execution and delivery of all documents where due authorization, execution and delivery are prerequisites to the effectiveness thereof. 

        For
the purposes of this opinion, we have also assumed that: (a) the Investors have fully paid all required consideration for the Purchased Shares to the Company as provided in
the Agreement and have fully performed all the other obligations that they are to perform at or before the Closing; (b) each Investor has all requisite power and authority and, if an entity, is
in good standing in the jurisdiction of its formation; (c) each Investor has taken any and all corporate, partnership or other 

 

action necessary for the due authorization by such Investor of the execution, delivery and performance of all such Investor's obligations under the Closing Agreements; and (c) each of the
Closing Agreements is duly enforceable in accordance with its respective terms against, and constitutes the legal, valid and binding obligations of, each of the parties thereto other than the Company. 

        As
used in this opinion, the phrases "our actual knowledge," "to our knowledge," "we are not aware," "known to us" or words of similar import refer only to the actual knowledge of the
attorneys currently in this firm who have rendered legal services to the Company in connection with the transactions contemplated by the Closing Agreements and mean that, while we have made no
investigation of the matters stated other than our examination of documents referred to on Attachment A, such attorneys do not have actual
knowledge that such matters are factually incorrect. No inference as to our knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of our representation
of the Company. 

        Where
statements in this opinion regarding an effect on, or matters relating to, the Company are qualified by the term "material," those statements involve judgments and opinions as to
the materiality or lack of materiality of any matter to the Company's business, assets or financial condition, taken as a whole, which are entirely those of the Company and its officers, after having
been advised by us as to the legal effect and consequences of such matters; however, such opinions and judgments are not known to us to be incorrect. 

        As
to the enforceability of the Closing Agreements, this opinion is qualified by, and is subject to, and we render no opinion with respect to: 

	(a)
	the
effect of bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance and other similar laws relating to or affecting the rights of creditors generally;
and

	(b)
	the
effect of general principles of equity and similar principles, including, without limitation, concepts of materiality, reasonableness, public policy and unconscionability and the
possible unavailability of specific performance, injunctive relief or other equitable remedies, regardless of whether considered in a proceeding in equity or at law. 

        We
draw your attention to and we render no opinion with respect to: (a) the enforceability of the indemnification and contribution provisions of the Rights Agreement;
(b) compliance or noncompliance with antifraud provisions of applicable state and federal statutes, rules and regulations concerning the issuance and sale of securities; and (c) the
effect any breach of the fiduciary duties of the Company's Board of Directors or principal stockholders in connection with the Board's approval of, or the principal stockholders' approval of or
participation in, the transactions contemplated by the Closing Agreements would have on the enforceability thereof. 

        In
rendering the opinion expressed in paragraph 1 below regarding the good standing of the Company and the Company's qualification to do business as a foreign corporation in the
State of California, we have relied solely on the certification of the Company's good standing set forth in the Certificates of Good Standing described on  Attachment A. 

        In
rendering the opinion expressed in paragraphs 5 and 6 below, we have assumed the accuracy and completeness of the information provided by the Company to the Investors in connection
with such offer and sale. We have also relied upon the Investors' representations in the Closing Agreements, and the Company's representations to us as to factual matters in the Management
Certificate, including, without limitation that, the Company has made no offer to sell the Purchased Shares or Warrant Shares by means of any "general solicitation" (as defined in Regulation D
under the Securities Act of 1933, as amended) or the "publication of any advertisement" (as defined under the California Corporate Securities Act of 1968, as amended, and the regulations thereunder)
and that no offer or sale of the Purchased Shares, Warrants or Warrant Shares has been made or will be made in any state or jurisdiction other than the State of California and the countries of
Singapore and the Cayman Islands. 

2

 

        We
are admitted to practice law in the State of California, and our opinion is only with respect to the existing laws of the State of California, the existing Delaware General
Corporation Law without reference to case law or secondary sources and the existing federal laws of the United States of America. Special rulings of such authorities or opinions of other counsel have
not been sought or obtained by us in connection with the transactions contemplated by the Closing Agreements. Our opinion is limited to such California state and United States federal statutes, laws,
rules or regulations and provisions of the Delaware General Corporation Law as in our experience are of general application to transactions of the sort provided for in the Closing Agreements. Without
limiting the foregoing, we express no opinion regarding the laws of Singapore or the Cayman Islands. 

        To
the extent that any of the documents reviewed by us in connection with this opinion other than the Closing Agreements are governed by the laws of any jurisdiction other than the State
of California, the United States federal law or the Delaware General Corporation Law as described above, our opinion relating to those documents is based on the assumption that the laws of such other
jurisdictions are the same as the relevant laws of California and that the choice of law provisions selecting the laws of such other jurisdictions as the governing law of such documents would be given
effect. Since we are admitted to practice law in the State of California, we express no opinion as to whether or not the laws of any jurisdiction other than the State of California, the United States
federal law or the Delaware General Corporation Law as described above, are applicable to the such documents. 

        We
also call your attention to the fact that under various reports published by committees of the State Bar of California under the 1989 Report of the Committee
on Corporations of the Business Law Section of the State Bar of California Regarding Legal Opinions in Business Transactions (August 1989), certain assumptions,
qualifications and exceptions are implicit in opinions of lawyers. Although we have expressly set forth some assumptions, qualifications and exceptions herein, we are not limiting or omitting any
others set forth in the various reports or otherwise deemed standard practice for lawyers in California. 

        Based
upon the foregoing, subject to the assumptions and qualifications referred to herein and except as may be otherwise set forth in the Company's Disclosure Letter, the following are
our opinions as of immediately prior to the Closing. 

	1.
	The
Company has been duly incorporated and organized, and is validly existing in good standing, under the laws of the State of Delaware. The Company is qualified to do business as a
foreign corporation in good standing in the State of California.

	2.
	The
Certificate of Amendment and the Closing Agreements have been duly adopted and authorized, respectively, by all necessary corporate action on the part of the Company. The Closing
Agreements have been duly executed on behalf of the Company and delivered by the Company to the Investors. Each of the Closing Agreements constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.

	3.
	The
execution and delivery of the Closing Agreements by the Company and the performance by the Company of its obligations under the Closing Agreements do not conflict with, or result
in a violation of, (a) the Restated Certificate, Certificate of Amendment or Bylaws, (b) to our knowledge and except as would not have a material adverse effect (as defined in the
Agreement) on the Company, any judgment, order or decree of any court or arbitrator to which the Company is a party, or (c) any agreement binding on the Company that has been filed by the
Company with the Securities and Exchange Commission ("SEC") as an exhibit to the Company's annual report on Form 10-K for its fiscal
year ended December 31, 2000 (the "2000 Form 10-K") or as an exhibit to any report filed by the Company with the SEC prior to
the Closing pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act") subsequent to the date of filing of the original 2000
Form 10-K or any agreement binding on the Company of which we are aware and which is required to be filed as an exhibit 

3

 

to
any report required to be filed by the Company with the SEC pursuant to the Exchange Act (collectively, the "Material Agreements"), which would have
a material adverse effect (as defined in the Agreement) on the Company. 

	4.
	The
Purchased Shares, when issued and paid for at the Closing as provided in the Agreement, will be duly authorized and validly issued, fully paid and nonassessable. The Warrant
Shares, when issued and paid for upon exercise of the Warrants as provided in the Warrants, will be duly authorized and validly issued, fully paid and nonassessable. The Warrant Shares have been duly
and validly reserved for issuance upon exercise of the Warrants. The Conversion Shares have been duly and validly reserved for issuance upon conversion of the Purchased Shares and Warrant Shares.
Assuming no change in applicable law or the Restated Certificate or Certificate of Amendment, the Conversion Shares, when issued upon conversion in accordance with the Restated Certificate and
Certificate of Amendment, will be duly authorized and validly issued, fully paid and nonassessable.

	5.
	The
offer and sale of the Purchased Shares and the Warrants to the Investors in accordance with the Agreement, and (assuming no change in currently applicable law) the issuance of the
Conversion Shares solely to Investors pursuant to the Restated Certificate and Certificate of Amendment for no additional consideration other than the surrender of the converted Purchased Shares, the
issuance of Warrant Shares solely to Investors for no additional consideration other than that set forth in the Warrants, and the issuance of Conversion Shares solely to Investors pursuant to the
Restated Certificate and Certificate of Amendment for no additional consideration other than the surrender of the converted Warrant Shares, are, and in the case of each such issuance of Conversion
Shares will be, exempt from the registration and prospectus delivery requirements of Section 5 of the 1933 Act and the securities registration requirements of the currently effective provisions
of the securities laws of the State of California.

	6.
	No
consent or approval of, or other action by or filing with, any court or administrative or governmental body that has not been obtained, taken or made is required under United States
federal or California State law or the Delaware General Corporation Law, for the Company to execute and deliver the Closing Agreements and to consummate the transactions provided for therein to be
performed as of the Closing, except such as have been obtained or made, and except for (a) the filing of such reports and information with the SEC under the Exchange Act, and the rules and
regulations promulgated by the SEC thereunder, as may be required in connection with the Closing Agreements and the transactions provided for therein and (b) notices to be filed by the Company
pursuant to the presently effective securities laws of the State of California, which notices are to be filed after the Closing.

	7.
	We
are not aware that there is any order, writ, injunction, judgment or decree of any court or governmental agency or instrumentality to which the Company is subject which questions
the validity of the Closing Agreements or any action to be taken by the Company in connection therewith, nor are we aware of any litigation pending against the Company, or that the Company has
received any overt written threat thereof, which, if determined adversely, would reasonably be expected to have a material adverse effect on the Company's finances or business. 

        In
rendering the opinions above, we are opining only as to the specific legal issues expressly set forth herein, and no opinion shall be inferred as to other matters. This opinion is
intended solely for the Investors' use for the purpose of the above transaction, and is not to be made available to, or relied upon for, any other purpose or by any other person or entity, without our
prior written consent. We assume no obligation to advise you of any fact, circumstance, event or change in the law or the 

4

 

facts that may hereafter be brought to our attention whether or not such occurrence would affect or modify the opinions expressed herein. 

Very
truly yours, 

FENWICK & WEST LLP

By:  

David
W. Healy, a Partner 

5

 
 

ATTACHMENT A
  Review    
  

	(1)
	The
Agreement, the Warrants, the Investors' Rights Agreement (the "Rights Agreement"), and the Stockholder Agreement among the
Investors and the Company and the Voting Agreement among the Investors, the Company and certain stockholders (such agreements are collectively referred to as the "Closing
Agreements").

	(2)
	A
copy of the Company's Second Amended and Restated Certificate of Incorporation, certified by the Delaware Secretary of State
on                        , 2002 (the
"Restated Certificate").

	(3)
	A
copy of the Certificate of Amendment to the Restated Certificate (the "Certificate of Amendment"), certified by the Delaware
Secretary of State on                        , 2002

	(4)
	A
copy of the Company's Restated Bylaws certified by the Company's Secretary on                        , 2002 (the "Bylaws").

	(5)
	The
Certificate of Incorporation of the Company filed with the Secretary of State of the State of Delaware upon the Company's incorporation, the bylaws of the Company initially
adopted by the Company and minutes of meetings and actions by written consent of the Company's incorporator(s), stockholders and Board of Directors that are contained in the Company's minute books
furnished to us by the Company (the "Minute Book Contents").

	(6)
	The
minutes of the meeting on January 29, 2002, of the Board of Directors of the Company and the special meeting
on                        , 2002 of the stockholders of the Company
approving the Certificate of Amendment, Closing Agreements and transactions contemplated thereby, provided to us by the Company and certified by the Company's Secretary
on                        , 2002.

	(7)
	Written
verification from Equiserve Trust Company, N.A., the Company's transfer agent, as to the number of issued and outstanding shares of the Company's capital stock on
                        , 2002, as well as the Company's lists of stock options, warrants and other securities issued by the
Company (collectively, the "Stock
Records").

	(8)
	The
certificates delivered by the Company and/or certain of its directors, officers and stockholders, at the Closing (collectively, the "Closing
Documents").

	(9)
	A
Management Certificate addressed to us and dated of even date herewith executed by the Company (the "Management Certificate").

	(10)
	A
Certificate of Good Standing regarding the Company issued by the Delaware Secretary of State, dated                        , 2002.

	(11)
	A
Certificate of Status as a Foreign Corporation regarding the Company issued by the California Secretary of State,
dated                        , 2002.

	(12)
	A
letter from the California Franchise Tax Board dated                        , 2002, to the effect that the Company was in good
standing with the California Franchise Tax Board as of such
date (together with certificates listed in (10) and (11), the "Certificates of Good Standing").

	(13)
	The
Material Agreements. 

QuickLinks

Exhibit 10.28

GRIC Communications, Inc. Series A Preferred Stock And Warrant Purchase Agreement

RECITALS

ARTICLE 1 DEFINITIONS

ARTICLE 2 AUTHORIZATION AND SALE OF PREFERRED STOCK AND WARRANTS

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

ARTICLE 5 CONDITIONS TO PURCHASERS'S OBLIGATIONS AT THE CLOSING

ARTICLE 6 CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING

ARTICLE 7 COVENANTS

ARTICLE 8 MISCELLANEOUS

List of Exhibits

Exhibit A Schedule of Investors

Exhibit B INVESTORS' RIGHTS AGREEMENT

EXHIBIT A Schedule of Investors

Exhibit C STOCKHOLDER AGREEMENT

EXHIBIT A Schedule of Investors

Exhibit D CERTIFICATE OF AMENDMENT OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF GRIC COMMUNICATIONS, INC.

Article IV

Exhibit E

Exhibit 1

Exhibit F

ATTACHMENT A Review

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