{"id":43022,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/agreement-and-plan-of-merger-and-reorganization-sonicwall-in3.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"agreement-and-plan-of-merger-and-reorganization-sonicwall-in3","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/agreement-and-plan-of-merger-and-reorganization-sonicwall-in3.html","title":{"rendered":"Agreement and Plan of Merger and Reorganization &#8211; SonicWALL Inc. and Phobos Corp."},"content":{"rendered":"<pre>\n================================================================================\n\n                AGREEMENT AND PLAN OF MERGER AND REORGANIZATION\n\n                                     among\n\n                                SONICWALL, INC.,\n\n                            PLUTO ACQUISITION CORP.,\n\n                               PHOBOS CORPORATION\n\n                                      and\n\n                         GMS CAPITAL PARTNERS, L.P. as\n\n                          STOCKHOLDERS' REPRESENTATIVE\n\n                          Dated as of October 16, 2000\n\n================================================================================\n\n \n                               TABLE OF CONTENTS\n                               -----------------\n\n\n                                                                           Page\n                                                                           ----\n                                                                          \nARTICLE I  THE MERGER................................................         2\n     SECTION 1.01  The Merger........................................         2\n     SECTION 1.02  Effective Time; Closing...........................         2\n     SECTION 1.03  Effect of the Merger..............................         3\n     SECTION 1.04  Articles of Incorporation; Bylaws.................         3\n     SECTION 1.05  Directors and Officers............................         3\n\nARTICLE II  MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES...........         3\n     SECTION 2.01  Merger Consideration..............................         3\n     SECTION 2.02  Contingent Deferred Merger Consideration..........         5\n     SECTION 2.03  Exchange of Certificates..........................         7\n     SECTION 2.04  Stock Transfer Books..............................         9\n     SECTION 2.05  Company Stock Options.............................        10\n     SECTION 2.06  Dissenting Shares.................................        10\n\nARTICLE III  REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........        11\n     SECTION 3.01  Organization and Qualification....................        11\n     SECTION 3.02  Articles of Incorporation and Bylaws..............        11\n     SECTION 3.03  No Subsidiaries...................................        12\n     SECTION 3.04  Capitalization....................................        12\n     SECTION 3.05  Authority Relative to This Agreement..............        14\n     SECTION 3.06  No Conflict; Required Filings and Consents........        14\n     SECTION 3.07  Permits; Compliance...............................        15\n     SECTION 3.08  Financial Statements..............................        15\n     SECTION 3.09  Absence of Certain Changes or Events..............        16\n     SECTION 3.10  Absence of Litigation.............................        16\n     SECTION 3.11  Employee Benefit Plans; Labor Matters.............        17\n     SECTION 3.12  Contracts.........................................        19\n     SECTION 3.13  Environmental Matters.............................        21\n     SECTION 3.14  Intellectual Property.............................        22\n     SECTION 3.15  Returns and Complaints............................        23\n     SECTION 3.16  Taxes.............................................        23\n     SECTION 3.17  Vote Required.....................................        24\n     SECTION 3.18  Assets............................................        24\n     SECTION 3.19  Owned Real Property...............................        25\n     SECTION 3.20  Certain Interests.................................        25\n     SECTION 3.21  Insurance Policies................................        25\n     SECTION 3.22  Brokers...........................................        26\n     SECTION 3.23  State Takeover Statutes...........................        26\n     SECTION 3.24  Customers and Suppliers...........................        26\n     SECTION 3.25  Inventory.........................................        26\n     SECTION 3.26  Accounts Receivable, Bank Accounts................        26\n \n\n                                       i\n\n \n \n                                                                          \n     SECTION 3.27  Powers of Attorney................................        27\n     SECTION 3.28  Offers............................................        27\n     SECTION 3.29  Warranties........................................        27\n     SECTION 3.30  Books and Records.................................        27\n     SECTION 3.31  Tax Matters.......................................        27\n     SECTION 3.32  No Misstatements..................................        27\n\nARTICLE IV  REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..        28 \n     SECTION 4.01  Organization and Qualification....................        28\n     SECTION 4.02  Authority Relative to This Agreement..............        28\n     SECTION 4.03  Capital Structure.................................        29\n     SECTION 4.04  No Conflict; Required Filings and Consents........        29\n     SECTION 4.05  SEC Filings; Financial Statements.................        30\n     SECTION 4.06  Interim Operations of Merger Sub..................        30\n     SECTION 4.07  Valid Issuance of Parent Shares...................        30\n     SECTION 4.08  Brokers...........................................        31\n     SECTION 4.09  No Parent Shareholder Vote........................        31\n     SECTION 4.10  Permits...........................................        31\n     SECTION 4.11  Absence of Change.................................        31\n     SECTION 4.12  Absence of Litigation.............................        31\n     SECTION 4.13  Material Contracts................................        31\n\nARTICLE V  CONDUCT OF BUSINESSES PENDING THE MERGER..................        32\n     SECTION 5.01  Conduct of Business by the Company and the \n           Subsidiaries Pending the Merger...........................        32\n     SECTION 5.02  Notification of Certain Matters...................        35\n\nARTICLE VI  ADDITIONAL AGREEMENTS....................................        35\n     SECTION 6.01  Stockholder Approval..............................        35\n     SECTION 6.02  Access to Information; Confidentiality............        36\n     SECTION 6.03  No Solicitation of Transactions...................        36\n     SECTION 6.04  Employee Benefits Matters.........................        37\n     SECTION 6.05  Further Action; Consents; Filings.................        38\n     SECTION 6.06  Plan of Reorganization............................        40\n     SECTION 6.07  No Public Announcement............................        40\n     SECTION 6.08  Expenses..........................................        40\n     SECTION 6.09 Voting Agreements..................................        40\n     SECTION 6.10  Indemnification of Officers and Directors.........        40\n     SECTION 6.11  Nasdaq National Market Listing....................        41\n     SECTION 6.12  Registration on Form S-3..........................        41\n     SECTION 6.13  Board Observation Rights..........................        41\n     SECTION 6.14  Contingent Deferred Merger Consideration..........        41\n     SECTION 6.15  No Requirement of Parent Shareholder Vote.........        41\n\nARTICLE VII  CONDITIONS TO THE MERGER................................        42\n     SECTION 7.01  Conditions to the Obligations of Each Party.......        42\n \n\n                                      ii\n\n \n \n                                                                          \n     SECTION 7.02  Conditions to the Obligations of Parent and  \n          Merger Sub.................................................        42\n     SECTION 7.03  Conditions to the Obligations of the Company......        45\n\nARTICLE VIII  TERMINATION, AMENDMENT AND WAIVER......................        45\n     SECTION 8.01  Termination.......................................        45\n     SECTION 8.02  Effect of Termination.............................        46\n     SECTION 8.03  Amendment.........................................        46\n     SECTION 8.04  Waiver............................................        46\n\nARTICLE IX  INDEMNIFICATION..........................................        47\n     SECTION 9.01  Survival of Representations and Warranties........        47\n     SECTION 9.02  Indemnification by the Stockholders...............        47\n     SECTION 9.03  Indemnification Procedures........................        48\n     SECTION 9.04  Stockholders' Representative......................        49\n\nARTICLE X  GENERAL PROVISIONS........................................        50\n     SECTION 10.01  Notices..........................................        50\n     SECTION 10.02  Certain Definitions..............................        51\n     SECTION 10.03  Severability.....................................        56\n     SECTION 10.04  Assignment; Binding Effect; Benefit..............        56\n     SECTION 10.05  Incorporation of Exhibits........................        56\n     SECTION 10.06  Specific Performance.............................        56\n     SECTION 10.07  Governing Law; Forum.............................        56\n     SECTION 10.08  Time of The Essence..............................        57\n     SECTION 10.09  Waiver of Jury Trial.............................        57\n     SECTION 10.10  Construction.....................................        57\n     SECTION 10.11  Further Assurances...............................        57\n     SECTION 10.12  Headings.........................................        57\n     SECTION 10.13  Counterparts.....................................        57\n     SECTION 10.14  Entire Agreement.................................        57\n\n\n\nExhibit A      Form of Voting Agreement\nExhibit B      Articles of Incorporation of Merger Sub\nExhibit C      Bylaws of Merger Sub\nExhibit D      Form of Escrow Agreement\nExhibit E      Form of Company Counsel Legal Opinion\nExhibit F      Form of Parent Special Counsel Legal Opinion\n\n                                      iii\n\n \n                AGREEMENT AND PLAN OF MERGER AND REORGANIZATION\n\n          AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of October\n16, 2000 (this \"Agreement\"), among SONICWALL INC., a California corporation\n                ---------                                                  \n(\"Parent\"), PLUTO ACQUISITION CORP., a Utah corporation and a wholly owned\n--------                                                                  \nsubsidiary of Parent (\"Merger Sub\"), PHOBOS CORPORATION, a Utah corporation (the\n                       ----------                                               \n\"Company\"), and GMS CAPITAL PARTNERS, L.P., a Delaware limited partnership, as\n -------                                                                      \nStockholders' Representative (as defined in Section 9.05 hereof).\n\n                              W I T N E S S E T H\n\n          WHEREAS, upon the terms and subject to the conditions of this\nAgreement and in accordance with the Utah Revised Business Corporation Act (the\n\"URBCA\"), Parent and the Company will enter into a business combination\n -----                                                                 \ntransaction pursuant to which Merger Sub will merge with and into the Company\n(the \"Merger\");\n      ------   \n\n          WHEREAS, the Board of Directors of the Company has (i) determined that\nthe Merger is consistent with and in furtherance of the long-term business\nstrategy of the Company and fair to, and in the best interests of, the Company\nand its stockholders, (ii) approved this Agreement, the Merger, and the other\ntransactions contemplated by this Agreement, and (iii) determined to unanimously\nrecommend that the stockholders of the Company adopt and approve the principal\nterms of this Agreement and approve the Merger;\n\n          WHEREAS, the Boards of Directors of each of Parent and Merger Sub have\n(i) determined that the Merger is consistent with and in furtherance of the\nlong-term business strategy of Parent and fair to, and in the best interests of,\nParent and its stockholders and (ii) approved this Agreement, the Merger, and\nthe other transactions contemplated by this Agreement;\n\n          WHEREAS, for federal income tax purposes, the Merger is intended to\nqualify as a reorganization under the provisions of Section 368(a) of the United\nStates Internal Revenue Code of 1986, as amended (the \"Code\");\n                                                       ----   \n\n          WHEREAS, pursuant to the Merger, each outstanding share of the common\nstock of the Company (the \"Company Common Stock\") and all outstanding options or\n                           --------------------                                 \nother rights to acquire or receive shares of Company Common Stock shall be\nconverted into the right to receive shares of Parent's authorized common stock\n(\"Parent Common Stock\") and cash, at the rate determined in this Agreement, and\n  -------------------                                                          \nSeries A Preferred Stock of the Company (the \"Company Series A Preferred\n                                              --------------------------\nStock\"), Series B Preferred Stock of the Company (the \"Company Series B\n-----                                                  ----------------\nPreferred Stock\") and Series C Preferred Stock of the Company (the \"Company\n---------------                                                     -------\nSeries C Preferred Stock\") shall be cancelled as described herein.  The Company\n------------------------                                                       \nSeries A Preferred Stock, the Company Series B Preferred Stock and the Company\nSeries C Preferred Stock are collectively referred to herein as the \"Company\n                                                                     -------\nPreferred Stock,\" and the Company Common Stock and the Company Preferred Stock\n---------------                                                               \nare collectively referred to herein as the \"Company Stock\";\n                                            -------------  \n\n                                       1\n\n \n          WHEREAS, as a condition and inducement to Parent's and Merger Sub's\nentering into this Agreement and incurring the obligations set forth herein,\nconcurrently with the execution and delivery of this Agreement, Parent is\nentering into a voting agreement with substantially all of the stockholders of\nCompany (the \"Stockholders\"), dated the date hereof (a \"Voting Agreement\") and\n              ------------                              ----------------      \nsubstantially in the form attached hereto as Exhibit A;\n                                             --------- \n\n          WHEREAS, a portion of the Parent Common Stock otherwise issuable by\nParent in connection with the Merger shall be placed in escrow by Parent, the\nrelease of which amount shall be contingent upon certain events and conditions,\nall as set forth in this Agreement and the Escrow Agreement (as defined in\nSection 2.03(b));\n\n          WHEREAS, up to $20,000,000 shall be reserved for payment upon the\nachievement by the Surviving Corporation (as defined in Section 1.01) of certain\nquarterly revenue targets;\n\n          WHEREAS, concurrently with the execution of this Agreement, and as a\ncondition and inducement to Parent's willingness to enter into this Agreement,\ncertain employees of the Company are entering into Employment Agreements (as\ndefined in Section 6.04(b)); and\n\n          WHEREAS, certain capitalized terms used in this Agreement are defined\nin Section 10.02 of this Agreement.\n\n          NOW, THEREFORE, in consideration of the foregoing and the mutual\ncovenants and agreements herein contained, and intending to be legally bound\nhereby, Parent, Merger Sub and the Company hereby agree as follows:\n\n                                   ARTICLE I\n\n                                  THE MERGER\n                                  ----------\n\n               SECTION 1.01   The Merger. Upon the terms and subject to the\n                              ----------\nconditions set forth in Article VII, and in accordance with the URBCA, at the\nEffective Time (as defined in Section 1.02), Merger Sub shall be merged with and\ninto the Company. As a result of the Merger, the separate corporate existence of\nMerger Sub shall cease, and the Company shall continue as the surviving\ncorporation of the Merger (the \"Surviving Corporation\"), provided however, that\n                                ---------------------\nin the event that the provisions of this Section 1.01 would preclude the Merger\nfrom qualifying as a tax-free reorganization under the provisions of section\n368(a) of the Code, then the Company shall be merged with and into Merger Sub,\nthe separate corporate existence of the Company shall cease, the Merger Sub\nshall continue as the Surviving Corporation and the terms of this Agreement\nshall be adjusted accordingly.\n\n               SECTION 1.02   Effective Time; Closing. As promptly as\n                              -----------------------\npracticable following the satisfaction or, if permissible, waiver of the\nconditions set forth in Article VII (or such other date as may be agreed by each\nof the parties hereto), the parties hereto shall cause the Merger to be\nconsummated by filing the Articles of Merger with the Secretary of State of the\nState of Utah. The term \"Effective Time\" means the date and time of such filing\n                         -------------- \n(or such later time as may be agreed by each of the parties hereto and specified\nin the Articles of Merger). Immediately prior to the filing of the Certificate\nof Merger, a closing (the \"Closing\") will be held \n                           -------\n\n                                       2\n\n \nat the offices of Gunderson Dettmer Stough Villeneuve Franklin &amp; Hachigian, LLP,\n155 Constitution Drive, Menlo Park, California 94025 (or such other place as the\nparties may agree). The date on which the Closing shall occur is referred to\nherein as the \"Closing Date.\"\n               ------------\n\n               SECTION 1.03   Effect of the Merger. At the Effective Time, the\n                              --------------------\neffect of the Merger shall be as provided in the applicable provisions of the\nURBCA. Without limiting the generality of the foregoing, and subject thereto, at\nthe Effective Time, all the property, rights, privileges, powers and franchises\nof each of the Company and Merger Sub shall vest in the Surviving Corporation,\nand all debts, liabilities, obligations, restrictions, disabilities and duties\nof each of the Company and Merger Sub shall become the debts, liabilities,\nobligations, restrictions, disabilities and duties of the Surviving Corporation.\n\n               SECTION 1.04   Articles of Incorporation; Bylaws.\n                              --------------------------------- \n\n               (a)  At the Effective Time, the Articles of Incorporation of\nMerger Sub, attached hereto as Exhibit B, shall be the Articles of Incorporation\n                               ---------\nof the Surviving Corporation until thereafter amended as provided by law and\nsuch Articles of Incorporation.\n\n               (b)  At the Effective Time, the Bylaws of Merger Sub, as in\neffect immediately prior to the Effective Time, attached hereto as Exhibit C,\n                                                                   ---------\nshall be the Bylaws of the Surviving Corporation until thereafter amended as\nprovided by law, the Articles of Incorporation of the Surviving Corporation and\nsuch Bylaws.\n\n               SECTION 1.05   Directors and Officers. The directors of Merger\n                              ----------------------\nSub immediately prior to the Effective Time shall be the initial directors of\nthe Surviving Corporation, each to hold office in accordance with the Articles\nof Incorporation and Bylaws of the Surviving Corporation, and the officers of\nthe Merger Sub immediately prior to the Effective Time shall be the initial\nofficers of the Surviving Corporation, in each case until their respective\nsuccessors are duly elected or appointed and qualified.\n\n                                  ARTICLE II\n\n                MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES\n                ----------------------------------------------\n\n               SECTION 2.01    Merger Consideration.\n                               --------------------\n\n               (a)  At the Effective Time, by virtue of the Merger and without\nany action on the part of Parent, Merger Sub, the Company or the holders of any\nof the following securities:\n\n                    (i)  each share of Company Common Stock issued and\noutstanding immediately prior to the Effective Time (other than any shares of\nCompany Common Stock to be canceled pursuant to Section 2.01(a)(ii) and any\nDissenting Shares (as defined in Section 2.06)) shall be converted into the\nright to receive the Common Stock Exchange Ratio (as defined in Section 2.01(b))\nand the Pro Rata Cash Distribution (as defined in Section 2.01(b));\n\n                                       3\n\n \n                    (ii)      each share of Company Common Stock held in the\ntreasury of the Company and each share of Company Common Stock owned by Parent\nor any direct or indirect wholly owned subsidiary of Parent or of the Company\nimmediately prior to the Effective Time shall be cancelled and extinguished\nwithout any conversion thereof and no payment or distribution shall be made with\nrespect thereto; and\n\n                    (iii)     each share of common stock, no par value, of\nMerger Sub issued and outstanding immediately prior to the Effective Time shall\nbe converted into and exchanged for one validly issued, fully paid and\nnonassessable share of common stock, par value $0.0001 per share, of the\nSurviving Corporation; and\n\n                    (iv)      each share of Company Preferred Stock issued and\noutstanding immediately prior to the Effective Time shall be cancelled and\nextinguished without any conversion thereof and no payment or distribution shall\nbe made with respect thereto.\n\n               (b)  As used in this Agreement, the following terms have the\nfollowing meanings:\n\n                    (i)       \"Aggregate Common Merger Consideration\" means\n                               -------------------------------------\n12,200,000 shares of Common Stock of Parent (the \"Parent Shares\").\n                                                  -------------   \n\n                    (ii)      \"Common Stock Exchange Ratio\" means the number of\n                               ---------------------------\nParent Shares determined by dividing (x) the amount equal to the Aggregate\nCommon Merger Consideration by (y) the Fully Diluted Common Shares Amount (as\ndefined below).\n\n                    (iii)     \"Escrow Shares\" means the number of Parent Shares\n(rounded up to the next whole number) determined by multiplying the Aggregate\nCommon Merger Consideration (less the number of shares equal to the product of\n(x) the number of Company Options times (y) the Common Stock Exchange Ratio) by\n0.10.\n\n                    (iv)      \"Fully Diluted Common Shares Amount\" means a\n                               ----------------------------------\nnumber of shares of Company Common Stock equal to the sum of (x) the number of\nshares of Company Common Stock issued and outstanding immediately prior to the\nEffective Time and (y) the number of shares of Company Common Stock issuable\nupon exercise, conversion or exchange of all securities issued and outstanding\nimmediately prior to the Effective Time that are exercisable, convertible or\nexchangeable for shares of Company Common Stock, including, without limitation,\nthe Company Options (as defined in Section 2.04 below), whether or not\nexercisable and whether or not vested, in each case after giving effect to the\ncancellations contemplated by Section 2.01(a)(ii) above.\n\n                    (v)       \"Pro Rata Cash Distribution\" means the amount of\n                               --------------------------\ncash consideration per share determined by dividing (x) $30,000,000 plus the\namount of net proceeds received by the Company resulting from any Bridge B\nConvertibles Notes issued by the Company on or after the date hereof and prior\nto the Effective Time resulting in aggregate net proceeds of at least $5,000,000\n(\"Financing Proceeds\") less the amount of any cash consideration paid pursuant\n  ------------------\nto Section 3 of the Option Assumption Agreements described in Section 6.04(c),\nand less any principal amount outstanding at the Effective Time of Bridge B\nConvertible Notes and less any expenses set forth on Schedule 6.08 that are\nincurred by the \n\n                                       4\n\n \nCompany by (y) the number of shares of Company Common Stock issued and\noutstanding immediately prior to the Effective Time plus the number of shares of\nCompany Stock issuable upon exercise of warrants to purchase Company Stock\nissued and outstanding immediately prior to the Effective Time.\n\n               (c)  If, during the period between the date hereof and the\nEffective Time, any change in the capital stock of Parent shall occur by reason\nof reclassification, recapitalization, stock split or combination, exchange or\nreadjustment of shares, or any stock dividend thereon with a record date during\nsuch period or any similar event, the Aggregate Common Merger Consideration, the\nCommon Exchange Ratio and the Escrow Shares shall be adjusted proportionately.\n\n               SECTION 2.02   Contingent Deferred Merger Consideration.\n                              ---------------------------------------- \n\n               (a)  Aggregate Contingent Deferred Merger Consideration of up to\n$20,000,000 in cash will be distributed to holders of Company Common Stock as of\nthe date of the Closing upon achievement of quarterly revenue targets in\naccordance with Schedule 2.02(a) hereto; provided, however, that Parent, Merger\n                                         -----------------\nSub and the Company agree that any contingencies with respect to such Contingent\nDeferred Merger Consideration shall be waived and the maximum amount of\nContingent Deferred Merger Consideration shall be immediately payable to such\nholders of Company Common Stock upon a Change of Control Event (as defined in\nSection 2.02(c) below) following the Closing.\n\n               (b)  Each holder of Company Common Stock as of the date of the\nClosing shall be entitled, without any action on the part of such holder, to\nreceive such holder's Pro Rata Contingent Distribution (as defined in Section\n2.02(c) below) upon each payment of Contingent Deferred Merger Consideration to\nbe paid pursuant to Section 2.02(a).\n\n               (c)  As used in this agreement, the following terms have the\nfollowing meanings:\n\n                    (i)  \"Contingent Deferred Merger Consideration\" means the\n                          ----------------------------------------\namount of cash payable upon the achievement of quarterly revenue milestones as\nset forth on Schedule 2.02(a) hereto less any contingent merger consideration\npayable pursuant to Section 3 of the Option Assumption Agreements described in\nSection 6.04(c).\n\n                    (ii) \"Change of Control Event\" means the occurrence of any\n                          -----------------------\nof the following: (a) a Person is or becomes the Beneficial Owner, directly or\nindirectly, of securities of Parent representing twenty percent (20%) or more of\nthe combined voting power of Parent's then outstanding securities; or (b)\nindividuals who at the Closing Date constitute the Board of Directors of Parent\nand any new director, whose election to the Board or nomination for election to\nthe Board by the Parent's stockholders was approved by a vote of at least two-\nthirds (2\/3) of the directors then still in office who either were directors at\nthe Closing Date or whose election to the Board or nomination for election to\nthe Board by Parent's stockholders was approved by a vote of at least two-thirds\n(2\/3) of the directors then still in office who either were directors at the\nClosing Date or whose election or nomination for election was previously so\napproved, cease for any reason to constitute a majority of the Board; or (c) the\nstockholders of \n\n                                       5\n\n \nParent approve (i) a merger or consolidation of Parent with any corporation or\nother entity other than a merger or consolidation which would result in the\nholders of the voting securities of Parent outstanding immediately prior thereto\nholding immediately thereafter securities representing more than fifty percent\n(50%) of the combined voting power of the voting securities of Parent or such\nsurviving entity outstanding immediately after such merger or consolidation (ii)\na plan of complete liquidation of Parent or an (iii) agreement for the sale or\ndisposition by Parent of all or substantially all of Parent's assets; provided,\nhowever, that if such a merger, consolidation, plan of liquidation or sale of\nsubstantially all assets is not consummated following such stockholder approval\nand the transaction is abandoned, then the Change of Control shall be deemed not\nto have occurred. Notwithstanding the foregoing, in no event shall a Change of\nControl be deemed to occur as the result of the formation of a holding company.\n\n               (iii)  \"Pro Rata Contingent Distribution\" equals (x) the amount\n                       --------------------------------\nof Contingent Deferred Merger Consideration divided by (y) the number of shares\nof Company Common Stock issued and outstanding immediately prior to the\nEffective Time.\n\n          (d)  Within thirty (30) days after the end of each quarterly period\nduring which Contingent Deferred Merger Consideration can be earned, Parent\nshall deliver to the Stockholders' Representative by overnight courier, return\nreceipt requested, accompanied by a statement of Revenues (as defined in\nSchedule 2.02(a)) for such period and a statement of the amount of the\nContingent Deferred Merger Consideration payable as a result thereof, if any.\nParent shall concurrently deliver to the Exchange Agent written instructions\ndirecting that such Contingent Deferred Merger Consideration be distributed as\nprovided herein.  Stockholders' Representative and its representatives shall\nhave thirty (30) days thereafter to review and consider such statements and the\nbooks and records which shall be maintained by Parent relating thereto, during\nwhich thirty (30) day period, at the request of the Stockholders'\nRepresentative, Parent and the Stockholders' Representative shall meet at\nParent's headquarters to discuss said statements.  At the end of such thirty\n(30) days period, Stockholder's Representative shall by written notice delivered\nto Parent accept or object to such statements.\n\n          (e)  If the Stockholders' Representative shall object to statements\nprovided pursuant to the immediately preceding paragraph, the parties shall\nendeavor in good faith to resolve such objection within ten (10) business days\nafter notice of the objection is transmitted by the Stockholders' Representative\nto Parent in writing. If the parties are unable to resolve such dispute within\nsuch 10-business-day period, then the parties shall refer the dispute to a\nnationally recognized independent accounting firm reasonably acceptable to the\nStockholders' Representative and Parent. Such accounting firm shall report to\nthe parties its resolution of the dispute within sixty (60) days thereafter and\nthe decision of said accounting firm shall be final and binding on the parties.\nAll of the fees and expenses of the independent accounting firm shall be paid by\nthe Parent unless the Revenues are equal to or less than stated in the statement\nprepared by Parent, in which case they shall be collected by delivery to Parent\nof Parent Shares held under the Escrow Agreement, which Parent Shares shall have\nvalue, determined as provided in Section 9.02 hereof, equal to the amount of\nsuch fees and expenses. If as the result of the resolution of any objections or\ndispute it is determined or agreed that additional Contingent Deferred Merger\nConsideration is distributable under this Section, Parent shall promptly deliver\nto the Exchange Agent written instructions directing that such Contingent\nDeferred Merger Consideration be distributed as provided herein.\n\n                                       6\n\n \n               SECTION 2.03   Exchange of Certificates.\n                              ------------------------ \n\n               (a)  Exchange Procedures. From and after the Effective Time,\n                    -------------------\nBoston EquiServe or another bank or trust company to be designated by Parent\nshall act as exchange agent (the \"Exchange Agent\") in effecting the exchange of\n                                  --------------\nthe applicable Parent Shares for certificates which immediately prior to the\nEffective Time represented outstanding shares of Company Stock (\"Company Share\n                                                                 -------------\nCertificates\") and which were converted into the right to receive the applicable\n------------\nParent Shares pursuant to Section 2.01. As promptly as practicable after the\nEffective Time, Parent and the Exchange Agent shall mail to each record holder\nof Company Share Certificates a letter of transmittal (the \"Letter of\n                                                            ---------\nTransmittal\") in a form approved by Parent and the Company and instructions for\n-----------\nuse in surrendering such Company Share Certificates and receiving Parent Shares\npursuant to Section 2.01 therefor. Promptly after the Effective Time, but in no\nevent later than 20 business days following the Effective Time, Parent shall\ncause to be deposited in trust with the Exchange Agent the Parent Shares (and\ncash in lieu of fractional shares pursuant to Section 2.03(e)) and the aggregate\nPro Rata Cash Distribution.\n\n          Upon the surrender of each Company Share Certificate for cancellation\nto the Exchange Agent, together with a properly completed Letter of Transmittal\nand such other documents as may reasonably be required by Parent:\n\n                         (i)  the holder of such Company Share Certificate shall\nbe entitled to receive in exchange therefor the applicable Parent Shares (and\ncash in lieu of fractional shares pursuant to Section 2.03(e)) and the payment\nof the Pro Rata Cash Distribution and, upon any payment of Contingent Deferred\nMerger Consideration, such holder's Pro Rata Contingent Distribution; and\n\n                         (ii) the Company Share Certificate so surrendered shall\nforthwith be cancelled.\n\n                         In the event of a transfer of ownership of shares of\nCompany Stock that is not registered in the transfer records of the Company, the\napplicable Parent Shares, Pro Rata Cash Distribution and Pro Rata Contingent\nDistribution may be issued to a person other than the person in whose name the\nCompany Share Certificate so surrendered is registered if the Company Share\nCertificate representing such shares of Company Stock is presented to Parent,\naccompanied by all documents required to evidence and effect such transfer and\nevidence that (i) the shares are transferable and (ii) any applicable stock\ntransfer taxes have been paid.\n\n                         Until surrendered as contemplated by this Article II,\neach Company Share Certificate shall, subject to appraisal rights under Utah Law\nand Section 2.06, be deemed at any time after the Effective Time to represent\nonly the right to receive upon surrender the applicable Parent Shares and Pro\nRata Cash Distribution with respect to the shares of Company Stock formerly\nrepresented thereby to which such holder is entitled pursuant to Section 2.01,\ncash in lieu of any fractional shares pursuant to Section 2.03(e), and any Pro\nRata Contingent Distribution payable to such holder pursuant to Section 2.02.\n\n                    (b)  Escrow Fund.  Prior to or simultaneously with the\n                         -----------\nClosing, the Stockholders' Representative and Parent shall enter into an escrow\nagreement (the \"Escrow \n                ------ \n\n                                       7\n\n \nAgreement\") with an escrow agent selected by Parent and reasonably acceptable to\n---------\nthe Stockholders' Representative (the \"Escrow Agent\") substantially in the form\n                                       ------------\nof Exhibit C hereto. Pursuant to the terms of the Escrow Agreement, at the\n    --------\nClosing, Parent shall deposit one or more certificates representing, in the\naggregate, the Escrow Shares otherwise issuable into an escrow account, which\naccount is to be managed by the Escrow Agent (the \"Escrow Account\"). In\n                                                   --------------\nconnection with such deposit of the Escrow Shares with the Escrow Agreement and\nas of the Effective Time, each holder of Company Stock will be deemed to have\nreceived and deposited with the Escrow Agent each stockholder's pro rata\ninterest in the Escrow Shares as determined as of the Closing by reference to\nsuch stockholder's ownership of shares of Common Stock (plus any additional\nshares as may be issued upon any stock split, stock dividend or recapitalization\neffected by Parent after the Effective Time with respect to shares constituting\nthe Escrow Account), without any act of any stockholder. Distributions of any\nEscrow Shares from the Escrow Account shall be governed by the terms and\nconditions of the Escrow Agreement (any Escrow Shares in the Escrow Account\nbeing referred to as the \"Escrow Fund\"). The adoption of this Agreement and the\n                          -----------\napproval of the Merger by the Company Stockholders shall constitute approval of\nthe Escrow Agreement and of all the arrangements relating thereto, including\nwithout limitation the placement of the Escrow Shares in escrow and the\nappointment of the Stockholders' Representative. No portion of the Escrow Fund\nshall be contributed in respect of any Company Options or any warrant or other\nsecurity exercisable or convertible into Company Common Stock. No Parent Shares\ncontributed to the Escrow Fund shall be unvested or subject to any right of\nrepurchase, risk of forfeiture or other condition in favor of the Surviving\nCorporation.\n\n               (c)  Distributions with Respect to Unexchanged Parent Shares.  No\n                    -------------------------------------------------------\ndividends or other distributions declared or made after the Effective Time with\nrespect to Parent Shares comprising part of the Aggregate Merger Consideration\nwith a record date after the Effective Time shall be paid to the holder of any\nunsurrendered Company Share Certificate with respect to the Parent Shares\nrepresented thereby until the holder of such Company Share Certificate shall\nsurrender such Company Share Certificate in accordance with this Section 2.03.\n\n               (d)  No Further Rights in Company Stock.  All Parent Shares\n                    ----------------------------------\nissued upon conversion of shares of Company Stock in accordance with the terms\nhereof (and any cash paid in lieu of fractional shares pursuant to Section\n2.03(e)) shall be deemed to have been issued in full satisfaction of all rights\npertaining to such shares of Company Stock.\n\n               (e)  No Fractional Shares. No certificates or scrip representing\n                    --------------------\nfractional Parent Shares shall be issued upon the surrender for exchange of\nCompany Share Certificates, and such fractional share interests will not entitle\nthe owner thereof to vote or to any other rights of a stockholder of Parent.\nEach holder of a fractional share interest shall be paid an amount in cash\n(without interest) equal to the product obtained by multiplying (i) such\nfractional share interest to which such holder (after taking into account all\nfractional share interests then held by such holder) would otherwise be entitled\nby the average of the closing sales price of a Parent Share as reported on the\nNasdaq National Market for each of the five consecutive trading days ending on\nthe trading day immediately preceding the Closing.\n\n               (f)  No Liability.  Neither Parent nor the Surviving Corporation\n                    ------------\nshall be liable to any holder of shares of Company Stock for any such shares of\nCompany Stock (or \n\n                                       8\n\n \ndividends or distributions with respect thereto) or cash properly and legally\ndelivered to a public official pursuant to any abandoned property, escheat or\nsimilar law.\n\n               (g)  Withholding Rights. Each of the Surviving Corporation and\n                    ------------------ \nParent shall be entitled to deduct and withhold from the consideration otherwise\npayable pursuant to this Agreement to any holder of shares of Company Stock such\namounts as it is required to deduct and withhold with respect to the making of\nsuch payment under the Code, or any provision of state, local or foreign tax\nlaw. To the extent that amounts are so withheld by the Surviving Corporation or\nParent, as the case may be, such withheld amounts shall be treated for all\npurposes of this Agreement as having been paid to the holder of the shares of\nCompany Stock in respect of which such deduction and withholding was made by the\nSurviving Corporation or Parent, as the case may be.\n\n               (h)  Market Standoff. Notwithstanding anything to the contrary\n                    ---------------\ncontained in this Agreement, no Parent Shares (or certificates therefor) shall\nbe issued in exchange for any Company Stock Certificates to any Stockholder and\nno Pro Rata Cash Distribution or Pro Rata Contingent Distribution shall be paid\nto any Stockholder until such Stockholder shall have delivered to Parent and the\nCompany a duly executed Voting Agreement.\n\n               (i)  Lost Certificates.  If any Company Share Certificate shall\n                    -----------------\nhave been lost, stolen or destroyed, upon the making of an affidavit of that\nfact by the person claiming such Company Share Certificate to be lost, stolen or\ndestroyed and, if required by the Surviving Corporation, the posting by such\nperson of a bond, in such reasonable amount as the Surviving Corporation may\ndirect, as indemnity against any claim that may be made against it with respect\nto such Company Share Certificate, Parent shall issue in exchange for such lost,\nstolen or destroyed Company Share Certificate, the applicable Parent Shares (and\ncash in lieu of fractional shares pursuant to Section 2.03(e)) to which such\nperson is entitled pursuant to the provisions of this Article II.\n\n               (j)  Return of Parent Shares.  Promptly following the end of the\n                    -----------------------\nfourth full calendar month after the Effective Time, the Exchange Agent shall\nreturn to the Surviving Corporation all of the remaining Parent Shares and the\nExchange Agent's duties shall terminate. Thereafter, upon the surrender of a\nCompany Share Certificate to the Surviving Corporation and such other documents\nas may reasonably be required by the Surviving Corporation, and subject to\napplicable abandoned property, escheat and similar laws, the holder of such\nCompany Share Certificate shall be entitled to receive, in exchange therefor,\nthe applicable Parent Shares (and cash in lieu of fractional shares pursuant to\nSection 2.03(e)) and Pro Rata Cash Distribution, without any interest thereon,\nand in addition, shall be entitled to receive such holder's Pro Rata Contingent\nDistribution to the extent any such distributions have been paid prior to such\nsurrender, without interest thereon, or are paid thereafter.\n\n               SECTION 2.04   Stock Transfer Books.  At the Effective Time, the\n                              --------------------\nstock transfer books of the Company shall be closed and there shall be no\nfurther registration of transfers of shares of Company Stock thereafter on the\nrecords of the Company. From and after the Effective Time, the holders of\ncertificates representing shares of Company Stock outstanding immediately prior\nto the Effective Time shall cease to have any rights with respect to such shares\nof Company Stock, except as otherwise provided in this Agreement or by Law.\n\n                                       9\n\n \n               SECTION 2.05   Company Options.  At the Effective Time, all\n                              ---------------\noptions to purchase Common Stock issued by the Company pursuant to its stock\noption plans or otherwise (\"Company Options\") whether vested or unvested, shall\n                            ---------------\nbe assumed by Parent. Immediately after the Effective Time, each Company Option\noutstanding immediately prior to the Effective Time shall be deemed to\nconstitute an option to acquire, on the same terms and conditions as were\napplicable under such Company Option immediately prior to the Effective Time,\nsuch number of shares of Parent Common Stock as is equal to the number of shares\nof Company Common Stock subject to the unexercised portion of such option\nmultiplied by the Exchange Ratio (rounded down to the nearest whole number). The\nexercise price per share of each such assumed Company Option shall be equal to\nthe exercise price of such option immediately prior to the Effective Time\ndivided by the Company Exchange Ratio (rounded up to the nearest whole cent).\nThe term, vesting schedule, status as an \"incentive stock option\" under Section\n422 of the Code, if applicable, and all of the other terms of the Company\nOptions shall otherwise remain unchanged. It is the intention of the parties\nthat the Options so assumed by Parent qualify following the Effective Time as\nincentive stock options as defined in Section 422 of the Code to the extent such\nCompany Options qualified as incentive stock options prior to the Effective\nTime. Within 30 calendar days after the Effective Time, Parent will issue to\neach person who immediately prior to the Effective Time was a holder of a\nCompany Option, a document evidencing the foregoing assumption of such option by\nParent. Within 90 calendar days after the Effective Time, Parent shall file a\nregistration statement on Form S-8 (or any successor or other appropriate forms)\nwhich will register the shares of Parent Shares subject to assumed Company\nOptions to the extent permitted by Federal securities laws and shall use its\ncommercially reasonable efforts to maintain the effectiveness of such\nregistration statement or registration statements (and maintain the current\nstatus of the prospectus or prospectuses contained therein) for so long as such\noptions remain outstanding.\n\n               SECTION 2.06   Dissenting Shares.\n\n               (a)  Notwithstanding any provision of this Agreement to the\ncontrary, shares of Company Stock that are outstanding immediately prior to the\nEffective Time and which are held by stockholders who have exercised and\nperfected appraisal rights for such shares of Company Stock in accordance with\nthe URBCA (collectively, the \"Dissenting Shares\") shall not be converted into or\n                              ----------------- \nrepresent the right to receive the applicable Parent Shares (or cash in lieu of\nfraction shares ). Such stockholders shall be entitled to receive payment of the\nappraised value of such shares of Company Common Stock held by them in\naccordance with the URBCA, unless and until such stockholders fail to perfect or\nwithdraw or otherwise lose their appraisal rights under the URBCA. All\nDissenting Shares held by stockholders who shall have failed to perfect or who\neffectively shall have withdrawn or lost their rights to appraisal of such\nshares of Company Common Stock under the URBCA shall thereupon be deemed to have\nbeen converted into and to have become exchangeable for, as of the Effective\nTime, the right to receive the applicable Parent Shares (or cash in lieu of\nfractional shares pursuant to Section 2.03(e)), without any interest thereon,\nupon surrender, in the manner provided in Section 2.03, including the provision\nof the Escrow Shares pursuant to Section 2.03(b) of the certificate or\ncertificates that formerly evidenced such shares of Company Common Stock.\n\n               (b)  The Company shall give Parent (i) prompt notice of any\ndemands for appraisal received by the Company, withdrawals of such demands, and\nany other related \n\n                                       10\n\n \ninstruments served pursuant to the URBCA and received by the Company and (ii)\nthe opportunity to participate in and be consulted regarding all negotiations\nand proceedings with respect to demands for appraisal under the URBCA. The\nCompany shall not, except with the prior written consent of Parent, which\nconsent shall not be unreasonably withheld, make any payment with respect to any\ndemands for appraisal or offer to settle or settle any such demands.\n\n                                  ARTICLE III\n                                  -----------\n\n                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY\n                 ---------------------------------------------\n\n          The disclosure schedule delivered by the Company to Parent and Merger\nSub concurrently with the execution of this Agreement (the \"Company Disclosure\n                                                            ------------------\nSchedule\") shall be arranged in paragraphs corresponding to the numbered and\n--------                                                                    \nlettered paragraphs contained in this Article III.  The Company has used its\ngood faith efforts to provide conspicuous cross-references for each description\nof an exception that may relate to more than one representation contained in\nArticle III.  If through oversight the Company has failed to cross-reference\nproperly, disclosure with respect to a specific section shall be deemed to be\ndisclosures with respect to other applicable sections.  Except as set forth in\nthe Company Disclosure Schedule, which provides an exception to or otherwise\nqualifies in reasonable detail and with specific Section references, the\nrepresentations or warranties of the Company specifically referred to therein,\nthe Company hereby represents and warrants to Parent and Merger Sub that:\n\n               SECTION 3.01   Organization and Qualification.  The Company is a\n                              ------------------------------\ncorporation duly incorporated, validly existing and in good standing under the\nlaws of the State of Utah and has all requisite corporate power and authority to\nown, lease and operate its properties and to carry on its business as it is now\nbeing conducted, except where the failure to be so organized, existing or in\ngood standing or to have such corporate power and authority have not had, and\ncould not reasonably be expected to have, individually or in the aggregate, a\nCompany Material Adverse Effect (as defined below). The Company is duly\nqualified or licensed as a foreign corporation to do business, and is in good\nstanding, in each jurisdiction where the character of the properties owned,\nleased or operated by it or the nature of its business makes such qualification\nor licensing necessary, except for such failures to be so qualified or licensed\nand in good standing that have not had, and could not reasonably be expected to\nhave, individually or in the aggregate, a Company Material Adverse Effect. The\nterm \"Company Material Adverse Effect\" means any change in or effect on the\n      -------------------------------                                      \nbusiness of the Company that is materially adverse to the business, operations,\nfinancial condition or results of operations of the Company taken as a whole,\nexcept for any such changes or effects resulting from or in connection with (a)\nany changes in general economic conditions, (b) any decline in the manner in\nwhich businesses such as the Company are valued or any adverse changes in the\nUnited States securities market, or (c) any changes related to the announcement\nof the Merger or actions taken as a result of this Agreement.\n\n               SECTION 3.02   Articles of Incorporation and Bylaws.  The Company\n                              ------------------------------------ \nhas heretofore made available to Parent a complete and correct copy of (a) the\nArticles of Incorporation and the Bylaws of the Company including all amendments\nthereto, (b) the minute books containing consents, actions and meeting of the\nstockholders of the Company and the Company's Board of Directors and any\ncommittees thereof, and (c) the stock transfer books of \n\n                                       11\n\n \nthe Company setting forth all transfer of any capital stock of the Company. Such\nArticles of Incorporation and Bylaws are in full force and effect. The Company\nis not in violation of any of the provisions of its Articles of Incorporation or\nBylaws. The corporate minute books, stock certificate books, stock registers and\nother corporate records of the Company are complete and accurate, and the\nsignatures appearing on all documents contained therein are the true or\nfacsimile signatures of the persons purported to have signed the same.\n\n               SECTION 3.03   No Subsidiaries.  The Company does not own, of\n                              ---------------\nrecord or beneficially, any direct or indirect equity or other interest, or any\nright (contingent or otherwise) to acquire the same, nor control directly or\nindirectly or have any direct or indirect equity participation interest, in any\ncorporation, partnership, or formal written joint venture, association or other\nentity. The Company is not a member of (nor is any part of the Company's\nbusiness conducted through) any partnership, nor is the Company a participant in\nany formal written joint venture.\n\n               SECTION 3.04   Capitalization.\n                              -------------- \n\n               (a)  The authorized capital stock of the Company consists of\n100,000,000 shares of Company Common Stock, warrants that upon exercise provide\nfor the issuance of no more than 255,621 shares of Company Stock, 4,000 shares\nof Company Series A Preferred Stock, 8,000 shares of Company Series B Preferred\nStock, and 6,000 shares of Company Series C Preferred Stock. As of the date\nhereof, (i) 9,235,791 shares of Company Common Stock are issued and outstanding,\nall of which are validly issued, fully paid and nonassessable, (ii) no shares of\nCompany Common Stock are held in the treasury of the Company and (iii) 3,450,600\nshares of Company Common Stock are reserved for future issuance pursuant to the\nCompany Options. As of the date of this Agreement, (A) 4,000 shares of Company\nSeries A Preferred Stock are issued and outstanding, (B) 6,750 shares of Company\nSeries B Preferred Stock are issued and outstanding, and (C) 6,000 shares of\nCompany Series C Preferred Stock are issued and outstanding. Each Share of\nCompany Preferred Stock is convertible into Company Common Stock as set forth in\nthe Articles of Incorporation of the Company. There are no other shares of\nCompany Preferred Stock outstanding. As of the date hereof, the outstanding\nshares of Company Common Stock and Company Preferred Stock are owned as set\nforth in Section 3.04(a) of the Company Disclosure Schedule. Section 3.04(a) of\nthe Company Disclosure Schedule lists all agreements that provide the Company\nrepurchase options to which any of such shares is subject.\n\n               (b)  The Company has reserved (i) 1,500,000 shares of Company\nCommon Stock for issuance under its Incentive Stock Plan of which options to\npurchase 949,000 shares are outstanding as of the date of this Agreement and\n(ii) 4,000,000 shares of Company Common Stock for issuance under its 1999 Stock\nPlan of which options to purchase 2,630,050 shares are outstanding as of the\ndate of this Agreement. Section 3.04(b) of the Company Disclosure Schedule\naccurately sets forth with respect to each Company Option that is outstanding as\nof the date of this Agreement: (i) the name of the holder of such Company Option\nand the date of the option agreement relating to such Company Option; (ii) the\ntotal number of shares of Company Common Stock with respect to which such\nCompany Option is immediately exercisable; (iii) the date on which such Company\nOption was granted and the term of such Company Option; (iv) the vesting\nschedule for such Company Option; (v) the exercise price per\n\n                                       12\n\n \nshare of Company Common Stock purchasable under such Company Option; and (vi)\nwhether such Company Option has been designated an \"incentive stock options\" as\ndefined in Section 422 of the Code. No Company Option will by its term require\nan adjustment in connection with the Merger. Neither the consummation of\ntransactions contemplated by this Agreement, nor any action taken or to be taken\nby Company in connection with such transactions will result in (vii) any\nacceleration of vesting in favor of any optionee under any Company Option;\n(viii) any additional benefits for any optionee under any Company Option; or\n(ix) the inability of Parent after the Effective Time to exercise any right or\nbenefit held by Company prior to the Effective Time with respect to any Company\nOption assumed by Parent, including, without limitation, the right to repurchase\nan optionee's unvested shares on termination of such optionee's employment. The\nassumption by Parent of Company Options in accordance with Section 2.04\nhereunder will not (x) give the optionees additional benefits which they did not\nhave under their options prior to such assumption (after taking into account the\nexisting provisions of the options, such as their respective exercise prices and\nvesting schedules) or (xi) constitute a breach of a stock option plan of Company\nor any agreement entered into pursuant to such plan.\n\n               (c)  Section 3.04(c) of the Company Disclosure Schedule sets\nforth, with respect to each warrant issued to any Person: (a) the name of the\nholder of such warrant;(b) the total number of shares of Company Common Stock\nthat are subject to such warrant;(c) the total number of shares of Company Stock\nwith respect to which such warrant is immediately exercisable; and (d) the term\nof such warrant.\n\n               (d)  Except as set forth in Sections 3.04(b) and 3.04(c) of the\nCompany Disclosure Schedule, there are no options, warrants or other rights,\nagreements, arrangements or commitments of any character relating to the issued\nor unissued capital stock of the Company or obligating the Company to issue or\nsell any shares of capital stock of, or other equity interests in, the Company.\nAll shares of Company Common Stock subject to issuance as aforesaid, upon\nissuance on the terms and conditions specified in the instruments pursuant to\nwhich they are issuable, will be duly authorized, validly issued, fully paid and\nnonassessable. There are no outstanding contractual obligations of the Company\nto repurchase, redeem or otherwise acquire any shares of Company Stock. There\nare no contractual obligations of the Company to provide funds to, or make any\ninvestment (in the form of a loan, capital contribution or otherwise) to any\nother Person. The holders of Company Options have been or will be given, or\nshall have properly waived, any required notice of the Merger prior thereto.\n\n               (e)  All of the securities sold or issued by the Company have\nbeen sold or issued in compliance with the requirements of the federal\nsecurities laws and any applicable state securities or \"blue sky\" laws\n\n               (f)  Except as set forth in Section 3.04(f) of the Company\nDisclosure Schedule, since September 30, 1996, the Company has not repurchased,\nredeemed or otherwise reacquired any shares of capital stock or other securities\nof the Company.\n\n               (g)  An updated Section 3.04 of the Company Disclosure Schedule\nreflecting changes in the capitalization of Company permitted by this Agreement\nbetween the date hereof and the Effective Time shall be delivered by Company to\nParent on the Closing Date.\n\n                                       13\n\n \n               SECTION 3.05   Authority Relative to This Agreement.\n                              ------------------------------------\n\n               (a)  The Company has all necessary corporate power and authority\nto execute and deliver this Agreement, and subject to obtaining the necessary\napprovals of the Company's stockholders, to perform its obligations hereunder\nand to consummate the Merger and the other transactions contemplated by this\nAgreement. The execution and delivery of this Agreement by the Company and the\nconsummation by the Company of the Merger and the other transactions\ncontemplated by this Agreement have been duly and validly authorized by all\nnecessary corporate action and no other corporate proceedings on the part of the\nCompany are necessary to authorize this Agreement or to consummate the Merger\nand the other transactions contemplated by this Agreement (other than, with\nrespect to the Merger, the approval of this Agreement by the holders of the\nrequisite number of Company Common Stock, Company Series A Preferred Stock,\nCompany Series B Preferred Stock and Company Series Preferred C Stock, voting as\nseparate series, and the filing and recordation of appropriate merger documents\nas required by the URBCA). This Agreement has been duly and validly executed and\ndelivered by the Company, and assuming the due authorization, execution and\ndelivery by Parent and Merger Sub, constitutes a legal, valid and binding\nobligation of the Company, enforceable against the Company in accordance with\nits terms, subject to any applicable bankruptcy, reorganization, insolvency,\nmoratorium or similar laws affecting creditors' rights generally and subject, as\nto enforceability, to general principles of equity.\n\n               (b)  Without limiting the generality of the foregoing, the Board\nof Directors of the Company, by unanimous written consent or at a meeting duly\ncalled and held, has by the unanimous vote of all directors (i) determined that\nthe Merger is fair and in the best interest of the Company and its stockholders,\n(ii) approved the Merger and this Agreement in accordance with the provisions of\nthe URBCA, and (iii) directed that this Agreement and the Merger be submitted to\nthe Company's stockholders for their approval and resolved to recommend that the\nCompany's stockholders vote in favor of the adoption and approval of this\nAgreement and the Merger.\n\n               SECTION 3.06   No Conflict; Required Filings and Consents.\n                              ------------------------------------------\n\n               (a)  The execution and delivery of this Agreement by the Company\ndoes not, and the performance of this Agreement by the Company will not, (i)\nconflict with or violate the Certificates of Incorporation or Bylaws of the\nCompany or any Subsidiary, (ii) assuming that all consents, approvals,\nauthorizations and other actions described in Section 3.06(b) have been obtained\nand all filings and obligations described in Section 3.06(b) have been made,\nconflict with or violate in any respect any foreign or domestic law, franchise,\npermit, concession, license, statute, ordinance, rule, regulation, order,\njudgment or decree (\"Law\") applicable to the Company or any Subsidiary or by\n                     ---                               \nwhich any property or asset of the Company of any Subsidiary is bound or\naffected, or (iii) result in any breach of or constitute a default (or an event\nwhich with notice or lapse of time or both would become a default) under, or\ngive to others any right of termination, amendment, acceleration or cancellation\nof, or result in the creation of a lien or other encumbrance on any property or\nasset of the Company or any Subsidiary pursuant to, any note, bond, mortgage,\nindenture, contract, agreement, lease, license, permit, franchise or other\ninstrument or obligation, except, with respect to clause (iii), for any such\nconflicts, violations, breaches, defaults, or other occurrences that could not\nreasonably be \n\n                                       14\n\n \nexpected, individually or in the aggregate, to prevent or materially delay the\nconsummation of the transactions contemplated by this Agreement.\n\n               (b)  The execution and delivery of this Agreement by the Company\ndoes not, and the performance of this Agreement by the Company will not, require\nany consent, approval, authorization, registration or permit of, or filing with\nor notification to, any domestic or foreign governmental or regulatory authority\n(\"Governmental Entity\") on the part of the Company, except (i) for the pre-\n  -------------------                                         \nmerger notification requirements of the Hart-Scott-Rodino Antitrust Improvements\nAct of 1976, as amended, and the rules and regulations thereunder (the \"HSR\n                                                                        ---\nAct\"), (ii) for the filing and recordation of appropriate merger documents as\n---                                       \nrequired by the URBCA, and (iii) where failure to obtain such consents,\napprovals, authorizations or permits, or to make such filings or notifications\ncould not reasonably be expected, individually or in the aggregate, to prevent\nor materially delay the consummation of the transactions contemplated by this\nAgreement.\n\n               SECTION 3.07   Permits; Compliance.\n                              -------------------\n\n               (a)  The Company and each Subsidiary is in possession of all\nfranchises, grants, authorizations, licenses, permits, easements, variances,\nexceptions, consents, certificates, approvals and orders of any Governmental\nEntity necessary for the Company and each Subsidiary to own, lease and operate\nits properties or to carry on its business as it is now being conducted (the\n\"Company Permits\"). All Company Permits are in full force and effect and\n----------------                                                         \nwill remain so after the Closing and no suspension or cancellation of any of the\nCompany Permits is pending or, to the knowledge of the Company, threatened.\nNeither the Company nor any Subsidiary has received any notice or other\ncommunication from any Governmental Entity regarding (a) any actual or possible\nviolation of or failure to comply with any term or requirement of any Company\nPermit, or (b) any actual or possible revocation, withdrawal, suspension,\ncancellation, termination or modification or any Company Permit.\n\n               (b)  The Company is not in conflict with, or in default or\nviolation of (i) any Law applicable to the Company or any Subsidiary (ii) any\nnote, bond, mortgage, indenture, contract, agreement, lease, license, permit,\nfranchise or other instrument or obligation to which the Company or any\nSubsidiary is a party or by which the Company or any Subsidiary or any property\nor asset of the Company or any Subsidiary is bound or affected, or (iii) any\nCompany Permits.\n\n               SECTION 3.08   Financial Statements.\n                              -------------------- \n\n               (a)  True and complete copies of (i) the audited consolidated\nbalance sheet of the Company and the Subsidiaries as of December 31, 1997, 1998\nand 1999, and the related audited statements of income, changes in stockholders'\nequity and cash flows for the years then ended, together with all notes and\nschedules related thereto (collectively referred to herein as the \"Audited\n                                                                   -------\nFinancial Statements\"), and (ii) the unaudited consolidated balance sheet of the\n--------------------                                                     \nCompany and the Subsidiaries as of September 30, 2000 (the \"Reference Balance\n                                                            -----------------\nSheet\"), and the related statements of income and cash flows of the Company for\n------ \nthe nine months then ended September 30, 2000 (collectively referred to herein\nas the \"Interim Financial Statements\"), are attached to Section 3.08 of the\n        ----------------------------   \nCompany Disclosure Schedule. The Audited Financial \n\n                                       15\n\n \nStatements and the Interim Financial Statements (including, in each case, any\nnotes thereto) were prepared in accordance with U.S. generally accepted\naccounting principles (\"U.S. GAAP\") applied on a consistent basis throughout the\n                        ---------\nperiods indicated (except as may be indicated in the notes thereto or, in the\ncase of unaudited statements, as permitted by U.S. GAAP) and each present\nfairly, in all respects, the consolidated financial position of the Company as\nof the respective dates thereof and for the respective periods indicated\ntherein, except as otherwise noted therein (subject, in the case of unaudited\nstatements, to normal and recurring year-end adjustments which were not and are\nnot expected, individually or in the aggregate, to be material).\n\n               (b)  Except as set forth in Section 3.08 of the Company\nDisclosure Schedule, the Company has not incurred any debts, liabilities or\nobligations, whether accrued or fixed, absolute or contingent, matured or\nunmatured or determined or determinable (\"Liabilities\") of the Company, other\n                                          -----------\nthan Liabilities (i) reflected or reserved against on the Reference Balance\nSheet and (ii) in an aggregate amount not exceeding $25,000 incurred since\nSeptember 30, 2000 in the ordinary course of the business, consistent with the\npast practice of the Company. Except as set forth in Section 3.08 of the Company\nDisclosure Schedule, reserves are reflected on the Reference Balance Sheet and\non the books of account and other financial records of the Company against all\nLiabilities of the Company in amounts that have been established on a basis\nconsistent with the past practice of the Company and in accordance with U.S.\nGAAP. Except as set forth in Section 3.08 of the Company Disclosure Schedule,\nthere are no outstanding warranty claims against the Company.\n\n               SECTION 3.09   Absence of Certain Changes or Events.  Since\n                              ------------------------------------\nSeptember 30, 2000, except as contemplated by or as disclosed in this Agreement\nor as set forth in Section 3.09 of the Company Disclosure Schedule, the Company\nhas conducted its business only in the ordinary course and in a manner\nconsistent with past practice and, since such date, (a) there has not been any\nCompany Material Adverse Effect and (b) the Company has not taken or legally\ncommitted to take any of the actions specified in Sections 5.01(a) through\n5.01(cc).\n\n               SECTION 3.10   Absence of Litigation.  There is no litigation,\n                              ---------------------\nsuit, claim, action, proceeding or investigation pending (each a \"Legal\n                                                                  -----\nProceeding\") or, to the knowledge of the Company, threatened against the Company\n----------- \nor any Subsidiary, or any property or asset owned or used by the Company or any\nSubsidiary or any Person whose liability the Company or any Subsidiary has or\nmay have assumed, either contractually or by operation of law, before any court,\narbitrator or Governmental Entity, which could reasonably be expected, if\nresolved adversely to the Company, to (i) impair the operations of the Company\nor any Subsidiary as currently conducted, including, without limitation, any\nclaim of infringement of any intellectual property right, (ii) result in losses\nto the Company or any Subsidiary in excess of $50,000, (iii) impair the ability\nof the Company or any Subsidiary to perform its obligations under this Agreement\nor (iv) prevent delay or make illegal the consummation of the transactions\ncontemplated by this Agreement. To the Company's knowledge, no event has\noccurred, and no claim, dispute or other condition or circumstance exists, that\ncould reasonably be expected to give rise to or serve as a basis for, the\ncommencement of any Legal Proceeding. Neither the Company, any Subsidiary, the\nofficers or directors thereof in their capacity as such, any property or assets\nof the Company nor any Subsidiary is subject to any continuing order of, consent\ndecree, settlement agreement or other similar written agreement with, or, to the\nknowledge of the \n\n                                       16\n\n \nCompany, continuing investigation by, any Governmental Entity, or any order,\nwrit, judgment, injunction, decree, determination or award of any court,\narbitrator or Governmental Entity.\n\n               SECTION 3.11   Employee Benefit Plans; Labor Matters.\n                              -------------------------------------\n\n               (a)  Schedule 3.11(a) of the Company Disclosure Schedule lists\n(i) all employee benefit plans (as defined in Section 3(3) of the Employee\nRetirement Income Security Act of 1974, as amended (\"ERISA\")) and all bonus,\n                                                     -----\nstock option, stock purchase, restricted stock, incentive, deferred\ncompensation, retiree medical or life insurance, supplemental retirement,\nseverance or other benefit plans, programs or arrangements, and all employment,\ntermination, severance or other contracts or agreements, whether legally\nenforceable or not, to which the Company or any Subsidiary is a party, with\nrespect to which the Company or any Subsidiary has any obligation or which are\nmaintained, contributed to or sponsored by the Company or any Subsidiary for the\nbenefit of any current or former employee, officer or director of the Company or\nany Subsidiary, (ii) each employee benefit plan for which the Company or any\nSubsidiary could incur liability under Section 4069 of ERISA in the event such\nplan has been or were to be terminated, (iii) any plan in respect of which the\nCompany or any Subsidiary could incur liability under Section 4212(c) of ERISA,\nand (iv) any contracts, arrangements or understandings between the Company or\nany Subsidiary and any employee of the Company or any Subsidiary including,\nwithout limitation, any contracts, arrangements or understandings relating to a\nsale of the Company (collectively, the \"Plans\").\n                                        -----   \n\n               (b)  Each Plan is in writing and the Company has furnished Parent\nwith a true and complete copy of each Plan and a true and complete copy of each\nmaterial document, if any, prepared in connection with each such Plan,\nincluding, without limitation, (i) a copy of each trust or other funding\narrangement, (ii) each summary plan description and summary of material\nmodifications, (iii) the most recently filed Internal Revenue Service (\"IRS\")\n                                                                        ---\nForm 5500, (iv) the most recently received IRS determination letter for each\nsuch Plan, (v) the most recently prepared actuarial report and financial\nstatement in connection with each such Plan, and (vi) any correspondence with\nthe IRS or the Department of Labor with respect to each such Plan. Except as\ndisclosed on Section 3.11(a) of the Company Disclosure Schedule, there are no\nother employee benefit plans, programs, arrangements or agreements, whether\nformal or informal, whether in writing or not, to which the Company or any\nSubsidiary is a party, with respect to which the Company or any Subsidiary has\nany obligation or which are maintained, contributed to or sponsored by the\nCompany or any Subsidiary for the benefit of any current or former employee,\nconsultant officer or director of the Company or any Subsidiary. Neither the\nCompany nor any Subsidiary has express or implied commitment, whether legally\nenforceable or not, (x) to create, incur liability with respect to, or cause to\nexist, any other employee benefit plan, program or arrangement, (y) to enter\ninto any contract or agreement to provide compensation or benefits to any\nindividual, or (z) to modify, change or terminate any Plan, other than with\nrespect to a modification, change or termination required by ERISA or the Code.\n\n               (c)  None of the Plans is a multiemployer plan (within the\nmeaning of Section 3(37) or 4001(a)(3) of ERISA) (a \"Multiemployer Plan\") or a\n                                                     ------------------ \nsingle employer pension plan (within the meaning of Section 4001(a)(15) of\nERISA) for which the Company or any Subsidiary could incur liability under\nSection 4063 or 4064 of ERISA (a \"Multiple Employer Plan\"). None of the Plans\n                                  ----------------------\nprovides for or promises retiree medical, disability or life insurance \n\n                                       17\n\n \nbenefits to any current or former employee, officer or director of the Company\nor any Subsidiary. Each of the Plans is subject only to the laws of the United\nStates or a political subdivision thereof.\n\n               (d)  None of the Plans provides for the payment of separation,\nseverance, termination or similar benefits to any Person or obligates the\nCompany or any Subsidiary to pay separation, severance, termination or similar\nbenefits solely or partially as a result of any transaction contemplated by this\nAgreement or as a result of a \"change in control\", within the meaning of such\nterm under Section 280G of the Code. Neither the execution and delivery of this\nAgreement nor the consummation of the transactions contemplated hereby, either\nalone or together with another event, will (i) result in any payment (including,\nwithout limitation, severance, unemployment compensation, golden parachute and\nforgiveness of indebtedness) becoming due under any Plan, (ii) materially\nincrease any benefits otherwise payable under any Plan or other arrangement,\n(iii) result in the acceleration of the time of payment, vesting or funding of\nany benefits including, but not limited to the acceleration of the vesting and\nexercisability of any Company Options, or (iv) affect any Plan's current\ntreatment under any Laws including any tax or social contribution law.\n\n               (e)  Each Plan is now and always has been operated in accordance\nwith its terms and the requirements of all applicable laws, regulations and\nrules promulgated thereunder including, without limitation, ERISA and the Code.\nEach of the Company and each Subsidiary has performed all obligations required\nto be performed by it under each Plan, and is not in any respect in default\nunder or in violation of, and has no knowledge of any default or violation by\nany party to, any Plan. No action, claim or proceeding is pending or, to the\nknowledge of the Company, threatened with respect to any Plan (other than claims\nfor benefits in the ordinary course) and no fact or event exists that could give\nrise to any such action, claim or proceeding. Neither the Company nor any Person\nthat is a member of the same controlled group as the Company or under common\ncontrol with the Company within the meaning of Section 414 of the Code (each an\n\"ERISA Affiliate\") is subject to any penalty or tax with respect to any Plan\n ---------------             \nunder Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.\n\n               (f)  Each Plan that is intended to be qualified under Section\n401(a) or Section 401(k) of the Code has received a timely favorable\ndetermination letter from the IRS covering all of the provisions applicable to\nthe Plan for which determination letters are currently available that the Plan\nis so qualified and each trust established in connection with any Plan that is\nintended to be exempt from federal income taxation under Section 501(a) of the\nCode has received a determination letter from the IRS that it is so exempt, and\nno fact or event has occurred since the date of such determination letter or\nletters from the IRS to adversely affect the qualified status of any such Plan\nor the exempt status of any such trust.\n\n               (g)  Neither the Company nor any Subsidiary has incurred any\nliability under, arising out of or by operation of Title IV of ERISA (other than\nliability for premiums to the Pension Benefit Guaranty Corporation arising in\nthe ordinary course), including, without limitation, any liability in connection\nwith (i) the termination or reorganization of any employee benefit plan subject\nto Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or\nMultiple Employer Plan, and no fact or event exists that could give rise to any\nsuch liability.\n\n                                       18\n\n \n               (h)  All contributions, premiums or payments required to be made\nor accrued with respect to any Plan have been made on or before their due dates.\nAll such contributions have been fully deducted for income tax purposes and no\nsuch deduction has been challenged or disallowed by any Governmental Entity and\nno fact or event exists that could give rise to any such challenge or\ndisallowance.\n\n               (i)  Except as set forth in Section 3.11(i) of the Company\nDisclosure Schedule, (i) neither the Company nor any Subsidiary is a party to\nany collective bargaining agreement or other labor union contract applicable to\npersons employed by the Company or any Subsidiary and currently there are no\norganizational campaigns, petitions or other unionization activities seeking\nrecognition of a collective bargaining unit which could affect the Company or\nany Subsidiary; (ii) there are no strikes, slowdowns or work stoppages pending,\nor to the best knowledge of the Company, threatened between the Company or any\nSubsidiary and any of its employees, and neither the Company nor any Subsidiary\nhas experienced any such strike, slowdown or work stoppage within the past three\nyears; (iii) there are no unfair labor practice complaints pending against the\nCompany or any Subsidiary before the National Labor Relations Board or any other\ngovernmental authority or any current union representation questions involving\nemployees of the Company or any Subsidiary; (iv) the Company and each Subsidiary\nis currently in compliance with all applicable laws relating to its employees,\nincluding those related to wages, hours, worker classification, collective\nbargaining and the payment and withholding of taxes and other sums as required\nby the appropriate governmental authority and has withheld and paid to the\nappropriate governmental authority or is holding for payment not yet due to such\ngovernmental authority all amounts required to be withheld from employees of the\nCompany or any Subsidiary and is not liable for any arrears of wages, taxes,\npenalties or other sums for failure to comply with any of the foregoing; (v) the\nCompany and each Subsidiary has paid in full to all employees or adequately\naccrued in accordance with U.S. GAAP consistently applied all wages, salaries,\ncommissions, bonuses, benefits and other compensation due to or on behalf of\nsuch employees; (vii) no claim with respect to payment of wages, salary or\novertime pay has been asserted or is now pending or to the knowledge of the\nCompany threatened with respect to any persons currently or formerly employed by\nthe Company or any Subsidiary; (viii) neither the Company nor any Subsidiary is\na party to, or otherwise bound by, any consent decree relating to employees or\nemployment practices; (ix) no violation of any occupational safety or health\nstandards has been asserted nor is any such proceeding pending or to the\nknowledge of the Company threatened with respect to the Company or any\nSubsidiary; and (x) no charge of discrimination in employment or employment\npractices, including, without limitation, discrimination based on age, gender,\nrace, religion or other legally protected category, has been asserted nor is any\nsuch action or proceeding pending or to the knowledge of the Company threatened\nbefore the United States Equal Employment Opportunity Commission, or any other\ngovernmental authority in any jurisdiction.\n\n               SECTION 3.12   Contracts.\n                              ---------\n\n               (a) Section 3.12 of the Company Disclosure Schedule lists each of\nthe following written or oral contracts and agreements of the Company and each\nSubsidiary (such contracts and agreements being \"Material Contracts\"):\n                                                 ------------------   \n\n                                       19\n\n \n          (i)    each contract and agreement for the purchase of personal\nproperty or to provide services to the Company that involves the payment of\n$100,000 or more in any one-year period;\n\n          (ii)   all broker, exclusive dealing or exclusivity, distributor,\ndealer, manufacturer's representative, franchise, agency, or any other contract\nthat compensates any Person based on any sales by the Company or any Subsidiary\nis a party or any other contract that compensates any Person based on any sales\nby the Company or any Subsidiary that can in any case reasonably be expected to\nresult in payments of $100,000 or more in any one-year period;\n\n          (iii)  all leases and subleases of real property;\n\n          (iv)   all leases of personal property with lease payments greater\nthan $100,000 per year;\n\n          (v)    all contracts and agreements relating to indebtedness (other\nthan trade indebtedness) of the Company or any Subsidiary, including, without\nlimitation, any contracts and agreements in which the Company or any Subsidiary\nis a guarantor of indebtedness;\n\n          (vi)   all contracts and agreements with any Governmental Entity to\nwhich the Company or any Subsidiary is a party;\n\n          (vii)  all contracts and agreements that limit or purport to limit the\nability of the Company or any Subsidiary to compete in any line of business,\nwith any Person, in any geographic area or during any period of time;\n\n          (viii) since January 1, 1998, all contracts relevant to the Company's\nbusiness that contain confidentiality requirements (including all nondisclosure\nagreements);\n\n          (ix)   all contracts and agreements between or among the Company or\nany Subsidiary and any stockholder of the Company or any Subsidiary or any\naffiliate of such Person;\n\n          (x)    all contracts and agreements relating to the voting rights or\nobligations of a stockholder of the Company or any Subsidiary;\n\n          (xi)   all contracts to manufacture any products or components for any\nthird party, or to supply or distribute any products or components to any third\nparty involving a payment or payments of $100,000 in the aggregate in any one-\nyear period;\n\n          (xii)  all contracts regarding the acquisition, issuance or transfer\nof any securities and each contract affecting or dealing with any securities of\nthe Company or any Subsidiary, including, without limitation, any restricted\nstock agreements or escrow agreements;\n\n                                       20\n\n \n               (xiii)  all contracts providing for indemnification of any\nofficer, director, employee or agent;\n\n               (xiv)   all contracts related to or regarding the performance of\nconsulting, advisory or other services or work of any type of any third party\ninvolving the payment in any one-year period of at least $100,000;\n\n               (xv)    all contracts involving payment of at least $100,000 that\nhave a term of more than sixty days and that may not be terminated by the\nCompany or any Subsidiary (without penalty) within 60 days after the delivery of\na termination notice by the Company or any Subsidiary;\n\n               (xvi)   any agreement of the Company or any Subsidiary involving\nthe payment of at least $100,000 that is terminable upon or prohibits a change\nof ownership or control of the Company; and\n\n               (xvii)  all contracts and agreements, whether or not made in the\nordinary course of business, that contemplate an exchange of consideration with\nan aggregate value greater than $50,000.\n\n          (b)  Each Material Contract:  (i) is valid and binding as to the\nCompany or Subsidiary, and to the knowledge of the Company, as to the other\nparties thereto (subject in each case to the effect of any applicable\nbankruptcy, reorganization, insolvency, moratorium or similar Laws affecting\ncreditors' rights generally and subject, as to enforceability, to general\nprinciples of equity), and is in full force and effect, and (ii) upon\nconsummation of the transactions contemplated by this Agreement, shall continue\nin full force and effect without penalty or other adverse consequence.\n\n          (c)  The Company has delivered or made available to Parent accurate\nand complete copies of all Material Contracts identified in Section 3.12 of the\nCompany Disclosure Schedule, including all amendments thereto. Section 3.12 of\nthe Company Disclosure Schedule provides an accurate description of the terms of\neach Material Contract that is not in written form.\n\n          (d)  Except as set forth in Section 3.12(d) of the Company Disclosure\nSchedule, to the Company's knowledge, no event has occurred, and no circumstance\nor condition exists, that (with or without notice or lapse of time) will or\ncould reasonable be expected to (i) result in a violation or breach of a\nMaterial Contract, (ii) give any entity the right to declare a default or\nexercise any remedy under any Material Contract, (iii) give any entity the right\nto accelerate the maturity or performance of any Material Contract or (iv) give\nany entity to the right to cancel, terminate or modify any Material Contract.\n\n          SECTION 3.13   Environmental Matters.  The Company and each Subsidiary\n(a) is in compliance in all material respects with all applicable Environmental\nLaws, (b) holds all Environmental Permits material to the conduct of the\nCompany's or any Subsidiary's business and (c) is in compliance in all material\nrespects with their respective Environmental Permits. Neither the Company nor\nany Subsidiary has received any written request for information or been notified\nthat it is a potentially responsible party under CERCLA \n\n                                       21\n\n \nor any similar Law of any state, locality or any other jurisdiction. Neither the\nCompany nor any Subsidiary has entered into or agreed to any consent decree or\norder or is subject to any judgment, decree or judicial order relating to\ncompliance with Environmental Laws, Environmental Permits or the investigation,\nsampling, monitoring, treatment, remediation, removal or cleanup of Hazardous\nMaterials, and to the knowledge of the Company, no investigation, litigation or\nother proceeding is pending or threatened with respect thereto.\n\n               SECTION 3.14 Intellectual Property.\n                            --------------------- \n\n               (a)  Proprietary Rights.\n                    ------------------ \n\n                    (i)     Company is the sole owner of all right, title and\ninterest in and to all the Company Proprietary Rights (as defined in Section\n3.14(b) below) free and clear of all liens, encumbrances, claims, rights of use\nand restrictions whatsoever. Any of the Company Proprietary Rights (as defined\nin Section 3.14(b) below) which require the execution and filing with an\nappropriate governmental agency, including without limitation the Patent and\nTrademark Office, have been so indicated in Section 3.14(a)(i) of the Company\nDisclosure Schedule. Any of the Company Proprietary Rights owned at any time by\nany predecessor of Company or by any former employer of any employee or officer\nof Company (collectively, \"Former Owners\") have been assigned in full to Company\nby a presently valid and enforceable instrument. There are no outstanding\noptions, licenses or agreements of any kind relating to the Company Proprietary\nRights (other than for distribution of standard object code products in the\nordinary course of business) nor is Company a party to any options, licenses or\nagreements of any kind with respect to the Proprietary Rights of any other\nPerson or entity which relates to the business of Company as conducted or as\nproposed to be conducted.\n\n                    (ii)    The Company Proprietary Rights do not infringe upon\nor conflict with any Proprietary Rights of any other Person, firm, corporation\nor other entity. There is not pending or threatened any claim or litigation\ncontesting the right of Company to engage in its business or employ any of the\nCompany Proprietary Rights. No Former Owner owns or controls Proprietary Rights\nthat such Former Owner could exercise to prevent Company from exploiting the\nCompany Proprietary Rights that were assigned from such Former Owner to Company.\nCompany has taken reasonable security measures to protect the secrecy,\nconfidentiality, and value of all Company Proprietary Rights. Company has only\ndisclosed Company Proprietary Rights to third parties subject to valid, binding\nand enforceable non-disclosure agreements that protect such disclosed Company\nProprietary Rights at least as much as Company protects Company Proprietary\nRights, and in no case permits less than reasonable protection. Company has not\ndisclosed any software source code to any third parties.\n\n                    (iii)   Any employee, consultant or other Person who, either\nalone or in concert with others, developed, invented, discovered, derived,\nprogrammed or designed any of the Company Proprietary Rights or any part\nthereof, or who has knowledge of or access to information relating to it, has\nbeen put on notice that the Company Proprietary Rights are proprietary to\nCompany and not to be divulged or misused, and has assigned or licensed all of\nhis or her rights relating to the Company Proprietary Rights to Company. No\nemployee of Company is in violation of any material term of any employment\ncontract, confidentiality, proprietary information or inventions agreement, or\nany other contract or agreement relating to the \n\n                                       22\n\n \nrelationship of any such employee with Company or any previous employer, and all\nsuch contracts or agreements with employees are in full force and effect and are\nvalid, binding and enforceable in accordance with their respective provisions.\nThe employees of Company are not obligated under any contract (including\nlicenses, covenants, or commitments of any nature) or other agreement, or\nsubject to any judgment, decree or order of any court or administrative agency\nthat would conflict with their obligation to use their best efforts to promote\nthe interests of Company or that would conflict with the business of Company as\nconducted or as proposed to be conducted.\n\n                    (iv)    There are no material contracts, commitments,\nleases, permits, and other instruments (written or oral) binding upon Company\nwith respect to the Company Proprietary Rights except the contracts listed on\nSection 3.14(a)(iv) of the Company Disclosure Schedule. Company has delivered to\nParent true and complete copies of all such items and any amendments thereto.\nAll of such contracts, commitments, leases, permits and instruments are in full\nforce and effect and are valid, binding and enforceable in accordance with their\nrespective provisions, and Company is not in material default nor has there\noccurred an event or condition which, with the passage of time or giving of\nnotice (or both), would constitute a material default with respect to the\npayment or performance of any obligation thereunder; and no claim of such a\nmaterial default has been asserted and there is no basis or alleged basis upon\nwhich such a claim could be made. Company has not received any notice or notices\nclaiming any such material default or indicating the desire or intention of any\nother party thereto to amend, modify, rescind or terminate the same.\n\n               (b)  As used in this Agreement, \"Proprietary Rights\" shall mean\nall rights, title and interests in and to inventions (whether or not\npatentable), ideas, formulae, software (in source and object code form), process\nengineering, art works, schematic drawings, processes, product plans, logos,\ntrademarks, trademark applications, service marks, copyrights, trade names,\ntrade secrets, know-how, technical information, patents, patent applications,\ndatabases, employee lists and customer lists, and other intangible or\nproprietary rights of any form or nature throughout the world, and \"Company\nProprietary Rights\" shall mean all Proprietary Rights necessary to conduct the\nbusiness of Company and each Subsidiary as conducted or as proposed to be\nconducted.\n\n               SECTION 3.15 Returns and Complaints. The Company has received \n                            ----------------------  \nno material customer complaints concerning its products and\/or services, nor has\nit had any of its products returned by a purchaser thereof, other than minor,\nnonrecurring warranty problems.\n\n               SECTION 3.16 Taxes.\n                            ----- \n\n               (a)  (i)  All returns and reports in respect of Taxes (as defined\nherein) required to be filed with respect to the Company and each Subsidiary\nhave been timely filed; (ii) all Taxes required to be shown on such returns and\nreports or otherwise due have been timely paid; (iii) all such returns and\nreports are true, correct and complete in all respects; (iv) no adjustment\nrelating to such returns has been proposed by any Tax authority, and to the\nknowledge of the Company, no basis exists for any such adjustment; (v) there are\nno pending actions or proceedings; or, to the knowledge of the Company, actions\nor nor have any such actions or proceedings been threatened in writing; (vi) no\nconsent under Section 341(f) of the \n\n                                       23\n\n \nCode has been filed with respect to the Company or any Subsidiary; (vii) there\nare no Tax liens on any assets of the Company or any Subsidiary; (viii) neither\nthe Company nor any Subsidiary or any affiliate is a party to any agreement or\narrangement that would result, separately or in the aggregate, in the actual or\ndeemed payment by the Company of any \"excess parachute payments\" within the\nmeaning of Section 280G of the Code (without regard to Section 280G(b)(4)); (ix)\nneither the Company nor any Subsidiary is doing business in nor engaged in a\ntrade or business in any jurisdiction in which it has not filed any applicable\nincome or franchise tax return required to be filed by applicable Law; and (x)\nno power of attorney is currently in force or has been granted with respect to\nany matter relating to Taxes that could affect the Company or any Subsidiary.\n\n \n               (b)  Neither the Company nor any Subsidiary is aware of any\nagreement, plan or other circumstance that would prevent the Merger from\nqualifying under Section 368(a) of the Code.\n\n               (c)  As used in this Agreement, \"Taxes\" shall mean any and all \n                                                -----  \ntaxes, fees, levies, duties, tariffs, imposts and other charges of any kind\n(together with any and all interest, penalties, additions to tax and additional\namounts imposed with respect thereto) imposed by any government or taxing\nauthority, including, without limitation: taxes or other charges on or with\nrespect to income, franchises, windfall or other profits, gross receipts,\nproperty, sales, use, capital stock, payroll, employment, social security,\nworkers' compensation, unemployment compensation or net worth; taxes or other\ncharges in the nature of excise, withholding, ad valorem, stamp, transfer, \nvalue-added or gains taxes; license, registration or documentation fees; and\ncustoms duties, tariffs or similar charges.\n\n               SECTION 3.17 Vote Required. The only votes of the holders of any\n                            -------------  \nclasses or series of capital stock of the Company necessary to approve and adopt\nthis Agreement, the Merger and the other transactions contemplated by this\nAgreement are the affirmative votes of the holders of the requisite number of\nCompany Common Stock, Company Series A Preferred Stock, Company Series B\nPreferred Stock and Company Series C Preferred Stock, voting as separate series.\n\n               SECTION 3.18 Assets. Except as set forth in Section 3.17 of the\n                            ------  \nCompany Disclosure Schedule, the Company and each Subsidiary owns, leases or has\nthe legal right to use all of the properties and assets, including, without\nlimitation, real property and personal property (other than Intellectual\nProperty, which is covered by Section 3.14 hereof), used or intended to be used\nin the conduct of the business of the Company or any Subsidiary or otherwise\nowned, leased or used by the Company or any Subsidiary (all such properties and\nassets being the \"Assets\"). Except as set forth in Section 3.17 of the Company\n                  ------                                                       \nDisclosure Schedule, the Company or a Subsidiary has good and marketable title\nto, or in the case of leased or subleased Assets, valid and subsisting leasehold\ninterests in, all the Assets, free and clear of all liens, pledges or \nencumbrances except for (x) liens for current taxes not yet due and payable and\n(y) liens that have arisen in the ordinary course of business and that do not\n(in any case or in the aggregate) materially detract from the value of the\nassets subject thereto or materially impair the operations of the Company and\nthe Subsidiaries.  The equipment used in the operations of the business of the\ncompany and each subsidiary is, taken as a whole, in good operating condition\nand repair in all material respects, ordinary wear and tear excepted.\n\n                                       24\n\n \n               SECTION 3.19 Owned Real Property The Company and the Subsidiaries\n                            ------------------- \ndo not own any real property.\n\n               SECTION 3.20 Certain Interests.\n                            ----------------- \n\n               (a)  No stockholders owning more than 5% of the Company any\naffiliate of any such stockholder, any officer or director of the Company or any\nSubsidiary, or to the knowledge of the Company, any immediate relative or spouse\n(or immediate relative of such spouse) who resides with, or is a dependent of,\nany such officer or director:\n\n                    (i)     has any direct or indirect financial interest in any\ncreditor, competitor, supplier, manufacturer, agent, representative, distributor\nor customer of the Company or any Subsidiary; provided, however, that the\n                                              --------  ------- \nownership of securities representing no more than 1% of the outstanding voting\npower of any creditor, competitor, supplier, manufacturer, agent,\nrepresentative, distributor or customer, and which securities are listed on any\nnational securities exchange or actively traded in the national over-the-counter\nmarket, shall not be deemed to be a \"financial interest\" as long as the Person\nowning such securities has no other connection or relationship with such\ncompetitor, supplier or customer, manufacturer, agent, representative,\ndistributor or customer of the Company;\n\n                    (ii)    owns, directly or indirectly, in whole or in part,\nor has any other interest in any tangible or intangible property that the\nCompany or any Subsidiary uses in the conduct of its business (except for any\nsuch ownership or interest resulting from the ownership of securities in a\npublic company);\n\n                    (iii)   has any claim or cause of action against the Company\nor any Subsidiary; or\n\n                    (iv)    except as set forth in Section 3.20(a)(iv) of the\nCompany Disclosure Schedule, has outstanding any indebtedness to the Company or\nany Subsidiary.\n\n               (b)  Except as set forth in Section 3.20(b) of the Company\nDisclosure Schedule, except for the payment of employee compensation in the\nordinary course of business, neither the Company nor any Subsidiary has any\nliability or any other obligation of any nature to any stockholder of the\nCompany or any affiliate thereof or to any officer or director of the Company or\nany Subsidiary, or to the knowledge of the Company, to any immediate relative or\nspouse (or immediate relative of such spouse) of any such officer or director.\n\n               SECTION 3.21 Insurance Policies. Section 3.20 of the Company \n                            ------------------  \nDisclosure Schedule sets forth a true and complete list of all insurance\npolicies held by the Company or any Subsidiary and any claims thereunder. True\nand complete copies of all such policies have been provided or made available by\nthe Company to Parent. All premiums due under such policies as of the date\nhereof have been paid. Neither the Company nor any Subsidiary has failed to give\nany notice or present any claim under any such policy in a timely fashion. Such\ninsurance to the date hereof has (i) been maintained in full force and effect\nand (ii) not been canceled or changed, except to extend the maturity dates\nthereof. Since December 31, 1999, neither the Company nor any Subsidiary has\nreceived any notice or other communication regarding any actual or possible (a)\ncancellation or termination of any insurance\n\n                                       25\n\n \npolicy, (b) refusal of any coverage or rejection of any claim under any \ninsurance policy, or (c) material adjustment in the amount of the premiums\npayable with respect to any insurance policy.\n\n               SECTION 3.22 Brokers. Except as set forth in Section 3.22 of the\n                            ------- \nCompany Disclosure Schedule, no broker, finder or investment banker is entitled\nto any brokerage, finder's or other fee or commission in connection with the\norigination, negotiation or execution of this Agreement, the Merger, the\ntransactions contemplated by this Agreement, or in connection with any financing\ncontemplated since January 1, 2000. The Company has heretofore furnished to\nParent a complete and correct copy of all agreements pursuant to which any such\nfirm would be entitled to any payment in connection with this Agreement, the\nMerger or the transactions contemplated by this complete Agreement. The\nCompany's stockholders are responsible for any such fees payable by the Company.\n\n               SECTION 3.23 State Takeover Statutes. There are no restrictions\n                            -----------------------  \non business combinations contained in the URBCA that apply or will apply to the\nMerger and the other transactions contemplated by this Agreement. To the\nknowledge of the Company, no other state takeover statute is applicable to the\nMerger or the other transactions contemplated by this Agreement.\n\n               SECTION 3.24 Customers and Suppliers. Section 3.24 of the Company\n                            -----------------------  \nDisclosure Schedule contains a complete list of all customers that individually\naccounted for more than 5% of the Company's consolidated gross revenues during\nthe fiscal year ended December 31, 1999 and the most recent fiscal quarter ended\nSeptember 30, 2000, and no material supplier of the Company nor any Subsidiary\nhas cancelled or otherwise terminated, prior to the expiration of the contract\nterm, or to the Company's knowledge, made any written threat to the Company or\nany Subsidiary to cancel, reduce the supply or otherwise terminate its\nrelationship with the Company or any Subsidiary. Neither the Company nor any\nSubsidiary has (i) breached (so as to provide a benefit to the Company that was\nnot intended by the parties) any agreement with, or (ii) engaged in any\nfraudulent conduct with respect to, any customer or supplier of the Company or\nany Subsidiary.\n\n               SECTION 3.25 Inventory. All inventory of the Company and the \n                            ---------  \nSubsidiaries, whether or not reflected on the Reference Balance Sheet, consists\nof a quality and quantity usable and saleable in the ordinary course of\nbusiness, except for obsolete items and items of below-standard quality, all of\nwhich have been written-off or written-down to net realizable value on the\nReference Balance Sheet. All inventories not written-off have been priced at the\nlower of cost or market on a first-in, first-out basis. The quantities of each\ntype of inventory, whether raw materials, work-in-process or finished goods, are\nnot excessive in the present circumstances of the Company and the Subsidiaries.\n\n               SECTION 3.26 Accounts Receivable, Bank Accounts. All accounts \n                            ----------------------------------  \nreceivable of the Company and the Subsidiaries reflected on the Reference\nBalance Sheet are valid receivables subject to no setoffs or counterclaims and\nare current and collectible (within 30 days after the date on which it first\nbecame due and payable), net of the applicable reserve for bad debts on the\nReference Balance Sheet. All accounts receivable reflected in the financial or\naccounting records of the Company and the Subsidiaries that have arisen since\nthe date of\n\n                                       26\n\n \nReference Balance Sheet are valid receivables subject to no setoffs or\ncounterclaims and are collectible (within 30 days after the date on which it\nfirst became due and payable), net of a reserve for bad debts in an amount\nproportionate to the reserve shown on the Reference Balance Sheet. Section 3.26\nof the Company Disclosure Schedule describes each account maintained by or for\nthe benefit of the Company or any Subsidiary at any bank or other financial\ninstitution\n\n               SECTION 3.27 Powers of Attorney. There are no outstanding powers\n                            ------------------  \n of attorney executed on behalf of the Company or any Subsidiary.\n\n               SECTION 3.28 Offers. The Company has suspended or terminated, and\n                            ------                            \nhad the legal right to terminate or suspend, all negotiations and discussions of\nany acquisition, merger, consolidation or sale of all or substantially all of\nthe assets of Company and the Subsidiaries with parties other than Parent.\n\n               SECTION 3.29 Warranties. No product or service manufactured, \n                            ----------  \nsold, leased, licensed or delivered by the Company or any Subsidiary is subject\nto any guaranty, warranty, right of return, right of credit or other indemnity\nother than (i) the applicable standard terms and conditions of sale or lease of\nthe Company or the appropriate Subsidiary, which are set forth in Section 3.29\nof the Company Disclosure Schedule and (ii) manufacturers' warranties for which\nneither the Company nor any Subsidiary has any liability. Section 3.29 of the\nCompany Disclosure Schedule sets forth the aggregate expenses incurred by the\nCompany and the Subsidiaries in fulfilling their obligations under any guaranty,\nwarranty, right of return or indemnity provisions during each of the fiscal\nyears and the interim period covered by the Audited Financial Statements; and\nneither the Company nor any Subsidiary knows of any reason why such expenses\nshould significantly increase as a percentage of sales in the future.\n\n               SECTION 3.30 Books and Records. The minute books and other \n                            -----------------  \nsimilar records of the Company and the Subsidiaries contain complete and\naccurate records in all material respects of all actions taken at any meetings\nof the Company's stockholders, Board of Directors of any committee thereof, and\nall written consents executed in lieu of any such meeting. The books and records\nof the Company accurately reflect the assets, liabilities, business, financial\ncondition and results of operations of the Company and the Subsidiaries and have\nbeen maintained in accordance with good business and bookkeeping practices.\n\n               SECTION 3.31 Tax Matters. To the knowledge of the Company, \n                            -----------  \nneither the Company nor any Subsidiary has taken or agreed to take any action\nthat would prevent the Merger from constituting a reorganization qualifying\nunder Section 368(a) of the Code. The Company is not aware of any agreement,\nplan or other circumstance that would prevent the Merger from qualifying as a\nreorganization under Section 368(a) of the Code.\n\n               SECTION 3.32 No Misstatements. No representation or warranty made\n                            ----------------  \nby the Company in this Agreement, the Company Disclosure Schedule or any\ncertificate delivered or deliverable pursuant to the terms hereof, contains or\nwill contain, any untrue statement of a material fact, or omits, or will omit,\nwhen taken as a whole, any material fact, necessary in order to make the\nstatements made, in light of the circumstances under which they were made, not\nmisleading.\n\n                                       27\n\n \n                                  ARTICLE IV\n\n            REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB\n            -------------------------------------------------------\n\n               Except as set forth in (i) the disclosure schedule delivered by\nParent and Merger Sub to the Company concurrently with the execution of this\nAgreement (the \"Parent Disclosure Schedule\"), which provides an exception to or\n                --------------------------            \notherwise qualifies in reasonable detail with specific Section references, the\nrepresentations or warranties of Parent and Merger Sub specifically referred to\ntherein, or (ii) in Parent SEC Reports (as defined in Section 4.05), Parent and\nMerger Sub hereby jointly and severally represent and warrant to the Company\nthat:\n\n               SECTION 4.01 Organization and Qualification.\n                            ------------------------------ \n\n               (a)  Parent is a corporation duly incorporated, validly existing\nand in good standing under the laws of California.\n\n               (b)  Merger Sub is a corporation duly incorporated, validly\nexisting and in good standing under the laws of the State of Utah.\n\n               (c)  Each of Parent and Merger Sub has all requisite corporate\npower and authority to own, lease and operate its properties and to carry on its\nbusiness as it is now being conducted, except where the failure to be so\norganized, existing or in good standing or to have such corporate power and\nauthority have not had, and could not reasonably be expected to have,\nindividually or in the aggregate, a Parent Material Adverse Effect (as defined\nbelow). The Parent is duly qualified or licensed as a foreign corporation to do\nbusiness, and is in good standing, in each jurisdiction where the character of\nthe properties owned, leased or operated by it or the nature of its business\nmakes such qualification or licensing necessary, except for such failures to be\nso qualified or licensed and in good standing that have not had, and could not\nreasonably be expected to have, individually or in the aggregate, a Parent\nMaterial Adverse Effect.\n\n               SECTION 4.02 Authority Relative to This Agreement. Each of Parent\n                            ------------------------------------  \nand Merger Sub has all necessary corporate power and authority to execute and\ndeliver this Agreement, and to perform its obligations hereunder and to\nconsummate the Merger and the other transactions contemplated by this Agreement.\nThe execution and delivery of this Agreement by each of Parent and Merger Sub\nand the consummation by each of Parent and Merger Sub of the Merger and the\nother transactions contemplated by this Agreement have been duly and validly\nauthorized by all necessary corporate action and no other corporate proceedings\non the part of Parent or Merger Sub are necessary to authorize this Agreement or\nto consummate the Merger and the other transactions contemplated by this\nAgreement (other than with respect to the Merger, the filing and recordation of\nappropriate merger documents as required by the URBCA). This Agreement has been\nduly and validly executed and delivered by each of Parent and Merger Sub, and\nassuming the due authorization, execution and delivery by the Company,\nconstitutes a legal, valid and binding obligation of each of Parent and Merger\nSub, enforceable against each of Parent and Merger Sub in accordance with its\nterms, subject to any applicable bankruptcy, reorganization, insolvency,\nmoratorium or similar laws affecting creditors' rights generally and subject, as\nto enforceability, to general principles of equity.\n\n                                       28\n\n \n               SECTION 4.03 Capital Structure. As of September 30, 2000, the \n                            -----------------  \nauthorized capital stock of Parent consists of (a) 200,000,000 shares of Parent\nCommon Stock and (b)10,000,000 shares of Preferred Stock (\"Parent Preferred\nStock\"). As of September 30, 2000, (i) 52,530,934 shares of Parent Common Stock\nwere issued and outstanding, all of which are validly issued, fully paid and \nnon-assessable, (ii) no shares of Parent Preferred Stock were issued and\noutstanding, and (iii) 6,951,643 shares of Parent Common Stock were reserved for\nfuture issuance pursuant to outstanding options to purchase Parent Common Stock,\nas described in Parent SEC Reports (as defined in Section 4.05). As of the date\nhereof, no shares of Parent Preferred Stock are issued and outstanding. As of\nthe date hereof, except for outstanding options referred to in clause (iii)\nabove, there are no outstanding options or warrants, or agreements relating to\nthe issuance of capital stock of Parent or obligating Parent to issue or sell\nany shares of its capital stock. The shares of Common Stock to be issued\npursuant to the Merger will be duly authorized, validly issued, fully paid, and\nnon-assessable, will not be subject to any preemptive or other statutory right\nof stockholders, and will be free of any liens or encumbrances other than any\nliens or encumbrances created by or imposed upon the holders thereof.\n\n               SECTION 4.04 No Conflict; Required Filings and Consents. (a) The \n                            ------------------------------------------  \nexecution and delivery of this Agreement by each of Parent and Merger Sub does\nnot, and the performance of this Agreement by each of Parent and Merger Sub will\nnot, (i) conflict with or violate their respective organizational documents,\n(ii) assuming that all consents, approvals, authorizations and other actions\ndescribed in Section 4.04(b) have been obtained and all filings and obligations\ndescribed in Section 4.04(b) have been made, conflict with or violate in any\nmaterial respect any Law applicable to Parent or Merger Sub or by which any\nproperty or asset of Parent or Merger Sub is bound or affected, or (iii) result\nin any breach of or constitute a default (or an event which with notice or lapse\nof time or both would become a default) under, or give to others any right of\ntermination, amendment, acceleration or cancellation of, or result in the\ncreation of a lien or other encumbrance on any property or asset of Parent or\nMerger Sub pursuant to, any material note, bond, mortgage, indenture, contract,\nagreement, lease, license, permit, franchise or other instrument or obligation,\nexcept, with respect to clause (iii), for any such conflicts, violations,\nbreaches, defaults, or other occurrences that could not reasonably be expected,\nindividually or in the aggregate, to prevent or materially delay the\nconsummation of the transactions contemplated by this Agreement.\n \n               (b)  The execution and delivery of this Agreement by each of\nParent and Merger Sub does not, and the performance of this Agreement by each of\nParent and Merger Sub will not, require any consent, approval, authorization or\npermit of, or filing with or notification to, any Governmental Entity, except\n(i) for pre-merger notification requirements of the HSR Act, (ii) for the filing\nand recordation of appropriate merger documents as required by the URBCA, (iii)\nany filings as may be required under applicable federal and state securities\nlaws, including, without limitation, qualification pursuant to Section 25121 of\nthe California General Corporations Law and the filing of a Notification of\nListing of Additional Shares with NASDAQ, and (iv) where the failure to obtain\nsuch consents, approvals, authorizations or permits, or to make such filings or\nnotifications, could not reasonably be expected, individually or in the\naggregate, to prevent or materially delay the consummation of the transactions\ncontemplated by this Agreement.\n\n                                       29\n\n \n               SECTION 4.05 SEC Filings; Financial Statements.\n                            --------------------------------- \n\n               (a)  Parent has filed all forms, reports and documents required\nto be filed by it with the Securities and Exchange Commission (the \"SEC\") since\n                                                                    ---\nNovember 1999 through the date of this Agreement (collectively, the \"Parent SEC\n                                                                     ----------\nReports\"). As of the respective dates they were filed, (i) the Parent SEC\n-------\nReports were prepared, and all forms, reports and documents filed with the SEC\nafter the date of this Agreement and prior to the Effective Time will be\nprepared, in all material respects in accordance with the requirements of the\nSecurities Act of 1933, as amended (together with the rules and regulations\npromulgated thereunder, the \"Securities Act\"), or the Securities Exchange Act of\n                             --------------\n1934, as amended (together with the rules and regulations promulgated\nthereunder, the \"Exchange Act\"), as the case may be, and (ii) the Parent SEC\n                 ------------\nReports, when read together, do not contain any untrue statement of a material\nfact or omit to state a material fact required to be stated therein or necessary\nin order to make the statements made therein, in the light of the circumstances\nunder which they were made, not misleading.\n\n               (b)  Each of the consolidated financial statements (including, in\neach case, any notes thereto) contained in the Parent SEC Reports and in any\nform, report or document filed after the date of this Agreement and prior to the\nEffective Time was, or will be, as the case may be, prepared in accordance with\nU.S. GAAP accounting standards applied on a consistent basis throughout the\nperiods indicated (except as may be indicated in the notes thereto or, in the\ncase of unaudited statements, as permitted by Form 8-K of the SEC) and each\npresented or will present fairly, in all material respects, the consolidated\nfinancial position of Parent and its consolidated subsidiaries as of the\nrespective dates thereof and for the respective periods indicated therein,\nexcept as otherwise noted therein (subject, in the case of unaudited statements,\nto normal and recurring year-end adjustments which were not and are not\nexpected, individually or in the aggregate, to have a Parent Material Adverse\nEffect). The term \"Parent Material Adverse Effect\" means any change in or effect\n                   ------------------------------  \non the business of Parent and its subsidiaries that is materially adverse to the\nbusiness, operations, condition (financial or otherwise), assets, liabilities,\nor results of operations of Parent and its subsidiaries taken as a whole, except\nfor any such changes or effects resulting from or in connection with (A) any\nchanges in general economic conditions, (B) any decline in the price of Parent\nShares or any adverse changes in the United States securities market, or (C) the\nannouncement of the Merger or actions taken as a result of this Agreement.\n\n               SECTION 4.06 Interim Operations of Merger Sub. Merger Sub was \n                            --------------------------------  \nformed by Parent solely for the purpose of engaging in the transactions\ncontemplated by this Agreement, has engaged in no other business activities and\nhas conducted its operations only as contemplated by this Agreement. Merger Sub\nhas no liabilities, and except for a subscription agreement pursuant to which\nall of its authorized capital stock was issued to Parent, is not a party to any\nagreement other than this Agreement and agreements with respect to the\nappointment of registered agents and similar matters.\n\n               SECTION 4.07 Valid Issuance of Parent Shares. The shares of \n                            -------------------------------  \nParent to be issued pursuant to this Agreement will, when issued, be duly\nauthorized, validly issued, fully paid and non-assessable, and issued in\ncompliance with all applicable United States federal and state securities laws.\n\n                                       30\n\n \n               SECTION 4.08 Brokers. Except for Bear, Stearns &amp; Co., Inc., no \n                            -------  \nbroker, finder or investment banker is entitled to any brokerage, finder's or\nother fee or commission in connection with the Merger or the other transactions\ncontemplated by this Agreement based upon arrangements made by or on behalf of\nParent or Merger Sub.\n\n               SECTION 4.09 No Parent Shareholder Vote. Assuming the number of\n                            --------------------------  \nshares of Parent Common Stock exchanged for Company Common Stock issued and\noutstanding immediately prior to the Effective Time does not exceed 10,500,000\nshares of Parent Common Stock, neither the Merger nor the transactions\ncontemplated by this Agreement shall trigger any requirement for a vote by\nParent shareholders.\n\n               SECTION 4.10 Permits. As of October 15, 2000, Parent is in \n                            -------  \npossession of all franchises, grants, authorizations, licenses, permits,\neasements, variances, exceptions, consents, certificates, approvals and orders\nof any Governmental Entity necessary for Parent to own, lease and operate its\nproperties or to carry on its business as it is now being conducted (the \"Parent\n                                                                          ------\nPermits\"). No suspension or cancellation of any of the Parent Permits is pending\n-------\nor, to the knowledge of Parent, threatened.\n\n               SECTION 4.11 Absence of Change. Since September 30, 2000, there\n                            -----------------  \nhas been no event the occurrence of which would give rise to a duty on the part\nof Parent to file a Form 8-K where such form has not been filed.\n\n               SECTION 4.12 Absence of Litigation.  As of October 15, 2000, \n                            ---------------------   \nthere is no litigation, suit, claim, action, proceeding or investigation pending\n(each a \"Legal Proceeding\") or, to the knowledge of Parent, threatened, or any\n         ----------------\nproperty or asset owned or used by the Parent or for which Parent has or may\nhave assumed, either contractually or by operation of law, liability before any\ncourt, arbitrator or Governmental Entity, which could reasonably be expected, if\nresolved adversely to Parent, to materially impair the operations of Parent. To\nParent's knowledge, no event has occurred, and no claim, dispute or other\ncondition or circumstance exists, that could reasonably be expected to give rise\nto or serve as a basis for, the commencement of any Legal Proceeding. Neither\nParent nor any property or assets of Parent is subject to any continuing order\nof, consent decree, settlement agreement or other similar written agreement\nwith, or to the knowledge of Parent, continuing investigation by, any\nGovernmental Entity, or any order, writ, judgment, injunction, decree,\ndetermination or award of any court, arbitrator or Governmental Entity.\n\n               SECTION 4.13 Material Contracts.\n                            ------------------ \n\n               (a)  Section 4.13 of the Parent Disclosure Schedule sets forth\neach Material Contract of Parent (for the purposes of this Section 4.13, the\nterm Material Contract shall have the same meaning given to that term in Item\n601(b)(10) of Regulation S-K of the Securities Act) required to be disclosed on\nParent's most recent annual report on Form 10-K and any Material Contracts\nentered into by Parent since January 1, 2000. Each Material Contract is valid\nand binding as to Parent, and to the knowledge of Parent, as to the other\nparties thereto (subject in each case to the effect of any applicable\nbankruptcy, reorganization, insolvency, moratorium or similar Laws affecting\ncreditors' rights generally and subject, as to enforceability, to general\nprinciples of equity), and is in full force and effect, and upon consummation of\nthe \n\n                                       31\n\n \ntransactions contemplated by this Agreement, shall continue in full force and\neffect without penalty or other adverse consequence.\n\n               (b)  Except as set forth in Section 4.13 of the Parent Disclosure\nSchedule, to Parent's knowledge, no event has occurred, and no circumstance or\ncondition exists, that (with or without notice or lapse of time) will or could\nreasonable be expected to (i) result in a violation or breach of a Material\nContract, (ii) give any entity the right to declare a default or exercise any\nremedy under any Material Contract, (iii) give any entity the right to\naccelerate the maturity or performance of any Material Contract or (iv) give any\nentity to the right to cancel, terminate or modify any Material Contract.\n\n                                   ARTICLE V\n\n                   CONDUCT OF BUSINESSES PENDING THE MERGER\n                   ----------------------------------------\n\n               SECTION 5.01 Conduct of Business by the Company and the \n                            ------------------------------------------\nSubsidiaries Pending the Merger. During the period from the date of this \n-------------------------------  \nAgreement and continuing until the earlier of the termination of this Agreement\nor the Effective Time, the Company agrees, and shall cause each Subsidiary,\n(except to the extent that Parent shall otherwise consent in writing), to carry\non its business in the usual, regular and ordinary course in substantially the\nsame manner as previously conducted, to pay its debts and taxes when due\n(subject to good faith disputes over such debts or taxes), to pay or perform\nother obligations when due, and to the extent consistent with such business, use\nall reasonable efforts consistent with past practices and policies to preserve\nintact its present business organization, to keep available the services of its\npresent officers and key employees and consultants and to preserve its\nrelationships with customers, suppliers, distributors, licensors, licensees, and\nothers having business dealings with it, to the end that its goodwill and\nongoing businesses would be unimpaired at the Effective Time. The Company shall\npromptly notify Parent of any event or occurrence not in the ordinary course of\nbusiness of the Company.\n\n               By way of amplification and not limitation, except as\ncontemplated by this Agreement or as set forth in Section 5.01 of the Company\nDisclosure Schedule, neither the Company nor any Subsidiary shall, between the\ndate of this Agreement and the Effective Time, directly or indirectly, do or\npropose to do, any of the following without the prior written consent of Parent:\n\n               (a)  amend or otherwise change its Articles of Incorporation or\nBylaws or equivalent organizational documents;\n\n               (b)  issue, sell, pledge, dispose of, grant, encumber, authorize\nor propose the issuance, sale, pledge, disposition, grant or encumbrance of any\nshares of its capital stock of any class, or any options, warrants, convertible\nsecurities or other rights of any kind to acquire any shares of such capital\nstock, or any other ownership interest (including, without limitation, any\nphantom interest) of the Company or any Subsidiary, except pursuant to the terms\nof options, warrants or preferred stock outstanding on the date of this\nAgreement;\n\n                                       32\n\n \n     (c)  sell, lease, license, pledge, grant, encumber or otherwise dispose of\nany of its properties or assets which are material, individually or in the\naggregate, to its business, except in the ordinary course of business;\n\n     (d)  declare, set aside, make or pay any dividend or other distribution\npayable in cash, stock, property or otherwise, with respect to any of its\ncapital stock;\n\n     (e)  split, combine, subdivide, redeem or reclassify any of its capital\nstock or issue or authorize the issuance of any other securities in respect of,\nin lieu of or in substitution for shares of capital stock of such party, or\npurchase or otherwise acquire, directly or indirectly, any shares of its capital\nstock except from former employees, directors and consultants in accordance with\nagreements providing for the repurchase of shares in connection with any\ntermination of service by such party;\n\n     (f)  acquire (including, without limitation, by merger, consolidation or\nacquisition of stock or assets) any interest in any corporation, partnership,\nother business organization or any division thereof or any assets thereof;\n\n     (g)  institute or settle any Legal Proceeding;\n\n     (h)  incur any indebtedness for borrowed money or issue any debt securities\nor assume, guarantee or endorse, or otherwise as an accommodation become\nresponsible for, the obligations of any Person, or make any loans or advances;\n\n     (i)  authorize any capital expenditure in excess of $50,000, individually\nor in the aggregate;\n\n     (j)  enter into any lease or contract for the purchase or sale of any\nproperty, real or, for purchases in excess of $50,000 individually or in the\naggregate, personal;\n\n     (k)  waive or release any material right or claim;\n\n     (l)  increase the compensation payable or to become payable to its officers\nor employees, or grant any severance or termination pay to, or enter into any\nemployment or severance agreement with, any director, officer or employee, or\nestablish, adopt, enter into or amend any collective bargaining, bonus, profit\nsharing, thrift, compensation, stock option, restricted stock, pension,\nretirement, deferred compensation, employment, termination, severance or other\nplan, agreement, trust, fund, policy or arrangement for the benefit of any\ndirector, officer or employee;\n\n     (m)  accelerate, amend or change the period of exercisability or the\nvesting schedule of restricted stock or options granted under any employee stock\nplan or agreement or authorize cash payments in exchange for any options granted\nunder any of such plan or agreement except as specifically required by the terms\nof such plans or agreements in effect as of the date of this Agreement;\n\n     (n)  take any action to cause, or fail to take any action to prevent, the\naccelerated vesting and exercisability of the Company Options;\n\n                                       33\n\n \n     (o)  extend any offers for the provision of services to potential\nemployees, consultants or independent contractors other than offers of\nemployment to potential employees lower than director-level that are \"at will\"\nand do not provide for severance obligations;\n\n     (p)  amend or terminate any Material Contract;\n\n     (q)  enter into, amend or terminate any contract, agreement, commitment or\narrangement that, if fully performed, would not be permitted under this Section\n5.01;\n\n     (r)  other than in the ordinary course of business consistent with past\npractice, enter into any licensing, distribution, OEM, sponsorship, advertising,\nmerchant program contracts, agreements or obligations, or other similar\ncontracts, agreements, or obligations, which may not be cancelled by the Company\nupon notice of 30 days or less without penalties;\n\n     (s)  enter into any contract or agreement material to the business, results\nof operations or financial condition of the Company;\n\n     (t)  take any action, other than reasonable and usual action in the\nordinary course of business and consistent with past practice, with respect to\naccounting policies, principles or procedures;\n     \n     (u)  make or change any material Tax or accounting election, change any\nannual accounting period, adopt or change any accounting method, file any\namended Return, enter into any closing agreement, settle any Tax claim or\nassessment relating to the Company or any Subsidiary, surrender any right to\nclaim a refund of Taxes, consent to any extension or waiver of the limitation\nperiod applicable to any Tax claim or assessment relating to the Company or any\nSubsidiary, or take any other action or omit to take any action that would have\nthe effect of increasing the Tax liability of the Company or any Subsidiary or\nParent;\n\n     (v)  (i) sell, assign, lease, terminate, abandon, transfer, permit to be\nencumbered, otherwise dispose of or grant any security interest in any item of\nOwned Intellectual Property or Licensed Intellectual Property, in whole or in\npart, (ii) grant any license with respect to any Owned Intellectual Property,\nother than the license of Company Software to customers of the Company or any\nSubsidiary to whom the Company or any Subsidiary licenses such Company Software\nin the ordinary course of business, (iii) develop, create or invent any\nIntellectual Property jointly with any third party, or (iv) disclose, or allow\nto be disclosed, any confidential Owned Intellectual Property, unless such Owned\nIntellectual Property is subject to a confidentiality or non-disclosure covenant\nprotecting against disclosure thereof;\n\n     (w)  make (or become obligated to make) any payments to any of the parties\nset forth on Schedule 6.08 in the aggregate in excess of the Financing Proceeds;\n     \n     (x)  revalue any of its assets, including writing down the value of\ninventory or writing off notes or accounts receivable;\n\n                                       34\n\n \n     (y)  fail to maintain its equipment and other assets in good working\ncondition and repair according to the standards it has maintained up to the date\nof this Agreement, subject only to ordinary wear and tear;\n\n     (z)  take any action or fail to take any action that would cause there to\nbe a Company Material Adverse Effect;\n\n     (aa) permit any insurance policy naming it as a beneficiary or a loss\npayable payee to be cancelled or terminated without notice to Parent and Merger\nSub;\n\n     (bb) write off as uncollectible, or establish any extraordinary reserve\nwith respect to, any account receivable or other indebtedness in excess of\n$50,000 with respect to a single matter, or in excess of $50,000 in the\naggregate; or\n\n     (cc) take, or agree in writing or otherwise to take, any of the actions\ndescribed in Sections (a) through (cc) above, or any action which is reasonably\nlikely to make any of the Company's representations or warranties contained in\nthis Agreement untrue or incorrect on the date made (to the extent so limited)\nor as of the Effective Time.\n\n     SECTION 5.02  Notification of Certain Matters.  Parent shall give prompt\n                   -------------------------------                           \nnotice to the Company, and the Company shall give prompt notice to Parent, of\n(i) the occurrence, or non-occurrence, of any event the occurrence, or non-\noccurrence, of which would be likely to cause (x) any representation or warranty\ncontained in this Agreement to be untrue or inaccurate or (y) any covenant,\ncondition or agreement contained in this Agreement not to be complied with or\nsatisfied and (ii) any failure of Parent or the Company, as the case may be, to\ncomply with or satisfy any covenant, condition or agreement to be complied with\nor satisfied by it hereunder; provided, however, that the delivery of any notice\n                              --------  -------                                 \npursuant to this Section 5.02 shall not limit or otherwise affect the remedies\navailable hereunder to the party receiving such notice.\n\n                                  ARTICLE VI\n\n                             ADDITIONAL AGREEMENTS\n                             ---------------------\n\n     SECTION 6.01  Stockholder Approval. The Company shall promptly, after the\n                   --------------------\ndate of this Agreement and in accordance with applicable Law, the Company's\nArticles of Incorporation and Bylaws, convene a meeting of its stockholders or\nsolicit written consents to obtain their approval and adoption of this\nAgreement, the Merger and the transactions contemplated by this Agreement. The\nCompany shall ensure that the stockholders' meeting is called, noticed,\nconvened, held and conducted, and that all proxies solicited by the Company in\nconnection with the stockholders' meeting are solicited, or in the alternative,\nthat written consents are solicited, in compliance with applicable Law, the\nCompany's Articles of Incorporation and Bylaws, and all other applicable legal\nrequirements. The Company agrees to use it best efforts to take all action\nnecessary or advisable to secure the necessary votes required by applicable Law,\nthe Company's Articles of Incorporation and Bylaws to effect the Merger.\n\n                                       35\n\n \n     SECTION 6.02  Access to Information; Confidentiality.\n                   -------------------------------------- \n\n     (a)  From the date of this Agreement to the Effective Time, the Company\nshall: (i) provide to Parent (and its officers, directors, employees,\naccountants, consultants, legal counsel, agents and other representatives,\ncollectively, \"Representatives\"), at reasonable times upon prior notice, access\n               ---------------\nto the directors, officers, employees, agents, properties, offices and other\nfacilities of the Company and the Subsidiaries and to the books and records\nthereof and (ii) promptly furnish information concerning the business,\nproperties, contracts, assets, liabilities, personnel and other aspects of the\nCompany and the Subsidiaries as Parent or its Representatives may reasonably\nrequest.\n\n     (b)  From the date of this Agreement to the Effective Time, the Parent\nshall provide to Company and its Representatives, at reasonable times upon prior\nnotice, access to the chief financial officer of Parent.\n\n     (c)  The parties shall comply with, and shall cause their respective\nRepresentatives to comply with, all of their respective obligations under the\nNon-Disclosure Agreement dated October __, 2000, (the \"Non-Disclosure\n                                                       --------------\nAgreement\") between the Company and Parent.\n---------\n\n     SECTION 6.03  No Solicitation of Transactions.\n                   ------------------------------- \n\n     (a)  The Company will not, directly or indirectly, and will instruct its\nofficers, directors, employees, agents, advisors or other representatives\n(including, without limitation, any investment banker, attorney or accountant\nretained by it) not to, directly or indirectly, solicit, initiate or encourage\n(including by way of furnishing nonpublic information), or take any other action\nto facilitate, any inquiries or the making of any proposal or offer (including,\nwithout limitation, any proposal or offer to its stockholders) that constitutes,\nor may reasonably be expected to lead to, any Competing Transaction (as defined\nbelow), or enter into or maintain or continue discussions or negotiate with any\nPerson or entity in furtherance of such inquiries or to obtain a Competing\nTransaction, or agree to or endorse any Competing Transaction, or authorize or\npermit any of the officers, directors or employees of the Company, or any\ninvestment banker, financial advisor, attorney, accountant or other\nrepresentative retained by the Company, to take any such action. The Company\nwill notify Parent immediately after receipt by the Company (or any of its\nofficers, directors, employees, agents, advisors or other representatives) of\nany proposal for or inquiry respecting any Competing Transaction, or any request\nfor nonpublic information in connection with such proposal or inquiry or for\naccess to the properties, books or records of the Company by any Person or\nentity that informs or has informed the Company that it is considering making or\nhas made such a proposal or inquiry. Such notice to Parent shall indicate in\nreasonable detail the identity of the Person making such proposal or inquiry and\nthe terms and conditions of such proposal or inquiry. The Company immediately\nshall cease and cause to be terminated all existing discussions or negotiations\nwith any parties conducted heretofore with respect to a Competing Transaction.\nThe Company agrees not to release any third party from, or waive any provision\nof, any confidentiality or standstill agreement to which it is a party.\n\n                                       36\n\n \n     (b)  A \"Competing Transaction\" means any of the following involving the\n             ---------------------\nCompany or any Subsidiary (other than the Merger and the other transactions\ncontemplated by this Agreement): (i) a merger, consolidation, share exchange,\nbusiness combination or other similar transaction; (ii) any sale, lease,\nexchange, transfer or other disposition of a material portion of the assets of\nsuch party; (iii) a tender offer or exchange offer for 15% or more of the\noutstanding voting securities of such party; or (iv) any solicitation in\nopposition to approval by the stockholders of the Company of this Agreement and\nthe Merger.\n\n     SECTION 6.04  Employee Benefits Matters.\n                   ------------------------- \n     \n     (a)  All Company and each Subsidiary's employees shall continue on their\nexisting benefit plans until such time as, in Parent's sole discretion, an\norderly transition can be accomplished to employee benefit plans and programs\nmaintained by Merger Sub for its and its affiliates' employees in the United\nStates. Parent shall provide the Company's and Subsidiaries' employees with\nhealth, welfare and other employee benefits that in the aggregate are\nsubstantially equivalent to those provided to Parent's employees in similar\nfunctions and positions. Pending such action, Parent shall maintain the\neffectiveness of the Company's and Subsidiaries' benefit plans.\n\n     (b)  Simultaneously with the execution of this Agreement, Parent has\nentered into employment agreements (collectively, the \"Employment Agreements\",\n                                                       ---------------------\nand individually, an \"Employment Agreement\") with the individuals set forth on\n                      --------------------\nSchedule 6.04(b) hereto.\n\n     (c)  Simultaneously with the execution of this Agreement, Parent has\nentered into option assumption agreements (collectively, the \"Option Assumption\n                                                              -----------------\nAgreements\", and individually, an \"Option Assumption Agreement\") with holders of\n----------                         --------------------------- \nCompany Options set forth on Schedule 6.04(b) hereto, which Option Assumption\nAgreements shall provide for the waiver of any acceleration of vesting for\ncertain options in connection with the Merger, the restriction on sales of the\nParent Common Stock issuable upon exercise of the assumed Company Options, and\nthe payment of certain cash consideration. Prior to the Effective Time, the\nCompany shall take all reasonably best actions to ensure that all holders of\nCompany Options shall execute an Option Assumption Agreement.\n\n     (d)  Prior to the Effective Date, Parent shall use reasonably best efforts\nto enter into non-disclosure and invention assignment agreements (collectively,\nthe \"Invention Assignment Agreements\", and individually, an \"Invention\n     -------------------------------                         ---------\nAssignment Agreement\") with the employees of the Company that will be employees\n--------------------\nof Parent following the Effective Date.\n\n     (e)  Prior to the Effective Date, the Company shall take all necessary\nactions to obtain the requisite stockholder approval under Section 280G(b)(5) of\nthe Code of any payments or benefits that could be considered \"excess parachute\npayments\" within the meaning of Section 280G of the Code and shall require all\n\"disqualified individuals\" within the meaning of Section 280G of the Code to\nsubject their existing benefits and payments to the stockholder approval\nrequirements of Section 280G(b)(5) of the Code, as contemplated in the Proposed\nTreasury Regulations promulgated thereunder.\n\n                                       37\n\n \n     (f)  The Company agrees to adopt resolutions to terminate its 401(k) plan\nimmediately prior to Closing, unless Parent, in its sole and absolute\ndiscretion, agrees to sponsor and maintain such plans by providing the Company\nwith written notice of such election before the Effective Time. Unless Parent\nprovides such notice to the Company, Parent shall receive from the Company\nevidence that the Company's Board of Directors has adopted resolutions to\nterminate the 401(k) plan (the form and substance of which resolutions shall be\nsubject to the review and approval of Parent), effective as of the day\nimmediately preceding the Closing Date.\n\n     (g)  The Company, and as applicable, its ERISA Affiliates, each agree to\nterminate any and all group severance, separation or salary continuation plans,\nprograms or arrangements immediately prior to Closing. Parent shall receive from\nthe Company evidence that the plans, programs or arrangements of the Company,\nand as applicable, each ERISA Affiliate, have been terminated pursuant to\nresolutions of each such entity's Board of Directors (the form and substance of\nwhich resolutions shall be subject to review and approval of Parent), effective\nas of the day immediately preceding the Closing Date, but contingent on the\nClosing.\n\n     SECTION 6.05  Further Action; Consents; Filings.\n                   --------------------------------- \n     \n     (a)  Upon the terms and subject to the conditions hereof, each of the\nparties hereto shall use its reasonable best efforts to (i) take or cause to be\ntaken, all appropriate action, and do or cause to be done all things necessary,\nproper or advisable under applicable Law or otherwise to consummate and make\neffective the Merger and the other transactions contemplated by this Agreement,\n(ii) obtain from Governmental Entities any consents, licenses, permits, waivers,\napprovals, authorizations or orders required to be obtained or made by Parent or\nthe Company or any of their subsidiaries in connection with the authorization,\nexecution and delivery of this Agreement and the consummation of the Merger and\nthe other transactions contemplated by this Agreement, (iii) obtain all\nconsents, waivers, approvals, authorizations and orders required in connection\nwith the authorization, execution and delivery of this Agreement and the\nconsummation of the Merger, including those required under the HSR Act and (iv)\nmake all necessary filings, and thereafter make any other required submissions,\nwith respect to this Agreement, the Merger and the other transactions\ncontemplated by this Agreement required under applicable Law. The parties hereto\nshall cooperate with each other in connection with the making of all such\nfilings, including providing copies of all such documents to the nonfiling party\nand its advisors prior to filing, and if requested, accepting all reasonable\nadditions, deletions or changes suggested in connection therewith.\n\n     (b)  Each of Parent and the Company shall use all reasonable efforts to\nresolve such objections, if any, as may be asserted by any Governmental Entity\nwith respect to the transactions contemplated by this Agreement under the HSR\nAct, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade\nCommission Act, as amended, and any other federal, state or foreign statutes,\nrules, regulations, orders or decrees that are designed to prohibit, restrict or\nregulate actions having the purpose or effect of monopolization or restrain of\ntrade (collectively, \"Antitrust Laws\"). In connection therewith, if any\n                      --------------\nadministrative or judicial action or proceeding is instituted (or threatened to\nbe instituted) challenging any transaction contemplated by this Agreement as\nviolative of any Antitrust Law, each of Parent and the Company shall cooperate\nand use all reasonable efforts to contest and resist vigorously\n\n                                       38\n\n \nany such action or proceeding and to have vacated, lifted, reversed, or\noverturned any decree, judgment, injunction or other order, whether temporary,\npreliminary or permanent (each an \"Order\"), that is in effect and that\n                                   -----\nprohibits, prevents, or restricts consummation of the Merger or any such other\ntransactions contemplated by this agreement, unless by mutual agreement Parent\nand the Company decide that litigation is not in their respective best\ninterests. The parties hereto will consult and cooperate with one another, and\nconsider in good faith the views of one another, in connection with any\nanalyses, appearances, presentations, memoranda, briefs, arguments, opinions and\nproposals made or submitted by or on behalf of any party hereto in connection\nwith proceedings under or relating to any Antitrust Laws. Notwithstanding the\nprovisions of the immediately preceding sentence, it is expressly understood and\nagreed that Parent shall have no obligation to litigate or contest any\nadministrative or judicial action or proceeding or any Antitrust Order beyond\nDecember 31, 2000. Each of Parent and the Company shall use all reasonable\nefforts to take such actions as may be required to cause the expiration of the\nwaiting periods under the HSR Act or other Antitrust Laws with respect to such\ntransactions as promptly as possible after the execution of this Agreement,\nprovided, however, that nothing contained herein shall require either party to\nseek early termination of any such waiting period under the Antitrust Laws.\n\n     (c)  Notwithstanding anything to the contrary in Section 6.05(a) or (b),\n(i) neither Parent nor any of its subsidiaries shall be required to divest any\nof their respective businesses, product lines or assets, or to take or agree to\ntake any other action or agree to any limitation that could reasonably be\nexpected to have a Parent Material Adverse Effect or of Parent combined with the\nSurviving Corporation after the Effective Time and (ii) neither the Company nor\nany Subsidiary shall be required to divest any of its respective businesses,\nproduct lines or assets, or to take or agree to take any other action or agree\nto any limitation that could reasonably be expected to have a Company Material\nAdverse Effect.\n\n     (d)  From the date of this Agreement until the earlier of the Effective\nTime or the termination of this Agreement, each party shall promptly notify the\nother party in writing of any pending, or to the knowledge of such party,\nthreatened, action, proceeding or investigation by any Governmental Entity or\nany other Person (i) challenging or seeking material damages in connection with\nthis Agreement or the transactions contemplated hereunder or (ii) seeking to\nrestrain or prohibit the consummation of the Merger or the transactions\ncontemplated hereunder or otherwise limit the right of Parent or its\nsubsidiaries to own or operate all or any portion of the businesses or assets of\nthe Company.\n\n                                       39\n\n \n     SECTION 6.06   Plan of Reorganization.  This Agreement is intended to\n                    ----------------------                                \nconstitute a \"plan of reorganization\" within the meaning of Section 1.368-2(g)\nof the income tax regulations promulgated under the Code. From and after the\ndate of this Agreement and until the Effective Time, each party hereto shall use\nits reasonable best efforts to cause the Merger to qualify, and will not take\nany action, cause any action to be taken, fail to take any action or cause any\naction to fail to be taken, which action or failure to act could prevent the\nMerger from qualifying as a reorganization under the provisions of Section\n368(a) of the Code, and following the Effective Time, neither the Surviving\nCorporation, Parent nor any of their affiliates shall take any action, cause any\naction to be taken, fail to take any action or cause any action to fail to be\ntaken, which action or failure to act could cause the Merger to fail to qualify\nas a reorganization under Section 368(a) of the Code.\n\n     SECTION 6.07   No Public Announcement. The initial press release relating\n                    ----------------------\nto this Agreement shall be a joint press release the text of which has been\nagreed to by each of Parent and the Company. Thereafter, unless otherwise\nrequired by applicable Law, the Company shall not issue any press release or\notherwise make any public statements without the prior written consent of\nParent.\n\n     SECTION 6.08   Expenses. If the Merger is consummated, all costs and\n                    --------\nexpenses incurred in connection with this Agreement, the Merger and other\ntransactions contemplated by this Agreement (including, without limitation, the\nfees and expenses of financial advisors, accountants and legal counsel) (i) if\nincurred by Parent and Merger Sub, shall be paid by Parent, (ii) if incurred by\nthe Company and set forth in Schedule 6.08 shall be deducted from the Pro Rata\nCash Distribution pursuant to Section 2.01, and (iii) if incurred by the Company\nand not set forth on Schedule 6.08 shall be paid by Parent. If the Merger is not\nconsummated, all such costs and expenses shall be paid by the party that\nincurred them.\n\n     SECTION 6.09   Voting Agreements. The Company shall cause each Stockholder\n                    -----------------\nto execute and deliver to Parent, as promptly as practicable after the execution\nof this Agreement, a Voting Agreement.\n\n     SECTION 6.10   Indemnification of Officers and Directors. (a) For six years\n                    -----------------------------------------\nfrom and after the Closing Date, Parent agrees to indemnify (including\nadvancement of expenses) and hold harmless all past and present officers and\ndirectors of the Company to the same extent such Persons are indemnified as of\nthe date of this Agreement by the Company pursuant to the Company's Articles of\nIncorporation or Bylaws, or pursuant to employment agreements or indemnification\nagreements identified on the Company Disclosure Schedule or under applicable law\nfor acts or omissions which occurred at or prior to the Effective Time;\nprovided, however, that Parent shall not be required to indemnify outside\ndirectors of the Company for breaches or alleged breaches of statutory fiduciary\nduties of loyalty or care to the Company'stockholders. This indemnification\nshall not apply to any claim by an Indemnitee pursuant to the terms of this\nAgreement or any other transaction contemplated by this Agreement. This Section\n6.10 shall survive the consummation of the Merger, and is intended to be for the\nbenefit of, and shall be enforceable by, the Indemnified Persons, their heirs\nand personal representatives and shall be binding on Parent and the Surviving\nCorporation.\n\n                                       40\n\n \n     (b)  If Parent, the Surviving Corporation or any of its successors or\nassigns (A) consolidates with or merges into any other Person and shall not be\nthe continuing or surviving corporation or entity of such consolidation or\nmerger, or (B) transfers or conveys all or substantially all of its properties\nand assets to any Person, then, in each such case, to the extent necessary,\nproper provision shall be made so that the successors and assigns of Parent or\nthe Surviving Corporation, as the case may be, shall assume the obligations set\nforth in this Section 6.10.\n\n     SECTION 6.11  Nasdaq National Market Listing. Parent shall promptly prepare\n                   ------------------------------\nand submit to the Nasdaq National Market a listing application covering the\nParent Shares to be issued in the Merger and pursuant to the Company Options,\nand shall use its reasonable efforts to obtain, prior to the Effective Time,\napproval for the listing of such Parent Shares, subject to official notice to\nthe Nasdaq National Market of issuance, and the Company shall cooperate with\nParent with respect to such listing.\n\n     SECTION 6.12  Registration on Form S-3. If the resale of the Parent Shares\n                   ------------------------\nissued hereunder is not permitted under Rule 145 of the Securities Act (subject\nto the applicable limitations contained therein) or is not otherwise permitted\nwithout restriction under the Securities Act or any rules promulgated\nthereunder, Parent shall register the resale of such Parent Shares pursuant to a\nregistration statement on Form S-3 within 90 days following the Effective Time\nsubject to the terms of Schedule 6.12 hereof; provided, however, that in the\nevent of a Board of Directors' determination (as such term is defined in\nSchedule 6.12), Parent shall have the right to delay the effectiveness of such\nregistration for a period of up to 30 days.\n\n     SECTION 6.13  Board Observation Rights. Parent shall grant one\n                   ------------------------\nrepresentative of GMS Capital Partners the right to attend all meetings of\nParent's Board of Directors until July 31, 2001 in a non-voting observer\ncapacity, and in this respect, shall give such representative copies of all\nnotices, minutes, consents, and other materials that it provides to its\ndirectors; provided, however, that such representative shall agree to hold in\n           --------  -------\nconfidence and trust and to act in a fiduciary manner with respect to all\ninformation so provided; and provided further, that Parent reserves the right to\n                             -------- -------\nwithhold any information and to exclude such representative from any meeting or\nportion thereof if access to such information or attendance at such meeting\ncould adversely affect the attorney-client privilege between Parent and its\ncounsel or would result in disclosure of trade secrets to such representative or\nif GMS Capital Partners or its representative is or owns a material interest in\na direct competitor of Parent.\n\n     SECTION 6.14  Contingent Deferred Merger Consideration.  Following the\n                   ----------------------------------------                \nEffective Time, Parent shall not take any action that would materially prejudice\nthe Stockholders' ability to receive the full amount of the Contingent Deferred\nMerger Consideration, provided however, that Parent shall in no way be limited\nin its ability to make any decision with respect to Parent or Surviving\nCorporation that, in the reasonable judgement of Parent (with the advice of\nmanagement of Surviving Corporation), is in the best interests of Parent and\nSurviving Corporation, taken as a whole, without regard to the payment or\nnonpayment of the Contingent Deferred Merger Consideration.\n\n     SECTION 6.15  No Requirement of Parent Shareholder Vote. Parent convenants\n                   -----------------------------------------\nthat, prior to Effective Time, it shall not take any actions the intent or\neffect of which \n\n                                       41\n\n \nwould be to allow Parent to elect not to consummate the Merger pursuant to\nSection 7.02(m) hereof.\n\n                                  ARTICLE VII\n\n                            CONDITIONS TO THE MERGER\n                            ------------------------\n\n     SECTION 7.01  Conditions to the Obligations of Each Party. The obligations\n                   -------------------------------------------\nof the Company, Parent and Merger Sub to consummate the Merger are subject to\nthe satisfaction or waiver (where permissible) of the following conditions:\n\n     (a)  Stockholder Approval. This Agreement shall have been approved and\n          --------------------\nadopted by the requisite affirmative vote of the stockholders of the Company in\naccordance with the URBCA and the Company's Articles of Incorporation;\n\n     (b)  No Order.  No Governmental Entity or court of competent jurisdiction\n          --------                                                            \nlocated or having jurisdiction in the United States shall have enacted, issued,\npromulgated, enforced or entered any Order which is then in effect and has the\neffect of making the Merger illegal or otherwise prohibiting consummation of the\nMerger; and\n\n     (c)  HSR Act.  Any waiting period (and any extension thereof) applicable to\n          -------\nthe consummation of the Merger under the HSR Act shall have expired or been\nterminated.\n\n     (d)  Tax Opinion.  The Company's stockholders and the Parent shall have\n          -----------\nreceived the opinion of Arthur Andersen LLP (or such other accounting or law\nfirm satisfactory to the Company and Parent) to the effect that the Merger will\nqualify as a tax-free reorganization under the provisions of Section 368(a) of\nthe Code.\n\n     SECTION 7.02  Conditions to the Obligations of Parent and Merger Sub. The\n                   ------------------------------------------------------\nobligations of Parent and Merger Sub to consummate the Merger are subject to the\nsatisfaction or waiver (where permissible) of the following additional\nconditions:\n\n     (a)  Representations and Warranties.  Each of the representations and\n          ------------------------------\nwarranties of the Company and the Subsidiaries contained in this Agreement that\nare qualified as to materiality or Company Material Adverse Effect or any\nsimilar standard or qualification, shall be true and correct in all respects,\nand each of the representations and warranties of the Company and its\nSubsidiaries contained in this Agreement that are not qualified as to\nmateriality or Company Material Adverse Effect or any similar standard or\nqualification, shall be true and correct in all material respects, in each case\nas of the Effective Time as though made on and as of the Effective Time, except\nthat those representations and warranties that address matters only as of a\nparticular date shall remain true and correct as of such date, and Parent shall\nhave received a certificate of the Chief Executive Officer of the Company to\nsuch effect;\n\n     (b)  Covenants.  The Company shall have performed or complied in all\n          ---------\nmaterial respects with all agreements and covenants required by this Agreement\nto be performed or complied with by it on or prior to the Effective Time and\nParent shall have received a certificate of the Chief Executive Officer of the\nCompany to that effect;\n\n                                       42\n\n \n     (c)  Approvals.  Parent shall have received, each in form and substance\n          ---------                                                         \nreasonably satisfactory to Parent, (i) all required authorizations, consents,\norders and approvals of all Governmental Entities and officials, if any, and\n(ii) all third party consents set forth in Sections 3.05 and 3.06 herein or on\nthe Company Disclosure Schedule;\n\n     (d)  Dissenting Stockholders. Dissenting Shares shall comprise not more\n          -----------------------\nthan 1% of the Company Stock outstanding immediately prior to the Effective\nTime;\n\n     (e)  No Company Material Adverse Effect. No event or events shall have\n          ----------------------------------\noccurred which, individually or in the aggregate, have, or could reasonably be\nexpected to have, a Company Material Adverse Effect;\n\n     (f)  Employment Agreements. The individuals set forth on Schedule 6.04(b)\n          ---------------------\nhereto remain employed by the Company and the Employment Agreements entered into\nwith such individuals remain in full force and effect at the Effective Time;\n\n     (g)  No Restraints. there shall not be pending or threatened any suit,\n          -------------\naction, investigation or proceeding to which a Governmental Entity is a party\n(i) seeking to restrain or prohibit the consummation of the Merger or any of the\nother transactions contemplated by this Agreement or seeking to obtain from\nParent or the Company any damages that are material or (ii) seeking to prohibit\nor limit the ownership or operation by Parent or the Company of any portion of\ntheir respective businesses or assets;\n\n     (h)  Escrow Agreement. The Company and the Stockholders' Representative\n          ----------------\nshall have entered into the Escrow Agreement and the Escrow Agreement shall be\nin full force and effect at the Effective Time;\n\n     (i)  Termination of Employee Plans. The Company shall have provided Parent\n          -----------------------------\nwith evidence, reasonably satisfactory to Parent, as to the termination of the\nPlans;\n\n     (j)  Opinion of Company's Counsel. Parent shall have received the opinion\n          ----------------------------\nof Doepken Keevican &amp; Weiss Professional Corporation, counsel to the Company, or\nanother counsel reasonably satisfactory to Parent substantially in the form\nattached hereto as Exhibit E;\n                   --------- \n\n     (k)  Secretary's Certificate. A certificate executed by the Secretary of\n          -----------------------\nthe Company attaching and certifying as to the Company's current Articles of\nIncorporation and Bylaws and the resolutions of the Company's Board of Directors\nand stockholders approving and adopting this Agreement and the transactions\nrelating thereto;\n\n     (l)  No Parent Shareholder Vote. Neither the Merger nor the transactions\n          --------------------------\ncontemplated by this Agreement shall trigger any requirement for a vote by\nParent shareholders.\n\n     (m)  FIRPTA Compliance. The Company shall have delivered to Parent a\n          -----------------\nproperly executed statement in a form reasonably acceptable to Parent for\npurposes of satisfying Parent's obligations under Treasury Regulation 1.1445-\n2(c)(3);\n\n                                       43\n\n \n               (n)  Parachute Payments. Prior to the Effective Date, the Company\n                    ------------------\nshall have taken all necessary actions to obtain the requisite stockholder\napproval under Section 280G(b)(5) of the Code of any payments or benefits that\ncould be considered \"excess parachute payments\" within the meaning of Section\n280G of the Code and shall require all \"disqualified individuals\" within the\nmeaning of Section 280G of the Code, to subject their existing benefits and\npayments to the stockholder approval requirements of Section 280G(b)(5) of the\nCode, as contemplated in the Proposed Treasury Regulations promulgated\nthereunder;\n\n               (o)  Employees. All of the individuals set forth on Schedule\n                    ---------\n6.04(b) shall be employed by the Company;\n\n               (p)  Approvals. All authorizations, consents (including the\n                    ---------\nMaterial Consents), or approvals of, or notifications to any third party,\nrequired by the Company's contracts, agreements or other obligations in\nconnection with the consummation of the Merger shall have occurred or been\nobtained;\n\n               (q)  Board and Officer Resignations. The Company shall have\n                    ------------------------------\nreceived written letters of resignation from each of the current members of the\nBoard of Directors and Officers of the Company, in each case effective at the\nEffective Time;\n\n               (r)  Conversion of Company Preferred Stock. Each issued and\n                    -------------------------------------\noutstanding share of Company Preferred Stock shall have been converted on a one-\nfor-one basis into shares of Company Common Stock in accordance with Company's\nArticles of Incorporation, and each holder thereof shall have waived prior\nnotice of the consummation of the Merger;\n\n               (s)  Termination of Warrants. All outstanding warrants to\n                    -----------------------\npurchase Company Stock shall have been exercised or terminate by their terms as\nof the Effective Time;\n\n               (t)  Termination of Company Agreements. The Company's agreements\n                    ---------------------------------\non Schedule 7.02(t) shall have been terminated;\n\n               (u)  Termination of 401(k) Plan. The Company shall have\n                    --------------------------\nterminated Company's 401(k) Plan effective at least one day prior to the Closing\nDate and no further contributions shall have been made to the 401(k) Plan. The\nCompany shall have provided to Parent (i) executed resolutions of the board of\ndirectors of the Company authorizing the termination and (ii) an executed\namendment to the 401(k) Plan sufficient to assure compliance with all applicable\nrequirements of the Code and regulations thereunder so that the tax-qualified\nstatus of the 401(k) Plan will be maintained at the time of termination;\n\n               (v)  Listing. The Parent Shares to be issued in the Merger shall\n                    -------\nhave been approved for listing (subject to notice of issuance) on the Nasdaq\nNational Market; and\n\n               (w)  Regulation D. The Parent Shares to be issued in the Merger\n                    ------------\nshall be exempt from the registration requirements under the Securities Act.\n\n                                       44\n\n \n               SECTION 7.03   Conditions to the Obligations of the Company. The\n                              --------------------------------------------\nobligations of the Company to consummate the Merger are subject to the\nsatisfaction or waiver (where permissible) of the following additional\nconditions:\n\n               (a)  Accuracy of Representations. Each of the representations and\n                    ---------------------------\nwarranties of Parent and Merger Sub contained in Sections 4.01 through 4.13,\ninclusive, of this Agreement shall be true and correct in all material respects,\nin each case as of the Effective Time, as though made on and as of the Effective\nTime, except that those representations and warranties which address matters\nonly as of a particular date shall remain true and correct as of such date, and\nthe Company shall have received a certificate of a duly authorized officer of\nParent to such effect;\n\n               (b)  Performance of Covenants. Parent and Merger Sub shall have\n                    ------------------------\nperformed or complied in all material respects with all agreements and covenants\nrequired by this Agreement to be performed or complied with by it on or prior to\nthe Effective Time, and the Company shall have received a certificate of a duly\nauthorized officer of Parent to that effect;\n\n               (c)  No Material Adverse Effect. No event or events shall have\n                    --------------------------\noccurred which, individually or in the aggregate, have, or could reasonably be\nexpected to have, a Parent Material Adverse Effect.\n\n\n               (d)  Board of Directors. As of the Effective Time, Ron Heinz\n                    ------------------\nshall be appointed to Parent's Board of Directors.\n\n               (e)  Opinion of Parent's Special Counsel. The Company shall have\n                    -----------------------------------\nreceived the opinion of Gunderson Dettmer Stough Villeneuve Franklin &amp; Hachigian, LLP, special counsel to Parent, or another counsel reasonably\nsatisfactory to the Company, substantially in the form attached hereto as\nExhibit F.\n--------- \n\n                                 ARTICLE VIII\n\n                       TERMINATION, AMENDMENT AND WAIVER\n                       ---------------------------------\n\n               SECTION 8.01   Termination. This Agreement may be terminated and\n                              -----------\nthe Merger and the other transactions contemplated by this Agreement may be\nabandoned at any time prior to the Effective Time, notwithstanding any requisite\napproval and adoption of this Agreement and the transactions contemplated by\nthis Agreement, as follows:\n\n               (a)  by mutual written consent duly authorized by the Boards of\nDirectors of each of Parent and the Company;\n\n               (b)  by either Parent or the Company if the Effective Time shall\nnot have occurred on or before January 31, 2001; provided, however, that the\n                                                 --------  -------\nright to terminate this Agreement under this Section 8.01(b) shall not be\navailable to any party whose failure to fulfill any obligation under this\nAgreement has been the cause of, or resulted in, the failure of the Effective\nTime to occur on or before January 31, 2001;\n\n                                       45\n\n \n               (c)  there shall be any Order which is final and nonappealable\npreventing the consummation of the Merger;\n\n               (d)  by Parent upon a breach of any material representation,\nwarranty, covenant or agreement on the part of the Company set forth in this\nAgreement, or if any representation or warranty of the Company shall have become\nuntrue, in either case such that the conditions set forth in Sections 7.02(a)\nand 7.02(b) would not be satisfied (\"Terminating Company Breach\"); provided,\n                                     --------------------------    -------- \nhowever, that, if such Terminating Company Breach is curable by the Company\n-------                                                                    \nthrough the exercise of its best efforts and for so long as the Company\ncontinues to exercise such best efforts, Parent may not terminate this Agreement\nunder this Section 8.01(d) unless such breach is not cured within 30 days after\nnotice thereof is provided by Parent to the Company (but no cure period is\nrequired for a breach which, by its nature, cannot be cured);\n\n               (e)  by the Company upon a breach of any material representation,\nwarranty, covenant or agreement on the part of Parent and Merger Sub set forth\nin this Agreement, or if any representation or warranty of Parent and Merger Sub\nshall have become untrue, in either case such that the conditions set forth in\nSections 7.03(a) and 7.03(b) would not be satisfied (\"Terminating Parent\n                                                      ------------------\nBreach\"); provided, however, that, if such Terminating Parent Breach is curable\n-------   --------  -------\nby Parent and Merger Sub through the exercise of their respective best efforts\nand for so long as Parent and Merger Sub continue to exercise such best efforts,\nthe Company may not terminate this Agreement under this Section 8.01(e) unless\nsuch breach is not cured within 30 days after notice thereof is provided by the\nCompany to Parent (but no cure period is required for a breach which, by its\nnature, cannot be cured); or\n\n               (f)  by Company, in the event Parent executes a definitive\nagreement that would result in a Change of Control Event of Parent.\n\n               SECTION 8.02   Effect of Termination. In the event of termination\n                              ---------------------\nof this Agreement pursuant to Section 8.01, this Agreement shall forthwith\nbecome void, there shall be no liability under this Agreement on the part of\nParent, Merger Sub or the Company or any of their respective officers or\ndirectors, and all rights and obligations of each party hereto shall cease,\nprovided, however, that (i) Sections 6.02(b) and 6.08 and Articles VIII and IX\n--------  -------      \nshall remain in full force and effect and survive any termination of this\nAgreement and (ii) nothing herein shall relieve any party from liability for the\nbreach of any of its representations, warranties, covenants or agreements set\nforth in this Agreement.\n\n               SECTION 8.03   Amendment. This Agreement may be amended by the\n                              ---------\nparties hereto by action taken by or on behalf of their respective Boards of\nDirectors at any time prior to the Effective Time. This Agreement may not be\namended except by an instrument in writing signed by the parties hereto.\n\n               SECTION 8.04   Waiver. At any time prior to the Effective Time,\n                              ------\nany party hereto may (a) extend the time for the performance of any obligation\nor other act of any other party hereto, (b) waive any inaccuracy in the\nrepresentations and warranties contained herein or in any document delivered\npursuant hereto, and (c) waive compliance with any agreement or condition\ncontained herein. Any such extension or waiver shall be valid if set forth in\nwriting and signed by the party or parties to be bound thereby.\n\n                                       46\n\n \n                                  ARTICLE IX\n\n                                INDEMNIFICATION\n                                ---------------\n\n               SECTION 9.01   Survival of Representations and Warranties. The\n                              ------------------------------------------\nrepresentations and warranties of the Company contained in this Agreement and\nthe Voting Agreements (collectively, the \"Acquisition Documents\") shall survive\n                                          ---------------------      \nthe Effective Time for a period of twelve (12) months. The Representations and\nWarranties of Parent and Merger Sub do not survive the Effective Time and shall\nterminate as of the Effective Time. Neither the period of survival nor the\nliability of a party hereto with respect to such party's representations and\nwarranties shall be reduced by any investigation made at any time (whether\nbefore or after the Effective Time) by or on behalf of another party hereto or\nby any actual, implied or constructive knowledge or notice of any facts or\ncircumstances that any party may have as a result of any such investigation or\notherwise. If written notice of a claim has been given prior to the expiration\nof the applicable representations and warranties by a party hereto to another\nparty hereto, then the relevant representations and warranties shall survive as\nto such claim until such claim has been finally resolved.\n\n               SECTION 9.02   Indemnification by the Stockholders.\n                              ----------------------------------- \n\n               (a)  After the Effective Time, Parent and its affiliates\n(including, after the Effective Time, the Surviving Corporation), officers,\ndirectors, employees, agents, successors and assigns (collectively, the \"Parent\n                                                                         ------\nIndemnified Parties\") shall be indemnified and held harmless by the\n-------------------\nStockholders, jointly and severally, for any and all Liabilities, losses,\ndamages of any kind, diminution in value, claims, costs, expenses, fines, fees,\ndeficiencies, interest, awards, judgments, amounts paid in settlement and\npenalties (including, without limitation, attorneys', consultants' and experts'\nfees and expenses and other costs of defending, investigating or settling\nclaims) actually suffered or incurred by them (including, without limitation, in\nconnection with any action brought or otherwise initiated by any of them)\n(hereinafter, a \"Loss\"), arising out of or resulting from:\n                 ----                                     \n\n                    (i)   the breach of any representation or warranty (without\ngiving effect to any qualification as to materiality (or similar qualifications)\ncontained therein) made by the Company or such Stockholder in the Acquisition\nDocuments;\n\n                    (ii)  the breach of any covenant or agreement made by the\nCompany or such Stockholder in the Acquisition Documents;\n\n                    (iii) Losses from breach of contract or other claims made by\nany party alleging to have had a contractual or other right to acquire the\nCompany's capital stock or assets; or\n\n                    (iv)  the value of any tax deduction lost by the Company by\nvirtue of the application of Section 280G of the Code.\n\n               (b)  Notwithstanding anything to the contrary contained in this\nAgreement, except with respect to claims based on fraud:\n\n                                       47\n\n \n                    (i)  the maximum aggregate amount of indemnifiable Losses\narising out of or resulting from the causes enumerated in Section 9.02(a) that\nmay be recovered from the Stockholders shall not exceed 10% of the Aggregate\nMerger Consideration; and\n\n                    (ii) no indemnification payment by the Stockholders with\nrespect to any indemnifiable Loss otherwise payable under Section 9.02(a) and\narising out of or resulting from the causes enumerated in Section 9.02(a) shall\nbe payable until such time as all such indemnifiable Losses shall aggregate to\nmore than $250,000, after which time the Stockholders shall be liable in full\nfor all indemnifiable Losses in excess of $250,000, provided, however, that the\nlimitations set forth above in each of clauses (i) and (ii) shall not be\noperative with respect to Losses arising from breaches of any of the Company\nBasic Representations. As used herein, Company Basic Representations shall mean\nthe representations and warranties set forth in Sections 3.04 and 3.05.\n\n               SECTION 9.03   Indemnification Procedures.\n                              -------------------------- \n               (a)  For purposes of this Section 9.03, a party against which\nindemnification may be sought is referred to as the \"Indemnifying Party\" and the\n                                                     -----------------\nparty which may be entitled to indemnification is referred to as the\n\"Indemnified Party\".\n -----------------  \n \n               (c)  The obligations and Liabilities of Indemnifying Parties\nunder this Article IX with respect to Losses arising from claims of any third\nparty which are subject to the indemnification provided for in this Article IX\n(\"Third Party Claims\") shall be governed by and contingent upon the following\n  ------------------\nadditional terms and conditions: if an Indemnified Party shall receive notice of\nany Third Party Claim, the Indemnified Party shall give all Indemnifying Parties\nnotice of such Third Party Claim within 90 days of the receipt by the\nIndemnified Party of such notice; provided, however, that the failure to provide\n                                  --------  -------\nsuch notice shall not release an Indemnifying Party from any of its obligations\nunder this Article IX except to the extent that such Indemnifying Party is\nmaterially prejudiced by such failure. The notice of claim shall describe in\nreasonable detail the facts known to the Indemnified Party giving rise to such\nindemnification claim, and the amount or good faith estimate of the amount\narising therefrom.\n\n               (d)  If the Indemnifying Party acknowledges in writing its\nobligation to indemnify the Indemnified Party hereunder against any Losses that\nmay result from such Third Party Claim (and in the case where a Parent\nIndemnified Party is the Indemnified Party, (i) Parent has reasonably determined\nthat losses which may be incurred as a result of the Third Party Claim do not\nexceed individually, or when aggregated with all other losses subject to\nindemnification under Section 9.02, the maximum aggregate amount of\nindemnifiable losses set forth in such Section, (ii) the Third Party Claim\ninvolves only money damages and does not seek an injunction or other equitable\nremedy, (iii) settlement of or an adverse judgement with respect to the Third\nParty Claim is not, in the good faith judgement of Parent, likely to establish a\nprecedential custom or practice adverse to the continuing business interests of\nParent or to increase the Tax liability of Parent or the Company), then the\nIndemnifying Party shall be entitled to assume and control the defense of such\nThird Party Claim at its expense and through counsel of its choice (such counsel\nto be reasonably acceptable to Parent) if it gives notice of its intention to do\nso to the Indemnified Party within ten days of the receipt of such notice from\nthe Indemnified Party; provided, however, if there exists or is reasonably\n                       --------  -------    \nlikely to exist a conflict of\n\n                                       48\n\n \ninterest that would make it inappropriate in the judgment of the Indemnified\nParty, in its reasonable discretion, for the same counsel to represent both the\nIndemnified Party and the Indemnifying Party, then the Indemnified Party shall\nbe entitled to retain its own counsel, in each jurisdiction for which the\nIndemnified Party determines counsel is required, at the expense of the\nIndemnifying Party. In the event that the Indemnifying Party exercises the right\nto undertake any such defense against any such Third Party Claim as provided\nabove, the Indemnifying Party shall conduct the defense of the Third Party Claim\nactively and diligently and the Indemnified Party shall cooperate with the\nIndemnifying Party in such defense and make available to the Indemnifying Party,\nat the Indemnifying Party's expense, all witnesses, pertinent records, materials\nand information in the Indemnified Party's possession or under the Indemnified\nParty's control relating thereto as is reasonably required by the Indemnifying\nParty. Similarly, in the event the Indemnified Party is, directly or indirectly,\nconducting the defense against any such Third Party Claim, the Indemnifying\nParty shall cooperate with the Indemnified Party in such defense and make\navailable to the Indemnified Party, at the Indemnifying Party's expense, all\nsuch witnesses, records, materials and information in the Indemnifying Party's\npossession or under the Indemnifying Party's control relating thereto as is\nreasonably required by the Indemnified Party. No such Third Party Claim may be\nsettled by any party conducting the defense against such claim without the prior\nwritten consent of the other party; provided, however, if the Stockholders are\n                                    --------  -------\nthe Indemnifying Parties and are not entitled to assume the defense against such\nThird Party Claim pursuant to this paragraph, the Parent Indemnified Party shall\nhave the right to consent to the entry of any judgement or enter into any\nsettlement with respect to the Third Party Claim in any manner it may deem\nappropriate (and Parent need not consult with, or obtain any consent from, the\nStockholders or the Stockholders' Representative in connection therewith).\n\n               SECTION 9.04   Stockholders' Representative. GMS Capital\n                              ----------------------------\nPartners, L.P. (such Person and any successor or successors being the\n\"Stockholders' Representative\") shall act as the representative of the\n ----------------------------\nStockholders, and shall be authorized to act on behalf of the Stockholders and\nto take any and all actions required or permitted to be taken by the\nStockholders' Representative under this Agreement or the Escrow Agreement, with\nrespect to any claims (including the settlement thereof) made by Parent or the\nStockholders for indemnification pursuant to this Article IX of the Agreement\nand with respect to any actions to be taken by the Stockholders' Representative\npursuant to the terms of the Escrow Agreement. The Stockholders shall be bound\nby all actions taken by the Stockholders' Representative in its capacity\nthereof, except for any action that conflicts with the limitation set forth in\nthe final sentence of this Section 9.04. The Stockholders' Representative shall\npromptly, and in any event within five business days, provide written notice to\nthe Stockholders of any action taken on their behalf by the Stockholders'\nRepresentative pursuant to the authority delegated to the Stockholders'\nRepresentative under this Section 9.04. The Stockholders' Representative shall\nat all times act in his or her capacity as Stockholders' Representative in a\nmanner that the Stockholders' Representative believes to be in the best interest\nof the Stockholders. Neither the Stockholders' Representative nor any of its\ndirectors, officers, agents or employees shall be liable to any Person for any\nerror of judgment, or any action taken, suffered or omitted to be taken, under\nthis Agreement or the Escrow Agreement, except in the case of the Stockholders'\nRepresentative's gross negligence, bad faith or willful misconduct. The\nStockholders' Representative may consult with legal counsel, independent public\naccountants and other experts selected by it and shall not be liable for any\naction taken or omitted to be taken in good faith by it \n\n                                       49\n\n \nin accordance with the advice of such counsel, accountants or experts. The\nStockholders' Representative shall not have any duty to ascertain or to inquire\nas to the performance or observance of any of the terms, covenants or conditions\nof this Agreement or the Escrow Agreement. As to any matters not expressly\nprovided for in this Agreement or the Escrow Agreement, the Stockholders'\nRepresentative shall not be required to exercise any discretion or take any\naction. Each Stockholder severally shall indemnify and hold harmless and\nreimburse the Stockholders' Representative from and against such Stockholder's\nratable share of any and all liabilities, losses, damages, claims, costs or\nexpenses suffered or incurred by the Stockholders' Representative arising out of\nor resulting from any action taken or omitted to be taken by the Stockholders'\nRepresentative under this Agreement or the Escrow Agreement, other than such\nliabilities, losses, damages, claims, costs or expenses arising out of or\nresulting from the Stockholders' Representative's gross negligence, bad faith or\nwillful misconduct. Notwithstanding anything to the contrary herein or in the\nEscrow Agreement, (a) the Stockholders' Representative is not authorized to, and\nshall not, accept on behalf of any Stockholder any merger consideration to which\nsuch Stockholder is entitled under this Agreement and (b) the Stockholders'\nRepresentative shall not in any manner exercise, or seek to exercise, any voting\npower whatsoever with respect to shares of capital stock of the Company or\nParent now or hereafter owned of record or beneficially by any Stockholder\nunless the Stockholders' Representative is expressly authorized to do so in a\nwriting signed by such Stockholder. In all matters relating to this Article IX,\nthe Stockholders' Representative shall be the only party entitled to assert the\nrights of the Stockholders, and the Stockholders' Representative shall perform\nall of the obligations of the Stockholders hereunder. Parent shall be entitled\nto rely on all statements, representations and decisions of the Stockholders'\nRepresentative.\n\n                                   ARTICLE X\n\n                              GENERAL PROVISIONS\n                              ------------------\n\n               SECTION 10.01  Notices. All notices, requests, claims, demands\n                              -------\nand other communications hereunder shall be in writing and shall be given (and\nshall be deemed to have been duly given upon receipt) by delivery in person, by\ncable, telecopy, facsimile, telegram or telex or by registered or certified mail\n(postage prepaid, return receipt requested) to the respective parties at the\nfollowing addresses (or at such other address for a party as shall be specified\nin a notice given in accordance with this Section 10.01):\n\n               (a)  if to Parent or Merger Sub:\n\n                              SonicWall, Inc.\n                              1160 Bordeaux Drive\n                              Sunnyvale, CA 94089\n                              Facsimile No.: (408) 962-1201\n                              Attention: Zachary Abrams\n\n                                       50\n\n \n                         with a copy to:\n\n                              Gunderson Dettmer Stough Villeneuve Franklin &amp; Hachigian, LLP\n                              155 Constitution Drive\n                              Menlo Park, California 94025\n                              Facsimile No.: (650) 463-5449\n                              Attention: Gregory K. Miller\n\n               (b)  if to the Company:\n                              Phobos Corporation\n                              348 East 4500 South\n                              Salt Lake City, Utah 84107\n                              Facsimile No.: (408) 962-1201\n                              Attention: Ron Heinz\n\n                         with a copy to:\n\n                              Doepken Keevican &amp; Weiss\n                              Professional Corporation\n                              58\/th\/ Floor USX Tower\n                              600 Grant Street\n                              Pittsburgh, PA 15219\n                              Facsimile No.: (412) 355-2609\n                              Attention: Leo A. Keevican, Jr., Esq.\n\n               SECTION 10.02  Certain Definitions.\n                              ------------------- \n               (a) As used in this Agreement, the following terms shall have the\nfollowing meanings:\n\n                    (i)  \"affiliate\" of a specified Person means a Person who\n                          ---------\ndirectly or indirectly through one or more intermediaries controls, is\ncontrolled by, or is under common control with such specified Person.\n\n                    (ii) \"beneficial owner\" with respect to any shares means a\n                          ----------------\nPerson who shall be deemed to be the beneficial owner of such shares (i) which\nsuch Person or any of its affiliates or associates (as such term is defined in\nRule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or\nindirectly, (ii) which such Person or any of its affiliates or associates has,\ndirectly or indirectly, (A) the right to acquire (whether such right is\nexercisable immediately or subject only to the passage of time), pursuant to any\nagreement, arrangement or understanding or upon the exercise of consideration\nrights, exchange rights, warrants or options, or otherwise, or (B) the right to\nvote pursuant to any agreement, arrangement or understanding, or (iii) which are\nbeneficially owned, directly or indirectly, by any other Persons with whom such\nPerson or any of its affiliates or associates or Person with \n\n                                       51\n\n \nwhom such Person or any of its affiliates or associates has any agreement,\narrangement or understanding for the purpose of acquiring, holding, voting or\ndisposing of any shares.\n\n                    (iii)  \"business day\" means any day on which banks are not\n                            ------------\nrequired or authorized to close in Sunnyvale, California.\n\n                    (iv)   \"CERCLA\" means the Comprehensive Environmental\n                            ------\nResponse, Compensation and Liability Act of 1980, as amended as of the date\nhereof.\n\n                    (v)    \"Company Software\" means Software (A) material to the\n                            ----------------\noperation of the business of the Company or any Subsidiary, including all\ncomputer software and databases operated by the Company or any Subsidiary on its\nweb sites or used by the Company or any Subsidiary in connection with processing\ncustomer orders, storing customer information, or storing or archiving data, and\n(B) manufactured, distributed, sold, licensed or marketed by the Company or any\nSubsidiary.\n\n                    (vi)   \"control\" (including the terms \"controlled by\" and\n                            -------\n\"under common control with\") means the possession, directly or indirectly or as\ntrustee or executor, of the power to direct or cause the direction of the\nmanagement and policies of a Person, whether through the ownership of voting\nsecurities, as trustee or executor, by contract or credit arrangement or\notherwise.\n\n                    (vii)  \"Environmental Laws\" means any federal, state or\n                            ------------------\nlocal statute, law, ordinance, regulation, rule, code or order of the United\nStates, or any other jurisdiction and any enforceable judicial or administrative\ninterpretation thereof, including any judicial or administrative order, consent\ndecree or judgment, relating to pollution or protection of the environment or\nnatural resources, including, without limitation, those relating to the use,\nhandling, transportation, treatment, storage, disposal, release or discharge of\nHazardous Materials, as in effect as of the date of this Agreement.\n\n                    (viii) \"Environmental Permits\" means any permit, approval,\n                            ---------------------\nidentification number, license and other authorization required under any\napplicable Environmental Law.\n\n                    (ix)   \"Hazardous Materials\" means (a) any petroleum,\n                            -------------------\npetroleum products, by-products or breakdown products, radioactive materials,\nasbestos-containing materials or polychlorinated biphenyls or (b) any chemical,\nmaterial or substance defined or regulated as toxic or hazardous or as a\npollutant or contaminant or waste under any applicable Environmental Law.\n\n                    (x)    \"Intellectual Property\" means: (a) United States,\n                            ---------------------\nforeign and international patents, patent applications and statutory invention\nregistrations, (b) trademarks, service marks, domain names, trade dress, logos,\nand other source identifiers, including registrations and applications for\nregistration thereof, (c) copyrights, including registrations and applications\nfor registration thereof, (d) Software, (e) confidential and proprietary\ninformation, including trade secrets and know-how, and (f) rights of privacy,\npublicity and endorsement, and all other rights associated therewith in any\njurisdiction.\n\n                                       52\n\n \n               (xi)     \"knowledge of the Company\" or \"the Company's knowledge\" \n                         ------------------------      -----------------------  \nmeans the knowledge of the directors and officers of the Company and such\nknowledge that would be imputed to such Persons upon due investigation.\n\n               (xii)    \"Legal Proceedings\" means a private or governmental \n                         -----------------                                      \naction, suite, proceeding, claim, arbitration or investigation pending before\nany agency, court, or tribunal, foreign or domestic.\n\n               (xiii)   \"Licensed Intellectual Property\" means all Intellectual \n                         ------------------------------         \nProperty licensed to the Company pursuant to the Licenses.\n\n               (xiv)    \"Licenses\" mean (A) licenses of Intellectual Property by\n                         --------         \nthe Company or any Subsidiary to third parties, (B) licenses of Intellectual\nProperty by third parties to the Company or any Subsidiary, and (C) agreements\nbetween the Company or any Subsidiary and third parties relating to the\ndevelopment or use of Intellectual Property, the development or transmission of\ndata, or the use, modification, framing, linking advertisement, or other\npractices with respect to Internet web sites.\n\n               (xv)     \"Owned Intellectual Property\" means all Intellectual \n                         ---------------------------     \nProperty owned by the Company or any Subsidiary.\n\n               (xvi)    \"Person\" means an individual, corporation, partnership, \n                         ------                 \nlimited partnership, syndicate, person (including, without limitation, a\n\"person\" as defined in Section 13(d)(3) of the Exchange Act), trust, association\nor entity or government, political subdivision, agency or instrumentality of a\ngovernment.\n\n               (xvii)   \"Software\" means computer software, programs and \n                         -------\ndatabases in any form, including Internet web sites, web content and links, all\nversions, updates, corrections, enhancements, and modifications thereof, and all\nrelated documentation.\n\n               (xviii)  \"subsidiary\" or \"subsidiaries\" of any Person means any \n                         ----------      ------------\ncorporation, partnership, joint venture or other legal entity of which such\nPerson (either alone or through or together with any other subsidiary) owns,\ndirectly or indirectly, more than 50% of the stock or other equity interests,\nthe holders of which are generally entitled to vote for the election of the\nboard of directors or other governing body of such corporation or other legal\nentity.\n\n          (b)  The following terms shall have the meanings defined for such\nterms in the Sections of this Agreement set forth below:\n\n \n \nTerm                                                             Section \n----                                                             -------\n                                                                       \nAcquisition Documents..........................................  9.01\naffiliate......................................................  10.02(a)\nAggregate Common Merger Consideration..........................  2.01(b)\nAgreement......................................................  Preamble\nAntitrust Laws.................................................  3.16\nAssets.........................................................  6.05(b)\nAudited Financial Statements...................................  3.08(a)\nbeneficial owner...............................................  10.02(a)\n \n\n                                       53\n\n \n \n                                                               \nBoard of Directors' Determination..............................  Sch. 6.12\nbusiness day...................................................  10.02(a)\nCERCLA.........................................................  10.02(a)\nChange of Control Event........................................  2.02(c)\nClosing........................................................  1.02\nClosing Date...................................................  1.02\nCode...........................................................  Recitals\nCommon Stock Exchange Ratio....................................  2.01(b)\nCompany........................................................  Preamble\nCompany Common Stock...........................................  Recitals\nCompany Disclosure Schedule....................................  Article III\nCompany Material Adverse Effect................................  3.01\nCompany Permits................................................  3.07\nCompany Preferred Stock........................................  Recitals\nCompany Proprietary Rights.....................................  3.14(b)\nCompany Series A Preferred Stock...............................  Recitals\nCompany Series B Preferred Stock...............................  Recitals\nCompany Series C Preferred Stock...............................  Recitals\nCompany Share Certificates.....................................  2.03(a)\nCompany Software...............................................  10.02(a)\nCompany Stock..................................................  Recitals\nCompany Options................................................  2.05(a)\nCompany's knowledge............................................  10.02(a)\nCompeting Transaction..........................................  6.03(b)\nContingent Deferred Merger Consideration.......................  2.02(c)\ncontrol........................................................  10.02(a)\nDissenting Shares..............................................  2.06(a)\nEffective Time.................................................  1.02\nEmployment Agreements..........................................  6.04(b)\nEnvironmental Laws.............................................  10.02(a)\nEnvironmental Permits..........................................  10.02(a)\nERISA..........................................................  3.11(a)\nERISA Affiliate................................................  3.11(e)\nEscrow Account.................................................  2.03(b)\nEscrow Agent...................................................  2.03(b)\nEscrow Agreement...............................................  2.03(b)\nEscrow Fund....................................................  2.03(b)\nEscrow Shares..................................................  2.01(b)\nExchange Act...................................................  4.05\nExchange Agent.................................................  2.03(a)\nFinancing Proceeds.............................................  2.01(b)\nFormer Owners..................................................  3.14(a)\nFully Diluted Common Shares Amount.............................  2.01(b)\nGovernmental Entity............................................  3.06(b)\nHazardous Materials............................................  10.02(a)\nHSR Act........................................................  3.06(b)\n \n\n                                       54\n\n \n \n                                                                    \nIndemnified Party..............................................  9.03(a)\nIndemnifying Party.............................................  9.03(a)\nIntellectual Property..........................................  10.02(a)\nInterim Financial Statements...................................  3.08(a)\nIRS............................................................  3.11(b)\nInvention Assignment Agreement.................................  6.04(d)\nLaw............................................................  3.06(a)\nLegal Proceeding...............................................  10.02(a)\nLetter of Transmittal..........................................  2.03(a)\nLiabilities....................................................  3.08(b)\nLicensed Intellectual Property.................................  10.02(a)\nLicenses.......................................................  10.02(a)\nLoss...........................................................  9.02(a)\nMaterial Contracts.............................................  3.12(a)\nMerger.........................................................  Recitals\nMerger Sub.....................................................  Preamble\nMultiemployer Plan.............................................  3.11(c)\nMultiple Employer Plan.........................................  3.11(c)\nNon-Disclosure Agreement.......................................  6.03(b)\nOption Assignment Agreement....................................  6.04(c)\nOrder..........................................................  7.01(b)\nOwned Intellectual Property....................................  10.02(a)\nParent.........................................................  Preamble\nParent Common Stock............................................  Recitals\nParent Disclosure Schedule.....................................  Article IV\nParent Indemnified Parties.....................................  9.02(a)\nParent Material Adverse Effect.................................  4.05(b)\nParent SEC Reports.............................................  4.05(a)\nParent Shares..................................................  2.01(b)\nPerson.........................................................  10.02(a)\nPlans..........................................................  3.11(a)\nProprietary Rights.............................................  3.14(b)\nPro Rata Cash Distribution.....................................  2.01(b)\nPro Rata Contingent Distribution...............................  2.02(c)\nMerger Sub.....................................................  Preamble\nReference Balance Sheet........................................  3.07(a)\nRepresentatives................................................  6.02(a)\nRevenues.......................................................  Sch. 2.02\nSEC............................................................  4.05(a)\nSecurities Act.................................................  4.05(a)\nSoftware.......................................................  10.02(a)\nStockholders...................................................  Recitals\nStockholders' Representative...................................  9.04\nSubsidiary.....................................................  10.02(a)\nSurviving Corporation..........................................  1.01\nTaxes..........................................................  3.16(c)\n \n\n                                       55\n\n \n \n                                                               \nTerminating Company Breach.....................................  8.01(d)\nTerminating Parent Breach......................................  8.01(e)\nThird Party Claims.............................................  9.03(a)\nURBCA..........................................................  Recitals\nU.S. GAAP......................................................  3.08(a)\nVoting Agreement...............................................  Recitals\n \n\n          SECTION 10.03  Severability.  If any term or other provision of this \n                         ------------\nAgreement is invalid, illegal or incapable of being enforced by any rule of Law\nor public policy, all other conditions and provisions of this Agreement shall\nnevertheless remain in full force and effect so long as the economic or legal\nsubstance of the transactions contemplated by this Agreement is not affected in\nany manner materially adverse to any party. Upon such determination that any\nterm or other provision is invalid, illegal or incapable of being enforced, the\nparties hereto shall negotiate in good faith to modify this Agreement so as to\neffect the original intent of the parties as closely as possible in a mutually\nacceptable manner in order that the transactions contemplated by this Agreement\nbe consummated as originally contemplated to the fullest extent possible.\n\n          SECTION 10.04  Assignment; Binding Effect; Benefit.  Neither this \n                         -----------------------------------          \nAgreement nor any of the rights, interests or obligations hereunder shall be\nassigned by any of the parties hereto (whether by operation of law or otherwise)\nwithout the prior written consent of the other parties. Subject to the preceding\nsentence, this Agreement shall be binding upon and shall inure to the benefit of\nthe parties hereto and their respective successors and assigns. Notwithstanding\nanything contained in this Agreement to the contrary, nothing in this Agreement,\nexpressed or implied, is intended to confer on any Person other than the parties\nhereto or their respective successors and assigns any rights, remedies,\nobligations or liabilities under or by reason of this Agreement.\n\n          SECTION 10.05  Incorporation of Exhibits.  The Company Disclosure \n                         -------------------------          \nSchedule, the Parent Disclosure Schedule, the Schedules and all Exhibits\nattached hereto and referred to herein are hereby incorporated herein and made a\npart hereof for all purposes as if fully set forth herein.\n\n          SECTION 10.06  Specific Performance.  The parties hereto agree that\n                         --------------------                                \nirreparable damage would occur in the event any provision of this Agreement was\nnot performed in accordance with the terms hereof and that the parties shall be\nentitled to specific performance of the terms hereof, in addition to any other\nremedy at law or in equity.\n\n          SECTION 10.07  Governing Law; Forum.  This Agreement shall be \n                         --------------------         \ngoverned by, and construed in accordance with, the laws of the State of\nCalifornia applicable to contracts executed in and to be performed in that state\nand without regard to any applicable conflicts of law. Any controversy or claim\narising out of or relating to this Agreement or a breach hereof shall be finally\nsettled by arbitration in San Francisco, California, under the commercial rules\nthen in effect of the American Arbitration Association, and shall be determined\nin accordance with the laws of the State of California, applicable to contracts\nto be wholly performed therein.\n\n                                       56\n\n \n               SECTION 10.08    Time of the Essence.  For purposes of this\n                                -------------------    \nAgreement and the transactions contemplated by this Agreement, time is of the\nessence.\n\n               SECTION 10.09    Waiver of Jury Trial.  Each of the Parties\n                                --------------------\nhereto hereby irrevocably waives any and all right to trial by jury in any Legal\nProceeding arising out of or related to this Agreement or any of the\ntransactions contemplated hereby.\n\n               SECTION 10.10    Construction.\n                                ------------    \n\n               (a)  For purposes of this Agreement, whenever the context\nrequires: the singular number shall include the plural, and vice versa; the\nmasculine gender shall include the feminine and neuter genders; the feminine\ngender shall include the masculine and neuter genders; and the neuter gender\nshall include the masculine and feminine genders.\n\n               (b)  The parties hereto agree that any rule of construction to\nthe effect that ambiguities are to be resolved against the drafting party shall\nnot be applied in the construction or interpretation of this Agreement.\n\n               (c)  As used in this Agreement, the words \"include\" and\n\"including,\" and variations thereof, shall not be deemed to be terms of\nlimitation, but rather shall be deemed to be followed by the words, \"without\nlimitation.\"\n\n               (d)  Except as otherwise indicated, all references in this\nAgreement to \"Sections\", and \"Schedules\" and \"Exhibits\" are intended to refer to\nSections of this Agreement and Schedules and Exhibits to this Agreement.\n\n               SECTION 10.11    Further Assurances.  Each party hereto shall\n                                ------------------\nexecute and cause to be delivered to each other party hereto such instruments\nand other documents, and shall take such other actions, as such other party may\nreasonably request (prior to, at or after the Closing) for the purpose of\ncarrying out or evidencing any of the transactions contemplated by this\nAgreement.\n\n               SECTION 10.12    Headings.  The descriptive headings contained in\n                                --------             \nthis Agreement are included for convenience of reference only and shall not\naffect in any way the meaning or interpretation of this Agreement.\n\n               SECTION 10.13    Counterparts.  This Agreement may be executed\n                                ------------\nand delivered (including by facsimile transmission) in one or more counterparts,\nand by the different parties hereto in separate counterparts, each of which when\nexecuted and delivered shall be deemed to be an original but all of which taken\ntogether shall constitute one and the same agreement.\n\n               SECTION 10.14    Entire Agreement.  This Agreement (including the\n                                ----------------\nExhibits, the Schedules, the Company Disclosure Schedule and the Parent\nDisclosure Schedule) and the Non-Disclosure Agreement constitute the entire\nagreement among the parties with respect to the subject matter hereof and\nsupersede all prior agreements and understandings among the parties with respect\nthereto. No addition to or modification of any provision of this\n\n                                      57\n\n \nAgreement shall be binding upon any party hereto unless made in writing and\nsigned by all parties hereto.\n\n\n                                      58\n\n \n          IN WITNESS WHEREOF, each of Parent, Merger Sub, the Company and the\nStockholders' Representative has executed or has caused this Agreement to be\nexecuted by its respective officers thereunto duly authorized as of the date\nfirst written above.\n\n                              SONICWALL, INC.\n\n                              By:  \/s\/ Sreekanth Ravi\n                                   ---------------------------------------------\n                                   Name:  Sreekanth Ravi\n                                   Title:  President and Chief Executive Officer\n\n                              PLUTO ACQUISITION CORP.\n\n                              By:  \/s\/ Michael J. Sheridan\n                                   ---------------------------------------------\n                                   Name:  Michael J. Sheridan\n                                   Title:  President and Chief Executive Officer\n\n                              PHOBOS CORPORATION\n\n                              By:  \/s\/ Ron Heinz\n                                   ---------------------------------------------\n                                   Name:  Ron Heinz\n                                   Title:  President and Chief Executive Officer\n\n                              GMS CAPITAL PARTNERS, L.P.\n                              GMS CAPITAL GROUP, L.L.C\n\n                              By:  \/s\/  Joachim Gfoeller, Jr.\n                                   ---------------------------------------------\n                                   Name:  Joachim Gfoeller, Jr.\n                                   Title:\n\n\n\n                               SIGNATURE PAGE TO\n             THE AGREEMENT AND PLAN OF MERGER AND REORGANTIZATION\n\n                                      59\n\n \n                                 Schedule 6.12\n\n                        REGISTRATION RIGHTS PROVISIONS\n\n \n1.  The Parent shall:\n\n          (a)  Furnish to each holder of Parent Shares registered under this\nAgreement (a \"Holder\") such numbers of copies of a prospectus, in conformity\nwith the requirements of the Securities Act, and such other documents as they\nmay reasonably request in order to facilitate the disposition of the Parent\nShares owned by them (the \"Registrable Shares\").\n\n          (b)  Use its best efforts to register and qualify the securities\ncovered by the registration statement under such Blue Sky or other securities\nlaws of such jurisdictions as shall be reasonably requested by any holder;\nprovided that the Parent shall not be required in connection therewith or as a\n--------\ncondition thereto to qualify to do business, subject itself to taxation or to\nfile a general consent to service of process in any such state or jurisdiction.\n\n          (c)  Notify each holder of Registrable Shares covered by the\nregistration statement at any time when a prospectus relating thereto is\nrequired to be delivered under the Securities Act of 1933 (the \"Securities Act\")\nof the happening of any event as a result of which the prospectus included in\nthe registration statement, as then in effect, includes an untrue statement of a\nmaterial fact or omits to state a material fact required to be stated therein or\nnecessary to make the statements therein not misleading in the light of the\ncircumstances then existing, and at the request of such Holder, prepare and\nfurnish to such Holder a reasonable number of copies of a supplement to or an\namendment of such prospectus as may be necessary so that, as thereafter\ndelivered to purchasers of such Registrable Shares, such prospectus shall not\ninclude an untrue statement of a material fact or omit to state a material fact\nrequired to be stated therein or necessary to make the statements therein not\nmisleading in light of the circumstances then existing.\n\n          (d)  Cause all Registrable Shares registered to be listed on each\nsecurities exchange on which similar securities issued by the Parent are then\nlisted. \n\n          (e)  Provide a transfer agent and registrar for all Registrable Shares\nregistered hereunder and a CUSIP number for all such Registrable Shares, in each\ncase not later than the effective date of the registration.\n\n\n          (f)  Maintain the effectiveness of the Registration Statement for a\nperiod of at least one (1) year.\n\n     2.  Furnish Information.  It shall be a condition precedent to the\n         -------------------\nobligations of the Parent to take any action pursuant to this attachment with\nrespect to the Registrable Shares of any selling Holder that such Holder shall\nfurnish to the Parent such information regarding itself, the Registrable Shares\nheld by it, and the intended method of disposition of such securities as shall\nbe required by the Securities Act to effect the registration of such Holder's\nRegistrable Shares.\n\n \n     3.  Expenses of Registration.  The Parent shall bear and pay all costs and\n         ------------------------\nexpenses including, without limitation, all registration filing fees, printing\nexpenses, fees and expenses incurred in connection with complying with state\nsecurities or blue sky laws (other than those which by law must be paid by the\nselling shareholders), fees of the National Association of Securities Dealers,\nInc. and fees of transfer agents and registrars relating to such offering\nincurred in connection with registrations, filings or qualifications except (a)\nany underwriters' or brokers' commissions or discounts applicable to the\nRegistrable Shares to be sold by any Holder; (b) Blue Sky or state securities\nlaws fees which by law must be paid by selling Holder rather than the Parent,\n(c) all fees or expenses expressly applicable to securities being sold by the\nholder of Registrable Shares, and (d) fees or expenses of such Holder's\nindividual counsel (the Parent being responsible to pay the reasonable fees of\none counsel for the Holders).\n\n     4.  Indemnification.  In the event any Registrable Shares are included in a\n         ---------------                                                        \nregistration statement under this Agreement:\n\n         (a)  To the extent permitted by law, the Parent will indemnify and hold\nharmless each Holder, if joining in a registration, and each of its directors,\nofficers and controlling persons and each underwriter within the meaning of the\nSecurities Act or the Securities Exchange Act of 1934 (the \"Exchange Act\")\n(each, an \"indemnified person\") against any losses, claims, damages or\nliabilities, joint or several, to which they may become subject under the\nSecurities Act, the Exchange Act, any other statute, at common law or otherwise,\ninsofar as such losses, claims, damages or liabilities (or actions in respect\nthereof) arise out of or are based on any untrue or alleged untrue statements of\nany material fact contained in the registration statement, including any\npreliminary prospectus or final prospectus, or any amendments or supplements\nthereto, or arise out of or are based upon the omission or alleged omission to\nstate therein a material fact required to be stated therein, or necessary to\nmake the statements therein not misleading or arise out of any violation by the\nParent of any rule or regulation promulgated under the Securities Act or the\nExchange Act applicable to the Parent and relating to action or inaction\nrequired of the Parent in connection with any the registration; and will\nreimburse each such indemnified person for any reasonable legal or other\nexpenses incurred by them in connection with defending any such loss, claim,\ndamage, liability or action; provided that the indemnity agreement contained in\nthis Section shall not apply to amounts paid in settlement of any such loss,\nclaim, damage, liability or action if such settlement is effected without the\nconsent of the Parent (which consent shall not be unreasonably withheld or\ndelayed) nor shall the Parent be liable in any such case for any such loss,\nclaim, damage, liability, action or expenses to the extent that they arise out\nof or are based upon an untrue statement or alleged untrue statement or omission\nor alleged omission made in connection with the registration statement,\npreliminary prospectus, final prospectus or amendments or supplements thereto,\nin reliance upon and in conformity with written information furnished for use in\nconnection with the registration by any such indemnified person.\n\n         (b)  To the extent permitted by law, each Holder, if joining in a\nregistration, will indemnify and hold harmless the Parent, each of its\ndirectors, each of its officers who have signed the registration statement and\neach person, if any, who controls the Parent within the meaning of the\nSecurities Act or the Exchange Act against any losses, claims, damages or\nliabilities joint or several, to which the Parent or any such director, officer\nor controlling person may become subject, under the Securities Act, the Exchange\nAct, any other statute, at common\n\n \nlaw or otherwise, insofar as such losses, claims, damages or liabilities (or\nactions in respect thereto) arise out of or are based upon any untrue statement\nor alleged untrue statement of any material fact contained in the registration\nstatement, including any preliminary prospectus or final prospectus, or any\namendments or supplements thereto, or arise out of or are based upon the\nomission or alleged omission to state therein a material fact required to be\nstated therein or necessary to make the statements therein not misleading, in\neach case to the extent, but only to the extent, that the registration\nstatement, preliminary or final prospectus, or amendments or supplements\nthereto, in reliance upon and in conformity with written information furnished\nby such Holder expressly for use in connection with the registration; and such\nHolder will reimburse any reasonable legal or other expenses incurred by the\nParent or any such director, officer or controlling person in connection with\ninvestigating or defending any such loss, claim, damage, liability or action;\nprovided that the indemnity agreement contained in this Section shall not apply\nto amounts paid in settlement of any such loss, claim, damage, liability or\naction if such settlement is effected without the consent of such Holder (which\nconsent shall not be unreasonably withheld or delayed).\n\n         (c)  In case any such action shall be brought against any indemnified\nparty and it shall notify the indemnifying party of the commencement thereof,\nthe indemnifying party shall be entitled to participate in and, to the extent it\nshall wish, to assume and undertake the defense thereof with counsel\nsatisfactory to such indemnified party, and, after notice from the indemnifying\nparty to such indemnified party of its election so to assume and undertake the\ndefense thereof, the indemnifying party shall not be liable to such indemnified\nparty under this Section 6.6 for any legal expenses subsequently incurred by\nsuch indemnified party in connection with the defense thereof other than\nreasonable costs of investigation and of liaison with counsel so selected,\nprovided, however, that, if the defendants in any such action include both the\n--------  -------\nindemnified party and the indemnifying party and the indemnifying party shall\nhave reasonably concluded that (i) there may be reasonable defenses available to\nthe indemnified party which are different from or additional to those available\nto the indemnifying party or (ii) the interests of the indemnified party\nreasonably may be deemed to conflict with the interests of the indemnifying\nparty, the indemnified party shall have the right to select a separate counsel\nand to assume such legal defenses and otherwise to participate in the defense of\nsuch action, with the reasonable and actual expenses and fees of such separate\ncounsel and other expenses related to such participation to be reimbursed by the\nindemnifying party as incurred. The failure to deliver written notice to the\nindemnifying party within a reasonable time of the commencement of any such\naction shall not relieve such indemnifying party of any liability to the\nindemnified party under this Section 6.6 except to the extent (and only to the\nextent) of any actual prejudice suffered by the indemnifying party.\n\n         (d)  If the indemnification provided for in this Section is held by a\ncourt of competent jurisdiction to be unavailable to an indemnified party with\nrespect to any loss, liability, claim, damage or expense referred to therein,\nthen the indemnifying party, in lieu of indemnifying such indemnified party\nhereunder, shall contribute to the amount paid or payable by such indemnified\nparty as a result of such loss, liability, claim, damage, or expense in such\nproportion as is appropriate to reflect the relative fault of the indemnifying\nparty on the one hand and of the indemnified party on the other in connection\nwith the statements or omissions that resulted in such loss, liability, claim,\ndamage, or expense as well as any other relevant equitable considerations. This\nrelative fault of the indemnifying party and of the indemnified party shall\n\n \nbe determined by reference to, among other things, whether the untrue or alleged\nuntrue statement of a material fact or the omission to state a material fact\nrelates to information supplied by the indemnifying party or by the indemnified\nparty and the parties' relative intent, knowledge, access to information, and\nopportunity to correct or prevent such statement or omission.\n\n\n         (e)  Notwithstanding the foregoing, to the extent that the provisions\non indemnification and contribution contained in an underwriting agreement\nentered into in connection with the underwritten public offering are in conflict\nwith the foregoing provisions, the provisions in the underwriting agreement\nshall control.\n\n         (f)  The obligations of the Parent and Holders under this Section shall\nsurvive the completion of any offering of Registrable Shares in a registration\nstatement under this Agreement, and otherwise. No indemnifying party, in the\ndefense of any such claim or litigation, shall, except with the consent of each\nindemnified party, consent to the entry of any judgment or enter into any\nsettlement which does not include as an unconditional term thereof the giving by\nthe claimant or plaintiff to such indemnified party of a release from all\nliability in respect to such claim or litigation.\n\n     5.  Reports Under Securities Law.  Until two years following the Effective\n         ---------------------------- \nTime, the Parent shall:\n\n         (a)  file with the SEC in a timely manner all reports and other\ndocuments required of the Parent under the Exchange Act (at any time after it\nhas become subject to such reporting requirements); and\n\n\n         (b)  furnish to each Holder upon request a written statement by the\nParent that it has compiled with the reporting requirements of the Securities\nAct or the Exchange Act (at any time after it has become subject to such\nreporting requirements), a copy of the most recent annual or quarterly report of\nthe Parent, and such other reports and documents so filed by the Parent as may\nbe reasonably requested in availing the Holder of any rule or regulation of the\nSEC permitting the selling of any such securities without registration.\n\n     6.  Stop Notice.  Each Holder agrees that, upon receipt of any notice (a\n         ----------- \n\"Stop Notice\") from the Parent that the Board of Directors of the Parent has\ndetermined, in its good faith reasonable judgment, that the disposition of the\nShares pursuant to the registration statement would materially interfere with,\nor require the premature disclosure of, any financing, acquisition or\nreorganization involving the Parent or any of its subsidiaries, or otherwise\nwould require premature disclosure of any other material nonpublic information\nas to which the Parent has a good faith, bona fide business purpose for\nmaintaining its confidentiality (the \"Board of Directors' Determination\"), such\nHolder will immediately discontinue disposition of the Shares pursuant to the\nregistration statement until such Holder's receipt of a copy of a supplemented\nor amended prospectus or written notice from the Parent that the reason for the\nBoard of Directors' `Determination has lapsed and, if so directed by the Parent,\nsuch Holder shall deliver to the Parent (at the expense of the Parent) or\ndestroy (and deliver to the Parent a certificate of destruction) all copies in\nits possession, of the prospectus covering the Shares current at the time of\nreceipt of the Stop Notice; provided, however, that any restriction on trading\n                            --------  -------                                 \nresulting from a Board of Directors' Determination shall be limited to a maximum\nof thirty (30) consecutive days\n\n \nand ninety (90) days in any 12-month period; and, provided further, that the\nperiod set forth in Section 1 of this attachment shall be extended by one day\nfor each day that a Stop Notice remains in effect.\n\n     7.  Assignment of Registration Rights.  The right to cause the Company to\n         ---------------------------------                                    \nregister Registrable Shares pursuant to this Agreement may be assigned by any\nHolder to a transferee or assignee of Registrable Shares; provided such transfer\nis permitted under applicable securities laws.  Notwithstanding the foregoing,\nif the Company has registered Registrable Shares pursuant to a registration\nstatement which has been declared effective by the Commission and, thereafter, a\nHolder purports to assign all or a portion of the Registrable Shares to any\nother person, the assignee shall have the right to cause the registration\nstatement to be amended or supplemented to name such assignee as a selling\nshareholder so long as (i) the filing of a supplement or post-effective\namendment is permitted by applicable law for such purpose and (ii) all costs and\nexpenses to the Company, including without limitation legal and accounting\nexpenses, incurred to so amend such registration statement shall be paid by the\nassignee requesting such amendment (or shared on a pro rata basis to the extent\nmore than one assignee requests such amendment).\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8863],"corporate_contracts_industries":[],"corporate_contracts_types":[9622,9626],"class_list":["post-43022","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-sonicwall-inc","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43022","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43022"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43022"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43022"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43022"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}