{"id":43029,"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-at-home-corp-and-narrative.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"agreement-and-plan-of-merger-at-home-corp-and-narrative","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/agreement-and-plan-of-merger-at-home-corp-and-narrative.html","title":{"rendered":"Agreement and Plan of Merger &#8211; At Home Corp. and Narrative Communications Corp."},"content":{"rendered":"<pre>\n\n                         AGREEMENT AND PLAN OF MERGER\n\n\n \n                                BY AND AMONG\n\n\n                             AT HOME CORPORATION,\n\n\n                            TRANSITORY CORPORATION\n\n\n                                      AND\n\n\n                        NARRATIVE COMMUNICATIONS CORP.\n\n\n\n                               DECEMBER 17, 1998\n                                        \n\n \n                         AGREEMENT AND PLAN OF MERGER\n\n     THIS AGREEMENT AND PLAN OF MERGER (the \"AGREEMENT\") is entered into as of\nDecember 17, 1998, by and among At Home Corporation, a Delaware corporation\n(\"ACQUIRER\"), Transitory Corporation, a Delaware corporation wholly owned by\nAcquirer (\"MERGER SUB\") and Narrative Communications Corp., a Delaware\ncorporation (\"TARGET\").\n\n     WHEREAS, the Boards of Directors of Acquirer, Merger Sub and Target each\nhave determined that the acquisition of Target by Acquirer is in the best\ninterests of their respective companies and stockholders, have approved the\nMerger and accordingly have agreed to effect the merger provided for herein upon\nthe terms and subject to the conditions set forth herein;\n\n     WHEREAS, the parties intend that: (a) Acquirer has organized Merger Sub as\na new Delaware corporation and a wholly owned subsidiary of Acquirer; (b) Merger\nSub will merge with and into Target in a reverse triangular merger (the\n\"MERGER\"); and (c) Target will be the surviving corporation (the \"SURVIVING\nCORPORATION\") of the Merger. Upon the effectiveness of the Merger, all the\noutstanding capital stock of Target will be converted into capital stock of\nAcquirer, and Acquirer will assume all outstanding options and warrants to\npurchase shares of Target capital stock. Each of these events will be subject to\nand carried out pursuant to the terms and conditions of this Agreement and a\nCertificate of Merger substantially in the form of Exhibit A (the \"CERTIFICATE\n                                                   ---------                  \nOF MERGER\") and the applicable provisions of the laws of the State of Delaware;\n\n     WHEREAS, the Merger is intended to be treated as: (a) a purchase for\naccounting purposes and (b) a tax-free reorganization pursuant to the provisions\nof Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the\n\"CODE\"), by virtue of the provisions of Section 368(a)(1)(A) and Section\n368(a)(2)(E) of the Code.\n\n     NOW, THEREFORE, in consideration of the foregoing and the respective\nrepresentations, warranties, covenants and agreements set forth herein,\nintending to be legally bound hereby the parties to this Agreement agree as\nfollows:\n\n     1.  CERTAIN DEFINITIONS OF GENERAL TERMS\n\n          1.1  \"ACQUISITION PROPOSAL\" with respect to an Entity means any\nproposal or offer concerning the possible disposition of all or any substantial\nportion of Target's business, assets or capital stock by merger, consolidation,\nsale of assets or any other means or any other transaction that would involve a\nchange in control of Target, but excluding (i) a potential working capital\nbridge loan facility with Silicon Valley Bank in an aggregate principal amount\nnot to exceed one million five hundred thousand dollars ($1,500,000) and (ii) a\nloan or equity financing not to exceed twelve million dollars ($12,000,000) with\ninvestors with whom Target had commenced discussions on or before November 23,\n1998 that will not preclude in any manner the consummation of the Merger and the\ntransactions contemplated herein.\n\n          1.2  \"BEST EFFORTS\" shall mean the commercially reasonable efforts\nthat a prudent business Person desiring to achieve a particular result with\nrespect to its business would use in order to ensure that such result is\nachieved as expeditiously as possible. An obligation to use \"Best Efforts\" under\nthis Agreement does not require the Person subject to that obligation to take\nactions that would result in a \n\n \nMaterial Adverse Change in the benefits to such Person under this Agreement or\nthe other Merger Agreements.\n\n          1.3  \"CAUSE\" shall mean (i) wrongful misappropriation of Acquirer's\nassets; (ii) conviction of a felony involving violence, dishonesty, conversion,\ntheft or misappropriation of property of another, controlled substances, moral\nturpitude or regulatory good standing of Acquirer; (iii) drug or alcohol abuse\nwhich prevents employee from substantially performing his duties; or (iv)\nrefusal to perform, or gross negligence with respect to the performance of, the\nduties assigned to him by Acquirer for any reason other than disability;\nprovided, however, that is such cause is of the type described in clause (iv)\nand is susceptible of being cured, employee shall have a period of twenty (20)\ndays after written notice has been received by employee to effect such cure or\nsuch longer period of time as may required for such cure, provided employee has\ncommenced such cure within such twenty (20) days and is diligently prosecuting\nsuch cure.\n\n          1.4  \"CODE\" shall mean the Internal Revenue Code of 1986, as amended.\n\n          1.5  \"CONTRACT\" shall mean, with respect to any Person, any written or\noral agreement, contract, understanding, arrangement, instrument, note,\nguaranty, indemnity, representation, warranty, deed, assignment, power of\nattorney, purchase order, work order, insurance policy, benefit plan,\ncommitment, covenant, obligation, promise or undertaking of any nature to which\nsuch Person is a party or by which its properties or assets may be bound or\naffected or under which it or its business, properties or assets receive\nbenefits. See also \"TARGET CONTRACTS\".\n\n          1.6  \"ENCUMBRANCE\" shall mean any lien, pledge, hypothecation, charge,\nmortgage, security interest, encumbrance, equity, equitable interest, claim,\npreference, right of possession, lease, tenancy, license, encroachment,\ncovenant, infringement, interference, Order, proxy, option, right of first\nrefusal, preemptive right, community property interest, defect, impediment,\nexception, reservation, limitation, impairment, imperfection of title, condition\nor restriction of any nature (including any restriction on the voting of any\nsecurity, any restriction on the transfer of any security or other asset, any\nrestriction on the receipt of any income derived from any asset, any restriction\non the use of any asset and any restriction on the possession, exercise or\ntransfer of any other attribute of ownership of any asset) other than liens for\nTaxes not yet due and payable.\n\n          1.7  \"ENTITY\" shall mean any corporation (including any non profit\ncorporation), general partnership, limited partnership, limited liability\npartnership, joint venture, estate, trust, cooperative, foundation, society,\npolitical party, union, company (including any limited liability company or\njoint stock company), firm or other enterprise, association, organization or\nentity.\n\n          1.8  \"GAAP\" shall mean U.S. generally accepted accounting principles,\napplied on a basis consistent with the basis on which the Target Financial\nStatements (defined in Section 4.8) were prepared.\n\n\n          1.9  \"INDEMNIFIED PERSON\" means any individual or entity that is\nindemnified pursuant to Article 11 hereof.\n\n          1.10  \"KNOWLEDGE\"\n\n                                      -2-\n\n \n               (a)  An individual shall be deemed to have \"Knowledge\" of a\n                    particular fact or other matter if such individual is after\n                    due inquiry actually aware of such fact or other matter.\n\n               (b)  Target shall be deemed to have \"Knowledge\" of a particular\n                    fact or matter only if a director or Key Employee has or had\n                    Knowledge of such fact or matter.\n\n          1.11 \"LIABILITY\" shall mean any debt, obligation, duty or liability\nof any nature including any unknown, undisclosed, unmatured, unaccrued,\nunasserted, contingent, indirect, conditional, implied, vicarious, derivative,\njoint, several or secondary liability, regardless of whether such debt,\nobligation, duty or liability would be required to be disclosed on a balance\nsheet prepared in accordance with GAAP and regardless of whether such debt,\nobligation, duty or liability is immediately due and payable.\n\n          1.12 \"MATERIAL ADVERSE CHANGE\" and \"MATERIAL ADVERSE EFFECT\" shall\nmean one or more changes in, or effects on, the business, financial condition,\noperations, results of operations, assets or liabilities of Acquirer or Target\n(as the case may be) that, individually or in the aggregate, results in or would\nreasonably be expected to result in a material adverse effect on, or a material\nadverse change in, the business, financial condition, operations, results of\noperations, assets or liabilities of the affected party taken as a whole.  A\nstatement in this Agreement that an event or state of affairs \"has,\" \"does not\nhave,\" \"would have,\" or \"would not have\" (or similar statements) a Material\nAdverse Change or Material Adverse Effect, shall be deemed to mean that such\nevent or state of affairs both: (a) has (or does not have), does (or does not),\nwill (or will not), or would (or would not), result in, and\/or (b) would (or\nwould not) reasonably be expected to result in, the consequences described in\nthe preceding sentence.\n\n          1.13 \"MERGER AGREEMENTS\" shall include: (a) this Agreement; (b) the\nEscrow Agreement; (c) the Rights Agreement; and (d) the Voting Agreement; (e)\nthe Non-Competition Agreement; (f) the Certificate of Merger and (g) all other\nagreements to which at least one party to this Agreement will be a party and\nthat must be executed pursuant to this Agreement.\n\n          1.14 \"ORDER\" shall mean any:\n\n               (a)  order, judgment, injunction, edict, decree, ruling,\n                    pronouncement, determination, decision, opinion, verdict,\n                    sentence, subpoena, writ or award that is issued, made,\n                    entered, rendered or otherwise put into effect by or under\n                    the authority of any court, administrative agency or other\n                    governmental body or any arbitrator or arbitration panel; or\n\n               (b)  Contract with any governmental body that is entered into in\n                    connection with any Proceeding.\n\n          1.15 \"ORDINARY COURSE OF BUSINESS\". An action taken by or on behalf\nof Acquirer or Target (as the case may be) shall not be deemed to have been\ntaken in the \"Ordinary Course of Business\" unless:\n\n               (a)  such action is consistent with such party's past customary\n                    business practices and taken in the ordinary course of such\n                    party's normal day to day operations;\n\n                                      -3-\n\n \n               (b)  such action is not required to be authorized by such party's\n                    stockholders, board of directors or any committee of its\n                    board of directors and does not require any other separate\n                    or special authorization of any nature; and\n\n               (c)  such action is similar in nature and magnitude to actions\n                    customarily taken, without any special or separate\n                    authorization, in the ordinary course of the normal day to\n                    day operations of other entities that are employed in\n                    businesses similar to such party's business.\n\n          1.16 \"PERMITTED ENCUMBRANCE\" shall mean any (i) statutory lien for\ntaxes, (ii) encumbrance in the nature of zoning restrictions, easements, rights\nor restrictions of record on the use of real property if the same do not\nmaterially detract from the value of the property encumbered thereby or\nmaterially impair the use of such property in the Business as currently\nconducted or proposed to be conducted, (iii) statutory or common law lien to\nsecure landlords, lessors or renters under leases or rental agreements confined\nto the premises rented, (iv) deposit or pledge made in connection with, or to\nsecure payment of, worker's compensation, unemployment insurance, old age\npension programs mandated under applicable law or other social security, (v)\nstatutory or common law liens in favor of carriers, warehousemen, mechanics and\nmaterialmen, statutory or common law liens to secure claims for labor, materials\nor supplies and other like liens, and (vi) restrictions on transfer of\nsecurities  imposed by applicable state and federal laws.\n\n          1.17 \"PERSON\" shall mean any individual, Entity or governmental body.\n\n          1.18 \"PROCEEDING\" shall mean any action, claim, suit, litigation,\narbitration, proceeding (including any civil, criminal, administrative,\ninvestigative or appellate proceeding and any informal proceeding), prosecution,\ncontest, hearing, inquiry, inquest, audit, examination or investigation\ncommenced, brought, conducted or heard by or before any governmental body or any\narbitrator or arbitration panel.\n\n          1.19 \"SEC\" shall mean the Securities and Exchange Commission.\n\n          1.20 \"SECURITIES ACT\" shall mean the Securities Act of 1933, as\n               amended.\n\n          1.21 \"TARGET CONTRACT\" shall mean any Contract:\n\n\n               (a)  to which Target is a party;\n\n               (b)  by which Target or any of its assets is or may become bound\n                    or under which Target has or may become subject to any\n                    obligation; or\n\n               (c)  under which Target has or may acquire any right or interest.\n\n          1.22 \"TARGET STOCKHOLDER\" shall mean a holder of shares of Target's\ncapital stock, including Target Common Stock and Target Preferred Stock (each\ndefined in Section 4.5) .\n\n          1.23  The definitions of the following defined terms are set forth in\nthe following Sections:\n\n                                      -4-\n\n \nDefinition                                      Section\n-----------                                     ------- \nAcquirer                                        p.1, Para. 1.\nAcquirer Damages                                11.3\nAcquirer and Merger Sub Tax                     \n  Representations                               8.9\nAcquirer Disclosure Package                     5.5         \nAcquirer Disclosure Schedule                    5.0         \nAcquirer Merger Agreements                      5.2(a)      \nAcquisition Proposal                            1.1         \nAgreement                                       pg. 1, Para. 1. \nCERCLA                                          4.21(a)         \nBest Efforts                                    1.2             \nCOBRA                                           4.18(h)         \nCause                                           1.3             \nCertificate of Merger                           pg. 1, Para. 3  \nClosing                                         2.1(a)(i)       \nClosing Date                                    2.1(a)(i)       \nClosing Price                                   2.2(a)(ii)(A)   \nCode                                            pg. 1, Para. 4. \nCode                                            1.4         \nContract                                        1.5         \nConversion Ratio                                2.2(a)(ii)(D)\nDamages                                         11.3        \ndisposal                                        4.21(a)     \nDGCL                                            2.2(b)(i)   \nD&amp;O Group                                       10.5        \nDissenting Shares                               2.2(b)(i)   \nEffective Time                                  2.1(a)(ii)  \nEncumbrance                                     1.6         \nERISA                                           4.18(c)     \nERISA Affiliate                                 4.18(c)     \nEscrow Agent                                    2.4(a)      \nEscrow Agreement                                2.4(a)      \nEscrow Percentage                               2.4(b)      \nEscrow Period                                   2.4(c)      \nEscrow Shares                                   2.4(b)      \nEntity                                          1.7         \nExchange Act                                    5.6         \nExchange Agent                                  2.3(a)(i)   \nExchange Option                                 2.2(c)(i)   \nExchange Share                                  2.2(a)(i)   \nFinal Balance Sheet                             4.8         \nFiscal Year End                                 5.5         \nGAAP                                            1.8         \nHSR Act                                         3.8         \nHazardous Materials                             4.21(a)     \nInformation Statement                           6.12(b)     \nIntellectual Property Rights                    4.10(a)      \n\n                                      -5-\n\n \nIndemnified Person                              1.9\nInterim Financial Statements                    4.8\nKey Employees                                   2.5(c)(i)\nKnowledge                                       1.10\nLiability                                       1.11\nMaterial Adverse Change                         1.12\nMaterial Adverse Effect                         1.12\nMaterial Target Contracts                       4.16(a)\nMerger                                          pg. 1, Para. 3.\nMerger Agreements                               1.13\nMerger Sub                                      pg. 1, Para. 1.\nNew Options                                     3.5\nNew Target Option Plan                          3.5\nNDA                                             3.2\nNon-Compete Agreements                          3.3(b)\nOrder                                           1.14\nOrdinary Course of Business                     1.15\nPermitted Encumbrance                           1.16\nPerson                                          1.17\nPre-Closing Period                              6.0\nProceeding                                      1.18\nrelease                                         4.21(a)\nRS Letter                                       11.2(c)\nRestricted Shares                               2.5(c)(i)\nRights Agreement                                2.5(a)(ii)\nSEC                                             1.19\nSEC Reports                                     5.6\nSecurities Act                                  1.20\nSeverance Amount                                3.4(b)\nSurviving Corporation                           pg. 1, Para. 3.\nTarget                                          pg. 1, Para. 1.\nTarget 401(a) Plan                              4.18(d)\nTarget Benefit Arrangements                     4.18(e)\nTarget Certificate of Incorporation             2.2(a)(i)\nTarget Certificates                             2.3(a)(i)\nTarget Common Stock                             4.5(a)\nTarget Contract                                 1.21\nTarget Contracts                                1.5\nTarget Damages                                  11.2\nTarget Disclosure Schedule                      4.0\nTarget Employee Plans                           4.18(c)\nTarget Financial Statements                     4.8\nTarget Information Statement                    6.5\nTarget IP Rights                                4.10(b)\nTarget Merger Agreements                        4.2(a)\nTarget Options                                  4.5(b)\nTarget Pension Plans                            4.18(d)\nTarget Preferred Stock                          4.5(a)\n\n                                      -6-\n\n \nTarget Stockholder                              1.22\nTarget Stockholders Questionnaire               6.12(c)\nTarget Tax Representations                      9.15\nTax                                             4.14(a)\nTaxes                                           4.14(a)\nthreatened release                              4.21(a)\nTotal Exchange Shares                           2.2(a)(i)\nTotal Exchange Shares                           2.2(a)(ii)(B)\nTotal Target Shares                             2.2(a)(ii)(C)\nTrading Window                                  2.5(a)(ii)\nYear 2000 Compliant                             4.10(f)\n\n\n     2.   PLAN OF MERGER\n\n          2.1  The Merger. Subject to the terms and conditions of this\n               ----------                                             \nAgreement, Merger Sub will merge with and into Target pursuant to this Agreement\nand the Certificate of Merger and in accordance with applicable provisions of\nthe laws of the State of Delaware as follows:\n\n               (a)  Timing of the Merger.\n                    -------------------- \n\n                    (i)  The Closing. Unless this Agreement has first been\n                         ----------- \nterminated pursuant to Article 10 hereof, the closing of the transactions\ncontemplated by this Agreement (the \"CLOSING\") will take place at the offices of\nFenwick &amp; West LLP, Two Palo Alto Square, Palo Alto, California 94306 at 11:00\na.m., Pacific Standard Time on December 30, 1998, or, if all conditions to\nclosing have not been satisfied or waived by such date, such other place, time\nand date as Target and Acquirer may mutually select (the \"CLOSING DATE\").\n\n                    (ii) Effective Time of the Merger. The Merger shall become\n                         ---------------------------- \neffective once the Certificate of Merger has been properly executed and duly\nfiled with the Delaware Secretary of State and appropriate evidence of\nacceptance for filing has been obtained. This filing shall be made by the\nAcquirer concurrently with the Closing. For the purposes of this Agreement, the\nterm \"EFFECTIVE TIME\" means the date and time at which such Certificate of\nMerger is filed or at such later time as is provided in the Certificate of\nMerger.\n\n               (b)  Effects of the Merger. At the Effective Time: (i) Merger Sub\n                    ---------------------\nwill merge with and into Target, Target will be the Surviving Corporation and\nthe separate existence of Merger Sub will thereupon cease; (ii) each share of\ncommon stock of Merger Sub outstanding immediately prior to the Effective Time\nwill convert into one share of common stock of the Surviving Corporation; (iii)\nthe certificate of incorporation and bylaws of Merger Sub as of the Effective\nTime will become the certificate of incorporation and bylaws of the Surviving\nCorporation; (iv) the directors of Merger Sub immediately prior to the Effective\nTime will become the directors of the Surviving Corporation; (v) the officers of\nMerger Sub immediately prior to the Effective Time will become the officers of\nthe Surviving Corporation; (vi) each share of Target Common Stock and Target\nPreferred Stock (each defined in Section 4.5) and each Target Option (defined in\nSection 4.5) outstanding immediately prior to the Effective Time will be\nconverted as provided in Section 2.2; and (vii) the Merger will, from and after\nthe Effective Time, have all of the effects provided by applicable law.\n\n          2.2  Conversion of Shares and Options.\n               -------------------------------- \n\n                                      -7-\n\n \n               (a)  Conversion of Shares.\n                    -------------------- \n\n                    (i)  Overall Agreement. In connection with the Merger and\n                         ----------------- \npursuant to the provisions of this Agreement and the Merger Agreements, Acquirer\nwill issue a certain number of fully paid and nonassessable shares of Acquirer\nSeries A Common Stock (the \"TOTAL EXCHANGE SHARES,\" and each share individually,\nan \"EXCHANGE SHARE\") in exchange for all of the capital stock of Target\noutstanding immediately prior to the Effective Time. All shares of Target\nPreferred Stock outstanding immediately prior to the Effective Time will have\nbeen converted to Target Common Stock at the then-applicable conversion ratio\ndefined in the Amended and Restated Certificate of Incorporation of Target,\nattached as Exhibit B (the \"TARGET CERTIFICATE OF INCORPORATION\"). Each share of\n            ---------\nTarget Common Stock owned by Target immediately prior to the Effective Time\nshall be canceled and extinguished without any conversion pursuant to this\nSection 2.2.\n\n                    (ii)  Conversion Formula. Each share of Target Common Stock\n                          ------------------\noutstanding immediately prior to the Effective Time, including the shares into\nwhich Target Preferred Stock are converted and excluding any Dissenting Shares\n(as defined in Section 2.2(b)), by virtue of the Merger and at the Effective\nTime, without further action on the part of any Target Stockholder, will be\nconverted solely into the right to receive a fraction of an Exchange Share equal\nto the Conversion Ratio. For the purposes of calculating the Conversion Ratio,\nand as used elsewhere in this Agreement, the following definitions apply:\n\n                          (A)  the \"CLOSING PRICE\" shall equal the average\nclosing price (in U.S. dollars) of one share of Acquirer Series A Common Stock\nas quoted on the Nasdaq National Market over the fifteen (15) trading days\nimmediately prior to the Closing Date; provided, however, that if such average\nclosing price is higher than $55.67, then the Closing Price shall equal $55.67\nand if such average closing price is lower than $48.45, then the Closing Price\nshall equal $48.45;\n\n                          (B)  the \"TOTAL EXCHANGE SHARES\" shall be that number\nof shares of Acquirer Series A Common Stock equal to one million four hundred\nforty thousand (1,440,000), multiplied by the quotient equal to $52.06 divided\nby the Closing Price, rounded to the nearest whole share.\n\n                          (C)  the \"TOTAL TARGET SHARES\" equals (not including\ntreasury shares) the sum of: (1) the total number of shares of Target Common\nStock outstanding immediately prior to the Effective Time; (2) the total number\nof shares of Target Common Stock issuable upon conversion of all outstanding\nshares of Target Preferred Stock immediately prior to the Effective Time at the\napplicable conversion ratio pursuant to the provisions of the Target Certificate\nof Incorporation; and (3) the total number of shares of Target Common Stock\nissuable upon exercise of all Target Options (other than the New Options which\nshall be excluded from the calculation) outstanding immediately prior to the\nEffective Time; and\n\n                          (D)  the \"CONVERSION RATIO\" equals the Total Exchange\nShares divided by the Total Target Shares.\n\n                    (iii) Adjustment for Capital Changes. If, prior to the\n                          ------------------------------ \nEffective Time, Acquirer or Target recapitalizes through a split-up of its\noutstanding shares into a greater number, or a combination of its outstanding\nshares into a lesser number, reorganizes, reclassifies or otherwise changes its\noutstanding shares into the same or a different number of shares of other\nclasses (other than through a split-up or combination of shares provided for in\nthe previous clause), or declares a dividend on its\n\n                                      -8-\n\n \noutstanding shares payable in shares or securities convertible into shares, the\nTotal Exchange Shares will be adjusted appropriately so as to maintain the\nproportionate interests of the Target Stockholders and the holders of Acquirer\nSeries A Common Stock at the time of such recapitalization.\n\n                    (iv) Fractional Shares. No fractional shares of Acquirer\n                         ----------------- \nSeries A Common Stock will be issued in connection with the Merger. However, in\nlieu thereof, each Target Stockholder who would otherwise be entitled to receive\na fraction of an Exchange Share (excluding with respect to Target Options) will\nreceive from Acquirer an amount of cash equal to the Closing Price multiplied by\nthe fraction of an Exchange Share to which such holder would otherwise be\nentitled.\n\n               (b)  Dissenting Shares.\n                    ----------------- \n\n                    (i)   For each Target Stockholder who exercises appraisal\nrights with respect to shares of Target capital stock in accordance with Section\n262(d) of the Delaware General Corporation Law (\"DGCL\") and, as of the Effective\nTime, has not lost or effectively withdrawn such appraisal rights, such Target\nshares (\"DISSENTING SHARES\") will not be converted into or represent a right to\nreceive the consideration described in Section 2.2(a). Instead, each holder of\nDissenting Shares will be entitled only to such rights as are granted by Section\n262 of the DGCL. The Exchange Shares to which such dissenting Target\nStockholders would have been entitled had each assented to the merger will have\nthe status of authorized and unissued shares of Acquirer.\n\n                    (ii)  For each Target Stockholder who demands appraisal\nrights with respect to such shares, but subsequently loses (through the failure\nto perfect or otherwise) or effectively withdraws such demand for appraisal\nrights in accordance with Section 262 of the DGCL, such holder's shares shall,\nas of the Effective Time (or, if after the Effective Time, upon the occurrence\nof such event) automatically be converted into and represent only the right to\nreceive the consideration described in Section 2.2(a) upon surrender of the\napplicable certificate(s) as provided in Section 2.3.\n\n                    (iii) Target shall comply with the notice and other\nprocedural requirements set forth in Section 262(d)(2) of the DGCL with respect\nto any Target Stockholder who demands appraisal rights for such Target shares\nand has not lost or effectively withdrawn such demand for appraisal rights.\nAcquirer shall have the opportunity to participate in all negotiations and\nproceedings with respect to such demands. Target shall not, except with the\nprior written consent of Acquirer, voluntarily make any payment with respect to\nany demands for the exercise of appraisal rights or offer to settle or settle\nany such demands.\n\n\n               (c)  Assumption of Options and Warrants.\n                    ---------------------------------- \n\n                    (i)  Target Options. Each Target Option (defined in Section\n                         --------------\n4.5) that is outstanding immediately prior to the Effective Time, by virtue of\nthe Merger at the Effective Time and without further action on the part of any\nTarget Stockholder or holders of Target Options, will be assumed by Acquirer and\nconverted into a corresponding option or warrant (an \"EXCHANGE OPTION\") to\npurchase that number of Exchange Shares which equals the number of shares of\nTarget Common Stock subject to such Target Option at the Effective Time\nmultiplied by the Conversion Ratio, rounded down to the nearest whole share. The\nper share exercise price for each Exchange Option will equal the per share\nexercise price of each such Target Option immediately prior to the Effective\nTime divided by the Conversion Ratio, rounded up to the nearest whole cent.\n\n                                      -9-\n\n \n                    (ii) Terms of Assumption of Stock Options and Warrants. The\n                         -------------------------------------------------\nterm, exercisability, vesting schedule, status as an \"incentive stock option\"\nunder Section 422 of the Code, if applicable, and all other terms of the Target\nOptions will otherwise be unchanged. No Target Options will be accelerated as a\nresult of the merger, except as described on Schedule 2.2. Continuous employment\nwith Target will be credited to holders of Target Options for purposes of\ndetermining the number of shares subject to exercise after the Effective Time.\n\n          2.3  Exchange of Shares.\n               ------------------ \n\n               (a)  Procedures.\n                    ---------- \n\n                    (i)   Prior to the Closing, Acquirer will designate an\nexchange agent (the \"EXCHANGE AGENT\"). On the Closing Date, Acquirer will\ndeposit with the Exchange Agent the Exchange Shares, to be held by the Exchange\nAgent until released as provided herein. Acquirer shall cause to be mailed to\neach holder of record of a certificate(s) for shares of Target capital stock\n(the \"TARGET CERTIFICATES\"): (A) a letter of transmittal (which shall specify\nthat delivery shall be effected, and risk of loss and title to the Target\nCertificates shall pass, only upon delivery of the Target Certificates to the\nExchange Agent), and (B) instructions for use in effecting the surrender of the\nTarget Certificates in exchange for certificates representing Exchange Shares.\nAt the Effective Time or promptly thereafter, each Target Stockholder will\nsurrender the Target Certificates, duly endorsed as requested by Acquirer, to\nthe Exchange Agent for cancellation. Promptly after the later of the Effective\nTime or the date of receipt of such Target Certificates by the Exchange Agent,\nthe Exchange Agent will issue to each tendering holder (excluding holders of\nDissenting Shares) a certificate for the Exchange Shares to which such holder is\nentitled pursuant to Section 2.2(a), less the Escrow Shares (defined in Section\n2.4) to be deposited into escrow on behalf of such holder pursuant to Section\n2.4, and distribute any cash payable under Section 2.2(a)(iv).\n\n                    (ii)  At the Effective Time, the stock transfer books of\nTarget will be closed and no transfer of shares of Target capital stock will\nthereafter be made. If, after the Effective Time, Target Certificates are\npresented for any reason, they will be canceled and exchanged as provided in\nthis Section 2.3; provided, however, that subject to applicable law any Target\nCertificate that is not properly submitted to Acquirer for exchange and\ncancellation within six years after the Effective Time shall no longer evidence\nownership of or any right to receive shares of Acquirer Series A Common Stock\nand all rights of the holder of such Target Certificate, with respect to the\nshares previously evidenced by such Target Certificate, shall cease.\n\n                    (iii) All Exchange Shares delivered upon the surrender of\nTarget Certificates in accordance with the terms hereof will be deemed to have\nbeen delivered in full satisfaction of all rights pertaining to the Target\nCommon Stock evidenced by such Target Certificates.\n\n               (b)  Unexchanged Shares.\n                    ------------------ \n\n                    (i)  Until Target Certificates outstanding prior to the\nMerger are surrendered pursuant to Section 2.3(a) above, such Target\nCertificates will be deemed, for all purposes, to evidence ownership of the\nnumber of Exchange Shares into which the Target Common Stock will have been\nconverted (less the number of shares to be withheld as Escrow Shares pursuant to\nSection 2.4).\n\n                    (ii) In the event any Target Certificates shall have been\nlost, stolen or destroyed, the Exchange Agent shall issue in exchange for such\nTarget Certificates, upon the making \n\n                                      -10-\n\n \nof an affidavit of that fact by the holder of such Target Certificates, such\nExchange Shares and cash for a fractional share, if any, pursuant to Section\n2.2; provided, however, that Acquirer may, in its discretion and as a condition\nprecedent to issuance of Exchange Shares, require the owner of such lost, stolen\nor destroyed Target Certificates to deliver a bond in a reasonable sum as\nindemnity against any claim that may be made against Acquirer or the Exchange\nAgent with respect to the Target Certificates alleged to have been lost, stolen\nor destroyed.\n\n          (c) Payment of Dividends. No dividends or distributions payable to\n              --------------------                                          \nholders of record of Acquirer Series A Common Stock after the Effective Time, or\ncash payable in lieu of fractional shares, will be paid to holders of any\nunsurrendered Target Certificates until such holders surrender their Target\nCertificates. Upon such surrender of any Target Certificate, subject to the\neffect, if any, of applicable escheat and other laws, there will be delivered to\nsuch tendering holder the amount of any dividends and distributions paid with\nrespect to Exchange Shares so withheld as of any date subsequent to the\nEffective Time and prior to such date of delivery, less any stock dividends for\nEscrow Shares that are issued in order to effect a stock split of Acquirer's\nSeries A Common Stock (which shall be held until the Escrow Shares are\nreleased). Except for the Escrow Shares, no other interest shall be paid on any\nsuch dividends withheld.\n\n          (d) Miscellaneous.\n              ------------- \n\n              (i)   If any certificates for Exchange Shares are to be issued in\na name other than that in which the Target Certificate surrendered in exchange\ntherefor is registered, the following shall be conditions of such exchange: (A)\nthe Target Certificate must be properly endorsed and otherwise in proper form\nfor transfer, and (B) the Person requesting such exchange shall either pay to\nthe Exchange Agent any transfer or other taxes required by reason of the\nissuance of certificates for such Exchange Shares in a name other than that of\nthe registered holder of the Target Certificate surrendered or establish to the\nsatisfaction of the Exchange Agent that such tax has been paid or is not\napplicable.\n\n              (ii)  Notwithstanding anything in this Agreement to the contrary,\nneither the Exchange Agent nor any party hereto shall be liable to a Target\nStockholder for any Exchange Shares or dividends thereon or the cash payments\notherwise due hereunder delivered to a public official pursuant to applicable\nabandoned property, escheat or other similar laws following the passage of time\nspecified therein.\n\n     2.4  Escrow.\n          ------ \n\n          (a) Escrow Agent. State Street Bank or an escrow agent selected by\n              ------------                                                  \nAcquirer prior to the closing and reasonably satisfactory to Target (the \"ESCROW\nAGENT\") shall hold, release and perform other tasks related to the Escrow Shares\n(defined in Section 2.4(b)) pursuant to the provisions of an escrow agreement\n(the \"ESCROW AGREEMENT\") in substantially the form attached as Exhibit C.\n                                                               --------- \n\n          (b) Escrow Shares. At the Effective Time Acquirer will withhold a\n              -------------                                                \npercentage (the \"ESCROW PERCENTAGE\") of shares from the number of the Exchange\nShares to be issued to each Target Stockholder upon surrender of his or her\nTarget Certificates, rounded down to the nearest whole number of shares to be\nissued to such Target Stockholder (the \"ESCROW SHARES\"). The Escrow Percentage\nshall be expressed as a fraction, the numerator of which is ten percent (10%) of\nthe Total Exchange Shares and the denominator of which is the number of Exchange\nShares actually issuable in the Merger to Target Stockholders at the Effective\nTime. Stock Dividends that are issued in order to \n\n                                      -11-\n\n \neffect a stock split of Acquirer's Series A Common Stock on Escrow Shares\ndeclared during the Escrow Period shall also be held in escrow until such Escrow\nShares are released. Acquirer will deliver to the Escrow Agent certificates\nrepresenting the Escrow Shares issued in the name of each holder of Exchange\nShares.\n\n          (c) Escrow Period. The Escrow Agent will hold the Escrow Shares and\n              -------------                                                  \ndividends as collateral for Target's indemnification obligations and release\nshares to satisfy valid claims, all pursuant to the Escrow Agreement and Article\n11 of this Agreement. The Escrow Agent will continue to hold Escrow Shares and\ndividends not released in satisfaction of claims until the end of the Escrow\nPeriod. For the purposes of this Agreement, the \"ESCROW PERIOD\" means that time\nperiod beginning at the Effective Time and ending ten (10) business days after\npublication of (but in any event no later than March 31, 2000) audited\nconsolidated financial statements of Acquirer for the fiscal year ended December\n31, 1999.\n\n     2.5  Securities Law Compliance; Additional Restrictions on Resale.\n          ------------------------------------------------------------ \n\n          (a) Issuance of Exchange Shares; Resale of Exchange Shares.\n              ------------------------------------------------------ \n\n              (i)  Private Placement. The parties to this Agreement intend that\n                   -----------------                                           \nAcquirer shall issue the Exchange Shares pursuant to a \"private placement\" under\nRegulation D and\/or Section 4(2) of the Securities Act and applicable state\nsecurities laws. The Exchange Shares shall constitute \"restricted securities\"\nwithin the meaning of the Securities Act. The certificates for Exchange Shares\nto be issued in the Merger shall bear appropriate legends to identify such\nprivately placed shares as being restricted under the Securities Act, to comply\nwith applicable state securities laws, and, if applicable, to notice the\nrestrictions on transfer set forth in Section 2.5(c) below. Target shall furnish\nAcquirer with all information concerning Target and the Target Stockholders as\nmay be reasonably requested in connection with any action contemplated by this\nSection 2.5. Target shall further assist Acquirer by carrying out the covenants\nin Section 6.12.\n\n              (ii) S-3 Registration.  Pursuant to the terms of the Rights\n                   ---------------- \n Agreement in substantially the form attached as Exhibits D (the \"Rights\nAgreement\"), Acquirer shall file with the SEC a shelf registration statement on\nForm S-3 to provide for the resale of the Exchange Shares held by the Target\nStockholders entering into the Rights Agreement. Acquirer will use its Best\nEfforts to cause the registration statement to become effective on or before the\nfirst day of Acquirer's first normal quarterly trading window (\"TRADING WINDOW\")\nof 1999, which is expected to occur during the last week of January 1999, and\nwill keep such registration statement effective for a period of one year after\nthe Effective Time, subject to Acquirer's Trading Windows and in accordance with\nthe terms and conditions of the Rights Agreement.\n\n          (b) Resale of Shares Issued Pursuant to Exchange Options and New\n              ------------------------------------------------------------\nOptions. Acquirer shall cause the Exchange Shares that are issuable upon\n-------                                                                 \nexercise of the Exchange Options and New Options to be registered under the\nSecurities Act on Form S-8 or any other applicable form, including if necessary\na \"wrap\" S-8\/S-3, within one hundred eighty (180) days after the Closing Date.\nTarget will use its Best Efforts to cooperate with Acquirer in the preparation\nof the Form S-8. Acquirer will use diligent good faith efforts to maintain the\neffectiveness of such registration statement so long as the Exchange Options and\nNew Options (or shares issued upon exercise thereof) remain outstanding. Holders\nof Exchange Shares and Shares received pursuant to the exercise of Exchange\nOptions and New Options will be wholly responsible for compliance with all\nfederal and state securities laws regarding such shares.\n\n                                      -12-\n\n \n          (c) Additional Restrictions on Resale.\n              --------------------------------- \n\n              (i)  Key Employees.  Pursuant to the terms of the Rights \n                   ------------- \nAgreement, Target employees listed on Schedule 2.5 hereto (each, a \"KEY\nEMPLOYEE\") shall not sell the Exchange Shares that each receives in exchange for\noutstanding Target capital stock pursuant to the Merger until the date that is\nthree years after the Closing Date, except that: (A) each Key Employee may sell\nup to twenty-five percent (25%) of the total of such Key Employee's Exchange\nShares and shares purchasable upon the exercise of Exchange Options that are\nvested as of the Effective Time (collectively, the \"RESTRICTED SHARES\") from the\nEffective Time until the date that is one year after the Effective Time, (B)\neach Key Employee may sell up to another twenty-five percent (25%) of his or her\nRestricted Shares after the date that is one year after the Effective Time if\nsuch Key Employee is still employed by Acquirer or Target one year after the\nEffective Time; and (C) each Key Employee may sell the remaining fifty percent\n(50%) of his or her Restricted Shares after the date that is two years after the\nEffective Time if such Key Employee is still employed by Acquirer or Target two\nyears after the Effective Time. If a Key Employee's employment with Target or\nAcquirer terminates, then the restrictions on resale of the Restricted Shares\nset forth in this Section 2.5(c)(i) shall no longer apply to that Key Employee\nas of the date of such termination if either: (1) the Key Employee was\nterminated without Cause by Acquirer or Target; (2) the Key Employee's\nresponsibilities were substantially reduced and the Key Employee was not offered\nanother position with a span of responsibilities similar to his or her current\nresponsibilities; or (3) the Key Employee was to be relocated by Acquirer to a\nlocation more than one hundred (100) miles from such Key Employee's then\nexisting location and the Key Employee declined to relocate.\n\n              (ii) Holders of Target Preferred Stock. Pursuant to the terms and\n                   ---------------------------------                           \nconditions of the Rights Agreement, each holder of Target Preferred Stock as of\nthe date of this Agreement shall not sell more than fifty percent (50%) of the\nExchange Shares that each receives in exchange for his or her Target Preferred\nStock before February 15, 1999. Regarding each such holder's remaining Exchange\nShares: (A) during the period from February 15, 1999 until the first anniversary\nof the Closing Date, each such holder may sell any remaining Exchange Shares\nduring any normal Trading Window as such trading policy was previously disclosed\nto Target, and (B) on or after the date that is one year after the Closing Date,\neach holder may sell any remaining Exchange Shares at any time, except that all\nsales of shares remain subject to any other applicable federal and state\nsecurities laws restrictions, if any, including without limitation the volume\nand manner of sale restrictions imposed by Rule 144 of the Securities Act.\n\n          2.6 Tax and Accounting Aspects of the Merger.\n              ---------------------------------------- \n\n              (a) Tax Free Reorganization. The parties intend to adopt this\n                  -----------------------                                  \nAgreement as a tax-free plan of reorganization and to consummate the Merger in\naccordance with the provisions of Section 368(a)(1)(A) and Section 368(a)(2)(E)\nof the Code. The parties to this Agreement hereby adopt this Agreement as a\n\"plan of reorganization\" within the meaning of Sections 1.368-2(g) and 1.368-\n3(a) of the United States Treasury Regulations. The value of the Exchange Shares\nand Exchange Options to be received in the Merger is approximately equal, in\neach instance, to the value of the Target Common Stock and Target Options to be\nsurrendered in exchange therefor. The Exchange Shares issued in the Merger will\nbe issued solely in exchange for the Target Common Stock or upon exercise of\nExchange Options, and no other transaction other than the Merger represents,\nprovides for or is intended to be an adjustment to, the consideration paid for\nthe Target Common Stock. Except for any cash paid in lieu of fractional shares,\nno consideration that could constitute \"other property\" within the meaning of\nSection 356 of the Code is being paid by Acquirer for the Target Common Stock in\nthe Merger. The parties shall treat the Merger as a tax-free reorganization\ndescribed in Section 368(a)(2)(E) of the Code and shall not \n\n                                      -13-\n\n \ntake any position on any tax returns or for any federal income tax purposes that\nis inconsistent with such treatment or is inconsistent with this Section 2.6(a).\nIn addition, Acquirer will, after the Closing continue Target's historic\nbusiness or use a significant portion of Target's business assets in a business.\nAcquirer and Merger Sub do not have a present intent following the Merger to\ncause Target to issue additional shares of its stock that would result in\nAcquirer losing control of Target within the meaning of Section 368(c) of the\nCode. Acquirer has no current plan or intention to liquidate Target, to merge\nTarget with or into another corporation, to sell or otherwise to dispose of the\nstock of Target, or to cause Target to sell or otherwise to dispose of any of\nthe assets of Target. Acquirer will not in connection with the Merger redeem its\nstock furnished in exchange for Target stock. Persons related to Acquirer\n(within the meaning of Treas. Reg. Section 1.368-1(e)(3)) will not acquire in\nconnection with the Merger, for consideration other than Acquirer stock, either\nTarget stock or Acquirer stock furnished in exchange for Target stock. Merger\nSub will acquire at least 90 percent of the fair market value of the net assets\nand at least 70 percent of the fair market value of the gross assets held by\nTarget immediately prior to the Merger. Prior to the Merger, Acquirer will be in\ncontrol of Merger Sub within the meaning of Section 368(c) of the Code. Acquirer\nhas no plan or intention to reacquire any of its stock issued in the Merger.\nAcquirer, Merger Sub, the Target and the stockholders of the Target will pay\ntheir respective expenses, if any, incurred in connection with the Merger. The\npayment of cash in lieu of fractional shares of Acquirer stock is solely for the\npurpose of avoiding the expense and inconvenience to Acquirer of issuing\nfractional shares and does not represent separately bargained for consideration.\nThe total cash consideration that will be paid in the transaction to\nstockholders of the Target instead of issuing fractional shares of Acquirer\nstock will not exceed one percent of the total consideration that will be issued\nin the transaction to the stockholders of the Target in exchange for their\nshares of stock of the Target. The fractional share interests of each\nstockholder of the Target will be aggregated, and no stockholder of the Target\nwill receive cash in an amount equal to or greater than the value of one full\nshare of Acquirer stock. None of the compensation received by any stockholder of\nthe Target will be separate consideration for, or allocable to, any of their\nshares of the Target stock; none of the shares of Acquirer stock received by any\nstockholder of the Target will be separate consideration for, or allocable to,\nany services, and the compensation paid to any stockholder of the Target will be\nfor services actually rendered and will be commensurate with amounts paid to\nthird parties bargaining at arm's length for similar services. Merger Sub does\nnot have any liabilities nor are any of its assets subject to any liabilities.\nAt the Closing, officers of each of Acquirer, Merger Sub and Target shall\nexecute and deliver tax representation certificates in the forms of Exhibit E-1\n                                                                    -----------\nand E-2. The provisions and representations contained or referred to in this\n    ---                \nSection 2.6(a) shall survive until the expiration of the applicable statute of\nlimitations.\n\n               (b) Accounting. The parties intend that the Merger be treated as\n                   ----------                                                  \na purchase for accounting purposes.\n\n     3.  ADDITIONAL AGREEMENTS\n\n         3.1   Public Announcement.\n               ------------------- \n\n               (a) Target shall make no public disclosure regarding the\nnegotiation of the Merger without the prior written consent of Acquirer.\nAcquirer shall make no public disclosure regarding the negotiation of the Merger\nunless, in the reasonable opinion of Acquirer's counsel after consultation with\nTarget's counsel, such disclosure is required by law, in which event Target\nshall have a reasonable opportunity to comment on any public disclosure before\nit is made. Acquirer and Target will cooperate to prepare a joint press release\nafter the date of this Agreement.\n\n                                      -14-\n\n \n               (b) Target shall take reasonable actions necessary to avoid any\ntrading in Acquirer equity securities by Target's directors, officers, employees\nand agents that would be based on material nonpublic information, that relates\nto the proposed Merger or that was learned in the due diligence process.\n\n          3.2  Confidentiality. Target and Acquirer each recognize that they\n               ---------------                                              \nhave received and will receive confidential information concerning the other\nduring the course of the Merger negotiations, preparations and due diligence.\nAccordingly, Acquirer and Target each: (a) shall use its respective Best Efforts\nto prevent the unauthorized disclosure of any confidential information\nconcerning the other that was or is disclosed during the course of such\nnegotiations, preparations and due diligence; and (b) shall not make use of or\npermit to be used any such confidential information other than for the purpose\nof effectuating the Merger and related transactions. The obligations of this\nsection will not apply to information that: (a) is or becomes part of the public\ndomain other than by fault of the receiving party; (b) is disclosed by the\ndisclosing party to third parties without restrictions on disclosure; (c) is\nreceived by the receiving party from a third party without breach of a\ncontractual or fiduciary nondisclosure obligation to the other party; or (d) is\nrequired to be disclosed by law. If this Agreement is terminated, all copies of\ndocuments containing confidential information shall be returned by the receiving\nparty to the disclosing party.  In addition to this paragraph 3.2, the\nprovisions of the Mutual Nondisclsoure Agreement executed by the parties in\nDecember 1998 (the \"NDA\") will apply.  To the extent there is a contradiction or\nambiguity between this Agreement and the NDA, the terms of this Agreement shall\ncontrol.\n\n          3.3  Non-Competition and Non-Solicitation Agreements.\n               ----------------------------------------------- \n\n               (a) All Employees. Target represents and warrants to Acquirer \n                   -------------  \nthat it has entered into agreements in the form attached hereto as Exhibit F-1\n                                                                   -----------\nwith each of its employees not to compete with Target for a period of one (1)\nyear following the termination of employment with Target for any reason and that\nsuch agreements will remain in effect following the Merger. For the purposes of\nsuch agreements, if any such employees become employees of Acquirer as a direct\nresult of the Merger, such events shall not constitute termination of employment\nwith Target.\n\n               (b) Additional Agreements with Key Employees. The parties shall\n                   ----------------------------------------\nuse their respective Best Efforts to have each Key Employee execute agreements\nwith Acquirer, in substantially the form attached as Exhibit F-2, to the effect\n                                                     -----------\nthat each Key Employee will not: (i) solicit employees of Target or Acquirer to\nterminate their employment with Target or Acquirer; (ii) compete in the field of\nInternet advertising technology; or (iii) provide employment, consulting or\nother services to America Online, Inc., each for a period of two years after the\nEffective Time (the \"NON-COMPETE AGREEMENTS\").\n\n          3.4  Severance.\n               --------- \n\n               (a) Key Employees. For each Key Employee: (i) whose employment is\n                   -------------                                                \nterminated by Acquirer without Cause, (ii) whose position is eliminated and the\nKey Employee is not offered a position with a span of responsibilities similar\nto his or her former responsibilities, or (iii) whose employment ceases after\nAcquirer attempts to relocate such Key Employee to a location more than one\nhundred (100) miles from such Key Employee's then existing location within a\nperiod of two years after the Effective Time and such Key Employee declines to\nrelocate, Acquirer shall pay such Key Employee at the option of the Key\nEmployee: (A) his or her salary, as of the date of such termination, on the\nnormal pay schedule, through the date that is one year after the Closing Date,\nor (B) the amount such Key Employee would receive as an employee under Section\n3.4(b); provided, however, that Acquirer \n        --------  -------                                                   \n\n                                      -15-\n\n \nmay choose at any time, without the consent of any other party, to waive the \nNon-Compete Agreement with such Key Employee and from the date such agreement is\nwaived Acquirer will no longer be liable to such Key Employee for amounts\ndescribed in this Section 3.4(a).\n\n          (b)  Other Employees. For each Target employee (or former Target\n               ---------------                                            \nEmployee who becomes an employee of Acquirer in connection with of the Merger)\nwhose employment with Target or Acquirer ceases within one year after the\nClosing Date and: (i) whose employment was eliminated specifically as a result\nof the Merger, (ii) whose position was eliminated and such employee was not\noffered a position with a span of responsibilities similar to his or her former\nresponsibilities, or (iii) whose employment was relocated to a location more\nthan one hundred (100) miles from such employee's existing location by Acquirer\nor Target and such employee refused to relocate, Acquirer shall pay each such\nemployee a \"SEVERANCE AMOUNT.\" If such employee had been continuously employed\nby Target for at least six months prior to the Closing Date, the Severance\nAmount shall be equal to two times the employee's then current monthly salary as\nof the date of termination plus an additional month of salary for each full year\nthat such employee had been continuously employed by Target and\/or Acquirer. If\nsuch employee had not been continuously employed by Target for at least six\nmonths prior to the Closing Date, the Severance Amount shall be equal to one\nmonth of the employee's then current monthly salary as of the date of\ntermination.\n\n          3.5  New Options. Before the Closing Date, at the request and\n               -----------                                             \ndirection of Acquirer, Target shall adopt a new stock option plan (the \"NEW\nTARGET OPTION PLAN\") in the form attached hereto as Exhibit G and reserve the\n                                                    ---------                \nnumber of shares of Target Common Stock which will equal 450,000 shares of\nAcquirer Series A Common Stock (after giving effect to the Conversion Ratio) for\nissuance thereunder, which stock option plan will be assumed by Acquirer in the\nMerger. At the Effective Time Acquirer will assume the New Target Option Plan,\nand promptly thereafter Acquirer shall grant the numbers of options to purchase\nAcquirer Series A Common Stock (\"NEW OPTIONS\") listed on Schedule 3.5 to the\nTarget employees listed on Schedule 3.5.\n\n          3.6  Listing of Exchange Shares. Acquirer shall cause the Exchange\n               --------------------------                                   \nShares and shares issuable upon exercise of Exchange Options and New Options to\nbe authorized for listing on The Nasdaq National Market.\n\n          3.7  Fees and Expenses. Each party will be responsible for its own\n               -----------------                                            \nfees and expenses incurred in connection with the Merger; provided, however,\nthat promptly after the Closing, Acquirer will pay the reasonable legal and\naccounting fees incurred by Target with respect to the Merger Agreements and the\ntransactions contemplated hereby.\n\n          3.8  Antitrust Law Compliance. If required, as promptly as\n               ------------------------                             \npracticable, Target and Acquirer shall make all filings and submissions under\nthe Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the \"HSR\nACT\") as may be reasonably required to be made in connection with the Merger and\nthe Merger Agreements. Each party will furnish to the other such information and\nassistance as the other may reasonably request in connection with the\npreparation of any such filings or submissions. Each party will furnish the\nother with copies of all correspondence, filings or communications (or memoranda\nsetting forth the substance thereof) between such party and any governmental\nbody with respect to the Merger and the Merger Agreements, except to the extent\nthat either party is advised by independent counsel that the provision of such\ninformation would be inadvisable under applicable antitrust laws.\n\n                                      -16-\n\n \n          3.9   Integration Matters. Target and Acquirer will cooperate in good\n                -------------------                                            \nfaith to identify and, to the extent practicable, to resolve matters regarding\nthe orderly integration of their respective operations, including matters\nrelating to acceptable positions with Acquirer for Key Employees and the\nretention of other Target employees who will remain after the Merger.\n\n          3.10  Further Assurances. If, at any time before or after the\n                ------------------                                     \nEffective Time, Acquirer considers or is advised that any further deeds,\nassignments or assurances are reasonably necessary or desirable to vest, perfect\nor confirm in Acquirer title to any property or rights of Target or the\nSurviving Corporation, Acquirer, Target, the Surviving Corporation and their\nproper officers and directors are authorized and shall use their Best Efforts to\nexecute and deliver all such proper deeds, assignments and assurances and do all\nother things necessary or desirable to vest, perfect or confirm title to such\nproperty or rights in Acquirer and otherwise to carry out the purpose of this\nAgreement.\n\n     4.   REPRESENTATIONS AND WARRANTIES OF TARGET\n\n          Except as specifically set forth in the disclosure letter provided by\nTarget to Acquirer simultaneously with the signing of this Agreement, dated as\nof the date of this Agreement (the \"TARGET DISCLOSURE SCHEDULE\"), the parts of\nwhich are numbered to correspond to the section numbers of this Agreement,\nTarget hereby represents and warrants to Acquirer and Merger Sub as follows:\n\n          4.1  Organization and Good Standing. Target is a corporation duly\n               ------------------------------                              \norganized, validly existing and in good standing under the laws of Delaware and\nis qualified as a foreign corporation in each jurisdiction in which a failure to\nbe so qualified would reasonably be expected to have a Material Adverse Effect.\nSection 4.1 of the Target Disclosure Schedule sets forth a true and complete\nlist of each jurisdiction in which Target has employees or owns or leases\nproperty and of each jurisdiction in which Target is qualified to do business.\n\n          4.2  Power, Authorization and Validity.\n               --------------------------------- \n\n               (a) Target has the right, power, legal capacity and authority:\n(i) to carry on its business as now conducted and as proposed to be conducted;\n(ii) to own, use and lease its properties in the manner in which its properties\nare currently owned, used and leased and in the manner in which its properties\nare proposed to be owned, used and leased; (iii) to perform its obligations\nunder all Target Contracts; and (iv) subject to stockholder approval of this\nAgreement and the Merger, to enter into and perform its obligations under this\nAgreement and all other agreements to which Target is or will be a party that\nare required to be executed pursuant to this Agreement (collectively with this\nAgreement, the \"TARGET MERGER AGREEMENTS\"). The execution, delivery and\nperformance of the Target Merger Agreements have been duly and validly approved\nand authorized by Target's Board of Directors and Target's Board of Directors\nhas determined to recommend that the Target Stockholders approve and adopt this\nAgreement and the Merger. Target Stockholders holding a sufficient number of\nshares to approve this Agreement and the Merger have executed a Voting Agreement\nin the form attached hereto as Exhibit H.\n                               --------- \n\n               (b) No filing, authorization or approval with any governmental\nbody, is necessary to enable Target to enter into and perform its obligations\nunder the Target Merger Agreements, except for: (i) the filing of the\nCertificate of Merger with the Delaware Secretary of State and the filing of\nappropriate documents with the relevant authorities of other states in which\nTarget is qualified to do business, if any; (ii) such filings as may be required\nto comply with federal and state securities laws; (iii) approval by the Target\nStockholders of the transactions contemplated hereby; and (iv) consents required\n\n                                      -17-\n\n \nunder Contracts disclosed in Section 4.16 of the Target Disclosure Schedule as\nexceptions to the representations made in Section 4.16 of this Agreement.\n\n          (c) The Target Merger Agreements are, or when executed by Target will\nbe, valid and binding obligations of Target enforceable in accordance with their\nrespective terms, except as to the effect, if any, of: (i) applicable bankruptcy\nand other similar laws affecting the rights of creditors generally; (ii) rules\nof law governing specific performance, injunctive relief and other equitable\nremedies; and (iii) the enforceability of provisions requiring indemnification;\nprovided, however, that the Certificate of Merger will not be effective until\nfiled with the Delaware Secretary of State.\n\n     4.3  No Violation of Existing Agreements. Neither the execution and \n          -----------------------------------                           \ndelivery of any of the Target Merger Agreements, nor the consummation of the\ntransactions contemplated hereby, will conflict with or (with or without notice\nand\/or lapse of time) result in a termination, breach, impairment or violation\nof: (a) any provision of the Target Certificate of Incorporation, Target bylaws\nor other charter documents, as currently in effect; (b) in any material respect,\nany material Target Contract; or (c) any federal, state, local or foreign Order,\nstatute, rule or regulation applicable to Target or its assets or properties the\nviolation of which would have a Material Adverse Effect. The consummation of the\nMerger and the transfer to Acquirer of all of Target's material rights,\nlicenses, franchises, leases and Target Contracts will not require the consent\nof any third party.\n\n     4.4  Corporate Documents.\n          ------------------- \n\n          (a) Target has made available to Acquirer for examination complete and\naccurate copies of all documents and information listed in the Target Disclosure\nSchedule and in the possession of Target or other Exhibits called for by this\nAgreement, including, without limitation, the following: (i) the Target\nCertificate of Incorporation, Target bylaws or other charter documents, as\ncurrently in effect; (ii) Target's minute book containing all records of all\nproceedings, consents, actions and meetings of the stockholders, the Board of\nDirectors and any committees of the Board of Directors; (iii) its stock ledger\nand journal reflecting all stock issuances, transfers and all other stock\nrecords; and (iv) all permits, Orders and consents issued by any regulatory\nagency with respect to Target, or any securities of Target, and all applications\nfor such permits, Orders and consents.\n\n          (b) There has not been any violation of any of the provisions of the\nTarget Certificate of Incorporation or Target bylaws or of any resolution\nadopted by the Target Stockholders or the Target Board of Directors, and to\nTarget's Knowledge, no event has occurred, and no condition or circumstance\nexists, that likely would (with or without notice and\/or lapse of time)\nconstitute or result directly or indirectly in such a violation.\n\n          (c) Target's books of account, stock records, minute books and other\nrecords are accurate, up to date and complete and have been maintained in\naccordance with standard industry business practices. The minute book made\navailable to Acquirer is Target's only original minute book. All of Target's\nrecords are in Target's actual possession and direct control.\n\n     4.5  Capitalization.\n          -------------- \n\n          (a) Capital Stock. Target's authorized capital stock consists of: (i)\n              -------------                                                    \n10,000,000 shares of Common Stock, $.01 par value per share (\"TARGET COMMON\nSTOCK\"); (ii) 1,371,185 shares of Series A Convertible Preferred Stock, $.01 par\nvalue per share, \"); (iii) 848,140 shares of Series B Convertible Preferred\nStock, $.01 par value per share; and (iv) 861,629 shares of Series C Convertible\n\n                                      -18-\n\n \nPreferred Stock, $.01 par value per share (the shares in (ii), (iii) and (iv)\ncollectively referred to as \"TARGET PREFERRED STOCK\"). As of the date of this\nAgreement: (i) 2,354,288 shares of Target Common Stock; (ii) 1,371,185 shares of\nTarget Series A Convertible Preferred Stock; (iii) 848,140 shares of Target\nSeries B Convertible Preferred Stock; and (iv) 848,896 shares of Target Series C\nConvertible Preferred Stock have been issued and are outstanding. A list of all\nholders of Target Common Stock and Target Preferred Stock and the number of\nshares held by each, is set forth in Section 4.5(a) of the Target Disclosure\nSchedule. Each share of Target Preferred Stock is convertible into one share of\nCommon Stock, except that each share of Target's Series B Convertible Preferred\nStock is convertible into 1.0063256 shares of Target Common Stock.\n\n          (b) Options and Warrants. As of the date of this Agreement: (i)\n              --------------------                                       \noptions to purchase 674,847 shares of Target Common Stock, and (ii) warrants to\npurchase 12,733 shares of Target Common Stock have been issued and are\noutstanding. Options and warrants to purchase Target Common Stock, are\ncollectively referred to as \"TARGET OPTIONS\"). A list of all holders of Target\nOptions (other than New Options) is set forth in Section 4.5(b) of the Target\nDisclosure Schedule. Section 4.5(b) of the Target Disclosure Schedule also sets\nforth the following information: (i) the particular plan, if any, pursuant to\nwhich each Target Option was granted; (ii) the name of each Target Option\nholder; (iii) the number of shares of Target Common Stock subject to each Target\nOption; (iv) the exercise price of each Target Option; (v) the date on which\neach Target Option was granted; (vi) a description of the vesting formula for\neach Target Option; and (vii) the date on which each Target Option expires.\nTarget has delivered to Acquirer accurate and complete copies of all plans\npursuant to which Target has ever granted stock options or warrants. Except as\nset forth in this Section 4.5(b) and Section 4.5(b) of the Target Disclosure\nSchedule, there is no: (i) outstanding preemptive right, subscription, option,\ncall, warrant or right (whether or not currently exercisable) to acquire from\nTarget or, to Target's Knowledge, from affiliates any shares of the capital\nstock or other securities of Target; (ii) outstanding security, instrument or\nobligation issued by Target or controlled affiliates that is or may become\nconvertible into or exchangeable for any shares of the capital stock or other\nsecurities of Target; (iii) stockholders' rights plan (or similar plan commonly\nreferred to as a \"poison pill\") or Contract under which Target is or may become\nobligated to sell or otherwise issue any shares of its capital stock or any\nother securities; (iv) Contract to which Target is a party relating to the\nvoting or registration of or restricting any Person from purchasing, selling,\npledging or otherwise disposing of (or granting any option or similar right with\nrespect to) any shares of Target Common Stock; or (v) condition or circumstance,\nto Target's Knowledge, that likely would directly or indirectly give rise to or\nprovide a basis for the assertion of a claim by any Person to the effect that\nsuch Person is entitled to acquire or receive any shares of capital stock or\nother securities of Target.\n\n          (c) All issued and outstanding shares of Target Common Stock have been\nduly authorized and validly issued, are fully paid and non-assessable, are not\nsubject to any right of rescission, and have been offered, issued, sold and\ndelivered by Target in compliance with all registration or qualification\nrequirements (or applicable exemptions therefrom) of applicable federal and\nstate securities laws.\n\n          (d) Target has not repurchased, redeemed or otherwise reacquired (and,\nexcept as contemplated by this Agreement, has not agreed, committed or offered,\nin writing or otherwise, to reacquire) any shares of capital stock or other\nsecurities of Target. There are no shares of Target Common Stock held in\ntreasury by Target.\n\n          (e) Section 4.5(e) of the Target Disclosure Schedule sets forth all\nshares of Target Common Stock reserved for future issuance pursuant to stock\noptions granted, director's and \n\n                                      -19-\n\n \nofficer's stock option and stock purchase plans, employee stock option and stock\npurchase plans and all other such similar plans. Target has reserved sufficient\nshares of Target Common Stock for issuance upon the conversion of all Target\nPreferred Stock and upon the exercise of all Target Options (other than New\nOptions).\n\n               (f) Target is not under any obligation to register under the\nSecurities Act any of its presently outstanding securities or any securities\nthat may be subsequently issued.\n\n          4.6  Board of Directors and Officers. Section 4.6 of the Target\n               -------------------------------                           \nDisclosure Schedule accurately sets forth: (i) the name of each member of\nTarget's Board of Directors; (ii) the name of each member of any committees of\nTarget's Board of Directors; and (iii) the name and title of each of Target's\nexecutive officers.\n\n          4.7  Subsidiaries and Other Interests. Target does not have any\n               --------------------------------                          \nsubsidiaries or any interest, direct or indirect, in any Entity.\n\n          4.8  Target Financial Statements. Target has delivered to Acquirer,\n               ---------------------------                                   \nhereto attached as Exhibit I, copies of: (a) Target's unaudited consolidated\n                   ---------                                                \nbalance sheet as of September 30, 1998 (the \"FINAL BALANCE SHEET\") and unaudited\nconsolidated income statement and statement of cash flows for the nine months\nended September 30, 1998 (the \"INTERIM FINANCIAL STATEMENTS\") and (b) Target's\naudited consolidated balance sheet as of December 31, 1997 and Target's audited\nconsolidated income statement and statement of cash flows for the fiscal year\nended December 31, 1997 (together with the Interim Financial Statements, the\n\"TARGET FINANCIAL STATEMENTS\"). The Target Financial Statements: (i) are in\naccordance with the books and records of Target; (ii) fairly present in all\nmaterial respects Target's financial condition at the date therein indicated and\nthe results of operations for the period therein specified; and (iii) have been\nprepared in accordance with GAAP applied on a consistent basis (except for the\nabsence of any footnotes required by GAAP in the Interim Financial Statements\nand subject to customary year-end adjustments). Except as set forth in the\nTarget Financial Statements, Target does not have any material Liability,\nexpense, claim, deficiency, guaranty or endorsement of any type, whether\naccrued, absolute, contingent, matured, unmatured or other (whether or not\nrequired to be reflected in financial statements in accordance with GAAP),\nexcept for those liabilities which were incurred after September 30, 1998 in the\nordinary course of Target's business consistent with past practices.\n\n          4.9  Title to Properties.\n               ------------------- \n\n               (a) Target has good and marketable title to all of its assets as\nshown on the Final Balance Sheet and all other assets reflected in Target's\nbooks and records as being owned by Target, free and clear of all Encumbrances\nexcept for Permitted Encumbrances and assets disposed of in the Ordinary Course\nof Business. All machinery and equipment included in such properties is in good\ncondition and repair, normal wear and tear excepted.\n\n               (b) Target owns no real property, nor has it ever owned any real\nproperty. All leases of real or personal property to which Target is a party are\nfully effective and afford Target peaceful and undisturbed possession of the\nsubject matter of the lease. The Surviving Corporation will obtain a valid\nownership or leasehold interest in all such personal property that Target\ncurrently owns or leases and all real property that Target currently leases, as\nof the date of this Agreement, in each case free and clear of all title defects\nand Encumbrances of any kind, except: (i) mechanics', carriers', workers' and\nother similar liens arising in the Ordinary Course of Business, (ii) liens for\ncurrent taxes not yet due and payable and (iii) Permitted Encumbrances.\n\n                                      -20-\n\n \n               (c)  Target is not in material violation of any law or regulation\n(including but not limited to zoning, building, safety or environmental\nordinance, regulation or requirements) applicable to the operation of owned or\nleased properties the violation of which would have a Material Adverse Effect,\nnor has Target received any written notice of violation of any such law or\nregulation with which it has not complied.\n\n          4.10 Intellectual Property.\n               --------------------- \n\n               (a)  As used herein, the term \"INTELLECTUAL PROPERTY RIGHTS\"\nshall mean all worldwide industrial and intellectual property rights, including,\nwithout limitation, patents, patent applications, patent rights, trademarks,\ntrademark applications, trade names, service marks, service mark applications,\ncopyright, copyright applications, franchises, licenses, inventories, know-how,\ntrade secrets, customer lists, proprietary processes and formulae, all source\nand object code, algorithms, architecture, structure, display screens, layouts,\ninventions, development tools and all documentation and media constituting,\ndescribing or relating to the above, including, without limitation, manuals,\nmemoranda and records.\n\n               (b)  Except for standard non-exclusive consumer software licenses\ngranted in the Ordinary Course of Business, Target owns or has a written license\nto, and has the unrestricted right to use, sell and license, all Intellectual\nProperty Rights material to Target's business or conduct of its businesses (such\nIntellectual Property Rights collectively referred to as the \"TARGET IP RIGHTS\")\nand such rights to use, sell or license are reasonably sufficient for such\nconduct of its businesses. No portion of the Target IP Rights is subject to: (i)\nany Encumbrance, or (ii) any outstanding Order, stipulation or Contract\nrestricting in any manner Target's ability to license or exploit such Target IP\nRights, except for standard non-exclusive consumer software licenses granted in\nthe Ordinary Course of Business. There are no royalties, honoraria, fees or\nother payments payable by Target to any Person by reason of the ownership, use,\nlicense, sale or disposition of the Target IP Rights (other than as set forth in\nSection 4.10(b) of the Target Disclosure Schedule).\n\n               (c)  After the Effective Time of the Merger, the Surviving\nCorporation will own or have the unrestricted right to use, sell, license and\ndispose of, and otherwise exercise rights with respect to all Target IP Rights\nother than as set forth 4.10(a) and (b). The execution, delivery and performance\nof this Agreement and the consummation of the transactions contemplated hereby\nwill not: (i) constitute a material breach of any Contract governing any Target\nIP Right or (ii) cause the forfeiture or termination or give rise to a right of\nforfeiture or termination of any Target IP Right or materially impair the right\nof Target or Acquirer to use, sell or license all or any portion of any Target\nIP Right.\n\n               (d)  Except as set forth on Section 4.10(e), neither the past,\ncurrent or intended use of the Target IP Rights in Target's business as it has\nbeen conducted prior to the Closing, nor the manufacture, marketing, license,\nsale or intended use of any product currently licensed or sold by Target or\ncurrently under development by Target, causes Target to violate any license or\nContract between Target and any third party or to violate or infringe any\nIntellectual Property Rights of any other Person. There is no pending or, to\nTarget's Knowledge, threatened Order or Proceeding contesting the validity,\nownership or right to use, sell, license or dispose of any Target IP Right nor,\nto Target's Knowledge, is there any basis for any such Order or Proceeding.\nTarget has not received any notice asserting that any Target IP Right or the\nproposed use, sale, license or disposition of a Target IP Right conflicts or\nwill conflict with the Intellectual Property Rights or other rights of any other\nparty, nor, to Target's Knowledge, is there any basis for any such assertion.\nTarget is not wrongfully using any confidential information or trade secrets of\nany former employer of any past or present Target\n\n                                      -21-\n\n \nemployees. Other than as part of its standard form of end-user license\nagreements or distributor or reseller agreements, Target has not entered into\nany Contract to indemnify any other Person against any charge of infringement\nrelating to any Intellectual Property Rights.\n\n          (e) Target has taken reasonable and practicable steps designed to\nsafeguard and maintain the secrecy and confidentiality of, and its proprietary\nrights in, all Target IP Rights. There is no material unauthorized use,\ninfringement or misappropriation of any Target IP Right by any third party,\nincluding, to the knowledge or Target, any Target employee. All Target officers,\nemployees and consultants have executed and delivered to Target an agreement\nregarding the protection of proprietary information and the assignment to Target\nof all Intellectual Property Rights arising from the services performed for\nTarget by such persons, and Target has delivered to Acquirer copies of all such\nagreements. No Target employee or consultant is in violation of any material\nterm of any employment Contract, patent disclosure agreement or any other\nContract relating to the relationship of such employee with Target or any other\nparty (including prior employers) because of the nature of the business\nconducted or proposed by Target. Section 4.10(f) of the Target Disclosure\nSchedule contains a list of all applications, registrations, filings and other\nformal actions made or taken pursuant to federal, state and foreign laws by\nTarget to perfect or protect its interest in Target IP Rights, including,\nwithout limitation, all patents, patent applications, trademarks, trademark\napplications and service marks. No loss, cancellation, termination or expiration\nof any such registration is reasonably foreseeable except as set forth in\nSection 4.10(e) of the Target Disclosure Schedule.\n\n          (f) Target has taken reasonable steps to ensure that its products,\nsystems and technology (including products, systems and technology that\ncurrently exist and\/or that are currently under development) will record, store,\nprocess, calculate and present calendar dates falling on and after (and if\napplicable, spans of time including) January 1, 2000, and will calculate any\ninformation dependent on or relating to such dates in the same manner, and with\nthe same functionality, data integrity and performance, as the products, systems\nand technology record, store, process, calculate and present calendar dates on\nor before December 31, 1999, or calculate any information dependent on or\nrelating to such dates (collectively, \"YEAR 2000 COMPLIANT\"). Target has taken\nreasonable steps to ensure that its products, systems and technology will lose\nno functionality with respect to the introduction of records containing dates\nfalling on or after January 1, 2000. All of Target's internal computer and\ntechnology products and systems which are critical to the operation of its\nbusiness are Year 2000 Compliant.\n\n       4.11   Absence of Certain Changes and Actions.\n              -------------------------------------- \n\n              (a) Since the date of the Final Balance Sheet, there has not been\nwith respect to Target:\n\n                  (i)    any Material Adverse Effect;\n\n                  (ii)   any contingent Liability incurred as guarantor or\notherwise with respect to the obligations of others;\n\n                  (iii)  any Encumbrance (other than Permitted Encumbrances)\nplaced on any of the properties or assets of which Target owns or has a\nsubstantial interest;\n\n                  (iv)   any material Liability incurred other than Liabilities\nincurred in the Ordinary Course of Business;\n\n                                      -22-\n\n \n          (v)    any purchase, sale, pledge, hypothecation or other disposition,\nor any Contract for the purchase, sale or other disposition, of any of Target's\nproperties or assets other than in the Ordinary Course of Business and not\nexceeding $100,000 in aggregate purchases, sales, pledges, hypothecations and\nother dispositions;\n\n          (vi)   any damage, destruction or loss, whether or not covered by\ninsurance, having a Material Adverse Effect on Target's properties, assets or\nbusiness;\n\n          (vii)  any material labor dispute or claim of unfair labor practices,\nany change in the compensation payable or to become payable to any of its\nofficers, employees or agents, or any bonus payment or arrangement made to or\nwith any of such officers, employees or agents;\n\n          (viii) any change with respect to the employment of the Key Employees;\n\n          (ix)   any payment or discharge of a material Liability of Target,\nwhich Liability was not either shown on the Final Balance Sheet or incurred in\nthe Ordinary Course of Business thereafter; or\n\n          (x)    any Liability of Target to any of Target's officers, directors\nor stockholders or any loans or advances made thereby to any of Target's\nofficers, directors or stockholders, except normal compensation and expense\nallowances payable to officers.\n\n     (b)  Since the date of the Final Balance Sheet, Target has not:\n\n          (i)    formed any subsidiary or acquired any equity interest or other\ninterest in any other Entity;\n\n          (ii)   amended the Target Certificate of Incorporation, Target bylaws\nor any other charter document;\n\n          (iii)  sold, issued, granted or authorized the issuance or grant of:\n(A) any shares of its capital stock of any class or other security (other than\npursuant to exercise of outstanding stock options); (B) any option, call,\nwarrant, obligation, subscription, option or right to acquire any capital stock\nor any other security, except for New Options authorized pursuant to Section 3.5\nand stock options and warrants described in Section 4.5; or (C) any instrument\nconvertible into or exchangeable for any capital stock or other security; or\naccelerated the vesting of any outstanding option or other security, except for\nacceleration provisions that are contained in existing stock option grants\ndescribed on Schedule 3.5 to the Target Disclosure Schedule;\n\n          (iv)   declared, set aside or paid any dividend on, or made any other\ndistribution in respect of, Target's capital stock;\n\n          (v)    effected any split, combination or recapitalization of Target's\ncapital stock or any direct or indirect redemption, purchase or other\nacquisition of Target's capital stock, or effected or been a party to any\ntransaction relating to a recapitalization, reclassification of shares, stock\nsplit, reverse stock split or similar transaction;\n\n          (vi)   effected or been a party to any transaction relating to a\nmerger, consolidation, sale of all or substantially all of its assets, or\nsimilar transaction; or received, accepted or\n\n                                      -23-\n\n \notherwise entered into any Acquisition Proposal, or solicited, initiated,\nencouraged or induced, or provided any nonpublic information to or entered into\nany discussions with any Person for the purpose of soliciting, initiating,\nencouraging or inducing, the making or submission of any Acquisition Proposal;\n\n          (vii)    made any capital expenditures, except for such capital\nexpenditures as in the aggregate, measured by invoice amount, do not exceed\n$50,000 or were consented to by Acquirer in writing;\n\n          (viii)   entered into any material lease or Contract for the purchase\nor sale of any property, real or personal, except in the Ordinary Course of\nBusiness consistent with past practice;\n\n          (ix)     borrowed any money other than in the Ordinary Course of\nBusiness, but in any event not exceeding $10,000 and a $1.5 million loan\nagreement with Silicon Valley Bank;\n\n          (x)      made any loan or advance to any other Person, including\nwithout limitation any Target Stockholder (except for normal employee travel\nadvances in the Ordinary Course of Business);\n\n          (xi)     guaranteed or acted as a surety for any obligation except for\nthe endorsement of checks and other negotiable instruments in the Ordinary\nCourse of Business, consistent with past practice, which are not material in\namount;\n\n          (xii)    established, amended or adopted any Target Employee Plan or\nTarget Benefit Arrangement (defined in Sections 4.18(c) and 4.18(e)), paid any\nbonus or made any profit sharing or similar payment to, or increased the amount\nof the wages, salary, commissions, fringe benefits or other compensation or\nremuneration payable to, any of its directors, officers or employees, other than\nas required under agreements existing on the date hereof as disclosed in Section\n4.11(b) of the Target Disclosure Schedule; or entered into any new employment\nagreement with any such person other than in the Ordinary Course of Business;\n\n          (xiii)   written off as uncollectible, or established any\nextraordinary reserve with respect to, any account receivable or other\nindebtedness, except in the Ordinary Course of Business;\n\n          (xiv)    forgiven any debt or Encumbrance or otherwise released or\nwaived any right or claim;\n\n          (xv)     amended or terminated any Contract or license to which it is\na party except those amended or terminated in the Ordinary Course of Business\nwhich are not material in amount or effect;\n\n          (xvi)    changed any of its methods of accounting or accounting\npractices in any respect (other than as required by GAAP); or\n\n          (xvii)   agreed to any audit assessment by any tax authority or filed\nany federal or state income or franchise tax return unless copies of such\nreturns have been delivered to Acquirer for its review prior to filing;\n\n                                      -24-\n\n \n               (xviii)  entered into any transaction or taken any other action\noutside the Ordinary Course of Business (other than as disclosed and pursuant to\nthis Agreement).\n\n          (c)  Since the date of the Final Balance Sheet, Target has not agreed,\ncommitted or entered into any Contract, in writing or otherwise, to take any of\nthe actions referred to in Sections 4.11(a) or 4.11(b) above.\n\n     4.12  Liabilities to Stockholders. To the Knowledge of Target, no Target\n           ---------------------------  \nStockholders have any claims of any nature against Target, including, without\nlimitation, for any undistributed earnings or profits of Target.\n\n     4.13  Litigation. There is no Proceeding pending against Target and, nor to\n           ----------  \nTarget's Knowledge, has any Proceeding been threatened, including without\nlimitation any Proceedings alleging infringement of the Intellectual Property\nRights of another or unfair competition or trade practices, that, if determined\nadversely to the interests of Target, would be reasonably likely to have a\nMaterial Adverse Effect on Target.\n\n     4.14  Taxes.\n           ----- \n\n           (a) For the purposes of this Agreement, the terms \"TAX\" and \"TAXES\"\ninclude all federal, state, local and foreign income, gains, franchise, excise,\nproperty, sales, use, employment, license, payroll, occupation, recording, value\nadded or transfer taxes, governmental charges, fees, levies or assessments\n(whether payable directly or by withholding), and, with respect to such taxes,\nany estimated tax, interest and penalties or additions to tax and interest on\nsuch penalties and additions to tax.\n\n           (b) Target has: (i) filed all federal, state, local and foreign tax\nreturns required to be filed; (ii) paid all taxes shown on such returns and;\n(iii) established an adequate accrual or reserve for the payment of all taxes\npayable in respect of the periods subsequent to the periods covered by the most\nrecent applicable tax returns. Target has no material Liability for taxes in\nexcess of the amount so paid or accruals or reserves so established in the\nTarget Financial Statements.\n\n           (c) Except as set forth on Schedule 4.14, no deficiencies for any tax\nhave been threatened, claimed, proposed or assessed in writing. No Target tax\nreturn currently is being audited by the Internal Revenue Service or any state\ntaxing agency or authority. Target has delivered to Acquirer accurate and\ncomplete copies of tax returns filed by Target during the past three years.\n\n     4.15  Compliance with Laws. To Target's Knowledge, Target has complied and\n           --------------------\nis in compliance, in all material respects, with all applicable laws,\nordinances, regulations and rules, and all Orders applicable to it or to its\nassets, properties and business and the violation of which would have a Material\nAdverse Effect, including, without limitation:\n\n           (a) all applicable federal and state securities laws and regulations;\n\n           (b) all applicable federal, state, and local laws, ordinances,\nregulations, and all Orders pertaining to: (i) the sale, licensing, leasing,\nownership, or management of its owned, leased or licensed real or personal\nproperty, products and technical data; (ii) employment and employment practices,\nterms and conditions of employment, and wages and hours; and (iii) safety,\nhealth, fire prevention, environmental protection, toxic waste disposal,\nbuilding standards, zoning and other similar matters;\n\n                                      -25-\n\n \n           (c) the Export Administration Act and regulations promulgated\nthereunder and all other laws, regulations, rules, Orders applicable to the\nimport, export and re-export of controlled commodities or technical data; and\n\n           (d) the Immigration Reform and Control Act and all other immigration\ncontrol laws.\n\n           Target has received all material permits and approvals from, and has\nmade all filings with, third parties, including government agencies and\nauthorities, that are necessary in connection with its present business.\n\n     4.16  Contracts and Commitments.\n           ------------------------- \n\n           (a) Target is not a party to any Contract which has had or would\nreasonably be expected to have a Material Adverse Effect. Except as set forth in\nSection 4.16(a) of the Target Disclosure Schedule, Target is not a party nor is\nsubject to any Contracts, any of which is material to the business, financial\ncondition, operations, results of operations, assets or Liabilities of Target\n(\"MATERIAL TARGET CONTRACTs\"), including, but not limited to any:\n\n               (i)    Contract providing for payments by or to Target in an\naggregate amount of: (A) $50,000 or more in the Ordinary Course of Business, or\n(B) $10,000 or more not in the Ordinary Course of Business;\n\n               (ii)   license agreement as licensor or licensee, including\nwithout limitation any Contract to which Target has granted or may grant in the\nfuture a source code license or option or other right to use or acquire source\ncode (except: (A) as licensee of standard non-exclusive consumer software\nlicenses in the ordinary course of business, and (B) for standard non-exclusive\nsoftware licenses granted to end-user customers in the Ordinary Course of\nBusiness, the form of which has been provided to Acquirer);\n\n               (iii)  agreement to place an Encumbrance on, transfer or sell\nrights in or with respect to any of the Target IP Rights (except for standard\nnon-exclusive software licenses granted to end-user customers in the Ordinary\nCourse of Business);\n\n               (iv)   material Contract for the lease of real or personal\nproperty;\n\n               (v)    joint venture Contract that involves a sharing of profits\nwith other Persons;\n\n               (vi)   instrument evidencing or related in any way to\nindebtedness for borrowed money by way of direct loan, sale of debt securities,\npurchase money obligation, conditional sale, guarantee or otherwise, except for\ntrade indebtedness incurred in the Ordinary Course of Business, and except as\ndisclosed in the Target Financial Statements;\n\n               (vii)  Contract containing covenants purporting to limit Target's\nfreedom to compete in any line of business in any geographic area;\n\n               (viii) stock redemption, stock option or stock purchase\nagreement, financing agreement, license, lease or franchise;\n\n                                      -26-\n\n \n               (ix) any government contract or subcontract; or\n\n               (x)  any other material Contract entered into outside the\nOrdinary Course of Business.\n\n          (b)  Target has delivered to Acquirer accurate and complete copies of\nall Material Target Contracts (each of which is listed in Section 4.16 (a) of\nthe Target Disclosure Schedule). Each Material Contract is in full force and\neffect, and is enforceable by Target in accordance with its material terms.\n\n          (c)  Target is not in breach or violation of or in default under any\nMaterial Contract, and to Target's Knowledge: (i) no Person acting for Target\nhas violated or breached, or declared or committed any material default under,\nany Material Contract; (ii) no event has occurred, and no circumstance or\ncondition exists, that likely would (with or without notice and\/or lapse of\ntime): (A) result in a material violation or breach of any of the provisions of\nany Material Contract, (B) give any Person the right to declare a default or\nexercise any material remedy under any Material Contract, (C) give any Person\nthe right to accelerate the maturity or performance of any Material Contract, or\n(D) give any Person the right to cancel, terminate or modify any Material\nContract; and (iii) Target has not waived any of its material rights under any\nMaterial Contract.\n\n          (d)  Target has not received any notice that any Person against which\nTarget has or may acquire any rights under any Material Contract is insolvent\nand is not able to satisfy all of such Person's Liabilities to Target, the\nfailure of which would result in a Material Adverse Effect.\n\n          (e)  No Person is currently materially renegotiating, nor has the\ncontractual right to materially renegotiate, any amount paid or payable to\nTarget under any Material Contract or any other material term or provision of\nany Material Contract.\n\n          (f)  Section 4.16(f) of the Target Disclosure Schedule identifies and\nprovides an accurate and brief description, as of the date of this Agreement, of\neach proposed Contract as to which any bid, offer, written proposal, term sheet\nor similar document has been submitted or received by Target that would commit\nTarget to provide services and is outstanding and if entered would constitute a\nMaterial Contract.\n\n          (g)  No party to any Material Contract has notified Target in writing\nthat Target has failed to perform any material obligation thereunder. In\naddition, to Target's Knowledge, there is no plan, intention or indication of\nany contracting party to any Material Contract to cause the termination,\ncancellation or modification of such Contract or to reduce or otherwise change\nits activity thereunder in any material respect so as to adversely affect the\nbenefits derived or expected to be derived therefrom by Target.\n\n          (h)  Target has all material Target Contracts necessary to conduct its\nbusiness in the manner in which it is being conducted or is proposed to be\nconducted prior to the Closing.\n\n     4.17  Certain Transactions and Agreements. None of the Target Key\n           -----------------------------------\nEmployees, nor to their knowledge any member of their immediate families\nresiding in the same residence:\n\n                                      -27-\n\n \n          (a)  has any direct or indirect ownership interest in any firm or\ncorporation that competes with Target (except with respect to any interest in\nless than one percent of the stock of any corporation whose stock is publicly\ntraded) other than passive investment in equity or debt securities;\n\n          (b)  is directly or indirectly interested in any Contract with Target,\nexcept for normal compensation for services as a Target officer, director or\nemployee; or\n\n          (c)  has any material interest in any property, real or personal,\ntangible or intangible, including without limitation Intellectual Property\nRights, used in or pertaining to Target's business, except for the normal rights\nof a stockholder.\n\n          To Target's knowledge, no Target officer or director, or any\n\"affiliate\" or \"associate\" (as those terms are defined in Rule 405 promulgated\nunder the Securities Act) of any such person has had, either directly or\nindirectly, a material interest in: (a) any Entity which purchases from or\nsells, licenses or furnishes to Target any goods, property, technology or\nintellectual or other property rights or services, or (b) any Contract to which\nTarget is a party or by which it may be bound or affected other than with\nrespect to arms-length transactions.\n\n     4.18 Employees, ERISA and Other Compliance.\n          ------------------------------------- \n\n          (a)  General Compliance. Target is in compliance in all material\n               ------------------                                         \nrespects with all applicable laws and Contracts relating to employment,\nemployment practices, wages, hours, and terms and conditions of employment,\nincluding, but not limited to, employee compensation matters. Except as set\nforth in Section 4.18(a) of the Target Disclosure Schedule, Target has no\nemployment or consulting Contracts currently in effect that are not terminable\nat will (other than agreements with the sole purpose of providing for the\nconfidentiality of proprietary information or assignment of inventions). All\nindependent contractors have been properly classified as independent contractors\nfor the purposes of federal and applicable state tax laws, laws applicable to\nemployee benefits and other applicable laws.\n\n          (b)  Good Labor Relations. Target: (i) to Target's knowledge has never\n               --------------------                                             \nbeen and is not now subject to a union organizing effort; (ii) is not subject to\nany collective bargaining agreement with respect to any of its employees; (iii)\nis not subject to any other Contract with any trade or labor union, employees'\nassociation or similar organization; and (iv) to its knowledge has no current\nlabor disputes. Target has good labor relations, and has no Knowledge of any\nfacts indicating that the consummation of the Merger or any of the other\ntransactions contemplated hereby will have a Material Adverse Effect on such\nlabor relations. As of the date of this Agreement, Target has no Knowledge that\nany Key Employees or other key personnel intends to leave its employ. There are\nno controversies pending or, to Target's Knowledge, threatened, between Target\nand any of its employees that would be reasonably likely to result in Target\nincurring any material Liability. All Target employees are legally permitted to\nbe employed by Target in the United States of America.\n\n          (c)  Employee Plans. Section 4.18(c) of the Target Disclosure Schedule\n               --------------                                                   \nidentifies: (i) each \"employee benefit plan\", as defined in Section 3(3) of the\nEmployee Retirement Income Security Act of 1974, as amended (\"ERISA\"); and (ii)\nall other written or formal plans or Contracts involving direct or indirect\ncompensation or benefits (including any employment Contracts entered into\nbetween Target and any employee of Target, but excluding workers' compensation,\nunemployment compensation and other government-mandated programs) currently or\npreviously maintained, contributed to or entered into by Target under which\nTarget or any ERISA Affiliate (as defined below) has any present or future\nLiability (collectively, the \"TARGET EMPLOYEE PLANS\"). For\n\n                                      -28-\n\n \npurposes of this Section 4.18, \"ERISA AFFILIATE\" shall mean any entity which is\na member of: (i) a \"controlled group of corporations\", as defined in Section\n414(b) of the Code; (ii) a group of entities under \"common control\", as defined\nin Section 414(c) of the Code; or (iii) an \"affiliated service group\", as\ndefined in Section 414(m) of the Code, or treasury regulations promulgated under\nSection 414(o) of the Code, any of which includes Target. Copies of all Target\nEmployee Plans (and, if applicable, related trust agreements) and all related\ndocuments, amendments and written interpretations (including summary plan\ndescriptions) thereto have been delivered to Acquirer or its counsel, together\nwith the two most recent annual reports (Form 5500, including, if applicable,\nSchedule B thereto) prepared in connection with any such Target Employee Plan.\nNo \"prohibited transaction,\" as defined in Section 406 of ERISA or Section 4975\nof the Code, has occurred with respect to any Target Employee Plan which is\ncovered by Title I of ERISA which would result in a material Liability to\nTarget, excluding transactions effected pursuant to a statutory or\nadministrative exemption. Nothing done or omitted to be done and no transaction\nor holding of any asset under or in connection with any Target Employee Plan has\nor will make Target or any Target officer or director subject to any material\nLiability under Title I of ERISA or Liability for any material tax (as defined\nin Section 4.14) or penalty pursuant to Sections 4972, 4975, 4976 or 4979 of the\nCode or Section 502 of ERISA. All contributions due from Target with respect to\nany of the Target Employee Plans have been made as required under ERISA or have\nbeen accrued on the Target Financial Statements. Target has performed in all\nmaterial respects all obligations required to be performed by it under each\nTarget Employee Plan, and each Target Employee Plan has been maintained\nsubstantially in compliance with its terms and with the requirements prescribed\nby any and all statutes, Orders, rules and regulations, including, without\nlimitation, ERISA and the Code, which are applicable to such Target Employee\nPlans.\n\n          (d) Pension Plans. All Target Employee Plans which individually or\n              -------------                                                 \ncollectively would constitute an \"employee pension benefit plan\", as defined in\nSection 3(2) of ERISA (collectively, the \"TARGET PENSION PLANS\"), are identified\nas such in Section 4.18(d) of the Target Disclosure Schedule. Any Target Pension\nPlan which is intended to be qualified under Section 401(a) of the Code (a\n\"TARGET 401(A) PLAN\") is so qualified and has been so qualified during the\nperiod from its adoption to date, and the trust forming a part is exempt from\ntax pursuant to Section 501(a) of the Code. No Target Pension Plan constitutes,\nor has since the enactment of ERISA constituted, a \"multiemployer plan,\" as\ndefined in Section 3(37) of ERISA. No Target Pension Plans are subject to Title\nIV of ERISA. Target has delivered to Acquirer or Acquirer's counsel a complete\nand correct copy of the most recent Internal Revenue Service determination\nletter with respect to each Target 401(a) Plan, if any exists.\n\n          (e) Benefit Arrangements. Section 4.18(e) of the Target Disclosure\n              --------------------                                          \nSchedule lists each employment, severance (including all post-employment\nLiabilities) or other similar Contract or policy and each Contract providing for\ninsurance coverage (including any self-insured arrangements), workers' benefits,\nvacation benefits, severance benefits, disability benefits, death benefits,\nhospitalization benefits, retirement benefits, deferred compensation, profit-\nsharing, bonuses, stock options, stock purchase, phantom stock, stock\nappreciation or other forms of incentive compensation or post-retirement\ninsurance, compensation or benefits for employees, consultants or directors\nwhich: (i) is not a Target Employee Plan; (ii) is entered into, maintained or\ncontributed to by Target; and (iii) covers any employee or former employee of\nTarget. Such Contracts and policies as are described in this Section 4.18(e) are\nherein referred to collectively as the \"TARGET BENEFIT ARRANGEMENTS.\" Each\nTarget Benefit Arrangement has been maintained in substantial compliance with\nits terms and with the requirements prescribed by any and all statutes, Orders,\nrules and regulations which are applicable to such Target Benefit Arrangement.\nTarget has delivered to Acquirer or its counsel a complete and correct copy or\ndescription of each Target Benefit Arrangement. All individuals who, pursuant to\nthe terms of any Target Benefit Arrangement, are entitled to participate in any\nsuch Target Benefit Arrangement, are currently\n\n                                      -29-\n\n \nparticipating in such Target Benefit Arrangement or have been offered an\nopportunity to do so and have declined.\n\n          (f)  Since January 1, 1998, there has been no amendment to, written\ninterpretation or announcement (whether or not written) by Target relating to,\nor change in employee participation or coverage under, any Target Employee Plan\nor Target Benefit Arrangement that would increase materially the expense of\nmaintaining such Target Employee Plan or Target Benefit Arrangement in the\nfuture other than the New Target Option Plan.\n\n          (g)  No benefit payable or which may become payable by Target pursuant\nto any Target Employee Plan or any Target Benefit Arrangement or as a result of\nor arising under this Agreement shall constitute an \"excess parachute payment\"\n(as defined in Section 280G(b)(1) of the Code) which is subject to the\nimposition of an excise tax under Section 4999 of the Code or which would not be\ndeductible by reason of Section 280G of the Code.\n\n          (h)  COBRA Compliance. Target has provided, or will have provided\n               ----------------\nprior to the Closing, to individuals entitled thereto all required notices and\ncoverage pursuant to Section 4980B of the Code and the Consolidated Omnibus\nBudget Reconciliation Act of 1985, as amended (\"COBRA\"), with respect to any\n\"qualifying event\" (as defined in Section 4980B(f)(3) of the Code) occurring\nprior to and including the Closing Date, and no material tax payable on account\nof Section 4980B of the Code has been incurred with respect to any current or\nformer employees (or their beneficiaries) of Target.\n\n          (i)  No Violation of Contracts. No Target employee is in violation of\n               -------------------------                                       \nany term of any employment Contract, patent disclosure agreement, non-\ncompetition agreement, or any other Contract, or any restrictive covenant\nrelating to the right of any such employee to be employed by Target, or to use\nIntellectual Property Rights of others. To Target's Knowledge, the mere fact of\nemployment of any Target employee does not subject Target to any Liability.\n\n          (j)  Effect of Merger.\n               ---------------- \n\n               (i)   Target is not a party to any Contract or plan with any\nTarget Key Employee or other key personnel: (A) the benefits of which are\ncontingent, or the terms of which are materially altered, upon the occurrence of\na transaction involving Target in the nature of any of the transactions\ncontemplated by this Agreement and the Certificate of Merger; (B) providing any\nterm of employment or compensation guarantee; or (C) providing severance\nbenefits or other benefits after the termination of employment of such employee\nregardless of the reason for such termination of employment.\n\n               (ii)  Target is not a party to any Contract or plan, including,\nwithout limitation, any stock option plan, stock appreciation rights plan or\nstock purchase plan, any of the benefits of which will be materially increased,\nor the vesting of benefits of which will be materially accelerated, by the\noccurrence of any of the transactions contemplated by this Agreement and the\nCertificate of Merger or the value of any of the benefits of which will be\ncalculated on the basis of any of the transactions contemplated by this\nAgreement and the Certificate of Merger, except as set forth in Section 4.18(j)\nof the Target Disclosure Schedule.\n\n          (k)  A list of all current Target employees and consultants and\nthe current compensation of each is set forth in Section 4.18(k) of the Target\nDisclosure Schedule.\n\n                                      -30-\n\n \n          4.19 Books and Records.\n               ----------------- \n\n               (a) The books, records and accounts of Target: (i) are in all\nmaterial respects true, complete and correct; (ii) have been maintained in\naccordance with standard industry practices on a basis consistent with prior\nyears; (iii) are stated in reasonable detail and accurately and fairly reflect\nthe transactions and dispositions of the assets of Target; and (d) accurately\nand fairly reflect the basis for the Target Financial Statements.\n\n               (b) Target has devised and maintains a system of internal\naccounting controls reasonably sufficient to provide reasonable assurances that:\n(i) transactions are executed in accordance with management's general or\nspecific authorization; (ii) transactions are recorded as necessary: (A) to\npermit preparation of financial statements in conformity with GAAP or any other\ncriteria applicable to such statements, and (B) to maintain accountability for\nassets; and (iii) the amount recorded for assets on Target's books and records\nis compared with the existing assets at reasonable intervals and appropriate\naction is taken with respect to any differences.\n\n          4.20 Insurance. Target maintains, and at all times since May 1996 has\n               ---------                                                       \nmaintained, fire and casualty, general liability, business interruption, product\nliability and sprinkler and water damage insurance which it believes to be\nreasonably prudent for similarly sized and similarly situated businesses.\n\n          4.21 Environmental Matters.\n               --------------------- \n\n               (a) For the purposes of this Agreement, the terms \"DISPOSAL,\"\n\"RELEASE,\" and \"THREATENED RELEASE\" shall have the definitions assigned thereto\nby the Comprehensive Environmental Response, Compensation and Liability Act of\n1980, 42 U.S.C. (S) 9601 et seq., as amended (\"CERCLA\"). For the purposes of\nthis Agreement, \"HAZARDOUS MATERIALS\" shall mean any hazardous or toxic\nsubstance, material or waste which is or becomes prior to the Closing regulated\nunder, or defined as a \"hazardous substance,\" \"pollutant,\" \"contaminant,\" \"toxic\nchemical,\" \"hazardous material,\" \"toxic substance\" or \"hazardous chemical\"\nunder: (i) CERCLA; (ii) any similar federal, state or local law; or (iii)\nregulations promulgated under any of the above laws or statutes.\n\n               (b) To Target's Knowledge, none of Target's properties or\nfacilities is in violation of any federal, state or local law, ordinance,\nregulation or Order relating to industrial hygiene or to the environmental\nconditions on, under or about such properties or facilities, including, but not\nlimited to, soil and ground water condition.\n\n               (c) To Target's Knowledge, during the time that Target has owned\nor leased properties or owned or operated any facilities:\n\n                   (i)    neither Target nor any third party has used,\ngenerated, manufactured or stored on, under or about such properties or\nfacilities or transported to or from such properties or facilities any Hazardous\nMaterials;\n\n                   (ii)   there have been no disposals, releases or threatened\nreleases of Hazardous Materials (as defined below) on, from or under such\nproperties or facilities; and\n\n                   (iii)  there has been no litigation or Proceeding brought or\nthreatened against Target by, or any settlement reached by Target with, any\nparty or parties alleging the presence,\n\n                                      -31-\n\n \ndisposal, release or threatened release of any Hazardous Materials on, from or\nunder any of Target's owned or leased properties or facilities.\n\n               (d) Target has no Knowledge of any presence, disposals, releases\nor threatened releases of Hazardous Materials on, from or under any of such\nproperties or facilities that may have occurred prior to Target having taken\npossession of any of such properties or facilities.\n\n          4.22 No Brokers' Fees. Target is not obligated for the payment of\n               ----------------                                            \nfees or expenses of any investment banker, broker, finder or other agent in\nconnection with the origin, negotiation or execution of this Agreement or the\nCertificate of Merger or in connection with any transaction contemplated hereby\nor thereby.\n\n          4.23 Voting Arrangements, Except for the Voting Agreement, there are\n               -------------------                                            \nno outstanding stockholder agreements, voting trusts, proxies or other Contracts\nto which Target is a party or, to Target's Knowledge, to which any other Person\nis a party, relating to the voting of any shares of Target's capital stock.\n\n          4.24 Ownership of Shares of Acquirer Capital Stock. Except as set\n               ---------------------------------------------               \nforth in Section 4.24 of the Target Disclosure Schedule, as of the date hereof,\nneither Target nor, to Target's Knowledge, any of Target's affiliates or\nassociates (as such terms are defined under the Securities and Exchange Act of\n1934, as amended): (a) beneficially owns, directly or indirectly; or (b) is\nparty to any Contract for the purpose of acquiring, holding, voting or disposing\nof, in each case, shares of Acquirer capital stock, except for shares of\nAcquirer capital stock in the aggregate representing less than 1% of the\noutstanding shares of Acquirer capital stock.\n\n          4.25 Accuracy of Disclosure. Neither the Target Disclosure Schedule,\n               ----------------------                                         \nthis Agreement, its exhibits and schedules, nor any of the certificates or\ndocuments to be delivered by Target to Acquirer under this Agreement, taken\ntogether, contains or will contain any untrue statement of a material fact or\nomits or will omit to state any material fact necessary in order to make the\nstatements contained herein and therein, in light of the circumstances under\nwhich such statements were made, not misleading.\n\n     5.   REPRESENTATIONS AND WARRANTIES OF ACQUIRER AND MERGER SUB. Except as\nspecifically set forth in the disclosure letter provided by Acquirer and Merger\nSub simultaneously with the signing of this Agreement, dated as of the date of\nthis Agreement (the \"Acquirer Disclosure Schedule\"), the parts of which are\nnumbered to correspond to the section numbers of this Agreement, Acquirer and\nMerger Sub hereby represent and warrant to Target as follows:\n\n          5.1  Organization and Good Standing. Acquirer is a corporation duly\n               ------------------------------                                \norganized, validly existing and in good standing under the laws of the State of\nDelaware, and has the corporate power and authority to own, operate and lease\nits properties and to carry on its business as now conducted and as proposed to\nbe conducted.\n\n          5.2  Power, Authorization and Validity.\n               --------------------------------- \n\n               (a) Acquirer has the right, power, legal capacity and authority\nto: (i) to carry on its business as now conducted and as proposed to be\nconducted; (ii) to own, use and lease its properties in the manner in which its\nproperties are currently owned, used and leased and in the manner in which its\nproperties are proposed to be owned, used and leased; and (iii) enter into and\nperform its\n\n                                      -32-\n\n \nobligations under this Agreement and all other Merger Agreements to which\nAcquirer is or will be a party that are required to be executed pursuant to this\nAgreement (collectively with this Agreement, the \"ACQUIRER MERGER AGREEMENTS\").\nThe execution, delivery and performance of the Acquirer Merger Agreements have\nbeen duly and validly approved and authorized by Acquirer's Board of Directors,\nand as required, by Merger Sub's Board of Directors.\n\n               (b)  No filing, authorization or approval, governmental or\notherwise, is necessary to enable Acquirer to enter into and perform its\nobligations under the Acquirer Merger Agreements, except for: (i) the filing of\nthe Certificate of Merger with the Delaware Secretary of State and the filing of\nappropriate documents with the relevant authorities of other states in which\nAcquirer is qualified to do business, if any; (ii) such filings as may be\nrequired to comply with federal and state securities laws; and (iii) such other\napprovals as set forth in Section 5.2(b) of the Target Disclosure Schedule.\n\n               (c)  The Acquirer Merger Agreements are, or when executed by\nAcquirer will be, valid and binding obligations of Acquirer enforceable in\naccordance with their respective terms, except as to the effect, if any, of: (i)\napplicable bankruptcy and other similar laws affecting the rights of creditors\ngenerally; (ii) rules of law governing specific performance, injunctive relief\nand other equitable remedies; and (iii) the enforceability of provisions\nrequiring indemnification in connection with the offering, issuance or sale of\nsecurities; provided, however, that the Certificate of Merger will not be\neffective until filed with the Delaware Secretary of State.\n\n          5.3  No Violation of Existing Agreements. Neither the execution and\n               -----------------------------------                           \ndelivery of any of the Acquirer Merger Agreements, nor the consummation of the\ntransactions contemplated hereby, will conflict with, or (with or without notice\nand\/or lapse of time) result in a termination, breach, impairment or violation\nof: (a) any provision of the certificate of incorporation, bylaws or other\ncharter documents of Acquirer, as currently in effect; (b) in any material\nrespect, any material Contract to which Acquirer is a party or by which Acquirer\nis bound; or (c) any federal, state, local or foreign Order, statute, rule or\nregulation applicable to Acquirer or its assets or properties.\n\n          5.4  Valid Issuance of Acquirer's Series A Common Stock. The shares of\n               --------------------------------------------------               \nAcquirer's Series A Common Stock to be issued pursuant to the Merger have been\nduly authorized and reserved for issuance and, when issued in accordance with\nthe terms of the Merger Agreements, will be validly issued, fully paid and non-\nassessable, will not be subject to any preemptive rights and will be issued in\ncompliance with all applicable federal or state securities laws pursuant to a\nvalid exemption from registration under Section 4(2) and\/or Rule 506 of\nRegulation D of the Securities Act. The authorized, issued and outstanding\ncapitalization of Acquirer is as set forth in Acquirer's SEC Filings as of the\ndates of the financial statements or other information included in Acquirer's\nSEC Filings.\n\n          5.5  Disclosure. Acquirer has made available to Target an investor\n               ----------                                                   \ndisclosure package consisting of Acquirer's annual report on Form 10-K for its\nfiscal year ending December 31, 1997 (the \"FISCAL YEAR END\"), all Forms 10-Q and\n8-K filed by Acquirer with the Securities and Exchange Commission since the\nFiscal Year End and up to the date of this Agreement and all proxy materials\ndistributed to Acquirer's stockholders since the Fiscal Year End and up to the\ndate of this Agreement (the \"ACQUIRER DISCLOSURE PACKAGE\").\n\n          5.6  SEC Reports. Acquirer has filed all required forms, reports and\n               -----------                                                    \ndocuments with the SEC since its initial public offering (collectively, the \"SEC\nREPORTS\"), each of which has complied in all material respects with all\napplicable requirements of the Securities Act and the Securities Exchange \n\n                                      -33-\n\n\nAct of 1934, as amended, and the rules and regulations thereunder (the \"EXCHANGE\nACT\"), each as in effect on the date so filed. The audited consolidated\nfinancial statements and unaudited consolidated interim financial statements of\nAcquirer included in its Annual Report on Form 10-K and its Quarterly Reports on\nForm 10-Q referred to above, were prepared in accordance with GAAP consistently\napplied throughout the periods specified therein, are correct and complete, and\npresent fairly, in all material respects, the consolidated financial position\nand results of operations of Acquirer for the periods specified therein, subject\nin the case of the unaudited consolidated interim financial statements to an\nabsence of footnotes and to normal year-end audit adjustments. The Acquirer\nDisclosure Package, this Agreement, the exhibits hereto and any certificates or\ndocuments to be delivered to Target pursuant to this Agreement, when taken\ntogether, do not contain any untrue statement of a material fact or omit to\nstate any material fact necessary in order to make the statements contained\nherein and therein, in light of the circumstances under which such statements\nwere made, not misleading.\n\n          5.7  Litigation. There is no Proceeding pending against Acquirer and,\n               ----------                                                      \nto Acquirer's Knowledge, there currently exists no set of circumstances which\nAcquirer believes is likely to result in any Proceeding nor has any Proceeding\nbeen threatened, that, if determined adversely to the interests of Acquirer,\nwould have a material adverse effect on Acquirer's ability to enter into the\nAcquirer Merger Agreements or to effect the Merger or would have a Material\nAdverse Effect on Acquirer.\n\n          5.8  Compliance with Laws. Acquirer has complied with, is not in\n               --------------------                                       \nviolation of, and has not received any notices of violations with respect to,\nany federal, state or local statute, law or regulation with respect to the\nconduct of its business, or the ownership or operation of its business, except\nfor failures to comply or violations which would not have a Material Adverse\nEffect on Acquirer.\n\n          5.9  No Brokers' Fees. Acquirer is not obligated for the payment of\n               ----------------                                              \nfees or expenses of any investment banker, broker, finder or other agent in\nconnection with the origin, negotiation or execution of this Agreement or the\nCertificate of Merger or in connection with any transaction contemplated hereby\nor thereby.\n\n          5.10 Interim Operations of Merger Sub. Merger Sub was formed solely\n               --------------------------------                              \nfor the purpose of engaging in the transactions contemplated by this Agreement,\nhas engaged in no other business activities and has conducted its operations\nonly as contemplated by this Agreement. All of the issued and outstanding shares\nof Merger Sub capital stock are held by Acquirer.\n\n          5.11 Merger Sub. Merger Sub hereby makes all of the same\n               ----------                                         \nrepresentations and warranties as Acquirer set forth above in this Article 5,\nexcept for Sections 5.5 and 5.10, by substituting \"Merger Sub\" for \"Acquirer\" in\nthe foregoing Article 5 text.\n\n          5.12 Investment Intent; Access to Information. Acquirer is acquiring\n               ----------------------------------------                       \nthe equity securities of the Surviving Corporation to be acquired by Acquirer as\na result of the Merger for Acquirer's own account and Acquirer has the present\nintention of holding such equity securities for investment purposes and not with\na view to, or for sale in connection with, any public distribution of such\nequity securities in violation of any federal or state securities law. Acquirer\nhas been furnished with or been given adequate access to information about\nTarget as it has requested.\n\n          5.13 Registration Statement; Information Statement. The Form S-3\n               ---------------------------------------------              \nshall not, at the time the Form S-3 (including any amendments or supplements\nthereto) is declared effective by the SEC, contain any untrue statement of a\nmaterial fact or omit to state any material fact necessary in order to make the\nstatements included therein, in light of the circumstances under which they were\nmade, not\n\n                                      -34-\n\n \nmisleading. If at any time prior to the Effective Date any event relating to\nAcquirer, Merger Sub or any of their respective affiliates, officers or\ndirectors should be discovered by Acquirer or Merger Sub which should be set\nforth in an amendment to the Target Information Statement, Acquirer or Merger\nSub will promptly inform Target. Notwithstanding the foregoing, Acquirer and\nMerger Sub make no representation or warranty with respect to any information\nsupplied by Target which is contained in any of the foregoing documents.\n\n     6.   PRE-CLOSING PERIOD COVENANTS OF TARGET. During the period of time from\nthe date of this Agreement until the Closing Date (the \"Pre-Closing Period\"),\nunless such other time period or date is explicitly specified, Target covenants\nand agrees as follows:\n\n          6.1  Access to Information.\n               --------------------- \n\n               (a) Target will provide Acquirer and its attorneys and\naccountants with full access (except with respect to technical trade secrets),\nat reasonable times and in a reasonable manner, to all files, books and records\nof Target (including without limitation all existing books, Contracts, leases,\nlicenses, records, tax returns, work papers and other documents and information\nrelated to Target).\n\n               (b) Target will provide Acquirer with copies of such existing\nbooks, Contracts, leases, licenses, records, tax returns, work papers and other\ndocuments and information related to Target as Acquirer may reasonably request\n(with the understanding of all parties that all such access and investigation\nshall be and remain subject to the confidentiality provisions of this Agreement\nand, to the extent set forth in Section 3.2, the NDA).\n\n               (c) Target will cause its accountants to cooperate with Acquirer\nand its agents in making available all financial information reasonably\nrequested.\n\n               (d) Unless otherwise mutually agreed to, all: (i) communications\nregarding the Merger; (ii) requests for additional information; (iii) requests\nfor facility tours or management meetings; and (iv) discussions or questions\nregarding procedures, will be submitted or directed to Hilmi Ozguc or Scott\nKliger.\n\n          6.2  Advice of Changes; Duty to Update.\n               --------------------------------- \n\n               (a) Target will promptly advise Acquirer in writing of: (i) the\ndiscovery by Target of any event, condition, fact or circumstance occurring on\nor prior to the date of this Agreement that would render any representation or\nwarranty by Target contained in this Agreement untrue or inaccurate in any\nmaterial respect; (ii) any event, condition, fact or circumstance occurring\nsubsequent to the date of this Agreement that would render any representation or\nwarranty by Target contained in this Agreement, if made on or as of the date of\nsuch event or the Closing Date, untrue or inaccurate in any material respect;\n(iii) any breach of any covenant or obligation of Target pursuant to this\nAgreement or any other Target Merger Agreements; (iv) any event, condition, fact\nor circumstance that may make the timely satisfaction of any of the conditions\nset forth in Article 9 impossible or unlikely; and (v) any Material Adverse\nEffect.\n\n               (b) If any event, condition, fact or circumstances that is\nrequired to be disclosed pursuant to Section 6.2(a) requires any material change\nin the Target Disclosure Schedule, or if any such event, condition, fact or\ncircumstance would require such a change assuming the Target Disclosure Schedule\nwere dated as of the date of the occurrence, existence or discovery of such\nevent,\n\n                                      -35-\n\n \ncondition, fact or circumstances, then Target shall promptly deliver to Acquirer\nan update to the Target Disclosure Schedule specifying such change.\n\n               (c) Target will promptly update any relevant and material\ninformation provided to Acquirer after the date of this Agreement pursuant to\nthe terms hereof.\n\n          6.3  Maintenance of Business.\n               ----------------------- \n\n               (a) Target will use its Best Efforts to conduct its operations\nexclusively in the Ordinary Course of Business and in the same manner as such\noperations have been conducted prior to the date of this Agreement.\n\n               (b) Target will use its Best Efforts to carry on and preserve\nintact its current business organization, keep available the services of its\ncurrent officers and employees and maintain its relations and goodwill with all\ncustomers, suppliers, landlords, creditors, licensors, licensees, employees and\nother Persons having business relationships with Target other than those\nrelationships which would not have a Material Adverse Effect.\n\n               (c) Target will use its Best Efforts to maintain its equipment\nand other assets in good working condition and repair according to the standards\nit has maintained to the date of this Agreement, subject only to ordinary wear\nand tear.\n\n               (d) Target will use its Best Efforts to keep in full force all\ninsurance policies identified in Section 4.20 of the Target Disclosure Schedule\nand obtain any additional insurance required consistent with past practices for\nits business and property.\n\n               (e) If Target becomes aware of a deterioration in the\nrelationship with any customer, supplier, landlord, creditor, licensor,\nlicensee, employee or other Person which would have a Material Adverse Effect,\nit will promptly bring such information to the attention of Acquirer in writing\nand, if requested by Acquirer, will exert its Best Efforts to restore the\nrelationship.\n\n          6.4  Covenants.  Except as set forth in Schedule 4.16(b), Target will\n               ---------                                                       \nnot, without the prior written consent of an officer of Acquirer, which consent\nshall not be unreasonably withheld:\n\n               (a) form any subsidiary or acquire any equity interest or other\ninterest in any other Entity;\n\n               (b) amend the Target Certificate of Incorporation, its bylaws or\nany other charter document;\n\n               (c) sell, issue, grant or authorize the issuance or grant of: (i)\nany shares of its capital stock of any class or other security (other than\npursuant to the exercise of currently outstanding options, warrants or\nconversion of Preferred Stock); (ii) any option, call, warrant, obligation,\nsubscription, option or right to acquire any capital stock or any other\nsecurity, except for New Options; or (iii) any instrument convertible into or\nexchangeable for any capital stock or other security;\n\n               (d) declare, set aside or pay any dividend on, or make any other\ndistribution in respect of, Target's capital stock;\n\n                                      -36-\n\n \n               (e) effect any split, combination or recapitalization of Target's\ncapital stock or any direct or indirect redemption, purchase or other\nacquisition of Target's capital stock (other than pursuant to repurchase upon an\nemployee's termination of employment), or effect or be a party to any\ntransaction relating to a recapitalization, reclassification of shares, stock\nsplit, reverse stock split or similar transaction;\n\n               (f) merge, consolidate, acquire or otherwise reorganize with any\nentity other than Merger Sub or Acquirer, or accept or enter into any\nAcquisition Proposal;\n\n               (g) sell, give away or otherwise transfer or dispose, or lease or\nlicense any Target asset, including without limitation placing any Target IP\nRight in the public domain or otherwise disposing of or transferring any Target\nIP Right or licensing the source code of any Target IP Right, to any other\nPerson, except for products sold (subject to the $100,000 limit in Section\n4.11(a)(v)) and Target IP Rights licensed by Target in the Ordinary Course of\nBusiness;\n\n               (h) pledge or hypothecate any of its assets or otherwise permit\nany of its assets to become subject to any Encumbrance, except in the Ordinary\nCourse of Business and subject to the $100,000 limit in Section 4.11(a)(v);\n\n               (i) make any capital expenditures, except for such capital\nexpenditures as in the aggregate, measured by invoice amount, do not exceed\n$100,000 or were consented to by Acquirer in writing;\n\n               (j) enter into any material lease or Contract for the purchase or\nsale of any property, real or personal, except in the Ordinary Course of\nBusiness consistent with past practice;\n\n               (k) borrow any money other than in the Ordinary Course of\nBusiness, but in any event not exceeding $10,000 (except that Target may borrow\nup to $500,000, or a larger amount with the prior written consent of Acquirer,\nunder the $1.5 million Bridge Loan Agreement with Silicon Valley Bank);\n\n               (l) make any loan or advance to any other Person, including\nwithout limitation any Target Stockholder, officer or director (except for\nnormal employee travel advances in the Ordinary Course of Business);\n\n               (m) guarantee or act as a surety for any obligation except for\nthe endorsement of checks and other negotiable instruments in the Ordinary\nCourse of Business, consistent with past practice, which are not material in\namount;\n\n               (n) establish, amend or adopt any Target Employee Plan or Target\nBenefit Arrangement (defined in Sections 4.18(d)-(e)), pay any bonus, make any\nprofit sharing or similar payment, increase the amount of the wages, salary,\ncommissions, fringe benefits or other compensation or remuneration payable, or\ngrant any severance or termination pay to any of its directors, officers or\nemployees, other than as required under agreements existing on the date of this\nAgreement as disclosed in Section 4.11(b) of the Target Disclosure Schedule; or\nenter into any new employment or consulting agreement with any such person;\n\n               (o) write off as uncollectible, or establish any extraordinary\nreserve with respect to, any account receivable or other indebtedness, except in\nthe Ordinary Course of Business;\n\n                                      -37-\n\n \n               (p) forgive any debt or Encumbrance or otherwise release or waive\nany right or claim, in any case, involving over $100,000;\n\n               (q) amend or terminate any Contract or license to which it is a\nparty except those amended or terminated in the Ordinary Course of Business\nwhich are not material in amount or effect;\n\n               (r) terminate any of its Key Employees or management;\n\n               (s) change any of its methods of accounting or accounting\npractices in any respect (other than as required by GAAP);\n\n               (t) agree to any audit assessment by any tax authority or file\nany federal or state income or franchise tax return unless copies of such\nreturns have been delivered to Acquirer for its review prior to filing;\n\n               (u) commence any litigation or dispute resolution process\ninvolving over $100,000;\n\n               (v) take any action that would be reasonably likely to interfere\nwith the tax-free reorganization status of the Merger;\n\n               (w) enter into any transaction or take any other action outside\nthe Ordinary Course of Business; or\n\n               (x) agree, commit or enter into any Contract to do any of the\nthings described in the preceding Sections 6.4(a) through 6.4(w).\n\n          6.5  Target Stockholders' Approval. As promptly as practicable after\n               -----------------------------                                  \nthe date of this Agreement and prior to the Effective Time, Target with the\ncooperation of Acquirer will solicit consent of its stockholders to submit this\nAgreement, the Merger and related matters for the consideration and approval of\nthe Target Stockholders (the \"TARGET INFORMATION STATEMENT\"), which approval has\nbeen recommended by Target's Board of Directors and management.\n\n          6.6  Regulatory Approvals. Target will execute and file, or join in\n               --------------------                                          \nthe execution and filing, of any application or other document that may be\nnecessary in order to obtain the authorization, approval or consent of any\ngovernmental body, federal, state, local or foreign which may be reasonably\nrequired, or which Acquirer may reasonably request, in connection with the\nconsummation of the transactions contemplated by this Agreement, including\nwithout limitation any required filings under the HSR Act. Target will use its\nBest Efforts to obtain all such authorizations, approvals and consents.\n\n          6.7  Necessary Consents. Target will use its Best Efforts to obtain\n               ------------------                                            \nsuch written consents and take such other actions as may be necessary or\nappropriate in addition to those set forth in Sections 6.5 and 6.6 to allow the\nconsummation of the transactions contemplated by this Agreement and to allow\nAcquirer to carry on Target's business after the Effective Time.\n\n          6.8  Litigation. Target will notify Acquirer in writing promptly after\n               ----------                                                       \nlearning of any material Proceedings by or before any court, board or\ngovernmental agency, initiated by or against Target, or known by Target to be\nthreatened against it. If Target becomes subject to a review by the Internal\nRevenue Service or any other taxing agency or authority for accounting periods\nprior to the\n\n                                      -38-\n\n \nClosing Date (including but not limited to any short tax year resulting from the\nMerger), then Target acknowledges that Acquirer will be entitled to participate\nin such review and that Target shall be responsible for payment of any\nassessment. Target will not enter into any settlement or other stipulation with\nrespect to any such review without the written consent of Acquirer, which\nconsent will not be unreasonably withheld.\n\n          6.9  No Other Negotiations.\n               --------------------- \n\n               (a) From the date of this Agreement until the earlier of the\nEffective Time or termination of this Agreement pursuant to its terms, Target\nshall not (nor will Target permit any of its officers directors, stockholders,\nagents, representatives or affiliates to, directly or indirectly: (i) solicit,\ninitiate, entertain, encourage or induce the making, submission or announcement\nof, any Acquisition Proposal by any Person other than Acquirer, or (ii)\nparticipate in any discussions or negotiations with, or disclose any non-public\ninformation concerning Target to, or afford any access to the properties, books\nor records of Target to, or otherwise assist or facilitate, or enter into any\nagreement or understanding with, any Person other than Acquirer, in connection\nwith any Acquisition Proposal with respect to Target. Target will not, and will\ninstruct each of its representatives not to, directly or indirectly, make or\nauthorize any public statement, recommendation or solicitation in support of any\nAcquisition Proposal by any Person other than Acquirer. Target shall immediately\ncease and cause to be terminated any such contacts or negotiations with third\nparties relating to any such transaction or proposed transaction. Without\nlimiting the generality of the foregoing, any violation of any of the\nrestrictions set forth in the preceding sentence by any representative of Target\nshall be deemed to constitute a breach of this Section 6.9 by Target.\n\n               (b) Target will notify Acquirer as promptly as practicable if it\nreceives any proposal or written inquiry or written request for Target in\nconnection with an Acquisition Proposal or potential Acquisition Proposal and,\nas promptly as practicable, notify Acquirer of the significant terms and\nconditions of any such Acquisition Proposal, as well as the identity of the\nthird party submitting such Acquisition Proposal.\n\n          6.10 No Solicitation of Employees. In the event of Termination of\n               ----------------------------                                \nthis Agreement, Target will not directly or indirectly: (a) initiate or maintain\ncontact (except for contacts made in the Ordinary Course of Business) with any\nofficer, director or employee of Acquirer regarding its business, operations,\nprospects or finances, or (b) solicit or offer to hire any employee of Acquirer\nor persuade any employee of Acquirer to terminate his or her employment before\nNovember 23, 1999. An employment advertisement that is placed in a national or\nregional publication and is directed at members of the public generally shall\nnot constitute a breach of clause \"(b)\" in the preceding sentence.\n\n          6.11 Target Dissenting Stockholders. As promptly as practicable after\n               ------------------------------                                  \nthe Target Stockholders' Meeting and prior to the Closing Date, Target shall\nfurnish Acquirer with the name and address of each holder of Dissenting Shares,\nif any, and the number of Dissenting Shares owned by such holder.\n\n          6.12 Stockholder's Questionnaire and Other Securities Laws\n               -----------------------------------------------------\nCompliance.\n----------\n               (a) Target will shall appoint a \"purchaser's representative\" (as\ndefined by Rule 501(h) of the Securities Act) and take any other actions\nnecessary to help qualify the issuance of the Exchange Shares as a \"private\nplacement\" under Regulation D and\/or Section 4(2) of the Securities Act. \n\n                                      -39-\n\n \nAny out-of-pocket costs of such purchaser's representative shall be borne\nequally by Acquirer on one hand and Target Stockholders on the other.\n\n               (b) Acquirer and Target shall prepare, with the cooperation of\neach other, a disclosure document for the offer and sale of the Exchange Shares\n(the \"INFORMATION STATEMENT\"). Acquirer and Target shall use its Best Efforts to\ncause the Information Statement to comply in all material respects with the\ninformation requirements of Rule 502(b) of the Securities Act (and all other\napplicable federal and state securities laws requirements) so that Acquirer may\navail itself of the Rule 506 exemption of the Securities Act if Acquirer so\nchooses. Acquirer and Target shall use its Best Efforts, with the cooperation of\neach other, to cause the Information Statement to be distributed to the Target\nStockholders as promptly as practicable after the date first written above.\nAcquirer and Target shall update the Information Statement if it becomes aware\nof any facts that might make it necessary or appropriate to amend or supplement\nthe Information Statement to make the statements contained or incorporated by\nreference therein not misleading or to comply with applicable law.\nNotwithstanding the foregoing, Target nor Acquirer shall include in the\nInformation Statement any information with respect to the other party or its\naffiliates or associates without the consent of such other party, which consent\nshall not be unreasonably withheld.\n\n               (c) Target will use its Best Efforts to cause each Target\nStockholder to execute and deliver to Acquirer a certificate in substantially\nthe form attached as Exhibit J (the \"TARGET STOCKHOLDER'S QUESTIONNAIRE\").\n                     ---------                                            \n\n          6.13 Blue Sky Laws. Target shall use its Best Efforts to assist\n               -------------                                             \nAcquirer to the extent necessary to comply with the securities and Blue Sky laws\nof all jurisdictions which are applicable in connection with the Merger.\n\n          6.14 Tax Free Reorganization. Target will cooperate with the other\n               -----------------------                                      \nparties and take all reasonable actions as may be necessary to ensure that this\nAgreement involves a tax-free plan of reorganization and that the Merger is\nconsummated in accordance with the provisions of Section 368(a)(1)(A) and\nSection 368(a)(2)(E) of the Code.\n\n          6.15 Best Efforts. Target will use its Best Efforts to satisfy or\n               ------------                                                \ncause to be satisfied all the conditions precedent which are set forth in\nArticle 9 on or before December 31, 1998, subject to any regulatory approvals or\nrequirements. Target will use its Best Efforts to cause the transactions\ncontemplated by this Agreement to be consummated, and, without limiting the\ngenerality of the foregoing, to obtain all consents and authorizations of third\nparties and to make all filings with, and give all notices to, third parties\nthat may be necessary or reasonably required on its part in order to effect the\ntransactions contemplated hereby.\n\n     7.   PRE-CLOSING PERIOD COVENANTS OF ACQUIRER. During the Pre-Closing\nPeriod, unless such other time period or date is explicitly specified, Acquirer\ncovenants and agrees as follows:\n\n          7.1  Access to Information. Acquirer shall permit Target and its\n               ---------------------                                      \nattorneys and accountants to conduct due diligence to the extent that is\ncustomary for private companies that are acquired by public companies. Unless\notherwise mutually agreed to, all: (a) communications regarding the Merger; (b)\nrequests for additional information; (c) requests for facility tours or\nmanagement meetings; and (d) discussions or questions regarding procedures, will\nbe submitted or directed to Charles Moldow.\n\n                                      -40-\n\n \n          7.2  Advice of Changes; Duty to Update.\n               --------------------------------- \n\n               (a) Acquirer will promptly advise Target in writing of: (i) the\ndiscovery by Acquirer of any event, condition, fact or circumstance occurring on\nor prior to the date of this Agreement that would render any representation or\nwarranty by Acquirer contained in this Agreement untrue or inaccurate in any\nmaterial respect; (ii) any event, condition, fact or circumstance occurring\nsubsequent to the date of this Agreement that would render any representation or\nwarranty by Acquirer contained in this Agreement, if made on or as of the date\nof such event or the Closing Date, untrue or inaccurate in any material respect;\n(iii) any breach of any covenant or obligation of Acquirer pursuant to this\nAgreement or any other Acquirer Merger Agreements; (iv) any event, condition,\nfact or circumstance that may make the timely satisfaction of any of the\nconditions set forth in Article 8 impossible or unlikely; and (v) any Material\nAdverse Effect.\n\n               (b) If any event, condition, fact or circumstances that is\nrequired to be disclosed pursuant to Section 7.2(a) requires any material change\nin the Acquirer Disclosure Schedule, or if any such event, condition, fact or\ncircumstance would require such a change assuming the Acquirer Disclosure\nSchedule were dated as of the date of the occurrence, existence or discovery of\nsuch event, condition, fact or circumstances, then Acquirer shall promptly\ndeliver to Target an update to the Acquirer Disclosure Schedule specifying such\nchange.\n\n               (c) Acquirer will promptly update any relevant and material\ninformation provided to Target after the date hereof pursuant to the terms of\nthis Agreement. Acquirer will furnish to Target, promptly after filed with the\nSEC, any reports filed with the SEC during the Pre-Closing Period.\n\n          7.3  Conduct of Business. Acquirer will use its Best Efforts to\n               -------------------                                       \npreserve its business without material impairment.\n\n          7.4  Regulatory Approvals. Acquirer will execute and file, or join in\n               --------------------                                            \nthe execution and filing, of any application or other document that may be\nnecessary in order to obtain the authorization, approval or consent of any\ngovernmental body, federal, state, local or foreign, which may be reasonably\nrequired, or which Target may reasonably request, in connection with the\nconsummation of the transactions contemplated by this Agreement. Acquirer will\nuse its Best Efforts to obtain all such authorizations, approvals and consents.\n\n          7.5  Necessary Consents. Acquirer will use its Best Efforts to obtain\n               ------------------                                              \nsuch written consents and take such other actions as may be necessary or\nappropriate in addition to those set forth in Section 7.4 to allow the\nconsummation of the transactions contemplated hereby and to allow Acquirer to\ncarry on Target's business after the Closing.\n\n          7.6  No Solicitation of Employees. In the event of Termination of this\n               ----------------------------                                     \nAgreement, Acquirer will not directly or indirectly: (a) initiate or maintain\ncontact (except for contacts made in the Ordinary Course of Business) with any\nofficer, director or employee of Target regarding its business, operations,\nprospects or finances, or (b) solicit or offer to hire any employee of Target or\npersuade any employee of Target to terminate his or her employment before\nNovember 23, 1999. An employment advertisement that is placed in a national or\nregional publication and is directed at members of the public generally shall\nnot constitute a breach of clause \"(b)\" in the preceding sentence.\n\n          7.7  Blue Sky Laws. Acquirer shall take such steps as may be necessary\n               -------------                                                    \nto comply with the securities and Blue Sky laws of all jurisdictions which are\napplicable in connection with the \n\n                                      -41-\n\n \nMerger; provided, however, that Acquirer shall not be required to qualify to do\nbusiness or execute a general consent to service of process in any jurisdiction.\n\n          7.8  Tax Free Reorganization. Acquirer will cooperate with the other\n               -----------------------                                        \nparties and take all reasonable actions as may be necessary to ensure that this\nAgreement involves a tax-free plan of reorganization and that the Merger is\nconsummated in accordance with the provisions of Section 368(a)(1)(A) and\nSection 368(a)(2)(E) of the Code.\n\n          7.9  Best Efforts. Acquirer will use its Best Efforts to satisfy or\n               ------------                                                  \ncause to be satisfied all the conditions precedent which are set forth in\nArticle 8 on or before December 31, 1998, subject to any regulatory approvals or\nrequirements. Acquirer will use its Best Efforts to cause the transactions\ncontemplated by this Agreement to be consummated.\n\n     8.  CONDITIONS TO OBLIGATIONS OF TARGET. Target's obligations to consummate\nthe Merger and to take the other actions contemplated in this Agreement are\nsubject to the fulfillment or satisfaction, at or prior to the Closing, of each\nof the following conditions (any one or more of which may be individually waived\nby Target, but only in a writing signed by Target):\n\n          8.1  Accuracy of Representations and Warranties. The representations\n               ------------------------------------------                     \nand warranties of Acquirer and Merger Sub set forth in Article 5 shall be true\nand accurate in every material respect (other than to the extent any such change\nis a result of the Merger) on and as of the Closing Date with the same force and\neffect as if they had been made at the Closing (except for reps made as of a\ndate certain and for those disclosed in a Disclosure Schedule dated as of, and\ndelivered to Acquirer on, the Closing Date), and Target shall have received a\ncertificate to such effect executed by an officer of each of Acquirer and Merger\nSub on behalf of each of Acquirer and Merger Sub.\n\n          8.2  Covenants. Acquirer shall have performed and complied in all\n               ---------                                                   \nmaterial respects with all of its covenants contained in Article 7 at or prior\nto the Closing, and Target shall have received a certificate to such effect\nexecuted by an officer of Acquirer on behalf of Acquirer.\n\n          8.3  Compliance with Law. There shall be no Order or threat of an\n               -------------------                                         \nOrder, or any other fact or circumstance, which would prohibit or render illegal\nthe transactions contemplated by this Agreement.\n\n          8.4  No Material Adverse Change. Acquirer shall not have experienced\n               --------------------------                                     \nany Material Adverse Change, other than to the extent that any such change is a\nresult of the proposed Merger. For the purpose of this Section 8.4, a decline in\nthe market price of Acquirer's common stock will not in and of itself constitute\na Material Adverse Change. Target shall have received a certificate to the\neffect that no Material Adverse Change has occurred, executed by an officer of\nAcquirer on behalf of Acquirer.\n\n          8.5  Government Consents. There shall have been obtained at or prior\n               -------------------                                            \nto the Closing Date such permits or authorizations, and there shall have been\ntaken such other action, as may be required to consummate the Merger by any\nregulatory authority having jurisdiction over the parties and the actions herein\nproposed to be taken, including but not limited to requirements under applicable\nfederal and state securities laws.\n\n          8.6  Consents. Target shall have received duly executed copies of all\n               --------                                                        \nmaterial third-party consents and approvals contemplated by this Agreement\nand\/or the Target Disclosure Schedule for Target to consummate the transactions\ncontemplated by this Agreement or the Target Disclosure \n\n                                      -42-\n\n \nSchedule in form and substance reasonably satisfactory to Target, except for\nsuch consents and approvals as Acquirer shall have agreed shall not be obtained.\n\n          8.7   Documents. Target shall have received all written consents,\n                ---------                                                  \nassignments, waivers, authorizations or other certificates reasonably deemed\nnecessary by Target or Target's legal counsel for Target to consummate the\ntransactions contemplated hereby.\n\n          8.8   Target Stockholder Approval. Target's Stockholders shall have\n                ---------------------------                                  \napproved and adopted this Agreement and the Merger by a favorable vote of the\nrequisite percentage of shares of outstanding capital stock of Target entitled\nto vote on this Agreement and the Merger by written consent, which complied in\nall respects with the Target Certificate of Incorporation, Target's bylaws and\nother charter documents and all applicable law.\n\n          8.9   Tax Representations. Target shall have received a certificate of\n                -------------------                                             \ntax representations substantially in the form of Exhibit E-1 executed by the\n                                                 -----------                \nSecretary of Acquirer on behalf of Acquirer and the Secretary of Merger Sub on\nbehalf of Merger Sub (the \"Acquirer and Merger Sub Tax Representations\").\n\n          8.10  Legal Opinion. Target shall have received an opinion of\n                -------------                                          \nAcquirer's counsel, of Fenwick &amp; West LLP, in form reasonably satisfactory to\nAcquirer and its counsel and dated as of the Closing Date. In rendering such\nopinion, Fenwick &amp; West LLP shall be entitled to rely upon representations of\nofficers of Acquirer, Merger Sub and Target in the Acquirer and Merger Sub Tax\nRepresentations, the Target Tax Representations and in the Merger Agreements.\nTarget shall have received an opinion of its counsel dated as of the Closing\nDate that the Merger shall qualify as a tax-free reorganization under Section\n368(a) of the Code (the \"Tax Opinion\"); provided, however, that if Acquirer and\nAcquirer Sub have delivered the Tax Representations attached hereto as Exhibit\n                                                                       -------\nE-1, the delivery of the Tax Opinion shall not be a condition to closing.\n---                                                                      \n\n     9.  CONDITIONS TO OBLIGATIONS OF ACQUIRER. Acquirer's obligations to\nconsummate the Merger and to take the other actions contemplated in this\nAgreement are subject to the fulfillment or satisfaction, at or prior to the\nClosing, of each of the following conditions (any one or more of which may be\nindividually waived by Acquirer, but only in a writing signed by Acquirer):\n\n          9.1   Accuracy of Representations and Warranties. The representations\n                ------------------------------------------                     \nand warranties by Target set forth in Article 4 shall be true and accurate in\nevery material respect on and as of the Closing with the same force and effect\nas if they had been made at the Closing (except for representations that are\nmade as of a date certain), and Acquirer shall have received a certificate to\nsuch effect executed by the President and Secretary of Target on behalf of\nTarget.\n\n          9.2   Covenants. Target shall have performed and complied in all\n                ---------                                                 \nmaterial respects with all of the covenants contained in Article 6 at or prior\nto the Closing, and Acquirer shall have received a certificate to such effect\nexecuted by the President and Secretary of Target on behalf of Target.\n\n          9.3   Compliance with Law. There shall be no Order or threat of an\n                -------------------                                         \nOrder, or any other fact or circumstance, which would prohibit or render illegal\nthe transactions contemplated by this Agreement.\n\n                                      -43-\n\n \n          9.4   No Material Adverse Change. Target shall not have experienced \n                --------------------------                                     \nany Material Adverse Change, other than to the extent that any such change is a\nresult of the proposed Merger. Acquirer shall have received a certificate to\nsuch effect executed by the President and Secretary of Target on behalf of\nTarget.\n\n          9.5   Government Consents. There shall have been obtained at or prior\n                -------------------                                            \nto the Closing such permits or authorizations, and there shall have been taken\nsuch other action, as may be required to consummate the Merger by any regulatory\nauthority having jurisdiction over the parties and the actions herein proposed\nto be taken, including but not limited to requirements under applicable federal\nand state securities laws.\n\n          9.6   Third-Party Consents; Assignments. Acquirer shall have received\n                ---------------------------------                              \nduly executed copies of all material third-party consents, approvals,\nassignments, waivers, authorizations or other certificates contemplated by this\nAgreement or the Target Disclosure Schedule or reasonably deemed necessary by\nAcquirer's legal counsel to provide for the continuation in full force and\neffect of any and all Material Contracts and leases of Target and for Acquirer\nto consummate the transactions contemplated hereby in form and substance\nreasonably satisfactory to Acquirer.  Acquirer shall have also received an\nassignment of that certain patent application described in Section 4.10(b)3 of\nthe Target Disclosure Schedule.\n\n          9.7   No Litigation. No litigation or Proceeding shall be threatened \n                -------------                                                  \nor pending for the purpose or with the probable effect of enjoining or\npreventing the consummation of any of the transactions contemplated by this\nAgreement, or which would be reasonably expected to have a Material Adverse\nEffect.\n\n          9.8   Termination of Rights. Any registration rights (other than those\n                ---------------------                                           \nset forth in the Rights Agreement), rights of refusal, rights to any liquidation\npreference, or redemption rights of any Target Stockholder shall have been\nterminated or waived as of the Closing Date.\n\n          9.9   Dissenting Shares. The aggregate number of Dissenting Shares\n                -----------------                                           \nshall not constitute more than five percent (5%) of the Total Target Shares.\n\n          9.10  Target Stockholder Approval. Acquirer shall have received a copy\n                ---------------------------                                     \nof a resolution, certified by the Secretary of Target, to the effect that\nTarget's Stockholders have approved and adopted this Agreement and the Merger by\na favorable vote of the requisite percentage of shares of outstanding capital\nstock of Target entitled to vote on this Agreement and the Merger by written\nconsent, which vote complied in all respects with the Target Certificate of\nIncorporation, Target's bylaws and other charter documents and all applicable\nlaw.\n\n          9.11  Escrow Agreement. Acquirer shall have received the Escrow\n                ----------------                                         \nAgreement, executed by Target and State Street Bank (as the Representative for\nall Target Stockholders), providing for the escrow of the Escrow Shares pursuant\nto the terms and conditions of the Escrow Agreement in substantially the form\nattached as Exhibit C.\n            --------- \n\n          9.12  Rights Agreement. Acquirer shall have received the Rights\n                ----------------                                         \nAgreement, executed by each of the Target Stockholders, Key Employees, in\nsubstantially the form attached as Exhibit D.\n                                   --------- \n\n          9.13  Non-Compete and Other Non-Competition Agreements. Acquirer shall\n                ------------------------------------------------                \nhave received from Target copies of non-competition agreements in substantially\nthe form attached as \n\n                                      -44-\n\n \nExhibit F-1 entered into with all Target employees and copies of Non-Compete\n-----------\nAgreements in substantially the form attached as Exhibit F-2 executed by each\n                                                 -----------\nof the Key Employees.\n\n          9.14  Target Stockholder's Questionnaires. Acquirer shall have\n                ------------------------------------                    \nreceived Target Stockholder's Questionnaires from holders of all of the then-\noutstanding Total Exchange Shares.\n\n          9.15  Tax Representations. Acquirer shall have received a certificate\n                -------------------                                            \nof tax representations substantially in the form of Exhibit E-2 executed by the\n                                                    -----------                \nSecretary of Target on behalf of Target (the \"Target Tax Representations\").\n\n          9.16  Legal Opinions. Acquirer shall have received an opinion of\n                --------------                                            \nTarget's counsel, Ropes &amp; Gray, reasonably satisfactory to Target and its\ncounsel dated as of the Closing Date. In rendering such opinions, Ropes &amp; Gray\nshall be entitled to rely upon representations of officers of Acquirer, Merger\nSub and Target in the Acquirer and Merger Sub Tax Representations, the Target\nTax Representations and in the Merger Agreements.\n\n          9.17  Resignation of Directors. Acquirer shall have received an\n                ------------------------                                 \nexecuted letter from each Target director in office immediately prior to the\nEffective Time of the Merger to the effect that each such director agrees to\nresign his or her post as a director of the Surviving Corporation effective as\nof the Effective Time of the Merger.\n\n     10.  TERMINATION OF AGREEMENT AND CONTINUING OBLIGATIONS\n\n          10.1  Right to Terminate.\n                ------------------ \n\n                (a)  Voluntary Termination.\n                     --------------------- \n\n                     This Agreement may be terminated by Acquirer and\/or Target\nand the Merger abandoned at any time prior to the Closing, whether before or\nafter approval by the Target Stockholders:\n\n                     (i)    by the mutual written consent of both parties;\n\n                     (ii)   by either party, if such party (including its\nstockholders) is not in material breach of any representation, warranty,\ncovenant or agreement contained in this Agreement, and such other party is in\nmaterial breach of any representation, warranty, covenant or agreement contained\nin this Agreement and such breaching party fails to cure such material breach\nwithin fifteen (15) days of written notice of such material breach from the non-\nbreaching party;\n\n                     (iii)  by either party, if any of the conditions precedent\nto such party's obligations set forth in Article 8 (if Target) or Article 9 (if\nAcquirer) have not been fulfilled or waived at and as of the Closing; or\n\n                     (iv)   by either party, if there is a final nonappealable\nOrder of a federal or state court in effect preventing consummation of the\nMerger, or if any statute, rule, regulation or Order is enacted, promulgated or\nissued or deemed applicable to the Merger by any governmental body that would\nmake consummation of the Merger illegal.\n\n                (b)  Automatic Termination. Unless otherwise agreed by Acquirer\n                     ---------------------                                     \nand Target, this Agreement will automatically terminate if all conditions to the\nClosing have not been\n                                      -45-\n\n \nsatisfied or waived on or before February 15, 1999; provided, however, that the\nright to terminate this Agreement under this Section 10.1 shall not be available\nto any party if such party (or its stockholders') breach of any representation,\nwarranty, covenant or agreement contained in this Agreement has been the cause\nof or resulted in the failure of the Closing to occur on or before such date.\n\n          10.2  Termination Procedures. If either party wishes to terminate this\n                ----------------------                                          \nAgreement pursuant to Section 10.1, such party shall deliver to the other party\na written notice stating that such party is terminating this Agreement and\nsetting forth a brief description of the basis of such termination. Termination\nof this Agreement will be effective upon the delivery of such notice.\n\n          10.3  Continuing Obligations. Following any termination of this\n                ----------------------                                   \nAgreement pursuant to this Article 10, the parties to this Agreement will\ncontinue to be liable for breaches of this Agreement prior to such termination\nand will continue to perform their respective obligations under Sections 3.2,\n6.10, 7.6 and 11.2. Except for the continuing obligations set forth in the\npreceding sentence, the parties to this Agreement will be without any further\nobligation or Liability upon any party in favor of the other party. However,\nnothing in this Section 10.3 will limit the obligations of each party to use its\nBest Efforts to cause the Merger to be consummated, as set forth in Sections\n6.15 and 7.9.\n\n          10.4  Acquirer shall comply with the reporting requirements of Section\n13 and 15(d) of the Exchange Act and shall comply with all other public\ninformation reporting requirements of the SEC (including Rule 144 promulgated by\nthe Commission under the Securities Act) from time to time in effect and\nrelating to the availability of an exemption from the Securities Act for the\nsale of any Exchange Shares. Acquirer shall also cooperate with each holder of\nany Exchange Shares in supplying such information as may be necessary for such\nholder to complete and file any information reporting forms presently or\nhereafter required by the SEC as a condition to the availability of a Rule 144\nexemption from the Securities Act for the sale of any Exchange Shares.\n\n          10.5  Directors and Officers Indemnification. From and after the\n                --------------------------------------                    \nEffective Time, Acquirer and Surviving Corporation shall indemnify, defend and\nhold harmless each person who is now or has been at any time prior to the date\nhereof, an officer or director of Target (collectively, the \"D&amp;O GROUP\") to the\nsame extent that such officer or director is indemnified by Target pursuant to\nthe Target's charter and by-laws, as in effect on the date hereof, for acts or\nomissions in such person's capacity as an officer or director of Target\noccurring on or prior to the Effective Date, provided that (i) the D&amp;O Group may\nretain only one law firm to represent them with respect to any single action,\nwhich firm shall be reasonably satisfactory to Acquirer and Surviving\nCorporation, unless there is, under applicable standards of professional\nconduct, conflict on any significant issue between the positions of any two or\nmore members of the D&amp;O Group, (ii) Acquirer and Surviving Corporation shall pay\nthe reasonable fees and expenses of such counsel and (iii) Acquirer and\nSurviving Corporation shall not be liable for any settlement effected without\ntheir written consent.\n\n     11.  SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES\n\n          11.1  Survival of Representations. All representations, warranties,\n                ---------------------------                                  \ncovenants and agreements of Acquirer and Merger Sub contained in this Agreement\nwill remain operative and in full force and effect, regardless of any\ninvestigation made by or on behalf of the parties to this Agreement, until the\nearlier of the termination of this Agreement or the Escrow Period, whereupon\nsuch representations, warranties, covenants and agreements will expire (except\nfor covenants that by their terms survive for a longer period). All\nrepresentations, warranties, covenants and agreements of Target contained in\nthis Agreement will remain operative and in full force and effect from the date\nof this \n\n                                      -46-\n\n \nAgreement until the earlier of the termination of this Agreement or the\nexpiration of the Escrow Period, whereupon such representations, warranties,\ncovenants and agreements will expire (except for provisions that by their terms\nsurvive for a longer period).\n\n          11.2  Agreement by Target and Target Stockholders to Indemnify.\n                -------------------------------------------------------- \nSubject to the limitations set forth in this Article 11, Target and each of the\nTarget Stockholders, severally but not jointly, hereby agree to indemnify and\nhold harmless Acquirer and its officers, directors, agents and employees, and\neach person, if any, who controls or may control Acquirer within the meaning of\nthe Securities Act from and against any and all claims, demands, actions, causes\nof actions, losses, costs, damages, liabilities and expenses including, without\nlimitation, reasonable legal fees, reduced by any recovery under policies of\ninsurance (\"TARGET DAMAGES\"):\n\n                (a) arising out of any misrepresentation or breach of or default\nin connection with any of the representations, warranties, covenants and\nagreements given or made by Target or Target Stockholder in this Agreement or\nany agreement, certificate, document or instrument delivered by or on behalf of\nTarget pursuant to this Agreement;\n\n                (b) resulting from any failure of any Target Stockholder: (i) to\nhave good, valid and marketable title to the issued and outstanding Target\nCommon Stock held by such stockholder, free and clear of Encumbrances other than\nPermitted Encumbrances, or (ii) to have full right, capacity and authority to\nvote such Target Common Stock in favor of the Merger and the other transactions\ncontemplated by the Certificate of Merger;\n\n                (c) including without limitation any Liability pursuant to that\nmatter referred to in Schedule 4.22.\n\n          11.3  Agreement by Acquirer to Indemnify. Subject to the limitations\n                ----------------------------------                            \nset forth in this Article 11, Acquirer hereby indemnify and hold harmless Target\nand its officers, directors, agents and each of the Target Stockholders and\nemployees, and each person, if any, who controls or may control Target or any\nTarget Stockholder within the meaning of the Securities Act from and against any\nand all claims, demands, actions, causes of actions, losses, costs, damages,\nliabilities and expenses including, without limitation, reasonable legal fees,\nreduced by any recovery under policies of insurance arising out of any\nmisrepresentation or breach of or default in connection with any of the\nrepresentations, warranties, covenants and agreements given or made by Acquirer\nor Merger Sub in this Agreement or any agreement certificate, document or\ninstrument delivered by or on behalf of Acquirer or Merger Sub pursuant to this\nAgreement or in connection with the New Target Option Plan (except for claims,\ndemands, actions, causes of actions, losses, costs, damages, liabilities and\nexpenses related to the valid approval thereof) (\"ACQUIRER DAMAGES\" and together\nwith Target Damages, \"DAMAGES\").\n\n          11.4  Limitations on Liability; Exceptions.\n                ------------------------------------ \n\n                (a) Limitations on Liability. Except as set forth in \n                    ------------------------                                   \nSection 11.4(b), the Escrow Shares and any other assets deposited in escrow\npursuant to the Escrow Agreement shall be the Indemnified Persons' sole recourse\nunder Section 11.2, and no claim for Damages shall first be made under Section\n11.2 after expiration of the Escrow Period. Except as set forth in Section\n11.4(b), the aggregate amount of Acquirer Damages shall not exceed $7,500,000.\nExcept as set forth in Section 11.4(b), the remedies set forth in this Article\n11 shall be the exclusive remedies of Acquirer and the other Indemnified Persons\nagainst any Target Stockholder, but shall not be deemed to limit any other\nremedies of Acquirer, legal or otherwise, against Target.\n\n                                      -47-\n\n \n                (b) Exceptions to Limitations on Liability. None of the \n                    --------------------------------------                     \nlimitations set forth in Section 11.4(a) shall in any manner limit the liability\nor indemnification obligations of the Target Stockholders or Acquirer with\nrespect to: (i) intentional fraud or willful misconduct, (ii) any breach of the\nrepresentations and warranties made in Section 4.5 or the first sentence of\nSection 5.4 of this Agreement or (iii) any matter or claim described in Section\n11.2(b) or (c) hereof. Any such liability, to the extent it exceeds the Escrow\nShares and any other assets deposited in escrow pursuant to the Escrow\nAgreement, shall be several and not joint with respect to each Indemnified\nPerson.\n\n                (c) Deductible. The indemnification provided for in this \n                    ----------                                                 \nArticle 11 shall not apply unless the aggregate Target Damages or Acquirer\nDamages, as the case may be, for which one or more Indemnified Persons seeks\nindemnification exceeds $250,000. In the event that such Damages do exceed\n$250,000, Target Stockholders or Acquirer, as the case may be, will indemnify\nonly the amount of such Damages in excess of $250,000. The deductible in this\nSection 11.3(c) shall not apply to any liability arising pursuant to Section\n11.2(c) hereof.\n\n          11.5  No Additional Representations. Neither Target nor Acquirer or\n                -----------------------------                                \nMerger Sub has made and is not making any representation, warranty, covenant or\nagreement, express or implied, with respect to the matters contained in this\nAgreement or the other Merger Agreements other than the explicit\nrepresentations, warranties, covenants and agreements set forth herein or\ntherein. Each Indemnifying Party acknowledge and agrees that it will not assert,\nexcept pursuant to Article 11, any claim against Acquirer Merger Sub, Target or\nthe Target Stockholders or any of their respective partners, directors,\nofficers, employees, agents, stockholders, consultants, representatives,\ncontrolling persons or an Affiliate of any of the foregoing, or any such persons\nliable for any inaccuracies, misstatements or omissions with respect to\ninformation furnished by such persons. Upon making any payment to an Indemnitee\nfor any indemnification claim pursuant to this Article 11, the Indemnifying\nParty shall be subrogated, to the extent of such payment, to any rights which\nthe Indemnitee may have against other persons (other than another Indemnitee)\nwith respect to the subject matter underlying such indemnification claim.  Each\nparty shall take all reasonable steps to mitigate all Damages upon and after\nbecoming aware of any event which could reasonably be expected to give rise to\nany Damages with respect to which indemnification may be requested hereunder.\n\n     12.  MISCELLANEOUS\n\n          12.1  Entire Agreement. The NDA (to the extent set forth in Section\n                ----------------                                             \n3.2 hereof) Merger Agreement and the exhibits to this Agreement constitute the\nentire understanding and agreement of the parties to this Agreement with respect\nto the subject matter hereof and supersede all prior and contemporaneous\nagreements or understandings, inducements or conditions, express or implied,\nwritten or oral, between the parties with respect to the subject matter hereof.\nThe express terms hereof control and supersede any course of performance or\nusage of the trade inconsistent with any of the terms hereof.\n\n          12.2  Assignment; Binding Upon Successors and Assigns. No party to\n                -----------------------------------------------             \nthis Agreement may assign any of its rights or obligations hereunder without the\nprior written consent of the other party hereto. This Agreement will be binding\nupon and inure to the benefit of the parties hereto and their respective\nsuccessors and permitted assigns.\n\n          12.3  No Third Party Beneficiaries. No provisions of this Agreement\n                ----------------------------                                 \nare intended, nor will be interpreted, to provide or create any third party\nbeneficiary rights or any other rights of any kind in any client, customer,\naffiliate, stockholder, partner, employee or any party hereto or any other\nPerson unless specifically provided otherwise herein (including without\nlimitation Section 10.5 hereof), and, \n\n                                      -48-\n\n \nexcept as so provided, all provisions hereof will be personal solely between the\nparties to this Agreement.\n\n          12.4  Construction of Agreement. This Agreement has been negotiated by\n                -------------------------                                       \nthe respective parties hereto and their attorneys and have been reviewed by each\nparty hereto. Accordingly, no ambiguity in the language of this Agreement will\nbe construed for or against either party.\n\n          12.5  Section Headings. A reference to a section, article or exhibit\n                ----------------                                              \nwill mean a section in, article in or exhibit to this Agreement unless otherwise\nexplicitly set forth. The titles and headings herein are for reference purposes\nonly and will not in any manner limit the construction of this Agreement, which\nwill be considered as a whole. Any item listed or described in any Schedule\npursuant to any Section of this Agreement shall be deemed to have been listed in\nor incorporated by reference into each other Schedule where such listing or\ndescription would be appropriate.\n\n          12.6  No Joint Venture. Nothing contained in this Agreement will be\n                ----------------                                             \ndeemed or construed as creating a joint venture or partnership between any of\nthe parties hereto. Except as explicitly specified herein, no party is by virtue\nof this Agreement authorized as an agent, employee or legal representative of\nany other party. Except as explicitly specified herein, no party will have the\npower to control the activities and operations of any other and their status is,\nand at all times, will continue to be, that of independent contractors with\nrespect to each other. Except as explicitly specified herein, no party will have\nany power or authority to bind or commit any other. No party will hold itself\nout as having any authority or relationship in contravention of this Section\n12.6.\n\n          12.7  Time of the Essence. Time is of the essence in the performance\n                -------------------                                           \nof each of the terms hereof with respect to the obligations and rights of each\nparty hereto.\n\n          12.8  Amendment, Extension and Waivers. At any time prior to the\n                --------------------------------                          \nEffective Time, Acquirer, Merger Sub and Target may, to the extent legally\nallowed: (a) extend the time for performance of any of the obligations of the\nother party; (b) waive any inaccuracies in the representations and warranties\nmade to such party contained herein or in any document delivered pursuant\nthereto; and (iii) waive compliance with any of the agreements, covenants or\nconditions for the benefit of such party contained herein. Any term or provision\nof this Agreement may be amended. Any agreement to any amendment, extension or\nwaiver will be valid only if set forth in writing and signed by the party to be\nbound. The waiver by a party of any breach hereof or default in the performance\nhereof will not be deemed to constitute a waiver of any other default or any\nsucceeding breach or default. The failure of any party to enforce any of the\nprovisions hereof will not be construed to be a waiver of the right of such\nparty thereafter to enforce such provisions. The Agreement may be amended by the\nparties hereto at any time before or after approval of the Target Stockholders,\nbut, after such approval, no amendment will be made which by applicable law\nrequires the further approval of the Target Stockholders without obtaining such\nfurther approval.\n\n          12.9  Severability. If any provision of this Agreement or its\n                ------------                                           \napplication will for any reason and to any extent be invalid or unenforceable,\nthe remainder of this Agreement and application of such provision to other\npersons or circumstances will be interpreted so as reasonably to effect the\nintent of the parties hereto. The parties will replace such void or\nunenforceable provision of this Agreement with a valid and enforceable provision\nthat will achieve, to the extent possible, the economic, business and other\npurposes of the void or unenforceable provision.\n\n                                      -49-\n\n \n          12.10  Governing Law. The validity of this Agreement the construction\n                 -------------                                                 \nof its terms, and the interpretation and enforcement of the rights and duties of\nthe parties of this Agreement will be exclusively governed by and construed in\naccordance with the internal laws of the State of Delaware, as applied to\nagreements entered into solely between residents of and to be performed entirely\nin the State of Delaware, without reference to that body of law relating to\nconflicts of law or choice of law.\n\n          12.11  Other Remedies. Except as otherwise provided herein, any and\n                 --------------                                              \nall remedies herein expressly conferred upon a party will be deemed cumulative\nwith and not exclusive of any other remedy conferred hereby or by law on such\nparty, and the exercise of any one remedy will not preclude the exercise of any\nother.\n\n          12.12  Jurisdiction. The parties consent to the personal jurisdiction\n                 -------------                                                 \nof and the venue in the state and federal courts within San Mateo County.\n\n          12.13  Waiver of Trial by Jury. The parties waive any right they may\n                 -----------------------                                      \nhave to a trial by jury in respect of any litigation based on, or arising out\nof, under or in connection with, the Merger, this Agreement or any other Merger\nAgreement, or any course of conduct, course of dealing, verbal or written\nstatement or other action of either of the parties hereto.\n\n          12.14  Specific Performance. The parties acknowledge that irreparable\n                 --------------------                                          \ndamage would occur in the event that any of the provisions of this Agreement\nwere not performed in accordance with their specific terms or were otherwise\nbreached. The parties shall be entitled to an injunction(s) to prevent breaches\nof this Agreement and to enforce specifically the terms and provisions hereof in\nany court of the United States or any state having jurisdiction. This is in\naddition to any other remedy to which the parties are entitled at law or in\nequity.\n\n          12.15  Attorneys' Fees. Should suit be brought to enforce or interpret\n                 ---------------                                                \nany part of this Agreement, the prevailing party will be entitled to recover, as\nan element of the costs of suit and not as damages, reasonable attorneys' fees\nto be fixed by the court (including without limitation, costs, expenses and fees\non any appeal). The prevailing party will be entitled to recover its costs of\nsuit, regardless of whether such suit proceeds to final judgment.\n\n          12.16  Notices. All notices, instructions and other communications\n                 -------                                                    \nrequired or permitted to be given under this Agreement or necessary or\nconvenient in connection herewith must be in writing and shall be deemed given:\n(a) when personally served or when delivered by telex or facsimile; (b) one\nbusiness day after deposit with an overnight courier service as shown by the\nrecords of such delivery service; (c) on the business day of transmission if\nsuch notice is sent by facsimile and the sender receives electronic confirmation\nof receipt by the recipient; or (d) on the earlier of actual receipt or the\nthird business day following the date on which the notice is deposited in the\nUnited States mail, first class certified or registered mail, postage prepaid,\naddressed as follows:\n\n\nIf to Acquirer:       At Home Corporation\n                      Attention:  General Counsel\n                      425 Broadway Street\n                      Redwood City, CA  94063\n                      Fax Number:  (650) 569-5100\n\n                                      -50-\n\n \nwith a copy to:       Fenwick &amp; West LLP\n                      Attention: Gordon Davidson, Esq.\n                      Two Palo Alto Square\n                      Palo Alto, California 94306\n                      Fax Number: (650) 494-1417\n\n\nIf to Target:         Narrative Communications Corp.\n                      Attention:  President\n                      1601 Trapelo Road\n                      Waltham, Massachusetts  02451\n                      Fax Number:  (781) 290-5312\n\nwith a copy to:       Ropes &amp; Gray\n                      Attention: Jane Goldstein, Esq.\n                      One International Place\n                      Boston, Massachusetts\n                      Fax Number: (617) 951-7050\n\nor to such other address as a party may have furnished to the other parties in\nwriting pursuant to this Section 12.16.\n\n          12.17  Counterparts. This Agreement may be executed in any number of\n                 ------------                                                 \ncounterparts, each of which will be an original as regards any party whose\nsignature appears thereon and all of which together will constitute one and the\nsame instrument. This Agreement will become binding when one or more\ncounterparts hereof, individually or taken together, will bear the signatures of\neach of the parties reflected hereon as signatories.\n\n                                      -51-\n\n \n     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of\nthe date first above written.\n\n \nAT HOME CORPORATION                NARRATIVE COMMUNICATIONS  CORP.\n \nBy:    \/s\/ Thomas Jermoluk         By:     \/s\/ Hilmi Ozguc\n       ------------------------            -----------------------\n \nName:  Thomas Jermoluk             Name:   Hilmi Ozguc\n \nTitle: Chief Executive Officer     Title:  Chief Executive Officer\n \n\nTRANSITORY CORPORATION\n\n\nBy:    \/s\/ Charles Moldow\n       ------------------\n\nName:  Charles Moldow\n\nTitle: President\n\n\n\n                [SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]\n\n                                      -52-\n\n \n                               INDEX OF EXHIBITS\n\n          Exhibits:\n          -------- \n\n          A.      Form of Certificate of Merger                                \n                                                                               \n          B.      Target Certificate of Incorporation                          \n                                                                               \n          C.      Form of Escrow Agreement                                     \n                                                                               \n          D.      Form of Rights Agreement                                     \n                                                                               \n          E-1.    Acquirer and Merger Sub Tax Representations                  \n                                                                               \n          E-2.    Target Tax Representations                                   \n                                                                               \n          F-1.    Form of Existing Target Non-Competition Agreement            \n                                                                               \n          F-2.    Form of Non-Competition Agreement                            \n                                                                               \n          G.      New Target Option Plan                                       \n                                                                               \n          H.      Target Stockholder Voting Agreement                          \n                                                                               \n          I.      Target Financial Statements                                  \n                                                                               \n          J.      Form of Target Stockholder's Questionnaire                    \n\n \n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6782],"corporate_contracts_industries":[9510],"corporate_contracts_types":[9622,9626],"class_list":["post-43029","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-at-home-corp","corporate_contracts_industries-technology__programming","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\/43029","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=43029"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43029"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43029"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43029"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}