{"id":43208,"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-reorganization-salon-com-and-mp3lit-com.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"agreement-and-plan-of-reorganization-salon-com-and-mp3lit-com","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/agreement-and-plan-of-reorganization-salon-com-and-mp3lit-com.html","title":{"rendered":"Agreement and Plan of Reorganization &#8211; Salon.com and MP3Lit.com Inc."},"content":{"rendered":"<pre>                                        \n                     AGREEMENT AND PLAN OF REORGANIZATION\n\n                                 BY AND AMONG\n\n                                   SALON.COM\n\n                        TARGET ACQUISITION CORPORATION,\n\n                               MP3LIT.COM, INC.\n\n                                      AND\n\n                              TARGET SHAREHOLDERS\n                                        \n\n                                  MAY 5, 2000\n\n \n                               LIST OF EXHIBITS\n\nExhibit A       Articles of Merger\nExhibit B       Form of Warrant\nExhibit C       Registration Rights Agreement\nExhibit D       Employment Agreements\nExhibit E       Investor Representation Statement\nExhibit F       Form of Offer Letter\n\n \n                     AGREEMENT AND PLAN OF REORGANIZATION\n\n     This AGREEMENT AND PLAN OF REORGANIZATION (this \"Agreement\") is made and\n                                                      ---------              \nentered into as of May __, 2000 by and among Salon.com, a Delaware corporation\n(\"Acquiror\" and \"Holdback Agent\"), Target Acquisition Corporation, a Delaware\n  --------       --------------                                              \ncorporation (\"Merger Sub\") and wholly owned subsidiary of Acquiror, MP3Lit.com,\n              ----------                                                       \nInc., a Nevada corporation (\"Target\"), Gary Hustwit, Valerie Hustwit, and\n                             ------                                      \nWilliam Hustwit, the shareholders of Target (collectively \"Target\n                                                           ------\nShareholders\"), and Gary Hustwit as the Shareholders' Agent.\n------------\n                                   RECITALS\n\n     A.  The Boards of Directors of Target, Acquiror and Merger Sub and the\nTarget Shareholders believe it is in the best interests of their respective\ncompanies and the shareholders of their respective companies that Target and\nMerger Sub combine into a single company through the statutory merger of Merger\nSub with and into Target (the \"Merger\") and, in furtherance thereof, have\n                               ------                                    \napproved the Merger.\n\n     B.  Pursuant to the Merger, among other things, the outstanding shares of\nTarget Common Stock (\"Target Common Stock\") shall be converted into the right to\n                      -------------------                                       \nreceive the Merger Consideration (as defined in Section 1.6(a)) upon the terms\nand subject to the conditions set forth herein.\n\n     C.  Target, the Target Shareholders, Acquiror and Merger Sub desire to make\ncertain representations and warranties and other agreements in connection with\nthe Merger.\n\n     NOW, THEREFORE, in consideration of the covenants and representations set\nforth herein, and for other good and valuable consideration, the parties agree\nas follows:\n\n     1.  The Merger.\n         ----------   \n\n         1.1  The Merger.  At the Effective Time (as defined in Section 1.2) and\n              ---------- \nsubject to and upon the terms and conditions of this Agreement, the Articles of\nMerger attached hereto as Exhibit A (the \"Articles of Merger\"), a Certificate of\n                          ---------       ------------------                    \nMerger to be filed with the Secretary of State of the State of Delaware\npertaining to the Merger (the \"Certificate of Merger\") and the applicable\n                               ---------------------                     \nprovisions of the Delaware General Corporation Law (\"Delaware Law\") and the\n                                                     ------------          \nNevada General Corporation Law (\"Nevada Law\"), Merger Sub shall be merged with\n                                 ----------                                   \nand into Target, the separate corporate existence of Merger Sub shall cease and\nTarget shall continue as the surviving corporation.  Target as the surviving\ncorporation after the Merger is hereinafter sometimes referred to as the\n\"Surviving Corporation.\"\n----------------------  \n\n         1.2  Closing; Effective Time.  The closing of the transactions \n              -----------------------\ncontemplated hereby (the \"Closing\") shall take place as soon as practicable, but\n                          -------\nno later than two (2) business days, after the satisfaction or waiver of each of\nthe conditions set forth in Section 6 hereof, or at such other time as the\nparties hereto agree (the \"Closing Date\"). The Closing shall take place at the\n                           ------------ \noffices of Gray Cary Ware &amp; Freidenrich LLP, or at such other location as the\nparties hereto agree. In connection with the Closing, the parties hereto shall\ncause the Merger to be consummated by filing the Articles of Merger with the\nSecretary of State of the State of Nevada, in accordance with the relevant\nprovisions of Nevada Law (the time of such filing being the \"Effective Time\").\n                                                             --------------\nPromptly after the Effective Time, the parties shall cause the Certificate of\nMerger to be filed with the Secretary of State of the State of Delaware in\naccordance with the relevant provisions of Delaware Law.\n\n \n         1.3  Effect of the Merger.  At the Effective Time, the effect of the \n              -------------------- \nMerger shall be as provided in this Agreement, the Articles of Merger and the\napplicable provisions of Nevada Law and Delaware Law.  Without limiting the\ngenerality of the foregoing, and subject thereto, at the Effective Time, all the\nproperty, rights, privileges, powers and franchises of Target and Merger Sub\nshall vest in the Surviving Corporation, and all debts, liabilities and duties\nof Target and Merger Sub shall become the debts, liabilities and duties of the\nSurviving Corporation.\n\n         1.4 Articles of Incorporation; Bylaws. The Articles of Incorporation \n             --------------------------------- \nand Bylaws of Target, as in effect immediately prior to the Effective Time,\nshall be the Articles of Incorporation and Bylaws of the Surviving Corporation\nuntil thereafter amended.\n\n         1.5 Directors and Officers. At the Effective Time, the directors and\n             ----------------------\nofficers of Merger Sub immediately prior to the Effective Time shall be the\ndirectors and officers of the Surviving Corporation, until their respective\nsuccessors are duly elected or appointed and qualified, except that Gary Hustwit\nshall be the Chief Executive Officer and Valerie Hustwit shall be the President\nof the Surviving Corporation.\n\n         1.6 Effect on Capital Stock. At the Effective Time, by virtue of the \n             ----------------------- \nMerger and without any action on the part of Merger Sub, Target or the holders\nof any of the following securities:\n\n             (a)  Merger Consideration.  The twenty-five thousand (25,000) \n                  -------------------- \nshares of Target Common Stock issued and outstanding immediately prior to the\nEffective Time shall be converted and exchanged, without any action on the part\nof the holders thereof, into the right to receive the following: (i) an\naggregate of one million two hundred sixty-eight thousand (1,268,000) shares of\nthe Common Stock (\"Acquiror Common Stock\"), $.001 par value, of Acquiror (the\n                   ---------------------\n\"Acquiror Shares\"); (ii) an aggregate of four hundred thousand dollars\n($400,000) the \"Cash Consideration\"), and (iii) warrants in the form attached as\n                ------------------ \nExhibit B to purchase one hundred thousand (100,000) shares of Acquiror Common \n--------- \nStock at a price of ten dollars and fifty cents ($10.50) per share (the\n\"Warrant Consideration\"). The Acquiror Shares, Cash Consideration and Warrant \n ---------------------\nConsideration are collectively referred to as the \"Merger Consideration.\"\n\n             (b)  Capital Stock of Merger Sub.  At the Effective Time, each \n                  ---------------------------  \nshare of Common Stock of Merger Sub issued and outstanding immediately prior to\nthe Effective Time shall be converted into and exchanged for one validly issued,\nfully paid and nonassessable share of Common Stock of the Surviving Corporation.\nEach stock certificate of Merger Sub evidencing ownership of any such shares\nshall continue to evidence ownership of such shares of capital stock of the\nSurviving Corporation.\n\n             (c)  Antidilution Adjustments.  The per share Merger Consideration \n                  ------------------------ \nshall be adjusted to reflect fully the effect of any stock split, reverse split,\nstock dividend (including any dividend or distribution of securities convertible\ninto Acquiror Common Stock or Target Common Stock), reorganization,\nrecapitalization or other like change with respect to Acquiror Common Stock or\nTarget Common Stock occurring after the date hereof and prior to the Effective\nTime.\n\n             (d)  Fractional Shares.  No fraction of a share of Acquiror Common \n                  ----------------- \nStock will be issued. All distributions of shares of Acquiror Common Stock to a\nTarget Shareholder\n\n \nshall be rounded down to the nearest whole share, and Target Shareholders waive\nany rights to receive fractional shares or cash or other consideration in lieu\nthereof.\n\n             (e)  Dissenters' Rights.  The Target Shareholders and each of them \n                  ------------------ \nhereby waive their rights to have their shares of Target Common Stock treated as\n\"Dissenting Shares\" in accordance with the Nevada Law following the Merger.\n\n             (f)  Certificate Legends.  The shares of Acquiror Common Stock to \n                  -------------------   \nbe issued pursuant to this Section 1 shall not have been registered and shall be\ncharacterized as \"restricted securities\" under the federal securities laws, and\nunder such laws such shares may be resold without registration under the\nSecurities Act of 1933, as amended (the \"Securities Act\"), only in certain \n                                         --------------           \nlimited circumstances. Each certificate evidencing shares of Acquiror Common\nStock to be issued pursuant to this Section 1 shall bear the following legend:\n\n          \"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR\n          INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF\n          1933.  SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE\n          ABSENCE OF SUCH REGISTRATION WITHOUT AN EXEMPTION UNDER THE SECURITIES\n          ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE\n          COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.\"\n\nand any legends required by state securities laws.\n\n         1.7 Payment of Merger Consideration; Holdback.\n             -----------------------------------------   \n\n             (a)  Exchange Procedures.  At the Closing, each Target Shareholder \n                  ------------------- \nshall deliver to Acquiror certificates (the \"Certificates\") representing all \n                                             ------------            \noutstanding shares of Target Common Stock held of record by such Target\nShareholder immediately prior to the Effective Time, together with such other\ncustomary documents as Acquiror may request, duly completed and validly executed\nin accordance with the instructions thereto, against delivery by Acquiror of:\n(i) the portion of Cash Consideration to which such Target Shareholder is\nentitled pursuant to Section 1.6(a), and (ii) the portion of the Warrant\nConsideration to which such Target Shareholder is entitled. Promptly following\nthe Effective Time, Acquiror shall instruct its transfer agent to issue to each\nTarget Shareholder a certificate representing the number of whole Acquiror\nShares into which such Target Shareholder's shares of Target Common Stock were\nconverted pursuant to Section 1.6(c), less the number of Acquiror Shares to be\nretained in the Holdback Fund on such holder's behalf pursuant to Section 1.7(b)\nhereof.\n\n             (b)  Holdback Fund.  Eight hundred eighty-seven thousand six\n                  -------------\nhundred (887,600) of the Acquiror Shares (the \"Holdback Shares\") shall not be\n                                               ---------------\ndistributed to the Target Shareholders but shall be retained by Acquiror in the\nHoldback Fund.\n\n         1.8  No Further Ownership Rights in Target Common Stock.  The Merger\n              --------------------------------------------------               \nConsideration delivered upon the surrender for exchange of shares of Target\nCommon Stock in accordance with the terms hereof (including any dividends,\ndistributions or cash paid in lieu of fractional shares) shall be deemed to have\nbeen issued in full satisfaction of all rights pertaining to such shares of\nTarget Common Stock, and there shall be no further registration of transfers on\nthe records of the Surviving Corporation of shares of Target Common Stock which\nwere\n\n \noutstanding immediately prior to the Effective Time. If, after the Effective\nTime, Certificates are presented to the Surviving Corporation for any reason,\nthey shall be canceled and exchanged as provided in this Section 1.\n\n         1.9 Taking of Necessary Action; Further Action. Each of Acquiror, \n             ------------------------------------------ \nMerger Sub, Target and Target Shareholders will take all such reasonable and\nlawful action as may be necessary or desirable in order to effectuate the Merger\nin accordance with this Agreement as promptly as possible. If, at any time after\nthe Effective Time, any further action is necessary or desirable to carry out\nthe purposes of this Agreement and to vest the Surviving Corporation with full\nright, title and possession to all assets, property, rights, privileges, powers\nand franchises of Target and Merger Sub, the officers and directors of Target\nand Merger Sub are fully authorized in the name of their respective corporations\nor otherwise to take, and will take, all such lawful and necessary action, so\nlong as such action is not inconsistent with this Agreement.\n\n     2.  Representations and Warranties of Target and Target Shareholders.  \n         ---------------------------------------------------------------- \nTarget and the Target Shareholders represent and warrant to Acquiror and Merger\nSub that the statements contained in this Section 2 are true and correct, except\nas disclosed in a document of even date herewith and delivered by Target to\nAcquiror referring to the representations and warranties in this Agreement (the\n\"Target Disclosure Schedule\"). The Target Disclosure Schedule will be arranged\n --------------------------                                                    \nin paragraphs corresponding to the numbered and lettered paragraphs contained in\nthis Section 2, and the disclosure in any such numbered and lettered section of\nthe Target Disclosure Schedule shall qualify only the corresponding subsection\nin this Section 2 (except to the extent disclosure in any numbered and lettered\nsection of the Target Disclosure Schedule is specifically cross-referenced in\nanother numbered and lettered section of the Target Disclosure Schedule).\n\n         2.1  Organization, Standing and Power.  Target is a corporation duly\n              --------------------------------                                 \norganized, validly existing and in good standing under the laws of its\njurisdiction of organization.  Target has the corporate power to own its\nproperties and to carry on its business as now being conducted and as proposed\nto be conducted and is duly qualified to do business and is in good standing in\neach jurisdiction in which the failure to be so qualified and in good standing\nwould have a Material Adverse Effect on Target.  Target has delivered a true and\ncorrect copy of the Articles of Incorporation and Bylaws or other charter\ndocuments, as applicable, of Target, each as amended to date, to Acquiror.\nTarget is not in violation of any of the provisions of its Articles of\nIncorporation or Bylaws or equivalent organizational documents.  Target does not\ndirectly or indirectly own any equity or similar interest in, or any interest\nconvertible or exchangeable or exercisable for, any equity or similar interest\nin, any corporation, partnership, joint venture or other business association or\nentity.\n\n         2.2  Authority.  Target has all requisite corporate power and \n              ---------  \nauthority to enter into this Agreement and to consummate the transactions\ncontemplated hereby. The execution and delivery of this Agreement and the\nconsummation of the transactions contemplated hereby have been duly authorized\nby all necessary corporate action on the part of Target subject only to the\napproval of the Merger by Target's shareholders as contemplated by Section\n6.1(a). The affirmative vote of the holders of a majority of the shares of\nTarget's Common Stock outstanding on the record date for the Written Consent of\nShareholders relating to this Agreement is the only vote of the Target\nShareholders necessary under Nevada Law to approve this Agreement and the\ntransactions contemplated hereby. The Board of Directors of Target has\nunanimously approved this Agreement and the Merger. This Agreement has been duly\nexecuted and delivered by Target and constitutes the valid and binding\nobligation of Target enforceable against Target in\n\n \naccordance with its terms, except that such enforceability may be limited by\nbankruptcy, insolvency, moratorium or other similar laws affecting or relating\nto creditors' rights generally, and is subject to general principles of equity.\nThe execution and delivery of this Agreement by Target does not, and the\nconsummation of the transactions contemplated hereby will not conflict with, or\nresult in any violation of, or default under (with or without notice or lapse of\ntime, or both), or give rise to a right of termination, cancellation or\nacceleration of any material obligation or loss of any material benefit under\n(i) any provision of the Articles of Incorporation or Bylaws of Target, as\namended, or (ii) any mortgage, indenture, lease, contract or other agreement or\ninstrument, permit, concession, franchise, license, judgment, order, decree,\nstatute, law, ordinance, rule or regulation applicable to Target or any of its\nsubsidiaries or any of their properties or assets. No consent, approval, order\nor authorization of, or registration, declaration or filing with, any court,\nadministrative agency or commission or other governmental authority or\ninstrumentality (\"Governmental Entity\") is required by or with respect to Target\n                  -------------------                                           \nor the Target Shareholders in connection with the execution and delivery of this\nAgreement or the consummation of the transactions contemplated hereby, except\nfor (i) the filing of the Articles of Merger, together with the required\nofficers' certificates, as provided in Section 1.2; (ii) such consents,\napprovals, orders, authorizations, registrations, declarations and filings\nrelating to the securities of Target as may be required under applicable state\nsecurities laws and the securities laws of any foreign country; and (iii) such\nother consents, authorizations, filings, approvals and registrations which, if\nnot obtained or made, would not have a Material Adverse Effect on Target and\nwould not prevent, or materially alter or delay any of the transactions\ncontemplated by this Agreement.\n\n         2.3  Governmental Authorization. Target and each of its subsidiaries \n              -------------------------- \nhave obtained each federal, state, county, local or foreign governmental\nconsent, license, permit, grant, or other authorization of a governmental entity\n(i) pursuant to which Target or any of its subsidiaries currently operates or\nholds any interest in any of its properties or (ii) that is required for the\noperation of Target's or any of its subsidiaries' business or the holding of any\nsuch interest and all of such authorizations are in full force and effect except\nwhere the failure to obtain or have any such authorizations could not reasonably\nbe expected to have a Material Adverse Effect on Target.\n\n         2.4  Financial Statements.  Target has delivered to Acquiror its \n              -------------------- \nunaudited financial statements (balance sheet, statement of operations and\nstatement of cash flows) for the period beginning with Target's inception and\nending February 29, 2000, and for the one-month period ended March 31, 2000\n(collectively, the \"Financial Statements\"). The Financial Statements are\n                    --------------------\ncomplete and correct in all material respects and have been prepared in\naccordance with generally accepted accounting principles (except for the absence\nof footnotes thereto) applied on a consistent basis throughout the periods\nindicated and with each other. The Financial Statements fairly present the\nfinancial condition and operating results of Target as of the dates, and for the\nperiods, indicated therein, subject to normal year-end audit adjustments. Except\nas disclosed in Section 2.4 of the Target Disclosure Schedule, Target maintains\na standard system of accounting established and administered in accordance with\ngenerally accepted accounting principles.\n\n         2.5  Capital Structure.  The authorized capital stock of Target \n              -----------------    \nconsists of twenty-five thousand (25,000) shares of Target Common Stock, all of\nwhich were issued and outstanding as of the date hereof, and no shares of\npreferred stock. All outstanding shares of Target Common Stock are duly\nauthorized, validly issued, fully paid and non-assessable and are\n\n \nfree of any liens or encumbrances other than any liens or encumbrances created\nby or imposed upon the holders thereof, and are not subject to preemptive rights\nor rights of first refusal created by statute, the Articles of Incorporation or\nBylaws of Target or any agreement to which Target is a party or by which it is\nbound. Except for the rights created pursuant to this Agreement, there are no\nother options, warrants, calls, rights, commitments or agreements of any\ncharacter to which Target is a party or by which it is bound obligating Target\nto issue, deliver, sell, repurchase or redeem or cause to be issued, delivered,\nsold, repurchased or redeemed, any shares of Target Common Stock. There are no\nother contracts, commitments or agreements relating to voting, purchase or sale\nof Target's capital stock (i) between or among Target and any of its\nshareholders or (ii) between or among any of Target's shareholders. All shares\nof outstanding Target Common Stock and rights to acquire Target capital stock\nwere issued in compliance with all applicable federal and state securities laws.\n\n         2.6  Absence of Certain Changes.  Since March 31, 2000 (the \"Target \n              --------------------------                              ------\nBalance Sheet Date\"), Target has conducted its business in the ordinary course\n------------------                                                            \nconsistent with past practice and there has not occurred:  (i) any change, event\nor condition (whether or not covered by insurance) that has resulted in a\nMaterial Adverse Effect to Target; (ii) any acquisition, sale or transfer of any\nmaterial asset of Target or any of its subsidiaries other than in the ordinary\ncourse of business and consistent with past practice; (iii) any change in\naccounting methods or practices (including any change in depreciation or\namortization policies or rates) by Target or any revaluation by Target of any of\nits or any of its subsidiaries' assets; (iv) any declaration, setting aside, or\npayment of a dividend or other distribution with respect to the shares of Target\nor any direct or indirect redemption, purchase or other acquisition by Target of\nany of its shares of capital stock; (v) any material contract entered into by\nTarget or any of its subsidiaries, other than in the ordinary course of business\nand as provided to Acquiror, or any material amendment or termination of, or\ndefault under, any material contract to which Target or any of its subsidiaries\nis a party or by which it is bound; (vi) any amendment or change to the Articles\nof Incorporation or Bylaws of Target; (vii) any increase in or modification of\nthe compensation or benefits payable or to become payable by Target to any of\nits directors or employees; or (viii) any negotiation or agreement by Target or\nany of its subsidiaries to do any of the things described in the preceding\nclauses (i) through (vii) (other than negotiations with Acquiror and its\nrepresentatives regarding the transactions contemplated by this Agreement).  At\nthe Effective Time, there will be no accrued but unpaid dividends on shares of\nTarget's capital stock.\n\n         2.7  Absence of Undisclosed Liabilities.  Target has no material \n              ----------------------------------\nobligations or liabilities of any nature (matured or unmatured, fixed or\ncontingent) other than (i) those set forth or adequately provided for in the\nTarget Balance Sheet, (ii) those incurred in the ordinary course of business and\nnot required to be set forth in the Target Balance Sheet under generally\naccepted accounting principles, (iii) those incurred in the ordinary course of\nbusiness since the Target Balance Sheet Date and consistent with past practice;\nand (iv) those incurred in connection with the execution of this Agreement.\n\n         2.8  Litigation.  There is no private or governmental action, suit,\n              ----------                                                      \nproceeding, claim, arbitration or investigation pending before any Governmental\nEntity, foreign or domestic, or, to the knowledge of Target or any of its\nsubsidiaries, threatened against Target or any of its subsidiaries or any of\ntheir respective properties or any of their respective officers or directors (in\ntheir capacities as such).  There is no judgment, decree or order against Target\nor any of its subsidiaries, or, to the knowledge of Target and its subsidiaries,\nany of their respective directors or officers (in their capacities as such).\nAll litigation to which Target is a party (or, to the\n\n \nknowledge of Target, threatened to become a party) is disclosed in the Target\nDisclosure Schedule.\n\n         2.9  Restrictions on Business Activities.  There is no agreement, \n              -----------------------------------               \njudgment, injunction, order or decree binding upon Target or any of its\nsubsidiaries which has the effect of prohibiting or materially impairing any\ncurrent or future business practice of Target or any of its subsidiaries, any\nacquisition of property by Target or any of its subsidiaries or the conduct of\nbusiness by Target or any of its subsidiaries as currently conducted or as\nproposed to be conducted by Target or any of its subsidiaries.\n\n         2.10  Literary Rights.  \"Literary Rights\" shall mean any rights \n               ---------------\n(whether on an exclusive or nonexclusive basis) to audio voice recordings,\nincluding without limitation recordings of poetry, novels, short stories,\nspeeches and interviews, including also related cover artwork and graphics or\nother recorded-voice-related Proprietary Assets, together with the associated\ncopyrights. Section 2.10(a)(i) of the Target Disclosure Schedule sets forth a\ntrue and complete list or summary of all Literary Rights owned by Target.\nSection 2.10(a)(ii) of the Target Disclosure Schedule sets forth a true and\ncomplete list or summary of all Literary Rights licensed by or to Target,\nincluding a description of whether such rights are exclusive or non-exclusive,\nwhether the rights include the right to distribute tangible copies, custom\ncompilations or digital downloads of the recording in question, whether such\nrights may be assigned or resold by Target, the expiration date of such rights\nand any territorial limitations of such rights. Except as set forth in Section\n2.10 of the Target Disclosure Schedule, Target has written contracts (each of\nwhich are listed or summarized in the Target Disclosure Schedule) for all\nLiterary Rights owned, licensed, used, marketed, and sold by it, and those\nlicensed to it, Target has not received any notice from any party to such a\ncontract or any third party challenging the enforceability or validity of such a\ncontract, and all such contracts are enforceable in accordance with their terms.\nExcept as set forth in Section 2.10 of the Target Disclosure Schedule, the\nMerger will not constitute or be deemed to constitute an assignment of any such\nLiterary Rights, require the consent of any third party or otherwise result in\nthe termination or modification of any such Literary Rights. Except as set forth\nin Section 2.10 of the Target Disclosure Schedule, all Literary Rights owned by\nTarget were recorded and otherwise prepared in all respects in accordance with\nthe rules and regulations of any unions, guilds and similar associations having\njurisdiction. Except as set forth in Section 2.10 of the Target Disclosure\nSchedule, each Person who has rendered any service or provided any materials in\nconnection with, or has contributed in any way, to the making of the Literary\nRights owned by Target has the right to grant such rights, render such services\nor furnish such materials. Except as set forth in Section 2.10 of the Target\nDisclosure Schedule, all fees and other payments applicable to or resulting from\nthe creation, recording, manufacture, duplication, and distribution of the\nLiterary Rights, including, but not limited to, payments to performers,\nproducers, engineers and others, have been fully and completely paid by Target.\n\n               (a)  Except as set forth in Section 2.10 of the Target Disclosure\nSchedule, there are no amounts owed or that will become owing to any holder of\nrights for royalties arising as a result of the Literary Rights, nor has the\nTarget paid an advance in respect of such royalties.\n\n               (b)  Except as described in Section 2.10 of the Target Disclosure\nSchedule, Target does not know of any customers of the Target, or any holder of\nLiterary Rights (i) who has sent a written complaint or objection with respect\nto the service or any business practices of the Target or the transactions\ncontemplated hereby which could reasonably be expected to have a\n\n \nMaterial Adverse Effect, or (ii) will cease to do business, or significantly\nreduce the business conducted, with Target as a result of the Merger.\n\n         2.11  Proprietary Rights and Warranty Claims.\n               ---------------------------------------\n\n               (a)  \"Proprietary Asset\" shall mean: (a) any patent, patent\napplication, trademark (whether registered or unregistered, trademark\napplication, trade name, fictitious business name, service mark (whether\nregistered or unregistered), service mark application, copyright (whether\nregistered or unregistered), copyright application, maskwork, maskwork\napplication, trade secret, know-how, customer list, franchise, system, computer\nsoftware, computer program, URL, invention, design, blueprint, engineering\ndrawing, proprietary product, technology, proprietary right or other\nintellectual property right; and (b) the right to use or exploit any of the\nforegoing including rights granted by third parties under license agreements.\nSection 2.11(a)(i) of the Disclosure Schedule sets forth, with respect to each\nProprietary Asset owned by Target (each a \"Target Proprietary Asset\" and\n                                           ------------------------ \ncollectively, the \"Target Proprietary Assets\") registered with any governmental \n                   -------------------------                      \nbody or for which an application has been filed with any governmental body, (i)\na brief description of such Target Proprietary Asset, and (ii) the names of the\njurisdictions covered by the applicable registration or application. Section\n2.11(a)(ii) of the Target Disclosure Schedule identifies and provides a brief\ndescription of all other Target Proprietary Assets owned by Target. Section\n2.11(a)(iii) of the Target Disclosure Schedule identifies and provides a brief\ndescription of each Proprietary Asset licensed to Target by any Person (except\nfor any Proprietary Asset that is licensed to Target under any third party\nsoftware license generally available to the public at a per unit cost of less\nthan One Thousand Dollars ($1,000)), and identifies the license agreement under\nwhich such Proprietary Asset is being licensed to Target. Except as set forth in\nSection 2.11(a)(iv) of the Target Disclosure Schedule, Target has good, valid\nand marketable title to all Target Proprietary Assets identified in Sections\n2.11(a)(i) and 2.11(a)(ii) of the Target Disclosure Schedule, free and clear of\nall liens and other encumbrances, and, except as disclosed in Section 2.11 of\nthe Target Disclosure Schedule, Target has a valid right to use all Proprietary\nAssets identified in Section 2.11(a)(iii) of the Target Disclosure Schedule in\nits business as it is currently conducted. Except as set forth in Section\n2.11(a)(v) of the Target Disclosure Schedule, Target is not obligated to make\nany payment to any person for the use of any Proprietary Asset. Except as set\nforth in Section 2.11(a)(vi) of the Target Disclosure Schedule, Target has not\ndeveloped jointly with any other person any Proprietary Asset with respect to\nwhich such other person has any rights.\n\n             (b)  Except as set forth in Section 2.11(b) of the Target\nDisclosure Schedule, Target has taken reasonable and customary measures and\nprecautions necessary to protect and maintain the confidentiality and secrecy of\nall Target Proprietary Assets (except Target Proprietary Assets whose value\nwould be unimpaired by public disclosure) and otherwise to maintain and protect\nthe value of all Target Proprietary Assets. Except as set forth in the Target\nDisclosure Schedule, Target has not disclosed or delivered to any Person, or\npermitted the disclosure or delivery to any person of any of the Target\nProprietary Assets used in or necessary for the conduct of business by Target as\ncurrently conducted by Target (except Target Proprietary Assets whose value\nwould be unimpaired by public disclosure).\n\n             (c)  Except as set forth in Section 2.11(c) of the Target\nDisclosure Schedule, Target is not infringing, misappropriating or making any\nunlawful use of, and Target has not at any time infringed, misappropriated or\nmade any unlawful use of, or received any\n\n \nnotice or other communication (in writing or otherwise) of any actual, alleged,\npossible or potential infringement, misappropriation or unlawful use of, any\nProprietary Asset owned or used by any other person (\"Third Party Proprietary\n                                                      -----------------------  \nAsset\"). Except as set forth in Section 2.11(c) of the Target Disclosure \n-----\nSchedule, no other person is infringing, misappropriating or making any unlawful\nuse of, and no Third Party Proprietary Asset owned or used by any other Person\ninfringes or conflicts with, any Target Proprietary Asset.\n\n             (d)  Except as set forth in Section 2.11(d) of the Target\nDisclosure Schedule: (i) each Target Proprietary Asset conforms with any\nspecification, documentation, performance standard, representation or statement\nmade or provided with respect thereto by or on behalf of Target; and (ii) there\nhas not been any claim made against Target by any customer or other person\nalleging that any Target Proprietary Asset (including each version thereof that\nhas ever been licensed or otherwise made available by Target to any person) does\nnot conform with any specification, documentation, performance standard,\nrepresentation or statement made or provided by or on behalf of Target, and\nthere is no basis for any such claim.\n\n     Except as set forth in Section 2.11(e) of the Target Disclosure Schedule,\nTarget's Proprietary Assets constitute all the proprietary assets necessary to\nenable Target to conduct its business in the manner in which such business has\nbeen and is being conducted.  Except as set forth in Section 2.11(e) of the\nTarget Disclosure Schedule, (i) Target has not licensed any of the Target\nProprietary Assets to any Person and (ii) Target has not entered into any\ncovenant not to compete or contract limiting its ability to exploit fully any of\nthe Target Proprietary Assets or to transact business in any market or\ngeographical area or with any Person.\n\n         2.12  Interested Party Transactions.  Neither Target nor any of its\n               -----------------------------                                  \nsubsidiaries is indebted to any director, officer, employee or agent of Target\nor any of its subsidiaries (except for amounts due as normal salaries and\nbonuses and in reimbursement of ordinary expenses), and no such person is\nindebted to Target or any of its subsidiaries.  There have been no transactions\nsince Target's inception that would require disclosure if Target were subject to\ndisclosure under Item 404 of Regulation S-K under the Securities Act.\n\n         2.13  Minute Books.  The minute books of Target and its subsidiaries \n               ------------  \nprovided to Acquiror contain a complete and accurate summary of all meetings of\ndirectors and shareholders or actions by written consent since the time of\nincorporation of Target and the respective subsidiaries through the date of this\nAgreement, and reflect all transactions referred to in such minutes accurately\nin all material respects.\n\n         2.14  Complete Copies of Materials.  Target has delivered true and \n               ---------------------------- \ncomplete copies of each document which has been requested by Acquiror or its\ncounsel in connection with their legal and accounting review of Target and its\nsubsidiaries.\n\n         2.15  Material Contracts.  All the material contracts and agreements \n               ------------------    \nto which Target is a party are listed in Section 2.15 of the Target Disclosure\nSchedule. With respect to each agreement so listed and with respect to each\nagreement listed in Section 2.10 of the Target Disclosure Schedule: (i) the\nagreement is legal, valid, binding and enforceable and in full force and effect\nwith respect to Target, and to Target's knowledge is legal, valid, binding,\nenforceable and in full force and effect with respect to each other party\nthereto, in either case subject to the effect of bankruptcy, insolvency,\nmoratorium or other similar laws affecting the enforcement of creditors' rights\ngenerally and except as the availability of equitable remedies may be limited by\n\n \ngeneral principles of equity; (ii) the agreement will continue to be legal,\nvalid, binding and enforceable and in full force and effect immediately\nfollowing the Closing in accordance with the terms thereof as in effect prior to\nthe Closing, subject to the effect of bankruptcy, insolvency, moratorium or\nother similar laws affecting the enforcement of creditors' rights generally and\nexcept as the availability of equitable remedies may be limited by general\nprinciples of equity; and (iii) neither the Target nor, to Target's knowledge,\nany other party, is in breach or default, and no event has occurred which with\nnotice or lapse of time would constitute a breach of default by Target or, to\nTarget's knowledge, by any such other party, or permit termination, modification\nor acceleration, under the agreement. Except as disclosed in Section 2.15 of the\nTarget Disclosure Schedule, Target is not a party to any material oral contract,\nagreement or other arrangement. \"Material Contract\" means any contract,\nagreement or commitment to which Target is a party (i) with expected receipts or\nexpenditures in excess of five thousand dollars ($5,000), (ii) requiring Target\nto indemnify any Person, (iv) granting any exclusive rights to any party, (iv)\nevidencing indebtedness for borrowed or loaned money of five thousand dollars\n($5,000) or more, including guarantees of such indebtedness, or (v) which, if\nbreached by Target in such a manner as would (A) permit any other party to\ncancel or terminate the same (with or without notice of passage of time) or (B)\nprovide a basis for any other party to claim money damages (either individually\nor in the aggregate with all other such claims under that contract) from Target\nor (C) give rise to a right of acceleration of any material obligation or loss\nof any material benefit under any such contract, agreement or commitment, would\nreasonably be expected to have a Material Adverse Effect on Target.\n\n         2.16  Accounts Receivable.    Subject to any reserves set forth in \n               -------------------\nthe Financial Statements, the accounts receivable shown on the Financial\nStatements are valid and genuine, have arisen solely out of bona fide sales and\ndeliveries of goods, performance of services, and other business transactions in\nthe ordinary course of business consistent with past practices in each case with\npersons other than affiliates, are not subject to any prior assignment, lien or\nsecurity interest and are not subject to valid defenses, set-offs or counter\nclaims. The accounts receivable will be collected in accordance with their terms\nat their recorded amounts, subject only to the reserve for doubtful accounts on\nthe Financial Statements.\n\n         2.17  Customers and Suppliers.    As of the date hereof, no customer \n               -----------------------    \nand no supplier of Target, has canceled or otherwise terminated, or made any\nwritten threat to Target to cancel or otherwise terminate its relationship with\nTarget or has at any time on or after the Target Balance Sheet, decreased\nmaterially its services or supplies to Target in the case of any such supplier,\nor its usage of the services or products of Target in the case of such customer,\nand to Target's knowledge, no such supplier or customer has indicated either\norally or in writing that it will cancel or otherwise terminate its relationship\nwith Target or to decrease materially its services or supplies to Target or its\nusage of the services or products of Target, as the case may be. Target has not\nknowingly breached, so as to provide a benefit to Target that was not intended\nby the parties, any agreement with, or engaged in any fraudulent conduct with\nrespect to, any customer or supplier of Target.\n\n         2.18  Employees and Consultants.  The Target Disclosure Schedule or a \n               ------------------------- \nletter delivered to Acquiror by Target contains a list of the names of all\nemployees (including, without limitation part-time employees and temporary\nemployees), leased employees, independent contractors and consultants of Target,\ntheir respective salaries or wages, other compensation and dates of employment\nand positions.\n\n \n         2.19  Title to Property.    Target and its subsidiaries have good and \n               ----------------- \nmarketable title to all of their respective properties, interests in properties\nand assets, real and personal, reflected in the Target Balance Sheet or acquired\nafter the Target Balance Sheet Date (except properties, interests in properties\nand assets sold or otherwise disposed of since the Target Balance Sheet Date in\nthe ordinary course of business), or with respect to leased properties and\nassets, valid leasehold interests therein, free and clear of all mortgages,\nliens, pledges, charges or encumbrances of any kind or character, except (i) the\nlien of current taxes not yet due and payable, (ii) such imperfections of title,\nliens and easements as do not and will not materially detract from or interfere\nwith the use of the properties subject thereto or affected thereby, or otherwise\nmaterially impair business operations involving such properties and (iii) liens\nsecuring debt which is reflected on the Target Balance Sheet. The plants,\nproperty and equipment of Target and its subsidiaries that are used in the\noperations of their businesses are in all material respects in good operating\ncondition and repair, subject to normal wear and tear. All properties used in\nthe operations of Target and its subsidiaries are reflected in the Target\nBalance Sheet to the extent generally accepted accounting principles require the\nsame to be reflected. All leases to which Target is a party are in full force\nand effect and are valid, binding and enforceable in accordance with their\nrespective terms, except as such enforceability may be limited by (i) bankruptcy\nlaws and other similar laws affecting creditors' rights generally and (ii)\ngeneral principles of equity, regardless of whether asserted in a proceeding in\nequity or at law. True and correct copies of all such leases have been provided\nto Acquiror. Target owns no real property.\n\n             2.20   Environmental Matters.\n                    --------------------- \n\n                    (a)  The following terms shall be defined as follows:\n\n                            (i)  \"Environmental Laws\" shall mean any applicable\n                                  ------------------ \nlocal governmental laws (including common laws), statutes, ordinances, codes,\nregulations, rules, policies, permits, licenses, certificates, approvals,\njudgments, decrees, orders, directives, or requirements that pertain to the\nprotection of the environment, protection of public health and safety, or\nprotection of worker health and safety, or that pertain to the handling, use,\nmanufacturing, processing, storage, treatment, transportation, discharge,\nrelease, emission, disposal, re-use, recycling, or other contact or involvement\nwith Hazardous Materials (defined below), including, without limitation, the\nfederal Comprehensive Environmental Response, Compensation and Liability Act of\n1980, 42 U.S.C. Section 9601, et seq., as amended (\"CERCLA\"), and the federal\n                                                    ------ \nResource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as\namended (\"RCRA\").\n          ----   \n\n                            (ii) \"Hazardous Materials\" shall mean any material, \n                                  -------------------                 \nchemical, compound, substance, mixture, or by-product that is identified,\ndefined, designated, listed, restricted or otherwise regulated under\nEnvironmental Laws (defined above) as a \"hazardous constituent,\" \"hazardous\nsubstance,\" \"hazardous material,\" \"acutely hazardous material,\" \"extremely\nhazardous material,\" \"hazardous waste,\" \"hazardous waste constituent,\" \"acutely\nhazardous waste,\" \"extremely hazardous waste,\" \"infectious waste,\" \"medical\nwaste,\" \"biomedical waste,\" \"pollutant,\" \"toxic pollutant,\" or \"contaminant,\" or\nany other formulation or terminology intended to classify or identify\nsubstances, constituents, materials, or wastes by reason of properties that are\ndeleterious to the environment, natural resources, worker health and safety, or\npublic health and safety, including, without limitation, ignitability,\ncorrosivity, reactivity, carcinogenicity, toxicity, and reproductive toxicity.\nThe term \"Hazardous Materials\" shall include, without limitation, any \"hazardous\nsubstances\" as defined, listed, designated or\n\n \nregulated under CERCLA, any \"hazardous wastes\" or \"solid wastes\" as defined,\nlisted, designated or regulated under RCRA, any asbestos or asbestos-containing\nmaterials, any polychlorinated biphenyls, and any petroleum or hydrocarbonic\nsubstance, fraction, distillate, or by-product.\n\n               (b)  Target is and has been in compliance with all Environmental\nLaws relating to the properties or facilities used, leased, or occupied by\nTarget at any time (collectively, \"Target's Facilities;\" such properties or\n                                   -------------------\nfacilities currently used, leased, or occupied by Target are defined herein as\n\"Target's Current Facilities\"), and no discharge, emission, release, leak,\n ---------------------------                                              \n     or spill of Hazardous Materials has occurred at any of Target's Facilities\n     which may or will give rise to liability of Target under Environmental\n     Laws.  To Target's knowledge, there are no Hazardous Materials (including,\n     but not limited to, asbestos) present in the surface waters, structures,\n     groundwaters, or soils of or beneath any of Target's Current Facilities.\n     To Target's knowledge, there neither are nor have been any aboveground or\n     underground storage tanks for Hazardous Materials at Target's Current\n     Facilities.  To Target's knowledge, no Target employee or other person has\n     claimed that Target is liable for alleged injury or illness resulting from\n     an alleged exposure to a Hazardous Material.  No civil, criminal or\n     administrative action, proceeding or investigation is pending against\n     Target, or to Target's knowledge, threatened against Target, with respect\n     to Hazardous Materials or Environmental Laws, and Target is not aware of\n     any facts or circumstances which could form the basis for assertion of a\n     claim against Target or which could form the basis for liability of Target,\n     regarding Hazardous Materials or regarding actual or potential non-\n     compliance with Environmental Laws.\n\n          2.21 Taxes.  As used in this Agreement, the terms \"Tax\" and,\n               -----                                         ---    \ncollectively, \"Taxes\" mean any and all federal, state and local taxes of any\n               -----\ncountry, assessments and other governmental charges, duties, impositions and\nliabilities, including taxes based upon or measured by gross receipts, income,\nprofits, sales, use and occupation, and value added, ad valorem, stamp transfer,\nfranchise, withholding, payroll, recapture, employment, excise and property\ntaxes, together with all interest, penalties and additions imposed with respect\nto such amounts and any obligations under any agreements or arrangements with\nany other person with respect to such amounts and including any liability for\ntaxes of a predecessor entity.\n\n               (a)  Target has prepared and timely filed all returns, estimates,\ninformation statements and reports required to be filed with any taxing\nauthority (\"Returns\") relating to any and all Taxes concerning or attributable\n            -------\nto Target or its operations with respect to Taxes for any period ending on or\nbefore the Closing Date and such Returns are true and correct in all material\nrespects and have been completed in accordance with applicable law.\n\n               (b)  Target, as of the Closing Date: (i) will have paid all Taxes\nshown to be payable on such Returns covered by Section 2.21(a) and (ii) will\nhave withheld with respect to its employees all Taxes required to be withheld.\n\n               (c)  There is no Tax deficiency outstanding or assessed or, to\nTarget's knowledge, proposed against Target that is not reflected as a liability\non the Target Balance Sheet nor has Target executed any agreements or waivers\nextending any statute of limitations on or extending the period for the\nassessment or collection of any Tax.\n\n               (d)  Target has no liabilities for unpaid Taxes that have not\nbeen accrued for or reserved on the Target Balance Sheet, whether asserted or\nunasserted, contingent or \n\n \notherwise and Target has no knowledge of any basis for the assertion of any such\nliability attributable to Target, its assets or operations.\n\n               (e)  Target is not a party to any tax-sharing agreement or\nsimilar arrangement with any other party, and Target has not assumed to pay any\nTax obligations of, or with respect to any transaction relating to, any other\nperson or agreed to indemnify any other person with respect to any Tax.\n\n               (f)  Target's Returns have never been audited by a government or\ntaxing authority, nor is any such audit in process or pending, and Target has\nnot been notified of any request for such an audit or other examination.\n\n               (g)  Target has never been a member of an affiliated group of\ncorporations filing a consolidated federal income tax return.\n\n               (h)  Target has disclosed to Acquiror (i) any Tax exemption, Tax\nholiday or other Tax sparing arrangement that Target has in any jurisdiction,\nincluding the nature, amount and lengths of such Tax exemption, Tax holiday or\nother Tax-sparing arrangement and (ii) any expatriate tax programs or policies\naffecting Target. Target is in compliance with all terms and conditions required\nto maintain such Tax exemption, Tax holiday or other Tax-sparing arrangement or\norder of any governmental entity and the consummation of the transactions\ncontemplated hereby will not have any adverse effect on the continuing validity\nand effectiveness of any such Tax exemption, Tax holiday or other Tax-sparing\narrangement or order.\n\n               (i)  Except as disclosed in Section 2.21(i) of the Target\nDisclosure Schedule, Target has made available to Acquiror copies of all Returns\nfiled for all periods since its inception.\n\n               (j)  Target has not filed any consent agreement under Section\n341(f) of the Code or agreed to have Section 341(f)(4) apply to any disposition\nof assets owned by Target.\n\n               (k)  Target has not been at any time a United States Real\nProperty Holding Corporation within the meaning of Section 897(c)(2) of the\nCode.\n\n               (l)  Target is not a party to any contract, agreement, plan or\narrangement, including but not limited to the provisions of this Agreement,\ncovering any employee or former employee of Target that, individually or\ncollectively, could give rise to the payment of any amount that would not be\ndeductible pursuant to Sections 280G, 464 or 162(m) of the Code by Target or\nMerger Sub as an expense under applicable law.\n\n          2.22  Employee Benefit Plans.\n                ---------------------- \n\n               (a)  Section 2.22 of the Target Disclosure Schedule contains a\ncomplete and accurate list of each plan, program, policy, practice, contract,\nagreement or other arrangement providing for employment, compensation,\nretirement, deferred compensation, loans, severance, separation, relocation,\nrepatriation, expatriation, visas, work permits, termination pay, performance\nawards, bonus, incentive, stock option, stock purchase, stock bonus, phantom\nstock, stock appreciation right, supplemental retirement, fringe benefits,\ncafeteria benefits, or other benefits, whether written or unwritten, including,\nwithout limitation, each \"employee benefit\n\n \nplan\" within the meaning of Section 3(3) of the Employee Retirement Income\nSecurity Act of 1974, as amended (\"ERISA\") which is or has been sponsored,\n                                   -----                                  \nmaintained, contributed to, or required to be contributed to by Target, any\nsubsidiary of Target and, with respect to any such plans which are subject to\nCode Section 401(a), any trade or business (whether or not incorporated) which\nis or, at any relevant time, was treated as a single employer with Target within\nthe meaning of Section 414(b), (c),(m) or (o) of the Code, (an \"ERISA\n                                                                -----\nAffiliate\") for the benefit of any person who performs or who has performed\n--------- \nservices for Target or with respect to which Target, any subsidiary, or ERISA\nAffiliate has or may have any liability (including, without limitation,\ncontingent liability) or obligation (collectively, the \"Target Employee Plans\").\n                                                        ---------------------\n\n               (b)  Documents  Target has furnished to Acquiror true and\n                    --------- \ncomplete copies of documents embodying each of the Target Employee Plans and\nrelated plan documents, including (without limitation) trust documents, group\nannuity contracts, plan amendments, insurance policies or contracts, participant\nagreements, employee booklets, administrative service agreements, summary plan\ndescriptions, compliance and nondiscrimination tests for the last three plan\nyears, standard COBRA forms and related notices, registration statements and\nprospectuses, and, to the extent still in its possession, any material employee\ncommunications relating thereto. With respect to each Target Employee Plan which\nis subject to ERISA reporting requirements, Target has provided copies of the\nForm 5500 reports filed for the last five plan years. Target has furnished\nAcquiror with the most recent Internal Revenue Service determination or opinion\nletter issued with respect to each such Target Employee Plan, and nothing has\noccurred since the issuance of each such letter which could reasonably be\nexpected to cause the loss of the tax-qualified status of any Target Employee\nPlan subject to Code Section 401(a).\n\n               (c)  Compliance  (i) Each Target Employee Plan has been\n                    ----------  \nadministered in accordance with its terms and in compliance with the\nrequirements prescribed by any and all statutes, rules and regulations\n(including ERISA and the Code), except as would not have, in the aggregate, a\nMaterial Adverse Effect, and Target and each subsidiary or ERISA Affiliate have\nperformed all material obligations required to be performed by them under, are\nnot in material respect in default under or violation of and have no knowledge\nof any material default or violation by any other party to, any of the Target\nEmployee Plans; (ii) any Target Employee Plan intended to be qualified under\nSection 401(a) of the Code has either obtained from the Internal Revenue Service\na favorable determination letter as to its qualified status under the Code,\nincluding all amendments to the Code which are currently effective, or has time\nremaining to apply under applicable Treasury Regulations or Internal Revenue\nService pronouncements for a determination or opinion letter and to make any\namendments necessary to obtain a favorable determination or opinion letter;\n(iii) none of the Target Employee Plans promises or provides retiree medical or\nother retiree welfare benefits to any person; (iv) there has been no \"prohibited\ntransaction,\" as such term is defined in Section 406 of ERISA or Section 4975 of\nthe Code, with respect to any Target Employee Plan: (v) none of Target, any\nsubsidiary or any ERISA Affiliate is subject to any liability or penalty under\nSections 4976 through 4980 of the Code or Title I of ERISA with respect to any\nTarget Employee Plan; (vi) all contributions required to be made by Target, any\nsubsidiary or ERISA Affiliate to any Target Employee Plan have been paid or\naccrued; (vii) with respect to each Target Employee Plan, no \"reportable event\"\nwithin the meaning of Section 4043 of ERISA (excluding any such event for which\nthe thirty (30) day notice requirement has been waived under the regulations to\nSection 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 or\nERISA has occurred; (viii) each Target\n\n \nEmployee Plan subject to ERISA, has prepared in good faith and timely filed all\nrequisite governmental reports (which were true and correct as of the date\nfiled) and has properly and timely filed and distributed or posted all notices\nand reports to employees required to be filed, distributed or posted with\nrespect to each such Target Employee Plan; (ix) no suit, administrative\nproceeding, action or other litigation has been brought, or to the knowledge of\nTarget is threatened, against or with respect to any such Target Employee Plan,\nincluding any audit or inquiry by the IRS or United States Department of Labor;\nand (x) there has been no amendment to, written interpretation or announcement\nby Target, any subsidiary or ERISA Affiliate which would materially increase the\nexpense of maintaining any Target Employee Plan above the level of expense\nincurred with respect to that Plan for the most recent fiscal year included in\nTarget's financial statements.\n\n               (d)  No Title IV or Multiemployer Plan  None of Target, any\n                    ---------------------------------       \nsubsidiary or any ERISA Affiliate has ever maintained, established, sponsored,\nparticipated in, contributed to, or is obligated to contribute to, or otherwise\nincurred any obligation or liability (including, without limitation, any\ncontingent liability) under any \"multiemployer plan\" (as defined in Section\n3(37) of ERISA) or to any \"pension plan\" (as defined in Section 3(2) of ERISA)\nsubject to Title IV of ERISA or Section 412 of the Code. None of Target, any\nsubsidiary or any ERISA Affiliate has any actual or potential withdrawal\nliability (including, without limitation, any contingent liability) for any\ncomplete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA)\nfrom any multiemployer plan.\n\n               (e)  COBRA, FMLA, HIPAA, CANCER RIGHTS  With respect to each\n                    ---------------------------------\nTarget Employee Plan, Target and each of its United States subsidiaries have\ncomplied with (i) the applicable health care continuation and notice provisions\nof the Consolidated Omnibus Budget Reconciliation Act of 1985 (\"COBRA\") and the\n                                                                -----          \nregulations thereunder or any state law governing health care coverage extension\nor continuation; (ii) the applicable requirements of the Family and Medical\nLeave Act of 1993 and the regulations thereunder; (iii) the applicable\nrequirements of the Health Insurance Portability and Accountability Act of 1996\n(\"HIPAA\"); and (iv) the applicable requirements of the Cancer Rights Act of\n  -----                                        \n1998, except to the extent that such failure to comply would not in the\naggregate have a Material Adverse Effect. Target has no material unsatisfied\nobligations to any employees, former employees, or qualified beneficiaries\npursuant to COBRA, HIPAA, or any state law governing health care coverage\nextension or continuation.\n\n               (f)  Effect of Transaction  The consummation of the transactions\n                    ---------------------\ncontemplated by this Agreement will not (i) entitle any current or former\nemployee or other service provider of Target, any subsidiary or any ERISA\nAffiliate to severance benefits or any other payment (including, without\nlimitation, unemployment compensation, golden parachute, bonus or benefits under\nany Target Employee Plan), except as expressly provided in this Agreement or\n(ii) accelerate the time of payment or vesting of any such benefits or increase\nthe amount of compensation due any such employee or service provider. No benefit\npayable or which may become payable by Target pursuant to any Target Employee\nPlan or as a result of or arising under this Agreement shall constitute an\n\"excess parachute payment\" (as defined in Section 280G(b)(1) of the Code) which\nis subject to the imposition of an excise Tax under Section 4999 of the Code or\nthe deduction for which would be disallowed by reason of Section 280G of the\nCode. Each Target Employee Plan can be amended, terminated or otherwise\ndiscontinued after the Effective Time in accordance with its terms, without\nmaterial liability to \n\n \nAcquirer or Target (other than ordinary administration expenses typically\nincurred in a termination event).\n\n          2.23  Employee Matters.  Target is in compliance with all currently\n                ----------------    \napplicable laws and regulations respecting terms and conditions of employment\nincluding, without limitation, applicant and employee background checking,\nimmigration laws, discrimination laws, verification of employment eligibility,\nemployee leave laws, classification of workers as employees and independent\ncontractors, wage and hour laws, and occupational safety and health laws. There\nare no proceedings pending or, to Target's knowledge, reasonably expected or\nthreatened, between Target, on the one hand, and any or all of its current or\nformer employees, on the other hand, including, but not limited to, any claims\nfor actual or alleged harassment or discrimination based on race, national\norigin, age, sex, sexual orientation, religion, disability, or similar tortious\nconduct, breach of contract, wrongful termination, defamation, intentional or\nnegligent infliction of emotional distress, interference with contract or\ninterference with actual or prospective economic disadvantage. There are no\nclaims pending, or, to Target's knowledge, reasonably expected or threatened,\nagainst Target under any workers' compensation or long term disability plan or\npolicy. Target has no material unsatisfied obligations to any employees, former\nemployees, or qualified beneficiaries pursuant to COBRA, HIPAA, or any state law\ngoverning health care coverage extension or continuation. Target is not a party\nto any collective bargaining agreement or other labor union contract, nor does\nTarget know of any activities or proceedings of any labor union to organize its\nemployees. Target has provided all employees with all wages, benefits,\nrelocation benefits, stock options, bonuses and incentives, and all other\ncompensation which became due and payable through the date of this Agreement.\n\n          2.24  Insurance.  Target has policies of insurance and bonds of the\n                ---------             \ntype and in amounts customarily carried by persons conducting businesses or\nowning assets similar to those of Target. There is no material claim pending\nunder any of such policies or bonds as to which coverage has been questioned,\ndenied or disputed by the underwriters of such policies or bonds. All premiums\ndue and payable under all such policies and bonds have been paid and Target are\notherwise in compliance with the terms of such policies and bonds. Target has no\nknowledge of any threatened termination of, or material premium increase with\nrespect to, any of such policies. Each such policy or bond is summarized in\nSection 2.24 of the Target Disclosure Schedule.\n\n          2.25  Compliance With Laws.  Target has complied with, is not in\n                --------------------             \nviolation of and has not received any notices of violation with respect to any\nfederal state, local or foreign statute, law or regulation with respect to the\nconduct of its business, or the ownership or operation of its business such that\na failure by Target to so comply would have a Material Adverse Effect on Target.\n\n          2.26  Brokers' and Finders' Fee.  No broker, finder or investment\n                ------------------------- \nbanker is entitled to brokerage or finders' fees or agents' commissions or\ninvestment bankers' fees or any similar charges in connection with the Merger,\nthis Agreement or any transaction contemplated hereby.\n\n          2.27  Representations Complete.  None of the representations or\n                ------------------------  \nwarranties made by Target or Shareholder herein or in any Schedule or Exhibit\nhereto, including the Target Disclosure Schedule, or certificate furnished by\nTarget pursuant to this Agreement or any written statement furnished to Acquiror\npursuant hereto or in connection with the transactions contemplated hereby, when\nall such documents are read together in their entirety, contain, or will\n\n \ncontain at the Effective Time any untrue statement of a material fact, or omits\nor will omit at the Effective Time to state any material fact necessary in order\nto make the statements contained herein or therein, in the light of the\ncircumstances under which made, not misleading; provided, however, that for\npurposes of this representation, any document attached hereto and any document\nspecifically referenced in the Target Disclosure Schedule as a \"Superseding\nDocument\" (even if not attached hereto) that provides information inconsistent\nwith or in addition to any other written statement furnished to Acquiror in\nconnection with the transaction contemplated hereby, shall be deemed to\nsupersede any other document or written statement furnished to Acquiror with\nrespect to such inconsistent or additional information.\n\n     3.   Representations and Warranties of Acquiror and Merger Sub.  Acquiror \n          ---------------------------------------------------------\nand Merger Sub represent and warrant to Target and the Target Shareholders that\nthe statements contained in this Section 3 are true and correct, except as\ndisclosed in a document of even date herewith and delivered by Acquiror to\nTarget on the date hereof referring to the representations and warranties in\nthis Agreement (the \"Acquiror Disclosure Schedule\").  The Acquiror Disclosure\n                     ----------------------------\nSchedule will be arranged in paragraphs corresponding to the lettered and\nnumbered paragraphs contained in this Section 3, and the disclosure in any such\nnumbered and lettered section of the Acquiror Disclosure Schedule shall qualify\nonly the corresponding section in this Section 3 (except to the extent\ndisclosure in any numbered and lettered section of the Acquiror Disclosure\nSchedule is specifically cross-referenced in another numbered and lettered\nsection of the Acquiror Disclosure Schedule.\n\n          3.1  Organization, Standing and Power.  Each of Acquiror and Merger\n               --------------------------------          \nSub is a corporation duly organized, validly existing and in good standing under\nthe laws of its jurisdiction of organization. Each of Acquiror and Merger Sub\nhas the corporate power to own its properties and to carry on its business as\nnow being conducted and as proposed to be conducted and is duly qualified to do\nbusiness and is in good standing in each jurisdiction in which the failure to be\nso qualified and in good standing would have a Material Adverse Effect on\nAcquiror. Acquiror has delivered a true and correct copy of the Certificate of\nIncorporation and Bylaws or other charter documents, as applicable, of Acquiror\nand Merger Sub, each as amended to date, to Target. Neither Acquiror nor Merger\nSub is in violation of any of the provisions of its Certificate of Incorporation\nor Bylaws or equivalent organizational documents.\n\n          3.2  Authority.  Acquiror and Merger Sub have all requisite corporate\n               ---------\npower and authority to enter into this Agreement and to consummate the\ntransactions contemplated hereby. The execution and delivery of this Agreement\nand the consummation of the transactions contemplated hereby have been, or will\nhave been by the Closing, duly authorized by all necessary corporate action on\nthe part of Acquiror and Merger Sub. This Agreement has been duly executed and\ndelivered by Acquiror and Merger Sub and constitutes the valid and binding\nobligations of Acquiror and Merger Sub. The execution and delivery of this\nAgreement do not and the consummation of the transactions contemplated hereby\nwill not conflict with, or result in any violation of, or default under (with or\nwithout notice or lapse of time, or both), or give rise to a right of\ntermination, cancellation or acceleration of any material obligation or loss of\na material benefit under (i) any provision of the Certificate of Incorporation\nor Bylaws of Acquiror or any of its subsidiaries, as amended, or (ii) any\nmaterial mortgage, indenture, lease, contract or other agreement or instrument,\npermit, concession, franchise, license, judgment, order, decree, statute, law,\nordinance, rule or regulation applicable to Acquiror or any of its\n\n \nsubsidiaries or their properties or assets.  No consent, approval, order or\nauthorization of or registration, declaration or filing with, any Governmental\nEntity, is required by or with respect to Acquiror or any of its subsidiaries in\nconnection with the execution and delivery of this Agreement by Acquiror and\nMerger Sub or the consummation by Acquiror and Merger Sub of the transactions\ncontemplated hereby, except for (i) the filing of the Articles of Merger,\ntogether with the required officers' certificates, as provided in Section 1.2,\n(ii) the filing of a Form D with the Securities and Exchange Commission in\naccordance with Regulation D following the Effective Time, (iii) the filing of a\nForm 8-K with the Securities and Exchange Commission (\"SEC\") and National\n                                                       ---\nAssociation of Securities Dealers (\"NASD\") within 15 days after the Closing\n                                    ---- \nDate, (iv) the filing with the NASDAQ National Market of a Notification Form for\nListing of Additional Shares, (v) any filings as may be required under\napplicable state securities laws and the securities laws of any foreign country,\nand (vi) such other consents, authorizations, filings, approvals and\nregistrations which, if not obtained or made, would not have a Material Adverse\nEffect on Acquiror and would not prevent, materially alter or delay any of the\ntransactions contemplated by this Agreement.\n\n          3.3  SEC Documents: Financial Statements.  Acquiror has made available\n               -----------------------------------          \nto Target or its counsel through EDGAR a true and complete copy of each\nstatement, report, registration statement (with the prospectus in the form filed\npursuant to Rule 424(b) of the Securities Act), definitive proxy statement, and\nother filing filed with the SEC by Acquiror since April 19, 1999, and, prior to\nthe Effective Time, Acquiror will have made available to Target or its counsel\nthrough EDGAR true and complete copies of any additional documents filed with\nthe SEC by Acquiror prior to the Effective Time (collectively, the \"Acquiror SEC\n                                                                    ------------\nDocuments\").  As of their respective filing dates, the Acquiror SEC Documents\n---------                                                                    \ncomplied in all material respects with the requirements of the Securities\nExchange Act of 1934, as amended (the \"Exchange Act\") and the Securities Act and\n                                       ------------                             \nnone of the Acquiror SEC Documents contained any untrue statement of a material\nfact or omitted to state a material fact required to be stated therein or\nnecessary to make the statements made therein, in light of the circumstances in\nwhich they were made, not misleading, except to the extent corrected by a\nsubsequently filed Acquiror SEC Document prior to the date hereof.  The\nfinancial statements of Acquiror, including the notes thereto, included in the\nAcquiror SEC Documents (the \"Acquiror Financial Statements\"), complied in all\n                             -----------------------------                   \nmaterial respects with applicable accounting requirements and with the published\nrules and regulations of the SEC with respect thereto as of their respective\ndates, and have been prepared in accordance with generally accepted accounting\nprinciples applied on a basis consistent throughout the periods indicated and\nconsistent with each other (except as may be indicated in the notes thereto or,\nin the case of unaudited statements included in Quarterly Reports on Form 10-Qs,\nas permitted by Form 10-Q of the SEC).  The Acquiror Financial Statements fairly\npresent in all material respects the consolidated financial condition and\noperating results of Acquiror and its subsidiaries at the dates and during the\nperiods indicated therein (subject, in the case of unaudited statements, to\nnormal, recurring year-end adjustments).  There has been no change in Acquiror\naccounting policies except as described in the notes to the Acquiror Financial\nStatements.\n\n          3.4  Capital Structure.  The authorized capital stock of Acquiror\n               -----------------\nconsists of 50,000,000 shares of Common Stock, $.001 par value, and 5,000,000\nshares of Preferred Stock, no par value, of which there were issued and\noutstanding as of the date of this Agreement approximately twelve million five\nhundred forty six thousand (12,546,000) shares of Common Stock and no shares of\nPreferred Stock. There are no other outstanding shares of capital stock or\nvoting securities of Acquiror other than shares of Acquiror Common Stock issued\nafter March 31, 2000, upon the exercise of options issued under Acquiror's 1995\nStock Option Plan (the \"Acquiror Stock Option Plan\"), or shares of Acquiror\n                        -------------------------- \nCommon Stock issued under Acquiror's \n\n \n1999 Employee Stock Purchase Plan (the \"Acquiror ESPP\").  The authorized capital\n                                        -------------\nstock of Merger Sub consists of 1,000 shares of Common Stock, all of which are\nissued and outstanding and are held by Acquiror. All outstanding shares of\nAcquiror and Merger Sub have been duly authorized, validly issued, fully paid\nand are nonassessable. The shares of Acquiror Common Stock to be issued pursuant\nto the Merger will be duly authorized, validly issued, fully paid, and\nnonassessable.\n\n          3.5  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.\n\n          3.6  Representations Complete.  None of the representations or\n               ------------------------ \nwarranties made by Acquiror or Merger Sub herein or in any Schedule hereto,\nincluding the Acquiror Disclosure Schedule, or certificate furnished by Acquiror\nor Merger Sub pursuant to this Agreement, or the Acquiror SEC Documents, or any\nwritten statement furnished to Target pursuant hereto or in connection with the\ntransactions contemplated hereby, when all such documents are read together in\ntheir entirety, contains or will contain at the Effective Time any untrue\nstatement of a material fact or omits or will omit at the Effective Time to\nstate any material fact necessary in order to make the statements contained\nherein or therein, in the light of the circumstances under which made, not\nmisleading; provided, however, that for purposes of this representation, any\ndocument attached hereto and any document specifically referenced in the\nAcquiror Disclosure Schedule as a \"Superseding Document\" (even if not attached\n                                   --------------------                       \nhereto) that provides information inconsistent with or in addition to any other\nwritten statement furnished to Target in connection with the transactions\ncontemplated hereby, shall be deemed to supersede any other document or written\nstatement furnished to Target with respect to such inconsistent or additional\ninformation.\n\n     4.   Conduct Prior To The Effective Time.\n          -----------------------------------   \n\n          4.1  Conduct of Business of Target.  During the period from the date\n               ----------------------------- \nof this Agreement and continuing until the earlier of the termination of this\nAgreement or the Effective Time, Target agrees (except to the extent expressly\ncontemplated by this Agreement or as consented to in writing by the other), to\ncarry on its and its subsidiaries' business in the usual regular and ordinary\ncourse in substantially the same manner as heretofore conducted; to pay and to\ncause its subsidiaries to pay debts and taxes when due subject (i) to good faith\ndisputes over such debts or taxes, and (ii) in the case of taxes of Target or\nany of its subsidiaries, to Acquiror's consent to the filing of material tax\nreturns if applicable; to pay or perform other obligations when due, and to use\nall reasonable efforts to preserve intact its present business organizations,\nkeep available the services of its and its subsidiaries' present officers and\nkey employees and preserve its and its subsidiaries' relationships with\ncustomers, suppliers, distributors, licensors, licensees, and others having\nbusiness dealings with it or its subsidiaries, to the end that its and its\nsubsidiaries' goodwill and ongoing businesses shall be unimpaired at the\nEffective Time. Each of Target and Acquiror agrees to promptly notify the other\nof (x) any event or occurrence not in the ordinary course of its or its\nsubsidiaries' business, and of any event which could have a Material Adverse\nEffect, and (y) any change in its capitalization as set forth in Sections 2.5\nand 3.4, respectively. Without limiting the foregoing, except as expressly\ncontemplated by this Agreement or the Target Disclosure Schedule, Target shall\nnot do, cause or permit any of the following, or allow, cause or permit any of\nits subsidiaries to do, cause or permit any of the following, without the prior\nwritten consent of Acquiror:\n\n \n               (a)  Charter Documents.  Cause or permit any amendments to its\n                    -----------------      \nArticles of Incorporation or Bylaws;\n\n               (b)  Dividends; Changes in Capital Stock.  Declare or pay any\n                    -----------------------------------\ndividends on or make any other distributions (whether in cash, stock or\nproperty) in respect of any of its capital stock, or split, combine or\nreclassify any of its capital stock or issue or authorize the issuance of any\nother securities in respect of, in lieu of or in substitution for shares of its\ncapital stock, or repurchase or otherwise acquire, directly or indirectly, any\nshares of its capital stock except from former employees, directors and\nconsultants in accordance with agreements providing for the repurchase of shares\nin connection with any termination of service to it or its subsidiaries;\n\n               (c)  Options, Warrants, Etc.  Grant any options, warrants, or\n                    ---------------------- \nother rights to purchase Target Common Stock;\n\n               (d)  Material Contracts.  Enter into any material contract or\n                    ------------------     \ncommitment, or violate, amend or otherwise modify or waive any of the terms of\nany of its material contracts, other than in the ordinary course of business\nconsistent with past practice;\n\n               (e)  Issuance of Securities.  Issue, deliver or sell or authorize\n                    ----------------------  \nor propose the issuance, delivery or sale of, or purchase or propose the\npurchase of, any shares of its capital stock or securities convertible into, or\nsubscriptions, rights, warrants or options to acquire, or other agreements or\ncommitments of any character obligating it to issue any such shares or other\nconvertible securities other than the issuance of shares of its Common Stock\npursuant to the exercise of stock options, warrants or other rights therefore\noutstanding as of the date of this Agreement;\n\n               (f)  Proprietary Rights and Literary Rights.  Transfer to any\n                    --------------------------------------\nperson or entity any rights to its Proprietary Rights and Literary Rights other\nthan in the ordinary course of business consistent with past practice;\n\n               (g)  Exclusive Rights.  Enter into or amend any agreements\n                    ----------------         \npursuant to which any other party is granted exclusive marketing or other\nexclusive rights of any type or scope with respect to any of Target products or\nTarget Proprietary Rights and Literary Rights;\n\n               (h)  Dispositions.  Sell, lease, license or otherwise dispose of\n                    ------------   \nor encumber any of its properties or assets which are material individually or\nin the aggregate, to its and its parent's\/subsidiaries' business, taken as a\nwhole, except in the ordinary course of business, consistent with past practice;\n\n               (i)  Indebtedness.  Incur any indebtedness for borrowed money or\n                    ------------   \nguarantee any such indebtedness or issue or sell any debt securities or\nguarantee any debt securities of others;\n\n               (j)  Agreements.  Enter into, terminate or amend, in a manner\n                    ----------\nwhich will adversely affect the business of Target (i) any agreement involving\nan obligation to pay or the right to receive $10,000 or more, (ii) any agreement\nrelating to the license, transfer or other disposition or acquisition of\nProprietary Rights and Literary Rights or rights to market or sell Target\nProducts, or (iii) any other agreement which is material to the business or\nprospects of Target or which is or would be a Material Contract;\n\n \n               (k)  Payment of Obligations.  Pay, discharge or satisfy any\n                    ---------------------- \nclaim, liability or obligation (absolute, accrued, asserted or unasserted,\ncontingent or otherwise) arising other than in the ordinary course of business,\nother than the payment, discharge or satisfaction of liabilities reflected or\nreserved against in the Target Financial Statements;\n\n\n               (l)  Capital Expenditures.  Make any capital expenditures,\n                    --------------------   \ncapital additions or capital improvements except in the ordinary course of\nbusiness and consistent with past practice;\n\n               (m)  Insurance.  Materially reduce the amount of any material\n                    --------- \ninsurance coverage provided by existing insurance policies;\n\n               (n)  Termination or Waiver.  Terminate or waive any right of\n                    ---------------------      \nsubstantial value, other than in the ordinary course of business;\n\n               (o)  Employee Benefit Plans; New Hires; Pay Increases.  Amend any\n                    ------------------------------------------------  \nTarget Employee Plan or adopt any plan that would constitute a Target Employee\nPlan or hire any new officer level employee, pay any special bonus, special\nremuneration or special noncash benefit (except payments and benefits made\npursuant to written agreements outstanding on the date hereof, or increase the\nbenefits, salaries or wage rates of its employees except in the ordinary course\nof business in accordance with its standard past practice;\n\n               (p)  Severance Arrangements.  Grant any severance or termination\n                    ----------------------   \npay or benefits (i) to any director or officer or (ii) to any other employee\nexcept payments made pursuant to written agreements outstanding on the date\nhereof and disclosed on the Target Disclosure Schedule;\n\n               (q)  Lawsuits.  Commence a lawsuit other than (i) for the routine\n                    --------  \ncollection of bills, (ii) in such cases where it in good faith determines that\nfailure to commence suit would result in the material impairment of a valuable\naspect of its business, provided that it consults with Acquiror prior to the\nfiling of such a suit, or (iii) for a breach of this Agreement;\n\n               (r)  Acquisitions.  Acquire or agree to acquire by merging or\n                    ------------\nconsolidating with, or by purchasing a substantial portion of the assets of, or\nby any other manner, any business or any corporation, partnership, association\nor other business organization or division thereof or otherwise acquire or agree\nto acquire any assets which are material individually or in the aggregate, to\nits business, taken as a whole;\n\n               (s)  Taxes.  Other than in the ordinary course of business, make\n                    -----     \nor change any material election in respect of taxes, adopt or change any\naccounting method in respect of taxes, file any material tax return or any\namendment to a material tax return, enter into any closing agreement, settle any\nmaterial claim or assessment in respect of taxes, or consent to any extension or\nwaiver of the limitation period applicable to any material claim or assessment\nin respect of taxes;\n\n               (t)  Revaluation.  Revalue any of its assets, including without\n                    -----------    \nlimitation writing down the value of inventory or writing off notes or accounts\nreceivable other than in the ordinary course of business; or\n\n \n               (u)  Other.  Take or agree in writing or otherwise to take, any\n                    -----     \nof the actions described in Sections 4.1(a) through (t) above, or any action\nwhich would cause a material breach of its representations or warranties\ncontained in this Agreement or prevent it from materially performing or cause it\nnot to materially perform its covenants hereunder.\n\n          4.2  No Solicitation.\n               ---------------\n\n               (a)  From and after the date of this Agreement until the\nEffective Time, Target shall not, directly or indirectly through any officer,\ndirector, employee, representative or agent of Target or otherwise, (i) solicit,\ninitiate, or encourage any inquiries or proposals that constitute, or could\nreasonably be expected to lead to, a proposal or offer for a merger,\nconsolidation, share exchange, business combination, sale of all or\nsubstantially all assets, sale of shares of capital stock or similar\ntransactions involving Target other than the transactions contemplated by this\nAgreement (any of the foregoing inquiries or proposals being referred to in this\nAgreement as an \"Acquisition Proposal\"), (ii) engage or participate in\n                 -------------------- \nnegotiations or discussions concerning, or provide any non-public information to\nany person or entity relating to, any Acquisition Proposal, or (iii) agree to,\nenter into, accept, approve or recommend any Acquisition Proposal. Target\nrepresents and warrants that it has the legal right to terminate any pending\ndiscussions or negotiations relating to an Acquisition Proposal without payment\nof any fee or other penalty.\n\n               (b)  Target shall notify Acquiror immediately (and no later than\n24 hours) after receipt by Target (or its advisors) of any Acquisition Proposal\nor any request for nonpublic information in connection with an Acquisition\nProposal or for access to the properties, books or records of Target by any\nperson or entity that informs Target that it is considering making, or has made,\nan Acquisition Proposal. Such notice shall be made orally and in writing and\nshall indicate in reasonable detail the identity of the offeror and the terms\nand conditions of such proposal, inquiry or contact.\n\n     5.   Additional Agreements.\n          ---------------------\n\n          5.1  Approval of Shareholders.   Each of the Target Shareholders\n               ------------------------\nagrees, upon Target's request, to execute a written consent of shareholders\napproving the Merger or to vote in favor of the Merger at any meeting of the\nTarget Shareholders called for that purpose.\n\n          5.2  Restricted Securities.  The parties hereto acknowledge and agree\n               ---------------------\nthat the shares of Acquiror Common Stock issuable to the Target Shareholders\npursuant to Section 1.6 hereof, shall constitute \"restricted securities\" within\nthe meaning of the Securities Act. The certificates of Acquiror Common Stock\nshall bear the legends set forth in Section 1.6(g). It is acknowledged and\nunderstood that Acquiror is relying on certain written representations made by\neach shareholder of Target.\n\n          5.3   Access to Information.  Target shall afford Acquiror and its\n                ---------------------\naccountants, counsel and other representatives, reasonable access during normal\nbusiness hours during the period prior to the Effective Time to (i) all of\nTarget's properties, personnel books, contracts, commitments and records, and\n(ii) all other information concerning the business, properties and personnel of\nTarget as Acquiror may reasonably request.\n\n               (a)  Subject to compliance with applicable law, from the date\nhereof until the Effective Time, each of Acquiror and Target shall confer on a\nregular and frequent basis with\n\n \none or more representatives of the other party to report operational matters of\nmateriality and the general status of ongoing operations.\n\n               (b)  No information or knowledge obtained in any investigation\npursuant to this Section 5.3 shall affect or be deemed to modify any\nrepresentation or warranty contained herein or the conditions to the obligations\nof the parties to consummate the Merger.\n\n          5.4  Confidentiality.  The parties acknowledge that Acquiror and\n               ---------------\nTarget have previously executed a non-disclosure agreement dated February 22,\n2000 (the \"Confidentiality Agreement\"), which Confidentiality Agreement is\n           -------------------------\nhereby incorporated herein by reference and shall continue in full force and\neffect in accordance with its terms.\n\n          5.5  Public Disclosure.  Unless otherwise permitted by this Agreement,\n               -----------------\nAcquiror and Target shall consult with each other before issuing any press\nrelease or otherwise making any public statement or making any other public (or\nnon-confidential) disclosure (whether or not in response to an inquiry)\nregarding the terms of this Agreement and the transactions contemplated hereby,\nand neither shall issue any such press release or make any such statement or\ndisclosure without the prior approval of the other (which approval shall not be\nunreasonably withheld), except as may be required by law or by obligations\npursuant to any listing agreement with any national securities exchange or with\nthe NASD.\n\n          5.6   Regulatory Approval: Further Assurances.\n                ---------------------------------------\n\n               (a)  Each party shall use all reasonable efforts to file, as\npromptly as practicable after the date of this Agreement, all notices, reports\nand other documents required to be filed by such party with any Governmental\nBody with respect to the Merger and the other transactions contemplated by this\nAgreement, and to submit promptly any additional information requested by any\nsuch Governmental Body. Acquiror and Target shall respond as promptly as\npracticable to any inquiries or requests received from any state attorney\ngeneral or other Governmental Body in connection with antitrust or related\nmatters. Each of Acquiror and Target shall (1) give the other party prompt\nnotice of the commencement of any Legal Proceeding by or before any Governmental\nBody with respect to the Merger or any of the other transactions contemplated by\nthis Agreement, (2) keep the other party informed as to the status of any such\nLegal Proceeding, and (3) promptly inform the other party of any communication\nto or from any Governmental Body regarding the Merger. Acquiror and Target will\nconsult and cooperate with one another, and will consider in good faith the\nviews of one another, in connection with any analysis, appearance, presentation,\nmemorandum, brief, argument, opinion or proposal made or submitted in connection\nwith any Legal Proceeding under any federal or state antitrust or fair trade\nlaw. In addition, except as may be prohibited by any Governmental Body or by any\nLegal Requirement, in connection with any Legal Proceeding under any federal or\nstate antitrust or fair trade law or any other similar Legal Proceeding, each of\nAcquiror and Target will permit authorized Representatives of the other party to\nbe present at each meeting or conference relating to any such Legal Proceeding\nand to have access to and be consulted in connection with any document, opinion\nor proposal made or submitted to any Governmental Body in connection with any\nsuch Legal Proceeding.\n\n               (b)  Subject to Section 5.6(c), Acquiror and Target shall use all\nreasonable efforts to take, or cause to be taken, all actions necessary to\neffectuate the Merger and make effective the other transactions contemplated by\nthis Agreement. Without limiting the generality\n\n \nof the foregoing, but subject to Section 5.6(c), each party to this Agreement\n(i) shall make all filings (if any) and give all notices (if any) required to be\nmade and given by such party in connection with the Merger and the other\ntransactions contemplated by this Agreement, (ii) shall use all reasonable\nefforts to obtain each consent (if any) required to be obtained (pursuant to any\napplicable legal requirement or contract, or otherwise) by such party in\nconnection with the Merger or any of the other transactions contemplated by this\nAgreement, and (iii) shall use all reasonable efforts to lift any restraint,\ninjunction or other legal bar to the Merger. Target shall promptly deliver to\nAcquiror a copy of each such filing made, each such notice given and each such\nconsent obtained by Target during the period prior to the Effective Time. Each\nparty hereto, at the reasonable request of another party hereto, shall execute\nand deliver such other instruments and do and perform such other acts and things\nas may be necessary or desirable for effecting completely the consummation of\nthis Agreement and the transactions contemplated hereby.\n\n               (c)  Notwithstanding anything to the contrary contained in this\nAgreement, Acquiror shall not have any obligation under this Agreement: (i) to\ndispose or transfer or cause any of its subsidiaries to dispose of or transfer\nany assets, or to commit to cause Target to dispose of any assets; (ii) to\ndiscontinue or cause any of its subsidiaries to discontinue offering any product\nor service, or to commit to cause Target to discontinue offering any product or\nservice; (iii) to license or otherwise make available, or cause any of its\nsubsidiaries to license or otherwise make available, to any person, any\ntechnology, software or other Proprietary Rights and Literary Rights, or to\ncommit to cause Target to license or otherwise make available to any person any\ntechnology, software or other Proprietary Rights and Literary Rights; (iv) to\nhold separate or cause any of its subsidiaries to hold separate any assets or\noperations (either before or after the Closing Date), or to commit to cause\nTarget to hold separate any assets or operations; or (v) to make or cause any of\nits Subsidiaries to make any commitment (to any Governmental Body or otherwise)\nregarding its future operations or the future operations of Target.\n\n          5.7  Legal Requirements.  Each of Acquiror, Merger Sub and Target will\n               ------------------             \ntake all reasonable actions necessary to comply promptly with all legal\nrequirements which may be imposed on them with respect to the consummation of\nthe transactions contemplated by this Agreement and will promptly cooperate with\nand furnish information to any party hereto necessary in connection with any\nsuch requirements imposed upon such other party in connection with the\nconsummation of the transactions contemplated by this Agreement and will take\nall reasonable actions necessary to obtain (and will cooperate with the other\nparties hereto in obtaining) any consent, approval, order or authorization of or\nany registration, declaration or filing with, any Governmental Entity or other\nperson, required to be obtained or made in connection with the taking of any\naction contemplated by this Agreement.\n\n          5.8  Blue Sky Laws.  Acquiror shall take such steps as may be\n               -------------  \nnecessary to comply with the securities and blue sky laws of all jurisdictions\nwhich are applicable to the issuance of the Acquiror Common Stock in connection\nwith the Merger. Target shall use its commercially reasonable efforts to assist\nAcquiror as may be necessary to comply with the securities and blue sky laws of\nall jurisdictions which are applicable in connection with the issuance of\nAcquiror Common Stock in connection with the Merger.\n\n          5.9  Nonaccredited Stockholders.  Prior to the Closing, Target shall\n               --------------------------             \nnot take any action, including the granting of employee stock options, that\nwould cause the number of Target stockholders who are not \"accredited investors\"\npursuant to Regulation D promulgated under the \n\n \nSecurities Act of 1933, as amended, to increase to more than 35 during the term\nof this Agreement.\n\n          5.10  Listing of Additional Shares.  Prior to the Effective Time,\n                ----------------------------    \nAcquiror shall file with the NASDAQ Stock Market a Notification Form for Listing\nof Additional Shares with respect to the shares of Acquiror Common Stock\nissuable upon conversion of the Target Common Stock in the Merger.\n\n          5.11  Employees.  Target will use reasonable commercial efforts in\n                --------- \nconsultation with Acquiror to retain existing employees of Target through the\nEffective Time and following the Merger.\n\n          5.12  Expenses.  Whether or not the Merger is consummated, all costs\n                --------  \nand expenses incurred in connection with this Agreement and the transactions\ncontemplated hereby shall be paid by the party incurring such expense.\n\n          5.13  Registration of Shares Issued in the Merger.  The Target\n                -------------------------------------------\nShareholders shall be entitled to rights to require Acquiror to cause the Shares\nof Acquiror Common Stock issued in the Merger, including any and all Holdback\nShares (the \"Registrable Securities\"), to be registered under the Securities Act\n             -----------------------\nso as to permit the resale thereof as set forth in the Registration Rights\nAgreement attached hereto as Exhibit C.\n                             --------- \n\n          5.14  Audited Financial Statements.  Target Financial Statements for\n                ----------------------------             \nthe period from inception through March 31, 2000 shall be audited and reported\non by a reputable independent public accounting firm with standing to appear\nbefore the Securities and Exchange Commission, and such Target Financial\nStatements shall be delivered to Acquiror within sixty (60) days of the date\nhereof.\n\n          5.15  Tax Consequences.  The Target Shareholders are responsible or\n                ----------------             \nliable for any tax consequences to them related to their receipt of the Merger\nConsideration. Target and the Target Shareholders will look solely to, and rely\nupon, their own advisors with respect to the tax consequences to them of the\ntransactions contemplated by this Agreement. Notwithstanding the foregoing,\nAcquiror agrees to treat the Merger as a reorganization under the provisions of\nSection 368 of the Internal Revenue Code of 1986, as amended, on its federal and\nstate income tax returns for the tax year beginning April 1, 2000; provided,\n                                                                   -------- \nhowever, that it reasonably believes that the Merger meets the requirements\n-------                                                                    \ntherefor; and provided, further, that Acquiror shall be entitled to amend such\n              --------  -------                                               \ntax returns in the future in the event that it reasonably determines, following\nconsultation with its tax advisors, that the Merger no longer meets the\nrequirements therefor.\n\n     6.   Conditions to the Merger.\n          ------------------------   \n\n          6.1  Conditions to Obligations of Each Party to Effect the Merger. The\n               ------------------------------------------------------------\nrespective obligations of each party to this Agreement to consummate and effect\nthis Agreement and the transactions contemplated hereby shall be subject to the\nsatisfaction at or prior to the Effective Time of each of the following\nconditions, any of which may be waived, in writing, by agreement of all the\nparties hereto:\n\n               (a)  Shareholder Approval.  This Agreement and the Merger shall\n                    --------------------       \nbe approved and adopted by the unanimous vote or written consent of the Target\nShareholders.\n\n \n               (b)  No Injunctions or Restraints; Illegality.  No temporary\n                    ----------------------------------------     \nrestraining order, preliminary or permanent injunction or other order issued by\nany court of competent jurisdiction or other legal or regulatory restraint or\nprohibition preventing the consummation of the Merger shall be and remain in\neffect, nor shall any proceeding brought by an administrative agency or\ncommission or other governmental authority or instrumentality, domestic or\nforeign, seeking any of the foregoing be pending, nor shall there be any action\ntaken, or any statute, rule, regulation or order enacted, entered, enforced or\ndeemed applicable to the Merger, which makes the consummation of the Merger\nillegal.\n\n               (c)  Governmental Approval.  Acquiror, Target and Merger Sub and\n                    ---------------------       \ntheir respective subsidiaries shall have timely obtained from each Governmental\nEntity (as defined below) all approvals, waivers and consents, if any, necessary\nfor consummation of or in connection with the Merger and the several\ntransactions contemplated hereby, including such approvals, waivers and consents\nas may be required under the Securities Act, and under state Blue Sky laws other\nthan filings and approvals relating to the Merger or affecting Acquiror's\nownership of Target or any of its properties if failure to obtain such approval,\nwaiver or consent would not have a Material Adverse Effect on Acquiror after the\nEffective Time.\n\n          6.2  Additional Conditions to the Obligations of Acquiror and Merger\n               ---------------------------------------------------------------\nSub. The obligations of Acquiror and Merger Sub to consummate and effect this\n---\nAgreement and the transactions contemplated hereby shall be subject to the\nsatisfaction at or prior to the Effective Time of each of the following\nconditions, any of which may be waived, in writing, by Acquiror:\n\n               (a)  Representations, Warranties and Covenants.  The\n                    -----------------------------------------  \nrepresentations and warranties of Target in this Agreement shall be true and\ncorrect in all material respects (without regard to any qualification as to\nmateriality contained in such representation or warranty) on and as of the date\nof this Agreement and on and as of the Closing as though such representations\nand warranties were made on and as of such time (except for such representations\nand warranties that speak specifically as of the date hereof or as of another\ndate, which shall be true and correct as of such date).\n\n               (b)  Performance of Obligations.  Target shall have performed and\n                    -------------------------- \ncomplied in all material respects with all covenants, obligations and conditions\nof this Agreement required to be performed and complied with by it as of the\nClosing.\n\n               (c)  Certificate of Officers.  Acquiror and Merger Sub shall have\n                    -----------------------    \nreceived a certificate executed on behalf of Target by the chief executive\nofficer or chief financial officer of Target certifying that the conditions set\nforth in Section 6.2(a) and Section 6.2(b) have been satisfied.\n\n               (d)  Third Party Consents.  All consents or approvals required to\n                    -------------------- \nbe obtained in connection with the Merger and the other transactions\ncontemplated by this Agreement shall have been obtained and shall be in full\nforce and effect.\n\n               (e)  No Governmental Litigation.  There shall not be pending or\n                    --------------------------     \nthreatened any legal proceeding in which a Governmental Body is or is threatened\nto become a party or is otherwise involved, and neither Acquiror nor Target\nshall have received any communication from any Governmental Body in which such\nGovernmental Body indicates the probability of commencing any legal proceeding\nor taking any other action: (a) challenging or seeking to \n\n \nrestrain or prohibit the consummation of the Merger; (b) relating to the Merger\nand seeking to obtain from Acquiror or any of its subsidiaries, or Target, any\ndamages or other relief that would be material to Acquiror; (c) seeking to\nprohibit or limit in any material respect Acquiror's ability to vote, receive\ndividends with respect to or otherwise exercise ownership rights with respect to\nthe stock of Target; or (d) which would materially and adversely affect the\nright of Acquiror or Target to own the assets or operate the business of Target.\n\n               (f)  No Other Litigation.  There shall not be pending any legal\n                    -------------------     \nproceeding: (a) challenging or seeking to restrain or prohibit the consummation\nof the Merger or any of the other transactions contemplated by this Agreement;\n(b) relating to the Merger and seeking to obtain from Acquiror or any of its\nsubsidiaries, or Target, any damages or other relief that would be material to\nAcquiror; (c) seeking to prohibit or limit in any material respect Acquiror's\nability to vote, receive dividends with respect to or otherwise exercise\nownership rights with respect to the stock of Target; or (d) which would affect\nadversely the right of Acquiror or Target to own the assets or operate the\nbusiness of Target.\n\n               (g)  Employment Agreements.  Gary Hustwit and Valerie Hustwit\n                    ---------------------     \nshall have entered into their respective Employment Agreements, copies of which\nare attached as Exhibit D.\n                --------- \n\n               (h)  No Material Adverse Change.  There shall not have occurred\n                    --------------------------\nany material adverse change in the financial condition, properties, assets\n(including intangible assets), liabilities, business, operations, results of\noperations or prospects of Target and its subsidiaries, taken as a whole.\n\n               (i)  Investor Representation Statement.  Each of the Target\n                    ---------------------------------      \nShareholders shall have delivered to Acquiror a signed Investor Representation\nStatement in substantially the form attached hereto as Exhibit E and each such\n                                                       ---------\nStatement shall be in full force and effect.\n\n               (j)  Offer Letters.  The employees of Target, other than Valerie\n                    -------------\nHustwit or Gary Hustwit, shall have accepted employment with the Surviving\nCorporation pursuant to the terms of an offer letter substantially in the form\nattached hereto as Exhibit F.\n                   --------- \n\n               (k)  Opinion.  Counsel for Target shall have delivered to\n                    -------   \nAcquiror an opinion in a form and substance reasonably satisfactory to Acquiror\nand its counsel.\n\n               (l)  Stock Powers.  The Target Shareholders and\/or the\n                    ------------        \nShareholders' Agent shall have executed and delivered to the Holdback Agent such\nexecuted stock powers, powers or attorney, letters of instruction necessary or\nappropriate to enable the Holdback Agent to effect releases, forfeitures,\ncancellations and any other transfers of Holdback Shares and Additional Holdback\nShares in accordance with the terms of Section 8.\n\n          6.3  Additional Conditions to Obligations of Target.  The obligations\n               ----------------------------------------------\nof Target to consummate and effect this Agreement and the transactions\ncontemplated hereby shall be subject to the satisfaction at or prior to the\nEffective Time of each of the following conditions, any of which may be waived,\nin writing, by Target:\n\n               (a)  Representations, Warranties and Covenants.  The\n                    -----------------------------------------  \nrepresentations and warranties of Acquiror and Merger Sub in this Agreement\nshall be true and correct in all material respects on and as of the date of this\nAgreement and on and as of the Closing as though such \n\n \nrepresentations and warranties were made on and as of such time (except for such\nrepresentations and warranties that speak specifically as of the date hereof or\nas of another date, which shall be true and correct as of such date).\n\n               (b)  Performance of Obligations.  Acquiror and Merger Sub shall\n                    -------------------------- \nhave performed and complied in all material respects with all covenants,\nobligations and conditions of this Agreement required to be performed and\ncomplied with by them as of the Closing.\n\n               (c)  Certificate of Officers.  Target shall have received a\n                    -----------------------    \ncertificate executed on behalf of each of Acquiror and Merger Sub by the chief\nexecutive officer or chief financial officer of Acquiror and Merger Sub,\nrespectively, certifying that the conditions set forth in Sections 6.3(a) and\n6.3(b) have been satisfied.\n\n               (d)  NASDAQ Listing.  Acquiror shall file with the NASDAQ Stock\n                    -------------- \nMarket a Notification Form for Listing of Additional Shares with respect to the\nshares of Acquiror Common Stock issuable upon conversion of the Target Common\nStock in the Merger.\n\n               (e)  Opinion.  Counsel for Acquiror shall have delivered to\n                    -------   \nTarget an opinion in a form and substance reasonably satisfactory to Target and\nits counsel.\n\n     7.   Termination, Amendment and Waiver.\n          ---------------------------------\n\n          7.1  Termination.  This Agreement may be terminated at any time prior\n               -----------\nto the Effective Time (with respect to Section 7.1(b) through Section 7.1(d), by\nwritten notice by the terminating party to the other party):\n\n               (a)  by the mutual written consent of Acquiror and Target;\n\n               (b)  by either Acquiror or Target if the Merger shall not have\nbeen consummated by May 15, 2000, provided, however, that the right to terminate\n                                  --------\nthis Agreement under this Section 7.1(b) shall not be available to any party\nwhose failure to fulfill any obligation under this Agreement has been the cause\nof or resulted in the failure of the Merger to occur on or before such date;\n\n               (c)  by either Acquiror or Target if a court of competent\njurisdiction or other Governmental Entity shall have issued a nonappealable\nfinal order, decree or ruling or taken any other action, in each case having the\neffect of permanently restraining, enjoining or otherwise prohibiting the\nMerger, except, if the party relying on such order, decree or ruling or other\naction has not complied with its obligations under this Agreement;\n\n               (d)  by Acquiror or Target, if there has been a breach of any\nrepresentation, warranty, covenant or agreement on the part of the other party\nset forth in this Agreement, which breach (i) causes the conditions set forth in\nSection 6.1 or 6.2 (in the case of termination by Acquiror) or Section 6.1 or\n6.3 (in the case of termination by Target) not to be satisfied and (ii) shall\nnot have been cured within ten (10) business days following receipt by the\nbreaching party of written notice of such breach from the other party.\n\n          7.2  Effect of Termination.  In the event of termination of this\n               ---------------------\nAgreement as provided in Section 7.1, there shall be no liability or obligation\non the part of Acquiror, Target, Sub or their respective officers, directors, or\nstockholders, except to the extent that such \n\n \ntermination results from the willful breach by a party of any of its\nrepresentations, warranties or covenants set forth in this Agreement; provided\nthat the provisions of Section 7.1 shall remain in full force and effect and\nsurvive any termination of this Agreement.\n\n          7.3  Amendment.  This Agreement may be amended by the parties hereto,\n               ---------\nby action taken or authorized by their respective Boards of Directors. This\nAgreement may not be amended except by an instrument in writing signed on behalf\nof each of the parties hereto.\n\n          7.4  Extension; Waiver.  At any time prior to the Effective Time, the\n               -----------------\nparties hereto, by action taken or authorized by their respective Boards of\nDirectors, may, to the extent legally allowed, (i) extend the time for the\nperformance of any of the obligations or other acts of the other parties hereto,\n(ii) waive any inaccuracies in the representations and warranties contained\nherein or in any document delivered pursuant hereto, and (iii) waive compliance\nwith any of the agreements or conditions contained herein. Any agreement on the\npart of a party hereto to any such extension or waiver shall be valid only if\nset forth in a written instrument signed on behalf of such party.\n\n     8.   Holdback and Indemnification.\n          ----------------------------\n\n          8.1  Holdback.\n               --------\n\n               (a)  Definitions.  For purposes of this Section 8:\n                    -----------                                  \n\n                    (i)    \"Acquiror Indemnified Person\" means individually and\n                            ---------------------------\n\"Acquiror Indemnified Persons\" means collectively, Acquiror and the Surviving\n ---------------------------- \nCorporation and their respective officers, directors, agents, attorneys and\nemployees, and each person, if any, who controls or may control Acquiror or the\nSurviving Corporation within the meaning of the Securities Act;\n\n                    (ii)   \"Additional Holdback Shares\" means any dividends paid\n                            --------------------------       \nin stock declared with respect to the Holdback Shares.\n\n                    (iii)  \"Damages\" refers to any and all losses, costs,\n                            -------     \ndamages, liabilities and expenses arising from claims, demands, actions, causes\nof action, including, without limitation, reasonable legal fees arising out of\nany misrepresentation or breach of or default in connection with any of the\nrepresentations, warranties, covenants and agreements given or made by Target or\nthe Target Shareholders in this Agreement, the Target Disclosure Schedule or any\nexhibit or schedule to this Agreement.\n\n                    (iv)   \"Employee\" means individually and \"Employees\" means\n                            --------                          ---------        \ncollectively, Gary Hustwit and Valerie Hustwit.\n\n                    (v)    \"Holdback Fund\" means the Holdback Shares and any\n                            -------------        \nAdditional Holdback Shares relating thereto, held by Acquiror and governed by\nthe terms set forth herein.\n\n                    (vi) \"Indemnification Fund Shares\" means two hundred fifty\n                          ---------------------------         \nthree thousand six hundred (253,600) Acquiror Shares, which shall be available\nto compensate Acquiror pursuant to the indemnification obligations of Target and\nthe Target Shareholders in accordance with Section 8.2 hereof.\n\n \n                    (vii)  \"JAMS\" refers to Judicial Arbitration and Mediation\n                            ----               \nServices.\n\n                    (viii) \"Officer's Certificate\" refers to a certificate\n                            ---------------------        \nsigned by any officer of Acquiror with respect to the indemnification\nobligations of the Target Shareholders containing the information described in\nSection 8.4.\n\n                    (ix)   \"Shareholders' Agent\" refers to the agent appointed\n                            -------------------  \nfor and on behalf of the Target Shareholders to give and receive notices and\ncommunications, to authorize delivery to Acquiror of the Acquiror Common Stock\nor other property from the Holdback Fund in satisfaction of claims by Acquiror,\nto object to such deliveries, to make claims on behalf of the Target\nShareholders pursuant to Section 8.6, to agree to, negotiate, enter into\nsettlements and compromises of, and demand arbitration and comply with orders of\ncourts and awards of arbitrators with respect to such claims, and to take all\nactions necessary or appropriate in the judgment of the Shareholders' Agent for\nthe accomplishment of the foregoing.\n\n               (b)  Holdback Shares.  The Holdback Shares shall be registered in\n                    ---------------\nthe name of the Shareholders' Agent, and shall be held by the Holdback Agent,\nsuch shares and any Additional Holdback Shares to constitute the Holdback Fund\nand to be governed by the terms set forth herein. In the event Acquiror issues\nany Additional Holdback Shares, such shares will be issued in the name of the\nShareholders' Agent and held by the Holdback Agent in the same manner as the\nHoldback Shares delivered at the Closing. Once released from the Holdback Fund,\nshares of Acquiror Common Stock shall cease to be Holdback Shares and Additional\nHoldback Shares.\n\n               (c)  Payment of Dividends; Voting.  Except for Additional\n                    ----------------------------         \nHoldback Shares, which shall be treated as Holdback Shares pursuant to Section\n8.1(a) hereof, any cash dividends, dividends payable in securities or other\ndistributions of any kind made in respect of the Holdback Shares will be\ndelivered to the Shareholders' Agent on behalf of the Target Shareholders. The\nTarget Shareholders shall be entitled to designate, through the Shareholders'\nAgent, how all shares in the Holdback Fund will be voted on any matters to come\nbefore the shareholders of Acquiror.\n\n               (d)  Distribution of Holdback Shares.  The Holdback Shares shall\n                    -------------------------------\nbe released to the Target Shareholders as follows:\n\n                    (i)    First Anniversary Earnout Shares.  Three hundred\n                           --------------------------------        \nseventeen thousand (317,000) Holdback Shares and any Additional Holdback Shares\nrelating thereto, less any Indemnification Fund Shares that have been used to\ncompensate Acquiror pursuant to the indemnification obligations of the Target\nShareholders pursuant to Section 8.2 below, shall be released from the Holdback\nFund to the Target Shareholders pro rata in accordance with their percentage\nownership of the outstanding shares of Target Common Stock immediately prior to\nthe Effective Time (\"Pro Rata\") if, on or before the first anniversary of the\n                     --------                       \nClosing Date, either (A) Target's combined site traffic on the MP3lit.com and\nLoudBooks.com web sites totals six million (6,000,000) page views, and Target\nproduces twenty-five (25) Original LoudBooks recordings, or (B) either Gary\nHustwit or Valerie Hustwit has been terminated \"Without Cause\" as defined in\ntheir respective Employment Agreements.\n\n                    (ii)   Second Anniversary Employment Condition Shares.\n                           -----------------------------------------------\n\n \n                         a)   If, on the second anniversary of the Closing Date,\nGary Hustwit either continues to be employed by Target, Acquiror or another\nsubsidiary of Acquiror or has been terminated \"Without Cause\" as defined in Gary\nHustwit's Employment Agreement, then ninety one thousand seven hundred and sixty\nthree (91,763) Holdback Shares and any Additional Shares relating thereto shall\nbe released to Gary Hustwit\n\n                         b)   If, on the second anniversary of the Closing Date,\nValerie Hustwit either continues to be employed by Target, Acquiror or another\nsubsidiary of Acquiror or has been terminated \"Without Cause\" as defined in\nValerie Hustwit's Employment Agreement, then sixty six thousand seven hundred\nand thirty seven (66,737) Holdback Shares and any Additional Shares relating\nthereto shall be released to Valerie Hustwit.\n\n                    (iii)  Second Anniversary Earnout Shares. Two hundred fifty-\n                           ---------------------------------\nthree thousand six hundred (253,600) Holdback Shares and any Additional Holdback\nShares relating thereto shall be released from the Holdback Fund to the Target\nShareholders Pro Rata upon the second anniversary of the Closing Date if either\n(A) Target's combined aggregate site traffic during the two-year period\nfollowing the Closing Date on the MP3lit.com and LoudBooks.com web sites totals\nfifteen million (15,000,000) page views and Target has produced a total of fifty\n(50) Original LoudBooks recordings during such two-year period, or (B) either\nGary Hustwit or Valerie Hustwit has been terminated \"Without Cause\" as defined\nin their respective Employment Agreements.\n\n                    (iv)   Third Anniversary Employment Condition Shares.\n                           ----------------------------------------------\n\n                         a)   If, on the third anniversary of the Closing Date,\nGary Hustwit either continues to be employed by Target, Acquiror or another\nsubsidiary of Acquiror or has been terminated \"Without Cause\" as defined in Gary\nHustwit's Employment Agreement, then ninety one thousand seven hundred and sixty\nthree (91,763) Holdback Shares and any Additional Shares relating thereto shall\nbe released to Gary Hustwit; and\n\n                         b)   If, on the third anniversary of the Closing Date,\nValerie Hustwit either continues to be employed by Target, Acquiror or another\nsubsidiary of Acquiror or has been terminated \"Without Cause\" as defined in\nValerie Hustwit's Employment Agreement, then sixty six thousand seven hundred\nand thirty seven (66,737) Holdback Shares and any Additional Shares relating\nthereto shall be released to Valerie Hustwit.\n\n               (e)  Forfeiture of Unreleased Holdback Shares.  Any Holdback\n                    ----------------------------------------         \nShares and any related Additional Holdback Shares described in subsections\n(d)(i) through (d)(iv) above that are not released to the Target Shareholders as\ndescribed in such subsections will be deemed forfeited by the Target\nShareholders without further consideration, shall be cancelled by the Holdback\nAgent, and the Holdback Agent shall have no obligation to release such Holdback\nShares and Additional Holdback Shares from the Holdback Fund. In the case of the\nearnout shares described in subsections (d)(1) and (d)(3) above, the date of\nsuch forfeiture will be the applicable anniversary of the Closing Date. In the\ncase of the employment condition shares described in subsections (d)(2) and\n(d)(4) above, the date of such forfeiture will be the effective date of the\napplicable Employee's voluntary resignation or termination of employment other\nthan \"Without Cause\". The Shareholders' Agent agrees to execute any stock\npowers, powers of attorney, letters of instruction or other documents necessary\nor appropriate to effect any such forfeiture and cancellation.\n\n \n               (f)  Manner of Issuance; Restrictions; Fractional Shares.  Except\n                    ---------------------------------------------------  \nas specifically provided for in this Agreement, Holdback Shares and Additional\nHoldback Shares shall be released to the respective Target Shareholders Pro Rata\nunless the Shareholders' Agent shall have instructed the Holdback Agent\notherwise in writing, in which case the Holdback Agent shall be entitled to rely\nupon such instructions. Acquiror will take such action as may be necessary to\ncause such certificates to be issued in the names of the appropriate persons.\nCertificates representing Holdback Shares and Additional Holdback Shares so\nissued that are subject to resale restrictions under applicable securities laws\nwill bear a legend to that effect. No fractional shares shall be released and\ndelivered from the Holdback Fund to the Target Shareholders. In lieu of any\nfraction of an Holdback Share to which a Target Shareholder would otherwise be\nentitled, such holder will receive from Acquiror an amount of cash (rounded to\nthe nearest whole cent) equal to the product of such fraction multiplied by the\nAverage Closing Price (as defined below).\n\n               (g)  Assignability.  No Holdback Shares or Additional Holdback\n                    -------------  \nShares or any beneficial interest therein may be pledged, sold, assigned or\ntransferred, including by operation of law, by any Target Shareholder or be\ntaken or reached by any legal or equitable process in satisfaction of any debt\nor other liability of any such shareholder, prior to the delivery to such\nshareholder of his pro rata portion of the Holdback Fund by the Holdback Agent\nas provided herein.\n\n          8.2  Indemnification.\n               ---------------\n\n               (a)  Survival of Warranties.  All representations and warranties\n                    ----------------------  \nmade by Target or the Target Shareholders herein, or in any certificate,\nschedule or exhibit delivered pursuant hereto, shall survive the Closing and\ncontinue in full force and effect until the first anniversary of the Closing\nDate (the \"Indemnification Period\").\n           ----------------------   \n\n            (b)  Indemnification.  Subject to the limitations set forth in this\n                 ---------------               \nSection 8, the Target Shareholders will jointly and severally indemnify and hold\nharmless Acquiror and the Surviving Corporation and their respective officers,\ndirectors, agents, attorneys and employees, and each person, if any, who\ncontrols or may control Acquiror or the Surviving Corporation within the meaning\nof the Securities Act from and against any and all Damages 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 Target or\nthe Target Shareholders in this Agreement, the Target Disclosure Schedules or\nany exhibit or schedule to this Agreement. Acquiror Indemnified Persons shall\nact in good faith and in a commercially reasonable manner to mitigate any\nDamages they may suffer. The sole recourse of the Acquiror Indemnified Persons\nshall be against the Indemnification Fund Shares and claims against the\nIndemnification Fund Shares shall be the sole and exclusive remedy of Acquiror\nIndemnified Persons for any Damages hereunder.\n\n               (c)  Limitations of Liability.  The liability of the Target\n                    ------------------------   \nShareholders under this Section 8 shall be limited to the total amount of\nIndemnification Fund Shares, provided, however, that nothing in this Agreement\nshall limit the liability in amount or otherwise (i) of Target for any breach of\nany representation, warranty or covenant if the Merger does not close, or (ii)\nof any Target Shareholder in connection with any breach by such shareholder of\nany representation or covenant in the Investor Representation Statement, or\n(iii) of Target with \n\n \nrespect to fraud, criminal activity or intentional breach of any covenant\ncontained in this Agreement.\n\n          8.3  Indemnification Period; Distribution upon Expiration of\n               -------------------------------------------------------\nIndemnification Period.  The Indemnification Period shall terminate Within three\n----------------------\nbusiness days thereafter (the upon the first anniversary of the Closing.\n\"Release Date\"), the Holdback Agent shall instruct Acquiror's transfer agent to\n ------------\nrelease from the Holdback Fund a number of Holdback Shares and Additional\nHoldback Shares determined as set forth in Section 8.1(d)(i) above, less (A) the\nnumber of Indemnification Fund Shares delivered to Acquiror in accordance with\nSections 8.5 and 8.6 hereof in satisfaction of claims for Damages, and (B) the\nnumber of Indemnification Fund Shares with a value (as determined pursuant to\nSection 8.4) equal to the amount of Damages set forth in any Officer's\nCertificate with respect to any pending but unresolved claims for Damages. Any\nportion of the Holdback Fund held as a result of clause (B) shall be released to\nthe Target Shareholders or Acquiror (as appropriate) promptly upon resolution of\neach specific claim for Damages in accordance with Sections 8.5 and 8.6 hereof.\n\n          8.4  Claims Upon Holdback Fund.  If Acquiror asserts a claim upon the\n               -------------------------\nHoldback Fund by delivering to the Shareholders' Agent on or before the Release\nDate an Officer's Certificate stating that, with respect to the indemnification\nobligations of the Target Shareholders set forth in Section 8.2, Damages exist\nor are expected to exist and specifying in reasonable detail the individual\nitems of such Damages included in the amount so stated, the date each such item\nwas paid, or properly accrued or arose, or is reasonably expected to be paid,\naccrue or arise, and the nature of the misrepresentation, breach of warranty,\ncovenant or claim to which such item is related, the Holdback Agent shall retain\nin the Holdback Fund, subject to the provisions of Sections 8.5 and 8.6, shares\nof Indemnification Fund Shares held in the Holdback Fund having a value equal to\nsuch Damages. For the purpose of compensating Acquiror for its Damages pursuant\nto this Agreement, the Indemnification Fund Shares shall be valued at the\naverage of (a) the average closing price of Acquiror Common Stock over the five\ntrading day period immediately prior to the Effective Time, and (b) the average\nclosing price of Acquiror Common Stock over the five trading days immediately\nprior to the Release Date (the \"Average Closing Price\"); provided, however that\n                                ---------------------\nsuch value will be no less than the average closing price of Acquiror Common\nStock over the five trading day period immediately prior to the Effective Time.\n\n          8.5  Objections to Claims.  Unless the Shareholders' Agent shall\n               --------------------\nnotify Acquiror and the Holdback Agent in writing within thirty (30) days of\ndelivery of an Officer's Certificate that the Shareholders' Agent objects to any\nclaim or claims for Damages set forth therein, which notice shall include a\nreasonable explanation of the basis for such objection, upon the expiration of\nsuch thirty (30) day period the Holdback Agent shall deliver to Acquiror for\ncancellation the Indemnification Fund Shares retained under Section 8.4 with\nrespect to the Damages claimed in such Officer's Certificate. If the\nShareholders' Agent shall timely notify Acquiror and the Holdback Agent in\nwriting that it objects to any claim or claims for Damages made in an Officer's\nCertificate, Acquiror shall have thirty (30) days from receipt of such notice to\nrespond in a written statement to the objection of the Shareholders' Agent. If\nafter such thirty (30) day period there remains a dispute as to any claims set\nforth in such Officer's Certificate, the Shareholders' Agent and Acquiror shall\nattempt in good faith for sixty (60) days to agree upon the rights of the\nrespective parties with respect to each of such claims. If the Shareholders'\nAgent and Acquiror should so agree, a memorandum setting forth such agreement\nshall be prepared and signed by both parties. The Holdback Agent shall be\nentitled to rely on any such \n\n \nmemorandum and distribute Indemnification Fund Shares from the Holdback Fund in\naccordance with the terms thereof.\n\n          8.6  Resolution of Conflicts and Arbitration.\n               -----------------------------\n\n               (a)  If no agreement can be reached after good faith negotiation\nbetween the parties pursuant to Sections 8.4 or 8.5, either Acquiror or the\nShareholders' Agent may, by written notice to the other, demand arbitration of\nthe matter unless the amount of the Damages is at issue in pending litigation\nwith a third party, in which event arbitration shall not be commenced until such\namount is ascertained or both parties agree to arbitration; and in either such\nevent the matter shall be settled by arbitration conducted by one arbitrator.\nAcquiror and the Shareholders' Agent shall agree on the arbitrator, provided\nthat if Acquiror and the Shareholders' Agent cannot agree on such arbitrator,\neither Acquiror or Shareholders' Agent can request that JAMS select the\narbitrator. The arbitrator shall set a limited time period and establish\nprocedures designed to reduce the cost and time for discovery while allowing the\nparties an opportunity, adequate in the sole judgment of the arbitrator, to\ndiscover relevant information from the opposing parties about the subject matter\nof the dispute. The arbitrator shall rule upon motions to compel or limit\ndiscovery and shall have the authority to impose sanctions, including attorneys'\nfees and costs, to the same extent as a court of competent law or equity, should\nthe arbitrator determine that discovery was sought without substantial\njustification or that discovery was refused or objected to without substantial\njustification. The decision of the arbitrator shall be written, shall be in\naccordance with applicable law and with this Agreement, and shall be supported\nby written findings of fact and conclusion of law which shall set forth the\nbasis for the decision of the arbitrator. The decision of the arbitrator as to\nthe validity and amount of any claim in such Officer's Certificate shall be\nbinding and conclusive upon the parties to this Agreement, and notwithstanding\nanything in to the contrary in this Section 8, the Holdback Agent shall be\nentitled to act in accordance with such decision and distribute Indemnification\nFund Shares from the Holdback Fund in accordance with the terms thereof.\n\n               (b)  Judgment upon any award rendered by the arbitrator may be\nentered in any court having jurisdiction. Any such arbitration shall be held in\nSan Francisco, California under the commercial rules then in effect of the\nAmerican Arbitration Association. For purposes of this Section 8.6(b), in any\narbitration hereunder in which any claim or the amount thereof stated in the\nOfficer's Certificate is at issue, the party seeking indemnification shall be\ndeemed to be the Non-Prevailing Party unless the arbitrators award the party\nseeking indemnification more than one-half (1\/2) of the amount in dispute, plus\nany amounts not in dispute; otherwise, the person against whom indemnification\nis sought shall be deemed to be the Non-Prevailing Party. The Non-Prevailing\nParty to an arbitration shall pay its own expenses, the fees of the arbitrator,\nany administrative fee of JAMS, and the expenses, including attorneys' fees and\ncosts, reasonably incurred by the other party to the arbitration.\n\n          8.7  Third-Party Claims.   In the event Acquiror becomes aware of a\n               ------------------\nthird-party claim which Acquiror believes may result in a demand against the\nHoldback Fund, Acquiror shall notify the Shareholders' Agent of such claim, and\nthe Shareholders' Agent and the Target Shareholders for whom shares of Acquiror\nCommon Stock otherwise issuable to them are deposited in the Holdback Fund shall\nbe entitled, at their expense, to participate in any defense of such claim with\nthe consent of Acquiror which shall not be unreasonably withheld. Acquiror shall\nhave the right in its sole discretion to settle any such claim. In the event\nthat the Shareholders' Agent has consented to any such settlement, the\nShareholders' Agent shall have no \n\n \npower or authority to object under Section 8.5 or any other provision of this\nSection 8 to the amount of any claim by Acquiror against the Holdback Fund for\nindemnity with respect to such settlement.\n\n          8.8  Shareholders' Agent.    \n               -------------------\n\n               (a)  Gary Hustwit shall be constituted and appointed as the\nShareholders' Agent for and on behalf of the Target Shareholders to give and\nreceive notices and communications, to vote all Holdback Shares and Additional\nHoldback Shares, to authorize delivery to Acquiror of the Acquiror Common Stock\nor other property from the Holdback Fund in satisfaction of claims by Acquiror,\nto object to such deliveries, to demand arbitration on behalf of the Target\nShareholders pursuant to Section 8.6, to agree to, negotiate, enter into\nsettlements and compromises of, and demand arbitration and comply with orders of\ncourts and awards of arbitrators with respect to such claims, and to take all\nactions necessary or appropriate in the judgment of the Shareholders' Agent for\nthe accomplishment of the foregoing. Such agency may be changed by from time to\ntime upon not less than 10 days' prior written notice, executed by the\nShareholders' Agent, to Acquiror. No bond shall be required of the Shareholders'\nAgent, and the Shareholders' Agent shall receive no compensation for his\nservices. Any fees and expenses incurred by the Shareholders' Agent in\nconnection with actions taken pursuant to the terms of this Section 8 will be\npaid by the Target Shareholders to the Shareholders' Agent. Notices or\ncommunications to or from the Shareholders' Agent shall constitute notice to or\nfrom each of the Target Shareholders.\n\n               (b)  The Shareholders' Agent shall not be liable for any act done\nor omitted hereunder as Shareholder' Agent while acting in good faith and in the\nexercise of reasonable judgment and any act done or omitted pursuant to the\nadvice of counsel shall be conclusive evidence of such good faith. The Target\nShareholders shall severally indemnify the Shareholders' Agent and hold him\nharmless against any loss, liability or expense incurred without gross\nnegligence or bad faith on the part of the Shareholders' Agent and arising out\nof or in connection with the acceptance or administration of his duties\nhereunder.\n\n               (c)  The Shareholders' Agent shall have reasonable access to\ninformation about Target and the reasonable assistance of Target's officers and\nemployees for purposes of performing his duties and exercising his rights\nhereunder, provided that the Shareholders' Agent shall treat confidentially and\nnot disclose any nonpublic information from or about Target to anyone (except on\na need to know basis to individuals who agree to treat such information\nconfidentially).\n\n          8.9  Actions of the Shareholders' Agent.  A decision, act, consent or\n               ----------------------------------\ninstruction of the Shareholders' Agent shall constitute a decision of all Target\nshareholders for whom shares of Acquiror Common Stock otherwise issuable to them\nare deposited in the Holdback Fund and shall be final, binding and conclusive\nupon each such Target Shareholder, and Acquiror may rely upon any decision, act,\nconsent or instruction of the Shareholders' Agent as being the decision, act,\nconsent or instruction of each and every such Target Shareholder. The\nShareholders' Agent and Acquiror are hereby relieved from any liability to any\nperson for any acts done by them in accordance with such decision, act, consent\nor instruction of the Shareholders' Agent.\n\n \n          8.10  Limitation of the Holdback Agent's Liability.  For purposes of\n                --------------------------------------------\nthis Section 8 (the \"Holdback Provisions\"), references to the Holdback Agent\n                     -------------------\nshall be deemed to apply to it in its capacity as Holdback Agent and not in its\ncapacity as Acquiror.\n\n               (a)  The parties acknowledge and agree that Acquiror has agreed\nto act as the Holdback Agent for the convenience of the parties, and that\nAcquiror's liability hereunder shall not be increased by reason of Acquiror\nagreeing to so act. Acquiror, when acting as the Holdback Agent pursuant to this\nAgreement, will incur no liability with respect to any action taken or suffered\nby it pursuant to this Agreement in reliance upon any notice, direction,\ninstruction, consent, statement or other document believed by it to be genuine\nand to have been signed by the proper person other than on its own behalf (and\nshall have no responsibility to determine the authenticity or accuracy thereof),\nnor for any other action or inaction, except its own willful misconduct, bad\nfaith or gross negligence. In no event shall the Holdback Agent be liable for\nindirect or consequential damages. The Holdback Agent will not be responsible\nfor the validity or sufficiency of the Holdback Provisions, including the amount\nof Holdback Fund. In all questions arising under the Holdback Provisions, the\nHoldback Agent may rely on the advice of counsel, and for anything done, omitted\nor suffered in good faith by the Holdback Agent based on such advice, the\nHoldback Agent will not be liable to anyone.\n\n               (b)  In the event conflicting demands are made or notices are\nserved upon the Holdback Agent with respect to the Holdback Fund or should a\nthird party make a claim on the Holdback Fund, the Holdback Agent will have the\nabsolute right, at the Holdback Agent's election, to do any of the following:\n(i) resign so a successor can be appointed pursuant to Section 8.13, (ii) file a\nsuit in interpleader and obtain an order from a court of competent jurisdiction\nrequiring the parties to interplead and litigate in such court their several\nclaims and rights among themselves or (iii) retain all or any of the Holdback\nFund in its possession, without liability to anyone, until such dispute shall\nhave been settled as contemplated in this Section 8. In the event such\ninterpleader suit is brought, the Holdback Agent will thereby be fully released\nand discharged from all further obligations imposed upon it under the Holdback\nProvisions, and the Holdback Agent will pay (subject to reimbursement from the\nTarget Shareholders pursuant to Section 8.11) all reasonable costs, expenses and\nreasonable attorney's fees expended or incurred by the Holdback Agent pursuant\nto the exercise of the Holdback Agent's rights under this Section 8 (such costs,\nfees and expenses will be treated as extraordinary fees and expenses for the\npurposes of Section 8.11). The resignation of the Holdback Agent under this\nsection shall not affect the right of the Holdback Agent to be paid any amount\ndue to Holdback Agent hereunder.\n\n          8.11  Expenses of Holdback Agent.   Acquiror will pay all fees and\n                 -------------------------\nexpenses including attorney's fees incurred in the ordinary course of performing\nits responsibilities as Holdback Agent hereunder. Any extraordinary fees and\nexpenses including attorney's fees, including without limitation any fees or\nexpenses incurred by the Holdback Agent in connection with a dispute over the\ndistribution of Holdback Fund or the validity of any claim or claims for Damages\nby Acquiror will be advanced by Acquiror and subject to reimbursement by the\nTarget Shareholders (it being understood that such obligation shall be joint and\nseveral), in accordance with Section 8.6(b), and the Holdback Agent may retain a\nportion of the shares of Acquiror Common Stock contained in the Holdback Fund\nequal to such fees and expenses as are reimbursable by the Target Shareholders\nunder Section 8.6(b).\n\n          8.12  [INTENTIONALLY LEFT BLANK]\n\n \n          8.13  Successor Holdback Agent.   In the event the Holdback Agent\n                ------------------------\nbecomes unavailable or unwilling to continue in its capacity as such, the\nHoldback Agent may resign and be discharged from its duties or obligations\nhereunder by giving not less than thirty (30) days' prior written notice of such\na date when such resignation will take effect. Acquiror will designate a\nsuccessor Holdback Agent prior to the expiration of such 30-day period by giving\nwritten notice to the Holdback Agent and the Shareholders' Agent. The Holdback\nAgent will promptly transfer the Holdback Fund to such designated successor. In\nthe event no successor Holdback Agent is appointed as described in this Section,\nthe Holdback Agent may apply to a court of competent jurisdiction for the\nappointment of a successor Holdback Agent.\n\n          8.14  Limitation of Responsibility; Notices.  The Holdback Agent's\n                -------------------------------------\nduties are limited to those set forth in the Holdback Provisions, and no implied\nduties or obligations shall be implied; and the Holdback Agent may rely upon the\nwritten notices delivered to the Holdback Agent hereunder by the Shareholders'\nAgent and under the Holdback Provisions.\n\n     9.   General Provisions.\n          ------------------\n\n          9.1  Notices.  All notices and other communications hereunder shall be\n               -------\nin writing and shall be deemed duly delivered if delivered personally (upon\nreceipt), or three (3) business days after being mailed by registered or\ncertified mail, postage prepaid (return receipt requested), or one (1) business\nday after it is sent by commercial overnight courier service, or upon\ntransmission, if sent via facsimile (with confirmation of receipt) to the\nparties at the following address (or at such other address for a party as shall\nbe specified by like notice):\n\n     (a)  if to Acquiror or Merger Sub, to:\n\n     Salon.com\n     22 Fourth Street, 16th Floor\n     San Francisco, CA 94103\n     Attention:  Chief Financial Officer\n     Fax:  (415) 645-9311\n     Tel:  (415) 645-9310\n\n     with a copy to:\n\n     Gray Cary Ware &amp; Freidenrich LLP\n     400 University Avenue\n     Palo Alto, CA 94301-1809\n     Attention:  Andrew Zeif, Esq.\n     Fax:  (650) 833-3699\n     Tel:  (650) 833-2459\n\n     (b)  if to Target, to:\n\n     MP3Lit.com, Inc.\n     107 Norfolk St.\n     New York, NY  10002\n     Attention:  Chief Executive Officer\n     Fax:  (212) 473-9735\n     Tel:  (212) 473-9530\n\n \n     with a copy to:\n\n     Morse Zelnick Rose &amp; Lander LLP\n     450 Park Avenue\n     New York, NY  10022\n     Attention:  Kenneth Rose, Esq.\n     Fax:  (212) 838-9190\n     Tel:  (212) 838-1177\n\n     (c)  if to the Shareholders' Agent, to:\n\n     Gary Hustwit\n     107 Norfolk St.\n     New York, NY  10002\n     Fax:  (212) 473-9735\n     Tel:  (212) 473-9530\n\n     with a copy to:\n\n     Morse Zelnick Rose &amp; Lander\n     450 Park Avenue\n     New York, NY  10022\n     Attention:  Kenneth Rose, Esq.\n     Fax:  (212) 838-9190\n     Tel:  (212) 838-1177\n\n     (d)  if to the Holdback Agent, to:\n\n     Salon.com\n     22 Fourth Street, 16th Floor\n     San Francisco, CA 94103\n     Attention: Chief Financial Officer\n     Fax:  (415) 645-9311\n     Tel:  (415) 645-9310\n\n     with a copy to:\n\n     Gray Cary Ware &amp; Freidenrich LLP\n     400 University Avenue\n     Palo Alto, CA 94301-1809\n     Attention: Andrew Zeif, Esq.\n     Fax:  (650) 833-3699\n     Tel:  (650) 833-2459\n\n \n          9.2  Definitions.  In this Agreement any reference to any event,\n               -----------\nchange, condition or effect being \"material\" with respect to any entity or group\nof entities means any material event, change, condition or effect related to the\nfinancial condition, properties, assets (including intangible assets),\nliabilities, business, operations or results of operations of such entity or\ngroup of entities. In this Agreement any reference to a \"Material Adverse\nEffect\" with respect to any entity or group of entities means any event, change\nor effect that is materially adverse to the financial condition, properties,\nassets, liabilities, business, operations, results of operations or prospects of\nsuch entity and its subsidiaries, taken as a whole. In this Agreement any\nreference to a party's \"knowledge\" means such party's actual knowledge after\nreasonable inquiry of officers, directors and other employees of such party\nreasonably believed to have knowledge of such matters.\n\n          9.3  Counterparts.  This Agreement may be executed in one or more\n               ------------\ncounterparts, all of which shall be considered one and the same agreement and\nshall become effective when one or more counterparts have been signed by each of\nthe parties and delivered to the other parties, it being understood that all\nparties need not sign the same counterpart.\n\n          9.4  Entire Agreement; Nonassignability; Parties in Interest.  This\n               -------------------------------------------------------\nAgreement and the documents and instruments and other agreements specifically\nreferred to herein or delivered pursuant hereto, including the Exhibits, the\nSchedules, including the Target Disclosure Schedule and the Acquiror Disclosure\nSchedule (a) constitute the entire agreement among the parties with respect to\nthe subject matter hereof and supersede all prior agreements and understandings,\nboth written and oral, among the parties with respect to the subject matter\nhereof except for the Confidentiality Agreement, which shall continue in full\nforce and effect, and shall survive any termination of this Agreement or the\nClosing, in accordance with its terms; (b) are not intended to confer upon any\nother person any rights or remedies hereunder, and shall not be assigned by\noperation of law or otherwise without the written consent of the other party.\n\n          9.5  Severability.  In the event that any provision of this Agreement,\n               ------------\nor the application thereof becomes or is declared by a court of competent\njurisdiction to be illegal, void or unenforceable, the remainder of this\nAgreement will continue in full force and effect and the application of such\nprovision to other persons or circumstances will be interpreted so as reasonably\nto effect the intent of the parties hereto. The parties further agree to replace\nsuch void or unenforceable provision of this Agreement with a valid and\nenforceable provision that will achieve, to the extent possible, the economic,\nbusiness and other purposes of such void or unenforceable provision.\n\n          9.6  Remedies Cumulative.  Except as otherwise provided herein, any\n               -------------------\nand all remedies herein expressly conferred upon a party will be deemed\ncumulative with and not exclusive of any other remedy conferred hereby, or by\nlaw or equity upon such party, and the exercise by a party of any one remedy\nwill not preclude the exercise of any other remedy.\n\n          9.7  Governing Law.  This Agreement shall be governed by and construed\n               -------------          \nin accordance with the internal laws of California applicable to parties\nresiding in California, without regard applicable principles of conflicts of\nlaw. Each of the parties hereto irrevocably consents to the exclusive\njurisdiction of any court located within California in connection with any\nmatter based upon or arising out of this Agreement or the matters contemplated\nhereby and it agrees that process may be served upon it in any manner authorized\nby the laws of the State of\n\n \nCalifornia for such persons and waives and covenants not to assert or plead any\nobjection which it might otherwise have to such jurisdiction and such process.\n\n          9.8  Rules of Construction.  The parties hereto agree that they have\n               ---------------------          \nbeen represented by counsel during the negotiation, preparation and execution of\nthis Agreement and, therefore, waive the application of any law, regulation,\nholding or rule of construction providing that ambiguities in an agreement or\nother document will be construed against the party drafting such agreement or\ndocument.\n\n          9.9  Expenses.  Each party shall pay its own costs and expenses\n               --------  \nincurred in the negotiation and consummation of the Merger; provided, however,\nif the costs and expenses of Target exceed one hundred thousand dollars\n($100,000), then the total number of Acquiror Shares issued shall be reduced\nthat a number of shares having the same value as the excess.\n\n \n     IN WITNESS WHEREOF, Target, Acquiror, Merger Sub, the Target Shareholders,\nthe Shareholders' Agent and the Holdback Agent have caused this Agreement to be\nexecuted and delivered by each of them or their respective officers thereunto\nduly authorized, all as of the date first written above.\n\nMP3LIT.COM, INC.\n\n\nBy:   \/s\/  Gary Hustwit\n   -----------------------------------------\n    Gary Hustwit, Chief Executive Officer\n\n\n\nSALON.COM\n\n\nBy:   \/s\/  Todd Hagen\n   -----------------------------------------\n     Todd Hagen, Chief Financial Officer\n\n\n\nTARGET ACQUISITION CORPORATION\n\nBy:   \/s\/  Todd Hagen\n   -----------------------------------------\n     Todd Hagen, Chief Financial Officer\n\n\n\nTARGET SHAREHOLDERS\n\n\n     \/s\/  Gary Hustwit\n--------------------------------------------\n     Gary Hustwit\n\n\n     \/s\/  Valerie Hustwit\n--------------------------------------------\n     Valerie Hustwit\n\n\n     \/s\/  William Hustwit\n--------------------------------------------\n     William Hustwit\n\n\n\n\n\nSHAREHOLDERS' AGENT\n\n     \/s\/  Gary Hustwit\n--------------------------------------------\n     Gary Hustwit\n\n\n\nHOLDBACK AGENT\n\n\n\nSALON.COM\n\n\nBy:   \/s\/  Todd Hagen\n--------------------------------------------\n      Todd Hagen, Chief Financial Officer\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8749],"corporate_contracts_industries":[9468],"corporate_contracts_types":[9622,9626],"class_list":["post-43208","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-salon-media-group-inc","corporate_contracts_industries-media__other","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\/43208","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=43208"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43208"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43208"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}