{"id":43210,"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-shockwave-com-inc-and.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"agreement-and-plan-of-reorganization-shockwave-com-inc-and","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/agreement-and-plan-of-reorganization-shockwave-com-inc-and.html","title":{"rendered":"Agreement and Plan of Reorganization – Shockwave.com Inc. and Atom Corp."},"content":{"rendered":"\n--------------------------------------------------------------------------------\n\n\n\n AGREEMENT AND PLAN OF REORGANIZATION\n\n\n BETWEEN\n\n\n SHOCKWAVE.COM, INC.\n\n\n AND\n\n\n ATOM CORPORATION\n\n\n\n\n--------------------------------------------------------------------------------\n\n\n\n 2\n\n AGREEMENT AND PLAN OF REORGANIZATION\n\n\n This AGREEMENT AND PLAN OF REORGANIZATION (this \"AGREEMENT\") is made and\nentered into as of December 14, 2000 (the \"AGREEMENT DATE\") by and between\nShockwave.com, Inc., a Delaware corporation (\"SHOCKWAVE\"), and Atom Corporation,\na Washington corporation (\"ATOM\").\n\n RECITALS\n\n A. The parties intend that Atom will be merged with and into Shockwave\nin a straight merger, with Shockwave to be the surviving corporation (the\n\"MERGER\"), all pursuant to the terms and conditions of this Agreement and\napplicable law. The parties also intend for the Merger to be treated as a\ntax-free \"reorganization\" under Section 368(a) of the Internal Revenue Code of\n1986, as amended (the \"CODE\"), and to be treated as a \"purchase\" transaction for\naccounting purposes.\n\n B. The Boards of Directors of Shockwave and Atom have determined that\nthe Merger is in the best interests of their respective companies and\nshareholders, have approved the Merger and, accordingly, have agreed to effect\nthe Merger provided for herein upon the terms and conditions of this Agreement.\n\n C. Concurrently with the execution and delivery of this Agreement, Atom\nShareholders holding a majority of the outstanding shares of (i) Atom Common\nStock and Atom Preferred Stock, (ii) Atom Common Stock, (iii) Atom Preferred\nStock, (iv) Atom Series A Preferred Stock, (v) Atom Series B Preferred Stock,\nand (vi) Atom Series C Preferred Stock will execute and deliver to Shockwave a\nvoting agreement in the form and substance of Exhibit A attached hereto (the\n\"ATOM VOTING AGREEMENT\") under which each such Atom Shareholder will agree to\nirrevocably vote all shares of Atom capital stock owned by such Atom Shareholder\nin favor of this Agreement, the Merger, the Restated Articles of Incorporation\nand the other transactions contemplated by this Agreement (the \"ATOM REQUIRED\nAPPROVALS\"), and an investment representation letter in the form and substance\nof Exhibit B attached hereto under which each such Atom Shareholder will provide\ncertain representations and warranties to Shockwave (the \"INVESTMENT\nREPRESENTATION LETTER\").\n\n D. Concurrently with the execution and delivery of this Agreement,\nShockwave Shareholders holding a majority of the outstanding shares of (i)\nShockwave Common Stock and Shockwave Preferred Stock, (ii) Shockwave Preferred\nStock, (iii) Shockwave Series A Preferred Stock, and (iv) Shockwave Series B\nPreferred Stock will execute and deliver to Shockwave a voting agreement in the\nform and substance of Exhibit C attached hereto (the \"SHOCKWAVE VOTING\nAGREEMENT\") under which each such Shockwave Shareholder will agree to\nirrevocably vote all shares of Shockwave capital stock owned by such Shockwave\nShareholder in favor of this Agreement, the Merger, the amendment and\nrestatement of the Certificate of Incorporation of Shockwave in form and\nsubstance of Exhibit D attached hereto (the \"RESTATED CERTIFICATE OF\nINCORPORATION\"), and the other transactions contemplated by this Agreement (the\n\"SHOCKWAVE REQUIRED APPROVALS\").\n\n\n\n 3\n\n E. Upon the effectiveness of the Merger, and subject to the terms and\nconditions hereof, (i) the shares of Atom Common Stock and Atom Preferred Stock\nthat are outstanding immediately prior to the effectiveness of the Merger will\nbe converted into Shockwave Merger Shares, (ii) Atom Options and Atom Warrants\nto purchase Atom Common Stock and Atom Preferred Stock that are outstanding\nimmediately prior to the effectiveness of the Merger will be converted into\nShockwave Options and Shockwave Warrants to purchase Shockwave Common Stock and\nShockwave Preferred Stock, and (iii) Atom will be merged with and into\nShockwave, in each case, as provided in this Agreement.\n\n F. Subsequent to the execution and delivery of this Agreement, the\nparties will agree to an appropriate allocation of members of the Board of\nDirectors of the Surviving Corporation, which allocation will be approximately\nproportional to the equity interests of the securities holders of the parties in\nthe Surviving Corporation, with one of the initial directors for the Atom\nShareholders to be a designee of Digital Ventures II Limited, and the parties\nwill agree to enter into an amendment to the Amended and Restated Voting\nAgreement dated August 7, 2000 among Shockwave, Macromedia, Inc., a Delaware\ncorporation (\"MACROMEDIA\"), and holders of Shockwave Series B Preferred Stock\n(the \"FIRST RESTATED VOTING AGREEMENT\") to set forth the terms of such\nallocation.\n\n NOW, THEREFORE, in consideration of the foregoing and the mutual\npromises, covenants and conditions contained herein, the parties hereby agree as\nfollows:\n\n ARTICLE 1\n CERTAIN DEFINITIONS\n\n As used in this Agreement, the following terms will have the meanings\nset forth below:\n\n 1.1 \"ATOM ANCILLARY AGREEMENTS\" means, collectively, the Articles of\nMerger, each certificate to be delivered by Atom or an officer or officers of\nAtom at the Closing pursuant to Article 9, and each other agreement (other than\nthis Agreement) which Atom is to enter into as a party thereto pursuant to this\nAgreement.\n\n 1.2 \"ATOM BONUS OPTIONS\" means the Bonus Amounts (as defined in the\nresolutions adopted by the Atom Board of Directors at its meeting on November\n28, 2000) granted to each of Matthew Hulett, Michael Comish, Heather Redman,\nEric Cansler, John Markom and Mikeal Shields pursuant to such action by the Atom\nBoard of Directors.\n\n 1.3 \"ATOM COMMON STOCK\" means common stock, without par value, of Atom.\n\n 1.4 \"ATOM CONVERSION NUMBER\" means the quotient (calculated to the\nfourth decimal place) obtained by dividing (a) the product (calculated to the\nfourth decimal place) obtained by multiplying (i) the Shockwave Post-Merger\nFully Diluted Share Number by (ii) three-tenths, by (b) the Atom Fully Diluted\nShare Number.\n\n 1.5 \"ATOM SERIES A PREFERRED STOCK\" means Series A Preferred Stock,\nwithout par value, of Atom.\n\n\n 2\n 4\n\n 1.6 \"ATOM SERIES B PREFERRED STOCK\" means Series B Preferred Stock,\nwithout par value, of Atom.\n\n 1.7 \"ATOM SERIES C PREFERRED STOCK\" means Series C Preferred Stock,\nwithout par value, of Atom.\n\n 1.8 \"ATOM PREFERRED STOCK\" means the Atom Series A Preferred Stock, the\nAtom Series B Preferred Stock and the Atom Series C Preferred Stock.\n\n 1.9 \"ATOM FULLY DILUTED SHARE NUMBER\" means the sum of (a) the aggregate\nnumber of shares of Atom Common Stock, Atom Preferred Stock, shares of Atom\nCommon Stock and Atom Preferred Stock underlying Atom Options and Atom Warrants\n(using an exercise price of $1.28 for Atom warrants to purchase the Atom\nPreferred Stock issued in Atom's next equity financing), and shares of Atom\nCommon Stock underlying the Atom Bonus Options (each on a fully exercised and\nconverted to Atom Common Stock basis) that are issued and outstanding\nimmediately prior to the Effective Time; provided, however, that such number\nwill not include shares of Atom Preferred Stock (or Atom Common Stock issued on\nconversion of Atom Preferred Stock) held by Shockwave or its affiliates; and (b)\nthe number of shares equal to the quotient obtained by dividing (i) the\noutstanding principal and interest as of the Effective Time under the Atom Notes\n(as defined in Section 3.4(a)) divided by (ii) the lesser of (A) the implied\nprice per share of capital stock of the Surviving Corporation in its next equity\nfinancing following the Effective Time based on a pre-money valuation of the\nSurviving Corporation of $250,000,000 or (B) the actual agreed price per share\nof preferred stock of the Surviving Corporation in its first preferred stock\nfinancing following the Effective Time (such lesser price, the \"DEEMED\nCONVERSION PRICE\").\n\n 1.10 \"ATOM OPTIONS\" will have the meaning given in Section 2.3.\n\n 1.11 \"ATOM SHAREHOLDERS\" means the record holders of issued and\noutstanding Atom Common Stock and Atom Preferred Stock immediately prior to the\nEffective Time of the Merger.\n\n 1.12 \"ATOM WARRANTS\" will have the meaning given in Section 2.4.\n\n 1.13 \"EFFECTIVE TIME\" means the date and time on which the Merger first\nbecomes legally effective under the laws of (a) the State of Delaware as a\nresult of the filing with the Delaware Secretary of State a certificate of\nmerger in the form and substance of Exhibit E attached hereto (the \"CERTIFICATE\nOF MERGER\") in conformity with the requirements of Section 252 of the Delaware\nGeneral Corporation Law (the \"DGCL\"), and (b) the State of Washington as a\nresult of the filing with the Washington Secretary of State of articles of\nmerger in the form and substance of Exhibit F attached hereto (the \"ARTICLES OF\nMERGER\") in conformity with the requirements of Section 23B.11.050 of the\nWashington Business Corporation Act (the \"WBCA\").\n\n\n 3\n 5\n\n 1.14 \"ENCUMBRANCE\" means, with respect to any asset, any mortgage, deed\nof trust, lien, pledge, charge, security interest, title retention devices,\ncollateral assignments, claims, charges, restrictions or other encumbrances of\nany kind in respect of such asset.\n\n 1.15 \"GOVERNMENTAL AUTHORITY\" means any court, administrative agency,\ncommission or other governmental authority.\n\n 1.16 \"KNOWLEDGE\" means, with respect to any fact, circumstance, event or\nother matter in question, the actual knowledge of such fact, circumstance, event\nor other matter of (a) an individual, if used in reference to an individual, or\n(b) any officer or director of such party, and, in the case of Atom, the Named\nEmployees, if used in reference to a Person that is not an individual. Any such\nindividual will be deemed to have actual knowledge of a particular fact,\ncircumstance, event or other matter if (i) such fact, circumstance, event or\nother matter is reflected in one or more documents (whether written or\nelectronic, including e-mails sent to or by such individual) in, or that have\nbeen in, such individual's possession, including personal files of such\nindividual, (ii) such fact, circumstance, event or other matter is reflected in\none or more documents (whether written or electronic) contained in books and\nrecords of such party (in the case of knowledge of a party that is not an\nindividual) that would reasonably be expected to be reviewed by an individual\nwho has the duties and responsibilities of such individual in the customary\nperformance of such duties and responsibilities, or (iii) such knowledge could\nbe obtained from reasonable inquiry of the persons employed by such party\ncharged with administrative or operational responsibility for such matters for\nsuch party.\n\n 1.17 \"LEGAL REQUIREMENTS\" means any federal, state, local, municipal,\nforeign or other law, statute, constitution, resolution, ordinance, code, edict,\ndecree, rule, regulation, ruling or requirement issued, enacted, adopted,\npromulgated, implemented or otherwise put into effect by or under the authority\nof any Governmental Authority.\n\n 1.18 \"MATERIAL ADVERSE CHANGE\" or \"MATERIAL ADVERSE EFFECT,\" when used\nwith reference to any entity or group of related entities, means any event,\nchange, violation, inaccuracy, circumstance or effect (regardless of whether or\nnot such events or changes are inconsistent with the representations or\nwarranties made by such party in this Agreement) that is or is reasonably likely\nto be, individually or in the aggregate, materially adverse to the condition\n(financial or otherwise), capitalization, properties, employees, assets\n(including intangible assets), business, operations or results of operations of\nsuch entity and its subsidiaries, taken as a whole; provided, that in no event\nwill conditions affecting the industry generally in which Shockwave or Atom\noperates or the U.S. economy as a whole, in and of itself, constitute a Material\nAdverse Change or Material Adverse Effect in Shockwave or Atom.\n\n 1.19 \"NAMED EMPLOYEES\" means each of Mika Salmi, Matthew Hulett, John\nMarcom, Heather Redman, Michael Comish and Eric Cansler.\n\n 1.20 \"PERSON\" means any individual, corporation (including any\nnot-for-profit corporation), partnership, limited liability partnership, joint\nventure, estate, trust, firm, company (including any limited liability company\nor joint stock company), association, organization, entity or Governmental\nAuthority.\n\n\n 4\n 6\n\n 1.21 \"SHOCKWAVE ANCILLARY AGREEMENTS\" means, collectively, the Articles\nof Merger, the Certificate of Merger, each certificate to be delivered by\nShockwave or an officer or officers of Shockwave at the Closing pursuant to\nArticle 8 and each agreement (other than this Agreement) which Shockwave is to\nenter into as a party thereto pursuant to this Agreement.\n\n 1.22 \"SHOCKWAVE COMMON STOCK\" means common stock, par value $0.001 per\nshare, of Shockwave.\n\n 1.23 \"SHOCKWAVE FULLY DILUTED SHARE NUMBER\" means the sum of (a) the\naggregate number of shares of Shockwave Common Stock, Shockwave Preferred Stock,\nand Shockwave Common Stock underlying options and warrants to purchase Shockwave\nCommon Stock (each, on a fully exercised and converted to Shockwave Common Stock\nbasis) that are issued and outstanding immediately prior to the Effective Time;\nand (b) the number of shares equal to the quotient obtained by dividing (i) the\noutstanding principal and interest as of the Effective Time under Note 1 (as\ndefined in the Note Purchase Agreement (the \"NOTE PURCHASE AGREEMENT\") dated\nDecember 14, 2000 among Atom, Shockwave and Macromedia, Inc.) by (ii) the Deemed\nConversion Price.\n\n 1.24 \"SHOCKWAVE MERGER SHARES\" means the shares of Shockwave Common\nStock, Shockwave Series C-1 Preferred Stock, Shockwave Series C-2 Preferred\nStock and Shockwave Series C-3 Preferred Stock issuable to Atom Shareholders in\nthe Merger.\n\n 1.25 \"SHOCKWAVE OPTIONS\" will have the meaning given in Section 2.3.\n\n 1.26 \"SHOCKWAVE POST-MERGER FULLY DILUTED SHARE NUMBER\" means the\nquotient (calculated to the fourth decimal place) obtained by dividing (a) the\nShockwave Fully Diluted Share Number by (b) seven-tenths.\n\n 1.27 \"SHOCKWAVE PREFERRED STOCK\" means Shockwave Series A Preferred\nStock, Shockwave Series B Preferred Stock and Shockwave Series C Preferred\nStock.\n\n 1.28 \"SHOCKWAVE SERIES A PREFERRED STOCK\" means Series A Preferred\nStock, par value $0.001 per share, of Shockwave.\n\n 1.29 \"SHOCKWAVE SERIES B PREFERRED STOCK\" means Series B Preferred\nStock, par value $0.001 per share, of Shockwave.\n\n 1.30 \"SHOCKWAVE SERIES C PREFERRED STOCK\" means Shockwave Series C-1\nPreferred Stock, Shockwave Series C-2 Preferred Stock and Shockwave Series C-3\nPreferred Stock.\n\n 1.31 \"SHOCKWAVE SERIES C-1 PREFERRED STOCK\" means Series C-1 Preferred\nStock, par value $0.001 per share, of Shockwave.\n\n 1.32 \"SHOCKWAVE SERIES C-2 PREFERRED STOCK\" means Series C-2 Preferred\nStock, par value $0.001 per share, of Shockwave.\n\n\n 5\n 7\n\n 1.33 \"SHOCKWAVE SERIES C-3 PREFERRED STOCK\" means Series C-3 Preferred\nStock, par value $0.001 per share, of Shockwave.\n\n 1.34 \"SHOCKWAVE SHAREHOLDERS\" means the record holders of issued and\noutstanding Shockwave Common Stock and Shockwave Preferred Stock immediately\nprior to the Effective Time of the Merger.\n\n 1.35 \"SHOCKWAVE WARRANTS\" will have the meaning given in Section 2.4.\n\n 1.36 \"TERMINATION DATE\" means January 31, 2001.\n\n Other capitalized terms defined elsewhere in this Agreement and not\ndefined in this Article 1 will have the meanings assigned to such terms in this\nAgreement.\n\n ARTICLE 2\n PLAN OF REORGANIZATION\n\n 2.1 Conversion of Shares.\n\n (a) Conversion of Atom Common Stock. Subject to the terms and\nconditions of this Agreement, at the Effective Time, each share of Atom Common\nStock held by an Atom Shareholder that is issued and outstanding immediately\nprior to the Effective Time will, by virtue of the Merger and without the need\nfor any further action on the part of the holder thereof (except as expressly\nprovided herein), be converted into and represent the right to receive the\nnumber of shares of Shockwave Common Stock that is equal to the Atom Conversion\nNumber. The preceding provisions of this Section 2.1(a) are subject to the\nprovisions of Section 2.1(e) regarding the elimination of fractional Merger\nShares), Section 2.1(f) (regarding Dissenting Shares) and Section 2.5 (regarding\nthe withholding of Escrow Shares).\n\n (b) Conversion of Atom Series A Preferred Stock. Subject to the\nterms and conditions of this Agreement, at the Effective Time, each share of\nAtom Series A Preferred Stock held by an Atom Shareholder that is issued and\noutstanding immediately prior to the Effective Time will, by virtue of the\nMerger and without the need for any further action on the part of the holder\nthereof (except as expressly provided herein), be converted into and represent\nthe right to receive the number of shares of Shockwave Series C-1 Preferred\nStock that is equal to the Atom Conversion Number. The preceding provisions of\nthis Section 2.1(b) are subject to the provisions of Section 2.1(e) regarding\nthe elimination of fractional Merger Shares), Section 2.1(f) (regarding\nDissenting Shares) and Section 2.5 (regarding the withholding of Escrow Shares).\n\n (c) Conversion of Atom Series B Preferred Stock. Subject to the\nterms and conditions of this Agreement, at the Effective Time, each share of\nAtom Series B Preferred Stock held by an Atom Shareholder that is issued and\noutstanding immediately prior to the Effective Time will, by virtue of the\nMerger and without the need for any further action on the part of the holder\nthereof (except as expressly provided herein), be converted into and represent\nthe right to receive the number of shares of Shockwave Series C-2 Preferred\nStock that is equal to the Atom\n\n\n 6\n 8\n\nConversion Number. The preceding provisions of this Section 2.1(c) are subject\nto the provisions of Section 2.1(e) regarding the elimination of fractional\nMerger Shares), Section 2.1(f) (regarding Dissenting Shares) and Section 2.5\n(regarding the withholding of Escrow Shares).\n\n (d) Conversion of Atom Series C Preferred Stock. Subject to the\nterms and conditions of this Agreement, at the Effective Time, each share of\nAtom Series C Preferred Stock held by an Atom Shareholder that is issued and\noutstanding immediately prior to the Effective Time will, by virtue of the\nMerger and without the need for any further action on the part of the holder\nthereof (except as expressly provided herein), be converted into and represent\nthe right to receive the number of shares of Shockwave Series C-3 Preferred\nStock that is equal to the Atom Conversion Number. The preceding provisions of\nthis Section 2.1(d) are subject to the provisions of Section 2.1(e) regarding\nthe elimination of fractional Merger Shares), Section 2.1(f) (regarding\nDissenting Shares) and Section 2.5 (regarding the withholding of Escrow Shares).\n\n (e) Fractional Shares. No fractional shares of Shockwave Common\nStock or Shockwave Preferred Stock will be issued in connection with the Merger.\nIn lieu thereof, each holder of Atom Common Stock or Atom Preferred Stock who\nwould otherwise be entitled to receive a fraction of a share of Shockwave Common\nStock, Shockwave Series C-1 Preferred Stock, Shockwave Series C-2 Preferred\nStock or Shockwave Series C-3 Preferred Stock pursuant to Section 2.1, computed\nafter aggregating, for each class or series, all shares of Shockwave Common\nStock, Shockwave Series C-1 Preferred Stock, Shockwave Series C-2 Preferred\nStock or Shockwave Series C-3 Preferred Stock to be received by such holder\npursuant to Section 2.1, will instead receive from Shockwave, upon surrender of\nsuch holder's Atom Certificates pursuant to Article 7, an amount of cash\n(rounded to the nearest cent) equal to the product obtained by multiplying (a)\nthe fair market value per share on the Closing Date, as determined in good faith\nby the Board of Directors of Shockwave, of the Shockwave Common Stock, Shockwave\nSeries C-1 Preferred Stock, Shockwave Series C-2 Preferred Stock or Shockwave\nSeries C-3 Preferred Stock (as adjusted to reflect any Capital Change (as\ndefined in Section 2.2)) by (b) the fraction of a share of Shockwave Common\nStock, Shockwave Series C-1 Preferred Stock, Shockwave Series C-2 Preferred\nStock or Shockwave Series C-3 Preferred Stock that such holder would otherwise\nhave been entitled to receive.\n\n (f) Dissenting Shares. Holders of shares of Atom Common Stock and\nAtom Preferred Stock who have complied with all requirements for perfecting\nshareholders' rights of appraisal, as set forth in Chapter 23B.13 of the WBCA,\nwill be entitled to their rights under the WBCA with respect to such shares\n(\"DISSENTING SHARES\").\n\n (h) Continuation of Vesting and Repurchase Rights. If any shares\nof Atom Common Stock or Atom Preferred Stock outstanding immediately prior to\nthe Effective Time are at the Effective Time (a) unvested or are subject to a\nrepurchase option, risk of forfeiture, or any other condition providing that\nsuch shares may be forfeited to Atom upon any termination of the shareholder's\nemployment, directorship or other relationship with Atom (and\/or any affiliate\nof Atom) under the terms of any restricted stock purchase agreement, stock\noption agreement\n\n\n 7\n 9\n\n(including any stock option agreement under the Atom Plan (as defined in Section\n2.3)) or other agreement with Atom (\"UNVESTED ATOM SHARES\"), or (b) not Unvested\nAtom Shares but are otherwise subject to a contractual restriction on the\ntransfer of such shares (\"RESTRICTED ATOM SHARES\"), then such repurchase option,\nrisk of forfeiture, other condition or contractual restriction on transfer will\nbe assigned to Shockwave, and the Shockwave Merger Shares issued upon the\nconversion of such Unvested Atom Shares or Restricted Atom Shares in the Merger\nwill continue to be unvested and will continue to be subject to the same\nrepurchase options, risks of forfeiture, other conditions or contractual\nrestrictions on transfer, as applicable, immediately following the Effective\nTime as they were subject to immediately prior to the Effective Time. The\ncertificates representing such shares of Shockwave Common Stock will accordingly\nbe marked with appropriate legends noting such repurchase options, risks of\nforfeiture, other conditions or contractual restrictions on transfer. Atom will\ntake all actions that may be necessary to ensure that, from and after the\nEffective Time, Shockwave is entitled to exercise any such repurchase option or\nother right set forth in any such restricted stock purchase agreement or other\nagreement and to enforce any such contractual restriction on transfer.\n\n 2.2 Adjustments for Capital Changes. Notwithstanding the provisions of\nSection 2.1, if Shockwave recapitalizes, either through a subdivision (or stock\nsplit) of any of its outstanding shares of Shockwave Common Stock or Shockwave\nPreferred Stock into a greater number of such shares, or a combination (or\nreverse stock split) of any of its outstanding shares of Shockwave Common Stock\nor Shockwave Preferred Stock into a lesser number of such shares, or\nreorganizes, reclassifies or otherwise changes its outstanding shares of\nShockwave Common Stock or Shockwave Preferred Stock into the same or a different\nnumber of shares of other classes or series of Shockwave stock (other than\nthrough a subdivision or combination of shares provided for in the preceding\nclause), or declares a dividend or other distribution on its outstanding shares\npayable in shares of Shockwave Common Stock or Shockwave Preferred Stock, in\nshares or securities convertible into shares of Shockwave Common Stock,\nShockwave Preferred Stock and\/or other Shockwave equity securities (each, a\n\"CAPITAL CHANGE\"), at any time after the Agreement Date and prior to the\nEffective Time, then the Atom Conversion Number will be proportionally and\nequitably adjusted.\n\n 2.3 Atom Options. At the Effective Time, all outstanding options (\"ATOM\nOPTIONS\") to purchase Atom Common Stock, including all Atom Options granted\nunder the Atom 1998 Stock Option Plan (the \"ATOM PLAN\"), will be assumed by\nShockwave. Holders of each Atom Option so assumed by Shockwave will be entitled,\nin accordance with the terms of such option, to purchase after the Effective\nTime that number of shares of Shockwave Common Stock (\"SHOCKWAVE OPTIONS\"),\ndetermined by multiplying the number of shares of Atom Common Stock subject to\nsuch Atom Option at the Effective Time by the Atom Conversion Number, and the\nexercise price per share for each such Shockwave Option will equal the exercise\nprice of the Atom Option immediately prior to the Effective Time divided by the\nAtom Conversion Number. If the foregoing calculation results in a Shockwave\nOption being exercisable for a fraction of a share, then the number of shares of\nShockwave Common Stock subject to such Shockwave Option will be rounded down to\nthe nearest whole number and the exercise price of such Shockwave Option will be\nrounded up to the nearest cent. The term, exercisability, vesting schedule,\nstatus as an \"incentive stock option\" under Section 422 of the Code, if\napplicable, and\n\n\n 8\n 10\n\nall other terms of the Atom Options will otherwise be unchanged, except as\nprovided in Section 5.11. Continuous employment with Atom will be credited to an\noptionee for purposes of determining the number of shares that are vested after\nthe Effective Time.\n\n 2.4 Atom Warrants. At the Effective Time, all then outstanding warrants,\nexchangeable or convertible securities or rights to purchase or otherwise\nacquire Atom Common Stock or Atom Preferred Stock that are exercisable or\nconvertible, ultimately or potentially, into Atom Common Stock or Atom Preferred\nStock (\"ATOM WARRANTS\") will by virtue of the Merger, and without any further\naction on the part of any holder thereof, be assumed by Shockwave and converted\ninto a warrant or like security (\"SHOCKWAVE WARRANTS\") to purchase that number\nof shares of Shockwave Common Stock or Shockwave Preferred Stock determined by\nmultiplying the number of shares of Atom Common Stock or Atom Preferred Stock\nthat are subject to such Atom Warrant immediately prior to the Effective Time by\nthe Atom Conversion Number, at an exercise price per share of such Shockwave\nCommon Stock or Shockwave Preferred Stock equal to the exercise price per share\nof Atom Common Stock or Atom Preferred Stock that was in effect for such Atom\nWarrant immediately prior to the Effective Time divided by the Atom Conversion\nNumber. If the foregoing calculation would result in an assumed Atom Warrant\nbeing exercisable (a) for a fraction of a share of Shockwave Common Stock or\nShockwave Preferred Stock, then the number of shares of Shockwave Common Stock\nor Shockwave Preferred Stock subject to such Shockwave Warrant will be rounded\ndown to the nearest whole number of shares of Shockwave Common Stock or\nShockwave Preferred Stock, or (b) for a fraction of a cent, then the exercise\nprice of such Atom Warrant will be rounded up to the nearest cent. The\nexercisability period and other terms and conditions of the Atom Warrants will\nremain unchanged.\n\n 2.5 Escrow of Shares. At the Effective Time, Shockwave will withhold\nfrom the Shockwave Merger Shares 10% of the Shockwave Merger Shares to be issued\nto Atom Shareholders in the Merger upon conversion of their Atom Common Stock\nand Atom Preferred Stock pursuant to Section 2.1, rounded down to the nearest\nwhole share (such withheld Shockwave Merger Shares and any dividends or\ndistributions received in respect of such Shockwave Merger Shares being\nhereinafter referred to as the \"ESCROW SHARES\"), and will hold the certificates\nrepresenting such Escrow Shares as security for the Atom Shareholders'\nindemnification obligations for Damages under Article 11. The Escrow Shares will\nbe represented by a certificate or certificates issued in the names of each Atom\nShareholder in proportion to each such shareholder's interest therein and will\nbe held by Shockwave, subject to the terms and conditions of Article 11, until\nthe Release Date (as defined in Section 11.1). The holder of the Escrow Shares\nwill be determined by the parties between the Agreement Date and the Closing\nDate and, if such holder is a third party, then the costs and expenses relating\nto such third party holder will be borne by the Atom Shareholders on a Pro Rata\nBasis (as defined in Section 11.2).\n\n 2.6 Effects of the Merger. At and upon the Effective Time of the Merger:\n\n (a) the separate existence of Atom will cease and Atom will be\nmerged with and into Shockwave, and Shockwave will be the surviving corporation\nof the Merger (sometimes\n\n\n 9\n 11\n\nhereinafter referred to as the \"SURVIVING CORPORATION\") pursuant to the terms of\nthis Agreement, the Articles of Merger and the Certificate of Merger;\n\n (b) the Restated Certificate of Incorporation will be the\nCertificate of Incorporation of the Surviving Corporation immediately after the\nEffective Time;\n\n (c) the Bylaws of Shockwave will continue unchanged and be the\nBylaws of the Surviving Corporation immediately after the Effective Time;\n\n (d) each share of Atom Common Stock and Atom Preferred Stock that\nis outstanding immediately prior to the Effective Time will be converted as\nprovided in Section 2.1;\n\n (e) each Atom Option and Atom Warrant that is outstanding\nimmediately prior to the Effective Time will be assumed and converted as\nprovided in Sections 2.3 and 2.4;\n\n (f) the officers of the Surviving Corporation immediately after\nthe Effective Time will be as agreed to in writing by the parties prior to the\nClosing;\n\n (g) the members of the Board of Directors of the Surviving\nCorporation immediately after the Effective Time will be as agreed to in writing\nby the parties prior to the Closing; and\n\n (h) the Merger will, from and after the Effective Time, have all\nof the effects provided by applicable law.\n\n 2.7 Securities Law Issues; Registration Rights. Shockwave will issue the\nShockwave Merger Shares to be issued to the Atom Shareholders in the Merger\npursuant to Section 2.1 pursuant to an exemption or exemptions from registration\nunder Section 4(2) of the Securities Act of 1933, as amended (the \"SECURITIES\nACT\") and\/or Regulation D promulgated under the Securities Act and an exemption\nfrom qualification under the laws of the States of California and Washington and\nother applicable state securities laws. Shockwave and Atom will comply with all\napplicable provisions of, and rules under, the Securities Act in connection with\nthe offering and issuance of the Shockwave Merger Shares in the Merger.\nShockwave, holders of at least two-thirds of the Registrable Securities under\nthe Investors' Rights Agreement dated December 1, 1999, as amended, between\nShockwave and certain Shockwave Shareholders (the \"SHOCKWAVE PRIOR INVESTORS'\nRIGHTS AGREEMENT\"), and the holders of Atom Preferred Stock who have\nregistration rights pursuant to the Second Amended and Restated Investors'\nRights Agreement dated December 3, 1999 between Atom and such holders (the \"ATOM\nPRIOR INVESTORS' RIGHTS AGREEMENT\") will enter into a first amended and restated\ninvestors' rights agreement in the form and substance of Exhibit G attached\nhereto (the \"INVESTORS' RIGHTS AGREEMENT\") with respect to the Shockwave Merger\nShares to be issued to the Atom Shareholders.\n\n 2.8 Tax-Free Reorganization; No Representations by Shockwave. The\nparties intend to adopt this Agreement as a plan of reorganization and to\nconsummate the Merger in accordance with the provisions of Section 368(a)(1)(A)\nof the Code. However, except as expressly set forth in this Agreement, Shockwave\nmakes no representations or warranties to Atom or to any Atom\n\n\n 10\n 12\n\nShareholder or other holder of Atom securities regarding the tax treatment of\nthe Merger, whether the Merger will qualify as a tax-free plan of reorganization\nunder the Code, or any of the tax consequences of this Agreement, the Merger or\nany of the other transactions or agreements contemplated hereby to any Atom\nShareholder or such holder, and Atom acknowledges that Atom is relying solely on\nits own tax advisor in connection with this Agreement, the Merger and the other\ntransactions contemplated by this Agreement.\n\n 2.9 Further Assurances. If, at any time before or after the Effective\nTime, Shockwave believes or is advised that any further instruments, deeds,\nassignments or assurances are reasonably necessary or desirable to consummate\nthe Merger or to carry out the purposes and intent of this Agreement at or after\nthe Effective Time, then Shockwave, as the Surviving Corporation, and its\nrespective officers and directors will execute and deliver all such proper\ndeeds, assignments, instruments and assurances and do all other things necessary\nor desirable to consummate the Merger and to carry out the purposes and intent\nof this Agreement.\n\n ARTICLE 3\n REPRESENTATIONS AND WARRANTIES OF ATOM\n\n Atom represents and warrants to Shockwave that, except as set forth in\nthe letter addressed to Shockwave from Atom and dated as of the Agreement Date\n(including all schedules thereto) which has been delivered by Atom to Shockwave\nconcurrently with the parties' execution of this Agreement (the \"ATOM DISCLOSURE\nLETTER\"), each of the representations, warranties and statements contained in\nthe following sections of this Article 3 is true and correct as of the Agreement\nDate and will be true and correct on and as of the Closing Date (as defined in\nSection 7.1). For all purposes of this Agreement, the statements contained in\nthe Atom Disclosure Letter will also be deemed to be representations and\nwarranties made and given by Atom under this Article 3.\n\n 3.1 Organization and Good Standing. Atom is a corporation duly organized\nand validly existing under the laws of the State of Washington, and at all times\nsince its inception has been duly authorized to transact business in the State\nof Washington. Atom has the corporate power and authority to own, operate and\nlease its properties and to carry on its business as now conducted and as\nproposed to be conducted, and is qualified to transact business, and is in good\nstanding, in each jurisdiction where the character of the properties owned,\nleased or operated by it or the nature of its activities make such qualification\nnecessary, except in such jurisdictions where the failure to be so qualified\nwould not have a Material Adverse Effect on Atom. Atom is not in violation of\nits Articles of Incorporation or Bylaws.\n\n 3.2 Subsidiaries. Except as set forth in Schedule 3.2, Atom has no\nSubsidiaries (as defined below) or any equity interest, direct or indirect, in\nor loans to, any corporation, partnership, joint venture, limited liability\ncompany or other business entity. Atom is not obligated to make, nor bound by\nany agreement or obligation to make, any investment in or capital contribution\nin or on behalf of any other entity. \"SUBSIDIARY\" of an entity means a\ncorporation or other business entity in which such entity owns, directly or\nindirectly, at least a 50% interest or that is otherwise, directly or\nindirectly, controlled by such entity. Each of the\n\n\n 11\n 13\n\nSubsidiaries listed on Schedule 3.2 is duly organized, validly existing, and in\ngood standing (or appropriately recognized as legally in existence and active\nunder the laws of its jurisdiction) under the laws of the jurisdiction\nidentified on Schedule 3.2, and has the requisite power and authority to conduct\nits business as it is presently being conducted. No other corporate proceedings\non the part of any Subsidiary of Atom are necessary to authorize this Agreement\nand the other transactions contemplated by this Agreement. Schedule 3.2 contains\na true, correct and complete list of all jurisdictions in which each Subsidiary\nof Atom is qualified to do business. Atom owns of record and beneficially all of\nthe issued and outstanding capital or other stock of each Subsidiary set forth\non Schedule 3.2, free and clear of any Encumbrances.\n\n 3.3 Power, Authorization and Validity.\n\n (a) Power and Authority. Subject to the Atom Required Approvals,\nAtom has all requisite corporate power and authority to enter into, execute,\ndeliver and perform its obligations under, this Agreement and all Atom Ancillary\nAgreements and to consummate the Merger and the other transactions contemplated\nby this Agreement. The Merger and the execution, delivery and performance by\nAtom of this Agreement and each of the Atom Ancillary Agreements have been duly\nand validly approved and authorized by Atom's Board of Directors.\n\n (b) No Consents. No consent, approval, order or authorization of,\nor registration, declaration or filing with, any Governmental Authority or any\nother person or entity, governmental or otherwise is necessary or required to be\nmade or obtained by Atom to enable Atom to lawfully execute and deliver, enter\ninto, and to perform its obligations under, this Agreement and each of the Atom\nAncillary Agreements, or to consummate the Merger and the other transactions\ncontemplated by this Agreement, except for such filings and notifications as may\nbe required to be made by Atom and the Atom Shareholders in connection with the\nMerger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as\namended (the \"HSR ACT\"), and the expiration of applicable waiting periods under\nthe HSR Act.\n\n (c) Enforceability. This Agreement has been validly executed and\ndelivered by Atom. This Agreement and each of the Atom Ancillary Agreements are,\nor when executed by Atom will be, valid and binding obligations of Atom,\nenforceable against Atom in accordance with their respective terms, subject to\nthe effect of (i) applicable bankruptcy, insolvency, reorganization, moratorium\nor other similar laws affecting the rights of creditors generally and (ii) rules\nof law and equity governing specific performance, injunctive relief and other\nequitable remedies.\n\n 3.4 Capitalization of Atom.\n\n (a) Outstanding Securities. The authorized capital stock of Atom\nconsists entirely of 25,000,000 shares of Atom Common Stock, of which a total of\n7,559,533 shares are issued and outstanding; 10,000,000 shares of Atom Preferred\nStock, 800,000 shares of which have been designated Series A Preferred Stock, of\nwhich 727,500 shares are issued and outstanding; 4,000,000 shares of which have\nbeen designated Series B Preferred Stock, of which 3,789,057 shares are issued\nand outstanding; and 5,000,000 shares of which have been designated Series C\nPreferred Stock, of which 5,000,000 shares are issued and outstanding and\n\n\n 12\n 14\n\nwhich are convertible into 5,539,494 shares of Atom Common Stock. The numbers of\nissued and outstanding shares of Atom Common Stock and Atom Preferred Stock held\nby each of the Atom Shareholders are set forth in Schedule 3.4(a)-1 to this\nAgreement. Except as expressly set forth Schedule 3.4(a)-1, no shares of Atom\nCommon Stock or Atom Preferred Stock are issued or outstanding. To Atom's\nknowledge, each of the Atom Shareholders has good and marketable title to that\nnumber of shares of Atom Common Stock and\/or Atom Preferred Stock as set forth\nbeside such person's name on Schedule 3.4(a)-1, free and clear of all\nEncumbrances or any restrictions on voting. An aggregate of 4,750,000 shares of\nAtom Common Stock are reserved and authorized for issuance pursuant to the Atom\nPlan, of which options to purchase a total of 3,216,009 shares of Atom Common\nStock are outstanding. Options granted outside of the Atom Plan to purchase a\ntotal of 128,000 shares of Atom Common Stock are outstanding (the \"NON-PLAN\nOPTIONS\"). Warrants to purchase 92,003 shares of Atom Common Stock and 2,694,575\nshares of Atom Preferred Stock are outstanding. Schedule 3.4(a)-2 of the Atom\nDisclosure Letter lists for each person who holds Atom Options and Atom\nWarrants, the name of the holder of each such Atom Option and Atom Warrant, the\nexercise price for each such Atom Option and Atom Warrant, the number of shares\nor other securities covered by each such Atom Option and Atom Warrant, and the\nvesting schedule and the extent each such Atom Option and Atom Warrant are\nvested as of the Agreement Date. True and complete copies of the standard\nagreement under the Atom Plan and each agreement for each Atom Option that does\nnot conform to the standard agreement under the Atom Plan, and true and complete\ncopies of each Atom Warrant, have been delivered by Atom to Shockwave or its\nlegal counsel, Fenwick & West LLP. The vesting or exercisability (or any other\nmaterial terms) of any Atom Option, except as disclosed in the Atom Disclosure\nLetter, will not accelerate or otherwise change as a result of the execution and\ndelivery of this Agreement or the consummation of the Merger or the other\ntransactions contemplated by this Agreement or the occurrence of any subsequent\nevent (such as the termination of employment of the option holder following\nconsummation of the Merger). Except for the Non-Plan Options, no Atom Options\nhave been granted or are outstanding except under and pursuant to the Atom Plan.\nAtom has issued convertible promissory notes with an aggregate principal amount\nof $3,880,286 (the \"ATOM NOTES\"). Schedule 3.4(a)-3 of the Atom Disclosure\nLetter lists for each person who holds an Atom Note, the name of the holder of\neach such Atom Note, the principal amount of such Atom Note, and the number of\nshares of Atom Preferred Stock or other securities of Atom into which such Atom\nNote is convertible. True and complete copies of each Atom Note has been\ndelivered by Atom to Shockwave or its legal counsel.\n\n (b) Valid Issuance. As of the Closing Date, there will have been\nno change in the authorized or outstanding capital stock of Atom as represented\nin Section 3.4(a), other than as contemplated by this Agreement. All issued and\noutstanding shares of Atom Common Stock and Atom Preferred Stock have been duly\nauthorized and validly issued, are fully paid and nonassessable, are not subject\nto any preemptive right, right of first refusal, right of first offer or right\nof rescission, and have been offered, issued, sold and delivered by Atom in\ncompliance with (i) all registration or qualification requirements (or\napplicable exemptions therefrom) of all applicable securities laws and, to the\nknowledge of Atom, other applicable Legal Requirements and (ii) all requirements\nset forth in applicable agreements or instruments. All shares of Atom Common\nStock and Atom Preferred Stock subject to issuance under Atom Options and Atom\n\n\n 13\n 15\n\nWarrants, upon issuance on the terms and conditions specified in the instruments\npursuant to which they are issuable, will be duly authorized, validly issued,\nfully paid and nonassessable. All outstanding Atom Options and Atom Warrants\nhave been issued and granted in compliance with (i) all registration or\nqualification requirements (or applicable exemptions therefrom) of all\napplicable securities laws and, to the knowledge of Atom, other applicable Legal\nRequirements and (ii) all requirements set forth in applicable agreements or\ninstruments.\n\n (c) No Other Options, Warrants or Rights. Other than as set forth\nin Section 3.4(a), there are no options, warrants, convertible securities or\nother securities, calls, commitments, conversion privileges, preemptive rights,\nrights of first refusal, rights of first offer or other rights or agreements\noutstanding to purchase or otherwise acquire (whether directly or indirectly)\nany shares of Atom's authorized but unissued capital stock or any securities\nconvertible into or exchangeable for any shares of Atom's capital stock or\nobligating Atom to grant, issue, extend, or enter into any such option, warrant,\nconvertible security or other security, call, commitment, conversion privilege,\npreemptive right, right of first refusal, right of first offer or other right or\nagreement, and there is no liability for dividends accrued but unpaid.\n\n (d) No Voting Arrangements or Registration Rights. Except as\ncontemplated by this Agreement, there are no voting agreements, voting trusts or\nproxies applicable to any of Atom's outstanding capital stock or any Atom\nOptions or to the conversion of any shares of Atom's capital stock in the Merger\npursuant to any agreement or obligation to which Atom is a party or, to Atom's\nknowledge, pursuant to any other agreement or obligation. Atom is not under any\nobligation to register under the Securities Act any of its presently outstanding\nshares of stock or other securities or any stock or other securities that may be\nsubsequently issued.\n\n 3.5 No Conflict. Neither the execution and delivery of this Agreement\nnor any of the Atom Ancillary Agreements by Atom, nor the consummation of the\nMerger or the other transactions contemplated hereby or thereby, will conflict\nwith, or (with or without notice or lapse of time, or both) result in a\ntermination, breach, impairment or violation of, or constitute a default under:\n(a) any provision of the Articles of Incorporation or Bylaws of Atom as\ncurrently in effect; (b) any material federal, state, local or foreign judgment,\nwrit, decree, order, statute, rule or regulation applicable to Atom or any of\nits material assets or properties; or (c) any material instrument, agreement,\ncontract, undertaking, understanding, letter of intent, memorandum of\nunderstanding or commitment (whether verbal or in writing) to which Atom is a\nparty or by which Atom or any of its material assets or properties are bound. To\nAtom's knowledge, neither Atom's entering into this Agreement nor the\nconsummation of the Merger or the other transactions contemplated by this\nAgreement will give rise to, or trigger the application of, any rights of any\nthird party that would come into effect upon the effectiveness of the Merger.\nThe consummation of the Merger by Atom will not require the consent, release,\nwaiver or approval of any third party (including the consent of any party\nrequired to be obtained in order to keep any agreement between such party and\nAtom in effect following the Merger or to provide that Atom is not in breach or\nviolation of any such agreement following the Merger), other than the approval\nof this Agreement and the Merger by Atom Shareholders under the WBCA.\n\n\n 14\n 16\n\n 3.6 Litigation. There is no action, suit, arbitration, mediation,\nproceeding, claim or investigation pending against Atom (or against any officer,\ndirector, employee or agent of Atom in their capacity as such or relating to\ntheir employment, services or relationship with Atom) before any Governmental\nAuthority or arbitrator, nor, to Atom's knowledge, has any such action, suit,\narbitration, mediation, proceeding, claim or investigation been threatened.\nThere is no judgment, decree, injunction, rule or order of any Governmental\nAuthority or arbitrator outstanding against Atom. To Atom's knowledge, there is\nno basis for any person to assert a claim against Atom based upon: (a) Atom's\nentering into this Agreement or any Atom Ancillary Agreement or consummating the\nMerger or the other transactions contemplated by this Agreement, any Atom\nAncillary Agreement; or (b) a claim of ownership of, or options, warrants or\nother rights to acquire ownership of, any shares of the capital stock of Atom or\nany rights as an Atom shareholder, including any option, warrant or preemptive\nrights or rights to notice or to vote, other than for the rights of the Atom\nShareholders with respect to the Atom Common Stock and Atom Preferred Stock\nshown as being owned by such persons on Schedule 3.4(a)-1 of the Atom Disclosure\nLetter and the rights of holders of Atom Options and Atom Warrants shown as\nbeing owned by such persons on Schedule 3.4(a)-2 of the Atom Disclosure Letter.\n\n 3.7 Taxes.\n\n (a) Atom has timely filed all federal, state, local and foreign\ntax and information returns required to be filed by it, has timely paid all\ntaxes required to be paid by it for which payment is due, has established an\nadequate accrual or reserve for the payment of all taxes payable in respect of\nthe periods or portions thereof prior to the Closing Date subsequent to the\nperiods covered by its most recent applicable tax returns (which accrual or\nreserve as of the Balance Sheet Date (as defined in Section 3.8) is fully\nreflected on the Balance Sheet and in any more recent balance sheet of Atom\nprovided by Atom to Shockwave on or before the Agreement Date), has made all\nnecessary estimated tax payments, and has no liability for taxes in excess of\nthe amount so paid or accruals or reserves so established. All such returns and\nreports are true, correct and complete, and Atom has provided Shockwave with\ntrue and correct copies of such returns and reports. Atom is not delinquent in\nthe payment of any tax or in the filing of any tax returns, and no deficiencies\nfor any tax have been threatened, claimed, proposed or assessed against Atom or\nany of the officers, employees or agents of Atom in their capacity as such. Atom\nhas not received any notification from the Internal Revenue Service or any other\ntaxing authority regarding any material issues that: (i) are currently pending\nbefore the Internal Revenue Service or any other taxing authority (including but\nnot limited to any sales or use tax authority) regarding Atom, or (ii) have been\nraised by the Internal Revenue Service or other taxing authority and not yet\nfinally resolved. No tax return of Atom is under audit by the Internal Revenue\nService or any state or local taxing agency or authority and any such past\naudits (if any) have been completed and fully resolved to the satisfaction of\nthe applicable tax authority conducting such audit and all taxes determined by\nsuch audit to be due from Atom have been paid in full to the applicable taxing\nauthorities. No tax liens are currently in effect against any assets of Atom\nother than liens which arise by operation of law for taxes not yet due and\npayable. There is not in effect any waiver by Atom of any statute of limitations\nwith respect to any taxes; and Atom has not consented to extend the due date for\nwhich any tax may be assessed or collected by any taxing authority. Atom is not\na \"personal holding company\" within the\n\n\n 15\n 17\n\nmeaning of the Code. Atom has withheld with respect to each of its employees and\nindependent contractors all taxes, including but not limited to federal and\nstate income taxes, FICA, Medicare, FUTA and other taxes, required to be\nwithheld, and paid such withheld amounts to the appropriate tax authority within\nthe time prescribed by law. Since its inception, Atom has not been a \"United\nStates real property holding corporation,\" as defined in Section 897(c)(2) of\nthe Code, and in Section 1.897-2(b) of the Treasury Regulations issued\nthereunder (the \"REGULATIONS\"), and Atom has filed, or at the Effective Time\nwill file, with the Internal Revenue Service all statements, if any, which are\nrequired under Section 1.897-2(h) of the Regulations. Atom has not been\ndistributed in a transaction qualifying under Section 355 of the Code within the\nlast two years, nor has Atom distributed any corporation in a transaction\nqualifying under Section 355 of the Code within the last two years. Atom has not\nelected pursuant to the Code to be treated as an \"S\" corporation or a\ncollapsible corporation pursuant to Section 1362(a) or Section 341(f) of the\nCode. Atom will not, as a result of any action taken prior to the Effective\nTime, have any adjustment under Section 481 of the Code for periods after the\nEffective Time.\n\n (b) For the purposes of this Section, the terms \"TAX\" and \"TAXES\"\ninclude all federal, state, local and foreign income, alternative or add-on\nminimum income, gains, franchise, excise, property, property transfer, sales,\nuse, employment, license, payroll, ad valorem, documentary, stamp, withholding,\noccupation, recording, value added or transfer taxes, governmental charges,\nfees, customs duties, levies or assessments (whether payable directly or by\nwithholding), and, with respect to any such taxes, any estimated tax, interest,\nfines and penalties or additions to tax and interest on such fines, penalties\nand additions to tax.\n\n 3.8 Atom Financial Statements. Attached as Schedule 3.8 to the Atom\nDisclosure Letter are Atom's audited balance sheet as of December 31, 1999, its\naudited consolidated statements of operations, statements of cash flows and\nstatements of changes in shareholders' equity for the year ended December 31,\n1999, its unaudited balance sheet of Atom as of October 31, 2000, and its\nunaudited consolidated statements of operations, statements of cash flows and\nstatements of changes in shareholders' equity for the ten-months ended October\n31, 2000 (all such financial statements of Atom and any notes thereto are\nhereinafter collectively referred to as the \"ATOM FINANCIAL STATEMENTS\"). The\nAtom Financial Statements: (a) are derived from and are in accordance with the\nbooks and records of Atom, (b) fairly present the financial condition of Atom at\nthe dates therein indicated and the results of operations for the periods\ntherein specified, and (c) have been prepared in accordance with United States\ngenerally accepted accounting principles (\"GAAP\") applied on a basis consistent\nwith prior periods except for any absence of notes with respect to the unaudited\nAtom Financial Statements. Atom has no material debt, liability or obligation of\nany nature, whether accrued, absolute, contingent or otherwise, and whether due\nor to become due, except for (a) those shown on Atom's unaudited balance sheet\nas of October 31, 2000 included in the Atom Financial Statements (the \"BALANCE\nSHEET\"), and (b) those that may have been incurred after October 31, 2000 the\n\"BALANCE SHEET DATE\") in the ordinary course of Atom's business consistent with\nits past practices, and that are not material in amount, either individually or\ncollectively. All reserves established by Atom that are set forth in or\nreflected in the Balance Sheet are adequate. At the Balance Sheet Date, there\nwere no material loss contingencies (as such term is used in Statement of\nFinancial Accounting Standards No. 5 issued by the Financial Accounting\nStandards Board in March 1975) which are\n\n\n 16\n 18\n\nnot adequately provided for in the Balance Sheet as required by said Statement\nNo. 5. The Atom Financial Statements comply in all material respects with the\nAmerican Institute of Certified Public Accountants' Statement of Position 97-2,\nas amended.\n\n 3.9 Title to Properties. Atom has good and marketable title to all of\nits assets and properties (including those shown on the Balance Sheet), free and\nclear of all Encumbrances, other than liens for current taxes that are not yet\ndue and payable and except for liens which in the aggregate do not secure more\nthan $10,000 in liabilities. All machinery, vehicles, equipment and other\ntangible personal property owned or leased by Atom or used in its business are\nin good condition and repair, normal wear and tear excepted, and all leases of\nreal or personal property to which Atom is a party are fully effective and\nafford Atom, as applicable, peaceful and undisturbed leasehold possession of the\nreal or personal property that is the subject of the lease. To its knowledge,\nAtom is not in material violation of any zoning, building, safety or\nenvironmental ordinance, regulation or requirement or other law or regulation\napplicable to the operation of its owned or leased properties, nor has Atom\nreceived any notice of violation of law with which it has not complied. Atom\ndoes not own any real property. Schedule 3.9 to the Atom Disclosure Letter sets\nforth a complete and accurate list and a brief description of all personal\nproperty owned or leased by Atom with an individual value of $10,000 or greater.\n\n 3.10 Absence of Certain Changes. Since the Balance Sheet Date, Atom has\noperated its business in the ordinary course consistent with its past practice,\nand since such date there has not been with respect to Atom any:\n\n (a) Material Adverse Change;\n\n (b) amendment or change in the Articles of Incorporation or\nBylaws or other charter documents;\n\n (c) incurrence, creation or assumption by Atom of (i) any\nEncumbrance on any of the assets or properties of Atom, (ii) any obligation or\nliability or any indebtedness for borrowed money, or (iii) any contingent\nliability as a guarantor or surety with respect to the obligations of others;\n\n (d) grant or issuance of any options, warrants or other rights to\nacquire from Atom, directly or indirectly, except as described in Section\n3.4(a), or any offer, issuance or sale by Atom of any debt or equity securities\nof Atom;\n\n (e) any acceleration or release of any vesting condition to the\nright to exercise any option, warrant or other right to purchase or otherwise\nacquire any shares of Atom's capital stock, or any acceleration or release of\nany right to repurchase shares of Atom's capital stock upon the shareholder's\ntermination of employment or services with Atom or pursuant to any right of\nfirst refusal;\n\n (f) payment or discharge by Atom of any Encumbrance on any asset\nor property of Atom, or the payment or discharge of any liability of Atom, in\neach case that was not either shown on the Balance Sheet or incurred in the\nordinary course of Atom's business after the\n\n\n 17\n 19\n\nBalance Sheet Date in an amount not in excess of $10,000 for any single\nliability to a particular creditor;\n\n (g) purchase, license, sale, assignment or other disposition or\ntransfer, or any agreement or other arrangement for the purchase, license, sale,\nassignment or other disposition or transfer, of any of the assets, properties or\ngoodwill of Atom other than a license of any product or products of Atom made in\nthe ordinary course of Atom's business consistent with its past practice;\n\n (h) damage, destruction or loss of any property or asset, whether\nor not covered by insurance, having (or likely with the passage of time to have)\na Material Adverse Effect on Atom;\n\n (i) declaration, setting aside or payment of any dividend on, or\nthe making of any other distribution in respect of, the capital stock of Atom,\nor any split, combination or recapitalization of the capital stock of Atom or\nany direct or indirect redemption, purchase or other acquisition of any capital\nstock of Atom or any change in any rights, preferences, privileges or\nrestrictions of any outstanding security of Atom;\n\n (j) change or increase in the compensation payable or to become\npayable to any of the officers, directors, or employees of Atom, or in any bonus\nor pension, insurance or other benefit payment or arrangement (including stock\nawards, stock option grants, stock appreciation rights or stock option grants)\nmade to or with any of such officers, employees or agents except in connection\nwith normal employee salary or performance reviews or otherwise in the ordinary\ncourse of Atom's business consistent with its past practice and except as\ncontemplated in this Agreement;\n\n (k) change with respect to the management, supervisory or other\nkey personnel of Atom;\n\n (l) obligation or liability incurred by Atom to any of its\nofficers, directors or shareholders, except for normal and customary\ncompensation and expense allowances payable to officers in the ordinary course\nof Atom's business consistent with its past practice;\n\n (m) making by Atom of any loan, advance or capital contribution\nto, or any investment in, any officer, director or shareholder of Atom or any\nfirm or business enterprise in which any such person had a direct or indirect\nmaterial interest at the time of such loan, advance, capital contribution or\ninvestment;\n\n (n) entering into, amendment of, relinquishment, termination or\nnon-renewal by Atom of any contract, lease, transaction, commitment or other\nright or obligation other than in the ordinary course of its business consistent\nwith its past practice; or any written or oral indication or assertion by the\nother party thereto of any material problems with Atom's services or performance\nunder such contract, lease, transaction, commitment or other right or obligation\nor its desire to so amend, relinquish, terminate or not renew any such contract,\nlease, transaction, commitment or other right or obligation;\n\n\n 18\n 20\n\n (o) material change in the manner in which Atom extends\ndiscounts, credits or warranties to customers or otherwise deals with its\ncustomers;\n\n (p) entering into by Atom of any transaction, contract or\nagreement that by its terms requires or contemplates a current and\/or future\nfinancial commitment, expense (inclusive of overhead expense) or obligation on\nthe part of Atom that involves in excess of $25,000 or that is not entered into\nin the ordinary course of Atom's business, or the conduct of any business or\noperations other than in the ordinary course of Atom's business consistent with\nits past practice; or\n\n (q) any license, transfer or grant of a right under any Atom IP\nRights (as defined in Section 3.13), other than those licensed, transferred or\ngranted in the ordinary course of Atom's business consistent with its past\npractices.\n\n 3.11 Contracts, Commitments and Licenses; Permits. Schedule 3.11 to the\nAtom Disclosure Letter sets forth a list, indexed by lettered subsection, of\neach of the following written or oral contracts, agreements, leases, licenses,\npermits, assignments, mortgages, transactions, obligations, commitments or other\ninstruments to which Atom is a party or to which Atom or any of its assets or\nproperties is bound:\n\n (a) any contract or agreement providing for payments (whether\nfixed, contingent or otherwise) by or to Atom in an aggregate amount of $25,000\nor more;\n\n (b) any dealer, distributor, OEM (Original Equipment\nManufacturer), VAR (Value Added Reseller), sales representative or similar\nagreement under which any third party is authorized to sell, sublicense, lease,\ndistribute, market or take orders for, any product, service or technology of\nAtom;\n\n (c) any contract providing for the development or license of any\nsoftware, content (including textual content and visual, cinematic, photographic\nor graphics content), technology or intellectual property for (or for the\nbenefit or use of) Atom, or providing for the purchase or license of any\nsoftware, content (including textual content and visual, cinematic, photographic\nor graphics content), technology or intellectual property to (or for the benefit\nor use of) Atom, which software, content, technology or intellectual property is\nused or incorporated in connection with any product, service or technology of\nAtom (other than software generally available to the public at a per copy\nlicense fee of less than $500 per copy);\n\n (d) any joint venture or partnership contract or other agreement\nwhich has involved, or is reasonably expected to involve, a sharing of profits,\nexpenses or losses with any other party;\n\n (e) any contract or commitment for or relating to the employment\nof any officer, employee or consultant of Atom or any other type of contract or\nunderstanding with any officer, employee or consultant of Atom that is not\nimmediately terminable by Atom without cost or other liability;\n\n\n 19\n 21\n\n (f) any agreement that contains a right or obligation of any\naffiliate, officer or director of Atom;\n\n (g) any indenture, mortgage, trust deed, promissory note, loan\nagreement, security agreement, guarantee or other agreement or commitment for\nthe borrowing of money, for a line of credit or for a leasing transaction of a\ntype required to be capitalized in accordance with Statement of Financial\nAccounting Standards No. 13 of the Financial Accounting Standards Board;\n\n (h) any lease or other agreement under which Atom is lessee of or\nholds or operates any items of tangible personal property or real property owned\nby any third party;\n\n (i) any agreement that limits or restricts Atom from engaging in\nany aspect of its business; from participating or competing in any line of\nbusiness or market; from freely setting prices for Atom's products, services or\ntechnologies (including but not limited to most favored customer pricing\nprovisions); from engaging in any business in any market or geographic area; or\nfrom soliciting potential employees, consultants, contractors or other suppliers\nor customers;\n\n (j) any Atom IP Rights Agreement (as defined in Section 3.13);\n\n (k) any agreement relating to the sale, issuance, grant,\nexercise, award, purchase, repurchase or redemption of any shares of capital\nstock or other securities of Atom or any options, warrants or other rights to\npurchase or otherwise acquire any such shares of capital stock, other securities\nor options, warrants or other rights therefor, except for those agreements\nconforming to the standard agreement under the Atom Plan;\n\n (l) any consulting or similar agreement under which Atom provides\nany advice or services to a third party for an annual compensation to Atom of\n$25,000 per year or more;\n\n (m) any contract with or commitment to any labor union;\n\n (n) any contract or arrangement under which Atom has made any\ncommitment to develop any new technology, to deliver any software currently\nunder development or to enhance or customize any software; or which provides for\nthe purchase, sale, license, transfer or encumbrance of Atom IP Rights (as\ndefined in Section 3.13) of any kind;\n\n (o) any other agreement, contract, commitment or instrument that\nis material to the business of Atom or that involves a future commitment by Atom\nin excess of $25,000;\n\n (p) any agreement that confers on a third party a right of first\nrefusal or right of first offer on the sale or transfer of any material\nproperties or assets of Atom; and\n\n (q) any Governmental Permit (as defined in Section 3.14(c)).\n\n\n 20\n 22\n\n A true and complete copy of each agreement or document, including all\namendments or supplements thereto, required by these subsections (a) through (p)\nof this Section to be listed on Schedule 3.11 to the Atom Disclosure Letter\n(such agreements and documents being hereinafter collectively referred to as the\n\"ATOM MATERIAL AGREEMENTS\") and a copy of each Governmental Permit required by\nsubsection (q) of this Section to be listed on Schedule 3.11 to the Atom\nDisclosure Letter has been delivered to Shockwave's legal counsel or made\navailable in the due diligence data room to Shockwave's legal counsel.\n\n 3.12 No Default; No Consent Required; No Restrictions. Atom is not in\nbreach or default under any Atom Material Agreement. Atom has no material\nliability for renegotiation of government contracts or subcontracts, if any.\nExcept as set forth in Schedule 3.12 to the Atom Disclosure Letter, no consent,\nnotice or approval of any third party is required to ensure that, following the\nEffective Time, any Atom Material Agreement will continue to be in full force\nand effect without any breach or violation thereof caused by virtue of the\nMerger or by any other transaction called for by this Agreement or any Atom\nAncillary Agreement. Atom is not a party to, and no asset or property of Atom is\nbound or affected by, any judgment, injunction, order, decree, contract,\ncovenant or agreement (noncompete or otherwise) that restricts or prohibits,\npurports to restrict or prohibit, Atom or, following the Effective Time,\nShockwave, from freely engaging in any business now conducted or contemplated by\nAtom or from competing anywhere in the world (including any contracts, covenants\nor agreements restricting the geographic area in which Atom may sell, license,\nmarket, distribute or support any products or technology or provide services; or\nrestricting the markets, customers or industries that Atom may address in\noperating its business; or restricting the prices which Atom may charge for its\nproducts or technology or services), or includes any grants by Atom of exclusive\nrights or licenses. No event has occurred, and no circumstance or condition\nexists, that (with or without notice or lapse of time) will, or would reasonably\nbe expected to, (a) result in a violation or breach of any of the provisions of\nany Atom Material Agreement, or (b) to Atom's knowledge, give any third party\n(i) the right to declare a default or exercise any remedy under any Atom\nMaterial Agreement, (ii) the right to a rebate, chargeback, penalty or change in\ndelivery schedule under any Atom Material Agreement, (iii) the right to\naccelerate the maturity or performance of any obligation of Atom under any Atom\nMaterial Agreement, or (iv) the right to cancel, terminate or modify any Atom\nMaterial Agreement, except in each such case for such defaults, acceleration\nrights, termination rights and other rights that have not had and would not\nreasonably be expected to have individually or in the aggregate a Material\nAdverse Effect on Atom. Atom has not received any notice or other communication\nregarding any actual or possible violation or breach of, or default under, any\nAtom Material Agreement.\n\n 3.13 Intellectual Property.\n\n (a) To Atom's knowledge, Atom owns, or has the valid right or\nlicense to use, possess, sell, license, copy, distribute, market, advertise\nand\/or dispose of all Intellectual Property (as defined below) to the extent\nnecessary or required for the conduct of the business of Atom as presently\nconducted and as presently proposed to be conducted by Atom (such Intellectual\nProperty being hereinafter collectively referred to as the \"ATOM IP RIGHTS\"),\nand such rights to use, possess, sell, license, copy, distribute, market,\nadvertise and\/or dispose of are\n\n\n 21\n 23\n\nsufficient for such conduct of such business. As used herein, the term\n\"INTELLECTUAL PROPERTY\" means, collectively, all worldwide industrial and\nintellectual property rights, including patents, patent applications, patent\nrights, trademarks, trademark registrations and applications therefor, trade\ndress rights, trade names, service marks, service mark registrations and\napplications therefor, Internet domain names, Internet and World Wide Web URLs\nor addresses, copyrights, copyright registrations and applications therefor,\nmask work rights, mask work registrations and applications therefor, franchises,\nlicenses, inventions, trade secrets, know-how, customer lists, supplier lists,\nproprietary processes and formulae, software source code and object code,\nalgorithms, net lists, architectures, structures, screen displays, photographs,\nimages, layouts, inventions, development tools, designs, blueprints,\nspecifications, technical drawings (or similar information in electronic format)\nand all documentation and media constituting, describing or relating to the\nforegoing, including manuals, programmers' notes, memoranda and records.\n\n (b) Neither the execution, delivery and performance of this\nAgreement nor the consummation of the Merger and the other transactions\ncontemplated by this Agreement will: (a) constitute a material breach of or\ndefault under any instrument, contract, license or other agreement governing any\nAtom IP Right to which Atom is a party (collectively, the \"ATOM IP RIGHTS\nAGREEMENTS\"); (b) cause the forfeiture or termination of, or give rise to a\nright of forfeiture or termination of, any Atom IP Right; or (c) materially\nimpair the right of Atom or Shockwave as the Surviving Corporation to use,\npossess, sell or license any Atom IP Right or portion thereof.\n\n (c) To Atom's knowledge, Atom has ownership or license rights\nnecessary in order to manufacture, market, license, sell or furnish, or for the\nintended use of, any product or service currently licensed, utilized, sold,\nprovided or furnished by Atom or currently under development by Atom; and, to\nAtom's knowledge, there is no pending or threatened, claim or litigation\ncontesting the validity, ownership or right of Atom to use, possess, sell,\nmarket, advertise, license or dispose of any Atom IP Right nor, to the knowledge\nof Atom, is there any basis for any such claim, nor has Atom received any notice\nasserting that any Atom IP Right or the proposed use, sale, license or\ndisposition thereof conflicts or will conflict with the rights of any other\nparty, nor, to the knowledge of Atom, is there any basis for any such assertion.\n\n (d) To Atom's knowledge, no current or former employee,\nconsultant or independent contractor of Atom: (i) is in material violation of\nany term or covenant of any employment contract, patent disclosure agreement,\ninvention assignment agreement, non-disclosure agreement, noncompetition\nagreement or any other contract or agreement with any other party, in each case\nwhere the subject of which is Intellectual Property, by virtue of such\nemployee's, consultant's, or independent contractor's being employed by, or\nperforming services for, Atom or using trade secrets or proprietary information\nof others without permission; or (ii) has developed any technology, software or\nother copyrightable, patentable, or otherwise proprietary work for Atom that is\nsubject to any agreement under which such employee, consultant or independent\ncontractor has assigned or otherwise granted to any third party any rights\n(including Intellectual Property) in or to such technology, software or other\ncopyrightable, patentable or otherwise proprietary work or any Intellectual\nProperty related thereto. To Atom's\n\n\n 22\n 24\n\nknowledge, the employment of any employee of Atom or the use by Atom of the\nservices of any consultant or independent contractor does not subject Atom to\nany liability to any third party.\n\n (e) Other than agreements listed in Schedule 3.13(e) to the Atom\nDisclosure Letter, there are no and will be no royalties, honoraria, fees or\nother payments payable by Atom to any third person (other than salaries payable\nto employees and amounts payable to independent contractors not contingent on or\nrelated to use of their work product) pursuant to agreements in effect as of the\nEffective Time by reason of the ownership, use, possession, license, copying,\nmodifying, making derivative works of, sale, marketing, advertising and\/or\ndisposition of any Atom IP Rights by Atom before or after the Closing Date, and\nnone will become payable as a result of the consummation of the Merger or the\nother transactions contemplated by this Agreement.\n\n (f) Atom has taken all commercially reasonably and appropriate\nsteps to protect, preserve and maintain the secrecy and confidentiality of the\nAtom IP Rights constituting reasonably protectible trade secrets and all Atom's\nownership interests and proprietary rights therein. All officers, employees and\nconsultants of Atom have executed and delivered to Atom an agreement regarding\nthe protection of such proprietary information and the assignment of inventions\nto Atom; and copies of all such agreements have been delivered to Shockwave's\ncounsel. Atom has secured valid written assignments from all consultants,\ncontractors and employees who were involved in, or who contributed to, the\ncreation or development of any Atom IP Rights, of the rights to such\ncontributions that may be owned by such persons or that Atom does not already\nown by operation of law. No current or former employee, officer, director,\nconsultant or independent contractor of Atom has any right, license, claim or\ninterest whatsoever in or with respect to any Atom IP Rights.\n\n (g) With respect to Atom IP Rights, Schedule 3.13(g) to the Atom\nDisclosure Letter contains a true and complete list of (i) all worldwide\nregistrations made by or on behalf of Atom of any patents, copyrights, mask\nworks, trademarks, service marks, Internet domain names or Internet or World\nWide Web URLs or addresses with any governmental or quasi-governmental\nauthority; (ii) all applications, registrations, filings and other formal\nwritten governmental actions made or taken pursuant to federal, state and\nforeign laws by Atom to secure, perfect or protect its interest in Atom IP\nRights, including all patent applications, copyright applications, and\napplications for registration of trademarks and service marks, (iii) all\nunregistered copyrights, trademarks and service marks owned by Atom used in\nconnection with the business of Atom as presently conducted or contemplated. To\nAtom's knowledge, all patents, and all registered trademarks, service marks,\nInternet domain names, Internet or World Wide Web URLs or addresses and\ncopyrights held by Atom are valid, enforceable and subsisting in all\njurisdictions in which Atom does business or markets its products and services\n(including short films, animations and other media listed in Section 3.13(l)) or\nAtom's distributors do business or market Atom products or services under\ntrademarks or service marks used by Atom in its own marketing activities. To\nAtom's knowledge, Atom owns all right, title and interest in and to all such\nAtom IP Rights free and clear of all security interests, liens, pledges,\nmortgages, assignments, claims, licenses, restrictions and encumbrances (other\nthan licenses and rights listed in Schedule 3.13(h)).\n\n\n 23\n 25\n\n (h) Schedule 3.13(h) to the Atom Disclosure Letter contains a\ntrue and complete list of (i) all licenses, sublicenses and other agreements as\nto which Atom is a party and pursuant to which any person or entity is\nauthorized to use any Atom IP Rights, and (ii) all licenses, sublicenses and\nother agreements as to which Atom is a party and pursuant to which Atom is\nauthorized to use any third party patents, trademarks, Internet domain names,\nInternet or World Wide Web URLs or addresses, or copyrights, including but not\nlimited to software (\"THIRD PARTY IP RIGHTS\") that would be infringed by, or are\nincorporated in, or form a part of, any Atom product or service currently or\npreviously contemplated to be sold, licensed, distributed, provided or marketed\nby Atom.\n\n (i) Atom owns or has valid licenses to (i) the source code and\nobject code for its existing website infrastructure (the \"SOFTWARE\"), and (ii)\nall commentary, explanations, specifications, documentation, proprietary\ninformation, test programs and program specifications, compiler and assembler\ndescriptions of proprietary or third party system utilities, and descriptions of\nsystem\/program generation and programs not owned by Atom but required for use or\nsupport, relating to the Software that are reasonably necessary for Shockwave to\nmaintain and enhance the Software.\n\n (j) To Atom's knowledge, there is no unauthorized use,\ndisclosure, infringement or misappropriation of any Atom IP Rights by any third\nparty, including any employee or former employee of Atom. Atom has not agreed to\nindemnify any person for any infringement of any Intellectual Property of any\nthird party by any product or service that has been sold, licensed, leased,\nsupplied, marketed, distributed, or provided by Atom.\n\n (k) To Atom's knowledge, all software developed by Atom and\nlicensed by Atom to customers and all other products manufactured, sold,\nlicensed, leased or delivered by Atom to customers and all services provided by\nAtom to customers on or prior to the Closing Date conform in all material\nrespects to applicable contractual commitments, express and implied warranties,\nproduct specifications and product documentation and to any representations\nprovided to customers and Atom has no material liability (and, to Atom's\nknowledge, there is no basis for any present or future action, suit, proceeding,\nhearing, investigation, charge, complaint, claim or demand against Atom giving\nrise to any liability relating to the foregoing contracts that could have a\nMaterial Adverse Effect on Atom) for replacement or repair thereof or other\ndamages in connection therewith in excess of any reserves therefor reflected on\nthe Balance Sheet.\n\n (l) Schedule 3.13(l) of the Atom Disclosure Letter lists all\nshort films, animations and other digital media that have been licensed,\nsyndicated or otherwise distributed by Atom during the twelve-month period\npreceding the Agreement Date. Except as otherwise set forth in Schedule 3.13(l)\nof the Atom Disclosure Letter, to Atom's knowledge, Atom owns or possesses all\nnecessary rights to produce and display such short films, animations and other\ndigital media on its website or available by Atom for syndication. Except\npursuant to a license, Atom is not using in any of the short films, animations\nand other digital media listed in Section 3.13(l) of the Atom Disclosure Letter\nany works or inventions made by any current or former employee, consultant or\nindependent contractor of Atom, which the current or former employee,\n\n\n 24\n 26\n\nconsultant or independent contractor has excluded from his or her assignment of\ninventions pursuant to such employee, consultant or contractor's proprietary\ninformation and inventions agreement, or which were made outside the course or\nscope of such employee's employment or consultant's or contractor's engagement\nby Atom.\n\n (m) No government funding; facilities of a university, college,\nother educational institution or research center; or funding from third parties\n(other than funds received in consideration for capital stock of Atom) was used\nin the development of the computer software programs or applications owned by\nAtom. No current or former employee, consultant or independent contractor of\nAtom has performed services for the government, university, college, or other\neducational institution or research center during a period of time during which\nsuch employee, consultant or independent contractor was also performing services\nfor Atom.\n\n 3.14 Compliance with Laws.\n\n (a) Atom has materially complied, and is now and at the Closing\nDate will be in material compliance with, all applicable federal, state, local\nor foreign laws, ordinances, regulations, and rules, and all orders, writs,\ninjunctions, awards, judgments, and decrees, applicable to it or to its assets,\nproperties, and business (and any regulations promulgated thereunder)\n(collectively, \"APPLICABLE LAW\"). Atom holds all material licenses and\nGovernmental Permits that are necessary and\/or legally required to be held by it\nto conduct its business as presently conducted.\n\n (b) All materials and products distributed or marketed by Atom\nhave at all times made all disclosures to users or customers required by\nApplicable Law and none of such disclosures made or contained in any such\nmaterials have been materially inaccurate, misleading or deceptive.\n\n (c) Atom holds all material permits, licenses and approvals from,\nand has made all material filings with, government (and quasi-governmental)\nagencies and authorities, that are necessary for Atom to conduct its present\nbusiness without any violation of Applicable Law (\"GOVERNMENTAL PERMITS\") and\nall such Governmental Permits are in full force and effect. Atom has not\nreceived any notice or other communication from any Governmental Authority\nregarding (i) any actual or possible violation of law or any Governmental Permit\nor any failure to comply with any term or requirement of any Governmental\nPermit, or (ii) any actual or possible revocation, withdrawal, suspension,\ncancellation, termination or modification of any Governmental Permit.\n\n (d) Neither Atom nor any director or officer or Atom, or, to\nAtom's knowledge, any agent or employee of Atom has, for or on behalf of Atom,\n(a) used any funds for unlawful contributions, gifts, entertainment or other\nunlawful expenses relating to political activity, (b) made any unlawful payment\nto foreign or domestic government officials or employees or to foreign or\ndomestic political parties or campaigns or violated any provision of the Foreign\nCorrupt Practices Act of 1977, as amended, or (c) made any other payment in\nviolation of Applicable Law.\n\n\n 25\n 27\n\n (e) None of the officers or directors of Atom or, to Atom's\nknowledge, employees or shareholders of Atom, nor any member of their immediate\nfamilies, has any direct or indirect ownership interest in any firm or\ncorporation that competes with, or does business with, or has any contractual\narrangement with, Atom (except with respect to any interest in less than 1% of\nthe stock of any corporation whose stock is publicly traded). None of said\nofficers or directors or, to Atom's knowledge, employees or shareholders or any\nmember of their immediate families, is a party to, or otherwise directly or\nindirectly interested in, any contract or informal arrangement with Atom, except\nfor normal compensation for services as an officer, director or employee thereof\nthat have been disclosed to Shockwave and except for agreements related to the\npurchase of the stock of Atom by such persons. None of said officers or\ndirectors or, to Atom's knowledge, employees, shareholders or family members has\nany interest in any property, real or personal, tangible or intangible\n(including but not limited to any Atom IP Rights or any other Intellectual\nProperty) that is used in, or that pertains to, the business of Atom, except for\nthe normal rights of a shareholder.\n\n 3.15 Employees, ERISA and Other Compliance.\n\n (a) Atom is in material compliance in all respects with all\napplicable laws, agreements and contracts relating to employment, employment\npractices, immigration, wages, hours, and terms and conditions of employment,\nincluding, but not limited to, employee compensation matters, and has correctly\nclassified employees as exempt employees and non-exempt employees under the Fair\nLabor Standards Act. A list of all employees, officers and consultants of Atom\nand their current title and\/or job description and compensation is set forth on\nSchedule 3.15(a) to Atom Disclosure Letter. Atom does not have any employment\ncontracts or consulting agreements currently in effect that are not terminable\nat will without penalty or payment of compensation by Atom (other than\nagreements with the sole purpose of providing for the confidentiality of\nproprietary information or assignment of inventions).\n\n (b) Atom (i) is not now, nor has ever been, subject to a union\norganizing effort, (ii) is not subject to any collective bargaining agreement\nwith respect to any of its employees, (iii) is not subject to any other\ncontract, written or oral, with any trade or labor union, employees' association\nor similar organization, or (iv) has no current labor disputes. Atom has good\nlabor relations, and has no knowledge of any facts indicating that the\nconsummation of the Merger or the other transactions contemplated by this\nAgreement will have a material adverse effect on such labor relations, and has\nno knowledge that any of its key employees intends to leave their employ. All of\nthe employees of Atom are legally permitted to be employed by Atom in the\njurisdictions in which they are employed in their current job capacities.\n\n (c) Atom has no pension plan which constitutes, or has since the\nenactment of the Employee Retirement Income Security Act of 1974, as amended\n(\"ERISA\") constituted, and has never been required to contribute to, a\n\"multiemployer plan\" as defined in Section 3(37) of ERISA. No pension plan of\nAtom is subject to Title IV of ERISA.\n\n (d) (i) Schedule 3.15(d) to the Atom Disclosure Letter lists each\nemployment, severance or other similar contract, arrangement or policy, each\n\"employee benefit\n\n\n 26\n 28\n\nplan\" as defined in Section 3(3) of ERISA and each plan or arrangement (written\nor oral) providing for insurance coverage (including any self-insured\narrangements), workers' benefits, vacation benefits, severance benefits,\ndisability benefits, death benefits, hospitalization benefits, retirement\nbenefits, deferred compensation, profit-sharing, bonuses, stock options, stock\npurchase, phantom stock, stock appreciation or other forms of incentive\ncompensation or post-retirement insurance, compensation or benefits for\nemployees, consultants or directors which is entered into, maintained or\ncontributed to by Atom and covers any employee or former employee of Atom. Such\ncontracts, plans and arrangements as are described in this Section 3.15(d) are\nhereinafter collectively referred to as \"ATOM BENEFIT ARRANGEMENTS.\"\n\n (ii) Each Atom Benefit Arrangement has been maintained in\ncompliance in all respects with its terms and with the requirements prescribed\nby any and all statutes, orders, rules and regulations that are applicable to\nsuch Atom Benefit Arrangement and, unless otherwise indicated in Schedule 3.15.4\nto the Atom Disclosure Letter, each such Atom Benefit Arrangement that is an\n\"employee pension benefit plan\" as defined in Section 3(2) of ERISA which is\nintended to qualify under Section 401(a) of the Code has received a favorable\ndetermination letter that such plan satisfied the requirements of the Tax Reform\nAct of 1986 (a copy of which letter(s) have been delivered to Shockwave and its\ncounsel), or Atom has time remaining in which to apply for such favorable\ndetermination letter within the remedial amendment period under Section 401(b)\nof the Code and the Regulations, or Atom may rely on an opinion letter from the\nInternal Revenue Service with respect to a standardized prototype plan adopted\nin accordance with the requirements for such reliance.\n\n (iii) Atom has delivered to Shockwave or its counsel a\ncomplete and correct copy and description of each Atom Benefit Arrangement.\n\n (iv) Atom has timely filed and delivered to Shockwave and\nits counsel the most recent annual report (Form 5500) for each Atom Benefit\nArrangement that is an \"employee benefit plan\" as defined under ERISA.\n\n (v) Atom has not ever been a participant in any\n\"prohibited transaction,\" within the meaning of Section 406 of ERISA, with\nrespect to any employee pension benefit plan (as defined in Section 3(2) of\nERISA) which Atom sponsors as employer or in which Atom participates as an\nemployer, which was not otherwise exempt pursuant to Section 408 of ERISA\n(including any individual exemption granted under Section 408(a) of ERISA), or\nwhich could result in an excise tax under the Code.\n\n (vi) All contributions due from Atom with respect to any\nAtom Benefit Arrangements have been made or have been accrued on the Atom\nFinancial Statements (including the Atom Financial Statements), and no further\ncontributions will be due or will have accrued thereunder as of the Closing\nDate.\n\n (vii) All individuals who, pursuant to the terms of any\nAtom Benefit Arrangement, are entitled to participate in any such Atom Benefit\nArrangement, are currently participating in such Atom Benefit Arrangement or\nhave been offered an opportunity to do so.\n\n\n 27\n 29\n\n (viii) Atom will have no liability to any employee or to\nany organization or any other entity as a result of the termination of any\nemployee leasing arrangement.\n\n (xi) Except as set forth in Schedule 3.15(d), no Atom\nBenefit Arrangement will be subject to any surrender fees or service fees upon\ntermination other than the normal and reasonable administrative fees associated\nwith the termination of benefit plans. Except as disclosed in Schedule 3.15(d),\nno employee of Atom and no person subject to any Atom health plan has made\nmedical claims through such health plan during the twelve months preceding the\nAgreement Date for more than $20,000 in the aggregate.\n\n (e) There has been no amendment to, written interpretation or\nannouncement (whether or not written) by Atom relating to, or change in employee\nparticipation or coverage under, any Atom Benefit Arrangement that would\nincrease materially the expense of maintaining such Atom Benefit Arrangement\nabove the level of the expense incurred in respect thereof during the calendar\nyear 1999.\n\n (f) The group health plans (as defined in Section 4980B(g) of the\nCode) that benefit employees of Atom are in compliance, in all respects, with\nthe continuation coverage requirements of Section 4980B of the Code as such\nrequirements affect Atom and its employees. As of the Closing Date, there will\nbe no material outstanding, uncorrected violations under the Consolidation\nOmnibus Budget Reconciliation Act of 1985, as amended (\"COBRA\"), with respect to\nany of Atom Benefit Arrangements, covered employees, or qualified beneficiaries\nthat could result in a Material Adverse Effect on Atom, or in a Material Adverse\nEffect on Shockwave after the Effective Time.\n\n (g) Unless otherwise indicated in Schedule 3.15(g) to the Atom\nDisclosure Letter, no benefit payable or which may become payable by Atom\npursuant to any Atom Benefit Arrangement or as a result of or arising under this\nAgreement or the other transactions contemplated by this Agreement will\nconstitute an \"excess parachute payment\" (as defined in Section 280G(b)(1) of\nthe Code) which is subject to the imposition of an excise Tax under Section 4999\nof the Code or which would not be deductible by reason of Section 280G of the\nCode. Unless otherwise indicated in Schedule 3.15(g) to the Atom Disclosure\nLetter, Atom is not a party to any: (i) agreement with any employee or service\nprovider of Atom (A) the benefits of which are contingent, or the terms of which\nare materially altered, upon the occurrence of a transaction involving Atom in\nthe nature of the Merger or the other transactions contemplated by this\nAgreement or any Atom Ancillary Agreement, (B) providing any term of employment\nor compensation guarantee, or (C) providing severance benefits or other benefits\nafter the termination of employment of such person regardless of the reason for\nsuch termination of employment; or (iii) agreement or plan, including any stock\noption plan, stock appreciation rights plan or stock purchase plan, any of the\nbenefits of which will be increased, or the vesting of benefits of which will be\naccelerated, by the occurrence of the Merger or the other transactions\ncontemplated by this Agreement.\n\n (h) Except as disclosed in Schedule 3.15(h), each Atom Option was\ngranted with an exercise price per share equal to the fair market value of the\nunderlying shares covered\n\n\n 28\n 30\n\nby such option, as determined by Atom's Board of Directors after giving due\nconsideration to the advice of its counsel and accountants as to possible\ncompensation charge issues, on the date of grant. All Atom Options granted as\nincentive stock options met the requirements of Section 422 of the Code on the\ndate of grant. All Atom Options granted to individuals who are not identified as\nindependent contractors may properly be accounted for under Accounting\nPrinciples Board Opinion No. 25 and related Accounting Principles Board\namendments and interpretations.\n\n (i) Attached as Schedule 3.15(i) are complete and correct copies\nof all policies of Atom relating to sales or commissions.\n\n (j) Attached as Schedule 3.15(j) is a list as of the Agreement\nDate of all outstanding liabilities of Atom for commissions or other payments to\nAtom's employees or consultants.\n\n (k) Attached as Schedule 3.15(k) is a list of \"executive\nofficers,\" as referenced in Section 11(c)(i) of the Atom Plan.\n\n 3.16 Corporate Documents. Atom has made available to Shockwave or its\nlegal counsel for examination all documents and information listed in the Atom\nDisclosure Letter or in any schedule thereto or in any other exhibit or schedule\ncalled for by this Agreement which have been requested by Shockwave or its legal\ncounsel, including the following: (a) copies of Atom's Articles of Incorporation\nand Bylaws as currently in effect; (b) Atom's minute book containing all records\nof all proceedings, consents, actions, and meetings of Atom Shareholders, Board\nof Directors and any committees thereof; (c) Atom's stock ledger, option ledger,\nand warrant ledger and journal reflecting all stock issuances and transfers, and\nall grants of options and warrants to purchase Atom capital stock and other Atom\nsecurities; and (d) all permits, orders, and consents issued by, and filings by\nAtom with, any regulatory agency with respect to Atom, or any securities of\nAtom, and all applications for such permits, orders, and consents.\n\n 3.17 No Brokers. Other than the fees and expenses of Morgan Stanley & Co. (\"MORGAN STANLEY\") pursuant to the engagement letter dated May 30, 2000 (the\n\"ENGAGEMENT LETTER\") between Atom and Morgan Stanley, a copy of which has been\ndelivered to Shockwave or its legal counsel, neither Atom nor any affiliate of\nAtom is obligated for the payment of any fees or expenses of any investment\nbanker, broker, finder or similar party in connection with the origin,\nnegotiation or execution of this Agreement or in connection with the Merger or\nany other transaction contemplated by this Agreement.\n\n 3.18 Books and Records.\n\n (a) The books, records and accounts of Atom (i) are in all\nmaterial respects true, complete and correct, (ii) have been maintained in\naccordance with good business practices on a basis consistent with prior years,\n(iii) are stated in reasonable detail and accurately and fairly reflect the\ntransactions and dispositions of the assets of Atom, and (iv) accurately and\nfairly reflect the basis for the Atom Financial Statements.\n\n\n 29\n\n 31\n (b) Atom has devised and maintains a system of internal\naccounting controls sufficient to provide reasonable assurances that: (i)\ntransactions are executed in accordance with management's general or specific\nauthorization; (ii) transactions are recorded as necessary (A) to permit\npreparation of financial statements in conformity with generally accepted\naccounting principles or any other criteria applicable to such statements, and\n(B) to maintain accountability for assets; and (iii) the amount recorded for\nassets on the books and records of Atom is compared with the existing assets at\nreasonable intervals and appropriate action is taken with respect to any\ndifferences.\n\n 3.19 Insurance. Since its organization, Atom has maintained, and now\nmaintains, policies of insurance and bonds of the type and in amounts\ncustomarily carried by persons conducting businesses or owning assets similar in\ntype and size to those of Atom, including all legally required workers'\ncompensation insurance and errors and omissions, casualty, fire and general\nliability insurance. There is no claim pending under any of such policies or\nbonds as to which coverage has been questioned, denied or disputed by the\nunderwriters of such policies or bonds. All premiums due and payable under all\nsuch policies and bonds have been timely paid and Atom is otherwise in\ncompliance with the terms of such policies and bonds. Atom has no knowledge of\nany threatened termination of, or material premium increase with respect to, any\nof such policies. All policies of insurance now held by Atom are set forth in\nSchedule 3.19 to Atom Disclosure Letter, together with the name of the insurer\nunder each policy, the type of policy, the policy coverage amount and any\napplicable deductible.\n\n 3.20 Environmental Matters.\n\n (a) Atom is in material compliance with all applicable\nEnvironmental Laws (as defined below), which compliance includes the possession\nby Atom of all permits and other governmental authorizations required under\napplicable Environmental Laws, and compliance with the terms and conditions\nthereof. Atom has not received any notice or other communication (in writing or\notherwise), whether from a governmental body, citizens groups, employee or\notherwise, that alleges that Atom is not in compliance with any Environmental\nLaw, and to Atom's knowledge, there are no circumstances that may prevent or\ninterfere with the compliance by Atom with any current Environmental Law in the\nfuture. To Atom's knowledge, no current or prior owner of any property leased or\npossessed by Atom has received any notice or other communication (in writing or\notherwise), whether from a government body, citizens group, employee or\notherwise, that alleges that such current or prior owner or Atom is not in\ncompliance with any Environmental Law. All governmental authorizations currently\nheld by Atom pursuant to any Environmental Law (if any) are identified in\nSchedule 3.20 of Atom Disclosure Letter.\n\n (b) For purposes of this Agreement: (a) \"ENVIRONMENTAL LAW\" means\nany federal, state or local statute, law regulation or other legal requirement\nrelating to pollution or protection of human health or the environment\n(including ambient air, surface water, ground water, land surface or subsurface\nstrata), including any law or regulation relating to emissions, discharges,\nreleases or threatened releases of Materials of Environmental Concern, or\notherwise relating to the manufacture, processing, distribution, use, treatment,\nstorage, disposal, transport or handling of Materials of Environmental Concern;\nand (b) \"MATERIAL OF ENVIRONMENTAL\n\n\n\n 30\n 32\nCONCERN\" include chemicals, pollutants, contaminants, wastes, toxic substances,\npetroleum and petroleum products and any other substance that is currently\nregulated by an Environmental Law or that is otherwise a danger to health,\nreproduction or the environment.\n\n 3.21 Accounts Receivable. The receivables shown on the Balance Sheet on\nthe Balance Sheet Date arose in the ordinary course of business, consistent with\npast practice, and have been collected or are collectible in the book amounts\nthereof, less an amount not in excess of the allowance for doubtful accounts\nprovided for in the balance sheet of Atom on the Balance Sheet Date. Allowances\nfor doubtful accounts and warranty returns are adequate and have been prepared\nin accordance with GAAP consistently applied and in accordance with the past\npractices of Atom. The receivables of Atom arising after the Balance Sheet Date\nand prior to the Closing Date arose or will arise in the ordinary course of\nbusiness, consistent with past practice, and have been collected or are\ncollectible in the book amounts thereof, less allowances for doubtful accounts\ndetermined in accordance with the past practices of Atom. To the knowledge of\nAtom, none of its receivables is subject to any material claim of offset,\nrecoupment, setoff or counter-claim and it has no knowledge of any specific\nfacts or circumstances (whether asserted or unasserted) that could give rise to\nany such claim. No material amount of receivables are contingent upon the\nperformance by Atom of any obligation or contract other than normal warranty\nrepair and replacement. No person has any Encumbrance on any of such receivables\nand no agreement for deduction or discount has been made with respect to any of\nsuch receivables. Schedule 3.21 sets forth an aging of accounts receivable of\nAtom in the aggregate and by customer, and indicates the amounts of allowances\nfor doubtful accounts.\n\n 3.22 Board Actions. The Board of Directors of Atom has unanimously (a)\napproved this Agreement, the Merger and all the agreements, transactions and\nactions contemplated hereby, (b) determined that the Merger is in the best\ninterests of the Atom Shareholders and is on terms that are fair to such\nshareholders, and has recommended the Merger to the Atom Shareholders, and (c)\nsubmitted this Agreement, the Merger and the transactions and agreements\ncontemplated by this Agreement to the vote and approval of Atom Shareholders.\n\n 3.23 Shareholder Approval. Concurrently with the execution of this\nAgreement, Atom Shareholders holding at least a majority of the outstanding\nshares of (a) Atom Common Stock and Atom Preferred Stock, (b) Atom Common Stock,\n(c) Atom Preferred Stock, (d) Atom Series A Preferred Stock, (e) Atom Series B\nPreferred Stock, and (f) Atom Series C Preferred Stock have executed and\ndelivered to Shockwave binding Voting Agreements and irrevocable proxies\nagreeing to vote for approval of this Agreement, the Merger, the Restated\nArticles of Incorporation and the other transactions contemplated by this\nAgreement.\n\n 3.24 No Existing Discussions. Neither Atom nor any director, officer,\nemployee or agent of Atom or, to Atom's knowledge, any Atom Shareholder, is\nengaged, directly or indirectly, in any discussions or negotiations with any\nthird party relating to any Alternative Transaction (as defined in Section 5.7).\n\n 3.25 Disclosure. Neither this Agreement, its exhibits and schedules and\nthe Atom Disclosure Letter, nor any Atom Ancillary Agreements delivered by Atom\nto Shockwave under\n\n\n\n 31\n 33\nthis Agreement, taken together, contains any untrue statement of a material fact\nor omits to state any material fact necessary in order to make the statements\ncontained herein and therein, in light of the circumstances under which such\nstatements were made, not misleading.\n\n 3.26 Tax Matters. Atom has not taken or agreed to take any action, nor\ndoes Atom have knowledge of any fact or circumstance that would prevent the\nMerger from qualifying as a reorganization within the meaning of Section 368(a)\nof the Code.\n\n ARTICLE 4\n REPRESENTATIONS AND WARRANTIES OF SHOCKWAVE\n\n Shockwave hereby represents and warrants to Atom that, except as set\nforth in the letter addressed to Atom from Shockwave and dated as of the\nAgreement Date which has been delivered by Shockwave to Atom concurrently\nherewith (the \"SHOCKWAVE DISCLOSURE LETTER\"), each of the following\nrepresentations, warranties and statements contained in the following Sections\nof this Article 4 are true and correct as of the Agreement Date and will be true\nand correct on and as of the Closing Date. For all purposes of this Agreement,\nthe statements contained in the Shockwave Disclosure Letter will also be deemed\nto be representations and warranties made and given by Shockwave under Article\n4.\n\n 4.1 Organization, Good Standing and Qualification. Shockwave is a\ncorporation duly organized, validly existing and in good standing under the laws\nof the State of Delaware. Shockwave has the corporate power and authority to\nown, operate and lease its properties and to carry on its business as now\nconducted and as proposed to be conducted, and is qualified to transact\nbusiness, and is in good standing, in each jurisdiction where the character of\nthe properties owned, leased or operated by it or the nature of its activities\nmake such qualification necessary, except in such jurisdictions where the\nfailure to be so qualified would not have a Material Adverse Effect on\nShockwave. Shockwave is not in violation of its Certificate of Incorporation.\n\n 4.2 Subsidiaries. Except as set forth on Schedule 4.2 to the Shockwave\nDisclosure Letter, Shockwave has no Subsidiaries or any equity interest, direct\nor indirect, in or loans to, any corporation, partnership, joint venture,\nlimited liability company or other business entity.\n\n 4.3 Power, Authorization and Validity.\n\n (a) Power and Authority. Subject to the Shockwave Required\nApprovals, Shockwave has all requisite corporate power and authority to enter\ninto, execute, deliver and perform its obligations under, this Agreement and all\nShockwave Ancillary Agreements and to consummate the Merger and the other\ntransactions contemplated by this Agreement. The Merger and the execution,\ndelivery and performance by Shockwave of this Agreement and each of the\nShockwave Ancillary Agreements have been duly and validly approved and\nauthorized by Shockwave's Board of Directors.\n\n (b) No Consents. No consent, approval, order or authorization of,\nor registration, declaration or filing with, any Governmental Authority, or any\nother person or\n\n\n\n 32\n 34\nentity, governmental or otherwise is necessary or required to be made or\nobtained by Shockwave to enable Shockwave to lawfully execute and deliver, enter\ninto, and to perform its obligations under, this Agreement and each of the\nShockwave Ancillary Agreements, or to consummate the Merger and the other\ntransactions contemplated by this Agreement, except for (i) the filing of the\nArticles of Merger with the Washington Secretary of State; (ii) the filing of\nthe Certificate of Merger with the Delaware Secretary of State; and (iii) such\nfilings and notifications as may be required to be made by Macromedia in\nconnection with the Merger under the HSR Act, and the expiration of applicable\nwaiting periods under the HSR Act.\n\n (c) Enforceability. This Agreement has been validly executed and\ndelivered by Shockwave. This Agreement and each of the Shockwave Ancillary\nAgreements are, or when executed by Shockwave will be, valid and binding\nobligations of Shockwave, enforceable against Shockwave in accordance with their\nrespective terms, subject to the effect of (i) applicable bankruptcy,\ninsolvency, reorganization, moratorium or other similar laws affecting the\nrights of creditors generally and (ii) rules of law and equity governing\nspecific performance, injunctive relief and other equitable remedies.\n\n 4.4 Capitalization of Shockwave.\n\n (a) Outstanding Securities. The authorized capital stock of\nShockwave consists entirely of 160,000,000 shares of Shockwave Common Stock, of\nwhich a total of 9,091,166 shares are issued and outstanding; 56,381,500 shares\nof Shockwave Preferred Stock, 34,581,500 shares of which have been designated\nSeries A Preferred Stock, of which 34,581,500 shares are issued and outstanding;\nand 21,800,000 shares of which have been designated Series B Preferred Stock, of\nwhich 20,080,500 shares are issued and outstanding. An aggregate of 17,400,500\nshares of Shockwave Common Stock are reserved and authorized for issuance\npursuant to the Shockwave 1999 Equity Incentive Plan, of which options to\npurchase a total of 5,441,179 shares of Shockwave Common Stock are outstanding.\nWarrants to purchase 2,773,138 shares of Shockwave Common Stock are outstanding.\n\n (b) Valid Issuance. As of the Closing Date, there will have been\nno change in the authorized or outstanding capital stock of Shockwave as\nrepresented in Section 3.4(a), other than as contemplated by this Agreement. All\nissued and outstanding shares of Shockwave Common Stock and Shockwave Preferred\nStock have been duly authorized and validly issued, are fully paid and\nnonassessable, are not subject to any preemptive right, right of first refusal,\nright of first offer or right of rescission, and have been offered, issued, sold\nand delivered by Shockwave in compliance with (i) all registration or\nqualification requirements (or applicable exemptions therefrom) of all\napplicable securities laws and, to the knowledge of Shockwave, other applicable\nLegal Requirements and (ii) all requirements set forth in applicable agreements\nor instruments. All shares of Shockwave Common Stock subject to issuance under\noptions and warrants to purchase Shockwave Common Stock, upon issuance on the\nterms and conditions specified in the instruments pursuant to which they are\nissuable, will be duly authorized, validly issued, fully paid and nonassessable.\nAll outstanding options and warrants to purchase Shockwave Common Stock have\nbeen issued and granted in compliance with (i) all registration or qualification\nrequirements (or applicable exemptions therefrom) of all applicable securities\n\n\n\n 33\n 35\nlaws and, to the knowledge of Shockwave, other applicable Legal Requirements and\n(ii) all requirements set forth in applicable agreements or instruments.\n\n (c) No Other Options, Warrants or Rights. Other than as set forth\nin Section 4.4(a), there are no options, warrants, convertible securities or\nother securities, calls, commitments, conversion privileges, preemptive rights,\nrights of first refusal, rights of first offer or other rights or agreements\noutstanding to purchase or otherwise acquire (whether directly or indirectly)\nany shares of Shockwave's authorized but unissued capital stock or any\nsecurities convertible into or exchangeable for any shares of Shockwave's\ncapital stock or obligating Shockwave to grant, issue, extend, or enter into any\nsuch option, warrant, convertible security or other security, call, commitment,\nconversion privilege, preemptive right, right of first refusal, right of first\noffer or other right or agreement, and there is no liability for dividends\naccrued but unpaid.\n\n (d) No Voting Arrangements or Registration Rights. Except as\ncontemplated by this Agreement, there are no voting agreements, voting trusts or\nproxies applicable to any of Shockwave's outstanding capital stock or any\noptions to purchase shares of Shockwave Common Stock or to the conversion of any\nshares of Shockwave's capital stock pursuant to any agreement or obligation to\nwhich Shockwave is a party or, to Shockwave's knowledge, pursuant to any other\nagreement or obligation. Shockwave is not under any obligation to register under\nthe Securities Act any of its presently outstanding shares of stock or other\nsecurities or any stock or other securities that may be subsequently issued.\n\n 4.5 No Conflict. Neither the execution and delivery of this Agreement\nnor any of the Shockwave Ancillary Agreements by Shockwave, nor the consummation\nof the Merger or the other transactions contemplated hereby or thereby, will\nconflict with, or (with or without notice or lapse of time, or both) result in a\ntermination, breach, impairment or violation of, or constitute a default under:\n(a) any provision of the Certificate of Incorporation or Bylaws of Shockwave as\ncurrently in effect; (b) any material federal, state, local or foreign judgment,\nwrit, decree, order, statute, rule or regulation applicable to Shockwave or any\nof its material assets or properties; or (c) any material instrument, agreement,\ncontract, undertaking, understanding, letter of intent, memorandum of\nunderstanding or commitment (whether verbal or in writing) to which Shockwave is\na party or by which Shockwave or any of its material assets or properties are\nbound.\n\n 4.6 Litigation. There is no action, suit, arbitration, mediation,\nproceeding, claim or investigation pending against Shockwave (or against any\nofficer, director, employee or agent of Shockwave in their capacity as such or\nrelating to their employment, services or relationship with Shockwave) before\nany Governmental Authority or arbitrator, nor, to Shockwave's knowledge, has any\nsuch action, suit, arbitration, mediation, proceeding, claim or investigation\nbeen threatened. There is no judgment, decree, injunction, rule or order of any\nGovernmental Authority or arbitrator outstanding against Shockwave. To\nShockwave's knowledge, there is no basis for any person to assert a claim\nagainst Shockwave based upon: (a) Shockwave's entering into this Agreement or\nany Shockwave Ancillary Agreement or consummating the Merger or the other\ntransactions contemplated by this Agreement, any Shockwave Ancillary Agreement;\nor (b)\n\n\n\n 34\n 36\na claim of ownership of, or options, warrants or other rights to acquire\nownership of, any shares of the capital stock of Shockwave or any rights as an\nShockwave shareholder, including any option, warrant or preemptive rights or\nrights to notice or to vote, other than for the rights of the Shockwave\nShareholders with respect to the Shockwave Common Stock and Shockwave Preferred\nStock and the rights of holders of options and warrants to purchase Shockwave\nCommon Stock.\n\n 4.7 Taxes. Shockwave has timely filed all federal, state, local and\nforeign tax and information returns required to be filed by it, has timely paid\nall taxes required to be paid by it for which payment is due, has established an\nadequate accrual or reserve for the payment of all taxes payable in respect of\nthe periods or portions thereof prior to the Closing Date subsequent to the\nperiods covered by its most recent applicable tax returns (which accrual or\nreserve as of the Shockwave Balance Sheet Date (as defined in Section 4.8) is\nfully reflected on the Shockwave Balance Sheet and in any more recent balance\nsheet of Shockwave provided by Shockwave to Shockwave on or before the Agreement\nDate), has made all necessary estimated tax payments, and has no liability for\ntaxes in excess of the amount so paid or accruals or reserves so established.\nAll such returns and reports are true, correct and complete, and Shockwave has\nprovided Shockwave with true and correct copies of such returns and reports.\nShockwave is not delinquent in the payment of any tax or in the filing of any\ntax returns, and no deficiencies for any tax have been threatened, claimed,\nproposed or assessed against Shockwave or any of the officers, employees or\nagents of Shockwave in their capacity as such. Shockwave has not received any\nnotification from the Internal Revenue Service or any other taxing authority\nregarding any material issues that: (i) are currently pending before the\nInternal Revenue Service or any other taxing authority (including but not\nlimited to any sales or use tax authority) regarding Shockwave, or (ii) have\nbeen raised by the Internal Revenue Service or other taxing authority and not\nyet finally resolved. No tax return of Shockwave is under audit by the Internal\nRevenue Service or any state or local taxing agency or authority and any such\npast audits (if any) have been completed and fully resolved to the satisfaction\nof the applicable tax authority conducting such audit and all taxes determined\nby such audit to be due from Shockwave have been paid in full to the applicable\ntaxing authorities. No tax liens are currently in effect against any assets of\nShockwave other than liens which arise by operation of law for taxes not yet due\nand payable. There is not in effect any waiver by Shockwave of any statute of\nlimitations with respect to any taxes; and Shockwave has not consented to extend\nthe due date for which any tax may be assessed or collected by any taxing\nauthority. Shockwave is not a \"personal holding company\" within the meaning of\nthe Code. Shockwave has withheld with respect to each of its employees and\nindependent contractors all taxes, including but not limited to federal and\nstate income taxes, FICA, Medicare, FUTA and other taxes, required to be\nwithheld, and paid such withheld amounts to the appropriate tax authority within\nthe time prescribed by law. Since its inception, Shockwave has not been a\n\"United States real property holding corporation,\" as defined in Section\n897(c)(2) of the Code, and in Section 1.897-2(b) of the Regulations, and\nShockwave has filed, or at the Effective Time will file, with the Internal\nRevenue Service all statements, if any, which are required under Section\n1.897-2(h) of the Regulations. Shockwave has not been distributed in a\ntransaction qualifying under Section 355 of the Code within the last two years,\nnor has Shockwave distributed any corporation in a transaction qualifying under\nSection 355 of the Code within the last two years. Shockwave has not elected\npursuant to the\n\n\n\n 35\n 37\nCode to be treated as an \"S\" corporation or a collapsible corporation pursuant\nto Section 1362(a) or Section 341(f) of the Code. Shockwave will not, as a\nresult of any action taken prior to the Effective Time, have any adjustment\nunder Section 481 of the Code for periods after the Effective Time.\n\n 4.8 Shockwave Financial Statements. Attached as Schedule 4.8 to the\nShockwave Disclosure Letter are Shockwave's audited balance sheet as of March\n31, 2000, its unaudited consolidated statements of operations, statements of\ncash flows and statements of changes in shareholders' equity for the year ended\nMarch 31, 2000, its unaudited balance sheet of Shockwave as of October 31, 2000,\nand its unaudited consolidated statements of operations, statements of cash\nflows and statements of changes in shareholders' equity for the seven-months\nended October 31, 2000 (all such financial statements of Shockwave and any notes\nthereto are hereinafter collectively referred to as the \"SHOCKWAVE FINANCIAL\nSTATEMENTS\"). The Shockwave Financial Statements: (a) are derived from and are\nin accordance with the books and records of Shockwave, (b) fairly present the\nfinancial condition of Shockwave at the dates therein indicated and the results\nof operations for the periods therein specified, and (c) have been prepared in\naccordance with United States GAAP applied on a basis consistent with prior\nperiods except for any absence of notes with respect to the unaudited Shockwave\nFinancial Statements. Shockwave has no material debt, liability or obligation of\nany nature, whether accrued, absolute, contingent or otherwise, and whether due\nor to become due, except for (a) those shown on Shockwave's unaudited balance\nsheet as of October 31, 2000 included in the Shockwave Financial Statements (the\n\"SHOCKWAVE BALANCE SHEET\"), and (b) those that may have been incurred after\nOctober 31, 2000 (the \"SHOCKWAVE BALANCE SHEET DATE\") in the ordinary course of\nShockwave's business consistent with its past practices, and that are not\nmaterial in amount, either individually or collectively. All reserves\nestablished by Shockwave that are set forth in or reflected in the Shockwave\nBalance Sheet are adequate. At the Shockwave Balance Sheet Date, there were no\nmaterial loss contingencies (as such term is used in Statement of Financial\nAccounting Standards No. 5 issued by the Financial Accounting Standards Board in\nMarch 1975) which are not adequately provided for in the Shockwave Balance Sheet\nas required by said Statement No. 5. The Shockwave Financial Statements comply\nin all material respects with the American Institute of Certified Public\nAccountants' Statement of Position 97-2. For purposes of this Section 4.8 only,\nreferences to \"material\" means the amount of $200,000 or more.\n\n 4.9 Absence of Certain Changes. Since the Shockwave Balance Sheet Date,\nthere has not been with respect to Shockwave any:\n\n (a) Material Adverse Change;\n\n (b) amendment or change in the Certificate of Incorporation or\nBylaws or other charter documents;\n\n (c) damage, destruction or loss of any property or asset, whether\nor not covered by insurance, having (or likely with the passage of time to have)\na Material Adverse Effect on Shockwave;\n\n\n\n 36\n 38\n (d) declaration, setting aside or payment of any dividend on, or\nthe making of any other distribution in respect of, the capital stock of\nShockwave, or any split, combination or recapitalization of the capital stock of\nShockwave or any direct or indirect redemption, purchase or other acquisition of\nany capital stock of Shockwave or any change in any rights, preferences,\nprivileges or restrictions of any outstanding security of Shockwave;\n\n (e) grant or issuance of any options, warrants or other rights to\nacquire from Shockwave, directly or indirectly, except as described in Section\n4.4(a), or any offer, issuance or sale by Shockwave of any debt or equity\nsecurities of Shockwave;\n\n (f) purchase, license, sale, assignment or other disposition or\ntransfer, or any agreement or other arrangement for the purchase, license, sale,\nassignment or other disposition or transfer, of any of the assets, properties or\ngoodwill of Shockwave other than a license of any product or products of\nShockwave made in the ordinary course of Shockwave's business consistent with\nits past practice;\n\n (g) obligation or liability incurred by Shockwave to any of its\nofficers, directors or shareholders, except for normal and customary\ncompensation and expense allowances payable to officers in the ordinary course\nof Shockwave's business consistent with its past practice; or\n\n (h) making by Shockwave of any loan, advance or capital\ncontribution to, or any investment in, any officer, director or shareholder of\nShockwave or any firm or business enterprise in which any such person had a\ndirect or indirect material interest at the time of such loan, advance, capital\ncontribution or investment.\n\n 4.10 Contracts, Commitments and Licenses; Permits. Schedule 4.10 to the\nShockwave Disclosure Letter sets forth a list, indexed by lettered subsection,\nof each of the following written or oral contracts, agreements, leases,\nlicenses, permits, assignments, mortgages, transactions, obligations,\ncommitments or other instruments to which Shockwave is a party or to which\nShockwave or any of its assets or properties is bound:\n\n (a) any contract or agreement providing for payments (whether\nfixed, contingent or otherwise) by or to Shockwave in an aggregate amount of\n$200,000 or more (including any contract or agreement providing for payments by\nShockwave in connection with the failure by Shockwave to consummate an initial\npublic offering of its securities);\n\n (b) any agreement that limits or restricts Shockwave from\nengaging in any aspect of its business; from participating or competing in any\nline of business or market; from freely setting prices for Shockwave's products,\nservices or technologies (including but not limited to most favored customer\npricing provisions); from engaging in any business in any market or geographic\narea; or from soliciting potential employees, consultants, contractors or other\nsuppliers or customers;\n\n (c) any agreement relating to the sale, issuance, grant,\nexercise, award, purchase, repurchase or redemption of any shares of capital\nstock or other securities of\n\n\n\n 37\n 39\nShockwave or any options, warrants or other rights to purchase or otherwise\nacquire any such shares of capital stock, other securities or options, warrants\nor other rights therefor, except for those agreements conforming to the standard\nagreement under the Shockwave Plan; and\n\n (d) any agreement that confers on a third party a right of first\nrefusal or right of first offer on the sale or transfer of any material\nproperties or assets of Shockwave.\n\n A true and complete copy of each agreement or document, including all\namendments or supplements thereto, required by these subsections (a) through (d)\nof this Section to be listed on Schedule 4.10 to the Shockwave Disclosure Letter\n(such agreements and documents being hereinafter collectively referred to as the\n\"SHOCKWAVE MATERIAL AGREEMENTS\") has been delivered to Atom's legal counsel or\nmade available in the due diligence data room to Atom's legal counsel.\n\n 4.11 Intellectual Property.\n\n (a) To Shockwave's knowledge, Shockwave owns, or has the valid\nright or license to use, possess, sell, license, copy, distribute, market,\nadvertise and\/or dispose of all Intellectual Property to the extent necessary or\nrequired for the conduct of the business of Shockwave as presently conducted and\nas presently proposed to be conducted by Shockwave (such Intellectual Property\nbeing hereinafter collectively referred to as the \"SHOCKWAVE IP RIGHTS\"), and\nsuch rights to use, possess, sell, license, copy, distribute, market, advertise\nand\/or dispose of are sufficient for such conduct of such business.\n\n (b) Neither the execution, delivery and performance of this\nAgreement nor the consummation of the Merger and the other transactions\ncontemplated by this Agreement will: (a) constitute a material breach of or\ndefault under any instrument, contract, license or other agreement governing any\nShockwave IP Right to which Shockwave is a party (collectively, the \"SHOCKWAVE\nIP RIGHTS AGREEMENTS\"); (b) cause the forfeiture or termination of, or give rise\nto a right of forfeiture or termination of, any Shockwave IP Right; or (c)\nmaterially impair the right of Shockwave or Shockwave as the Surviving\nCorporation to use, possess, sell or license any Shockwave IP Right or portion\nthereof.\n\n (c) To Shockwave's knowledge, Shockwave has ownership or license\nrights or access to license rights necessary in order to manufacture, market,\nlicense, sell or furnish, or for the intended use of, any product or service\ncurrently licensed, utilized, sold, provided or furnished by Shockwave or\ncurrently under development by Shockwave; and, to Shockwave's knowledge, there\nis no pending or threatened, claim or litigation contesting the validity,\nownership or right of Shockwave to use, possess, sell, market, advertise,\nlicense or dispose of any Shockwave IP Right nor, to the knowledge of Shockwave,\nis there any basis for any such claim, nor has Shockwave received any notice\nasserting that any Shockwave IP Right or the proposed use, sale, license or\ndisposition thereof conflicts or will conflict with the rights of any other\nparty, nor, to the knowledge of Shockwave, is there any basis for any such\nassertion.\n\n (d) To Shockwave's knowledge, no current or former employee,\nconsultant or independent contractor of Shockwave: (i) is in material violation\nof any term or covenant of any\n\n\n\n 38\n 40\nemployment contract, patent disclosure agreement, invention assignment\nagreement, non-disclosure agreement, noncompetition agreement or any other\ncontract or agreement with any other party, in each case where the subject of\nwhich is Intellectual Property, by virtue of such employee's, consultant's, or\nindependent contractor's being employed by, or performing services for,\nShockwave or using trade secrets or proprietary information of others without\npermission; or (ii) has developed any technology, software or other\ncopyrightable, patentable, or otherwise proprietary work for Shockwave that is\nsubject to any agreement under which such employee, consultant or independent\ncontractor has assigned or otherwise granted to any third party any rights\n(including Intellectual Property) in or to such technology, software or other\ncopyrightable, patentable or otherwise proprietary work or any Intellectual\nProperty related thereto. To Shockwave's knowledge, the employment of any\nemployee of Shockwave or the use by Shockwave of the services of any consultant\nor independent contractor does not subject Shockwave to any liability to any\nthird party.\n\n (e) Shockwave has taken all commercially reasonably and\nappropriate steps to protect, preserve and maintain the secrecy and\nconfidentiality of the Shockwave IP Rights constituting reasonably protectible\ntrade secrets and all Shockwave's ownership interests and proprietary rights\ntherein. All officers, employees and consultants of Shockwave have executed and\ndelivered to Shockwave an agreement regarding the protection of such proprietary\ninformation and the assignment of inventions to Shockwave; and copies of all\nsuch agreements have been delivered to Shockwave's counsel.\n\n (f) To Shockwave's knowledge, there is no unauthorized use,\ndisclosure, infringement or misappropriation of any Shockwave IP Rights by any\nthird party, including any employee or former employee of Shockwave.\n\n (g) To Shockwave's knowledge, all software developed by Shockwave\nand licensed by Shockwave to customers and all other products manufactured,\nsold, licensed, leased or delivered by Shockwave to customers and all services\nprovided by Shockwave to customers on or prior to the Closing Date conform in\nall material respects to applicable contractual commitments, express and implied\nwarranties, product specifications and product documentation and to any\nrepresentations provided to customers and Shockwave has no material liability\n(and, to Shockwave's knowledge, there is no basis for any present or future\naction, suit, proceeding, hearing, investigation, charge, complaint, claim or\ndemand against Shockwave giving rise to any liability relating to the foregoing\ncontracts that could have a Material Adverse Effect on Shockwave) for\nreplacement or repair thereof or other damages in connection therewith in excess\nof any reserves therefor reflected on the Shockwave Balance Sheet.\n\n (h) Except as otherwise set forth in Schedule 4.11(h), to\nShockwave's knowledge, Shockwave owns or possesses all necessary rights to\nproduce and display the short films, animations and other digital media on its\nwebsite or available by Shockwave for syndication. Except pursuant to a license,\nShockwave is not using in any of the short films, animations and other digital\nmedia, any works or inventions made by any current or former employee,\nconsultant or independent contractor of Shockwave, which the current or former\nemployee, consultant or independent contractor has excluded from his or her\nassignment of\n\n\n\n 39\n 41\ninventions pursuant to such employee, consultant or contractor's proprietary\ninformation and inventions agreement, or which were made outside the course or\nscope of such employee's employment or consultant's or contractor's engagement\nby Shockwave.\n\n 4.12 Compliance with Laws.\n\n (a) Shockwave has materially complied, and is now and at the\nClosing Date will be in material compliance with, all Applicable Law. Shockwave\nholds all material licenses and Governmental Permits that are necessary and\/or\nlegally required to be held by it to conduct its business as presently\nconducted.\n\n (b) Shockwave holds all material Governmental Permits and all\nsuch Governmental Permits are in full force and effect. Shockwave has not\nreceived any notice or other communication from any Governmental Authority\nregarding (i) any actual or possible violation of law or any Governmental Permit\nor any failure to comply with any term or requirement of any Governmental\nPermit, or (ii) any actual or possible revocation, withdrawal, suspension,\ncancellation, termination or modification of any Governmental Permit.\n\n 4.13 Corporate Documents. Shockwave has made available to Atom or its\nlegal counsel for examination copies of (a) Shockwave's Certificate of\nIncorporation and Bylaws as currently in effect; and (b) Shockwave's minute book\ncontaining all records of all proceedings, consents, actions, and meetings of\nShockwave's Board of Directors and any committees thereof, and Shockwave\nShareholders.\n\n 4.14 Books and Records.\n\n (a) The books, records and accounts of Shockwave (i) are in all\nmaterial respects true, complete and correct, (ii) have been maintained in\naccordance with good business practices on a basis consistent with prior years,\n(iii) are stated in reasonable detail and accurately and fairly reflect the\ntransactions and dispositions of the assets of Shockwave, and (iv) accurately\nand fairly reflect the basis for the Shockwave Financial Statements.\n\n (b) Shockwave has devised and maintains a system of internal\naccounting controls sufficient to provide reasonable assurances that: (i)\ntransactions are executed in accordance with management's general or specific\nauthorization; (ii) transactions are recorded as necessary (A) to permit\npreparation of financial statements in conformity with generally accepted\naccounting principles or any other criteria applicable to such statements, and\n(B) to maintain accountability for assets; and (iii) the amount recorded for\nassets on the books and records of Shockwave is compared with the existing\nassets at reasonable intervals and appropriate action is taken with respect to\nany differences.\n\n 4.15 Environmental Matters. Shockwave is in material compliance with all\napplicable Environmental Laws, which compliance includes the possession by\nShockwave of all permits and other governmental authorizations required under\napplicable Environmental Laws, and compliance with the terms and conditions\nthereof. Shockwave has not received any notice or other communication (in\nwriting or otherwise), whether from a governmental body, citizens\n\n\n\n 40\n 42\ngroups, employee or otherwise, that alleges that Shockwave is not in compliance\nwith any Environmental Law, and to Shockwave's knowledge, there are no\ncircumstances that may prevent or interfere with the compliance by Shockwave\nwith any current Environmental Law in the future. To Shockwave's knowledge, no\ncurrent or prior owner of any property leased or possessed by Shockwave has\nreceived any notice or other communication (in writing or otherwise), whether\nfrom a government body, citizens group, employee or otherwise, that alleges that\nsuch current or prior owner or Shockwave is not in compliance with any\nEnvironmental Law.\n\n 4.16 Accounts Receivable. The receivables shown on the Shockwave Balance\nSheet on the Shockwave Balance Sheet Date arose in the ordinary course of\nbusiness, consistent with past practice, and have been collected or are\ncollectible in the book amounts thereof, less an amount not in excess of the\nallowance for doubtful accounts provided for in the balance sheet of Shockwave\non the Shockwave Balance Sheet Date. Allowances for doubtful accounts and\nwarranty returns are adequate and have been prepared in accordance with GAAP\nconsistently applied and in accordance with the past practices of Shockwave. The\nreceivables of Shockwave arising after the Shockwave Balance Sheet Date and\nprior to the Closing Date arose or will arise in the ordinary course of\nbusiness, consistent with past practice, and have been collected or are\ncollectible in the book amounts thereof, less allowances for doubtful accounts\ndetermined in accordance with the past practices of Shockwave. To the knowledge\nof Shockwave, none of its receivables is subject to any material claim of\noffset, recoupment, setoff or counter-claim and it has no knowledge of any\nspecific facts or circumstances (whether asserted or unasserted) that could give\nrise to any such claim. No material amount of receivables are contingent upon\nthe performance by Shockwave of any obligation or contract other than normal\nwarranty repair and replacement. No person has any Encumbrance on any of such\nreceivables and no agreement for deduction or discount has been made with\nrespect to any of such receivables. Schedule 4.16 sets forth an aging of\naccounts receivable of Shockwave in the aggregate and by customer, and indicates\nthe amounts of allowances for doubtful accounts.\n\n 4.17 Board Actions. The Board of Directors of Shockwave has unanimously\n(a) approved this Agreement, the Merger and all the agreements, transactions and\nactions contemplated hereby, (b) determined that the Merger is in the best\ninterests of the Shockwave Shareholders and is on terms that are fair to such\nshareholders, and has recommended the Merger to the Shockwave Shareholders, and\n(c) submitted this Agreement, the Merger and the transactions and agreements\ncontemplated by this Agreement to the vote and approval of the Shockwave\nShareholders.\n\n 4.18 Shareholder Approval. Concurrently with the execution of this\nAgreement, Shockwave Shareholders holding at least a majority of the outstanding\nshares of (a) Shockwave Common Stock and Shockwave Preferred Stock, (b)\nShockwave Preferred Stock, (c) Shockwave Series A Preferred Stock, and (d)\nShockwave Series B Preferred Stock have executed and delivered to Shockwave\nbinding Shockwave Voting Agreements and irrevocable proxies agreeing to vote for\napproval of this Agreement, the Merger, the Restated Certificate of\nIncorporation and the other transactions contemplated by this Agreement.\n\n\n\n 41\n 43\n 4.19 Disclosure. Neither this Agreement, its exhibits and schedules and\nthe Shockwave Disclosure Letter, nor any Shockwave Ancillary Agreements\ndelivered by Shockwave to Shockwave under this Agreement, taken together,\ncontains any untrue statement of a material fact or omits to state any material\nfact necessary in order to make the statements contained herein and therein, in\nlight of the circumstances under which such statements were made, not\nmisleading.\n\n 4.20 Tax Matters. Shockwave has not taken or agreed to take any action,\nnor does Shockwave have knowledge of any fact or circumstance that would prevent\nthe Merger from qualifying as a reorganization within the meaning of Section\n368(a) of the Code.\n\n 4.21 Valid Issuance of Stock. The Shockwave Merger Shares, when issued\nas provided in this Agreement, will be duly authorized and validly issued, fully\npaid and nonassessable, and will be free of restrictions on transfer other than\nthose imposed on the holders thereof and other than restrictions on transfer\nunder this Agreement, the Investors' Rights AGREEMENT and applicable state and\nfederal securities laws.\n\n ARTICLE 5\n PRE-CLOSING COVENANTS OF ATOM\n\n During the time period from the Agreement Date until the earlier\nto occur of (a) the Effective Time or (b) the termination of this Agreement in\naccordance with the provisions of Article 10, Atom covenants and agrees with\nShockwave as follows:\n\n 5.1 Advice of Changes. Atom will promptly advise Shockwave in writing of\nany (a) event occurring subsequent to the Agreement Date that would render any\nrepresentation or warranty of Atom contained in Article 3, if made on or as of\nthe date of such event or the Closing Date, untrue or inaccurate, and (b)\nMaterial Adverse Change in Atom.\n\n 5.2 Maintenance of Business. Atom will carry on and preserve its\nbusiness and its relationships with content providers, customers, advertisers,\nsuppliers, employees and others with whom Atom has contractual relations in\nsubstantially the same manner as it has prior to the Agreement Date. If Atom\nbecomes aware of a material deterioration in the relationship with any key\ncontent providers, key customer, key advertiser, key supplier or key employee,\nit will promptly bring such information to the attention of Shockwave in writing\nand, if requested by Shockwave, will exert reasonable commercial efforts to\npromptly restore the relationship.\n\n 5.3 Conduct of Business. Except as contemplated by this Agreement or in\nSchedule 5.3 to the Atom Disclosure Letter, Atom will continue to conduct its\nbusiness and maintain its business relationships in the ordinary and usual\ncourse and Atom will not, without the prior written consent of Shockwave:\n\n (a) incur any indebtedness for borrowed money or guarantee any\nsuch indebtedness of another person other than in the ordinary course of\nbusiness consistent with past practice;\n\n\n\n 42\n 44\n (b) lend any money, other than reasonable and normal advances to\nemployees for bona fide expenses that are incurred in the ordinary course of\nAtom's business consistent with Atom's past practices;\n\n (c) enter into any material transaction or agreement or take any\nother action not in the ordinary course of Atom's business consistent with\nAtom's past practices;\n\n (d) grant any Encumbrance on any of its assets;\n\n (e) sell, transfer or dispose of any of its assets except in the\nordinary course of Atom's business consistent with Atom's past practices;\n\n (f) enter into any material lease or contract for the purchase or\nsale of any property, whether real or personal, tangible or intangible;\n\n (g) pay any bonus, increased salary or special remuneration to\nany officer, director, employee or consultant (except for normal salary\nincreases consistent with Atom's past practices and not to exceed 5% of such\nofficer's, employee's or consultant's base annual compensation, and except\npursuant to existing arrangements previously disclosed in writing to Shockwave\nprior to the Agreement Date) or enter into any new employment or consulting\nagreement with any such person;\n\n (h) change any of its accounting methods;\n\n (i) declare, set aside or pay any cash or stock dividend or other\ndistribution in respect of its capital stock, redeem, repurchase or otherwise\nacquire any of its capital stock or other securities (except for the repurchase\nof stock from employees, directors, consultants or contractors of Atom in\nconnection with the termination of their services with Atom at the original\npurchase price of such stock), pay or distribute any cash or property to any\nshareholder or security holder of Atom or make any other cash payment to any\nshareholder or security holder of Atom that is unusual, extraordinary, or not\nmade in the ordinary course of Atom's business consistent with its past\npractices;\n\n (j) amend or terminate any contract, agreement or license to\nwhich Atom is a party except those amended or terminated in the ordinary course\nof Atom's business, consistent with its past practices, and which are not\nmaterial in amount or effect;\n\n (k) waive or release any material right or claim except in the\nordinary course of Atom's business, consistent with Atom's past practice;\n\n (l) issue, sell, create or authorize any shares of its capital\nstock of any class or series or any other of its securities (other than pursuant\nto the exercise of any Atom Options or Atom Warrants), or issue, grant or create\nany warrants, obligations, subscriptions, options, convertible securities, or\nother commitments to issue shares of its capital stock or any securities that\nare potentially exchangeable for, or convertible into, shares of its capital\nstock;\n\n\n\n 43\n 45\n (m) subdivide or split or combine or reverse split the\noutstanding shares of its capital stock of any class or series or enter into any\nrecapitalization affecting the number of outstanding shares of its capital stock\nof any class or series or affecting any other of its securities;\n\n (n) merge, consolidate or reorganize with, or acquire, or enter\ninto any other business combination with, any corporation, partnership, limited\nliability company or any other entity (other than Shockwave) or enter into any\nnegotiations, discussions or agreement for such purpose;\n\n (o) amend its Articles of Incorporation or Bylaws, except as\nprovided in this Agreement;\n\n (p) license any of its technology or Intellectual Property, or\nacquire any Intellectual Property (or any license thereto) from any third party\nexcept for any such license or acquisition in the ordinary course of Atom's\nbusiness;\n\n (q) materially change any insurance coverage;\n\n (r) agree to any audit assessment by any tax authority or file\nany federal or state income or franchise tax return unless copies of such\nreturns have first been delivered to Shockwave for its review at a reasonable\ntime prior to filing;\n\n (s) other than as contemplated in Section 5.11, modify or change\nthe exercise or conversion rights or exercise or purchase prices of any capital\nstock of Atom, any Atom stock options, warrants or other Atom securities, or\naccelerate or otherwise modify (i) the right to exercise any option, warrant or\nother right to purchase any capital stock or other securities of Atom or (ii)\nthe vesting or release of any shares of capital stock or other securities of\nAtom from any repurchase options or rights of refusal held by Atom or any other\nparty or any other restrictions; or\n\n (t) agree to do any of the things described in the preceding\nclauses 5.3(a) through 5.3(s).\n\n 5.4 Regulatory Approvals. Atom will promptly execute and file, or join\nin the execution and filing, of any application, notification or any other\ndocument that may be necessary in order to obtain the authorization, approval or\nconsent of any Governmental Authority, whether federal, state, local or foreign,\nwhich may be reasonably required, or which Shockwave may reasonably request, in\nconnection with the consummation of the Merger or the other transactions\ncontemplated by this Agreement or any Atom Ancillary Agreement. Atom will use\ndiligent efforts to obtain, and to cooperate with Shockwave to promptly obtain,\nall such authorizations, approvals and consents.\n\n 5.5 Necessary Consents. Atom will use diligent efforts to promptly\nobtain such written consents and authorizations of third parties, give notices\nto third parties and take such other actions as may be necessary or appropriate\nin order to effect the consummation of the Merger and the other transactions\ncontemplated by this Agreement, to enable Shockwave to carry\n\n\n\n 44\n 46\non Atom's business immediately after the Effective Time and to keep in effect\nand avoid the breach, violation of, termination of, or adverse change to, any\nagreement or contract to which Atom is a party or is bound or by which any of\nits assets is bound.\n\n 5.6 Litigation. Atom will notify Shockwave in writing promptly after\nlearning of any claim, action, suit, arbitration, mediation, proceeding or\ninvestigation by or before any court, arbitrator or arbitration panel, board or\ngovernmental agency, initiated by or against it or any of its subsidiaries, or\nknown by it to be threatened against Atom or any of its subsidiaries or any of\ntheir officers, directors, employees or shareholders in their capacity as such.\n\n 5.7 No Other Negotiations. Atom will not, and will not authorize,\nencourage or permit any officer, director, employee, affiliate or agent of Atom\nor any attorney, investment banker or other person on Atom's or their behalf to,\ndirectly or indirectly: (a) solicit, initiate, encourage or induce the making,\nsubmission or announcement of, any offer or proposal from any party concerning\nany Alternative Transaction (as defined below) or take any other action that\ncould reasonably be expected to lead to an Alternative Transaction or a proposal\ntherefor; (b) consider any inquiry, offer or proposal received from any party\nconcerning any Alternative Transaction; (c) furnish any information regarding\nAtom to any person or entity in connection with or in response to any inquiry,\noffer or proposal for or regarding any Alternative Transaction; (d) participate\nin any discussions or negotiations with any person or entity with respect to any\nAlternative Transaction; (e) otherwise cooperate with, facilitate or encourage\nany effort or attempt by any person or entity (other than Shockwave) to effect\nany Alternative Transaction; or (f) execute, enter into or become bound by any\nletter of intent, agreement, commitment or understanding between Atom and any\nthird party that is related to, provides for or concerns any Alternative\nTransaction. Atom will promptly (but in no event more than one business day)\nnotify Shockwave orally and in writing of any inquiries or proposals received by\nAtom, directors, officers, shareholders, employees or agents of Atom regarding\nany Alternative Transaction and will identify the party making the inquiry or\nproposal and the nature and terms of any inquiry or proposal. Any violation of\nthe restrictions set forth in this Section by any officer, director or employee\nof Atom or any attorney, investment banker or other director or representative\nof Atom will be deemed a breach of this Section 5.7 by Atom. As used herein, the\nterm \"ALTERNATIVE TRANSACTION\" means any commitment, agreement or transaction\ninvolving or providing for (a) the possible disposition of all or any\nsubstantial portion of Atom's business, assets or capital stock, whether by way\nof merger, consolidation, sale of assets, sale of stock, stock exchange, tender\noffer and\/or any other form of business combination, or (b) any initial public\noffering of capital stock or other securities of Atom pursuant to a registration\nstatement filed under the Securities Act.\n\n 5.8 Access to Information. Atom will allow Shockwave and its agents\naccess at reasonable time to the files, books, records, technology, contracts,\npersonnel and offices of Atom, including any and all information relating to\nAtom's taxes, commitments, contracts, leases, licenses, financial condition and\nreal, personal and intangible property, subject to the terms of the\nnondisclosure agreement between Atom and Shockwave dated as of April 4, 2000\n(the \"NONDISCLOSURE AGREEMENT\"). Atom will cause its accountants to cooperate\nwith Shockwave and its agents in making available all financial information\nreasonably requested by\n\n\n\n 45\n 47\nShockwave, including the right to examine all working papers pertaining to all\nfinancial statements prepared or audited by such accountants.\n\n 5.9 Satisfaction of Conditions Precedent. Atom will use its diligent\nefforts to satisfy or cause to be satisfied all the conditions precedent set\nforth in Article 9, and Atom will use its diligent efforts to cause the Merger\nand the other transactions contemplated by this Agreement to be consummated in\naccordance with this Agreement.\n\n 5.10 Atom Benefit Arrangements. Upon the request of Shockwave, Atom will\nterminate any Atom Benefit Arrangements immediately prior to the Effective Time.\n\n 5.11 Amendments of Atom Options. Atom will use its diligent efforts to\nobtain the consent of each holder of an outstanding Atom Option listed on\nSchedule 5.11 to the Atom Disclosure Letter to amend such Atom Option as set\nforth in Exhibit H.\n\n 5.12 Information Statement. Atom will deliver to legal counsel to\nShockwave a draft of an information statement (the \"INFORMATION STATEMENT\") on\nthe Agreement Date and, within five business days following the Agreement Date,\nwill send to Atom Shareholders the Information Statement for the purpose of\nconsidering and approving the Merger Agreement, the Merger and the other\ntransactions contemplated by this Agreement.\n\n 5.13 Employees. Promptly following the Agreement Date, Atom will deliver\nto Shockwave a list of employees whose employment will be terminated and a list\nof employees whose employment will be retained in connection with the Merger.\n\n 5.14. WARN Act Compliance. Atom will comply with all notice and other\nobligations required pursuant to the WARN Act.\n\n 5.15 Debt. Atom will pay in full all of Atom's indebtedness for money\nborrowed listed on Schedule 5.15 to the Atom Disclosure Letter, and will\ncooperate with holders of such debt to release all liens related to such debt.\n\n 5.16 Amendment to Atom Articles of Incorporation. Atom will amend its\nArticles of Incorporation (the \"RESTATED ARTICLES OF INCORPORATION\") such that\nno payment of a liquidation preference to holders of Atom Preferred Stock will\nbe made in connection with the Merger, and Atom will use its diligent efforts to\nhave the Restated Articles of Incorporation adopted by Atom by all necessary\ncorporate action of its Board of Directors and shareholders and to file the\nRestated Articles of Incorporation with the Washington Secretary of State.\n\n 5.17 Tax-Free Reorganization. Atom agrees not to take any action either\nprior to or after the Effective Time that could reasonably be expected to cause\nthe Merger to fail to qualify as a \"reorganization\" under Section 368 of the\nCode.\n\n 5.18 Calculation of Atom Fully Diluted Share Number. Atom will provide\nto Shockwave a schedule setting forth the Atom Fully Diluted Share Number, which\nschedule will set forth the aggregate number of shares of each of the Atom\nCommon Stock, Atom Series A\n\n\n\n 46\n 48\nPreferred Stock, Atom Series B Preferred Stock and Atom Series C Preferred\nStock, and Atom Common Stock and Atom Preferred Stock underlying Atom Options\nand Atom Warrants to purchase Atom Common Stock (each, on a fully exercised and\nconverted to Atom Common Stock basis) that are issued and outstanding\nimmediately prior to the Effective Time.\n\n 5.19 Letter Agreement with Morgan Stanley. Atom will enter into a letter\nagreement with Morgan Stanley relating to the payment of fees and expenses by\nAtom to Morgan Stanley pursuant to the Engagement Letter (the \"ENGAGEMENT LETTER\nAMENDMENT\").\n\n\n ARTICLE 6\n SHOCKWAVE PRE-CLOSING COVENANTS\n\n During the time period from the Agreement Date until the earlier to\noccur of (a) the Effective Time or (b) the termination of this Agreement in\naccordance with Article 10, Shockwave covenants and agrees as follows:\n\n 6.1 Advice of Changes. Shockwave will promptly advise Atom in writing of\nany (a) event that would render any representation or warranty of Shockwave\ncontained in this Agreement or the Shockwave Disclosure Letter, if made on or as\nof the date of such event or the Closing Date, to be untrue or inaccurate, and\n(b) Material Adverse Change in Shockwave.\n\n 6.2 Maintenance of Business. Atom will carry on and preserve its\nbusiness and its relationships with content providers, customers, advertisers,\nsuppliers, employees and others with whom Atom has contractual relations in\nsubstantially the same manner as it has prior to the Agreement Date. If Atom\nbecomes aware of a material deterioration in the relationship with any key\ncontent providers, key customer, key advertiser or key supplier, it will\npromptly bring such information to the attention of Shockwave in writing and, if\nrequested by Shockwave, will exert reasonable commercial efforts to promptly\nrestore the relationship.\n\n 6.3 Conduct of Business. Except as contemplated by this Agreement or in\nSchedule 6.3 to the Shockwave Disclosure Letter, Shockwave will continue to\nconduct its business and maintain its business relationships in the ordinary and\nusual course and Shockwave will not, without the prior written consent of\nShockwave:\n\n (a) incur any indebtedness for borrowed money or guarantee any\nsuch indebtedness of another person other than in the ordinary course of\nbusiness consistent with past practice;\n\n (b) lend any money, other than reasonable and normal advances to\nemployees for bona fide expenses that are incurred in the ordinary course of\nShockwave's business consistent with Shockwave's past practices;\n\n (c) enter into any material transaction or agreement or take any\nother action not in the ordinary course of Shockwave's business consistent with\nShockwave's past practices;\n\n\n\n 47\n 49\n (d) grant any Encumbrance on any of its assets;\n\n (e) sell, transfer or dispose of any of its assets except in the\nordinary course of Shockwave's business consistent with Shockwave's past\npractices;\n\n (f) enter into any material lease or contract for the purchase or\nsale of any property, whether real or personal, tangible or intangible;\n\n (g) change any of its accounting methods;\n\n (h) declare, set aside or pay any cash or stock dividend or other\ndistribution in respect of its capital stock, redeem, repurchase or otherwise\nacquire any of its capital stock or other securities (except for the repurchase\nof stock from employees, directors, consultants or contractors of Shockwave in\nconnection with the termination of their services with Shockwave at the original\npurchase price of such stock), pay or distribute any cash or property to any\nshareholder or security holder of Shockwave or make any other cash payment to\nany shareholder or security holder of Shockwave that is unusual, extraordinary,\nor not made in the ordinary course of Shockwave's business consistent with its\npast practices;\n\n (i) issue, sell, create or authorize any shares of its capital\nstock of any class or series or any other of its securities (other than pursuant\nto the exercise of any options or warrants to purchase Shockwave Common Stock),\nor issue, grant or create any warrants, obligations, subscriptions, options,\nconvertible securities, or other commitments to issue shares of its capital\nstock or any securities that are potentially exchangeable for, or convertible\ninto, shares of its capital stock, except for grants of options to purchase\nShockwave Common Stock to new employees in customary amounts and on customary\nterms;\n\n (j) subdivide or split or combine or reverse split the\noutstanding shares of its capital stock of any class or series or enter into any\nrecapitalization affecting the number of outstanding shares of its capital stock\nof any class or series or affecting any other of its securities;\n\n (k) merge, consolidate or reorganize with, or acquire, or enter\ninto any other business combination with, any corporation, partnership, limited\nliability company or any other entity (other than Atom) or enter into any\nnegotiations, discussions or agreement for such purpose;\n\n (l) amend its Certificate of Incorporation or Bylaws, except as\nprovided in this Agreement;\n\n (m) license any of its technology or Intellectual Property, or\nacquire any Intellectual Property (or any license thereto) from any third party\nexcept for any such license or acquisition in the ordinary course of Shockwave's\nbusiness;\n\n (n) materially change any insurance coverage;\n\n\n\n 48\n 50\n (o) agree to any audit assessment by any tax authority or file\nany federal or state income or franchise tax return unless copies of such\nreturns have first been delivered to Shockwave for its review at a reasonable\ntime prior to filing;\n\n (p) modify or change the exercise or conversion rights or\nexercise or purchase prices of any capital stock of Shockwave, any Shockwave\nstock options, warrants or other Shockwave securities, or accelerate or\notherwise modify (i) the right to exercise any option, warrant or other right to\npurchase any capital stock or other securities of Shockwave or (ii) the vesting\nor release of any shares of capital stock or other securities of Shockwave from\nany repurchase options or rights of refusal held by Shockwave or any other party\nor any other restrictions; or\n\n (q) agree to do any of the things described in the preceding\nclauses 6.3(a) through 6.3(p).\n\n 6.4 Regulatory Approvals. Shockwave will promptly execute and file, or\njoin in the execution and filing, of any application, notification or other\ndocument that may be necessary in order to obtain the authorization, approval or\nconsent of any governmental body, federal, state, local or foreign, which may be\nreasonably required, in connection with the consummation of the Merger and the\nother transactions contemplated by this Agreement and the Shockwave Ancillary\nAgreements in accordance with the terms of this Agreement. Shockwave will use\nits diligent efforts to obtain all such authorizations, approvals and consents.\nNotwithstanding anything in this Agreement to the contrary, neither Shockwave\nnor any of its affiliates will be under any obligation to make proposals,\nexecute or carry out agreements or submit to orders providing for the sale or\nother disposition or holding separate (through the establishment of a trust or\notherwise) of any assets or categories of assets of Shockwave, or any of its\naffiliates or Atom, or the holding separate of the shares of Atom Common Stock\nor Atom Preferred Stock or imposing or seeking to impose any limitation on the\nability of Shockwave or any of its subsidiaries or affiliates to conduct their\nbusiness or own such assets or to acquire, hold or exercise full rights of\nownership of the shares of Atom Common Stock or Atom Preferred Stock.\n\n 6.5 Satisfaction of Conditions Precedent. Shockwave will use its\ndiligent efforts to satisfy or cause to be satisfied all of the conditions\nprecedent set forth in Article 8, and Shockwave will use its diligent efforts to\ncause the transactions contemplated by this Agreement to be consummated in\naccordance with the terms of this Agreement.\n\n 6.6 Information Statement. Shockwave will cooperate with Atom and its\nlegal counsel in the preparation of the Information Statement.\n\n 6.7 Tax-Free Reorganization. Shockwave agrees not to take any action\neither prior to or after the Effective Time that could reasonably be expected to\ncause the Merger to fail to qualify as a \"reorganization\" under Section 368 of\nthe Code.\n\n 6.8 Calculation of Shockwave Fully Diluted Share Number. Shockwave will\nprovide to Atom a schedule setting forth the Shockwave Fully Diluted Share\nNumber, which schedule will set forth the aggregate number of shares of each of\nthe Shockwave Common Stock,\n\n\n\n 49\n 51\nShockwave Series A Preferred Stock and Shockwave Series B Preferred Stock, and\nShockwave Common Stock underlying options and warrants to purchase Shockwave\nCommon Stock (each, on a fully exercised and converted to Shockwave Common Stock\nbasis) that are issued and outstanding immediately prior to the Effective Time.\n\n 6.9 Letter Agreement with Morgan Stanley. Shockwave will cooperate with\nAtom regarding the Engagement Letter Amendment.\n\n ARTICLE 7\n CLOSING MATTERS\n\n 7.1 The Closing. Subject to termination of this Agreement as provided in\nArticle 10, the closing of the transactions to consummate the Merger (the\n\"CLOSING\") will take place at the offices of Fenwick & West LLP, 275 Battery\nStreet, San Francisco, Shockwave at 10:00 a.m., Pacific Time, on January 2, 2001\nor, if all of the conditions to Closing set forth in Articles 8 and 9 have not\nbeen satisfied and\/or waived in accordance with this Agreement on or before\nJanuary 2, 2001, on the second business day after all such conditions have been\nsatisfied and\/or waived in accordance with this Agreement, or on such other day\nas Shockwave and Atom may mutually agree upon (the \"CLOSING DATE\"). Concurrently\nwith the Closing, the Articles of Merger will be filed with the Washington\nSecretary of State and the Certificate of Merger will be filed with the Delaware\nSecretary of State.\n\n 7.2 Exchange of Certificates.\n\n (a) At the Effective Time, shares of Atom Common Stock and Atom\nPreferred Stock that are outstanding immediately prior thereto will, by virtue\nof the Merger and without further action, cease to exist, and all such shares\nwill be converted into the right to receive from Shockwave the number of\nShockwave Merger Shares to which such holder is entitled pursuant to Section\n2.1, subject to the provisions of Section 2.1(e) regarding the elimination of\nfractional Merger Shares), Section 2.1(f) (regarding Dissenting Shares) and\nSection 2.5 (regarding the withholding of Escrow Shares). At the Closing, each\nholder of shares of Atom Common Stock and Atom Preferred Stock that are\noutstanding immediately prior thereto will surrender either (i) the\ncertificate(s) for such shares (each a \"ATOM CERTIFICATE\"), duly endorsed to\nShockwave for cancellation as of the Effective Time, or (ii) an affidavit of\nlost certificate and an indemnity in form and substance reasonable satisfactory\nto Shockwave (the \"AFFIDAVIT\"). Promptly after the Effective Time and receipt of\nsuch Atom Certificate or Affidavit, as the case may be: (a) Shockwave or its\ntransfer agent will issue to each tendering holder of an Atom Certificate or an\nAffidavit, certificates (a \"TENDERING ATOM HOLDER\") for the number of Shockwave\nMerger Shares to which such holder is entitled pursuant to Section 2.1, subject\nto the provisions of Section 2.1(e) (regarding the elimination of fractional\nMerger Shares), Section 2.1(f) (regarding Dissenting Shares) and Section 2.5\n(regarding the withholding of Escrow Shares); and (b) Shockwave or its transfer\nagent will pay by check to each Tendering Atom Holder cash in the amounts\npayable to such holder in accordance with the provisions of Sections 2.1(f).\n\n\n\n 50\n 52\n (b) No dividends or distributions payable to holders of record of\nShockwave Common Stock or Shockwave Preferred Stock after the Effective Time\nwill be paid to the holder of any unsurrendered Atom Certificate unless and\nuntil the holder of such unsurrendered Atom Certificate surrenders such Atom\nCertificate or an Affidavit to Shockwave as provided above. Subject to the\neffect, if any, of applicable escheat and other laws, following surrender of any\nAtom Certificate or Affidavit, there will be delivered to the person entitled\nthereto, without interest, the amount of any dividends and distributions\ntheretofore paid with respect to Shockwave Common Stock so withheld as of any\ndate subsequent to the Effective Time and prior to such date of delivery.\n\n (c) After the Effective Time, there will be no further\nregistration of transfers on the stock transfer books of Atom or its transfer\nagent of any shares of capital stock of Atom that were outstanding immediately\nprior to the Effective Time. If, after the Effective Time, Atom Certificates or\nan Affidavit are presented for any reason, they will be canceled and exchanged\nas provided in this Section 7.2.\n\n (d) Until Atom Certificates or an Affidavit representing shares\nof Atom Common Stock and Atom Preferred Stock that are outstanding immediately\nprior to the Effective Time are surrendered pursuant to Section 7.2(a), such\nAtom Certificates will be deemed, for all purposes, to evidence ownership of the\nnumber of Shockwave Merger Shares into which such shares of Atom Common Stock\nand Atom Preferred Stock will have been converted pursuant to Section 2.1,\nsubject to the provisions of Section 2.1(e) regarding the elimination of\nfractional Merger Shares), Section 2.1(f) (regarding Dissenting Shares) and\nSection 2.5 (regarding the withholding of Escrow Shares).\n\n 7.3 Appraisal Rights. If holders of Atom Common Stock and Atom Preferred\nStock are entitled to appraisal rights pursuant to the WBCA in connection with\nthe Merger, any Dissenting Shares held by Atom Shareholders will not be\nconverted into a right to receive Shockwave Common Stock or Shockwave Preferred\nStock, but will be converted into the right to receive such consideration as may\nbe determined to be due with respect to such Dissenting Shares pursuant to the\nWBCA. Atom will give Shockwave prompt notice (and in no event more than two\nbusiness days) of any demand received by Atom for appraisal of Atom Common Stock\nand Atom Preferred Stock, and Shockwave will have the right to control all\nnegotiations and proceedings with respect to such demand. Atom agrees that,\nexcept with the prior written consent of Shockwave, it will not voluntarily make\nany payment with respect to, or settle or offer to settle, any such demand for\nappraisal. In the event that any Atom Shareholder fails to make an effective\ndemand for payment or otherwise loses his status as a holder of Dissenting\nShares (a \"DISSENTING SHAREHOLDER\"), Shockwave will, as of the later of the\nEffective Time of the Merger or ten business days from the occurrence of such\nevent, issue and deliver, upon surrender by such Dissenting Shareholder of its\nAtom Certificate or Certificates or an Affidavit, the Shockwave Merger Shares,\nwithout interest thereon, to which such Dissenting Shareholder would have been\nentitled to under Section 2.1 (less the number of Escrow Shares to be held in\nescrow with respect to such shareholder pursuant to Section 2.5).\n\n\n\n 51\n 53\n ARTICLE 8\n CONDITIONS TO OBLIGATIONS OF ATOM\n\n Atom's obligations hereunder are subject to the fulfillment or\nsatisfaction, on and as of the Closing, of each of the following conditions (any\none or more of which may be waived by Atom, but only in a writing signed by\nAtom):\n\n 8.1 Accuracy of Representations and Warranties. The representations and\nwarranties of Shockwave contained in Article 4 of this Agreement, disregarding\nall qualifications and exceptions contained therein relating to materiality or\nMaterial Adverse Effect or any similar standard or qualification, shall be true\nand correct at and as of the Closing Date as if made at and as of the Closing\nDate (other than representations and warranties that address matters only as of\na certain date, which shall be true and correct as of such date), except where\nthe failure of such representations or warranties to be true or correct would\nnot have, individually or in the aggregate, a Material Adverse Effect on\nShockwave. It is understood that, for purposes of determining the accuracy of\nsuch representations and warranties, any update of or modification to the\nShockwave Disclosure Letter made or purported to have been made after the\nexecution of this Agreement shall be disregarded. Atom will have received a\ncertificate with respect to the foregoing signed on behalf of Shockwave by an\nexecutive officer of Shockwave.\n\n 8.2 Covenants. Shockwave will have performed and complied in all\nmaterial respects with all of its covenants contained in Article 6 on or before\nthe Closing (to the extent that such covenants require performance by Shockwave\non or before the Closing), and at the Closing Atom will have received a\ncertificate to such effect signed by an executive officer of Shockwave.\n\n 8.3 Requisite Approvals. This Agreement will have been duly and validly\napproved and adopted by Shockwave's Board of Directors and shareholders in\naccordance with Applicable Law and Shockwave's Certificate of Incorporation and\nBylaws, each as amended.\n\n 8.4 Compliance with Law; No Legal Restraints. There will not be issued,\nenacted or adopted, or threatened in writing by any Governmental Authority, any\norder, decree, temporary, preliminary or permanent injunction, legislative\nenactment, statute, regulation, action or proceeding, or any judgment or ruling\nby any Governmental Authority that prohibits or renders illegal or imposes\nlimitations on the Merger or any other material transaction contemplated by this\nAgreement or any Shockwave Ancillary Agreements.\n\n 8.5 Government Consents. There will have been obtained at or prior to\nthe Closing Date such permits or authorizations, and there will have been taken\nall such other actions by any regulatory authority having jurisdiction over the\nparties and the actions herein proposed to be taken, as may be required to\nlawfully consummate the Merger, including but not limited to requirements under\napplicable federal and state securities laws.\n\n 8.6 Opinion of Shockwave's Counsel. Atom will have received from Fenwick\n& West LLP, counsel to Shockwave, an opinion covering the matters set forth in\nExhibit I.\n\n\n\n 52\n 54\n 8.7 HSR Compliance. All applicable waiting periods under the HSR Act\nwill have expired or early termination will have been granted by both the\nFederal Trade Commission and the United States Department of Justice.\n\n 8.8 Investors' Rights Agreement. Shockwave, holders of at least\ntwo-thirds of the Registrable Securities under the Shockwave Prior Investors'\nRights Agreement and holders of Atom Preferred Stock who have registration\nrights under the Atom Prior Investors' Rights Agreement will each have executed\nthe Investors' Rights Agreement.\n\n 8.9 Restated Certificate of Incorporation Effective. The Restated\nCertificate of Incorporation will have been duly adopted by Shockwave by all\nnecessary corporate action of its Board of Directors and shareholders and will\nhave been duly filed with and accepted by the Delaware Secretary of State.\n\n 8.10 Restated Articles of Incorporation Effective. The Restated Articles\nof Incorporation will have been duly adopted by Atom by all necessary corporate\naction of its Board of Directors and shareholders and will have been duly filed\nwith and accepted by the Washington Secretary of State.\n\n 8.11 Calculation of Shockwave Fully Diluted Share Number. Shockwave will\nhave provided to Atom a schedule setting forth the Shockwave Fully Diluted Share\nNumber, which schedule will set forth the aggregate number of shares of each of\nthe Shockwave Common Stock, Shockwave Series A Preferred Stock and Shockwave\nSeries B Preferred Stock, and Shockwave Common Stock underlying options and\nwarrants to purchase Shockwave Common Stock (each, on a fully exercised and\nconverted to Shockwave Common Stock basis) that are issued and outstanding\nimmediately prior to the Effective Time.\n\n 8.12 First Restated Voting Agreement. Shockwave, Macromedia, holders of\nAtom Preferred Stock and holders of at least a majority of the then outstanding\nshares of the Shockwave Series B Preferred Stock will each have executed the\nFirst Restated Voting Agreement.\n\n 8.13 Investment by Macromedia. Macromedia will have provided $15,000,000\nin funds to Shockwave, a portion of which will be applied toward Macromedia's\npurchase, at the then fair market value thereof, of the 714,286 shares of Series\nA Preferred Stock of Stan Lee Media, Inc. and 2,049,181 shares of Series B\nPreferred Stock of Mondo Media\/Mechadeus, Inc. held by Shockwave, and the\nremainder of which will be invested in shares of preferred stock of the\nSurviving Corporation in its first preferred stock financing following the\nEffective Time; provided, however, that such $15,000,000 will be reduced if and\nto the extent that Macromedia sells and issues to Atom Note 2 (as defined in the\nNote Purchase Agreement).\n\n 8.14 Additional Investment. Sequoia Capital, or another entity or fund\nprocured by Macromedia, will have provided funds in the amount of at least\n$5,000,000 for an equity investment in the Surviving Corporation in its first\npreferred stock financing following the Effective Time.\n\n\n\n 53\n 55\n ARTICLE 9\n CONDITIONS TO OBLIGATIONS OF SHOCKWAVE\n\n The obligations of Shockwave hereunder are subject to the fulfillment or\nsatisfaction on, and as of the Closing, of each of the following conditions (any\none or more of which may be waived by Shockwave, but only in a writing signed by\nShockwave):\n\n 9.1 Accuracy of Representations and Warranties. The representations and\nwarranties of Atom contained in Article 3 of this Agreement, disregarding all\nqualifications and exceptions contained therein relating to materiality or\nMaterial Adverse Effect or any similar standard or qualification, shall be true\nand correct at and as of the Closing Date as if made at and as of the Closing\nDate (other than representations and warranties that address matters only as of\na certain date, which shall be true and correct as of such date), except where\nthe failure of such representations or warranties to be true or correct would\nnot have, individually or in the aggregate, a Material Adverse Effect on Atom.\nIt is understood that, for purposes of determining the accuracy of such\nrepresentations and warranties, any update of or modification to the Atom\nDisclosure Letter made or purported to have been made after the execution of\nthis Agreement shall be disregarded. Shockwave will have received a certificate\nwith respect to the foregoing signed on behalf of Atom by the President or Chief\nExecutive Officer of Atom. The representations and warranties of each Atom\nShareholder set forth in such Atom Shareholder's Investment Representation\nLetter will be true and correct in all material respects.\n\n 9.2 Covenants. Atom will have performed and complied in all material\nrespects with all of its covenants contained in Article 5 at or before the\nClosing (to the extent that such covenants require performance by Atom at or\nbefore the Closing), and Shockwave will have received a certificate to such\neffect signed by Atom's President or Chief Executive Officer.\n\n 9.3 Compliance with Law; No Legal Restraints; No Litigation. There will\nnot be any issued, enacted or adopted, or threatened in writing by any\nGovernmental Authority any order, decree, temporary, preliminary or permanent\ninjunction, legislative enactment, statute, regulation, action or proceeding by\nany Governmental Authority that prohibits or renders illegal or imposes\nlimitations on: (a) the Merger or any other material transaction contemplated by\nthis Agreement or any Atom Ancillary Agreement; or (b) Shockwave's right (or the\nright of any Shockwave subsidiary) to own, retain, use or operate any of its\nproducts, properties or assets (including equity, properties or assets of Atom)\non or after consummation of the Merger or seeking a disposition or divestiture\nof any such properties or assets. No litigation or proceeding will be threatened\nor pending for the purpose or with the probable effect of enjoining or\npreventing the consummation of the transactions contemplated by this Agreement,\nor which could be reasonably expected to have a Material Adverse Effect on Atom\nor Shockwave.\n\n 9.4 Government Consents. There will have been obtained at or prior to\nthe Closing Date such permits or authorizations, and there will have been taken\nall such other actions by any governmental or regulatory authority having\njurisdiction over the parties and the actions herein proposed to be taken, as\nmay be required to consummate the Merger, including but not limited to\nrequirements under applicable federal and state securities laws.\n\n\n\n 54\n 56\n 9.5 Opinion of Atom's Counsel. Shockwave will have received from Venture\nLaw Group, counsel to Atom, an opinion opining to the matters set forth in\nExhibit J.\n\n 9.6 Consents. Shockwave will have received duly executed copies of all\nthird-party consents, approvals, assignments, notices, waivers, authorizations\nor other certificates (including those set forth in Schedule 3.12 to the Atom\nDisclosure Letter) contemplated by this Agreement or the Atom Disclosure Letter\nor deemed reasonably necessary to provide for the continuation in full force and\neffect of any and all material contracts, agreements and leases of Atom after\nthe Merger and the preservation of Atom's material IP Rights and other material\nassets and properties after the Merger and for Shockwave to consummate the\nMerger and the other transactions contemplated by this Agreement, the Shockwave\nAncillary Agreements and the Atom Ancillary Agreements, in each case, in form\nand substance reasonably satisfactory to Shockwave.\n\n 9.7 Requisite Approvals. This Agreement, the Merger and the other\ntransactions contemplated by this Agreement will have been duly and validly\napproved and adopted, by the valid and affirmative vote of 95% of the\noutstanding shares of Atom Common Stock and Atom Preferred Stock.\n\n 9.8 HSR Compliance. All applicable waiting periods under the HSR Act\nwill have expired or early termination will have been granted by both the\nFederal Trade Commission and the United States Department of Justice.\n\n 9.9 Investment Representation Letters; Exemptions Available. Shockwave:\n(a) will have received an executed counterpart of an Investment Representation\nLetter executed by each Atom Shareholder who approved and adopted this\nAgreement, the Merger and the other transactions contemplated by this Agreement;\nand (b) must be reasonably satisfied that there are not more than thirty-five\nAtom Shareholders who are not \"accredited investors\" within the meaning of\nRegulation D promulgated under the Securities Act or that the issuance of the\nShockwave Merger Shares in the Merger is otherwise exempt from registration\nunder the Securities Act pursuant to Section 4(2) thereof.\n\n 9.10 Investors' Rights Agreement. Shockwave, holders of at least\ntwo-thirds of the Registrable Securities under the Shockwave Prior Investors'\nRights Agreement and holders of Atom Preferred Stock with registration rights\nunder the Atom Prior Investors' Rights Agreement will each have executed the\nInvestors' Rights Agreement.\n\n 9.11 Amendments of Atom Options. Each outstanding Atom Option held by\nthe holders listed on Schedule 5.11 to the Atom Disclosure Letter will have been\nduly amended as set forth in Exhibit H.\n\n 9.12 Termination of Atom Prior Investors' Rights Agreement. Atom and\nholders of at least (a) a majority of the outstanding shares of Atom Series C\nPreferred Stock and (b) a majority of the Registrable Securities under the Atom\nPrior Investors' Rights Agreement will have amended such agreements to terminate\nthe registration rights of Atom Shareholders and the obligations of Atom under\nsuch agreement.\n\n\n\n 55\n 57\n 9.13 Restated Certificate of Incorporation Effective. The Restated\nCertificate of Incorporation will have been duly adopted by Shockwave by all\nnecessary corporate action of its Board of Directors and shareholders, and will\nhave been duly filed with and accepted by the Delaware Secretary of State.\n\n 9.14 Restated Articles of Incorporation Effective. The Restated Articles\nof Incorporation will have been duly adopted by Atom by all necessary corporate\naction of its Board of Directors and shareholders, and will have been duly filed\nwith and accepted by the Washington Secretary of State.\n\n 9.15 Debt. Atom will have paid in full all of Atom's indebtedness for\nmoney borrowed listed on Schedule 5.15 to the Atom Disclosure Letter, and\nShockwave will have received payoff letters from holders of such debt stating\nthat such debt has been paid in full and acknowledging that all liens related to\nsuch debt have been released.\n\n 9.16 Employment Agreements. Each Named Employee will have executed and\ndelivered an employment and noncompetition agreement in the form and substance\nof Exhibit K attached hereto.\n\n 9.17 Calculation of Atom Fully Diluted Share Number. Atom will have\nprovided to Shockwave a schedule setting forth the Atom Fully Diluted Share\nNumber, which schedule will set forth the aggregate number of shares of each of\nthe Atom Common Stock, Atom Series A Preferred Stock, Atom Series B Preferred\nStock and Atom Series C Preferred Stock, and Atom Common Stock and Atom\nPreferred Stock underlying Atom Options and Atom Warrants to purchase Atom\nCommon Stock (each, on a fully exercised and converted to Atom Common Stock\nbasis) that are issued and outstanding immediately prior to the Effective Time.\n\n 9.18 First Restated Voting Agreement. Shockwave, Macromedia, holders of\nAtom Preferred Stock and holders of at least a majority of the then outstanding\nshares of the Shockwave Series B Preferred Stock will each have executed the\nFirst Restated Voting Agreement.\n\n 9.19 Conversion of Atom Notes. Each holder of an Atom Note will have\nagreed in writing to convert such Atom Note into preferred stock of the\nSurviving Corporation in its first preferred stock financing following the\nEffective Time.\n\n ARTICLE 10\n TERMINATION OF AGREEMENT\n\n 10.1 Termination by Mutual Consent. This Agreement may be terminated at\nany time prior to the Effective Time by the mutual written consent of Shockwave\nand Atom.\n\n 10.2 Unilateral Termination.\n\n (a) Either Shockwave or Atom, by giving written notice to the\nother, may terminate this Agreement if a court of competent jurisdiction or\nother Governmental Authority\n\n\n\n 56\n 58\nwill have issued a nonappealable final order, decree or ruling or taken any\nother action, in each case having the effect of permanently restraining,\nenjoining or otherwise prohibiting the Merger.\n\n (b) Either Shockwave or Atom, by giving written notice to the\nother, may terminate this Agreement if the Merger will not have been consummated\nby midnight Pacific Time on the Termination Date; provided, however, that the\nright to terminate this Agreement pursuant to this Section 10.2(b) will not be\navailable to any party whose failure to perform in any material respect any of\nits obligations or covenants under this Agreement results in the failure of any\ncondition set forth in Article 8 or Article 9 or if the failure of such\ncondition results from facts or circumstances that constitute a material breach\nof a representation or warranty or covenant made under this Agreement by such\nparty.\n\n (c) Shockwave may terminate this Agreement at any time prior to\nthe Effective Time upon a breach of any representation, warranty, covenant or\nagreement on the part of Atom set forth in this Agreement, or if any\nrepresentation or warranty of Atom will have become untrue, in either case such\nthat the conditions set forth in Section 9.1 or Section 9.2 would not be\nsatisfied as of the time of such breach or as of the time such representation or\nwarranty shall have become untrue, provided that if such inaccuracy in Atom's\nrepresentations and warranties or breach by Atom is curable by Atom through the\nexercise of its commercially reasonable efforts, then Shockwave may not\nterminate this Agreement under this Section 10.2(c) for ten days after delivery\nof written notice from Shockwave to Atom of such breach, provided Atom continues\nto exercise commercially reasonable efforts to cure such breach (it being\nunderstood that Shockwave may not terminate this Agreement pursuant to this\nSection 10.2(c) if such breach by Atom is cured during such ten-day period, or\nif Shockwave shall have materially breached this Agreement).\n\n (d) Atom may terminate this Agreement at any time prior to the\nEffective Time upon a breach of any representation, warranty, covenant or\nagreement on the part of Shockwave set forth in this Agreement, or if any\nrepresentation or warranty of Shockwave will have become untrue, in either case\nsuch that the conditions set forth in Section 8.1 or Section 8.2 would not be\nsatisfied as of the time of such breach or as of the time such representation or\nwarranty shall have become untrue, provided that if such inaccuracy in\nShockwave's representations and warranties or breach by Shockwave is curable by\nShockwave through the exercise of its commercially reasonable efforts, then Atom\nmay not terminate this Agreement under this Section 10.2(d) for ten days after\ndelivery of written notice from Atom to Shockwave of such breach, provided\nShockwave continues to exercise commercially reasonable efforts to cure such\nbreach (it being understood that Atom may not terminate this Agreement pursuant\nto this Section 10.2(d) if such breach by Shockwave is cured during such ten-day\nperiod, or if Atom shall have materially breached this Agreement).\n\n (e) No Liability for Termination. Termination of this Agreement\nby a party (the \"TERMINATING PARTY\") in accordance with the provisions of this\nArticle 10 will not give rise to any obligation or liability on the part of the\nTerminating Party on account of such termination; provided, however, that\nnothing herein will relieve a party from liability for a willful breach of\n\n\n\n 57\n 59\nthis Agreement. The provisions of this Article 10 and Article 12 will survive\nany termination of this Agreement.\n\n ARTICLE 11\n SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION\n AND REMEDIES; CONTINUING COVENANTS\n\n 11.1 Survival of Representations. All representations, warranties and\ncovenants of the parties contained in this Agreement will remain operative and\nin full force and effect, regardless of any investigation made by or on behalf\nof any of the parties to this Agreement, until that date (the \"RELEASE DATE\")\nwhich is the earlier of (a) the termination of this Agreement in accordance with\nits terms or (b) the first anniversary of the Effective Time; provided, however,\nthat notwithstanding the foregoing, either party may seek recovery of Damages\n(as defined in Section 11.2(a) relating to Special Damages (as defined in\nSection 11.2(b)) at any time prior to the expiration of the applicable statute\nof limitations for the claim which seeks recovery of such Special Damages.\n\n 11.2 Agreement to Indemnify.\n\n (a) (i) Shockwave will indemnify and hold harmless the Atom\nShareholders (each hereinafter referred to individually as an \"ATOM INDEMNIFIED\nPERSON\" and collectively as \"ATOM INDEMNIFIED PERSONS\"), and (ii) the Atom\nShareholders severally, but not jointly, on a pro rata basis based upon their\nrespective ownership interests in the escrowed portion of the Atom Common Stock\nand Atom Preferred Stock set forth besides their names on Schedule 3.4(a)-1 to\nthis Agreement (\"PRO RATA BASIS\"), will indemnify and hold harmless, Shockwave\nand its officers, directors, agents, representatives, shareholders and\nemployees, and each person, if any, who controls or may control Shockwave within\nthe meaning of the Securities Act or the Exchange Act (each hereinafter referred\nto individually as a \"SHOCKWAVE INDEMNIFIED PERSON\" and collectively as\n\"SHOCKWAVE INDEMNIFIED PERSONS\") from and against any and all claims, demands,\nsuits, actions, causes of actions, losses, costs, damages, liabilities and\nexpenses including reasonable attorneys' fees, other professionals' and experts'\nreasonable fees and court or arbitration costs (hereinafter collectively\nreferred to as \"DAMAGES\") directly or indirectly incurred, resulting or and\narising out of any inaccuracy, misrepresentation, breach of, or default in, any\nof the representations, warranties or covenants given or made by, in the case of\na Claim (as defined in Section 11.5) made by Shockwave Indemnified Persons, Atom\nin this Agreement or in the Atom Disclosure Letter or in any certificate\ndelivered by or on behalf of Atom or an officer of Atom pursuant hereto; or, in\nthe case of a Claim made by the Representatives (as defined below), Shockwave in\nthis Agreement, the Shockwave Disclosure Letter or in any certificate delivered\nby or on behalf of Shockwave or an officer of Shockwave pursuant hereto. Except\nwith respect to claims arising from Special Damages, which may be raised after\nthe Release Date, any Claim made by Shockwave or the Representatives under this\nSection 11.2(a) must be raised in a writing delivered to the other party by no\nlater than the Release Date and, if raised by such date, such Claim will survive\nthe Release Date until final resolution thereof. Escrow Shares, other than\nEscrow Shares having a value (calculated pursuant to Section 11.3(a)) equal to\nthe amount of Damages asserted in any Claim which has not been resolved pursuant\nto\n\n\n\n 58\n 60\nthe terms hereof prior to the Release Date, will be released to the Atom\nShareholders on the Release Date or, in the case of any such withheld shares,\nupon the resolution of such Claim(s).\n\n (b) (i) Shockwave will indemnify and hold harmless Atom\nIndemnified Persons from and against Damages incurred or suffered by any such\npersons or arising from, by reason of or in connection with any fraudulent\nconduct or fraudulent misrepresentation on the part of Shockwave or any officer,\ndirector, employee or agent of Shockwave, and (ii) the Atom Shareholders will\nseverally, but not jointly, on a Pro Rata Basis, indemnify and hold harmless\nShockwave Indemnified Persons from and against Damages incurred or suffered by\nany such persons or arising from, by reason of or in connection with (A) any\nfraudulent conduct or fraudulent misrepresentation on the part of Atom or any\nofficer, director, employee or agent of Atom, or (B) any inaccuracy,\nmisrepresentation, breach of or default in, of the representations and\nwarranties of Atom set forth in Section 3.4 (Capitalization) or Section 3.7\n(Taxes) (collectively, \"SPECIAL DAMAGES\").\n\n 11.3 Limitation.\n\n (a) Cap On Indemnity Obligation of the Atom Shareholders. Except\nwith respect to claims for indemnification for Special Damages, in no event will\nthe total of the Claims for Damages against any Atom Shareholder exceed the\nvalue of such Atom Shareholder's pro rata portion of the escrowed Shockwave\nMerger Shares received by such Atom Shareholder in the Merger. The value of each\nshare of Shockwave Common Stock, Shockwave Series C-1 Preferred Stock, Shockwave\nSeries C-2 Preferred Stock or Shockwave Series C-3 Preferred Stock, for such\npurposes of satisfying claims for Damages, will be deemed to equal the fair\nmarket value on the Closing Date per share of Shockwave Common Stock, Shockwave\nSeries C-1 Preferred Stock, Shockwave Series C-2 Preferred Stock or Shockwave\nSeries C-3 Preferred Stock as determined in good faith by the board of directors\nof Shockwave. Except with respect to Special Damages, each Atom Shareholder\nagrees that Claims against such shareholder under this Article 11 shall be\nsatisfied by the forfeiture of such shareholder's Escrow Shares (including\nfractions of a share thereof) as provided for in this Article 11 and that no\nShockwave Indemnified Person will have any obligation to exercise its remedies\nagainst any other assets of such shareholder prior to exercising them against\nsuch Escrow Shares. In the event of a Capital Change after the Effective Time,\nthe fair market value of the Escrow Shares will, for purposes of this Section\n11.3, be proportionally and equitably adjusted. In no event will the total of\nthe Claims for Damages against any Atom Shareholder for Special Damages exceed\n50% of the fair market value on the Closing Date of the Merger Shares issued to\nsuch Atom Shareholder.\n\n (b) Cap On Indemnity Obligation of Shockwave. In no event will\nthe total of the Claims for Damages against Shockwave exceed the fair market\nvalue on the Closing Date of the Escrow Shares (the \"SHOCKWAVE INDEMNIFICATION\nLIMIT\"). Shockwave will satisfy any Claim for Damages, at its option, in either\ncash or shares of Shockwave Common Stock and Shockwave Series C Preferred Stock.\nIf Shockwave elects to issue shares of Shockwave Common Stock and Shockwave\nSeries C Preferred Stock to satisfy any Claim, such shares will have an\naggregate fair market value equal to such Claim, and such shares of Shockwave\nCommon Stock and Shockwave Series C Preferred Stock will be allocated\nproportionally to each\n\n\n\n 59\n 61\nAtom Shareholder according to such shareholder's ownership of shares of Atom\nCommon Stock and Atom Preferred Stock immediately prior to the Effective Time.\nThe value of each share of Shockwave Common Stock, Shockwave Series C-1\nPreferred Stock, Shockwave Series C-2 Preferred Stock or Shockwave Series C-3\nPreferred Stock, for such purposes of satisfying claims for Damages, will be\ndeemed to equal the fair market value on the Closing Date per share of Shockwave\nCommon Stock, Shockwave Series C-1 Preferred Stock, Shockwave Series C-2\nPreferred Stock or Shockwave Series C-3 Preferred Stock as determined in good\nfaith by the board of directors of Shockwave.\n\n (c) Basket. The indemnification provided for in Section 11.2(a)\nwill not apply unless and until the aggregate Damages for which one or more\nShockwave Indemnified Persons or Atom Indemnified Persons, as the case may be,\nseeks or has sought indemnification hereunder exceeds a cumulative aggregate of\n$100,000 (the \"BASKET\"), in which event Atom Shareholders or Shockwave, as the\ncase may be, will, subject to the limitations Section 11.3(a) and (b), be liable\nto indemnify the Shockwave Indemnified Persons or the Atom Indemnified Persons,\nas the case may be, for all Damages; provided, however, that the Basket and the\nforegoing provisions of this sentence will not apply to any Claim for fraudulent\nconduct, fraudulent misrepresentation or other willful misconduct on the part of\nShockwave or any officer, director, employee or agent of Shockwave, or Atom, an\nAtom Shareholder or any officer, director, employee or agent of Atom.\n\n (d) Exclusive Contractual Remedy and Limitations. Shockwave, the\nAtom Shareholders and Atom each acknowledge that resort to this Article 11 shall\nbe the exclusive contractual remedy of Shockwave, the Shockwave Indemnified\nPersons, Atom and the Atom Indemnified Persons for any Claim for Damages.\nShockwave, the Atom Shareholders and Atom each further acknowledge that resort\nto the Escrow Fund shall be the exclusive contractual remedy of Shockwave and\nthe Shockwave Indemnified Persons for any Claim for Damages by Shockwave, and\nthe Shockwave Indemnification Limit shall be the exclusive contractual remedy of\nAtom and the Atom Indemnified Persons for any Claim for Damages by the\nRepresentatives. The maximum liability of any Atom Shareholder for any breach of\na representation, warranty or covenant of Atom will be limited to the Escrow\nShares in which such holder has an interest; provided, however, that the maximum\nliability of any Atom Shareholder for Special Damages will be limited to 50% of\nthe fair market value on the Closing Date of the Merger Shares issued to such\nAtom Shareholder. The maximum liability of Shockwave for Special Damages will be\nlimited to 50% of the Shockwave Indemnification Limit.\n\n 11.4 Appointment of Representatives. Robert Egan and Thomas Heogh will\nact as representatives (the \"REPRESENTATIVES\") of the Atom Shareholders and as\nthe attorneys-in-fact and agents for and on behalf of each Atom Shareholder with\nrespect to Claims under Article 11. Any action taken or decisions made by\nMessrs. Egan and Heogh as Representatives will be taken or made jointly. The\nRepresentatives will take any and all actions and the make any decisions\nrequired or permitted to be taken by the Representatives under this Agreement,\nincluding the exercise of the power to: (a) authorize the release or delivery to\nShockwave of Escrow Shares and any other assets deposited in escrow pursuant to\nthe terms of Section 2.5 and Article 11 (including any shares of Shockwave\ncapital stock or other securities into which Shockwave Common Stock or Shockwave\nPreferred Stock is converted or exchanged or which is received in\n\n\n\n 60\n 62\nrespect of such Escrow Shares or other capital stock and securities) in\nsatisfaction of Claims by any Shockwave Indemnified Person pursuant to Article\n11; (b) agree to, negotiate, enter into settlements and compromises of, demand\narbitration of, and comply with orders of courts and awards of arbitrators with\nrespect to, such Claims; (c) arbitrate, resolve, settle or compromise any Claim\nmade pursuant to Article 11; and (d) take all actions necessary in the judgment\nof the Representatives for the accomplishment of the foregoing. The\nRepresentatives will have authority and power to act on behalf of each Atom\nShareholder with respect to the disposition, settlement or other handling of all\nClaims under Article 11 and all rights or obligations arising under Article 11.\nThe Atom Shareholders will be bound by all actions taken and documents executed\nby the Representatives in connection with Article 11, and Shockwave will be\nentitled to rely on any action or decision of the Representatives. In performing\nthe functions specified in this Agreement, the Representatives will not be\nliable to any Atom Shareholder in the absence of gross negligence or willful\nmisconduct on the part of the Representatives. The Atom Shareholders will\nseverally, but not jointly, on a Pro Rata Basis, indemnify the Representatives\nand hold him harmless against any loss, liability or expense incurred without\ngross negligence or willful misconduct on the part of the Representatives and\narising out of or in connection with the acceptance or administration of his\nduties hereunder; provided that in no event will such indemnification against\nany Atom Shareholder exceed the value of such Atom Shareholder's pro rata\nportion of the escrowed Shockwave Merger Shares received by such Atom\nShareholder in the Merger. Any out-of-pocket costs and expenses reasonably\nincurred by the Representatives in connection with actions taken by the\nRepresentatives pursuant to the terms of Article 11 (including the hiring of\nlegal counsel and the incurring of legal fees and costs) will be paid by the\nAtom Shareholders to the Representatives on a Pro Rata Basis.\n\n 11.5 Notice of Claim. As used herein, the term \"CLAIM\" means a claim for\nindemnification of any Shockwave Indemnified Person or Atom Indemnified Person\nfor Damages under Article 11. Shockwave (and only Shockwave) may give notice of\na Claim under this Agreement whether for its own Damages or for Damages incurred\nby any other Shockwave Indemnified Person, and the Representatives (and only the\nRepresentatives) may give notice of a Claim under this Agreement for Damages\nincurred by any Atom Indemnified Person. In the case of a Claim by a Shockwave\nIndemnified Person, Shockwave will give written notice of the Claim executed by\nan officer of Shockwave to the Representatives and, in the case of a Claim by an\nAtom Indemnified Person, the Representatives will give written notice of the\nClaim to Shockwave (a \"NOTICE OF CLAIM\"), in each case promptly after Shockwave\nor the Representatives, as the case may be, becomes aware of the existence of\nany potential Claim by a Shockwave Indemnified Person against the Atom\nShareholders or an Atom Shareholder or by an Atom Indemnified Person against\nShockwave under Article 11, but in any event before the Release Date arising\nfrom or relating to:\n\n (a) (i) in the case of a Claim made by Shockwave, any inaccuracy,\nmisrepresentation, breach of, or default in, any of the representations,\nwarranties or covenants given or made by Atom in this Agreement or in the Atom\nDisclosure Letter or in any certificate delivered by Atom or an officer of Atom\npursuant hereto; or (ii) in the case of a Claim made by the Representatives, any\ninaccuracy, misrepresentation, breach of, or default in, any of the\nrepresentations, warranties or covenants given or made by Shockwave in this\nAgreement or in\n\n\n\n 61\n 63\nthe Shockwave Disclosure Letter or in any certificate delivered by Shockwave or\nan officer of Shockwave pursuant hereto; or\n\n (b) only in the case of a Claim made by Shockwave, the assertion,\nwhether orally or in writing, against Shockwave or against any other Shockwave\nIndemnified Person of a claim, demand, suit, action, arbitration, investigation,\ninquiry or proceeding brought by a third party against such Shockwave\nIndemnified Person that is based upon, or includes assertions that would, if\ntrue, constitute (in each such case, a \"THIRD-PARTY CLAIM\") any inaccuracy,\nmisrepresentation, breach of, or default in, any of the representations,\nwarranties or covenants given or made by Atom in this Agreement or in the Atom\nDisclosure Letter or in any certificate delivered by or on behalf of Atom or an\nofficer of Atom pursuant hereto (if such inaccuracy, misrepresentation, breach\nor default existed at the Closing Date).\n\n Until the Release Date, no delay on the part of Shockwave in giving the\nRepresentatives, or on the part of the Representatives in giving Shockwave, a\nNotice of Claim will relieve the Representatives or any Atom Shareholder (in the\ncase of a Claim made by Shockwave) or Shockwave (in the case of a Claim made by\nthe Representatives) from any of its obligations under Article 11 unless (and\nthen only to the extent) that the Representatives or the Atom Shareholders (in\nthe case of a Claim made by Shockwave) or Shockwave (in the case of a Claim made\nby the Representatives) are materially prejudiced thereby.\n\n 11.6 Defense of Third-Party Claims.\n\n (a) Shockwave will defend any Third-Party Claim, and the costs\nand expenses incurred by Shockwave in connection with such defense (including\nbut not limited to reasonable attorneys' fees, other professionals' and experts'\nfees and court or arbitration costs) will be included in the Damages for which\nShockwave may seek indemnity pursuant to a Claim made by any Shockwave\nIndemnified Person hereunder.\n\n (b) The Representatives will have the right to receive copies of\nall pleadings, notices and communications with respect to the Third-Party Claim\nto the extent that receipt of such documents by the Representatives does not\naffect any privilege relating to the Indemnified Person, and may participate in\nsettlement negotiations with respect to the Third-Party Claim. No Shockwave\nIndemnified Person will enter into any settlement of a Third-Party Claim without\nthe prior written consent of the Representatives (which consent will not be\nunreasonably withheld), provided, that if the Representatives will have\nconsented in writing to any such settlement, then the Representatives will have\nno power or authority to object to any Claim by any Shockwave Indemnified Person\nunder Section 11.2 for the amount of such settlement; and the Atom Shareholders\nwill remain responsible to indemnify the Shockwave Indemnified Persons for all\nDamages they may incur arising out of, resulting from or caused by the\nThird-Party Claim to the fullest extent provided in Article 11.\n\n 11.7 Contents of Notice of Claim. Each Notice of Claim by Shockwave or\nthe Representatives given pursuant to Section 11.5 will contain the following\ninformation:\n\n\n\n 62\n 64\n (a) such party's good faith estimate of the reasonably\nforeseeable maximum amount of the alleged Damages arising from such Claim (which\namount, in the case of Third-Party Claims, may be the amount of damages claimed\nby the third party in an action brought against any Shockwave Indemnified Person\nbased on alleged facts, which if true, would give rise to liability for Damages\nto such Shockwave Indemnified Person under Article 11); and\n\n (b) a brief description, in reasonable detail (to the extent\nreasonably available to such party), of the facts, circumstances or events\ngiving rise to the alleged Damages based on such party's good faith belief\nthereof, including the identity and address of any third-party claimant (to the\nextent reasonably available to such party) and copies of any formal demand or\ncomplaint.\n\n 11.8 Resolution of Notice of Claim. Any Notice of Claim received by the\nNotified Party pursuant to Sections 11.5 and 11.7 will be resolved as follows:\n\n (a) Uncontested Claims. In the event that, within thirty calendar\ndays after a Notice of Claim is received by the Representatives or Shockwave, as\nthe case may be (the \"NOTIFIED PARTY\"), pursuant to Sections 11.5 and 11.7, the\nNotified Party does not contest such Notice of Claim in writing to Shockwave or\nthe Representatives, as the case may be (the \"NOTIFYING PARTY\") as provided in\nSection 11.8(b) (an \"UNCONTESTED CLAIM\"), the Notified Party will be\nconclusively deemed to have consented to the recovery by the Notifying Party of\nthe full amount of Damages specified in the Notice of Claim in accordance with\nArticle 11, including, in the case of a Claim against the Atom Shareholders, the\nforfeiture of shares of Shockwave Common Stock, Shockwave Preferred Stock and\nany other assets deposited in escrow pursuant to the terms of Section 2.5 and\nArticle 11 (including any shares of Shockwave capital stock or other securities\ninto which Shockwave Common Stock or Shockwave Preferred Stock is converted or\nexchanged or which is received in respect of such shares of Shockwave Common\nStock, Shockwave Preferred Stock or other capital stock and securities), in\naccordance with Section 11.3(a) and, without further notice, to have stipulated\nto the entry of a final judgment for damages against, as the case may be,\nShockwave or the Atom Shareholders for such amount in the Superior Court for the\nCounty of San Francisco, the United States District Court for the Northern\nDistrict of California or any other court having jurisdiction over the matter\nwhere venue is proper.\n\n (b) Contested Claims. In the event that the Notified Party gives\nthe Notifying Party written notice contesting all or any portion of a Notice of\nClaim (a \"CONTESTED CLAIM\") within the thirty day period specified in Section\n11.8(a), then: (i) such Contested Claim will be resolved by either (A) a written\nsettlement agreement executed by the Notified Party and the Notifying Party or\n(B) in the absence of such a written settlement agreement, by binding\narbitration between the Notified Party and the Notifying Party in accordance\nwith the terms and provisions of Section 11.8(c).\n\n (c) Arbitration of Contested Claims. Shockwave and Atom agree\nthat any Contested Claim will be submitted to mandatory, final and binding\narbitration before J.A.M.S.\/ENDISPUTE or its successor (\"J.A.M.S.\"), pursuant to\nthe United States Arbitration\n\n\n\n\n 63\n 65\nAct, 9 U.S.C., Section 1 et seq. and that any such arbitration will be conducted\nin San Francisco County, California. Either Shockwave or the Representatives may\ncommence the arbitration process called for by this Agreement by filing a\nwritten demand for arbitration with J.A.M.S. and giving a copy of such demand to\neach of the other party to this Agreement. The arbitration will be conducted in\naccordance with the provisions of J.A.M.S' Streamlined Arbitration Rules and\nProcedures in effect at the time of filing of the demand for arbitration,\nsubject to the provisions of Section 11.8(c). The parties will cooperate with\nJ.A.M.S. and with each other in promptly selecting an arbitrator from J.A.M.S.'\npanel of neutrals, and in scheduling the arbitration proceedings in order to\nfulfill the provisions, purposes and intent of this Agreement. The parties\ncovenant that they will participate in the arbitration in good faith, and that\nthey will share in its costs in accordance with subparagraph (i) below. The\nprovisions of this Section 11.8(c) may be enforced by any court of competent\njurisdiction, and the party seeking enforcement will be entitled to an award of\nall costs, fees and expenses, including attorneys' fees, to be paid by the party\nagainst whom enforcement is ordered. Subject to the provisions of subparagraph\n(vii) below, judgment upon the award rendered by the arbitrator may be entered\nin any court having competent jurisdiction.\n\n (i) Payment of Costs. The parties will bear the expense of\ndeposits and advances required by the arbitrator in equal proportions, but\neither party may advance such amounts, subject to recovery as an addition or\noffset to any award. The arbitrator will determine the party who is the\nprevailing party and the party who is the non-prevailing party. The\nnon-prevailing party will pay all reasonable costs, fees and expenses related to\nthe arbitration, including reasonable fees and expenses of attorneys,\naccountants and other professionals incurred by the prevailing party, the fees\nof each arbitrator and the administrative fee of the arbitration proceedings. If\nsuch an award would result in manifest injustice, however, the arbitrator may\napportion such costs, fees and expenses between the parties in such a manner as\nthe arbitrator deems just and equitable.\n\n (ii) Burden of Proof. Except as may be otherwise expressly\nprovided herein, for any Contested Claim submitted to arbitration, the burden of\nproof will be as it would be if the claim were litigated in a judicial\nproceeding governed by California law exclusively.\n\n (iii) Award. Upon the conclusion of any arbitration\nproceedings hereunder, the arbitrator will render findings of fact and\nconclusions of law and a final written arbitration award setting forth the basis\nand reasons for any decision reached (the \"FINAL AWARD\") and will deliver such\ndocuments to the Representatives and Shockwave, together with a signed copy of\nthe Final Award. Subject to the provisions of subparagraph (vii) below, the\nFinal Award will constitute a conclusive determination of all issues in\nquestion, binding upon the Atom Shareholders, the Representatives and Shockwave,\nand will include an affirmative statement to such effect. To the extent that the\nFinal Award determines that a Shockwave Indemnified Person or an Atom\nIndemnified Person has actually incurred Damages in connection with the\nContested Claim through the date of the Final Award (\"INCURRED DAMAGES\"), the\nFinal Award will set forth and award to the Shockwave Indemnified Persons or the\nAtom Indemnified Persons, as the case may be, the amount of such Incurred\nDamages. In addition, the Final Award will set forth and award to the Shockwave\nIndemnified Persons or the Atom Indemnified\n\n\n\n 64\n 66\nPersons, as the case may be, an additional amount of Damages equal to the\nreasonably foreseeable amount of alleged Damages that the arbitrator determines\n(based on the evidence submitted by the parties in the arbitration) are\nreasonably likely to be incurred by such persons as a result of the facts giving\nrise to the Contested Claim (\"ESTIMATED DAMAGES\"), which amount of Estimated\nDamages may include the amount of damages claimed by a third party in an action\nbrought against any Indemnified Person based on alleged facts which, if true,\nwould give rise to Damages. Awards of Damages will be subject to the provisions\nregarding the \"Basket\" (as defined in Section 11.3); provided, however, that\nawards of Damages arising out of fraudulent conduct, fraudulent\nmisrepresentation or other willful misconduct on the part of Shockwave or any\nofficer, director, employee or agent of Shockwave; or Atom or any officer,\ndirector, employee or agent of Atom or any subsidiary of Atom will not be\nsubject to such provisions regarding the \"Basket.\"\n\n (iv) Timing. The Representatives, Shockwave and the\narbitrator will conclude each arbitration pursuant to this Section 11.8 as\npromptly as possible for the Contested Claim being arbitrated.\n\n (v) Terms of Arbitration. The arbitrator chosen in\naccordance with these provisions will not have the power to alter, amend or\notherwise affect the terms of these arbitration provisions or the provisions of\nthis Agreement.\n\n (vi) Exclusive Remedy. Following the Effective Time,\nexcept as specifically otherwise provided in this Agreement, arbitration\nconducted in accordance with this Agreement will be the sole and exclusive\nremedy of the parties for any Claim made pursuant to Article 11.\n\n (vii) Treatment of Damages. Upon issuance and delivery of\nthe Final Award as provided in subparagraph (iii) above, the Shockwave\nIndemnified Persons or Atom Indemnified Persons, as the case may be, will\nimmediately be entitled to recover (A) the amount of any Incurred Damages\ndetermined and awarded under such Final Award and (B) the amount of Estimated\nDamages determined and awarded under such Final Award and such Incurred Damages\nand such Estimated Damages will be deemed to be owed to the Shockwave\nIndemnified Persons or Atom Indemnified Persons, as the case may be, for\npurposes of this Agreement. Both Incurred Damages and Estimated Damages owed to\nShockwave Indemnified Persons or Atom Indemnified Persons, as the case may be,\nare deemed to be Damages for purposes of this Agreement.\n\n 11.9 Distribution Upon Termination of Escrow Period. As soon as\nreasonably practicably following the Release Date, Shockwave will deliver to the\nAtom Shareholders all of the Escrow Shares in excess of any amount of Escrow\nShares necessary to satisfy any unsatisfied or disputed claims for Damages\nspecified in any Notice of Claim delivered to the Representatives before the\nRelease Date. As soon as all such claims have been resolved, Shockwave will\ndeliver to the Atom Shareholders all remaining Escrow Shares not required to\nsatisfy such claims.\n\n\n\n 65\n 67\n ARTICLE 12\n MISCELLANEOUS\n\n 12.1 Governing Law. The internal laws of the State of California,\nirrespective of its choice of law principles, will govern the validity of this\nAgreement, the construction of its terms, and the interpretation and enforcement\nof the rights and duties of the parties hereto; provided however, that issues\ninvolving the consummation and effects of the Merger will be governed by the\nlaws of the States of Delaware and Washington.\n\n 12.2 Assignment; Binding Upon Successors and Assigns. Except as set\nforth in Section 12.12, neither party hereto may assign any of its rights or\nobligations hereunder without the prior written consent of the other party\nhereto. This Agreement will be binding upon and inure to the benefit of the\nparties hereto and their respective successors and permitted assigns. Any\nassignment in violation of this provision will be void.\n\n 12.3 Severability. If any provision of this Agreement, or the\napplication thereof, will for any reason and to any extent be invalid or\nunenforceable, then the remainder of this Agreement 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 the void or unenforceable provision.\n\n 12.4 Counterparts. This Agreement may be executed in any number of\ncounterparts, each of which will be an original as regards any party whose\nsignature appears thereon and all of which together will constitute one and the\nsame instrument. This Agreement will become binding when one or more\ncounterparts hereof, individually or taken together, will bear the signatures of\nall parties reflected hereon as signatories.\n\n 12.5 Other Remedies. Except as otherwise provided herein, any and all\nremedies herein expressly conferred upon a party hereunder will be deemed\ncumulative with and not exclusive of any other remedy conferred hereby or by law\non such party, and the exercise of any one remedy will not preclude the exercise\nof any other. The parties hereto agree that irreparable damage would occur in\nthe event that any of the provisions of this Agreement were not performed in\naccordance with their specific terms or were otherwise breached. It is\naccordingly agreed that the parties will be entitled to seek an injunction or\ninjunctions to prevent breaches of this Agreement and to enforce specifically\nthe terms and provisions hereof in any court of the United States or any state\nhaving jurisdiction.\n\n 12.6 Amendment and Waivers. Any term or provision of this Agreement may\nbe amended, and the observance of any term of this Agreement may be waived\n(either generally or in a particular instance and either retroactively or\nprospectively) only by a writing signed by the party to be bound thereby. The\nwaiver by a party of any breach hereof or default in the performance hereof will\nnot be deemed to constitute a waiver of any other default or any succeeding\nbreach or default. This Agreement may be amended by the parties hereto as\nprovided in this Section at any time before or after approval of this Agreement\nby the Atom Shareholders\n\n\n\n 66\n 68\nor the Shockwave Shareholders, but, after such approval, no amendment will be\nmade which by applicable law requires the further approval of the Atom\nShareholders or the Shockwave Shareholders without obtaining such further\napproval. At any time prior to the Effective Time, each of Atom and Shockwave,\nby action taken by its Board of Directors, may, to the extent legally allowed,\n(a) extend the time for the performance of any of the obligations or other acts\nof the other; (b) waive any inaccuracies in the representations and warranties\nmade to it contained herein or in any document delivered pursuant hereto; and\n(c) waive compliance with any of the agreements or conditions for its benefit\ncontained herein. No such waiver or extension will be effective unless signed in\nwriting by the party against whom such waiver or extension is asserted. The\nfailure of any party to enforce any of the provisions hereof will not be\nconstrued to be a waiver of the right of such party thereafter to enforce such\nprovisions.\n\n 12.7 Expenses. Each party will bear its respective legal, auditors',\ninvestment bankers' and financial advisors' fees and other expenses incurred\nwith respect to this Agreement, the Merger and the other transactions\ncontemplated by this Agreement (\"TRANSACTION EXPENSES\"); provided, however,\nthat, if the Merger is successfully consummated, any Transaction Expenses of\nAtom (including Transaction Expenses that are paid by Atom at or prior to the\nEffective Time, but excluding fees and expenses of Morgan Stanley, which fees\nand expenses will be paid by Shockwave as the Surviving Corporation following\nthe Merger) in excess of $350,000 will be paid by the Atom Shareholders at or\nprior to the Closing; provided further that any fees and expenses of a purchaser\nrepresentative for the Atom Shareholders who are unaccredited investors will be\npaid by the Atom Shareholders. If for any reason Shockwave pays any amounts in\nexcess of the foregoing limit, Shockwave will be entitled to be reimbursed by\nthe Atom Shareholders for such payment and, if not so reimbursed, Shockwave will\nbe entitled to treat the amount of payment as Damages recoverable under Section\n11.2, without giving effect to the Basket.\n\n 12.8 Attorneys' Fees. Should suit be brought to enforce or interpret any\npart of this Agreement, the prevailing party will be entitled to recover, as an\nelement of the costs of suit and not as damages, reasonable attorneys' fees to\nbe fixed by the court (including costs, expenses and fees on any appeal). The\nprevailing party will be entitled to recover its costs of suit, regardless of\nwhether such suit proceeds to final judgment.\n\n 12.9 Notices. All notices and other communications required or permitted\nunder this Agreement will be in writing and will be either hand delivered in\nperson, sent by facsimile, sent by certified or registered first class mail,\npostage pre-paid, or sent by nationally recognized express courier service. Such\nnotices and other communications will be effective upon receipt if hand\ndelivered or sent by facsimile, five days after mailing if sent by mail, and one\nday after dispatch if sent by express courier, to the following addresses, or\nsuch other addresses as any party may notify the other parties in accordance\nwith this Section:\n\n\n\n 67\n 69\n If to Shockwave:\n\n Shockwave.com, Inc.\n 650 Townsend Street, Suite 450\n San Francisco, CA 94103\n Attention: General Counsel\n Fax Number: (415) 621-0751\n\n with copies to:\n\n Fenwick & West LLP\n 275 Battery Street, Suite 1500\n San Francisco, CA 94111\n Attention: Douglas N. Cogen\n Fax Number: (415) 281-1350\n\n If to Atom:\n\n Atom Corporation\n 815 Western Avenue, Suite 300\n Seattle, WA 98104\n Attention: President\n Fax Number: (206) 264-0223\n\n with a copy to:\n\n Venture Law Group\n 4750 Carillon Point\n Kirkland, WA 98033\n Attention: Craig E. Sherman\n Fax Number: (425) 739-8750\n\n\n\n 68\n 70\n If to the Representatives:\n\n Robert Egan\n Chase Capital Partners\n 380 Madison Avenue, 12th Floor\n New York, NY 10017\n Fax Number: (212) 622-3101\n\n Thomas Heogh\n Arts Alliance\n 60 Sloan Avenue\n London FW33DD\n United Kingdom\n Fax Number: (44) 0 171 594 4026\n\n with a copy to:\n\n Venture Law Group\n 4750 Carillon Point\n Kirkland, WA 98033\n Attention: Craig E. Sherman\n Fax Number: (425) 739-8750\n\nor to such other address as a party may have furnished to the other parties in\nwriting pursuant to this Section 12.9.\n\n 12.10 Construction of Agreement. This Agreement has been negotiated by\nthe respective parties hereto and their attorneys and the language hereof will\nnot be construed for or against either party. A reference to a Section or an\nexhibit will mean a Section in, or exhibit to, this Agreement unless otherwise\nexplicitly set forth. The titles and headings herein are for reference purposes\nonly and will not in any manner limit the construction of this Agreement which\nwill be considered as a whole. Unless otherwise indicated, the words \"include,\"\n\"includes\" and \"including\" when used herein will be deemed in each case to be\nfollowed by the words \"without limitation.\" Each reference herein to a law,\nstatute, regulation, document or agreement will be deemed in each case to\ninclude all amendments thereto.\n\n 12.11 No Joint Venture. Nothing contained in this Agreement will be\ndeemed or construed as creating a joint venture or partnership between any of\nthe parties hereto. No party is by virtue of this Agreement authorized as an\nagent, employee or legal representative of any other party. No party will have\nthe power to control the activities and operations of any other and their status\nis, and at all times will continue to be, that of independent contractors with\nrespect to each other. No party will have any power or authority to bind or\ncommit any other party. No party will hold itself out as having any authority or\nrelationship in contravention of this Section.\n\n 12.12 Further Assurances. Each party agrees to cooperate fully with the\nother parties and to execute such further instruments, documents and agreements\nand to give such further\n\n\n\n 69\n 71\nwritten assurances as may be reasonably requested by any other party to evidence\nand reflect the transactions described herein and contemplated hereby and to\ncarry into effect the intents and purposes of this Agreement.\n\n 12.13 Third Party Beneficiary Rights. No provisions of this Agreement\nare intended, nor will be interpreted, to provide or create any third party\nbeneficiary rights or any other rights of any kind in any client, customer,\naffiliate, shareholder, partner or any party hereto or any other person or\nentity unless specifically provided otherwise herein and, except as so provided,\nall provisions hereof will be personal solely between the parties to this\nAgreement; except that the provisions of Article 11 are intended to create third\nparty beneficiary rights for the Atom Shareholders.\n\n 12.14 Public Announcement. Upon execution of this Agreement, Shockwave\nand Atom will issue a press release approved by both parties announcing the\nMerger. Thereafter, Shockwave in its discretion may issue press releases and\nmake other disclosures regarding the Merger. Prior to the publication of such\ninitial and mutually agreed press release, neither party will make any public\nannouncement relating to this Agreement or the other transactions contemplated\nby this Agreement (except as may be required by law). Neither Shockwave nor Atom\nwill make any disclosures regarding this Agreement or the Merger that would\njeopardize Shockwave's ability to timely and lawfully issue the Shockwave Merger\nShares in the Merger pursuant to the exemptions described in Section 2.7.\n\n 12.15 Atom Disclosure Letter and Shockwave Disclosure Letter. The Atom\nDisclosure Letter and the Shockwave Disclosure Letter will be arranged in\nseparate parts corresponding to the numbered and lettered sections contained in\nArticles 3 and 4, respectively, and the information disclosed in any numbered or\nlettered part will be deemed to relate to and to qualify only the particular\nrepresentation or warranty set forth in the corresponding numbered or lettered\nsection in Articles 3 and 4, respectively, and any other representation or\nwarranty in such Article to which the relevance of such information is readily\napparent from the text of the information disclosed, but will not be deemed to\nrelate to or to qualify any other representation or warranty.\n\n 12.16 Confidentiality. Atom and Shockwave each confirm that they have\nentered into the Nondisclosure Agreement and that they are each bound by, and\nwill abide by, the provisions of such Nondisclosure Agreement (except that\nShockwave will cease to be bound by the Nondisclosure Agreement after the Merger\nbecomes effective). If this Agreement is terminated, the Nondisclosure Agreement\nwill remain in full force and effect and all copies of documents containing\nconfidential information of a disclosing party will be returned by the receiving\nparty to the disclosing party or be destroyed, as provided in the Nondisclosure\nAgreement.\n\n 12.17 Entire Agreement. This Agreement, the Note Purchase Agreement and\nthe exhibits hereto constitute the entire understanding and agreement of the\nparties hereto with respect to the subject matter hereof and supersede all prior\nand contemporaneous agreements or understandings, inducements or conditions,\nexpress or implied, written or oral, between the parties with respect hereto\nother than the Nondisclosure Agreement. The express terms hereof\n\n\n\n 70\n 72\ncontrol and supersede any course of performance or usage of the trade\ninconsistent with any of the terms hereof.\n\n\n\n [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]\n\n\n\n 71\n 73\n\n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as\nof the date first above written.\n\nSHOCKWAVE.COM, INC. ATOM CORPORATION\n\n\n\nBy: \/s\/ Robert Burgess By: \/s\/ Mika Salmi\n -------------------------- --------------------------\nName: Robert Burgess Name: Mika Salmi\n ------------------------ ------------------------\nTitle: CEO Title: CEO\n ----------------------- -----------------------\n\n\n\n\n [SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]\n\n\n\n 72\n 74\n LIST OF EXHIBITS\n\n\n\nExhibit A Atom Voting Agreement\n\nExhibit B Investment Representation Letter\n\nExhibit C Shockwave Voting Agreement\n\nExhibit D Restated Certificate of Incorporation\n\nExhibit E Certificate of Merger\n\nExhibit F Articles of Merger\n\nExhibit G First Amended and Restated Investors' Rights Agreement\n\nExhibit H Amendment to Atom Option\n\nExhibit I Matters to be Covered in the Opinion of Fenwick & West LLP\n\nExhibit J Matters to be Covered in the Opinion of Venture Law Group\n\nExhibit K Employment and Noncompetition Agreement\n\n 75\n\n EXHIBIT A\n\n ATOM VOTING AGREEMENT\n\n\n This ATOM VOTING AGREEMENT (this \"AGREEMENT\") is entered into as of\nDecember 14, 2000 (the \"AGREEMENT DATE\") by and between Shockwave.com, Inc., a\nDelaware corporation (\"SHOCKWAVE\"), and [name of shareholder] (\"SHAREHOLDER\").\n\n\n RECITALS\n\n A. Concurrently with the execution of this Agreement, Shockwave and Atom\nCorporation, a Washington corporation (\"ATOM\"), are entering into an Agreement\nand Plan of Reorganization dated as of December 14, 2000 (the \"MERGER\nAGREEMENT\"), which provides (subject to the conditions set forth therein) for\nthe merger of Atom with and into Shockwave (the \"MERGER\") with Shockwave to\nsurvive the Merger. Upon the effectiveness of the Merger, the outstanding shares\nof Atom Common Stock and Atom Preferred Stock will be converted into the right\nto receive Shockwave Common Stock and Shockwave Series C Preferred Stock, and\noutstanding Atom Options and Atom Warrants to purchase shares of Atom Common\nStock and Atom Preferred Stock will be converted into Shockwave Options and\nShockwave Warrants, all as more particularly set forth in the Merger Agreement.\nCapitalized terms used but not otherwise defined in this Agreement will have the\nsame meanings ascribed to such terms in the Merger Agreement.\n\n B. As of the Agreement Date, Shareholder owns in the aggregate\n(including shares held both beneficially and of record and other shares held\neither beneficially or of record) the number of shares of Atom Common Stock and\nAtom Preferred Stock set forth below Shareholder's name on the signature page of\nthis Agreement (all such shares, together with any shares of Atom Common Stock\nand Atom Preferred Stock or any other shares of capital stock of Atom that may\nhereafter be acquired by Shareholder, being collectively referred to herein as\nthe \"SUBJECT SHARES\"). If, between the Agreement Date and the Expiration Date\n(as defined in Section 1.1(b) below), the outstanding shares of Atom's capital\nstock are changed into a different number or class of shares by reason of any\nstock split, stock dividend, reverse stock split, reclassification,\nrecapitalization or other similar transaction, then the shares constituting the\nSubject Shares shall be appropriately adjusted, and shall include any shares or\nother securities of Atom issued on, or with respect to, the Subject Shares in\nsuch a transaction.\n\n C. As a condition to the willingness of Shockwave to enter into the\nMerger Agreement, Shockwave has required that Shareholder agree, and in order to\ninduce Shockwave to enter into the Merger Agreement, Shareholder has agreed, to\nenter into this Agreement.\n\n In consideration of the facts recited above, the parties to this\nAgreement, intending to be legally bound by this Agreement, now hereby agree as\nfollows:\n\n\n\n 76\n\n ARTICLE 1\n TRANSFER OF SUBJECT SHARES\n\n 1.1 No Transfer of Voting Rights.\n\n (a) Shareholder covenants and agrees that, prior to the\nExpiration Date, Shareholder will not deposit any of the Subject Shares into a\nvoting trust or grant a proxy or enter into an agreement of any kind with\nrespect to any of the Subject Shares, except for the Proxy called for by Section\n2.2 of this Agreement and except for any other proxy granted by Shareholder to\nShockwave.\n\n (b) As used in this Agreement, the term \"EXPIRATION DATE\" shall\nmean the earlier of (i) the date upon which the Merger Agreement is validly\nterminated in accordance with the provisions of Article 10 of the Merger\nAgreement or (ii) the Effective Time of the Merger.\n\n 1.2 Prohibition on Disposition and Transfer. Shareholder agrees that\nprior to the Expiration Date, Shareholder will not, directly or indirectly,\nsell, transfer, exchange, pledge or otherwise dispose of, or in any other way\nreduce Shareholder's risk of ownership or investment in, or make any offer or\nagreement relating to any of the foregoing with respect to the Subject Shares,\nexcept in connection with the Merger.\n\n ARTICLE 2\n VOTING OF SUBJECT SHARES\n\n 2.1 Agreement. Shareholder hereby agrees that, prior to the Expiration\nDate, at any meeting of Atom Shareholders, however called, and in any action\ntaken by the written consent of Atom Shareholders without a meeting, unless\notherwise directed in writing by Shockwave, Shareholder shall vote the Subject\nShares:\n\n (a) in favor of the Merger, the execution and delivery by Atom\nof the Merger Agreement attached hereto as Exhibit 1 and the adoption and\napproval of the terms thereof and in favor of each of the other transactions\ncontemplated by the Merger Agreement, and any action required in furtherance\nhereof and thereof;\n\n (b) in favor of the amendment and restatement of the Articles of\nIncorporation of Atom to provide that no payment of a liquidation preference to\nholders of Atom Preferred Stock will be paid in connection with the Merger;\n\n (c) in favor of the waiver (by amendment of any such agreement\nor otherwise), effective as of immediately prior to the effectiveness of the\nMerger, of any rights of first refusal, rights of first offer, rights of notice\nor rights of co-sale of Shareholder under any agreement applicable to the\nSubject Shares, to the extent that the same may apply to the Merger or any other\nactions or transactions contemplated by the Merger Agreement; provided, however,\nthat such waiver will not apply to the shares of Shockwave Common Stock or\nShockwave Preferred Stock issued or issuable to Shareholder in connection with\nthe Merger; and\n\n\n\n 2\n 77\n\n (d) against any \"Alternative Transaction\" (as defined in Section\n5.7 of the Merger Agreement).\n\nPrior to the Expiration Date, Shareholder shall not enter into any agreement or\nunderstanding with any Person to vote or give instructions in any manner\ninconsistent with clauses (a), (b), (c) or (d) of this Section 2.1.\n\n 2.2 Proxy. Contemporaneously with the execution of this Agreement,\nShareholder shall deliver to Shockwave a proxy with respect to the Subject\nShares in the form and substance attached hereto as Exhibit 2, which proxy shall\nbe irrevocable to the fullest extent permitted by applicable law (the \"PROXY\").\n\n ARTICLE 3\n WAIVER\n\n 3.1 Appraisal Rights. Shareholder hereby agrees not to exercise any\nrights of appraisal and any dissenters' rights that Shareholder may have\n(whether under applicable law or otherwise) or could potentially have or acquire\nin connection with the Merger.\n\n 3.2 Other Rights. Shareholder hereby waives any rights of first refusal,\nrights of first offer, rights to notice or rights of co-sale of Shareholder\nunder any agreement applicable to the Subject Shares, in each case as the same\nmay apply to the execution and delivery of the Merger Agreement and the\nconsummation of the Merger and the other actions and transactions contemplated\nby the Merger Agreement; provided, however, that such waiver will not apply to\nthe shares of Shockwave Common Stock or Shockwave Preferred Stock issued or\nissuable to Shareholder in connection with the Merger.\n\n 3.3 Consent and Waiver. Shareholder hereby gives any consents or waivers\nthat are reasonably required for the consummation of the Merger under the terms\nof any agreement to which Shareholder is a party or pursuant to any rights\nShareholder may have.\n\n ARTICLE 4\n REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER\n\n Shareholder hereby represents and warrants to Shockwave that the\nfollowing representations and warranties will be accurate in all respects at all\ntimes through the Expiration Date and will be accurate in all respects as of the\ndate of the consummation of the Merger as if made on that date:\n\n 4.1 Due Organization, Authorization, etc. Shareholder has all requisite\npower and capacity to execute and deliver this Agreement and to perform\nShareholder's obligations hereunder. This Agreement has been duly executed and\ndelivered by Shareholder and constitutes a legal, valid and binding obligation\nof Shareholder, enforceable against Shareholder in accordance with its terms,\nsubject to (a) laws of general application relating to bankruptcy, insolvency\nand the relief of debtors, and (b) rules of law governing specific performance,\ninjunctive relief and other equitable remedies.\n\n\n\n 3\n 78\n\n 4.2 No Conflicts, Required Filings and Consents.\n\n (a) The execution and delivery of this Agreement by Shareholder\ndo not, and the performance of this Agreement by Shareholder will not: (i)\nconflict with or violate any order, decree or judgment applicable to Shareholder\nor by which Shareholder or the Subject Shares is bound or affected; or (ii)\nresult in any breach of or constitute a default (with notice or lapse of time,\nor both) under, or give to others or affect any rights of termination,\namendment, acceleration or cancellation of, or result in the creation of any\nlien, restriction, adverse claim, option on, right to acquire, or any\nencumbrance or security interest in or to, any of the Subject Shares, except as\ndisclosed in the Shockwave Disclosure Letter.\n\n (b) The execution and delivery of this Agreement by Shareholder\ndo not, and the performance of this Agreement by Shareholder will not, require\nany notice to or consent of any third party.\n\n 4.3 Title to Subject Shares. As of the Agreement Date, Shareholder\nbeneficially or of record owns the Subject Shares set forth under Shareholder's\nname on the signature page hereof and does not directly or indirectly own,\neither beneficially or of record, any shares of capital stock of Atom, or rights\nto acquire any shares of capital stock of Atom, other than the Subject Shares\nset forth below Shareholder's name on the signature page hereof (other than\nshares subject to Atom Options listed on Schedule 3.4(a)-2 to the Atom\nDisclosure Letter).\n\n ARTICLE 5\n MISCELLANEOUS\n\n 5.1 Expenses. All costs and expenses incurred in connection with the\ntransactions contemplated by this Agreement shall be paid by the party incurring\nsuch costs and expenses.\n\n 5.2 Governing Law. The internal laws of the State of Washington\n(irrespective of its choice of law principles) will govern the validity of this\nAgreement, the construction of its terms, and the interpretation and enforcement\nof the rights and duties of the parties hereto.\n\n 5.3 Assignment; Binding Effect; Third Parties. Except as provided\nherein, neither this Agreement nor any of the rights, interests or obligations\nhereunder shall be assigned by either of the parties hereto (whether by\noperation of law or otherwise) without the prior written consent of the other\nparty. Subject to the preceding sentence, this Agreement shall be binding upon\nand shall inure to the benefit of (a) Shareholder and Shareholder's heirs,\nsuccessors and assigns and (b) Shockwave and its successors and assigns.\nNotwithstanding anything contained in this Agreement to the contrary, nothing in\nthis Agreement, expressed or implied, is intended to confer on any person or\nentity other than the parties hereto or their respective heirs, successors and\nassigns, any rights, remedies, obligations or liabilities under or by reason of\nthis Agreement.\n\n 5.4 Severability. If any provision of this Agreement, or the application\nthereof, will for any reason and to any extent be invalid or unenforceable, then\nthe remainder of this Agreement and application of such provision to other\npersons or circumstances will be interpreted so as reasonably to effect the\nintent of the parties hereto.\n\n\n\n 4\n 79\n\n 5.5 Counterparts. This Agreement may be executed by the parties hereto\nin separate counterparts, each of which when so executed and delivered shall be\nan original, but all such counterparts shall together constitute one and the\nsame instrument.\n\n 5.6 Termination; Amendment; Waiver. This Agreement shall terminate on\nthe Expiration Date. This Agreement may be amended by the written agreement of\nthe parties hereto. No waiver by any party hereto of any condition or of any\nbreach of any provision of this Agreement will be effective unless such waiver\nis set forth in a writing signed by such party. No waiver by any party of any\nsuch condition or breach, in any one instance, will be deemed to be a further or\ncontinuing waiver of any such condition or breach or a waiver of any other\ncondition or breach of any other provision contained herein.\n\n 5.7 Notices. All notices and other communications required or permitted\nunder this Agreement will be in writing and will be either hand delivered in\nperson, sent by telecopier, sent by certified or registered first class mail,\npostage pre-paid, or sent by nationally recognized express courier service. Such\nnotices and other communications will be effective upon receipt if hand\ndelivered or sent by telecopier, three (3) days after mailing if sent by mail,\nand one (l) business day after dispatch if sent by express courier, to the\nfollowing addresses, or such other addresses as any party may notify the other\nparties in accordance with this Section:\n\nIf to Shareholder: If to Shockwave:\n\nAt the address set forth below Shareholder's Shockwave.com, Inc.\nsignature on the signature page hereto; 650 Townsend Street, Suite 450\n San Francisco, CA 94103\n Attn: General Counsel\n Fax Number: (415) 621-0751\n\nor to such other address as a party designates in a writing delivered to each of\nthe other parties hereto.\n\n 5.8 Entire Agreement. This Agreement and any documents delivered by the\nparties in connection herewith constitute the entire agreement and understanding\nbetween the parties with respect to the subject matter hereof and thereof and\nsupersede all prior agreements and understandings between the parties with\nrespect thereto. No addition to or modification of any provision of this\nAgreement shall be binding upon either party hereto unless made in writing and\nsigned by both parties hereto. The parties hereto waive trial by jury in any\naction at law or suit in equity based upon, or arising out of, this Agreement or\nthe subject matter hereof.\n\n 5.9 Specific Performance. The parties hereto agree that irreparable\ndamage would occur in the event that any of the provisions of this Agreement was\nnot performed in accordance with its specific terms or was otherwise breached.\nIt is accordingly agreed that, in addition to any other remedy to which\nShockwave is entitled at law or in equity, Shockwave shall be entitled to\ninjunctive relief to prevent breaches of this Agreement and to enforce\nspecifically the terms and provisions hereof in any California court or in any\nother court of competent jurisdiction.\n\n\n\n 5\n 80\n\n 5.10 Other Agreements. Nothing in this Agreement shall limit any of the\nrights or remedies of Shockwave or any of the obligations of Shareholder under\nany other agreement.\n\n 5.11 Construction. This Agreement has been negotiated by the respective\nparties hereto and their attorneys and the language hereof will not be construed\nfor or against either party. Unless otherwise indicated herein, all references\nin this Agreement to \"Sections\" refer to sections of this Agreement. The titles\nand headings herein are for reference purposes only and will not in any manner\nlimit the construction of this Agreement which will be considered as a whole.\n\n\n [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]\n\n\n\n 6\n 81\n\n IN WITNESS WHEREOF, Shockwave and Shareholder have caused this Agreement\nto be executed as of the Agreement Date first written above.\n\n\n\nSHOCKWAVE.COM, INC.\n\n\nBy:\n -----------------------------------------\nName:\n ---------------------------------------\nTitle:\n --------------------------------------\n\n\nSHAREHOLDER\n\n\nBy:\n -----------------------------------------\nName:\n ---------------------------------------\nTitle:\n --------------------------------------\nAddress:\n ------------------------------------\n\n ------------------------------------\n\n ------------------------------------\nFacsimile:\n ----------------------------------\n\n\n\nNO. OF SHARES OF ATOM CAPITAL STOCK\n\n\n\nCommon Stock:\n -------------------------------\nSeries A Preferred Stock:\n -------------------\nSeries B Preferred Stock:\n -------------------\nSeries C Preferred Stock:\n -------------------\n\n\n [SIGNATURE PAGE TO ATOM VOTING AGREEMENT]\n\n\n\n 7\n 82\n\n EXHIBIT \"2\" TO VOTING AGREEMENT\n\n\n IRREVOCABLE PROXY\n\n The undersigned shareholder of Atom Corporation, a Washington\ncorporation (\"ATOM\"), hereby irrevocably (to the fullest extent permitted by\nlaw) appoints and constitutes Robert Burgess and\/or Shockwave.com, Inc., a\nDelaware corporation (\"SHOCKWAVE\"), and each of them, the attorneys and proxies\nof the undersigned, with full power of substitution and resubstitution, to the\nfullest extent of the undersigned's rights with respect to (i) the shares of\nAtom Common Stock and Atom Preferred Stock owned by the undersigned as of the\ndate of this proxy, which shares are specified on the final page of this proxy\nand (ii) any and all other shares of capital stock of Atom which the undersigned\nmay acquire after the date hereof. The shares of the capital stock of Atom\nreferred to in clauses (i) and (ii) of the immediately preceding sentence are\ncollectively referred to as the \"SHARES.\" Upon the execution hereof, all prior\nproxies given by the undersigned with respect to any of the Shares (other than\nany proxies granted to Shockwave) are hereby revoked, and no subsequent proxies\nwill be given with respect to any of the Shares.\n\n This proxy is irrevocable, is coupled with an interest and is granted in\nconnection with that certain Atom Voting Agreement, dated as of the date hereof,\nbetween Shockwave and the undersigned (the \"VOTING AGREEMENT\"), and is granted\nin consideration of Shockwave entering into the Agreement and Plan of\nReorganization dated as of December 14, 2000 between Shockwave and Atom (the\n\"MERGER AGREEMENT\"). Capitalized terms used but not otherwise defined in this\nproxy have the meanings ascribed to such terms in the Voting Agreement.\n\n The attorneys and proxies named above will be empowered, and may\nexercise this proxy, to vote the Shares at any time until the Expiration Date at\nany meeting of Atom Shareholders, however called, or in any action by written\nconsent of Atom Shareholders:\n\n (i) in favor of the Merger, the execution and delivery by Atom of the\nMerger Agreement attached hereto as Exhibit 1 and the adoption and approval of\nthe terms thereof and in favor of each of the other transactions contemplated by\nthe Merger Agreement, and any action required in furtherance hereof and thereof;\n\n (ii) in favor of the amendment and restatement of the Articles of\nIncorporation of Atom to provide that no payment of a liquidation preference to\nholders of Atom Preferred Stock will be paid in connection with the Merger;\n\n (iii) in favor of the waiver (by amendment of any such agreement or\notherwise), effective as of immediately prior to the effectiveness of the\nMerger, of any rights of first refusal, rights of first offer, rights of notice\nor rights of co-sale of Shareholder under any agreement applicable to the\nSubject Shares, to the extent that the same may apply to the Merger or any other\nactions or transactions contemplated by the Merger Agreement; provided, however,\nthat such waiver will not apply to the shares of Shockwave Common Stock or\nShockwave Preferred Stock issued or issuable to Shareholder in connection with\nthe Merger; and\n\n\n\n 83\n\n (iv) against any \"Alternative Transaction\" (as defined in Section 5.7 of\nthe Merger Agreement).\n\n The undersigned shareholder may vote the Shares on all other matters not\ndescribed in the foregoing subparagraphs (i), (ii), (iii) and (iv) above.\n\n Prior to the Expiration Date, at any meeting of Atom Shareholders,\nhowever called, and in any action by written consent of Atom Shareholders, the\nattorneys and proxies named above may, in their sole discretion, elect to\nabstain from voting on any matter covered by the foregoing subparagraphs (i),\n(ii), (iii) and (iv) above.\n\n This proxy and any obligation of the undersigned hereunder shall be\nbinding upon the heirs, successors and assigns of the undersigned (including any\ntransferee of any of the Shares).\n\n This proxy shall terminate upon the Expiration Date.\n\n\n\nDated: December 14, 2000\n\n\n Name:\n ------------------------------------\n By:\n --------------------------------------\n Title (If Applicable):\n -------------------\n\n\n [SIGNATURE PAGE TO IRREVOCABLE PROXY]\n\n\n\n 2\n 84\n\n EXHIBIT B\n\n January 12, 2001\n\nShockwave.com, Inc.\n650 Townsend Street, Suite 450\nSan Francisco, California 94103\n\n RE: INVESTMENT REPRESENTATION LETTER [to be executed by accredited\n investors]\n\nLadies and Gentlemen:\n\n The undersigned (\"SHAREHOLDER\") holds shares of Common Stock and\/or\nPreferred Stock of Atom Corporation, a Washington corporation (\"ATOM\"). Pursuant\nto that certain Agreement and Plan of Reorganization dated as of December 14,\n2000 (the \"MERGER AGREEMENT\") by and between Shockwave.com, Inc., a Delaware\ncorporation (\"SHOCKWAVE\"), and Atom, Atom will be merged with and into Shockwave\n(the \"MERGER\"), with Shockwave to be the surviving corporation of the Merger. In\nconnection with the Merger, Shockwave will issue to Atom Shareholders Shockwave\nCommon Stock and Shockwave Series C Preferred Stock (the \"MERGER SHARES\") in a\nprivate placement effected in reliance on an exemption from the registration\nrequirements of the Securities Act of 1933, as amended (the \"SECURITIES ACT\"),\nprovided by Section 4(2) of the Securities Act and\/or Regulation D promulgated\nunder the Securities Act, and exemptions from the qualification requirements of\napplicable state law. Shareholder is a shareholder of Atom, and Shareholder\nacknowledges and agrees that Shockwave is relying on the truth and accuracy of\nthe representations and warranties made by Shareholder in this Investment\nRepresentation Letter in order to rely on the exemption described above. Unless\notherwise defined herein, all capitalized terms used herein shall have the same\nmeanings given to such terms in the Merger Agreement.\n\n Shareholder hereby makes the following representations, warranties and\nagreements to Shockwave, each of which representations and warranties contained\nin the following Sections of this Investment Representation Letter are true and\ncorrect as to Shareholder as of the date hereof and will be true and correct on\nand as of the Closing Date.\n\n 1. Binding Agreement; Authority. This Investment Representation Letter\nconstitutes Shareholder's valid and legally binding obligation, enforceable in\naccordance with its terms, except as may be limited by (a) applicable\nbankruptcy, insolvency, reorganization, moratorium or other similar laws now or\nhereafter in effect relating to creditors' rights generally, and (b) rules of\nlaw and equity governing specific performance, injunctive relief and other\nequitable remedies. Shareholder has executed, delivered and performed\nhis\/her\/its obligations under, and has all requisite legal power, authority and\ncapacity to execute, deliver and perform his\/her\/its obligations under, this\nInvestment Representation Letter. The execution, delivery and performance by\nShareholder of this Investment Representation Letter have been duly and validly\napproved and authorized by all necessary corporate, trust, partnership or\ncustodial action required by applicable law.\n\n 2. Title; No Other Securities; Waiver. Shareholder has good and\nmarketable title to that number of shares of Atom Common Stock and\/or Atom\nPreferred Stock as set forth beside his\/her\/its name on Schedule 3.4(a)-1 to the\nAtom Disclosure Letter (the \"SUBJECT SHARES\"), free and clear of all mortgages,\ndeeds of trust, security interests, pledges, liens, title retention devices,\ncollateral assignments,\n\n\n\n 85\n\nclaims, charges, restrictions or other encumbrances of any kind. Except as set\nforth in the Atom Disclosure Schedule, Shareholder has no interest in, or right\nof any kind to, any other securities of Atom, including any options, warrants,\nconvertible securities or other securities, calls, commitments, conversion\nprivileges, preemptive rights, rights of first refusal, rights of first offer or\nother rights or agreements outstanding to purchase or otherwise acquire (whether\ndirectly or indirectly) any shares of Atom capital stock or any securities\nconvertible into or exchangeable for any shares of Atom capital stock or\nobligating Atom to grant, issue, extend or enter into any such option, warrant,\nconvertible security or other security, call, commitment, conversion privilege,\npreemptive right, right of first refusal, right of first offer or other right or\nagreement. Shareholder hereby waives any rights of first refusal, rights of\nfirst offer, rights to notice, rights of co-sale, tag-along rights, information\nrights, registration rights, preemptive rights, rights of redemption or\nrepurchase, and similar rights of Shareholder under any agreement, arrangement\nor understanding applicable to the Subject Shares, in each case as the same may\napply to the execution and delivery of the Merger Agreement and the consummation\nof the Merger and the other actions and transactions contemplated by the Merger\nAgreement.\n\n 3. Approval of Agreement; Merger. Shareholder hereby approves the terms\nof the Merger Agreement and the Merger, and agrees to be bound by the\nindemnification obligations of Shareholder as security for the performance of\nthe obligations of Shareholder under Article 11 of the Merger Agreement.\nShareholder further approves the designation of and designates _____________ as\nthe representative of Shareholder (the \"REPRESENTATIVE\") and as the\nattorney-in-fact and agent for and on behalf of Shareholder with respect to\nclaims for indemnification under Article 11 and the taking by the Representative\nof any and all actions and the making of any decisions required or permitted to\nbe taken by the Representative under the Merger Agreement in accordance with\nArticle 11 thereof.\n\n 4. Purchase for Own Account. The Merger Shares to be issued to\nShareholder hereunder will be acquired for investment for Shareholder's own\naccount, not as a nominee or agent, and not with a view to the public resale or\ndistribution thereof within the meaning of the Securities Act, and Shareholder\nhas no present intention of selling, granting any participation in, or otherwise\ndistributing the same.\n\n 5. Disclosure of Information. Shareholder has received or has had full\naccess to all the information Shareholder considers necessary or appropriate to\nmake an informed investment decision with respect to the Merger Shares to be\nissued to Shareholder under the Merger Agreement. Shareholder has had an\nopportunity to ask questions and receive answers from Shockwave and Atom\nregarding the terms and conditions of the offering of Merger Shares pursuant to\nthe Merger Agreement and to obtain additional information (to the extent\nShockwave possessed such information or could acquire it without unreasonable\neffort or expense) necessary to verify any information furnished to Shareholder\nor to which Shareholder had access.\n\n 6. Investment Experience. Shareholder understands that the acquisition\nof the Merger Shares pursuant to the Merger Agreement involves substantial risk.\nShareholder acknowledges that Shareholder can bear the economic risk of\nShareholder's investment in the Merger Shares, and has such knowledge and\nexperience in financial or business matters that Shareholder is capable of\nevaluating the merits and risks of this investment in the Merger Shares and\nprotecting his\/her\/its own interests in connection with this investment.\nShareholder hereby represents that he\/she\/it is an \"accredited investor\" as such\nterm is defined under Section 501(a) of Regulation D promulgated under the\nSecurities Act.\n\n 7. Merger Shares. Shareholder understands that the Merger Shares are\ncharacterized as \"restricted securities\" under the Securities Act inasmuch as\nthey are being acquired from Shockwave in a\n\n\n\n 2\n 86\n\ntransaction not involving a public offering and that under the Securities Act\nand applicable regulations thereunder such securities may be resold without\nregistration under the Securities Act only in certain limited circumstances. In\nthis connection, Shareholder represents that Shareholder is familiar with\nSecurities Exchange Commission Rule 144 as presently in effect, and understands\nthe resale limitations imposed thereby and by the Securities Act. Shareholder\nunderstands that, except as set forth in Section 2.7 of the Merger Agreement and\nthe Investors' Rights Agreement, Shockwave is under no obligation to register\nany of the Merger Shares. Shareholder agrees to be bound by the limitations and\nrestrictions set forth in Section 2.7 of the Merger Agreement and the Investors'\nRights Agreement while exercising any of the rights granted to Shareholder\ntherein.\n\n 8. Further Limitations on Disposition. Without in any way limiting the\nrepresentations set forth above, Shareholder further agrees not to make any\ndisposition of all or any portion of the Merger Shares issued to Shareholder in\nthe Merger unless and until:\n\n (a) there is then in effect a registration statement under the\nSecurities Act covering such proposed disposition and such disposition is made\nin accordance with such registration statement; or\n\n (b) Shareholder shall have notified Shockwave of the proposed\ndisposition and shall have furnished Shockwave with a statement of the\ncircumstances surrounding the proposed disposition, and, at the expense of\nShareholder or Shareholder's transferee, with an opinion of counsel, reasonably\nsatisfactory to Shockwave, that such disposition will not require registration\nof such securities under the Securities Act.\n\nNotwithstanding the provisions of paragraphs (a) and (b) above, no such\nregistration statement or opinion of counsel shall be required for the transfer\nof such shares by gift, will or intestate succession by Atom Shareholder to his\nor her spouse or lineal descendants or ancestors or any charitable organization\nor any trust for any of the foregoing, personal representative (such as an\nexecutor of Shareholder's will), custodian or conservator of Shareholder in the\ncase of the death, bankruptcy or adjudication of incompetency of Shareholder,\npartners of Shareholder if Shareholder is a partnership or members of\nShareholder if Shareholder is a limited liability company (each a \"PERMITTED\nTRANSFEREE\"); provided that the Permitted Transferee agrees in writing to be\nsubject to the terms of this Section 8 to the same extent as if the transferee\nwere an original Shareholder hereunder.\n\n 9. Legends. Shareholder acknowledges and understands that the\ncertificates evidencing the Merger Shares issued in the Merger will bear the\nlegend set forth below:\n\n THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE\n SECURITIES ACT OF 1933, AS AMENDED (THE \"ACT\"), OR UNDER THE SECURITIES\n LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON\n TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT\n AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,\n PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE\n AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS\n INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE\n SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE\n SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR\n RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES\n LAWS.\n\n\n\n 3\n 87\n\nThe legend set forth above shall be removed by Shockwave from any certificate\nevidencing Merger Shares upon receipt by Shockwave of an opinion by its counsel\nthat a registration statement under the Securities Act is at that time in effect\nwith respect to the legended security or upon delivery to Shockwave of an\nopinion by its counsel, or counsel reasonably satisfactory to Shockwave, that\nsuch security can be freely transferred in a public sale without such a\nregistration statement being in effect.\n\n 10. Stop-Transfer Instructions. Shareholder agrees that to ensure\ncompliance with the restrictions imposed by this Investment Representation\nLetter, Shockwave may issue appropriate \"stop-transfer\" instructions to its\ntransfer agent, if any, and if Shockwave transfers its own securities, it may\nmake appropriate notations to the same effect in its own records.\n\n 11. Refusal to Transfer. Shockwave will not be required to (a) register\na transfer on its books any Merger Shares that have been sold or otherwise\ntransferred in violation of any of the provisions of this Investment\nRepresentation Letter, or (b) treat as owner of such Merger Shares, or to accord\nthe right to vote or pay dividends, to any purchaser or other trustee to whom\nsuch Merger Shares have been so transferred.\n\n 12. Compliance With Laws and Regulations. The issuance and transfer of\nthe Merger Shares will be subject to and conditioned upon compliance by\nShockwave and Shareholder with all applicable state and federal laws and\nregulations and with all applicable requirements of any stock exchange or\nautomated quotation system on which Merger Shares may be listed or quoted at the\ntime of such issuance or transfer.\n\n 13. Entire Agreement. This Investment Representation Letter and the\nspecific provisions of the Merger Agreement by which Shareholder has agreed to\nbe bound constitute the entire agreement and understanding of the parties with\nrespect to the subject matter of this Investment Representation Letter, and\nsupersede all prior understandings and agreements, whether oral or written,\nbetween or among the parties hereto with respect to the specific subject matter\nhereof.\n\n 14. Construction of Agreement. This Investment Representation Letter has\nbeen negotiated by the respective parties hereto and their attorneys and the\nlanguage hereof will not be construed for or against either party.\n\n 15. Governing Law. The internal laws of the State of California\n(irrespective of its choice of law principles) will govern the validity of this\nInvestment Representation Letter, the construction of its terms, and the\ninterpretation and enforcement of the rights and duties of the parties hereto.\n\n 16. Assignment; Binding Upon Successors and Assigns. Neither party\nhereto may assign any of its rights or obligations hereunder without the prior\nwritten consent of the other party hereto. This Investment Representation Letter\nwill be binding upon and inure to the benefit of the parties hereto and their\nrespective successors and permitted assigns.\n\n 17. Severability. If any provision of this Investment Representation\nLetter, or the application thereof, will for any reason and to any extent be\ninvalid or unenforceable, then the remainder of this Investment Representation\nLetter and the application of such provision to other persons or circumstances\nwill be interpreted so as reasonably to effect the intent of the parties hereto.\n\n\n\n 4\n 88\n\n 18. Counterparts. This Investment Representation Letter may be executed\nin any number of counterparts, each of which will be an original as regards any\nparty whose signature appears thereon and all of which together will constitute\none and the same instrument.\n\n 19. Other Remedies. Except as otherwise provided herein, any and all\nremedies herein expressly conferred upon a party hereunder will be deemed\ncumulative with and not exclusive of any other remedy conferred hereby or by law\non such party, and the exercise of any one remedy will not preclude the exercise\nof any other. The parties hereto agree that irreparable damage would occur in\nthe event that any of the provisions of this Investment Representation Letter\nwere not performed in accordance with their specific terms or were otherwise\nbreached. It is accordingly agreed that the parties shall be entitled to seek an\ninjunction or injunctions to prevent breaches of this Investment Representation\nLetter and to enforce specifically the terms and provisions hereof in any court\nof the United States or any state having jurisdiction.\n\n 20. Amendment and Waivers. Any term or provision of this Investment\nRepresentation Letter may be amended, and the observance of any term of this\nInvestment Representation Letter may be waived (either generally or in a\nparticular instance and either retroactively or prospectively), only by a\nwriting signed by the party to be bound thereby.\n\n Very truly yours,\n\n\n ------------------------------------\n Signature\n\n ------------------------------------\n Name (Please Type or Print)\n\n ------------------------------------\n Address\n\n ------------------------------------\n City, State and Zip Code\n\n\n\nACKNOWLEDGED AND AGREED:\n\nShockwave.com, Inc.\n\n\n\nBy:\n ------------------------------------\nName:\n ----------------------------------\nTitle:\n ---------------------------------\n\n\n [SIGNATURE PAGE TO INVESTMENT REPRESENTATION LETTER - ACCREDITED]\n\n\n\n 5\n 89\n\n January 12, 2001\n\nShockwave.com, Inc.\n650 Townsend Street, Suite 450\nSan Francisco, California 94103\n\n\n RE: INVESTMENT REPRESENTATION LETTER [to be executed by unaccredited\n investors]\n\nLadies and Gentlemen:\n\n The undersigned (\"SHAREHOLDER\") holds shares of Common Stock and\/or\nPreferred Stock of Atom Corporation, a Washington corporation (\"ATOM\"). Pursuant\nto that certain Agreement and Plan of Reorganization dated as of December 14,\n2000 (the \"MERGER AGREEMENT\") by and between Shockwave.com, Inc., a Delaware\ncorporation (\"SHOCKWAVE\"), and Atom, Atom will be merged with and into Shockwave\n(the \"MERGER\"), with Shockwave to be the surviving corporation of the Merger. In\nconnection with the Merger, Shockwave will issue to Atom Shareholders Shockwave\nCommon Stock and Shockwave Series C Preferred Stock (the \"MERGER SHARES\") in a\nprivate placement effected in reliance on an exemption from the registration\nrequirements of the Securities Act of 1933, as amended (the \"SECURITIES ACT\"),\nprovided by Section 4(2) of the Securities Act and\/or Regulation D promulgated\nunder the Securities Act, and exemptions from the qualification requirements of\napplicable state law. Shareholder is a shareholder of Atom, and Shareholder\nacknowledges and agrees that Shockwave is relying on the truth and accuracy of\nthe representations and warranties made by Shareholder in this Investment\nRepresentation Letter in order to rely on the exemption described above. Unless\notherwise defined herein, all capitalized terms used herein shall have the same\nmeanings given to such terms in the Merger Agreement.\n\n Shareholder hereby makes the following representations, warranties and\nagreements to Shockwave, each of which representations and warranties contained\nin the following Sections of this Investment Representation Letter are true and\ncorrect as to Shareholder as of the date hereof and will be true and correct on\nand as of the Closing Date.\n\n 1. Binding Agreement; Authority. This Investment Representation Letter\nconstitutes Shareholder's valid and legally binding obligation, enforceable in\naccordance with its terms, except as may be limited by (a) applicable\nbankruptcy, insolvency, reorganization, moratorium or other similar laws now or\nhereafter in effect relating to creditors' rights generally, and (b) rules of\nlaw and equity governing specific performance, injunctive relief and other\nequitable remedies. Shareholder has executed, delivered and performed\nhis\/her\/its obligations under, and has all requisite legal power, authority and\ncapacity to execute, deliver and perform his\/her\/its obligations under, this\nInvestment Representation Letter. The execution, delivery and performance by\nShareholder of this Investment Representation Letter have been duly and validly\napproved and authorized by all necessary corporate, trust, partnership or\ncustodial action required by applicable law.\n\n 2. Title; No Other Securities; Waiver. Shareholder has good and\nmarketable title to that number of shares of Atom Common Stock and\/or Atom\nPreferred Stock as set forth beside his\/her\/its\n\n\n\n 90\n\nname on Schedule 3.4(a)-1 to the Atom Disclosure Letter (the \"SUBJECT SHARES\"),\nfree and clear of all mortgages, deeds of trust, security interests, pledges,\nliens, title retention devices, collateral assignments, claims, charges,\nrestrictions or other encumbrances of any kind. Except as set forth in the Atom\nDisclosure Schedule, Shareholder has no interest in, or right of any kind to,\nany other securities of Atom, including any options, warrants, convertible\nsecurities or other securities, calls, commitments, conversion privileges,\npreemptive rights, rights of first refusal, rights of first offer or other\nrights or agreements outstanding to purchase or otherwise acquire (whether\ndirectly or indirectly) any shares of Atom capital stock or any securities\nconvertible into or exchangeable for any shares of Atom capital stock or\nobligating Atom to grant, issue, extend or enter into any such option, warrant,\nconvertible security or other security, call, commitment, conversion privilege,\npreemptive right, right of first refusal, right of first offer or other right or\nagreement. Shareholder hereby waives any rights of first refusal, rights of\nfirst offer, rights to notice, rights of co-sale, tag-along rights, information\nrights, registration rights, preemptive rights, rights of redemption or\nrepurchase, and similar rights of Shareholder under any agreement, arrangement\nor understanding applicable to the Subject Shares, in each case as the same may\napply to the execution and delivery of the Merger Agreement and the consummation\nof the Merger and the other actions and transactions contemplated by the Merger\nAgreement.\n\n 3. Approval of Agreement; Merger. Shareholder hereby approves the terms\nof the Merger Agreement and the Merger, and agrees to be bound by the\nindemnification obligations of Shareholder as security for the performance of\nthe obligations of Shareholder under Article 11 of the Merger Agreement.\nShareholder further approves the designation of and designates _____________ as\nthe representative of Shareholder (the \"REPRESENTATIVE\") and as the\nattorney-in-fact and agent for and on behalf of Shareholder with respect to\nclaims for indemnification under Article 11 and the taking by the Representative\nof any and all actions and the making of any decisions required or permitted to\nbe taken by the Representative under the Merger Agreement in accordance with\nArticle 11 thereof.\n\n 4. Purchase for Own Account. The Merger Shares to be issued to\nShareholder hereunder will be acquired for investment for Shareholder's own\naccount, not as a nominee or agent, and not with a view to the public resale or\ndistribution thereof within the meaning of the Securities Act, and Shareholder\nhas no present intention of selling, granting any participation in, or otherwise\ndistributing the same.\n\n 5. Disclosure of Information. Shareholder has received or has had full\naccess to all the information Shareholder considers necessary or appropriate to\nmake an informed investment decision with respect to the Merger Shares to be\nissued to Shareholder under the Merger Agreement. Shareholder has had an\nopportunity to ask questions and receive answers from Shockwave and Atom\nregarding the terms and conditions of the offering of Merger Shares pursuant to\nthe Merger Agreement and to obtain additional information (to the extent\nShockwave possessed such information or could acquire it without unreasonable\neffort or expense) necessary to verify any information furnished to Shareholder\nor to which Shareholder had access.\n\n 6. Investment Experience. Shareholder understands that the acquisition\nof the Merger Shares pursuant to the Merger Agreement involves substantial risk.\nShareholder acknowledges that Shareholder can bear the economic risk of\nShareholder's investment in the Merger Shares, and has such knowledge and\nexperience in financial or business matters that Shareholder is capable of\nevaluating the merits and risks of this investment in the Merger Shares and\nprotecting his\/her\/its own interests in connection with this investment.\n\n\n\n 2\n 91\n\n 7. Appointment of Purchaser Representative. Shareholder hereby appoints\n_______________ to act as a \"purchaser representative,\" as that term is used in\nRule 501(h) promulgated under the Securities Act, for the purpose of making\nShareholder's decision to exchange Atom Common Stock and\/or Atom Preferred Stock\npursuant to the Merger Agreement.\n\n 8. Merger Shares. Shareholder understands that the Merger Shares are\ncharacterized as \"restricted securities\" under the Securities Act inasmuch as\nthey are being acquired from Shockwave in a transaction not involving a public\noffering and that under the Securities Act and applicable regulations thereunder\nsuch securities may be resold without registration under the Securities Act only\nin certain limited circumstances. In this connection, Shareholder represents\nthat Shareholder is familiar with Securities Exchange Commission Rule 144 as\npresently in effect, and understands the resale limitations imposed thereby and\nby the Securities Act. Shareholder understands that, except as set forth in\nSection 2.7 of the Merger Agreement and the Investors' Rights Agreement,\nShockwave is under no obligation to register any of the Merger Shares.\nShareholder agrees to be bound by the limitations and restrictions set forth in\nSection 2.7 of the Merger Agreement and the Investors' Rights Agreement while\nexercising any of the rights granted to Shareholder therein.\n\n 9. Further Limitations on Disposition. Without in any way limiting the\nrepresentations set forth above, Shareholder further agrees not to make any\ndisposition of all or any portion of the Merger Shares issued to Shareholder in\nthe Merger unless and until:\n\n (a) there is then in effect a registration statement under the\nSecurities Act covering such proposed disposition and such disposition is made\nin accordance with such registration statement; or\n\n (b) Shareholder shall have notified Shockwave of the proposed\ndisposition and shall have furnished Shockwave with a statement of the\ncircumstances surrounding the proposed disposition, and, at the expense of\nShareholder or Shareholder's transferee, with an opinion of counsel, reasonably\nsatisfactory to Shockwave, that such disposition will not require registration\nof such securities under the Securities Act.\n\nNotwithstanding the provisions of paragraphs (a) and (b) above, no such\nregistration statement or opinion of counsel shall be required for the transfer\nof such shares by gift, will or intestate succession by Atom Shareholder to his\nor her spouse or lineal descendants or ancestors or any charitable organization\nor any trust for any of the foregoing, personal representative (such as an\nexecutor of Shareholder's will), custodian or conservator of Shareholder in the\ncase of the death, bankruptcy or adjudication of incompetency of Shareholder,\npartners of Shareholder if Shareholder is a partnership or members of\nShareholder if Shareholder is a limited liability company (each, a \"PERMITTED\nTRANSFEREE\"); provided that the Permitted Transferee agrees in writing to be\nsubject to the terms of this Section 9 to the same extent as if the transferee\nwere an original Atom Shareholder hereunder.\n\n 10. Legends. Shareholder acknowledges and understands that the\ncertificates evidencing the Merger Shares issued in the Merger will bear the\nlegend set forth below:\n\n THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE\n SECURITIES ACT OF 1933, AS AMENDED (THE \"ACT\"), OR UNDER THE SECURITIES\n LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON\n TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT\n AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,\n PURSUANT\n\n\n\n 3\n 92\n\n TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT\n THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR\n AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE\n AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER\n TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH\n THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.\n\nThe legend set forth above shall be removed by Shockwave from any certificate\nevidencing Merger Shares upon receipt by Shockwave of an opinion by its counsel,\nthat a registration statement under the Securities Act is at that time in effect\nwith respect to the legended security or upon delivery to Shockwave of an\nopinion by its counsel, or counsel reasonably satisfactory to Shockwave, that\nsuch security can be freely transferred in a public sale without such a\nregistration statement being in effect.\n\n 11. Stop-Transfer Instructions. Shareholder agrees that to ensure\ncompliance with the restrictions imposed by this Investment Representation\nLetter, Shockwave may issue appropriate \"stop-transfer\" instructions to its\ntransfer agent, if any, and if Shockwave transfers its own securities, it may\nmake appropriate notations to the same effect in its own records.\n\n 12. Refusal to Transfer. Shockwave will not be required to (a) register\na transfer on its books any Merger Shares that have been sold or otherwise\ntransferred in violation of any of the provisions of this Investment\nRepresentation Letter, or (b) treat as owner of such Merger Shares, or to accord\nthe right to vote or pay dividends, to any purchaser or other trustee to whom\nsuch Merger Shares have been so transferred.\n\n 13. Compliance With Laws and Regulations. The issuance and transfer of\nthe Merger Shares will be subject to and conditioned upon compliance by\nShockwave and Shareholder with all applicable state and federal laws and\nregulations and with all applicable requirements of any stock exchange or\nautomated quotation system on which Shockwave's capital stock may be listed or\nquoted at the time of such issuance or transfer.\n\n 14. Entire Agreement. This Investment Representation Letter and the\nspecific provisions of the Merger Agreement by which Shareholder has agreed to\nbe bound constitute the entire agreement and understanding of the parties with\nrespect to the subject matter of this Investment Representation Letter, and\nsupersede all prior understandings and agreements, whether oral or written,\nbetween or among the parties hereto with respect to the specific subject matter\nhereof.\n\n 15. Construction of Agreement. This Investment Representation Letter has\nbeen negotiated by the respective parties hereto and their attorneys and the\nlanguage hereof will not be construed for or against either party.\n\n 16. Governing Law. The internal laws of the State of California\n(irrespective of its choice of law principles) will govern the validity of this\nInvestment Representation Letter, the construction of its terms, and the\ninterpretation and enforcement of the rights and duties of the parties hereto.\n\n 17. Assignment; Binding Upon Successors and Assigns. Neither party\nhereto may assign any of its rights or obligations hereunder without the prior\nwritten consent of the other party hereto. This Investment Representation Letter\nwill be binding upon and inure to the benefit of the parties hereto and their\nrespective successors and permitted assigns.\n\n\n\n 4\n 93\n\n 18. Severability. If any provision of this Investment Representation\nLetter, or the application thereof, will for any reason and to any extent be\ninvalid or unenforceable, then the remainder of this Investment Representation\nLetter and the application of such provision to other persons or circumstances\nwill be interpreted so as reasonably to effect the intent of the parties hereto.\n\n 19. Counterparts. This Investment Representation Letter may be executed\nin any number of counterparts, each of which will be an original as regards any\nparty whose signature appears thereon and all of which together will constitute\none and the same instrument.\n\n 20. Other Remedies. Except as otherwise provided herein, any and all\nremedies herein expressly conferred upon a party hereunder will be deemed\ncumulative with and not exclusive of any other remedy conferred hereby or by law\non such party, and the exercise of any one remedy will not preclude the exercise\nof any other. The parties hereto agree that irreparable damage would occur in\nthe event that any of the provisions of this Investment Representation Letter\nwere not performed in accordance with their specific terms or were otherwise\nbreached. It is accordingly agreed that the parties shall be entitled to seek an\ninjunction or injunctions to prevent breaches of this Investment Representation\nLetter and to enforce specifically the terms and provisions hereof in any court\nof the United States or any state having jurisdiction.\n\n 21. Amendment and Waivers. Any term or provision of this Investment\nRepresentation Letter may be amended, and the observance of any term of this\nInvestment Representation Letter may be waived (either generally or in a\nparticular instance and either retroactively or prospectively) only by a writing\nsigned by the party to be bound thereby.\n\n\n Very truly yours,\n\n\n -----------------------------------------\n Signature\n\n -----------------------------------------\n Name (Please Type or Print)\n\n -----------------------------------------\n Address\n\n -----------------------------------------\n City, State and Zip Code\n\nACKNOWLEDGED AND AGREED:\n\nShockwave.com, Inc.\n\n\nBy:\n ------------------------------------\nName:\n ----------------------------------\nTitle:\n ---------------------------------\n\n\n [SIGNATURE PAGE TO INVESTMENT REPRESENTATION LETTER - UNACCREDITED]\n\n\n\n 5\n 94\n\n EXHIBIT C\n\n SHOCKWAVE VOTING AGREEMENT\n\n\n This SHOCKWAVE VOTING AGREEMENT (this \"AGREEMENT\") is entered into as of\nDecember 14, 2000 (the \"AGREEMENT DATE\") by and between Atom Corporation, a\nWashington corporation (\"Atom\") and [name of shareholder] (\"SHAREHOLDER\").\n\n RECITALS\n\n A. Concurrently with the execution of this Agreement, Shockwave.com,\nInc., a Delaware corporation (\"SHOCKWAVE\"), and Atom are entering into an\nAgreement and Plan of Reorganization dated as of December 14, 2000 (the \"MERGER\nAGREEMENT\"), which provides (subject to the conditions set forth therein) for\nthe merger of Atom with and into Shockwave (the \"MERGER\") with Shockwave to\nsurvive the Merger. Upon the effectiveness of the Merger, the outstanding shares\nof Atom Common Stock and Atom Preferred Stock will be converted into the right\nto receive Shockwave Common Stock and Shockwave Series C Preferred Stock, and\noutstanding Atom Options and Atom Warrants to purchase shares of Atom Common\nStock and Atom Preferred Stock will be converted into Shockwave Options and\nShockwave Warrants, all as more particularly set forth in the Merger Agreement.\nCapitalized terms used but not otherwise defined in this Agreement will have the\nsame meanings ascribed to such terms in the Merger Agreement.\n\n B. As of the Agreement Date, Shareholder owns in the aggregate\n(including shares held both beneficially and of record and other shares held\neither beneficially or of record) the number of shares of Shockwave Common Stock\nand Shockwave Preferred Stock set forth below Shareholder's name on the\nsignature page of this Agreement (all such shares, together with any shares of\nShockwave Common Stock and Shockwave Preferred Stock or any other shares of\ncapital stock of Shockwave that may hereafter be acquired by Shareholder, being\ncollectively referred to herein as the \"SUBJECT SHARES\"). If, between the\nAgreement Date and the Expiration Date (as defined in Section 1.1(b) below), the\noutstanding shares of Shockwave's capital stock are changed into a different\nnumber or class of shares by reason of any stock split, stock dividend, reverse\nstock split, reclassification, recapitalization or other similar transaction,\nthen the shares constituting the Subject Shares shall be appropriately adjusted,\nand shall include any shares or other securities of Shockwave issued on, or with\nrespect to, the Subject Shares in such a transaction.\n\n C. As a condition to the willingness of Atom to enter into the Merger\nAgreement, Atom has required that Shareholder agree, and in order to induce Atom\nto enter into the Merger Agreement, Shareholder has agreed, to enter into this\nAgreement.\n\n In consideration of the facts recited above, the parties to this\nAgreement, intending to be legally bound by this Agreement, now hereby agree as\nfollows:\n\n\n\n 95\n\n ARTICLE 1\n TRANSFER OF SUBJECT SHARES\n\n 1.1 No Transfer of Voting Rights.\n\n (a) Shareholder covenants and agrees that, prior to the\nExpiration Date, Shareholder will not deposit any of the Subject Shares into a\nvoting trust or grant a proxy or enter into an agreement of any kind with\nrespect to any of the Subject Shares, except for the Proxy called for by Section\n2.2 of this Agreement.\n\n (b) As used in this Agreement, the term \"EXPIRATION DATE\" shall\nmean the earlier of (i) the date upon which the Merger Agreement is validly\nterminated in accordance with the provisions of Article 10 of the Merger\nAgreement or (ii) the Effective Time of the Merger.\n\n 1.2 Prohibition on Disposition and Transfer. Shareholder agrees that\nprior to the Expiration Date, Shareholder will not, directly or indirectly,\nsell, transfer, exchange, pledge or otherwise dispose of, or in any other way\nreduce Shareholder's risk of ownership or investment in, or make any offer or\nagreement relating to any of the foregoing with respect to the Subject Shares,\nexcept in connection with the Merger.\n\n ARTICLE 2\n VOTING OF SUBJECT SHARES\n\n 2.1 Agreement. Shareholder hereby agrees that, prior to the Expiration\nDate, at any meeting of Shockwave Shareholders, however called, and in any\naction taken by the written consent of Shockwave Shareholders without a meeting,\nunless otherwise directed in writing by Atom, Shareholder shall vote the Subject\nShares:\n\n (a) in favor of the Merger, the execution and delivery by\nShockwave of the Merger Agreement and the adoption and approval of the terms\nthereof and in favor of each of the other transactions contemplated by the\nMerger Agreement and any action required in furtherance hereof and thereof;\n\n (b) in favor of the amendment and restatement of the Certificate\nof Incorporation of Shockwave in form and substance attached hereto as Exhibit\n1;\n\n (c) in favor of the waiver (by amendment of any such agreement\nor otherwise), effective as of immediately prior to the effectiveness of the\nMerger, of any rights of first refusal, rights of first offer or rights of\nnotice of Shareholder under any agreement applicable to the Subject Shares, to\nthe extent that the same may apply to the Merger or any other actions or\ntransactions contemplated by the Merger Agreement; and\n\n (d) against any other action which is intended, or would\nreasonably be expected to, impede, interfere with, delay, postpone, discourage\nor adversely affect the Merger, the other transactions contemplated by the\nMerger Agreement or any action required in furtherance hereof or thereof.\n\n\n\n 2\n 96\n\nPrior to the Expiration Date, Shareholder shall not enter into any agreement or\nunderstanding with any Person to vote or give instructions in any manner\ninconsistent with clauses (a), (b), (c) or (d) of this Section 2.1.\n\n 2.2 Proxy. Contemporaneously with the execution of this Agreement,\nShareholder shall deliver to Atom a proxy with respect to the Subject Shares in\nthe form and substance attached hereto as Exhibit 2, which proxy shall be\nirrevocable to the fullest extent permitted by applicable law (the \"PROXY\").\n\n ARTICLE 3\n WAIVER\n\n 3.1 Appraisal Rights. Shareholder hereby agrees not to exercise any\nrights of appraisal and any dissenters' rights that Shareholder may have\n(whether under applicable law or otherwise) or could potentially have or acquire\nin connection with the Merger.\n\n 3.2 Other Rights. Shareholder hereby waives any rights of first refusal,\nrights of first offer or rights to notice of Shareholder under any agreement\napplicable to the Subject Shares, in each case as the same may apply to the\nexecution and delivery of the Merger Agreement and the consummation of the\nMerger and the other actions and transactions contemplated by the Merger\nAgreement.\n\n 3.3 Consent and Waiver. Shareholder hereby gives any consents or waivers\nthat are reasonably required for the consummation of the Merger under the terms\nof any agreement to which Shareholder is a party or pursuant to any rights\nShareholder may have.\n\n ARTICLE 4\n REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER\n\n Shareholder hereby represents and warrants to Atom that the following\nrepresentations and warranties will be accurate in all respects at all times\nthrough the Expiration Date and will be accurate in all respects as of the date\nof the consummation of the Merger as if made on that date:\n\n 4.1 Due Authorization, etc. Shareholder has all requisite power and\ncapacity to execute and deliver this Agreement and to perform Shareholder's\nobligations hereunder. This Agreement has been duly executed and delivered by\nShareholder and constitutes a legal, valid and binding obligation of\nShareholder, enforceable against Shareholder in accordance with its terms,\nsubject to (a) laws of general application relating to bankruptcy, insolvency\nand the relief of debtors, and (b) rules of law governing specific performance,\ninjunctive relief and other equitable remedies.\n\n 4.2 No Conflicts, Required Filings and Consents.\n\n (a) The execution and delivery of this Agreement by Shareholder\ndo not, and the performance of this Agreement by Shareholder will not: (i)\nconflict with or violate any\n\n\n\n 3\n 97\n\norder, decree or judgment applicable to Shareholder or by which Shareholder or\nthe Subject Shares is bound or affected; or (ii) result in any breach of or\nconstitute a default (with notice or lapse of time, or both) under, or give to\nothers or affect any rights of termination, amendment, acceleration or\ncancellation of, or result in the creation of any lien, restriction, adverse\nclaim, option on, right to acquire, or any encumbrance or security interest in\nor to, any of the Subject Shares, except as disclosed in the Shockwave\nDisclosure Letter.\n\n (b) The execution and delivery of this Agreement by Shareholder\ndo not, and the performance of this Agreement by Shareholder will not, require\nany notice to or consent of any third party.\n\n 4.3 Title to Subject Shares. As of the Agreement Date, Shareholder\nbeneficially or of record owns the Subject Shares set forth under Shareholder's\nname on the signature page hereof and does not directly or indirectly own,\neither beneficially or of record, any shares of capital stock of Shockwave or\nrights to acquire any shares of capital stock of Shockwave, other than the\nSubject Shares set forth below Shareholder's name on the signature page hereof\n(other than shares subject to options).\n\n ARTICLE 5\n MISCELLANEOUS\n\n 5.1 Expenses. All costs and expenses incurred in connection with the\ntransactions contemplated by this Agreement shall be paid by the party incurring\nsuch costs and expenses.\n\n 5.2 Governing Law. The internal laws of the State of Delaware\n(irrespective of its choice of law principles) will govern the validity of this\nAgreement, the construction of its terms, and the interpretation and enforcement\nof the rights and duties of the parties hereto.\n\n 5.3 Assignment; Binding Effect; Third Parties. Except as provided\nherein, neither this Agreement nor any of the rights, interests or obligations\nhereunder shall be assigned by either of the parties hereto (whether by\noperation of law or otherwise) without the prior written consent of the other\nparty. Subject to the preceding sentence, this Agreement shall be binding upon\nand shall inure to the benefit of (a) Shareholder and Shareholder's heirs,\nsuccessors and assigns and (b) Atom and its successors and assigns.\nNotwithstanding anything contained in this Agreement to the contrary, nothing in\nthis Agreement, expressed or implied, is intended to confer on any person or\nentity other than the parties hereto or their respective heirs, successors and\nassigns, any rights, remedies, obligations or liabilities under or by reason of\nthis Agreement.\n\n 5.4 Severability. If any provision of this Agreement, or the application\nthereof, will for any reason and to any extent be invalid or unenforceable, then\nthe remainder of this Agreement and application of such provision to other\npersons or circumstances will be interpreted so as reasonably to effect the\nintent of the parties hereto.\n\n 5.5 Counterparts. This Agreement may be executed by the parties hereto\nin separate counterparts, each of which when so executed and delivered shall be\nan original, but all such counterparts shall together constitute one and the\nsame instrument.\n\n\n\n 4\n 98\n\n 5.6 Termination; Amendment; Waiver. This Agreement shall terminate on\nthe Expiration Date. This Agreement may be amended by the written agreement of\nthe parties hereto. No waiver by any party hereto of any condition or of any\nbreach of any provision of this Agreement will be effective unless such waiver\nis set forth in a writing signed by such party. No waiver by any party of any\nsuch condition or breach, in any one instance, will be deemed to be a further or\ncontinuing waiver of any such condition or breach or a waiver of any other\ncondition or breach of any other provision contained herein.\n\n 5.7 Notices. All notices and other communications required or permitted\nunder this Agreement will be in writing and will be either hand delivered in\nperson, sent by telecopier, sent by certified or registered first class mail,\npostage pre-paid, or sent by nationally recognized express courier service. Such\nnotices and other communications will be effective upon receipt if hand\ndelivered or sent by telecopier, three (3) days after mailing if sent by mail,\nand one (l) business day after dispatch if sent by express courier, to the\nfollowing addresses, or such other addresses as any party may notify the other\nparties in accordance with this Section:\n\nIf to Shareholder: If to Atom:\n\nAt the address set forth below Shareholder's Atom Corporation\nsignature on the signature page hereto 815 Western Avenue, Suite 300\n Seattle, WA 98104\n Attn: President\n Fax Number: (206) 262-0223\n\nor to such other address as a party designates in a writing delivered to each of\nthe other parties hereto.\n\n 5.8 Entire Agreement. This Agreement and any documents delivered by the\nparties in connection herewith constitute the entire agreement and understanding\nbetween the parties with respect to the subject matter hereof and thereof and\nsupersede all prior agreements and understandings between the parties with\nrespect thereto. No addition to or modification of any provision of this\nAgreement shall be binding upon either party hereto unless made in writing and\nsigned by both parties hereto. The parties hereto waive trial by jury in any\naction at law or suit in equity based upon, or arising out of, this Agreement or\nthe subject matter hereof.\n\n 5.9 Specific Performance. The parties hereto agree that irreparable\ndamage would occur in the event that any of the provisions of this Agreement was\nnot performed in accordance with its specific terms or was otherwise breached.\nIt is accordingly agreed that, in addition to any other remedy to which Atom is\nentitled at law or in equity, Atom shall be entitled to injunctive relief to\nprevent breaches of this Agreement and to enforce specifically the terms and\nprovisions hereof in any Washington court or in any other court of competent\njurisdiction.\n\n 5.10 Other Agreements. Nothing in this Agreement shall limit any of the\nrights or remedies of Atom or any of the obligations of Shareholder under any\nother agreement.\n\n 5.11 Construction. This Agreement has been negotiated by the respective\nparties hereto and their attorneys and the language hereof will not be construed\nfor or against either party.\n\n\n\n 5\n 99\n\nUnless otherwise indicated herein, all references in this Agreement to\n\"Sections\" refer to sections of this Agreement. The titles and headings herein\nare for reference purposes only and will not in any manner limit the\nconstruction of this Agreement which will be considered as a whole.\n\n\n [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]\n\n\n\n 6\n 100\n\n IN WITNESS WHEREOF, Atom and Shareholder have caused this Agreement to\nbe executed as of the Agreement Date first written above.\n\n\nATOM CORPORATION\n\n\nBy:\n -----------------------------------------\nName: \n ---------------------------------------\n\nTitle: \n --------------------------------------\n\n\nSHAREHOLDER\n\n\nBy: \n -----------------------------------------\n\nName: \n ---------------------------------------\n\nTitle: \n --------------------------------------\n\nAddress:\n ------------------------------------\n\n ------------------------------------\n\n ------------------------------------\nFacsimile:\n ----------------------------------\n\n\nNO. OF SHARES OF SHOCKWAVE CAPITAL STOCK\n\n\nCommon Stock:\n -------------------------------\nSeries A Preferred Stock: \n -------------------\nSeries B Preferred Stock: \n -------------------\n\n\n [SIGNATURE PAGE TO SHOCKWAVE VOTING AGREEMENT]\n\n\n\n 7\n 101\n\n EXHIBIT \"2\" TO VOTING AGREEMENT\n\n\n IRREVOCABLE PROXY\n\n\n The undersigned shareholder of Shockwave.com, Inc., a Delaware\ncorporation (\"Shockwave\"), hereby irrevocably (to the fullest extent permitted\nby law) appoints and constitutes _____________, ____________ and\/or Atom\nCorporation, a Washington corporation (\"ATOM\"), and each of them, the attorneys\nand proxies of the undersigned, with full power of substitution and\nresubstitution, to the fullest extent of the undersigned's rights with respect\nto (i) the shares of Shockwave Common Stock and Shockwave Preferred Stock owned\nby the undersigned as of the date of this proxy, which shares are specified on\nthe final page of this proxy and (ii) any and all other shares of capital stock\nof Shockwave which the undersigned may acquire after the date hereof. The shares\nof the capital stock of Shockwave referred to in clauses (i) and (ii) of the\nimmediately preceding sentence are collectively referred to as the \"SHARES.\"\nUpon the execution hereof, all prior proxies given by the undersigned with\nrespect to any of the Shares (other than any proxies granted to Atom) are hereby\nrevoked, and no subsequent proxies will be given with respect to any of the\nShares.\n\n This proxy is irrevocable, is coupled with an interest and is granted in\nconnection with that certain Shockwave Voting Agreement, dated as of the date\nhereof, between Atom and the undersigned (the \"VOTING AGREEMENT\"), and is\ngranted in consideration of Atom entering into the Agreement and Plan of\nReorganization dated as of December 14, 2000 between Shockwave and Atom (\"MERGER\nAGREEMENT\"). Capitalized terms used but not otherwise defined in this proxy have\nthe meanings ascribed to such terms in the Voting Agreement.\n\n The attorneys and proxies named above will be empowered, and may\nexercise this proxy, to vote the Shares at any time until the Expiration Date at\nany meeting of Shockwave Shareholders, however called, or in any action by\nwritten consent of Shockwave Shareholders:\n\n (i) in favor of the Merger, the execution and delivery by Shockwave of\nthe Merger Agreement and the adoption and approval of the terms thereof and in\nfavor of each of the other transactions contemplated by the Merger Agreement and\nany action required in furtherance hereof and thereof;\n\n (ii) in favor of the amendment and restatement of the Certificate of\nIncorporation of Shockwave in form and substance attached hereto as Exhibit 1;\n\n (iii) in favor of the waiver (by amendment of any such agreement or\notherwise), effective as of immediately prior to the effectiveness of the\nMerger, of any rights of first refusal, rights of first offer or rights of\nnotice of Shareholder under any agreement applicable to the Subject Shares, to\nthe extent that the same may apply to the Merger or any other actions or\ntransactions contemplated by the Merger Agreement; and\n\n\n\n 102\n\n (iv) against any other action which is intended, or would reasonably be\nexpected to, impede, interfere with, delay, postpone, discourage or adversely\naffect the Merger, the other transactions contemplated by the Merger Agreement\nor any action required in furtherance hereof or thereof.\n\n The undersigned shareholder may vote the Shares on all other matters not\ndescribed in the foregoing subparagraphs (i), (ii), (iii) and (iv) above.\n\n Prior to the Expiration Date, at any meeting of Shockwave Shareholders,\nhowever called, and in any action by written consent of Shockwave Shareholders,\nthe attorneys and proxies named above may, in their sole discretion, elect to\nabstain from voting on any matter covered by the foregoing subparagraphs (i),\n(ii), (iii) and (iv) above.\n\n This proxy and any obligation of the undersigned hereunder shall be\nbinding upon the heirs, successors and assigns of the undersigned (including any\ntransferee of any of the Shares).\n\n This proxy shall terminate upon the Expiration Date.\n\n\n\nDated: December 14, 2000\n\n\n Name:\n ------------------------------------\n By:\n --------------------------------------\n Title (If Applicable):\n -------------------\n\n\n\n 2\n 103\n\n\n [SIGNATURE PAGE TO IRREVOCABLE PROXY]\n\n\n\n 3\n 104\n\n EXHIBIT D\n\n THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION\n\n OF\n\n SHOCKWAVE.COM, INC.\n\n\n Shockwave.com, Inc., a Delaware corporation, hereby certifies that:\n\n 1. The name of the corporation is Shockwave.com, Inc. The date of filing\nits original Certificate of Incorporation with the Secretary of State was April\n16, 1999.\n\n 2. The Amended and Restated Certificate of Incorporation of the\ncorporation attached hereto as Exhibit \"A\", which is incorporated herein by this\nreference, and which restates, integrates and further amends the provisions of\nthe Second Restated Certificate of Incorporation of this corporation, has been\nduly adopted by the corporation's Board of Directors and stockholders in\naccordance with Sections 242 and 245 of the Delaware General Corporation Law,\nwith the approval of the Corporation's stockholders having been given by written\nconsent without a meeting in accordance with Section 228 of the Delaware General\nCorporation Law.\n\n IN WITNESS WHEREOF, said corporation has caused this Amended and\nRestated Certificate of Incorporation to be signed by its duly authorized\nofficer and the foregoing facts stated herein are true and correct.\n\nDated: January ____, 2000 SHOCKWAVE.COM, INC.\n\n\n\n By:\n -------------------------------\n Loren Hillberg, Secretary\n\n\n\n 105\n\n EXHIBIT \"A\"\n\n THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION\n\n OF\n\n SHOCKWAVE.COM, INC.\n\n\n ARTICLE I\n\n The name of the corporation is Shockwave.com, Inc.\n\n ARTICLE II\n\n The address of the registered office of the corporation in the State of\nDelaware is 15 East North Street, City of Dover, County of Kent, DE 19901. The\nname of its registered agent at that address is Incorporating Services, Ltd.\n\n\n ARTICLE III\n\n The purpose of the corporation is to engage in any lawful act or\nactivity for which a corporation may be organized under the Delaware General\nCorporation Law of the State of Delaware.\n\n ARTICLE IV\n\n This corporation is authorized to issue two (2) classes of shares,\ndesignated \"Common Stock\" and \"Preferred Stock.\" The total number of shares of\nCommon Stock authorized to be issued is One Hundred Sixty Million (160,000,000)\nshares, $0.001 par value per share. The total number of shares of Preferred\nStock authorized to be issued is Sixty-Eight Million Four Hundred Fifty-Five\nThousand Five Hundred (68,455,500) shares, $0.001 par value per share,\nThirty-Four Million Five Hundred Eighty-One Thousand Five Hundred (34,581,500)\nof which are designated as \"Series A Preferred Stock\"; Twenty-One Million Eight\nHundred Thousand (21,800,000) of which are designated as \"Series B Preferred\nStock\"; and Twelve Million Seventy Four Thousand (12,074,000) of which are\ndesignated as \"Series C Preferred Stock,\" Eight Hundred Ninety-Seven Thousand\n(897,000) of which are designated as \"Series C-1 Preferred Stock,\" Four Million\nSix Hundred Seventy Thousand (4,670,000) of which are designated as \"Series C-2\nPreferred Stock,\" Six Million Four Hundred Seventeen Thousand (6,417,000) of\nwhich are designated as \"Series C-3 Preferred Stock.\"\n\n ARTICLE V\n\n The rights, preferences, privileges and restrictions granted to and\nimposed on the Series A Preferred Stock, the Series B Preferred Stock, the\nSeries C Preferred Stock and the Common Stock are as follows:\n\n\n\n 106\n\n 1. DEFINITIONS. For purposes of this Article V, the following\ndefinitions apply:\n\n 1.1 \"BOARD\" shall mean the Board of Directors of the\nCorporation.\n\n 1.2 \"CORPORATION\" shall mean this corporation.\n\n 1.3 \"COMMON STOCK\" shall mean the Common Stock, $0.001 par\nvalue, of the Corporation.\n\n 1.4 \"COMMON STOCK DIVIDEND\" shall mean a stock dividend declared\nand paid on the Common Stock that is payable in shares of Common Stock.\n\n 1.5 \"ORIGINAL ISSUE DATE\" shall mean the date on which the first\nshare of (i) Series A Preferred Stock is issued by the Corporation for the\nSeries A Preferred Stock; (ii) Series B Preferred Stock is issued by the\nCorporation, for the Series B Preferred Stock; and (iii) Series C Preferred\nStock is issued by the Corporation for the Series C Preferred Stock.\n\n 1.6 \"ORIGINAL ISSUE PRICE\" shall mean Two Dollars Fifty Cents\n($2.50) per share for the Series A Preferred Stock, Two Dollars Fifty Cents\n($2.50) per share for the Series B Preferred Stock, Eighty-One Cents ($0.81) per\nshare for the Series C-1 Preferred Stock, One Dollar Four Cents ($1.04) per\nshare for the Series C-2 Preferred Stock, and Three Dollars Fifty-Four Cents\n($3.54) per share for the Series C-3 Preferred Stock (as adjusted for any stock\nsplits, stock dividends, recapitalizations or the like, with respect to each\nsuch Series of Preferred Stock).\n\n 1.7 \"PERMITTED REPURCHASES\" shall mean the repurchase by the\nCorporation of shares of Common Stock held by employees, officers, directors,\nconsultants, independent contractors, advisors, or other persons performing\nservices for the Corporation or a subsidiary that are subject to restricted\nstock purchase agreements or stock option exercise agreements under which the\nCorporation has the option to repurchase such shares: (i) at cost, upon the\noccurrence of certain events, such as the termination of employment or services;\nor (ii) at any price pursuant to the Corporation's exercise of a right of first\nrefusal to repurchase such shares.\n\n 1.8 \"PREFERRED STOCK\" shall mean the Series A Preferred Stock,\nthe Series B Preferred Stock and the Series C Preferred Stock, collectively.\n\n 1.9 \"SERIES A PREFERRED STOCK\" shall mean the Series A Preferred\nStock, $0.001 par value per share, of the Corporation.\n\n 1.10 \"SERIES B PREFERRED STOCK\" shall mean the Series B\nPreferred Stock, $0.001 par value per share, of the Corporation.\n\n 1.11 \"SERIES C PREFERRED STOCK\" shall mean, collectively, the\nSeries C-1 Preferred Stock, the Series C-2 Preferred Stock, and the Series C-3\nPreferred Stock.\n\n 1.12 \"SERIES C-1 PREFERRED STOCK\" shall mean the Series C-1\nPreferred Stock, $0.001 par value per share, of the Corporation.\n\n\n\n 2\n 107\n\n 1.13 \"SERIES C-2 PREFERRED STOCK\" shall mean the Series C-2\nPreferred Stock, $0.001 par value per share, of the Corporation.\n\n 1.14 \"SERIES C-3 PREFERRED STOCK\" shall mean the Series C-3\nPreferred Stock, $0.001 par value per share, of the Corporation.\n\n 1.15 \"SUBSIDIARY\" shall mean any corporation of which at least\nfifty percent (50%) of the outstanding voting stock is at the time owned\ndirectly or indirectly by the Corporation or by one or more of such subsidiary\ncorporations.\n\n 2. DIVIDEND RIGHTS.\n\n 2.1 Dividend Preference. The holders of the then outstanding\nPreferred Stock shall be entitled to receive dividends, when as and if declared\nby the Board, out of any funds and assets of the Corporation legally available\ntherefor, prior and in preference to the payment of any dividends on the Common\nStock. However, no dividends (other than a Common Stock Dividend) shall be paid\nwith respect to the Common Stock during any calendar year unless dividends for\neach series of Preferred Stock shall have first been paid or declared and set\napart for payment to the holders of each such series of Preferred Stock,\nrespectively, during that calendar year in at least an amount per share of\nPreferred Stock determined by multiplying the (a) dividend to be paid on one\nshare of Common Stock by (b) the number of shares of Common Stock then issuable\nupon conversion of such share of Preferred Stock pursuant to Section 5;\nprovided, however, that this restriction shall not apply to Permitted\nRepurchases. Payments of any dividends to the holders of each such series of\nPreferred Stock shall be paid pro rata, on an equal priority, pari passu basis.\nDividends on the Preferred Stock shall not be mandatory or cumulative, and no\nrights or interest shall accrue to the holders of the Preferred Stock by reason\nof the fact that the Corporation shall fail to declare or pay dividends on the\nPreferred Stock in any amount in any calendar year or any fiscal year of the\nCorporation, whether or not the earnings of the Corporation in any calendar year\nor fiscal year were sufficient to pay dividends.\n\n 2.2 Non-Cash Dividends. Whenever a dividend provided for in this\nSection 2 shall be payable in property other than cash, the value of such\ndividend shall be deemed to be the fair market value of such property as\ndetermined in good faith by the Board.\n\n 3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or\nwinding up of the Corporation, whether voluntary or involuntary, the funds and\nassets that may be legally distributed to the Corporation's stockholders (the\n\"AVAILABLE FUNDS AND ASSETS\") shall be distributed to stockholders in the\nfollowing manner:\n\n 3.1 Liquidation Preferences.\n\n (a) Subject to clause 3.1(b) below, the holders of each share of\nPreferred Stock then outstanding shall be entitled to be paid, out of the\nAvailable Funds and Assets, and prior and in preference to any payment or\ndistribution (or any setting apart of any payment or distribution) of any\nAvailable Funds and Assets on any shares of Common Stock, an amount per share\nequal to the Original Issue Price for each such series of Preferred Stock,\nrespectively, plus\n\n\n\n 3\n 108\n\nall declared but unpaid dividends thereon. If upon any liquidation, dissolution\nor winding up of the Corporation, the Available Funds and Assets shall be\ninsufficient to permit the payment to holders of the Preferred Stock of their\nfull preferential amounts described in this subsection, then all Available Funds\nand Assets shall be distributed among the holders of the then outstanding\nPreferred Stock pro rata, on an equal priority, pari passu basis, according to\ntheir respective liquidation preferences as set forth herein (with the\ndistributions to the holders of then outstanding Series C Preferred Stock made\nin accordance with the provisions of clause 3.1(b) below).\n\n (b) Liquidation Preference Payment to Series C Preferred Stock.\n\n (i) To the extent that any payment or distribution is to\nbe made to holders of Series C Preferred Stock pursuant to this Section 3, the\nholders of Series C-3 Preferred Stock shall be entitled to receive, prior and in\npreference to any payment or distribution to the holders of Series C-1 Preferred\nStock or Series C-2 Preferred Stock, by reason of their ownership thereof, an\namount per share equal to the Original Issue Price for each such series of\nPreferred Stock, respectively, plus all declared but unpaid dividends thereon.\nIf upon any liquidation, dissolution or winding up of the Corporation the\nAvailable Funds and Assets allocated to the Series C Preferred Stock shall be\ninsufficient to permit the payment to holders of Series C-3 Preferred Stock of\ntheir full preferential amounts described in this clause b(i), then all\nAvailable Funds and Assets to be distributed to holders of Series C Preferred\nStock shall be distributed among the holders of the then outstanding Series C-3\nPreferred Stock pro rata, on an equal priority, pari passu basis, according to\ntheir respective liquidation preferences as set forth herein.\n\n (ii) Upon the completion of the distribution required by\nclause (b)(i) above, if Available Funds and Assets remain, then the holders of\nSeries C-2 Preferred Stock shall be entitled to receive, prior and in preference\nto any payment or distribution to the holders of Series C-1 Preferred Stock, by\nreason of their ownership thereof, an amount per share equal to the Original\nIssue Price per share for each share of Series C-2 Preferred Stock then held by\nthem, plus all declared but unpaid dividends thereon. If upon any liquidation,\ndissolution or winding up of the Corporation the Available Funds and Assets\nallocated to the Series C Preferred Stock shall be insufficient to permit the\npayment to holders of Series C-2 Preferred Stock of their full preferential\namounts described in this clause b(ii), then all Available Funds and Assets to\nbe distributed to holders of Series C-2 Preferred Stock shall be distributed\nratably among the holders of Series C-2 Preferred Stock in proportion to the\npreferential amount each holder is otherwise entitled to receive.\n\n (iii) Upon the completion of the distribution required\nby clause (b)(ii) above, if Available Funds and Assets remain, then the holders\nof Series C-1 Preferred Stock shall be entitled to receive, prior and in\npreference to any payment or distribution to the holders of Common Stock, by\nreason of their ownership thereof, an amount per share equal to the Original\nIssue Price per share for each share of Series C-1 Preferred Stock then held by\nthem, plus all declared but unpaid dividends thereon. If upon any liquidation,\ndissolution or winding up of the Corporation the Available Funds and Assets\nallocated to the Series C Preferred Stock shall be insufficient to permit the\npayment to holders of Series C-1 Preferred Stock of their full\n\n\n\n 4\n 109\n\npreferential amounts described in this clause b(iii), then all Available Funds\nand Assets to be distributed to holders of Series C-1 Preferred Stock shall be\ndistributed ratably among the holders of Series C-1 Preferred Stock in\nproportion to the preferential amount each holder is otherwise entitled to\nreceive.\n\n 3.2 No Participation Rights. If at the closing or effective time\nof the liquidation event, shares of Common Stock of the Corporation are\noutstanding and there are any Available Funds and Assets remaining after the\npayment or distribution (or the setting aside for payment or distribution) to\nthe holders of the Preferred Stock of their full preferential amounts described\nabove in Section 3.1, then all such remaining Available Funds and Assets shall\nbe distributed among the holders of the then outstanding Common Stock pro rata\naccording to the number of shares of Common Stock held by such holders. If at\nthe closing or effective time of the liquidation event, no shares of Common\nStock of the Corporation are outstanding and there are any Available Funds and\nAssets remaining after the payment or distribution (or the setting aside for\npayment or distribution) to the holders of the Preferred Stock of their full\npreferential amounts described above in Section 3.1, then all remaining\nAvailable Funds and Assets shall be distributed among the holders of the then\noutstanding Preferred Stock pro rata according to the greatest whole number of\nshares of Common Stock then issuable to each holder upon conversion in full of\nsuch shares of Preferred Stock pursuant to Section 5.\n\n 3.3 Merger or Sale of Assets. Any (i) acquisition of the\nCorporation by another entity by means of any transaction or series of related\ntransactions (including, without limitation, any reorganization, merger or\nconsolidation) that results in the transfer of fifty percent (50%) or more of\nthe outstanding voting power of the Corporation; or (ii) sale of all or\nsubstantially all of the assets of the Corporation, shall each be deemed to be a\nliquidation, dissolution or winding up of the Corporation as those terms are\nused in this Section 3.\n\n 3.4 Non-Cash Consideration. If any assets of the Corporation\ndistributed to stockholders in connection with any liquidation, dissolution, or\nwinding up of the Corporation are other than cash, then the value of such assets\nshall be their fair market value as determined by the Board of Directors in good\nfaith, except that any securities to be distributed to stockholders in a\nliquidation, dissolution, or winding up of the Corporation shall be valued as\nfollows:\n\n (a) The method of valuation of securities not subject to\ninvestment letter or other similar restrictions on free marketability shall be\nas follows:\n\n (i) if the securities are then traded on a\nnational securities exchange or the Nasdaq National Market (or a similar\nnational quotation system), then the value shall be deemed to be the average of\nthe closing prices of the securities on such exchange or system over the thirty\n(30) day period ending three (3) days prior to the distribution; and\n\n (ii) if (i) above does not apply but the\nsecurities are actively traded over-the-counter, then the value shall be deemed\nto be the average of the closing bid prices over the thirty (30) day period\nending three (3) days prior to the distribution; and\n\n\n\n 5\n 110\n\n (iii) if there is no active public market, then\nthe value shall be the fair market value thereof, as determined in good faith by\nthe Board of Directors of the Corporation.\n\n (b) The method of valuation of securities subject to\ninvestment letter or other restrictions on free marketability shall be to make\nan appropriate discount from the market value determined as above in\nsubparagraphs (a)(i), (ii) or (iii) of this subsection to reflect the\napproximate fair market value thereof, as determined in good faith by the Board\nof Directors.\n\n 4. VOTING RIGHTS.\n\n 4.1 Common Stock. Each holder of shares of Common Stock shall be\nentitled to one (1) vote for each share thereof held.\n\n 4.2 Preferred Stock. Each holder of shares of Preferred Stock\nshall be entitled to the number of votes equal to the number of whole shares of\nCommon Stock into which such shares of Preferred Stock could be converted\npursuant to the provisions of Section 5 below at the record date for the\ndetermination of the stockholders entitled to vote on such matters or, if no\nsuch record date is established, the date such vote is taken or any written\nconsent of stockholders is solicited. Fractional votes shall not, however, be\npermitted and any fractional voting rights otherwise available on an\nas-converted to Common Stock basis shall be rounded to the nearest whole number\nof votes.\n\n 4.3 General. Subject to the other provisions of this Certificate\nof Incorporation, each holder of Preferred Stock shall have full voting rights\nand powers equal to the voting rights and powers of the holders of Common Stock,\nand shall be entitled to notice of any stockholders' meeting in accordance with\nthe bylaws of the Corporation (as in effect at the time in question) and\napplicable law, and shall be entitled to vote, together with the holders of\nCommon Stock, with respect to any question upon which holders of Common Stock\nhave the right to vote, except as may be otherwise provided by applicable law.\nExcept as otherwise expressly provided herein or as required by law, the holders\nof Preferred Stock and the holders of Common Stock shall vote together and not\nas separate classes.\n\n 5. CONVERSION RIGHTS. The outstanding shares of Preferred Stock shall be\nconvertible into Common Stock as follows:\n\n 5.1 Optional Conversion.\n\n (a) At the option of the holder thereof, each share of\nPreferred Stock shall be convertible, at any time or from time to time prior to\nthe close of business on the business day before any date fixed for redemption\nof such share, into fully paid and nonassessable shares of Common Stock as\nprovided herein.\n\n (b) Each holder of Preferred Stock who elects to convert\nthe same into shares of Common Stock shall surrender the certificate or\ncertificates therefor, duly endorsed, at the office of the Corporation or any\ntransfer agent for the Preferred Stock or Common Stock, and\n\n\n\n 6\n 111\n\nshall give written notice to the Corporation at such office that such holder\nelects to convert the same and shall state therein the number of shares of\nPreferred Stock being converted. Thereupon the Corporation shall promptly issue\nand deliver at such office to such holder a certificate or certificates for the\nnumber of shares of Common Stock to which such holder is entitled upon such\nconversion. Such conversion shall be deemed to have been made immediately prior\nto the close of business on the date of such surrender of the certificate or\ncertificates representing the shares of Preferred Stock to be converted, and the\nperson entitled to receive the shares of Common Stock issuable upon such\nconversion shall be treated for all purposes as the record holder of such shares\nof Common Stock on such date. If a conversion election under this subsection 5.1\nis made in connection with an underwritten offering of the Corporation's\nsecurities pursuant to the Securities Act of 1933, as amended, (which\nunderwritten offering does not cause an automatic conversion pursuant to\nsubsection 5.2 to take place) the conversion may, at the option of the holder\ntendering shares of Preferred Stock for conversion, be conditioned upon the\nclosing with the underwriters of the sale of the Corporation's securities\npursuant to such offering, in which event the holders making such elections who\nare entitled to receive Common Stock upon conversion of their Preferred Stock\nshall not be deemed to have converted such shares of Preferred Stock until\nimmediately prior to the closing of such sale of the Corporation's securities in\nthe offering.\n\n 5.2 Automatic Conversion.\n\n (a) Each share of Preferred Stock shall automatically be\nconverted into fully paid and nonassessable shares of Common Stock, as provided\nherein: (i) immediately prior to the closing of a firm commitment underwritten\npublic offering pursuant to an effective registration statement filed under the\nSecurities Act of 1933, as amended, covering the offer and sale of Common Stock\nfor the account of the Corporation in which the aggregate public offering price\n(before deduction of underwriters' discounts and commissions) equals or exceeds\nTwenty-Five Million Dollars ($25,000,000) and the public offering price per\nshare of which equals or exceeds Five Dollars ($5.00) per share before deduction\nof underwriters' discounts and commissions (such price per share of Common Stock\nto be appropriately adjusted to reflect Common Stock Events (as defined in\nsubsection 5.4); or (ii) upon the Corporation's receipt of the written consent\nof the holders of not less than sixty-six percent (66%) of the then outstanding\nshares of Preferred Stock to the conversion of all then outstanding Preferred\nStock under this Section 5.\n\n (b) Upon the occurrence of an event specified in\nsubparagraph 5.2(a) (i) or (ii) above, the outstanding shares of Preferred Stock\nshall be converted into Common Stock automatically without the need for any\nfurther action by the holders of such shares and whether or not the certificates\nrepresenting such shares are surrendered to the Corporation or its transfer\nagent; provided, however, that the Corporation shall not be obligated to issue\ncertificates evidencing the shares of Common Stock issuable upon such conversion\nunless the certificates evidencing such shares of Preferred Stock are either\ndelivered to the Corporation or its transfer agent as provided below, or the\nholder notifies the Corporation or its transfer agent that such certificates\nhave been lost, stolen or destroyed and executes an agreement satisfactory to\nthe Corporation to indemnify the Corporation from any loss incurred by it in\nconnection with such\n\n\n\n 7\n 112\n\ncertificates. Upon the occurrence of such automatic conversion of the Preferred\nStock, the holders of Preferred Stock shall surrender the certificates\nrepresenting such shares at the office of the Corporation or any transfer agent\nfor the Preferred Stock or Common Stock. Thereupon, there shall be issued and\ndelivered to such holder promptly at such office and in its name as shown on\nsuch surrendered certificate or certificates, a certificate or certificates for\nthe number of shares of Common Stock into which the shares of Preferred Stock\nsurrendered were convertible on the date on which such automatic conversion\noccurred.\n\n 5.3 Conversion Price. Each share of Preferred Stock shall be\nconvertible in accordance with subsection 5.1 or subsection 5.2 above into the\nnumber of shares of Common Stock which results from dividing the Original Issue\nPrice for such series of Preferred Stock by the conversion price for such series\nof Preferred Stock that is in effect at the time of conversion (the \"CONVERSION\nPRICE\"). The initial Conversion Price for each such series of Preferred Stock,\nother than the Series C-3 Preferred Stock, shall be the Original Issue Price for\nsuch series of Preferred Stock, and the initial Conversion Price for the Series\nC-3 Preferred Stock shall be Three Dollars Twenty-Five Cents ($3.25). The\nConversion Price of each series of the Preferred Stock shall be subject to\nadjustment from time to time as provided below. Following each adjustment of the\nConversion Price, such adjusted Conversion Price shall remain in effect until a\nfurther adjustment of such Conversion Price hereunder.\n\n 5.4 Adjustment Upon Common Stock Event. Upon the happening of a\nCommon Stock Event (as hereinafter defined), the Conversion Price of each series\nof Preferred Stock shall, simultaneously with the happening of such Common Stock\nEvent, be adjusted by multiplying the Conversion Price of such series of\nPreferred Stock in effect immediately prior to such Common Stock Event by a\nfraction, (i) the numerator of which shall be the number of shares of Common\nStock issued and outstanding immediately prior to such Common Stock Event, and\n(ii) the denominator of which shall be the number of shares of Common Stock\nissued and outstanding immediately after such Common Stock Event, and the\nproduct so obtained shall thereafter be the Conversion Price for such series of\nPreferred Stock. The Conversion Price for each series of Preferred Stock shall\nbe readjusted in the same manner upon the happening of each subsequent Common\nStock Event. As used herein, the term the \"COMMON STOCK EVENT\" shall mean at any\ntime or from time to time after the Original Issue Date, (i) the issue by the\nCorporation of additional shares of Common Stock as a dividend or other\ndistribution on outstanding Common Stock, (ii) a subdivision of the outstanding\nshares of Common Stock into a greater number of shares of Common Stock, or (iii)\na combination of the outstanding shares of Common Stock into a smaller number of\nshares of Common Stock.\n\n 5.5 Adjustments for Other Dividends and Distributions. If at any\ntime or from time to time after the Original Issue Date the Corporation pays a\ndividend or makes another distribution to the holders of the Common Stock\npayable in securities of the Corporation, other than an event constituting a\nCommon Stock Event, or in other property not provided for elsewhere in this\nSection 5, then in each such event provision shall be made so that the holders\nof the Preferred Stock shall receive upon conversion thereof, in addition to the\nnumber of shares of Common Stock receivable upon conversion thereof, the amount\nof securities of the Corporation or other property which they would have\nreceived had their Preferred Stock been converted into\n\n\n\n 8\n 113\n\nCommon Stock on the date of such event (or such record date, as applicable) and\nhad they thereafter, during the period from the date of such event (or such\nrecord date, as applicable) to and including the conversion date, retained such\nsecurities or other property receivable by them as aforesaid during such period,\nsubject to all other adjustments called for during such period under this\nSection 5 with respect to the rights of the holders of the Preferred Stock or\nwith respect to such other securities or other property by its terms.\n\n 5.6 Adjustment for Reclassification, Exchange and Substitution.\nIf at any time or from time to time after the Original Issue Date the Common\nStock issuable upon the conversion of the Preferred Stock is changed into the\nsame or a different number of shares of any class or classes of stock, whether\nby recapitalization, reclassification or otherwise (other than by a Common Stock\nEvent or a stock dividend, reorganization, merger, consolidation or sale of\nassets provided for elsewhere in this Section 5), then in any such event each\nholder of Preferred Stock shall have the right thereafter to convert such stock\ninto the kind and amount of stock and other securities and property receivable\nupon such recapitalization, reclassification or other change by holders of the\nnumber of shares of Common Stock into which such shares of Preferred Stock could\nhave been converted immediately prior to such recapitalization, reclassification\nor change, all subject to further adjustment as provided herein or with respect\nto such other securities or property by the terms thereof.\n\n 5.7 Reorganizations, Mergers and Consolidations. If at any time\nor from time to time after the Original Issue Date there is a reorganization of\nthe Corporation (other than a recapitalization, subdivision, combination,\nreclassification or exchange of shares provided for elsewhere in this Section 5)\nor a merger or consolidation of the Corporation with or into another corporation\n(except an event which is governed under subsection 3.3), then, as a part of\nsuch reorganization, merger or consolidation, provision shall be made so that\nthe holders of the Preferred Stock thereafter shall be entitled to receive, upon\nconversion of the Preferred Stock, the number of shares of stock or other\nsecurities or property of the Corporation, or of such successor corporation\nresulting from such reorganization, merger or consolidation, to which a holder\nof Common Stock deliverable upon conversion would have been entitled on such\nreorganization, merger or consolidation. In any such case, appropriate\nadjustment shall be made in the application of the provisions of this Section 5\nwith respect to the rights of the holders of the Preferred Stock after the\nreorganization, merger or consolidation to the end that the provisions of this\nSection 5 (including adjustment of the Conversion Price then in effect and\nnumber of shares issuable upon conversion of the Preferred Stock) shall be\napplicable after that event and be as nearly equivalent to the provisions hereof\nas may be practicable. This subsection 5.7 shall similarly apply to successive\nreorganizations, mergers and consolidations.\n\n 5.8 Sale of Shares Below Conversion Price.\n\n (a) Adjustment Formula. If at any time or from time to\ntime after the Original Issue Date the Corporation issues or sells, or is deemed\nby the provisions of this subsection 5.8 to have issued or sold, Additional\nShares of Common Stock (as hereinafter defined), otherwise than in connection\nwith a Common Stock Event as provided in subsection 5.4, a dividend or\ndistribution as provided in subsection 5.5, a recapitalization, reclassification\nor\n\n\n\n 9\n 114\n\nother change as provided in subsection 5.6, or a reorganization, merger or\nconsolidation as provided in subsection 5.7, for an Effective Price (as\nhereinafter defined) that is less than the Conversion Price for a series of\nPreferred Stock in effect immediately prior to such issue or sale (or deemed\nissue or sale), then, and in each such case, the Conversion Price for such\nseries of Preferred Stock shall be reduced, as of the close of business on the\ndate of such issue or sale, to the price obtained by multiplying such Conversion\nPrice by a fraction:\n\n (i) The numerator of which shall be the sum of\n(A) the number of Common Stock Equivalents Outstanding (as hereinafter defined)\nimmediately prior to such issue or sale of Additional Shares of Common Stock\nplus (B) the quotient obtained by dividing the Aggregate Consideration Received\n(as hereinafter defined) by the Corporation for the total number of Additional\nShares of Common Stock so issued or sold (or deemed so issued and sold) by the\nConversion Price for such series of Preferred Stock in effect immediately prior\nto such issue or sale; and\n\n (ii) The denominator of which shall be the sum\nof (A) the number of Common Stock Equivalents Outstanding immediately prior to\nsuch issue or sale plus (B) the number of Additional Shares of Common Stock so\nissued or sold (or deemed so issued and sold).\n\n (b) Certain Definitions. For the purpose of making any\nadjustment required under this subsection 5.8:\n\n (i) The \"ADDITIONAL SHARES OF COMMON STOCK\"\nshall mean all shares of Common Stock issued (including such shares that are\ndeemed to have been issued pursuant to Section 5.8(c)) by the Corporation,\nwhether or not subsequently reacquired or retired by the Corporation, other\nthan:\n\n (A) shares of Common Stock issued or\nissuable upon conversion of the outstanding shares of the Preferred Stock;\n\n (B) any shares of Common Stock or\nPreferred Stock (and\/or options, warrants or rights therefor) granted or issued\nhereafter to employees, officers, directors, contractors, consultants or\nadvisers to, the Corporation or any Subsidiary pursuant to incentive agreements,\nstock purchase or stock option plans, stock bonuses or awards, warrants,\ncontracts or other arrangements that are approved by the Board of Directors;\n\n (C) any shares of the Corporation's\nCommon Stock or Preferred Stock (and\/or options, warrants or rights therefor)\nissued or issuable to parties that are (i) providing the Corporation with\nequipment leases, real property leases, loans, credit lines, guaranties of\nindebtedness or similar transactions; (ii) providers of goods and services; or\n(iii) providers or developers of content or technology, or strategic or\ncommercial partners of the Corporation; provided that such arrangements, in each\ncase, are approved by the Board of Directors and are for primarily non-equity\nfinancing purposes;\n\n\n\n 10\n 115\n\n (D) shares of Common Stock or Preferred\nStock (and\/or options, warrants or rights therefor) issued pursuant to the\nacquisition of another corporation or entity by the Corporation by\nconsolidation, merger, purchase of all or substantially all of the assets, or\nother reorganization in which the Corporation acquires, in a single transaction\nor series of related transactions, all or substantially all of the assets of\nsuch other corporation or entity or a division or business unit of such\ncorporation or entity or fifty percent (50%) or more of the voting power of such\nother corporation or entity or fifty percent (50%) or more of the equity\nownership of such other entity;\n\n (E) shares of Common Stock issued\npursuant to a transaction described in Section 5.4 hereof; and\n\n (F) shares of Common Stock issued or\nissuable in a public offering prior to or in connection with which all\noutstanding shares of Preferred Stock will be converted into Common Stock.\n\n (ii) The \"AGGREGATE CONSIDERATION RECEIVED\" by\nthe Corporation for any issue or sale (or deemed issue or sale) of securities\nshall (A) to the extent it consists of cash, be computed at the gross amount of\ncash received by the Corporation before deduction of any underwriting or similar\ncommissions, compensation or concessions paid or allowed by the Corporation in\nconnection with such issue or sale and without deduction of any expenses payable\nby the Corporation; (B) to the extent it consists of property other than cash,\nbe computed at the fair value of that property as determined in good faith by\nthe Board; and (C) if Additional Shares of Common Stock, Convertible Securities\nor Rights or Options to purchase either Additional Shares of Common Stock or\nConvertible Securities are issued or sold together with other stock or\nsecurities or other assets of the Corporation for a consideration which covers\nboth, be computed as the portion of the consideration so received that may be\nreasonably determined in good faith by the Board to be allocable to such\nAdditional Shares of Common Stock, Convertible Securities or Rights or Options.\n\n (iii) The \"COMMON STOCK EQUIVALENTS OUTSTANDING\"\nshall mean the number of shares of Common Stock that is equal to the sum of (A)\nall shares of Common Stock of the Corporation that are outstanding at the time\nin question, plus (B) all shares of Common Stock of the Corporation issuable\nupon conversion of all shares of Preferred Stock or other Convertible Securities\nthat are outstanding at the time in question, plus (C) all shares of Common\nStock of the Corporation that are issuable upon the exercise of Rights or\nOptions (excluding any shares of Common Stock excluded from the definition of\n\"Additional Shares of Common Stock\" pursuant to subsection 5.8(b)(i)(B), after\nthe Original Issue Date) that are outstanding at the time in question assuming\nthe full conversion or exchange into Common Stock of all such Rights or Options\nthat are Rights or Options to purchase or acquire Convertible Securities into or\nfor Common Stock.\n\n (iv) The \"CONVERTIBLE SECURITIES\" shall mean\nstock or other securities convertible into, or exchangeable for, shares of\nCommon Stock.\n\n\n\n 11\n 116\n\n (v) The \"EFFECTIVE PRICE\" of Additional Shares\nof Common Stock shall mean the quotient determined by dividing the total number\nof Additional Shares of Common Stock issued or sold, or deemed to have been\nissued or sold, by the Corporation under this subsection 5.8, into the Aggregate\nConsideration Received, or deemed to have been received, by the Corporation\nunder this subsection 5.8, for the issue of such Additional Shares of Common\nStock; and\n\n (vi) The \"RIGHTS OR OPTIONS\" shall mean\nwarrants, options or other rights to purchase or acquire shares of Common Stock\nor Convertible Securities.\n\n (c) Deemed Issuances. For the purpose of making any\nadjustment to the Conversion Price of any series of Preferred Stock required\nunder this subsection 5.8, if the Corporation issues or sells any Rights or\nOptions or Convertible Securities and if the Effective Price of the shares of\nCommon Stock issuable upon exercise of such Rights or Options and\/or the\nconversion or exchange of Convertible Securities (computed without reference to\nany additional or similar protective or antidilution clauses) is less than the\nConversion Price then in effect for a series of Preferred Stock, then the\nCorporation shall be deemed to have issued, at the time of the issuance of such\nRights, Options or Convertible Securities, that number of Additional Shares of\nCommon Stock that is equal to the maximum number of shares of Common Stock\nissuable upon exercise or conversion of such Rights, Options or Convertible\nSecurities upon their issuance and to have received, as the Aggregate\nConsideration Received for the issuance of such shares, an amount equal to the\ntotal amount of the consideration, if any, received by the Corporation for the\nissuance of such Rights or Options or Convertible Securities, plus, in the case\nof such Rights or Options, the minimum amounts of consideration, if any, payable\nto the Corporation upon the exercise in full of such Rights or Options, plus, in\nthe case of Convertible Securities, the minimum amounts of consideration, if\nany, payable to the Corporation (other than by cancellation of liabilities or\nobligations evidenced by such Convertible Securities) upon the conversion or\nexchange thereof; provided that:\n\n (i) if the minimum amounts of such consideration\ncannot be ascertained, but are a function of antidilution or similar protective\nclauses, then the Corporation shall be deemed to have received the minimum\namounts of consideration without reference to such clauses;\n\n (ii) if the minimum amount of consideration\npayable to the Corporation upon the exercise of Rights or Options or the\nconversion or exchange of Convertible Securities is reduced over time or upon\nthe occurrence or non-occurrence of specified events other than by reason of\nantidilution or similar protective adjustments, then the Effective Price shall\nbe recalculated using the figure to which such minimum amount of consideration\nis reduced; and\n\n (iii) if the minimum amount of consideration\npayable to the Corporation upon the exercise of such Rights or Options or the\nconversion or exchange of Convertible Securities is subsequently increased, then\nthe Effective Price shall again be recalculated using the increased minimum\namount of consideration payable to the Corporation\n\n\n\n 12\n 117\n\nupon the exercise of such Rights or Options or the conversion or exchange of\nsuch Convertible Securities.\n\nNo further adjustment of the Conversion Price, adjusted upon the issuance of\nsuch Rights or Options or Convertible Securities, shall be made as a result of\nthe actual issuance of shares of Common Stock on the exercise of any such Rights\nor Options or the conversion or exchange of any such Convertible Securities. If\nany such Rights or Options or the conversion rights represented by any such\nConvertible Securities shall expire without having been fully exercised, then\nthe Conversion Price as adjusted upon the issuance of such Rights or Options or\nConvertible Securities shall be readjusted to the Conversion Price which would\nhave been in effect had an adjustment been made on the basis that the only\nshares of Common Stock so issued were the shares of Common Stock, if any, that\nwere actually issued or sold on the exercise of such Rights or Options or rights\nof conversion or exchange of such Convertible Securities, and such shares of\nCommon Stock, if any, were issued or sold for the consideration actually\nreceived by the Corporation upon such exercise, plus the consideration, if any,\nactually received by the Corporation for the granting of all such Rights or\nOptions, whether or not exercised, plus the consideration received for issuing\nor selling all such Convertible Securities actually converted or exchanged, plus\nthe consideration, if any, actually received by the Corporation (other than by\ncancellation of liabilities or obligations evidenced by such Convertible\nSecurities) on the conversion or exchange of such Convertible Securities,\nprovided that such readjustment shall not apply to prior conversions of\nPreferred Stock.\n\n 5.9 Certificate of Adjustment. In each case of an adjustment or\nreadjustment of the Conversion Price for a series of Preferred Stock, the\nCorporation, at its expense, shall cause its Chief Financial Officer to compute\nsuch adjustment or readjustment in accordance with the provisions hereof and\nprepare a certificate showing such adjustment or readjustment, and shall mail\nsuch certificate, by first class mail, postage prepaid, to each registered\nholder of the Preferred Stock at the holder's address as shown in the\nCorporation's books.\n\n 5.10 Fractional Shares. No fractional shares of Common Stock\nshall be issued upon any conversion of Preferred Stock. In lieu of any\nfractional share to which the holder would otherwise be entitled, the\nCorporation shall pay the holder cash equal to the product of such fraction\nmultiplied by the Common Stock's fair market value as determined in good faith\nby the Board as of the date of conversion.\n\n 5.11 Reservation of Stock Issuable Upon Conversion. The\nCorporation shall at all times reserve and keep available out of its authorized\nbut unissued shares of Common Stock, solely for the purpose of effecting the\nconversion of the shares of the Preferred Stock, such number of its shares of\nCommon Stock as shall from time to time be sufficient to effect the conversion\nof all outstanding shares of the Preferred Stock; and if at any time the number\nof authorized but unissued shares of Common Stock shall not be sufficient to\neffect the conversion of all then outstanding shares of the Preferred Stock, the\nCorporation will take such corporate action as may, in the opinion of its\ncounsel, be necessary to increase its authorized but unissued shares of Common\nStock to such number of shares as shall be sufficient for such purpose.\n\n\n\n 13\n 118\n\n 5.12 Notices. Any notice required by the provisions of this\nCertificate of Incorporation to be given to the holders of shares of the\nPreferred Stock shall be deemed given upon the earlier of actual receipt or\ndeposit in the United States mail, by certified or registered mail, return\nreceipt requested, postage prepaid, or delivery by a recognized express courier,\nfees prepaid, addressed to each holder of record at the address of such holder\nappearing on the books of the Corporation.\n\n 5.13 No Impairment. The Corporation shall not avoid or seek to\navoid the observance or performance of any of the terms to be observed or\nperformed hereunder by the Corporation, but shall at all times in good faith\nassist in carrying out all such action as may be reasonably necessary or\nappropriate in order to protect the conversion rights of the holders of the\nPreferred Stock against impairment.\n\n 6. RESTRICTIONS AND LIMITATIONS.\n\n 6.1 Series A Protective Provisions. So long as any shares of\nSeries A Preferred Stock remain outstanding, the Corporation shall not, without\nthe approval, by vote or written consent, of the holders of a majority of the\nSeries A Preferred Stock then outstanding, voting as a separate series:\n\n (a) amend its Certificate of Incorporation in any manner\nthat would alter or change the rights, preferences, privileges or restrictions\nof such series of Preferred Stock;\n\n (b) authorize or issue any other equity security,\nincluding any other security convertible into or exercisable for any equity\nsecurity having rights or preferences senior to or being on a parity with such\nseries of Preferred Stock as to dividend rights or liquidation preferences;\n\n (c) reclassify any outstanding shares of securities of\nthe Corporation into shares having rights, preferences or privileges senior to\nor on a parity with the Series A Preferred Stock; or\n\n (d) amend its Certificate of Incorporation or Bylaws in\nany manner that materially and adversely affects the rights of such series of\nPreferred Stock.\n\n 6.2 Series B Protective Provisions. So long as any shares of\nSeries B Preferred Stock remain outstanding, the Corporation shall not, without\nthe approval, by vote or written consent, of the holders of a majority of the\nSeries B Preferred Stock then outstanding, voting as a separate series:\n\n (a) amend its Certificate of Incorporation in any manner\nthat would alter or change the rights, preferences, privileges or restrictions\nof such series of Preferred Stock;\n\n (b) authorize or issue any other equity security,\nincluding any other security convertible into or exercisable for any equity\nsecurity having rights or preferences senior\n\n\n\n 14\n 119\n\nto or being on a parity with such series of Preferred Stock as to dividend\nrights or liquidation preferences;\n\n (c) reclassify any outstanding shares of securities of\nthe Corporation into shares having rights, preferences or privileges senior to\nor on a parity with the Series B Preferred Stock; or\n\n (d) amend its Certificate of Incorporation or Bylaws in\nany manner that materially and adversely affects the rights of such series of\nPreferred Stock.\n\n 6.3 Series C Protective Provisions. So long as any shares of\nSeries C Preferred Stock remain outstanding, the Corporation shall not, without\nthe approval, by vote or written consent, of the holders of a majority of the\nSeries C Preferred Stock (with the Series C-1 Preferred Stock, Series C-2\nPreferred Stock and Series C-3 Preferred Stock treated as a single series) then\noutstanding, voting as a separate series on an as-converted to Common Stock\nbasis; provided, however, that in the event of an amendment contemplated by\nSection 6.3(d) below that materially and adversely affects the rights of the\nSeries C-1 Preferred Stock, Series C-2 Preferred Stock, Series C-3 Preferred\nStock in a manner different from any other such Series C Preferred Stock, such\namendment shall require the prior approval of the holders of a majority of the\nSeries C-1 Preferred Stock, Series C-2 Preferred Stock, Series C-3 Preferred\nStock, as the case may be, voting separately:\n\n (a) amend its Certificate of Incorporation in any manner\nthat would alter or change the rights, preferences, privileges or restrictions\nof the Series C Preferred Stock;\n\n (b) authorize or issue any other equity security,\nincluding any other security convertible into or exercisable for any equity\nsecurity having rights or preferences senior to or being on a parity with the\nSeries C Preferred Stock as to dividend rights or liquidation preferences;\n\n (c) reclassify any outstanding shares of securities of\nthe Corporation into shares having rights, preferences or privileges senior to\nor on a parity with the Series C Preferred Stock; or\n\n (d) amend its Certificate of Incorporation or Bylaws in\nany manner that materially and adversely affects the rights of the Series C\nPreferred Stock.\n\n 6.4 Class Protective Provisions. So long as any shares of\nPreferred Stock remain outstanding, the Corporation shall not, without the\napproval, by vote or written consent, of the holders of a majority of the\nPreferred Stock then outstanding, voting as a single class on an as-converted to\nCommon Stock basis (and not as separate series):\n\n (a) effect the acquisition of the Corporation by another\nentity by means of any transaction or series of related transactions (including,\nwithout limitation, any reorganization, merger or consolidation) that results in\nthe transfer of fifty percent (50%) or more of the outstanding voting power of\nthe Corporation;\n\n\n\n 15\n 120\n\n (b) sell, convey of otherwise dispose of all or\nsubstantially all the Corporation's assets in a single transaction or series of\nrelated transactions; or\n\n (c) liquidate or dissolve the Corporation.\n\n 7. MISCELLANEOUS\n\n 7.1 No Reissuance of Preferred Stock. No share or shares of\nPreferred Stock acquired by the Corporation by reason of redemption, purchase,\nconversion or otherwise shall be reissued, and all such shares shall be\ncancelled, retired and eliminated from the shares which the Corporation shall be\nauthorized to issue.\n\n 7.2 Preemptive Rights. No stockholder of the Corporation shall\nhave a right to purchase shares of capital stock of the Corporation sold or\nissued by the Corporation except to the extent that such a right may from time\nto time be set forth in a written agreement between the Corporation and a\nstockholder.\n\n ARTICLE VI\n\n The Board of Directors of the Corporation shall have the power to adopt,\namend or repeal Bylaws of the corporation.\n\n ARTICLE VII\n\n Election of directors need not be by written ballot unless the Bylaws of\nthe corporation shall so provide.\n\n ARTICLE VIII\n\n To the fullest extent permitted by law, no director of the Corporation\nshall be personally liable for monetary damages for breach of fiduciary duty as\na director. Without limiting the effect of the preceding sentence, if the\nDelaware General Corporation Law is hereafter amended to authorize the further\nelimination or limitation of the liability of a director, then the liability of\na director of the Corporation shall be eliminated or limited to the fullest\nextent permitted by the Delaware General Corporation Law, as so amended.\n\n Neither any amendment nor repeal of this Article VIII, nor the adoption\nof any provision of this Certificate of Incorporation inconsistent with this\nArticle VIII, shall eliminate, reduce or otherwise adversely affect any\nlimitation on the personal liability of a director of the Corporation existing\nat the time of such amendment, repeal or adoption of such an inconsistent\nprovision.\n\n\n\n 16\n 121\n EXHIBIT G\n\n FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT\n\n\n This FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this\n\"AGREEMENT\") is made and entered into as of January ___, 2001 by and among\nShockwave.com, Inc., a Delaware corporation (the \"COMPANY\"), Macromedia, Inc., a\nDelaware corporation (\"MACROMEDIA\"), the persons and entities listed on Exhibit\nA attached hereto (the \"SERIES B PURCHASERS\" and, together with Macromedia, the\n\"PRIOR INVESTORS\"), and the persons and entities listed on Exhibit B attached\nhereto (the \"ATOM SHAREHOLDERS\" and, together with the Prior Investors, the\n\"INVESTORS\").\n\n A. In connection with the formation of the Company, Macromedia\ncontributed certain assets to the Company and entered into certain agreements\nwith the Company and in exchange therefor has received shares of the Company's\nSeries A Preferred Stock (the \"SERIES A STOCK\") issued by the Company to\nMacromedia pursuant to that certain Formation Agreement, dated as of December 1,\n1999, by and between the Company and Macromedia (the \"FORMATION AGREEMENT\"),\nthat certain Asset License Agreement of even date therewith (the \"ASSET\nLICENSING AGREEMENT\"), that certain IT Services Agreement of even date\ntherewith, that certain Corporate Services Agreement of even date therewith and\nother ancillary agreements as contemplated by the Formation Agreement\n(collectively the \"MACROMEDIA AGREEMENTS\").\n\n B. As part of and in connection with the transactions contemplated by\nthe Macromedia Agreements, the Series B Purchasers purchased from the Company\nshares of the Company's Series B Preferred Stock (the \"SERIES B STOCK\") issued\nby the Company to such Series B Purchasers pursuant to that certain Series B\nPreferred Stock Purchase Agreement, dated as of December 1, 1999, by and among\nthe Company, the Series B Purchasers and, for the purpose only of Sections 4, 6\nand 9, Macromedia (the \"SERIES B AGREEMENT\").\n\n C. The Company has issued common stock purchase warrants to acquire\nshares of Common Stock (the \"WARRANTS\") to content and service providers\ndescribed on Exhibit C to this Agreement (the \"WARRANT HOLDERS\") and shares of\nCommon Stock (the \"SHARES\") to Macromedia subject to a subscription agreement\n(the \"SUBSCRIPTION AGREEMENT\"), and desires to give registration rights with\nregard to the Shares and the shares of Common Stock issuable upon exercise of\nthe Warrants; and\n\n D. The Prior Investors have been granted certain information,\nregistration rights and\/or rights of first refusal under an Investors' Rights\nAgreement, dated as of December 1, 1999, by and between the Prior Holders and\nthe Company, as amended by Amendment No. 1 to Investors' Rights Agreement dated\nas of January 14, 2000 and Amendment No. 2 to Investors' Rights Agreement dated\nas of April 27, 2000 (the \"PRIOR RIGHTS AGREEMENT\").\n\n E. The Company and Atom Corporation, a Washington corporation (\"ATOM\"),\nentered into an Agreement and Plan of Reorganization dated as of December 14,\n2000 (the \"MERGER AGREEMENT\"), which provides (subject to the conditions set\nforth therein) for the merger of Atom with and into the Company (the \"MERGER\")\nwith the Company to survive the Merger. Upon the effectiveness of the Merger,\nthe outstanding shares of Atom Common Stock and Atom\n\n\n 122\n\nPreferred Stock will be converted into the right to receive Shockwave Common\nStock and Shockwave Series C Preferred Stock (the \"SERIES C STOCK\" and, together\nwith the Series A Stock and the Series B Stock, the \"PREFERRED STOCK\"), and\noutstanding Atom Options (as defined in the Merger Agreement) and Atom Warrants\n(as defined in the Merger Agreement) to purchase shares of Atom Common Stock and\nAtom Preferred Stock will be converted into Shockwave Options (as defined in the\nMerger Agreement) and Shockwave Warrants (as defined in the Merger Agreement),\nall as more particularly set forth in the Merger Agreement. The Merger Agreement\nprovides that, as a condition to Atom's obligations under the Merger Agreement,\nthe Company will enter into this Agreement and the Atom Shareholders will be\ngranted the rights set forth herein.\n\n F. The Company and the Prior Investors desire to enter into this\nAgreement in order to amend, restate and replace their rights and obligations\nunder the Prior Rights Agreement with the rights and obligations set forth in\nthis Agreement. Section 4.2 of the Prior Rights Agreement provides that the\nPrior Rights Agreement may be amended by the written consent of the holders of\nsixty-six percent (66%) of all the Registrable Securities (as defined in the\nPrior Rights Agreement), and the undersigned parties to this Agreement hold\nsixty-six percent (66%) or more of the Registrable Securities.\n\n NOW, THEREFORE, in consideration of the foregoing recitals and the\nmutual promises hereinafter set forth, the parties hereto agree as follows:\n\n 1. INFORMATION RIGHTS.\n\n 1.1 Financial Information. The Company covenants and agrees that,\ncommencing on the date of this Agreement, for so long as any Investor holds at\nleast 300,000 shares of Preferred Stock and\/or the equivalent number (on an\nas-converted basis) of shares of Common Stock issued upon the conversion of such\nshares of Preferred Stock (\"CONVERSION STOCK\"), the Company will:\n\n (a) Annual Reports. Furnish to such Investor, as soon as\npracticable and in any event within one hundred twenty (120) days after the end\nof each fiscal year of the Company, a consolidated Balance Sheet as of the end\nof such fiscal year, a consolidated Statement of Income and a consolidated\nStatement of Cash Flows of the Company and its subsidiaries for such year,\nsetting forth in each case in comparative form the figures from the Company's\nprevious fiscal year (if any), all prepared in accordance with generally\naccepted accounting principles and practices and audited by nationally\nrecognized independent certified public accountants; and\n\n (b) Quarterly Reports. Furnish to such Investor as soon as\npracticable, and in any case within sixty (60) days after the end of each fiscal\nquarter of the Company (except the last quarter of the Company's fiscal year),\nquarterly unaudited financial statements, including an unaudited Balance Sheet,\nan unaudited Statement of Income and an unaudited Statement of Cash Flows.\n\n 123\n\n (c) Reporting with Macromedia. So long as the Company\nconsolidates its financial statements with Macromedia and Macromedia is subject\nto the reporting requirements of the Securities Exchange Act of 1934, as amended\n(the \"EXCHANGE ACT\"), the Company's obligation to deliver financial information\nin this Section 1.1 shall be satisfied, as to Macromedia, by filing of\nMacromedia's periodic reports under the Exchange Act and, as to Investors other\nthan Macromedia entitled to receive such reports under this Section 1.1, by\ndelivery to such Investors of the publicly filed reports of Macromedia. If\nMacromedia ceases to consolidate its financial statements with those of the\nCompany, the Company shall prepare and deliver to investors entitled to receive\nsuch reports under this Section 1.1, financial statements as provided therein.\n\n (d) Confidentiality. Unless such information is otherwise\nmade generally available to the public through filings with the Securities and\nExchange Commission (the \"COMMISSION\") or otherwise, each Investor agrees to\nhold all information received pursuant to this Section 1.1 in confidence and not\nto use or disclose any of such information to any third party, except to the\nextent such information may be made publicly available by the Company.\n\n 1.2 Inspection Rights. The Company shall permit each Investor\nholding at least 300,000 shares of Preferred Stock and\/or the equivalent number\n(on an as-converted basis) of shares of Conversion Stock, or any combination\nthereof, at such Investor's expense, to visit and inspect the Company's\nproperties, to examine its books of account and records and to discuss the\nCompany's affairs, finances and accounts with its officers, all at such\nreasonable times as may be requested by such Investor. Each Investor agrees to\nhold all information received from such inspections in confidence, and not to\nuse or disclose any of such information to any third party, except to the extent\nsuch information may be made publicly available by the Company.\n\n 1.3 Termination of Information Rights. The Company's obligations\nunder Sections 1.1 and 1.2 above will terminate upon the earliest to occur of\nthe following: (i) the initial closing of the Company's initial public offering\nof Common Stock pursuant to an effective registration statement filed under the\nU.S. Securities Act of 1933, as amended (the \"SECURITIES ACT\"); (ii) the\neffective time of a merger or other acquisition of the Company in which the\nCompany is not the surviving corporation or (iii) the time at which the Company\nitself becomes subject to the reporting requirements of the Exchange Act (other\nthan as an entity consolidated for reporting purposes with Macromedia).\n\n 2. REGISTRATION RIGHTS.\n\n 2.1 Definitions. For purposes of this Section 2:\n\n (a) Registration. The terms \"REGISTER,\" \"REGISTRATION\" and\n\"REGISTERED\" refer to a registration effected by preparing and filing a\nregistration statement in compliance with the Securities Act, and the\ndeclaration or ordering of effectiveness of such registration statement.\n\n (b) Registrable Securities. The term \"REGISTRABLE\nSECURITIES\" means: (1) all the shares of Common Stock issued or issuable upon\nthe conversion of any shares of Series A Stock issued under the Formation\nAgreement; (2) all shares of Common Stock issued\n\n 124\n\nunder the Formation Agreement; (3) all shares of Common Stock issued or issuable\nupon the conversion of any shares of Series B Stock issued under the Series B\nAgreement, as such agreement may hereafter be amended from time to time; (4) all\nshares of Common Stock issued upon exercise of the Warrants (the \"WARRANT\nSTOCK\"); (5) all shares of Common Stock issued to Macromedia under the\nSubscription Agreement; (6) all shares of Common Stock issued or issuable upon\nthe conversion of any shares of Series C Stock issued under the Merger\nAgreement; and (7) all shares of Common Stock issued as (or issuable upon the\nconversion or exercise of any warrant, right or other security which is issued\nas) a dividend or other distribution with respect to, or in exchange for or in\nreplacement of, all such shares of Common Stock described in clause (1), (2),\n(3), (4), (5) or (6) of this subsection (b); excluding in all cases, however,\nany Registrable Securities sold by a person in a transaction in which rights\nunder this Section 2 are not assigned in accordance with this Agreement or any\nRegistrable Securities sold to the public or sold pursuant to Rule 144\npromulgated under the Securities Act.\n\n (c) Registrable Securities Then Outstanding. The number of\nshares of \"REGISTRABLE SECURITIES THEN OUTSTANDING\" shall mean the number of\nshares of Common Stock which are Registrable Securities and (1) are then issued\nand outstanding or (2) are then issuable pursuant to the exercise or conversion\nof then outstanding and then exercisable options, warrants or convertible\nsecurities.\n\n (d) Holder. For purposes of this Section 2 and Sections 3\nand 4 hereof, the term \"HOLDER\" means any person owning of record Registrable\nSecurities that have not been sold to the public or pursuant to Rule 144\npromulgated under the Securities Act or any assignee of record of such\nRegistrable Securities to whom rights under such Sections have been duly\nassigned in accordance with this Agreement; provided, however, that for purposes\nof this Agreement, a record holder of shares of Series A Stock, Series B Stock\nor Series C Stock convertible into such Registrable Securities and a holder of\nWarrants exercisable for Registrable Securities shall be deemed to be the Holder\nof such Registrable Securities; provided further, that a holder of Warrant Stock\nwith respect to such Warrant Stock and a holder of Macromedia with respect to\nsuch Common Stock shall not be a Holder for purposes of Sections 2.2 or 3 of\nthis Agreement; and provided, further, that the Company shall in no event be\nobligated to register shares of Preferred Stock or Warrants, and Holders of\nRegistrable Securities will not be required to convert their shares of Series A\nStock, Series B Stock, or Series C Stock into Common Stock, and the holders of\nWarrants will not be required to exercise these securities for stock, in order\nto exercise the registration rights granted hereunder until immediately before\nthe closing of the offering to which the registration relates.\n\n (e) Form S-3. The term \"FORM S-3\" means such form under the\nSecurities Act as is in effect on the date hereof or any successor registration\nform under the Securities Act subsequently adopted by the SEC which permits\ninclusion or incorporation of substantial information by reference to other\ndocuments filed by the Company with the SEC.\n\n (f) SEC. The term \"SEC\" or \"COMMISSION\" means the U.S.\nSecurities and Exchange Commission.\n\n 125\n\n 2.2 Demand Registration.\n\n (a) Request by Holders. If the Company shall receive at any\ntime after the earlier of (i) November 25, 2003 or (ii) six (6) months after the\neffective date of the Company's initial public offering of its securities\npursuant to a registration filed under the Securities Act, a written request\nfrom the Holders of at least a majority of the Registrable Securities then\noutstanding that the Company file a registration statement under the Securities\nAct covering the registration of Registrable Securities pursuant to this Section\n2.2, then the Company shall, within twenty (20) days after the receipt of such\nwritten request, give written notice of such request (\"REQUEST NOTICE\") to all\nHolders, and effect, as soon as practicable, the registration under the\nSecurities Act of all Registrable Securities which Holders request to be\nregistered and included in such registration by written notice given by such\nHolders to the Company within twenty (20) days after receipt of the Request\nNotice, subject only to the limitations of this Section 2; provided that the\nRegistrable Securities requested by all Holders to be registered pursuant to\nsuch request must either (i) be at least twenty-five percent (25%) of all\nRegistrable Securities then outstanding or (ii) have an anticipated aggregate\npublic offering price (before any underwriting discounts and commissions) of not\nless than $25,000,000. The Company shall not be obligated to effect a\nregistration under this Section 2.2 during the six-month period after the\neffective date of the Company's initial public offering of its securities as set\nforth above.\n\n (b) Underwriting. If the Holders initiating the registration\nrequest under this Section 2.2 (\"INITIATING HOLDERS\") intend to distribute the\nRegistrable Securities covered by their request by means of an underwriting,\nthen they shall so advise the Company as a part of their request made pursuant\nto this Section 2.2 and the Company shall include such information in the\nwritten notice referred to in Section 2.2(a). In such event, the right of any\nHolder to include his Registrable Securities in such registration shall be\nconditioned upon such Holder's participation in such underwriting and the\ninclusion of such Holder's Registrable Securities in the underwriting (unless\notherwise mutually agreed by a majority in interest of the Initiating Holders\nand such Holder) to the extent provided herein. All Holders proposing to\ndistribute their securities through such underwriting shall enter into an\nunderwriting agreement in customary form with the managing underwriter or\nunderwriters selected for such underwriting by the Company and a majority in\ninterest of the Initiating Holders. Notwithstanding any other provision of this\nSection 2.2, if the underwriter(s) advise(s) the Company in writing that\nmarketing factors require a limitation of the number of securities to be\nunderwritten then the Company shall so advise all Holders of Registrable\nSecurities that would otherwise be registered and underwritten pursuant hereto,\nand the number of Registrable Securities that may be included in the\nunderwriting shall be reduced as required by the underwriter(s) and allocated\namong the Holders of Registrable Securities on a pro rata basis according to the\nnumber of Registrable Securities then outstanding held by each Holder requesting\nregistration (including the Initiating Holders); provided, however, that the\nnumber of shares of Registrable Securities to be included in such underwriting\nand registration shall not be reduced unless all other securities of the Company\nare first entirely excluded from the underwriting and registration. Any\nRegistrable Securities excluded and withdrawn from such underwriting shall be\nwithdrawn from the registration.\n\n 126\n\n (c) Maximum Number of Demand Registrations. The Company is\nobligated to effect only two (2) such registrations pursuant to this Section\n2.2.\n\n (d) Deferral. Notwithstanding the foregoing, if the Company\nshall furnish to Holders requesting the filing of a registration statement\npursuant to this Section 2.2, a certificate signed by the President or Chief\nExecutive Officer of the Company stating that in the good faith judgment of the\nBoard of Directors of the Company, it would be seriously detrimental to the\nCompany and its shareholders for such registration statement to be filed and it\nis therefore essential to defer the filing of such registration statement, then\nthe Company shall have the right to defer such filing for a period of not more\nthan one hundred twenty (120) days after receipt of the request of the\nInitiating Holders; provided, however, that the Company may not utilize this\nright more than once in any twelve (12) month period.\n\n (e) Expenses. All expenses incurred in connection with a\nregistration pursuant to this Section 2.2, including without limitation all\nfederal and \"blue sky\" registration and qualification fees, printers' and\naccounting fees, fees and disbursements of counsel for the Company, and the\nreasonable fees and disbursements of one counsel for the selling Holders (but\nexcluding underwriters' discounts and commissions) shall be borne by the\nCompany. Each Holder participating in a registration pursuant to this Section\n2.2 shall bear such Holder's proportionate share (based on the total number of\nshares sold in such registration other than for the account of the Company) of\nall discounts, commissions or other amounts payable to underwriters or brokers\nin connection with such offering. Notwithstanding the foregoing, the Company\nshall not be required to pay for any expenses of any registration proceeding\nbegun pursuant to this Section 2.2 if the registration request is subsequently\nwithdrawn at the request of the Holders of a majority of the Registrable\nSecurities to be registered, unless the Holders of a majority of the Registrable\nSecurities then outstanding agree to forfeit their right to one (1) demand\nregistration pursuant to this Section 2.2 (in which case such right shall be\nforfeited by all Holders of Registrable Securities); provided, further, however,\nthat if at the time of such withdrawal, the Holders have learned of a material\nadverse change in the condition, business, or prospects of the Company not known\nto the Holders at the time of their request for such registration and have\nwithdrawn their request for registration with reasonable promptness after\nlearning of such material adverse change, then the Holders shall not be required\nto pay any of such expenses and shall retain their rights pursuant to this\nSection 2.2.\n\n 2.3 Piggyback Registrations. The Company shall notify all Holders\nof Registrable Securities in writing at least thirty (30) days prior to filing\nany registration statement under the Securities Act for purposes of effecting a\npublic offering of securities of the Company (including, but not limited to,\nregistration statements relating to secondary offerings of securities of the\nCompany, but excluding registration statements relating to any registration\nunder Section 2.2 or Section 2.4 of this Agreement or to any employee benefit\nplan or a corporate reorganization) and will afford each such Holder an\nopportunity to include in such registration statement all or any part of the\nRegistrable Securities then held by such Holder. Each Holder desiring to include\nin any such registration statement all or any part of the Registrable Securities\nheld by such Holder shall, within twenty (20) days after receipt of the\nabove-described notice from the Company, so notify the Company in writing, and\nin such notice shall inform the\n 127\nCompany of the number of Registrable Securities such Holder wishes to include in\nsuch registration statement. If a Holder decides not to include all of its\nRegistrable Securities in any registration statement thereafter filed by the\nCompany, such Holder shall nevertheless continue to have the right to include\nany Registrable Securities in any subsequent registration statement or\nregistration statements as may be filed by the Company with respect to offerings\nof its securities, all upon the terms and conditions set forth herein.\n\n (a) Underwriting. If a registration statement under which\nthe Company gives notice under this Section 2.3 is for an underwritten offering,\nthen the Company shall so advise the Holders of Registrable Securities. In such\nevent, the right of any such Holder's Registrable Securities to be included in a\nregistration pursuant to this Section 2.3 shall be conditioned upon such\nHolder's participation in such underwriting and the inclusion of such Holder's\nRegistrable Securities in the underwriting to the extent provided herein. All\nHolders proposing to distribute their Registrable Securities through such\nunderwriting shall enter into an underwriting agreement in customary form with\nthe managing underwriter or underwriter(s) selected for such underwriting.\nNotwithstanding any other provision of this Agreement, if the managing\nunderwriter determine(s) in good faith that marketing factors require a\nlimitation of the number of shares to be underwritten, then the managing\nunderwriter(s) may exclude shares (including Registrable Securities) from the\nregistration and the underwriting, and the number of shares that may be included\nin the registration and the underwriting shall be allocated, first, to\nshareholders exercising any demand registration rights, second to the Company,\nand third, to each of the Holders requesting inclusion of their Registrable\nSecurities in such registration statement on a pro rata basis based on the total\nnumber of Registrable Securities then held by each such Holder, provided\nhowever, that the right of the underwriters to exclude shares (including\nRegistrable Securities) from the registration and underwriting as described\nabove shall be restricted so that: (i) the number of Registrable Securities\nincluded in any such registration is not reduced below twenty-five percent (25%)\nof the shares included in the registration, except for a registration relating\nto the Company's initial public offering from which all Registrable Securities\nmay be excluded. If any Holder disapproves of the terms of any such\nunderwriting, such Holder may elect to withdraw therefrom by written notice to\nthe Company and the underwriter, delivered at least twenty (20) days prior to\nthe effective date of the registration statement. Any Registrable Securities\nexcluded or withdrawn from such underwriting shall be excluded and withdrawn\nfrom the registration. For any Holder that is a partnership or corporation, the\npartners, retired partners and shareholders of such Holder, or the estates and\nfamily members of any such partners and retired partners and any trusts for the\nbenefit of any of the foregoing persons shall be deemed to be a single \"Holder,\"\nand any pro rata reduction with respect to such \"Holder\" shall be based upon the\naggregate amount of shares carrying registration rights owned by all entities\nand individuals included in such \"Holder,\" as defined in this sentence.\n\n (b) Expenses. All expenses incurred in connection with a\nregistration pursuant to this Section 2.3 (excluding underwriters' and brokers'\ndiscounts and commissions), including, without limitation all federal and \"blue\nsky\" registration and qualification fees, printers' and accounting fees, fees\nand disbursements of counsel for the Company and reasonable fees and\ndisbursements of one counsel for the selling Holders shall be borne by the\nCompany.\n\n 128\n\n 2.4 Form S-3 Registration. In case the Company shall receive from\nany Holder or Holders of Registrable Securities a written request or requests\nthat the Company effect a registration on Form S-3 and any related qualification\nor compliance with respect to all or a part of the Registrable Securities owned\nby such Holder or Holders, then the Company will:\n\n (a) Notice. Promptly give written notice of the proposed\nregistration and the Holder's or Holders' request therefor, and any related\nqualification or compliance, to all other Holders of Registrable Securities; and\n\n (b) Registration. As soon as practicable, effect such\nregistration and all such qualifications and compliances as may be so requested\nand as would permit or facilitate the sale and distribution of all or such\nportion of such Holder's or Holders' Registrable Securities as are specified in\nsuch request, together with all or such portion of the Registrable Securities of\nany other Holder or Holders joining in such request as are specified in a\nwritten request given within twenty (20) days after receipt of such written\nnotice from the Company; provided, however, that the Company shall not be\nobligated to effect any such registration, qualification or compliance pursuant\nto this Section 2.4:\n\n (1) if Form S-3 is not available for such offering;\n\n (2) if the Holders, together with the holders of any\nother securities of the Company entitled to inclusion in such registration,\npropose to sell Registrable Securities and such other securities (if any) at an\naggregate price to the public of less than $1,000,000;\n\n (3) if the Company shall furnish to the Holders a\ncertificate signed by the President or Chief Executive Officer of the Company\nstating that in the good faith judgment of the Board of Directors of the\nCompany, it would be seriously detrimental to the Company and its shareholders\nfor such Form S-3 Registration to be effected at such time, in which event the\nCompany shall have the right to defer the filing of the Form S-3 registration\nstatement no more than once during any twelve month period for a period of not\nmore than sixty (60) days after receipt of the request of the Holder or Holders\nunder this Section 2.4;\n\n (4) if the Company has, within the six (6) month period\npreceding the date of such request, already effected one (1) registration on\nForm S-3 for the Holders pursuant to this Section 2.4; or\n\n (5) in any particular jurisdiction in which the Company\nwould be required to qualify to do business or to execute a general consent to\nservice of process in effecting such registration, qualification or compliance.\n\n (c) Expenses. Subject to the foregoing, the Company shall\nfile a Form S-3 registration statement covering the Registrable Securities and\nother securities so requested to be registered pursuant to this Section 2.4 as\nsoon as practicable after receipt of the request or requests of the Holders for\nsuch registration. The Company shall pay all expenses incurred in connection\nwith the first four (4) registrations requested pursuant to this Section 2.4,\n\n 129\n\n(excluding underwriters' or brokers' discounts and commissions), including\nwithout limitation all federal and \"blue sky\" registration and qualification,\nprinters' and accounting fees and the reasonable fees and disbursements of one\ncounsel for the selling Holder or Holders and counsel for the Company. All\nexpenses incurred in connection with any subsequent registration requested\npursuant to this Section 2.4 shall be borne by the Holders who participate in\nsuch registration on a pro rata basis according to the number of Registrable\nSecurities owned by the Holders that are included in such registration at the\ntime it goes effective.\n\n (d) Not Demand Registration. Form S-3 registrations shall\nnot be deemed to be demand registrations as described in Section 2.2 above.\n\n 2.5 Obligations of the Company. Whenever required to effect the\nregistration of any Registrable Securities under this Agreement, the Company\nshall, as expeditiously as reasonably possible:\n\n (a) Prepare and file with the SEC a registration statement\nwith respect to such Registrable Securities and use reasonable, diligent efforts\nto cause such registration statement to become effective, and, upon the request\nof the Holders of a majority of the Registrable Securities registered\nthereunder, keep such registration statement effective for up to one hundred\ntwenty (120) days.\n\n (b) Prepare and file with the SEC such amendments and\nsupplements to such registration statement and the prospectus used in connection\nwith such registration statement as may be necessary to comply with the\nprovisions of the Securities Act with respect to the disposition of all\nsecurities covered by such registration statement.\n\n (c) Furnish to the Holders such number of copies of a\nprospectus, including a preliminary prospectus, in conformity with the\nrequirements of the Securities Act, and such other documents as they may\nreasonably request in order to facilitate the disposition of the Registrable\nSecurities owned by them that are included in such registration.\n\n (d) Use reasonable, diligent efforts to register and qualify\nthe securities covered by such registration statement under such other\nsecurities or Blue Sky laws of such jurisdictions as shall be reasonably\nrequested by the Holders, provided that the Company shall not be required in\nconnection therewith or as a condition thereto to qualify to do business or to\nfile a general consent to service of process in any such states or\njurisdictions.\n\n (e) In the event of any underwritten public offering, enter\ninto and perform its obligations under an underwriting agreement, in usual and\ncustomary form, with the managing underwriter(s) of such offering. Each Holder\nparticipating in such underwriting shall also enter into and perform its\nobligations under such an agreement.\n\n (f) Notify each Holder of Registrable Securities covered by\nsuch registration statement at any time when a prospectus relating thereto is\nrequired to be delivered under the Securities Act of the happening of any event\nas a result of which the prospectus included in such registration statement, as\nthen in effect, includes an untrue statement of a\n\n 130\n\nmaterial fact or omits to state a material fact required to be stated therein or\nnecessary to make the statements therein not misleading in the light of the\ncircumstances then existing.\n\n (g) Furnish, at the request of any Holder requesting\nregistration of Registrable Securities, on the date that such Registrable\nSecurities are delivered to the underwriters for sale, if such securities are\nbeing sold through underwriters, or, if such securities are not being sold\nthrough underwriters, on the date that the registration statement with respect\nto such securities becomes effective, (1) an opinion, dated as of such date, of\nthe counsel representing the Company for the purposes of such registration, in\nform and substance as is customarily given to underwriters in an underwritten\npublic offering and reasonably satisfactory to a majority in interest of the\nHolders requesting registration, addressed to the underwriters, if any, and to\nthe Holders requesting registration of Registrable Securities and (2) a\n\"comfort\" letter dated as of such date, from the independent certified public\naccountants of the Company, in form and substance as is customarily given by\nindependent certified public accountants to underwriters in an underwritten\npublic offering and reasonably satisfactory to a majority in interest of the\nHolders requesting registration, addressed to the underwriters, if any, and to\nthe Holders requesting registration of Registrable Securities.\n\n 2.6 Furnish Information. It shall be a condition precedent to the\nobligations of the Company to take any action pursuant to Sections 2.2, 2.3 or\n2.4 that the selling Holders shall furnish to the Company such information\nregarding themselves, the Registrable Securities held by them, and the intended\nmethod of disposition of such securities as shall be required to timely effect\nthe registration of their Registrable Securities.\n\n 2.7 Delay of Registration. No Holder shall have any right to\nobtain or seek an injunction restraining or otherwise delaying any such\nregistration as the result of any controversy that might arise with respect to\nthe interpretation or implementation of this Section 2.\n\n 2.8 Indemnification. In the event any Registrable Securities are\nincluded in a registration statement under Sections 2.2, 2.3 or 2.4:\n\n (a) By the Company. To the extent permitted by law, the\nCompany will indemnify and hold harmless each Holder, the partners, officers and\ndirectors of each Holder, any underwriter (as defined in the Securities Act) for\nsuch Holder and each person, if any, who controls such Holder or underwriter\nwithin the meaning of the Securities Act or the Exchange Act against any losses,\nclaims, damages, or liabilities (joint or several) to which they may become\nsubject under the Securities Act, the l934 Act or other federal or state law,\ninsofar as such losses, claims, damages, or liabilities (or actions in respect\nthereof) arise out of or are based upon any of the following statements,\nomissions or violations (collectively, \"VIOLATIONS\" and, individually, a\n\"VIOLATION\"):\n\n (1) any untrue statement or alleged untrue statement of\na material fact contained in such registration statement, including any\npreliminary prospectus or final prospectus contained therein or any amendments\nor supplements thereto;\n\n 131\n\n (2) the omission or alleged omission to state therein a\nmaterial fact required to be stated therein, or necessary to make the statements\ntherein not misleading, or\n\n (3) any violation or alleged violation by the Company\nof the Securities Act, the Exchange Act, any federal or state securities law or\nany rule or regulation promulgated under the Securities Act, the Exchange Act or\nany federal or state securities law in connection with the offering covered by\nsuch registration statement; \n\nand the Company will reimburse each such Holder, partner, officer or director,\nunderwriter or controlling person for any legal or other expenses reasonably\nincurred by them, as incurred, in connection with investigating or defending any\nsuch loss, claim, damage, liability or action; provided however, that the\nindemnity agreement contained in this Section 2.8(a) shall not apply to amounts\npaid in settlement of any such loss, claim, damage, liability or action if such\nsettlement is effected without the consent of the Company (which consent shall\nnot be unreasonably withheld), nor shall the Company be liable in any such case\nfor any such loss, claim, damage, liability or action to the extent that it\narises out of or is based upon a Violation which occurs in reliance upon and in\nconformity with written information furnished expressly for use in connection\nwith such registration by such Holder, partner, officer, director, underwriter\nor controlling person of such Holder.\n\n (b) By Selling Holders. To the extent permitted by law, each\nselling Holder will indemnify and hold harmless the Company, each of its\ndirectors, each of its officers who have signed the registration statement, each\nperson, if any, who controls the Company within the meaning of the Securities\nAct, any underwriter and any other Holder selling securities under such\nregistration statement or any of such other Holder's partners, directors or\nofficers or any person who controls such Holder within the meaning of the\nSecurities Act or the Exchange Act, against any losses, claims, damages or\nliabilities (joint or several) to which the Company or any such director,\nofficer, controlling person, underwriter or other such Holder, partner or\ndirector, officer or controlling person of such other Holder may become subject\nunder the Securities Act, the Exchange Act or other federal or state law,\ninsofar as such losses, claims, damages or liabilities (or actions in respect\nthereto) arise out of or are based upon any Violation, in each case to the\nextent (and only to the extent) that such Violation occurs in reliance upon and\nin conformity with written information furnished by such Holder expressly for\nuse in connection with such registration; and each such Holder will reimburse\nany legal or other expenses reasonably incurred by the Company or any such\ndirector, officer, controlling person, underwriter or other Holder, partner,\nofficer, director or controlling person of such other Holder in connection with\ninvestigating or defending any such loss, claim, damage, liability or action;\nprovided, however, that the indemnity agreement contained in this Section 2.8(b)\nshall not apply to amounts paid in settlement of any such loss, claim, damage,\nliability or action if such settlement is effected without the consent of the\nHolder, which consent shall not be unreasonably withheld; and provided further,\nthat the total amounts payable in indemnity by a Holder under this Section\n2.8(b) in respect of any Violation shall not exceed the net proceeds received by\nsuch Holder in the registered offering out of which such Violation arises.\n 132\n\n (c) Notice. Promptly after receipt by an indemnified party\nunder this Section 2.8 of notice of the commencement of any action (including\nany governmental action), such indemnified party will, if a claim in respect\nthereof is to be made against any indemnifying party under this Section 2.8,\ndeliver to the indemnifying party a written notice of the commencement thereof\nand the indemnifying party shall have the right to participate in, and, to the\nextent the indemnifying party so desires, jointly with any other indemnifying\nparty similarly noticed, to assume the defense thereof with counsel mutually\nsatisfactory to the parties; provided, however, that an indemnified party shall\nhave the right to retain its own counsel, with the fees and expenses to be paid\nby the indemnifying party, if representation of such indemnified party by the\ncounsel retained by the indemnifying party would be inappropriate due to actual\nor potential conflict of interests between such indemnified party and any other\nparty represented by such counsel in such proceeding. The failure to deliver\nwritten notice to the indemnifying party within a reasonable time of the\ncommencement of any such action, if prejudicial to its ability to defend such\naction, shall relieve such indemnifying party of any liability to the\nindemnified party under this Section 2.8, but the omission so to deliver written\nnotice to the indemnifying party will not relieve it of any liability that it\nmay have to any indemnified party otherwise than under this Section 2.8.\n\n (d) Defect Eliminated in Final Prospectus. The foregoing\nindemnity agreements of the Company and Holders are subject to the condition\nthat, insofar as they relate to any Violation made in a preliminary prospectus\nbut eliminated or remedied in the amended prospectus on file with the SEC at the\ntime the registration statement in question becomes effective or the amended\nprospectus filed with the SEC pursuant to SEC Rule 424(b) (the \"FINAL\nPROSPECTUS\"), such indemnity agreement shall not inure to the benefit of any\nperson if a copy of the Final Prospectus was furnished to the indemnified party\nand was not furnished to the person asserting the loss, liability, claim or\ndamage at or prior to the time such action is required by the Securities Act.\n\n (e) Contribution. In order to provide for just and equitable\ncontribution to joint liability under the Securities Act in any case in which\neither (1) any Holder exercising rights under this Agreement, or any controlling\nperson of any such Holder, makes a claim for indemnification pursuant to this\nSection 2.8 but it is judicially determined (by the entry of a final judgment or\ndecree by a court of competent jurisdiction and the expiration of time to appeal\nor the denial of the last right of appeal) that such indemnification may not be\nenforced in such case notwithstanding the fact that this Section 2.8 provides\nfor indemnification in such case, or (2) contribution under the Securities Act\nmay be required on the part of any such selling Holder or any such controlling\nperson in circumstances for which indemnification is provided under this Section\n2.8; then, and in each such case, the Company and such Holder will contribute to\nthe aggregate losses, claims, damages or liabilities to which they may be\nsubject (after contribution from others) in such proportion so that such Holder\nis responsible for the portion represented by the percentage that the public\noffering price of its Registrable Securities offered by and sold under the\nregistration statement bears to the public offering price of all securities\noffered by and sold under such registration statement, and the Company and other\nselling Holders are responsible for the remaining portion; provided, however,\nthat, in any such case, (A) no such Holder will be required to contribute any\namount in excess of the public offering price of \n\n 133\nall such Registrable Securities offered and sold by such Holder pursuant to such\nregistration statement; and (B) no person or entity guilty of fraudulent\nmisrepresentation (within the meaning of Section 11(f) of the Securities Act)\nwill be entitled to contribution from any person or entity who was not guilty of\nsuch fraudulent misrepresentation.\n\n (f) Survival. The obligations of the Company and Holders\nunder this Section 2.8 shall survive the completion of any offering of\nRegistrable Securities in a registration statement, and otherwise.\n\n 2.9 \"Market Stand-Off\" Agreement.\n\n (a) Each Holder hereby agrees that it shall not, to the\nextent requested by the Company or an underwriter of securities of the Company,\nsell or otherwise transfer or dispose of any Registrable Securities or other\nshares of stock of the Company then owned by such Holder (other than to donees\nor partners of the Holder who agree to be similarly bound) for up to one hundred\neighty (180) days following the effective date of a registration statement of\nthe Company filed under the Securities Act; provided, however, that such\nagreement shall be applicable only to the first such registration statement of\nthe Company which covers securities to be sold on its behalf to the public in an\nunderwritten offering but not to any Registrable Securities sold pursuant to\nsuch registration statement.\n\n (b) In order to enforce the market stand-back agreement in\nthis Section 2.9, the Company shall have the right to place restrictive legends\non the certificates representing the shares subject hereto and to impose stop\ntransfer instructions with respect to the Registrable Securities and such other\nshares of stock of each Holder (and the shares or securities of every other\nperson subject to the foregoing restriction) until the end of such period.\n\n 2.10 Rule 144 Reporting. With a view to making available the\nbenefits of certain rules and regulations of the Commission which may at any\ntime permit the sale of the Registrable Securities to the public without\nregistration, after such time as a public market exists for the Common Stock of\nthe Company, the Company agrees to:\n\n (a) Make and keep public information available, as those\nterms are understood and defined in Rule 144 under the Securities Act, at all\ntimes after the effective date of the first registration under the Securities\nAct filed by the Company for an offering of its securities to the general\npublic;\n\n (b) File with the Commission in a timely manner all reports\nand other documents required of the Company under the Securities Act and the\nExchange Act (at any time after it has become subject to such reporting\nrequirements); and\n\n (c) So long as a Holder owns any Registrable Securities, to\nfurnish to the Holder forthwith upon request a written statement by the Company\nas to its compliance with the reporting requirements of said Rule 144 (at any\ntime after 90 days after the effective date of the first registration statement\nfiled by the Company for an offering of its securities to the general public),\nand of the Securities Act and the Exchange Act (at any time after it has become\nsubject \n\n 134\n\nto the reporting requirements of the Exchange Act), a copy of the most recent\nannual or quarterly report of the Company, and such other reports and documents\nof the Company as a Holder may reasonably request in availing itself of any rule\nor regulation of the Commission allowing a Holder to sell any such securities\nwithout registration (at any time after the Company has become subject to the\nreporting requirements of the Exchange Act).\n\n 2.11 Termination of the Company's Obligations. The Company shall\nhave no obligations pursuant to Sections 2.2 through 2.4 with respect to: (a)\nany request or requests for registration made by any Holder on a date more than\nfive (5) years after the closing date of the Company's initial public offering;\nor (b) any Registrable Securities proposed to be sold by a Holder in a\nregistration pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel\nto the Company, all such Registrable Securities proposed to be sold by a Holder\nmay be sold in a three-month period without registration under the Securities\nAct pursuant to Rule 144 under the Securities Act.\n\n 3. RIGHT OF FIRST REFUSAL.\n\n 3.1 General. Each Holder (as defined in Section 2.1(d)) and any\nparty to whom such Holder's rights under this Section 3 have been duly assigned\nin accordance with Section 4.1(b) (each such Holder or assignee being\nhereinafter referred to as a \"RIGHTS HOLDER\") has a right of first refusal to\npurchase such Rights Holder's Pro Rata Share (as defined below), of all (or any\npart) of any \"New Securities\" (as defined in Section 3.2) that the Company may\nfrom time to time issue after the date of this Agreement, provided, however,\nthat no Holder will be entitled to such right of first refusal if, at the time\nof the Company's offer of such New Securities, the Holder is not an \"accredited\ninvestor\" as that term is defined in Section 501(a) of Regulation D promulgated\nby the Commission under the Securities Act. A Rights Holder's \"PRO RATA SHARE\"\nfor purposes of this right of first refusal is the ratio of (a) the number of\nRegistrable Securities as to which such Rights Holder is the Holder (and\/or is\ndeemed to be the Holder under Section 2.1(d)), to (b) the number of shares of\nCommon Stock of the Company equal to the sum of (1) the total number of shares\nof Common Stock of the Company then outstanding plus (2) the total number of\nshares of Common Stock issuable upon exercise or conversion of all Preferred\nStock of the Company then outstanding plus (3) the number of shares of Common\nStock of the Company issuable upon exercise and\/or conversion of all rights,\noptions or warrants to purchase such Common Stock or Preferred Stock of the\nCompany then outstanding.\n\n 3.2 New Securities. \"NEW SECURITIES\" shall mean any Common Stock\nor Preferred Stock of the Company, whether now authorized or not, and rights,\noptions or warrants to purchase such Common Stock or Preferred Stock, and\nsecurities of any type whatsoever that are, or may become, convertible or\nexchangeable into such Common Stock or Preferred Stock; provided, however, that\nthe term \"New Securities\" does not include:\n\n (a) shares of Common Stock issued or issuable upon\nconversion of the outstanding shares of the Preferred Stock;\n\n (b) any shares of Common Stock or Preferred Stock (or\noptions, warrants or rights therefor) granted or issued hereafter to employees,\nofficers, directors, \n\n 135\n\ncontractors, consultants or advisers to, the Company or any Subsidiary pursuant\nto incentive agreements, stock purchase or stock option plans, stock bonuses or\nawards, warrants, contracts or other arrangements that are approved by the Board\nof Directors;\n\n (c) any shares of the Company's Common Stock or Preferred\nStock (and\/or options, warrants or rights therefor) issued or issuable to (i)\nparties providing the Company with equipment leases, real property leases,\nloans, credit lines, guaranties of indebtedness or similar financing or (ii)\nproviders of goods and services or (iii) providers or developers of content or\ntechnology, or strategic or commercial partners of the Company; provided that\nsuch arrangements, in each case, are approved by the Board of Directors and are\nfor primarily non-equity financing purposes;\n\n (d) shares of Common Stock or Preferred Stock (and\/or\noptions, warrants or rights therefor) issued pursuant to the acquisition of\nanother corporation or entity by the Company by consolidation, merger, purchase\nof all or substantially all of the assets, or other reorganization in which the\nCompany acquires, in a single transaction or series of related transactions, all\nor substantially all of the assets of such other corporation or entity or fifty\npercent (50%) or more of the voting power of such other corporation or entity or\nfifty percent (50%) or more of the equity ownership of such other entity;\n\n (e) any shares of Series A Stock issued under the Formation\nAgreement, any shares of Series B Stock issued under the Series B Agreement and\nany shares of Series C Stock issued under the Merger Agreement, as such\nagreements may be amended;\n\n (f) any securities issuable upon exercise of any options,\nwarrants or rights to purchase any securities of the Company outstanding on the\ndate of this Agreement (\"WARRANT SECURITIES\") and any securities issuable upon\nthe conversion of any Warrant Securities or upon the exercise or conversion of\nany securities, if such securities were first offered to the Rights Holders\nhereunder;\n\n (g) shares of the Company's Common Stock or Preferred Stock\nissued in connection with any stock split or stock dividend; and\n\n (h) securities offered by the Company to the public pursuant\nto a registration statement filed under the Securities Act.\n\n 3.3 Procedures. In the event that the Company proposes to\nundertake an issuance of New Securities, it shall give to each Rights Holder\nwritten notice of its intention to issue New Securities (the \"NOTICE\"),\ndescribing the type of New Securities and the price and the general terms upon\nwhich the Company proposes to issue such New Securities. Each Rights Holder\nshall have twenty (20) days from the date of mailing of any such Notice to agree\nin writing to purchase such Rights Holder's Pro Rata Share of such New\nSecurities for the price and upon the general terms specified in the Notice by\ngiving written notice to the Company and stating therein the quantity of New\nSecurities to be purchased (not to exceed such Rights Holder's Pro Rata Share)\nand to execute and deliver to the Company such other documentation as may be\nreasonably required by the Company to demonstrate that such Rights Holder is, at\nthe \n\n 136\n\ntime of such offer of New Securities, an \"accredited investor\" as defined in\nRegulation D. If any Rights Holder fails to so agree in writing and to\ndemonstrate such Rights Holder's status as an \"accredited investor\" within such\ntwenty (20) day period to purchase such Rights Holder's full Pro Rata Share of\nan offering of New Securities (a \"NONPURCHASING HOLDER\"), then such\nNonpurchasing Holder shall forfeit the right hereunder to purchase that part of\nhis Pro Rata Share of such New Securities that he did not so agree to purchase\nand the Company shall promptly give each Rights Holder who has timely agreed to\npurchase his full Pro Rata Share of such offering of New Securities and\ndemonstrated his status as an \"accredited investor\" (a \"PURCHASING HOLDER\")\nwritten notice of the failure of any Nonpurchasing Holder to purchase such\nNonpurchasing Rights Holder's full Pro Rata Share of such offering of New\nSecurities (the \"OVERALLOTMENT NOTICE\"). Each Purchasing Holder shall have a\nright of overallotment such that such Purchasing Holder may agree to purchase a\nportion of the Nonpurchasing Holders' unpurchased Pro Rata Shares of such\noffering on a pro rata basis according to the relative Pro Rata Shares of the\nPurchasing Rights Holders, at any time within ten (10) days after receiving the\nOverallotment Notice.\n\n 3.4 Failure to Exercise. In the event that the Rights Holders\nfail to exercise in full the right of first refusal within such twenty (20) plus\nten (10) day period, then the Company shall have ninety (90) days thereafter to\nsell the New Securities with respect to which the Rights Holders' rights of\nfirst refusal hereunder were not exercised, at a price and upon general terms\nnot materially more favorable to the purchasers thereof than specified in the\nCompany's Notice to the Rights Holders. In the event that the Company has not\nissued and sold the New Securities within such ninety (90) day period, then the\nCompany shall not thereafter issue or sell any New Securities without again\nfirst offering such New Securities to the Rights Holders pursuant to this\nSection 3.\n\n 3.5 Termination. This right of first refusal shall terminate (a)\nimmediately before the initial closing of the first underwritten sale of Common\nStock of the Company to the public pursuant to a registration statement filed\nwith, and declared effective by, the SEC under the Securities Act, covering the\noffer and sale of Common Stock to the public at an offering price of at least\n$5.00 per share (such offering price being subject to proportional adjustment to\nreflect subdivisions, combinations, stock dividends and similar transactions\naffecting the number of outstanding shares of Common Stock) for an aggregate\ngross public offering price (calculated before deduction of underwriters'\ndiscounts and commissions) of at least $25,000,000 and shall not extend to\nshares of Common Stock sold in such offering, or (b) upon (1) the acquisition of\nall or substantially all the assets of the Company or (2) an acquisition of the\nCompany by another corporation or entity by consolidation, merger or other\nreorganization in which the holders of the Company's outstanding voting stock\nimmediately prior to such transaction own, immediately after such transaction,\nsecurities representing less than fifty percent (50%) of the voting power of the\ncorporation or other entity surviving such transaction.\n\n 3.6 Waiver. The right of first refusal provided in this Section 3\nmay be amended and the observance thereof may be waived (either generally or in\na particular instance and either retroactively or prospectively), only with the\nwritten consent of the Company and \n\n 137\n\nInvestors (and\/or any of their permitted successors or assigns) holding\nsixty-six percent (66%) of all the Registrable Securities then outstanding.\n\n 4. ASSIGNMENT AND AMENDMENT.\n\n 4.1 Assignment. Notwithstanding anything herein to the contrary:\n\n (a) Information Rights. The rights of an Investor under\nSection 1.1 hereof may be assigned only to a party who acquires from an Investor\n(or an Investor's permitted assigns) at least that number of shares of Preferred\nStock and\/or an equivalent number (on an as-converted basis) of shares of\nConversion Stock described in Section 1.1 hereof.\n\n (b) Registration Rights; Refusal Rights. The registration\nrights of a Holder under Section 2 hereof and the rights of first refusal of a\nRights Holder under Section 3 hereof may be assigned only to a party who\nacquires at least 300,000 shares of Series A Stock and\/or Series B Stock issued\nunder the Series B Agreement and\/or Series C Stock issued under the Merger\nAgreement and\/or an equivalent number (on an as-converted basis) of Registrable\nSecurities issued upon conversion thereof, or an equivalent number of Warrants\nto acquire shares of Common Stock; provided, however that no party may be\nassigned any of the foregoing rights unless the Company is given written notice\nby the assigning party at the time of such assignment stating the name and\naddress of the assignee and identifying the securities of the Company as to\nwhich the rights in question are being assigned; and provided further that any\nsuch assignee shall receive such assigned rights subject to all the terms and\nconditions of this Agreement, including without limitation the provisions of\nthis Section 4.\n\n 4.2 Amendment of Rights. Except as otherwise provided in Section\n3.6, any provision of this Agreement may be amended and the observance thereof\nmay be waived (either generally or in a particular instance and either\nretroactively or prospectively), only with the written consent of the Company\nand Investors (and\/or any of their permitted successors or assigns) holding\nsixty-six percent (66%) of all the Registrable Securities then outstanding;\nprovided, however, that no waiver of or amendment to the registration rights\nprovisions of Section 2 which adversely affects the rights of the holders of\nRegistrable Securities issued or issuable upon conversion of Series B Preferred\nStock of the Company may not be approved without the consent of a majority of\nthe holders of Series B Preferred Stock and the shares of Common Stock into\nwhich shares of such Series B Preferred Stock has been converted Any amendment\nor waiver effected in accordance with this Section 4.2 shall be binding upon\neach Investor, each Holder, each permitted successor or assignee of such\nInvestor or Holder and the Company.\n\n 4.3 New Investors. Notwithstanding anything herein to the\ncontrary, if pursuant to Section 2.2 of the Series B Agreement, additional\nparties purchase shares of Series B Stock as \"New Investors\" thereunder, then\neach such New Investor shall become a party to this Agreement as an \"Investor\"\nhereunder, without the need any consent, approval or signature of any Investor\nwhen such New Investor has both: (a) purchased shares of Series B Stock under\nthe Series B Agreement and paid the Company all consideration payable for such\nshares and (b) \n\n 138\n\nexecuted one or more counterpart signature pages to this Agreement as an\n\"Investor\", with the Company's consent.\n\n 5. GENERAL PROVISIONS.\n\n 5.1 Notices. Any notice, request or other communication required\nor permitted hereunder shall be in writing addressed as follows:\n\n (a) if to an Investor, at such Investor's respective address\nas set forth on Exhibit A, Exhibit B or Exhibit C hereto.\n\n (b) if to the Company, at 650 Townsend Street, San\nFrancisco, California 94103; facsimile (415) 621-0751; attn: Chief Financial\nOfficer.\n\n (c) if to Macromedia, at 600 Townsend Street, San Francisco,\nCalifornia 94103; facsimile (415) 626-0274; attn: General Counsel.\n\n\nEach such communication shall be deemed received if given: (i) by personal\ndelivery, upon receipt; (ii) by facsimile transmission with confirmation of\nreceipt, on the next business day after dispatch; (iii) by overnight courier, on\nthe next business day after dispatch properly addressed and costs of delivery\npre-paid; and (iv) by U.S. mail, five business days after dispatch, properly\naddressed and postage pre-paid. Any party hereto (and such party's permitted\nassigns) may by notice so given change its address for future notices hereunder.\n\n\n 5.2 Entire Agreement. This Agreement, together with all the\nExhibits hereto, constitutes and contains the entire agreement and understanding\nof the parties with respect to the subject matter hereof and supersedes any and\nall prior negotiations, correspondence, agreements, understandings, duties or\nobligations between the parties respecting the subject matter hereof.\n\n 5.3 Governing Law. This Agreement shall be governed by and\nconstrued exclusively in accordance with the internal laws of the State of\nCalifornia as applied to agreements among California residents entered into and\nto be performed entirely within California, excluding that body of law relating\nto conflict of laws and choice of law.\n\n 5.4 Severability. If one or more provisions of this Agreement are\nheld to be unenforceable under applicable law, then such provision(s) shall be\nexcluded from this Agreement and the balance of this Agreement shall be\ninterpreted as if such provision(s) were so excluded and shall be enforceable in\naccordance with its terms.\n\n 5.5 Third Parties. Nothing in this Agreement, express or implied,\nis intended to confer upon any person, other than the parties hereto and their\nsuccessors and assigns, any rights or remedies under or by reason of this\nAgreement.\n\n 5.6 Successors and Assigns. Subject to the provisions of Section\n4.1, the provisions of this Agreement shall inure to the benefit of, and shall\nbe binding upon, the successors and permitted assigns of the parties hereto.\n\n 139\n\n 5.7 Captions. The captions to sections of this Agreement have\nbeen inserted for identification and reference purposes only and shall not be\nused to construe or interpret this Agreement.\n\n 5.8 Counterparts. This Agreement may be executed in counterparts,\neach of which shall be deemed an original, but all of which together shall\nconstitute one and the same instrument.\n\n 5.9 Costs and Attorneys' Fees. In the event that any action, suit\nor other proceeding is instituted concerning or arising out of this Agreement or\nany transaction contemplated hereunder, the prevailing party shall recover all\nof such party's costs and attorneys' fees incurred in each such action, suit or\nother proceeding, including any and all appeals or petitions therefrom.\n\n 5.10 Adjustments for Stock Splits, Etc. Wherever in this\nAgreement there is a reference to a specific number of shares of Common Stock or\nPreferred Stock of the Company of any class or series, then, upon the occurrence\nof any subdivision, combination or stock dividend of such class or series of\nstock, the specific number of shares so referenced in this Agreement shall\nautomatically be proportionally adjusted to reflect the affect on the\noutstanding shares of such class or series of stock by such subdivision,\ncombination or stock dividend.\n\n 5.11 Aggregation of Stock. All shares held or acquired by\naffiliated entities or persons shall be aggregated together for the purpose of\ndetermining the availability of any rights under this Agreement.\n\n\n [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]\n\n 140\n\n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as\nof the date and year first written above.\n\n\n\nTHE COMPANY:\n\nSHOCKWAVE.COM, INC.\n\n\n\n\nBy:\n --------------------------------------\n\nTitle:\n -----------------------------------\n\n\nMACROMEDIA:\n\nMACROMEDIA, INC.\n\n\n\n\nBy:\n --------------------------------------\n\nTitle:\n -----------------------------------\n\n\n\n [SIGNATURE PAGE TO\n FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]\n\n 141\n\n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as\nof the date first written above.\n\n INVESTOR:\n\n SEQUOIA CAPITAL FRANCHISE FUND\n\n By: SCFF Management, LLC\n A Delaware Limited Liability Company\n Its General Partner\n\n\n\n By:\n -----------------------------------\n Managing Member\n\n\n\n [SIGNATURE PAGE TO\n FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]\n\n 142\n\n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as\nof the date first written above.\n\n INVESTOR:\n\n SEQUOIA CAPITAL FRANCHISE PARTNERS\n\n By: SCFF Management, LLC\n A Delaware Limited Liability Company\n Its General Partner\n\n\n\n By:\n -----------------------------------\n Managing Member\n\n\n\n [SIGNATURE PAGE TO\n FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]\n\n 143\n\n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as\nof the date first written above.\n\n INVESTOR:\n\n SEQUOIA CAPITAL IX\n\n By: SC IX Management, LLC\n A Delaware Limited Liability Company\n Its General Partner\n\n\n\n By:\n -----------------------------------\n Managing Member\n\n\n\n [SIGNATURE PAGE TO\n FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]\n\n 144\n\n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as\nof the date first written above.\n\n INVESTOR:\n\n SEQUOIA CAPITAL ENTREPRENEURS FUND\n\n By: SC IX Management, LLC\n A Delaware Limited Liability Company\n Its General Partner\n\n\n\n By:\n -----------------------------------\n Managing Member\n\n\n\n [SIGNATURE PAGE TO\n FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]\n\n 145\n\n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as\nof the date first written above.\n\n INVESTOR:\n\n SEQUOIA CAPITAL IX PRINCIPALS FUND\n\n By: SC IX Management, LLC\n A Delaware Limited Liability Company\n Its General Partner\n\n\n\n By:\n -----------------------------------\n Managing Member\n\n\n\n [SIGNATURE PAGE TO\n FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]\n\n 146\n\n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as\nof the date first written above.\n\n\n INVESTOR:\n\n MONACO PARTNERS L.P.\n A Nevada limited partnership\n\n\n\n By:\n ----------------------------------------\n Secretary\n\n\n\n [SIGNATURE PAGE TO\n FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]\n\n 147\n\n EXHIBIT A\n\n LIST OF SERIES B PURCHASERS\n\n\n\n<\/pre>\n
\n\n NUMBER OF SHARES OF
\nNAME AND ADDRESS SERIES B STOCK
\n——————————————- ——————-
\n
\nSequoia Capital Franchise Fund 6,688,000
\n3000 Sand Hill Road, 4-280
\nMenlo Park, California 94025<\/p>\nSequoia Capital Franchise Partners 912,000
\n3000 Sand Hill Road, 4-280
\nMenlo Park, California 94025<\/p>\n
Sequoia Capital IX 4,482,600
\n3000 Sand Hill Road, 4-280
\nMenlo Park, California 94025<\/p>\n
Sequoia Capital Entrepreneurs Fund 690,000
\n3000 Sand Hill Road, 4-280
\nMenlo Park, California 94025<\/p>\n
Sequoia Capital IX Principals Fund 827,400
\n3000 Sand Hill Road, 4-280
\nMenlo Park, California 94025<\/p>\n
Monaco Partners, L.P. 4,000,000
\n2025 Garcia Avenue
\nMountain View, California 94043<\/p>\n
Allen & Company Incorporated 348,000
\n711 5th Avenue
\nNew York, New York 10022
\nAttn: Eran Ashany<\/p>\n
Bayview 99 I, L.P. 108,328
\n555 California Street, Suite 2600
\nSan Francisco, California 94104
\nAttn: Richard Innenberg<\/p>\n
Bayview 99 II, L.P. 91,672
\n555 California Street, Suite 2600
\nSan Francisco, California 94104
\nAttn: Richard Innenberg
\n<\/c><\/s><\/caption>\n<\/table>\n
148<\/p>\n
\n
\nAlan Ramadan 20,000
\n151 Lark Lane
\nMill Valley California 94941<\/p>\nBarry Weinman 20,000
\nMedia Technology Ventures \/ AVI Management
\nOne First St., Suite 2
\nLos Altos, California 94022<\/p>\n
TOTALS: 18,188,000
\n<\/c><\/s><\/table>\n
149<\/p>\n
EXHIBIT B<\/p>\n
LIST OF ATOM SHAREHOLDERS<\/p>\n
150<\/p>\n
EXHIBIT C<\/p>\n
LIST OF WARRANT HOLDERS<\/p>\n
151
\n EXHIBIT H<\/p>\n
AMENDMENT TO ATOM OPTION<\/p>\n
The undersigned holds an option to purchase __________ shares of Common
\nStock (the “OPTION”) of Atom Corporation, a Washington corporation (the
\n“COMPANY”). The undersigned acknowledges that the undersigned has knowledge of
\nthe proposed merger (the “MERGER”) between the Company and Shockwave.com, Inc.,
\na Delaware corporation (“SHOCKWAVE”), pursuant to that certain Agreement and
\nPlan of Reorganization dated as of December 14, 2000 between the Company and
\nShockwave (the “MERGER AGREEMENT”). The undersigned hereby further acknowledges
\nthat, pursuant to the terms of Section 11(c) of the Amended and Restated 1998
\nStock Option Plan of the Company (the “ATOM PLAN”), the undersigned may be
\nentitled to receive (1) acceleration of 50% of the unvested shares subject to
\nthe Option upon the consummation of the Merger, and (2) full acceleration of the
\nunvested shares subject to the Option in the event that, within twelve months of
\nthe consummation of the Merger, the undersigned’s employment is terminated by
\nthe Company other than for Cause (as defined in the Atom Plan), or by the
\nundersigned for Good Reason (as defined in the Atom Plan). The undersigned will
\nbe employed by Shockwave as an at-will employee following the Merger, and the
\nOption will be assumed by Shockwave and converted into an option to purchase
\nshares of Shockwave Common Stock on the terms and conditions provided in the
\nMerger Agreement. In consideration for such employment and the assumption of the
\nOption, the undersigned hereby waives any right to receive the acceleration
\ndescribed in this paragraph.<\/p>\n
Dated: January ___, 2001<\/p>\n
——————————–
\n[Name of Executive Officer]
\n 152
\n EXHIBIT I<\/p>\n
SUBSTANTIVE PROVISIONS OF LEGAL OPINION
\n OF COUNSEL FOR SHOCKWAVE<\/p>\n
[Subject to standard qualifications and assumptions of Fenwick & West LLP, the
\ndisclosures made in the Shockwave Disclosure Letter and the approval of the
\nFenwick & West LLP opinion committee]<\/p>\n
1. Shockwave is a corporation duly organized, validly existing and in
\ngood standing under the laws of the State of Delaware. Shockwave has the
\ncorporate power and authority to own, operate and lease its properties and to
\ncarry on its business as presently conducted and, to our knowledge, is qualified
\nto transact business and is in good standing in each jurisdiction where the
\ncharacter of the properties owned, leased or operated by it or the nature of its
\nactivities make such qualification necessary, except in any jurisdiction in
\nwhich the failure to so qualify would not be reasonably expected to have a
\nMaterial Adverse Effect on Shockwave.<\/p>\n
2. Shockwave has all requisite corporate power and authority to enter
\ninto, execute, deliver, and perform its obligations under the Merger Agreement
\nand the Shockwave Ancillary Agreements, and to consummate the Merger and the
\nother transactions contemplated by the Merger Agreement. The Merger and the
\nexecution, delivery and performance of the Merger Agreement and each Shockwave
\nAncillary Agreement by Shockwave have been duly and validly approved and
\nauthorized by all necessary corporate action on the part of Shockwave’s Board of
\nDirectors and its stockholders, in accordance with applicable law and
\nShockwave’s Certificate of Incorporation and Bylaws, each as currently in
\neffect.<\/p>\n
3. No consent, approval, order or authorization of, or registration,
\ndeclaration or filing with, any Governmental Authority is necessary or required
\nto be made or obtained by Shockwave to enable Shockwave to lawfully execute and
\ndeliver, enter into, and to perform its obligations under the Merger Agreement
\nor the Shockwave Ancillary Agreements, or to consummate the Merger and the other
\ntransactions contemplated by the Merger Agreement, except for: (a) the filing of
\nthe Articles of Merger with the Washington Secretary of State; and (b) the
\nfiling of the Certificate of Merger with the Delaware Secretary of State.<\/p>\n
4. The Merger Agreement and the Shockwave Ancillary Agreements have been
\nvalidly executed and delivered by Shockwave. The Merger Agreement and each of
\nthe Shockwave Ancillary Agreements are valid and binding obligations of
\nShockwave, enforceable against Shockwave in accordance with their respective
\nterms.<\/p>\n
5. Immediately prior to the Effective Time, the authorized capital stock
\nof Shockwave consists entirely of __________ shares of Shockwave Common Stock,
\nof which, to our knowledge, a total of __________ shares are issued and
\noutstanding; __________ shares of Shockwave Preferred Stock, 34,581,500 shares
\nof which have been<\/p>\n
153<\/p>\n
designated Series A Preferred Stock, of which, to our knowledge, 34,581,500
\nshares are issued and outstanding; 21,800,000 shares of which have been
\ndesignated Series B Preferred Stock, of which, to our knowledge, 20,080,500
\nshares are issued and outstanding; and __________ shares of which have been
\ndesignated Series C Preferred Stock, of which, to our knowledge, no shares are
\nissued and outstanding. An aggregate of 17,400,500 shares of Shockwave Common
\nStock are reserved and authorized for issuance pursuant to the Shockwave 1999
\nEquity Incentive Plan, of which, to our knowledge, options to purchase a total
\nof __________ shares of Shockwave Common Stock are outstanding. To our
\nknowledge, there are options to purchase a total of __________ shares of
\nShockwave Common Stock that were granted outside of the Shockwave 1999 Equity
\nIncentive Plan. To our knowledge, warrants to purchase __________ shares of
\nShockwave Common Stock are outstanding.<\/p>\n
6. All issued and outstanding shares of Shockwave Common Stock and
\nShockwave Preferred Stock have been duly authorized and validly issued, are
\nfully paid and nonassessable, to our knowledge are not subject to any preemptive
\nright, right of first refusal, right of first offer or right of rescission
\npursuant to any agreement to which Shockwave is a party, and have been offered,
\nissued, sold and delivered by Shockwave in compliance with all registration or
\nqualification requirements (or applicable exemptions therefrom) of U.S. federal
\nand California state securities laws. All shares of Shockwave Common Stock and
\nShockwave Preferred Stock subject to issuance under Shockwave options and
\nwarrants, upon issuance on the terms and conditions specified in the instruments
\npursuant to which they are issuable and assuming no change in the Shockwave
\nCertificate of Incorporation or Bylaws or in applicable laws, will be duly
\nauthorized, validly issued, fully paid and nonassessable. All outstanding
\noptions and warrants to purchase Shockwave Common Stock have been issued and
\ngranted in compliance with all registration or qualification requirements (or
\napplicable exemptions therefrom) of all applicable securities laws.<\/p>\n
7. To our knowledge, other than as set forth in paragraph 5 above, there
\nare no options, warrants, convertible securities or other securities, calls,
\ncommitments, conversion privileges, preemptive rights, rights of first refusal,
\nrights of first offer or other rights or agreements outstanding to purchase or
\notherwise acquire (whether directly or indirectly) any shares of Shockwave’s
\nauthorized but unissued capital stock to which Shockwave is a party or any
\nsecurities convertible into or exchangeable for any shares of Shockwave’s
\ncapital stock or obligating Shockwave to grant, issue, extend, or enter into any
\nsuch option, warrant, convertible security or other security, call, commitment,
\nconversion privilege, preemptive right, right of first refusal, right of first
\noffer or other right or agreement, and there is no liability for dividends
\naccrued but unpaid. Except as contemplated by the Agreement, to our knowledge,
\nthere are no voting agreements, voting trusts or proxies applicable to any of
\nShockwave’s outstanding capital stock or any Shockwave options or to the
\nconversion of any shares of Shockwave’s capital stock in the Merger pursuant to
\nany agreement or obligation to which Shockwave is a party. To our knowledge,
\nShockwave is not under any obligation to register under the Securities Act any
\nof its presently outstanding shares of stock or other securities or any stock or
\nother securities that may be subsequently issued.<\/p>\n
154<\/p>\n
8. Neither the execution and delivery of this Agreement nor any of the
\nShockwave Ancillary Agreements by Shockwave, nor the consummation of the Merger
\nor the other transactions contemplated hereby or thereby, conflict with, or
\n(with or without notice or lapse of time, or both) result in a termination,
\nbreach, impairment or violation of, or constitute a default under: (a) any
\nprovision of the Certificate of Incorporation or Bylaws of Shockwave, as
\ncurrently in effect; (b) to our knowledge, any material U.S. federal or
\nCalifornia state judgment, writ, decree, order, statute, rule or regulation
\napplicable to Shockwave or any of its material assets or properties; or (c) any
\nShockwave Material Agreement.<\/p>\n
9. To our knowledge, there is no action, suit, arbitration, mediation,
\nproceeding, claim or investigation pending against Shockwave (or against any
\nofficer, director, employee or agent of Shockwave in his or her capacity as such
\nor relating to his or her employment, services or relationship with Shockwave)
\nbefore any Governmental Authority or arbitrator which, if decided adversely,
\nwould have a Material Adverse Effect on Shockwave. To our knowledge, there is no
\njudgment, decree, injunction, rule or order of any Governmental Authority or
\narbitrator outstanding against Shockwave that has a Material Adverse Effect on
\nShockwave.
\n 155
\n EXHIBIT J<\/p>\n
SUBSTANTIVE PROVISIONS OF LEGAL OPINION
\n OF COUNSEL FOR ATOM<\/p>\n
[Subject to standard qualifications and assumptions of Venture Law Group, the
\ndisclosures made in the Atom Disclosure Letter and the approval of the Venture
\nLaw Group opinion committee.]<\/p>\n
1. Atom is a corporation duly organized and validly existing under the
\nlaws of the State of Washington. Atom has the corporate power and authority to
\nown, operate and lease its properties and to carry on its business as presently
\nconducted and, to our knowledge, is qualified to transact business and is in
\ngood standing in each jurisdiction where the character of the properties owned,
\nleased or operated by it or the nature of its activities make such qualification
\nnecessary, except in any jurisdiction in which the failure to so qualify would
\nnot be reasonably expected to have a Material Adverse Effect on Atom.<\/p>\n
2. To our knowledge, except as set forth in Schedule 3.2 to the Atom
\nDisclosure Letter, Atom has no Subsidiaries or any equity interest, direct or
\nindirect, in or loans to, any corporation, partnership, joint venture, limited
\nliability company or other business entity.<\/p>\n
3. Atom has all requisite corporate power and authority to enter into,
\nexecute, deliver, and perform its obligations under the Merger Agreement and the
\nAtom Ancillary Agreements, and to consummate the Merger and the other
\ntransactions contemplated by the Merger Agreement. The Merger and the execution,
\ndelivery and performance of the Merger Agreement and each Atom Ancillary
\nAgreement by Atom have been duly and validly approved and authorized by all
\nnecessary corporate action on the part of Atom’s Board of Directors and its
\nshareholders, in accordance with applicable law and Atom’s Articles of
\nIncorporation and Bylaws, each as currently in effect.<\/p>\n
4. No consent, approval, order or authorization of, or registration,
\ndeclaration or filing with, any Governmental Authority is necessary or required
\nto be made or obtained by Atom to enable Atom to lawfully execute and deliver,
\nenter into, and to perform its obligations under the Merger Agreement or the
\nAtom Ancillary Agreements, or to consummate the Merger and the other
\ntransactions contemplated by the Merger Agreement.<\/p>\n
5. The Merger Agreement and the Atom Ancillary Agreements have been
\nvalidly executed and delivered by Atom. The Merger Agreement and each of the
\nAtom Ancillary Agreements are valid and binding obligations of Atom, enforceable
\nagainst Atom in accordance with their respective terms.<\/p>\n
6. Immediately prior to the Effective Time, the authorized capital stock
\nof Atom consists entirely of 25,000,000 shares of Atom Common Stock, of which,
\nto our<\/p>\n
156<\/p>\n
knowledge, a total of __________ shares are issued and outstanding; __________
\nshares of Atom Preferred Stock, 800,000 shares of which have been designated
\nSeries A Preferred Stock, of which, to our knowledge, 727,500 shares are issued
\nand outstanding; 4,000,000 shares of which have been designated Series B
\nPreferred Stock, of which, to our knowledge, 3,789,057 shares are issued and
\noutstanding; 5,000,000 shares of which have been designated Series C Preferred
\nStock, of which, to our knowledge, 5,000,000 shares are issued and outstanding;
\nand __________ shares of which have been designated Series D Preferred Stock, of
\nwhich, to our knowledge, __________ shares are issued and outstanding. To our
\nknowledge, the numbers of issued and outstanding shares of Atom Common Stock and
\nAtom Preferred Stock held by each of the Atom Shareholders are set forth in
\nAttachment 1 hereto. To our knowledge, except as expressly set forth on
\nAttachment 1, no shares of Atom Common Stock or Atom Preferred Stock are issued
\nor outstanding. An aggregate of 4,750,000 shares of Atom Common Stock are
\nreserved and authorized for issuance pursuant to the Atom Plan, of which, to our
\nknowledge, options to purchase a total of __________ shares of Atom Common Stock
\nare outstanding. To our knowledge, Non-Plan Options to purchase a total of
\n128,000 shares of Atom Common Stock are outstanding. To our knowledge, Atom
\nWarrants to purchase 75,948 shares of Atom Common Stock and __________ shares of
\nAtom Preferred Stock are outstanding. To our knowledge, Schedule 3.4(a)-2 of the
\nAtom Disclosure Letter lists for each person who holds Atom Options and Atom
\nWarrants, the name of the holder of each such Atom Option and Atom Warrant, the
\nexercise price for each such Atom Option and Atom Warrant, the number of shares
\nor other securities covered by each such Atom Option and Atom Warrant, and the
\nvesting schedule and the extent each such Atom Option and Atom Warrant are
\nvested as of the Agreement Date. The vesting or exercisability (or any other
\nmaterial terms) of any Atom Option, except as disclosed in the Atom Disclosure
\nLetter, will not accelerate or otherwise change as a result of the execution and
\ndelivery of the Merger Agreement or the consummation of the Merger or the other
\ntransactions contemplated by the Merger Agreement or the occurrence of any
\nsubsequent event (such as the termination of employment of the option holder
\nfollowing consummation of the Merger). To our knowledge, except for the Non-Plan
\nOptions, no Atom Options have been granted or are outstanding except under and
\npursuant to the Atom Plan. Atom has issued convertible promissory notes with an
\naggregate principal amount of $__________, which are convertible into _________
\nshares of Atom Preferred Stock.<\/p>\n
7. All issued and outstanding shares of Atom Common Stock and Atom Preferred
\nStock have been duly authorized and validly issued, are fully paid and
\nnonassessable, to our knowledge are not subject to any preemptive right, right
\nof first refusal, right of first offer or right of rescission pursuant to any
\nagreement to which Atom is a party, and have been offered, issued, sold and
\ndelivered by Atom in compliance with all registration or qualification
\nrequirements (or applicable exemptions therefrom) of U.S. federal, California
\nand Washington state securities laws. All shares of Atom Common Stock and Atom
\nPreferred Stock subject to issuance under Atom options and warrants, upon
\nissuance on the terms and conditions specified in the instruments pursuant to
\nwhich they are issuable and assuming no change in the Atom Articles of
\nIncorporation or Bylaws or in applicable laws, will be duly authorized, validly
\nissued, fully paid and nonassessable. All outstanding Atom Options and Atom
\nWarrants have been issued and<\/p>\n
157<\/p>\n
granted in compliance with all registration or qualification requirements (or
\napplicable exemptions therefrom) of all applicable securities laws.<\/p>\n
8. To our knowledge, other than as set forth in paragraph 6 above, there
\nare no options, warrants, convertible securities or other securities, calls,
\ncommitments, conversion privileges, preemptive rights, rights of first refusal,
\nrights of first offer or other rights or agreements outstanding to purchase or
\notherwise acquire (whether directly or indirectly) any shares of Atom’s
\nauthorized but unissued capital stock to which Atom is a party or any securities
\nconvertible into or exchangeable for any shares of Atom’s capital stock or
\nobligating Atom to grant, issue, extend, or enter into any such option, warrant,
\nconvertible security or other security, call, commitment, conversion privilege,
\npreemptive right, right of first refusal, right of first offer or other right or
\nagreement, and there is no liability for dividends accrued but unpaid. Except as
\ncontemplated by the Agreement, to our knowledge, there are no voting agreements,
\nvoting trusts or proxies applicable to any of Atom’s outstanding capital stock
\nor any Atom Options or to the conversion of any shares of Atom’s capital stock
\nin the Merger pursuant to any agreement or obligation to which Atom is a party.
\nTo our knowledge, Atom is not under any obligation to register under the
\nSecurities Act any of its presently outstanding shares of stock or other
\nsecurities or any stock or other securities that may be subsequently issued.<\/p>\n
9. Neither the execution and delivery of the Merger Agreement or any of
\nthe Atom Ancillary Agreements by Atom, nor the consummation of the Merger or the
\nother transactions contemplated hereby or thereby, conflict with, or (with or
\nwithout notice or lapse of time, or both) result in a termination, breach,
\nimpairment or violation of, or constitute a default under (a) any provision of
\nthe Articles of Incorporation or Bylaws of Atom, as currently in effect; (b) to
\nour knowledge, any material U.S. federal, California or Washington state
\njudgment, writ, decree, order, statute, rule or regulation applicable to Atom or
\nany of its material assets or properties; or (c) any Atom Material Agreement.<\/p>\n
10. To our knowledge, there is no action, suit, arbitration, mediation,
\nproceeding, claim or investigation pending against Atom (or against any officer,
\ndirector, employee or agent of Atom in his or her capacity as such or relating
\nto his or her employment, services or relationship with Atom) before any
\nGovernmental Authority or arbitrator which, if decided adversely, would have a
\nMaterial Adverse Effect on Atom. To our knowledge, there is no judgment, decree,
\ninjunction, rule or order of any Governmental Authority or arbitrator
\noutstanding against Atom that has a Material Adverse Effect on Atom.
\n 158
\n EXHIBIT K<\/p>\n
EMPLOYMENT AND NONCOMPETITION AGREEMENT<\/p>\n
This EMPLOYMENT AND NONCOMPETITION AGREEMENT (this “AGREEMENT”) is made by
\nand among Shockwave.com, Inc., a Delaware corporation (“SHOCKWAVE”), Atom
\nCorporation, a Washington corporation (“ATOM”), and __________ (“EMPLOYEE”) on
\nthe Employment Effective Date (as defined below) and binds the parties to the
\nterms and provisions hereof as of such date.<\/p>\n
RECITALS<\/p>\n
This Agreement is contingent upon and is entered into in connection with an
\nAgreement and Plan of Reorganization, dated as of December 14, 2000 (the “MERGER
\nAGREEMENT”), by and between Shockwave and Atom, pursuant to which Atom is to
\nmerge with and into Shockwave. The employment relationship between Shockwave and
\nEmployee provided for by this Agreement shall commence as of the Effective Time
\nof the Merger, as set forth in the Merger Agreement (the “EMPLOYMENT EFFECTIVE
\nDATE”). Capitalized terms used herein and not defined herein shall have the
\nmeanings set forth in the Merger Agreement. This Agreement shall be null and
\nvoid if the Merger does not occur by January 31, 2001.<\/p>\n
Employee has been one of a very select group of key and senior management
\nemployees of Atom and is a significant owner of outstanding capital stock and\/or
\nan option to purchase shares of capital stock of Atom. The parties hereto
\nrecognize that Employee has unique knowledge and experience regarding Atom’s
\nbusiness, and Shockwave and Atom desire to be assured that confidential
\ninformation pertaining to Atom’s business and the goodwill of Atom will be
\npreserved and protected and will inure to the benefit of Shockwave. Employee
\nacknowledges that the promises and restrictive covenants that Employee is
\nproviding in this Agreement are reasonable and necessary to the protection of
\nShockwave’s and Atom’s business and Shockwave’s legitimate interests in
\nacquiring Atom pursuant to the Merger Agreement. Employee acknowledges that, in
\nconnection with the acquisition of Atom and the employment of Employee by
\nShockwave or Atom, he is receiving substantial capital stock equity and other
\nbenefits for the consummation of the Merger Agreement, which benefits constitute
\nadequate consideration for the covenants in this Agreement.<\/p>\n
Shockwave desires to retain the services of Employee from and after the
\nEmployment Effective Date, and Employee desires to become and remain employed by
\nShockwave from and after the Employment Effective Date. Employee understands and
\nacknowledges that as an inducement for, and a material condition to, the merger
\nof Shockwave and Atom, Employee is entering into this Agreement and agrees and
\napproves to the terms and conditions set forth herein.<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
\nof the parties contained herein, Shockwave, Atom and Employee hereby agree as
\nfollows:<\/p>\n
1. Employment. Shockwave will employ Employee and Employee accepts
\nemployment with Shockwave during the period (the “INITIAL PERIOD”) commencing on
\nthe<\/p>\n
159<\/p>\n
Employment Effective Date and ending on the second anniversary of the Employment
\nEffective Date (the “APPLICABLE DATE”), unless Employee’s employment is sooner
\nterminated in accordance with this Agreement. Subject to Section 10 below,
\nEmployee’s employment may be terminable by either party at will, with or without
\nCause (as defined below). It is specifically agreed to by Employee that Employee
\nwill become an employee of Shockwave at the Employment Effective Date and that
\nthe transfer of his employment at any time to any parent or subsidiary of, or
\nsuccessor corporation to, Shockwave shall be expressly permitted pursuant to
\nthis Agreement and that in the event of such a transfer, references to Shockwave
\nas the employer shall be deemed references to such other parent or subsidiary or
\nsuccessor to Shockwave as the employer. Employee agrees that the termination of
\nhis employment with Atom to effect the transfer of his employment from Atom to
\nShockwave at the Employment Effective Date or from Shockwave to any parent,
\nsubsidiary or successor of Shockwave thereafter shall not constitute a
\ntermination of his employment under this Agreement. Notwithstanding the
\nforegoing, nothing in this Section shall affect Employee’s ability to Quit for
\nGood Reason as that term is defined in Section 10 below. Obligations of
\nShockwave, Atom and Employee set forth in (a) the Employee Invention Assignment
\nand Confidentiality Agreement, a copy of which is attached to this Agreement as
\nExhibit A (the “EMPLOYEE INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT”)
\n(referring to confidentiality), and (b) the following Sections of this
\nEmployment Agreement: Section 10 (referring to termination), Section 13
\n(referring to dispute resolution) and Section 8 (referring to reimbursement of
\nexpenses), will survive the termination of Employee’s employment, regardless of
\nthe circumstances or reasons for such termination.<\/p>\n
2. Duties. Employee will be an employee of Shockwave and will initially
\nserve as __________, reporting to the __________ of Shockwave. Employee agrees
\nthat, to the best of his ability and experience, he will at all times
\nconscientiously perform all of the duties and obligations assigned to him under
\nthis Agreement. Employee consents to the use by Shockwave or any parent or
\nsubsidiary for any legitimate corporate reason of Employee’s name or likeness or
\nany body of work, awards or other recognition in connection with Employee’s
\nduties to Atom, Shockwave, their affiliates, joint ventures or participating
\nprojects during the term of Employee’s employment with Shockwave.<\/p>\n
3. Full-time Employment. Employee’s employment will be on a full-time
\nbasis, in accordance with standard employee policies of Shockwave, except during
\nvacation time, any periods of illness and authorized leaves of absence. Employee
\nmay engage in managing his personal finances and investments, serving on Boards
\nof Directors or Advisors, and other outside activities such as participation in
\ncharitable and civic activities, provided that such activities do not materially
\ndetract from Employee’s ability to fulfill his obligations to Shockwave and do
\nnot represent a conflict of interest with Shockwave.<\/p>\n
4. Base Salary and Bonus. Employee’s base salary for the period
\ncommencing on the Employment Effective Date will be no less than __________
\n($_____) per year which is Employee’s base salary on the date Employee enters
\ninto this Agreement, payable on Shockwave’ regular payroll dates, less required
\nwithholdings. Such base salary will be reviewed jointly by Employee and
\nShockwave at least annually. Employee will also be eligible to an annual bonus
\nof up to __________ ($_____) under a policy based upon Shockwave’s meeting its<\/p>\n
2
\n 160<\/p>\n
operating plan on a quarterly basis. Such bonus, if earned, shall be paid within
\nsixty (60) days of the end of each fiscal quarter. Provided however that
\nEmployee shall be guaranteed to receive bonus payments of at least __________
\n($_____) within Employees first twelve (12) months of employment with Shockwave
\npursuant to the terms of this Agreement.<\/p>\n
5. Relocation. Employee acknowledges and agrees that an express condition
\nof this Agreement is Employee’s relocation to the San Francisco, California area
\nwithin 180 days of the Effective Time of the Merger, provided, however, that
\nEmployee agrees to make himself reasonably physically available in San Francisco
\nduring regular business days and hours beginning no later than 90 days of the
\nEffective Time of Merger. Shockwave shall reimburse all of Employee’s reasonable
\nexpenses associated with relocating to the San Francisco area. Reasonable
\nexpenses shall include airfare for Employee and Employee’s spouse\/domestic
\npartner, hotel, cab, car rental, and dining expenses for three house hunting
\ntrips; packing and shipment of household goods; temporary living expenses in the
\nSan Francisco area up to 180 day; reimbursement of closing costs, including real
\nestate commissions, on the sale of his home in the Seattle area as well as
\nreimbursement for the closing costs incurred in connection with the purchase of
\na home in the San Francisco area; reimbursement of the cost associated with
\nbreaking a lease of a prior residence in order to relocate to San Francisco;
\nassistance in finding a rental home in the San Francisco area; economy class
\nairfare to move Employee and his immediate family or domestic partner and tax
\nplanning assistance in connection with the move. The total amount of relocation
\nexpenses that Shockwave pays to Employee pursuant to this Section 5 shall not
\nexceed __________ ($_____).<\/p>\n
6. Stock Options.<\/p>\n
(a)(1). Atom Options. Prior to the date of this Agreement and pursuant
\nto Atom’s 1998 Stock Option Plan (the “ATOM PLAN”), Employee was granted options
\nby Atom to purchase shares of Atom Common Stock (such options are referred to
\nherein as the “ATOM OPTIONS”). Such Atom Options shall be treated in the manner
\nset forth in the Merger Agreement. Employee expressly and forever waives any
\nacceleration of vesting of his Atom Options provided for in any other agreement
\nbetween Employee and Atom, including his Atom Option Plan Stock Option Agreement
\n(the “OPTION AGREEMENT”), his employment offer letter or employment agreement
\n(if any), and\/or in Section 11(c)(ii) of the Atom Option Plan. However, Employee
\nshall receive the following acceleration of vesting of his Atom Options:<\/p>\n
(i) the vesting provided for in the November 28, 2000 Action by
\nUnanimous Written Consent of the Compensation Committee of the Board of
\nDirectors of Atom Corporation (the “RESOLUTION”). Specifically, pursuant to the
\nterms of that Resolution and with respect to Atom Options granted prior to the
\nResolution, the number of shares that would have vested in the twenty (20)
\nmonths following the Effective Time of the Merger pursuant to Employee’s Option
\nAgreement shall vest and become exercisable prior to the Effective Time of the
\nMerger and will remain exercisable pursuant to the terms of the Atom Plan.
\nAdditional Atom Options shall vest ratably over a term determined by subtracting
\ntwenty (20) months from the total months remaining for vesting of the Atom
\nOptions prior to the Effective Time of the Merger; and<\/p>\n
3<\/p>\n
161<\/p>\n
Immediately preceding the Effective Time of the Merger, Employee
\nshall receive an additional option to purchase ____ shares of Atom Common Stock
\n(the “New Option”), as provided in the Resolution. The New Option shall vest as
\nfollows: fifty percent (50%) shall vest on the Closing Date, and so long as
\nEmployee remains an employee of Shockwave, twenty-five percent (25%) shall vest
\nthree (3) months after the Effective Time of the Merger and the remainder shall
\nvest six (6) months after the Effective Time of the Merger. However, the New
\nOptions shall fully vest if Employee is terminated without Cause (as defined
\nbelow, the definition of Cause in the Atom Option Plan being hereby superceded)
\nor Quits for Good Reason (as defined below, the definition Good Reason in the
\nAtom Option plan being hereby superceded).<\/p>\n
Any remaining Atom options shall be assumed by Shockwave.<\/p>\n
(b). Shockwave Options. Immediately following the Effective Time of
\nthe Merger, Employee shall receive a nonstatutory stock option under the
\nShockwave Stock Incentive Plan to purchase __________ (_____) shares of
\nShockwave common stock. The option will vest monthly over a four year period in
\naccordance with Shockwave’s 1999 Equity Incentive Plan.<\/p>\n
7. Employee Benefits. Employee will be entitled to insurance, vacation
\nand other benefits commensurate with Employee’s position in accordance with
\nShockwave’s standard employee policies in effect from time to time. Employee’s
\naccrued vacation at Atom shall be honored by Shockwave. Employee’s prior service
\nwith Atom shall be acknowledged by Shockwave in determining Employee’s
\nparticipation and eligibility for benefits under Shockwave employment policies
\nand benefit plans and programs. Employee has received a summary of such standard
\nemployee benefits policies in effect as of the date hereof.<\/p>\n
8. Reimbursement of Business Expenses. Shockwave will, in accordance with
\nShockwave’s policies in effect from time to time, reimburse Employee for all
\nreasonable business expenses incurred by Employee in connection with the
\nperformance of his duties under this Agreement, upon submission of the
\ndocumentation required pursuant to such standard policies and record keeping
\nprocedures.<\/p>\n
9. Confidentiality. Simultaneously with the execution of this Agreement,
\nEmployee is executing and delivering and hereby adopts and agrees to be bound by
\nthe Employee Invention Assignment and Confidentiality Agreement.<\/p>\n
10. Termination of Employment.<\/p>\n
(a) By the Employee. Employee may terminate his employment at any
\ntime, provided that Employee provides thirty days advance written notice to
\nShockwave of such termination. Employee shall be entitled to receive all accrued
\nand unpaid salary and vacation and earned commissions upon such termination.<\/p>\n
(b) By the Employer . Shockwave may terminate Employee’s employment
\nat any time with “Cause” (as defined below) upon written notice to Employee and
\nupon thirty days<\/p>\n
4
\n 162<\/p>\n
advance written notice to Employee if without Cause. If Shockwave terminates
\nEmployee for Cause, this Agreement shall terminate and Employee shall not be
\nentitled to any further benefits hereunder, except for accrued and unpaid salary
\nand vacation.<\/p>\n
For purposes of this Agreement, “CAUSE” shall mean:<\/p>\n
(i) Employee’s willful misconduct in the performance of
\nEmployee’s material duties, including Employee’s failure to follow the
\nreasonable and lawful directions of the person to whom Employee reports which
\nare consistent with Employee’s position and duties, provided that (a) Employee
\nis given written notice from Shockwave setting forth with reasonable specificity
\nsuch misconduct or failure and giving Employee notice that failure to cure such
\nmisconduct or failure will result in termination of Employee for Cause, and (b)
\nEmployee’s failure to correct the behavior described in the notice within 15
\nbusiness days following receipt of such notice;<\/p>\n
(ii) Employee’s commission of a felony offense, plea of “guilty”
\nor “no contest” to a felony offense or commission of any unlawful act which
\nwould be materially detrimental to the reputation of Shockwave or its
\naffiliates, or a material act of dishonesty, fraud, embezzlement,
\nmisappropriation or financial dishonesty against Shockwave or its affiliates;<\/p>\n
(iii) Employee’s material breach of this Agreement, the Employee
\nInvention Assignment and Confidentiality Agreement, or any other material
\nwritten agreement between Shockwave and Employee, or Employee’s material breach
\nor violation of any lawful material employment policy of Shockwave, including
\nthose prohibiting harassment of another employee, provided that any such
\nShockwave employment policies are not inconsistent with the provisions of this
\nAgreement; or<\/p>\n
(iv) Employee’s failure to relocate to the San Francisco,
\nCalifornia area within 180 days of the Effective Time of the Merger, or make
\nhimself reasonably physically available in San Francisco during regular business
\ndays and hours beginning no later than 90 days of the Effective Date of Merger.<\/p>\n
(c) By the Employee for Good Reason. For purposes of this Agreement,
\nEmployee shall be deemed to have “QUIT FOR GOOD REASON” if her terminates his
\nemployment within 30 days of any of the following events which occur within two
\nyears following the Effective Time of the Merger:<\/p>\n
(i) a material adverse change in Employee’s responsibilities,
\nduties, title or reporting relationship as of the time immediately following the
\nEmployment Effective Date, provided, however, that a change of the individual
\nperson to whom Employee reports will not constitute a material adverse change,
\nand provided further, that Employee’s acceptance of the position set forth in
\nSection 1 above shall not constitute a material adverse change;<\/p>\n
(ii) Shockwave (or parent, subsidiary, successor or other
\naffiliate) requires Employee to relocate to a facility or location more than 35
\nmiles from<\/p>\n
5
\n 163<\/p>\n
Employee’s place of employment at the time of such request (provided that a
\nrequest by Shockwave that Employee relocate to the San Francisco area shall not
\nconstitute such a prohibited request); or<\/p>\n
(iii) a material reduction in Employee’s then current base salary
\nor bonus opportunity provided, however, that Employee’s failure to earn a bonus
\ndoes not constitute a material reduction in his bonus opportunity, and provided
\nfurther, that a broader reduction applicable to similarly situated employees by
\nthe same percentage, but not more than 10% of Employee’s current base salary, as
\npart of a general salary reduction shall not constitute such a salary reduction.<\/p>\n
(d) Upon Death or Disability. If Employee dies or becomes disabled
\nduring the term of this Agreement, Shockwave will pay his estate, in the case of
\nhis death, or Employee, in the case of his disability, an amount equal to all
\nsalary, bonuses, earned commissions and benefits accrued through the date of
\ntermination. To the extent consistent with the requirements of the Americans
\nwith Disabilities Act, Employee shall be considered to be disabled for purposes
\nof this Agreement if he is unable by reason of accident or illness (including
\nmental illness) to perform the material duties of his regular position with
\nShockwave and is (i) not expected to recover from his disability within a period
\nof six (6) months from the commencement of the disability; or (ii) not expected
\nto be able to perform his material duties of his regular position with Shockwave
\nfor a period of six (6) months in any consecutive twelve (12) month period as a
\nresult of the same disability. If, at any time Employee claims or is claimed to
\nbe so disabled, a physician acceptable to both Employee, or his personal
\nrepresentative, and Shockwave (which acceptances shall not be unreasonably
\nwithheld) shall be retained by Shockwave and shall examine Employee. Employee
\nshall cooperate fully with the physician. If the physician determines that
\nEmployee is so disabled, the physician shall deliver to Shockwave and to
\nEmployee a certificate certifying both that Employee is so disabled and the date
\nupon which the condition of disability commenced. The determination of the
\nphysician shall be conclusive.<\/p>\n
(e) Termination Benefits. If Shockwave terminates Employee prior to
\nthe Applicable Date and such termination is not for Cause; or if Employee Quits
\nfor Good Reason (as defined above) Shockwave will pay to Employee his earned but
\nunpaid salary (and commissions, as applicable) and accrued vacation. In
\naddition, if Shockwave terminates Employee prior to the Applicable Date and such
\ntermination is not for Cause, or if Employee Quits for Good Reason prior to the
\nApplicable Date, and in either instance Employee executes a complete waiver of
\nclaims in a the standard form used by Shockwave, Employee shall received the
\nfollowing “TERMINATION BENEFITS”:<\/p>\n
(i) a severance amount equal to six (6) months (the “SEVERANCE
\nPERIOD”) base salary. Such severance salary continuation payment shall be paid
\nat the rate and on the payroll schedule pursuant to which such base salary was
\npaid to Employee immediately prior to such termination, or, at Employee’s
\noption, in a lump sum within thirty (30) business days after the effective date
\nof termination; and<\/p>\n
6
\n 164<\/p>\n
(ii) health (medical and dental), life and disability insurance
\nbenefits with the same coverage and at the same cost to Employee as those
\nprovided to Employee and his family immediately prior to termination for the
\nduration of the Severance period or until Employee becomes covered by comparable
\ncoverage from another employer, whichever occurs sooner; and<\/p>\n
(iii) continuation of the vesting of Employee’s Shockwave stock
\noptions for the Severance Period.<\/p>\n
(f) There shall be no severance for termination for any reason after
\nthe original Applicable Date.<\/p>\n
11. Noncompetition.<\/p>\n
(a) Except as provided below, during the period commencing on the
\nEmployment Effective Date and ending on the later to occur of the later of (i)
\ntwo years from the Employment Effective Date or (ii) one year from the date that
\nEmployee’s employment with Shockwave terminates (the “RESTRICTIVE PERIOD”),
\nEmployee shall not, in any county, state, country or other jurisdiction in which
\nShockwave or Atom do business or are planning to do business as of the
\nEmployment Effective Date:<\/p>\n
(i) directly or indirectly, alone or with others, engage in the
\nbusiness of providing services which are, at the Employment Effective Date,
\nDirectly Competitive;<\/p>\n
(ii) be or become an officer, director, stockholder, owner,
\ncorporate affiliate, salesperson, co-owner, partner, trustee, promoter, founder,
\ntechnician, engineer, analyst, employee, agent, representative, supplier,
\ninvestor or lender, compensated consultant, advisor or manager of or to, or
\notherwise acquire or hold any interest in or otherwise engage in the providing
\nof service to, any person or entity that engages in a business that is Directly
\nCompetitive; or<\/p>\n
(iii) permit Employee’s name to be used in connection with a
\nbusiness that is Directly Competitive;<\/p>\n
provided, however, that nothing in this Section 11 shall prevent Employee from
\nowning as a passive investment less than 1% of the outstanding shares of the
\ncapital stock of a publicly-held corporation if Employee is not otherwise
\nassociated directly or indirectly with such corporation or any affiliate of such
\ncorporation or from owning less than a 1% interest in a venture capital fund.<\/p>\n
For purposes of this Agreement, “DIRECTLY COMPETITIVE” means engaging
\nin providing (i) products, services or technology that compete with Atom’s
\nproducts, services or technology as described in any price list, business plan,
\nor product development plan or proposal of Atom in existence as of the
\nEmployment Effective Date; and (ii) products, services or technology that
\ncompete with Shockwave’ products, services or technology as described in any<\/p>\n
7
\n 165<\/p>\n
price list, business plan, or product development plan or proposal of Shockwave
\nin existence at any time during Employee’s employment under this Agreement.<\/p>\n
(b) Employee must inform any person or entity for whom Employee
\nperforms services during the Restricted Period of Employee’s obligations under
\nthis Section 11 and 12.<\/p>\n
12. Nonsolicitation. Employee further agrees that during the Restrictive
\nPeriod:<\/p>\n
(a) Employee will not directly or indirectly solicit away employees
\nor consultants of Shockwave or Atom for Employee’s own benefit or for the
\nbenefit of any other person or entity; and<\/p>\n
(b) Employee will not directly or indirectly take away or attempt to
\ntake away suppliers or customers of Shockwave or Atom.<\/p>\n
13. Miscellaneous.<\/p>\n
(a) Notices. Any and all notices permitted or required to be given
\nunder this Agreement must be in writing. Notices will be deemed given (i) when
\npersonally received or when sent by facsimile transmission (to the receiving
\nparty’s facsimile number), (ii) on the first business day after having been sent
\nby commercial overnight courier with written verification of receipt, or (iii)
\non the third business day after having been sent by registered or certified mail
\nfrom a location on the United States mainland, return receipt requested, postage
\nprepaid, whichever occurs first, at the address set forth below or at any new
\naddress, notice of which will have been given in accordance with this Section
\n13(a):<\/p>\n
If to Shockwave Shockwave.com, Inc.
\n 650 Townsend Street, Suite 450
\n San Francisco, CA 94103
\n Attn: General Counsel<\/p>\n
with a copy to: Fenwick & West LLP
\n 275 Battery Street, Suite 1500
\n San Francisco, CA 94111
\n Attention: Douglas N. Cogen<\/p>\n
If to Employee:<\/p>\n
with a copy to
\nEmployee’s counsel:<\/p>\n
(b) Amendments This Agreement may not be changed or modified in whole
\nor in part except by a writing signed by the party against whom enforcement of
\nthe change or modification is sought.<\/p>\n
8
\n 166<\/p>\n
(c) Successors and Assigns. This Agreement will not be assignable by
\neither Employee, Atom or Shockwave, except that the rights and obligations of
\nShockwave and Atom under this Agreement may be assigned to a corporation which
\nbecomes the successor to Shockwave or Atom as the result of a merger or other
\ncorporate reorganization and which continues the business of Shockwave or Atom,
\nor any other parent or subsidiary of Shockwave, provided that Shockwave and Atom
\nguarantee the performance by such assignee of Shockwave’ and Atom’s respective
\nobligations hereunder.<\/p>\n
(d) Governing Law. This Agreement will be governed by and interpreted
\naccording to the substantive laws of the California without regard to such
\nstate’s conflicts laws.<\/p>\n
(e) No Waiver. No failure on the part of Shockwave, Employee or Atom
\nto exercise any power, right, privilege or remedy under this Agreement, and no
\ndelay on the part of Shockwave, Employee or Atom in exercising any power, right,
\nprivilege or remedy under this Agreement, shall operate as a waiver of such
\npower, right, privilege or remedy; and no single or partial exercise of any such
\npower, right, privilege or remedy shall preclude any other or further exercise
\nthereof or of any other power, right, privilege or remedy. Neither Shockwave,
\nEmployee nor Atom shall be deemed to have waived any claim arising out of this
\nAgreement, or any power, right, privilege or remedy under this Agreement, unless
\nthe waiver of such claim, power, right, privilege or remedy is expressly set
\nforth in a written instrument duly executed and delivered on behalf of such
\nparty; and any such waiver shall not be applicable or have any effect except in
\nthe specific instance in which it is given.<\/p>\n
(f) Severability. Employee, Atom and Shockwave recognize that the
\nlimitations contained herein are reasonably and properly required for the
\nadequate protection of the interests of Shockwave and Atom. If for any reason a
\ncourt of competent jurisdiction or binding arbitration proceeding finds any
\nprovision of this Agreement, or the application thereof, to be unenforceable,
\nthe remaining provisions of this Agreement will be interpreted so as best to
\nreasonably effect the intent of the parties. The parties further agree that a
\ncourt of competent jurisdiction is authorized to replace any such invalid or
\nunenforceable provisions with valid and enforceable provisions designed to
\nachieve, to the extent possible, the business purposes and intent of such
\nunenforceable provisions.<\/p>\n
(g) Counterparts. This Agreement may be executed in counterparts
\nwhich when taken together will constitute one instrument. Any copy of this
\nAgreement with the original signatures of all parties appended will constitute
\nan original.<\/p>\n
(h) Specific Performance; Remedies. Employee agrees that in the event
\nof any breach or threatened breach by Employee of any covenant, obligation or
\nother provision contained in this Agreement, Shockwave shall be entitled (in
\naddition to any other remedy that may be available), to the extent permitted by
\napplicable law, to seek (a) a decree or order of specific performance to enforce
\nthe observance and performance of such covenant, obligation or other provision
\nand (b) an injunction restraining such breach or threatened breach. The rights
\nand remedies of Shockwave hereunder are not exclusive of or limited by any other
\nrights or remedies which Shockwave may have, whether at law, in equity, by
\ncontract or otherwise, all of<\/p>\n
9
\n 167<\/p>\n
which shall be cumulative (and not alternative). Without limiting the generality
\nof the foregoing, the rights and remedies of Shockwave hereunder, and the
\nobligations and liabilities of Employee hereunder, are in addition to their
\nrespective rights, remedies, obligations and liabilities under the law of unfair
\ncompetition, misappropriation of trade secrets and the like. This Agreement does
\nnot limit Employee’s obligations or the rights of Shockwave (or any affiliate of
\nShockwave) under the terms of (a) the Employee Invention Assignment and
\nConfidentiality Agreement between Employee and Shockwave; or (b) the terms of
\nany other agreement between Employee, Shockwave and Atom. If any legal action or
\nother legal proceeding relating to this Agreement or the enforcement of any
\nprovision of this Agreement is brought against any party to this Agreement, the
\nprevailing party shall be entitled to recover reasonable attorneys’ fees, costs
\nand disbursements (in addition to any other relief to which the prevailing party
\nmay be entitled).<\/p>\n
(i) Arbitration. (i) At the option of either party, any and all
\ndisputes or controversies, whether of law or in equity, and of any nature
\nwhatsoever arising from or respecting this Agreement, unless otherwise expressly
\nprovided herein, shall be decided by binding arbitration by J.A.M.S.\/ENDISPUTE
\nor its successor in accordance with the rules and regulations of
\nJ.A.M.S.\/ENDISPUTE or its successor.<\/p>\n
(ii) The arbitrators shall be selected as follows: In the event
\nShockwave and the Employee agree on one arbitrator, the arbitration shall be
\nconducted by such arbitrator. In the event Shockwave and the Employee do not
\nagree on one arbitrator, Shockwave and the Employee shall each select one
\nindependent, qualified arbitrator and these two arbitrators shall select a third
\narbitrator. Shockwave reserves the right to reject any individual arbitrator who
\nshall be employed by or affiliated with a competing organization.<\/p>\n
(iii) Arbitration shall take place at San Francisco, California,
\nor any other location mutually agreeable to the parties. At the request of
\neither party, arbitration proceedings will be conducted in secrecy. In such case
\nall documents, testimony and records shall be received, heard and maintained by
\nthe arbitrators in secrecy under seal, available for inspection only by
\nShockwave and the Employee and their respective attorneys and their respective
\nexperts who shall agree in advance and in writing to receive all such
\ninformation confidentially and to maintain such information in secrecy until
\nsuch information shall become generally known. The arbitrators, who shall act by
\nmajority vote, shall be able to decree any and all relief of any equitable
\nnature, including, but not limited to, such relief as a temporary restraining
\norder, a temporary or a permanent injunction, or both, and shall also be able to
\naward damages (with or without an accounting), costs and reasonable attorney’s
\nfees. The decree or judgment of an award rendered by the arbitrators may be
\nentered in any court having jurisdiction thereof.<\/p>\n
(iv) Reasonable notice of the time and place of arbitration shall
\nbe given to all persons, other than the parties, as shall be required by law, in
\nwhich case such persons or their authorized representatives shall have the right
\nto attend and participate in all the arbitration hearings to the extent and in
\nsuch manner as the law shall require.<\/p>\n
10
\n 168<\/p>\n
(j) Captions. The captions contained in this Agreement are for
\nconvenience of reference only, shall not be deemed to be a part of this
\nAgreement and shall not be referred to in connection with the construction or
\ninterpretation of this Agreement.<\/p>\n
(k) Entire Agreement. This Agreement, the exhibits attached hereto,
\nrelevant option agreements and the Merger Agreement constitute the entire
\nunderstanding and agreement of the parties hereto with respect to the subject
\nmatter hereof and supersede all prior and contemporaneous agreements or
\nunderstandings, inducements or conditions, express or implied, written or oral,
\nbetween the parties with respect to the subject matter hereof. The express terms
\nhereof control and supersede any course of performance or usage of trade
\ninconsistent with any of the terms hereof. This Agreement will be binding upon
\nEmployee and Employee’s representatives, executors, administrators, estate,
\nheirs, successors and assigns, and will inure to the benefit of Shockwave and
\nAtom and their respective successors and assigns. The parties agree that this
\nAgreement shall not be interpreted against any party solely because this
\nAgreement was drafted by attorneys for Shockwave and Atom.<\/p>\n
(l) Employment Not Inconsistent with Other Duties. Employee
\nrepresents that his\/her employment is not in violation of or inconsistent with
\nany agreement or duties to any person or entity, including any previous employer
\nor other person or entity with whom Employee has or has had a business,
\nconsulting or other service relationship.<\/p>\n
(m) Duty to Mitigate. Employee shall not be required to mitigate the
\namount of any payment contemplated by this Agreement (whether by seeking new
\nemployment or in any other manner), nor, except as provided in this Agreement,
\nshall any such payment be reduced by any earnings that Employee may receive from
\nany other source.<\/p>\n
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]<\/p>\n
11
\n 169<\/p>\n
IN WITNESS WHEREOF, this Agreement is made and effective as set forth
\nherein.<\/p>\n
SHOCKWAVE.COM, INC. EMPLOYEE<\/p>\n
By:
\n ———————————— ————————————
\n Name: Rob Burgess Name:
\n Title: Chairman<\/p>\n
ATOM CORPORATION<\/p>\n
By:
\n ————————————-
\n Name:
\n Title:<\/p>\n
[SIGNATURE PAGE TO EMPLOYMENT AND NONCOMPETITION AGREEMENT]<\/p>\n
12
\n 170<\/p>\n
EXHIBIT A<\/p>\n
SHOCKWAVE.COM, INC.<\/p>\n
EMPLOYEE INVENTION ASSIGNMENT
\n AND
\n CONFIDENTIALITY AGREEMENT<\/p>\n
In consideration of, and as a condition of my employment with
\nShockwave.com, Inc., a Delaware corporation (the “COMPANY”), I hereby represent
\nto and agree with the Company as follows:<\/p>\n
1. PURPOSE OF AGREEMENT. I understand that the Company is engaged in a
\ncontinuous program of research, development, production and marketing in
\nconnection with its business and that it is critical for the Company to preserve
\nand protect its “Proprietary Information” (as defined in Section 7 below), its
\nrights in “Inventions” (as defined in Section 2 below) and in all related
\nintellectual property rights. Accordingly, I am entering into this Employee
\nInvention Assignment and Confidentiality Agreement (this “AGREEMENT”) as a
\ncondition of my employment with the Company, whether or not I am expected to
\ncreate inventions of value for the Company.<\/p>\n
2. DISCLOSURE OF INVENTIONS. I will promptly disclose in confidence to
\nthe Company all inventions, improvements, designs, original works of authorship,
\nformulas, processes, compositions of matter, computer software programs,
\ndatabases, algorithms, mask works and trade secrets (the “INVENTIONS”) that I
\nmake or conceive or first reduce to practice or create, either alone or jointly
\nwith others, during the period of my employment, whether or not in the course of
\nmy employment, and whether or not such Inventions are patentable, copyrightable
\nor protectible as trade secrets.<\/p>\n
3. WORK FOR HIRE; ASSIGNMENT OF INVENTIONS. I acknowledge and agree that
\nany copyrightable works prepared by me within the scope of my employment are
\n“works for hire” under the Copyright Act and that the Company will be considered
\nthe author and owner of such copyrightable works. I agree that all Inventions
\nthat (i) are developed using equipment, supplies, facilities or trade secrets of
\nthe Company, (ii) result from work performed by me for the Company, or (iii)
\nrelate to the Company’s business or current or anticipated research and
\ndevelopment (the “ASSIGNED INVENTIONS”), will be the sole and exclusive property
\nof the Company and are hereby irrevocably assigned by me to the Company.<\/p>\n
4. LABOR CODE SECTION 2870 NOTICE. I have been notified and understand
\nthat the provisions of Sections 3 and 5 of this Agreement do not apply to any
\nAssigned Invention that qualifies fully under the provisions of Section 2870 of
\nthe California Labor Code, which states as follows:<\/p>\n
ANY PROVISION IN AN EMPLOYMENT AGREEMENT WHICH<\/p>\n
13
\n 171<\/p>\n
PROVIDES THAT AN EMPLOYEE SHALL ASSIGN, OR OFFER TO ASSIGN, ANY OF HIS
\n OR HER RIGHTS IN AN INVENTION TO HIS OR HER EMPLOYER SHALL NOT APPLY
\n TO AN INVENTION THAT THE EMPLOYEE DEVELOPED ENTIRELY ON HIS OR HER OWN
\n TIME WITHOUT USING THE EMPLOYER’S EQUIPMENT, SUPPLIES, FACILITIES, OR
\n TRADE SECRET INFORMATION EXCEPT FOR THOSE INVENTIONS THAT EITHER: (1)
\n RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF THE
\n INVENTION TO THE EMPLOYER’S BUSINESS, OR ACTUAL OR DEMONSTRABLY
\n ANTICIPATED RESEARCH OR DEVELOPMENT OF THE EMPLOYER; OR (2) RESULT
\n FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. TO THE
\n EXTENT A PROVISION IN AN EMPLOYMENT AGREEMENT PURPORTS TO REQUIRE AN
\n EMPLOYEE TO ASSIGN AN INVENTION OTHERWISE EXCLUDED FROM BEING REQUIRED
\n TO BE ASSIGNED UNDER CALIFORNIA LABOR CODE SECTION 2870(a), THE
\n PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE AND IS
\n UNENFORCEABLE.<\/p>\n
5. ASSIGNMENT OF OTHER RIGHTS. In addition to the foregoing assignment of
\nAssigned Inventions to the Company, I hereby irrevocably transfer and assign to
\nthe Company: (i) all worldwide patents, patent applications, copyrights, mask
\nworks, trade secrets and other intellectual property rights in any Assigned
\nInventions; and (ii) any and all “Moral Rights” (as defined below) that I may
\nhave in or with respect to any Assigned Inventions. I also hereby forever waive
\nand agree never to assert any and all Moral Rights I may have in or with respect
\nto any Assigned Inventions, even after termination of my work on behalf of the
\nCompany. “MORAL RIGHTS” mean any rights to claim authorship of an Assigned
\nInventions, to object to or prevent the modification of any Assigned Inventions,
\nor to withdraw from circulation or control the publication or distribution of
\nany Assigned Inventions, and any similar right, existing under judicial or
\nstatutory law of any country in the world, or under any treaty, regardless of
\nwhether or not such right is denominated or generally referred to as a “moral
\nright”.<\/p>\n
6. ASSISTANCE. I agree to assist the Company in every proper way to
\nobtain for the Company and enforce patents, copyrights, mask work rights, trade
\nsecret rights and other legal protections for the Company’s Assigned Inventions
\nin any and all countries. I will execute any documents that the Company may
\nreasonably request for use in obtaining or enforcing such patents, copyrights,
\nmask work rights, trade secrets and other legal protections. My obligations
\nunder this paragraph will continue beyond the termination of my employment with
\nthe Company, provided that the Company will compensate me at a reasonable rate
\nafter such termination for time or expenses actually spent by me at the
\nCompany’s request on such assistance. I appoint the Secretary of the Company as
\nmy attorney-in-fact to execute documents on my behalf for this purpose should I
\nbe unavailable or unwilling to do so.<\/p>\n
7. PROPRIETARY INFORMATION. I understand that my employment by the
\nCompany creates a relationship of confidence and trust with respect to any
\ninformation of a confidential or<\/p>\n
14
\n 172<\/p>\n
secret nature that may be disclosed to me by the Company that relates to the
\nbusiness of the Company, to its predecessor division within Macromedia, Inc., or
\nto the business of any parent, subsidiary, affiliate, customer or supplier of
\nthe Company or any other party with whom the Company agrees to hold information
\nof such party in confidence (the “PROPRIETARY INFORMATION”). Such Proprietary
\nInformation includes, but is not limited to, Assigned Inventions, marketing
\nplans, product plans, business strategies, financial information, forecasts,
\npersonnel information, customer lists and domain names.<\/p>\n
8. CONFIDENTIALITY. At all times, both during my employment and after its
\ntermination, I will keep and hold all such Proprietary Information in strict
\nconfidence and trust. I will not use or disclose any Proprietary Information
\nwithout the prior written consent of the Company, except as may be necessary to
\nperform my duties as an employee of the Company for the benefit of the Company.
\nUpon termination of my employment with the Company, I will promptly deliver to
\nthe Company all documents and materials of any nature pertaining to my work with
\nthe Company. I will not take with me any documents or materials or copies
\nthereof containing any Proprietary Information.<\/p>\n
9. NO BREACH OF PRIOR AGREEMENT. I represent that my performance of all
\nthe terms of this Agreement and my duties as an employee of the Company will not
\nbreach any invention assignment, proprietary information, confidentiality or
\nsimilar agreement with any former employer or other party. I represent that I
\nwill not bring with me to the Company or use in the performance of my duties for
\nthe Company any documents or materials or intangibles of a former employer or
\nthird party that are not generally available to the public or have not been
\nlegally transferred to the Company.<\/p>\n
10. NOTIFICATION. I hereby authorize the Company to notify my actual or
\nfuture employers of the terms of this Agreement and my responsibilities
\nhereunder.<\/p>\n
11. INJUNCTIVE RELIEF. I understand that in the event of a breach or
\nthreatened breach of this Agreement by me the Company may suffer irreparable
\nharm and will therefore be entitled to injunctive relief to enforce this
\nAgreement.<\/p>\n
12. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by and
\nconstrued in accordance with the laws of the State of California, without giving
\neffect to that body of laws pertaining to conflict of laws. If any provision of
\nthis Agreement is determined by any court or arbitrator of competent
\njurisdiction to be invalid, illegal or unenforceable in any respect, such
\nprovision will be enforced to the maximum extent possible given the intent of
\nthe parties hereto. If such clause or provision cannot be so enforced, such
\nprovision shall be stricken from this Agreement and the remainder of this
\nAgreement shall be enforced as if such invalid, illegal or unenforceable clause
\nor provision had (to the extent not enforceable) never been contained in this
\nAgreement. Notwithstanding the forgoing, if the value of this Agreement based
\nupon the substantial benefit of the bargain for any party is materially
\nimpaired, which determination as made by the presiding court or arbitrator of
\ncompetent jurisdiction shall be binding, then this Agreement will not be
\nenforceable against such affected party and both parties agree to renegotiate
\nsuch provision(s) in good faith.<\/p>\n
15
\n 173<\/p>\n
13. COUNTERPARTS. This Agreement may be executed in any number of
\ncounterparts, each of which when so executed and delivered will be deemed an
\noriginal, and all of which together shall constitute one and the same agreement.<\/p>\n
14. ENTIRE AGREEMENT. This Agreement and the documents referred to herein
\nconstitute the entire agreement and understanding of the parties with respect to
\nthe subject matter of this Agreement, and supersede all prior understandings and
\nagreements, whether oral or written, between or among the parties hereto with
\nrespect to the specific subject matter hereof.<\/p>\n
15. AMENDMENT AND WAIVERS. This Agreement may be amended only by a written
\nagreement executed by each of the parties hereto. No amendment of or waiver of,
\nor modification of any obligation under this Agreement will be enforceable
\nunless set forth in a writing signed by the party against which enforcement is
\nsought. Any amendment effected in accordance with this section will be binding
\nupon all parties hereto and each of their respective successors and assigns. No
\ndelay or failure to require performance of any provision of this Agreement shall
\nconstitute a waiver of that provision as to that or any other instance. No
\nwaiver granted under this Agreement as to any one provision herein shall
\nconstitute a subsequent waiver of such provision or of any other provision
\nherein, nor shall it constitute the waiver of any performance other than the
\nactual performance specifically waived.<\/p>\n
16. SUCCESSORS AND ASSIGNS; ASSIGNMENT. Except as otherwise provided in
\nthis Agreement, this Agreement, and the rights and obligations of the parties
\nhereunder, will be binding upon and inure to the benefit of their respective
\nsuccessors, assigns, heirs, executors, administrators and legal representatives.
\nThe Company may assign any of its rights and obligations under this Agreement.
\nNo other party to this Agreement may assign, whether voluntarily or by operation
\nof law, any of its rights and obligations under this Agreement, except with the
\nprior written consent of the Company.<\/p>\n
17. FURTHER ASSURANCES. The parties agree to execute such further
\ndocuments and instruments and to take such further actions as may be reasonably
\nnecessary to carry out the purposes and intent of this Agreement.<\/p>\n
16<\/p>\n
174<\/p>\n
18. “AT WILL” EMPLOYMENT. I understand that this Agreement does not
\nconstitute a contract of employment or obligate the Company to employ me for any
\nstated period of time. I understand that I am an “at will” employee of the
\nCompany. This Agreement shall be effective as of the first day of my employment
\nby the Company.<\/p>\n
SHOCKWAVE.COM, INC. EMPLOYEE:<\/p>\n
By:
\n ———————————- ———————————-
\n Signature
\nName:
\n ——————————– ———————————-
\n Name (Please print)
\nTitle:
\n ——————————-<\/p>\n
16
\n 175
\n NOTE PURCHASE AGREEMENT<\/p>\n
This NOTE PURCHASE AGREEMENT (this “AGREEMENT”) is made as of December 14,
\n2000 among Atom Corporation, a Washington corporation (the “BORROWER”),
\nMacromedia, Inc., a Delaware corporation (the “LENDER” or “HOLDER”) and
\nShockwave.com, Inc. (“SHOCKWAVE”), a subsidiary of Lender and a Delaware
\ncorporation.<\/p>\n
RECITALS<\/p>\n
WHEREAS, Borrower has authorized the sale and issuance of two (2)
\nconvertible promissory notes (each a “NOTE”, and collectively, the “NOTES”),
\neach Note in the principal amount of Five Million Dollars ($5,000,000), for an
\naggregate potential principal amount of Ten Million Dollars ($10,000,000) (the
\n“LOAN AMOUNT”). For purposes of this Agreement, the first Note issuable under
\nthis Agreement shall be referred to herein as “NOTE 1”, and the second Note
\nissuable under this Agreement shall be referred to herein as “NOTE 2”.<\/p>\n
WHEREAS, the Holder desires to purchase, and Borrower desires to sell, the
\nNotes on the terms and conditions set forth herein.<\/p>\n
WHEREAS, This Agreement shall be entered in contemplation of an Agreement
\nand Plan of Reorganization (the “MERGER AGREEMENT”), to be entered into between
\nShockwave and Borrower as of the date hereof. Following the Merger (as defined
\nin the Merger Agreement), Shockwave will assume all of Borrower’s indebtedness
\nunder the Notes.<\/p>\n
NOW THEREFORE, the parties hereby agree as follows:<\/p>\n
1. PURCHASE AND SALE OF NOTES. Subject to the terms of this Agreement and
\nthe terms of the Notes, Borrower agrees to sell to Holder, and Holder agrees to
\npurchase from Borrower, each of the two (2) Notes in the principal amount of
\n$5,000,000 for an aggregate potential principal amount of the Loan Amount. Note
\n1 shall be substantially in the form attached hereto as Exhibit A, and Note 2
\nshall be substantially in the form attached hereto as Exhibit B. The Notes sold
\npursuant to this Agreement are hereinafter collectively referred to as the
\n“PURCHASED SECURITIES.” The shares of capital stock issuable upon conversion and
\nexercise of the Notes, and the shares of capital stock issuable upon conversion
\nof such shares so issued, are hereinafter collectively referred to as the
\n“CONVERSION SECURITIES.” The Purchased Securities and the Conversion Securities
\nare collectively referred to as the “SECURITIES.”<\/p>\n
2. CLOSINGS.<\/p>\n
2.1 THE FIRST CLOSING. The purchase and sale of Note 1 will take
\nplace at the offices of Fenwick & West LLP, 275 Battery Street, 15th Floor, San
\nFrancisco, California, at 10:00 a.m. Pacific time, on December 15, 2000 or such
\nlater date to be determined in the sole discretion of Borrower, or at such other
\ntime and place as Borrower and Holder mutually agree upon (which time and place
\nare referred to as the “FIRST CLOSING”). At the First Closing, Holder<\/p>\n
176<\/p>\n
will deliver to Borrower payment in full for the Note in the amount of
\n$5,000,000, which such Holder agrees to purchase at the First Closing by (i) a
\ncheck payable to Borrower’s order, (ii) wire transfer of funds to Borrower, or
\n(iii) any combination of the foregoing. At the First Closing, Borrower will
\ndeliver to Holder a duly executed Note 1 substantially in the form set forth on
\nExhibit A.<\/p>\n
2.2 THE SECOND CLOSING. The purchase and sale of Note 2 will take
\nplace at the offices of Fenwick & West LLP, 275 Battery Street, 15th Floor, San
\nFrancisco, California, at 10:00 a.m. Pacific time, on or before January 15,
\n2001, such date to be determined in the sole discretion of Holder, or at such
\nother time and place as Borrower and Holder mutually agree upon (which time and
\nplace are referred to as the “SECOND CLOSING”) (each First Closing and Second
\nClosing, a “CLOSING” and, collectively, the “CLOSINGS”). At the Second Closing,
\nHolder will deliver to Borrower payment in full for the Note in the amount of
\n$5,000,000, which such Holder agrees to purchase at the Second Closing by (i) a
\ncheck payable to Borrower’s order, (ii) wire transfer of funds to Borrower, or
\n(iii) any combination of the foregoing. At the Second Closing, Borrower will
\ndeliver to Holder a duly executed Note 2 substantially in the form set forth on
\nExhibit B.<\/p>\n
3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby represents
\nand warrants to Holder that the statements in the following paragraphs of this
\nSection 3 are all true and complete:<\/p>\n
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Borrower has been
\nduly incorporated and organized, and is validly existing under the laws of the
\nState of Washington. Borrower has the corporate power and authority to own and
\noperate it properties and assets and to carry on its business as currently
\nconducted and as presently proposed to be conducted. Borrower is duly qualified
\nto do business as a foreign corporation in good standing in all jurisdictions in
\nwhich it is required to be qualified to do intrastate business as Borrower’s
\nbusiness is currently conducted and as presently proposed to be conducted by
\nBorrower, except for jurisdictions in which failure to so qualify could not
\nreasonably be expected to have a material adverse effect on the business and
\noperations of Borrower taken as a whole.<\/p>\n
3.2 DUE AUTHORIZATION. All corporate action on the part of
\nBorrower’s directors and shareholders necessary for the authorization,
\nexecution, delivery of, and the performance of all obligations of Borrower
\nunder, this Agreement and the Notes has been taken or will be taken prior to the
\nClosing, and this Agreement constitutes, and the Notes when executed and
\ndelivered, will constitute, valid and legally binding obligations of Borrower,
\nenforceable in accordance with their respective terms, except as may be limited
\nby (i) applicable bankruptcy, insolvency, reorganization or other laws of
\ngeneral application relating to or affecting the enforcement of creditor’s
\nrights generally and (ii) the effect of rules of law governing the availability
\nof equitable remedies.<\/p>\n
3.3 CORPORATE POWER. Borrower has the corporate power and authority
\nto execute and deliver this Agreement and the Notes to be purchased by Holder
\nhereunder, to issue the Notes and to carry out and perform all its obligations
\nunder this Agreement and the Notes.<\/p>\n
-2-
\n 177<\/p>\n
3.4 VALID ISSUANCE.<\/p>\n
(a) The Notes, when issued, sold and delivered in accordance
\nwith the terms of this Agreement for the consideration provided for herein, will
\nbe duly and validly issued, fully paid and nonassessable.<\/p>\n
(b) Based in part on the representations made by Holder in
\nSection 4 hereof, the offer and sale of the Notes solely to Holder in accordance
\nwith this Agreement are exempt from the registration and prospectus delivery
\nrequirements of the Securities Act of 1933, as amended (the “1933 ACT”) and the
\nsecurities registration and qualification requirements of the currently
\neffective provisions of the securities laws of the states in which Holder is
\nresident.<\/p>\n
3.5 ADDITIONAL NOTE 2 WARRANTIES OF BORROWER. As of the Second
\nClosing and solely with respect to the parties’ rights and obligations in
\nconnection with Note 2, Borrower hereby makes the following additional
\nwarranties: (i) the financial position of Borrower, as represented in Section
\n5.c. of the Letter of Intent dated November 28, 2000 among Holder,
\nShockwave.com, Inc. and Borrower, shall not have materially changed; (ii)
\nBorrower and Borrower’s employees shall not have acted, and shall not act, to
\nfrustrate the consummation of the Merger or the closing of the Merger; (iii)
\nBorrower and Borrower’s employees shall have cooperated, and shall cooperate, in
\ngood faith with the Merger-related due diligence review of Lender and Lender’s
\nagents and affiliates; (iv) Borrower shall have received verbal or written
\nconfirmation and agreement from each of those Borrower employees who are
\nrequired by the terms of the Merger Agreement to enter into employment
\nagreements and\/or noncompetition agreements with Shockwave that such employees
\nare willing to enter into such agreements; (v) at least five of the six Borrower
\nemployees described in clause (iv), above, including Mika Salmi, shall remain
\nemployees of Borrower; and (vi) Borrower shall not be subject to any pending
\nlitigation or claim estimable at greater than $25,000 which has not otherwise
\nbeen disclosed to Lender, Lender’s agents or affiliates.<\/p>\n
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF HOLDER. Holder
\nhereby represents and warrants to, and agrees with, Borrower, that:<\/p>\n
4.1 AUTHORIZATION. This Agreement constitutes Holder’s valid and
\nlegally binding obligation, enforceable in accordance with its terms except as
\nmay be limited by (i) applicable bankruptcy, insolvency, reorganization or other
\nlaws of general application relating to or affecting the enforcement of
\ncreditors’ rights generally and (ii) the effect of rules of law governing the
\navailability of equitable remedies. Holder represents that Holder has full power
\nand authority to enter into this Agreement.<\/p>\n
4.2 PURCHASE FOR OWN ACCOUNT. The Securities will be acquired for
\ninvestment for such Holder’s own account, not as a nominee or agent, and not
\nwith a view to the public resale or distribution thereof within the meaning of
\nthe 1933 Act, and Holder has no present intention of selling, granting any
\nparticipation in, or otherwise distributing the same.<\/p>\n
-3-
\n 178<\/p>\n
4.3 DISCLOSURE OF INFORMATION. Holder believes that Holder has
\nreceived or has had full access to all the information it considers necessary or
\nappropriate to make an informed investment decision with respect to the
\nSecurities. Such Holder further has had an opportunity to ask questions and
\nreceive answers from Borrower regarding the terms and conditions of the offering
\nof the Securities and to obtain additional information (to the extent Borrower
\npossessed such information or could acquire it without unreasonable effort or
\nexpense) necessary to verify any information furnished to Holder or to which
\nHolder had access. The foregoing, however, does not in any way limit or modify
\nthe representations and warranties made by Borrower in Section 3.<\/p>\n
4.4 INVESTMENT EXPERIENCE. Holder understands that the purchase of
\nthe Securities involves substantial risk. Holder (i) has experience as an
\ninvestor in securities of companies in the development stage and acknowledges
\nthat Holder is able to fend for itself, can bear the economic risk of Holder’s
\ninvestment in the Securities and has such knowledge and experience in financial
\nor business matters that Holder is capable of evaluating the merits and risks of
\nthis investment in the Securities and protecting its own interests in connection
\nwith this investment and\/or (ii) has a preexisting personal or business
\nrelationship with Borrower and certain of its officers, directors or controlling
\npersons of a nature and duration that enables Holder to be aware of the
\ncharacter, business acumen and financial circumstances of such persons.<\/p>\n
4.5 ACCREDITED INVESTOR STATUS. Holder is an “accredited investor”
\nwithin the meaning of Regulation D promulgated under the 1933 Act.<\/p>\n
5. CONDITIONS TO CLOSING.<\/p>\n
5.1 CONDITIONS TO HOLDER’S OBLIGATIONS. The obligations of Holder
\nunder Section 2 of this Agreement are subject to the fulfillment or waiver, on
\nor before the First Closing or Second Closing, as the case may be, of each of
\nthe following conditions, the waiver of which shall not be effective against any
\nHolder who does not consent to such waiver, which consent may be given by any
\nwritten communication to Borrower, its counsel or to counsel to Holder:<\/p>\n
(a) Each of the representations and warranties of Borrower
\ncontained in Section 3 (except Section 3.5 for purposes of the First Closing)
\nshall be true and correct on and as of each Closing with the same effect as
\nthough such representations and warranties had been made on and as of the date
\nof such Closing;<\/p>\n
(b) Borrower shall have performed and complied with all
\nagreements, obligations and conditions contained in this Agreement that are
\nrequired to be performed or complied with by it on or before each Closing and
\nshall have obtained all approvals, consents and qualifications necessary to
\ncomplete the purchase and sale described herein; and<\/p>\n
(c) only with respect to the Second Closing, the Merger has
\nnot been consummated on or before January 15, 2001.<\/p>\n
-4-
\n 179<\/p>\n
5.2 CONDITION TO BORROWER’S OBLIGATIONS. The obligations of Borrower
\nto Holder under this Agreement are subject to the fulfillment or waiver on or
\nbefore the First Closing or Second Closing, as the case may be, of the following
\nconditions by such Holder:<\/p>\n
(a) Each of the representations and warranties of Holder
\ncontained in Section 4 shall be true and correct on the dates of each Closing
\nwith the same effect as though such representations and warranties had been made
\non and as of the dates of such Closing; and<\/p>\n
(b) Holder shall have performed and complied with all
\nagreements, obligations and conditions contained in this Agreement that are
\nrequired to be performed or complied with by it on or before each Closing and
\nshall have obtained all approvals, consents and qualifications necessary to
\ncomplete the purchase and sale described herein.<\/p>\n
6. GENERAL PROVISIONS.<\/p>\n
6.1 SURVIVAL OF WARRANTIES. The representations, warranties and
\ncovenants of Borrower and Holder contained in or made pursuant to this Agreement
\nshall survive the execution and delivery of this Agreement and shall in no way
\nbe affected by any investigation of the subject matter thereof made by or on
\nbehalf of Holder or Borrower, as the case may be.<\/p>\n
6.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
\nAgreement shall inure to the benefit of and be binding upon the respective
\nsuccessors and assigns of the parties.<\/p>\n
6.3 GOVERNING LAW. This Agreement shall be governed by and construed
\nunder the internal laws of the State of California as applied to agreements
\namong California residents entered into and to be performed entirely within
\nCalifornia, without reference to principles of conflict of laws or choice of
\nlaws.<\/p>\n
6.4 COUNTERPARTS. This Agreement may be executed in two or more
\ncounterparts, each of which shall be deemed an original, but all of which
\ntogether shall constitute one and the same instrument.<\/p>\n
6.5 HEADINGS. The headings and captions used in this Agreement are
\nused for convenience only and are not to be considered in construing or
\ninterpreting this Agreement. All references in this Agreement to sections,
\nparagraphs, exhibits and schedules shall, unless otherwise provided, refer to
\nsections and paragraphs hereof and exhibits and schedules attached hereto, all
\nof which exhibits and schedules are incorporated herein by this reference.<\/p>\n
6.6 NOTICES. Unless otherwise provided, any notice required or
\npermitted under this Agreement shall be given in writing and shall be deemed
\neffectively given upon personal delivery to the party to be notified or upon
\ndeposit with the United States Post Office, by registered or certified mail,
\npostage prepaid and addressed to, in the case of Lender, 600 Townsend Street,
\nSan Francisco, CA 94103, Attn. Loren Hillberg, Esq., in the case of Borrower, at
\nits offices at 815 Western, Suite 300, Seattle, WA 98104, Attn. Mika Salmi, or,
\nin the case of Shockwave, 650 Townsend, Suite 450, San Francisco, CA 94103,
\nAttn. General Counsel, or at <\/p>\n
-5-
\n 180<\/p>\n
such other address as any party may designate by giving ten (10) days’ advance
\nwritten notice to all other parties.<\/p>\n
6.7 AMENDMENTS AND WAIVERS. Any term of this Agreement and the Notes
\nmay be amended and the observance of any term of this Agreement may be waived
\n(either generally or in a particular instance and either retroactively or
\nprospectively), only with the written consent of Borrower and the holders of
\nNotes representing at least a majority of the aggregate principal amount of the
\nNotes at the time outstanding. Any amendment or waiver effected in accordance
\nwith this Section 6.7 shall be binding upon each holder of any Notes at the time
\noutstanding, each future holder of such securities, and Borrower.<\/p>\n
6.8 SEVERABILITY. If one or more provisions of this Agreement are
\nheld to be unenforceable under applicable law, such provision(s) shall be
\nexcluded from this Agreement and the balance of the Agreement shall be
\ninterpreted as if such provision(s) were so excluded and shall be enforceable in
\naccordance with its terms.<\/p>\n
6.9 ENTIRE AGREEMENT. This Agreement, together with all exhibits and
\nschedules hereto, constitutes the entire agreement and understanding of the
\nparties with respect to the subject matter hereof and supersedes any and all
\nprior negotiations, correspondence, agreements, understandings duties or
\nobligations between the parties with respect to the subject matter hereof.<\/p>\n
6.10 SECTION 12(g) ISSUES OF SHOCKWAVE. Shockwave agrees to
\ncooperate in the resolution of issues relating to its compliance with Section
\n12(g) of the Securities Exchange Act of 1934, as amended, and Lender agrees to
\nbear the costs associated with resolving such issues.<\/p>\n
6.11 ADDITIONAL FUNDING BY LENDER. Contingent upon the satisfaction
\nof all closing conditions set forth in Article 9 of the Merger Agreement, Lender
\nwill provide $15,000,000 in funds to Shockwave, a portion of which will be
\napplied toward Lender’s purchase, at the then fair market value thereof, of the
\n714,286 shares of Series A Preferred Stock of Stan Lee Media, Inc. and 2,049,181
\nshares of Series B Preferred Stock of Mondo Media\/Mechadeus, Inc. held by
\nShockwave, and the remainder of which will be invested in shares of preferred
\nstock of Shockwave in its first preferred stock financing following the
\nEffective Time (as defined in the Merger Agreement); provided, however, that
\nsuch $15,000,000 will be reduced if and to the extent that Lender sells and
\nissues to Borrower Note 2.<\/p>\n
6.12 FUNDING BY SEQUOIA CAPITAL. Lender and Borrower acknowledge
\nthat, pursuant to that letter agreement dated between Lender and Sequoia Capital
\ndated December 14, 2000, Sequoia Capital has agreed to invest at least
\n$5,000,000 in the first equity financing of Shockwave following the Merger (as
\ndefined in the Merger Agreement). Contingent upon the satisfaction of all
\nclosing conditions set forth in Article 9 of the Merger Agreement, in the event
\nthat Sequoia Capital, or another entity or fund procured by Lender, shall not
\nhave provided at least $5,000,000 in funds for investment in such equity
\nfinancing, Lender will invest $5,000,000 in such equity financing.<\/p>\n
-6-
\n 181<\/p>\n
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
\nthe date first above written.<\/p>\n
ATOM CORPORATION MACROMEDIA, INC.<\/p>\n
By: By:
\n ——————————- ——————————–<\/p>\n
Name: Name:
\n —————————– ——————————<\/p>\n
Title: Title:
\n —————————- —————————–<\/p>\n
SHOCKWAVE.COM, INC.<\/p>\n
By:
\n ——————————- <\/p>\n
Name:
\n —————————– <\/p>\n
Title:
\n —————————- <\/p>\n
SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT<\/p>\n
Attachments:<\/p>\n
Exhibit A – Form of Note 1
\nExhibit B – Form of Note 2<\/p>\n
-7-
\n 182<\/p>\n
EXHIBIT A<\/p>\n
Form of Note 1<\/p>\n
183<\/p>\n
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
\nACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
\nSTATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
\nRESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
\nAND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
\nTHEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
\nFINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
\nOF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
\nSATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
\nIN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.<\/p>\n
CONVERTIBLE PROMISSORY NOTE
\n OF
\n ATOM CORPORATION<\/p>\n
$ 5,000,000.00
\n Issue Date: December 15, 2000
\n Maturity Date: December 15, 2001<\/p>\n
1. OBLIGATION. The undersigned, Atom Corporation (“BORROWER”), hereby
\npromises to pay to the order of Macromedia, Inc., (“LENDER” OR “HOLDER”) on
\nDecember 15, 2001, at Lender’s principal place of business at 600 Townsend
\nStreet, San Francisco, CA 94103, or at such other place as Holder may direct,
\nthe principal sum of Five Million Dollars ($5,000,000.00) plus accrued interest
\nat a rate of 6.10 percent (6.10%) per annum, compounded annually, which rate is
\nnot less than the minimum rate established pursuant to Section 1274(d) of the
\nInternal Revenue Code of 1986, as amended, as of the date hereof. As used
\nherein, the term “HOLDER” shall initially mean Lender, and shall subsequently
\nmean each person or entity to which this Note is duly assigned.<\/p>\n
This Note shall be entered into pursuant to a Note Purchase Agreement
\ndated December 14, 2000 (the “NOTE AGREEMENT”) between Lender and Borrower.<\/p>\n
2. DEFAULT; ACCELERATION OF OBLIGATION. Borrower will be deemed to be in
\ndefault under this Note and the outstanding unpaid principal balance of this
\nNote, together with all interest accrued thereon, will immediately become due
\nand payable in full, without the need for any further action on the part of
\nHolder, upon the occurrence of any of the following events (each an “EVENT OF
\nDEFAULT”): (a) upon Borrower’s failure to make any payment when due under this
\nNote; (b) upon the filing by or against Borrower of any voluntary or involuntary
\npetition in bankruptcy or any petition for relief under the federal bankruptcy
\ncode or any other state or federal law for the relief of debtors; provided,
\nhowever, with respect to an involuntary petition in bankruptcy, such petition
\nhas not been dismissed within thirty (30) days after the filing of such
\npetition; (c) upon the execution by Borrower of an assignment for the benefit of
\ncreditors or the appointment of a receiver, custodian, trustee or similar party
\nto take possession of Borrower’s assets or property; or (d) material breach of
\nthe terms and conditions of the Note Agreement.<\/p>\n
184<\/p>\n
3. REMEDIES ON DEFAULT; ACCELERATION. Upon any Event of Default, Holder
\nwill have, in addition to its rights and remedies under this Note, full recourse
\nagainst any real, personal, tangible or intangible assets of Borrower, and may
\npursue any legal or equitable remedies that are available to Holder, and may
\ndeclare the entire unpaid principal amount of this Note and all unpaid accrued
\ninterest under this Note to be immediately due and payable in full.<\/p>\n
4. CONVERSION. Upon the closing of the Merger (as referred to in the Note
\nAgreement), all of Shockwave’s indebtedness under this Note shall become
\nconvertible into equity securities of the surviving corporation, Shockwave (the
\n“SERIES NEXT PREFERRED STOCK”), issued in Shockwave’s next private equity
\nfinancing (the “NEXT EQUITY FINANCING”), provided the Next Equity Financing
\ncloses prior to the Maturity Date of this Note. Upon the Next Equity Financing,
\nBorrower’s indebtedness under this Note shall automatically be converted into
\nthat number of fully paid and nonassessable shares of Shockwave’s Series Next
\nPreferred Stock that is equal to the dollar amount of all principal outstanding
\nand interest accrued as of the date of conversion being converted into stock by
\nHolder, divided by the price per share of Shockwave’s Series Next Preferred
\nStock at which such Series Next Preferred Stock is or will be offered to other
\nSeries Next Preferred Stock investors (the “CONVERSION PRICE”); provided,
\nhowever, that the Conversion Price will automatically, equitably and
\nproportionally be adjusted to reflect any subdivision (stock split), combination
\n(reverse stock split), stock dividend or other recapitalization affecting
\nShockwave’s Series Next Preferred Stock. In the event that the Merger Agreement
\n(as referred to in the Note Agreement) is terminated according to its terms, all
\nof Borrower’s indebtedness under this Note shall automatically be converted into
\nBorrower’s Series D Preferred Stock based upon a fully diluted pre-money
\nvaluation of Borrower’s equity of $75,000,000 (the “BORROWER CONVERSION PRICE”);
\nprovided, however, that the Conversion Price will automatically, equitably and
\nproportionally be adjusted to reflect any subdivision (stock split), combination
\n(reverse stock split), stock dividend or other recapitalization affecting
\nBorrower’s Series D Preferred Stock. Such Series D Preferred Stock received by
\nHolder will have rights, privileges, preferences and restrictions no less
\nfavorable than Borrower’s Series C Preferred Stock in existence on the date of
\nthe Note Agreement and any Series D Preferred Stock issued subsequent to that
\ndate, and will have a liquidation preference based upon the price per share of
\nthe Series D Preferred Stock. Borrower covenants and agrees with Holder that
\nBorrower will not in any way alter, amend or modify any of the rights,
\npreferences, privileges or restrictions of Borrower’s Series D Preferred Stock,
\nor to issue, eliminate or reduce the number of authorized shares of Borrower’s
\nSeries D Preferred Stock. Upon the conversion of Borrower’s outstanding
\nindebtedness hereunder pursuant to this Section, Borrower, at its expense, will
\nas soon as practicable cause to be issued in the name of and delivered to
\nHolder, a certificate or certificates for the number of fully paid and
\nnonassessable shares of Borrower’s Series D Preferred Stock to which Holder is
\nentitled upon such conversion. Such certificates will include legends required
\nfederal and applicable state securities laws. No fractional shares will be
\nissued upon any conversion of this Note or any part hereof. If, upon any
\nconversion of this Note, a fraction of a share would otherwise result, then
\nShockwave or Borrower, as the case may be, will pay Holder an amount of cash
\nequal to the fair market value of one share of the type and class of capital
\nstock issuable to Holder upon such conversion (determined in accordance with the
\nConversion Price or Borrower Conversion Price, as the case may be, applicable at
\nthe time of <\/p>\n
-2-
\n 185<\/p>\n
such conversion), multiplied by the fraction of a share of stock to which Holder
\nwould otherwise be entitled.<\/p>\n
5. WAIVER AND AMENDMENT. Any provision of this Note may be amended or
\nmodified only by a writing signed by both Borrower and Holder. Except as
\nprovided below with respect to waivers by Borrower, no waiver or consent with
\nrespect to this Note will be binding or effective unless it is set forth in
\nwriting and signed by the party against whom such waiver is asserted. No course
\nof dealing between Borrower and Holder will operate as a waiver or modification
\nof any party’s rights or obligations under this Note. No delay or failure on the
\npart of either party in exercising any right or remedy under this Note will
\noperate as a waiver of such right or any other right. A waiver given on one
\noccasion will not be construed as a bar to, or as a waiver of, any right or
\nremedy on any future occasion.<\/p>\n
6. WAIVERS OF BORROWER. Borrower hereby waives presentment, notice of
\nnon-payment, notice of dishonor, protest, demand and diligence. This Note may be
\namended only by a writing executed by Borrower and Holder.<\/p>\n
7. GOVERNING LAW. This Note will be governed by and construed in
\naccordance with the internal laws of the State of California as applied to
\nagreements between residents thereof to be performed entirely within such State,
\nwithout reference to that body of law relating to conflict of laws or choice of
\nlaw.<\/p>\n
8. SEVERABILITY; HEADINGS. The invalidity or unenforceability of any term
\nor provision of this Note will not affect the validity or enforceability of any
\nother term or provision hereof. The headings in this Note are for convenience of
\nreference only and will not alter or otherwise affect the meaning of this Note.<\/p>\n
9. JURISDICTION; VENUE. Borrower, by its execution of this Note, hereby
\nirrevocably submits to the in personam jurisdiction of the state courts of the
\nState of California and of the United States District Court for the Northern
\nDistrict of California that are located in San Francisco, California, for the
\npurpose of any suit, action or other proceeding arising out of or based upon
\nthis Note.<\/p>\n
10. ATTORNEYS’ FEES. If suit is brought for collection of this Note,
\nBorrower agrees to pay all reasonable expenses, including attorneys’ fees,
\nincurred by Holder in connection therewith whether or not such suit is
\nprosecuted to judgment.<\/p>\n
11. ASSIGNMENT. This Note is freely transferable and assignable by Holder,
\nprovided that such transfer is made in compliance with all applicable state and
\nfederal securities laws. Any reference to Holder herein will be deemed to refer
\nto any subsequent transferee of this Note at such time as such transferee holds
\nthis Note. This Note may not be assigned or delegated by Borrower, whether by
\nvoluntary assignment or transfer, operation of law, merger or otherwise, except
\nthat upon the closing of the Merger, Shockwave will assume all indebtedness
\nunder this Note.<\/p>\n
-3-
\n 186<\/p>\n
IN WITNESS WHEREOF, Borrower has executed this Note as of the date and
\nyear first above written.<\/p>\n
BORROWER<\/p>\n
ATOM CORPORATION<\/p>\n
By:
\n ———————————-
\n Name:
\n ———————————
\n Title:
\n ——————————–<\/p>\n
-4-
\n 187<\/p>\n
EXHIBIT B<\/p>\n
Form of Note 2<\/p>\n
188<\/p>\n
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
\nACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
\nSTATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
\nRESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
\nAND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
\nTHEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
\nFINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
\nOF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
\nSATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
\nIN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.<\/p>\n
CONVERTIBLE PROMISSORY NOTE
\n OF
\n ATOM CORPORATION<\/p>\n
$ 5,000,000.00
\n Issue Date: January __, 2001
\n Maturity Date: January __, 2002<\/p>\n
1. OBLIGATION. The undersigned, Atom Corporation (“BORROWER”), hereby
\npromises to pay to the order of Macromedia, Inc., (“LENDER” OR “HOLDER”) on
\nJanuary __, 2002, at Lender’s principal place of business at 600 Townsend
\nStreet, San Francisco, CA 94103, or at such other place as Holder may direct,
\nthe principal sum of Five Million Dollars ($5,000,000.00) plus accrued interest
\nat a rate of 6.10 percent (6.10%) per annum, compounded annually, which rate is
\nnot less than the minimum rate established pursuant to Section 1274(d) of the
\nInternal Revenue Code of 1986, as amended, as of the date hereof. As used
\nherein, the term “HOLDER” shall initially mean Lender, and shall subsequently
\nmean each person or entity to which this Note is duly assigned.<\/p>\n
This Note shall be entered into pursuant to a Note Purchase Agreement
\ndated December 14, 2000 (the “NOTE AGREEMENT”) between Lender and Borrower.<\/p>\n
2. DEFAULT; ACCELERATION OF OBLIGATION. Borrower will be deemed to be in
\ndefault under this Note and the outstanding unpaid principal balance of this
\nNote, together with all interest accrued thereon, will immediately become due
\nand payable in full, without the need for any further action on the part of
\nHolder, upon the occurrence of any of the following events (each an “EVENT OF
\nDEFAULT”): (a) upon Borrower’s failure to make any payment when due under this
\nNote; (b) upon the filing by or against Borrower of any voluntary or involuntary
\npetition in bankruptcy or any petition for relief under the federal bankruptcy
\ncode or any other state or federal law for the relief of debtors; provided,
\nhowever, with respect to an involuntary petition in bankruptcy, such petition
\nhas not been dismissed within thirty (30) days after the filing of such
\npetition; (c) upon the execution by Borrower of an assignment for the benefit of
\ncreditors or the appointment of a receiver, custodian, trustee or similar party
\nto take possession of Borrower’s assets or property; or (d) material breach of
\nthe terms and conditions of the Note Agreement.<\/p>\n
189<\/p>\n
3. REMEDIES ON DEFAULT; ACCELERATION. Upon any Event of Default, Holder
\nwill have, in addition to its rights and remedies under this Note, full recourse
\nagainst any real, personal, tangible or intangible assets of Borrower, and may
\npursue any legal or equitable remedies that are available to Holder, and may
\ndeclare the entire unpaid principal amount of this Note and all unpaid accrued
\ninterest under this Note to be immediately due and payable in full.<\/p>\n
4. CONVERSION. Upon the closing of the Merger (as referred to in the Note
\nAgreement), all of Shockwave’s indebtedness under this Note shall become
\nconvertible into equity securities of the surviving corporation, Shockwave (the
\n“SERIES NEXT PREFERRED Stock”), issued in Shockwave’s next private equity
\nfinancing (the “NEXT EQUITY FINANCING”), provided the Next Equity Financing
\ncloses prior to the Maturity Date of this Note. Upon the Next Equity Financing,
\nBorrower’s indebtedness under this Note shall automatically be converted into
\nthat number of fully paid and nonassessable shares of Shockwave’s Series Next
\nPreferred Stock that is equal to the dollar amount of all principal outstanding
\nand interest accrued as of the date of conversion being converted into stock by
\nHolder, divided by the price per share of Shockwave’s Series Next Preferred
\nStock at which such Series Next Preferred Stock is or will be offered to other
\nSeries Next Preferred Stock investors (the “CONVERSION PRICE”); provided,
\nhowever, that the Conversion Price will automatically, equitably and
\nproportionally be adjusted to reflect any subdivision (stock split), combination
\n(reverse stock split), stock dividend or other recapitalization affecting
\nShockwave’s Series Next Preferred Stock. In the event that the Merger Agreement
\n(as referred to in the Note Agreement) is terminated according to its terms, all
\nof Borrower’s indebtedness under this Note shall automatically be converted into
\nBorrower’s Series D Preferred Stock based upon a fully diluted pre-money
\nvaluation of Borrower’s equity of $75,000,000 (the “BORROWER CONVERSION PRICE”);
\nprovided, however, that the Conversion Price will automatically, equitably and
\nproportionally be adjusted to reflect any subdivision (stock split), combination
\n(reverse stock split), stock dividend or other recapitalization affecting
\nBorrower’s Series D Preferred Stock. Such Series D Preferred Stock received by
\nHolder will have rights, privileges, preferences and restrictions no less
\nfavorable than Borrower’s Series C Preferred Stock in existence on the date of
\nthe Note Agreement and any Series D Preferred Stock issued subsequent to that
\ndate, and will have a liquidation preference based upon the price per share of
\nthe Series D Preferred Stock. Borrower covenants and agrees with Holder that
\nBorrower will not in any way alter, amend or modify any of the rights,
\npreferences, privileges or restrictions of Borrower’s Series D Preferred Stock,
\nor to issue, eliminate or reduce the number of authorized shares of Borrower’s
\nSeries D Preferred Stock. Upon the conversion of Borrower’s outstanding
\nindebtedness hereunder pursuant to this Section, Borrower, at its expense, will
\nas soon as practicable cause to be issued in the name of and delivered to
\nHolder, a certificate or certificates for the number of fully paid and
\nnonassessable shares of Borrower’s Series D Preferred Stock to which Holder is
\nentitled upon such conversion. Such certificates will include legends required
\nfederal and applicable state securities laws. No fractional shares will be
\nissued upon any conversion of this Note or any part hereof. If, upon any
\nconversion of this Note, a fraction of a share would otherwise result, then
\nShockwave or Borrower, as the case may be, will pay Holder an amount of cash
\nequal to the fair market value of one share of the type and class of capital
\nstock issuable to Holder upon such conversion (determined in accordance with the
\nConversion Price or Borrower Conversion Price, as the case may be, applicable at
\nthe time of <\/p>\n
-2-
\n 190<\/p>\n
such conversion), multiplied by the fraction of a share of stock to which Holder
\nwould otherwise be entitled.<\/p>\n
5. WAIVER AND AMENDMENT. Any provision of this Note may be amended or
\nmodified only by a writing signed by both Borrower and Holder. Except as
\nprovided below with respect to waivers by Borrower, no waiver or consent with
\nrespect to this Note will be binding or effective unless it is set forth in
\nwriting and signed by the party against whom such waiver is asserted. No course
\nof dealing between Borrower and Holder will operate as a waiver or modification
\nof any party’s rights or obligations under this Note. No delay or failure on the
\npart of either party in exercising any right or remedy under this Note will
\noperate as a waiver of such right or any other right. A waiver given on one
\noccasion will not be construed as a bar to, or as a waiver of, any right or
\nremedy on any future occasion.<\/p>\n
6. WAIVERS OF BORROWER. Borrower hereby waives presentment, notice of
\nnon-payment, notice of dishonor, protest, demand and diligence. This Note may be
\namended only by a writing executed by Borrower and Holder.<\/p>\n
7. GOVERNING LAW. This Note will be governed by and construed in
\naccordance with the internal laws of the State of California as applied to
\nagreements between residents thereof to be performed entirely within such State,
\nwithout reference to that body of law relating to conflict of laws or choice of
\nlaw.<\/p>\n
8. SEVERABILITY; HEADINGS. The invalidity or unenforceability of any term
\nor provision of this Note will not affect the validity or enforceability of any
\nother term or provision hereof. The headings in this Note are for convenience of
\nreference only and will not alter or otherwise affect the meaning of this Note.<\/p>\n
9. JURISDICTION; VENUE. Borrower, by its execution of this Note, hereby
\nirrevocably submits to the in personam jurisdiction of the state courts of the
\nState of California and of the United States District Court for the Northern
\nDistrict of California that are located in San Francisco, California, for the
\npurpose of any suit, action or other proceeding arising out of or based upon
\nthis Note.<\/p>\n
10. ATTORNEYS’ FEES. If suit is brought for collection of this Note,
\nBorrower agrees to pay all reasonable expenses, including attorneys’ fees,
\nincurred by Holder in connection therewith whether or not such suit is
\nprosecuted to judgment.<\/p>\n
11. ASSIGNMENT. This Note is freely transferable and assignable by Holder,
\nprovided that such transfer is made in compliance with all applicable state and
\nfederal securities laws. Any reference to Holder herein will be deemed to refer
\nto any subsequent transferee of this Note at such time as such transferee holds
\nthis Note. This Note may not be assigned or delegated by Borrower, whether by
\nvoluntary assignment or transfer, operation of law, merger or otherwise, except
\nthat upon the closing of the Merger, Shockwave will assume all indebtedness
\nunder this Note.<\/p>\n
-3-
\n 191<\/p>\n
IN WITNESS WHEREOF, Borrower has executed this Note as of the date and
\nyear first above written.<\/p>\n
BORROWER<\/p>\n
ATOM CORPORATION<\/p>\n
By:
\n ———————————-
\n Name:
\n ———————————
\n Title:
\n ——————————–<\/p>\n
-4-
\n 192
\nTHE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
\nACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
\nSTATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
\nRESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
\nAND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
\nTHEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
\nFINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
\nOF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
\nSATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
\nIN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.<\/p>\n
CONVERTIBLE PROMISSORY NOTE
\n OF
\n ATOM CORPORATION<\/p>\n
$ 5,000,000.00
\n Issue Date: December 15, 2000
\n Maturity Date: December 15, 2001<\/p>\n
1. OBLIGATION. The undersigned, Atom Corporation (“BORROWER”), hereby
\npromises to pay to the order of Macromedia, Inc., (“LENDER” OR “HOLDER”) on
\nDecember 15, 2001, at Lender’s principal place of business at 600 Townsend
\nStreet, San Francisco, CA 94103, or at such other place as Holder may direct,
\nthe principal sum of Five Million Dollars ($5,000,000.00) plus accrued interest
\nat a rate of 6.10 percent (6.10%) per annum, compounded annually, which rate is
\nnot less than the minimum rate established pursuant to Section 1274(d) of the
\nInternal Revenue Code of 1986, as amended, as of the date hereof. As used
\nherein, the term “HOLDER” shall initially mean Lender, and shall subsequently
\nmean each person or entity to which this Note is duly assigned.<\/p>\n
This Note shall be entered into pursuant to a Note Purchase Agreement
\ndated December 14, 2000 (the “NOTE AGREEMENT”) between Lender and Borrower.<\/p>\n
2. DEFAULT; ACCELERATION OF OBLIGATION. Borrower will be deemed to be in
\ndefault under this Note and the outstanding unpaid principal balance of this
\nNote, together with all interest accrued thereon, will immediately become due
\nand payable in full, without the need for any further action on the part of
\nHolder, upon the occurrence of any of the following events (each an “EVENT OF
\nDEFAULT”): (a) upon Borrower’s failure to make any payment when due under this
\nNote; (b) upon the filing by or against Borrower of any voluntary or involuntary
\npetition in bankruptcy or any petition for relief under the federal bankruptcy
\ncode or any other state or federal law for the relief of debtors; provided,
\nhowever, with respect to an involuntary petition in bankruptcy, such petition
\nhas not been dismissed within thirty (30) days after the filing of such
\npetition; (c) upon the execution by Borrower of an assignment for the benefit of
\ncreditors or the appointment of a receiver, custodian, trustee or similar party
\nto take possession of Borrower’s assets or property; or (d) material breach of
\nthe terms and conditions of the Note Agreement.<\/p>\n
193<\/p>\n
3. REMEDIES ON DEFAULT; ACCELERATION. Upon any Event of Default, Holder
\nwill have, in addition to its rights and remedies under this Note, full recourse
\nagainst any real, personal, tangible or intangible assets of Borrower, and may
\npursue any legal or equitable remedies that are available to Holder, and may
\ndeclare the entire unpaid principal amount of this Note and all unpaid accrued
\ninterest under this Note to be immediately due and payable in full.<\/p>\n
4. CONVERSION. Upon the closing of the Merger (as referred to in the Note
\nAgreement), all of Shockwave’s indebtedness under this Note shall become
\nconvertible into equity securities of the surviving corporation, Shockwave (the
\n“SERIES NEXT PREFERRED Stock”), issued in Shockwave’s next private equity
\nfinancing (the “NEXT EQUITY FINANCING”), provided the Next Equity Financing
\ncloses prior to the Maturity Date of this Note. Upon the Next Equity Financing,
\nBorrower’s indebtedness under this Note shall automatically be converted into
\nthat number of fully paid and nonassessable shares of Shockwave’s Series Next
\nPreferred Stock that is equal to the dollar amount of all principal outstanding
\nand interest accrued as of the date of conversion being converted into stock by
\nHolder, divided by the price per share of Shockwave’s Series Next Preferred
\nStock at which such Series Next Preferred Stock is or will be offered to other
\nSeries Next Preferred Stock investors (the “CONVERSION PRICE”); provided,
\nhowever, that the Conversion Price will automatically, equitably and
\nproportionally be adjusted to reflect any subdivision (stock split), combination
\n(reverse stock split), stock dividend or other recapitalization affecting
\nShockwave’s Series Next Preferred Stock. In the event that the Merger Agreement
\n(as referred to in the Note Agreement) is terminated according to its terms, all
\nof Borrower’s indebtedness under this Note shall automatically be converted into
\nBorrower’s Series D Preferred Stock based upon a fully diluted pre-money
\nvaluation of Borrower’s equity of $75,000,000 (the “BORROWER CONVERSION PRICE”);
\nprovided, however, that the Conversion Price will automatically, equitably and
\nproportionally be adjusted to reflect any subdivision (stock split), combination
\n(reverse stock split), stock dividend or other recapitalization affecting
\nBorrower’s Series D Preferred Stock. Such Series D Preferred Stock received by
\nHolder will have rights, privileges, preferences and restrictions no less
\nfavorable than Borrower’s Series C Preferred Stock in existence on the date of
\nthe Note Agreement and any Series D Preferred Stock issued subsequent to that
\ndate, and will have a liquidation preference based upon the price per share of
\nthe Series D Preferred Stock. Borrower covenants and agrees with Holder that
\nBorrower will not in any way alter, amend or modify any of the rights,
\npreferences, privileges or restrictions of Borrower’s Series D Preferred Stock,
\nor to issue, eliminate or reduce the number of authorized shares of Borrower’s
\nSeries D Preferred Stock. Upon the conversion of Borrower’s outstanding
\nindebtedness hereunder pursuant to this Section, Borrower, at its expense, will
\nas soon as practicable cause to be issued in the name of and delivered to
\nHolder, a certificate or certificates for the number of fully paid and
\nnonassessable shares of Borrower’s Series D Preferred Stock to which Holder is
\nentitled upon such conversion. Such certificates will include legends required
\nfederal and applicable state securities laws. No fractional shares will be
\nissued upon any conversion of this Note or any part hereof. If, upon any
\nconversion of this Note, a fraction of a share would otherwise result, then
\nShockwave or Borrower, as the case may be, will pay Holder an amount of cash
\nequal to the fair market value of one share of the type and class of capital
\nstock issuable to Holder upon such conversion (determined in accordance with the
\nConversion Price or Borrower Conversion Price, as the case may be, applicable at
\nthe time of <\/p>\n
2
\n 194<\/p>\n
such conversion), multiplied by the fraction of a share of stock to which Holder
\nwould otherwise be entitled.<\/p>\n
5. WAIVER AND AMENDMENT. Any provision of this Note may be amended or
\nmodified only by a writing signed by both Borrower and Holder. Except as
\nprovided below with respect to waivers by Borrower, no waiver or consent with
\nrespect to this Note will be binding or effective unless it is set forth in
\nwriting and signed by the party against whom such waiver is asserted. No course
\nof dealing between Borrower and Holder will operate as a waiver or modification
\nof any party’s rights or obligations under this Note. No delay or failure on the
\npart of either party in exercising any right or remedy under this Note will
\noperate as a waiver of such right or any other right. A waiver given on one
\noccasion will not be construed as a bar to, or as a waiver of, any right or
\nremedy on any future occasion.<\/p>\n
6. WAIVERS OF BORROWER. Borrower hereby waives presentment, notice of
\nnon-payment, notice of dishonor, protest, demand and diligence. This Note may be
\namended only by a writing executed by Borrower and Holder.<\/p>\n
7. GOVERNING LAW. This Note will be governed by and construed in
\naccordance with the internal laws of the State of California as applied to
\nagreements between residents thereof to be performed entirely within such State,
\nwithout reference to that body of law relating to conflict of laws or choice of
\nlaw.<\/p>\n
8. SEVERABILITY; HEADINGS. The invalidity or unenforceability of any term
\nor provision of this Note will not affect the validity or enforceability of any
\nother term or provision hereof. The headings in this Note are for convenience of
\nreference only and will not alter or otherwise affect the meaning of this Note.<\/p>\n
9. JURISDICTION; VENUE. Borrower, by its execution of this Note, hereby
\nirrevocably submits to the in personam jurisdiction of the state courts of the
\nState of California and of the United States District Court for the Northern
\nDistrict of California that are located in San Francisco, California, for the
\npurpose of any suit, action or other proceeding arising out of or based upon
\nthis Note.<\/p>\n
10. ATTORNEYS’ FEES. If suit is brought for collection of this Note,
\nBorrower agrees to pay all reasonable expenses, including attorneys’ fees,
\nincurred by Holder in connection therewith whether or not such suit is
\nprosecuted to judgment.<\/p>\n
11. ASSIGNMENT. This Note is freely transferable and assignable by Holder,
\nprovided that such transfer is made in compliance with all applicable state and
\nfederal securities laws. Any reference to Holder herein will be deemed to refer
\nto any subsequent transferee of this Note at such time as such transferee holds
\nthis Note. This Note may not be assigned or delegated by Borrower, whether by
\nvoluntary assignment or transfer, operation of law, merger or otherwise, except
\nthat upon the closing of the Merger, Shockwave will assume all indebtedness
\nunder this Note.<\/p>\n
3
\n 195<\/p>\n
IN WITNESS WHEREOF, Borrower has executed this Note as of the date and
\nyear first above written.<\/p>\n
BORROWER<\/p>\n
ATOM CORPORATION<\/p>\n
By:
\n ———————————
\n Name:
\n ——————————–
\n Title:
\n ——————————-<\/p>\n
4<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8105],"corporate_contracts_industries":[9513],"corporate_contracts_types":[9622,9626],"class_list":["post-43210","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-macromedia-inc","corporate_contracts_industries-technology__software","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\/43210","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=43210"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43210"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43210"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43210"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}