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<center><font face="Courier New"><font size=-2>SECURITIES AND EXCHANGE
COMMISSION</font></font>
<br><font face="Courier New"><font size=-2>Washington, D.C. 20549</font></font>
<p><b><font face="Courier New"><font size=-2>FORM 8-K</font></font></b>
<p><font face="Courier New"><font size=-2>CURRENT REPORT</font></font>
<p><font face="Courier New"><font size=-2>Pursuant to Section 13 or 15(d)
of the</font></font>
<br><font face="Courier New"><font size=-2>Securities Exchange Act of 1934</font></font></center>
<p><font face="Courier New"><font size=-2>Date of Report (Date of earliest
event reported): <u>December 17, 1999</u></font></font>
<br>
<br>
<br>
<center>
<p><b><u><font face="Courier New"><font size=-1>Cabletron Systems, Inc.</font></font></u></b>
<br><font face="Courier New"><font size=-2>(Exact name of registrant as
specified in its charter)</font></font></center>
<p><br>
<table BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH="590" >
<tr>
<td VALIGN=TOP WIDTH="39%">
<center><u><font face="Courier New"><font size=-2>Delaware</font></font></u></center>
</td>
<td VALIGN=TOP WIDTH="34%">
<center><u><font face="Courier New"><font size=-2>001-10228</font></font></u></center>
</td>
<td VALIGN=TOP WIDTH="28%">
<center><u><font face="Courier New"><font size=-2>04-2797263</font></font></u></center>
</td>
</tr>
<tr>
<td VALIGN=TOP WIDTH="39%"><font face="Courier New"><font size=-2>(State
or other jurisdiction of</font></font>
<br><font face="Courier New"><font size=-2> incorporation or organization)</font></font></td>
<td VALIGN=TOP WIDTH="34%">
<center><font face="Courier New"><font size=-2>(Commission</font></font>
<br><font face="Courier New"><font size=-2>File Number)</font></font></center>
</td>
<td VALIGN=TOP WIDTH="28%">
<center><font face="Courier New"><font size=-2>(I.R.S. Employer</font></font>
<br><font face="Courier New"><font size=-2>identification no.)</font></font></center>
</td>
</tr>
</TABLE>
<br>
<center>
<p><u><font face="Courier New"><font size=-2>35 Industrial Way, Rochester,
New Hampshire 03867</font></font></u>
<br>(Address of principal executive offices and Zip Code)
<p>Registrant's telephone number, including area code: (603) 332-9400
<p><u>Not Applicable</u>
<br>(Former name or former address, if changed since last report)
<p><u>-1-</u></center>
<p><br>
<br>
<br>
<br>
<br>
<p><a NAME="node2"></a>ITEM 5. OTHER EVENTS
<p>On November 21, 1999, Cabletron Systems, Inc., a Delaware corporation
("Cabletron"), entered into an Agreement and Plan of Merger and Reorganization
(the "Merger Agreement") with Efficient Networks, Inc., a Delaware corporation
("Efficient"), Fire Acquisition Corporation, a California corporation and
wholly-owned subsidiary of Efficient ("Merger Sub"), and Flowpoint Corporation,
a California corporation and wholly-owned subsidiary of Cabletron ("Flowpoint"),
pursuant to which, on December 17, 1999, Flowpoint merged with and into
Merger Sub and became a wholly-owned subsidiary of Efficient (the "Merger").
A copy of each of the Merger Agreement, Amendment No. 1 to the Merger Agreement
dated December 14, 1999 and Amendment No. 2 to the Merger Agreement dated
December 17, 1999 are attached hereto as Exhibits 2.1, 2.2 and 2.3 respectively,
and are incorporated herein by reference.
<p>The Merger was effected on December 17, 1999 through the issuance of
7,200,000 shares of Common Stock of Efficient and 6,300 shares of Series
A Non-Voting Convertible Preferred Stock of Efficient (the "Shares") in
exchange for all of the capital stock of Flowpoint outstanding immediately
prior to the consummation of the Merger. The amount of consideration was
determined based upon arm's-length negotiations between Efficient, Cabletron
and Flowpoint. The Merger qualified as a tax-free reorganization under
the Internal Revenue Code of 1986, as amended.
<p>In connection with the Merger Agreement, Efficient entered into Voting
Agreements dated November 20, 1999 (the "Voting Agreements") with a majority
of its stockholders. The Voting Agreements relate to the 6,300 shares of
Efficient Series A Non-Voting Preferred Stock (the "Preferred Stock") issued
to Cabletron as partial consideration in connection with the Merger. Pursuant
to the Voting Agreements, the majority of Efficient's stockholders (such
majority to be determined as of December 10, 1999) have agreed to vote
all of the shares of Efficient Common Stock held by them as of December
10, 1999 and which they continue to hold at the time of the Efficient special
meeting of stockholders (which special meeting will be held in the near
future on a date to be announced) in favor of the conversion of the Preferred
Stock into shares of Efficient Common Stock at a conversion ratio of 1,000
shares of Efficient Common Stock for each share of Preferred Stock. Upon
stockholder approval, the 6,300 shares of Preferred Stock shall convert
into an aggregate of 6,300,000 shares of Efficient Common Stock.
<p>In connection with the Merger Agreement, Cabletron and Efficient entered
into a Standstill and Disposition Agreement (the "SDA") whereby Cabletron
agreed, among other things, not to transfer or acquire additional shares
of Efficient (except in certain circumstances) and to restrictions on Cabletron's
ability to vote its shares of Efficient Common Stock. Under the SDA, Efficient,
among other things, granted certain registration rights to Cabletron.
<p>In connection with the Merger Agreement, Efficient filed a Certificate
of Designation that governs the rights and preferences accorded to the
shares of Series A preferred stock issued to Cabletron in the Merger.
<p>The foregoing description is qualified in its entirety by reference
to the Merger Agreement, Amendments Nos. 1 and 2 to the Merger Agreement,
the Standstill and Disposition Agreement and the Certificate of Designations,
all of which are attached hereto as Exhibits.
<p><a NAME="node3"></a>ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
<dir>
<dl>(c) EXHIBITS
<dd>
<br>
2.1 Agreement and Plan of Merger and Reorganization dated as
of November 21, 1999 by and among Cabletron Systems, Inc., Efficient Networks,
Inc., Flowpoint Corporation and Fire Acquisition Corporation (the "Merger
Agreement").<br>
2.2 Amendment No. 1 to the Merger Agreement dated as of December
14, 1999.<br>
2.3 Amendment No. 2 to the Merger Agreement dated as of December
17, 1999.<br>
2.4 Standstill and Disposition Agreement, dated as of December
17, 1999, between Cabletron Systems, Inc. and Efficient Networks, Inc.<br>
2.5 Certificate of Designation of Efficient Networks, Inc.,
filed December 17, 1999.<br>
2.6 Agreement by Cabletron Systems, Inc. to Furnish Copies
of Omitted Schedules and Exhibits to the Merger Agreement.</dd>
</dl>
</dir>
<center>-3-
<p>SIGNATURES</center>
<p><br>
<br>
<br>
<br>
<br>
<p>Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
<br>
<br>
<br>
<table BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH="590" >
<tr>
<td VALIGN=TOP WIDTH="33%">
<center><u><font face="Courier New"><font size=-2>January 14, 2000</font></font></u>
<br>Date</center>
</td>
<td VALIGN=TOP WIDTH="33%"> </td>
<td VALIGN=TOP WIDTH="33%">
<center><u><font face="Courier New"><font size=-2>CABLETRON SYSTEMS, INC.</font></font></u>
<br>Registrant</center>
</td>
</tr>
</TABLE>
<br>
<br>
<table BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH="590" >
<tr>
<td VALIGN=TOP WIDTH="33%"> </td>
<td VALIGN=TOP WIDTH="28%"> </td>
<td VALIGN=TOP COLSPAN="2" WIDTH="39%"><u><font face="Courier New"><font size=-2>/s/
Eric Jaeger</font></font></u></td>
</tr>
<tr>
<td VALIGN=TOP WIDTH="33%"> </td>
<td VALIGN=TOP COLSPAN="2" WIDTH="34%"> </td>
<td VALIGN=TOP WIDTH="33%"><font face="Courier New"><font size=-2>Eric
Jaeger</font></font>
<br><font face="Courier New"><font size=-2>Executive Vice President</font></font></td>
</tr>
</TABLE>
<br>
<br>
<br>
<center>
<p><font face="Courier New"><font size=-2>-4-</font></font>
<br>
<br>
<br>
<br>
<br>
<p><b><font face="Courier New"><font size=-1>INDEX TO EXHIBITS</font></font></b></center>
<p><br>
<table BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH="590" >
<tr>
<td VALIGN=TOP WIDTH="12%">
<center><font face="Courier New"><font size=-2>Exhibit</font></font>
<br><u><font face="Courier New"><font size=-2>Number</font></font></u></center>
</td>
<td VALIGN=TOP WIDTH="88%">
<br><u><font face="Courier New"><font size=-2>Description of Document</font></font></u></td>
</tr>
<tr>
<td VALIGN=TOP WIDTH="12%">
<center><font face="Courier New"><font size=-2>2.1</font></font></center>
</td>
<td VALIGN=TOP WIDTH="88%"><font face="Courier New"><font size=-2>Agreement
and Plan of Merger and Reorganization, dated as of November 21, 1999, by
and among Cabletron Systems, Inc., Efficient Networks, Inc., Flowpoint
Corporation and Fire Acquisition Corporation.</font></font></td>
</tr>
<tr>
<td VALIGN=TOP WIDTH="12%">
<center><font face="Courier New"><font size=-2>2.2</font></font></center>
</td>
<td VALIGN=TOP WIDTH="88%"><font face="Courier New"><font size=-2>Amendment
No. 1 to the Merger Agreement dated as of December 14, 1999.</font></font></td>
</tr>
<tr>
<td VALIGN=TOP WIDTH="12%">
<center><font face="Courier New"><font size=-2>2.3</font></font></center>
</td>
<td VALIGN=TOP WIDTH="88%"><font face="Courier New"><font size=-2>Amendment
No. 2 to the Merger Agreement dated as of December 17, 1999.</font></font></td>
</tr>
<tr>
<td VALIGN=TOP WIDTH="12%">
<center><font face="Courier New"><font size=-2>2.4</font></font></center>
</td>
<td VALIGN=TOP WIDTH="88%"><font face="Courier New"><font size=-2>Standstill
and Disposition Agreement, dated as of December 17, 1999, between Cabletron
Systems, Inc. and Efficient Networks, Inc.</font></font></td>
</tr>
<tr>
<td VALIGN=TOP WIDTH="12%">
<center><font face="Courier New"><font size=-2>2.5</font></font></center>
</td>
<td VALIGN=TOP WIDTH="88%"><font face="Courier New"><font size=-2>Certificate
of Designation of Efficient Networks, Inc., filed December 17, 1999.</font></font></td>
</tr>
<tr>
<td VALIGN=TOP WIDTH="12%">
<center><font face="Courier New"><font size=-2>2.6</font></font></center>
</td>
<td VALIGN=TOP WIDTH="88%"><font face="Courier New"><font size=-2>Agreement
by Cabletron Systems, Inc. to Furnish Copies of Omitted Schedules and Exhibits
to the Merger Agreement.</font></font></td>
</tr>
</TABLE>
<br>
<p><a NAME="node4"></a>
<div align=right><u><font face="Courier New"><font size=-2>Exhibit 2.1</font></font></u></div>
<br>
<br>
<br>
<br>
<br>
<center>
<p><font face="Courier New"><font size=-2>AGREEMENT AND PLAN OF REORGANIZATION</font></font>
<p><font face="Courier New"><font size=-2>BY AND AMONG</font></font>
<p><font face="Courier New"><font size=-2>EFFICIENT NETWORKS, INC.,</font></font>
<p><font face="Courier New"><font size=-2>FIRE ACQUISITION CORPORATION</font></font>
<p><font face="Courier New"><font size=-2>CABLETRON SYSTEMS, INC.</font></font>
<p><font face="Courier New"><font size=-2>AND</font></font>
<p><font face="Courier New"><font size=-2>FLOWPOINT CORPORATION</font></font>
<p><font face="Courier New"><font size=-2>Dated as of November 21, 1999</font></font>
<br>
<br>
<p><b><u><font face="Courier New"><font size=-2>TABLE OF CONTENTS</font></font></u></b></center>
<p><br>
<br>
<br>
<br>
<br>
<table BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="590" >
<tr>
<td VALIGN=TOP WIDTH="75%"> </td>
<td VALIGN=TOP WIDTH="33%"><u><font face="Courier New"><font size=-2>Page</font></font></u></td>
</tr>
</TABLE>
<p><font face="Courier New"><font size=-2>ARTICLE I THE MERGER...................................................
1</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>1.1 The Merger 1</font></font>
<p><font face="Courier New"><font size=-2>1.2 Effective Time; Closing..................................
2</font></font>
<p><font face="Courier New"><font size=-2>1.3 Effect of the Merger.....................................
2</font></font>
<p><font face="Courier New"><font size=-2>1.4 Certificate of Incorporation;
Bylaws..................... 2</font></font>
<p><font face="Courier New"><font size=-2>1.5 Directors and Officers...................................
2</font></font>
<p><font face="Courier New"><font size=-2>1.6 Effect on Capital Stock..................................
3</font></font>
<p><font face="Courier New"><font size=-2>1.7 Surrender of Certificates................................
4</font></font>
<p><font face="Courier New"><font size=-2>1.8 No Further Ownership Rights
in Company Common Stock...... 5</font></font>
<p><font face="Courier New"><font size=-2>1.9 Lost, Stolen or Destroyed
Certificates................... 5</font></font>
<p><font face="Courier New"><font size=-2>1.10 Tax and Accounting Consequences.........................
5</font></font>
<p><font face="Courier New"><font size=-2>1.11 Taking of Necessary Action;
Further Action.............. 5</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE II REPRESENTATIONS AND WARRANTIES
OF PARENT AND COMPANY..... 6</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>2.1 Organization and Qualification;
Subsidiaries............. 6</font></font>
<p><font face="Courier New"><font size=-2>2.2 Certificate of Incorporation
and Bylaws.................. 6</font></font>
<p><font face="Courier New"><font size=-2>2.3 Capitalization 6</font></font>
<p><font face="Courier New"><font size=-2>2.4 Authority Relative to this
Agreement..................... 7</font></font>
<p><font face="Courier New"><font size=-2>2.5 No Conflict; Required Filings
and Consents............... 8</font></font>
<p><font face="Courier New"><font size=-2>2.6 Compliance; Permits......................................
8</font></font>
<p><font face="Courier New"><font size=-2>2.7 Financial Statements.....................................
9</font></font>
<p><font face="Courier New"><font size=-2>2.8 Absence of Certain Changes
or Events..................... 10</font></font>
<p><font face="Courier New"><font size=-2>2.9 Absence of Litigation....................................
14</font></font>
<p><font face="Courier New"><font size=-2>2.10 Customers; Suppliers.....................................
14</font></font>
<p><font face="Courier New"><font size=-2>2.11 Product and Service Warranties...........................
15</font></font>
<p><font face="Courier New"><font size=-2>2.12 Employee Benefit Plans...................................
15</font></font>
<p><font face="Courier New"><font size=-2>2.13 Labor Matters............................................
17</font></font>
<p><font face="Courier New"><font size=-2>2.14 Key Employees............................................
17</font></font>
<p><font face="Courier New"><font size=-2>2.15 Material Contracts.......................................
18</font></font>
<p><font face="Courier New"><font size=-2>2.16 Guaranties, Intercompany
Debt............................ 18</font></font>
<p><font face="Courier New"><font size=-2>2.17 Restrictions on Business
Activities...................... 18</font></font>
<p><font face="Courier New"><font size=-2>2.18 Title to Property........................................
19</font></font>
<p><font face="Courier New"><font size=-2>2.19 Environmental Matters....................................
19</font></font>
<p><font face="Courier New"><font size=-2>2.20 Intellectual Property....................................
19</font></font>
<p><font face="Courier New"><font size=-2>2.21 Board Approval...........................................
22</font></font>
<p><font face="Courier New"><font size=-2>2.22 Assets...................................................
22</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE III REPRESENTATIONS AND
WARRANTIES OF PARENT................. 23</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>3.1 Organization and Qualification...........................
23</font></font>
<p><font face="Courier New"><font size=-2>3.2 Authority Relative to this
Agreement..................... 23</font></font>
<br>
<br> </dir>
</dir>
<center><font face="Courier New"><font size=-2>-i-</font></font></center>
<p><br>
<br>
<br>
<br>
<br>
<p><a NAME="node5"></a>
<dir>
<dir><font face="Courier New"><font size=-2>3.3 No Conflict; Required Filings
and Consents............... 23</font></font>
<p><font face="Courier New"><font size=-2>3.4 Brokers..................................................
24</font></font>
<p><font face="Courier New"><font size=-2>3.5 Intellectual Property....................................
24</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MERGER SUB... 25</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>4.1 Organization and Qualification;
Subsidiaries............. 25</font></font>
<p><font face="Courier New"><font size=-2>4.2 Certificate of Incorporation
and Bylaws.................. 25</font></font>
<p><font face="Courier New"><font size=-2>4.3 Capitalization...........................................
25</font></font>
<p><font face="Courier New"><font size=-2>4.4 Authority Relative to this
Agreement..................... 26</font></font>
<p><font face="Courier New"><font size=-2>4.5 No Conflict; Required Filings
and Consents............... 27</font></font>
<p><font face="Courier New"><font size=-2>4.6 SEC Filings; Financial Statements........................
27</font></font>
<p><font face="Courier New"><font size=-2>4.7 Absence of Litigation....................................
28</font></font>
<p><font face="Courier New"><font size=-2>4.8 Title to Property........................................
28</font></font>
<p><font face="Courier New"><font size=-2>4.9 Environmental Matters....................................
28</font></font>
<p><font face="Courier New"><font size=-2>4.10 Board Approval..........................................
29</font></font>
<p><font face="Courier New"><font size=-2>4.11 No Undisclosed Liabilities..............................
29</font></font>
<p><font face="Courier New"><font size=-2>4.12 Compliance..............................................
29</font></font>
<p><font face="Courier New"><font size=-2>4.13 Brokers.................................................
30</font></font>
<p><font face="Courier New"><font size=-2>4.14 Absence of Certain Changes
or Events.................... 30</font></font>
<p><font face="Courier New"><font size=-2>4.15 Intellectual Property...................................
30</font></font>
<p><font face="Courier New"><font size=-2>4.16 Customers...............................................
30</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE
TIME....................... 30</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>5.1 Conduct of Business by
Company and Parent................ 30</font></font>
<p><font face="Courier New"><font size=-2>5.2 Conduct of Business by Purchaser.........................
33</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE VI ADDITIONAL AGREEMENTS....................................
33</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>6.1 Information Statement;
Filings; Board Recommendations.... 33</font></font>
<p><font face="Courier New"><font size=-2>6.2 Meeting of Purchaser Stockholders........................
34</font></font>
<p><font face="Courier New"><font size=-2>6.3 Confidentiality; Access to
Information................... 34</font></font>
<p><font face="Courier New"><font size=-2>6.4 Public Disclosure........................................
35</font></font>
<p><font face="Courier New"><font size=-2>6.5 Reasonable Efforts; Notification.........................
35</font></font>
<p><font face="Courier New"><font size=-2>6.6 Employee Benefits........................................
36</font></font>
<p><font face="Courier New"><font size=-2>6.7 Third Party Consents.....................................
37</font></font>
<p><font face="Courier New"><font size=-2>6.8 Nasdaq Listing...........................................
37</font></font>
<p><font face="Courier New"><font size=-2>6.9 Regulatory Filings; Reasonable
Efforts................... 37</font></font>
<p><font face="Courier New"><font size=-2>6.10 Non-Competition.........................................
38</font></font>
<p><font face="Courier New"><font size=-2>6.11 Intercompany Accounts; Cash
Balance..................... 39</font></font>
<p><font face="Courier New"><font size=-2>6.12 License of Intellectual
Property........................ 39</font></font>
<p><font face="Courier New"><font size=-2>6.13 Reseller Agreement......................................
40</font></font>
<p><font face="Courier New"><font size=-2>6.14 Transition Services Agreement...........................
40</font></font>
<p><font face="Courier New"><font size=-2>6.15 SDA Agreement...........................................
40</font></font>
<p><font face="Courier New"><font size=-2>6.16 License Agreements......................................
40</font></font>
<p><font face="Courier New"><font size=-2>6.17 WARN....................................................
40</font></font>
<br>
<br>
<br>
<br> </dir>
</dir>
<center><font face="Courier New"><font size=-2>-ii-</font></font></center>
<dir>
<dir><font face="Courier New"><font size=-2>6.18 Options...................................................
40</font></font>
<p><font face="Courier New"><font size=-2>6.19 Retention.................................................
40</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE VII CONDITIONS TO THE MERGER..................................
41</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>7.1 Conditions to Obligations
of Each Party to Effect the</font></font>
<br><font face="Courier New"><font size=-2>
Merger.....
41</font></font>
<p><font face="Courier New"><font size=-2>7.2 Additional Conditions to
Obligations of Company and Parent 41</font></font>
<p><font face="Courier New"><font size=-2>7.3 Additional Conditions to
the Obligations of Purchaser and</font></font>
<br><font face="Courier New"><font size=-2>
Merger Sub............................................. 42</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE VIII TAX MATTERS.............................................
43</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>8.1 Definition of Taxes.......................................
43</font></font>
<p><font face="Courier New"><font size=-2>8.2 Tax Representations.......................................
43</font></font>
<p><font face="Courier New"><font size=-2>8.3 Indemnity.................................................
44</font></font>
<p><font face="Courier New"><font size=-2>8.4 Tax Returns...............................................
46</font></font>
<p><font face="Courier New"><font size=-2>8.5 Refunds and Credits.......................................
46</font></font>
<p><font face="Courier New"><font size=-2>8.6 Termination of Tax Sharing
Agreements..................... 47</font></font>
<p><font face="Courier New"><font size=-2>8.7 Tax-Free Reorganization...................................
47</font></font>
<p><font face="Courier New"><font size=-2>8.8 Conduct of Audits and Other
Procedural Matters............ 47</font></font>
<p><font face="Courier New"><font size=-2>8.9 Assistance and Cooperation................................
48</font></font>
<p><font face="Courier New"><font size=-2>8.10 Survival.................................................
49</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE IX TERMINATION, AMENDMENT
AND WAIVER.........................
49</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>9.1 Termination...............................................
49</font></font>
<p><font face="Courier New"><font size=-2>9.2 Notice of Termination; Effect
of Termination.............. 50</font></font>
<p><font face="Courier New"><font size=-2>9.3 Fees and Expenses.........................................
50</font></font>
<p><font face="Courier New"><font size=-2>9.4 Amendment.................................................
50</font></font>
<p><font face="Courier New"><font size=-2>9.5 Extension; Waiver.........................................
50</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>ARTICLE X GENERAL PROVISIONS.........................................
51</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>10.1 Survival of Representations
and Warranties............... 51</font></font>
<p><font face="Courier New"><font size=-2>10.2 Indemnification by the Holders...........................
51</font></font>
<p><font face="Courier New"><font size=-2>10.3 Notices..................................................
53</font></font>
<p><font face="Courier New"><font size=-2>10.4 Interpretation; Knowledge................................
54</font></font>
<p><font face="Courier New"><font size=-2>10.5 Counterparts.............................................
55</font></font>
<p><font face="Courier New"><font size=-2>10.6 Entire Agreement; Third
Party Beneficiaries.............. 55</font></font>
<p><font face="Courier New"><font size=-2>10.7 Severability.............................................
55</font></font>
<p><font face="Courier New"><font size=-2>10.8 Other Remedies; Specific
Performance..................... 55</font></font>
<p><font face="Courier New"><font size=-2>10.9 Governing Law............................................
55</font></font>
<p><font face="Courier New"><font size=-2>10.10 Rules of Construction...................................
56</font></font>
<p><font face="Courier New"><font size=-2>10.11 Assignment..............................................
56</font></font>
<p><font face="Courier New"><font size=-2>10.12 WAIVER OF JURY TRIAL....................................
56</font></font>
<br>
<br>
<br>
<br> </dir>
</dir>
<center><font face="Courier New"><font size=-2>-iii-</font></font>
<p><font face="Courier New"><font size=-2>INDEX OF EXHIBITS</font></font></center>
<p><font face="Courier New"><font size=-2>Exhibit A Form of Purchaser Voting
Agreement</font></font>
<p><font face="Courier New"><font size=-2>Exhibit B Form of Reseller Agreement</font></font>
<p><font face="Courier New"><font size=-2>Exhibit C Form of Standstill
and Disposition Agreement</font></font>
<p><font face="Courier New"><font size=-2>Exhibit D Certificate of Designation</font></font>
<p><font face="Courier New"><font size=-2>Exhibit E Form of Transition
Services Agreement</font></font>
<p><font face="Courier New"><font size=-2>Exhibit F Form of Cross License
Agreement</font></font>
<center>
<p><font face="Courier New"><font size=-2>-iv-</font></font>
<p><font face="Courier New"><font size=-2>AGREEMENT AND PLAN OF REORGANIZATION</font></font></center>
<p><font face="Courier New"><font size=-2>This AGREEMENT AND PLAN OF REORGANIZATION
is made and entered into as of November 21, 1999, among Efficient Networks,
Inc., a Delaware corporation ("Purchaser"), Fire Acquisition Corporation,
a California corporation and a wholly-owned subsidiary of Purchaser ("Merger
Sub"), Cabletron Systems, Inc., a Delaware corporation ("Parent") and Flowpoint
Corporation, a California corporation and a wholly-owned subsidiary of
Parent ("Company").</font></font>
<center>
<p><font face="Courier New"><font size=-2>RECITALS</font></font></center>
<p><font face="Courier New"><font size=-2>A. Upon the terms and subject
to the conditions of this Agreement (as defined in Section 1.2 below) and
in accordance with the California Corporations Code (the "CCC"), Purchaser,
Merger Sub, Parent and Company intend to enter into a business combination
transaction.</font></font>
<p><font face="Courier New"><font size=-2>B. The Boards of Directors of
Company, Parent, Purchaser and Merger Sub (i) have determined that the
Merger (as defined in Section 1.1) is consistent with and in furtherance
of their respective long-term business strategies and is fair to, and in
the best interests of their respective stockholders and (ii) have approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement.</font></font>
<p><font face="Courier New"><font size=-2>C. Concurrently with the execution
of this Agreement, and as a condition and inducement to Parent's and Company's
willingness to enter into this Agreement, certain affiliates of Purchaser
are entering into Voting Agreements in substantially the form attached
hereto as <u>Exhibit A</u> (the "Purchaser Voting Agreements").</font></font>
<p><font face="Courier New"><font size=-2>D. The parties intend, by executing
this Agreement, to adopt a plan of reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").</font></font>
<p><font face="Courier New"><font size=-2>E. It is also intended by the
parties hereto that the Merger shall qualify for accounting treatment as
a purchase.</font></font>
<p><font face="Courier New"><font size=-2>NOW, THEREFORE, in consideration
of the covenants, promises and representations set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:</font></font>
<center>
<p><font face="Courier New"><font size=-2>ARTICLE I</font></font>
<br>
<br>
<p><font face="Courier New"><font size=-2>THE MERGER</font></font></center>
<p><font face="Courier New"><font size=-2>1.1 <u>The Merger</u>. At the
Effective Time (as defined in Section 1.2) and subject to and upon the
terms and conditions of this Agreement and the applicable provisions of
the CCC, the Company shall be merged with and into Merger Sub (the "Merger"),
the separate corporate existence of the Company shall cease and Merger
Sub shall continue as the surviving corporation. Merger Sub as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."</font></font>
<p><font face="Courier New"><font size=-2>1.2 <u>Effective Time; Closing</u>.
Subject to the provisions of this Agreement, the parties hereto shall cause
the Merger to be consummated by filing a certificate of merger with the
Secretary of State of the State of California in accordance with the relevant
provisions of California law (the "Merger Documents") (the time of such
filing (or such later time as may be agreed in writing by Company and Purchaser
and specified in the Merger Documents) being the "Effective Time") as soon
as practicable on or after the Closing Date (as herein defined). Unless
the context otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and Plan of Reorganization and the certificate
of merger. The closing of the Merger (the "Closing") shall take place at
the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
at a time and date to be specified by the parties, which shall be no later
than the second business day after the satisfaction or waiver of the conditions
set forth in Article VII, or at such other time, date and location as the
parties hereto agree in writing (the "Closing Date").</font></font>
<p><font face="Courier New"><font size=-2>1.3 <u>Effect of the Merger</u>.
At the Effective Time, the effect of the Merger shall be as provided in
this Agreement and the applicable provisions of the CCC. Without limiting
the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.</font></font>
<p><font face="Courier New"><font size=-2>1.4 <u>Certificate of Incorporation;
Bylaws</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) At the Effective Time, the
Certificate of Incorporation of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation of the Surviving Corporation; provided, however,
that at the Effective Time the Certificate of Incorporation of the Surviving
Corporation shall be amended so that the name of the Surviving Corporation
shall be "Flowpoint, Corp."</font></font>
<p><font face="Courier New"><font size=-2>(b) The Bylaws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be, at the
Effective Time, the Bylaws of the Surviving Corporation until thereafter
amended.</font></font>
<p><font face="Courier New"><font size=-2>1.5 <u>Directors and Officers.</u>
The initial directors of the Surviving Corporation shall be the directors
of Merger Sub immediately prior to the Effective Time, until their respective
successors are duly elected or appointed and qualified. The initial officers
of the Surviving Corporation shall be the officers of Merger Sub immediately
prior to the Effective Time.</font></font>
<p><font face="Courier New"><font size=-2>1.6 <u>Effect on Capital Stock.</u>
Subject to the terms and conditions of this Agreement, at the Effective
Time, by virtue of the Merger and without any action on the part of Parent,
Merger Sub, Company or the holders of any of the following securities,
the following shall occur:</font></font>
<p><font face="Courier New"><font size=-2>(a) <u>Conversion of Company
Common Stock</u>. Each share of Common Stock, par value $0.01 per share,
of Company (the "Company Common Stock") issued and outstanding immediately
prior to the Effective Time, other than any shares of Company Common Stock
to be canceled pursuant to Section 1.6(b), will be canceled and extinguished
and automatically converted</font></font>
<center>
<p><font face="Courier New"><font size=-2>-2-</font></font></center>
<p><font face="Courier New"><font size=-2>(subject to Sections 1.6(d) and
(e)) into the right to receive 72,000 shares of Common Stock of Purchaser
(the "Purchaser Common Stock") and 63,000 shares of Series A Non-Voting
Convertible Preferred Stock having the terms set forth in the Certificate
of Designation attached hereto as <u>Exhibit D</u> (the "Preferred Stock",
together with the Purchaser Common Stock, the "Merger Consideration") upon
surrender of the certificate representing such share of Company Common
Stock in the manner provided in Section 1.7 (or in the case of a lost,
stolen or destroyed certificate, upon delivery of an affidavit (and bond,
if required) in the manner provided in Section 1.9).</font></font>
<p><font face="Courier New"><font size=-2>(b) <u>Cancellation of Purchaser-Owned
Stock</u>. Each share of Company Common Stock held by Company or owned
by Merger Sub, Purchaser or any direct or indirect wholly-owned subsidiary
of Company or of Purchaser immediately prior to the Effective Time shall
be canceled and extinguished without any conversion thereof.</font></font>
<p><font face="Courier New"><font size=-2>(c) <u>Capital Stock of Merger
Sub.</u> Each certificate evidencing ownership of shares of Common Stock,
par value $.001 per share, of Merger Sub shall evidence ownership of such
shares of capital stock of the Surviving Corporation.</font></font>
<p><font face="Courier New"><font size=-2>(d) <u>Adjustments to Merger
Consideration.</u> The Merger Consideration shall be adjusted to reflect
appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible
into Purchaser Common Stock or Company Common Stock), extraordinary cash
dividends, reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to Purchaser Common
Stock or Company Common Stock occurring on or after the date hereof and
prior to the Effective Time, or in the event that the number of shares
of Company Common Stock on a fully diluted basis is different from that
specified in Section 2.3 of this Agreement and disclosed in Section 2.3
of the Company Schedule (regardless of whether such difference is a result
of an additional issuance or cancellation of capital stock or a correction
to such Sections).</font></font>
<p><font face="Courier New"><font size=-2>(e) <u>Fractional Shares.</u>
No fraction of a share of Purchaser Common Stock will be issued by virtue
of the Merger, but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be entitled to a fraction of a share of Purchaser
Common Stock (after aggregating all fractional shares of Purchaser Common
Stock that otherwise would be received by such holder) shall, upon surrender
of such holder's Certificates(s) (as defined in Section 1.7(b)) receive
from Purchaser an amount of cash (rounded to the nearest whole cent), without
interest, equal to the product of (i) such fraction, multiplied by (ii)
the average closing price of one share of Purchaser Common Stock for the
five (5) most recent days that Purchaser Common Stock has traded ending
on the trading day immediately prior to the Effective Time, as reported
on the Nasdaq National Market System ("Nasdaq").</font></font>
<p><font face="Courier New"><font size=-2>1.7 <u>Surrender of Certificates.</u></font></font>
<p><font face="Courier New"><font size=-2>(a) <u>Purchaser to Provide Common
Stock</u>. At the Effective Time, Purchaser shall make available for exchange
in accordance with this Article I, the shares of Purchaser Common Stock
and Preferred Stock issuable pursuant to Section 1.6 in exchange for outstanding
shares of Company Common Stock, and cash in an amount sufficient for payment
in lieu of fractional shares</font></font>
<center>
<p><font face="Courier New"><font size=-2>-3-</font></font></center>
<p><font face="Courier New"><font size=-2>pursuant to Section 1.6(e) and
any dividends or distributions to which holders of shares of Company Common
Stock may be entitled pursuant to Section 1.7(b).</font></font>
<p><font face="Courier New"><font size=-2>(b) <u>Distributions With Respect
to Unexchanged Shares.</u> No dividends or other distributions declared
or made after the date of this Agreement with respect to Purchaser Common
Stock and Preferred Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered certificate or certificates
of Company Common Stock (the "Certificates") with respect to the shares
of Purchaser Common Stock and Preferred Stock represented thereby until
the holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates,
the Purchaser shall deliver to the record holders thereof, without interest,
certificates representing whole shares of Purchaser Common Stock and Preferred
Stock issued in exchange therefor along with payment in lieu of fractional
shares pursuant to Section 1.6(e) hereof and the amount of any such dividends
or other distributions with a record date after the Effective Time payable
with respect to such whole shares of Purchaser Common Stock and Preferred
Stock.</font></font>
<p><font face="Courier New"><font size=-2>(c) <u>Transfers of Ownership.</u>
If certificates representing shares of Purchaser Common Stock and Preferred
Stock are to be issued in a name other than that in which the Certificates
surrendered in exchange therefor are registered, it will be a condition
of the issuance thereof that the Certificates so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Purchaser or any agent designated
by it any transfer or other taxes required by reason of the issuance of
certificates representing shares of Purchaser Common Stock and Preferred
Stock in any name other than that of the registered holder of the Certificates
surrendered, or established to the satisfaction of Purchaser or any agent
designated by it that such tax has been paid or is not payable.</font></font>
<p><font face="Courier New"><font size=-2>(d) <u>No Liability</u>. Notwithstanding
anything to the contrary in this Section 1.7, neither the Purchaser nor
the Surviving Corporation shall be liable to a holder of shares of Purchaser
Common Stock or Company Common Stock for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat
or similar law following the passage of time specified therein.</font></font>
<p><font face="Courier New"><font size=-2>1.8 <u>No Further Ownership Rights
in Company Common Stock</u>. All shares of Purchaser Common Stock and Preferred
Stock issued in accordance with the terms hereof (including any cash paid
in respect thereof pursuant to Section 1.6(e) and 1.7(c)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration
of transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in this Article I.</font></font>
<p><font face="Courier New"><font size=-2>1.9 <u>Lost, Stolen or Destroyed
Certificates</u>. In the event that any Certificates shall have been lost,
stolen or destroyed, Purchaser shall issue in exchange for such lost, stolen
or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, certificates representing the shares of Purchaser
Common Stock and Preferred Stock into which the shares of</font></font>
<center>
<p><font face="Courier New"><font size=-2>-4-</font></font></center>
<p><font face="Courier New"><font size=-2>Company Common Stock represented
by such Certificates were converted pursuant to Section 1.6, cash for fractional
shares, if any, as may be required pursuant to Section 1.6(e) and any dividends
or distributions payable pursuant to Section 1.7(b); provided, however,
that Purchaser may, in its sole and absolute discretion and as a condition
precedent to the issuance of such certificates representing shares of Purchaser
Common Stock and Preferred Stock, cash and other distributions, require
the owner of such lost, stolen or destroyed Certificates to deliver a bond
in such sum as it may reasonably direct as indemnity against any claim
that may be made against Purchaser or the Surviving Corporation with respect
to the Certificates alleged to have been lost, stolen or destroyed.</font></font>
<p><font face="Courier New"><font size=-2>1.10 <u>Tax and Accounting Consequences.</u></font></font>
<p><font face="Courier New"><font size=-2>(a) It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning
of Section 368 of the Code. The parties hereto adopt this Agreement as
a "plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Income Tax Regulations.</font></font>
<p><font face="Courier New"><font size=-2>(b) It is intended by the parties
hereto that the Merger shall be treated as a purchase for accounting purposes.</font></font>
<p><font face="Courier New"><font size=-2>1.11 <u>Taking of Necessary Action;
Further Action.</u> If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement
and to vest the Surviving Corporation with full right, title and possession
to all assets, property, rights, privileges, powers and franchises of Company
and Merger Sub, the officers and directors of Company and Merger Sub immediately
prior to the Effective Time will take all such lawful and necessary action.</font></font>
<center>
<p><font face="Courier New"><font size=-2>ARTICLE II</font></font>
<p><font face="Courier New"><font size=-2>REPRESENTATIONS AND WARRANTIES
OF PARENT AND COMPANY</font></font></center>
<p><font face="Courier New"><font size=-2>As of the date hereof and as
of the Closing Date, the Parent and the Company represent and warrant to
Purchaser and Merger Sub, jointly and severally, subject to such exceptions
as are disclosed in writing in the disclosure letter supplied by Parent
and Company to Purchaser dated as of the date hereof and certified by duly
authorized officers of Company and Parent (the "Company Schedule"), as
follows:</font></font>
<p><font face="Courier New"><font size=-2>2.1 <u>Organization and Qualification;
Subsidiaries.</u></font></font>
<p><font face="Courier New"><font size=-2>(a) Company is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Except as set forth
in Section 2.1(a) of the Company Schedule, Company is in possession of
all franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Approvals") necessary to own, lease
and operate the assets it purports to own, operate or lease and to carry
on its business as it</font></font>
<center>
<p><font face="Courier New"><font size=-2>-5-</font></font></center>
<p><br>
<br>
<br>
<br>
<br>
<p><font face="Courier New"><font size=-2>is now being conducted except
where the failure to have such Approvals would not have a Material Adverse
Effect on the Company.</font></font>
<p><font face="Courier New"><font size=-2>(b) Company has no subsidiaries.
Company has not agreed nor is obligated to make nor is bound by any written,
oral or other agreement, contract, subcontract, lease, binding understanding,
instrument, note, option, warranty, purchase order, license, sublicense,
insurance policy, benefit plan, commitment or undertaking of any nature,
as of the date hereof or as may hereafter be in effect (a "Contract") under
which it may become obligated to make, any future investment in or capital
contribution to any other entity. Company does not directly or indirectly
own any equity or similar interest in or any interest convertible, exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business, association or entity.</font></font>
<p><font face="Courier New"><font size=-2>(c) Company is qualified or licensed
to do business as a foreign corporation, and is in good standing, in each
jurisdiction where the nature of their business makes such qualification
or licensing necessary and where the failure to be so duly qualified or
licensed would either individually or in the aggregate have a Material
Adverse Effect on the Company.</font></font>
<p><font face="Courier New"><font size=-2>2.2 <u>Certificate of Incorporation
and Bylaws.</u> Company has previously furnished to Purchaser a complete
and correct copy of its Certificate of Incorporation and Bylaws as amended
to date (together, the "Company Charter Documents"). Such Company Charter
Documents are in full force and effect. Company is not in violation of
any of the provisions of the Company Charter Documents.</font></font>
<p><font face="Courier New"><font size=-2>2.3 <u>Capitalization.</u></font></font>
<p><font face="Courier New"><font size=-2>(a) The authorized capital stock
of Company consists of 1,000 shares of Company Common Stock, par value
of $0.01 per share. At the close of business on the date of this Agreement
(i) 100 shares of Company Common Stock were issued and outstanding, all
of which are validly issued, fully paid and nonassessable; (ii) no shares
of Company Common Stock were held by subsidiaries of Company; (iii) no
shares of Company Common Stock were available or reserved for issuance
pursuant to any employee stock plan or upon conversion of any warrants;
and all 100 shares of issued and outstanding Company Common Stock were
held by Parent. All outstanding shares of Company Common Stock have been
issued and granted in compliance with (i) all applicable federal and state
securities laws and other applicable Legal Requirements (as defined below)
and (ii) all requirements set forth in applicable contracts, agreements,
and instruments. For the purposes of this Agreement, "Legal Requirements"
means any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issues, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined below).</font></font>
<p><font face="Courier New"><font size=-2>(b) As of the date of this Agreement,
there are no equity securities, partnership interests or similar ownership
interests of any class of equity security of any subsidiary of the Company,
or any security exchangeable or convertible into or exercisable for such
equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Section
2.3(b) of the Company Schedule or as set forth in Section 2.3(a)</font></font>
<center>
<p><font face="Courier New"><font size=-2>-6-</font></font></center>
<p><br>
<br>
<br>
<br>
<br>
<p><font face="Courier New"><font size=-2>hereof, there are no subscriptions,
options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments
or agreements of any character to which Company or any of its subsidiaries
is a party or by which it is bound obligating Company or any of its subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption
or acquisition of, any shares of capital stock, partnership interests or
similar ownership interests of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. As of the date of this
Agreement, except as contemplated by this Agreement, there are no registration
rights and there is no voting trust, proxy, rights plan, anti takeover
plan or other agreement or understanding to which the Company or any of
its subsidiaries is a party or by which they are bound with respect to
any equity security of any class of the Company or with respect to any
equity security, partnership interest or similar ownership interest of
any class of any of its subsidiaries.</font></font>
<p><font face="Courier New"><font size=-2>2.4 <u>Authority Relative to
this Agreement</u>. Company has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Company and the consummation by Company of
the transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of Company and no other corporate
proceedings on the part of Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been
duly and validly executed and delivered by Company and, assuming the due
authorization, execution and delivery by Purchaser and Merger Sub, constitutes
a legal and binding obligation of Company, enforceable against Company
in accordance with its terms, except (i) as may be limited by (x) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally
and (y) the effect of rules of law governing the availability of equitable
remedies and (ii) as rights to indemnity or contribution may be limited
under federal or state securities laws or by principles of public policy
thereunder.</font></font>
<p><font face="Courier New"><font size=-2>2.5 <u>No Conflict; Required
Filings and Consents</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Except as set forth in Section
2.5(a) of the Company Schedule, the execution and delivery of this Agreement
by Company do not, and the performance of this Agreement by Company shall
not, (i) conflict with or violate the Company Charter Documents, (ii) subject
to compliance with the requirements set forth in Section 2.5(b) below,
to the knowledge of Company, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Company or by which its or any
of their respective properties is bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or materially impair
Company's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance
on any of the properties or assets of Company pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Company is a party
or by which Company or its properties are bound or affected, except in
any case for such conflicts, violations, breaches, defaults or other occurrences
that could not-</font></font>
<center>
<p><font face="Courier New"><font size=-2>-7-</font></font></center>
<p><font face="Courier New"><font size=-2>reasonably be expected to have
a Material Adverse Effect on the Company.</font></font>
<p><font face="Courier New"><font size=-2>(b) Except as set forth in Section
2.5(b) of the Company Schedule, the execution and delivery of this Agreement
by Company do not, and the performance of this Agreement by Company shall
not, require any consent, approval, authorization or permit of, or filing
with or notification to, any court, administrative agency, commission,
governmental or regulatory authority, domestic or foreign (a "Governmental
Entity"), except for applicable requirements, if any, of the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), state securities laws ("Blue
Sky Laws"), the pre-merger notification requirements (the "HSR Approval")
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and of foreign Governmental Entities and the rules and
regulations thereunder, the rules and regulations of Nasdaq, and the filing
and recordation of the Merger Documents as required by California Law and
except where the failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications would not otherwise
have a Material Adverse Effect.</font></font>
<p><font face="Courier New"><font size=-2>2.6 <u>Compliance; Permits</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Except as set forth in Section
2.6(a) of the Company Schedule, to the knowledge of the Company, Company
is not in conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to Company or by which
its properties are bound or affected, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Company is a party or by which
Company or its properties are bound or affected, except for any conflicts,
defaults or violations that (individually or in the aggregate) would not
cause the Company to lose any material benefit or incur any material liability.
No investigation or review by any governmental or regulatory body or authority
is pending or, to the knowledge of Company, threatened against Company,
nor has any governmental or regulatory body or authority indicated to the
Company an intention to conduct the same, other than, in each such case,
those the outcome of which could not, individually or in the aggregate,
reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of the Company, any acquisition of material
property by the Company or the conduct of business by the Company.</font></font>
<p><font face="Courier New"><font size=-2>(b) Except as set forth in Section
2.6(b) of the Company Schedule, to the knowledge of the Company, Company
holds all permits, licenses, variances, exemptions, orders and approvals
from governmental authorities which are material to operation of the business
of Company taken as a whole as it is now being conducted (collectively,
the "Company Permits"). Company is in compliance in all material respects
with the terms of the Company Permits.</font></font>
<p><font face="Courier New"><font size=-2>2.7 <u>Financial Statements</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) The Company has provided
to Purchaser (i) unaudited consolidated financial statements for the fiscal
years ended March 31, 1997 and 1998, August 31, 1998 and February 28, 1999,
and (ii) unaudited financial statements for the period ended September
30, 1999 (collectively and as amended, the "Company Reports").</font></font>
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<p><font face="Courier New"><font size=-2>(b) Except as set forth in Section
2.7(b) of the Company Schedule, each of the financial statements (including,
in each case, any notes thereto) contained in the Company Reports was prepared
in accordance with U.S. generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto) and each presented fairly, in
all material respects, the financial position of the Company as at the
respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein (subject to normal and recurring year-end
adjustments which did not have and could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect).</font></font>
<p><font face="Courier New"><font size=-2>(c) Except as and to the extent
set forth or reserved against on the balance sheet of the Company as reported
in the Company Reports, including the notes thereto, the Company has no
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet
or in notes thereto prepared in accordance with GAAP, except (i) liabilities
provided for in Company's balance sheet as of September 30, 1999; (ii)
liabilities incurred since September 30, 1999 in the ordinary course of
business; or (iii) liabilities which are not material to the business,
results of operations or financial condition of Company.</font></font>
<p><font face="Courier New"><font size=-2>2.8 <u>Absence of Certain Changes
or Events</u>. Since September 30, 1999 (the "Reference Balance Sheet Date"),
except (i) as disclosed in Section 2.8 of the Company Schedule, or (ii)
provided for in or disclosed pursuant to subsections (i) - (xxiv) below,
the business of the Company has been conducted in the ordinary course and
consistent with past practice. As amplification and not limitation of the
foregoing, except as disclosed in Section 2.8 of the Company Schedule,
since the Reference Balance Sheet Date, the Company has not:</font></font>
<p><font face="Courier New"><font size=-2>(i) transferred to any person
or entity, including Parent, any rights to its Intellectual Property (as
defined in Section 2.20) other than transfers necessary to conduct development
and manufacturing activities and sell products in the ordinary course of
business consistent with past practice;</font></font>
<p><font face="Courier New"><font size=-2>(ii) knowingly permitted or allowed
any of the assets or properties (whether tangible or intangible) of the
Company to be subjected to any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge, encumbrance,
adverse claim, preferential arrangement or restriction of any kind, including,
without limitation, any restriction on the use, voting, transfer, receipt
of income or other exercise of any attributes of ownership ("Encumbrance"),
other than such of the following as to which no enforcement, collection,
execution, levy or foreclosure proceeding shall have been commenced: (a)
liens for taxes, assessments and governmental charges or levies not yet
due and payable which are not in excess of $50,000 in the aggregate; (b)
Encumbrances imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the
ordinary course of business securing obligations that (i) are not overdue
for a period of more than 30 days and (ii) are not in excess of $5,000
in the case of a single property or $50,000 in the aggregate at any time;
(c) pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory obligations;
and (d) minor survey exceptions, reciprocal easement agreements and other
customary encumbrances on title to real property or assets that (i) were
not incurred in connection with</font></font>
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<p><font face="Courier New"><font size=-2>any Indebtedness, (ii) do not
render title to the property encumbered thereby unmarketable, (iii) do
not, individually or in the aggregate, materially adversely affect the
value or use of such property for its current and anticipated purposes
and (iv) Encumbrances that could not reasonably be expected to have a Material
Adverse Effect ("Permitted Encumbrances") and Encumbrances that will be
released at or prior to the Closing;</font></font>
<p><font face="Courier New"><font size=-2>(iii) except in the ordinary
course of business consistent with past practice, discharged or otherwise
obtained the release of any Encumbrance or paid or otherwise discharged
any liability, other than current liabilities reflected on the Reference
Balance Sheet and current liabilities incurred in the ordinary course of
business consistent with past practice since the Reference Balance Sheet
Date;</font></font>
<p><font face="Courier New"><font size=-2>(iv) made any loan to, guaranteed
any indebtedness for borrowed money of or otherwise incurred any indebtedness
for borrowed money on behalf of any individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act), trust, association, entity or government or political subdivision,
agency or instrumentality of a government ("Person") other than payroll,
travel guaranties and other advances made in the ordinary course of business;</font></font>
<p><font face="Courier New"><font size=-2>(v) failed to pay any creditor
any material amount owed to such creditor when due except as may be in
accordance with the ordinary course of business consistent with past practice;</font></font>
<p><font face="Courier New"><font size=-2>(vi) redeemed any of the capital
stock or declared, made or paid any dividends or distributions (whether
in cash, securities or other property) to the holders of capital stock
of the Company or otherwise;</font></font>
<p><font face="Courier New"><font size=-2>(vii) made any material changes
in the customary methods of operations of the Company, including, without
limitation, practices and policies relating to manufacturing, purchasing,
Inventories (as defined below), marketing, selling and pricing;</font></font>
<p><font face="Courier New"><font size=-2>(viii) merged with, entered into
a consolidation with or acquired an interest of 5% or more in any Person
or acquired a substantial portion of the assets or business of any Person
or any division or line of business thereof, or otherwise acquired any
material assets other than in the ordinary course of business consistent
with past practice;</font></font>
<p><font face="Courier New"><font size=-2>(ix) made any capital expenditure
or commitment of any capital expenditure in excess of $75,000 individually
or $200,000 in the aggregate;</font></font>
<p><font face="Courier New"><font size=-2>(x) issued any sales orders or
otherwise entered into an agreement that requires the Company to make any
purchases involving payments by the Company in excess of $250,000 individually
or $1,000,000 in the aggregate;</font></font>
<p><font face="Courier New"><font size=-2>(xi) sold, transferred, leased,
subleased, licensed or otherwise disposed of any material properties or
assets, real, personal or mixed (including, without limitation, leasehold
interests and intangible assets), other than the sale of</font></font>
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<p><font face="Courier New"><font size=-2>Inventories in the ordinary course
of business consistent with past practice;</font></font>
<p><font face="Courier New"><font size=-2>(xii) issued or sold any capital
stock, notes, bonds or other securities, or any option, warrant or other
right to acquire the same,of, or any other interest in, the Company;</font></font>
<p><font face="Courier New"><font size=-2>(xiii) entered into any agreement,
arrangement or transaction with any of its directors, officers, employees
or shareholders (or with any relative, beneficiary, spouse or Affiliate
of such Person);</font></font>
<p><font face="Courier New"><font size=-2>(xiv) (A) granted any increase,
or announced any increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable by the Company to any of
its employees, consultants or directors or (B) established or increased
or promised to increase any benefits under any Parent employee benefit
or option plans, in either case except as required by law or any collective
bargaining agreement or involving ordinary increases in the ordinary course
of business consistent with the past practices of the Company;</font></font>
<p><font face="Courier New"><font size=-2>(xv) written down or written
up the value of any Inventories or receivables or revalued any assets of
the Company other than in the ordinary course of business consistent with
past practice, and in accordance with U.S. GAAP;</font></font>
<p><font face="Courier New"><font size=-2>(xvi) amended, terminated, cancelled
or compromised any material claims of the Company or waived any other rights
of substantial value to the Company or settled any material litigation;</font></font>
<p><font face="Courier New"><font size=-2>(xvii) made any change in any
method of accounting or accounting practice or policy used by the Company,
other than such changes required by U.S. GAAP or disclosed in Section 2.8
of the Company Schedule;</font></font>
<p><font face="Courier New"><font size=-2>(xviii) amended or modified in
any material respect, or consented to the termination of, any Material
Contract (as defined below) or the Company's rights thereunder;</font></font>
<p><font face="Courier New"><font size=-2>(xix) amended or restated the
certificate of incorporation or the bylaws (or other organizational documents)
of the Company;</font></font>
<p><font face="Courier New"><font size=-2>(xx) knowingly disclosed any
secret or confidential Intellectual Property (except by way of issuance
of a patent or a valid confidentiality agreement); or knowingly permitted
to lapse or go abandoned any Intellectual Property (or any registration
or grant thereof or any application relating thereto) to which, or under
which, the Company has any right, title, interest or license;</font></font>
<p><font face="Courier New"><font size=-2>(xxi) made any express or deemed
election (other than as set forth on the Company's tax returns) or settled
or compromised any material liability, with respect to Taxes (as defined
in Section 8.1) of the Company;</font></font>
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<p><font face="Courier New"><font size=-2>(xxii) suffered any casualty
loss or damage with respect to any of the assets which in the aggregate
have a replacement cost of more than $100,000, and which is not covered
by insurance;</font></font>
<p><font face="Courier New"><font size=-2>(xxiii) suffered any Material
Adverse Effect; or</font></font>
<p><font face="Courier New"><font size=-2>(xxiv) agreed, whether in writing
or otherwise, to take any of the actions specified in this Section 2.8
or granted any options to purchase, rights of first refusal, rights of
first offer or any other similar rights or commitments with respect to
any of the actions specified in this Section 2.8, except as expressly contemplated
by this Agreement.</font></font>
<p><font face="Courier New"><font size=-2>For purposes of this Agreement,
the term "Inventories" shall mean all inventory, merchandise, finished
goods, raw materials, packaging and supplies of the Company.</font></font>
<p><font face="Courier New"><font size=-2>For purposes of this Agreement,
the term "Material Contracts" shall mean the following contracts and agreements
(including, without limitation, oral and informal arrangements) of the
Company:</font></font>
<p><font face="Courier New"><font size=-2>(i) each contract, agreement,
invoice, purchase order and other arrangement, for the purchase of Inventory,
spare parts, other materials or personal property with any supplier or
for the furnishing of services to the Company or otherwise related to the
business of the Company under the term of which the Company (A) is likely
to pay or otherwise give consideration of more than $100,000 in the aggregate
during the calendar year ended December 31, 1999, (B) is likely to pay
or otherwise give consideration of more than $200,000 in the aggregate
over the remaining term of such contract, or (C) cannot be cancelled by
the Company without penalty or further payment and without more than 90
days' notice;</font></font>
<p><font face="Courier New"><font size=-2>(ii) each contract, agreement,
invoice, sales order and other arrangement, for the sale of Inventory or
other personal property or for the furnishing of services by the Company
which: (A) is likely to involve consideration of more than $100,000 in
the aggregate during the calendar year ended December 31, 1999, (B) is
likely to involve consideration of more than $200,000 in the aggregate
over the remaining term of the contract, or (C) cannot be cancelled by
the Company without penalty or further payment and without more than 90
days' notice;</font></font>
<p><font face="Courier New"><font size=-2>(iii) all broker, distributor,
label group, dealer, manufacturer's representative, franchise, agency,
sales promotion, market research, marketing consulting and advertising
contracts and agreements to which the Company is a party involving the
payment of more than $200,000 during the calendar year ended December 31,
1999 and which are not cancelable without penalty or further payment and
without more than 90 days' notice;</font></font>
<p><font face="Courier New"><font size=-2>(iv) all management contracts,
and contracts with independent contractors or consultants (or similar arrangements)
to which the Company is a party involving payments in excess of $50,000
per annum and which are not cancelable without penalty or further payment
and without more than 30 days' notice;</font></font>
<p><font face="Courier New"><font size=-2>(v) all contracts and agreements
relating to indebtedness of the Company;</font></font>
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<p><font face="Courier New"><font size=-2>(vi) all agreements relating
to Intellectual Property, including all licenses and sublicenses thereof,
but excluding shrink wrap and other commodity type licenses;</font></font>
<p><font face="Courier New"><font size=-2>(vii) all contracts and agreements
with any Governmental Entity to which the Company is a party;</font></font>
<p><font face="Courier New"><font size=-2>(viii) all contracts and agreements
that limit or purport to limit the ability of the Company to compete in
any line of business or with any Person or in any geographic area or during
any period of time;</font></font>
<p><font face="Courier New"><font size=-2>(ix) all contracts and agreements
between or among the Company and any Affiliate of the Company, including
any shareholder agreements;</font></font>
<p><font face="Courier New"><font size=-2>(x) all contracts and agreements
for providing benefits to Company employees, consultants or directors under
any Parent employee benefit or option plans;</font></font>
<p><font face="Courier New"><font size=-2>(xi) all contracts and agreements
of indemnification or any guaranty other than an agreement of indemnification
entered into in connection with the sale or license of software products
in the ordinary course of business;</font></font>
<p><font face="Courier New"><font size=-2>(xii) all dealer, distributor,
joint marketing or development contracts and agreements currently in force
under which Company have continuing material obligations to jointly market
any product, technology or service and which may not be canceled without
penalty upon notice of ninety (90) days or less, and all contracts and
agreements pursuant to which Company have continuing material obligations
to jointly develop any intellectual property that will not be owned, in
whole or in part, by Company and which may not be canceled without penalty
upon notice of ninety (90) days or less;</font></font>
<p><font face="Courier New"><font size=-2>(xiii) all contracts, agreement
and commitments currently in force to license any third party to manufacture
or reproduce any Company product, service or technology or any contract,
agreement and commitment currently in force to sell or distribute any Company
products, service or technology except agreements with distributors or
sales representative in the normal course of business cancelable without
penalty upon notice of ninety (90) days or less and substantially in the
form previously provided to Purchaser; and</font></font>
<p><font face="Courier New"><font size=-2>(xiv) all other contracts and
agreements, whether or not made in the ordinary course of the business,
which are material to the Company, taken as a whole, or the conduct of
the business, or the absence of which would have a Material Adverse Effect.</font></font>
<p><font face="Courier New"><font size=-2>For purposes of this Agreement,
the term "Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.</font></font>
<p><font face="Courier New"><font size=-2>2.9 <u>Absence of Litigation</u>.
Except as set forth in Section 2.9 of the Company Schedule, there are no
claims, actions, suits or proceedings pending or, to the knowledge of Company,
threatened (or, to the knowledge of Company, any governmental or regulatory
investigation pending or threatened) against Company or any properties</font></font>
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<p><font face="Courier New"><font size=-2>or rights of Company, before
any court, arbitrator or administrative, governmental or regulatory authority
or body, domestic or foreign.</font></font>
<p><font face="Courier New"><font size=-2>2.10 <u>Customers; Suppliers</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Listed in Section 2.10(a)
of the Company Schedule are the names and addresses of all the customers
of the Company which ordered goods or merchandise from the Company with
an aggregate value of $200,000 or more during the twelve-month period ended
September 30, 1999, and the amount for which each such customer was invoiced
during such period. Except as disclosed in Section 2.10 of the Company
Schedule, none of Parent, the Company has not received any notice written
or oral that any significant customer of the Company has ceased, or will
cease, to use the products, equipment, goods or services of the Company,
or has substantially reduced, or will substantially reduce, the use of
such products, equipment, goods or services at any time.</font></font>
<p><font face="Courier New"><font size=-2>(b) Listed in Section 2.10(b)
of the Company Schedule are the names and addresses of all the suppliers
from which the Company ordered raw materials, supplies, merchandise and
other goods for the Company with an aggregate purchase price of $200,000
or more during the twelve-month period ended September 30, 1999 and the
amount for which each such supplier invoiced the Company during such period.
Except as disclosed in Section 2.10 of the Company Schedule, none of Parent
nor the Company has received any notice written or oral that any such supplier
will not sell raw materials, supplies, merchandise and other goods to the
Company at any time after the Closing Date on terms and conditions substantially
similar to those used in its current sales to the Company, subject only
to general and customary price increases.</font></font>
<p><font face="Courier New"><font size=-2>2.11 <u>Product and Service Warranties</u></font></font>
<p><font face="Courier New"><font size=-2>Set forth on Section 2.11 of
the Company Schedule are the standard written forms of product and service
warranties and guarantees utilized by the Company as of the date of this
Agreement. Except as set forth on Section 2.11 of the Company Schedule,
during a period of one (1) year prior to the Closing Date, neither the
Company or any of their Affiliates have made any other written material
warranties (which remain in effect) with regard to products and/or services
supplied by the Company.</font></font>
<p><font face="Courier New"><font size=-2>2.12 <u>Employee Benefit Plans</u>.
Except as set forth in Section 2.12 of the Company Schedule:</font></font>
<p><font face="Courier New"><font size=-2>(a) For purposes of this Section
2.12, the following terms shall have the meanings set forth below:</font></font>
<p><font face="Courier New"><font size=-2>(i) "<u>Affiliate</u>" shall
mean any person or entity under common control with the Company within
the meaning of Code Section 414(b), (c), (m) or (o).</font></font>
<p><font face="Courier New"><font size=-2>(ii) "<u>COBRA</u>" shall mean
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.</font></font>
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<p><font face="Courier New"><font size=-2>(iii) "<u>Code</u>" shall mean
the Internal Revenue Code of 1986, as amended.</font></font>
<p><font face="Courier New"><font size=-2>(iv) "<u>Employee</u>" shall
mean any former or active employee, consultant, or director of the Company.</font></font>
<p><font face="Courier New"><font size=-2>(v) "<u>Employee Plan</u>" shall
mean each plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether
written or unwritten or otherwise, funded or unfunded, including without
limitation, each "employee benefit plan," within the meaning of ERISA Section
3(3) which is or has been maintained, contributed to, or required to be
contributed to, by the Parent or any Affiliate for the benefit of any Employee
or for which the Company has or may have any liability or obligation.</font></font>
<p><font face="Courier New"><font size=-2>(vi) "<u>ERISA</u>" shall mean
the Employee Retirement Income Security Act of 1974, as amended.</font></font>
<p><font face="Courier New"><font size=-2>(b) (i) Each Employee Plan has
been maintained in all material respects in compliance with its terms and
with all applicable requirements of law (including the Code and ERISA).
Parent and the Company have performed in all material respects all obligations
required to be performed by each of them under, is not in default or violation
of, and has no knowledge of any default or violation by any other party
to each Employee Plan; (ii) No suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course) has been brought,
or to the knowledge of Parent or Company is threatened against or with
respect to any Employee Plan; (iii) There are no audits, inquiries or proceedings
pending or, to the knowledge of Parent or the Company, threatened by the
Internal Revenue Service ("IRS") or the Department of Labor with respect
to any Employee Plan; (iv) Each Employee Plan intended to qualify under
Code Section 401(a) and each trust intended to qualify under Code Section
501(a) has either received a favorable determination, opinion, notification
or advisory letter from the IRS with respect to each such Employee Plan
as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation,
or has remaining a period of time under applicable Treasury regulations
or IRS pronouncements in which to apply for such a letter and make any
amendments necessary to obtain a favorable determination as to the qualified
status of each such Employee Plan; (v) Neither Parent nor Company has any
plan or commitment, whether legally binding or not, to establish any new
Employee Plan solely for Employees of the Company prior to Closing Date;
and (vi) each Employee Plan can be amended, terminated or otherwise discontinued
by Parent after the Closing Date in accordance with its terms, without
liability to Company or Purchaser or any Affiliate of Company or Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>(c) (i) No "prohibited transaction,"
within the meaning of Code Section 4975 or ERISA Sections 406 and 407,
and not otherwise exempt under Code Section 4975 or ERISA Section 408 (or
any administrative class exemption issued thereunder), has occurred with
respect to any Company Employee Plan; (ii) Neither Company nor any Affiliate
has at any time maintained, established, sponsored, participated in, or
contributed to any Employee Plan subject to Title IV of ERISA or Code Section
412; (iii) Neither Company nor any Affiliate has been required to contribute
or</font></font>
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plan," as defined in ERISA Section 3(37); and (iv) Neither Company nor
any Affiliate has ever maintained, established, sponsored, participated
in, or contributed to any "multiple employer plan," as defined in Code
Section 413(c).</font></font>
<p><font face="Courier New"><font size=-2>(d) (i) Neither Company nor any
Affiliate has in any material respect violated any of the health care continuation
requirements of COBRA with respect to any Employee, the requirements of
the Family Medical Leave Act of 1993, as amended, the requirements of the
Health Insurance Portability and Accountability Act of 1996, as amended,
the requirements of the Women's Health and Cancer Rights Act, as amended,
the requirements of the Newborns' and Mothers' Health Protection Act of
1996, as amended, or any similar provision of state law applicable to the
Employees; (ii) None of the Employee Plans provides, reflects or represents
any liability to provide retiree health to any person for any reason, except
as may be required by COBRA or other applicable statute, and Parent and
the Company have never represented, promised, or contracted (whether in
oral or written form) to any Employee (either individually or to Employees
as a group) that such Employee(s) would be provided with retiree health,
except to the extent required by statute.</font></font>
<p><font face="Courier New"><font size=-2>(e) Except as disclosed on Schedule
2.12(e) of the Company Schedule, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any stockholder,
director or employee of Company under any Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Plan, or (iii) result
in the acceleration of the time of payment or vesting of any such benefits.</font></font>
<p><font face="Courier New"><font size=-2>(f) Each International Employee
Plan (as defined below) has been established, maintained and administered
in all material respects in compliance with its terms and conditions and
with the requirements prescribed by any and all statutory or regulatory
laws that are applicable to such International Employee Plan. Furthermore,
no International Employee Plan has unfunded liabilities that, as of the
Effective Time, will not be offset by insurance or fully accrued. Except
as required by law, no condition exists that would prevent the Company
or Purchaser from terminating or amending any International Employee Plan
at any time for any reason. For purposes of this Section "International
Employee Plan" shall mean each Plan that has been adopted or maintained
by the Company, whether informally or formally, for the benefit of current
or former employees of the Company outside the United States.</font></font>
<p><font face="Courier New"><font size=-2>2.13 <u>Labor Matters</u>. (i)
There are no material work-related controversies pending or, to the knowledge
of Company, threatened, between Company and any of its respective employees;
(ii) as of the date of this Agreement, Company is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by Company nor does Company know of any activities or proceedings
of any labor union to organize any such employees; and (iii) as of the
date of this Agreement, Company has no knowledge of any strikes, slowdowns,
work stoppages or lockouts, or threats thereof, by or with respect to any
employees of Company. The Company and its subsidiaries are in compliance
in all material respects with all applicable material foreign, federal,
state and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours.</font></font>
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<p><font face="Courier New"><font size=-2>2.14 <u>Key Employees</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Section 2.14 of the Company
Schedule lists the name, place of employment, the current annual salary
rates, bonuses, deferred or contingent compensation, pension, accrued vacation,
"golden parachute" and other like benefits paid or payable (in cash or
otherwise) in 1998 and 1999 the date of employment and job title of each
current salaried employee, officer, director, consultant or agent of the
Company whose annual compensation (excluding sales commissions, the value
of stock options and deferred compensation) exceeded (or, in 1999, is expected
to exceed) $100,000.</font></font>
<p><font face="Courier New"><font size=-2>(b) All officers, management
employees, and technical and professional employees of the Company are
under written obligation to the Company to maintain in confidence all information
that is confidential or proprietary acquired by them in the course of their
employment and to assign to the Company all inventions made by them within
the scope of their employment during such employment.</font></font>
<p><font face="Courier New"><font size=-2>2.15 <u>Material Contracts</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Except as disclosed in Section
2.15 of the Company Schedule, each Material Contract: (i) is legal, valid
and binding on the respective parties thereto and is in full force and
effect, and (ii) upon consummation of the transactions contemplated by
this Agreement, except to the extent that any consents set forth in Section
2.15(a) of the Company Schedule are not obtained, shall continue in full
force and effect without penalty or other adverse consequence except in
a situation where the failure to be in full force and effect could not
reasonably be expected to have a Material Adverse Effect. The Company is
not in breach of, or default under, any Material Contract, except in any
such case for breaches or defaults that could not reasonably be expected
to have a Material Adverse Effect.</font></font>
<p><font face="Courier New"><font size=-2>(b) Except as disclosed in Section
2.15(b) of the Company Schedule, to the best knowledge of the Company and
Parent, no other party to any Material Contract is in material breach thereof
or default thereunder.</font></font>
<p><font face="Courier New"><font size=-2>2.16 <u>Guaranties, Intercompany
Contracts</u>. Except as set forth in Section 2.16 of the Company Schedule,
the Company is not a party to any guaranty, and no Person is a party to
any guaranty for the benefit of the Company. Set forth in Section 2.16
of the Company Schedule is a complete and accurate list of all contracts
and agreements between Company and Parent.</font></font>
<p><font face="Courier New"><font size=-2>2.17 <u>Restrictions on Business
Activities</u>. Except as set forth in Section 2.17 of the Company Schedule,
to the knowledge of the Company, there is no agreement, commitment, judgment,
injunction, order or decree binding upon Company or to which the Company
is a party which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of Company,
any acquisition of property by Company or the conduct of business by Company
as currently conducted, except for any prohibition or impairment that could
not reasonably be expected to have a Material Adverse Effect.</font></font>
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<p><font face="Courier New"><font size=-2>2.18 <u>Title to Property</u>.
Company owns no real property.</font></font>
<p><font face="Courier New"><font size=-2>2.19 <u>Environmental Matters</u>.
Except as disclosed in Section 2.19 of the Company Schedule, (i) the Company
is in material compliance with all applicable laws relating to the protection
of the environment ("Environmental Laws"); all past noncompliance, if any,
of the Company with respect to Environmental Laws, known to the Company
has been resolved without any pending, ongoing or future obligation, cost
or liability; and (iii) the Company has not released any hazardous materials
to or from any real property currently, or within the two year period preceding
the date hereof, owned, leased or occupied by the Company, except in compliance
with all Environmental Laws.</font></font>
<p><font face="Courier New"><font size=-2>2.20 <u>Intellectual Property</u>.
For the purposes of this Agreement, the following terms have the following
definitions:</font></font>
<dir><font face="Courier New"><font size=-2>"Intellectual Property" shall
mean any or all of the following and all worldwide common law and statutory
rights in, arising out of, or associated therewith: (i) patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof ("Patents"); (ii) inventions
(whether patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, know how, technology, technical data
and customer lists, and all documentation relating to any of the foregoing;
(iii) copyrights, copyrights registrations and applications therefor, and
all other rights corresponding thereto throughout the world; (iv) domain
names, uniform resource locators ("URLs") and other names and locators
associated with the Internet ("Domain Names"); (v) industrial designs and
any registrations and applications therefor; (vi) trade names, logos, common
law trademarks and service marks, trademark and service mark registrations
and applications therefor; (vii) all databases and data collections and
all rights therein; (viii) all moral and economic rights of authors and
inventors, however denominated, and (ix) any similar or equivalent rights
to any of the foregoing (as applicable).</font></font>
<p><font face="Courier New"><font size=-2>"Company Intellectual Property"
shall mean any Intellectual Property that is owned by, or exclusively licensed
to, Company.</font></font>
<p><font face="Courier New"><font size=-2>"Registered Intellectual Property"
means all Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued, filed with,
or recorded by any private, state, government or other legal authority.</font></font>
<p><font face="Courier New"><font size=-2>"Company Registered Intellectual
Property" means all of the Registered ntellectual Property owned by, or
filed in the name of, the Company.</font></font></dir>
<font face="Courier New"><font size=-2>(a) Section 2.20(a) of the Company
Schedule is a complete and accurate list of all Company Registered Intellectual
Property and specifies, where applicable, the jurisdictions in which each
such item of Company Registered Intellectual Property has been issued or
registered and lists any proceedings or actions before any court or tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property.</font></font>
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<p><font face="Courier New"><font size=-2>(b) Section 2.20(b) of the Company
Schedule is a complete and accurate list (by name and version number or
other identifying code) of all products or service offerings of the Company
("Company Products") that have been distributed or provided in the one
year period preceding the date hereof or which the Company currently intends
to distribute or provide in the future, including any products or service
offerings under development.</font></font>
<p><font face="Courier New"><font size=-2>(c) No Company Intellectual Property
or Company Product is subject to any proceeding or outstanding decree,
order, judgment, contract, license, agreement, or stipulation restricting
in any manner the use, transfer, or licensing thereof by Company, or which
may affect the validity, use or enforceability of such Company Intellectual
Property or Company Product.</font></font>
<p><font face="Courier New"><font size=-2>(d) Each material item of Company
Registered Intellectual Property is valid and subsisting, all necessary
registration, maintenance and renewal fees currently due in connection
with such Company Registered Intellectual Property have been made and all
necessary documents, recordations and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Company Registered Intellectual Property.</font></font>
<p><font face="Courier New"><font size=-2>(e) Section 2.20(e) of the Company
Schedule is a complete and accurate list of all material actions that are
required to be taken by the Company within ninety (90) days of the date
hereof with respect to any of the foregoing Registered Intellectual Property.</font></font>
<p><font face="Courier New"><font size=-2>(f) Company owns and has good
and exclusive title to, each material item of Company Intellectual Property
owned by it free and clear of any lien or encumbrance (excluding non-exclusive
licenses and related restrictions granted in the ordinary course). Without
limiting the foregoing: (i) Company is the exclusive owner or licensee
of all trademarks and trade names used in connection with the operation
or conduct of the business of Company, including the sale, distribution
or provision of any Company Products by Company; except for the trademarks
listed on Section 2.20(f) of the Company Disclosure Schedule; (ii) Company
owns exclusively, and has good title to, all copyrighted works that are
Company Products or which Company otherwise purports to own; and (iii)
the Company is the exclusive owner of all Patents that it purports to own.</font></font>
<p><font face="Courier New"><font size=-2>(g) To the extent that any material
technology, software or Intellectual Property has been developed or created
independently or jointly by a third party for Company and is incorporated
into any of the Company Products, Company has a written agreement with
such third party with respect thereto and Company thereby either (i) has
obtained ownership of, and is the exclusive owner of, or (ii) has obtained
a perpetual, non-terminable license (sufficient for the conduct of its
business as currently conducted and as proposed to be conducted) to all
such third party's Intellectual Property in such work, material or invention
by operation of law or by valid assignment, to the fullest extent it is
legally possible to do so.</font></font>
<p><font face="Courier New"><font size=-2>(h) Company has not transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was in the last year material Company Intellectual
Property, to any third party, or knowingly permitted Company's rights in
such material Company Intellectual Property to lapse or enter the public
domain.</font></font>
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<p><font face="Courier New"><font size=-2>(i) Section 2.20(i) of the Company
Schedule lists all material contracts, licenses and agreements to which
Company is a party: (i) with respect to Company Intellectual Property licensed
or transferred to any third party (other than end-user licenses in the
ordinary course); or (ii) pursuant to which a third party has licensed
or transferred any material Intellectual Property to Company.</font></font>
<p><font face="Courier New"><font size=-2>(j) All material contracts, licenses
and agreements relating to either (i) Company Intellectual Property or
(ii) between the Company and a third party relating to Intellectual Property
of a third party licensed to Company, are in full force and effect. Except
as set forth on Schedule 2.5, the consummation of the transactions contemplated
by this Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of such contracts, licenses and
agreements. Company is in material compliance with, and has not materially
breached any term of any such contracts, licenses and agreements and, to
the knowledge of Company, all other parties to such contracts, licenses
and agreements are in compliance with, and have not materially breached
any term of, such contracts, licenses and agreements. Except as set forth
on Schedule 2.5, Parent is not aware of any fact that would prevent the
Surviving Corporation following the Closing Date from exercising all of
Company's rights under such contracts, licenses and agreements to the same
extent Company would have been able to had the transactions contemplated
by this Agreement not occurred and without the payment of any additional
amounts or consideration other than ongoing fees, royalties or payments
which Company would otherwise be required to pay. Neither this Agreement
nor the transactions contemplated by this Agreement, including the assignment
to Purchaser or Merger Sub by operation of law or otherwise of any contracts
or agreements to which the Company is a party, will result in (i) either
Purchaser's or the Merger Sub's granting to any third party any right to
or with respect to any material Intellectual Property right owned by, or
licensed to, either of them, (ii) either the Purchaser's or the Merger
Sub's being bound by, or subject to, any non-compete or other material
restriction on the operation or scope of their respective businesses, or
(iii) either the Purchaser's or the Merger Sub's being obligated to pay
any royalties or other material amounts to any third party in excess of
those payable by Purchaser or Merger Sub, respectively, prior to the Closing.</font></font>
<p><font face="Courier New"><font size=-2>(k) The operation of the business
of the Company as such business currently is conducted, including (i) Company's
design, development, manufacture, distribution, reproduction, marketing
or sale of the products or services of Company (including Company Products
) and (ii) the Company's use of any product, device or process in connection
with the foregoing, has not, does not and, to its knowledge, will not infringe
or misappropriate the Intellectual Property of any third party or constitute
unfair competition or trade practices under the laws of any jurisdiction.</font></font>
<p><font face="Courier New"><font size=-2>(l) Company has not received
notice from any third party that the operation of the business of Company
or any product or service of Company, infringes or misappropriates the
Intellectual Property of any third party or constitutes unfair competition
or trade practices under the laws of any jurisdiction.</font></font>
<p><font face="Courier New"><font size=-2>(m) To the knowledge of Company,
no person has or is infringing or misappropriating any Company Intellectual
Property.</font></font>
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<p><font face="Courier New"><font size=-2>(n) Company has taken reasonable
steps to protect Company's rights in Company's confidential information
and trade secrets that it wishes to protect or any trade secrets or confidential
information of third parties provided to Company, and, without limiting
the foregoing, Company has and uses its best efforts to enforce a policy
requiring each employee and contractor to execute a proprietary information/confidentiality
agreement substantially in the form provided to Purchaser and all current
and former employees and contractors of Company have executed such an agreement,
except where the failure to do so is not reasonably expected to be material
to Company.</font></font>
<p><font face="Courier New"><font size=-2>(o) All of the Company Products
(i) will record, store, process, calculate and present calendar dates falling
on and after (and if applicable, spans of time including) January 1, 2000,
and will calculate any information dependent on or relating to such dates
in the same manner, and with the same functionality, data integrity and
performance, as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively, "Year 2000 Compliant")
and (ii) will lose no functionality with respect to the introduction of
records containing dates falling on or after January 1, 2000. All of Company's
Information Technology (as defined below) is Year 2000 Compliant, and will
not cause an interruption in the ongoing operations of the Company's business
on or after January 1, 2000. For purposes of the foregoing, the term "Information
Technology" shall mean and include all software, hardware, firmware, telecommunications
systems, network systems, embedded systems and other systems and/or components
that are owned or used by the Company in the conduct of their business.
The Company has taken reasonable steps to confirm that any third parties
providing services that are material to the operation of the Company's
business are Year 2000 compliant and delivered to Purchaser the documentation
it has received from such third parties.</font></font>
<p><font face="Courier New"><font size=-2>2.21 <u>Board Approval</u>. The
Board of Directors of Company has, as of the date of this Agreement unanimously
(i) approved this Agreement and the transactions contemplated hereby and
(ii) determined that the Merger is in the best interests of the stockholders
of Company and is on terms that are fair to such stockholders.</font></font>
<p><font face="Courier New"><font size=-2>2.22 <u>Assets</u>. Except as
set forth in the Company Schedule, at the Closing, the Company shall have
right, title or interest in and to such assets (tangible and intangible),
taking into account the Transition Services Agreement, necessary to manufacture,
develop and sell the Company Products as currently manufactured, developed
and sold by the Company.</font></font>
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<p><font face="Courier New"><font size=-2>ARTICLE III</font></font>
<p><font face="Courier New"><font size=-2>REPRESENTATIONS AND WARRANTIES
OF PARENT</font></font></center>
<p><font face="Courier New"><font size=-2>As of the date hereof and as
of the Closing Date, the Parent represents and warrants to Purchaser and
Merger Sub, subject to such exceptions as are disclosed in writing in the
disclosure letter supplied by Parent to Purchaser dated as of the date
hereof and certified by a duly authorized officer of Parent (the "Parent
Schedule"), as follows:</font></font>
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<p><font face="Courier New"><font size=-2>3.1 <u>Organization and Qualification</u>.
Parent is a corporation duly organized, validly existing and in good standing
under the laws Delaware, the jurisdiction of its incorporation, and has
the requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
Parent is qualified or licensed to do business as a foreign corporation,
and is in good standing, in each jurisdiction where the nature of their
business makes such qualification or licensing necessary and where the
failure to so qualify would have a Material Adverse Effect.</font></font>
<p><font face="Courier New"><font size=-2>3.2 <u>Authority Relative to
this Agreement</u>. Parent has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and the consummation by Parent of
the transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of Parent and no other corporate
proceedings on the part of Parent are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been
duly and validly executed and delivered by Parent and, assuming the due
authorization, execution and delivery by Purchaser and Merger Sub, constitutes
legal and binding obligations of Parent, enforceable against Parent in
accordance with their respective terms, except (i) as may be limited by
(x) applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of creditors'
rights generally and (y) the effect of rules of law governing the availability
of equitable remedies and (ii) as rights to indemnity or contribution may
be limited under federal or state securities laws or by principles of public
policy thereunder. Parent has executed an irrevocable written consent voting
all of its shares of Company Common Stock in favor of the Merger.</font></font>
<p><font face="Courier New"><font size=-2>3.3 <u>No Conflict; Required
Filings and Consents</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) The execution and delivery
of this Agreement by Parent do not, and the performance of this Agreement
by Parent shall not, (i) conflict with or violate the Parent organizational
documents, (ii) subject to compliance with the requirements set forth in
Section 3.3(b) below, to the knowledge of Parent, conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Parent
or by which its or any of their respective properties is bound or affected,
or (iii) result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or
materially impair Parent's rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Parent pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent is
a party or by which Parent or its properties are bound or affected, except
in any case for such conflicts, violations, breaches, defaults or other
occurrences that could not reasonably be expected to have a Material Adverse
Effect on the Company.</font></font>
<p><font face="Courier New"><font size=-2>(b) The execution and delivery
of this Agreement by Parent do not, and the performance of this Agreement
by Parent shall not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity, except
for applicable requirements, if any, of the Securities Act, the Exchange
Act, the Blue Sky Laws, the HSR Approval of the HSR Act and of foreign</font></font>
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<p><font face="Courier New"><font size=-2>Governmental Entities and the
rules and regulations thereunder, the rules and regulations of Nasdaq,
and the filing and recordation of the Merger Documents as required by California
Law and except where the failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications would not otherwise
have a Material Adverse Effect on the Company.</font></font>
<p><font face="Courier New"><font size=-2>3.4 <u>Brokers</u>. No broker,
finder or investment banker (other than SG Cowen Securities Corp.) is entitled
to any brokerage, finder's or other fee or commission in connection with
the Merger based upon arrangements made by or on behalf of the Parent.</font></font>
<p><font face="Courier New"><font size=-2>3.5 <u>Intellectual Property</u>.</font></font>
<p><font face="Courier New"><font size=-2>Except as is set forth in Section
3.5 of the Company Schedule:</font></font>
<p><font face="Courier New"><font size=-2>(a) Parent has not disclosed
any portion of the Company's Intellectual Property to any third party [except
pursuant to a valid and enforceable confidentiality agreement] and has
no violated any confidentiality or use restrictions regarding the Company's
Intellectual Property.</font></font>
<p><font face="Courier New"><font size=-2>(b) Parent is not aware of any
third party rights that are or may be infringed by products currently or
previously manufactured, used, or sold by the Company.</font></font>
<p><font face="Courier New"><font size=-2>(c) Parent has not filed any
patent application or obtained any issued patent covering any technology
invented, created or developed solely by the Company, or invented, created
or developed jointly by Parent and the Company.</font></font>
<p><font face="Courier New"><font size=-2>(d) No patent or patent application
filed by, issued to or assigned to Parent identifies any current or former
employee of the Company as an inventor.</font></font>
<p><font face="Courier New"><font size=-2>(e) Parent is not aware of any
Parent patent or patent application which covers technology used in products
manufactured by the Company.</font></font>
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<p><font face="Courier New"><font size=-2>ARTICLE IV</font></font>
<p><font face="Courier New"><font size=-2>REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MERGER SUB</font></font></center>
<p><font face="Courier New"><font size=-2>As of the date hereof and as
of the Closing Date, Purchaser and Merger Sub jointly and severally represent
and warrant to Company and Parent, subject to such exceptions as are specifically
disclosed in writing in the disclosure letter and referencing a specific
representation supplied by Purchaser to Company and Parent dated as of
the date hereof and certified by a duly authorized officer of Purchaser
(the "Purchaser Schedule"), as follows:</font></font>
<p><font face="Courier New"><font size=-2>4.1 <u>Organization and Qualification;
Subsidiaries</u>. Each of Purchaser and its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted, except where the failure
to do so would not, individually or in the aggregate, have a Material Adverse
Effect</font></font>
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<p><font face="Courier New"><font size=-2>on Purchaser. Each of Purchaser
and its subsidiaries is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease and
to carry on its business as it is now being conducted, except where the
failure to have such Approvals would not, individually or in the aggregate,
have a Material Adverse Effect on Purchaser. Each of Purchaser and its
subsidiaries is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for
such failures to be so duly qualified or licensed and in good standing
that would not, either individually or in the aggregate, have a Material
Adverse Effect on Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>4.2 <u>Certificate of Incorporation
and Bylaws</u>. Purchaser has previously furnished to Company and Parent
complete and correct copies of its Certificate of Incorporation and Bylaws,
as amended to date (together the "Charter Documents"). Such Purchaser Charter
Documents and equivalent organizational documents of each of its subsidiaries
are in full force and effect. Purchaser is not in violation of any of the
provisions of the Purchaser Charter Documents, and no subsidiary of Purchaser
is in violation of any of its equivalent organizational documents.</font></font>
<p><font face="Courier New"><font size=-2>4.3 <u>Capitalization</u>. The
authorized capital stock of Purchaser consists of (i) 200,000,000 shares
of Purchaser Common Stock, par value $0.001 per share, and 10,000,000 shares
of Preferred Stock, par value $0.001 per share. At the close of business
on November 19, 1999, (i) 37,498,724 shares of Purchaser Common Stock were
issued and outstanding, (ii) no shares of Purchaser Common Stock were held
in treasury by Purchaser or by subsidiaries of Purchaser, and (iii) as
of October 30, 1999, 200,000 shares of Purchaser Common Stock were reserved
for issuance pursuant to Purchaser's 1999 employee stock purchase plan,
and an aggregate of 10,279,329 shares were either issued or reserved for
issuance, under the Purchaser's 1999 stock plan, 1998 director's plan,
and the Purchaser's option plan, together, as well as warrants to purchase
34,246 shares of Purchaser's Common Stock. No shares of Preferred Stock
are outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, no par value, all of which, as of the date
hereof, are issued and outstanding. All of the outstanding shares of Purchaser's
and Merger Sub's respective capital stock have been duly authorized and
validly issued and are fully paid and nonassessable. All shares of Purchaser
Common Stock subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are
issuable, shall, and the shares of Purchaser Common Stock and Preferred
Stock to be issued pursuant to the Merger will be, duly authorized, validly
issued, fully paid and nonassessable. All of the outstanding shares of
capital stock (other than directors' qualifying shares) of each of Purchaser's
subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and all such shares (other than directors' qualifying shares) are owned
by Purchaser or another subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Purchaser's voting rights,
charges or other encumbrances of any nature whatsoever. Except as set forth
in Section 4.3 of the Purchaser Schedule or as set forth in this Section,
there are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the Purchaser
or any of its subsidiaries is a party or by which it is bound obligating
Purchaser or any of its subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, or repurchase, redeem or otherwise acquire,
or cause the repurchase, redemption or acquisition of, any shares of capital
stock, partnership interests or similar</font></font>
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<p><font face="Courier New"><font size=-2>ownership interests of the Purchaser
or any of its subsidiaries or obligating the Purchaser of any of its subsidiaries
to grant, extend, accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or agreement.
As of the date of this Agreement, except as set forth in Section 4.3 of
the Purchaser Schedule and except as contemplated by this Agreement, there
are no registration rights and there is no voting trust, proxy, rights
plan, antitakeover plan or other agreement or understanding to which the
Purchaser or any of its subsidiaries is a party or by which they are bound
with respect to any equity security of any class of Purchaser or with respect
to any equity security, partnership interest or similar ownership interest
of any class of any of its subsidiaries.</font></font>
<p><font face="Courier New"><font size=-2>4.4 <u>Authority Relative to
this Agreement</u>. Each of Purchaser and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement and
the Purchaser Voting Agreements attached hereto as <u>Exhibit A</u>, and
to perform its obligations hereunder and thereunder and, to consummate
the transactions contemplated hereby and thereby. The execution and delivery
of this Agreement and the Purchaser Voting Agreements by Purchaser and
Merger Sub and the consummation by Purchaser and Merger Sub of the transactions
contemplated hereby and thereby have been duly and validly authorized by
all necessary corporate action on the part of Purchaser and Merger Sub,
and no other corporate proceedings on the part of Purchaser or Merger Sub
are necessary to authorize this Agreement and the Purchaser Voting Agreements,
or to consummate the transactions so contemplated. This Agreement and the
Purchaser Voting Agreements have been duly and validly executed and delivered
by Purchaser and Merger Sub and, assuming the due authorization, execution
and delivery by Company, constitute legal and binding obligations of Purchaser
and Merger Sub, enforceable against Purchaser and Merger Sub in accordance
with their respective terms.</font></font>
<p><font face="Courier New"><font size=-2>4.5 <u>No Conflict; Required
Filings and Consents</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) The execution and delivery
of this Agreement by Purchaser and Merger Sub do not, and the performance
of this Agreement by Purchaser and Merger Sub shall not, (i) conflict with
or violate the Certificate of Incorporation, Bylaws or equivalent organizational
documents of Purchaser or any of its subsidiaries, (ii) subject to compliance
with the requirements set forth in Section 4.5(b) below, conflict with
or violate any law, rule, regulation, order, judgment or decree applicable
to Purchaser or any of its subsidiaries or by which it or their respective
properties are bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would
become a default) under, or impair Purchaser's or any such subsidiary's
rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the properties
or assets of Purchaser or any of its subsidiaries pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Purchaser or any of
its subsidiaries is a party or by which Purchaser or any of its subsidiaries
or its or any of their respective properties are bound or affected, except
to the extent such conflict, violation, breach, default, impairment or
other effect could not in the case of clauses (ii) or (iii) individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect on Purchaser.</font></font>
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<p><font face="Courier New"><font size=-2>(b) The execution and delivery
of this Agreement by Purchaser and Merger Sub do not, and the performance
of this Agreement by Purchaser and Merger Sub shall not, require any consent,
approval, authorization or permit of, or filing with or notification to,
any Governmental Entity except (i) for applicable requirements, if any,
of the Securities Act, the Exchange Act, Blue Sky Laws, the pre-merger
notification requirements of the HSR Act and of foreign governmental entities
and the rules and regulations thereunder, the rules and regulations of
Nasdaq, and the filing and recordation of the certificate of merger as
required by California Law and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
(x) would not prevent consummation of the Merger or otherwise prevent Purchaser
or Merger Sub from performing their respective obligations under this Agreement
or (y) could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>4.6 <u>SEC Filings; Financial
Statements</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Purchaser has made available
to Company a correct and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Purchaser with the SEC
on or after July 15, 1999 (the "Purchaser SEC Reports"), which are all
the forms, reports and documents required to be filed by Purchaser with
the SEC since July 15, 1999. The Purchaser SEC Reports (A) were prepared
in accordance with the requirements of the Securities Act or the Exchange
Act and the rules and regulations of the SEC promulgated thereunder, as
the case may be, and (B) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of Purchaser's subsidiaries
is required to file any reports or other documents with the SEC.</font></font>
<p><font face="Courier New"><font size=-2>(b) Each set of consolidated
financial statements (including, in each case, any related notes thereto)
contained in the Purchaser SEC Reports was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto or, in the case of unaudited statements,
do not contain footnotes as permitted by Form 10-Q of the Exchange Act)
and each presented fairly in all material respects the consolidated financial
position of Purchaser and its subsidiaries at the respective dates thereof
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were
or are subject to normal adjustments which were not or are not expected
to be material in amount.</font></font>
<p><font face="Courier New"><font size=-2>(c) Since the date of the balance
sheet included in Purchaser's report on Form 10-Q filed on October 20,
1999, and until the date hereof, there has not occurred any Material Adverse
Effect on Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>4.7 <u>Absence of Litigation</u>.
There are no claims, actions, suits or proceedings pending or, to the knowledge
of each of Purchaser and Merger Sub, threatened (or, to the knowledge of
each of Purchaser and Merger Sub, any governmental or regulatory investigation
pending or threatened) against Purchaser, Merger Sub or any other subsidiary
of Purchaser or any properties or rights of Purchaser, Merger Sub or any</font></font>
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<p><font face="Courier New"><font size=-2>other subsidiary of Purchaser,
before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign.</font></font>
<p><font face="Courier New"><font size=-2>4.8 <u>Title to Property</u>.
Purchaser, Merger Sub and all other subsidiaries of Purchaser have good
and defensible title to all of their material properties and assets, free
and clear of all liens, charges and encumbrances except liens for taxes
not yet due and payable and such liens or other imperfections of title,
if any, as do not materially detract from the value of or materially interfere
with the present use of the property affected thereby; and all leases pursuant
to which Purchaser, Merger Sub or any other subsidiary of Purchaser lease
from others material real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing material default or event of default
of Purchaser or any of its subsidiaries or, to Purchaser's knowledge, any
other party (or any event which with notice or lapse of time, or both,
would constitute a material default and in respect of which Purchaser or
subsidiary has not taken adequate steps to prevent such default from occurring).</font></font>
<p><font face="Courier New"><font size=-2>4.9 <u>Environmental Matters</u>.
Except as disclosed in Section 4.9 of the Purchaser Schedule, (i) the Purchaser,
Merger Sub or any other subsidiary of Purchaser are in material compliance
with all applicable laws relating to pollution and environment; all past
noncompliance, if any, of the Purchaser, Merger Sub or any other subsidiary
of Purchaser with respect to such laws or environmental related permits,
known to the Purchaser has been resolved without any pending, ongoing or
future obligation, cost or liability; and (iii) neither the Purchaser,
Merger Sub nor any other subsidiary of Purchaser has released any hazardous
materials to or from, any real property currently or within the two year
period preceding the date hereof, owned, leased or occupied by the Purchaser,
Merger Sub or any other subsidiary of Purchaser, in violation of any environmental
related laws.</font></font>
<p><font face="Courier New"><font size=-2>4.10 <u>Board Approval</u>. The
Boards of Directors of each of Purchaser and Merger Sub have, as of the
date of this Agreement unanimously (i) approved this Agreement and the
transactions contemplated hereby and (ii) determined that the Merger is
in the best interests of the stockholders of each of Purchaser and Merger
Sub and is on terms that are fair to such stockholders.</font></font>
<p><font face="Courier New"><font size=-2>4.11 <u>No Undisclosed Liabilities</u>.
Neither Purchaser, Merger Sub or any other subsidiary of Purchaser has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet or in notes thereto prepared in accordance with U.S. GAAP, except
(i) liabilities provided for in Purchaser's balance sheet as of September
30, 1999 or (ii) liabilities incurred since September 30, 1999 in the ordinary
course of business, none of which is material to the business, results
of operations or financial condition of Purchaser and its subsidiaries,
taken as a whole.</font></font>
<p><font face="Courier New"><font size=-2>4.12 <u>Compliance</u>. Neither
Purchaser, Merger Sub nor any other subsidiary of Purchaser is in conflict
with, or in default or violation of, (i) any law, rule, regulation, order,
judgment or decree applicable to Purchaser, Merger Sub or any other subsidiary
of Purchaser or by which its or any of their respective properties is bound
or affected, or (ii) any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Purchaser, Merger Sub or any other subsidiary of Purchaser is
a party or by which Purchaser, Merger Sub or any other subsidiary of Purchaser
or its</font></font>
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<p><font face="Courier New"><font size=-2>or any of their respective properties
is bound or affected, except for any conflicts, defaults or violations
that (individually or in the aggregate) would not cause the Purchaser to
lose any material benefit or incur any material liability. No investigation
or review by any governmental or regulatory body or authority is pending
or, to the knowledge of Purchaser, threatened against Purchaser, Merger
Sub or any other subsidiary of Purchaser, nor has any governmental or regulatory
body or authority indicated to the Purchaser an intention to conduct the
same, other than, in each such case, those the outcome of which could not,
individually or in the aggregate, reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of the Purchaser,
Merger Sub or any other subsidiary of Purchaser, any acquisition of material
property by the Purchaser, Merger Sub or any other subsidiary of Purchaser
or the conduct of business by the Purchaser, Merger Sub or any other subsidiary
of Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>4.13 <u>Broker</u>s. No broker,
finder or investment banker (other than Credit Suisse First Boston) is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of the Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>4.14 <u>Absence of Certain Changes
or Events</u>. Since October 20, 1999, (i) the business of the Purchaser
and its subsidiaries has been conducted in the ordinary course of business
consistent with past practice and (ii) there has not occurred any event,
development or change which, individually or in the aggregate, has resulted
in or is reasonably likely to result in a Material Adverse Effect on Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>4.15 <u>Intellectual Property</u>.
For the purposes of this Agreement, "Purchaser Intellectual Property" shall
mean any Intellectual Property that is owned by, or exclusively licensed
to, Purchaser and its subsidiaries. The operation of the business of Purchaser
and its subsidiaries as such business currently is conducted, including
(i) Purchaser's and its subsidiaries' design, development, manufacture,
distribution, reproduction, marketing or sale of products or services of
Purchaser and its subsidiaries, and (ii) Purchaser's use of any product,
device or process to its knowledge does not, infringe or misappropriate
the Intellectual Property of any third party or constitute unfair competition
or trade practices under the laws of any jurisdiction. Purchaser has not
received notice from any third party that the operation of the business
of Purchaser, any of its subsidiaries or any product or service of Purchaser,
infringes or misappropriates the Intellectual Property of any third party
or constitutes unfair competition or trade practices under the laws of
any jurisdiction.</font></font>
<p><font face="Courier New"><font size=-2>4.16 <u>Customers</u>. Neither
Purchaser nor any of its subsidiaries has received any notice oral or written
that any significant customer of Purchaser has ceased, or will cease, to
use the products, equipment, goods or services of the Purchaser or any
subsidiary of Purchaser, or has substantially reduced, or will substantially
reduce, the use of such products, equipment, goods or services at any time.</font></font>
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<p><font face="Courier New"><font size=-2>ARTICLE V</font></font>
<p><font face="Courier New"><font size=-2>CONDUCT PRIOR TO THE EFFECTIVE
TIME</font></font></center>
<p><font face="Courier New"><font size=-2>5.1 <u>Conduct of Business by
Company and Parent</u>. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, Company and each of its subsidiaries
shall, except to the extent that Purchaser shall otherwise consent in writing,
carry on its business, in the usual, regular and ordinary course, in substantially
the same manner as heretofore conducted and in compliance with all applicable
laws and regulations, pay its debts and taxes when due subject to good
faith disputes over such debts or taxes, pay or perform other material
obligations when due, and use its commercially reasonable efforts consistent
with past practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers
and employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has significant
business dealings.</font></font>
<p><font face="Courier New"><font size=-2>In addition, except as permitted
by the terms of this Agreement, and the transactions contemplated hereby,
and except as provided in Section 5.1 of the Company Schedule, without
the prior written consent of Purchaser, during the period from the date
of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, Company shall
not, and with respect to Section (a) below, the Parent shall not permit
the Company or any of the Company's subsidiaries to, do any of the following:</font></font>
<p><font face="Courier New"><font size=-2>(a) With respect to Parent, waive
any stock repurchase rights, accelerate, amend or change the period of
exercisability of options or restricted stock, or reprice options granted
under any employee, consultant, director or other stock plans or authorize
cash payments in exchange for any options granted under any of such plans
to any employee, consultant or director of the Company, except as provided
for under this Agreement or the attached exhibits;</font></font>
<p><font face="Courier New"><font size=-2>(b) Grant any severance or termination
pay to any officer or employee except pursuant to written agreements outstanding,
or policies existing, on the date hereof and as previously disclosed in
writing or made available to Purchaser, or adopt any new severance plan,
or amend or modify or alter in any manner any severance plan, agreement
or arrangement existing on the date hereof;</font></font>
<p><font face="Courier New"><font size=-2>(c) Transfer or license to any
person or entity or otherwise extend, amend or modify any rights to the
Company Intellectual Property, or enter into grants to transfer or license
to any person future patent rights, other than in the ordinary course of
business consistent with past practices, provided that in no event shall
Company license on an exclusive basis or sell any Company Intellectual
Property;</font></font>
<p><font face="Courier New"><font size=-2>(d) Declare, set aside or pay
any dividends on or make any other distributions (whether in cash, stock,
equity securities or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
any capital stock;</font></font>
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<p><font face="Courier New"><font size=-2>(e) Purchase, redeem or otherwise
acquire, directly or indirectly, any shares of capital stock of Company
or its subsidiaries;</font></font>
<p><font face="Courier New"><font size=-2>(f) Issue, deliver, sell, authorize,
pledge or otherwise encumber or propose any of the foregoing with respect
to any shares of capital stock, or enter into other agreements or commitments
of any character obligating it to issue any such shares;</font></font>
<p><font face="Courier New"><font size=-2>(g) Cause, permit or propose
any amendments to the Company Charter Documents (or similar governing instruments
of any of its subsidiaries);</font></font>
<p><font face="Courier New"><font size=-2>(h) Acquire or agree to acquire
by merging or consolidating with, or by purchasing any equity interest
in or a portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof, or otherwise acquire or agree to enter into any joint
ventures, strategic partnerships or alliances;</font></font>
<p><font face="Courier New"><font size=-2>(i) Sell, lease, license, encumber
or otherwise dispose of any properties or assets except sales of inventory
in the ordinary course of business consistent with past practice;</font></font>
<p><font face="Courier New"><font size=-2>(j) Incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue
or sell any debt securities or options, warrants, calls or other rights
to acquire any debt securities of Company, enter into any "keep well" or
other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing
other than in connection with the financing of ordinary course trade payables
consistent with past practice;</font></font>
<p><font face="Courier New"><font size=-2>(k) Adopt or amend any material
employee policy or arrangement, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past practice
with employees who are terminable "at will"), pay any special bonus or
special remuneration to any director or employee, or, except in the ordinary
course of business consistent with past practice, increase the salaries
or wage rates or fringe benefits (including rights to severance or indemnification)
of its directors, officers, employees or consultants;</font></font>
<p><font face="Courier New"><font size=-2>(l) (i) pay, discharge, settle
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), or litigation (whether or not
commenced prior to the date of this Agreement) other than the payment,
discharge, settlement or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, or liabilities
recognized or disclosed in the most recent consolidated financial statements
(or the notes thereto) of Company as provided to the Purchasers or incurred
since the date of such financial statements, or (ii) waive the benefits
of, agree to modify in any manner, terminate, release any person from or
knowingly fail to enforce any confidentiality or similar agreement to which
Company or any of its subsidiaries is a party or of which Company or any
of its subsidiaries is a beneficiary;</font></font>
<p><font face="Courier New"><font size=-2>(m) Make any individual or series
of related payments outside of the ordinary course of business in excess
of $100,000;</font></font>
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<p><font face="Courier New"><font size=-2>(n) Except in the ordinary course
of business consistent with past practice, modify, amend or terminate any
Material Contract or agreement to which Company or any subsidiary thereof
is a party or waive, delay the exercise of, release or assign any material
rights or claims thereunder;</font></font>
<p><font face="Courier New"><font size=-2>(o) Enter into, renew or materially
modify any contracts, agreements, or obligations relating to the distribution,
sale, license or marketing by third parties of Company's products or products
licensed by Company other than renewals of existing nonexclusive contracts,
agreements or obligations;</font></font>
<p><font face="Courier New"><font size=-2>p) Except as required by GAAP,
revalue any of its assets or make any change in accounting methods, principles
or practices;</font></font>
<p><font face="Courier New"><font size=-2>(q) Incur or enter into any agreement,
contract or commitment requiring Company or any of its subsidiaries to
pay in excess of $100,000, excluding routine purchase orders consistent
with past practices;</font></font>
<p><font face="Courier New"><font size=-2>(r) Settle any material litigation;</font></font>
<p><font face="Courier New"><font size=-2>(s) Agree in writing or otherwise
to take any of the actions described in Section 5.1(a) through (s) above.</font></font>
<p><font face="Courier New"><font size=-2>5.2 <u>Conduct of Business by
Purchaser</u>. During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to its
terms or the Effective Time, except as permitted by the terms of this Agreement
and except as provided in Section 5.2 of the Purchaser Schedule, without
the prior written consent of Company, Purchaser shall not engage in any
action that could reasonably be expected to cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code or that
could reasonably be expected to delay the Closing of the Merger.</font></font>
<p><font face="Courier New"><font size=-2>In addition, except as permitted
by the terms of this Agreement and the transactions contemplated hereby,
and except as provided in Section 5.2 of the Purchaser Schedule, without
the prior written consent of Parent, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Purchaser shall
not acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire
or agree to enter into any joint ventures, strategic partnerships or alliances,
if such acquisition or agreement to acquire would materially delay or impede
the Closing of the Merger or other transactions contemplated hereby.</font></font>
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<p><font face="Courier New"><font size=-2>ARTICLE VI</font></font>
<p><font face="Courier New"><font size=-2>ADDITIONAL AGREEMENTS</font></font></center>
<p><font face="Courier New"><font size=-2>6.1 <u>Information Statement;
Filings; Board Recommendations</u>. As promptly as practicable after the
execution of this Agreement, Purchaser will prepare, and file with the
SEC, an information statement with respect to the Merger and the conversion
of the Preferred Stock (the "Information Statement"). Each of Purchaser
and Company shall provide promptly to the other such information concerning
its business and financial statements and affairs as, in the reasonable
judgment of the providing party or its counsel, may be required or appropriate
for inclusion in the Information Statement, or in any amendments or supplements
thereto, and to cause its counsel and auditors to cooperate with the other's
counsel and auditors in the preparation of the Information Statement. Each
of Company and Purchaser will respond to any comments of the SEC, and Purchaser
will cause the Information Statement to be mailed to its stockholders at
the earliest practicable time after approval by the SEC. As promptly as
practicable after the date of this Agreement, each of Company and Purchaser
will prepare and file any other filings required to be filed by it under
the Exchange Act, the Securities Act or any other federal, foreign or Blue
Sky or related laws relating to the Merger and the transactions contemplated
by this Agreement (the "Other Filings"). Each of Company and Purchaser
will notify the other promptly upon the receipt of any comments from the
SEC or its staff or any other government officials and of any request by
the SEC or its staff or any other government officials for amendments or
supplements to the Information Statement or any Other Filing or for additional
information and will supply the other with copies of all correspondence
between such party or any of its representatives, on the one hand, and
the SEC or its staff or any other government officials, on the other hand,
with respect to the Information Statement, the Merger or any Other Filing.
Each of Company and Purchaser will cause all documents that it is responsible
for filing with the SEC or other regulatory authorities under this Section
6.1(a) to comply in all material respects with all applicable requirements
of law and the rules and regulations promulgated thereunder. Whenever any
event occurs which is required to be set forth in an amendment or supplement
to the Information Statement or any Other Filing, Company or Purchaser,
as the case may be, will promptly inform the other of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to stockholders of Purchaser, such amendment or supplement.</font></font>
<p><font face="Courier New"><font size=-2>6.2 <u>Meeting of Purchaser Stockholders</u>.
Promptly after the date hereof Purchaser will take all action necessary
in accordance with Delaware Law and the Purchaser Charter Documents to
convene a meeting to approve the Merger and the conversion of the Preferred
Stock into shares of Purchaser Common Stock in accordance with the terms
of the Preferred Stock, such meeting to be held as soon as reasonably practicable
after the Closing but in any event within 90 days of the Closing. Purchaser
will vote all proxies obtained under the Purchaser Voting Agreements in
favor of conversion of the Preferred Stock.</font></font>
<p><font face="Courier New"><font size=-2>6.3 <u>Confidentiality; Access
to Information.</u></font></font>
<p><font face="Courier New"><font size=-2>(a) The parties acknowledge that
Company, Parent and Purchaser have previously executed a Mutual Confidentiality
Agreement, between the Parent and the Purchaser (the "Confidentiality Agreement"),
which Confidentiality Agreement will</font></font>
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<p><font face="Courier New"><font size=-2>continue in full force and effect
in accordance with its terms.</font></font>
<p><font face="Courier New"><font size=-2>(b) <u>Access to Information</u>.
Company and Parent will afford Purchaser and its accountants, counsel and
other representatives, and Purchaser will afford Company and Parent and
their accountants, counsel and other representatives, reasonable access
during normal business hours, upon reasonable notice, to the properties,
books, records and personnel of Company and Purchaser, respectively, during
the period prior to the Effective Time to obtain all information concerning
the business of the Company and Purchaser, respectively, including the
status of product development efforts, properties, results of operations
and personnel of Company and Purchaser, as Purchaser and Company may reasonably
request. No information or knowledge obtained by Purchaser or Company in
any investigation pursuant to this Section 6.3 will affect or be deemed
to modify any representation or warranty contained herein or the conditions
to the obligations of the parties to consummate the Merger.</font></font>
<p><font face="Courier New"><font size=-2>6.4 <u>Public Disclosure</u>.
Purchaser, Merger Sub, Parent and Company will consult with each other,
and to the extent practicable, agree, before issuing any press release
or otherwise making any public statement with respect to the Merger, this
Agreement and will not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law
or any listing agreement with a national securities exchange. The parties
have agreed to the text of the joint press release announcing the signing
of this Agreement.</font></font>
<p><font face="Courier New"><font size=-2>6.5 <u>Reasonable Efforts; Notification</u>.</font></font>
<p><font face="Courier New"><font size=-2>Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees
to use all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger
and the other transactions contemplated by this Agreement, including using
reasonable efforts to accomplish the following: (i) the taking of all reasonable
acts necessary to cause the conditions precedent set forth in Article VII
to be satisfied, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents, approvals, orders and authorizations from Governmental
Entities and the making of all necessary registrations, declarations and
filings (including registrations, declarations and filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary
to avoid any suit, claim, action, investigation or proceeding by any Governmental
Entity, (iii) the obtaining of all consents, approvals or waivers from
third parties required as a result of the transactions contemplated in
this Agreement, (iv) the defending of any suits, claims, actions, investigations
or proceedings, whether judicial or administrative, challenging this Agreement
or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (v) the execution
or delivery of any additional instruments reasonably necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of,
this Agreement.</font></font>
<p><font face="Courier New"><font size=-2>(a) Parent and Company shall
give prompt notice to Purchaser upon becoming aware that any representation
or warranty made by it contained in this Agreement has become untrue or
inaccurate, or of any failure of Company or Parent to comply with</font></font>
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<p><font face="Courier New"><font size=-2>or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement, in each case, such that the conditions set forth
in Section 7.3(a) or 7.3(b) would not be satisfied; <u>provided</u>, <u>however</u>,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations
of the parties under this Agreement.</font></font>
<p><font face="Courier New"><font size=-2>(b) Purchaser shall give prompt
notice to Company upon becoming aware that any representation or warranty
made by it or Merger Sub contained in this Agreement has become untrue
or inaccurate, or of any failure of Purchaser or Merger Sub to comply with
or satisfy in any material respect any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement, in each case,
such that the conditions set forth in Section 7.2(a) or 7.2(b) would not
be satisfied; <u>provided</u>, <u>however</u>, that no such notification
shall affect the representations, warranties, covenants or agreements of
the parties or the conditions to the obligations of the parties under this
Agreement.</font></font>
<p><font face="Courier New"><font size=-2>6.6 <u>Employee Benefits</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) To the extent permitted by
the Purchaser's 401k plan, Purchaser shall cause a tax-qualified defined
contribution plan maintained by Purchaser or a subsidiary of Purchaser
to accept rollovers (including direct rollovers) from the 401(k) plan maintained
for the benefit of employees of Company and its subsidiaries (the "Transferor
Plan") in respect of distributions made on account of the transactions
contemplated by this Agreement; provided however, Purchaser is reasonably
satisfied that such plan is qualified under Code Section 401(a) and that
the trust is exempt under Code Section 501(a). If rollovers meet the aforementioned
criteria, loan balances of participants who have borrowed from the Transferor
Plan may be rolled over without requiring that the participant first repay
the loan. Purchaser shall provide or cause to be provided that under each
employee benefit plan, policy, program or arrangement where service is
relevant to a determination of an employee's eligibility to participate,
vesting, or level or amount of benefits, employees of Company shall be
credited with their periods of service with Company and its affiliates
prior to the Closing; provided, that Parent provides Company with all applicable
accurate records to facilitate such credits. Purchaser shall make its commercially
reasonable best efforts available, or cause to be made available, to employees
of Company, medical, dental, disability and other welfare benefits plans
and programs without regard to any preexisting condition limitation, actively-at-
work requirement or similar limitation. In determining an employee's share
of the cost of coverage under any plan or program of Purchaser or its subsidiaries
for the year in which the Closing Date falls, the Purchaser shall cause
the employee to be credited with any pre-Closing co-pays and deductibles
granted under corresponding plans of Company for such year.</font></font>
<p><font face="Courier New"><font size=-2>(b) Neither Purchaser nor the
Company will maintain, sponsor, participate in, or be obligated to contribute
to any Employee Plan, effective upon the Closing Date; and Parent shall
satisfy any and all of the Company's obligations and liabilities relating
to, arising out of or resulting from its participation in the Employee
Plans. Effective not later than the Effective Time, the Company shall cease
to participate in those Employee Plans (the "Parent-group Employee Plans")
(i) in which it participated prior to the Effective Time, and (ii) which
were not sponsored or</font></font>
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<p><font face="Courier New"><font size=-2>maintained by the Company solely
for the benefit of its Employees, former Employees or beneficiaries. Prior
to Closing, Parent shall furnish Purchaser with a list and copies of relevant
documents of all Employee Plans other than Parent-group Employee Plans.
Upon and following the Effective Time, the Company shall have no liability
for contributions, premiums, benefits, or other payments, or any other
obligation, under any Parent-group Employee Plan.</font></font>
<p><font face="Courier New"><font size=-2>(c) (i) Parent and the Company
agree that the Merger will result in, and constitute, a distribution event
for the Employees under the Code Section 401(k) plan maintained by Parent.
(ii) Parent and the Company further agree that on or prior to the Closing
Date, all accounts of Company employees participating in the Parent's 401(k)
Plan shall be fully vested.</font></font>
<p><font face="Courier New"><font size=-2>(d) Parent assumes any and all
liability relating to, arising out of, or resulting from COBRA (or similar
state statute) attributable to Employees and any and all related Qualified
Beneficiaries (as such term is defined in COBRA) with respect to qualifying
events occurring at or prior to the Effective Time (including, without
limitation, by reason of the transactions contemplated by this Agreement)
under a Parent-group Employee Plan (as that term is defined at (b) above);
provided, that Company shall cooperate with Parent in facilitating the
delivery by Parent of required notices and other COBRA-related communications
to Employees and Qualified Beneficiaries.</font></font>
<p><font face="Courier New"><font size=-2>(e) Parent shall make its commercially
reasonable best efforts to transfer to Purchaser all records attributable
to each Employee's participation in the flexible spending accounts (pursuant
to Code Sections 105 and/or 129) maintained by Parent or Company; and the
aggregate cash amount of contributions paid by or on behalf of Employees
to, net of the aggregate amount of reimbursements and payments to Employees
from, such flexible spending accounts for the year in which the Closing
occurs.</font></font>
<p><font face="Courier New"><font size=-2>(f) Purchaser and Parent agree
that all employees of Parent who accept employment by Purchaser and/or
Company shall be transferred to the Company prior to the Closing Date.
In addition, Parent shall assume all liabilities relating to, arising out
of or resulting from the transfer of such individuals from Parent to Company.
For the one year period following the Effective Time, Purchaser agrees
not to solicit for employment the Parent employees listed on Section 6.6
of the Company Schedule</font></font>
<p><font face="Courier New"><font size=-2>6.7 <u>Third Party Consents</u>.
As soon as practicable following the date hereof, Purchaser, Parent and
Company will each use its commercially reasonable efforts to obtain any
consents, waivers and approvals under any of its or its subsidiaries' respective
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.</font></font>
<p><font face="Courier New"><font size=-2>6.8 <u>Nasdaq Listing</u>. Purchaser
agrees to cause the listing on Nasdaq the shares of Purchaser Common Stock
issuable, and those required to be reserved for issuance, in connection
with the Merger, subject to official notice of issuance.</font></font>
<p><font face="Courier New"><font size=-2>6.9 <u>Regulatory Filings; Reasonable
Efforts</u>. As soon as may be reasonably practicable, Parent, Company
and Purchaser each shall file with the United States Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department
of Justice ("DOJ") Notification and Report Forms relating to the</font></font>
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<p><font face="Courier New"><font size=-2>transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification
forms required by the merger notification or control laws and regulations
of any applicable jurisdiction, as agreed to by the parties. Company and
Purchaser each shall promptly (a) supply the other with any information
which may be required in order to effectuate such filings and (b) supply
any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other jurisdiction
and which the parties may reasonably deem appropriate; provided, however,
that Purchaser shall not be required to agree to any divestiture by Purchaser
or the Company or any of Purchaser's subsidiaries or affiliates of shares
of capital stock or of any business, assets or property of Purchaser or
its subsidiaries or affiliates or of the Company, its affiliates, or the
imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.</font></font>
<p><font face="Courier New"><font size=-2>6.10 <u>Non-Competition</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Parent agrees that for a
period of 3 years after the Closing, Parent and each entity that Parent
directly (or indirectly through a controlled Affiliate) controls, including
any entity acquired subsequent to the date hereof (Parent and each such
entity a "Restricted Entity") shall not develop, have developed, and shall
not manufacture for its own behalf or on behalf of another Restricted Entity,
xDSL and ISDN customer premise or customer located equipment, including
but not limited to modems, bridges, routers, and voice/data integrated
access devices excluding the products specifically listed in Section 6.10(a)
of the Parent Disclosure Schedule (the "Restricted Products"),</font></font>
<p><font face="Courier New"><font size=-2>(b) Parent agrees that for a
period of 3 years after the Closing, no Restricted Entity may distribute,
market, sell or resell for its own behalf or on behalf of another Restricted
Entity any Restricted Products except as provided for under the Reseller
Agreement the form of which is attached hereto as <u>Exhibit B</u>.</font></font>
<p><font face="Courier New"><font size=-2>(c) Parent agrees that for a
period of 3 years after the Closing, no Restricted Entity shall acquire
(whether by acquisition of assets, merger or otherwise) any entity for
whom the sale of Restricted Products: (x) accounted for greater than twenty
percent (25%) of such entity's revenues during its last year; (y) is projected
to account for greater than twenty percent (25%) of such entity's revenues
during its next year; or (z) would have accounted for greater than ten
percent (10%) of Purchaser's revenues during the last year (a "Relevant
Acquisition").</font></font>
<p><font face="Courier New"><font size=-2>A Restricted Entity may make
a Relevant Acquisition if, and only if, (i) it is making such Relevant
Acquisition by itself and not as part of a group that includes a person
described in subclause (x), (y) or (z), (ii) its primary purpose in making
such Relevant Acquisition is not to exploit for profit such Restricted
Products (iii) within six months of the consummation of such Relevant Acquisition
Parent has disposed of (or ceased operating) the entity or portion thereof
whose business constituted the manufacture or sale of Restricted Products
and (iv) in connection with such disposition Parent shall grant Purchaser
the right or option to acquire such entity or portion in any sale or disposition
process that Parent may conduct. If Parent or another Restricted Entity
makes an acquisition of an entity for whom the sale of Restricted Products
is below the levels specified in subclauses (x) (y)</font></font>
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<p><font face="Courier New"><font size=-2>or (z) (a "Permitted Acquisition"),
the entity so acquired may continue to sell Restricted Products under its
own brand name only and as otherwise may be permitted in the Reseller Agreement;
provided, however, that for the purpose of determining whether an acquisition
is a Relevant Acquisition or a Permitted Acquisition all entities previously
acquired under the Permitted Acquisition exception shall be included in
a person proposed to be acquired. All restrictions specified in this Section
6.10 shall not apply to any person who purchases more than 50% of the voting
common stock of Parent or more than 50% of Parent's assets (a "Change of
Control") and shall not apply to Parent or any Restricted Entity after
such Change of Control if Parent discontinues using its brand name in business
or legally ceases to exit.</font></font>
<p><font face="Courier New"><font size=-2>(d) Notwithstanding subsections
(a), (b) and (c), the obligations and restrictions on Parent in this Section
6.10 shall be extinguished concurrently with the termination of the Reseller
Agreement.</font></font>
<p><font face="Courier New"><font size=-2>For the purposes of this Section
6.10, "control" means the ability (through the ownership of securities
or similar interests, by contract or otherwise and whether or not exercised)
to elect a majority of the board of directors or similar governing body
of a Person.</font></font>
<p><font face="Courier New"><font size=-2>6.11 <u>Intercompany Accounts</u>;
Cash Balance. At the Effective Time (i) all intercompany payables or liabilities
of the Company to Parent shall be cancelled and extinguished and (ii) all
intercompany payables or liabilities of Parent to the Company (excluding
Commercial Payables) shall be cancelled and extinguished and all Commercial
Payables shall be paid in cash by Parent. In addition, on or immediately
prior to the Effective Time Parent shall contribute $5,450,000 in cash
to the Company in respect of Parent's equity ownership of the Company.
At the Effective Time, all indemnification and similar obligations of Company
in favor of Parent and the Master Purchaser Agreement and Master Escrow
Agreement between Parent and the Company shall be cancelled and extinguished.
A "Commercial Payable" is an intercompany payable on the account of the
sale of a Company Product to Parent consistent with past practice.</font></font>
<p><font face="Courier New"><font size=-2>6.12 <u>License of Intellectual
Property</u>. Effective as of the Closing Date, subject to the Terms and
conditions of this Agreement and subject to any restrictions in the Cross-License
Agreement entered into between Purchaser and Parent attached hereto as
<u>Exhibit
F</u>:</font></font>
<p><font face="Courier New"><font size=-2>(a) Parent hereby grants to Purchaser,
under all of the rights to Parent Intellectual Property, an irrevocable,
perpetual, non-terminable, fully- paid, sublicensable, worldwide, royalty-free
license: (i) to make, have made, use, offer for sale, sell and import the
products which were being made, used or sold by Company immediately prior
to the Closing and (ii) to otherwise exploit the Company products and any
improvements and derivatives thereof, for any and all purposes whatsoever.</font></font>
<p><font face="Courier New"><font size=-2>b) To the extent that the operation
of the Parent's operations as conducted by Parent as of the Closing Date
would infringe any transferred Company Intellectual Property, Purchaser
grants to Parent, under Purchaser's rights in such transferred Company
Intellectual Property a perpetual, irrevocable, non-terminable, worldwide,
royalty-free license to continue the operations of the Parent as currently
conducted.</font></font>
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<p><font face="Courier New"><font size=-2>6.13 <u>Reseller Agreement</u>.
Purchaser and Parent agree that at the Closing Purchaser and Parent shall
enter an Reseller Agreement in substantially the form attached hereto as
Exhibit B.</font></font>
<p><font face="Courier New"><font size=-2>6.14 <u>Transition Services Agreement</u>.
Parent agrees at the Closing to enter into a Transition Services Agreement
with Purchaser in substantially the form attached hereto as <u>Exhibit
E</u>.</font></font>
<p><font face="Courier New"><font size=-2>6.15 <u>SDA Agreement</u>. The
Parent and the Purchaser agree at the Closing to enter into the SDA Agreement
attached hereto as <u>Exhibit C</u>.</font></font>
<p><font face="Courier New"><font size=-2>6.16 <u>License Agreement</u>.
The Parent and Purchaser agree at the Closing to enter into the License
Agreements attached hereto as <u>Exhibits F.</u></font></font>
<p><font face="Courier New"><font size=-2>6.17 <u>WARN</u>. For a period
of 90 days after the Closing, Parent and the Surviving Corporation shall
not conduct any layoffs or plant closings involving the Surviving Corporation
that could trigger obligations under the Worker Adjustment and Retraining
Notification Act of 1988 or any state plant closing or notification law.</font></font>
<p><font face="Courier New"><font size=-2>6.18 <u>Options</u>. At the Closing,
Purchaser shall have reserved for issuance to the Company's employees not
less than 950,000 options on shares of Purchaser Common Stock under the
terms of its Purchaser Stock Option Plan.</font></font>
<p><font face="Courier New"><font size=-2>6.19 <u>Retention</u>. At the
Effective Time, Parent shall accelerate the vesting of all options that
were granted under the Company's Option Plan prior to Parent's acquisition
of the Company in September 1998 then held by employees of the Company
such that all such options then held by such Company employees are 100%
vested and free from blackout, trading window or similar restrictions.
In addition, immediately prior to the Effective Time, Parent shall have
established a cash payout pool in an amount equal to the closing price
per share of Purchaser Common Stock on November 24, 1999 multiplied by
one hundred thirty five thousand (135,000) shares (the "Retention Pool").
The Retention Pool shall be allocated among Company employees as mutually
agreed between Purchaser and Parent or may be structured in another manner
that is mutually satisfactory to Parent and Purchaser.</font></font>
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<p><font face="Courier New"><font size=-2>ARTICLE VII</font></font>
<p><font face="Courier New"><font size=-2>CONDITIONS TO THE MERGER</font></font></center>
<p><font face="Courier New"><font size=-2>7.1 <u>Conditions to Obligations
of Each Party to Effect the Merger</u>. The respective obligations of each
party to this Agreement to effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of the following conditions:</font></font>
<p><font face="Courier New"><font size=-2>(a) <u>No Order; HSR Act</u>.
No Governmental Entity shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger. All waiting periods, if any, under
the HSR Act relating to the transactions contemplated hereby will have
expired or</font></font>
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<p><font face="Courier New"><font size=-2>terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger
in connection with the transactions contemplated hereby shall have been
obtained.</font></font>
<p><font face="Courier New"><font size=-2>(b) <u>Tax Opinions</u>. Purchaser
and Parent shall each have received written opinions from their respective
tax counsel (Wilson Sonsini Goodrich & Rosati, Professional Corporation,
and Ropes & Gray, respectively), in form and substance reasonably satisfactory
to them, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code and such opinions shall
not have been withdrawn. The parties to this Agreement agree to make such
reasonable representations as requested by such counsel for the purpose
of rendering such opinions.</font></font>
<p><font face="Courier New"><font size=-2>(c) <u>SDA Agreement</u>. The
Parent and the Purchaser shall have entered into the SDA Agreement in substantially
the form attached hereto as <u>Exhibit C</u>.</font></font>
<p><font face="Courier New"><font size=-2>(d) <u>License Agreements</u>.
Purchaser and Parent shall have entered into the License Agreement in substantially
the form attached hereto as <u>Exhibit F</u>.</font></font>
<p><font face="Courier New"><font size=-2>7.2 <u>Additional Conditions
to Obligations of Company and Parent</u>. The obligation of Company and
Parent to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any
of which may be waived, in writing, exclusively by Company:</font></font>
<p><font face="Courier New"><font size=-2>a) <u>Representations and Warranties</u>.
Each representation and warranty of Purchaser and Merger Sub contained
in this Agreement (i) shall have been true and correct as of the date of
this Agreement and (ii) shall be true and correct on and as of the Closing
Date with the same force and effect as if made on the Closing Date except
(A) in each case, or in the aggregate, as does not constitute a Material
Adverse Effect on Purchaser and Merger Sub, (B) for changes contemplated
by this Agreement and (C) for those representations and warranties which
address matters only as of a particular date (which representations shall
have been true and correct (subject to the qualifications as set forth
in the preceding clause A) as of such particular date) (it being understood
that, for purposes of determining the accuracy of such representations
and warranties, (i) all "Material Adverse Effect" qualifications and other
qualifications based on the word "material" or similar phrases contained
in such representations and warranties shall be disregarded and (ii) any
update of or modification to the Purchaser Schedule made or purported to
have been made after the date of this Agreement shall be disregarded).
Company shall have received a certificate with respect to the foregoing
signed on behalf of Purchaser by an authorized officer of Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>(b) <u>Agreements and Covenants</u>.
Purchaser and Merger Sub shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to
be performed or complied with by them on or prior to the Closing Date,
and Company shall have received a certificate to such effect signed on
behalf of Purchaser by an authorized officer of Purchaser.</font></font>
<p><font face="Courier New"><font size=-2>(c) <u>Nasdaq Listing</u>. The
shares of Purchaser Common Stock issuable to the stockholders of Company
pursuant to this Agreement and such other shares required to be reserved
for issuance in connection with the Merger shall have been authorized for
listing on Nasdaq upon official notice of issuance.</font></font>
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<p><font face="Courier New"><font size=-2>(d) <u>Material Adverse Effect</u>.
No Material Adverse Effect with respect to Purchaser and its subsidiaries
shall have occurred since the date of this Agreement.</font></font>
<p><font face="Courier New"><font size=-2>(e) <u>Reseller Agreement</u>.
Purchaser shall have entered into the Reseller Agreement in substantially
the form attached hereto as <u>Exhibit B</u>.</font></font>
<p><font face="Courier New"><font size=-2>7.3 <u>Additional Conditions
to the Obligations of Purchaser and Merger Sub</u>. The obligations of
Purchaser and Merger Sub to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Purchaser:</font></font>
<p><font face="Courier New"><font size=-2>(a) <u>Representations and Warranties</u>.
Each representation and warranty of Company and Parent contained in this
Agreement (i) shall have been true and correct as of the date of this Agreement
and (ii) shall be true and correct on and as of the Closing Date with the
same force and effect as if made on and as of the Closing Date except (A)
in each case, or in the aggregate, as does not constitute a Material Adverse
Effect on Company, (B) for changes contemplated by this Agreement and (C)
for those representations and warranties which address matters only as
of a particular date (which representations shall have been true and correct
(subject to the qualifications as set forth in the preceding clause A)
as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based
on the word "material" or similar phrases contained in such representations
and warranties shall be disregarded and (ii) any update of or modification
to the Company Schedule made or purported to have been made after the date
of this Agreement shall be disregarded). Purchaser shall have received
a certificate with respect to the foregoing signed on behalf of Company
by an authorized officer of Company.</font></font>
<p><font face="Courier New"><font size=-2>(b) <u>Agreements and Covenants</u>.
Company and Parent shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed
or complied with by it at or prior to the Closing Date, and Purchaser shall
have received a certificate to such effect signed on behalf of Company
by the Chief Executive Officer and the Chief Financial Officer of Company.</font></font>
<p><font face="Courier New"><font size=-2>(c) <u>Material Adverse Effect</u>.
No Material Adverse Effect with respect to Company and its subsidiaries
shall have occurred since the date of this Agreement.</font></font>
<p><font face="Courier New"><font size=-2>(d) <u>Consents</u>. Company
shall have obtained all consents, waivers and approvals required in connection
with the consummation of the transactions contemplated hereby in connection
with the agreements, contracts, licenses or leases set forth on Schedule
7.3(d).</font></font>
<p><font face="Courier New"><font size=-2>(e) <u>Transition Services Agreement</u>.
Purchaser and Parent shall have entered into the Transition Services Agreement
in substantially the form attached hereto as <u>Exhibit E</u>.</font></font>
<p><font face="Courier New"><font size=-2>(f) <u>Reseller Agreement</u>.
Purchaser and Parent shall have entered into the Reseller Agreement in
substantially the form attached hereto as <u>Exhibit B</u></font></font>
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<p><font face="Courier New"><font size=-2>ARTICLE VIII</font></font>
<p><font face="Courier New"><font size=-2>TAX MATTERS</font></font></center>
<p><font face="Courier New"><font size=-2>8.1 <u>Definition of Taxes</u>.
For the purposes of this Agreement, "Tax" or "Taxes" refers to any and
all federal, state, local and foreign taxes, assessments and other governmental
charges constituting taxes, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements
or arrangements with any other person with respect to such amounts and
including any liability for taxes of a predecessor entity.</font></font>
<p><font face="Courier New"><font size=-2>8.2 <u>Tax Representations</u>.
Parent and Company represent and warrant to the Purchaser and Merger Sub
as set forth below:</font></font>
<p><font face="Courier New"><font size=-2>(a) The Company (or Parent on
behalf of the Company) has (i) timely filed within the time period for
filing or any extension granted with respect thereto all applicable federal,
state, local, foreign and other returns, declarations, reports, claims
for refund, or information statements relating to Taxes including any schedule
attached thereto and any amendment thereto ("Returns") required to be filed
relating to or pertaining to any and all Taxes attributable to, levied
or imposed upon, or incurred in connection with the Company and (ii) paid
all of the Taxes due and payable prior to the date hereof.</font></font>
<p><font face="Courier New"><font size=-2>(b) With respect to the Company,
(i) there are not pending or threatened in writing any audits, examinations,
assessments, asserted deficiencies or written claims for Taxes and (ii)
there are (and immediately after the Closing there will be) no Encumbrances
for Taxes upon any assets of the Company other than for Taxes not yet due
and payable.</font></font>
<p><font face="Courier New"><font size=-2>(c) No Tax deficiencies, assessments
or audit adjustments have been proposed in writing, assessed or asserted
against the Company).</font></font>
<p><font face="Courier New"><font size=-2>(d) The Company is not delinquent
in the payment of its Taxes.</font></font>
<p><font face="Courier New"><font size=-2>(e) Except as set forth in Section
8.2(e) of Company Schedule Parent has not requested any extension of time
within which to file any Returns related to the Company in respect of any
taxable period which have not since been filed and no request for waivers
of the time to assess any Taxes are pending or outstanding.</font></font>
<p><font face="Courier New"><font size=-2>(f) The Company has complied
in all material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or
similar provisions under any foreign Laws) and have, within the time and
in the manner prescribed by law, withheld from employee wages and paid
over to the proper governmental authorities all employment, FICA, FUTA
and other Taxes and similar amounts required to be so withheld and paid
over under all applicable laws.</font></font>
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<p><font face="Courier New"><font size=-2>(g) Except as set forth in Section
8.2(g) of the Company Schedule, no power of attorney for Taxes has been
granted with respect to the Company.</font></font>
<p><font face="Courier New"><font size=-2>(h) Parent is not a foreign corporation
(as defined in the Code and Income Tax Regulations) and Parent's U.S. employer
identification number is __________________.</font></font>
<p><font face="Courier New"><font size=-2>(i) The accruals and reserves
for Taxes reflected in the balance sheet of the Company as of September
30, 1999 are in all material respects adequate to cover all Taxes required
to be accrued through the date thereof (including interest and penalties,
if any, thereon and Taxes being contested) in accordance with U.S. GAAP
applied on a consistent basis with the balance sheet included in the Company
Reports, and the accrual and reserves for Taxes reflected in the books
and records of the Company as of the last day of the Company's most recently
complete fiscal month end are in all material respects adequate to cover
all Taxes required to be accrued through such date (including interest
and penalties, if any, thereon and Taxes being contested) in accordance
with GAAP applied on a consistent basis with the balance sheet included
in the Company Reports.</font></font>
<p><font face="Courier New"><font size=-2>8.3 <u>Indemnity</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Parent shall indemnify, defend
and hold harmless, the Purchaser from and against and in respect of and
shall be responsible for and shall timely pay or cause to be paid (i) any
and all Taxes whensoever arising with respect to or relating to the Company
that are attributable to any taxable period ending on or prior to the Closing
Date and, in the case of a taxable period that includes, but does not end
on the Closing Date, the portion of such taxable period that ends on the
Closing Date, (ii) any and all Taxes of Parent or any subsidiaries or Affiliates
thereof other than the Company, whensoever arising, regardless of the period
to which such Taxes relate, imposed on the Company arising out of Treasury
Regulation (S) 1.1502-6 or any comparable provision of foreign, state,
local or subnational law or Taxes of such entities for which the Company
is otherwise liable, (iii) any and all Taxes arising out of or constituting
a breach of any representation, warranty, or covenant of the Parent or
the Company contained in this Article VIII; provided that no indemnity
shall be provided by Parent for Taxes resulting from any transaction of
the Company, not including the Merger, occurring on the Closing Date after
the Closing. (The foregoing items (i) through (iii) shall collectively
be referred to herein as "Parent's Taxes"). Parent's Taxes shall include,
with respect to any taxable period commencing before the Closing Date and
ending after the Closing Date (a "Straddle Period"), all Taxes relating
to the Company attributable to the portion of the Straddle Period prior
to and including the Closing Date (the "Pre-Closing Period"). For purposes
of such Straddle Periods, the portion of any Tax that is attributable to
the Pre-Closing Period shall be (i) in the case of a Tax that is not based
on net income, gross income, sales, premiums or gross receipts, the total
amount of such Tax for the period in question multiplied by a fraction,
the numerator of which is the number of days in the Pre-Closing Period,
and the denominator of which is the total number of days in such Straddle
Period, and (ii) in the case of a Tax that is based on any of net income,
gross income, sales, premiums or gross receipts, the Tax that would be
due with respect to the Pre-Closing Period if such Pre-Closing Period were
a separate taxable period, except that exemptions, allowances, deductions
or credits, exclusive of the amount by which they are increased or decreased
as a result of the transactions contemplated hereby, and which are calculated
on an annual basis (such as the deduction for depreciation or capital allowances)
shall be apportioned on a per diem basis. If there is an</font></font>
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<p><font face="Courier New"><font size=-2>indemnification obligation under
this Section and there is a correlative adjustment which makes allowable
to Purchaser, any of its Affiliates or, following the Closing, the Company,
and deduction, amortization, exclusion from income or other allowance which
produces an actual tax savings or actual reduction in such Person's Tax
liability after taking into account such indemnity payments which would
not, but for such adjustment, be allowable, then this indemnification obligation
shall be reduced by such amount.</font></font>
<p><font face="Courier New"><font size=-2>(b) Purchaser shall indemnify,
defend and hold harmless Parent and its affiliates from and against and
in respect of and shall be responsible for and shall timely pay or cause
to be paid (i) any and all Taxes with respect to the Company, that are
attributable to any taxable period commencing after the Closing Date and,
in the case of a Straddle Period, the portion of such taxable period that
begins on the day after the Closing Date and all other Taxes imposed on
the Company which are not Parent's Taxes ("Purchaser's Taxes") and (ii)
any losses incurred by Parent attributable to a breach of any representation,
warranty or covenant of Purchaser or Merger Sub contained in this Article
VIII.</font></font>
<p><font face="Courier New"><font size=-2>(c) If Purchaser or any Affiliate
files any Return which includes payment of Parent's Taxes, Parent shall
reimburse Purchaser for such Parent's Taxes within ten (10) days following
written notice that payment of such amounts to the appropriate tax authority
is due, provided that payment shall not be required earlier than two (2)
days before it is due to the appropriate tax authority. If Parent files
any Return which includes payments of Purchaser's Taxes, Purchaser shall
reimburse Parent for such Purchaser's Taxes within ten (10) days following
written notice that payment of such amounts to the appropriate tax authority
is due, provided that payment shall not be required earlier than two (2)
days before it is due to the appropriate tax authority. Parent shall timely
provide to Purchaser all information and documents within the possession
of Parent (or their auditors, advisors or Affiliates) and signatures and
consents necessary for Purchaser to properly prepare and file the Returns
described in the second preceding sentence or in connection with the determination
of any Tax liability or any audit, examination or proceeding. Purchaser
shall timely provide to Parent all information and documents within its
possession or the possession of its auditors, advisors or affiliates and
signatures and consents necessary for Parent properly to prepare and file
the Returns described in the second preceding sentence or in connection
with the determination of any Tax liability or any audit, examination or
proceeding. Each party hereto shall reasonably cooperate with the other
(at their own expense) party to obtain other information or documents necessary
or appropriate to prepare and file Returns or elections or necessary or
appropriate in connection with the determination of any Tax liability or
any audit, examination or proceeding.</font></font>
<p><font face="Courier New"><font size=-2>8.4 <u>Tax Returns</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Subject to each Parties'
obligation to make payment pursuant to Section 8.3(a) of this Agreement,
Parent shall prepare and file (or cause to be prepared and filed) on a
timely basis all Returns with respect to the Company ("Company Tax Returns")
for all taxable periods ending on or before the Closing Date. Such Returns
shall be prepared in a manner consistent with past practice.</font></font>
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<p><font face="Courier New"><font size=-2>(b) Subject to each Parties'
obligation to make payment pursuant to Section 8.3(a) of this Agreement,
Purchaser shall prepare and file (or cause to be prepared and filed) on
a timely basis all Company Tax Returns for periods ending after the Closing
Date. Parent shall have the right to review and comment on all Returns
filed by the Purchaser for taxable periods or portions thereof prior to
and including the Closing Date, which Returns shall be prepared in a manner
consistent with past practice. Purchaser shall provide Parent such Returns
at least ten (10) business days before each such Return is due to be filed.</font></font>
<p><font face="Courier New"><font size=-2>8.5 <u>Refunds and Credits</u>.
All refunds or credits of Parent's Taxes (other than refunds or credits
of Taxes shown on the Closing Balance Sheet) shall be for the account of
Parent. All refunds or credits of Purchaser's Taxes and Taxes shown on
the Closing Balance Sheet shall be for the account of Purchaser. Following
the Closing, Purchaser shall cause any such refunds or credits due Parent
pursuant to this section to be promptly forwarded to Parent after receipt
or realization thereof by Purchaser, and Parent shall promptly forward
(or cause to be forwarded) to Purchaser any refunds or credits due to Purchaser
pursuant to this section after receipt or realization thereof by Parent.
Purchaser shall, if Parent so requests, cause the Company to file for and
use its commercially reasonable efforts to obtain the receipt of any refund
to which Parent is entitled.</font></font>
<p><font face="Courier New"><font size=-2>8.6 <u>Termination of Tax Sharing
Agreements</u>. Parent hereby agrees and covenants that there are and will
be no obligations relating to the Company pursuant to any Tax sharing agreement
or any similar arrangement in effect at any time before or on the Closing
Date, and any further obligations that might otherwise have existed thereunder
shall be extinguished as of the Closing Date.</font></font>
<p><font face="Courier New"><font size=-2>8.7 <u>Tax-Free Reorganization</u>.
Parent, the Company and Purchaser will each use its best efforts to cause
the Merger to be treated as a reorganization within the meaning of Section
368 of the Code, and neither party will take any action that would cause
the Merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code. Each of the parties shall report the Merger
for income tax purposes as a reorganization within the meaning of Section
368(a) of the Code (and any comparable state or local tax statute).</font></font>
<p><font face="Courier New"><font size=-2>8.8 <u>Conduct of Audits and
Other Procedural Matters</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) Parent shall, at its own
expense, control any audit or examination by any Taxing authority, and
have the right to initiate any claim for refund or amended return, and
contest, resolve and defend against any assessment, notice of deficiency
or other adjustment or proposed adjustment of Taxes ("Tax Proceedings")
for any taxable period ending on or before the Closing Date. Purchaser
shall, at its own expense, control any audit or examination by any Taxing
authority, and have the right to initiate any claim for refund or amended
return, any contest, resolve and defend against any Tax Proceeding for
any taxable period beginning after the Closing Date.</font></font>
<p><font face="Courier New"><font size=-2>(b) In the case of any Proceedings
relating to any Straddle Period, Purchaser and Parent shall jointly control
such Tax Proceedings and shall consult in good faith with each other as
to the conduct of such Tax Proceedings. Each party shall pay its own costs,
including legal costs, of conducting such Tax Proceedings; <u>provided</u>,
<u>however</u>,
that either party may instead elect to pay or cause to be paid to the other
the allocable amount of the applicable Taxes that constitute its Taxes</font></font>
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<p><font face="Courier New"><font size=-2>(which amount shall not be less
than the portion allocable to it hereunder of the Tax as asserted by the
applicable Taxing authority) including any interest, penalties, or additions
thereto asserted in such proceeding. Each party shall, at the expense of
the requesting party, execute or cause to be executed any powers of attorney
or other documents reasonably requested by such requesting party to enable
it to take any and all actions such party reasonably requests with respect
to any Tax Proceedings which the requesting party controls.</font></font>
<p><font face="Courier New"><font size=-2>(c) Each party shall promptly
forward to the other all written notifications and other written communications
from any Taxing authority received by such party or its affiliates relating
to any liability for Taxes for any taxable period for which such other
party or any of its affiliates is charged with payment or indemnification
responsibility under this Agreement and each indemnifying party shall promptly
notify, and consult with, each indemnified party as to any action it proposes
to take with respect to any liability for Taxes for which it is required
to indemnify another party or which may affect the Taxes of another party
and shall not enter into any closing agreement or final settlement with
any Taxing authority with respect to any such liability without the written
consent of the indemnified or affected parties, which consent shall not
be unreasonably withheld.</font></font>
<p><font face="Courier New"><font size=-2>(d) The failure by a party to
provide timely notice under this subsection shall not relieve the other
party from its obligations under this Section 8.8 with respect to the subject
matter of any notification not timely forwarded, unless and to the extent
that the other party can demonstrate that the other party has suffered
an economic detriment because of such failure to provide notification in
a timely fashion.</font></font>
<p><font face="Courier New"><font size=-2>8.9 <u>Assistance and Cooperation</u>.
Each of Parent and Purchaser (and their respective Affiliates) shall at
their own expense:</font></font>
<p><font face="Courier New"><font size=-2>(a) assist the other party in
preparing any Returns which such other party is responsible for preparing
and filing in accordance with this Article VIII;</font></font>
<p><font face="Courier New"><font size=-2>(b) cooperate fully in preparing
for any audits of, or disputes with Taxing authorities regarding, any Returns
relating to the Company;</font></font>
<p><font face="Courier New"><font size=-2>(c) make available to the other
and to any Taxing authority as reasonably requested all information, records,
and documents relating to Taxes concerning the Company;</font></font>
<p><font face="Courier New"><font size=-2>(d) make available to the other
and to any Taxing authority as reasonably requested employees and independent
auditors to provide explanations and additional information relating to
Taxes concerning the Company;</font></font>
<p><font face="Courier New"><font size=-2>(e) provide timely notice to
the other in writing of any pending or threatened Tax audits, assessments
or Tax Proceedings with respect to the Company for taxable periods for
which the other may have a liability under this Article VIII;</font></font>
<p><font face="Courier New"><font size=-2>(f) furnish the other with copies
of all correspondence received from any Taxing authority in connection
with any Tax audit or Tax Proceedings with respect to any taxable period
for which the other may have a liability under this Article VIII; and</font></font>
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<p><font face="Courier New"><font size=-2>(g) retain any books and records
that could reasonably be expected to be necessary or useful in connection
with Purchaser's or Parent's preparation, as the case may be, of any Return,
or for any audit, examination, or Proceeding relating to Taxes. Such books
and records shall be retained until the expiration of the applicable statute
of limitations (including extensions thereof to the extent the party has
been notified thereof); provided, however, that in the event of an audit,
examination, investigation or Proceeding has been instituted prior to the
expiration of the applicable statute of limitations (or in the event of
any claim under this Agreement), the books and records shall be retained
until there is a final determination thereof (and the time for any appeal
has expired).</font></font>
<p><font face="Courier New"><font size=-2>8.10 <u>Survival</u>. Notwithstanding
anything in this Agreement to the contrary, the provisions of this Article
VIII shall survive for the full period of all statutes of limitations (giving
effect to any waiver, mitigation or extension thereof).</font></font>
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<p><font face="Courier New"><font size=-2>ARTICLE IX</font></font>
<p><font face="Courier New"><font size=-2>TERMINATION, AMENDMENT AND WAIVER</font></font></center>
<p><font face="Courier New"><font size=-2>9.1 <u>Termination</u>. This
Agreement may be terminated at any time prior to the Effective Time:</font></font>
<p><font face="Courier New"><font size=-2>(a) by mutual written consent
duly authorized by the Boards of Directors of Purchaser and Company;</font></font>
<p><font face="Courier New"><font size=-2>(b) by either Company or Purchaser
if the Merger shall not have been consummated by March 31, 2000 for any
reason; <u>provided</u>, <u>however</u>, that the right to terminate this
Agreement under this Section 9.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action
or failure to act constitutes a breach of this Agreement;</font></font>
<p><font face="Courier New"><font size=-2>(c) by either Company or Purchaser
if a Governmental Entity shall have issued an order, decree or ruling or
taken any other action, in any case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, which order, decree, ruling
or other action is final and nonappealable;</font></font>
<p><font face="Courier New"><font size=-2>(d) by Company, upon a breach
of any representation, warranty, covenant or agreement on the part of Purchaser
set forth in this Agreement, or if any representation or warranty of Purchaser
shall have become untrue, in either case such that the conditions set forth
in Section 7.2(a) or Section 7.2(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall
have become untrue, <u>provided</u>, that if such inaccuracy in Purchaser's
representations and warranties or breach by Purchaser is curable by Purchaser
through the exercise of its commercially reasonable efforts, then Company
may not terminate this Agreement under this Section 9.1(d) for thirty (30)
days after delivery of written notice from Company to Purchaser of such
breach, provided Purchaser continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Company may not terminate
this Agreement pursuant to this</font></font>
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<p><font face="Courier New"><font size=-2>Section 9.1(d) if it shall have
materially breached this Agreement or if such breach by Purchaser is cured
during such thirty (30)-day period); or</font></font>
<p><font face="Courier New"><font size=-2>(e) by Purchaser, upon a breach
of any representation, warranty, covenant or agreement on the part of Company
set forth in this Agreement, or if any representation or warranty of Company
shall have become untrue, in either case such that the conditions set forth
in Section 7.3(a) or Section 7.3(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall
have become untrue, <u>provided</u>, that if such inaccuracy in Company's
representations and warranties or breach by Company is curable by Company
through the exercise of its commercially reasonable efforts, then Purchaser
may not terminate this Agreement under this Section 9.1(e) for thirty (30)
days after delivery of written notice from Purchaser to Company of such
breach, provided Company continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Purchaser may not
terminate this Agreement pursuant to this Section 9.1(e) if it shall have
materially breached this Agreement or if such breach by Company is cured
during such thirty (30)-day period).</font></font>
<p><font face="Courier New"><font size=-2>9.2 <u>Notice of Termination;
Effect of Termination</u>. Any termination of this Agreement under Section
9.1 above will be effective immediately upon (or, if the termination is
pursuant to Section 9.1(d) or Section 9.1(e) and the proviso therein is
applicable, thirty (30) days after) the delivery of written notice of the
terminating party to the other parties hereto. In the event of the termination
of this Agreement as provided in Section 9.1, this Agreement shall be of
no further force or effect, except (i) as set forth in this Section 9.2,
Section 9.3 and Article X (General Provisions), each of which shall survive
the termination of this Agreement, and (ii) nothing herein shall relieve
any party from liability for any intentional or willful breach of this
Agreement. No termination of this Agreement shall affect the obligations
of the parties contained in the Confidentiality Agreement, all of which
obligations shall survive termination of this Agreement in accordance with
their terms.</font></font>
<p><font face="Courier New"><font size=-2>9.3 <u>Fees and Expenses</u>.
Except as set forth in this Section 9.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
by the Purchaser shall be paid by the Purchaser whether or not the Merger
is consummated and all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby by the Parent and the
Company shall be paid by the Parent whether or not the Merger is consummated.</font></font>
<p><font face="Courier New"><font size=-2>9.4 <u>Amendment</u>. Subject
to applicable law, this Agreement may be amended by the parties hereto
at any time by execution of an instrument in writing signed on behalf of
each of Purchaser, Parent and Company.</font></font>
<p><font face="Courier New"><font size=-2>9.5 <u>Extension; Waiver</u>.
At any time prior to the Effective Time, any party hereto may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any inaccuracies
in the representations and warranties made to such party contained herein
or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.</font></font>
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<p><font face="Courier New"><font size=-2>ARTICLE X</font></font>
<p><font face="Courier New"><font size=-2>GENERAL PROVISIONS</font></font></center>
<p><font face="Courier New"><font size=-2>10.1 <u>Survival of Representations
and Warranties</u>. The representations and warranties of the Parent, the
Company, Merger Sub and the Purchaser contained in this Agreement, and
all statements contained in this Agreement, the Disclosure Schedule and
any certificate delivered pursuant to this Agreement or in connection with
the transactions contemplated by this Agreement (collectively, the "Acquisition
Documents"), shall survive the Closing by one year; provided, however,
that the representation and warranty contained in Section 2.20 shall survive
until the third anniversary of the Closing Date; and provided further,
however, that the obligations under Article 8 shall survive as provided
therein. If written notice of a claim has been given prior to the expiration
of the applicable representations and warranties, then the relevant representations
and warranties shall survive as to such claim, until such claim has been
finally resolved.</font></font>
<p><font face="Courier New"><font size=-2>10.2 <u>Indemnification by the
Holders</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) From and after the Closing,
Purchaser and its Affiliates, officers, directors, employees, agents, successors
and assigns (each an "Indemnified Party") shall be indemnified and held
harmless, jointly and severally, by each holder (a "Holder") of Company
Capital Stock for any and all Liabilities, losses, damages, claims, costs
(including business interruption costs) and expenses, interest, awards,
judgments and penalties (including, without limitation, attorneys' and
consultants' fees and expenses) actually suffered or incurred by them (including,
without limitation, any Action brought or otherwise initiated by any of
them) (hereinafter a "Loss" and in the aggregate the "Losses"), arising
out of or resulting from the breach of any representation or warranty made
by the Company or Parent contained in the Acquisition Documents and for
any Losses related to ERISA liabilities of Parent or any of Parent's ERISA
Affiliates ("ERISA Liabilities"). For the purposes of determining whether
there has been a breach of any representation or warranty made by the Company
or Parent, all "Material Adverse Effect" qualifications and other qualifications
based on the word material or similar phrases shall be disregarded and
all qualifications based on "knowledge" other than in the case of threatened
litigation or governmental proceedings shall also be disregarded. Indemnification
payments under this Agreement (including under Article 8 hereof) shall
be reduced by any Tax benefit (net of Tax cost including, without limitation,
receipt of indemnification payments) actually realized by the indemnified
party as a result of the indemnification payment.</font></font>
<p><font face="Courier New"><font size=-2>(b) An Indemnified Party shall
give Parent notice of any matter which an Indemnified Party has determined
has given or could give rise to a right of indemnification under this Agreement,
within 60 days of such determination, stating the amount of the Loss, if
known, and method of computation thereof, and containing a reference to
the provisions of this Agreement in respect of which such right of indemnification
is claimed or arises. The obligation and Liabilities of the Holders under
this Article X with respect to Losses arising from claims of any third
party which are subject to the indemnification provided for in this Article
X ("Third Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnified Party shall receive
notice of any Third Party Claim, the Indemnified Party shall give the Parent
notice of such Third Party Claim within</font></font>
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<p><font face="Courier New"><font size=-2>30 days of the receipt by the
Indemnified Party of such notice; provided, however, that the failure to
provide such notice shall not release the Holders from any of its obligations
under this Article X except to the extent the Holders are materially prejudiced
by such failure and shall not relieve the Holders from any other obligation
or Liability that it may have to any Indemnified Party otherwise than under
this Article X. If the Parent acknowledges in writing the Holders' obligation
to indemnify the Indemnified Party hereunder against any Losses that may
result from such Third Party Claim, then the Parent shall be entitled to
assume and control the defense of such Third Party Claim on behalf of the
Holders at its expense and through counsel of its choice if it gives notice
of its intention to do so to the Indemnified Party within ten days of the
receipt of such notice from the Indemnified Party; provided, however, that
if there exists or is reasonably likely to exist a conflict of interest
that would make it appropriate in the judgment of the Indemnified Party,
in its sole and absolute discretion, for the same counsel to represent
both the Indemnified Party and the Holders, then the Indemnified Party
shall be entitled to retain its own counsel, in each jurisdiction for which
the Indemnified Party determines counsel is required, at the expense of
the Holders. In any event the Parent exercises the right to undertake any
such defense against any such Third Party Claim on behalf of the Holders
as provided above, the Indemnified Party shall cooperate with the Parent
in such defense and make available to the Parent, at the Holders' expense,
all witnesses, pertinent records, materials and information in the Indemnified
Party's possession or under the Indemnified Party's control relating thereto
as is reasonably required by the Parent. Similarly, in the event the Indemnified
Party is, directly or indirectly, conducting the defense against any such
Third Party Claim, the Holders shall cooperate with the Indemnified Party
in such defense and make available to the Indemnified Party, at the Holders'
expense, all such witnesses, records, materials and information in the
Holders' possession or under the Holders' control relating thereto as is
reasonably required by the Indemnified Party. No such Third Party Claim
may be settled by the Holders without the prior written consent of the
Indemnified Party; provided, however, that if the Indemnified Party does
not consent to a settlement that is otherwise acceptable to the Holders,
in no event shall the Holders be required to indemnify the Indemnified
Party for any judgment amount in excess of the proposed settlement amount.</font></font>
<p><font face="Courier New"><font size=-2>(c) The Holders shall not have
any obligation to indemnify the Indemnified Parties pursuant to Sections
10.2(a) and (b) unless the aggregate amount of all Losses arising under
Section 10.2 (excluding claims related to ERISA Liabilities) exceeds $2
million, in which case the Indemnified Parties shall be entitled to indemnification
pursuant to Section 10.2 only to the extent to which such Losses exceed
$2 million. The total maximum aggregate indemnification liability of the
Holders for any Losses arising under Sections 10.2(a) and (b) (including
Losses arising from a breach of Section 2.20 of this Agreement but excluding
claims related to ERISA Liabilities) shall not exceed $150 million, provided,
however, that of such $150 million maximum, the total maximum aggregate
indemnification liability of the Holders for any Losses arising under Section
10.2(a) and (b) other than as a result of a breach of Section 2.20 of this
Agreement shall not exceed $75 million. The Holders shall indemnify Purchaser
dollar for dollar with respect to any losses associated with ERISA Liabilities.</font></font>
<p><font face="Courier New"><font size=-2>(d) From and after the Closing,
in the absence of fraud, willful misconduct or bad faith breach ("Excepted
Claims"), the sole and exclusive remedy of Purchaser and its Affiliates,
officers, directors, employees, agents, successors and assigns</font></font>
<center>
<p><font face="Courier New"><font size=-2>-49-</font></font></center>
<p><br>
<br>
<br>
<br>
<br>
<p><font face="Courier New"><font size=-2>against Parent or any of its
Affiliates, officers, directors, employees, agents, successors and assigns
with respect to any and all claims relating to the Acquisition Documents
shall be pursuant to the indemnification provisions set forth in this Section
10.2. Except with respect to Excepted Claims, the Purchaser hereby, on
its own behalf and on behalf of its Affiliates, to the fullest extent permitted
under applicable law, waives, and agrees that neither it nor any of its
Affiliates will assert in any action or proceeding of any kind, any and
all rights, claims or causes of action it or such Affiliate may now or
hereafter have against the Parent (including, without limitation, any such
rights, claims or causes of action arising under or based upon common law
or other Legal Requirements) other than claims for indemnification that
are asserted as permitted by and in accordance with the provisions set
forth in this Article.</font></font>
<p><font face="Courier New"><font size=-2>(e) Upon making any payment to
an Indemnified Party for any indemnification claim pursuant to this Section
10.2, the Parent shall be subrogated, to the extent of such payment to
any rights which the Indemnified Party may have against other Persons with
respect to the subject matter underlying such indemnification claim.</font></font>
<p><font face="Courier New"><font size=-2>10.3 <u>Notices</u>. All notices
and other communications hereunder shall be in writing and shall be deemed
given if delivered personally or by commercial delivery service, or sent
via telecopy (receipt confirmed) to the parties at the following addresses
or telecopy numbers (or at such other address or telecopy numbers for a
party as shall be specified by like notice):</font></font>
<p><font face="Courier New"><font size=-2>(a) if to Purchaser or Merger
Sub, to:</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>Efficient Networks, Inc.</font></font>
<br><font face="Courier New"><font size=-2>4201 Spring Valley Road, Suite
1200</font></font>
<br><font face="Courier New"><font size=-2>Dallas, Texas 75244</font></font>
<br><font face="Courier New"><font size=-2>Attention: Jill Manning, CFO</font></font>
<br><font face="Courier New"><font size=-2>Telephone No.: (972) 991-3884</font></font>
<br><font face="Courier New"><font size=-2>Telecopy No.: (972) 991-3887</font></font>
<p><font face="Courier New"><font size=-2>with a copy to:</font></font>
<br><font face="Courier New"><font size=-2>Wilson Sonsini Goodrich &
Rosati</font></font>
<br><font face="Courier New"><font size=-2>Professional Corporation</font></font>
<br><font face="Courier New"><font size=-2>975 Page Mill Road</font></font>
<br><font face="Courier New"><font size=-2>Palo Alto, California 94304-1050</font></font>
<br><font face="Courier New"><font size=-2>Attention: Michael Kennedy,
Esq.</font></font>
<br><font face="Courier New"><font size=-2>Kenneth Siegel, Esq.</font></font>
<br><font face="Courier New"><font size=-2>Telephone No.:(650) 493-9300</font></font>
<br><font face="Courier New"><font size=-2>Telecopy No.:(650) 493-6811</font></font></dir>
</dir>
<center><font face="Courier New"><font size=-2>-50-</font></font></center>
<p><br>
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<p><font face="Courier New"><font size=-2>(b) if to Parent or Company,
to:</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>Cabletron Systems, Inc.</font></font>
<br><font face="Courier New"><font size=-2>35 Industrial Way</font></font>
<br><font face="Courier New"><font size=-2>Rochester, NH 03867</font></font>
<br><font face="Courier New"><font size=-2>Attention: General Counsel</font></font>
<br><font face="Courier New"><font size=-2>Telephone No.: (630) 332-9400</font></font>
<p><font face="Courier New"><font size=-2>with a copy to:</font></font>
<br><font face="Courier New"><font size=-2>Ropes & Gray</font></font>
<br><font face="Courier New"><font size=-2>One International Place</font></font>
<br><font face="Courier New"><font size=-2>Boston, MA 02110</font></font>
<br><font face="Courier New"><font size=-2>Attention: David A. Fine, Esq.</font></font>
<br><font face="Courier New"><font size=-2>Telephone No.: (617) 951-7000</font></font>
<br><font face="Courier New"><font size=-2>Telecopy No.: (617) 951-7050</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>10.4 <u>Interpretation; Knowledge</u>.</font></font>
<p><font face="Courier New"><font size=-2>(a) When a reference is made
in this Agreement to Exhibits, such reference shall be to an Exhibit to
this Agreement unless otherwise indicated. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement. Unless otherwise indicated the words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed
by the words "without limitation." The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference
is made herein to "the business of" an entity, such reference shall be
deemed to include the business of all direct and indirect subsidiaries
of such entity. Reference to the subsidiaries of an entity shall be deemed
to include all direct and indirect subsidiaries of such entity.</font></font>
<p><font face="Courier New"><font size=-2>(b) For purposes of this Agreement,
the term "Material Adverse Effect" when used in connection with an entity
means any change, event, violation, inaccuracy, circumstance or effect,
individually or when aggregated with other changes, events, violations,
inaccuracies, circumstances or effects, that is materially adverse to the
business, assets (including intangible assets), capitalization, financial
condition or results of operations of such entity and its subsidiaries
taken as a whole; provided that a decline in a Person's stock price shall
not in and of itself constitute a Material Adverse Effect.</font></font>
<p><font face="Courier New"><font size=-2>(c) For purposes of this Agreement,
the term "Person" shall mean any individual, corporation (including any
non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including
any limited liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.</font></font>
<p><font face="Courier New"><font size=-2>10.5 <u>Counterparts</u>. This
Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and</font></font>
<center>
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<p><br>
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<br>
<p><font face="Courier New"><font size=-2>delivered to the other party,
it being understood that all parties need not sign the same counterpart.</font></font>
<p><font face="Courier New"><font size=-2>10.6 <u>Entire Agreement; Third
Party Beneficiaries</u>. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred
to herein, including the Company Disclosure Schedule and the Purchaser
Disclosure Schedule (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, both written and oral, among the parties with respect
to the subject matter hereof, it being understood that the Confidentiality
Agreement shall continue in full force and effect until the Closing and
shall survive any termination of this Agreement; and (b) are not intended
to confer upon any other person any rights or remedies hereunder.</font></font>
<p><font face="Courier New"><font size=-2>10.7 <u>Severability</u>. In
the event that any provision of this Agreement, or the application thereof,
becomes or is declared by a court of competent jurisdiction to be illegal,
void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent
of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business
and other purposes of such void or unenforceable provision.</font></font>
<p><font face="Courier New"><font size=-2>10.8 <u>Other Remedies; Specific
Performance</u>. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to seek an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled at
law or in equity.</font></font>
<p><font face="Courier New"><font size=-2>10.9 <u>Governing Law</u>. This
Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, regardless of the laws that might otherwise govern
under applicable principles of conflicts of law thereof.</font></font>
<p><font face="Courier New"><font size=-2>10.10 <u>Rules of Construction</u>.
The parties hereto agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the party drafting such agreement or document.</font></font>
<p><font face="Courier New"><font size=-2>10.11 <u>Assignment</u>. No party
may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other parties. Subject
to the preceding sentence, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and permitted assigns.</font></font>
<center>
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<p><br>
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<p><font face="Courier New"><font size=-2>10.12 <u>WAIVER OF JURY TRIAL</u>.
EACH OF PARENT, COMPANY, PURCHASER AND MERGER SUB HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF PARENT, COMPANY, PURCHASER OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.</font></font>
<center>
<p><font face="Courier New"><font size=-2>-53-</font></font></center>
<p><br>
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<br>
<br>
<br>
<p><font face="Courier New"><font size=-2>IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed by their duly authorized
respective officers as of the date first written above.</font></font>
<dir>
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<dir><font face="Courier New"><font size=-2>EFFICIENT NETWORKS, INC.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Mark Floyd</font></font></u>
<br><u><font face="Courier New"><font size=-2>Name: Mark Floyd</font></font></u>
<br><font face="Courier New"><font size=-2>Title: Chief Executive Officer</font></font>
<br>
<p><font face="Courier New"><font size=-2>FIRE ACQUISITION CORPORATION</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Mark Floyd</font></font></u>
<br><u><font face="Courier New"><font size=-2>Name: Mark Floyd</font></font></u>
<br><font face="Courier New"><font size=-2>Title: Chief Executive Officer</font></font>
<br>
<p><font face="Courier New"><font size=-2>CABLETRON SYSTEMS, INC.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Piyush Patel</font></font></u>
<br><u><font face="Courier New"><font size=-2>Name: Piyush Patel</font></font></u>
<br><font face="Courier New"><font size=-2>Title: Chief Executive Officer</font></font>
<br>
<p><font face="Courier New"><font size=-2>FLOWPOINT CORP.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Piyush Patel</font></font></u>
<br><u><font face="Courier New"><font size=-2>Name: Piyush Patel</font></font></u>
<br><font face="Courier New"><font size=-2>Title: President</font></font>
<br>
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<a NAME="node7"></a>
<p><font face="Courier New"><font size=-2>EX-2.2</font></font>
<p><font face="Courier New"><font size=-2>3</font></font>
<center>
<p><font face="Courier New"><font size=-2>AMENDMENT NO. 1 TO AGREEMENT
AND PLAN OF REORGANIZATION</font></font></center>
<p><br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<div align=right><font face="Courier New"><font size=-2>EXHIBIT 2.2</font></font></div>
<center><font face="Courier New"><font size=-2>AMENDMENT NO. 1 TO</font></font>
<p><font face="Courier New"><font size=-2>AGREEMENT AND PLAN OF REORGANIZATION</font></font>
<p><font face="Courier New"><font size=-2>BY AND AMONG</font></font>
<p><font face="Courier New"><font size=-2>EFFICIENT NETWORKS, INC.,</font></font>
<p><font face="Courier New"><font size=-2>FIRE ACQUISITION CORPORATION</font></font>
<p><font face="Courier New"><font size=-2>CABLETRON SYSTEMS, INC.</font></font>
<p><font face="Courier New"><font size=-2>AND</font></font>
<p><font face="Courier New"><font size=-2>FLOWPOINT CORP.</font></font>
<p><font face="Courier New"><font size=-2>Dated as of December 14, 1999</font></font>
<br>
<br>
<p><font face="Courier New"><font size=-2>AMENDMENT No. 1 TO</font></font>
<p><font face="Courier New"><font size=-2>AGREEMENT AND PLAN OF REORGANIZATION</font></font></center>
<p><font face="Courier New"><font size=-2>This AMENDMENT NO. 1 TO AGREEMENT
AND PLAN OF REORGANIZATION (the "Amendment") is made and entered into as
of December 14, 1999, among Efficient Networks, Inc., a Delaware corporation
("Purchaser"), Fire Acquisition Corporation, a California corporation and
a wholly-owned subsidiary of Purchaser ("Merger Sub"), Cabletron Systems,
Inc., a Delaware corporation ("Parent") and Flowpoint Corp., a California
corporation and a wholly-owned subsidiary of Parent ("Company").</font></font>
<p><font face="Courier New"><font size=-2>The Purchaser, Merger Sub, Parent
and Company are parties to that certain Agreement and Plan of Reorganization
dated as of November 21, 1999 (the "Reorganization Agreement"), and desire
to amend the Reorganization Agreement as provided herein.</font></font>
<p><font face="Courier New"><font size=-2>NOW, THEREFORE, in consideration
of the covenants, promises and representations set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:</font></font>
<p><font face="Courier New"><font size=-2>1. <u>Defined Terms</u>. Capitalized
terms which are used herein without definition, but which are defined in
the Reorganization Agreement shall have the same meanings herein as therein
defined.</font></font>
<p><font face="Courier New"><font size=-2>2. <u>Amendment To The Reorganization
Agreement</u></font></font>
<p><font face="Courier New"><font size=-2>2.1 Section 1.6(a) of the Reorganization
Agreement is hereby amended by deleting Section 1.6(a) in its entirety
and substituting the following therefor:</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>(a) Conversion of Company Common
Stock. Each share of Common Stock, par value $0.01 per share, of Company
(the "Company Common Stock") issued and outstanding immediately prior to
the Effective Time, other than any shares of Company Common Stock to be
canceled pursuant to Section 1.6(b), will be canceled and extinguished
and automatically converted (subject to Sections 1.6(d) and (e)) into the
right to receive 72,000 shares of Common Stock of Purchaser (the "Purchaser
Common Stock") and 63 shares of Series A Non-Voting Convertible Preferred
Stock having the terms set forth in the Certificate of Designation attached
hereto as Exhibit D (the "Preferred Stock", together with the Purchaser
Common Stock, the "Merger Consideration") upon surrender of the certificate
representing such share of Company Common Stock in the manner provided
in Section 1.7 (or in the case of a lost, stolen or destroyed certificate,
upon delivery of an affidavit (and bond, if required) in the manner provided
in Section 1.9).</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>2.2 The Certificate of Designation
attached to the Reorganization Agreement as Exhibit D is hereby deleted
and replaced with the Certificate of Designation attached to this Amendment
as Exhibit A.</font></font>
<p><font face="Courier New"><font size=-2>2.3 Section 2.20(f) of the Reorganization
Agreement is hereby amended to delete the word "Disclosure" appearing between
the words "Company" and "Schedule" in clause (i) of the second sentence
thereof.</font></font>
<p><font face="Courier New"><font size=-2>2.4 Section 3.5(a) of the Reorganization
Agreement is hereby amended by deleting Section 3.5(a) in its entirety
and substituting the following therefor:</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>(a) Parent has not disclosed
any portion of the Company's Intellectual Property to any third party except
pursuant to a valid and enforceable confidentiality agreement and has not
violated any confidentiality or use restrictions regarding the Company's
Intellectual Property.</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>2.5 Section 6.10(a) of the Reorganization
Agreement is hereby amended to delete the word "Disclosure" appearing between
the words "Parent" and "Schedule" in the penultimate line of text thereof.</font></font>
<p><font face="Courier New"><font size=-2>2.6 Section 6.11 of the Reorganization
Agreement is hereby amended by deleting the third sentence thereof in its
entirety and substituting the following therefor:</font></font>
<dir><font face="Courier New"><font size=-2>At the Effective Time, (i)
all indemnification and similar obligations of Company in favor of Parent,
(ii) the Master Purchaser Agreement and Master Escrow Agreement between
Parent and the Company, (iii) the OEM Program License Agreement between
Parent and the Company, and (iv) any and all other commercial agreements
between the Parent and the Company (other than the agreements attached
as exhibits to this Reorganization Agreement) shall automatically and without
any further action or notice be cancelled and extinguished.</font></font></dir>
<font face="Courier New"><font size=-2>2.7 Section 8.2(h) of the Reorganization
Agreement is hereby amended indicate that Parent's U.S. employer identification
number is: 04-2797263:</font></font>
<p><font face="Courier New"><font size=-2>2.8 Section 10.1 is hereby amended
to provide that the term "Disclosure Schedule" set forth in the third line
thereof is hereby deleted and replaced with the term "respective Schedules".</font></font>
<p><font face="Courier New"><font size=-2>2.9 Section 10.6 of the Reorganization
Agreement is hereby amended to delete the word "Disclosure" appearing in
the phrases "Company Disclosure Schedule" and "Purchaser Disclosure Schedule"
appearing in the third line thereof.</font></font>
<center>
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<p><br>
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<br>
<p><font face="Courier New"><font size=-2>3. <u>No Other Amendments</u>.
Except as expressly provided in this Amendment, all of the terms and conditions
of the Reorganization Agreement remain unchanged and are ratified and confirmed
in all respects, and the terms and conditions of the Reorganization Agreement,
as amended hereby, remain in full force and effect.</font></font>
<p><font face="Courier New"><font size=-2>4. <u>Counterparts</u>. This
Amendment may be executed in one or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other party, it being understood that all parties need not sign
the same counterpart.</font></font>
<p><font face="Courier New"><font size=-2>5. <u>Governing Law</u>. This
Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, regardless of the laws that might otherwise govern
under applicable principles of conflicts of law thereof.</font></font>
<br>
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<center>
<p><u><font face="Courier New"><font size=-2>[REMAINDER OF PAGE LEFT BLANK
INTENTIONALLY]</font></font></u>
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<p><br>
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<p><font face="Courier New"><font size=-2>IN WITNESS WHEREOF, the parties
hereto have caused this Amendment to be executed by their duly authorized
respective officers as of the date first written above.</font></font>
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<dir><font face="Courier New"><font size=-2>EFFICIENT NETWORKS, INC.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Mark Floyd</font></font></u>
<p><u><font face="Courier New"><font size=-2>Name: Mark Floyd</font></font></u>
<br><font face="Courier New"><font size=-2>Title: Chief Executive Officer</font></font>
<br>
<p><font face="Courier New"><font size=-2>FIRE ACQUISITION CORPORATION</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Mark Floyd</font></font></u>
<p><u><font face="Courier New"><font size=-2>Name: Mark Floyd</font></font></u>
<br><font face="Courier New"><font size=-2>Title: Chief Executive Officer</font></font>
<br>
<br>
<p><font face="Courier New"><font size=-2>CABLETRON SYSTEMS, INC.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Daniel J. Harding</font></font></u>
<p><u><font face="Courier New"><font size=-2>Name: Daniel J. Harding</font></font></u>
<br><font face="Courier New"><font size=-2>Title: VP of Business Development</font></font>
<br>
<br>
<p><font face="Courier New"><font size=-2>FLOWPOINT CORP.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Daniel J. Harding</font></font></u>
<p><u><font face="Courier New"><font size=-2>Name: Daniel J. Harding</font></font></u>
<br><u><font face="Courier New"><font size=-2>Title:</font></font></u>
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<p><a NAME="node8"></a>
<p><font face="Courier New"><font size=-2>EX-2.3</font></font>
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<center>
<p><font face="Courier New"><font size=-2>AMENDMENT NO. 2 TO AGREEMENT
AND PLAN OF MERGER</font></font></center>
<p><br>
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<div align=right><u><font face="Courier New"><font size=-2>EXHIBIT 2.3</font></font></u></div>
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<center>
<p><font face="Courier New"><font size=-2>AMENDMENT NO. 2 TO</font></font>
<p><font face="Courier New"><font size=-2>AGREEMENT AND PLAN OF REORGANIZATION</font></font>
<p><font face="Courier New"><font size=-2>BY AND AMONG</font></font>
<p><font face="Courier New"><font size=-2>EFFICIENT NETWORKS, INC.,</font></font>
<p><font face="Courier New"><font size=-2>FIRE ACQUISITION CORPORATION</font></font>
<p><font face="Courier New"><font size=-2>CABLETRON SYSTEMS, INC.</font></font>
<p><font face="Courier New"><font size=-2>AND</font></font>
<p><font face="Courier New"><font size=-2>FLOWPOINT CORP.</font></font>
<p><font face="Courier New"><font size=-2>Dated as of December 17, 1999</font></font>
<br>
<br>
<p><font face="Courier New"><font size=-2>AMENDMENT No. 2 TO</font></font>
<p><font face="Courier New"><font size=-2>AGREEMENT AND PLAN OF REORGANIZATION</font></font></center>
<p><font face="Courier New"><font size=-2>This AMENDMENT NO. 2 TO AGREEMENT
AND PLAN OF REORGANIZATION (the "Amendment") is made and entered into as
of December 17, 1999, among Efficient Networks, Inc., a Delaware corporation
("Purchaser"), Fire Acquisition Corporation, a California corporation and
a wholly-owned subsidiary of Purchaser ("Merger Sub"), Cabletron Systems,
Inc., a Delaware corporation ("Parent") and Flowpoint Corp., a California
corporation and a wholly-owned subsidiary of Parent ("Company").</font></font>
<p><font face="Courier New"><font size=-2>The Purchaser, Merger Sub, Parent
and Company are parties to that certain Agreement and Plan of Reorganization
dated as of November 21, 1999 as amended by Amendment No. 1 thereto (collectively,
the "Reorganization Agreement"), and desire to amend the Reorganization
Agreement as provided herein.</font></font>
<p><font face="Courier New"><font size=-2>NOW, THEREFORE, in consideration
of the covenants, promises and representations set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:</font></font>
<p><font face="Courier New"><font size=-2>1. <u>Defined Terms</u>. Capitalized
terms which are used herein without definition, but which are defined in
the Reorganization Agreement shall have the same meanings herein as therein
defined.</font></font>
<p><font face="Courier New"><font size=-2>2. <u>Amendment To The Reorganization
Agreement</u></font></font>
<p><font face="Courier New"><font size=-2>2.1 Section 6.19 of the Reorganization
Agreement is hereby amended by deleting existing Section 6.19 in its entirety
and substituting the following therefor:</font></font>
<p><font face="Courier New"><font size=-2>"6.19 <u>Retentio</u>n.</font></font>
<dir>
<dir><font face="Courier New"><font size=-2>(a) <u>Cabletron Options</u>.
At the Effective Time, Parent shall accelerate the vesting of all options
that were granted under the Company's Option Plan prior to Parent's acquisition
of the Company in September 1998 then held by employees of the Company
such that all such options then held by such Company employees are 100%
vested and free from blackout, trading window or similar restrictions.</font></font>
<p><font face="Courier New"><font size=-2>(b) <u>Retention Pool</u>. Immediately
prior to the Effective Time, the parties will create a cash payout pool
in the aggregate amount of $8,445,938 (the "Retention Pool") for the benefit
of the Company employees listed on Schedule 6.19 hereto. The Retention
Pool will be allocated to the Company employees as set forth in Schedule
6.19, subject to the time-based vesting requirements reflected in Schedule
6.19. The parties shall fund the Retention Pool as follows: (1) immediately
prior to the Effective Time, Parent will deposit in a bank account of Company
for the benefit of the Retention Pool the sum of $4,873,875; (2) immediately
prior to the Effective Time,</font></font>
<p><font face="Courier New"><font size=-2>Parent will pay to Chuck Wagonner
the sum of $1,126,125 (less applicable withholdings); and (3) Purchaser
shall be obligated to provide the remaining $2,445,938 to the Retention
Pool as payout therefrom requires. The amounts set forth in this Section
6.19 shall be in addition to any amounts in the accounts of Company at
the Effective Time and any amounts required to be deposited therein by
any other provision of this Reorganization Agreement. Purchaser covenants
that it will use the Retention Pool for the benefit of the Company employees
listed on Schedule 6.19; provided, however, that in the event that the
employment of any such employee is terminated voluntarily by the employee
or involuntarily terminated by Company or Purchaser with cause, then any
unvested amounts shall not be payable to such employee(s) and shall remain
the property of Company. The concepts of voluntary and involuntary termination,
as well as cause, shall be as set forth in Schedule 6.19."</font></font></dir>
</dir>
<font face="Courier New"><font size=-2>3. <u>No Other Amendments</u>. Except
as expressly provided in this Amendment, all of the terms and conditions
of the Reorganization Agreement remain unchanged and are ratified and confirmed
in all respects, and the terms and conditions of the Reorganization Agreement,
as amended hereby, remain in full force and effect.</font></font>
<p><font face="Courier New"><font size=-2>4. <u>Counterparts</u>. This
Amendment may be executed in one or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other party, it being understood that all parties need not sign
the same counterpart.</font></font>
<p><font face="Courier New"><font size=-2>5. <u>Governing Law</u>. This
Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, regardless of the laws that might otherwise govern
under applicable principles of conflicts of law thereof.</font></font>
<br>
<br>
<br>
<center>
<p><u><font face="Courier New"><font size=-2>[REMAINDER OF PAGE LEFT BLANK
INTENTIONALLY]</font></font></u>
<br>
<br>
<p><font face="Courier New"><font size=-2>-2-</font></font></center>
<p><br>
<br>
<br>
<br>
<br>
<p><font face="Courier New"><font size=-2>IN WITNESS WHEREOF, the parties
hereto have caused this Amendment to be executed by their duly authorized
respective officers as of the date first written above.</font></font>
<dir>
<dir>
<dir>
<dir>
<dir>
<dir>
<dir>
<dir>
<dir>
<dir><font face="Courier New"><font size=-2>EFFICIENT NETWORKS, INC.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Jill Manning</font></font></u>
<p><u><font face="Courier New"><font size=-2>Name: Jill Manning</font></font></u>
<br><font face="Courier New"><font size=-2>Title: Vice President and Chief</font></font>
<br><font face="Courier New"><font size=-2>Financial Officer</font></font>
<br>
<p><font face="Courier New"><font size=-2>FIRE ACQUISITION CORPORATION</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Jill Manning</font></font></u>
<p><u><font face="Courier New"><font size=-2>Name: Jill Manning</font></font></u>
<br><font face="Courier New"><font size=-2>Title: Chief Financial Officer</font></font>
<br>
<p><font face="Courier New"><font size=-2>CABLETRON SYSTEMS, INC.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Piyush Patel</font></font></u>
<p><u><font face="Courier New"><font size=-2>Name: Piyush Patel</font></font></u>
<br><font face="Courier New"><font size=-2>Title: Chief Executive Officer</font></font>
<br>
<p><font face="Courier New"><font size=-2>FLOWPOINT CORP.</font></font>
<p><u><font face="Courier New"><font size=-2>By: /s/ Piyush Patel</font></font></u>
<p><u><font face="Courier New"><font size=-2>Name: Piyush Patel</font></font></u>
<br><font face="Courier New"><font size=-2>Title: President</font></font>
<br>
<br>
<br>
<br> </dir>
</dir>
</dir>
</dir>
</dir>
</dir>
</dir>
</dir>
</dir>
</dir>
<center><font face="Courier New"><font size=-2>-3-</font></font></center>
<p><font face="Courier New"><font size=-2>Exhibit 2.4</font></font>
<center>
<p>STANDSTILL AND DISPOSITION AGREEMENT
<br>Between
<br>EFFICIENT NETWORKS, INC.
<br>and
<br>CABLETRON SYSTEMS, INC.
<p>Dated as of December 17, 1999
<br>
<br>
<br>
<br>
<p><b>TABLE OF CONTENTS</b></center>
<p><b><font size=-1>
<u>Page</u></font></b>
<p>ARTICLE 1 DEFINITIONS
<a href="#_Toc467605245">*</a>
<dir>
<dir>
<dir>
<dir>1.1 Certain Definitions
<a href="#_Toc467605246">*</a></dir>
</dir>
ARTICLE 2 STANDSTILL AND RELATED COVENANTS
<a href="#_Toc467605247">*</a>
<dir>
<dir>2.1 Cabletron Ownership of Efficient Securities
<a href="#_Toc467605248">*</a>
<br>2.2 Standstill Provisions
<a href="#_Toc467605249">*</a>
<br>2.3 Voting
<a href="#_Toc467605250">*</a>
<br>2.4 Voting Trust
<a href="#_Toc467605251">*</a>
<br>2.5 Solicitation of Proxies
<a href="#_Toc467605252">*</a>
<br>2.6 Acts in Concert with Others
<a href="#_Toc467605253">*</a>
<br>2.7 Termination
<a href="#_Toc467605254">*</a></dir>
</dir>
ARTICLE 3 RESTRICTIONS ON TRANSFER OF SECURITIES; COMPLIANCE WITH SECURITIES
LAWS
<a href="#_Toc467605255">*</a>
<dir>
<dir>3.1 Restrictions on Transfer of Voting Securities of Efficient
<a href="#_Toc467605256">*</a>
<br>3.2 Restrictive Legends
<a href="#_Toc467605257">*</a>
<br>3.3 Procedures for Certain Transfers
<a href="#_Toc467605258">*</a>
<br>3.4 Covenant Regarding Exchange Act Filings
<a href="#_Toc467605259">*</a>
<br>3.5 Termination
<a href="#_Toc467605260">*</a></dir>
</dir>
ARTICLE 4 REGISTRATION RIGHTS
<a href="#_Toc467605261">*</a>
<dir>
<dir>4.1 Demand Registration
<a href="#_Toc467605262">*</a>
<br>4.2 Shelf Registration
<a href="#_Toc467605263">*</a>
<br>4.3 Piggyback Registration
<a href="#_Toc467605264">*</a>
<br>4.4 Demand and Shelf Registration Procedures, Rights and Obligations
<a href="#_Toc467605265">*</a>
<br>4.5 Expenses
<a href="#_Toc467605266">*</a>
<br>4.6 Indemnification
<a href="#_Toc467605267">*</a>
<br>4.7 Issuances by Efficient or Other Holders
<a href="#_Toc467605268">*</a>
<br>4.8 Information by Cabletron
<a href="#_Toc467605269">*</a>
<br>4.9 Market Standoff Agreements
<a href="#_Toc467605270">*</a>
<br>4.10 Additional Registration Rights Covenants
<a href="#_Toc467605271">*</a>
<br>4.11 Termination
<a href="#_Toc467605272">*</a></dir>
</dir>
ARTICLE 5 MISCELLANEOUS
<a href="#_Toc467605273">*</a>
<dir>
<dir>5.1 Governing Law
<a href="#_Toc467605274">*</a>
<br>5.2 Successors and Assigns
<a href="#_Toc467605275">*</a>
<br>5.3 Entire Agreement; Amendment
<a href="#_Toc467605276">*</a>
<br>5.4 Notices and Dates
<a href="#_Toc467605277">*</a>
<br>5.5 Language Interpretation
<a href="#_Toc467605278">*</a>
<br>5.6 Table of Contents; Titles; Headings
<a href="#_Toc467605279">*</a>
<br>5.7 Counterparts
<a href="#_Toc467605280">*</a>
<br>5.8 Severability
<a href="#_Toc467605281">*</a>
<br>5.9 Injunctive Relief
<a href="#_Toc467605282">*</a>
<br>5.10 Automatic Adjustments to Share Numbers</dir>
</dir>
</dir>
</dir>
<center>
<p><br><b><font size=-1>STANDSTILL AND DISPOSITION AGREEMENT</font></b></center>
<p><font size=-1>THIS STANDSTILL AND DISPOSITION AGREEMENT (this "<b>Agreement</b>")
is made as of December __, 1999, between Cabletron Systems, Inc., a Delaware
corporation ("<b>Cabletron</b>"), and Efficient Networks, Inc., a Delaware
corporation ("<b>Efficient</b>").</font>
<center>
<p><u><font size=-1>RECITALS</font></u></center>
<p><font size=-1>A. Pursuant to the terms of the Agreement and Plan of
Reorganization, dated as of November 21, 1999, as amended (the "<b>Merger
Agreement</b>"), by and among Efficient, Cabletron, Fire Acquisition Corporation,
a California corporation and Flowpoint Corporation, a California corporation,
Cabletron will receive 7,200,000 shares of Efficient's Common Stock, par
value $0.01 per share (the "<b>Shares</b>") and 6,300 shares of Efficient's
Series A Non-Voting Convertible Stock (the "<b>Preferred Stock</b>").</font>
<p>B. The Merger Agreement provides for the execution and delivery of this
Agreement.
<p>NOW, THEREFORE, in consideration of the representations, warranties,
covenants and conditions herein and in the Merger Agreement, the parties
hereto hereby agree as follows:
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605245"></a><b>DEFINITIONS</b>
<p><a NAME="_Toc467605246"></a><b><font size=+2>Certain Definitions</font></b></center>
<p><font size=-1>. As used in this Agreement:</font>
<ol TYPE="a">
<ol TYPE="a">
<ol TYPE="a">
<li>
"<b>Affiliate</b>" shall have the meaning set forth in Section 3.3(c).</li>
<li>
"<b>Available Shares</b>" shall have the meaning set forth in Section 4.3(c)(ii).</li>
<li>
"<b>Base Shares</b>" means the number of shares of Efficient equal to ten
percent (10%) of Efficient's Voting Securities.</li>
<li>
"<b>Beneficial ownership</b>" or "<b>beneficial owner</b>" has the meaning
provided in Rule 13d-3 promulgated under the Exchange Act. References to
ownership of Voting Securities hereunder mean record and/or beneficial
ownership.</li>
<li>
"<b>Change in Control of Efficient</b>" shall mean a merger, consolidation
or other business combination or the sale of all or substantially all of
the assets of Efficient (other than a transaction pursuant to which the
holders of the voting stock of Efficient outstanding immediately prior
to such transaction have the entitlement to exercise, directly or indirectly,
fifty percent (50%) or more of the Total Voting Power of the continuing,
surviving entity or transferee immediately after such transaction).</li>
<li>
"<b>Cabletron</b>" has the meaning set forth in the recitals hereto and
includes any Person controlling Cabletron.</li>
<li>
"<b>Cabletron Competitor</b>" is any of the top five (5) data networking
companies, as measured by revenues from time to time.</li>
<li>
"<b>Cabletron Conflict of Interest Transaction</b>" means any transaction
requiring the approval of Efficient's Stockholders (i) between Efficient
and one (or more) Persons in which Cabletron owns or controls a five percent
(5%) equity interest or (ii) a Change of Control of Efficient with a Cabletron
Competitor.</li>
<li>
"<b>Cabletron Pooling Transaction Lock-Up</b>" has the meaning set forth
in Section 4.9(a).</li>
<li>
"<b>Cabletron Public Offering Lock-Up</b>" has the meaning set forth in
Section 4.9(a).</li>
<li>
"<b>Controlled Affiliate</b>" means, with respect to any Person, any Person
directly or indirectly controlled by such other Person where, for purposes
of this definition, "<b>control</b>" or "<b>controlled by</b>" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of Voting Securities, by contract or otherwise.</li>
<li>
"<b>Conversion Stock</b>" shall mean the Efficient Common Stock received
upon conversion of the Preferred Stock.</li>
<li>
"<b>Demand Breathing Period</b>" means (x) 180 days after the closing of
the offering related to a prior Demand Request or (y) 90 days after the
closing of the last public offering of securities by Efficient for its
own account.</li>
<li>
"<b>Demand Registration Statement</b>" has the meaning set forth in Section
4.1(a).</li>
<li>
"<b>Demand Request</b>" has the meaning set forth in Section 4.1(a).</li>
<li>
"<b>Demand Managing Underwriters</b>" has the meaning set forth in Section
4.4(c).</li>
<li>
"<b>Demand Market Cut-Back</b>" has the meaning set forth in Section 4.4(d).</li>
<li>
"<b>Exchange Act</b>" means the Securities Exchange Act of 1934, as amended.</li>
<li>
"<b>Exclusive Demand Period</b>" means the period between the date hereof
and December 31, 2000; provided, that, the Exclusive Demand Period shall
be extended day per day for the duration of any Suspension Condition in
effect prior to December 31, 2000.</li>
<li>
"<b>Exclusive Demand Period Offering</b>" means a public offering of Voting
Securities for cash by Efficient for its own account (excluding the First
Offering) during the Exclusive Demand Period.</li>
<li>
"<b>First Offering</b>" means the first underwritten public offering of
Voting Securities for cash by Efficient for its own account following the
date hereof.</li>
<li>
"<b>Group</b>" or "<b>group</b>" shall have the meaning provided in Section
13(d)(3) of the Exchange Act and the rules and regulations promulgated
thereunder, but shall exclude any institutional underwriter purchasing
Voting Securities of Efficient in connection with an underwritten registered
offering for purposes of a distribution of such securities.</li>
<li>
"<b>Indemnified Party</b>" has the meaning set forth in Section 4.6(c).</li>
<li>
"<b>Indemnifying Party</b>" has the meaning set forth in Section 4.6(c).</li>
<li>
"<b>Investors</b>" shall have the meaning set forth in the Investors' Rights
Agreement.</li>
<li>
"<b>Investors' Rights Agreement</b>" shall mean that certain Investors'
Rights Agreement of Efficient dated July 30, 1993, as amended (or any successor
to such agreement).</li>
<li>
"<b>Minimum Demand Portion</b>" shall have the meaning set forth in Section
4.4(d)(i).</li>
<li>
"<b>Passive Investor</b>" means a bank, a qualified pension trust or a
registered mutual fund which reports its ownership of securities under
and utilizing Section 13(G) of the Exchange Act (and Form 13(G) under the
Exchange Act) and which has not, within the two (2) year period prior to
the time of determination, participated in a solicitation of proxies against
a portfolio company or filed a Form 13(d) or converted from a Form 13(G)
filer to a Form 13(d) filer with respect to any portfolio company.</li>
<li>
"<b>Person</b>" shall mean any person, individual, corporation, partnership,
trust, limited liability company or other non-governmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).</li>
<li>
"<b>Piggyback Market Cut-Back</b>" has the meaning set forth in Section
4.3(c).</li>
<li>
"<b>Piggyback Registrable Securities</b>" has the meaning set forth in
Section 4.3(a).</li>
<li>
"<b>Piggyback Registration Statement</b>" has the meaning set forth in
Section 4.3(a).</li>
<li>
"<b>Piggyback Request</b>" has the meaning set forth in Section 4.3(a).</li>
<li>
"<b>Piggyback Underwriting Agreement</b>" has the meaning set forth in
Section 4.3(b).</li>
<li>
"<b>Preferred Stock</b>" has the meaning set forth in Section A of the
Recitals.</li>
<li>
"<b>Proportionately</b>" has the meaning set forth in Section 2.3.</li>
<li>
"<b>Register,</b>" "<b>registered</b>" and "<b>registration</b>" refer
to a registration effected by preparing and filing a registration statement
in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.</li>
<li>
"<b>Registrable Securities</b>" means (i) the Shares, (ii) Conversion Stock
and (iii) any securities issued in respect of the foregoing as a result
of any stock split, stock dividend, recapitalization, or similar transaction.</li>
<li>
"<b>Registration Expenses</b>" shall mean all expenses incurred in connection
with a registration hereunder, including, without limitation, all registration
and filing fees, listing fees, printing and automated document preparation
expenses, custody fees, fees and disbursements of counsel for Efficient,
blue sky fees and expenses, and the expenses of Efficient's independent
accountants, including any special audits or comfort letters incident to
or required by any such registration, but excluding the expenses of regular
employees of Efficient, which shall be paid in any event by Efficient.</li>
<li>
"<b>Reserved Portion</b>" shall mean (i) with respect to the First Offering,
provided the preliminary prospectuses with respect to such offering are
printed and distributed prior to May 1, 2000 and such offering closes by
June 1, 2000 (the "<b>Criteria</b>"), 35% of the number of shares to be
distributed in such offering; (ii) with respect to an Exclusive Demand
Period Offering (or the First Offering if the Criteria are not met), the
greater of 40% of the shares to be distributed in such offering or 3,000,000
shares.</li>
<li>
"<b>Reserved Shares</b>" shall have the meaning set forth in Section 4.4(d)(ii).</li>
<li>
"<b>Securities</b>" has the meaning set forth in Section 3.2(a).</li>
<li>
"<b>Securities Act</b>" means the Securities Act of 1933, as amended.</li>
<li>
"<b>SEC</b>" means the Securities and Exchange Commission or any other
federal agency at the agency administering the Securities Act.</li>
<li>
"<b>Selling Expenses</b>" shall mean with respect to any registration pursuant
to this Agreement, all underwriting discounts and selling commissions applicable
to the sale of shares and all fees and disbursements of counsel to any
Person other than the Company.</li>
<li>
"<b>Shares</b>" has the meaning set forth in Section A of the recitals
above; provided, however, if not capitalized, "<b>shares</b>" shall mean
shares of Efficient's common stock generally.</li>
<li>
"<b>Shelf Registrable Securities</b>" has the meaning set forth in Section
4.2(a).</li>
<li>
"<b>Shelf Registration Statement</b>" has the meaning set forth in Section
4.2(a).</li>
<li>
"<b>Suspension Condition</b>" has the meaning set forth in Section 4.4(f).</li>
<li>
"<b>Total Consideration Shares</b>" shall mean the aggregate of (x) the
total number of Shares held by Cabletron and (y) the total number of shares
of Efficient Common Stock which the Preferred Stock has been converted
into or is convertible into.</li>
<li>
"<b>Voting Securities</b>" means all securities of Efficient, entitled,
in the ordinary course, to vote in the election of directors of Efficient.
Voting Securities shall not include stockholder rights or other comparable
securities having Voting Power only upon the happening of a trigger event
or comparable contingency and which can only be transferred together with
the Voting Securities to which they attach. References herein to meetings
of holders of Voting Securities shall include meetings of any class or
type thereof.</li>
<li>
"<b>Voting Power</b>" or "<b>Total Voting Power</b>" of Efficient (or any
other corporation) refer to the votes or total number of votes which at
the time of calculation may be cast in the election of directors of Efficient
(or such corporation) at any meeting of stockholders of Efficient (or such
corporation) if all securities entitled to vote in the election of directors
of Efficient (or such corporation) were present and voted at such meeting;
provided that for purposes of references herein made to any Person's "Voting
Power" or percentage beneficial ownership of "Total Voting Power," any
rights (other than rights referred to in any rights plan of Efficient (or
any such other corporation) or a successor to such rights plan so long
as such rights can only be transferred together with the Voting Securities
to which they attach) of such Person to acquire Voting Securities (whether
or not the exercise of any such right shall be conditioned upon any contingency)
shall be deemed to have been exercised in full.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<p><font size=-1>All capitalized terms used and not defined herein shall
have the respective meanings assigned to such terms in the Merger Agreement.</font>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605247"></a><b>STANDSTILL AND RELATED COVENANTS</b>
<p><a NAME="_Toc467605248"></a><b><font size=+2>Cabletron Ownership of
Efficient Securities</font></b></center>
<p><font size=-1>. On the date hereof, and without giving effect
to the transactions contemplated by the Merger Agreement, neither Cabletron
nor any Controlled Affiliate of Cabletron beneficially owns any Voting
Securities of Efficient.</font>
<center>
<p><a NAME="_Toc467605249"></a><b><font size=+2>Standstill Provisions</font></b></center>
<p><font size=-1>. Cabletron shall not acquire, directly or indirectly,
and shall not cause or permit any Controlled Affiliate of Cabletron to
acquire, directly or indirectly (through market purchases or otherwise),
record or beneficial ownership of any Voting Securities of Efficient without
the prior written consent of the Board of Directors of Efficient; provided,
however, that the prior written consent of the Board of Directors of Efficient
shall not be required for the acquisition of any Voting Securities of Efficient
directly from Efficient or resulting from a stock split, stock dividend
or similar recapitalization by Efficient. Nothing contained in this Section
2.2 shall adversely affect any right of Cabletron or any Controlled Affiliate
of Cabletron to acquire record or beneficial ownership of Voting Securities
of Efficient pursuant to any rights plan instituted by Efficient.</font>
<center>
<p><a NAME="_Toc467605250"></a><b><font size=+2>Voting</font></b></center>
<p><font size=-1>. Unless the Board of Directors of Efficient otherwise
consents in writing in advance, Cabletron shall take such action (and shall
cause each Controlled Affiliate of Cabletron that beneficially owns Voting
Securities of Efficient to take such action) as may be required so that
all Voting Securities of Efficient beneficially owned by Cabletron (or
any such Controlled Affiliate of Cabletron) from time to time, other than
the Base Shares, are voted on all matters to be voted on by holders of
Voting Securities of Efficient in the same proportion (for, against and
abstain, with lost, damaged or disfigured ballots counting as abstentions
to the extent that they cannot be counted as for or against under applicable
law) as the votes cast by the other holders of Voting Securities of Efficient
with respect to such matters ("<b>Proportionately</b>"); provided, however,
that on any matter that constitutes, involves or is part of, a Cabletron
Conflict of Interest Transaction, Cabletron and any Controlled Affiliate
of Cabletron must vote all Voting Securities, including the Base Shares,
Proportionately. Cabletron (or any Controlled Affiliate of Cabletron),
as the holder of Voting Securities of Efficient, shall be present, in person
or by proxy, at all meetings of the stockholders of Efficient so that all
Voting Securities of Efficient beneficially owned by Cabletron (or such
Controlled Affiliate of Cabletron) from time to time may be counted for
the purposes of determining the presence of a quorum at such meetings.
The foregoing provision shall also apply to the execution by Cabletron
of any written consent in lieu of a meeting of holders of Voting Securities
of Efficient or any class thereof.</font>
<center>
<p><a NAME="_Toc467605251"></a><b><font size=+2>Voting Trust</font></b></center>
<p><font size=-1>. Cabletron shall not, and shall not cause or permit
any Controlled Affiliate of Cabletron to, deposit any Voting Securities
of Efficient in a voting trust or, except as otherwise provided herein,
subject any Voting Securities of Efficient to any arrangement or agreement
with respect to the voting of such Voting Securities of Efficient.</font>
<center>
<p><a NAME="_Toc467605252"></a><b><font size=+2>Solicitation of Proxies</font></b></center>
<p><font size=-1>. Without the prior written consent of the Board
of Directors of Efficient, Cabletron shall not, and shall not cause or
permit any Controlled Affiliate of Cabletron to, directly or indirectly
(i) initiate, propose or otherwise solicit Efficient stockholders for the
approval of one or more stockholder proposals with respect to Efficient
or induce or attempt to induce any other Person to initiate any stockholder
proposal, (ii) make, or in any way participate in, any "<b>solicitation</b>"
of "<b>proxies</b>" (as such terms are defined or used in Regulation 14a-1
under the Exchange Act) with respect to any Voting Securities of Efficient,
or become a "<b>participant</b>" in any "<b>election contest</b>" (as such
terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act),
with respect to Efficient or (iii) call or seek to have called any meeting
of the holders of Voting Securities of Efficient.</font>
<center>
<p><a NAME="_Toc467605253"></a><b><font size=+2>Acts in Concert with Others</font></b></center>
<p><font size=-1>. Except as contemplated herein, Cabletron shall
not, and shall not cause or permit any Controlled Affiliate of Cabletron,
to participate in the formation, or encourage the formation, of any Person
which owns or seeks to acquire beneficial ownership of, or otherwise acts
in concert in respect of the Voting or disposition of, Voting Securities
of Efficient. Without limiting the generality of the foregoing, and except
as contemplated herein, Cabletron shall not, and shall not cause or permit
any Controlled Affiliate of Cabletron to: (i) join a partnership, limited
partnership, syndicate or other group, or otherwise act in concert with
any third person, for the purpose of acquiring, holding, or disposing of
Voting Securities of Efficient; (ii) seek election to or seek to place
a representative on the Board of Directors of Efficient; (iii) seek the
removal of any member of the Board of Directors of Efficient; (iv) otherwise
seek control of the management, Board of Directors or policies of Efficient;
(v) solicit, propose, seek to effect or negotiate with any other Person
with respect to any form of business combination transaction with Efficient
or any Controlled Affiliate thereof, or any restructuring, recapitalization
or similar transaction with respect to Efficient or any Controlled Affiliate
thereof; (vi) solicit, make or propose or encourage or negotiate with any
other Person with respect to, or announce an intent to make, any tender
offer or exchange offer for any Voting Securities of Efficient; (vii) disclose
an intent, purpose, plan or proposal with respect to Efficient or any Voting
Securities of Efficient inconsistent with the provisions of this Agreement,
including an intent, purpose, plan or proposal that is conditioned on or
would require Efficient to waive the benefit of or amend any provision
of this Agreement; or (vii) assist, participation in, facilitate, encourage
or solicit any effort or attempt by any Person to do or seek to do any
of the foregoing. Cabletron shall not, and shall not cause or permit any
Controlled Affiliate of Cabletron to, encourage or render advice to or
make any recommendation or proposal to any Person to engage in any of the
actions covered by Section 2.5 and this Section 2.6 hereof.</font>
<center>
<p><a NAME="_Toc467605254"></a><b><font size=+2>Termination</font></b></center>
<p><font size=-1>. The provisions of this Article 2 shall terminate
at such time as (i) Cabletron (together with all Controlled Affiliates
of Cabletron) beneficially owns in the aggregate Voting Securities of Efficient
representing less than five percent (5%) of the Total Voting Power of Efficient
or (ii) upon a Change in Control of Efficient.</font>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605255"></a><b>RESTRICTIONS ON TRANSFER OF SECURITIES;
COMPLIANCE WITH SECURITIES LAWS</b>
<p><a NAME="_Toc467605256"></a><b><font size=+2>Restrictions on Transfer
of Voting Securities of Efficient</font></b></center>
<p><font size=-1>. Cabletron shall not, and shall not cause or permit
any Controlled Affiliate of Cabletron to, directly or indirectly, offer
to sell, contract to sell, make any short sale of, or otherwise sell, dispose
of, loan, gift, pledge or grant any options or rights with respect to,
any Securities, now or hereafter acquired, or with respect to which Cabletron
or any Controlled Affiliate of Cabletron has or hereafter acquires the
power of disposition or enter into any agreement or understanding with
respect to the foregoing, except as set forth below (for purposes of the
following, the Preferred Stock shall be deemed converted into Conversion
Stock):</font>
<li>
to Efficient, or any Person or group approved in writing in advance by
the Board of Directors of Efficient;</li>
<li>
subject to Section 3.3(a) below, to any Controlled Affiliate of Cabletron,
so long as such Controlled Affiliate agrees in writing, in form reasonably
acceptable to counsel for Efficient, to hold such Voting Securities or
Preferred Stock of Efficient subject to all the provisions of this Agreement,
and so agrees to transfer such Voting Securities or Preferred Stock of
Efficient to Cabletron or another Controlled Affiliate of Cabletron if
it ceases to be a Controlled Affiliate of Cabletron;</li>
<li>
pursuant to a firm commitment, underwritten public offering of Securities
registered under the Securities Act;</li>
<li>
subject to Section 3.3(b) below, through a sale of Securities pursuant
to Rule 144 under the Securities Act or pursuant to the Shelf Registration
Statement; provided, however, that any such sale complies with the manner
of sale provisions under paragraph (f) of Rule 144 or the plan of distribution
set forth in the Shelf Registration Statement, as applicable and is not
made to: (A) any Person or group which has theretofore filed a Schedule
13D with the SEC with respect to any class of "<b>equity security</b>"
(as defined in Rule 13a11-1 under the Exchange Act) of Efficient and which,
at the time of such sale, continues to reflect beneficial ownership in
excess of five percent (5%) of the Total Voting Power of Efficient; (B)
any Person or group which, after giving effect to the sale and to the actual
knowledge of Cabletron (with no duty of investigation), will beneficially
own in excess of five percent (5%) of any Voting Securities of Efficient
or to be accumulating stock on behalf of or acting in concert with any
such Person or group or a Person or group contemplated by clause (A) above,
provided however, that this clause (B) shall not apply with respect to
transfers less than 100,000 shares; or (C) any Person or group that has
announced or commenced an unsolicited offer for any Voting Securities or
Preferred Stock of Efficient or publicly initiated, proposed or otherwise
solicited Efficient stockholders for the approval of one or more stockholder
proposals with respect to Efficient or publicly made, or in any way participated
in, any "<b>solicitation</b>" of "<b>proxies</b>" (as such terms are defined
or used in Regulation 14A under the Exchange Act) with respect to any Voting
Securities or Preferred Stock of Efficient, or become a "<b>participant</b>"
in any "<b>election contest</b>" (as such terms are used in Rule 14a-11
of Regulation 14A under the Exchange Act);</li>
<li>
(i) subject to Section 3.3(a) below, pursuant to any private sale of Securities
exempt from the registration requirements under the Securities Act; provided,
however, that (i) no such sale may be made to any Person or group which,
to the knowledge of Cabletron after reasonable inquiry and after giving
effect to such sale, will beneficially own or have the right to acquire
Voting Securities or Preferred Stock of Efficient with aggregate Voting
Power of more than five percent (5%) of the Total Voting Power of Efficient
or group, except, however, if such Person or group is a Passive Investor,
such limitation shall be ten percent (10%) of the Total Voting Power of
Efficient; and (ii) in any event any such purchaser shall agree to take
and hold such Securities subject to the provisions and upon the conditions
specified in Sections 2 and 3 of this Agreement, and it will be a condition
precedent to the effectiveness of any such transfer that Cabletron shall
have delivered to Efficient a written agreement of such purchaser to that
effect in form and substance reasonably satisfactory to Efficient; or</li>
<li>
in response to an offer to purchase or exchange for cash or other consideration
any Voting Securities or Preferred Stock, which in any case is not opposed
by the Board of Directors of Efficient within the time such Board is required,
pursuant to Regulations under the Exchange Act, to advise the stockholders
of Efficient of such Board's position with respect to such offer, or, if
no such Regulations are applicable, within ten (10) business days of the
commencement of such offer, or pursuant to a merger, consolidation or other
business combination involving Efficient approved by the Board of Directors
of Efficient.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605257"></a><b><font size=+2>Restrictive Legends</font></b></center>
<p><font size=-1>.</font>
<p><font size=-1>(a) The certificate or certificates representing the (i)
the Shares, (ii) the Preferred Stock, (iii) the Conversion Stock and (iv)
any securities issued in respect of the foregoing as a result of any stock
split, stock dividend, recapitalization, or similar transaction (collectively,
the "<b>Securities</b>") shall be stamped or otherwise imprinted with a
legend substantially in the following form (in addition to any legend required
under applicable state Securities laws):</font>
<p>THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AS TO THE AVAILABILITY OF
AN EXEMPTION FROM REGISTRATION.
<p><font size=-1>(b) In addition to the legend provided for in Section
3.2 (a), the certificate or certificates representing the Securities and
any other securities of Efficient hereafter acquired (for example, in compliance
with Section 2.2) shall be stamped or otherwise imprinted with a legend
substantially in the following form:</font>
<p>THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER, INCLUDING ANY SALE, PLEDGE OR OTHER HYPOTHECATION, WHICH RESTRICTIONS
ARE SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND CABLETRON SYSTEMS,
INC., A COPY OF WHICH MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER
AT THE ISSUER'S PRINCIPAL EXECUTIVE OFFICES.
<center>
<p><a NAME="_Toc467605258"></a><b><font size=+2>Procedures for Certain
Transfers</font></b></center>
<p><font size=-1>.</font>
<li>
Prior to any proposed transfer of any Securities pursuant to Sections 3.1(b)
and 3.1(e)(i) hereof, Cabletron shall give written notice to Efficient
of Cabletron's intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail, and shall be accompanied by either: (i) a written opinion of legal
counsel (including in-house counsel), who shall be reasonably satisfactory
to Efficient, addressed to Efficient and reasonably satisfactory in form
and substance to Efficient's counsel, to the effect that the proposed transfer
of the Securities may be effected without registration under the Securities
Act; or (ii) a "no action" letter from the SEC and a copy of any request
by Cabletron (together with all supplements or amendments thereto), which
shall have been provided to Efficient at or prior to the time of first
delivery to the SEC's staff, to the effect that the transfer of such Securities
without registration will not result in a recommendation by the staff of
the SEC that action be taken with respect thereto, whereupon Cabletron
shall be entitled to transfer such Restricted Securities in accordance
with the terms of the notice delivered by Cabletron to Efficient.</li>
<li>
In connection with any proposed transfer of Securities pursuant to Rule
144 as provided in Section 3.1(d) above, Cabletron shall comply with the
reasonable requirements of Efficient's transfer agent with respect to sales
of restricted securities pursuant to Rule 144.</li>
<li>
Each certificate evidencing the Securities transferred as herein provided
(other than a transfer pursuant to Section 3.1(c) or pursuant to the Shelf
Registration Statement) shall bear the appropriate restrictive legend set
forth (or described) in Section 3.4(a) above, except that such certificate
shall not bear such restrictive legend if: (i) in the opinion of counsel
for Efficient, such legend is not required in order to establish compliance
with any provisions of the Securities Act; (ii) the Securities have been
held by the holder for more than two years, and the holder represents to
counsel for Efficient that it has not been an "<b>Affiliate</b>" (as such
term is defined for purposes of Rule 144) of Efficient during the three-month
period prior to the sale and shall not become an affiliate (as such term
is defined for purposes of Rule 144) of Efficient without resubmitting
the Securities for reimposition of the legend; or (iii) the Securities
have been sold pursuant to Rule 144 and in compliance with Section 3.1(d).
In addition, each certificate evidencing the Securities transferred pursuant
to this Article 3 (other than transfers pursuant to Sections 3.1(c) or
pursuant to the Shelf Registration Statement) shall bear the legend set
forth in Section 3.2(b) above. The restrictive legend specified in Section
3.2(a) shall promptly be removed in connection with a sale pursuant to
Section 3.1(c) or the Shelf Registration Statement or the satisfaction
of subclause (i), (ii) or (iii) above. The restrictive legend specified
in Section 3.2(b) shall be removed upon termination of Article 3 as set
forth in Section 3.5 below or in connection with a transfer of securities
which does not require the transferee to be bound by this Section 3.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605259"></a><b><font size=+2>Covenant Regarding Exchange
Act Filings</font></b></center>
<p><font size=-1>. With a view to making available to Cabletron the
benefits of Rule 144 promulgated under the Act and any other rule or regulation
of the SEC that may any time permit Cabletron to sell securities of Efficient
to the public without registration. Efficient agrees to:</font>
<ol TYPE="i">
<li>
Make and keep public information available, as those terms are understood
and defined in SEC Rule 144;</li>
<li>
File with the SEC in a timely manner all reports and other documents required
of the Company under the Act and the 1934 Act; and</li>
<li>
Furnish to Cabletron, so long as Cabletron owns any Voting Securities,
forthwith upon request (i) a written statement by Efficient that it has
complied with the reporting requirements of SEC Rule 144; (ii) a copy of
the most recent annual or quarterly report of Efficient and such other
reports and documents so filed by Efficient and (iii) such other information
as may be reasonably requested in availing Cabletron of any rule or regulation
of the SEC which permits the selling of any such securities without registration.</li>
</ol>
<center><a NAME="_Toc467605260"></a><b><font size=+2>Termination</font></b></center>
<p><font size=-1>. The provisions of this Article 3 shall terminate
(other than insofar they relate to general application of securities laws)
upon the later to occur of: (i) the tenth anniversary date of this Agreement
and (ii) such time as Cabletron (together with all Controlled Affiliates
of Cabletron) beneficially owns in the aggregate Voting Securities of Efficient
representing less than five percent (5%) of the Total Voting Power of Efficient
or upon the closing or other completion of a Change in Control of Efficient.</font>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605261"></a><b>REGISTRATION RIGHTS</b>
<p><a NAME="_Toc467605262"></a><b><font size=+2>Demand Registration</font></b></center>
<p><font size=-1>.</font>
<li>
If at any time after July 21, 2000, Efficient shall receive from Cabletron
a written request (a "<b>Demand Request</b>") that Efficient register on
Form S-1 or Form S-3 under the Securities Act (or if such form is not available,
any registration statement form then available to Efficient) Registrable
Securities equal to at least 2,000,000 shares of the Voting Securities
of Efficient outstanding on the date of such Demand Request, then Efficient
shall use commercially reasonable efforts to cause the Registrable Securities
specified in such Demand Request (the<b> </b>"<b>Demand Registrable Securities</b>")
to be registered as soon as reasonably practicable so as to permit the
offering and sale thereof and, in connection therewith, shall prepare and
file with the SEC as soon as practicable, and in any event within thirty
(30) days, after receipt of such Demand Request, a registration statement
(a "<b>Demand Registration Statement</b>") to effect such registration;
provided, however, that each such Demand Request shall: (i) specify the
number of Demand Registrable Securities intended to be offered and sold
by Cabletron pursuant thereto (which number of Demand Registrable Securities
shall not be less than 2,000,000 of the Voting Securities of Efficient
outstanding on the date of such Demand Request); (ii) express the present
intention of Cabletron to offer or cause the offering of such Demand Registrable
Securities pursuant to such Demand Registration Statement, (iii) describe
the nature or method of distribution of such Demand Registrable Securities
pursuant to such Demand Registration Statement (including, in particular,
whether Cabletron plans to effect such distribution by means of an underwritten
offering); and (iv) contain the undertaking of Cabletron to provide all
such information and materials and take all such actions as may be required
in order to permit Efficient to comply with all applicable requirements
of the Securities Act, the Exchange Act and the rules and Regulations of
the SEC thereunder, and to obtain any desired acceleration of the effective
date of such Demand Registration Statement.</li>
<li>
The procedures to be followed by Efficient and Cabletron, and the respective
rights and obligations of Efficient and Cabletron, with respect to the
preparation, filing and effectiveness of Demand Registration Statements
and the distribution of Demand Registrable Securities pursuant to Demand
Registration Statements under this Section 4.1 are set forth in Section
4.4 hereof.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605263"></a><b><font size=+2>Shelf Registration</font></b></center>
<p><font size=-1>.</font>
<li>
By July 21, 2000, Efficient shall use its commercially reasonable efforts
to register pursuant to Rule 415(a)(1)(i) under the Securities Act (or
any successor rule with similar effect) a continuous or delayed offering
of Registrable Securities (the "<b>Shelf Registrable Securities</b>") to
be registered as soon as reasonably practicable so as to permit the sale
thereof and, in connection therewith, shall prepare and file with the SEC
a shelf registration statement on Form S-3 relating to the Shelf Registrable
Securities, if such Form S-3 is available for use by Efficient (or any
successor form of registration statement to such Form S-3), to effect such
registration (the "<b>Shelf Registration Statement</b>"), to enable the
distribution of the Shelf Registrable Securities. In connection with the
Shelf Registration Statement, Cabletron shall undertake to offer or cause
the offering of such Shelf Registrable Securities in accordance with the
plan of distribution described in the Shelf Registration Statement which
shall include, to the extent allowable on such form, exchange transactions
or the over-the-counter market transactions; private transactions other
than exchange or over-the-counter market transactions; pledge to secure
debts and other obligations; writing of non-traded and exchange-traded
call options, hedge transactions and in settlement of other transactions
in standardized or over-the-counter options, or a combination of the above
transactions; and provide all such information and materials and take all
such actions as may be required in order to permit Efficient to comply
with all applicable requirements of the Securities Act, the Exchange Act
and the rules and Regulations of the SEC thereunder, and to obtain any
desired acceleration of the effective date of the Shelf Registration Statement.</li>
<li>
The aggregate number of shares sold by Cabletron pursuant to this Section
4.2 hereof and pursuant to the resale allowances under Rule 144 may not
exceed an aggregate of 2,000,000 shares during any calendar quarter.</li>
<li>
The procedures to be followed by Efficient and Cabletron, and the respective
rights and obligations of Efficient and Cabletron, with respect to the
preparation, filing and effectiveness of the Shelf Registration Statement
and the distribution of Registrable Securities pursuant to the Shelf Registration
Statement under this Section 4.2 are set forth in Section 4.4 hereof.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605264"></a><b><font size=+2>Piggyback Registration</font></b></center>
<p><font size=-1>.</font>
<li>
If at any time after the date of this Agreement, Efficient shall determine
to register any of its equity or equity-linked Securities, including registration
of shares in a so-called unallocated or universal shelf registration, whether
for sale for its own account or for the account of any other Person, other
than registration statements relating to (i) employee, consultant or distributor
compensation or incentive arrangements, including employee benefit plans,
or (ii) acquisitions or any transaction or transactions under Rule 145
under the Securities Act or any successor rule with similar effect, then
Efficient will promptly give Cabletron written notice thereof and include
in such registration statement (a "<b>Piggyback Registration Statement</b>")
and in any underwriting involved therein, all Registrable Securities (the
"<b>Piggyback Registrable Securities</b>") specified in a written request
made by Cabletron (a "<b>Piggyback Request</b>") within five (5) business
days (or such later time as the underwriters may allow in writing) after
receipt of such written notice from Efficient.</li>
<li>
If the Piggyback Registration Statement of which Efficient gives notice
is for an underwritten offering or Efficient proposes to do an underwritten
take down from an unallocated or universal shelf registration, Efficient
shall so advise Cabletron as a part of the written notice given pursuant
to Section 4.3(a). In such event, the right of Cabletron to registration
pursuant to this Section 4.3 (or participate in an underwritten take down
in the case of an unallocated or universal shelf registration) shall be
conditioned upon the agreement of Cabletron to participate in such underwriting
and in the inclusion of such Piggyback Registrable Securities in the underwriting
to the extent provided herein. Cabletron shall (together with Efficient
and any other holders distributing Securities in such Piggyback Registration
Statement, if any) enter into an underwriting agreement (the "<b>Piggyback
Underwriting Agreement</b>") in customary form with the underwriter or
underwriters selected for such underwriting by Efficient. If Cabletron
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to Efficient and the managing underwriters.
Any Piggyback Registrable Securities excluded or excluded from such underwriting
shall be excluded from such Piggyback Registration Statement.</li>
<li>
Notwithstanding any other provision of this Agreement, if the managing
underwriters of any underwritten offering pursuant to a Piggyback Request
determine, in their sole discretion that, after including all the shares
proposed to be offered by Efficient and all the shares of any other Persons
entitled to registration rights with respect to such Piggyback Registration
Statement (pursuant to other agreements with Efficient), marketing factors
require a limitation of the number of Piggyback Registrable Securities
to be underwritten, Efficient may exclude Piggyback Registrable Securities
(a "<b>Piggyback Market Cut-Back</b>"), subject to the following:</li>
<ol TYPE="i">
<li>
Cabletron shall, in any event, have the right to include in the First Offering
or an Exclusive Demand Period Offering, as the case may be, a number of
shares of Piggyback Registrable Securities equal to the Reserved Portion,
(to the exclusion of shares to be included by Efficient or any other Person);
and</li>
<li>
With respect to shares in excess of the Reserve Portion in the case of
the First Offering or an Exclusive Demand Period Offering, or in other
offerings, the Piggyback Market Cut-Back shall be made among Cabletron
and the Investors pro-rata relative to the shares to be included in the
offering other than (a) any shares to be issued and sold by Efficient,
or (b) any Reserved Portion (the "<b>Available Shares</b>"); provided that
other than in connection with the First Offering or an Exclusive Demand
Period Offering, the Available Shares shall not be less than thirty percent
(30%) of the shares to be sold in the offering. An Investor's pro-rata
portion of the Available Shares shall be a fraction, the numerator of which
is (a) the total number of shares of Efficient common stock held by such
Investor, and the denominator of which is (b) the aggregate number of shares
of common stock beneficially owned by all Investors and the Total Consideration
Shares then beneficially owned by Cabletron (excluding the Reserved Portion).
Cabletron's pro-rata portion of the Available Shares shall be a fraction,
the numerator of which is (a) the number of Total Consideration Shares
then beneficially owned by Cabletron (excluding the Reserved Portion),
and the denominator of which is (b) the aggregate number of shares of common
stock beneficially owned by all Investors and the number of Total Consideration
Shares then beneficially owned by Cabletron (excluding the Reserved Portion).</li>
</ol>
<li>
Except to the extent specifically provided in this Section 4.3 hereof,
the procedures to be followed by Efficient and Cabletron, and the respective
rights and obligations of Efficient and Cabletron, with respect to the
distribution of any Piggyback Registrable Securities by Cabletron pursuant
to any Piggyback Registration Statement filed by Efficient shall be as
set forth in the Piggyback Underwriting Agreement, or any other agreement
or agreements governing the distribution of such Piggyback Registrable
Securities pursuant to such Piggyback Registration Statement.</li>
<li>
Notwithstanding the foregoing, however, nothing in this Section 4.3, or
any other provision of this Agreement, shall be construed to limit the
absolute right of Efficient, for any reason and in its sole discretion:
(i) to delay, suspend or terminate the filing of any Piggyback Registration
Statement; (ii) to delay the effectiveness of any Piggyback Registration
Statement; (iii) reduce the number of securities to be distributed pursuant
to any Piggyback Registration Statement (except below the 3,000,000 share
minimum of the Reserve Portion in either (a) an Exclusive Demand Period
Offering or (b) if the First Offering has not met the Criteria, then the
First Offering, as the case may be); or (iv) to withdraw such Piggyback
Registration Statement.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605265"></a><b><font size=+2>Demand and Shelf Registration
Procedures, Rights and Obligations</font></b></center>
<p><font size=-1>. The procedures to be followed by Efficient and
Cabletron, and the respective rights and obligations of Efficient and Cabletron,
with respect to the preparation, filing and effectiveness of Demand Registration
Statements and the Shelf Registration Statement, respectively, and the
distribution of Demand Registrable Securities and Registrable Securities,
respectively, pursuant thereto, are as follows:</font>
<ol TYPE="i">
<li>
Cabletron shall not be entitled to make a Demand Request until expiration
of the Demand Breathing Period, and shall not be entitled to make more
than two (2) Demand Requests; provided, however, that any Demand Request
that: (A) does not result in the corresponding Demand Registration Statement
being declared effective by the SEC; (B) is withdrawn by Cabletron following
the imposition of an order by the SEC with respect to the corresponding
Demand Registration Statement; (C) is withdrawn by Cabletron as a result
of the exercise by Efficient of its suspension rights pursuant to Sections
4.4(e) or (f) hereof; (D) is withdrawn by Cabletron as a result of a Demand
Market Cut-Back in violation of Section 4.4(d)(i) below, (E) is withdrawn
if Cabletron shall have learned of a material adverse change in the condition,
business or prospects of Efficient different than that known to Cabletron
at the time of Cabletron shall have initiated the Demand Request (other
than a decline in Efficient's stock price since such time unless, however,
Cabletron agrees to pay, or otherwise reimburse Efficient, for all Registration
Expenses) that makes the proposed offering unreasonable in the good faith
judgment of Cabletron; or (F) is withdrawn because the terms of the underwriting
agreement, as contemplated by Section 4.4(c) below, are not reasonably
customary, such Demand Request in the event of any of (A) through (F) shall
not count as one of the two (2) Demand Requests. Any Demand Request that
is withdrawn by Cabletron for any reason other than as set forth in the
previous sentence shall count as a Demand Request.<a NAME="bookmark"></a></li>
</ol>
<li>
Efficient shall use commercially reasonable efforts to cause each Demand
Registration Statement and the Shelf Registration Statement to be declared
effective promptly and to keep such Demand Registration Statement and the
Shelf Registration Statement continuously effective until the earlier to
occur of: (i) the sale or other disposition of the Registrable Securities
so registered; (ii) in the case of Demand Registration Statements, one
hundred twenty (120) days after the effective date of any such Demand Registration
Statement; (iii) in the case of the Shelf Registration Statement, until
September 30, 2002; and (iv) the termination of Cabletron's registration
rights pursuant to Section 4.10 hereof. Efficient shall prepare and file
with the SEC such amendments and supplements to each Demand Registration
Statement and the Shelf Registration Statement and each prospectus used
in connection therewith as may be necessary to make and to keep such Demand
Registration Statement and the Shelf Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the
sale or other disposition of all Registrable Securities proposed to be
distributed pursuant to such Demand Registration Statement and the Shelf
Registration Statement until the earlier to occur of: (i) the sale or other
disposition of such Registrable Securities so registered; (ii) in the case
of Demand Registration Statements, one hundred twenty (120) days after
the effective date of any such Demand Registration Statement; (iii) in
the case of the Shelf Registration Statement, until September 30, 2002;
and (iv) the termination of Cabletron's registration rights pursuant to
Section 4.10 hereof.</li>
<li>
In connection with any underwritten offering pursuant to a Demand Registration
Statement or the Shelf Registration Statement, Efficient shall select and
Cabletron shall approve, which approval shall not be unreasonably withheld,
one investment banking firm to serve as manager of such offering. The manager
is hereinafter referred to as the "<b>Demand Managing Underwriter.</b>"
Efficient shall, together with Cabletron, enter into an underwriting agreement
with the Demand Managing Underwriter, which agreement shall contain representations,
warranties, indemnities and agreements then customarily included by an
issuer in underwriting agreements with respect to secondary distributions
under demand registration statements or shelf registration statements,
as the case may be, and shall stipulate that the Demand Managing Underwriter
will receive commissions and fees and other remuneration in connection
with the distribution of any Demand Registrable Securities or Registrable
Securities thereunder.</li>
<li>
Notwithstanding any other provision of this Agreement, the number of shares
proposed to be distributed by Cabletron pursuant to any underwritten offering
may be limited by and at the discretion of the Demand Managing Underwriter
(a "<b>Demand Market Cut-Back</b>"), subject to the following:</li>
<ol TYPE="i">
<li>
The number of shares to be distributed by Cabletron may not be limited
to less than the greater of (x) 50% of the total number of shares proposed
to be distributed in the offering, (y) 4,000,000 shares, or (z) the total
number of shares proposed to be offered if such total proposed offering
size is less than 4,000,000 shares (the "<b>Minimum Demand Portion</b>");
and</li>
<li>
With respect to shares in excess of the Minimum Demand Portion, the Demand
Market Cut-Back shall be made among Cabletron and the Investors pro-rata
relative to the shares to be included in the offering other than (a) any
shares to be issued and sold by Efficient or (b) any Minimum Demand Portion
(the "<b>Remaining Shares</b>"). An Investor's pro-rata portion shall be
a fraction, the numerator of which is (a) the total number of shares of
Efficient Common Stock held by such Investor, and the denominator of which
is (b) the aggregate number of shares of common stock beneficially owned
by all Investors and the Total Consideration Shares then beneficially owned
by Cabletron (excluding the Minimum Demand Portion). Cabletron's pro-rata
portion of the Remaining Shares shall be a fraction, the numerator of which
is (a) the Total Consideration Shares then beneficially owned by Cabletron
(excluding the Minimum Demand Portion) and the denominator of which is
(b) the aggregate number of shares of common stock beneficially owned by
all Investors and the Total Consideration Shares then beneficially owned
by Cabletron (excluding the Minimum Demand Portion).</li>
</ol>
<li>
Notwithstanding any other provisions of this Agreement, in the event that
Efficient receives a Demand Request, or Cabletron proposes an underwritten
offering utilizing the Shelf Registration Statement at a time when Efficient
(i) shall have filed, or has a bona fide intention to file, a registration
statement with respect to a proposed public offering of equity or equity-linked
Securities or (ii) has commenced, or has a bona fide intention to commence,
a public offering of equity or equity-linked Securities pursuant to an
existing effective shelf or other registration statement, then Efficient
shall be entitled to suspend, for a period of up to ninety (90) days after
the receipt by Efficient of such Demand Request or Cabletron proposal,
the filing of any Demand Registration Statement or the implementation of
such proposal under the Shelf Registration Statement; provided that if
Efficient does not file and make effective a primary registration statement
with respect to such offering within such 90 day period, Cabletron shall
have a period of at least 90 consecutive days during the twelve (12) month
period commencing with the expiration of such 90 day period to effect a
Cabletron Demand Request without preemption or suspension.</li>
<li>
Notwithstanding any other provision of this Agreement, in the event that
Efficient determines that: (i) non-public material information regarding
Efficient exists, the immediate disclosure of which would be significantly
disadvantageous to Efficient; (ii) the prospectus constituting a part of
any Demand Registration Statement or the Shelf Registration Statement covering
the distribution of any Demand Registrable Securities or Registrable Securities
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; or (iii) an offering of Demand Registrable Securities or
Registrable Securities would materially interfere with any proposed material
acquisition, disposition or other similar corporate transaction or event
involving Efficient (each of the events or conditions referred to in clauses
(i), (ii) and (iii) of this sentence is hereinafter referred to as a "<b>Suspension
Condition</b>"), then Efficient shall have the right to suspend the filing
or effectiveness of any Demand Registration Statement or to suspend any
distribution of Demand Registrable Securities or Registrable Securities
pursuant to any effective Demand Registration Statement or the Shelf Registration
Statement for so long as such Suspension Condition exists; provided that
Efficient shall have suspended the filing or effectiveness of all other
registration statements registering securities for the account of Efficient
or any other Person or suspended the distribution of any securities under
such registration statements and; provided further, that in the case of
(ii) above, Efficient shall be obligated to use best efforts to amend such
registration statement to correct such material misstatement or omission
in the Registration Statement and related prospectus. Efficient will as
promptly as practicable provide written notice to Cabletron when a Suspension
Condition arises and when it ceases to exist. Upon receipt of notice from
Efficient of the existence of any Suspension Condition, Cabletron shall
forthwith discontinue efforts to: (i) file or cause any Demand Registration
Statement or the Shelf Registration Statement to be declared effective
by the SEC (in the event that such Demand Registration Statement or the
Shelf Registration Statement has not been filed, or has been filed but
not declared effective, at the time Cabletron receives notice that a Suspension
Condition has arisen); or (ii) offer or sell Demand Registrable Securities
or Registrable Securities (in the event that such Demand Registration Statement
or the Shelf Registration Statement has been declared effective at the
time Cabletron receives notice that a Suspension Condition has arisen).
In the event that Cabletron had previously commenced or was about to commence
the distribution of Demand Registrable Securities or Registrable Securities
pursuant to a prospectus under an effective Demand Registration Statement
or the Shelf Registration Statement, then Efficient shall, as promptly
as practicable after the Suspension Condition ceases to exist, make available
to Cabletron (and to each underwriter, if any, participating in such distribution)
an amendment or supplement to such prospectus. If so directed by Efficient,
Cabletron shall deliver to Efficient all copies, other than permanent file
copies then in Cabletron's possession, of the most recent prospectus covering
such Demand Registrable Securities or Registrable Securities at the time
of receipt of such notice.</li>
<li>
Notwithstanding any other provision of this Agreement, Efficient shall
not be permitted to postpone (i) the filing or effectiveness of any Demand
Registration Statement or the Shelf Registration Statement or (ii) the
distribution of any Demand Registrable Securities or Registrable Securities
pursuant to an effective Demand Registration Statement or the Shelf Registration
Statement pursuant to Sections 4.4(e) or 4.4(f) hereof more than four (4)
times in any 360 day period provided that the aggregate of such suspensions
may not exceed a total of sixty (60) days in any 360 day period (excluding
any market standoff periods applicable to Cabletron pursuant to Section
4.9(a) hereof).</li>
<li>
Efficient shall promptly notify Cabletron of any stop order issued or,
to Efficient's knowledge, threatened, to be issued by the SEC with respect
to any Demand Registration Statement or the Shelf Registration Statement,
and will use its best efforts to prevent the entry of such stop order or
to remove it if entered at the earliest possible date.</li>
<li>
Efficient shall furnish to Cabletron (and any underwriter in connection
with any underwritten offering) such number of copies of any prospectus
(including any preliminary prospectus and any amended or supplemented prospectus),
in conformity with the requirements of the Securities Act, as Cabletron
(and such underwriters) shall reasonably request in order to effect the
offering and sale of any Demand Registrable Securities or the Registrable
Securities to be offered and sold, but only while Efficient shall be required
under the provisions hereof to cause the Demand Registration Statement
or the Shelf Registration Statement pursuant to which such Demand Registrable
Securities or Registrable Securities are intended to be distributed to
remain current.</li>
<li>
Efficient shall use commercially reasonable efforts to register or qualify
the Demand Registrable Securities and Registrable Securities covered by
each Demand Registration Statement and the Shelf Registration Statement,
respectively, under the state Securities or "blue sky" laws of such states
as Cabletron shall reasonably request, maintain any such registration or
qualification current, until the earlier to occur of: (i) the sale of such
Demand Registrable Securities or Registrable Securities so registered;
(ii) in the case of Demand Registration Statements, one hundred twenty
(120) days after the effective date of any such Demand Registration Statement;
(iii) in the case of the Shelf Registration Statement, until September
30, 2002; and (iv) the termination of Cabletron's registration rights pursuant
to Section 4.10 hereof; provided, however, that Efficient shall not be
required to take any action that would subject it to the general jurisdiction
of the courts of any jurisdiction in which it is not so subject or to qualify
as a foreign corporation in any jurisdiction where Efficient is not so
qualified.</li>
<li>
Efficient shall furnish to Cabletron and to each underwriter engaged in
an underwritten offering of Demand Registrable Securities or Registrable
Securities, a signed counterpart, addressed to Cabletron or such underwriter,
of (i) an opinion or opinions of counsel to Efficient (with respect to
Efficient and Securities law compliance by Efficient) and (ii) a comfort
letter or comfort letters from Efficient's independent public accountants,
each in customary form and covering such matters of the type customarily
covered by opinions or comfort letters, as the case may be, as Cabletron
or the managing underwriters may reasonably request.</li>
<li>
Efficient shall use commercially reasonable efforts to make appropriate
members of its management reasonably available for due diligence purposes,
"road show" presentations and analyst presentations in connection with
any distributions of Demand Registrable Securities pursuant to a Demand
Registration Statement.</li>
<li>
Efficient shall use commercially reasonable efforts to cause all Demand
Registrable Securities and Registrable Securities to be listed on each
Securities exchange on which similar Securities of Efficient are then listed,
or, if Efficient does not have a class of equity securities listed on a
national securities exchange, apply for qualification and use commercially
reasonable efforts to qualify the Demand Registrable Securities and Registrable
Securities being registered for inclusion on the Nasdaq Stock Market.</li>
<li>
Efficient shall take all such other actions either reasonably necessary
or desirable to permit the Registrable Securities held by Cabletron to
be registered and disposed of in accordance with the methods of disposition
described herein.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605266"></a><b><font size=+2>Expenses</font></b></center>
<p><font size=-1>. Subject to Section 4.6, Cabletron, Efficient and
any other Person whose securities are included in any registration statements
that are initiated pursuant to Sections 4.1, 4.2 or 4.3 of this Agreement
shall pay their respective Selling Expenses, and, in the case of Sections
4.1 and 4.2, shall pay the proportion of all Registration Expenses incurred
in connection with any such registration that the aggregate number of securities
included in such registration on behalf of such Cabletron or such Person
bears to the aggregate of number of all securities included in such registration.
Efficient shall pay all Registration Expenses incurred in connection with
any registration statement that is initiated pursuant to Section 4.3 of
this Agreement.</font>
<center>
<p><a NAME="_Toc467605267"></a><b><font size=+2>Indemnification</font></b></center>
<p><font size=-1>.</font>
<li>
In the case of any offering registered pursuant to this Section 4, Efficient
hereby indemnifies and agrees to hold harmless Cabletron (and its officers
and directors), any underwriter (as defined in the Securities Act) of Registrable
Securities offered by Cabletron, and each Person, if any, who controls
Cabletron or any such underwriter within the meaning of Section 15 of the
Securities Act against any losses, claims, damages or liabilities, joint
or several, to which any such Persons may be subject, under the Securities
Act or otherwise, and to reimburse any of such Persons for any legal or
other expenses reasonably incurred by them in connection with investigating
any claims or defending against any actions, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement under which such Registrable Securities were registered under
the Securities Act pursuant to this Section 4, the prospectus contained
therein (during the period that Efficient is required to keep such prospectus
current), or any amendment or supplement thereto, or the omission or alleged
omission to state therein (if so used) a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities arise out of or are (i) based
upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon information furnished to Efficient in
writing by Cabletron or any underwriter for Cabletron specifically for
use therein, or (ii) made in any preliminary prospectus, and the prospectus
contained in the registration statement as declared effective or in the
form filed by Efficient with the SEC pursuant to Rule 424 under the Securities
Act shall have corrected such statement or omission and a copy of such
prospectus shall not have been sent or otherwise delivered to such Person
at or prior to the confirmation of such sale to such Person.</li>
<li>
By requesting registration under this Section 4, Cabletron agrees, if Registrable
Securities held by Cabletron are included in the Securities as to which
such registration is being effected, and each underwriter shall agree,
in the same manner and to the same extent as set forth in the preceding
paragraph, to indemnify and to hold harmless Efficient and its directors
and officers and each Person, if any, who controls Efficient within the
meaning of the Securities Act against any losses, claims, damages or liabilities,
joint or several, to which any of such Persons may be subject under the
Securities Act or otherwise, and to reimburse any of such Persons for any
legal or other expenses incurred in connection with investigating or defending
against any such losses, claims, damages or liabilities, but only to the
extent it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission of a material fact in
any registration statement under which the Registrable Securities were
registered under the Securities Act pursuant to this Section 4, any prospectus
contained therein, or any amendment or supplement thereto, which was based
upon and made in conformity with information furnished to Efficient in
writing by Cabletron or such underwriter expressly for use therein.</li>
<li>
Each party entitled to indemnification under this Section 4.6 (the "<b>Indemnified
Party</b>") shall give notice to the party required to provide indemnification
(the "<b>Indemnifying Party</b>") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may participate
in such defense at its own expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Section 4 unless such
failure resulted in actual detriment to the Indemnifying Party. No Indemnifying
Party, (i) in the defense of any such claim or litigation, shall, except
with the consent of each Indemnified Party, which consent shall not be
unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation, or (ii) shall
be liable for amounts paid in any settlement if such settlement is effected
without the consent of the Indemnifying Party, which consent shall not
be unreasonably withheld.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605268"></a><b><font size=+2>Issuances by Efficient
or Other Holders</font></b></center>
<p><font size=-1>. As to each registration or distribution referred
to in Section 4.1, additional shares of the Common Stock to be sold for
the account of Efficient or the Investors may be included therein, provided
that the inclusion of such Securities in such registration or distribution
shall be subject to and governed by the provisions of Sections 4.3(c) and
4.4(d).</font>
<center>
<p><a NAME="_Toc467605269"></a><b><font size=+2>Information by Cabletron</font></b></center>
<p><font size=-1>. Cabletron shall furnish to Efficient such information
regarding Cabletron in the distribution of Registrable Securities proposed
by Cabletron as Efficient may reasonably request in writing and as shall
be required in connection with any registration, qualification or compliance
referred to in this Article 4.</font>
<center>
<p><a NAME="_Toc467605270"></a><b><font size=+2>Market Standoff Agreements</font></b></center>
<p><font size=-1>. In connection with the underwritten public offering
by Efficient of at least 1,000,000 shares for its own account or $50,000,000,
whichever is lesser, Cabletron agrees that, upon the request of Efficient
or the underwriters managing any underwritten offering of Efficient's Securities,
Cabletron shall agree in writing (the "<b>Cabletron Public Offering Lock-Up</b>")
that neither Cabletron (nor any director, executive officer or Controlled
Affiliate of Cabletron) will, directly or indirectly, offer to sell, contract
to sell, make any short sale of, or otherwise sell, dispose of, loan, gift,
pledge or grant any options or rights with respect to, any Securities of
Efficient (other than those included in such registration statement, if
any) now or hereafter acquired by Cabletron (or any director, executive
officer or Controlled Affiliate of Cabletron) or with respect to which
Cabletron (or any director, executive officer or Controlled Affiliate of
Cabletron) has or hereafter acquires the power of disposition without the
prior written consent of Efficient and such underwriters for such period
of time (not to exceed fourteen (14) days prior to the date such offering
is expected to commence and ninety (90) days after the date of the final
prospectus delivered to the underwriters for use in confirming sales in
such offering) as may be requested by Efficient and the underwriters provided
that (i) the directors, executive officers (ii) all holders of more than
five percent (5%) of Efficient's Voting Securities which are an "<b>affiliate</b>"
of Efficient for purposes of the accounting rules governing pooling of
interest transactions and (iii) any Investor or other Person participating
in such offering enter into a public offering lock-up containing the same
terms as the Cabletron Public Offering Lock-Up; provided, however, that
neither Cabletron (nor any director, executive officer or Controlled Affiliate
of Cabletron) shall be bound by such Cabletron Public Offering Lock-Up
more than once during any twelve month period. Furthermore, Cabletron agrees
that, at the request of Efficient, Cabletron shall agree in writing (the
"<b>Cabletron Pooling Transaction Lock-Up</b>") that neither Cabletron
(nor any director, executive officer or Controlled Affiliate of Cabletron)
shall, directly or indirectly, offer to sell, contract to sell, make any
short sale of, or otherwise sell, dispose of, loan, pledge or grant any
options or rights with respect to, any Securities of Efficient now or hereafter
acquired directly by Cabletron (or any director, executive officer or Controlled
Affiliate of Cabletron) or with respect to which Cabletron (or any director,
executive officer or Controlled Affiliate of Cabletron) has or hereafter
acquires the power of disposition without the prior written consent of
Efficient for such period of time as shall be necessary for Efficient to
complete any business combination transaction in the form of a pooling
of interests; provided that Efficient's independent accountants shall have
reasonably concluded, after reasonable inquiry, that, at the relevant time
with respect to such proposed pooling of interests transaction, Cabletron
is or was an "affiliate" of Efficient for purposes of the accounting rules
governing pooling of interests transactions. Cabletron agrees that Efficient
may instruct its transfer agent to place stop-transfer notations in its
records to enforce the provisions of the Cabletron Public Offering Lock-Up
and the Cabletron Pooling Transaction Lock-Up contained in this Section
4.9(a).</font>
<center>
<p><a NAME="_Toc467605271"></a><b><font size=+2>Additional Registration
Rights Covenants</font></b></center>
<p><font size=-1>.</font>
<li>
<u>First Offering</u>. Efficient shall use its commercially reasonable
efforts to conduct and close the First Offering as promptly as is practicable
after the date hereof with a target date for completion of such First Offering
of no later than March 31, 2000; provided, however, Efficient shall have
no obligation to so conduct and close such First Offering if the Efficient
Board of Directors concludes in good faith that so doing would be materially
detrimental to Efficient or its shareholders.</li>
<li>
<u>Exclusive Demand Period</u>. Without Cabletron's consent, during the
Exclusive Demand Period and any other period during which Cabletron is
prohibited from effecting a Demand Registration or distributing securities
under the Shelf Registration Statement, Efficient will not file or cause
or allow to become effective a registration statement pursuant to Section
1.2 of the Investors' Rights Agreement.</li>
<br>
<p>
<br>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605272"></a><b><font size=+2>Termination</font></b></center>
<p><font size=-1>. The provisions of this Article 4 shall terminate
upon the earlier to occur of: (i) five years after the date of the closing
of transactions contemplated by the Merger Agreement; and (ii) such time
as Cabletron and any Affiliates of Cabletron beneficially own, in the aggregate,
less than 5% of the Total Voting Power of Efficient.</font>
<br>
<br>
<br>
<center>
<p><a NAME="_Toc467605273"></a><b>MISCELLANEOUS</b>
<p><a NAME="_Toc467605274"></a><b><font size=+2>Governing Law</font></b></center>
<p><font size=-1>. This Agreement shall be governed in all respects
by the laws of the State of Delaware as applied to contracts entered into
solely between residents of, and to be performed entirely within, such
state.</font>
<center>
<p><a NAME="_Toc467605275"></a><b><font size=+2>Successors and Assigns</font></b></center>
<p><font size=-1>. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement may not be assigned by a party without the
prior written consent of the other party; provided that, without the consent
of Efficient, Cabletron may assign this Agreement (and the rights and obligations
hereunder) to any wholly-owned subsidiary in connection with a transfer
of Voting Securities of Efficient to such Affiliate of Cabletron pursuant
to Section 3.1(b), and without the consent of Cabletron, Efficient may
assign all or part of this Agreement (and the rights and obligations hereunder)
to the successor or an assignee of all or substantially all of Efficient's
business; provided that, in each case, such assignee expressly assumes
the relevant obligations of this Agreement (by a written instrument delivered
to the other party, in form and substance reasonably acceptable to it)
and, notwithstanding such assignment, the parties hereto shall each continue
to be bound by all of their respective obligations hereunder. This Agreement
is not intended and shall not be construed to create any rights or remedies
in any parties other than Cabletron and Efficient and no Person shall assert
any rights as third party beneficiary hereunder.</font>
<center>
<p><a NAME="_Toc467605276"></a><b><font size=+2>Entire Agreement; Amendment</font></b></center>
<p><font size=-1>. This Agreement contains the entire understanding
and agreement between the parties with regard to the subject matter hereof
and thereof and supersedes all prior agreements and understandings among
the parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other
than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.</font>
<center>
<p><a NAME="_Toc467605277"></a><b><font size=+2>Notices and Dates</font></b></center>
<p><font size=-1>.</font>
<li>
All notices, requests, demands, and other communications under this Agreement
shall be in writing and shall be delivered personally (including by courier)
or given by facsimile transmission to the parties at the following addresses
(or to such other address as a party may have specified by notice given
to the other pursuant to this provision) and shall be deemed given when
so received:</li>
<ol TYPE="i">
<li>
if to Efficient, to:</li>
</ol>
<font size=-1>Efficient Networks, Inc.</font>
<br><font size=-1>4201 Spring Valley Road, Suite 1200</font>
<br><font size=-1>Dallas, Texas 75244</font>
<br><font size=-1>Attention: Jill Manning, CFO</font>
<br><font size=-1>Telephone: 972-991-3884</font>
<br><font size=-1>Facsimile: 972-991-3887</font>
<p><font size=-1>with a copy to:</font>
<br><font size=-1>Wilson Sonsini Goodrich & Rosati</font>
<br><font size=-1>650 Page Mill Road</font>
<br><font size=-1>Palo Alto, California 94304</font>
<br><font size=-1>Attention: Kenneth Siegel, Esq.</font>
<br><font size=-1>Telephone: (650) 493-9300</font>
<br><font size=-1>Facsimile: (650) 493-6811</font>
<p><font size=-1>if to Cabletron, to:</font>
<p>Cabletron Systems Inc.
<br>35 Industrial Way
<br>Rochester, NH 03867
<br>Attention: General Counsel
<br>Telephone: 630-332-9400
<p><font size=-1>Facsimile:</font>
<p><font size=-1>with a copy to:</font>
<br><font size=-1>Ropes & Gray</font>
<br><font size=-1>One International Place</font>
<br><font size=-1>Boston, MA 02110</font>
<br><font size=-1>Attention: David A. Fine, Esq.</font>
<br><font size=-1>Telephone No.: (617) 951-7000</font>
<br><font size=-1>Telecopy No.: (617) 951-7050</font>
<p>All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior
to 5 p.m. in the place of receipt and such day is a business day in the
place of receipt. Otherwise, any such notice, request or communication
shall be deemed not to have been received until the next succeeding business
day in the place of receipt.
<li>
In the event that any date provided for in this Agreement falls on a Saturday,
Sunday or legal holiday, such date shall be deemed extended to the next
business day.</li>
</ol>
</ol>
</ol>
<center><a NAME="_Toc467605278"></a><b><font size=+2>Language Interpretation</font></b></center>
<p><font size=-1>. In the interpretation of this Agreement, unless
the context otherwise requires, (a) words importing the singular shall
be deemed to import the plural and vice versa, (b) words denoting gender
shall include all genders, (c) references to persons shall include corporations
or other entities and vice versa, and (d) references to parties, Sections,
schedules, paragraphs and exhibits shall mean the parties, Sections, schedules,
paragraphs and exhibits of and to this Agreement, unless otherwise indicated
by the context.</font>
<center>
<p><a NAME="_Toc467605279"></a><b><font size=+2>Table of Contents; Titles;
Headings</font></b></center>
<p><font size=-1>. The table of contents and Section headings of
this Agreement are for reference purposes only and are to be given no effect
in the construction or interpretation of this Agreement. All references
herein to Articles and Sections, unless otherwise identified, are to Articles
and Sections of this Agreement.</font>
<center>
<p><a NAME="_Toc467605280"></a><b><font size=+2>Counterparts</font></b></center>
<p><font size=-1>. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become a binding agreement when one or more counterparts have
been signed by each party and delivered to the other party.</font>
<center>
<p><a NAME="_Toc467605281"></a><b><font size=+2>Severability</font></b></center>
<p><font size=-1>. If any provision of this Agreement or portion
thereof is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.</font>
<center>
<p><a NAME="_Toc467605282"></a><b><font size=+2>Injunctive Relief</font></b></center>
<p><font size=-1>. Cabletron, on the one hand, and Efficient, on
the other, acknowledge and agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specific performance of the terms and provisions hereof
in any court of the United States or any state thereof having jurisdiction,
this being in addition to any other remedy to which they may be entitled
at law or equity.</font>
<center>
<p><a NAME="_Toc467605283"></a><b><font size=+2>Automatic Adjustments to
Share Numbers</font></b></center>
<p><font size=-1>. All numbers regarding the number of shares of
Efficient (e.g., 2,000,000) shall be appropriately and automatically adjusted
to take into account any stock splits occurring after the date hereof.</font>
<br>
<br>
<br>
<br>
<br>
<center>
<p><i><font size=-1>[Signature page follows]</font></i></center>
<p><font size=-1>IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective authorized officers as of
the date set forth in the introduction to this Agreement.</font>
<p><b>EFFICIENT NETWORKS, INC., </b>
<b>CABLETRON SYSTEMS, INC.,</b>
<p>a Delaware corporation
a Delaware corporation
<p>By <u>/s/ Jill S. Manning </u>
By <u>/s/ Piyush Patel</u>
<p>Name: <u>Jill S. Manning </u>
Name: <u>Piyush Patel</u>
<br>Title: Vice President and Chief Financial Officer
Title: President
<br>
<br>
<br>
<br>
<p><font face="Courier New"><font size=-2>Exhibit 2.5</font></font>
<center>
<p><b>CERTIFICATE OF DESIGNATION</b>
<p><b>OF RIGHTS, PREFERENCES AND PRIVILEGES</b>
<p><b>OF SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK OF</b>
<p><b>EFFICIENT NETWORKS, INC.,</b>
<p><b>A DELAWARE CORPORATION</b></center>
<p><font size=-1>Pursuant to Section 151 of the General Corporation Law
of the State of Delaware, Mark Floyd and Jill Manning hereby certify that:</font>
<p><font size=-1>(a) They are the duly elected Chief Executive Officer
and Secretary, respectively, of Efficient Networks, Inc., a Delaware corporation
(the "<u>Corporation</u>").</font>
<p><font size=-1>(b) Pursuant to the authority conferred upon the Board
of Directors of the Corporation by Article Four of the Corporation's Amended
and Restated Certificate of Incorporation (the "<u>Certificate</u>"), the
Board of Directors of the Corporation on November 19, 1999 adopted the
following recitals and resolutions creating a new series of preferred stock
designated as Series A Non-Voting Convertible Preferred Stock:</font>
<p><font size=-1>"WHEREAS, the Certificate provides for a class of shares
known as Preferred Stock, issuable from time to time in one or more series;</font>
<p><font size=-1>WHEREAS, the Board of Directors of the Corporation is
authorized by the Certificate to determine the powers, rights, preferences,
limitations and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, to fix the number of shares constituting any
such series, and to determine the designation thereof, or any of them;</font>
<p><font size=-1>WHEREAS, the Board of Directors of the Corporation desires,
pursuant to its authority as aforesaid, to determine and fix the powers,
rights preferences, limitations and restrictions relating to a series of
Preferred Stock and the number of shares constituting, and the designation
of, such series;</font>
<p><font size=-1>NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
vested in the Board of Directors of the Corporation in accordance with
the provisions of the Certificate, a new series of Preferred Stock to be
designated "Series A Non-Voting Convertible Preferred Stock," is hereby
created, and the Board of Directors hereby fixes and determines the designation
of, the number of shares constituting, and the rights, preferences, privileges
and restrictions relating to, such series of Preferred Stock as follows
(all terms used herein which are not otherwise defined shall have the meanings
set forth in the Certificate):</font>
<center>
<p><b>Section 1. <u>Designation, Amount and Par Value</u></b>.</center>
<p>The series of preferred stock shall be designated as its Series A Non-Voting
Convertible Preferred Stock (the "<u>Series A Preferred</u>") and the number
of shares so designated shall be six thousand three hundred (6,300) (which
shall not be subject to increase without the consent of the holders of
the Series A Preferred (each, a "<u>Holder</u>" and collectively, the "<u>Holders</u>")).
Each share of Series A Preferred shall have a par value of $.001.
<center>
<p><b>Section 2. <u>Voting Rights</u>.</b></center>
<p>Except as otherwise provided herein and as otherwise required by law,
the Series A Preferred shall have no voting rights. However, so long as
any shares of Series A Preferred are outstanding, the Corporation shall
not, without the affirmative vote of the Holders of 66% of the shares of
the Series A Preferred then outstanding, (a) alter or change adversely
the powers, preferences or rights given to the Series A Preferred or alter
or amend this Certificate of Designation, (b) authorize or create or issue
any class of stock ranking as to dividends or distribution of assets upon
a Liquidation (as defined in Section 4) or redemption senior to or on parity
with the Series A Preferred, (c) amend its certificate of incorporation
or other charter documents so as to affect adversely any rights of the
Holders, (d) increase or decrease the authorized number of shares of Series
A Preferred, or (e) enter into any agreement with respect to the foregoing.
<center>
<p><b>Section 3.<font size=+2> </font><u>Dividends</u></b>.</center>
<p>In each fiscal year of the Corporation, the Holders of shares of Series
A Preferred shall be entitled to receive, before any cash dividends shall
be declared and paid upon or set aside for the Common Stock in such fiscal
year, if, when and as declared by the Board of Directors of the Corporation,
dividends payable in cash in an amount per share for such fiscal year at
least equal to the product of (i) the per share amount, if any, of the
cash dividend declared, paid or set aside for the Common Stock during such
fiscal year, multiplied by (ii) the number of shares of Common Stock into
which each such share of Series A Preferred is then convertible.
<center>
<p><b>Section 4. <u>Liquidation</u>.</b></center>
<p>Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary (a "<u>Liquidation</u>"), the Holders
shall be entitled to receive out of the assets of the Corporation, whether
such assets are capital or surplus, for each share of Series A Preferred
an amount equal to $0.001 per share before any distribution or payment
shall be made to the holders of any Junior Securities, and thereafter an
amount equal to the amount per share of Series A Preferred that would be
distributable to such Holder if such Holder had converted his or her Series
A Preferred into Common Stock immediately prior to such Liquidation. The
Corporation shall mail written notice of any such Liquidation, not less
than 45 days prior to the payment date stated therein, to each record Holder.
<p><font size=-1>The merger or consolidation of the Corporation into or
with another corporation (other than one in which the holders of the capital
stock of the Corporation immediately prior to the merger or consolidation
continue to hold, directly or indirectly, more than 50% of the voting power
of the capital stock of the surviving corporation), or the sale, lease,
exchange, or other conveyance of all or substantially all the assets of
the Corporation, shall be deemed to be a liquidation, dissolution, or winding-up
of the Corporation for purposes of this Section 4, in which case the Holders
of Series A Preferred shall, unless the Series A Preferred is or was to
be converted into Common Stock in such transaction or would receive in
such transaction consideration equal (on an as converted basis) to that
received by the Common Stock in such transaction, be entitled to receive
the amount payable to such Holders set forth above, unless the Holders
of 66% of the then outstanding shares of Series A Preferred, voting separately
as a single class, elect not to treat any of the foregoing events as a
liquidation, dissolution or winding up by giving written notice thereof
to the Corporation.</font>
<center>
<p><b>Section 5. <u>Automatic Conversion</u>.</b></center>
<p><font size=-1>(a) <u>Automatic Conversions</u>. All shares of Series
A Preferred shall be automatically converted into shares of Common Stock,
at the Conversion Ratio (as defined in Section (5)(c)), immediately upon
the Stockholder Vote. The date upon which such conversion takes place shall
be referred to as the "<u>Conversion Date</u>".</font>
<p><font size=-1>(b) Immediately after the Conversion Date, the Corporation
will deliver to the Holder a certificate or certificates, subject to the
terms of the Standstill and Disposition Agreement, representing the number
of shares of Common Stock acquired upon the conversion of shares of Series
A Preferred. Notwithstanding the foregoing or anything to the contrary
contained herein, the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares
of Series A Preferred until after certificates evidencing such shares of
Series A Preferred are delivered for conversion to the Corporation, or
the Holder of such Series A Preferred notifies the Corporation that such
certificates have been lost, stolen or destroyed and provides a bond (or
other adequate security) reasonably satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection therewith.
The Corporation shall, upon request of the Holder, if available, use its
best efforts to deliver any certificate or certificates required to be
delivered by the Corporation under this Section electronically through
the Depository Trust Corporation or another established clearing corporation
performing similar functions.</font>
<p><font size=-1>(c)(i) The conversion ratio for each share of Series A
Preferred in effect on the Conversion Date (the "<u>Conversion Ratio</u>")
shall be equal to one thousand shares of Common Stock for one share of
Series A Preferred.</font>
<p><font size=-1>(ii) If the Corporation, at any time while any shares
of Series A Preferred are outstanding, shall (a) pay a stock dividend or
otherwise make a distribution or distributions on shares of its Junior
Securities payable in shares of Common Stock, (b) subdivide or split outstanding
shares of Common Stock into a larger number of shares, (c) combine or reclassify
outstanding shares of Common Stock into a smaller number of shares, or
(d) issue by reclassification and exchange of the Common Stock any shares
of capital stock of the Corporation, then the Conversion Ratio shall be
multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding after such event and of which the denominator
shall be the number of shares of Common Stock outstanding before such event.
Any adjustment made pursuant to this Section 5(c)(ii) shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.</font>
<p><font size=-1>(iii) Whenever the Conversion Ratio is adjusted pursuant
to Section 5(c)(ii) the Corporation shall promptly mail to each Holder,
a notice setting forth the Conversion Ratio after such adjustment and setting
forth a reasonably detailed statement of the facts requiring such adjustment.</font>
<p><font size=-1>(iv) In case of any reclassification of the Common Stock,
or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holders of the Series
A Preferred then outstanding shall have the right thereafter to convert
such shares only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holders of the
Series A Preferred shall be entitled upon such event to receive such amount
of securities, cash or property as a holder of the number of shares of
Common Stock of the Corporation into which such shares of Series A Preferred
could have been converted immediately prior to such reclassification or
share exchange would have been entitled. This provision shall similarly
apply to successive reclassifications or share exchanges.</font>
<p><font size=-1>(d) Upon a conversion hereunder the Corporation shall
not be required to issue stock certificates representing fractions of shares
of Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the Per Share Market
Value at such time. If the Corporation elects not, or is unable, to make
such a cash payment, the Holder of a share of Series A Preferred shall
be entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.</font>
<p><font size=-1>(e) The issuance of certificates for Common Stock on conversion
of Series A Preferred shall be made without charge to the Holders thereof
for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificate, provided that the Corporation
shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such shares
of Series A Preferred so converted.</font>
<p><font size=-1>(f) The Corporation will take all such actions as may
be requisite to assure that all shares of Common Stock which may be issued
upon conversion of Series A Preferred will, upon issuance, be legally and
validly issued, fully paid and non-assessable and free from all liens and
charges with respect to the issue thereof.</font>
<p><font size=-1>(g) Any and all notices or other communications or deliveries
to be provided by the Holders of the Series A Preferred hereunder, shall
be in writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to the attention of the
Chief Executive Officer of the Corporation addressed to 4201 Spring Valley
Road, Dallas, TX 75244, Attention: Mark Floyd, Chief Executive Officer
or to facsimile number 972-991-3887, or to such other address or facsimile
number as shall be specified in writing by the Corporation for such purpose.
Any and all notices or other communications or deliveries to be provided
by the Corporation hereunder shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to each Holder at the facsimile telephone number or address of
such Holder appearing on the books of the Corporation, or if no such facsimile
telephone number or address appears, at the principal place of business
of the Holder. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in this Section prior to 6:30
p.m. (New York City time), (ii) the date after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 6:30 p.m. (New York
City time) on any date and earlier than 11:59 p.m. (New York City time)
on such date, (iii) upon receipt, if sent by a nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.</font>
<center>
<p><b>Section 6. <u>Redemption</u>.</b></center>
<ol TYPE="a">
<ol TYPE="a">
<ol TYPE="a">
<li>
If the Series A Preferred has not been automatically converted pursuant
to Section 5(a) prior to July 21, 2000, then, until such time as such Series
A Preferred is converted pursuant to Section 5(a) or otherwise, the Corporation
shall redeem one-fifth (20%) of the Series A Preferred, for cash, at the
Redemption Price on the following dates:</li>
</ol>
</ol>
</ol>
<dir>
<dir>
<dir>
<dir>
<dir>
<dir><font size=-1>December 31, 2000</font>
<br><font size=-1>December 31, 2001</font>
<br><font size=-1>December 31, 2002</font>
<br><font size=-1>December 31, 2003</font>
<br><font size=-1>December 31, 2004</font></dir>
</dir>
</dir>
</dir>
</dir>
</dir>
<ol TYPE="a">
<ol TYPE="a">
<ol TYPE="a">
<li>
<font size=-1>Notice of redemption will be mailed at least 30 days but
not more than 80 days before the redemption date to each Holder of Series
A Preferred to be redeemed at his registered address; <u>provided</u>,
<u>however</u>,
that the Corporation's failure to give such notice of redemption shall
in no way affect its obligation to redeem the Series A Preferred as provided
in this Section 6. The notice of redemption shall contain the number of
shares of Series A Preferred held by the Holder which shall be redeemed,
the date on which the redemption shall be effective, the Redemption Price,
and the address at which the Holder may surrender to the Corporation its
certificates representing shares of Series A Preferred to be redeemed.
Series A Preferred in denominations larger than $1,000 may be redeemed
in part but only in whole multiples of $1,000.</font></li>
</ol>
</ol>
</ol>
<b>(ii) </b>Once notice of redemption is mailed, the Series A Preferred
called for redemption become due and payable on the redemption date and
at the Redemption Price stated in the notice. Upon surrender of such shares
of Series A Preferred to the Corporation, the Corporation shall pay the
Redemption Price stated in the notice and each surrendered certificate
shall be canceled and a new certificate representing the remaining unredeemed
shares of Series A Preferred, if any, shall be issued to each Holder, at
the expense of the Corporation.
<center>
<p><b>Section 7. <u>Definitions</u>. For the purposes hereof, the following
terms shall have the following meanings:</b></center>
<p><font size=-1>"<u>Common Stock</u>" means the Corporation's common stock,
par value $.001 per share, and stock of any other class into which such
shares may hereafter have been reclassified or changed.</font>
<p><font size=-1>"<u>Junior Securities</u>" means the Common Stock and
all other equity securities of the Corporation which are explicitly junior
in liquidation preference to the Series A Preferred.</font>
<p><font size=-1>"<u>Per Share Market Value</u>" means on any particular
date (a) the closing price per share of Common Stock on such date on the
NASDAQ or on any subsequent market on which the Common Stock is then listed
or quoted, or if there is no such price on such date, then the closing
bid price on the NASDAQ or on such subsequent market on the date nearest
preceding such date, or (b) if the Common Stock is not then listed or quoted
on the NASDAQ or on such subsequent market, the closing bid price for a
shares of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding
to its functions of reporting prices), then the average of the "Pink Sheet"
quotes for the relevant conversion period, as determined in good faith
by the Holder, or (d) if the Common Stock are not then publicly traded
the fair market value of a Common Share as determined in good faith by
the Board of Directors of the Corporation.</font>
<p><font size=-1>"<u>Person</u>" means a corporation, an association, a
partnership, organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.</font>
<p><font size=-1>"<u>Redemption Price</u>" means, with respect to each
share of Series A Preferred, an amount of cash (rounded to the nearest
whole cent), without interest, equal to the product of (A) 1,000 times
(B) the average closing price of one share of the Corporation's Common
Stock for the five (5) most recent days that the Corporation's Common Stock
has traded ending on the trading day immediately prior to the Closing Date
as that term is defined in the Agreement and Plan of Reorganization dated
November 21, 1999, as amended, as reported on the Nasdaq National Market
System, and any declared but unpaid dividends on the Corporation's Common
Stock, subject to proportionate adjustment in the event of any subdivision
or split of outstanding shares of Series A Preferred into a larger number
of shares or any combination or reclassification of outstanding shares
of Series A Preferred into a smaller number of shares.</font>
<p><font size=-1>"<u>Stockholder Vote</u>" means the affirmative vote of
a stockholders holding a majority of the Corporation's Common Stock at
a meeting of the Corporation's stockholders in favor of approving the conversion
of the Series A Preferred into Common Stock in accordance with the terms
hereof.</font>
<center>
<p><b>* * * * *</b></center>
<p><font size=-1>IN WITNESS WHEREOF, Efficient Networks, Inc. has caused
this Certificate of Designation of Rights, Preferences and Privileges of
Series A Non-Voting Convertible Preferred Stock to be signed by the undersigned
this 17th day of December, 1999.</font>
<br>
<table BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH="662" >
<tr>
<td VALIGN=TOP WIDTH="50%"> </td>
<td VALIGN=TOP WIDTH="50%"><u><font size=-1>/s/ Mark Floyd</font></u>
<br><u> Mark Floyd,</u>
<br> Chief Executive Officer</td>
</tr>
</TABLE>
<br>
<br>
<br>
<p><a NAME="node9"></a>
<p><font face="Courier New"><font size=-2>EXHIBIT 2.6</font></font>
<br>
<br>
<br>
<div align=right><font face="Courier New"><font size=-2>January 14, 2000</font></font></div>
<br>
<br>
<br>
<p><font face="Courier New"><font size=-2>Securities and Exchange Commission</font></font>
<br><font face="Courier New"><font size=-2>450 Fifth Street, N.W.</font></font>
<br><font face="Courier New"><font size=-2>Washington, D.C. 20549</font></font>
<p><font face="Courier New"><font size=-2>Ladies and Gentlemen:</font></font>
<p><font face="Courier New"><font size=-2>Reference is made to the Agreement
and Plan of Merger and Reorganization (the "Merger Agreement") dated November
21, 1999 by and among Cabletron Systems, Inc., a Delaware corporation,
Efficient Networks, Inc., a Delaware corporation, Fire Acquisition Corporation,
a California corporation and wholly-owned subsidiary of Efficient, and
Flowpoint Corporation, a California corporation and wholly-owned subsidiary
of Cabletron, which is an Exhibit to the Registrant's Current Report on
Form 8-K (the "Current Report") filed today with the Securities and Exchange
Commission (the "Commission"). The Registrant hereby agrees to furnish
to the Commission, upon request, a copy of any annex, schedule or exhibit
to the Merger Agreement omitted from the copy of Merger Agreement filed
as an Exhibit to the Current Report.</font></font>
<p><font face="Courier New"><font size=-2>
Very truly yours,</font></font>
<br><font face="Courier New"><font size=-2>
CABLETRON SYSTEMS, INC.</font></font>
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<p><font face="Courier New"><font size=-2>By:<u>/S/ Eric Jaeger</u>_______</font></font>
<br><font face="Courier New"><font size=-2>Name Eric Jaeger</font></font>
<br><font face="Courier New"><font size=-2>Title Executive Vice President</font></font></dir>
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