INVESTMENT AGREEMENT

This Investment Agreement (the "Agreement") is made as of the ______, by and between ______
(the "Company"), a[n] ______ corporation, with its principal office located at ______, ______,
______, ______, *[each of the undersigned shareholders of the Company who are selling their
shares pursuant to the terms of this Agreement (hereinafter collectively referred to as the "Selling
Shareholders" and each, individually, as a "Selling Shareholder "), ]*each of the undersigned
founders of the Company (hereinafter collectively referred to as the "Founders" and each,
individually, as a "Founder"), and each of the entities and/or persons listed on the "Schedule of
Investors" attached hereto (hereinafter collectively referred to as the "Investors" and each,
individually, as an "Investor").
Recitals
WHEREAS, the Company wishes to sell, and the Investors desire to purchase, the securities of the
Company described herein on the term and conditions set forth in this agreement.
In consideration of the mutual promises, covenants and conditions hereinafter set forth, the parties
hereto mutually agree as follows:
1. Authorization and Sale of Securities
1.1 Authorization
The Company will, prior to the Closing (as defined), authorize the sale and issuance of (a) up to
______ shares of its Series B Preferred Stock (the "Series B Shares"), including shares sold
hereunder and shares available for sale at any of the Subsequent Closings (as defined) and (b)
warrants to purchase up to ______ shares of its ______. The Series B Shares shall have the rights,
restrictions, privileges, and preferences set forth in the Restated Articles of Incorporation of the
Company (the "Restated Articles") attached hereto as Exhibit ______. The Company has, or before
the Closing will have, adopted and filed the Restated Articles with the Secretary of State of the State
of ______.
1.2 Issuance and Sale
Subject to the terms and conditions hereof, at the Closing the Company will issue and sell to the
Investors, and the Investors will buy from the Company, the number of Series B Shares specified
opposite each Investor's name on the Schedule of Investors at a cash purchase price of $______ per
share, and the warrants, in the form of Exhibit ______ hereto, covering the number of shares of
______ (the "Warrants ") specified opposite each Investor's name on the Schedule of Investors at a
cash purchase price of $______ per share of ______ for which each Warrant is exercisable. Any
Series B Shares issued upon exercise of any of the Warrants shall be deemed to be "Shares" for all
purposes hereunder, and any shares of Common Stock that may be issued upon exercise of the
Warrants (at such time as the Warrants may be exercisable for Common Stock) shall be deemed to
be "Common Stock issued upon conversion of the Shares" for purposes of this Agreement. The
Company's agreements with each of the Investors are separate agreements, and the sales of the

Series B Shares and the Warrants to each of the Investors are separate sales.
*[1.3 Sales by Selling Shareholders
Subject to the terms and conditions hereof, at the Closing the Selling Shareholders will sell to the
Investors, and the Investors will buy from the Selling Shareholders, the number of shares of
Common Stock specified opposite each Selling Shareholder's and Investor's name on the Schedule
of Investors at a cash purchase price of $______ per share. Each of the Selling Shareholders also
agrees to sell, transfer and assign to each of the Investors any rights or privileges which are
appurtenant to ownership of the shares of Common Stock being sold hereunder to the Investors (the
"Appurtenant Rights ") including, without limitation, the rights set out in that certain ______, and
the Company hereby consents to any such sale, transfer and assignment of the Appurtenant Rights.
]*1.4 Subsequent Closings
In addition to the Series B Shares being sold at the Closing (as defined), the Company may sell, on
or before ______, up to an aggregate of ______ additional Series B Shares pursuant to Purchase
Agreements similar to this Agreement at a price per share of at least $______ (such additional sales
are referred to herein as "Subsequent Closings"). The purchasers of any such additional Series B
Shares at any of the Subsequent Closings shall be deemed "Investors" and any such stock shall be
deemed "Shares" for purposes of this Agreement. The Investors under this Agreement shall be
given notice of any such Subsequent Closings within [spelled number of days] (______) days of the
date thereof. Notwithstanding the foregoing, the Company shall not issue and sell any additional
Series B Shares after ______.
2. Closing
2.1 Closing Date
The closing for (a) the purchase, sale and issuance of the Series B Shares being purchased by the
Investors (the "Shares") hereunder, (b) the purchase, sale and issuance of the Warrants being
purchased by the Investors hereunder, and *[(c) the purchase and sale of the Common Stock by the
Investors from the Selling Shareholders (the "Secondary Shares") hereunder]* (the "Closing") shall
be held at ______, at ______ on ______ or at such other time and place as the Company and a
majority in interest of the Investors mutually agree upon (the "Closing Date").
2.2 Closing Procedures
At the Closing, the Company will deliver to the Investors certificates representing the number of
Shares to be purchased by each Investor at the Closing, as set forth in the Schedule of Investors,
against payment of the purchase price therefor by a check (or wire transfer of funds or cancellation
of indebtedness) in the amount specified in the Schedule of Investors and payable to the order of the
Company. At the Closing, the Company will deliver to each Investor a check in the amount of all
interest accrued through the Closing Date on the Company's indebtedness to such Investor.
*[2.3 Closing Procedures for Secondary Sales

At the Closing, the Selling Shareholders will deliver to the Investors certificates representing the
number of Secondary Shares to be purchased by each Investor at the Closing, as set forth in the
Schedule of Investors, against payment of the purchase price therefor by a check (or wire transfer of
funds) in the amount specified in the Schedule of Investors and payable to the order of the Selling
Shareholders. The Selling Shareholders shall also deliver such documents and instruments as each
of the Investors may reasonably require to sell, transfer, and assign any Appurtenant Rights to the
Investors.
]*3.

Company Representations and Warranties

Subject to and except as disclosed by the Company in Exhibit ______ to this Agreement, the
Company represents and warrants to each Investor that:
3.1 Organization and Standing
(a)
The Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of ______, and has the requisite corporate power and authority to
own, lease and operate its properties and to transact it business as presently conducted and
as proposed to be conducted.
(b)
The Company is duly qualified to do business and is in good standing in each place
and jurisdiction where the nature of the business conducted by it or the ownership, lease or
operation of its properties requires qualification, provided, however, that the Company need
not be qualified in a jurisdiction in which its failure to qualify would not have a material
adverse effect on its operations or financial condition.
(c)
The Company has delivered to special counsel for the Investors (1) copies of the
Articles of Incorporation and Bylaws of the Company, as amended, and (2) the minute
books of the Company containing all records required to be set forth of all proceedings,
consents, actions and meetings of the shareholders and board of directors of the Company.
Said copies and minute books are true, correct and complete and contain all amendments
and required records through the date hereof, and will be true, correct and complete on the
Closing Date.
3.2 Capitalization
(a)
The authorized capital of the Company consists of (or will consist of prior to the
Closing) (1) ______ shares of Preferred Stock, of which ______ shares have been
designated as shares of Series A Preferred Stock, and ______ shares have been designated as
shares of Series B Preferred Stock, and (2) ______ shares of Common Stock. The rights,
privileges, and preferences of the Series A and Series B Preferred Stock are as set forth in
the Restated Articles.
(b)
As of ______, ______ shares of Series A Preferred Stock were validly issued and
outstanding, fully paid, and nonassessable, and were issued in compliance with all

applicable state and federal securities laws. As of ______, ______ shares of Common Stock
were validly issued and outstanding, fully paid, and nonassessable, and were issued in
compliance with all applicable state and federal securities laws. The consideration paid for
the outstanding Common Stock was cash and has been paid in full.
(c)
As of ______, there were outstanding options and warrants to acquire an aggregate
of ______ shares of Common Stock. All the shares of the Company's Common Stock
which are to be issued pursuant to the exercise of options or warrants will be, when issued in
accordance with the terms thereof, duly authorized, validly issued, fully-paid and
nonassessable and free of any preemptive rights in respect thereto. The Company has
reserved (or will reserve prior to the Closing) a total of ______ shares of Common Stock as
follows: (1) [sum of shares] shares of Common Stock consisting of ______ shares, and
______ shares of Common Stock for issuance upon conversion of the outstanding Series A
and Series B Preferred Stock, respectively, (2) ______ shares of Common Stock for
issuance upon exercise of warrants issued to the existing Shareholders, (3) ______ shares of
Common Stock for issuance upon exercise of currently outstanding options granted by the
Company pursuant to its Option Plan, (4) not more than ______ shares of Common Stock
for issuance to employees, directors, officers and consultants of the Company pursuant to
stock purchases or stock options approved, or to be approved, by the Company's Board of
Directors (the "Board of Directors "), excluding for purposes of calculating such shares,
shares issued upon exercise of options outstanding on the date hereof. Except as set forth
above and in the right of first refusal set forth in Section 7.4 below, there are no preemptive
or other outstanding rights, subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities, conversion rights or agreements for the purchase or
acquisition from the Company of any shares of its capital stock or other securities of the
Company.
(d)
The Company has previously delivered to special counsel for the Investors copies of
each stock option plan, stock purchase agreement and stock option agreement of the
Company under which Common Stock (or options to purchase Common Stock) and other
outstanding securities of the Company have been or may be issued.
(e)
Attached hereto as Exhibit ______ is an accurate list of the holders of the
Company's outstanding Common Stock (and options to purchase Common Stock) and other
outstanding securities of the Company as of the date of this agreement and as of the Closing
Date, which list accurately reflects employees, directors, officers, consultants and other
shareholders of the Company who hold Common Stock (and options to purchase Common
Stock) and other outstanding securities of the Company and the shares of Common Stock
which are subject to an option to repurchase pursuant to the various stock purchase plans
and agreements under which they were issued.
3.3 Subsidiaries
The Company does not presently own or control, directly or indirectly, and has no stock or other
interest as owner or principal in, any other corporation or partnership, joint venture, association or
other business venture or entity.

3.4 Authorization
(a)
The Company has all the requisite legal and corporate power to execute and deliver
this Agreement and any other agreement referred to herein (the "Ancillary Agreements"), to
sell and issue the Shares hereunder, and to carry out and perform its obligations under the
terms of this Agreement and any other Ancillary Agreements.
(b)
All corporate action on the part of the Company and its officers, directors, and
shareholders, that is necessary for the authorization, execution, delivery, and performance of
all of the obligations of the Company under this Agreement and any other Ancillary
Agreements, and for the authorization, issuance, and delivery of the Shares being sold under
this Agreement, and of the Common Stock issuable upon conversion of the Shares has been
(or will be) taken prior to the Closing.
(c)
This Agreement and the other Ancillary have each been duly executed and delivered
by the Company and, assuming due execution and delivery by all other parties thereto, are
each a valid and legally binding obligation of the Company, enforceable in accordance with
their terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application relating to or affecting enforcement of
creditors' rights, and except to the extent that the enforceability of the indemnification
provisions in Section ______ of the Investors' Rights Agreement may be limited by
applicable laws.
3.5 Validity of Securities
The Shares (and the Common Stock issuable upon conversion thereof), when issued in compliance
with the provisions of this agreement, will be validly issued and will be fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however, that the Shares
(and the Common Stock issuable upon conversion thereof) may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein.
3.6 Absence of Conflicting Agreements
Neither the execution and delivery of this Agreement or any of the Ancillary Agreements by the
Company, the consummation by the Company of the transactions contemplated hereby, nor
compliance by the Company with any provisions contained herein or in any of the Ancillary
Agreements will (1) conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws of the Company; (2) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or provisions of any
indenture, mortgage, note, lien, license, government registration, contract, lease, agreement or other
instrument or obligation to which the Company is a party or by which the Company or any of its
assets may be bound, or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company; or (3) violate any order, writ, judgment,
injunction, decree, statute, ordinance, rule or regulation applicable to the Company or any of its
assets.

3.7 Disclosures
The Company has previously delivered its Confidential Business Plan, dated ______ (the "Business
Plan"), to each of the Investors. The Business Plan has been prepared by the Company's
management in a good faith effort to describe the Company's present and proposed products,
operations, and projected growth. Neither the Business Plan, the Financial Statements (as defined
below), the Schedule of Exceptions, nor any representation or warranty by the Company contained
in this Agreement, nor any other statement, certificate or memorandum furnished or to be furnished
to the Investors pursuant hereto or in connection with the transactions contemplated hereby by the
Company (or on the Company's behalf), when read together, contains or will contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made
herein or therein, in light of the circumstances under which made, not misleading. There is no fact
known to the Company which adversely affects, or in the future may (so far as the Company can
now foresee) adversely affect, the condition, assets, liabilities, business, operations or prospects of
its business that has not been set forth herein or heretofore communicated by the Company to the
Investors in writing pursuant hereto. To the best knowledge of the Company, the assumptions used
in preparing the Business Plan are materially correct; however, no warranty or representation is
given as to the opinions, forecasts or other non-factual matters contained in the Business Plan.
3.8 Governmental Consents
No consent, waiver, approval, authorization or permit of, or designation, declaration or filing with or
notification to, any governmental or regulatory authority on the part of the Company is required in
connection with the valid execution and delivery of this agreement, the offer, sale or issuance of the
Shares (or of the Common Stock issuable upon conversion thereof, or the consummation of any
other transaction contemplated by this agreement, except (1) the filing of the Articles with the
Secretary of State of the State of ______, which filing will have been made and be effective on the
Closing Date, (2) the qualification, if required, of the Shares under applicable state securities laws,
which qualification has been effected, and (3) certain routine securities filings required to be made
subsequent to the Closing.
3.9 Exempt Offering
(a)
Based in part on the representations of the Investors set forth in Section 4 hereof and
in written responses to the Company's inquiries, the offer, sale and issuance of the Shares
(and the Common Stock issuable upon conversion thereof) in conformity with the terms of
this agreement constitute transactions exempt from the registration requirements of Section
5 of the Securities Act of 1933, as amended (the "Securities Act").
(b)
The Company has delivered to special counsel for the Investors a list of persons
other than the Investors to whom the Shares or any similar securities of the Company were
offered by the Company or any of its agents.
3.10

Brokerage or Finder's Fees

There are no claims for brokerage commissions, finder's fees or similar compensation in connection
with the transactions contemplated by this agreement based on any arrangement or agreement made
by or on behalf of the Company. The Company agrees to indemnify and hold the Investors
harmless against any liability, settlement or expense arising out of, or in connection with, any such
claim.
3.11

Financial Information
*[(a) The Company has furnished the following financial statements to the Investors: (1)
the financial statements of the Company for ______, and for the fiscal years ended on those
dates, certified by Numbers and Ledgers, the Company's independent public accountants,
and (2) the balance sheet of the Company at ______ and statements of profit and loss and
changes in shareholder equity for the [spelled number of months] (______) months ended
on that date prepared by Numbers and Ledgers (collectively the "Unaudited Financial
Statements") (all of the foregoing financial statements are collectively referred to herein as
the "Financial Statements").
(b)
The Financial Statements, including the notes thereto, (1) are true, complete and
correct in all material respects, (2) have been prepared in conformity with generally
accepted accounting principles consistently maintained and applied throughout the periods
indicated (except as disclosed therein), (3) present fairly and accurately the financial
position of the Company's business at the respective dates of the balance sheets included in
the Financial Statements, and the results of operations of the Company's business for the
respective periods indicated, provided, however, that the Unaudited Financial Statements are
subject to year-end adjustments, which in any event, to the knowledge of the Company, will
not be materially adverse and do not contain all footnotes required under generally accepted
accounting principles, (4) are in accordance with the books and records of the Company
regarding its business, and (5) do not omit to state or reflect any material fact concerning the
Company's business required to be stated or reflected therein or necessary to make the
statements made therein not misleading in light of the circumstances in which made.
(c)
The Company's backlog of orders as of the date of the Unaudited Financial
Statements is set forth on Exhibit ______.
(d)
The records and customer lists of the Company relating to its business are in all
respects complete and correct, have been maintained in accordance with good business
practices and the matters contained therein are accurately reflected, to the extent appropriate,
on the Financial Statements.

]**[The Company was organized on ______ and has not prepared any financial statements or
similar information regarding its activities since such date. The Company has no material liability
or obligation, absolute or contingent (individually or in the aggregate), except (1) obligations and
liabilities incurred after ______ in the ordinary course of business that are not individually or in the
aggregate material and (2) obligations under contracts or agreements made in the ordinary course of
business that would not be required to be reflected in financial statements prepared in accordance
with generally accepted accounting principles. The Company has no indebtedness for borrowed

money that the Company has directly or indirectly created, incurred, assumed, or guaranteed, or
which respect to which the Company has otherwise become directly or indirectly liable.
]*3.12 Absence of Undisclosed Liabilities
As of ______, the Company had no liabilities or obligations (absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise) other than as disclosed on the consolidated balance sheet (and
notes thereto) contained in the Unaudited Financial Statements. Except as set forth on Exhibit
______, since the date of the Unaudited Financial Statements, the Company has not incurred any
liabilities or obligations (absolute, accrued, fixed, contingent, liquidated, unliquidated or otherwise)
except for liabilities incurred in the ordinary course of business consistent with past practice.
3.13

Outstanding Indebtedness

The Company does not have any indebtedness incurred as the result of a direct borrowing of money,
including, but not limited to, indebtedness with respect to trade accounts ("Borrowed
Indebtedness"). The Company is not in default in the payment of the principal-of or interest or
premium on any such indebtedness, and no event has occurred or is continuing under the provisions
of any instrument, document or agreement evidencing or relating to any such indebtedness which
with the lapse of time or the giving of notice, or both, would constitute an event of default
thereunder.
3.14

Absence of Changes

*[To the best of the Company's knowledge, since the date of the Unaudited Financial Statements,
there has not been any event or condition of any type that has materially and adversely affected the
Company's business, prospects, condition, affairs, operations, properties, or assets.
]**[Since the date of the Unaudited Financial Statements, there has not been:
(a)
Any change in the assets, liabilities, financial condition or operations of the
Company, except changes in the ordinary course of business which have not been, either in
any case or in the aggregate, materially adverse;
(b)
Any change (individually or in the aggregate), except non-material changes
occurring in the ordinary course of business, in the contingent obligations of the Company
by way of guaranty, endorsement, indemnity, warranty or otherwise;
(c)
Any damage, destruction or loss, whether or not covered by insurance, materially
and adversely affecting the properties or business of the Company;
(d)
Any waiver or compromise by the Company of a valuable right or of a material debt
owed to it;
(e)
Any loans made by the Company to its employees, officers or directors, other than
travel advances made in the ordinary course of business;

(f)

Any changes in the compensation of the Company's employees, officers or directors;

(g)
Any declaration or payment of any dividend or other distribution of the assets of the
Company;
(h)
Any agreement obligating the Company to make payments that could exceed
$______ in any fiscal year;
(i)
To the best knowledge of the Company, any other change, event or condition of any
character which, in any case or in the aggregate, had or may have a materially adverse effect
on the condition (financial or otherwise), properties, assets, liabilities, operations or
prospects of the Company's business; or
(j)
Any agreement or commitment by the Company to do any of the things described in
this Section 3.14.
]*3.15 Tax Matters
*[The Company has accurately and completely prepared and timely filed all United States income
tax returns and all state and municipal tax returns that are required to be filed by it and has paid or
made provision for the payment of all taxes that have become due pursuant to such returns. The
United States income tax returns of the Company have not been audited by the Internal Revenue
Service. No deficiency assessment or proposed adjustment of the Company's United States income
tax or state or municipal taxes is pending and, to the best knowledge of the Company, there is no
liability as of the date hereof for any tax for which there is not an adequate reserve reflected in the
Financial Statements.
]**[(a) The Company has timely filed all returns, declarations, reports, estimates,
information returns and statements and other documents (the "Returns ") required to be filed
by or for the Company in respect of all federal, state, local and foreign taxes, assessments
and governmental charges of any kind whatsoever, whether payable directly, by withholding
or otherwise, including without limitation, income, profits, premium, rent, occupation,
property, license, excise, sales, windfall profits, use, conveyance, customs, duties, value
added, gross receipts, franchise, ad valorem, intangibles, severance, transfer, employment,
payroll-related, withholding, stamp and estimated taxes, assessments and governmental
charges, together with any interest, penalties, additions to tax or additional amounts imposed
by any taxing authority with respect thereto (collectively, "Taxes" or "Tax"), and the
information contained in each such Return is complete and accurate. The Company has not
requested any extension of time within which to file any Return, which Return has not since
been (or will not be) timely filed.
(b)
All Taxes attributable to the Company's business, its employees or the Company's
assets that have become due or for which the Company may have liability or be subject have
been timely paid in full or fully reserved against in the Financial Statements, except such
Taxes, if any, as are being contested in good faith and as to which adequate reserves have

been provided. The Company has established on its books and records reserves that are
adequate for the payment of all Taxes not yet due and payable.
(c)
There are no federal, state, local or foreign audits, actions, proceedings
(administrative or court), investigations or claims presently pending relating to any Returns
or any liability of the Company's business or the Company's assets in respect of Taxes, and,
to the best of the Company's knowledge, there is no basis for any such claim which is likely
to result in a Tax liability being imposed with respect to its Business, its employees or its
assets. No deficiency for any Taxes has been proposed, asserted or assessed against the
Company which has not been resolved and paid in full.
(d)
There are no liens or encumbrances for Taxes upon the Company's assets, except
liens or encumbrances for Taxes not yet due.
(e)
The Company has complied in all 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 Internal Revenue Code of
1986, as amended (the "Code"), or similar provisions under any foreign laws) and has,
within the time and in the manner prescribed by law, withheld from employee wages and
paid over to the proper governmental authorities all amounts required to be so withheld and
paid over under all applicable law.
(f)
Except as set forth in Exhibit ______ (which shall set forth the type of Return, date
filed, and date of expiration of the statute of limitations), (1) the statute of limitations for the
assessment of federal income taxes has expired for all federal income tax returns of the
Company for all periods through December 31, ______, and (2) the statute of limitations for
the assessment of Taxes has expired for all other Returns of the Company or those Returns
have been examined by the appropriate taxing authorities for all periods. Except as set forth
in Exhibit ______, there are no outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Returns that have been
given by the Company.
]*3.16 Transactions With Principals
No employee, shareholder, officer or director of the Company is indebted to the Company in an
amount in excess of $______, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them in an amount in excess of $______. To the best of the
Company's knowledge, no employee, shareholder, officer or director of the Company, member of
the immediate family of any such person, nor any corporation, partnership or other business in
which any such person or a member of such person's immediate family has a material interest, is a
party to any transaction, agreement or understanding to which the Company is also a party or bound
and does not have any material interest in any person with whom the Company does or intends to
do business. The Company previously has furnished special counsel to the Investors a copy of each
agreement, instrument or other writing constituting legal rights and obligations to which both the
Company and any of the persons referred to in the previous sentence are a party.

3.17

Voting Agreements

Except as set forth in the Voting Agreement in the form attached hereto as Exhibit ______, the
Company has no agreement, obligation or commitment with respect to the election of any individual
or individuals to the Board of Directors, and to the best of the Company's knowledge, there is no
voting agreement or other arrangement among its shareholders with respect to the election of any
individual or individuals to the Board of Directors.
3.18

Title to Property and Assets

*[Except as reflected in the Financial Statements, the Company has good and marketable title to all
its property and assets and good and valid interest as lessee in all properties held under lease, subject
to no mortgage, option, lease, covenant, condition, agreement, lien, security interest, adverse claim,
restriction, charge, encumbrances or right of others, other than (1) the lien of current taxes not yet
due and payable, and (2) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially impair the operations
of the Company, and which have not arisen otherwise than in the ordinary course of business. There
are no restrictions or reservations affecting the Company's title to, or the utility of, the Company's
assets which would prevent the Company from occupying, utilizing or transferring its assets, or any
portion thereof.
]**[(a) Except as reflected in the Financial Statements, the Company has good and
marketable title to all its property and assets and good and valid interest as lessee in all
properties held under lease, subject to no mortgage, option, lease, covenant, condition,
agreement, lien, security interest, adverse claim, restriction, charge, encumbrances or right
of others, other than (1) the lien of current taxes not yet due and payable, and (2) possible
minor liens and encumbrances which do not in any case materially detract from the value of
the property subject thereto or materially impair the operations of the Company, and which
have not arisen otherwise than in the ordinary course of business. There are no restrictions
or reservations affecting the Company's title to, or the utility of, the Company's assets which
would prevent the Company from occupying, utilizing or transferring its assets, or any
portion thereof.
(b)
The Company's assets are in good operating condition and repair, ordinary wear
excepted, are fit and usable for the purposes for which they are being used, are sufficient for
all current operations of the Company's business and conform to all applicable laws and
regulations, and no notice of any violation of any law, statute, ordinance or regulation
relating to any such property or assets has been received by the Company except as have
been fully complied with or are listed on Exhibit ______ hereof. All of the Company's
assets are located at the premises of its business located at the Company's corporate
headquarters. The Company's assets constitute all of the property now used in, and
necessary for the conduct of, the Company's business in the manner and to the extent
conducted by the Company during the periods covered by the Financial Statements or as
presently conducted.
]*3.19 Intellectual Property Rights

*[The Company owns or possesses, has access to, or can become licensed on reasonable terms
under all patents, inventions, trademarks, trade names, copyrights, licenses, information, proprietary
rights, trade secrets, and processes (collectively, "Intellectual Property Rights") necessary for the
lawful conduct of its business as now conducted and as proposed to be conducted. There are no
pending or threatened claims against the Company alleging that the conduct of the Company's
business infringes or conflicts with the Intellectual Property Rights of any other party, and the
business of the Company as now conducted and as proposed to be conducted will not infringe or
conflict with the Intellectual Property Rights of any other party. The Company has taken reasonable
precautions to fully protect its Intellectual Property Rights, including, without limitation,
registrations required in the business judgment of the Company under applicable copyright and
patent laws. All technical employees, other key employees and officers of the Company have
signed nondisclosure and assignment of inventions agreements with the Company in substantially
the form previously delivered to special counsel to the Investors.
]**[(a) Set forth on Schedule ______ hereto is a description of all the Company's
Intellectual Property Rights together with all registration numbers and dates of filing and
registration, if any. For purposes of this Agreement, "Intellectual Property Rights" mean (1)
all patent rights and all rights, title and interest in and to all letters patent and applications for
letters patent, industrial models, industrial designs, petty patents, patents of importation,
utility models, certificates of invention and other government issued or granted indicia of
invention ownership including any reissue, division, continuation or continuation-in-part
applications throughout the world; (2) all rights, title and interest in and to all trade secrets
and trade secret rights arising under the common law, state law, federal law and laws of
foreign countries; (3) all copyright rights, and all other literary property and author rights
whether or not copyrightable; and all rights, title and interest in and to all copyrights,
copyright registrations, certificates of copyright and copyrighted interests throughout the
world; (4) all mask work rights including mask work registration rights and mask work
registrations throughout the world; (5) all rights, title and interest in and to all know-how
and show-how whether or not protectable by patent, copyright or trade secret law, or as a
registered mask work; and (6) all trademarks, tradenames and service marks, whether
registered or arising under the common law, state law, federal law and laws of foreign
countries and all registrations thereof and interests therein throughout the world and all
associated goodwill.
(b)
Except as otherwise set forth on Schedule ______, (1) the Company owns the entire
right, title and interest in and to all Intellectual Property Rights (except for the Intellectual
Property Rights licensed from others ("Licensed Rights"), for which the Company has valid
and enforceable licenses) of the Company used or useful in or associated with the
Company's assets or its business, and (2) the Company's Intellectual Property Rights are not
subject to any outstanding orders, decrees, judgments, stipulations, claims or settlements,
nor is any item of such Intellectual Property Rights subject to any mortgage, option, lease,
covenant, condition, agreement, lien, security interest, adverse claim, restriction, charge or
encumbrance. There are no restrictions on the use or transfer of any of the Company's
Intellectual Property Rights.

(c)
The Company's business as now conducted and as proposed to be conducted will not
infringe or conflict with the Intellectual Property Rights of others. There are no pending or
threatened claims against the Company affecting or otherwise impairing the rights of the
Company in the Company's Intellectual Property Rights, including claims alleging that the
conduct of the Company's business infringes or conflicts with the rights of others under
patents, service marks, trade names, trademarks, copyrights, trade secrets or other
proprietary rights.
(d)
The Company owns or possesses sufficient legal rights to all the Intellectual
Property Rights necessary for the operation of its business as now conducted and as
proposed to be conducted without conflict with the rights of others. The Company has no
knowledge of any facts which would be detrimental to the ownership, use or validity of any
of the Company's Intellectual Property Rights.
(e)
To the Company's knowledge, no employee or consultant of the Company owns any
rights in patents, trademarks, trade names, processes, data or know-how directly or
indirectly competitive with those owned or to be used by the Company or derived from or in
connection with the conduct of the Company's business.
(f)
The Company is not aware of any violation, infringement or misappropriation by a
third party of any of the Company's patents, licenses, trademarks, service marks, trade
names, copyrights, trade secrets or other proprietary rights. The Company has taken and
will take reasonable security measures to protect the secrecy, confidentiality and value of all
trade secrets useful in the conduct of its business.
(g)
Except as set forth on Schedule ______, the Company has not granted any license or
rights to any other person or entity with respect to any item of the Company's Intellectual
Property Rights.
(h)
Set forth on Schedule ______ hereto is a description of each license under which the
Company is the licensee of any Intellectual Property Rights owned by other parties ("Third
Party Intellectual Property Rights") along with a description of such Third Party Intellectual
Property Rights. The Company has delivered to special counsel for the Investors a true,
correct and complete copy of each license agreement identified in Schedule ______. The
items described in said licenses are presently used by the Company as licensee under the
terms of said licenses. All royalties due under said licenses have been paid and there exists
no default under the terms of said licenses and no event has occurred which, upon the
passage of time or the giving of notice, or both, would result in any event of default or
prevent the Company from exercising and obtaining the benefits of any options contained
therein. The Company has all rights, title and interest of the licensee under the terms of said
licenses, free of all liens, claims or encumbrances, all such licenses are valid and in full
force and effect and the Company is in compliance with the terms thereof. There will be no
default or basis for acceleration under any of said licenses as a result of the transactions
contemplated by this Agreement. The Company has not received any notice of
infringement, violation or conflict with any Intellectual Property Rights of any other party
with respect its use of any Third Party Intellectual Property Rights.

]*3.20 Insurance
*[The Company has fire and casualty insurance policies, with extended coverage, sufficient in
amount (subject to reasonable deductibles) to allow it to replace any of its properties that might be
damaged or destroyed, has a products liability insurance policy with limits as specified on Exhibit
______, and currently has in effect key-man insurance on the lives of the persons, and in the
amounts as set forth on Exhibit ______ attached hereto with proceeds payable to the Company. The
Company has heretofore delivered to special counsel for the Investors true, complete and correct
copies of all such policies.
]**[(a) Exhibit ______ sets forth all primary, excess and umbrella policies of general
liability, fire, workers' compensation, products liability, completed operations, employers,
liability, health, bonds and other forms of insurance providing insurance coverage to the
Company, including the name of insurer, limits of liability, per occurrence and annual
aggregate, if any, or combined single limit as applicable. The Company has heretofore
delivered to special counsel to the Investors true, complete and correct copies of all such
policies. Exhibit ______ also identifies all risks which the Company has designated as
being self-insured. Except as set forth in Exhibit ______, the Company has not been
refused any insurance with respect to the Business of the Company nor has its coverage
been limited, by any insurance carrier to which it has applied for such insurance or with
which it has carried insurance during the last five years.
(b)
With respect to all such policies, all premiums currently payable or previously due
and payable with respect to all periods up to and including the Closing Date have been paid
and no notice of cancellation or termination has been received with respect to any such
policy. To the best knowledge of the Company, all such policies are valid, outstanding and
enforceable policies and provide adequate insurance coverage for the Business of the
Company, as presently being conducted, of the kinds, in the amounts and against the risks
customarily maintained by organizations similarly situated. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which the Company is a
party and will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Each notice which has been required to be
delivered by the Company with respect to any insured claim has been given to the
appropriate insurer on a timely basis. The Company has received no notice of default or
cancellation with respect to any policy of insurance.
]*3.21 Material Contracts
*[(a) Except as set forth on Schedule ______, the Company does not have any contract,
agreement, lease, or other commitment, written or oral, absolute or contingent, other than (1)
contracts for the purchase of supplies and services that were entered into in the ordinary and
usual course of business and that do not involve more than $______, and do not extend for
more than [spelled number of months] (______) beyond the date hereof, (2) sales contracts
entered into in the ordinary course of business, and (3) contracts terminable at will by the
Company on no more than [spelled number of days] (______) days' notice without cost or

liability to the Company (the contracts listed on Schedule ______ are referred to herein as
the "Contracts"). True and complete copies of all written Contracts and written summaries
of all oral Contracts have been furnished to special counsel for the Investors.
(b)
Each of the Contracts is valid, binding and enforceable against the Company and
each other party thereto in accordance with its terms without any defenses, setoffs,
counterclaims or disputes of any nature and is in full force and effect. The Company has not
received notice nor does it have knowledge that any party to any contract, agreement, lease,
or other commitment with it, is considering or intends to cancel, terminate, or make a
material modification in any such contract, agreement, lease, or other commitment, or to
exercise or not exercise any option under any Contract. The Company has not waived any
right under any Contract, nor is the Company subject to, or a party to, any charter, bylaw,
mortgage, lien, lease, agreement, contract, or instrument which adversely affects the
business practices, operations or condition of its business or of any of its assets.
]**[Schedule ______ sets forth all contracts, agreements, orders and commitments, written or oral,
to which the Company is a party or by which it is bound, under which full performance (including
payment) has not been rendered by any party thereto (the "Contracts"), which are material to
conduct of the Company's business and identifies those material Contracts which require the
approval or consent of a third party prior to the transactions contemplated hereunder. The Contracts
which are deemed to be material to the Company's business shall include, without limitation, the
following:
(a)
Any purchase contract or purchase commitment, whether written or oral, that
continues (or an outstanding bid or proposal that if accepted would continue) for a period of
______ or more after the Closing Date or involves $______ or more in remaining payments;
(b)
(1) Any outstanding sales, license or service contract or commitment which has a
remaining term of ______ or more after the Closing Date or involves $______ or more in
remaining payments to the Company or (2) any outstanding oral sales, license or service
contract or commitment which was in effect at any time during the past year and which
involves or involved the value of $______ per annum;
(c)
Each indenture, lease, sublease, license or other instrument under which the
Company claims or holds a leasehold interest in real property;
(d)
Each lease of personal property involving payment remaining to or from the
Company in excess of $______;
(e)
Any collective bargaining agreements, employment and consulting agreements,
executive compensation plans, profit sharing plans, bonus plans, deferred compensation
agreements, employee pension retirement plans and employee benefit stock option or stock
purchase plans and other employee benefit plans entered into or adopted by the Company;
(f)
Any written or oral agreement or policy that contains any severance or termination
pay liabilities or obligations;

(g)
Any written or oral agreement prohibiting or limiting the ability of the Company to
engage in its business or any other business or to compete with any person;
(h)
Any debt obligation for borrowed money, including guarantees (including
guarantees by way of acting as guarantor, surety, co-signor, endorser, co-maker, indemnitor
or otherwise) of or agreements to acquire, any such debt obligation of others;
(i)

Any outstanding loan to any person;

(j)

Any outstanding powers of attorney; or

(k)
Any contract (including any oral or written agreement) for the acquisition of any
other business or company.
True and complete copies of all written Contracts and written summaries of all oral
Contracts have been furnished to special counsel for the Investors.
]*3.22 Compliance With Other Instruments
The Company is not in violation of any term of its Articles of Incorporation or Bylaws, each as
amended and in effect on and as of the Closing, or, in any material respect, of any term contained in
any instrument or contract to which it is a party the damages arising from which would have a
liquidated value exceeding $______, and, to the best of its knowledge, is not in violation of any
federal or state judgment, writ, decree, order, statute, rule, or governmental regulation applicable to
the Company. No event or failure of performance has occurred which, with the passage of time or
the giving of notice or both, would constitute such a violation, and the Company is not aware of any
claim of any such default having been made against the Company with respect to any Contract.
There is no such violation, nor any such default, which materially and adversely affects the business
of the Company as presently conducted or as proposed to be conducted or any of its property or
assets. To the best of the Company's knowledge, no other party is in material default of any such
instrument or contract, and the Company is not aware of any event which, upon the passage of time
or the giving of notice, or both, could constitute an event of default by any other party to any such
Contract or could cause the acceleration of any obligation of any other party thereto.
3.23

Litigation

There is no pending or currently threatened claim or action, suit, arbitration, proceeding or

investigation before any court, arbitrator or government commission or agency against the
Company or against any other person or entity (a) which questions or would affect the validity or
enforceability of this Agreement, the Ancillary Agreements, or the further documents, instruments
or agreements referred to or provided for herein or the Company's right to enter into the same or to
consummate transactions contemplated hereby, (b) which might reasonably be expected to have an
adverse effect on the Company's assets or its business, (c) which may affect the Company's ability
to conduct its business as presently conducted or as proposed to be conducted, or (d) which might
result in any change in the business, assets, condition, affairs, operations, properties or prospects of

the Company, financially or otherwise; nor is the Company aware that there is any basis for any of
the foregoing. The foregoing includes, without limitation, actions pending or threatened (or any
basis therefor known to the Company) involving the prior employment of any of the Company's
employees or consultants, their use in connection with the business of the Company of any
information or techniques allegedly proprietary to any of their former employers or clients, or their
obligations under any agreements with prior employers or clients. The Company is not subject to
the provisions of any order, writ, injunction, judgment or decree of any court or governmental
agency or instrumentality. There is no litigation against any third party by the Company involving
its business. The Company has furnished or made available to Investors' special counsel copies of
all relevant court papers and documents relating to the matters described in this Section.
3.24

Employee Matters

*[The Company has no employment contract with any officer or employee or any other consultant
or person which is not terminable by it at will without liability, except as the Company's right to
terminate its employees at will may be limited by applicable ______ law. Other than the stock and
bonus plans specifically described in Exhibit ______, a copy of which has previously been
furnished to special counsel to the Investors, the Company has no deferred compensation, pension,
health, profit sharing, bonus, stock purchase, stock option, hospitalization, insurance, severance, or
any other employee benefit or welfare benefit plan or obligation covering any of its officers or
employees, nor is any benefit plan of the Company subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA), as amended. No employee or consultant to the
Company is receiving compensation from the Company at a rate in excess of $______ per annum.
There are no controversies or labor trouble or union organization activities pending or, to the
knowledge of the Company, threatened, between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. The Company has complied with all
applicable state and federal equal employment opportunity and other laws relating to employment.
]**[(a) Schedule ______ contains a complete and correct list of the names and addresses of
all the Company's employees (the "Employees") and consultants who perform reviews to or
on behalf of the Company, including to the extent applicable, their titles, rates of
compensation and all other remuneration and perquisites granted to or accrued on behalf of
such persons, together with the anticipated dates of such persons' next salary reviews.
Schedule ______ attached hereto also sets forth a true, correct and complete list of the
employee compensation plans and benefits provided by the Company to the Employees and
all job descriptions and contracts and agreements of the Company with regard to the
Employees and/or consultants.
(b)
Except as set forth on Schedule ______, the Company has no employment contract
with any officer or employee or any other consultant or person which is not terminable by it
at will without liability, except as the Company's right to terminate its employees at will may
be limited by applicable ______ law. The Company has provided special counsel to the
Investors with true, correct and complete copies of all employment contracts and agreements
of the Company.
(c)

Except as set forth on Schedule ______, the Company has no deferred

compensation, pension, health, vacation, disability, sick leave, profit sharing, bonus, stock
purchase, stock option, medical hospitalization, life or other insurance, severance or any
other retainer, consulting, welfare or incentive plan or agreement covering any of its officers
or employees. The Company does not have any retirement plans in which any employee of
the Company participates that is subject to any provisions of the Employee Retirement
Income Security Act of 1974 (ERISA) and of the regulations adopted pursuant thereto.
(d)
No employee or consultant to the Company is receiving compensation from the
Company at a rate in excess of $______ per annum. The Company has no outstanding
commitment or agreement to effect any general wage or salary increase with respect to any
of its employees.
(e)
The Company is in compliance with all federal, state, local and foreign laws related
to employment and employment practices, compensation and benefits, which are applicable
to the conduct of its business, including provisions relating to wages, hours, equal
opportunity, collective bargaining and payment of Social Security and other taxes. The
Company is not engaged in any unfair labor practice or discriminatory employment practice
and no complaint of any such practice against the Company has been filed or threatened to
be filed with or by the National Labor Relations Board, the Equal Employment Opportunity
Commission or any other administrative agency, federal or state, that regulates labor or
employment practices. The Company is in compliance with all applicable federal and state
laws and regulations regarding occupational safety and health standards and has received no
complaint from any federal or state agency or regulatory body alleging violations of any
such laws or regulations.
(f)
None of the Company's employees belongs to any labor union or collective
bargaining unit. There are no controversies or labor trouble or union organization activities
pending or, to the knowledge of the Company, threatened, between the Company and its
employees, including, without limitation, any labor strike, work stoppage, labor grievance,
slow down, unfair labor practice complaint before the National Labor Relations Board or
any state or local agency, or other labor trouble or interference with or impairment of the
Company's business.
(g)
To the best of the Company's knowledge, no officer of the Company or employee or
consultant of the Company (whose annual compensation or fees, in cash or property is in
excess of $______) has any plans to terminate his or her employment or relationship with
the Company.
(h)
All employees and consultants of the Company are either United States citizens or
resident aliens specifically authorized to engage in employment in the United States in
accordance with all applicable laws.
]*3.25 Conflicting Employment Agreements
To the best of the Company's knowledge, no employee of the Company is, or will be in connection
with the proposed operations of the Company, in violation of any term of any employment contract,

proprietary information and inventions agreement, or any other contract or agreement relating to the
relationship of any such employee with the Company or any previous employer. Aside from the
assignment of inventions and proprietary information agreements referred to in Section 3.19, to the
best of the Company's knowledge, no employee of the Company is subject to any secrecy or
noncompetition agreement or any agreement or restriction of any kind that would impede in any
way the ability of such employee to carry out fully all activities of such employee in furtherance of
the business of the Company.
3.26

Compliance

*[The Company has (a) complied in all material respects with all Federal, state, local and foreign
laws, ordinances, regulations and orders applicable to it, its business or the ownership of its assets,
and (b) obtained all Federal, state, local and foreign governmental franchises, licenses and permits
material to and necessary in the conduct of its business, such franchises, licenses and permits are in
full force and effect, no violations have been recorded in respect of any such franchises, licenses or
permits, and no proceeding is pending or threatened to revoke or limit any thereof. The Company is
not subject to, or party to, any license, permit, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind of character, which adversely affects the business
practices, operations or condition of its business or of any of its assets.
]**[(a) The Company is not in violation of any law, rule, regulation or ordinance (including,
without limitation, laws, rules, regulations or ordinances relating to building, zoning,
environmental protection, disposal of hazardous substances, land use or similar matters)
relating to its business, its assets or properties, the violation of which could have an adverse
effect on its business or the Company's assets or properties.
(b)
The Company's conduct of its business does not violate, in any respect, any federal,
state, local or foreign laws, regulations or orders (including, but not limited to, any of the
foregoing relating to employment, wages, hours, employment discrimination, occupational
safety, environmental protection, hazardous waste (as defined in the Resource Conservation
and Recovery Act, as amended, and the regulations adopted pursuant thereto), conservation
or corrupt practices), the enforcement of which could have an adverse effect on the results of
operations, condition (financial or otherwise), assets, properties or prospects of the
Company or its business, and no material expenditures are or will be required in order to
comply with any such law, regulation or order.
(c)
The Company has filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or foreign governmental
agency and all such returns, reports, documents and information are true and complete in all
respects regarding its business.
(d)
The Company has all requisite licenses, permits and certificates, including
environmental, health and safety permits, from federal, state and local governmental
authorities necessary to conduct its Business and own and operate its assets (collectively, the
"Permits"), all of which are listed on Schedule ______, together with the name of the
governmental agency or entity issuing such Permit. The Permits are valid and in full force

and effect and will not be terminated or otherwise adversely affected by the consummation
of the transactions contemplated hereby.
(e)
The Company is not subject to, or party to, any license, permit, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind of character,
which adversely affects the business practices, operations or condition of its business or of
any of its assets.
]**[3.27

Environmental Matters

Except as set forth in Schedule ______:

(a)
The Company and its business are in compliance with the terms and conditions of all
environmental permits, licenses, and other authorizations required under applicable laws
relating to pollution of the environment the noncompliance with which would be likely to
have an adverse effect on the Company's business.
(b)
The Company and its business are in compliance with all applicable federal, state,
local and foreign laws relating to emissions, discharges, and releases of hazardous materials
into the environment and the generation, treatment, storage, transportation and disposal of
hazardous wastes, including, without limitation, any applicable provisions of the Resource
Conservation and Recovery Act of 1976 or the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the noncompliance with which would be likely to
have an adverse effect on the Company's business.
(c)
There are no conditions at, on, under or related to, the real property constituting all
or any portion of the premises upon which the Company's business is conducted (the
"Premises") which presently or potentially pose a significant hazard to human health or the
environment, whether or not in compliance with law, and there has been no production, use,
treatment, storage, transportation or disposal by the Company of any Hazardous Substance,
as hereinafter defined, on the Premises nor any release or threatened release by the
Company of any Hazardous Substance, pollutant or contaminant into or upon or over the
Premises or into or upon ground or surface water at or within feet of the boundaries of the
Premises. No Hazardous Substance is now or ever has been stored by the Company on the
Premises in underground tanks, pits or surface impoundments. To the Company's
knowledge, there are no asbestos-containing materials incorporated into the buildings or
interior improvements that are part of either the Premises or the Company's assets, nor, to
the Company's knowledge, is there any electrical transformer, fluorescent light fixture with
ballasts or other PCB Item, as defined at 40 CFR 761.3, on the Premises or among the
Company's assets. For purposes of this Agreement, "Hazardous Substance" shall mean any
hazardous or toxic substance, material or waste which is regulated by any local
governmental authority, any state or the United States Government.
]**[3.28

Small Business Concern

The Company is a "Small Business Concern" within the meaning of such term as used in the Small

Business Investment Act of 1958, as amended, and the rules and regulations thereunder, as now in
effect. The Company has heretofore furnished to every Investor which is a Small Business
Investment Company ("SBIC ") a completed Size Status Declaration on SBA Form 480, a Portfolio
Financing Report on SBA Form 1031 and an Assurance of Compliance Report on SBA Form 652D.
The Company represents and warrants that such reports remain accurate and that all objective facts
stated therein remain correct. The Company does not own or control 10% or more of any class of
stock of any partner of an Investor which is an SBIC. No officer or director or holder of 10% or
more of any class of the Company's stock is an officer, director or 10% shareholder of any partner of
a Investor which is an SBIC or an associate" (as defined in 13 CFR 55 107.3) of such Investor.
]**[3.29

Real Property Leases

(a)
Schedule ______ contains a complete and accurate legal description of each parcel
of real property leased to the Company (collectively, the "Real Property"). Schedule ______
contains a description of all of the buildings, fixtures and improvements located on the Real
Property and a list of the policies of title insurance issued to the Company for these
properties. All of the buildings, fixtures and improvements used by the Company in the
Business are located on the Real Property. True, correct and complete copies of all the
leases of the Real Property (the "Real Property Leases") have been delivered to the
Investors.
(b)
All of the Real Property Leases are valid and in full force and effect, and there does
not exist any default or event which with notice or lapse of time or both would constitute a
default under any of the Real Property Leases. No party has notified the Company in
writing of its intention to cease to perform any material services required to be performed by
and under any lease. There are no brokerage or other commissions payable in connection
with any Real Property Lease or any renewal of such lease, or amendments of existing Real
Property Leases, or increases or other changes in space or rents.
(c)
Zoning laws and the applicable Real Property Lease of each parcel of the Real
Property permit the presently existing improvements and the continuation of the Business to
the extent it is presently being conducted on such parcel. All improvements located on, and
the use presently made of, all real property leased by the Company in connection with the
Business complies with all applicable fire, environmental, occupational safety and health
standards established by law or regulation and there is no proposed, pending or threatened
change in any such codes, ordinances or standards, which would adversely affect the
Business or the Company's use of its property and assets. With respect to all of the Real
Property Leases, to the Company's best knowledge, no condition, law, statute, rule or
regulation of any governmental authority that is presently in effect precludes or materially
restricts continuation of the present use of such properties covered by the Real Property
Leases. Each of the Real Properties are used and operated in compliance and in conformity
with all applicable leases, contracts, commitments, licenses and permits to the extent that the
failure to so comply and conform would not have a material adverse effect on the Business
or the Company.
]**[3.30

Inventories

Any and all inventories of the Company relating to the Company's business described in the
Unaudited Financial Statements, plus any replacements for such items acquired on or before the
Closing Date, and minus any such items sold or leased by the Company in the ordinary course of
business on or before the Closing Date (the "Inventories"), are properly valued at the lower of cost
(first-in, first-out) or market in accordance with generally accepted accounting principles
consistently maintained and applied, and, except for obsolete and slow-moving items which have
been fully written off and except for items sold in the ordinary course of business, consist of and
will, at the Closing Date, consist of items of such quality and quantity currently usable and saleable
in the ordinary course of the Company's business.
]**[3.31

Manufacturing Rights

The Company has not granted rights to manufacture, produce, assemble, license or sell its products
to any other person and is not bound by any agreement which affects the Company's exclusive right
to manufacture, assemble or sell its products.
]**[3.32

Customers

(a)
A true, correct and complete list of the names and addresses of all customers of the
Company which account for at least ______% of the Company's total installed customer
base for the Business has been delivered by the Company to the Investors under cover letter
dated ______. The Company is not aware of any customer appearing on such list that has
refused to (or threatened to refuse to) continue to do business with the company, or will
materially alter the amount of business it is presently doing with the Company.
(b)
Schedule ______ lists the Company's ten largest customer contracts (measured in
terms of gross revenues to be derived therefrom) which have not yet been fully performed
by the Company and the person hours required to be invested by the Company for the
completion of such contracts. The person hours required to be invested by the Company for
the completion of the foregoing customer contracts will not exceed the person hours
indicated for each such customer contract.
]**[3.33

Warranties

Set forth in Schedule ______ are the standard forms of warranties and guarantees utilized by the
Company with respect to products and services of the Company's business and copies of all other
warranties and guarantees and all other arrangements or understandings, written or oral, pursuant to
which the Company is obligated to perform any corrections, modifications or repairs or furnish any
replacements, whether under warranty or otherwise, on products or services licensed or rendered by
the Company through its business. Included on Schedule ______ is a list of all pending products
liability, warranty or similar claims involving more than $______.
]**[3.34

Future Employee Stock Sales

All future sales and issuances of stock of the Company to employees of the Company shall be made

only pursuant to Employee Stock Purchase Agreements in the form previously provided to special
counsel to the Investors, pursuant to incentive and/or nonqualified stock options granted under the
Company's Employee Incentive Stock Option Plan or other similar plan adopted by the Company's
Board of Directors, or pursuant to other transactions approved by the Company's Board of
Directors. Copies of the Employee Incentive Stock Option Plan and option grant form thereunder
have been supplied to special counsel for the Investors.
]**[3.35

Proprietary Information and Inventions Agreements

The Company's managerial and technical employees shall each, on or before the Closing, have
executed a Proprietary Information and Inventions Agreement in the form previously delivered to
special counsel for the Investors and all of the Company's future managerial and technical
employees shall, subject to the power of the Board of Directors to waive or alter such requirement,
execute Proprietary Information and Inventions Agreements in such form.
]**[3.36

Employee Benefit Plans

(a)
Other than those plans and agreements listed on Schedule ______ (collectively, the
"Company Plans"), the Company does not now nor has it ever established, maintained or
contributed or been required to contribute nor is it a party to any of the following:
(1)
Any employee pension benefit plan, as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended (ERISA), including
(without limitation) any multiemployer plan, as defined in Section 3(37) of ERISA.
(2)

Any employee welfare benefit plan, as defined in Section 3(1) of ERISA;

(3)
Any bonus, deferred compensation, incentive, restricted stock, stock
purchase, stock option, stock appreciation right, phantom stock, debenture,
supplemental pension, profit-sharing, royalty pool, commission or similar plan or
arrangement;
(4)
Any plan, program, agreement, policy, commitment or other arrangement
relating to severance or termination pay, whether or not published or generally
known;
(5)
Any plan, program, agreement, policy, commitment or other arrangement
relating to the provision of any benefit described in Section 3(a) of ERISA to former
employees or directors or to their survivors, other than procedures intended to
comply with the Consolidated Omnibus Budget Reconciliation Act of 1984
("COBRA");
(6)

Any employment, consulting or termination agreement; or

(7)
Any other plan, program, agreement, procedure, policy, commitment,
understanding or other arrangement relating to employee benefits, executive

compensation, fringe benefits, severance pay, terms of employment or services as an

independent contractor.
(b)
The Company has provided to the Investors complete, accurate and current copies of
each of the following:
(1)
The text (including amendments) of each of the Company Plans, to the
extent reduced to writing;
(2)
A description of all material elements of each of the Company Plans, to the
extent not previously reduced to writing;
(3)
With respect to each Company Plan that is an employee benefit plan (as
defined in Section 3(3) of ERISA), the following:
(a)
The most recent summary plan description, as described in Section
102 of ERISA;
(b)
Any summary of material modifications that have been distributed to
participants or filed with the U.S. Department of Labor but that has not been
incorporated in an updated summary plan description furnished under
subparagraph (a) above; and
(c)
The annual reports, as described in Section 103 of ERISA, for the
most recent three plan years for which an annual report has been prepared
(including all schedules and attachments).
(4)
With respect to each Company Plan that is intended to qualify under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), the most
recent determination letter concerning the plan's qualifications under Section 401(a)
of the Code, as issued by the Internal Revenue service; and
(5)
Any handbook, manual, policy statement or similar written guidelines
furnished to employees of the Company, excluding any such item that has been
superseded by any subsequent handbook, manual, policy statement or similar written
guidelines.
(c)
With respect to each Company Plan that is an employee benefit plan (as defined in
Section 3(3) of ERISA) and that is subject to the reporting, disclosure and record retention
requirements set forth in Part 1 of Subtitle B of Title I of ERISA and the regulations
thereunder, each of such requirements has in all material respects been fully met on a timely
basis.
(d)
With respect to each Company Plan that is an employee benefit plan (as defined in
Section 3(3) of ERISA) and that is subject to Part 4 of Subtitle B of Title I of ERISA, none
of the following now exists or has existed within the six-year period ending on the date

hereof:
(1)
Any act or omission constituting a violation of Sections 402, 403, 404 or 405
of ERISA which is not exempted by applicable Department of Labor Regulations; or
(2)
Any act or omission that constitutes a violation of Sections 406 and 407 of
ERISA and is not exempted by Section 408 of ERISA or that constitutes a violation
of Section 4975(c) of the Code and is not exempted by Section 4975(d) of the Code.
(e)
Each Company Plan that is intended to qualify under Section 401(a) of the Code
meets in all material respects all requirements for qualifications under Section 401(a) of the
Code and the regulations thereunder, except to the extent that such requirements may be
satisfied by adopting retroactive amendments under Section 401(b) of the Code and the
regulations thereunder. Each such Company Plan has been administered in accordance with
its terms and the applicable provisions of ERISA and the Code and the regulations
thereunder.
(f)
No Company Plan is subject to Title IV of ERISA. The Company has no liability or
potential liability under Section 412 of the Code as a result of the underfunding or
termination of, or withdrawal from, any plan by the Company or by any person which may
be aggregated with the Company for purposes of Section 412 of the Code.
(g)
All contributions, premiums or other payments due from the Company Shareholders
or the Company to (or under) any Company Plan have been fully paid or adequately
provided for on the books and financial statements of the Company. All accruals (including,
where appropriate, proportional accruals for partial periods) have been made in accordance
with prior practices.
(h)
Each Company Plan complies in all material respects with all applicable
requirements of (1) the Age Discrimination in Employment Act of 1967, as amended, and
the regulations thereunder, (2) Title VII of the Civil Rights Act of 1964, as amended, and the
regulations thereunder, and (3) the health care continuation provisions of COBRA.
(i)

There is no material pending or threatened litigation relating to any Company Plan.

(j)
No payment made to any employee, officer, director or independent contractor of the
Company (the "Recipient") pursuant to any employment contract, severance agreement or
other arrangement (the "Golden Parachute Payment") will be nondeductible by the
Company because of the application of Sections 28OG and 4999 of the Code to the Golden
Parachute Payment, nor will the Company be required to compensate any Recipient because
of the imposition of an excise tax (including any interest or penalties related thereto) on the
Recipient by reason of Sections 28OG and 4999 of the Code.
(k)
No employer other than the Company now contributes to nor has it ever contributed
to any Company Plan. Each Company Plan is in full force and effect and neither the
Company nor any other party is, nor at the Effective Time will be, in default in any manner

thereunder.
(l)
The fiduciaries and administrators of each Company Plan have at all times complied
with all applicable provisions of law (including without limitation the provisions of ERISA)
in operating and dealing with each Company Plan.
(m)
No Company Plan which is subject to the minimum funding standards of Section
412 of the Code has an "accumulated funding deficiency" (as that term is defined in that
section), whether or not waived. No fiduciary or party in interest (as those terms are defined
in Sections 3(21)(A) and 3(14) of ERISA, respectively) has engaged in a "prohibited
transaction" (as that term is defined in Section 406 of ERISA or in Section 4975 of the
Code) with respect to any Company Plan. No "reportable event" (as that term is defined in
Section 4043 of ERISA) has occurred with respect to any Company Plan. No liability to the
Pension Benefit Guaranty Corporation (except for premiums which are not delinquent) or to
any other person or entity has been incurred, or is expected to be incurred by the Company
with respect to any Company Plan. All reports and returns required to be filed with any
government agency with respect to each Company Plan have been timely and accurately
filed. No government agency has conducted an audit or investigation or made an
assessment of taxes or penalties in respect to any Company Plan. No Company Plan has
any liability to any participant or beneficiary, except accrued liabilities, payment of which is
not due under the Company Plan.
(n)
No Company Plan, administrator or fiduciary of any Company Plan or the Company
has taken any action, or failed to take any action, that would subject it or any other person to
any liability for any excise tax or for breach of fiduciary duty with respect to or in
connection with any Company Plan.
(o)
No Company Plan, administrator or fiduciary of any Company Plan or the Company
has any liability under any provision of ERISA or any other applicable law by reason of any
communication or failure to communicate with respect to or in connection with any
Company Plan, or any filing or failure to file with any government entity.
(p)
No Company Plan, administrator or fiduciary of any Company Plan or the Company
has any liability to any Company Plan participant, beneficiary or other person under any
provision of ERISA or any other applicable law by reason of any payment of benefits or
other amounts or failure to pay benefits with respect to or in connection with any Company
Plan. The Company is not delinquent or in arrears on other amounts owed to or with respect
to any contributions under any Company Plan.
]**[3.37

Representations of Founders

(a)
Founder is not obligated under any contract (including licenses, covenants, or
commitments of any nature) or other agreement, or subject to any judgment, decree or order
of any Court or administrative agency which would conflict with his or her obligation to use
his or her best efforts to promote the interests of the Company or which would conflict with
the Company's business as conducted or as proposed to be conducted. Neither the execution

nor delivery of this agreement, nor the carrying on of the Company's business as an officer,
director or employee by Founder, nor the conduct of the Company's business as conducted
or as proposed to be conducted, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract, covenant or instrument
under which Founder is now obligated. Founder has previously delivered to special counsel
for the Investors copies of all agreements between him or her and his or her previous
employers and other persons which are relevant.
(b)
Founder does not own, directly or indirectly, of record or beneficially, more than
______% of the outstanding voting securities (which shall include any security or option
convertible into or exercisable for voting securities) of any corporation other than the
Company, nor is Founder a general partner or limited partner in a partnership in which he or
she has a direct or indirect interest in more than ______% of the profits of such partnership.
(c)
Without having undertaken to determine independently the accuracy or
completeness of either the representations and warranties of the Company contained herein
or any of the information contained in the Business Plan, Founder has no reason to believe
that the representations and warranties of the Company contained herein are not true and
correct, and is familiar with the contents of the Business Plan and has no knowledge of any
material fact, condition or information not disclosed in the Business Plan which has
adversely affected or may adversely affect the business of the Company.
]**[3.38

Intellectual Property Rights and Competitive Activities of Founders

(a)
For valuable consideration, the receipt of which is hereby acknowledged, each of the
Founders does hereby transfer all of his or her right, title and interest to the Company in
ideas and proprietary data, if any, to certain technology, inventions and devices, described as
products that have been, or will be, developed manufactured or sold in under the Business
Plan, which was prepared by the Company, or otherwise, including, but not limited to, all
right, title and interest in any data or other proprietary information or know-how related,
necessary or useful to the design, engineering, development, manufacture, sale of said
products, or to perfecting patent or trademark rights in and to said products, or
improvements or modifications thereon. Each of the Founders covenants with the Company
that he or she will prepare detailed drawings, plans and specifications of the said personal
property and such other materials as are reasonably necessary for the purposes of
ascertaining the potential patentability of said personal property, and he or she will
cooperate fully with the Company, including any additional research or the preparation of
any additional materials or modifications necessary in patent searches, examinations, and
applications in this regard if the Company decides to apply for patents upon any of the said
personal property.
(b)
For valuable consideration, receipt of which is hereby acknowledged, each of the
Founders agrees that, except as permitted or directed by the Company's Board of Directors,
he or she shall not divulge, furnish or make accessible to anyone or use in any way (other
than in the ordinary course of the business of the Company) any confidential or secret
knowledge or information of the Company which he or she has acquired or become

acquainted with or will acquire or become acquainted with prior to any termination of his or
her employment by the Company (including employment by any affiliated companies prior
to the date of this Agreement), with respect to the ______ Founders who are employees;
and, with respect to the Founders who are not employees, any such information which has
become known by such Founder during the period of the Founder's involvement with the
Company as a Director, Consultant or otherwise, whether developed by himself or herself or
by others, concerning any trade secrets, confidential or secret designs, processes, formulae,
plans, devices or material (whether or not patented or patentable) directly or indirectly
useful in any aspect of the business of the Company, any confidential customer or supplier
lists of the Company, any confidential or secret development or research work of the
Company, or any other confidential or secret aspects of the business of the Company. Each
Founder acknowledges that the above described knowledge or information constitutes a
unique and valuable asset of the Company acquired at great time and expense by the
Company and its predecessors, and that any disclosure or other use of such knowledge or
information other than for the sole benefit of the Company would be wrongful and would
cause irreparable harm to the Company. Each Founder agrees to refrain from any acts or
omissions that would reduce the value of such knowledge or information to the Company.
The foregoing obligations of confidentiality, however, shall not apply to any knowledge or
information which is now published or which subsequently becomes generally publicly
known, other than as a direct or indirect result of the breach of this agreement by any
Founder.
(c)

For valuable consideration receipt of which is hereby acknowledged:

(1)
Each Founder agrees that, during the period of his or her affiliation with the
Company in any manner or capacity (e.g., as an advisor, principal, agent, partner,
officer, director, shareholder, employee, member of any association, or otherwise)
(or any affiliated companies) for the ______ Founders who are employees; or during
the period of his or her involvement with the Company with respect to the Founders
who are not employees; and for a period of [spelled number of years] (______)
year[s] thereafter, he or she shall not, directly or indirectly, engage in competition
with the Company anywhere within the United States in any manner or capacity
(e.g., as an advisor, principal, agent, partner, officer, director, shareholder, employee,
member of any association, or otherwise) in any phase of the business which the
Company is conducting during the term of his or her employment, including but not
limited to the design, development, manufacture, distribution, marketing, leasing or
selling of any ______ and of accessories, devices, or components related to the
products or services being sold by the Company; provided, however, that ownership
by a Founder, of a passive investment, of less than ______% of the outstanding
shares of authorized stock of any corporation listed on a national securities exchange
or publicly traded in the over-the-counter market shall not constitute a breach of this
Section.
(2)
Each Founder agrees that, during the period of his or her affiliation with the
Company in any manner or capacity (e.g., as an advisor, principal, agent, partner,
officer, director, shareholder, employee, member of any association, or otherwise)

(or any affiliated companies) for the ______ Founders who are employees; or during
the period of his or her involvement with the Company with respect to the Founders
who are not employees; and for a period of [spelled number of years] (______)
year[s] thereafter he or she will not, directly or indirectly, assist or encourage any
other person in carrying out, directly or indirectly, any activity that would be
prohibited by the above provisions of this Section if such activity were carried out
by such Founder, either directly or indirectly, and in particular each Founder agrees
that he or she will not, directly or indirectly, induce any employee of the Company
to carry out, directly or indirectly, any such activity.
]**[3.39

Selling Shareholders' Representations

(a)
All consents, approvals, authorizations and orders necessary for the execution and
delivery by such Selling Shareholder of this Agreement and the Power of Attorney (the
"Power of Attorney") and the Escrow or Custody Agreement (the "Custody Agreement")
hereinafter referred to, and for the sale and delivery of the Shares to be sold by each Selling
Shareholder hereunder, have been obtained; and such Selling Shareholder has full right,
power and authority to enter into this Agreement, the Power of Attorney and the Custody
Agreement and to sell, assign, transfer and deliver the Shares to be sold by such Selling
Shareholder hereunder.
(b)
The performance of this Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions herein and therein contemplated will
not result in a breach or violation of any of the terms or provisions of or constitute a default
under, and statute, any indenture, mortgage, deed of trust, note agreement or other
agreement or instrument to which such Selling Shareholder is a party or by which such
Selling Shareholder is bound, or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over such Selling Shareholder or the property of such
Selling Shareholder.
(c)
Such Selling Shareholder has, and immediately prior to the Closing Date such
Selling Shareholder will have, good and valid title to the Shares to be sold by such Selling
Shareholder hereunder, free and clear of all liens, encumbrances, equities or claims; and,
upon delivery of such Shares and payment therefor pursuant hereto, good and valid title to
such Shares, free and clear of all liens, encumbrances, equities or claims will pass to the
Investors.
(d)
Without having undertaken to determine independently the accuracy or
completeness of either the representations and warranties of the Company contained herein
or any of the information contained in the Business Plan, none of the Selling Shareholders
has any reason to believe that the representations and warranties of the Company contained
herein are not true and correct, and each Selling Shareholder is familiar with the contents of
the Business Plan and has no knowledge of any material fact, condition or information not
disclosed in the Business Plan which has adversely affected or may adversely affect the
business of the Company.

]*4.

Investors' Representation and Warranties

Each Investor hereby represents and warrants to the Company with respect to the sale and issuance
of the Shares and the purchase of the ______ issuable upon conversion of the Shares (collectively,
the "Securities") as follows:
4.1 Purchase for Own Account
Each Investor represents that it is acquiring the Securities solely for its own account and beneficial
interest for investment and not for sale or with a view to distribution of said Securities or any part
thereof, has no present intention of selling, granting participation in or otherwise distributing the
same, and does not presently have reason to anticipate a change in such intention.
4.2 Information
Each Investor acknowledges that it has received and carefully reviewed the Company s Business
Plan (including, without limitation, the risk factors set forth therein), Financial Statements and the
Term Sheet for this transaction supplied to each Investor, and, in addition, has received all the
information it has requested from the Company and considers necessary or appropriate for deciding
whether to purchase the Securities. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of this Agreement. Each Investor
represents that it has had an opportunity to ask questions of and receive answers from the Company
regarding the terms and conditions of the offering of the Securities and the Company's business,
management and financial affairs and to obtain any additional information necessary to verify the
accuracy of the information given the Investor. Each Investor agrees to hold in confidence any
confidential information provided to it in writing by the Company in connection with the offer and
sale of the Securities hereunder.
4.3 Investment Experience
Each Investor represents that it either (a) (either individually or in conjunction with any investor
representative engaged by it who experienced in the matters referred to in this sentence) is
experienced in evaluating ______ companies such as the Company, is able to fend for itself in the
transactions contemplated by this Agreement, and has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its investment or (b) is an
"accredited investor" as that term is defined and used in Rules 501 through 506 of Regulation D
promulgated under the Securities Act of 1933 and is correctly identified as such on the Schedule of
Investors attached hereto.
4.4 Ability To Bear Economic Risk
Each Investor acknowledges that investment in the Securities involves a high degree of risk, and
represents that it is able, without impairing its financial condition, to hold the Securities for an
indefinite period of time and to suffer a complete loss on its investment.
4.5 Restricted Securities and Limitation on Disposition

(a)
Each Investor understands that the Securities it is purchasing are characterized as
"Restricted Securities" under the federal securities laws inasmuch as they are being acquired
from the Company in a transaction not involving a public offering, and that under such laws
and applicable regulations such Securities may be resold without registration under the Act
only in certain limited sets of circumstances. Each Investors acknowledges that, because
they have not been registered under the Securities Act of 1933, the Shares (and the Common
Stock into which the Shares are convertible) being purchased must be held indefinitely
unless subsequently registered under the Securities Act of 1933 or an exemption from such
registration is available. Each Investor is aware of the provisions of Rule 144 promulgated
under the Securities Act of 1933 which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than two years after a
party has purchased and paid for the security to be sold, the sale being through a "broker s
transaction" or in transactions directly with a "market maker" (as provided by Rule 144(f))
and the number of shares being sold during any three-month period not exceeding specified
limitations (unless the sale is within the requirements of Rule 144(k)). In this connection,
each Investor represents that it has received a copy of SEC Rule 144, as presently in effect,
and has read and understands the information contained in Rule 144. Each Investor
understands that except as set forth in paragraph 14 of the Registration Rights Agreement
the Company will be under no obligation to make public the information necessary for the
investors to obtain the benefits of Rule 144.
(b)
Without limiting the foregoing, each Investor agrees that it will in no event make
any disposition of the Securities unless and until:
(1)
The Company shall have received a letter secured by the Investor from the
SEC stating that no action will be recommended to such Commission with respect to
the proposed disposition; or
(2)
There is then in effect a registration statement under the Securities Act of
1933, as amended, covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(3)
The Investor shall have notified the Company of the detailed circumstances
of the proposed disposition and, if the Company so requests, shall have provided the
Company with an opinion of counsel for the Investor to the effect that such
disposition will not require registration of such Securities under the Act, which
opinion of counsel for the Investor shall be in form and substance reasonably
satisfactory to the Company's counsel and the Company shall have advised the
Investor of such satisfaction; provided, however, that no such opinion need be
supplied in connection with a distribution in kind by an Investor that is a partnership
to its partners (or former or retired partners or the estates thereof), provided that such
persons agree to be subject to the terms of this Agreement to the same extent as if
they themselves originally purchased the Securities hereunder.

(c)
Each Investor understands that the Company's transfer records will be noted to
reflect the restrictions on transferability of the Securities contained herein.
4.6 Legends
It is understood that the evidences of the Securities may bear one or all of the following legends (in
substantially the form set forth below):
(a)
"These securities have not been registered under the Securities Act of 1933 They
may not be sold, offered for sale, pledged, or hypothecated in the absence of an effective
registration statement as to the securities under said Act or an opinion of counsel satisfactory
to the Company that such registration is not required, or except as set forth in the Investment
Agreement, dated as of ______, between the Company and the original purchaser thereof, a
copy of which agreement is available upon request from the Company."
(b)

Any legend relating to the right of first refusal contained in the Company's Bylaws.

(c)

Any other legend required by applicable state securities laws.

4.7 Authorization
Each Investor represents and warrants that this Agreement and the Ancillary Agreements, when
executed and delivered by it, each will constitute a valid and legally binding obligation of such
Investor enforceable in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application relating to or affecting
enforcement of creditors' rights, except to the extent that the enforceability of the indemnification
provisions in Section ______ of the Investors' Rights Agreement may be limited by applicable laws.
*[4.8 Qualification of Securities Under Blue Sky Laws
The sale of the securities that is the subject of this Agreement has not been qualified with the
Secretary of State and the issuance of such securities, or the payment or receipt of any part of the
consideration for such securities prior to such qualification or in the absence of an exemption from
such qualification is unlawful The rights of all parties to this Agreement are expressly conditioned
on such qualification being obtained, or an exemption from such qualification being available.
]*5.

Investors' Closing Conditions

The Investors' obligations to purchase the Shares at the Closing are subject to the fulfillment on or
prior to the Closing Date of all of the conditions set forth below in this Section:
5.1 Representations and Warranties Correct
The representations and warranties made in Section 3 hereof shall be true and correct when made,
and shall be true and correct on the Closing Date.

5.2 Covenants
All covenants, agreements and conditions contained in this agreement to be performed by the
Company on or prior to the Closing Date shall have been performed or complied with in all
respects.
5.3 Governmental Consents
All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the lawful issuance and sale
of the Shares pursuant to this Agreement shall have been duly obtained and shall be effective on and
as of the Closing.
5.4 Opinion of Company's Counsel
At the Closing the Investors shall have received from ______, counsel to the Company, and ______,
special counsel to the Company, favorable opinions addressed to them, dated the Closing Date, in
the forms attached hereto as Exhibits ______ and ______, respectively.
5.5 Compliance Certificate
The Company shall have delivered to the Investors a certificate, executed by the President of the
Company, dated the Closing Date, certifying to the fulfillment of the conditions specified in Section
5 of this agreement.
*[5.6 Additional Closing Conditions
(a)
The Company shall have duly filed with the Secretary of State of the State of
______ the Restated Articles of Incorporation in the form attached hereto as Exhibit ______,
and the Restated Articles shall be in full force and effect on and as of the Closing.
(b)
The Investors shall have tendered, in the aggregate, at the Closing consideration of
not less than $______ for the purchase of the Shares.
(c)

The Board of Directors shall be as set forth in Exhibit ______ attached hereto.

(d)
The Company, each of the Founders, and each of the Investors shall have executed
and delivered the Co-Sale Agreement substantially in the form of Exhibit ______ attached
hereto.
(e)
The Company, each of the Founders, and each of the Investors shall have entered
into a Voting Agreement substantially in the form of Exhibit ______ attached hereto.
(f)
The Company and each of the Investors shall have entered into the Investors' Rights
Agreement substantially in the form of Exhibit ______ attached hereto.

(g)
The Company shall have executed and delivered to each of the Investors that
requests them, a Size Status Declaration on SBA Form 480, an Assurance of Compliance on
SBA Form 652D, and a Portfolio Financing Report on SBA Form 1031.
(h)
All corporate and other proceedings in connection with the transactions
contemplated at the Closing hereby and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the Investors and their
special counsel, and the Investors and their special counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may reasonably
request.
]*6.

Company's Closing Conditions

The Company's obligation to sell the Shares to the Investors at the Closing is subject to the
fulfillment of the following conditions:
6.1 Representations Correct
The representations made by the Investors in Section 4 hereof shall be true and correct when made,
and shall be true and correct on the Closing Date.
6.2 Covenants
All covenants, agreements and conditions contained in this agreement to be performed by the
Investors on or prior to the Closing Date shall have been performed or complied with in all respects.
6.3 Governmental Consents
All authorizations, approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the lawful issuance and sale
of the Shares pursuant to this Agreement shall have been duly obtained and shall be effective on and
as of the Closing.
6.4 Minimum Investment
The Investors, other than the Existing Investors, shall have tendered, in the aggregate, at the Closing
consideration of not less than $______ for purchase of the Shares.
7. Company Covenants
7.1 Financial Information
(a)
The Company will furnish the following information to each Investor for so long as
he or she or it is a holder of any ______ into which the Shares are converted:

(1)
As soon as practicable after the end of each fiscal year, and in any event
within [spelled number of days] (______) days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and a consolidated statement of income and a consolidated statement of changes in
financial position of the Company and its subsidiaries, if any, for such year, prepared
in accordance with generally accepted accounting principles and setting forth in each
case in comparative form the figures for the previous fiscal year, all in reasonable
detail and with an audit opinion thereon from independent public accountants of
recognized national standing.
(2)
As soon as practicable after the end of the first, second and third quarterly
accounting periods in each fiscal year of the Company, and in any event within
[spelled number of days] (______) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of each such quarterly period,
and a consolidated statement of income and a consolidated statement of changes in
financial position of the Company and its subsidiaries, if any, for such period and for
the current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made. Said financial
statements shall be signed by an officer of the Company who shall state that such
financial statements are in accordance with generally accepted accounting principles,
with the exception that no notes need be attached to such statements and year-end
audit adjustments may not have been made.
(b)
The Company shall furnish the following information to each Investor for so long as
the Investor (together with the Investor's affiliates) holds at least an aggregate of ______
Shares and shares of ______ issued upon conversion of the Shares (subject to adjustment for
any stock splits, combinations or dividends):
(1)
As soon as practicable after the end of each fiscal month, and in any event
within [spelled number of days] (______) days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of such month, and a
consolidated statement of income of the Company and its subsidiaries, if any, for
such month, and for the current fiscal year to date, in each case setting forth in
comparative form the Company's and its subsidiaries, if any, projected consolidated
balance sheets and projected consolidated statements of income for the
corresponding periods (as prepared pursuant to subsection 7.1(a), prepared in
accordance with generally accepted accounting principles, all in reasonable detail
and certified subject to changes resulting from year-end audit adjustments, by the
principal financial officer of the Company; provided, however, that any financial
statements provided hereunder need not contain any footnotes. To such financial
statements there shall be appended a discussion and analysis, in reasonable detail, of
such financial statements and the general business condition and prospects of the
Company by management of the Company so as to assist the recipients in
understanding and interpreting such financial statements.

(2)
Within [spelled number of days] (______) days of adoption by the Board of
Directors, but not later than [spelled number of days] (______) days prior to the
beginning of each fiscal year, an annual plan for such year which shall include
monthly capital and operating expense budgets, cash flow statements, projected
balance sheets and profit and loss statements for each month and for the end of such
year itemized in such detail as the Board of Directors may reasonably determine.
Approval of such budgets, statements and projections shall be required by a majority
of the Board of Directors.
(3)
Within [spelled number of days] (______) days after a material change in the
annual plan specified in subsection 7.1(b)(2) is approved by the Board of Directors,
revised budgets, statements or projections (as so specified).
(4)
Copies of all reports, registration statements and other material filed by the
Company or any subsidiary with the Securities Exchange Commission or with any
national securities exchange on which securities of the Company or any subsidiary
may be listed.
(5)
The covenants provided in this Section 7.1(b) shall be suspended for so long
as the Company is subject to the reporting requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended.
(c)
Each Investor has the right to visit and inspect any of the properties of the Company
or any of its subsidiaries, and to discuss their affairs, finances and accounts with their
officers, all at such reasonable times and as often as may be reasonably requested.
7.2 Assignment of Rights to Information
The rights granted pursuant to Section 7.1 may be assigned or otherwise conveyed by any Investor
or by any subsequent transferee of any such rights with the written consent of the Company, which
consent shall not be unreasonably withheld; provided that the Company may refuse such written
consent if the proposed transferee is a competitor of the Company; is affiliated with a competitor or
is an investor holding an equity position of ______% or more in a competitor, and provided further
that the rights granted pursuant to Section 7.1(b) may only be assigned to a transferee who will own
at least an aggregate of ______ Shares and shares of ______ issued upon conversion of the Shares
(subject to adjustment for any stock splits, combinations or dividends) after the transfer; and
provided further, that no such written consent shall be required if the transfer is to any parent,
subsidiary, affiliate, or group member of any Investor, or to any partner or retired partner of any
Investor that is a general or limited partnership or to any such partner's estate, or if the transfer is to
any transferee who will own at least an aggregate of ______ Shares and shares of ______ issued
upon conversion of the Shares (subject to adjustment for any stock splits, combinations or
dividends)
7.3 Confidentiality
Each Investor agrees that he, she or it will keep confidential and will not disclose or divulge any

confidential, proprietary or secret information which such Investor may obtain from the Company,
and which the Company has prominently marked "confidential", "proprietary" or "secret" or has
otherwise identified as being such, pursuant to financial statements, reports and other materials
submitted by the Company as required hereunder, or pursuant to visitation or inspection rights
granted hereunder unless such information is already known to the Investor or is or becomes
publicly known, or unless the Company gives its written consent to the Investor's release of such
information, except that no such written consent shall be required (and Investor shall be free to
release such information) if such information is to be provided to Investor's lawyer or accountant, or
to an officer, director or partner of a Investor.
7.4 Right of First Refusal
(a)
The Company hereby grants to each Investor the right of first refusal to purchase pro
rata, all (or any part) of New Securities (as defined in this Section) that the Company may,
from time to time, propose to sell and issue. Such Investor's pro rata share, for purposes of
this right of first refusal, is the ratio of the sum of (1) the shares of Common Stock held by
such Investor and (2) aggregate number of shares of Common Stock into which the Shares
purchased by or issued to such Investor hereunder, and other options or warrants held by
such Investor are convertible, to the total number of outstanding shares of Common Stock
(including all outstanding options and warrants held by Investors) of the Company.
(b)
"New Securities" shall mean any Common Stock or Preferred Stock of the
Company, whether now authorized or not, and rights, options, or warrants to purchase said
Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may
become, convertible into said Common stock or Preferred Stock; provided, however, that
"New Securities" does not include (1) securities issuable upon conversion of or with respect
to the Company's Series A or B Preferred Stock; (2) securities offered to the public pursuant
to a registration statement filed under the Securities Act of 1933; (3) securities issued
pursuant to the acquisition of another corporation by the Company by merger purchase of
substantially all of the assets, or other reorganization whereby the Company owns not less
than ______% of the voting power of such corporation; (4) shares of the Company's
Common Stock (or related options) issued to employees, officers or consultants of the
Company pursuant to any employee stock offering, plan, or arrangement approved by the
Board of Directors; (5) shares of the Company's Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or recapitalization by the Company; (6)
securities issued to existing investors upon exercise of warrants which are outstanding as of
the Closing Date; or (7) securities issued pursuant to the acquisition of license or other
rights, assets or technology from third parties on the condition that such issuance and
acquisition is approved by at least ______% of the incumbent Board of Directors.
(c)
In the event that the Company proposes to undertake an issuance of New Securities,
it shall give each Investor written notice of its intention, describing the type of New
Securities, the price, and the general terms upon which the Company proposes to issue the
same. Each Investor shall have [spelled number of days] (______) days from the date of
mailing of any such notice to agree to purchase his, her or its pro rata share of such New
Securities for the price and upon the general terms specified in the notice by giving written

notice to the Company and stating therein the quantity of New Securities to be purchased.
Each Investor shall have a right of over-allotment such that if any Investor fails to exercise
his or her right hereunder to purchase his or her pro rata portion of New Securities, the
Company shall so notify the other Investors and the other Investors may purchase the
nonpurchasing Investor's portion on a pro rata basis, within [spelled number of days]
(______) days from the date of such notice.
(d)
In the event that Investors fail to exercise in full the right of first refusal within said
[spelled number of days] (______) day period (plus [spelled number of days] (______) day
period, if applicable) the Company shall have [spelled number of days] (______) days
thereafter to sell the New Securities respecting which the Investors' rights were not
exercised, at a price and upon general terms no more favorable to the investors thereof than
specified in the Company's notice. In the event that the Company has not sold the New
Securities within such [spelled number of days] (______) day period, the Company shall not
thereafter issue or sell any New Securities, without first offering such securities to the
Investors in the manner provided above.
(e)
The right of first refusal granted under this agreement shall expire upon the first
closing of the first firmly underwritten public offering of Common Stock of the Company
that is pursuant to a registration statement filed with, and declared effective by, the SEC
under the Securities Act of 1933, covering the offer and sale of Common Stock to the public
at a per share price (prior to underwriter commissions and expenses) of at least $______ and
at an aggregate offering price (after deducting underwriting commissions and expenses) of
not less than $______.
(f)
This right of first refusal is assignable only in connection with a sale or other transfer
of Shares or Common Stock issued on conversion thereof.
(g)
Notwithstanding any other provision of this agreement to the contrary, a Investor's
rights under this Section may not be amended or waived without the consent of such
Investor.
*[7.5 Election of Directors and Observer Rights
For so long as the holders of the Series B Shares voting as a class are entitled to elect ______
directors pursuant to the Restated Articles:
(a)
The Company and each of the Founders agree to use its or their best efforts to cause
one nominee designated by each of the Shareholders to be nominated, elected and
maintained as a member of the Company's Board of Directors (the "Board").
(b)
A nominee of the Shareholders shall be entitled to observe all meetings of the Board
and receive all information provided to the Board; provided, that such observer rights shall
terminate at such time as the Shareholders no longer hold at least ______ Shares (including
for such purposes any shares of Common Stock obtained upon conversion of the Shares).

]**[7.6 Proprietary Information Agreements

All current officers, employees and consultants of the Company have executed, and all future
employees and consultants of the Company shall be required to execute, a proprietary information
agreement substantially in the form attached hereto as Exhibit ______ with such amendments
thereto as the Board of Directors may from time to time deem appropriate.
]**[7.7 Key Person Life Insurance
The Company shall keep in effect term life insurance policies on ______ in the amount of $______
each, with proceeds payable in each case to the Company. Additional term life insurance policies
may be obtained on such other officers of the Company, and in such amounts, as may be determined
by the Board of Directors.
]**[7.8 Investors' Rights of Access and Inspection
From the date hereof to the Closing Date, any Investor may, through its employees, agents and
representatives, during normal working hours as it deems necessary or advisable, upon such
restrictions as the Company may reasonably impose to protect the Company's business records and
to avoid disruption of the Company's operations, make or cause to be made such investigation of the
Company's assets and liabilities and the Company's business as such Investor shall deem advisable.
During such period the Company shall furnish promptly to any Investor all information concerning
the Company's assets and liabilities and its business as such Investor may reasonably request.
]**[7.9 Operation of Business
From the date hereof to the Closing Date, except to the extent expressly permitted by this
Agreement or otherwise waived in writing by a majority in interest of the Investors, the Company
shall take no action which would be required to be disclosed as an exception to any of the
Company's representations and warranties in Section 3.
]**[7.10

Best Efforts

Subject to the terms and conditions herein provided, the Company agrees to use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done as promptly as practicable, all
things necessary, proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.
]**[7.11

Expenses

The Company and each Investor shall bear its own expenses and legal fees incurred on its behalf
with respect to this agreement and the transactions contemplated hereby; however, the Company
will pay at the Closing the reasonable legal fees and out-of-pocket expenses of ______, special
counsel to the Investors, in connection with the negotiation and execution of this agreement and the
completion of the transactions described herein which are to be completed as of the Closing.

]**[7.12

Other Covenants

(a)
Unless otherwise approved by the holders of a majority of the Shares, the net
proceeds received by the Company from the sale of the Shares on the Closing Date will be
used substantially to pay general operating expenses primarily associated with the
development, manufacturing, marketing and sales of products related to ______.
(b)
The Company will apply for, or obtain assignments of, or licenses to use, all the
Intellectual Property Rights which in the opinion of a prudent and experienced businessman
operating in the industry in which the Company is operating are desirable or necessary for
the conduct and protection of the business of the Company.
(c)
The rights and protections granted to the Investors under this agreement and the
rights, preferences and priorities of the Series B Shares, shall be no less favorable than those
of any future investor purchasing any Preferred Stock or any security convertible into
Common Stock of the Company. In the event that the Company proposes to issue any
Preferred Stock or any security convertible into Common Stock to any future investor, the
rights of the Investors hereunder, and the rights, preferences and priorities of the Series B
Shares, shall be modified or amended so as to be superior to or on a parity with those of
such future investor or the securities issued thereto.
]*8.

Miscellaneous

8.1 Governing Law

This agreement shall be governed by and construed in accordance with the laws of the State of
______ applicable to contracts between ______ residents entered into and to be performed entirely
within the State of ______.
8.2 Survival
The representations, warranties, covenants and agreements made by the parties herein shall survive
any investigation made by any Investor or the Company and shall survive the closing of the
transactions contemplated hereby.
8.3 Indemnification
The Company agrees to indemnify and hold each of the Investors harmless from and against any
and all liabilities, damages, losses, claims, demands, costs or expenses (including interest, penalties,
reasonable attorneys' and accountants' fees and expenses, court costs and fees of expert witnesses)
(all of the foregoing hereinafter collectively referred to as the "Claims") which the Investors shall
suffer or incur, whether liquidated or unliquidated, accrued or contingent, connected with or arising
out of any untruth or error in or breach or default of any representation, warranty or covenant
contained in the Business Plan, the Financial Statements, the Schedule of Exceptions, this
Agreement, or any other statement, certificate or memorandum furnished or to be furnished to the
Investors pursuant hereto or in connection with the transactions contemplated hereby by the

Company (or on the Company's behalf).

8.4 Confidentiality of Information
Each of the Investors and the Company each hereby acknowledge and confirm their respective
obligations under the Information Receipt Agreement dated ______ by and between them.
8.5 Successors and Assigns
Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto,
provided that none of the Founders is intended to have any right, remedy or privilege hereunder.
8.6 Entire Agreement
Except for the matters referred to in the Information Receipt Agreement, this agreement and the
other documents delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
8.7 Amendments and Waivers
Except as provided herein, any term of this agreement may be amended and the observance of any
term of this agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and the holders of at least
______% of the outstanding shares (including any converted shares that have not been sold to the
public. Any amendment or waiver effected in accordance with this section shall be binding upon
and equally affect each holder of any securities purchased under this agreement at the time
outstanding (including securities into which such securities have been converted), each future holder
of all such securities, and the Company.
8.8 Rights of Investors
Each holder of the Shares (including converted Shares) shall have the absolute right to exercise or
refrain from exercising any right or rights that such holder may have by reason of this agreement or
the Shares, including without limitation the right to consent to the waiver of any obligation of the
Company under this agreement and to enter into an agreement with the Company for the purpose of
modifying this agreement or any agreement effecting any such modification, and such holder shall
not incur any liability to any other holder or holders of the Shares with respect to exercising or
refraining from exercising any such right or rights.
8.9 Exculpation Among Investors
Each Investor acknowledges that he, she or it is not relying upon any person, firm, or corporation,
other than the Company and its officers and directors, in making its investment or decision to invest
in the Company. Each Investor agrees that no Investor nor the respective controlling person,
officers directors, partners, agents, or employees of any Investor shall be liable for any action

heretofore or hereafter taken or omitted to be taken by any of them in connection with the Shares
(including converted Shares).
8.10

Notices

All notices and other communications required or permitted hereunder shall be in writing and shall
be effective (if by mail) [spelled number of days] (______) days after mailed by first-class mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to a Investor, at
such Investor's address set forth in the Schedule of Investors, or at such other address as such
Investor shall have furnished to the Company in writing, or (b) if to any other holder of any Shares,
at such address as such holder shall have furnished the Company in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of the last holder of such
Shares who has so furnished an address to the Company, or (c) if to the Company, at such address as
the Company shall have furnished to each Investor and each such other holder in writing.
8.11

Counterparts

This agreement may be executed in any number of counterparts, each of which may be executed by
less than all of the Investors, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one instrument.
The foregoing agreement is hereby executed as of the date first above written.
[Signature of Company]
[Notary for Company]
*[SELLING SHAREHOLDERS:
*{{[Signature of Shareholders]
[Notary for Shareholders]
}}*
]*FOUNDERS:
*{{[Signature of Founders]
[Notary for Founders]
}}*
INVESTORS:
*{{[Signature of Investors]
[Notary for Investors]
}}*