POLYCOM INC
8-K, 1997-08-13
TELEPHONE & TELEGRAPH APPARATUS
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<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION

                                WASHINGTON, D.C. 20549

                                  -----------------

                                       FORM 8-K

                                    CURRENT REPORT

                        PURSUANT TO SECTION 13 OR 15(d) OF THE

                           SECURITIES EXCHANGE ACT OF 1934


DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):   JUNE 11, 1997
                                                  ------------------------------

                                    POLYCOM, INC.
- --------------------------------------------------------------------------------
                  (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
                                           

    Delaware                       0-27978                  94-3128324
- --------------------------------------------------------------------------------
(State or other jurisdiction      (Commission              (IRS Employer
   of incorporation)              File Number)             Identification No.)


2584 Junction Avenue, San Jose, California                       95134
- --------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)


Company's telephone number, including area code:   (408) 526-9000
                                                 -------------------------------




- --------------------------------------------------------------------------------
            (Former name or former address, if changed since last report.)



<PAGE>

ITEM  5. OTHER EVENTS.

              (a) On June 11, 1997, the Registrant agreed to acquire ViaVideo 
Communications, Inc., a Delaware corporation ("ViaVideo"), by the statutory 
merger (the "Merger") of a wholly-owned subsidiary of the Registrant, Venice 
Acquisition Corporation, a Delaware corporation ("Merger Sub"), with and into 
ViaVideo.  The Merger will be accomplished pursuant to the Agreement and Plan 
of Reorganization, dated as of June 11, 1997, among the Registrant, ViaVideo 
and Merger Sub, and a related Certificate of Merger (collectively, the 
"Merger Agreements").  The Merger of Merger Sub with and into ViaVideo will 
occur following the approval of the Merger Agreements by the stockholders of 
the Registrant at a stockholders' meeting currently expected to be held in 
November, 1997 and the satisfaction of certain other closing conditions, 
including first customer shipment by ViaVideo of its initial video 
conferencing system no later than March 31, 1998 and Polycom's share price 
preceding the acquisition to be at or above $3.00 per share.  As a result of 
the Merger, the Registrant will become the owner of 100% of the issued and 
outstanding shares of ViaVideo Common Stock and each outstanding share of 
ViaVideo Common Stock will be converted into newly issued shares of 
Registrant's Common Stock.  A total of approximately 9.7 million shares of 
the Registrant's Common Stock will be issued to former ViaVideo stockholders, 
warrantholders and optionholders in exchange for the acquisition by Merger 
Sub of all issued and outstanding ViaVideo capital stock and the assumption 
of unexpired and unexercised options and warrants to acquire ViaVideo capital 
stock (plus up to an additional 300,000 shares based on future option grants 
by ViaVideo).  Depending on the price of Polycom's shares averaged during a 
specified period preceding the acquisition, the total number of Polycom 
shares to be issued may be reduced so in no event will the total acquisition 
consideration exceed $90 million. The shares issued to ViaVideo stockholders 
will be issued pursuant to a registration statement on Form S-4, pursuant to 
the Securities Act of 1933, as amended.  ViaVideo options to purchase 
ViaVideo Common Stock will be assumed by the Registrant and will remain 
outstanding as options to purchase shares of the Registrant's Common Stock. 
The terms of the Merger Agreements were the result of arm's-length 
negotiations among the parties.

              


                                       2.

<PAGE>

ITEM 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

         (a)   Financial Statements of Business Acquired.  Not applicable.

         (b)   Forma Financial Information.  Not applicable.

         (c)   Exhibits:

         Exhibit
         Number
         -------

         2.1   Agreement and Plan of Reorganization, dated as of June 11,
               1997, by and among the Registrant, Venice Acquisition
               Corporation and ViaVideo Communications, Inc.

         20.1  Press Release of the Registrant dated June 11, 1997.



                                       3.

<PAGE>

                                      SIGNATURES



         Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.


                                  POLYCOM, INC.



Dated:  August 13, 1997           By:  /s/ Michael R. Kourey 
                                       ------------------------------------
                                       Michael R. Kourey, Vice President,
                                       Finance and Administration, Chief
                                       Financial Officer and Secretary









                             [SIGNATURE PAGE TO FORM 8-K]



<PAGE>

                                    EXHIBIT INDEX


                               DESCRIPTION OF DOCUMENT

Exhibit
Number
- -------

2.1  Agreement and Plan of Reorganization, dated as of June 11, 1997, by and
     among the Registrant, Venice Acquisition Corporation and ViaVideo
     Communications, Inc.

20.1 Press Release of the Registrant dated June 11, 1997.






<PAGE>


                                     EXHIBIT 2.1

                         AGREEMENT AND PLAN OF REORGANIZATION






<PAGE>


                         AGREEMENT AND PLAN OF REORGANIZATION

                                     BY AND AMONG

                                    POLYCOM, INC.,

                            VENICE ACQUISITION CORPORATION

                                         AND

                            VIAVIDEO COMMUNICATIONS, INC.


                                    JUNE 11, 1997


<PAGE>

                                  TABLE OF CONTENTS


                                                                           PAGE

ARTICLE I    THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . .   2
    1.1      The Merger. . . . . . . . . . . . . . . . . . . . . . . . . .   2
    1.2      Closing; Effective Time . . . . . . . . . . . . . . . . . . .   2
    1.3      Effect of the Merger. . . . . . . . . . . . . . . . . . . . .   2
    1.4      Certificate of Incorporation; Bylaws. . . . . . . . . . . . .   2
    1.5      Directors and Officers. . . . . . . . . . . . . . . . . . . .   3
    1.6      Effect on Capital Stock . . . . . . . . . . . . . . . . . . .   3
    1.7      Surrender of Certificates . . . . . . . . . . . . . . . . . .   5
    1.8      No Further Ownership Rights in Target Capital Stock . . . . .   7
    1.9      Lost, Stolen or Destroyed Certificates. . . . . . . . . . . .   7
    1.10     Tax and Accounting Consequences . . . . . . . . . . . . . . .   7
    1.11     Taking of Necessary Action; Further Action. . . . . . . . . .   8

ARTICLE II   REPRESENTATIONS AND WARRANTIES OF TARGET. . . . . . . . . . .   8
    2.1      Organization, Standing and Power. . . . . . . . . . . . . . .   8
    2.2      Capital Structure . . . . . . . . . . . . . . . . . . . . . .   9
    2.3      Authority . . . . . . . . . . . . . . . . . . . . . . . . . .  10
    2.4      Financial Statements. . . . . . . . . . . . . . . . . . . . .  11
    2.5      Absence of Certain Changes. . . . . . . . . . . . . . . . . .  11
    2.6      Absence of Undisclosed Liabilities. . . . . . . . . . . . . .  11
    2.7      Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .  12
    2.8      Restrictions on Business Activities . . . . . . . . . . . . .  12
    2.9      Governmental Authorization. . . . . . . . . . . . . . . . . .  12
    2.10     Title to Property . . . . . . . . . . . . . . . . . . . . . .  12
    2.11     Intellectual Property . . . . . . . . . . . . . . . . . . . .  13
    2.12     Environmental Matters . . . . . . . . . . . . . . . . . . . .  14
    2.13     Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
    2.14     Employee Benefit Plans. . . . . . . . . . . . . . . . . . . .  16
    2.15     Certain Agreements Affected by the Merger . . . . . . . . . .  19
    2.16     Employee Matters. . . . . . . . . . . . . . . . . . . . . . .  19
    2.17     Interested Party Transactions . . . . . . . . . . . . . . . .  19
    2.18     Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .  20
    2.19     Compliance With Laws. . . . . . . . . . . . . . . . . . . . .  20


<PAGE>


    2.20     Minute Books. . . . . . . . . . . . . . . . . . . . . . . . .  20
    2.21     Complete Copies of Materials. . . . . . . . . . . . . . . . .  20
    2.22     Pooling of Interests. . . . . . . . . . . . . . . . . . . . .  20
    2.23     Brokers' and Finders' Fees. . . . . . . . . . . . . . . . . .  20
    2.24     Registration Statement; Proxy Statement/Prospectus. . . . . .  20
    2.25     Affiliate's Agreement; Stockholder's Representation 
             Agreement; Irrevocable Proxies. . . . . . . . . . . . . . . .  21
    2.26     Vote Required . . . . . . . . . . . . . . . . . . . . . . . .  21
    2.27     Board Approval. . . . . . . . . . . . . . . . . . . . . . . .  21
    2.28     Inventory . . . . . . . . . . . . . . . . . . . . . . . . . .  22
    2.30     Preliminary Pooling Letter. . . . . . . . . . . . . . . . . .  22
    2.31     Representations Complete. . . . . . . . . . . . . . . . . . .  23

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF ACQUIROR 
             AND MERGER SUB                                                 23
    3.1      Organization, Standing and Power. . . . . . . . . . . . . . .  23
    3.2      Capital Structure . . . . . . . . . . . . . . . . . . . . . .  24
    3.3      Authority . . . . . . . . . . . . . . . . . . . . . . . . . .  25
    3.4      SEC Documents; Financial Statements . . . . . . . . . . . . .  25
    3.5      Absence of Certain Changes. . . . . . . . . . . . . . . . . .  26
    3.6      Absence of Undisclosed Liabilities. . . . . . . . . . . . . .  27
    3.7      Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .  27
    3.8      Restrictions on Business Activities . . . . . . . . . . . . .  27
    3.9      Opinion of Financial Advisor. . . . . . . . . . . . . . . . .  27
    3.10     Intellectual Property . . . . . . . . . . . . . . . . . . . .  27
    3.11     Governmental Authorization. . . . . . . . . . . . . . . . . .  28
    3.12     Compliance With Laws. . . . . . . . . . . . . . . . . . . . .  28
    3.13     Pooling of Interests. . . . . . . . . . . . . . . . . . . . .  28
    3.14     Broker's and Finders' Fees. . . . . . . . . . . . . . . . . .  28
    3.15     Registration Statement; Proxy Statement/Prospectus. . . . . .  28
    3.16     Vote Required . . . . . . . . . . . . . . . . . . . . . . . .  29
    3.17     Board Approval. . . . . . . . . . . . . . . . . . . . . . . .  29
    3.18     Preliminary Pooling Letter. . . . . . . . . . . . . . . . . .  29
    3.19     Representations Complete. . . . . . . . . . . . . . . . . . .  29

ARTICLE IV   CONDUCT PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . .  30
    4.1      Conduct of Business of Acquiror . . . . . . . . . . . . . . .  30
    4.2      Conduct of Business of Target . . . . . . . . . . . . . . . .  31
    4.3      Limitations on Business of Target . . . . . . . . . . . . . .  32


                                       ii.

<PAGE>

    4.4      No Solicitation . . . . . . . . . . . . . . . . . . . . . . .  34

ARTICLE V    ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . .  35
    5.1      Proxy Statement/Prospectus; Registration Statement. . . . . .  35
    5.2      Meeting of Stockholders . . . . . . . . . . . . . . . . . . .  36
    5.3      Access to Information . . . . . . . . . . . . . . . . . . . .  36
    5.4      Confidentiality . . . . . . . . . . . . . . . . . . . . . . .  37
    5.5      Public Disclosure . . . . . . . . . . . . . . . . . . . . . .  37
    5.6      Consents; Cooperation . . . . . . . . . . . . . . . . . . . .  37
    5.7      Pooling Accounting. . . . . . . . . . . . . . . . . . . . . .  38
    5.8      Affiliate Agreements. . . . . . . . . . . . . . . . . . . . .  39
    5.9      Voting Agreement. . . . . . . . . . . . . . . . . . . . . . .  39
    5.10     Legal Requirements. . . . . . . . . . . . . . . . . . . . . .  39
    5.11     Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . .  40
    5.12     Employee Benefit Plans. . . . . . . . . . . . . . . . . . . .  40
    5.13     Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . .  41
    5.14     Letter of Acquiror's and Target's Accountants . . . . . . . .  41
    5.15     Form S-8. . . . . . . . . . . . . . . . . . . . . . . . . . .  41
    5.16     Stockholder's Representation Agreements . . . . . . . . . . .  41
    5.17     Listing of Additional Shares. . . . . . . . . . . . . . . . .  42
    5.18     Employees . . . . . . . . . . . . . . . . . . . . . . . . . .  42
    5.19     Pooling Letters . . . . . . . . . . . . . . . . . . . . . . .  42
    5.20     Indemnification . . . . . . . . . . . . . . . . . . . . . . .  42
    5.21     Reorganization. . . . . . . . . . . . . . . . . . . . . . . .  43
    5.22     Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .  43
    5.25     Employee Benefit Plans. . . . . . . . . . . . . . . . . . . .  43
    5.26     Reasonable Commercial Efforts and Further Assurances. . . . .  44

ARTICLE VI   CONDITIONS TO THE MERGER. . . . . . . . . . . . . . . . . . .  44
    6.1      Conditions to Obligations of Each Party to Effect the 
             Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . .  44
    6.2      Additional Conditions to Obligations of Target. . . . . . . .  45
    6.3      Additional Conditions to the Obligations of 
             Acquiror and Merger Sub . . . . . . . . . . . . . . . . . . .  47

ARTICLE VII  TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . .  49
    7.1      Termination . . . . . . . . . . . . . . . . . . . . . . . . .  49
    7.2      Effect of Termination . . . . . . . . . . . . . . . . . . . .  51
    7.3      Expenses and Termination Fees . . . . . . . . . . . . . . . .  51
    7.4      Amendment . . . . . . . . . . . . . . . . . . . . . . . . . .  53


                                       iii.

<PAGE>

    7.5      Extension; Waiver . . . . . . . . . . . . . . . . . . . . . .  53

ARTICLE VIII ESCROW AND INDEMNIFICATION. . . . . . . . . . . . . . . . . .  54
    8.1      Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . .  54
    8.2      Indemnification . . . . . . . . . . . . . . . . . . . . . . .  54
    8.3      Damage Threshold. . . . . . . . . . . . . . . . . . . . . . .  55
    8.4      Escrow Period . . . . . . . . . . . . . . . . . . . . . . . .  55
    8.5      Claims upon Escrow Fund . . . . . . . . . . . . . . . . . . .  56
    8.6      Objections to Claims. . . . . . . . . . . . . . . . . . . . .  56
    8.7      Resolution of Conflicts; Arbitration. . . . . . . . . . . . .  57
    8.8      Stockholders' Agent . . . . . . . . . . . . . . . . . . . . .  58
    8.9      Actions of the Stockholders' Agent. . . . . . . . . . . . . .  58
    8.10     Third-Party Claims. . . . . . . . . . . . . . . . . . . . . .  59

ARTICLE IX   GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . .  59
    9.1      Survival at Effective Time. . . . . . . . . . . . . . . . . .  59
    9.2      Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
    9.3      Interpretation. . . . . . . . . . . . . . . . . . . . . . . .  61
    9.4      Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .  61
    9.5      Entire Agreement; Nonassignability; Parties in Interest . . .  61
    9.6      Severability. . . . . . . . . . . . . . . . . . . . . . . . .  61
    9.7      Remedies Cumulative . . . . . . . . . . . . . . . . . . . . .  62
    9.8      Governing Law . . . . . . . . . . . . . . . . . . . . . . . .  62
    9.9      Rules of Construction . . . . . . . . . . . . . . . . . . . .  62


                                       iv.

<PAGE>


SCHEDULES

Target Disclosure Schedule
Acquiror Disclosure Schedule

Schedule 1.6            -    Exchange Ratio
Schedule 2.10           -    Target Real Property
Schedule 2.11           -    Target Intellectual Property
Schedule 2.14           -    Target Employee Benefit Plans
Schedule 2.21           -    Material Agreements
Schedule 5.8(a)         -    Target Affiliates
Schedule 5.8(b)         -    Acquiror Affiliates
Schedule 5.9(a)         -    Target Voting Agreement Signatories
Schedule 5.9(b)         -    Acquiror Voting Agreement Signatories
Schedule 5.13           -    Outstanding Options
Schedule 5.18           -    List of Employees
Schedule 6.2(g)         -    Acquiror Third Party Consents
Schedule 6.3(c)         -    Target Third Party Consents

EXHIBITS

Exhibit A               -    Certificate of Merger
Exhibit B-1             -    Target's Affiliate Agreement
Exhibit B-2             -    Acquiror's Affiliate Agreement
Exhibit C-1             -    Target Voting Agreement
Exhibit C-2             -    Acquiror Voting Agreement
Exhibit D               -    FIRPTA Notice
Exhibit E               -    Escrow Agreement
Exhibit F               -    Stockholder's Representation Agreement
Exhibit G-1, et. seq.   -    Form of Employment Agreements
Exhibit H               -    Services Agreement


                                       v.

<PAGE>


                         AGREEMENT AND PLAN OF REORGANIZATION


         This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
and entered into as of June 11, 1997, by and among Polycom, Inc., a Delaware
corporation ("Acquiror"), Venice Acquisition Corporation, a Delaware corporation
and wholly-owned subsidiary of Acquiror ("Merger Sub"), and ViaVideo
Communications, Inc., a Delaware corporation ("Target").

                                       RECITALS

         A.    The Boards of Directors of Target, Acquiror and Merger Sub
believe it is in the best interests of their respective companies and
stockholders that Target and Merger Sub combine into a single company through
the statutory merger of Merger Sub with and into Target (the "Merger") and, in
furtherance thereof, have approved the Merger.

         B.    Pursuant to the Merger, among other things, the outstanding
shares of Target Common Stock (assuming the conversion of all outstanding Target
Preferred Stock into Common Stock prior to the Effective Time, as defined below)
shall be converted into shares of Acquiror Common Stock, $.0005 par value
("Acquiror Common Stock"), and all outstanding options to purchase Target Common
Stock shall be assumed by Acquiror and shall be exercisable into Acquiror Common
Stock at the rate set forth herein.  Target Common Stock (assuming the
conversion of all outstanding Target Preferred Stock into Common Stock prior to
the Effective Time) and all outstanding options to purchase Target Common Stock
shall hereinafter to referred to as Target Capital Stock.

         C.    Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.

         D.    The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.

         E.    The parties intend to cause the Merger to be accounted for as a
pooling of interests pursuant to APB Opinion No. 16, Staff Accounting Series
Releases 130, 135 and 146 and Staff Accounting Bulletins Topic Two.

         F.    Concurrent with the execution of this Agreement and as an
inducement to Acquiror and Merger Sub to enter into this Agreement, certain of
the affiliates of Target who are stockholders, officers or directors have on the
date hereof entered into an agreement to vote the 




<PAGE>

shares of Target's Common Stock owned by such persons to approve the Merger 
and against any competing proposals.

         NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:

                                      ARTICLE I

                                      THE MERGER

         1.1   THE MERGER.  At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as EXHIBIT A (the "Certificate of Merger")
and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Merger Sub shall be merged with and into Target, the separate corporate
existence of Merger Sub shall cease and Target shall continue as the surviving
corporation.  Target as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."

         1.2   CLOSING; EFFECTIVE TIME.  The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof or at such other time as the parties hereto agree (the "Closing
Date").  The Closing shall take place at the offices of Brobeck, Phleger &
Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo Alto, California, or
at such other location as the parties hereto agree.  In connection with the
Closing, the parties hereto shall cause the Merger to be consummated by filing
the Certificate of Merger with the Secretary of State of the State of Delaware,
in accordance with the relevant provisions of Delaware Law (the time of such
filing being the "Effective Time").

         1.3   EFFECT OF THE MERGER.  At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law.  Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.

         1.4   CERTIFICATE OF INCORPORATION; BYLAWS.

               (a) At the Effective Time, the Certificate of Incorporation
of Merger Sub, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of 

                                       2.

<PAGE>

the Surviving Corporation shall be amended to read as follows: "The name of 
the corporation is Acquiror, Inc."

               (b) The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.

         1.5   DIRECTORS AND OFFICERS.  At the Effective Time, the directors
of Merger Sub, as in effect immediately prior to the Effective Time, shall be
the directors of the Surviving Corporation, until their respective successors
are duly elected or appointed and qualified.  The officers of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the initial officers of
the Merger Sub, until their respective successors are duly elected or appointed
and qualified.

         1.6   EFFECT ON CAPITAL STOCK.  By virtue of the Merger and without
any action on the part of Merger Sub, Target or the holders of any of the
following securities:

               (a) SHARES TO BE ISSUED; CONVERSION OF TARGET COMMON STOCK. 
The number of shares of Acquiror Common Stock to be issued (including 
Acquiror Common Stock to be reserved for issuance upon exercise of Target 
options assumed by Acquiror and all ungranted options under the Target Stock 
Option Plan, as defined below) in exchange for the acquisition by Acquiror of 
all outstanding Target Capital Stock and all reserved but ungranted options 
to acquire Target Common Stock shall be Ten Million (10,000,000) shares of 
Acquiror Common Stock, reduced as a result of any Dissenting Shares.  At the 
Effective Time, each share of Target Common Stock (assuming the conversion of 
all outstanding Target Preferred Stock into Common Stock prior to the 
Effective Time) issued and outstanding immediately prior to the Effective 
Time will be canceled and extinguished and be converted automatically into 
the right to receive that number of shares of Acquiror Common Stock obtained 
by dividing Ten Million (10,000,000) by the total amount of shares of Target 
Capital Stock, plus all reserved but ungranted options to purchase Target 
Common Stock, issued and outstanding immediately prior to the Effective Time 
as set forth on SCHEDULE 1.6 hereto (the "Exchange Ratio").  Notwithstanding 
the foregoing, if, based on the average of the closing prices of Acquiror's 
Common Stock as quoted on the Nasdaq National Market System for the ten (10) 
trading days immediately preceding (and including) the second trading day 
prior to the Effective Time (the "Closing Price"), the product of (x) the 
total number of shares of Acquiror Common Stock to be issued (including 
Acquiror Common Stock to be reserved for issuance upon exercise of Target 
options issued by Acquiror under the Target Stock Option Plan) and (y) the 
Closing Price (such product defined herein as the "Total Value") exceeds 
$87,015,303, the Exchange Ratio shall be reduced such that the Total Value 
shall be $87,015,303.  The limit on the Total Value herein shall be 
recalculated in accordance with the preceding formula based upon the total 
number of shares of Acquiror Common Stock to be issued (including Acquiror 
Common Stock to be reserved for issuance upon exercise of Target options 
issued by Acquiror under the Target Stock Option Plan) as calculated 
immediately prior to the Effective Time; in no event shall the Total Value 
exceed $90,000,000.  No other adjustment shall be made in the 


                                       3.

<PAGE>

Exchange Ratio as a result of any cash proceeds received by Target from the 
date hereof to the Closing Date pursuant to the exercise of currently 
outstanding options to acquire Target Common Stock. 

               (b) CANCELLATION OF TARGET COMMON STOCK OWNED BY ACQUIROR
OR TARGET.  At the Effective Time, all shares of Target Common Stock that are
owned by Target as treasury stock and each share of Target Common Stock owned by
Acquiror or any direct or indirect wholly-owned subsidiary of Acquiror or of
Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.

               (c) TARGET STOCK OPTION PLANS.  At the Effective Time,
Target's 1996 Stock Option/Stock Issuance Plan (the "Target Stock Option Plan")
and all options to purchase Target Common Stock then outstanding under the
Target Stock Option Plan shall be assumed by Acquiror in accordance with Section
5.13.

               (d) CAPITAL STOCK OF MERGER SUB.  At the Effective Time,
each share of Common Stock, $.0001 par value, of Merger Sub ("Merger Sub Common
Stock") issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, $.0001 par value, of the Surviving
Corporation.  Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.

               (e) ADJUSTMENTS TO EXCHANGE RATIO.  The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities convertible
into Acquiror Common Stock or Target Common Stock), reorganization,
recapitalization or other like change with respect to Acquiror Common Stock or
Target Common Stock occurring after the date hereof and prior to the Effective
Time.

               (f) FRACTIONAL SHARES.  No fraction of a share of Acquiror
Common Stock will be issued, but in lieu thereof each holder of shares of Target
Common Stock who would otherwise be entitled to a fraction of a share of
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the average of the closing prices of a share
of Acquiror Common Stock for the ten most recent days that Acquiror Common Stock
has traded ending on the trading day immediately prior to the Effective Time, as
reported on the Nasdaq National Market.

               (g) DISSENTERS' RIGHTS.  Any shares held by persons who
have not voted in favor of the Merger and with respect to which such persons
shall become entitled to exercise dissenters' rights under Delaware Law
("Dissenting Shares") shall not be converted into Acquiror 


                                       4.

<PAGE>

Common Stock but shall instead be converted into the right to receive such 
consideration as may be determined to be due with respect to such Dissenting 
Shares pursuant to Delaware Law.  Target agrees that, except with the prior 
written consent of Acquiror, which shall not be unreasonably withheld, or as 
required under Delaware Law, it will not voluntarily make any payment with 
respect to, or settle or offer to settle, any such purchase demand.  Each 
holder of Dissenting Shares ("Dissenting Stockholder") who, pursuant to the 
provisions of Delaware Law, becomes entitled to payment of the fair value for 
shares of Target Capital Stock shall receive payment therefor (but only after 
the value therefor shall have been agreed upon or finally determined pursuant 
to such provisions).  If, after the Effective Time, any Dissenting Shares 
shall lose their status as Dissenting Shares, Acquiror shall issue and 
deliver, upon surrender by such stockholder of certificate or certificates 
representing shares of Target Capital Stock, the number of shares of Acquiror 
Common Stock to which such stockholder would otherwise be entitled under this 
Section 1.6 and the Certificate of Merger less the number of shares allocable 
to such stockholder that have been deposited in the Escrow Fund (as defined 
below) in respect of such shares of Acquiror Common Stock pursuant to Section 
2.2(c) and Article VIII hereof.

         1.7   SURRENDER OF CERTIFICATES.

               (a) EXCHANGE AGENT.  The First National Bank of Boston
shall act as exchange agent (the "Exchange Agent") in the Merger.

               (b) ACQUIROR TO PROVIDE COMMON STOCK AND CASH.  Promptly after 
the Effective Time, Acquiror shall make available to the Exchange Agent for 
exchange in accordance with this Article I, through such reasonable 
procedures as Acquiror may adopt, (i) the shares of Acquiror Common Stock 
issuable pursuant to Section 1.6(a) in exchange for shares of Target Capital 
Stock outstanding immediately prior to the Effective Time less the number of 
shares of Acquiror Common Stock to be deposited into an escrow fund (the 
"Escrow Fund") pursuant to the requirements of Article VIII and (ii) cash in 
an amount sufficient to permit payment of cash in lieu of fractional shares 
pursuant to Section 1.6(g).

               (c) EXCHANGE PROCEDURES.  Promptly after the Effective Time, 
the Surviving Corporation shall cause to be mailed to each holder of record 
of a certificate or certificates (the "Certificates") which immediately prior 
to the Effective Time represented outstanding shares of Target Capital Stock, 
whose shares were converted into the right to receive shares of Acquiror 
Common Stock (and cash in lieu of fractional shares) pursuant to Section 1.6, 
(i) a letter of transmittal (which shall specify that delivery shall be 
effected, and risk of loss and title to the Certificates shall pass, only 
upon receipt of the Certificates by the Exchange Agent, and shall be in such 
form and have such other provisions as Acquiror may reasonably specify) and 
(ii) instructions for use in effecting the surrender of the Certificates in 
exchange for certificates representing shares of Acquiror Common Stock (and 
cash in lieu of fractional shares).  Upon surrender of a Certificate for 
cancellation to the Exchange Agent or to such other agent or agents as may be 
appointed by Acquiror, together with such letter of transmittal, duly 
completed and validly 


                                       5.

<PAGE>


executed in accordance with the instructions thereto, the holder of such 
Certificate shall be entitled to receive in exchange therefor a certificate 
representing the number of whole shares of Acquiror Common Stock less the 
number of shares of Acquiror Common Stock to be deposited in the Escrow Fund 
on such holder's behalf pursuant to Article VIII hereof and payment in lieu 
of fractional shares which such holder has the right to receive pursuant to 
Section 1.6, and the Certificate so surrendered shall forthwith be canceled.  
Until so surrendered, each outstanding Certificate that, prior to the 
Effective Time, represented shares of Target Capital Stock will be deemed 
from and after the Effective Time, for all corporate purposes, other than the 
payment of dividends, to evidence the ownership of the number of full shares 
of Acquiror Common Stock into which such shares of Target Capital Stock shall 
have been so converted and the right to receive an amount in cash in lieu of 
the issuance of any fractional shares in accordance with Section 1.6. As soon 
as practicable after the Effective Time, and subject to and in accordance 
with the provisions of Article VIII hereof, Acquiror shall cause to be 
distributed to the Escrow Agent (as defined in Article VIII hereof) a 
certificate or certificates representing shares of Acquiror Common Stock 
which shall be registered in the name of the Escrow Agent as nominee for the 
holders of Certificates cancelled pursuant to this Section 1.7. Such shares 
shall be beneficially owned by such holders and shall be held in escrow and 
shall be available to compensate Acquiror for certain damages as provided in 
Article VIII.  To the extent not used for such purposes, such shares shall be 
released, all as provided in Article VIII hereof.

               (d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.  No 
dividends or other distributions with respect to Acquiror Common Stock with a 
record date after the Effective Time will be paid to the holder of any 
unsurrendered Certificate with respect to the shares of Acquiror Common Stock 
represented thereby until the holder of record of such Certificate shall 
surrender such Certificate.  Subject to applicable law, following surrender 
of any such Certificate, there shall be paid to the record holder of the 
certificates representing whole shares of Acquiror Common Stock issued in 
exchange therefor, without interest, at the time of such surrender, the 
amount of any such dividends or other distributions with a record date after 
the Effective Time theretofore payable (but for the provisions of this 
Section 1.7(d)) with respect to such shares of Acquiror Common Stock.

               (e) TRANSFERS OF OWNERSHIP.  If any certificate for shares of 
Acquiror Common Stock is to be issued in a name other than that in which the 
Certificate surrendered in exchange therefor is registered, it will be a 
condition of the issuance thereof that the Certificate so surrendered will be 
properly endorsed and otherwise in proper form for transfer and that the 
person requesting such exchange will have paid to Acquiror or any agent 
designated by it any transfer or other taxes required by reason of the 
issuance of a certificate for shares of Acquiror Common Stock in any name 
other than that of the registered holder of the Certificate surrendered, or 
established to the satisfaction of Acquiror or any agent designated by it 
that such tax has been paid or is not payable.


                                       6.

<PAGE>


               (f) NO LIABILITY.  Notwithstanding anything to the contrary in 
this Section 1.7, none of the Exchange Agent, the Surviving Corporation or 
any party hereto shall be liable to any person for any amount properly paid 
to a public official pursuant to and in compliance with any applicable 
abandoned property, escheat or similar law.

               (g) DISSENTING SHARES.  The provisions of this Section 1.7 
shall also apply to Dissenting Shares that lose their status as such, except 
that the obligations of Acquiror under this Section 1.7 shall commence on the 
date of loss of such status and the holder of such shares shall be entitled 
to receive in exchange for such shares the number of shares of Acquiror 
Common Stock to which such holder is entitled pursuant to Section 1.6 hereof.

         1.8   NO FURTHER OWNERSHIP RIGHTS IN TARGET CAPITAL STOCK.  All 
shares of Acquiror Common Stock issued upon the surrender for exchange of 
shares of Target Capital Stock in accordance with the terms hereof (including 
any cash paid in lieu of fractional shares) shall be deemed to have been 
issued in full satisfaction of all rights pertaining to such shares of Target 
Capital Stock and there shall be no further registration of transfers on the 
records of the Surviving Corporation of shares of Target Capital Stock which 
were outstanding immediately prior to the Effective Time.  If, after the 
Effective Time, Certificates are presented to the Surviving Corporation for 
any reason, they shall be canceled and exchanged as provided in this Article 
I.

         1.9   LOST, STOLEN OR DESTROYED CERTIFICATES.  In the event any 
Certificates shall have been lost, stolen or destroyed, the Exchange Agent 
shall issue in exchange for such lost, stolen or destroyed Certificates, upon 
the making of an affidavit of that fact by the holder thereof, such shares of 
Acquiror Common Stock (and cash in lieu of fractional shares) as may be 
required pursuant to Section 1.6; provided, however, that Acquiror may, in 
its discretion and as a condition precedent to the issuance thereof, require 
the owner of such lost, stolen or destroyed Certificates to deliver a bond in 
such sum as it may reasonably direct as indemnity against any claim that may 
be made against Acquiror, the Surviving Corporation or the Exchange Agent 
with respect to the Certificates alleged to have been lost, stolen or 
destroyed.

         1.10  TAX AND ACCOUNTING CONSEQUENCES.  It is intended by the 
parties hereto that the Merger shall (i) constitute a reorganization within 
the meaning of Section 368 of the Code and (ii) qualify for accounting 
treatment as a pooling of interests.

         1.11  TAKING OF NECESSARY ACTION; FURTHER ACTION.  If, at any time 
after the Effective Time, any further action is necessary or desirable to 
carry out the purposes of this Agreement and to vest the Surviving 
Corporation with full right, title and possession to all assets, property, 
rights, privileges, powers and franchises of Target and Merger Sub, the 
officers and directors of Target and Merger Sub are fully authorized in the 
name of third respective corporations or otherwise to take, and will take, 
all such lawful and necessary action, so long as such action is not 
inconsistent with this Agreement.


                                       7.

<PAGE>

                                      ARTICLE II

                       REPRESENTATIONS AND WARRANTIES OF TARGET

         In this Agreement, any reference to any event, change, condition or 
effect being "material" with respect to any entity or group of entities means 
any material event, change, condition or effect related to the financial 
condition, properties, assets (including intangible assets), liabilities, 
business, operations or results of operations of such entity or group of 
entities.  In this Agreement, any reference to a "Material Adverse Effect" 
with respect to any entity or group of entities means any event, change or 
effect that is materially adverse to the financial condition, properties, 
assets, liabilities, business, operations or results of operations of such 
entity and its subsidiaries, taken as a whole.

         In this Agreement, any reference to a party's "knowledge" means such 
party's actual knowledge after due and diligent inquiry of officers, 
directors and other employees of such party reasonably believed to have 
knowledge of such matters.

         Except as disclosed in a document of even date herewith and 
delivered by Target to Acquiror prior to the execution and delivery of this 
Agreement and referring to the representations and warranties in this 
Agreement (the "Target Disclosure Schedule"), Target represents and warrants 
to Acquiror and Merger Sub as follows:

         2.1   ORGANIZATION, STANDING AND POWER.  Target is a corporation 
duly organized, validly existing and in good standing under the laws of its 
jurisdiction of organization.  Target has the corporate power to own its 
properties and to carry on its business as now being conducted and as 
proposed to be conducted and is duly qualified to do business and is in good 
standing in each jurisdiction in which the failure to be so qualified and in 
good standing would have a Material Adverse Effect on Target.  Target has 
delivered a true and correct copy of the Certificate of Incorporation and 
Bylaws or other charter documents, as applicable, of Target, each as amended 
to date, to Acquiror. Target is not in violation of any of the provisions of 
its Certificate of Incorporation or Bylaws or equivalent organizational 
documents.  Target does not directly or indirectly own any equity or similar 
interest in, or any interest convertible or exchangeable or exercisable for, 
any equity or similar interest in, any corporation, partnership, joint 
venture or other business association or entity.

         2.2   CAPITAL STRUCTURE.  The authorized capital stock of Target 
consists of 14,000,000 shares of Common Stock and 6,000,000 shares of 
Preferred Stock, of which there were issued and outstanding as of the close 
of business on June 10, 1997, 2,190,554 shares of Common Stock, 2,574,310 
shares of Series A Preferred Stock (the "Series A Preferred") that are 
convertible 


                                       8.

<PAGE>


into 2,574,310 shares of Common Stock, and 2,333,334 shares of Series B 
Preferred Stock (the "Series B Preferred") that are convertible into 
2,333,334 shares of Common Stock.  There are no other outstanding shares of 
capital stock or voting securities and no outstanding commitments to issue 
any shares of capital stock or voting securities after June 10, 1997 other 
than pursuant to the exercise of options outstanding as of such date under 
the Target Stock Option Plan.  All outstanding shares of Target Capital Stock 
are duly authorized, validly issued, fully paid and non-assessable and are 
free of any liens or encumbrances other than any liens or encumbrances 
created by or imposed upon the holders thereof, and are not subject to 
preemptive rights or rights of first refusal created by statute, the 
Certificate of Incorporation or Bylaws of Target or any agreement to which 
Target is a party or by which it is bound.  As of the close of business on 
June 10, 1997, Target has reserved (i) 1,350,000 shares of Target Common 
Stock for issuance to employees, officers, directors and consultants pursuant 
to the Target Stock Option Plan, of which no shares have been issued pursuant 
to option exercises or direct stock purchases, 1,069,833 shares are subject 
to outstanding, unexercised options, and no shares are subject to outstanding 
stock purchase rights.  Since June 10, 1997, Target has not (i) issued or 
granted additional options under the Target Stock Option Plan or (ii) granted 
additional warrants or options (other than Target Options) to acquire Target 
Capital Stock. Except for (i) the rights created pursuant to this Agreement 
and the Target Stock Option Plan, (ii) Target's right to repurchase any 
unvested shares under the Target Stock Option Plan and (iii) options and 
warrants referred to in this Section 2.2, there are no other options, 
warrants, calls, rights, commitments or agreements of any character to which 
Target is a party or by which it is bound obligating Target to issue, 
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, 
repurchased or redeemed, any shares of capital stock of Target or obligating 
Target to grant, extend, accelerate the vesting of, change the price of, or 
otherwise amend or enter into any such option, warrant, call, right, 
commitment or agreement.  There are no other contracts, commitments or 
agreements relating to voting, purchase or sale of Target's capital stock (i) 
between or among Target and any of its stockholders and (ii) to Target's 
knowledge, between or among any of Target's stockholders, except for the 
stockholders delivering Irrevocable Proxies (as defined below).  The terms of 
the Target Stock Option Plan permit the assumption or substitution of options 
or warrants, as applicable, to purchase Acquiror Common Stock as provided in 
this Agreement, without the consent or approval of the holders of such 
securities, the Target stockholders, or otherwise and without any 
acceleration of the exercise schedule or vesting provisions in effect for 
those options.  True and complete copies of all agreements and instruments 
relating to or issued under the Target Stock Option Plan have been made 
available to Acquiror and such agreements and instruments have not been 
amended, modified or supplemented, and there are no agreements to amend, 
modify or supplement such agreements or instruments in any case from the form 
made available to Acquiror.  All outstanding Target Capital Stock was issued 
in compliance with all applicable federal and state securities laws.

         2.3   AUTHORITY.  Target has all requisite corporate power and 
authority to enter into this Agreement and to consummate the transactions 
contemplated hereby.  The execution and delivery of this Agreement and the 
consummation of the transactions contemplated hereby have been duly 
authorized by all necessary corporate action on the part of Target, subject 
only to the


                                       9.

<PAGE>

approval of the Merger by Target's stockholders as contemplated by Section 
6.1(a). This Agreement has been duly executed and delivered by Target and 
constitutes the valid and binding obligation of Target enforceable against 
Target in accordance with its terms, except that such enforceability may be 
limited by bankruptcy, insolvency, moratorium or other similar laws affecting 
or relating to creditors' rights generally, and is subject to general 
principles of equity.  The execution and delivery of this Agreement by Target 
does not, and the consummation of the transactions contemplated hereby will 
not, conflict with, or result in any violation of, or default under (with or 
without notice or lapse of time, or both), or give rise to a right of 
termination, cancellation or acceleration of any material obligation or loss 
of any material benefit under (i) any provision of the Certificate of 
Incorporation or Bylaws of Target or any of its subsidiaries, as amended, or 
(ii) any material mortgage, indenture, lease, contract or other agreement or 
instrument, permit, concession, franchise, license, judgment, order, decree, 
statute, law, ordinance, rule or regulation applicable to Target or any of 
its subsidiaries or any of their properties or assets except where such 
conflict, violation, default, termination, cancellation or acceleration with 
respect to the foregoing provisions of (ii) would not be reasonably expected 
to have a Material Adverse Effect on Target.  No consent, approval, order or 
authorization of, or registration, declaration or filing with, any court, 
administrative agency or commission or other governmental authority or 
instrumentality ("Governmental Entity") is required by or with respect to 
Target or any of its subsidiaries in connection with the execution and 
delivery of this Agreement or the consummation of the transactions 
contemplated hereby, except for (i) the filing of the Certificate of Merger 
as provided in Section 1.2, (ii) the filing with the Securities and Exchange 
Commission (the "SEC") and the National Association of Securities Dealers, 
Inc. (the "NASD") of the Proxy Statement (as defined in Section 2.24) 
relating to the Acquiror Stockholders Meeting (as defined in Section 2.24) 
and the Target Stockholders Meeting (as defined in Section 2.24), (iii) such 
consents, approvals, orders, authorizations, registrations, declarations and 
filings as may be required under applicable state securities laws and the 
securities laws of any foreign country; (iv) such filings as may be required 
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended 
("HSR"); and (v) such other consents, authorizations, filings, approvals and 
registrations which, if not obtained or made, would not have a Material 
Adverse Effect on Target and would not prevent, or materially alter or delay 
any of the transactions contemplated by this Agreement or the Option 
Agreement.

         2.4   FINANCIAL STATEMENTS.  Target has delivered to Acquiror its 
unaudited financial statements for the fiscal year ended December 31, 1996, 
and its unaudited financial statements (balance sheet, statement of 
operations and statement of cash flows) on a consolidated basis as at, and 
for the five-month period ended May 31, 1997 (collectively, the "Financial 
Statements").  The Financial Statements are complete and correct in all 
material respects and have been prepared in accordance with generally 
accepted accounting principles (except that the unaudited financial 
statements do not have notes thereto) applied on a consistent basis 
throughout the periods indicated and with each other.  The Financial 
Statements fairly present the financial condition and operating results of 
Target as of the dates, and for the periods, indicated therein, subject to 
normal year-end audit adjustments.  Target maintains a standard system of 
accounting established and administered in accordance with generally accepted 
accounting principles.


                                       10.

<PAGE>

         2.5   ABSENCE OF CERTAIN CHANGES.  Since May 31, 1997 (the "Target 
Balance Sheet Date"), Target has conducted its business in the ordinary 
course consistent with past practice and there has not occurred: (i) any 
change, event or condition (whether or not covered by insurance) that has 
resulted in, or might reasonably be expected to result in, a Material Adverse 
Effect on Target; (ii) any acquisition, sale or transfer of any material 
asset of Target or any of its subsidiaries other than in the ordinary course 
of business and consistent with past practice; (iii) any change in accounting 
methods or practices (including any change in depreciation or amortization 
policies or rates) by Target or any revaluation by Target of any of its or 
any of its subsidiaries' assets; (iv) any declaration, setting aside, or 
payment of a dividend or other distribution with respect to the shares of 
Target, or any direct or indirect redemption, purchase or other acquisition 
by Target of any of its shares of capital stock; (v) any material contract 
entered into by Target or any of its subsidiaries, other than in the ordinary 
course of business and as provided to Acquiror, or any material amendment or 
termination of, or default under, any material contract to which Target or 
any of its subsidiaries is a party or by which it is bound; (vi) any 
amendment or change to the Certificate of Incorporation or Bylaws of Target; 
(vii) any increase in or modification of the compensation or benefits payable 
or to become payable by Target to any of its directors or employees or (viii) 
any negotiation or agreement by Target to do any of the things described in 
the preceding clauses (i) through (vii) (other than negotiations with 
Acquiror and its representatives regarding the transactions contemplated by 
this Agreement).

         2.6   ABSENCE OF UNDISCLOSED LIABILITIES.  Target has no material 
obligations or liabilities of any nature (matured or unmatured, fixed or 
contingent) other than (i) those set forth or adequately provided for in the 
Balance Sheet for the period ended May 31, 1997 (the "Target Balance Sheet"), 
(ii) those incurred in the ordinary course of business and not required to be 
set forth in the Target Balance Sheet under generally accepted accounting 
principles, (iii) those incurred in the ordinary course of business since the 
Target Balance Sheet Date and consistent with past practice, and (iv) those 
incurred in connection with the execution of this Agreement.

         2.7   LITIGATION.  There is no private or governmental action, suit, 
proceeding, claim, arbitration or investigation pending before any agency, 
court or tribunal, foreign or domestic, or, to the knowledge of Target or any 
of its subsidiaries, threatened against Target or any of its subsidiaries or 
any of their respective properties or any of their respective officers or 
directors (in their capacities as such) that, individually or in the 
aggregate, could reasonably be expected to have a Material Adverse Effect on 
Target.  There is no judgment, decree or order against Target or any of its 
subsidiaries, or, to the knowledge of Target and its subsidiaries, any of 
their respective directors or officers (in their capacities as such), that 
could prevent, enjoin, or materially alter or delay any of the transactions 
contemplated by this Agreement, or that could reasonably be expected to have 
a Material Adverse Effect on Target.  All litigation to which Target is a 
party (or, to the knowledge of Target, threatened to become a party) is 
disclosed in the Target Disclosure Schedule.


                                       11.

<PAGE>


         2.8   RESTRICTIONS ON BUSINESS ACTIVITIES.  There is no agreement, 
judgment, injunction, order or decree binding upon Target which has or could 
reasonably be expected to have the effect of prohibiting or materially 
impairing any current or future business practice of Target, any acquisition 
of property by Target or the conduct of business by Target as currently 
conducted or as proposed to be conducted by Target.

         2.9   GOVERNMENTAL AUTHORIZATION.  Target has obtained each federal, 
state, county, local or foreign governmental consent, license, permit, grant, 
or other authorization of a Governmental Entity (i) pursuant to which Target 
currently operates or holds any interest in any of its properties or (ii) 
that is required for the operation of Target's business or the holding of any 
such interest ((i) and (ii) herein collectively called "Target 
Authorizations"), and all of such Target Authorizations are in full force and 
effect, except where the failure to obtain or have any such Target 
Authorizations could not reasonably be expected to have a Material Adverse 
Effect on Target.

         2.10  TITLE TO PROPERTY.  Target has good and marketable title to 
all of its properties, interests in properties and assets, real and personal, 
reflected in the Target Balance Sheet or acquired after the Target Balance 
Sheet Date (except properties, interests in properties and assets sold or 
otherwise disposed of since the Target Balance Sheet Date in the ordinary 
course of business), or with respect to leased properties and assets, valid 
leasehold interests in, free and clear of all mortgages, liens, pledges, 
charges or encumbrances of any kind or character, except (i) the lien of 
current taxes not yet due and payable, (ii) such imperfections of title, 
liens and easements as do not and will not materially detract from or 
interfere with the use of the properties subject thereto or affected thereby, 
or otherwise materially impair business operations involving such properties 
and (iii) liens securing debt which is reflected on the Target Balance Sheet. 
The plants, property and equipment of Target and its subsidiaries that are 
used in the operations of their businesses are in all material respects in 
good operating condition and repair subject to reasonable wear and tear.  All 
properties used in the operations of Target are reflected in the Target 
Balance Sheet to the extent generally accepted accounting principles require 
the same to be reflected. SCHEDULE 2.10 identifies each parcel of real 
property owned or leased by Target.

         2.11  INTELLECTUAL PROPERTY.

               (a) Target owns, licenses or otherwise possesses legally 
enforceable rights to use all patents, trademarks, trade names, service 
marks, copyrights, and any applications therefor, maskworks, net lists, 
schematics, technology, know-how, trade secrets, inventory, ideas, 
algorithms, processes, computer software programs or applications (in both 
source code and object code form), and tangible or intangible proprietary 
information or material ("Intellectual Property") that are used or currently 
proposed to be used in the business of Target as currently conducted or as 
proposed to be conducted by Target, except to the extent that the failure to 
have such rights have not had and would not reasonably be expected to have a 
Material Adverse Effect on Target.


                                       12.

<PAGE>

               (b) SCHEDULE 2.11 lists (i) all patents and patent 
applications and all registered and unregistered trademarks, trade names and 
service marks, registered copyrights, included in the Intellectual Property, 
including the jurisdictions in which each such Intellectual Property right 
has been issued or registered or in which any application for such issuance 
and registration has been filed, (ii) all licenses, sublicenses and other 
agreements as to which Target is a party and pursuant to which any person is 
authorized to use any Intellectual Property of Target, and (iii) all 
licenses, sublicenses and other agreements as to which Target is a party and 
pursuant to which Target is authorized to use any third party patents, 
trademarks or copyrights, including software ("Third Party Intellectual 
Property Rights") which are incorporated in, are, or form a part of any 
Target product that is material to its business.

               (c) There is no material unauthorized use, disclosure, 
infringement or misappropriation of any Intellectual Property rights of 
Target, any trade secret material to Target, or any Intellectual Property 
right of any third party to the extent licensed by or through Target, by any 
third party, including any employee or former employee of Target. Target has 
not entered into any agreement to indemnify any other person against any 
charge of infringement of any Intellectual Property, other than 
indemnification provisions contained in sales invoices arising in the 
ordinary course of business.

               (d) Target is not, nor will it be as a result of the execution 
and delivery of this Agreement or the performance of its obligations under 
this Agreement, in breach of any license, sublicense or other agreement 
relating to the Intellectual Property or Third Party Intellectual Property 
Rights, the breach of which would have a Material Adverse Effect on Target.

               (e) All patents, registered trademarks, service marks and 
copyrights held by Target are valid and subsisting.  Target (i) has not been 
sued in any suit, action or proceeding which involves a claim of infringement 
of any patents, trademarks, service marks, copyrights or violation of any 
trade secret or other proprietary right of any third party; and (ii) has not 
brought any action, suit or proceeding for infringement of Intellectual 
Property or breach of any license or agreement involving Intellectual 
Property against any third party.  The manufacturing, marketing, licensing or 
sale of its product does not infringe any patent, trademark, service mark, 
copyright, trade secret or other proprietary right of any third party, where 
such infringement would have a Material Adverse Effect on Target.

               (f) Target has secured valid written assignments from all 
consultants and employees who contributed to the creation or development of 
Intellectual Property of the rights to such contributions that Target does 
not already own by operation of law, the absence of which would have a 
Material Adverse Effect on Target.

               (g) All use, disclosure or appropriation of Intellectual
Property not otherwise protected by patents, patent applications or copyright
("Confidential Information"), 


                                       13.

<PAGE>

owned by Target by or to a third party has been pursuant to the terms of a 
written agreement between Target and such third party.  All use, disclosure 
or appropriation of Confidential Information not owned by Target has been 
pursuant to the terms of a written agreement between Target and the owner of 
such Confidential Information, or is otherwise lawful.

         2.12  ENVIRONMENTAL MATTERS.

               (a) The following terms shall be defined as follows:

                  (i)   "Environmental and Safety Laws" shall mean any 
federal, state or local laws, ordinances, codes, regulations, rules, policies 
and orders that are intended to assure the protection of the environment, or 
that classify, regulate, call for the remediation of, require reporting with 
respect to, or list or define air, water, groundwater, solid waste, hazardous 
or toxic substances, materials, wastes, pollutants or contaminants, or which 
are intended to assure the safety of employees, workers or other persons, 
including the public.

                 (ii)   "Hazardous Materials" shall mean any toxic or 
hazardous substance, material or waste or any pollutant or contaminant, or 
infectious or radioactive substance or material, including without 
limitation, those substances, materials and wastes defined in or regulated 
under any Environmental and Safety Laws.

               (iii)    "Property" shall mean all real property leased or 
owned by Target or its subsidiaries either currently or in the past.

                 (iv)   "Facilities" shall mean all buildings and 
improvements on the Property of Target or its subsidiaries.

               (b)  Except in all cases as, in the aggregate, have not had 
and would not be reasonably expected to have a Material Adverse Effect on 
Target, Target represents and warrants as follows: (i) to Target's knowledge, 
no methylene chloride or asbestos is contained in or has been used at or 
released from the Facilities; (ii) to Target's knowledge, all Hazardous 
Materials and wastes have been disposed of in accordance with all 
Environmental and Safety Laws; and (iii) Target and its subsidiaries have 
received no written notice of any noncompliance of the Facilities or its past 
or present operations with Environmental and Safety laws; (iv) no notices, 
administrative actions or suits are pending, or, to Target's knowledge, 
threatened relating to a violation of any Environmental and Safety Laws; (v) 
to Target's knowledge, neither Target nor its subsidiaries are a potentially 
responsible party under the federal Comprehensive Environmental Response, 
Compensation and Liability Act (CERCLA), or state analog statute, arising out 
of events occurring prior to the Closing Date; (vi) to Target's knowledge, 
there have not been in the past, and are not now, any Hazardous Materials on, 
under or migrating to or from the Facilities or Property; (vii) to Target's 
knowledge, there have not been in the past, and are not now, any underground 
tanks or 


                                       14.

<PAGE>

underground improvements at, on or under the Property including without 
limitation, treatment or storage tanks, sumps, or water, gas or oil wells; 
(viii) Target has not deposited, stored, disposed of or located 
polychlorinated biphenyls (PCB) on the Property or Facilities or any 
equipment on the Property containing PCBs at levels in excess of 50 parts per 
million; (ix) to Target's knowledge, there is no formaldehyde on the Property 
or in the Facilities, nor any insulating material containing urea 
formaldehyde in the Facilities; (x) to Target's knowledge, the Facilities and 
Target's and its subsidiaries uses and activities therein have at all times 
complied with all Environmental and Safety Laws; and (xi) Target and its 
subsidiaries have all the permits and licenses required to be issued and are 
in full compliance with the terms and conditions of those permits.

         2.13  TAXES.  

               (a)  Target and any consolidated, combined or unitary group 
for Tax purposes of which Target is or has been a member have timely filed 
all Tax Returns required to be filed by them and have paid all Taxes shown 
thereon to be due.  The Financial Statements (i) fully accrue all actual and, 
except in the case of unaudited Financial Statements, contingent liabilities 
for Taxes with respect to all periods through May 31, 1997 and Target has not 
and will not incur any Tax liability in excess of the amount reflected on the 
Financial Statements with respect to such periods.  No material Tax liability 
has accrued or been incurred or will be accrued or incurred by Target for 
periods after May 31, 1997, through the Effective Time, other than in the 
ordinary course of business.  The Financial Statements and the Target Closing 
Disclosure Schedule properly reflects the amount of any net operating loss 
and tax credit carryforwards available with respect to Target and a 
limitation on the use of such losses or credits, subject to any limitations 
arising from the Merger. Target has withheld and paid to the applicable 
financial institution or Tax Authority all amounts required to be withheld.  
No notice of deficiency or similar document of any Tax Authority has been 
received by Target, and there are no liabilities for Taxes with respect to 
the issues that have been raised (and are currently pending) by any Tax 
Authority that could, if determined adversely to Target, materially and 
adversely affect the liability of Target for Taxes. There is (i) no material 
claim for Taxes that is a lien against the property of Target other than 
liens for Taxes not yet due and payable, (ii) Target has received no 
notification of any audit of any Tax Return of Target being conducted pending 
or threatened by a Tax authority, (iii) no extension or waiver of the statute 
of limitations on the assessment of any Taxes granted by Target and currently 
in effect, and (iv) no agreement, contract or arrangement to which Target is 
a party that may result in the payment of any material amount that would not 
be deductible by reason of Sections 162(m), 280G or 404 of the Code. Target 
will not be required to include any material adjustment in Taxable income for 
any Tax period (or portion thereof) pursuant to Section 481 or 263A of the 
Code or any comparable provision under state or foreign Tax laws as a result 
of transactions, events or accounting methods employed prior to the Merger. 
Target is not a party to any tax sharing or tax allocation agreement nor does 
Target owe any amount under any such agreement.  For purposes of this 
Agreement, the following terms have the following meanings: "Tax" (and, with 
correlative meaning, "Taxes" and "Taxable") means (i) any net income, 
alternative or add-on minimum tax, gross income, gross receipts, sales, use, 
ad valorem, transfer, franchise, profits, license, 


                                       15.

<PAGE>


withholding, payroll, employment, excise, severance, stamp, occupation, 
premium, property, environmental or windfall profit tax, customs duty or 
other tax governmental fee or other like assessment or charge of any kind 
whatsoever, together with any interest or any penalty, addition to tax or 
additional amount imposed by any Governmental Entity (a "Tax Authority") 
responsible for the imposition of any such tax (domestic or foreign), (ii) 
any liability for the payment of any amounts of the type described in (i) as 
a result of being a member of an affiliated, consolidated, combined or 
unitary group for any Taxable period and (iii) any liability for the payment 
of any amounts of the type described in (i) or (ii) as a result of any 
express or implied obligation to indemnify any other person.  As used herein, 
"Tax Return" shall mean any return, statement, report or form (including, 
without limitation,) estimated Tax returns and reports, withholding Tax 
returns and reports and information reports and returns required to be filed 
with respect to Taxes.  Target and each of its subsidiaries are in full 
compliance with all terms and conditions of any Tax exemptions or other 
Tax-sparing agreement or order of a foreign government applicable to them and 
the consummation of the Merger shall not have any adverse effect on the 
continued validity and effectiveness of any such Tax exemptions or other 
Tax-sparing agreement or order.

         2.14  EMPLOYEE BENEFIT PLANS.

               (a)  SCHEDULE 2.14 lists, with respect to Target and any trade 
or business (whether or not incorporated) which is treated as a single 
employer with Target (an "ERISA Affiliate") within the meaning of Section 
414(b), (c), (m) or (o) of the Code, (i) all material employee benefit plans 
(as defined in Section 3(3) of the Employee Retirement Income Security Act of 
1974, as amended ("ERISA")), (ii) each loan to a non-officer employee in 
excess of $10,000, loans to officers and directors and any stock option, 
stock purchase, phantom stock, stock appreciation right, supplemental 
retirement, severance, sabbatical, medical, dental, vision care, disability, 
employee relocation, cafeteria benefit (Code section 125) or dependent care 
(Code section 129), life insurance or accident insurance plans, programs or 
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred 
compensation or incentive plans, programs or arrangements, (iv) other fringe 
or employee benefit plans, programs or arrangements that apply to senior 
management of Target and that do not generally apply to all employees, and 
(v) any current or former employment or executive compensation or severance 
agreements, written or otherwise, as to which unsatisfied obligations of 
Target of greater than $10,000 remain for the benefit of, or relating to, any 
present or former employee, consultant or director of Target (together, the 
"Target Employee Plans").

               (b)  Target has furnished to Acquiror a copy of each, if any, 
of the Target Employee Plans and related plan documents (including trust 
documents, insurance policies or contracts, employee booklets, summary plan 
descriptions and other authorizing documents, and, to the extent still in its 
possession, any material employee communications relating thereto) and has, 
with respect to each Target Employee Plan which is subject to ERISA reporting 
requirements, provided copies of the Form 5500 reports filed for the last 
three plan years.  Any Target Employee Plan intended to be qualified under 
Section 401(a) of the Code has either obtained from the Internal 


                                       16.

<PAGE>

Revenue Service a favorable determination letter as to its qualified status 
under the Code, including all amendments to the Code effected by the Tax 
Reform Act of 1986 and subsequent legislation, or has applied to the Internal 
Revenue Service for such a determination letter prior to the expiration of 
the requisite period under applicable Treasury Regulations or Internal 
Revenue Service pronouncements in which to apply for such determination 
letter and to make any amendments necessary to obtain a favorable 
determination, or has been established under a standardized prototype plan 
for which an Internal Revenue Service opinion letter has been obtained by the 
plan sponsor and is valid as to the adopting employer. Target has also 
furnished Acquiror with the most recent Internal Revenue Service 
determination or opinion letter issued with respect to each such Target 
Employee Plan, and nothing has occurred since the issuance of each such 
letter which could reasonably be expected to cause the loss of the 
tax-qualified status of any Target Employee Plan subject to Code Section 
401(a).

               (c)  (i) None of the Target Employee Plans promises or 
provides retiree medical or other retiree welfare benefits to any person, 
except as required by the Consolidated Omnibus Budget Reconciliation Act of 
1985 ("COBRA"); (ii) there has been no "prohibited transaction," as such term 
is defined in Section 406 of ERISA and Section 4975 of the Code, with respect 
to any Target Employee Plan, which could reasonably be expected to have, in 
the aggregate, a Material Adverse Effect on Target; (iii) each Target 
Employee Plan has been administered in accordance with its terms and in 
compliance with the requirements prescribed by any and all statutes, rules 
and regulations (including ERISA and the Code), except as would not have, in 
the aggregate, a Material Adverse Effect on Target, and Target and each ERISA 
Affiliate have performed all material obligations required to be performed by 
them under, are not in any material respect in default under or violation of, 
and have no knowledge of any material default or violation by any other party 
to, any of the Target Employee Plans; (iv) neither Target nor any ERISA 
Affiliate is subject to any liability or penalty under Sections 4976 through 
4980 of the Code or Title I of ERISA with respect to any of the Target 
Employee Plans which have a Material Adverse Effect on any parties; (v) all 
material contributions required to be made by Target or any ERISA Affiliate 
to any Target Employee Plan have been made on or before their due dates and a 
reasonable amount has been accrued for contributions to each Target Employee 
Plan for the current plan years; (vi) with respect to each Target Employee 
Plan, no "reportable event" within the meaning of Section 4043 of ERISA 
(excluding any such event for which the thirty (30) day notice requirement 
has been waived under the regulations to Section 4043 of ERISA) nor any event 
described in Section 4062, 4063 or 4041 or ERISA has occurred; and (vii) no 
Target Employee Plan is covered by, and neither Target nor any ERISA 
Affiliate has incurred or expects to incur any liability under Title IV of 
ERISA or Section 412 of the Code.  With respect to each Target Employee Plan 
subject to ERISA as either an employee pension plan within the meaning of 
Section 3(2) of ERISA or an employee welfare benefit plan within the meaning 
of Section 3(l) of ERISA, Target has prepared in good faith and timely filed 
all requisite governmental reports (which were true and correct as of the 
date filed) and has properly and timely filed and distributed or posted all 
notices and reports to employees required to be filed, distributed or posted 
with respect to each such Target Employee Plan except as would not have a 
Material Adverse Effect.  No suit, administrative proceeding, 


                                       17.

<PAGE>

action or other litigation has been brought, or to the knowledge of Target is 
threatened, against or with respect to any such Target Employee Plan, 
including any audit or inquiry by the IRS or United States Department of 
Labor.  Neither Target nor any Target subsidiary or other ERISA Affiliate is 
a party to, or has made any contribution to or otherwise incurred any 
obligation under, any "multiemployer plan" as defined in Section 3(37) of 
ERISA.

               (d)  With respect to each Target Employee Plan, Target has 
complied with (i) the applicable health care continuation and notice 
provisions of COBRA and the proposed regulations thereunder and (ii) the 
applicable requirements of the Family and Medical Leave Act of 1993 and the 
regulations thereunder, except to the extent that such failure to comply 
would not, in the aggregate, have a Material Adverse Effect on Target.

               (e)  The consummation of the transactions contemplated by this 
Agreement will not (i) entitle any current or former employee or other 
service provider of Target or any other ERISA Affiliate to severance benefits 
or any other payment (including, without limitation, unemployment 
compensation, golden parachute or bonus), except as expressly provided in 
this Agreement, or (ii) accelerate the time of payment or vesting of any such 
benefits, or increase the amount of compensation due any such employee or 
service provider.

               (f)  There has been no amendment to, written interpretation or 
announcement (whether or not written) by Target or other ERISA Affiliate 
relating to, or change in participation or coverage under, any Target 
Employee Plan which would materially increase the expense of maintaining such 
Plan above the level of expense incurred with respect to that Plan for the 
most recent fiscal year included in Target's financial statements.

         2.15  CERTAIN AGREEMENTS AFFECTED BY THE MERGER.  Neither the 
execution and delivery of this Agreement nor the consummation of the 
transaction contemplated hereby will (i) result in any payment (including, 
without limitation, severance, unemployment compensation, golden parachute, 
bonus or otherwise) becoming due to any director or employee of Target, (ii) 
materially increase any benefits otherwise payable by Target or (iii) result 
in the acceleration of the time of payment or vesting of any such benefits.

         2.16  EMPLOYEE MATTERS.  Target is in compliance in all material 
respects with all currently applicable laws and regulations respecting 
employment, discrimination in employment, terms and conditions of employment, 
wages, hours and occupational safety and health and employment practices, and 
are not engaged in any unfair labor practice, except where failure to be in 
compliance or the engagement in such unfair labor practices would not 
reasonably be expected to have a Material Adverse Effect on Target.  There 
are no pending claims against Target under any workers compensation plan or 
policy or for long term disability.  Target has no material obligations under 
COBRA with respect to any former employees or qualifying beneficiaries 
thereunder except for obligations that would not reasonably be expected to 
have a Material Adverse Effect on Target.  


                                       18.

<PAGE>

There are no proceedings pending or, to the knowledge of Target, threatened, 
between Target and its employees, which proceedings have or could reasonably 
be expected to have a Material Adverse Effect on Target. Target is not a 
party to any collective bargaining agreement or other labor unions contract 
nor does Target know of any activities or proceedings of any labor union to 
organize any such employees.  In addition, Target has provided all employees, 
with all relocation benefits, stock options, bonuses and incentives, and all 
other compensation that such employee has earned up through the date of this 
Agreement or that such employee was otherwise promised in their employment 
agreements with Target.

         2.17  INTERESTED PARTY TRANSACTIONS.  Target is not indebted to any 
director, officer, employee or agent of Target (except for amounts due as 
normal salaries and bonuses and in reimbursement of ordinary expenses), and 
no such person is indebted to Target.

         2.18  INSURANCE.  Target has policies of insurance and bonds of the 
type and in amounts customarily carried by persons conducting businesses or 
owning assets similar to those of Target.  There is no material claim pending 
under any of such policies or bonds as to which coverage has been questioned, 
denied or disputed by the underwriters of such policies or bonds.  All 
premiums due and payable under all such policies and bonds have been paid and 
Target is otherwise in compliance with the terms of such policies and bonds.  
Target has no knowledge of any threatened termination of, or material premium 
increase with respect to, any of such policies.

         2.19  COMPLIANCE WITH LAWS.  Target has complied with, is not in 
violation of, and has not received any notices of violation with respect to, 
any federal, state, local or foreign statute, law or regulation with respect 
to the conduct of its business, or the ownership or operation of its 
business, except for such violations or failures to comply as could not be 
reasonably expected to have a Material Adverse Effect on Target.

         2.20  MINUTE BOOKS.  The minute books of Target made available to 
Acquiror contain a complete and accurate summary of all meetings of directors 
and stockholders or actions by written consent since the time of 
incorporation of Target through the date of this Agreement, and reflect all 
transactions referred to in such minutes accurately in all material respects.

         2.21  COMPLETE COPIES OF MATERIALS.  Target has delivered or made 
available true and complete copies of each document which has been requested 
by Acquiror or its counsel in connection with their legal and accounting 
review of Target.  All the material contracts and agreements (as such terms 
are defined in Regulation S-K promulgated under the Act) to which Target is a 
party are listed in SCHEDULE 2.21 hereto.

         2.22  POOLING OF INTERESTS.  Neither Target nor, to the knowledge of 
Target, any of its respective directors, officers or stockholders, has taken 
any action which would interfere with Acquiror's ability to account for the 
Merger as a pooling of interests.


                                       19.

<PAGE>

         2.23  BROKERS' AND FINDERS' FEES.  Target has not incurred, nor will 
it incur, directly or indirectly, any liability for brokerage or finders' 
fees or agents' commissions or investment bankers' fees or any similar 
charges in connection with this Agreement or any transaction contemplated 
hereby.

         2.24  REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.  The 
information supplied by Target for inclusion in the registration statement on 
Form S-4 (or such other or successor form as shall be appropriate) pursuant 
to which the shares of Acquiror Common Stock to be issued in the Merger will 
be registered with the SEC (the "Registration Statement") shall not, at the 
time the Registration Statement (including any amendments or supplements 
thereto) is declared effective by the SEC, contain any untrue statement of a 
material fact or omit to state any material fact required to be stated 
therein or necessary in order to make the statements therein, in light of the 
circumstances under which they were made, not misleading.  The information 
supplied by Target for inclusion in the proxy statement/prospectus to be sent 
to the stockholders of Target and Acquiror in connection with the meeting of 
Target's stockholders to consider the Merger (the "Target Stockholders 
Meeting") and in connection with the meeting of Acquiror's stockholders to 
consider the Merger (the "Acquiror Stockholders Meeting") (such proxy 
statement/prospectus as amended or supplemented is referred to herein as the 
"Proxy Statement") shall not, on the date the Proxy Statement is first mailed 
to Target's stockholders and Acquiror's stockholders, at the time of the 
Target Stockholders Meeting, at the time of the Acquiror Stockholders Meeting 
and at the Effective Time, contain any statement which, at such time, is 
false or misleading with respect to any material fact, or omit to state any 
material fact necessary in order to make the statements made therein, in 
light of the circumstances under which they are made, not false or 
misleading; or omit to state any material fact necessary to correct any 
statement in any earlier communication with respect to the solicitation of 
proxies for the Target Stockholders Meeting or the Acquiror Stockholders 
Meeting which has become false or misleading.  Notwithstanding the foregoing, 
Target makes no representation, warranty or covenant with respect to any 
information supplied by Acquiror or Merger Sub which is contained in any of 
the foregoing documents.

         2.25  AFFILIATE'S AGREEMENT; STOCKHOLDER'S REPRESENTATION AGREEMENT; 
IRREVOCABLE PROXIES.  All of the persons and/or entities deemed "Affiliates" 
of Target within the meaning of Rule 145 promulgated under the Securities Act 
and holders of more than 51% of the sum of (i) all shares of Target Common 
Stock issued and outstanding and (ii) all shares of Target Preferred Stock 
issued and outstanding, have agreed in writing to vote for approval of the 
Merger pursuant to stockholder agreements attached hereto as EXHIBIT B-1 and 
EXHIBIT F ("Target Affiliate's Agreement" and "Stockholder's Representation 
Agreement", respectively), and pursuant to Irrevocable Proxies attached as 
EXHIBIT A ("Irrevocable Proxies") to the Voting Agreement attached hereto as 
EXHIBIT C-1 (the "Target Voting Agreement").

         2.26  VOTE REQUIRED.  The affirmative vote of (i) the holders of a
majority of the shares of Target's Common Stock and Preferred Stock voting
together as a single class outstanding 


                                       20.

<PAGE>

on the record date set for the Target Stockholders Meeting and (ii) the 
holders of a majority of the shares of Target's Preferred Stock voting 
together as a single class outstanding on the record date set for the Target 
Stockholder Meeting are the only votes of the holders of any of Target's 
Capital Stock necessary to approve this Agreement and the transactions 
contemplated hereby.

         2.27  BOARD APPROVAL.  The Board of Directors of Target has 
unanimously approved this Agreement and the Merger, (ii) determined that in 
its opinion the Merger is in the best interests of the stockholders of Target 
and is on terms that are fair to such stockholders and (iii) recommended that 
the stockholders of Target approve this Agreement and the Merger.

         2.28  INVENTORY.  The inventories shown on the Financial Statements 
or thereafter acquired by Target, consisted of items of a quantity and 
quality usable or salable in the ordinary course of business.  Since May 31, 
Target has, subject to any reasonable reserves contained in the Financial 
Statements, continued to replenish inventories in a normal and customary 
manner consistent with past practices.  Target has not received notice that 
it will experience in the foreseeable future any difficulty in obtaining, in 
the desired quantity and quality and at a reasonable price and upon 
reasonable terms and conditions, the raw materials, supplies or component 
products required for the manufacture, assembly or production of its 
products.  The values at which inventories are carried reflect the inventory 
valuation policy of Target, which is consistent with its past practice and in 
accordance with generally accepted accounting principles applied on a 
consistent basis.  Since May 31, 1997, due provision was made on the books of 
Target in the ordinary course of business consistent with past practices to 
provide for all slow-moving, obsolete, or unusable inventories to their 
estimated useful or scrap values and such inventory reserves are adequate to 
provide for such slow-moving, obsolete or unusable inventory and inventory 
shrinkage.

         2.29  CUSTOMERS AND SUPPLIERS.  As of the date hereof, no customer 
which individually accounted for more than 10% of Target's gross revenues 
during the 12 month period preceding the date hereof, and no supplier of 
Target, has canceled or otherwise terminated, or made any written threat to 
Target to cancel or otherwise terminate its relationship with Target, or has 
at any time on or after May 31, 1997 decreased materially its services or 
supplies to Target in the case of any such supplier, or its usage of the 
services or products of Target in the case of such customer, and to Target's 
knowledge, no such supplier or customer has indicated either orally or in 
writing that it will cancel or otherwise terminate its relationship with 
Target or to decrease materially its services or supplies to Target or its 
usage of the services or products of Target, as the case may be.  Target has 
not knowingly breached, so as to provide a benefit to Target that was not 
intended by the parties, any agreement with, or engaged in any fraudulent 
conduct with respect to, any customer or supplier of Target.

         2.30  PRELIMINARY POOLING LETTER.  Target has caused Coopers &
Lybrand L.L.C., Target's independent auditors, to deliver to Acquiror on or
prior to the date hereof a draft letter setting forth the preliminary conclusion
of Coopers & Lybrand L.L.C. that, assuming Acquiror is a corporation eligible to
be a party to a transaction seeking pooling of interests accounting treatment


                                       21.

<PAGE>

and that the participation of Acquiror in the Merger will not, in and of 
itself, disqualify the Merger from qualifying for pooling of interests 
accounting treatment, the Merger will qualify for pooling of interests 
accounting treatment if consummated in accordance with this Agreement.

         2.31  REPRESENTATIONS COMPLETE.  None of the representations or 
warranties made by Target herein or in any Schedule or Exhibit hereto, 
including the Target Disclosure Schedule, or certificate furnished by Target 
pursuant to this Agreement or any written statement furnished to Acquiror 
pursuant hereto or in connection with the transactions contemplated hereby, 
when all such documents are read together in their entirety, contains or will 
contain at the Effective Time any untrue statement of a material fact, or 
omits or will omit at the Effective Time to state any material fact necessary 
in order to make the statements contained herein or therein, in the light of 
the circumstances under which made, not misleading; provided, however, that 
(a) for purposes of this representation, any document attached hereto and any 
document specifically referenced in the Target Disclosure Schedule as a 
"Superseding Document" (even if not attached hereto) that provides 
information inconsistent with or in addition to any other written statement 
furnished to Acquiror in connection with the transaction contemplated hereby, 
shall be deemed to supersede any other document or written statement 
furnished to Acquiror with respect to such inconsistent or additional 
information, and (b) it is understood that the financial projections 
delivered by Target represent only Target's best estimate under the 
circumstances of what it reasonably believes (although it is not aware of any 
fact or information that would lead it to believe that such projections are 
misleading in any material respect) and are based upon assumptions set forth 
in such projections that Target believes were reasonable as of the time such 
projections were made.  Target does not make any other representation or 
warranty regarding such projections or Target's possible or anticipated 
operating performance other than as set forth in this Section 2.31.

                                     ARTICLE III

              REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB

         Except as disclosed in a document of even date herewith and 
delivered by Acquiror to Target prior to the execution and delivery of this 
Agreement and referring to the representations and warranties in this 
Agreement (the "Acquiror Disclosure Schedule"), Acquiror and Merger Sub 
represent and warrant to Target as follows:

         3.1   ORGANIZATION, STANDING AND POWER.  Each of Acquiror and its
subsidiaries, including Merger Sub, is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization.  Each of Acquiror and its subsidiaries has the corporate power to
own its properties and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Acquiror.  Acquiror has
delivered a true and correct copy of the Certificate of Incorporation and Bylaws
or other charter documents, as applicable, of Acquiror and each of its
subsidiaries, each as 


                                       22.

<PAGE>

amended to date, to Target.  Neither Acquiror nor any of its subsidiaries is 
in violation of any of the provisions of its Certificate of Incorporation or 
Bylaws or equivalent organizational documents.  Acquiror is the owner of all 
outstanding shares of capital stock of each of its subsidiaries and all such 
shares are duly authorized, validly issued, fully paid and nonassessable.  
All of the outstanding shares of capital stock of each such subsidiary are 
owned by Acquiror free and clear of all liens, charges, claims or 
encumbrances or rights of others.  There are no outstanding subscriptions, 
options, warrants, puts, calls, rights, exchangeable or convertible 
securities or other commitments or agreements of any character relating to 
the issued or unissued capital stock or other securities of any such 
subsidiary, or otherwise obligating Acquiror or any such subsidiary to issue, 
transfer, sell, purchase, redeem or otherwise acquire any such securities.  
Except as disclosed in the Acquiror SEC Documents (as defined in Section 
3.4), Acquiror does not directly or indirectly own any equity or similar 
interest in, or any interest convertible or exchangeable or exercisable for, 
any equity or similar interest in, any corporation, partnership, joint 
venture or other business association or entity.

         3.2   CAPITAL STRUCTURE.  The authorized capital stock of Acquiror 
consists of 50,000,000 shares of Common Stock, $0.0005 par value, and 
18,095,690 shares of Preferred Stock, $0.001 par value, of which there were 
issued and outstanding as of the close of business on June 10, 1997, 
19,111,647 shares of Common Stock and no shares of Preferred Stock.  There 
are no other outstanding shares of capital stock or voting securities of 
Acquiror other than shares of Acquiror Common Stock issued after June 10, 
1997 upon the exercise of options issued under the Acquiror 1996 Stock 
Incentive Plan (the "Acquiror Stock Option Plan").  The authorized capital 
stock of Merger Sub consists of 1,000 shares of Common Stock, $.0001 par 
value, all of which are issued and outstanding and are held by Acquiror.  All 
outstanding shares of Acquiror and Merger Sub have been duly authorized, 
validly issued, fully paid and are nonassessable and free of any liens or 
encumbrances other than any liens or encumbrances created by or imposed upon 
the holders thereof.  As of the close of business on June 10, 1997, Acquiror 
has reserved 5,377,393 shares of Common Stock for issuance to employees, 
directors and independent contractors pursuant to the Acquiror Stock Option 
Plan, of which 2,347,525 shares have been issued pursuant to option 
exercises, and 2,352,456 shares are subject to outstanding, unexercised 
options. In addition, as of the close of business on June 10, 1997, Acquiror 
had also issued a warrant to purchase 2,000,000 shares of Acquiror's Common 
Stock.  Other than pursuant to this Agreement, the Acquiror Stock Option Plan 
and the Acquiror Employee Stock Purchase Plan there are no other options, 
warrants, calls, rights, commitments or agreements of any character to which 
Acquiror or Merger Sub is a party or by which either of them is bound 
obligating Acquiror or Merger Sub to issue, deliver, sell, repurchase or 
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any 
shares of the capital stock of Acquiror or Merger Sub or obligating Acquiror 
or Merger Sub to grant, extend or enter into any such option, warrant, call, 
right, commitment or agreement.  The shares of Acquiror Common Stock to be 
issued pursuant to the Merger will be duly authorized, validly issued, fully 
paid, and non-assessable.

         3.3   AUTHORITY.  Acquiror and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.  


                                       23.

<PAGE>

The execution and delivery of this Agreement and the consummation of the 
transactions contemplated hereby have been duly authorized by all necessary 
corporate action on the part of Acquiror and Merger Sub, subject only to the 
approval of the Merger by the Acquiror stockholders as contemplated by 
Section 6.1(a).  This Agreement has been duly executed and delivered by 
Acquiror and Merger Sub and constitutes the valid and binding obligations of 
Acquiror and Merger Sub.  The execution and delivery of this Agreement do 
not, and the consummation of the transactions contemplated hereby will not, 
conflict with, or result in any violation of, or default under (with or 
without notice or lapse of time, or both), or give rise to a right of 
termination, cancellation or acceleration of any obligation or loss of a 
benefit under (i) any provision of the Certificate of Incorporation or Bylaws 
of Acquiror or any of its subsidiaries, as amended, or (ii) any material 
mortgage, indenture, lease, contract or other agreement or instrument, 
permit, concession, franchise, license, judgment, order, decree, statute, 
law, ordinance, rule or regulation applicable to Acquiror or any of its 
subsidiaries or their properties or assets, except where such conflict, 
violation, default, termination, cancellation or acceleration with respect to 
the foregoing provisions of (ii) would not have had and would not reasonably 
be expected to have a Material Adverse Effect on Acquiror.  No consent, 
approval, order or authorization of, or registration, declaration or filing 
with, any Governmental Entity, is required by or, to the knowledge of 
Acquiror with respect to, Acquiror or any of its subsidiaries in connection 
with the execution and delivery of this Agreement by Acquiror and Merger Sub 
or the consummation by Acquiror and Merger Sub of the transactions 
contemplated hereby, except for (i) the filing of the Certificate of Merger 
as provided in Section 1.2, (ii) the filing with the SEC and NASD of the 
Registration Statement and the Proxy Statement relating to the Acquiror 
Stockholders Meeting, (iii) the filing of a Form 8-K with the SEC and NASD 
within 15 calendar days after the Closing Date, (iv) any filings as may be 
required under applicable state securities laws and the securities laws of 
any foreign country, (v) such filings as may be required under HSR, (vi) the 
filing with the Nasdaq National Market System of a Notification Form for 
Listing of Additional Shares with respect to the shares of Acquiror Common 
Stock issuable upon conversion of the Target Common Stock in the Merger and 
upon exercise of the options under the Target Stock Option Plans assumed by 
Acquiror, and (vii) such other consents, authorizations, filings, approvals 
and registrations which, if not obtained or made, would not have a Material 
Adverse Effect on Acquiror and would not prevent or materially alter or delay 
any of the transactions contemplated by this Agreement.

         3.4   SEC DOCUMENTS; FINANCIAL STATEMENTS.  Acquiror has made
available to Target a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Acquiror since April 29, 1996, and, prior to the Effective
Time, Acquiror will have furnished Target with true and complete copies of any
additional documents filed with the SEC by Acquiror prior to the Effective Time
(collectively, the "Acquiror SEC Documents").  In addition, Acquiror has made
available to Target all exhibits to the Acquiror SEC Documents filed prior to
the date hereof, and will promptly make available to Target all exhibits to any
additional Acquiror SEC Documents filed prior to the Effective Time.  All
documents required to be filed as exhibits to the Target SEC Documents have been
so filed, and all 


                                       24.

<PAGE>

material contracts so filed as exhibits are in full force and effect, except 
those which have expired in accordance with their terms, and neither Acquiror 
nor any of its subsidiaries is in default thereunder.  As of their respective 
filing dates, the Acquiror SEC Documents complied in all material respects 
with the requirements of the Securities Exchange Act of 1934, as amended (the 
"Exchange Act") and the Securities Act, and none of the Acquiror SEC 
Documents contained any untrue statement of a material fact or omitted to 
state a material fact required to be stated therein or necessary to make the 
statements made therein, in light of the circumstances in which they were 
made, not misleading, except to the extent corrected by a subsequently filed 
Acquiror SEC Document prior to the date hereof.  The financial statements of 
Acquiror, including the notes thereto, included in the Acquiror SEC Documents 
(the "Acquiror Financial Statements") were complete and correct in all 
material respects as of their respective dates, complied as to form in all 
material respects with applicable accounting requirements and with the 
published rules and regulations of the SEC with respect thereto as of their 
respective dates, and have been prepared in accordance with generally 
accepted accounting principles applied on a basis consistent throughout the 
periods indicated and consistent with each other (except as may be indicated 
in the notes thereto or, in the case of unaudited statements included in 
Quarterly Reports on Form 10-Qs, as permitted by Form 10-Q).  The Acquiror 
Financial Statements fairly present the consolidated financial condition and 
operating results of Acquiror and its subsidiaries at the dates and during 
the periods indicated therein (subject, in the case of unaudited statements, 
to normal, recurring year-end adjustments). There has been no change in 
Acquiror accounting policies except as described in the notes to the Acquiror 
Financial Statements.

         3.5   ABSENCE OF CERTAIN CHANGES.  Since March 29, 1997 (the 
"Acquiror Balance Sheet Date"), Acquiror has conducted its business in the 
ordinary course consistent with past practice and there has not occurred: (i) 
any change, event or condition (whether or not covered by insurance) that has 
resulted in, or might reasonably be expected to result in, a Material Adverse 
Effect to Acquiror; (ii) any acquisition, sale or transfer of any material 
asset of Acquiror or any of its subsidiaries other than in the ordinary 
course of business and consistent with past practice; (iii) any change in 
accounting methods or practices (including any change in depreciation or 
amortization policies or rates) by Acquiror or any revaluation by Acquiror of 
any of its assets; (iv) any declaration, setting aside, or payment of a 
dividend or other distribution with respect to the shares of Acquiror, or any 
direct or indirect redemption, purchase or other acquisition by Acquiror of 
any of its shares of capital stock; (v) any material contract entered into by 
Acquiror, other than in the ordinary course of business and as provided to 
Target, or any material amendment or termination of, or default under, any 
material contract to which Acquiror is a party or by which it is bound; (vi) 
any amendment or change to Acquiror's Certificate of Incorporation or Bylaws; 
or (vii) any negotiation or agreement by Acquiror or any of its subsidiaries 
to do any of the things described in the preceding clauses (i) through (vi) 
(other than negotiations with Target and its representatives regarding the 
transactions contemplated by this Agreement).

         3.6   ABSENCE OF UNDISCLOSED LIABILITIES.  Acquiror has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or 


                                       25.

<PAGE>

adequately provided for in the Balance Sheet included in Acquiror's Quarterly 
Report on Form 10-Q for the period ended March 29, 1997 (the "Acquiror 
Balance Sheet"), (ii) those incurred in the ordinary course of business and 
not required to be set forth in the Acquiror Balance Sheet under generally 
accepted accounting principles, and (iii) those incurred in the ordinary 
course of business since the Acquiror Balance Sheet Date and consistent with 
past practice.

         3.7   LITIGATION.  There is no private or governmental action, suit, 
proceeding, claim, arbitration or investigation pending before any agency, 
court or tribunal, foreign or domestic, or, to the knowledge of Acquiror or 
any of its subsidiaries, threatened against Acquiror or any of its 
subsidiaries or any of their respective properties or any of their respective 
officers or directors (in their capacities as such) that, individually or in 
the aggregate, could reasonably be expected to have a Material Adverse Effect 
on Acquiror.  There is no judgment, decree or order against Acquiror or any 
of its subsidiaries or, to the knowledge of Acquiror or any of its 
subsidiaries, any of their respective directors or officers (in their 
capacities as such) that could prevent, enjoin, or materially alter or delay 
any of the transactions contemplated by this Agreement, or that could 
reasonably be expected to have a Material Adverse Effect on Acquiror.

         3.8   RESTRICTIONS ON BUSINESS ACTIVITIES.  There is no material 
agreement, judgment, injunction, order or decree binding upon Acquiror or any 
of its subsidiaries which has the effect of prohibiting or materially 
impairing any current or future business practice of Acquiror or any of its 
subsidiaries, any acquisition of property by Acquiror or any of its 
subsidiaries or the conduct of business by Acquiror or any of its 
subsidiaries as currently conducted or as proposed to be conducted by 
Acquiror or any of its subsidiaries.

         3.9   OPINION OF FINANCIAL ADVISOR. Acquiror has been advised in 
writing by its financial advisor, Montgomery Securities, that in such 
advisor's opinion as of the date hereof, the consideration to be paid by 
Acquiror pursuant to the Merger is fair to Acquiror from a financial point of 
view.

         3.10  INTELLECTUAL PROPERTY.  Acquiror and its subsidiaries own, or 
are licensed or otherwise possess legally enforceable rights to use all 
patents, trademarks, trade names, service marks, copyrights, and any 
applications therefor, maskworks, net lists, schematics, technology, 
know-how, trade secrets, inventory, ideas, algorithms, processes, computer 
software programs or applications (in both source code and object code form), 
and tangible or intangible proprietary information or material ("Acquiror 
Intellectual Property") that are used or proposed to be used in the business 
of Acquiror and its subsidiaries as currently conducted or as proposed to be 
conducted by Acquiror and its subsidiaries, except to the extent that the 
failure to have such rights have not had and would not reasonably be expected 
to have a Material Adverse Effect on Acquiror.

         3.11  GOVERNMENTAL AUTHORIZATION.  Acquiror and each of its
subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or 


                                       26.

<PAGE>

other authorization of a Governmental Entity (i) pursuant to which Acquiror 
or any of its subsidiaries currently operates or holds any interest in any of 
its properties or (ii) that is required for the operation of Acquiror's or 
any of its subsidiaries' business or the holding of any such interest ((i) 
and (ii) herein collectively called "Acquiror Authorizations"), and all of 
such Acquiror Authorizations are in full force and effect, except where the 
failure to obtain or have any of such Acquiror Authorizations could not 
reasonably be expected to have a Material Adverse Effect on Acquiror.

         3.12  COMPLIANCE WITH LAWS.  Each of Acquiror and its subsidiaries 
has complied with, are not in violation of, and have not received any notices 
of violation with respect to, any federal, state, local or foreign statute, 
law or regulation with respect to the conduct of its business, or the 
ownership or operation of its business, except for such violations or 
failures to comply as could not be reasonably expected to have a Material 
Adverse Effect on Acquiror.

         3.13  POOLING OF INTERESTS.  Neither Acquiror nor any of its 
subsidiaries nor, to the knowledge of Acquiror, any of their respective 
directors, officers or stockholders has taken any action which would 
interfere with Acquiror's ability to account for the Merger as a pooling of 
interests.

         3.14  BROKER'S AND FINDERS' FEES.  Acquiror has not incurred, nor 
will it incur, directly or indirectly, any liability for brokerage or 
finders' fees or agents' commissions or investment bankers' fees or any 
similar charges in connection with this Agreement or any transaction 
contemplated hereby.

         3.15  REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.  The 
information supplied by Acquiror and Merger Sub for inclusion in the 
Registration Statement shall not, at the time the Registration Statement 
(including any amendments or supplements thereto) is declared effective by 
the SEC, contain any untrue statement of a material fact or omit to state any 
material fact necessary in order to make the statements therein, in light of 
the circumstances under which they were made, not misleading.  The 
information supplied by Acquiror for inclusion in the Proxy Statement shall 
not, on the date the Proxy Statement is first mailed to Target's stockholders 
and Acquiror's stockholders, at the time of the Target Stockholders Meeting, 
at the time of the Acquiror Stockholders Meeting and at the Effective Time, 
contain any statement which, at such time, is false or misleading with 
respect to any material fact, or omit to state any material fact necessary in 
order to make the statements therein, in light of the circumstances under 
which they are made, not false or misleading; or omit to state any material 
fact necessary to correct any statement in any earlier communication with 
respect to the solicitation of proxies for the Target Stockholders Meeting or 
the Acquiror Stockholders Meeting which has become false or misleading.  If 
at any time prior to the Effective Time any event or information should be 
discovered by Acquiror or Merger Sub which should be set forth in an 
amendment to the Registration Statement or a supplement to the Proxy 
Statement, Acquiror or Merger Sub will promptly inform Target.  
Notwithstanding the 


                                       27.

<PAGE>

foregoing, Acquiror and Merger Sub make no representation, warranty or 
covenant with respect to any information supplied by Target which is 
contained in any of the foregoing documents. 

         3.16  VOTE REQUIRED.  The affirmative vote of the holders of a 
majority of the shares of Acquiror's Common Stock outstanding on the record 
date set for the Target Stockholders Meeting is the only vote of the holders 
of any of Acquiror's Common Stock necessary to approve this Agreement and the 
transactions contemplated hereby.

         3.17  BOARD APPROVAL.  The Boards of Directors of Acquiror and 
Merger Sub have prior to the date hereof unanimously (i) approved this 
Agreement and the Merger, (ii) determined that the Merger is in the best 
interests of their respective stockholders and is on terms that are fair to 
such stockholders and (iii) determined to recommend that the stockholder of 
Merger Sub approve this Agreement and the consummation of the Merger.

         3.18  PRELIMINARY POOLING LETTER.  Acquiror has on or prior to the 
date hereof received a draft letter from Coopers & Lybrand, L.L.P., 
Acquiror's independent auditors, setting forth its preliminary conclusion, 
based in part upon the conclusions set forth in the letter referred to in 
Section 2.31, that the Merger will qualify for pooling of interests 
accounting treatment if consummated in accordance with this Agreement.

         3.19  REPRESENTATIONS COMPLETE.  None of the representations or 
warranties made by Acquiror or Merger Sub herein or in any Schedule hereto, 
including the Acquiror Disclosure Schedule, or certificate furnished by 
Acquiror or Merger Sub pursuant to this Agreement, or the Acquiror SEC 
Documents, or any written statement furnished to Target pursuant hereto or in 
connection with the transactions contemplated hereby, when all such documents 
are read together in their entirety, contains or will contain at the 
Effective Time any untrue statement of a material fact, or omits or will omit 
at the Effective Time to state any material fact necessary in order to make 
the statements contained herein or therein, in the light of the circumstances 
under which made, not misleading; provided, however, that for purposes of 
this representation, any document attached hereto and any document 
specifically referenced in the Acquiror Disclosure Schedule as a "Superseding 
Document" (even if not attached hereto) that provides information 
inconsistent with or in addition to any other written statement furnished to 
Target in connection with the transaction contemplated hereby, shall be 
deemed to supersede any other document or written statement furnished to 
Target with respect to such inconsistent or additional information.

                                      ARTICLE IV

                         CONDUCT PRIOR TO THE EFFECTIVE TIME


                                       28.

<PAGE>

         4.1   CONDUCT OF BUSINESS OF ACQUIROR.  Except as expressly 
contemplated by this Agreement, Acquiror shall neither cause, nor permit any 
of the following, or allow, cause or permit any of its subsidiaries to do, 
cause or permit any of the following, without the prior written consent of 
Target, which consent shall not be unreasonably withheld:

               (a)  DIVIDENDS; CHANGES IN CAPITAL STOCK.  Declare or pay any 
dividends on or make any other distributions (whether in cash, stock or 
property) with respect to any of its capital stock, or split, combine or 
reclassify any of its capital stock or issue or authorize the issuance of any 
other securities in respect of, in lieu of or in substitution for shares of 
its capital stock, or repurchase or otherwise acquire, directly or 
indirectly, any shares of its capital stock except from former employees, 
directors and consultants in accordance with agreements providing for the 
repurchase of shares in connection with any termination of service to it or 
its subsidiaries;

               (b)  MATERIAL ACQUISITIONS.  Acquire or agree to acquire by 
merging or consolidating with, or by purchasing a substantial portion of the 
assets of, or by any other manner, any business or any corporation, 
partnership, association or other business organization or division thereof, 
or otherwise acquire or agree to acquire any assets which are material, 
individually or in the aggregate, to its and its subsidiaries' business, 
taken as a whole, or acquire or agree to acquire any equity securities of any 
corporation, partnership, association or business organization (any of the 
foregoing referred to herein as a "Material Acquisition") which Material 
Acquisition would require Acquiror to file a Form 8-K pursuant to Item 2 of 
Form 8-K under Section 13 or 15(d) of the Securities and Exchange Act of 1934;

               (c)  STOCK OPTION PLANS, ETC.  Grant in excess of 1,300,000 
options under the Acquiror's Stock Option Plan after the date hereof, in the 
ordinary course of business.

               (d)  OTHER.  Take, or agree in writing or otherwise to take, 
any of the actions described in Sections 4.1(a) through (c) above, or any 
action which would make any of its representations or warranties contained in 
this Agreement untrue or incorrect or prevent it from performing or cause it 
not to perform its covenants hereunder.

         4.2   CONDUCT OF BUSINESS OF TARGET.  During the period from the 
date of this Agreement and continuing until the earlier of the termination of 
this Agreement or the Effective Time, Target agrees (except to the extent 
expressly contemplated by this Agreement or as consented to in writing by 
Acquiror, which consent shall not be unreasonably withheld), to carry on its 
and its subsidiaries' business in the usual, regular and ordinary course in 
substantially the same manner as heretofore conducted, to pay debts and Taxes 
when due subject (i) to good faith disputes over such debts or Taxes and (ii) 
to Acquiror's consent (which will not be unreasonably withheld) to the filing 
of material Tax Returns if applicable, to pay or perform other obligations 
when due, and to use all reasonable commercial efforts consistent with past 
practice and policies to preserve intact its present business organizations, 
keep available the services of its and its subsidiaries' 


                                       29.

<PAGE>

present officers and key employees and preserve its relationships with 
customers, suppliers, distributors, licensors, licensees, and others having 
business dealings with it, to the end that its goodwill and ongoing 
businesses shall be materially unimpaired at the Effective Time.  Each of 
Target and Acquiror agrees to promptly notify the other of (x) any event or 
occurrence not in the ordinary course of its or its subsidiaries' business, 
and of any event which could have a Material Adverse Effect and (y) any 
material change in its capitalization as set forth in Section 2.2 or Section 
3.3, as applicable.  Without limiting the foregoing, except as expressly 
contemplated by this Agreement or the Target Disclosure Schedule, Target, 
shall not do, cause or permit any of the following, without the prior written 
consent of the Acquiror which consent shall not be unreasonably withheld:

               (a)  CHARTER DOCUMENTS.  Cause or permit any amendments to its
Certificate of Incorporation or Bylaws;

               (b)  DIVIDENDS; CHANGES IN CAPITAL STOCK.  Declare or pay any 
dividends on or make any other distributions (whether in cash, stock or 
property) in respect of any of its capital stock, or split, combine or 
reclassify any of its capital stock or issue or authorize the issuance of any 
other securities in respect of, in lieu of or in substitution for shares of 
its capital stock, or repurchase or otherwise acquire, directly or 
indirectly, any shares of its capital stock except from former employees, 
directors and consultants in accordance with agreements providing for the 
repurchase of shares in connection with any termination of service to it;

               (c)  STOCK OPTION PLANS, ETC.  Accelerate, amend or change the 
period of exercisability or vesting of options or other rights granted under 
its stock plans or authorize cash payments in exchange for any options or 
other rights granted under any of such plans.

               (d)  POOLING.  Take any action, which would interfere with 
Acquiror's ability to account for the Merger as a pooling of interests; or

               (e)  OTHER.  Take, or agree in writing or otherwise to take, 
any of the actions described in Sections 4.1(a) through (d) above, or any 
action which would cause a material breach of its representations or 
warranties contained in this Agreement or prevent it from materially 
performing or cause it not to materially perform its covenants hereunder.

         4.3   LIMITATIONS ON BUSINESS OF TARGET.  During the period from the 
date of this Agreement and continuing until the earlier of the termination of 
this Agreement or the Effective Time, except as expressly contemplated by 
this Agreement or the Target Disclosure Schedule, Target shall not do, cause 
or permit any of the following, or allow, cause or permit any of its 
subsidiaries to do, cause or permit any of the following, without the prior 
written consent of Acquiror which consent shall not be unreasonably withheld:


                                       30.

<PAGE>

               (a)  MATERIAL CONTRACTS.  Enter into any material contract or 
commitment, or violate, amend or otherwise modify or waive in any material 
fashion any of the terms of any of its material contracts, other than in the 
ordinary course of business.  Among other things, the ordinary course of 
business shall include non-exclusive distribution agreements;

               (b)  ISSUANCE OF SECURITIES.  Issue, deliver, sell, authorize 
or propose the issuance, delivery or sale of, or purchase or propose the 
purchase of, any shares of its capital stock or securities convertible into, 
or subscriptions, rights, warrants or options to acquire, or other agreements 
or commitments of any character obligating it to issue any such shares or 
other convertible securities, other than (i) the issuance of shares of its 
Common Stock pursuant to the exercise of stock options, warrants or other 
rights therefor outstanding as of the date of this Agreement, (ii) the grant 
of stock options to service providers in the ordinary course of business, or 
(iii) issuances and option exercises to service providers pursuant to the 
grants in (ii) above, in the ordinary course of business, provided that the 
aggregate of (ii) and (iii) above shall not exceed 77,667 shares after the 
date hereof;

               (c)  INTELLECTUAL PROPERTY.  Transfer to any person or entity 
any rights to its Intellectual Property other than in the ordinary course of 
business consistent with past practice;

               (d)  EXCLUSIVE RIGHTS.  Enter into or amend any agreements 
pursuant to which any other party is granted exclusive marketing or other 
exclusive rights of any type or scope with respect to any of its products or 
technology;

               (e)  DISPOSITIONS.  Sell, lease, license or otherwise dispose 
of or encumber any of its properties or assets which are material, 
individually or in the aggregate, to its and its parent's/subsidiaries' 
business, taken as a whole, except in the ordinary course of business;

               (f)  INDEBTEDNESS.  Incur any indebtedness for borrowed money 
or guarantee any such indebtedness or issue or sell any debt securities or 
guarantee any debt securities of others in excess of $1,000,000 at an 
interest rate of no greater than prime rate plus 1%;

               (g)  LEASES.  Enter into any operating lease in excess of 
$50,000;

               (h)  PAYMENT OF OBLIGATIONS.  Pay, discharge or satisfy in an 
amount in excess of $10,000 in any one case or $50,000 in the aggregate, any 
claim, liability or obligation (absolute, accrued, asserted or unasserted, 
contingent or otherwise) arising other than in the ordinary course of 
business, other than the payment, discharge or satisfaction of liabilities 
reflected or reserved against in the Target Financial Statements; 

               (i)  CAPITAL EXPENDITURES.  Make any capital expenditures, 
capital additions or capital improvements except in the ordinary course of 
business;


                                       31.

<PAGE>

               (j)  INSURANCE.  Materially reduce the amount of any material 
insurance coverage provided by existing insurance policies;

               (k)  TERMINATION OR WAIVER.  Terminate or waive any right of 
substantial value, other than in the ordinary course of business;

               (l)  EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES.  Adopt 
or amend any employee benefit plan, except if such Plan, as adopted or 
amended, is not materially more favorable than Acquiror's benefit plans, or 
adopt or amend any stock purchase or option plan, or hire any new officer 
level employee (except that it may hire a replacement for any current 
director level or officer level employee if it first provides Acquiror 
advance notice regarding such hiring decision), pay any special bonus or 
special remuneration to any employee or director (except payments made 
pursuant to written agreements outstanding on the date hereof), or increase 
the salaries or wage rates of its employees except in the ordinary course of 
business in accordance with its standard past practice;

               (m)  SEVERANCE ARRANGEMENTS.  Except as set forth on the 
Target Disclosure Schedule, grant any severance or termination pay (i) to any 
director or officer or (ii) to any other employee except (A) payments made 
pursuant to written plans or agreements outstanding on the date hereof or (B) 
grants which are made in the ordinary course of business in accordance with 
its standard past practice;

               (n)  LAWSUITS.  Commence a lawsuit other than (i) for the 
routine collection of bills, (ii) in such cases where it in good faith 
determines that failure to commence suit would result in the material 
impairment of a valuable aspect of its business, provided that it consults 
with Acquiror prior to the filing of such a suit, or (iii) for a breach of 
this Agreement or otherwise in connection with interpretation or enforcement 
of any provision of this Agreement or any agreement or transaction 
contemplated hereby;

               (o)  ACQUISITIONS.  Acquire or agree to acquire by merging or 
consolidating with, or by purchasing a substantial portion of the assets of, 
or by any other manner, any business or any corporation, partnership, 
association or other business organization or division thereof, or otherwise 
acquire or agree to acquire any assets which are material, individually or in 
the aggregate, to its and its parent's/subsidiaries' business, taken as a 
whole;

               (p)  TAXES.  Other than in the ordinary course of business, 
make or change any material election in respect of Taxes, adopt or change any 
accounting method in respect of Taxes, file any material Tax Return or any 
amendment to a material Tax Return, enter into any closing agreement, settle 
any material claim or assessment in respect of Taxes, or consent to any 


                                       32.

<PAGE>

extension or waiver of the limitation period applicable to any material claim 
or assessment in respect of Taxes;

               (q)  REVALUATION.  Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or

               (r)  OTHER.  Take or agree in writing or otherwise to take, 
any of the actions described in Sections 4.2(a) through (q) above, or any 
action which would cause a material breach of its representations or 
warranties contained in this Agreement or prevent it from materially 
performing or cause it not to materially perform its covenants hereunder.

         4.4   NO SOLICITATION.  Target and its officers, directors, 
employees or other agents will not, directly or indirectly, (i) take any 
action to solicit, initiate or encourage any Takeover Proposal (defined 
below) or (ii) engage in negotiations with, or disclose any nonpublic 
information relating to Target to, or afford access to the properties, books 
or records of Target to, any person that has advised Target that it may be 
considering making, or that has made, a Takeover Proposal.  Target will 
promptly notify Acquiror after receipt of any Takeover Proposal or any notice 
that any person is considering making a Takeover Proposal or any request for 
nonpublic information relating to Target for access to the properties, books 
or records of Target by any person that has advised Target that it may be 
considering making, or that has made, a Takeover Proposal and will keep 
Acquiror fully informed of the status and details of any such Takeover 
Proposal notice or request.  For purposes of this Agreement, "Takeover 
Proposal" means any offer or proposal for, or any indication of interest in 
15% or more of the outstanding shares of capital stock of Target, a merger or 
other business combination involving Target or the acquisition of any 
significant equity interest in, or a significant portion of the assets of, 
Target other than the transactions contemplated by this Agreement.  
Notwithstanding the foregoing, if on or after December 31, 1997 Target 
delivers a written notice to Acquiror (with appropriate backup documentation 
provided) which states that Target projects that it will run out of cash and 
cash equivalents on or before June 1, 1998, Target may initiate discussions 
with venture funds and other non-corporate investors for the purpose of 
raising equity funding for Target's operations.  Target may not close any of 
such transactions prior to March 31, 1998, and must keep Acquiror fully 
informed of the details of such discussions, including, without limitation, 
the identities of all parties with whom Target has such discussions.  The 
foregoing shall in no way limit any of Target's other obligations and 
covenants in this Agreement.

                                      ARTICLE V

                                ADDITIONAL AGREEMENTS


                                       33.

<PAGE>

         5.1   PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.  As 
promptly as practicable after the execution of this Agreement, Target and 
Acquiror shall prepare, and Acquiror shall file with the SEC, preliminary 
proxy materials relating to the approval of the Merger and the transactions 
contemplated hereby by the stockholders of Acquiror and, as promptly as 
practicable following receipt of SEC comments thereon, Acquiror shall file 
with the SEC a Registration Statement on Form S-4 (or such other or successor 
form as shall be appropriate) (the "S-4"), which complies in form with 
applicable SEC requirements and shall use all reasonable efforts to cause the 
Registration Statement to become effective as soon thereafter as practicable; 
provided, however, that neither Acquiror nor Target shall be obligated to 
agree to account for the Merger as a "purchase" in order to cause the 
Registration Statement to become effective.  Subject to the provisions of 
Section 4.4 hereof, the Proxy Statement shall include, if requested by 
Acquiror, the recommendation of the Target's Board of Directors in favor of 
the Merger.  The Proxy Statement shall include the recommendation of the 
Acquiror's Board of Directors in favor of the Merger; provided that such 
recommendation may not be included, or may be withdrawn if previously 
included, if Acquiror's Board of Directors believes in good faith and, upon 
written advice of its outside legal counsel, shall determine that to include 
such recommendation, or not withdraw such recommendation if previously 
included, would constitute a breach of Acquiror's Board of Directors' 
fiduciary duty under applicable law.  The Acquiror will update and amend the 
S-4 to the extent necessary prior to the Closing.

         5.2   MEETING OF STOCKHOLDERS.

               (a)  Target shall promptly after the date hereof take all 
action necessary in accordance with Delaware Law and its Certificate of 
Incorporation and Bylaws to convene the Target Stockholders Meeting within 45 
days of the Registration Statement being declared effective by the SEC.  
Target shall consult with Acquiror and use all reasonable efforts to hold the 
Target Stockholders Meeting on the same day as the Acquiror Stockholders 
Meeting and shall not postpone or adjourn (other than for the absence of a 
quorum) the Target Stockholders Meeting without the consent of Acquiror, 
which consent shall not be unreasonably withheld.  Subject to Section 5.1, 
Target shall use its best efforts to solicit from stockholders of Target 
proxies in favor of the Merger and shall take all other action necessary or 
advisable to secure the vote or consent of stockholders required to effect 
the Merger.

               (b)  Acquiror shall promptly after the date hereof take all
action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Acquiror Stockholders Meeting within 45
days of the Registration Statement being declared effective by the SEC. Acquiror
shall consult with Target and use all reasonable efforts to hold the Acquiror
Stockholders Meeting on the same day as the Target Stockholders Meeting and
shall not postpone or adjourn (other than for the absence of a quorum) the
Acquiror Stockholders Meeting without the consent of Target, which consent shall
not be unreasonably withheld.  Subject to Section 5.1, Acquiror shall use its
best efforts to solicit from stockholders of Acquiror proxies in 


                                       34.

<PAGE>

favor of the Merger and shall take all other action necessary or advisable to 
secure the vote or consent of stockholders required to effect the Merger.

         5.3   ACCESS TO INFORMATION.

               (a)  Target shall afford Acquiror and its accountants, counsel 
and other representatives, reasonable access during normal business hours 
during the period prior to the Effective Time to (i) all of Target's 
properties, books, contracts, commitments and records, and (ii) all other 
information concerning the business, properties and personnel of Target as 
Acquiror may reasonably request.  Target agrees to provide to Acquiror and 
its accountants, counsel and other representatives copies of internal 
financial statements promptly upon request.  Acquiror shall afford Target and 
its accountants, counsel and other representatives, reasonable access during 
normal business hours during the period prior to the Effective Time to (i) 
all of Acquiror's and its subsidiaries' properties, books, contracts, 
commitments and records, and (ii) all other information concerning the 
business, properties and personnel of Acquiror and its subsidiaries as Target 
may reasonably request.  Acquiror agrees to provide to Target and its 
accountants, counsel and other representatives copies of internal financial 
statements promptly upon request.  

               (b)  Subject to compliance with applicable law, from the date 
hereof until the Effective Time, each of Acquiror and Target shall confer on 
a regular and frequent basis with one or more representatives of the other 
party to report operational matters of materiality and the general status of 
ongoing operations.

               (c)  No information or knowledge obtained in any investigation 
pursuant to this Section 5.3 shall affect or be deemed to modify any 
representation or warranty contained herein or the conditions to the 
obligations of the parties to consummate the Merger.

         5.4   CONFIDENTIALITY.  The parties acknowledge that each of 
Acquiror and Target have previously executed a non-disclosure agreement dated 
March 11, 1997 (the "Confidentiality Agreement"), which Confidentiality 
Agreement shall continue in full force and effect in accordance with its 
terms.

         5.5   PUBLIC DISCLOSURE.  Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld), except as may be required by law, or in
exercise of the fiduciary duties of the Board of Directors, or by obligations
pursuant to any listing agreement with any national securities exchange or with
the 


                                       35.

<PAGE>

NASD.  Notwithstanding the foregoing, Acquiror and Target intend to issue a 
mutually agreeable press release upon execution of this Agreement.

         5.6   CONSENTS; COOPERATION.

               (a)  Each of Acquiror and Target shall promptly apply for or 
otherwise seek, and use its reasonable commercial efforts to obtain, all 
consents and approvals required to be obtained by it for the consummation of 
the Merger, including those required under HSR, and shall use its reasonable 
commercial efforts to obtain all necessary consents, waivers and approvals 
under any of its material contracts in connection with the Merger for the 
assignment thereof or otherwise, except where the failure to obtain such 
consents under material contracts would not have a Material Adverse Effect on 
Target.  The parties hereto will consult and cooperate with one another, and 
consider in good faith the views of one another, in connection with any 
analyses, appearances, presentations, memoranda, briefs, arguments, opinions 
and proposals made or submitted by or on behalf of any party hereto in 
connection with proceedings under or relating to HSR or any other federal or 
state antitrust or fair trade law.

               (b)  Each of Acquiror and Target shall use all reasonable 
efforts to resolve such objections, if any, as may be asserted by any 
Governmental Entity with respect to the transactions contemplated by this 
Agreement under HSR, the Sherman Act, as amended, the Clayton Act, as 
amended, the Federal Trade Commission Act, as amended, and any other Federal, 
state or foreign statutes, rules, regulations, orders or decrees that are 
designed to prohibit, restrict or regulate actions having the purpose or 
effect of monopolization or restraint of trade (collectively, "Antitrust 
Laws").  In connection therewith, if any administrative or judicial action or 
proceeding is instituted (or threatened to be instituted) challenging any 
transaction contemplated by this Agreement as violative of any Antitrust Law, 
each of Acquiror and Target shall cooperate and use all reasonable commercial 
efforts to vigorously contest and resist any such action or proceeding and to 
have vacated, lifted, reversed, or overturned any decree, judgment, 
injunction or other order, whether temporary, preliminary or permanent (each 
an "Order"), that is in effect and that prohibits, prevents, or restricts 
consummation of the Merger or any such other transactions, unless by mutual 
agreement Acquiror and Target decide that such litigation is not in their 
respective best interests.  Notwithstanding the provisions of the immediately 
preceding sentence, it is expressly understood and agreed that Acquiror shall 
have no obligation to litigate or contest any administrative or judicial 
action or proceeding or any Order beyond the earlier of (i) March 31, 1998 or 
(ii) the date of a ruling preliminary enjoining the Merger issued by a court 
of competent jurisdiction (the "Injunction Date"). Each of Acquiror and 
Target shall use all reasonable efforts to take such action as may be 
required to cause the expiration of the notice periods, under the HSR or 
other Antitrust Laws with respect to such transactions, to occur as promptly 
as possible after the execution of this Agreement.

               (c)  Notwithstanding anything to the contrary in Section 5.6(a)
or (b), (i) neither Acquiror nor any of it subsidiaries shall be required to
divest any of their respective businesses, product lines or assets, or to take
or agree to take any other action or agree to any 


                                       36.

<PAGE>

limitation that could reasonably be expected to have a Material Adverse 
Effect on Acquiror or on Acquiror combined with the Surviving Corporation 
after the Effective Time, and (ii) Target shall not be required to divest any 
of its businesses, product lines or assets, or to take or agree to take any 
other action or agree to any limitation that could reasonably be expected to 
have a Material Adverse Effect on Target.

         5.7   POOLING ACCOUNTING.  Acquiror and Target shall each use its 
reasonable commercial efforts to cause the business combination to be 
effected by the Merger to be accounted for as a pooling of interests.  Each 
of Acquiror and Target shall use its reasonable commercial efforts to cause 
its "Affiliates" (as defined in Section 5.8) not to take any action that 
would adversely affect the ability of Acquiror to account for the business 
combination to be effected by the Merger as a pooling of interest.

         5.8   AFFILIATE AGREEMENTS.

               (a)  SCHEDULE 5.8(A) sets forth those persons who may be 
deemed "Affiliates" of Target within the meaning of Rule 145 promulgated 
under the Securities Act ("Rule 145").  Target shall provide Acquiror such 
information and documents as Acquiror shall reasonably request for purposes 
of reviewing such list.  Target shall use its reasonable commercial efforts 
to deliver or cause to be delivered to Acquiror, concurrently with the 
execution of this Agreement (and in each case prior to the Effective Time) 
from each of the Affiliates of Target, an executed Affiliate Agreement in the 
form attached hereto as EXHIBIT B-1. Acquiror and Merger Sub shall be 
entitled to place appropriate legends on the certificates evidencing any 
Acquiror Common Stock to be received by such Affiliates of Target pursuant to 
the terms of this Agreement, and to issue appropriate stop transfer 
instructions to the transfer agent for Acquiror Common Stock, consistent with 
the terms of such Affiliate Agreements.

               (b)  SCHEDULE 5.8(B) sets forth those persons who may be 
deemed "Affiliates" of Acquiror within the meaning of Rule 145.  Acquiror 
shall provide Target such information and documents as Target shall 
reasonably request for purposes of reviewing such list.  Acquiror shall use 
its reasonable commercial efforts to deliver or cause to be delivered to 
Target, concurrently with the execution of this Agreement (and in each case 
prior to the Effective Time) from each of the Affiliates of Acquiror, an 
executed Affiliate Agreement in the form attached hereto as EXHIBIT B-2.

         5.9   VOTING AGREEMENT.  

               (a)  Target shall use its reasonable commercial efforts, on 
behalf of Acquiror and pursuant to the request of Acquiror, to cause each 
Target stockholder named in SCHEDULE 5.9(A) to execute and deliver to 
Acquiror a Voting Agreement substantially in the form of EXHIBIT C-1 attached 
hereto concurrent with the execution of this Agreement.


                                       37.

<PAGE>

               (b)  Acquiror shall use its reasonable commercial efforts, on 
behalf of Target and pursuant to the request of Target, to cause each 
Acquiror stockholder named in SCHEDULE 5.9(B) to execute and deliver to 
Target a Voting Agreement substantially in the form of EXHIBIT C-2 attached 
hereto concurrent with the execution of this Agreement.

         5.10  LEGAL REQUIREMENTS.  Each of Acquiror, Merger Sub and Target 
will, and will cause their respective subsidiaries to, take all reasonable 
actions necessary to comply promptly with all legal requirements which may be 
imposed on them with respect to the consummation of the transactions 
contemplated by this Agreement and will promptly cooperate with and furnish 
information to any party hereto necessary in connection with any such 
requirements imposed upon such other party in connection with the 
consummation of the transactions contemplated by this Agreement and will take 
all reasonable actions necessary to obtain (and will cooperate with the other 
parties hereto in obtaining) any consent, approval, order or authorization 
of, or any registration, declaration or filing with, any Governmental Entity 
or other person, required to be obtained or made in connection with the 
taking of any action contemplated by this Agreement.

         5.11  BLUE SKY LAWS.  Acquiror shall take such steps as may be 
necessary to comply with the securities and blue sky laws of all 
jurisdictions which are applicable to the issuance of the Acquiror Common 
Stock in connection with the Merger.  Target shall use its best efforts to 
assist Acquiror as may be necessary to comply with the securities and blue 
sky laws of all jurisdictions which are applicable in connection with the 
issuance of Acquiror Common Stock in connection with the Merger.

         5.12  EMPLOYEE BENEFIT PLANS.

               (a)  At the Effective Time, the Target Stock Option Plan and 
each outstanding option to purchase shares of Target Common Stock under the 
Target Stock Option Plan, whether vested or unvested, will be assumed by 
Acquiror.  SCHEDULE 5.13 hereto sets forth a true and complete list as of the 
date hereof of all holders of outstanding options under the Target Stock 
Option Plan, including the number of shares of Target capital stock subject 
to each such option, the exercise or vesting schedule, the exercise price per 
share and the term of each such option.  On the Closing Date, Target shall 
deliver to Acquiror an updated SCHEDULE 5.13 hereto current as of such date.  
Each such option so assumed by Acquiror under this Agreement shall continue 
to have, and be subject to, the same terms and conditions set forth in the 
Target Stock Option Plan, immediately prior to the Effective Time, except 
that (i) such option will be exercisable for that number of whole shares of 
Acquiror Common Stock equal to the product of the number of shares of Target 
Common Stock that were issuable upon exercise of such option immediately 
prior to the Effective Time multiplied by the Exchange Ratio and rounded down 
to the nearest whole number of shares of Acquiror Common Stock, and (ii) the 
per share exercise price for the shares of Acquiror Common Stock issuable 
upon exercise of such assumed option will be equal to the quotient determined 
by dividing the exercise price per share of Target Common Stock at which 


                                       38.

<PAGE>


such option was exercisable immediately prior to the Effective Time by the 
Exchange Ratio, rounded up to the nearest whole cent.  Consistent with the 
terms of the Target Stock Option Plan and the documents governing the 
outstanding options under that Plan, the Merger will not terminate any of the 
outstanding options under such Plan or accelerate the exercisability or 
vesting of such options except as disclosed in the Target Disclosure Schedule 
or the shares of Acquiror Common Stock which will be subject to those options 
upon the Acquiror's assumption of the options in the Merger. It is the 
intention of the parties that the options so assumed by Acquiror qualify 
following the Effective Time as incentive stock options as defined in Section 
422 of the Code to the extent such options qualified as incentive stock 
options prior to the Effective Time.  Within 10 business days after the 
Effective Time, Acquiror will issue to each person who, immediately prior to 
the Effective Time was a holder of an outstanding option under the Target 
Stock Option Plan a document in form and substance satisfactory to Target 
evidencing the foregoing assumption of such option by Acquiror.

         5.13  ESCROW AGREEMENT.  On or before the Effective Time, the Escrow 
Agent and the Stockholders' Agent (as defined in Article VIII hereto) will 
execute the Escrow Agreement contemplated by Article VIII in the form 
attached hereto as EXHIBIT E ("Escrow Agreement").

         5.14  LETTER OF ACQUIROR'S AND TARGET'S ACCOUNTANTS.

               (a)  Acquiror shall use all reasonable efforts to cause to be 
delivered to Target a Procedures Letter of Acquiror's independent auditors, 
dated a date within two business days before the date on which the 
Registration Statement shall become effective and addressed to Target, in 
form reasonably satisfactory to Target and customary in scope and substance 
for letters delivered by independent public accountants in connection with 
registration statements similar to the Registration Statement.

               (b)  Target shall use all reasonable efforts to cause to be 
delivered to Acquiror a Procedures Letter of Target's independent auditors, 
dated a date within two business days before the date on which the 
Registration Statement shall become effective and addressed to Acquiror, in 
form reasonably satisfactory to Acquiror and customary in scope and substance 
for letters delivered by independent public accountants in connection with 
registration statements similar to the Registration Statement.

         5.15  FORM S-8.  Acquiror agrees to file, as soon as practicable but 
in no event later than thirty (30) days after the Closing, a registration 
statement on Form S-8 covering the shares of Acquiror Common Stock issuable 
pursuant to outstanding options under the Target Stock Option Plan assumed by 
Acquiror and use reasonable commercial efforts to cause such registration 
statement to be declared effective as soon as practicable thereafter.  Target 
shall cooperate with and assist Acquiror in the preparation of such 
registration statement.


                                       39.

<PAGE>

         5.16  STOCKHOLDER'S REPRESENTATION AGREEMENTS.  Target will use 
reasonable commercial efforts to cause all Target stockholders who are not 
also Affiliates of Target to execute and deliver to Acquiror a Stockholder's 
Representation Agreement substantially in the form attached hereto as EXHIBIT 
F (the "Stockholder's Representation Agreement") which imposes certain 
restrictions regarding the resale of Acquiror Common Stock received in the 
Merger.

         5.17  LISTING OF ADDITIONAL SHARES.  Prior to the Effective Time, 
Acquiror shall file with the Nasdaq National Market a Notification Form for 
Listing of Additional Shares with respect to the shares referred to in 
Section 6.1(f) and use reasonable commercial efforts to ensure that all such 
shares are listed for trading thereof.

         5.18  EMPLOYEES.  Concurrently with the execution of this Agreement, 
each of the individuals set forth on SCHEDULE 5.18 shall have delivered to 
Acquiror an executed Employment and Non-Competition Agreement in the form of 
EXHIBIT G-1, et. seq., as applicable.  Target shall cooperate with Acquiror 
to assist Acquiror in employing such employees.

         5.19  POOLING LETTERS.  

               (a)  Target shall use all reasonable efforts to cause to be 
delivered to Acquiror a letter of Coopers & Lybrand L.L.P., Target's 
independent auditors, dated on or prior to the date of this Agreement and 
confirmed in writing two business days before the date of the Proxy Statement 
to the effect that the Merger qualifies for pooling-of-interest accounting 
treatment if consummated in accordance with this Agreement.  Such letter 
shall be in a form reasonably satisfactory to Acquiror and customary in scope 
and substance for letters delivered by independent public accountants in 
connection with transactions of this type.

               (b)  Acquiror shall use all reasonable efforts to cause to be 
delivered to Target a letter of Coopers & Lybrand L.L.P., Acquiror's 
independent auditors, dated on or prior to the date of this Agreement and 
confirmed in writing two business days before the date of the Proxy Statement 
to the effect that the Merger qualifies for pooling-of-interest accounting 
treatment if consummated in accordance with this Agreement.  Such letter 
shall be in a form reasonably satisfactory to Target and customary in scope 
and substance for letters delivered by independent public accountants in 
connection with transactions of this type.

         5.20  INDEMNIFICATION.

               (a)  After the Effective Time, Acquiror will cause the 
Surviving Corporation to indemnify and hold harmless the present and former 
officers, directors, employees and agents of Target (the "Indemnified 
Parties") in respect of acts or omissions occurring on or prior to the 
Effective Time to the extent provided under Target's then effective 
Certificate of Incorporation and Bylaws or any indemnification agreement with 
Target officers and directors to 


                                       40.

<PAGE>

which Target is a party, in each case in effect on March 1, 1997; provided 
that such indemnification shall be subject to any limitation imposed from 
time to time under applicable law.

               (b)  The provisions of this Section 5.21 are intended to be 
for the benefit of and shall be enforceable by, each Indemnified Party, and 
his or her heirs and representatives.

         5.21  REORGANIZATION.  Acquiror and Target shall each use its 
reasonable commercial efforts to cause the business combination to be 
effected by the Merger to be qualified as a "reorganization" described in 
Section 368(a) of the Code.

         5.22  EXPENSES.  Whether or not the Merger is consummated, all costs 
and expenses incurred in connection with this Agreement, the Certificate of 
Merger and the transactions contemplated hereby and thereby shall be paid by 
the party incurring such expense; provided, however, that any out-of-pocket 
expenses incurred by Target (including, without limitation, fees and expenses 
of one legal counsel to the Company, financial advisors and accountants) in 
excess of $150,000.00 (which amount shall be subject to reasonable increases 
in the event of unexpected and material changes in the scope of work required 
by such counsel, advisors or accounts, approval of which shall not be 
unreasonably withheld) in addition to fees and expenses of more than one 
legal counsel shall remain an obligation of Target's stockholders.

         5.23  TERMINATION OF REGISTRATION RIGHTS.  Target shall use 
commercially reasonable efforts to terminate any and all rights granted by 
that certain Amended and Restated Investors Rights Agreement, dated May 28, 
1997, by and among Target and each of the parties listed on Exhibit A 
thereto, from all holders of Registrable Securities thereunder.

         5.24  SERVICES AGREEMENT.  Acquiror and Target shall have entered 
into a Services Agreement in the form attached hereto as EXHIBIT H.

         5.25  EMPLOYEE BENEFIT PLANS.  As soon as practicable after 
Effective Time, Acquiror shall merge Target's 401(k) plan into the 401(k) 
plan maintained by Acquiror.  Acquiror shall, and shall cause the Surviving 
Corporation to, permit the employees of the Surviving Corporation to 
participate in all employee benefit plans offered to similarly situated 
employees of Acquiror.  Acquiror shall cause the employee benefit plans and 
vacation programs of Acquiror or the Surviving Corporation that are offered 
to the employees of the Surviving Corporation to recognize service with 
Target to the same extent as service with Acquiror for purposes of 
determining eligibility, vesting and seniority, but service with Target need 
not be recognized for purposes of benefit accrual under any defined-benefit 
pension plan maintained by Acquiror or the Surviving Corporation.  Acquiror 
shall absorb any deferred sales charges associated with the termination of 
Target's 401(k) plan not to exceed $10,000.


                                       41.

<PAGE>

         5.26  REASONABLE COMMERCIAL EFFORTS AND FURTHER ASSURANCES.  Each of 
the parties to this Agreement shall use reasonable commercial efforts to 
effectuate the transactions contemplated hereby and to fulfill and cause to 
be fulfilled the conditions to closing under this Agreement.  Each party 
hereto, at the reasonable request of another party hereto, shall execute and 
deliver such other instruments and do and perform such other acts and things 
as may be necessary or desirable for effecting completely the consummation of 
this Agreement and the transactions contemplated hereby.

                                      ARTICLE VI

                               CONDITIONS TO THE MERGER

         6.1   CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. 
The respective obligations of each party to this Agreement to consummate and 
effect this Agreement and the transactions contemplated hereby shall be 
subject to the satisfaction at or prior to the Effective Time of each of the 
following conditions, any of which may be waived, in writing, by agreement of 
all the parties hereto:

               (a)  STOCKHOLDER APPROVAL.  This Agreement and the Merger 
shall have been approved and adopted by (i) the holders of at least 
ninety-one percent (91%) of the stockholders of Target (as described in 
Section 2.26) under Delaware Law, (ii) the requisite vote of the stockholders 
of Acquiror (as described in Section 3.16) and (iii) Acquiror as the sole 
stockholder of Merger Sub.

               (b)  REGISTRATION STATEMENT EFFECTIVE.  The SEC shall have 
declared the Registration Statement effective.  No stop order suspending the 
effectiveness of the Registration Statement or any part thereof shall have 
been issued and no proceeding for that purpose, and no similar proceeding in 
respect of the Proxy Statement, shall have been initiated or threatened by 
the SEC and all requests for additional information on the part of the SEC 
shall have been complied with to the reasonable satisfaction of the parties 
thereto.

               (c)  NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY.  No temporary 
restraining order, preliminary or permanent injunction or other order issued 
by any court of competent jurisdiction or other legal or regulatory restraint 
or prohibition preventing the consummation of the Merger shall be and remain 
in effect, nor shall any proceeding brought by an administrative agency or 
commission or other governmental authority or instrumentality, domestic or 
foreign, seeking any of the foregoing be pending, which would have a Material 
Adverse Effect on such party.  Nor shall there be any action taken, or any 
statute, rule, regulation or order enacted, entered, enforced or deemed 
applicable to the Merger, which makes the consummation of the Merger illegal. 
In the event an injunction or other order shall have been 


                                       42.

<PAGE>

issued, each party agrees to use its reasonable diligent efforts to have such 
injunction or other order terminated or lifted.

               (d)  GOVERNMENTAL APPROVAL.  Acquiror, Target and Merger Sub 
and their respective subsidiaries shall have timely obtained from each 
Governmental Entity all approvals, waivers and consents, if any, necessary 
for consummation of or in connection with the Merger and the several 
transactions contemplated hereby, including such approvals, waivers and 
consents as may be required under the Securities Act, under state Blue Sky 
laws, and under HSR other than filings and approvals relating to the Merger 
or affecting Acquiror's ownership of Target or any of its properties if 
failure to obtain such approval, waiver or consent would not have a Material 
Adverse Effect to either party.

               (e)  ESCROW AGREEMENT.  Acquiror, Target, Escrow Agent and the 
Stockholder's Agent (as defined in Article VIII hereto) shall have entered 
into an Escrow Agreement substantially in the form attached hereto as EXHIBIT 
E.

               (f)  TAX OPINIONS.  Each of Acquiror and Target shall have 
received substantially identical written opinions from their respective 
counsel, in form and substance reasonably satisfactory to them, to the effect 
that the Merger will constitute a reorganization within the meaning of 
Section 368(a) of the Code.  In rendering such opinions, counsel shall be 
entitled to rely upon representations of Acquiror, Merger Sub and Target and 
certain stockholders of Target.

               (g)  LISTING OF ADDITIONAL SHARES.  The filing with the Nasdaq 
National Market of a Notification Form for Listing of Additional Shares with 
respect to the shares of Acquiror Common Stock issuable upon conversion of 
the Target Common Stock in the Merger and upon exercise of the options under 
the Target Stock Option Plan assumed by Acquiror shall have been made and 
shares so listed.

               (h)  LETTER FROM ACCOUNTANTS.  Each of Acquiror and Target 
shall have received a letter from Coopers & Lybrand L.L.P., independent 
auditors of both Acquiror and Target, confirming that the Merger qualifies 
for pooling of interests accounting treatment if consummated in accordance 
with this Agreement.

         6.2   ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET.  The 
obligations of Target to consummate and effect this Agreement and the 
transactions contemplated hereby shall be subject to the satisfaction at or 
prior to the Effective Time of each of the following conditions, any of which 
may be waived, in writing, by Target:


                                       43.

<PAGE>

               (a)  REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Except as 
set forth on a schedule to be delivered to Target prior to the Effective Time 
(the "Acquiror Closing Disclosure Schedule"), the representations and 
warranties of Acquiror and Merger Sub in this Agreement shall be true and 
correct in all material respects (except for such representations and 
warranties that are qualified by their terms by a reference to materiality 
which representations and warranties as so qualified shall be true in all 
respects) on and as of the Effective Time as though such representations and 
warranties were made on and as of such time, except to the extent that the 
failure to be so true would not and would not reasonably be expected to have 
a Material Adverse Effect on Acquiror and (ii) Acquiror and Merger Sub shall 
have performed and complied in all material respects with all covenants, 
obligations and conditions of this Agreement required to be performed and 
complied with by them as of the Effective Time.

               (b)  CERTIFICATE OF ACQUIROR.  Target shall have been provided 
with a certificate executed on behalf of Acquiror by its President and its 
Chief Financial Officer to the effect that, as of the Effective Time:

                  (i)   except as set forth on Acquiror Closing Disclosure 
Schedule delivered prior to the Effective Time, all representations and 
warranties made by Acquiror and Merger Sub under this Agreement are true and 
complete in all material respects; and

                 (ii)   all covenants, obligations and conditions of this 
Agreement to be performed by Acquiror and Merger Sub on or before such date 
have been so performed in all material respects.

               (c)  NO MATERIAL ADVERSE CHANGES.  There shall not have 
occurred any material adverse change in the financial condition, properties, 
assets (including intangible assets), liabilities, business, operations or 
results of operations of Acquiror and its subsidiaries, taken as a whole.

               (d)  LETTER FROM ACCOUNTANTS.  Target shall have received the 
letters referred to in Section 5.20 from Coopers & Lybrand L.L.C., Acquiror's 
independent auditors.

               (e)  AFFILIATE AGREEMENTS.  Target shall have received from 
each of the Affiliates of Acquiror an executed Affiliate Agreement in 
substantially the form attached hereto as EXHIBIT B-2.

               (f)  CLOSING PRICE.  The Closing Price (as defined in Section 
1.6(a)) shall be at least $3.00 per share, as adjusted for any stock splits, 
stock dividends or recapitalizations. 

               (g)  THIRD PARTY CONSENTS.  SCHEDULE 6.2(G) hereto sets forth 
all consents or approvals required in connection with the Merger under the 
contracts of Acquiror.  Target shall 


                                       44.

<PAGE>

have been furnished with evidence satisfactory to it of the consent or 
approval of those persons whose consent or approval shall be required in 
connection with the Merger under the contracts of Acquiror set forth on 
SCHEDULE 6.2(G) hereto, if failure to obtain such consents or approvals would 
or would reasonably be expected to have a Material Adverse Effect on Acquiror.

         6.3   ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND 
MERGER SUB.  The obligations of Acquiror and Merger Sub to consummate and 
effect this Agreement and the transactions contemplated hereby shall be 
subject to the satisfaction at or prior to the Effective Time of each of the 
following conditions, any of which may be waived, in writing, by Acquiror:

               (a)  REPRESENTATIONS, WARRANTIES AND COVENANTS.  Except as set 
forth on a schedule to be delivered to Acquiror prior to the Effective Time 
(the "Target Closing Disclosure Schedule"), the representations and 
warranties of Target in this Agreement shall be true and correct in all 
material respects (except for such representations and warranties that are 
qualified by their terms by a reference to materiality which representations 
and warranties as so qualified shall be true in all respects) on and as of 
the Effective Time as though such representations and warranties were made on 
and as of such time except to the extent that the failure to be so true would 
not and would not reasonably be expected to have a Material Adverse Effect on 
Target and (ii) Target shall have performed and complied in all material 
respects with all covenants, obligations and conditions of this Agreement 
required to be performed and complied with by it as of the Effective Time.

               (b)  CERTIFICATE OF TARGET.  Acquiror shall have been provided 
with a certificate executed on behalf of Target by its President and Chief 
Financial Officer to the effect that, as of the Effective Time:

                  (i)   except as set forth on the Target Closing Disclosure 
Schedule delivered prior to the Effective Time, all representations and 
warranties made by Target under this Agreement are true and complete in all 
material respects; and

                 (ii)   all covenants, obligations and conditions of this 
Agreement to be performed by Target on or before such date have been so 
performed in all material respects.

               (c)  THIRD PARTY CONSENTS.  SCHEDULE 6.3(C) hereto sets forth 
all consents or approvals required in connection with the Merger under the 
contracts of Target.  Acquiror shall have been furnished with evidence 
satisfactory to it of the consent or approval of those persons whose consent 
or approval shall be required in connection with the Merger under the 
contracts of Target set forth on SCHEDULE 6.3(C) hereto, if failure to obtain 
such consents or approvals would or would reasonably be expected to have a 
Material Adverse Effect on Target.

               (d)  INJUNCTIONS OR RESTRAINTS ON CONDUCT OF BUSINESS.  No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of 


                                       45.

<PAGE>

competent jurisdiction or other legal or regulatory restraint provision 
limiting or restricting Acquiror's conduct or operation of the business of 
Target, following the Merger shall be in effect, nor shall any proceeding 
brought by an administrative agency or commission or other Governmental 
Entity, domestic or foreign, seeking the foregoing be pending.

               (e)  NO MATERIAL ADVERSE CHANGES.  There shall not have 
occurred any material adverse change in the financial condition, properties, 
assets (including intangible assets), liabilities, business, operations or 
results of operations of Target.

               (f)  LETTER OF ACCOUNTANTS.  Acquiror shall have received the 
letters referred to in Section 5.19 from Coopers & Lybrand L.L.C., Acquiror's 
independent auditors.

               (g)  AFFILIATE'S AGREEMENTS.  Acquiror shall have received 
from each of the Affiliates of Target an executed Affiliate's Agreement in 
substantially the form attached hereto as EXHIBIT B-1.

               (h)  FIRPTA CERTIFICATE.  Target shall, prior to the Closing 
Date, provide Acquiror with a properly executed FIRPTA Notification Letter, 
substantially in the form of EXHIBIT D attached hereto, which states that 
shares of capital stock of Target do not constitute "United States real 
property interests" under Section 897(c) of the Code, for purposes of 
satisfying Acquiror's obligations under Treasury Regulation Section 
1.1445-2(c)(3). In addition, simultaneously with delivery of such 
Notification Letter, Target shall have provided to Acquiror, as agent for 
Target, a form of notice to the Internal Revenue Service in accordance with 
the requirements of Treasury Regulation Section 1.897-2(h)(2) and 
substantially in the form of EXHIBIT D attached hereto along with written 
authorization for Acquiror to deliver such notice form to the Internal 
Revenue Service on behalf of Target upon the Closing of the Merger.

               (i)  STOCKHOLDER'S REPRESENTATION AGREEMENTS.  Acquiror shall 
have received from holders of at least ninety percent (90%) of the Target 
Capital Stock, outstanding immediately prior to the Effective Time, a duly 
executed and delivered Stockholder's Representation Agreement in 
substantially the form attached hereto as EXHIBIT F.

               (j)  RESIGNATION OF DIRECTORS. The directors of Target in 
office immediately prior to the Effective Time shall have resigned as 
directors of the Surviving Corporation effective as of the Effective Time.

               (k)  EMPLOYMENT AND NON-COMPETITION AGREEMENTS.  The employees 
of Target set forth on Schedule 5.18 shall have accepted employment with 
Acquiror and shall have entered into an Employment and Non-Competition 
Agreement substantially in the form attached hereto as EXHIBITS G-1, et. seq.


                                       46.

<PAGE>

               (l)  EXPENSE STATEMENT.  Acquiror shall have received from 
Target a statement of all out-of-pocket expenses incurred by Target which are 
subject to the limitation described in Section 5.23 hereto.

               (m)  TERMINATION OF REGISTRATION RIGHTS.  Acquiror shall have 
received an agreement of termination of any and all rights granted by that 
certain Amended and Restated Investors Rights Agreement, dated May 28, 1997, 
as amended, by and among Target and each of the parties listed on EXHIBIT A 
thereto.

               (n)  CONVERSION OF PREFERRED STOCK.  All holders of Target 
Preferred Stock shall have converted all such shares of Preferred Stock into 
Common Stock of Target prior to the Closing.  There shall be no outstanding 
shares of Target Preferred Stock immediately prior to the Closing.

               (o)  PRODUCT DELIVERY.  Target shall have made shipments of 
commercially available Products, as that term is defined and pursuant to the 
specifications detailed in a product acceptance criteria letter provided by 
the Target and approved by Acquiror as of the date hereof, to bona fide 
customers bookable in accordance with Acquiror's revenue recognition policy 
of at least Seventy-Five Thousand dollars ($75,000) by March 31, 1998. 

                                     ARTICLE VII

                          TERMINATION, AMENDMENT AND WAIVER

         7.1   TERMINATION.  At any time prior to the Effective Time, whether 
before or after approval of the matters presented in connection with the 
Merger by the stockholders of Target, this Agreement may be terminated:

               (a)  by mutual consent duly authorized by the Boards of 
Directors of Acquiror and Target;

               (b)  by either Acquiror or Target, if, without fault of the 
terminating party, the Closing shall not have occurred on or before March 31, 
1998 (provided a later date may be agreed upon in writing by the parties 
hereto, and provided further that the right to terminate this Agreement under 
this Section 7.1(b) shall not be available to any party whose action or 
failure to act has been the cause or resulted in the failure of the Merger to 
occur on or before such date and such action or failure to act constitutes a 
breach of this Agreement);

               (c)  by Acquiror, if (i) Target shall breach any 
representation, warranty, obligation or agreement hereunder and such breach 
shall not have been cured within ten (10) 


                                       47.

<PAGE>

business days of receipt by Target of written notice of such breach and such 
breach would have or would reasonably be expected to have a Material Adverse 
Effect on Target, or Target or shall take any action that would preclude the 
Merger to be accounted for as a pooling of interests, provided that the right 
to terminate this Agreement by Acquiror under this Section 7.1(c)(i) shall 
not be available to Acquiror where Acquiror is at that time in willful breach 
of this Agreement, (ii) the Board of Directors of Target shall have withdrawn 
or modified its recommendation of this Agreement or the Merger in a manner 
adverse to Acquiror or shall have resolved to do any of the foregoing, 
provided that the right to terminate this Agreement by Acquiror under this 
Section 7.1(c)(ii) shall not be available to Acquiror where Acquiror is at 
that time in willful breach of this Agreement, (iii) for any reason Target 
fails to call and hold the Target Stockholders Meeting or obtain appropriate 
written consent of Target's stockholders by March 31, 1998 or (iv) holders of 
more than nine percent (9%) of Target Capital Stock have not voted in favor 
of the Merger by March 31, 1998.

               (d)  by Target, if (i) Acquiror shall breach any 
representation, warranty, obligation or agreement hereunder and such breach 
shall not have been cured within ten (10) days following receipt by Acquiror 
of written notice of such breach and such breach would have or would 
reasonably be expected to have a Material Adverse Effect on Target, provided 
that the right to terminate this Agreement by Target under this Section 
7.1(d) shall not be available to Target where Target is at that time in 
willful breach of this Agreement, (ii) the Board of Directors of Acquiror 
shall have withdrawn or modified its recommendation of this Agreement or the 
Merger in a manner adverse to Target or shall have resolved to do any of the 
foregoing, provided that the right to terminate this Agreement by Target 
under this Section 7.1(d)(ii) shall not be available to Target where Target 
is at that time in willful breach of this Agreement, (iii) for any reason 
Acquiror fails to call and hold the Acquiror Stockholders Meeting or obtain 
appropriate written consent of Acquiror's stockholders by March 31, 1998 or 
(iv) Acquiror's stockholders do not approve the Merger and this Agreement by 
the requisite vote at the Acquiror Stockholders Meeting;

               (e)  by either Acquiror or Target (i) if any permanent 
injunction or other order of a court or other competent authority preventing 
the consummation of the Merger shall have become final and nonappealable or 
(ii) if any required approval of the stockholders of Target shall not have 
been obtained by reason of the failure to obtain the required vote upon a 
vote held at a duly held meeting of stockholders or at any adjournment 
thereof or by written consent;

               (f)  by Target, in the event (i) of the acquisition, by any
person or group of persons (other than persons or groups of persons who (A)
acquired shares of Acquiror Common Stock pursuant to any merger of Acquiror in
which Acquiror was the surviving corporation or any acquisition by Acquiror of
all or substantially all of the capital stock or assets of another person or (B)
disclose their beneficial ownership of shares of Acquiror Common Stock on
Schedule 13G under the Exchange Act) of beneficial ownership of 30% or more of
the outstanding shares of Acquiror Common Stock (the terms "person," "group" and
"beneficial ownership" having the meanings ascribed thereto in Section 13(d) of
the Exchange Act and the regulations promulgated 


                                       48.

<PAGE>

thereunder), or (ii) the Board of Directors of Acquiror accepts or publicly 
recommends acceptance of an offer from a third party to acquire 50% or more 
of the outstanding shares of Acquiror Common Stock or of Acquiror's 
consolidated assets; or

         7.2   EFFECT OF TERMINATION.  In the event of termination of this 
Agreement as provided in Section 7.1, this Agreement shall forthwith become 
void and there shall be no liability or obligation on the part of Acquiror, 
Merger Sub or Target or their respective officers, directors, stockholders or 
affiliates, except to the extent that such termination results from the 
breach by a party hereto of any of its representations, warranties or 
covenants set forth in this Agreement; provided that, the provisions of 
Section 5.4 (Confidentiality), Section 7.3 (Expenses and Termination Fees) 
and this Section 7.2 shall remain in full force and effect and survive any 
termination of this Agreement.

         7.3   EXPENSES AND TERMINATION FEES.

               (a)  Subject to Sections 7.3(b), 7.3(c), 7.3(d) and 7.3(e), 
whether or not the Merger is consummated, all costs and expenses incurred in 
connection with this Agreement and the transactions contemplated hereby 
(including, without limitation, the fees and expenses of its advisers, 
accountants and legal counsel) shall be paid by the party incurring such 
expense.

               (b)  In the event that (i) either Acquiror or Target shall 
terminate this Agreement pursuant to Section 7.1(e)(ii) following a failure 
of the stockholders of Target to approve this Agreement and, prior to the 
time of the Target Stockholders Meeting, there shall have been (A) a Trigger 
Event with respect to Target or (B) a Takeover Proposal which at the time of 
the meeting of Target's stockholders shall not have been (x) rejected by 
Target and (y) withdrawn by the third party, or (ii) Acquiror shall terminate 
this Agreement pursuant to Section 7.1(c), due in whole or in part to any 
failure by Target to use its reasonable commercial efforts to perform and 
comply with all agreements and conditions required by this Agreement to be 
performed or complied with by Target prior to or on the Closing Date or any 
failure by Target's Affiliates to take any actions required to be taken 
hereby, and prior thereto there shall have been (A) a Trigger Event or (B) a 
Takeover Proposal which shall not have been (x) rejected by Target and (y) 
withdrawn by the third party, then Target shall reimburse Acquiror for all of 
the reasonable out-of-pocket costs and expenses incurred by Acquiror in 
connection with this Agreement and the transactions contemplated hereby 
(including, without limitation, the fees and expenses of its advisors, 
accountants and legal counsel) and, in addition, Target shall promptly pay to 
Acquiror the sum of $4,000,000 (the "Termination Fee").

               (c)  In the event that Acquiror shall terminate this Agreement 
pursuant to Section 7.1(c) or Section 7.1(e)(ii), Target shall promptly 
reimburse Acquiror for all of the reasonable out-of-pocket costs and expenses 
incurred by Acquiror in connection with this Agreement and the transactions 
contemplated hereby (including, without limitation, the fees and 


                                       49.

<PAGE>

expenses of its advisors, accountants and legal counsel); and, in the event 
any Takeover Proposal or Trigger Event is consummated (as defined in Section 
7.3(h) within six months of the later of (x) such termination of this 
Agreement and (y) the payment of the above-described expenses, Target shall 
promptly pay to Acquiror the additional sum of $4,000,000 (provided that no 
Termination Fee had been previously paid pursuant to Section 7.3(b)).

               (d)  In the event that Target shall terminate this Agreement 
pursuant to Section 7.1(d) or Section 7.1(f), Acquiror shall promptly 
reimburse Target for all of the reasonable out-of-pocket costs and expenses 
incurred by Target in connection with this Agreement and the transactions 
contemplated hereby (including, without limitation, the fees and expenses of 
its advisors, accountants and legal counsel).

               (e)  The parties hereto agree that the Termination Fees due 
pursuant to Section 7.3(b) and Section 7.3(c) shall not be deemed to be 
liquidated damages and that Acquiror's right to the payment of such 
Termination Fees shall be in addition to any other rights or remedies under 
contract, at law or in equity to which Acquiror may be entitled.  Nothing in 
this Article VII shall be interpreted as limiting Acquiror's rights and 
remedies under any circumstance in the event of Target's breach of this 
Agreement.

               (f)  As used herein, a "Trigger Event" shall occur if any 
Person (as that term is defined in Section 13(d) of the Exchange Act and the 
regulations promulgated thereunder) acquires securities representing 15% or 
more, or commences a tender or exchange offer following the successful 
consummation of which the offeror and its affiliate would beneficially own 
securities representing 15% or more, of the voting power of Target; PROVIDED, 
HOWEVER, a Trigger Event shall not be deemed to include the acquisition by 
any Person of securities representing 15% or more of Target if such Person 
has acquired such securities not with the purpose nor with the effect of 
changing or influencing the control of Target, nor in connection with or as a 
participant in any transaction having such purpose or effect, including 
without limitation not in connection with such Person (i) making any public 
announcement with respect to the voting of such shares at any meeting to 
consider any merger, consolidation, sale of substantial assets or other 
business combination or extraordinary transaction involving Target, (ii) 
making, or in any way participating in, any "solicitation" of "proxies" (as 
such terms are defined or used in Regulation 14A under the Exchange Act) to 
vote any voting securities of Target (including, without limitation, any such 
solicitation subject to Rule 14a-11 under the Exchange Act) or seeking to 
advise or influence any Person with respect to the voting of any voting 
securities of Target, directly or indirectly, relating to a merger or other 
business combination involving Target or the sale or transfer of a 
significant portion of assets (excluding the sale or disposition of assets in 
the ordinary course of business) of Target, (iii) forming, joining or in any 
way participating in any "group" within the meaning of Section 13(d)(3) of 
the Exchange Act with respect to any voting securities of Target, directly or 
indirectly, relating to a merger or other business combination involving 
Target or the sale or transfer of a significant portion of assets (excluding 
the sale or disposition of assets in the ordinary 

                                       50.

<PAGE>

course of business) of Target, or (iv) otherwise acting, alone or in concert 
with others, to seek control of Target or to seek to control or influence the 
management or policies of Target.  

               (g)  For purposes of Section 7.3(c) above, (A) "consummation" 
of a Takeover Proposal shall occur on the date a written agreement is entered 
into with respect to a merger or other business combination involving Target 
or the acquisition of any significant equity interest in 15% or more of the 
outstanding shares of capital stock of Target, or sale or transfer of any 
material assets (excluding the sale or disposition of assets in the ordinary 
course of business) of Target or any of its subsidiaries and (B) 
"consummation" of a Trigger Event shall occur on the date any Person or any 
of its affiliates or associates would beneficially own securities 
representing 15% or more of the voting power of Target following a tender or 
exchange offer.  Additionally, for the purposes of this Section 7.3(g), a 
Takeover Proposal shall not include an equity investment by financial 
investors, including venture capitalists, which does not result in a change 
of control of Target.

         7.4   AMENDMENT.  The boards of directors of the parties hereto may 
cause this Agreement to be amended at any time by execution of an instrument 
in writing signed on behalf of each of the parties hereto; provided that an 
amendment made subsequent to adoption of the Agreement by the stockholders of 
Target or Merger Sub shall not (i) alter or change the amount or kind of 
consideration to be received on conversion of the Target Capital Stock, (ii) 
alter or change any term of the Certificate of Incorporation of the Surviving 
Corporation to be effected by the Merger, or (iii) alter or change any of the 
terms and conditions of the Agreement if such alteration or change would 
adversely affect the holders of Target Common Stock or Merger Sub Common 
Stock.

         7.5   EXTENSION; WAIVER.  At any time prior to the Effective Time 
any party hereto may, to the extent legally allowed, (i) extend the time for 
the performance of any of the obligations or other acts of the other parties 
hereto, (ii) waive any inaccuracies in the representations and warranties 
made to such party contained herein or in any document delivered pursuant 
hereto and (iii) waive compliance with any of the agreements or conditions 
for the benefit of such party contained herein.  Any agreement on the part of 
a party hereto to any such extension or waiver shall be valid only if set 
forth in an instrument in writing signed on behalf of such party.


                                       51.

<PAGE>

                                     ARTICLE VIII

                              ESCROW AND INDEMNIFICATION

         8.1   ESCROW FUND.  As soon as practicable after the Effective Time, 
10% of the shares of Acquiror Common Stock issued at the Closing (the "Escrow 
Shares") shall be registered in the name of, and be deposited with, State 
Street Bank and Trust Company of California, N.A. (or other institution 
selected by Acquiror with the reasonable consent of Target) as escrow agent 
(the "Escrow Agent"), such deposit to constitute the Escrow Fund and to be 
governed by the terms set forth herein and in the Escrow Agreement attached 
hereto EXHIBIT E. The Escrow Fund (but only up to a maximum of ten percent 
(10%) of the shares of Acquiror Common Stock issued at the Closing) shall be 
available to compensate Acquiror pursuant to the indemnification obligations 
of the stockholders of Target.

         8.2   INDEMNIFICATION.

               (a)  Subject to the limitations set forth in this Article 
VIII, the stockholders of Target will indemnify and hold harmless Acquiror 
and the Surviving Corporation and its respective officers, directors, agents 
and employees, and each person, if any, who controls or may control Acquiror 
or the Surviving Corporation within the meaning of the Securities Act 
(hereinafter referred to individually as an "Indemnified Person" and 
collectively as "Indemnified Persons") from and against any and all losses, 
costs, damages, liabilities and expenses arising from claims, demands, 
actions, causes of action, including, without limitation, reasonable legal 
fees, net of any recoveries under existing insurance policies, tax benefit 
received by Acquiror or its affiliates as a result of such damages, 
indemnities from third parties or in the case of third party claims, by any 
amount actually recovered by Acquiror or its affiliates pursuant to 
counterclaims made by any of them directly relating to the facts giving rise 
to such third party claims (collectively, "Damages") arising out of (i) 
breach by Target of the Confidentiality Agreement and (ii) any 
misrepresentation or breach of or default in connection with any of the 
representations, warranties, covenants and agreements given or made by Target 
in this Agreement, the Target Disclosure Schedules or any exhibit or schedule 
to this Agreement.  Acquiror and its affiliates shall act in good faith and 
in a commercially reasonable manner to mitigate any Damages they may suffer. 
The Escrow Fund shall be the sole and exclusive remedy for any claims, 
demands, actions or other causes of action brought against Target or its 
affiliates, stockholders, officers, directors or agents.

               (b)  Nothing in this Agreement shall limit the liability (i) 
of Target for any breach of any representation, warranty or covenant if the 
Merger does not close, or (ii) of any Target stockholder in connection with 
any breach by such stockholder of the Affiliate and Stockholder Agreement, 
Stockholder's Representation Agreement, Irrevocable Proxy or continuity of 
interest certificate(s) delivered in connection with the tax opinions to be 
rendered pursuant to Section 6.2(g); provided, however, that resort to the 
Escrow Fund shall be the exclusive remedy of Acquiror for any such breaches 
and misrepresentations following the Effective Time of the Merger.


                                       52.

<PAGE>

         8.3   DAMAGE THRESHOLD.

               (a)  Notwithstanding Section 8.2, Acquiror may not receive any 
shares from the Escrow Fund with respect to the indemnification obligations 
of the stockholders of Target set forth in Section 8.2(a)(i) unless and until 
an Officer's Certificate or Certificates (as defined in Section 8.5 below) 
satisfying the requirements of Section 8.5(a)(ii) and identifying Damages has 
been delivered to the Escrow Agent as provided in Section 8.5 below and such 
amount is determined pursuant to this Article VIII to be payable, in which 
case Acquiror shall receive shares equal in value to the full amount of 
Damages; provided, however, that in no event shall Acquiror receive more than 
the Escrow Shares.

               (b)  Notwithstanding Section 8.2, Acquiror may not receive any 
shares from the Escrow Fund with respect to the indemnification obligations 
of the stockholders of Target set forth in Section 8.2(a)(ii) unless and 
until an Officer's Certificate or Certificates (as defined in Section 8.5 
below) satisfying the requirements of Section 8.5(a)(i) and (ii) and 
identifying Damages the aggregate amount of which exceeds $100,000 (which 
aggregate amount cannot include any individual Damage items of $5,000 or 
less) has been delivered to the Escrow Agent as provided in Section 8.5 below 
and such amount is determined pursuant to this Article VIII to be payable, in 
which case Acquiror shall receive shares equal in value to the full amount of 
Damages in excess of $100,000; provided, however, that in no event shall 
Acquiror receive more than the Escrow Shares.  In determining the amount of 
any Damage attributable to a breach, any materiality standard contained in a 
representation, warranty or covenant of Acquiror shall be disregarded.

         8.4   ESCROW PERIOD.  The Escrow Period shall terminate upon the 
expiration the earlier to occur of (i) twelve (12) months after the Effective 
Time or (ii) the issuance of Acquiror's audited financial statements for the 
year ending December 31, 1997 or December 31, 1998, depending on the Closing 
Date, which include the results of Target; provided, however, that a portion 
of the Escrow Shares, which, in the reasonable judgment of Acquiror, subject 
to the objection of the Stockholders' Agent and the subsequent arbitration of 
the matter in the manner provided in Section 8.7 hereof, are necessary to 
satisfy any unsatisfied claims specified in any Officer's Certificate 
theretofore delivered to the Escrow Agent prior to termination of the Escrow 
Period with respect to facts and circumstances existing prior to expiration 
of the Escrow Period, shall remain in the Escrow Fund until such claims have 
been resolved.

         8.5   CLAIMS UPON ESCROW FUND.

               (a)  Upon receipt by the Escrow Agent on or before the last 
day of the Escrow Period of a certificate signed by any officer of Acquiror 
(an "Officer's Certificate"):


                                       53.

<PAGE>

                  (i)   stating that, with respect to the indemnification
         obligations of the stockholders of Target set forth in Section
         8.2(a)(ii), Damages exist in an aggregate amount greater than
         $100,000, (which aggregate amount cannot include any individual Damage
         items of $5,000 or less), and

                 (ii)   specifying in reasonable detail the individual items of
         such Damages included in the amount so stated, the date each such item
         was paid, or properly accrued or arose, the nature of the
         misrepresentation, breach of warranty or claim to which such item is
         related,

the Escrow Agent shall, subject to the provisions of this Article VIII, 
deliver to Acquiror out of the Escrow Fund, as promptly as practicable, 
Acquiror Common Stock or other assets held in the Escrow Fund having a value 
equal to (x) such Damages with respect to the indemnification obligations of 
the stockholders of Target set forth in Section 8.2(a)(i) and (y) such 
Damages in excess of $100,000 with respect to the indemnification obligations 
of the stockholders of Target set forth in Section 8.2(a)(ii).

               (b)  For the purpose of compensating Acquiror for its Damages 
pursuant to this Agreement, the Acquiror Common Stock in the Escrow Fund 
shall be valued at the Closing Price.

         8.6   OBJECTIONS TO CLAIMS.  At the time of delivery of any 
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's 
Certificate shall be delivered to the Stockholders' Agent (defined in Section 
8.8 below) and for a period of forty-five (45) days after such delivery, the 
Escrow Agent shall make no delivery of Acquiror Common Stock or other 
property pursuant to Section 8.5 hereof unless the Escrow Agent shall have 
received written authorization from the Stockholders' Agent to make such 
delivery.  After the expiration of such forty-five (45) day period, the 
Escrow Agent shall make delivery of the Acquiror Common Stock or other 
property in the Escrow Fund in accordance with Section 8.5 hereof, provided 
that no such payment or delivery may be made if the Stockholders' Agent shall 
object in a written statement to the claim made in the Officer's Certificate, 
and such statement shall have been delivered to the Escrow Agent and to 
Acquiror prior to the expiration of such forty-five (45) day period.


                                       54.

<PAGE>

         8.7   RESOLUTION OF CONFLICTS; ARBITRATION.

               (a)  In case the Stockholders' Agent shall so object in 
writing to any claim or claims by Acquiror made in any Officer's Certificate, 
Acquiror shall have forty-five (45) days to respond in a written statement to 
the objection of the Stockholders' Agent.  If after such forty-five (45) day 
period there remains a dispute as to any claims, the Stockholders' Agent and 
Acquiror shall attempt in good faith for thirty (30) days to agree upon the 
rights of the respective parties with respect to each of such claims.  If the 
Stockholders' Agent and Acquiror should so agree, a memorandum setting forth 
such agreement shall be prepared and signed by both parties and shall be 
furnished to the Escrow Agent.  The Escrow Agent shall be entitled to rely on 
any such memorandum and shall distribute the Acquiror Common Stock or other 
property from the Escrow Fund in accordance with the terms thereof.

               (b)  If no such agreement can be reached after good faith 
negotiation, either Acquiror or the Stockholders' Agent may, by written 
notice to the other, demand arbitration of the matter unless the amount of 
the damage or loss is at issue in pending litigation with a third party, in 
which event arbitration shall not be commenced until such amount is 
ascertained or both parties agree to arbitration; and in either such event 
the matter shall be settled by arbitration conducted by three arbitrators.  
Within fifteen (15) days after such written notice is sent, Acquiror and the 
Stockholders' Agent shall each select one arbitrator, and the two arbitrators 
so selected shall select a third arbitrator.  The decision of the arbitrators 
as to the validity and amount of any claim in such Officer's Certificate 
shall be binding and conclusive upon the parties to this Agreement, and 
notwithstanding anything in Section 8.6 hereof, the Escrow Agent shall be 
entitled to act in accordance with such decision and make or withhold 
payments out of the Escrow Fund in accordance therewith.

               (c)  Judgment upon any award rendered by the arbitrators may 
be entered in any court having jurisdiction.  Any such arbitration shall be 
held in Santa Clara County or San Mateo County, California under the 
commercial rules then in effect of the American Arbitration Association.  For 
purposes of this Section 8.7(c), in any arbitration hereunder in which any 
claim or the amount thereof stated in the Officer's Certificate is at issue, 
Acquiror shall be deemed to be the Non-Prevailing Party unless the 
arbitrators award Acquiror more than one-half (1/2) of the amount in dispute, 
plus any amounts not in dispute; otherwise, the Target stockholders for whom 
shares of Target Common Stock otherwise issuable to them have been deposited 
in the Escrow Fund shall be deemed to be the Non-Prevailing Party.  The 
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees 
of each arbitrator, the administrative fee of the American Arbitration 
Association, and the expenses, including without limitation, attorneys' fees 
and costs, reasonably incurred by the other party to the arbitration.


                                       55.

<PAGE>

         8.8   STOCKHOLDERS' AGENT.

               (a)  Craig Malloy shall be constituted and appointed as agent 
("Stockholders' Agent") for and on behalf of the Target stockholders to give 
and receive notices and communications, to authorize delivery to Acquiror of 
the Acquiror Common Stock or other property from the Escrow Fund in 
satisfaction of claims by Acquiror, to object to such deliveries, to agree 
to, negotiate, enter into settlements and compromises of, and demand 
arbitration and comply with orders of courts and awards of arbitrators with 
respect to such claims, and to take all actions necessary or appropriate in 
the judgment of the Stockholders' Agent for the accomplishment of the 
foregoing.  Such agency may be changed by the holders of a majority in 
interest of the Escrow Fund from time to time upon not less than 10 days 
prior written notice to Acquiror.  No bond shall be required of the 
Stockholders' Agent, and the Stockholders' Agent shall receive no 
compensation for his services.  Notices or communications to or from the 
Stockholders' Agent shall constitute notice to or from each of the Target 
stockholders.

               (b)  The Stockholders' Agent shall not be liable for any act 
done or omitted hereunder as Stockholders' Agent while acting in good faith 
and in the exercise of reasonable judgment, and any act done or omitted 
pursuant to the advice of counsel shall be conclusive evidence of such good 
faith.  The Target stockholders shall severally indemnify the Stockholders' 
Agent and hold him harmless against any loss, liability or expense incurred 
without gross negligence or bad faith on the part of the Stockholders' Agent 
and arising out of or in connection with the acceptance or administration of 
his duties hereunder.

               (c)  The Stockholders' Agent shall have reasonable access to 
information about Target and the reasonable assistance of Target's officers 
and employees for purposes of performing its duties and exercising its rights 
hereunder, provided that the Stockholders' Agent shall treat confidentially 
and not disclose any nonpublic information from or about Target to anyone 
(except on a need to know basis to individuals who agree to treat such 
information confidentially).

         8.9   ACTIONS OF THE STOCKHOLDERS' AGENT.  A decision, act, consent 
or instruction of the Stockholders' Agent shall constitute a decision of all 
Target stockholders for whom shares of Acquiror Common Stock otherwise 
issuable to them are deposited in the Escrow Fund and shall be final, binding 
and conclusive upon each such Target stockholder, and the Escrow Agent and 
Acquiror may rely upon any decision, act, consent or instruction of the 
Stockholders' Agent as being the decision, act, consent or instruction of 
each and every such Target stockholder.  The Escrow Agent and Acquiror are 
hereby relieved from any liability to any person for any acts done by them in 
accordance with such decision, act, consent or instruction of the 
Stockholders' Agent.

         8.10  THIRD-PARTY CLAIMS.  In the event Acquiror becomes aware of a
third-party claim which Acquiror believes may result in a demand against the
Escrow Fund, Acquiror 


                                       56.

<PAGE>

shall notify the Stockholders' Agent of such claim, and the Stockholders' 
Agent and the Target stockholders for whom shares of Acquiror Common Stock 
otherwise issuable to them are deposited in the Escrow Fund shall be 
entitled, at their expense, to participate in any defense of such claim. 
Acquiror shall have the right in its sole discretion to settle any such 
claim; provided, however, that Acquiror may not affect the settlement of any 
such claim without the consent of the Stockholders' Agent, which consent 
shall not be unreasonably withheld.  In the event that the Stockholders' 
Agent has consented to any such settlement, the Stockholders' Agent shall 
have no power or authority to object under Section 8.6 or any other provision 
of this Article VIII to the amount of any claim by Acquiror against the 
Escrow Fund for indemnity with respect to such settlement.

                                      ARTICLE IX

                                  GENERAL PROVISIONS

         9.1   SURVIVAL AT EFFECTIVE TIME.  The representations, warranties 
and agreements set forth in this Agreement shall survive after the Effective 
Time and shall terminate at the earlier of (i) twelve (12) months after the 
Effective Time or (ii) the issuance of Acquiror's audited financial 
statements for the year ending December 31, 1997 or December 31, 1988, 
depending on the Closing Date, which include the results of Target (the 
"Termination Date"), except that the agreements set forth in Article I, 
Section 5.4 (Confidentiality), 5.7 (Pooling Accounting), 5.8 (Affiliate 
Agreements), 5.13 (Employee Benefit Plans), 5.16 (Form S-8), 5.17 
(Stockholder's Representation Agreement), 5.22 (Reorganization), 5.25 
(Reasonable Commercial Efforts and Further Assurances), 7.3 (Expenses and 
Termination Fees), 7.4 (Amendment), Article VIII and this Article IX shall 
survive the Termination Date.

         9.2   NOTICES.  All notices and other communications hereunder shall 
be in writing and shall be deemed given if delivered personally or by 
commercial delivery service, or mailed by registered or certified mail 
(return receipt requested) or sent via facsimile (with confirmation of 
receipt) to the parties at the following address (or at such other address 
for a party as shall be specified by like notice):

               (a)  if to Acquiror or Merger Sub, to: 

                    Polycom, Inc.
                    2584 Junction Avenue
                    San Jose, CA  95134
                    Attention:  President
                    Fax: (408) 526-9100
                    Tel: (408) 526-9000


                                       57.

<PAGE>

                    with a copy to:

                    Brobeck, Phleger & Harrison LLP
                    Two Embarcadero Place
                    2200 Geng Road
                    Palo Alto, CA 94303
                    Attention:  Jeffrey P. Higgins, Esq.
                    Fax:  (415) 496-2885
                    Tel:  (415) 424-0160


               (b)  if to Target, to
                    
                    ViaVideo Communications, Inc.
                    8900 Shoal Creek
                    Building 300
                    Austin, TX  78757
                    Attention:  President
                    Fax:  (512) 342-7179
                    Tel:  (512) 923-9633

                    with a copy to:

                    Gunderson Dettmer Stough Villeneuve
                      Franklin & Hachigian, LLP
                    155 Constitution Drive
                    Menlo Park, CA 94025
                    Attention:  Scott Dettmer, Esq.
                    Fax:  (415) 321-2400
                    Tel:  (415) 321-2800


         9.3   INTERPRETATION.  When a reference is made in this Agreement to 
Exhibits, such reference shall be to an Exhibit to this Agreement unless 
otherwise indicated.  The words "include," "includes" and "including" when 
used herein shall be deemed in each case to be followed by the words "without 
limitation." The phrase "made available" in this Agreement shall mean that 
the information referred to has been made available if requested by the party 
to whom such information is to be made available.  The phrases "the date of 
this Agreement," "the date hereof," and terms of similar import, unless the 
context otherwise requires, shall be deemed to refer to June 


                                       58.

<PAGE>

11, 1997.  The table of contents and headings contained in this Agreement are 
for reference purposes only and shall not affect in any way the meaning or 
interpretation of this Agreement.

         9.4   COUNTERPARTS.  This Agreement may be executed in one or more 
counterparts, all of which shall be considered one and the same agreement and 
shall become effective when one or more counterparts have been signed by each 
of the parties and delivered to the other parties, it being understood that 
all parties need not sign the same counterpart.

         9.5   ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST.  This 
Agreement and the documents and instruments and other agreements specifically 
referred to herein or delivered pursuant hereto, including the Exhibits, the 
Schedules, including the Target Disclosure Schedule and the Acquiror 
Disclosure Schedule (a) constitute the entire agreement among the parties 
with respect to the subject matter hereof and supersede all prior agreements 
and understandings, both written and oral, among the parties with respect to 
the subject matter hereof, except for the Confidentiality Agreement, which 
shall continue in full force and effect, and shall survive any termination of 
this Agreement or the Closing, in accordance with its terms; (b) are not 
intended to confer upon any other person any rights or remedies hereunder, 
except as set forth in Sections 1.6(a)-(d) and (h), 1.7-1.9, and 5.13; and 
(c) shall not be assigned by operation of law or otherwise except as 
otherwise specifically provided.

         9.6   SEVERABILITY.  In the event that any provision of this 
Agreement, or the application thereof, becomes or is declared by a court of 
competent jurisdiction to be illegal, void or unenforceable, the remainder of 
this Agreement will continue in full force and effect and the application of 
such provision to other persons or circumstances will be interpreted so as 
reasonably to effect the intent of the parties hereto.  The parties further 
agree to replace such void or unenforceable provision of this Agreement with 
a valid and enforceable provision that will achieve, to the extent possible, 
the economic, business and other purposes of such void or unenforceable 
provision.

         9.7   REMEDIES CUMULATIVE.  Except as otherwise provided herein, any 
and all remedies herein expressly conferred upon a party will be deemed 
cumulative with and not exclusive of any other remedy conferred hereby, or by 
law or equity upon such party, and the exercise by a party of any one remedy 
will not preclude the exercise of any other remedy.

         9.8   GOVERNING LAW.  This Agreement shall be governed by and 
construed in accordance with the laws of California that might otherwise 
govern under applicable principles of conflicts of law.  Each of the parties 
hereto irrevocably consents to the exclusive jurisdiction of any court 
located within Santa Clara County, State of California, in connection with 
any matter based upon or arising out of this Agreement or the matters 
contemplated herein, agrees that process may be served upon them in any 
manner authorized by the laws of the State of California for such 


                                       59.

<PAGE>

persons and waives and covenants not to assert or plead any objection which 
they might otherwise have to such jurisdiction and such process.

         9.9   RULES OF CONSTRUCTION.  The parties hereto agree that they 
have been represented by counsel during the negotiation, preparation and 
execution of this Agreement and, therefore, waive the application of any law, 
regulation, holding or rule of construction providing that ambiguities in an 
agreement or other document will be construed against the party drafting such 
agreement or document.


                                       60.

<PAGE>


         IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this 
Agreement to be executed and delivered by their respective officers thereunto 
duly authorized, all as of the date first written above.

                        TARGET



                        By:    /s/ Craig B. Malloy
                               ----------------------------------


                        ACQUIROR



                        By:    /s/ Brian L. Hinman
                               ----------------------------------


                        MERGER SUB



                        By:    /s/ Brian L. Hinman
                               ----------------------------------





<PAGE>



             [SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION] 



<PAGE>

                                     SCHEDULE 1.6

                                    EXCHANGE RATIO


         An aggregate of up to 10,000,000 shares of Acquiror Common Stock 
shall be available for the exchange of all outstanding Target Capital Stock 
as set forth in Section 1.6 of the Agreement.  The exact exchange ratio for 
Target Capital Stock shall be determined by dividing 10,000,000 by the number 
of shares of outstanding Target Capital Stock plus all reserved but ungranted 
options to purchase Target Common Stock; accordingly, each share of Target 
Stock issued and outstanding immediately prior to the Effective Time shall be 
exchanged for 1.183684 of a share of Acquiror Common Stock.  

         Based on the capitalization of Target as of the date of the 
Agreement and Plan of Reorganization, assuming such capitalization was 
unchanged at the Effective Time, 8,402,023 shares of Acquiror Common Stock 
would be exchanged for all issued and outstanding shares of Target Common 
Stock (assuming conversion of all Target Preferred Stock into Common Stock 
prior to the Effective Time) and 1,266,344 shares of Acquiror Common Stock 
would be reserved for issuance upon the exercise of outstanding Target stock 
options.  Of the 8,402,023 shares of Acquiror Common Stock to be issued at 
the Closing, 840,202 shares would be deposited in the Escrow Fund as set 
forth in Section 8.1 of the Agreement.




<PAGE>


                                     EXHIBIT 20.1

                                    PRESS RELEASE


<PAGE>
                             POLYCOM ANNOUNCES AGREEMENT
                                           
                          TO ACQUIRE VIAVIDEO COMMUNICATIONS
                                           
                 Addition of videoconferencing unit positions Polycom
                  as first total group conferencing product provider
                                           
SAN JOSE, California and AUSTIN, Texas -- June 11, 1997 -- Polycom-Registered 
Trademark- , Inc. (NASDAQ: PLCM) and ViaVideo Communications (TM), Inc. today 
announced an agreement under which Polycom will acquire ViaVideo 
Communications in exchange for 9.7 million new shares of Polycom common 
stock. This acquisition will be consummated once Polycom has obtained 
shareholder approval and ViaVideo has completed a working production version 
of its next-generation group videoconferencing system. In acquiring ViaVideo, 
Polycom will become the first manufacturer to offer a full suite of 
teleconferencing products for group meeting applications.

"Our acquisition of ViaVideo positions Polycom as the only full-range 
provider of premium quality teleconferencing products and will fuel our 
continued growth as a global leader in teleconferencing," explained Brian 
Hinman, chairman and CEO of Polycom. "ViaVideo's vision will effectively 
bring the network computing model to the videoconferencing industry. The 
power, simplicity and price point of these products will open the door to 
broad scale deployment worldwide for small businesses to large corporations."

"We are pleased to be joining Polycom, as there is a natural synergy between 
our companies: we have complementary product lines, we share a common vision 
for the development of easy-to-use, intuitive products, and we have common 
channels of distribution," stated Craig Malloy, president and CEO of ViaVideo 
Communications. "Combining ViaVideo's videoconferencing expertise with 
Polycom's global reach, leading teleconferencing products and customer focus, 
we can provide an unmatched array of premium quality conferencing solutions."

Craig Malloy, president and CEO of ViaVideo Communications will assume the 
role of general manager, videoconferencing products division for Polycom, 
reporting to Brian Hinman, Polycom chairman and CEO. Several key ViaVideo 
employees have signed three-year employment agreements with Polycom. Robert 
Hagerty will remain President and COO of Polycom and Michael Kourey will 
remain CFO. The composition of the Polycom Board of Directors will remain the 
same.

Under the terms of the agreement, 9.7 million shares of Polycom common stock 
(plus up to an additional 300,000 shares based on future option grants by 
ViaVideo) will be exchanged for all outstanding shares and options of 
ViaVideo. The closing price of Polycom common stock on June 11, 1997 was 
$3.875 per share, giving the transaction an approximate value of $37.6 
million. Depending on the price of Polycom's shares 



<PAGE>

averaged during a specified period preceding the acquisition, the total 
number of Polycom shares to be issued may be reduced so in no event will the 
total acquisition consideration exceed $90 million. The transaction will be 
accounted for as a pooling of interests and will qualify as a tax-free 
reorganization. The transaction is expected to be completed during the first 
quarter of 1998 and is subject to various conditions. These closing 
conditions include first customer shipment by ViaVideo of its initial 
videoconferencing system no later than March 31, 1998 and Polycom's share 
price preceding the acquisition to be at or above $3.00 per share.

About Polycom Polycom develops, manufactures and markets teleconferencing 
solutions that facilitate meetings at a distance. Polycom has established 
itself as the leading worldwide provider of audioconferencing equipment with 
products such as SoundStation, SoundStation Premier and SoundPoint, winner of 
the Consumer Electronics Show's "Innovations `97" award and Teleconnect's 
"Editor's Choice" award. Polycom's innovative dataconferencing product, the 
ShowStation document conferencing projector, enables real-time exchange of 
data and other images over ordinary phone lines. Named Computer Telephony's 
"Editor's Choice," ShowStation is a cost-effective, easy-to-use, 
high-resolution dataconferencing solution that enables groups in multiple 
locations to simultaneously view, edit and annotate paper or electronic 
documents and data in a lights-on environment.

About ViaVideo Communications ViaVideo Communications was founded in 
September 1996 with the mission to develop next-generation videoconferencing 
solutions for the group conferencing market. Founded by a team of recognized 
experts in audio, video and data technology, ViaVideo is developing 
state-of-the-art systems designed to deliver high quality, full featured, 
easy-to-use videoconferencing solutions to the market. ViaVideo currently has 
patents filed and in the filing process on its audio and video technology.

Additional information can be found on the World Wide Web at www.polycom.com 
and www.viavideo.com.

Except for the historical information contained herein, the matters discussed 
in this news release are forward looking statements that involve risk and 
uncertainties, including the risks associated with integrating the two 
companies, the market acceptance and the risks associated with this emerging 
market, the development and acceptance of the company's products, the impact 
of competitive products and pricing, and the other risks detailed from time 
to time in the Company's SEC reports, including the Form 10-K, filed March 
26, 1997 and form 10-Q filings.

Polycom, the Polycom logo design, SoundStation, and ShowStation are 
registered trademarks and SoundStation Premier and SoundPoint are trademarks 
of Polycom, Inc. in the U.S. and various countries. ViaVideo Communications 
is a trademark of ViaVideo Communications, Inc.



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