PULSEPOINT COMMUNICATIONS
8-K, 1999-06-18
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                       SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549

                                    _________

                                    FORM 8-K


                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934

                                  June 14, 1999
                Date of Report (Date of earliest event reported)

                                    _________

                            PulsePoint Communications

             (Exact name of registrant as specified in its charter)



          California                   0-18280                  95-3222624
(State or other Jurisdiction      (Commission File            (IRS Employer
      of Incorporation)                Number)           Identification Number)

    6307 Carpinteria Avenue                                        93013
    Carpinteria, California                                      (Zip Code)
(Address of principal executive offices)



                                 (805) 556-2000
              (Registrant's telephone number, including area code)

                                       N/A
          (Former Name or Former Address, if Changed Since Last Report)



<PAGE>


Item 5.  Other Events.
         ------------

      On  June  15,  1999,  Unisys  Corporation  and  PulsePoint  Communications
announced that they had signed an agreement for Unisys to acquire PulsePoint,  a
leading  developer  of  carrier-class   enhanced  services   solutions  for  the
communications industry, in a tax-free, stock-for-stock merger.

      In the merger,  each share of  PulsePoint  common  stock will be converted
into Unisys  common stock using an exchange  ratio based on the average price of
Unisys common stock during a  20-trading-day  period  preceding  the  PulsePoint
shareholder  meeting to approve the  transaction.  The ratio will  provide for a
maximum  consideration  of $6.60 (if the average price of Unisys common stock is
above $33) and a minimum  consideration  of $5.40 (if the average price is below
$27) for each  PulsePoint  common share.  If the Unisys average price is between
$27 and $33,  PulsePoint  shareholders  will receive 0.2 shares of Unisys common
stock  for  each  share  of  PulsePoint  common  stock.  PulsePoint  convertible
preferred  stock will be  converted  into  PulsePoint  common stock prior to the
merger.

      On June 14, 1999, the closing price of Unisys common stock on the New York
Stock  Exchange was $37.4375 per share.  If this were the 20-day  average price,
PulsePoint  shareholders  would receive the maximum  consideration  of $6.60, or
0.176 shares of Unisys common stock, for each share of PulsePoint  common stock.
This  would  result in a total of  approximately  2.4  million  shares of Unisys
common stock being issued in the merger. In addition, all outstanding PulsePoint
stock  options and  warrants  will be  converted  into  options and  warrants to
purchase  Unisys common stock,  giving effect to the exchange  ratio used in the
merger.

      The acquisition, which will be accounted for as a pooling of interests, is
expected to close in the third quarter of 1999.  The  transaction  is subject to
approval by  PulsePoint  common and  preferred  shareholders,  each class voting
separately,  as well as  regulatory  approvals,  including  registration  of the
shares of Unisys  common stock to be issued in the merger and  Hart-Scott-Rodino
Act review, and customary closing conditions.

      Certain   institutional  holders  owning  more  than  90  percent  of  the
outstanding shares of PulsePoint  convertible  preferred stock and approximately
10 percent of the outstanding  shares of PulsePoint  common stock have agreed to
vote in  favor of the  merger.  These  holders  have  also  agreed,  subject  to
completion of the registration process by July 30, 1999, to convert a portion of
their preferred  holdings into common stock prior to the PulsePoint  shareholder
meeting and to also vote those  common  shares in favor of the  merger.  In such
event,  89  percent  of the  PulsePoint  preferred  shares and 38 percent of the
PulsePoint  common  shares  will be  committed  to approve  the  merger.  If the
registration  process is not completed by July 30, 1999,  and the holders of the
preferred  stock elect not to  convert,  Unisys has the right to  terminate  the
transaction before August 20, 1999.

      The merger agreement also includes customary non-solicitation, termination
fee and expense reimbursement  provisions.  In addition,  PulsePoint has granted
Unisys an option to purchase a number of shares of PulsePoint common stock equal
to  approximately  19.9% of its  currently  outstanding  shares of common stock,
exercisable if the merger is terminated under certain circumstances .

      Attached  and  incorporated  herein  by  reference  in their  entirety  as
Exhibits 2.1, 10.1,  10.2,  10.3 and 99.1,  respectively,  are copies of (1) the
Merger Agreement,  (2) the PulsePoint Stock Option Agreement,  (3) a form of the
Voting  Agreement,  (4) a form of letter  agreement  pursuant  to which  certain
institutional  holders have agreed to convert their  PulsePoint  preferred stock
into  PulsePoint  common stock and (5) a press release of PulsePoint  and Unisys
announcing the signing of a definitive agreement to merge the two companies.


                                        2
<PAGE>


Item 7(c).  Exhibits
            --------

     2.1    Agreement  and  Plan of  Merger  dated as of June  14, 1999, between
            PulsePoint Communications, Unisys Corporation and Shellco Inc.

    10.1    Stock Option Agreement  dated as of June 14,  1999,  between  Unisys
            Corporation and PulsePoint Communications, as Grantor.

    10.2*   Form of Voting Agreement dated as of June 14, 1999.

    10.3**  Form of Letter Agreement.

    99.1    Press  release  dated  June 15, 1999, announcing  the  signing of an
            agreement to merge  PulsePoint Communications  and a  subsidiary  of
            Unisys Corporation.


          * Attached as Exhibit B  to the  Merger Agreement.  Unisys Corporation
            has entered into a Voting Agreement in substantially  the form filed
            herewith with Oak Investment  Partners V, Limited  Partnership;  Oak
            Investment  Partners  VII,  Limited   Partnership;   Oak  Investment
            Partners  III,  A  Limited  Partnership;  Oak VII  Affiliates  Fund,
            Limited Partnership; Oak V Affiliates Fund, Limited Partnership; and
            Bandel L. Carano  (collectively,  the "Oak Entities");  Frederick J.
            Warren; Microsoft Corporation; Citiventure 96 A.P. Partnership Fund,
            L.P.;   Chancellor  Private  Capital  Offshore  Partners  II,  L.P.;
            Chancellor  Private  Capital  Partners  III,  Limited   Partnership;
            Chancellor  Private Capital Offshore  Partners I, C.V.; Moore Global
            Investments, Ltd. and Remington Investment Strategies, L.P.

         ** Unisys and  PulsePoint have  received letters  in substantially  the
            form filed  herewith  from the Oak  Entities;  Frederick  J. Warren;
            Microsoft  Corporation;  Citiventure 96 A.P. Partnership Fund, L.P.;
            Chancellor  Private Capital Offshore  Partners II, L.P.;  Chancellor
            Private  Capital  Partners  III,  Limited  Partnership;   Chancellor
            Private Capital Offshore Partners I, C.V.; Moore Global Investments,
            Ltd. and Remington  Investment  Strategies,  L.P.; provided that the
            letter from the Oak Entities  provides for the  conversion of thirty
            three percent (33%) of the PulsePoint Preferred shares held by them.


                                        3
<PAGE>


                                   SIGNATURES


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


                                    PULSEPOINT COMMUNICATIONS


Date: June 18, 1999                 By:    /s/ Mark C. Ozur
                                       -------------------------------
                                    Name:  Mark C. Ozur
                                    Title: President and
                                           Chief Executive Officer


                                        4
<PAGE>


EXHIBIT INDEX


     2.1    Agreement  and  Plan of  Merger  dated as of June  14, 1999, between
            PulsePoint Communications, Unisys Corporation and Shellco Inc.

    10.1    Stock Option Agreement  dated as of June 14,  1999,  between  Unisys
            Corporation and PulsePoint Communications, as Grantor.

    10.2*   Form of Voting Agreement dated as of June 14, 1999.

    10.3**  Form of Letter Agreement.

    99.1    Press  release  dated  June 15, 1999, announcing  the  signing of an
            agreement to merge  PulsePoint Communications  and a  subsidiary  of
            Unisys Corporation.


          * Attached as Exhibit B  to the  Merger Agreement.  Unisys Corporation
            has entered into a Voting Agreement in substantially  the form filed
            herewith with Oak Investment  Partners V, Limited  Partnership;  Oak
            Investment  Partners  VII,  Limited   Partnership;   Oak  Investment
            Partners  III,  A  Limited  Partnership;  Oak VII  Affiliates  Fund,
            Limited Partnership; Oak V Affiliates Fund, Limited Partnership; and
            Bandel L. Carano  (collectively,  the "Oak Entities");  Frederick J.
            Warren; Microsoft Corporation; Citiventure 96 A.P. Partnership Fund,
            L.P.;   Chancellor  Private  Capital  Offshore  Partners  II,  L.P.;
            Chancellor  Private  Capital  Partners  III,  Limited   Partnership;
            Chancellor  Private Capital Offshore  Partners I, C.V.; Moore Global
            Investments, Ltd. and Remington Investment Strategies, L.P.

         ** Unisys and  PulsePoint have  received letters  in substantially  the
            form filed  herewith  from the Oak  Entities;  Frederick  J. Warren;
            Microsoft  Corporation;  Citiventure 96 A.P. Partnership Fund, L.P.;
            Chancellor  Private Capital Offshore  Partners II, L.P.;  Chancellor
            Private  Capital  Partners  III,  Limited  Partnership;   Chancellor
            Private Capital Offshore Partners I, C.V.; Moore Global Investments,
            Ltd. and Remington  Investment  Strategies,  L.P.; provided that the
            letter from the Oak Entities  provides for the  conversion of thirty
            three percent (33%) of the PulsePoint Preferred shares held by them.


                                        5
<PAGE>





                                 ______________


                          AGREEMENT AND PLAN OF MERGER

                                   DATED AS OF

                                  June 14, 1999

                                  BY AND AMONG

                               UNISYS CORPORATION,

                                  SHELLCO INC.,

                                       AND

                            PULSEPOINT COMMUNICATIONS


                                 ______________


<PAGE>


                                TABLE OF CONTENTS

ARTICLE I  THE MERGER........................................................2
      Section 1.1 The Merger.................................................2
      Section 1.2 The Closing; Effective Time................................2
      Section 1.3 Subsequent Actions.........................................3
      Section 1.4 Articles of Incorporation; Bylaws; Directors and Officers
                    of the Surviving Corporation.............................3

ARTICLE II  EFFECT OF THE MERGER.............................................4
      Section 2.1 Treatment of Capital Stock.................................4
      Section 2.2 Conversion of Company Common Stock.........................4
      Section 2.3 Conversion of Company Preferred Stock......................5
      Section 2.4 Cancellation of Excluded Shares............................5
      Section 2.5 Conversion of Common Stock of Merger Sub...................5
      Section 2.6 Exchange Agent; Exchange Procedures........................5
      Section 2.7 Transfer Books.............................................6
      Section 2.8 No Fractional Share Certificates; Termination of
                    Exchange Fund ...........................................7
      Section 2.9 Dissenting Shares..........................................7
      Section 2.10 Dividends.................................................8
      Section 2.11 Certain Adjustments.......................................8
      Section 2.12 Withholding Rights........................................8
      Section 2.13 Lost, Stolen or Destroyed Certificates....................9
      Section 2.14 Options to Purchase Company Shares........................9

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................11
      Section 3.1 Organization and Qualification; Subsidiaries..............11
      Section 3.2 Articles of Incorporation and Bylaws......................12
      Section 3.3 Capitalization............................................12
      Section 3.4 Power and Authority; Authorization; Valid & Binding.......14
      Section 3.5 No Conflict; Required Filings and Consents................14
      Section 3.6 SEC Reports; Financial Statements.........................15
      Section 3.7 Absence of Certain Changes................................16


                                     - i -
<PAGE>


      Section 3.8 Litigation and Liabilities................................17
      Section 3.9 No Violation of Law; Permits..............................18
      Section 3.10 Benefit Plans............................................18
      Section 3.11 Labor Matters............................................20
      Section 3.12 Environmental Matters....................................20
      Section 3.13 Vote Required; Options...................................22
      Section 3.14 Opinion of Financial Advisor.............................23
      Section 3.15 Brokers..................................................23
      Section 3.16 Tax Matters..............................................23
      Section 3.17 Intellectual Property....................................25
      Section 3.18 Title to Property........................................25
      Section 3.19 Contracts and Commitments................................26
      Section 3.20 Proxy Statement/Prospectus; Registration Statement.......26
      Section 3.21 Pooling of Interests; Reorganization.....................27
      Section 3.22 Restrictions on Business Activities......................27
      Section 3.23 Related Party Transactions...............................27
      Section 3.24 Insurance................................................28
      Section 3.25 Year 2000................................................28
      Section 3.26 Foreign Corrupt Practices, etc...........................29

ARTICLE IV  REPRESENTATIONS & WARRANTIES OF PARENT AND MERGER SUB...........29
      Section 4.1 Organization and Qualification; Subsidiaries..............29
      Section 4.2 Certificate of Incorporation and Bylaws...................29
      Section 4.3 Capitalization............................................30
      Section 4.4 Power and Authority; Authorization; Valid & Binding.......30
      Section 4.5 No Conflict; Required Filings and Consents................31
      Section 4.6 SEC Reports; Financial Statements.........................32
      Section 4.7 Absence of Certain Changes................................33
      Section 4.8 Litigation and Liabilities................................33
      Section 4.9 No Violation of Law; Permits..............................33


                                     - ii -
<PAGE>


      Section 4.10 Proxy Statement/Prospectus; Registration Statement.......34
      Section 4.11 Pooling of Interests; Reorganization.....................34
      Section 4.12 Merger Sub...............................................34
      Section 4.13 Valid Issuance...........................................35
      Section 4.14 Brokers..................................................35

ARTICLE V  COVENANTS RELATING TO CONDUCT OF BUSINESS........................35
      Section 5.1 Interim Operations of the Company.........................35
      Section 5.2 Interim Operations of Parent..............................38
      Section 5.3 No Solicitation...........................................39

ARTICLE VI  ADDITIONAL COVENANTS............................................42
      Section 6.1 Meeting of Shareholders; Record Date......................42
      Section 6.2 Filings; Other Actions....................................42
      Section 6.3 Publicity.................................................43
      Section 6.4 Registration Statement....................................43
      Section 6.5 Listing Application.......................................43
      Section 6.6 Further Action............................................44
      Section 6.7 Expenses..................................................44
      Section 6.8 Notification of Certain Matters...........................44
      Section 6.9 Access to Information.....................................45
      Section 6.10 Review of Information....................................46
      Section 6.11 Insurance; Indemnity.....................................46
      Section 6.12 Employee Benefits........................................47
      Section 6.13 Options..................................................48
      Section 6.14 Affiliates...............................................48
      Section 6.15 Takeover Statutes........................................48
      Section 6.16 Pooling of Interests.....................................49
      Section 6.17 Tax-Free Reorganization..................................49
      Section 6.18 Accountant's Comfort Letters.............................49
      Section 6.19 Accountant's Pooling Letters.............................49
      Section 6.20 Warrants.................................................49


                                     - iii -
<PAGE>


ARTICLE VII  CONDITIONS TO MERGER...........................................50
      Section 7.1 Conditions to Obligations of the Parties to Consummate
                    the Merger .............................................50
      Section 7.2 Additional Conditions to Obligations of Parent and
                    Merger Sub .............................................51
      Section 7.3 Additional Conditions to Obligations of the Company.......52

ARTICLE VIII  TERMINATION AND AMENDMENT.....................................53
      Section 8.1 Termination...............................................53
      Section 8.2 Effect of Termination.....................................54
      Section 8.3 Amendment.................................................56

ARTICLE IX  GENERAL PROVISIONS..............................................56
      Section 9.1 Non-Survival of Representations, Warranties and
                    Agreements .............................................56
      Section 9.2 Notices...................................................56
      Section 9.3 Certain Definitions; Interpretation.......................57
      Section 9.4 Headings..................................................61
      Section 9.5 Severability..............................................61
      Section 9.6 Entire Agreement; No Third-Party Beneficiaries............62
      Section 9.7 Assignment................................................62
      Section 9.8 Governing Law; Jurisdiction...............................62
      Section 9.9 Trial by Jury.............................................62
      Section 9.10 Enforcement..............................................62
      Section 9.11 Obligations of Subsidiaries..............................62
      Section 9.12 Counterparts.............................................63


      EXHIBITS
      --------

      Exhibit A -- List of Persons Executing Voting Agreements
      Exhibit B -- Form of Voting  Agreements
      Exhibit C -- Articles of Incorporation of Surviving Corporation
      Exhibit D -- Form of Affiliate Letter



                                     - iv -
<PAGE>


                             INDEX OF DEFINED TERMS


DEFINED TERM                                                           Page No.

Action......................................................................46
affiliate...................................................................57
Agreement....................................................................1
Agreement of Merger..........................................................2
Average Stock Price..........................................................4
Benefit Agreement...........................................................18
Benefit Plan................................................................57
Cap Amount..................................................................46
CGCL.........................................................................2
Closing......................................................................2
Closing Date.................................................................2
Code.........................................................................1
Company......................................................................1
Company Acquisition Proposal................................................40
Company Acquisition Transaction.............................................41
Company Capital Stock Disclosure Date.......................................12
Company Common Shares........................................................1
Company Common Stock.........................................................1
Company Disclosure Letter...................................................57
Company Equity Rights.......................................................58
Company Financial Advisor...................................................23
Company Material Adverse Effect.............................................58
Company Options..............................................................9
Company Preferred Stock or Company Preferred Shares.........................58
Company SEC Reports.........................................................15
Company Shareholder Meeting.................................................42
Company Shares..............................................................58
Company Stock Option Plans...................................................9
Confidentiality Agreement...................................................58
Consents....................................................................51
Contracts...................................................................26
control.....................................................................58
Daily Per Share Price........................................................4
Debt Instrument.............................................................26
December 1998 Company Balance Sheet.........................................58
December 1998 Parent Balance Sheet..........................................58


                                     - i -
<PAGE>


E&Y.........................................................................49
Effective Time...............................................................3
Employee....................................................................58
Environmental Claim.........................................................21
Environmental Laws..........................................................22
Environmental Permits.......................................................20
ERISA.......................................................................59
ERISA Affiliate.............................................................59
ERISA Benefit Plan..........................................................59
ESPP........................................................................48
ESPP Option.................................................................48
Exchange Act................................................................10
Exchange Agent...............................................................5
Exchange Fund................................................................6
Exchange Ratio...............................................................4
Excluded Shares.............................................................59
Filings.....................................................................51
Form S-4....................................................................43
GAAP.........................................................................1
Governmental Entity.........................................................15
Hazardous Materials.........................................................22
HSR Act.....................................................................15
Imperial Bank Warrants......................................................59
Indebtedness................................................................26
Indemnified Party...........................................................46
Intellectual Property Rights................................................59
Joint Proxy Statement/Prospectus............................................43
Junior Preferred Stock......................................................59
Knowledge...................................................................59
Merger.......................................................................1
Merger Sub...................................................................1
Nasdaq......................................................................59
NEXTLINK Warrants...........................................................59
Nondisclosure Agreement.....................................................60
NYSE........................................................................60
Other Warrants..............................................................60
Parent.......................................................................1
Parent Common Stock..........................................................4
Parent Disclosure Letter....................................................60
Parent Equity Rights........................................................60
Parent Material Adverse Effect..............................................60


                                     - ii -
<PAGE>


Parent Rights Agreement.....................................................60
Parent SEC Reports..........................................................32
Parent Shares................................................................4
Parties......................................................................1
Party........................................................................1
PCBs........................................................................22
Person......................................................................60
Preferred Holders............................................................1
Related Party...............................................................27
Release.....................................................................22
Representative..............................................................39
Requisite Conversion........................................................54
SEC..........................................................................1
Securities Act..............................................................15
Series A Preferred Stock....................................................30
Shareholder Meeting Date....................................................60
Stock Option Agreement.......................................................1
Subsidiary..................................................................60
Substitute Option............................................................9
Superior Proposal...........................................................41
Surviving Corporation........................................................2
Tax.........................................................................61
Tax Return..................................................................61
Termination Date............................................................53
Termination Fee.............................................................55
Third Party.................................................................39
Total Merger Consideration..................................................51
Trigger Date................................................................54
Voting Agreements............................................................1
Warrants....................................................................61
Year 2000 Compliant.........................................................28


                                     - iii -
<PAGE>


                          AGREEMENT AND PLAN OF MERGER

            AGREEMENT  AND  PLAN OF  MERGER,  dated as of June  14,  1999  (this
"Agreement"),   by  and  among  UNISYS   CORPORATION   ("Parent"),   a  Delaware
 ---------                                               ------
corporation,  SHELLCO  INC.  ("Merger  Sub"),  a  California  corporation  and a
                               -----------
wholly-owned   subsidiary  of  Parent,   and  PULSEPOINT   COMMUNICATIONS   (the
"Company"),  a California  corporation.  Parent,  Merger Sub and the Company are
 -------
sometimes referred to herein, individually,  as a "Party," and, together, as the
                                                   -----
"Parties." Certain capitalized terms used herein are defined in Section 9.3.
 -------

                              W I T N E S S E T H:

            WHEREAS,  the respective  Boards of Directors of Parent,  Merger Sub
and the Company have each determined that the merger of Merger Sub with and into
the Company  (the  "Merger")  upon the terms and subject to the  conditions  set
                    ------
forth in this Agreement is advisable, fair to and in the best interests of their
respective corporations and shareholders and have approved the Merger;

            WHEREAS,  it is intended that, for federal income tax purposes,  the
Merger  will  qualify  as a tax-free  reorganization  under  Section  368 of the
Internal  Revenue  Code of  1986,  as  amended  and the  rules  and  regulations
promulgated thereunder (the "Code");
                             ----

            WHEREAS,  it is intended that, for accounting  purposes,  the Merger
will be accounted for as a  pooling-of-interests  under United States  generally
accepted accounting  principles ("GAAP") and applicable rules and regulations of
                                  ----
the Securities and Exchange Commission (the "SEC");
                                             ---

            WHEREAS,  concurrently  with  the  execution  and  delivery  of this
Agreement and as a condition and  inducement  to Parent's  willingness  to enter
into this Agreement,  Parent and the Company have executed and delivered a Stock
Option  Agreement,  dated as of the date hereof (the "Stock Option  Agreement"),
                                                      -----------------------
pursuant to which the Company is granting to Parent an option to purchase, under
certain  circumstances,  up to a number of shares of common stock, no par value,
of the Company (the "Company  Common Stock" or "Company Common Shares") equal to
                     ---------------------      ---------------------
19.9% of the  outstanding  shares of Company Common Stock with an exercise price
per share equal to $6.60; and

            WHEREAS,  concurrently  with  the  execution  and  delivery  of this
Agreement and as a condition and  inducement  to Parent's  willingness  to enter
into  this  Agreement,  certain  persons  listed on  Exhibit  A (the  "Preferred
                                                     ----------        ---------
Holders") have entered into Voting  Agreements  with Parent dated as of the date
- -------
of this  Agreement  in the  form  attached  hereto  as  Exhibit  B (the  "Voting
                                                        ----------        ------
Agreements"), pursuant to which such persons
- ----------


                                     - 1 -
<PAGE>


have agreed,  among other things,  to vote all voting  securities of the Company
beneficially  owned by such  persons in favor of approval  and  adoption of this
Agreement and the Merger.

            NOW,  THEREFORE,  in  consideration  of the foregoing and the mutual
covenants  and  agreements  contained  in this  Agreement,  and  intending to be
legally bound hereby, the parties hereto agree as follows:

                                    ARTICLE I

                                   THE MERGER

      Section 1.1 The Merger.  At the Effective Time and subject to and upon the
                  ----------
terms and  conditions of this  Agreement and in accordance  with the  California
General  Corporation Law (the "CGCL"),  Merger Sub shall be merged with and into
                               ----
the Company and the separate corporate  existence of Merger Sub shall cease. The
Company  shall  continue as the  surviving  corporation  (sometimes  referred to
herein as the  "Surviving  Corporation")  in the Merger and as of the  Effective
                ----------------------
Time shall be a  wholly-owned  subsidiary  of Parent.  The Merger shall have the
effects specified in the CGCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all properties,  rights, privileges,
powers and  franchises of Merger Sub and the Company shall vest in the Surviving
Corporation,  and all debts,  liabilities  and obligations of Merger Sub and the
Company shall become the debts,  liabilities  and  obligations  of the Surviving
Corporation.

      Section 1.2 The  Closing;  Effective  Time.  (a) The closing of the Merger
                  ------------------------------
(the  "Closing")  shall take place (i) at the offices of Fried,  Frank,  Harris,
       -------
Shriver & Jacobson, One New York Plaza, New York, New York, 10004, at 10:00 A.M.
local time,  on the second  business day following the date on which the last to
be  satisfied or waived of the  conditions  set forth in Article VII (other than
those  conditions  that by their nature are to be satisfied at the Closing,  but
subject to the  satisfaction or, where  permitted,  waiver of those  conditions)
shall be  satisfied  or waived in  accordance  with this  Agreement  unless that
second  business day would be September 1, 1999 in which case the Parties  shall
use  reasonable  best  efforts to ensure  that the  closing  shall take place on
August 31, 1999 or (ii) at such other place,  time and/or date as Parent and the
Company shall agree (the date of the Closing, the "Closing Date").
                                                   ------------

            (b)   On the Closing Date,  Parent, the Company and Merger Sub shall
cause a merger  agreement in such form as is required by Sections 1101, 1102 and
1103 of the CGCL  (the  "Agreement  of  Merger")  to be  properly  executed  and
                         ---------------------
acknowledged,  and filed with the  Secretary of State of the State of California
as provided in the CGCL. The Merger shall become effective at such time at which
such  Agreement of Merger shall be


                                     - 2 -
<PAGE>


duly filed with the Secretary of State of the State of California or at the time
specified in the Agreement of Merger,  if any (the time that the Merger  becomes
effective, the "Effective Time").
                --------------

      Section 1.3 Subsequent Actions.  If, at any time after the Effective Time,
                  ------------------
the Surviving  Corporation shall consider or be advised that any deeds, bills of
sale,  assignments,  assurances  or any other actions or things are necessary or
desirable  to  continue,  vest,  perfect or confirm of record or  otherwise  the
Surviving  Corporation's  right,  title or  interest  in, to or under any of the
rights,  properties,   privileges,   franchises  or  assets  of  either  of  its
constituent corporations acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger, or otherwise to carry out the
intent  of  this  Agreement,   the  officers  and  directors  of  the  Surviving
Corporation  shall be  authorized  to execute  and  deliver,  in the name and on
behalf of either of the constituent  corporations of the Merger, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such  corporations  or  otherwise,  all such other actions and
things as may be necessary or desirable to vest,  perfect or confirm any and all
right, title and interest in, to and under such rights, properties,  privileges,
franchises or assets in the Surviving  Corporation or otherwise to carry out the
intent of this Agreement.

      Section 1.4 Articles of Incorporation;  Bylaws;  Directors and Officers of
                  --------------------------------------------------------------
the Surviving  Corporation.  Unless  otherwise  agreed by Parent and the Company
- --------------------------
prior to the Closing, at the Effective Time:

            (a)   the  Articles of Incorporation of the Company shall be amended
to read in their  entirety  as set forth on Exhibit C hereto,  and as so amended
                                            ---------
shall constitute  (until amended as provided by applicable law and such Articles
of Incorporation,  as applicable) the articles of incorporation of the Surviving
Corporation;

            (b)   the Bylaws of Merger Sub as in effect immediately prior to the
Effective  Time  shall be at and after the  Effective  Time  (until  amended  as
provided by law, its Articles of  Incorporation  and its Bylaws,  as applicable)
the Bylaws of the Surviving Corporation;

            (c)   the  officers of Merger Sub immediately prior to the Effective
Time  shall  continue  to serve in their  respective  offices  of the  Surviving
Corporation  from and after the  Effective  Time,  until  their  successors  are
elected or appointed and qualified or until their resignation or removal; and

            (d)   the directors of Merger Sub immediately prior to the Effective
Time shall be the  directors  of the  Surviving  Corporation  from and after the
Effective Time,


                                     - 3 -
<PAGE>


until their  successors  are elected or appointed  and  qualified or until their
resignation or removal.

                                   ARTICLE II

                              EFFECT OF THE MERGER

      Section 2.1 Treatment of Capital Stock. The manner and basis of converting
                  --------------------------
the  Company  Shares and the shares of common  stock of Merger Sub, by virtue of
the Merger and without any action on the part of any holder thereof, shall be as
set forth in this Article II.

      Section 2.2 Conversion of Company  Common  Stock.  (a) Subject to Section
                  ------------------------------------
2.8, each share of Company Common Stock issued and outstanding immediately prior
to the  Effective  Time  (other  than the  Excluded  Shares),  and all rights in
respect thereof,  shall at the Effective Time, without any action on the part of
any holder thereof,  forthwith cease to exist and be converted into the right to
receive an amount of validly  issued,  fully  paid and  nonassessable  shares of
Parent's  Common Stock,  $.01 par value per share (the "Parent  Common Stock" or
                                                        --------------------
"Parent   Shares"),   which  is  equal  to  the  Exchange  Ratio  and  including
 ---------------
corresponding  rights to purchase  shares of Junior  Preferred Stock pursuant to
the Parent Rights  Agreement.  Prior to the Distribution Date (as defined in the
Parent Rights  Agreement),  all  references  in this  Agreement to Parent Common
Stock or Parent  Shares to be received in  accordance  with the Merger  shall be
deemed to include such associated rights under the Parent Rights Agreement.

            (b)   The  "Exchange Ratio" means a fraction (expressed as a decimal
                        --------------
and rounded to the  nearest  one-thousandth),  such  fraction to be in the ratio
provided below. If the Average Stock Price (as defined below) is:

            (i)   greater than  $33.00,  the Common Stock  Exchange  Ratio shall
      be equal to $6.60 divided by the Average Stock Price;

            (ii)  equal to or  greater  than  $27.00  and less  than or equal to
      $33.00, the Common Stock Exchange Ratio shall be fixed at 0.20; and

            (iii) less than  $27.00,  the Common Stock  Exchange  Ratio shall be
      equal to $5.40 divided by the Average Stock Price.

"Average  Stock  Price"  means the average of the Daily Per Share Prices for the
 ---------------------
twenty  consecutive  trading days ending on the fourth  trading day prior to the
Company  Shareholder  Meeting.  The "Daily Per Share  Price" for any trading day
                                     ----------------------
means the last  reported sale price per share of Parent Common Stock as reported
on the NYSE Composite Transaction Tape for that day.


                                     - 4 -
<PAGE>


            (c)   Except as otherwise  provided herein,  commencing  immediately
after the Effective  Time,  each  certificate  which,  immediately  prior to the
Effective  Time,  represented  issued and  outstanding  shares of Company Common
Stock shall  evidence the right to receive  shares of Parent Common Stock on the
basis set forth in  Section  2.2(a)  above  (and cash in lieu of any  fractional
shares pursuant to Section 2.8.)

      Section 2.3 Conversion of Company Preferred Stock.
                  -------------------------------------

            (a)   Subject to Section 2.8, each share of Company  Preferred Stock
issued and outstanding  immediately  prior to the Effective Time (other than the
Excluded  Shares),  and all rights in respect  thereof,  shall at the  Effective
Time,  without any action on the part of any holder thereof,  forthwith cease to
exist and be  converted  into the right to receive an amount of validly  issued,
fully paid and  nonassessable  shares of Parent Common Stock,  which is equal to
the product of (i) the  Exchange  Ratio and (ii) the number of shares of Company
Common Stock  issuable  upon  conversion of a share of Company  Preferred  Stock
immediately prior to the Effective Time.

            (b)   Except as otherwise  provided herein,  commencing  immediately
after the Effective  Time,  each  certificate  which,  immediately  prior to the
Effective Time,  represented  issued and outstanding shares of Company Preferred
Stock shall  evidence the right to receive  shares of Parent Common Stock on the
basis set forth in  Section  2.3(a)  above  (and cash in lieu of any  fractional
shares pursuant to Section 2.8).

      Section 2.4 Cancellation of Excluded  Shares.  At the Effective Time, each
                  --------------------------------
Excluded  Share,  by virtue of the Merger and  without any action on the part of
the holder thereof,  shall forthwith cease to be outstanding,  shall be canceled
and  retired,  and no  shares  of stock or other  securities  of  Parent  or the
Surviving  Corporation shall be issuable,  and no payment or other consideration
shall be made or paid, in respect thereof.

      Section 2.5 Conversion  of Common  Stock of Merger Sub. At the  Effective
                  ------------------------------------------
Time,  each  share  of  common  stock  of  Merger  Sub  issued  and  outstanding
immediately  prior to the  Effective  Time,  and all rights in respect  thereof,
shall, without any action on the part of Parent, forthwith cease to exist and be
converted into one validly issued,  fully paid and nonassessable share of common
stock of the Surviving Corporation.

      Section 2.6 Exchange Agent; Exchange Procedures.  (a) Subject to the terms
                  -----------------------------------
and  conditions of this  Agreement,  at or prior to the Effective  Time,  Parent
shall  appoint  a bank or  trust  company  selected  by  Parent  and  reasonably
acceptable  to the Company  (the  "Exchange  Agent"),  to effect the exchange of
                                   ---------------
Company  Shares  for  shares  of  Parent  Common  Stock in  accordance  with the
provisions of this Article II. From time to time  following  the Effective  Time
upon the requisition by the Exchange Agent, Parent shall deposit, or cause to be
deposited,  with the  Exchange  Agent  certificates  representing  the


                                     - 5 -
<PAGE>


shares of Parent  Common  Stock to be issued in the Merger,  any cash payable in
respect of fractional  shares in  accordance  with Section 2.8 and the amount of
any dividends or  distributions in accordance with Section 2.6(b) (the "Exchange
                                                                        --------
Fund").
- ----

            (b)   As soon as reasonably  practicable  after the Effective  Time,
Parent  shall  instruct the  Exchange  Agent to mail to each record  holder of a
certificate  or  certificates  which  immediately  prior to the  Effective  Time
represented  Company  Shares  (other than the  Excluded  Shares) (i) a letter of
transmittal  (which shall specify that delivery  shall be effected,  and risk of
loss and  title to such  certificates  shall  pass,  only upon  delivery  to the
Exchange  Agent  and shall be in such form and have  such  other  provisions  as
Parent shall reasonably  specify) and (ii) instructions for use in effecting the
surrender  of  certificates  which  immediately  prior  to  the  Effective  Time
represented Company Shares for certificates representing shares of Parent Common
Stock and cash in lieu of  fractional  shares,  if any.  Commencing  immediately
after the  Effective  Time,  upon the  surrender to the  Exchange  Agent of such
certificate or certificates,  together with a duly executed and completed letter
of  transmittal  and all other  documents  and other  materials  required by the
Exchange Agent to be delivered in connection therewith, the holder thereof shall
be entitled to receive a certificate or certificates  representing the number of
whole  shares  of Parent  Common  Stock  into  which the  Company  Shares  which
immediately  prior to the Effective Time were  represented by the certificate or
certificates  so surrendered  shall have been  converted in accordance  with the
provisions  of Section 2.2 or Section 2.3 as  appropriate,  together with a cash
payment (net of any applicable tax  withholdings) in lieu of fractional  shares,
if any. Unless and until any certificate or certificates which immediately prior
to the Effective Time represented Company Shares are so surrendered, no dividend
or other  distribution,  if any,  payable to the  holders of record of shares of
Parent Common Stock as of any date  subsequent  to the  Effective  Time shall be
paid to the holder of such  certificate  or  certificates  in  respect  thereof.
Except as otherwise  provided  herein,  upon the surrender of any certificate or
certificates  which immediately prior to the Effective Time represented  Company
Shares, the record holder of the certificate or certificates representing shares
of Parent Common Stock issued in exchange therefore shall be entitled to receive
(i) at the time of surrender, the amount of any dividends or other distributions
(net of any  applicable  tax  withholdings)  having  a  record  date  after  the
Effective  Time and a payment  date  prior to the  surrender  date,  payable  in
respect  of such  shares of  Parent  Common  Stock  and (ii) at the  appropriate
payment  date,  the  amount  of  dividends  or other  distributions  (net of any
applicable tax withholdings) having a record date after the Effective Time and a
payment date  subsequent  to the date of such  surrender,  payable in respect of
such shares of Parent Common Stock.  No interest  shall be payable in respect of
the payment of dividends or distributions  pursuant to the immediately preceding
sentence.

      Section 2.7 Transfer Books.  The stock transfer books of the Company shall
                  --------------
be closed at the  Effective  Time and no  transfer  of any  Company  Shares will
thereafter be


                                     - 6 -
<PAGE>


recorded  on any of such stock  transfer  books.  In the event of a transfer  of
ownership of any Company  Shares that is not  registered  in the stock  transfer
records of the Company at the  Effective  Time, a  certificate  or  certificates
representing  the number of full shares of Parent  Common  Stock into which such
Company  Shares  shall have been  converted in the Merger shall be issued to the
transferee together with a cash payment (net of any applicable tax withholdings)
in lieu of fractional shares, if any, in accordance with Section 2.8, and a cash
payment in accordance with Section 2.6(b) of dividends or distributions, if any,
only if the certificate or certificates which immediately prior to the Effective
Time represented such Company Shares are surrendered as provided in Section 2.6,
accompanied  by all documents  required to evidence and effect such transfer and
by evidence of payment of any applicable stock transfer taxes.

      Section 2.8 No  Fractional  Share  Certificates;  Termination  of Exchange
                  --------------------------------------------------------------
Fund. (a) No scrip or fractional share  certificate for Parent Common Stock will
- ----
be issued upon the surrender for exchange of a certificate or certificates which
immediately  prior to the Effective  Time  represented  Company  Shares,  and no
outstanding fractional share interest will entitle the holder thereof to vote or
receive  dividends  or  distributions  or any other rights of a  shareholder  of
Parent with respect to such fractional  share interest.  Each holder entitled to
receive a fractional  share of Parent  Common Stock but for this Section  2.8(a)
shall  be  entitled  to  receive  an  amount  of  cash  (net of  applicable  tax
withholdings)  equal to the product  obtained by multiplying  (i) the fractional
share  interest to which such holder would  otherwise be entitled  (after taking
into account all Company Shares held immediately  prior to the Effective Time by
such holder) by (ii) the closing price for a share of Parent Common Stock on the
NYSE  Composite  Transaction  Tape on the trading day  immediately  prior to the
Closing  Date.  No interest  shall be payable in respect of any cash payment for
fractional share interests.

            (b)   Any  portion of the Exchange Fund which remains  undistributed
one year after the Effective Time shall be delivered to Parent upon demand,  and
each holder of Company Shares who had not theretofore  surrendered  certificates
or  certificates  which  immediately  prior to the  Effective  Time  represented
Company  Shares in  accordance  with the  provisions  of this  Article  II shall
thereafter  look only to Parent for  satisfaction  of such  holder's  claims for
shares of Parent Common Stock,  any cash in lieu of fractional  shares of Parent
Common  Stock and any  dividends or  distributions  payable in  accordance  with
Section 2.6(b).  Notwithstanding  the foregoing,  none of Parent,  the Surviving
Corporation,  the  Exchange  Agent or any  other  Person  shall be liable to any
former holder of Company  Shares for any amount  properly  delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.

      Section 2.9 Dissenting Shares.  Notwithstanding anything in this Agreement
                  -----------------
to the contrary,  Company  Shares which are  "dissenting  shares" (as defined in
Section 1300(b) of the CGCL), if any, shall not be converted into or represent a
right to receive


                                     - 7 -
<PAGE>


any shares of Parent  Common  Stock,  but the holders  thereof shall be entitled
only to such rights as are granted by the CGCL. Each holder of dissenting shares
who becomes  entitled  to payment  therefor  pursuant to the CGCL shall  receive
payment from the Surviving  Corporation in accordance  with the CGCL;  provided,
                                                                       --------
however,  that (i) if any such holder of dissenting  shares shall have failed to
- -------
establish his  entitlement to appraisal  rights as provided in the CGCL, (ii) if
any such holder of dissenting shares shall have effectively withdrawn his demand
for appraisal  thereof or lost his right to appraisal and payment therefor under
the CGCL or (iii) if, as to the  Company  Common  Shares,  neither any holder of
dissenting  shares which are shares of Company  Common  Stock nor the  Surviving
Corporation  shall have filed a petition  demanding a determination  of the fair
value of all dissenting  shares of Company Common Stock within the time provided
in the CGCL, such holder or holders (as the case may be) of Company Common Stock
shall forfeit the right to appraisal of such shares of Company Common Stock, and
if, as to the Company Preferred Shares,  neither any holder of dissenting shares
which are shares of Company Preferred Stock nor the Surviving  Corporation shall
have  filed a  petition  demanding  a  determination  of the  fair  value of all
dissenting  shares of Company Preferred Stock within the time period provided by
the CGCL, such holder or holders (as the case may be) of Company Preferred Stock
shall forfeit the right to appraisal of such shares of Company  Preferred  Stock
and,  in  either  case,  such  shares  shall  thereupon  be  deemed to have been
converted,  as of the Effective Time, into and represent shares of Parent Common
Stock, without interest thereon, as provided in Section 2.1(a).

      Section 2.10 Dividends.  Parent and the Company shall coordinate with each
                   ---------
other the declaration of, and the setting of record dates and payment dates for,
dividends  (if any) in  respect of their  respective  common  stock so that,  in
respect of any fiscal quarter,  holders thereof (i) do not receive  dividends in
respect  of both (x)  Company  Shares  and (y)  shares  of Parent  Common  Stock
received  pursuant  to the Merger in  respect  thereof or (ii) fail to receive a
dividend  in  respect  of both (x)  Company  Shares and (y) the shares of Parent
Common Stock received pursuant to the Merger in respect thereof.

      Section 2.11 Certain  Adjustments.  If between the date of this  Agreement
                   --------------------
and the Effective Time, the outstanding shares of Company Common Stock or Parent
Common Stock shall be changed into a different number of shares by reason of any
stock split or combination of shares,  or any dividend payable in stock shall be
declared thereon with a record date within such period, the Exchange Ratio shall
be  appropriately  adjusted to provide  the  holders of Company  Shares the same
economic effect as contemplated by this Agreement prior to such event.

      Section 2.12 Withholding  Rights.  Each of Parent and the Company shall be
                   -------------------
entitled  to  deduct  and  withhold  from the  consideration  otherwise  payable
pursuant  to this  Agreement  to any holder of  certificates  which prior to the
Effective Time represented  Company Shares such amounts as Parent or the Company
is required to deduct and


                                     - 8 -
<PAGE>


withhold  with  respect  to the  making  of such  payment  under the Code or any
provision of state, local, or foreign Tax law. To the extent that amounts are so
withheld by Parent or the Company,  such  withheld  amounts shall be treated for
all purposes of this  Agreement as having been paid to the holder of the Company
Shares in respect of which such deduction and  withholding was made by Parent or
the Company, as the case may be.

      Section 2.13 Lost,  Stolen or  Destroyed  Certificates.  In the event any
                   -----------------------------------------
certificates  representing  Company  Shares  shall  have  been  lost,  stolen or
destroyed,  the Exchange  Agent shall pay in exchange  for such lost,  stolen or
destroyed  certificates,  upon the  making of an  affidavit  of that fact by the
holder  thereof,  shares of Parent  Common Stock and cash in lieu of  fractional
shares  thereof  as may be  required  pursuant  to  Sections  2.2,  2.3 and 2.8;
provided,  however,  that  Parent  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  Parent,  the Surviving
Corporation  or the Exchange Agent with respect to the  certificates  alleged to
have been lost, stolen or destroyed.


      Section 2.14 Options to Purchase  Company  Shares.  (a)  Effective at the
                   ------------------------------------
Effective  Time,  each  unexpired and  unexercised  outstanding  option or stock
purchase right, whether or not then vested or exercisable in accordance with its
terms,  to  purchase  shares of Company  Common  Stock (the  "Company  Options")
                                                              ----------------
previously granted by the Company or any of its Subsidiaries under the Company's
1983 Stock Option  Plan,  as amended,  or its  Directors  Stock Option Plan,  as
amended  (such plans,  as amended,  are  collectively  referred to herein as the
"Company Stock Option Plans"),  shall be converted  automatically into an option
 --------------------------
or right to acquire the number of shares of Parent  Common Stock (a  "Substitute
                                                                      ----------
Option"),  rounded to the nearest whole share, determined by multiplying (i) the
- ------
number of  shares  of  Company  Common  Stock  subject  to such  Company  Option
immediately prior to the Effective Time by (ii) the Exchange Ratio. The exercise
price per share of Parent Common Stock subject to each  Substitute  Option shall
be equal to the exercise  price per share of Company Common Stock subject to the
relevant  Company  Option  divided by the Exchange Ratio and then rounded to the
nearest one one-hundredth of a cent; provided, however, that, in the case of any
                                     --------  -------
Company Option which is qualified as an incentive stock option under Section 422
of the Code, the  conversion  formula (both as to number of shares to be subject
to the  related  Substitute  Option  and  the  exercise  price  of  the  related
Substitute  Option)  shall be  adjusted,  if  necessary,  to comply with Section
424(a) of the Code.  After the Effective Time,  each Substitute  Option shall be
exercisable upon the same terms and conditions as were applicable to the related
Company Option  immediately  prior to the Effective Time (including  those terms
which  may  have  caused  such  Company   Option/Substitute   Option  to  become
exercisable  in full in connection  with the  consummation  of the  transactions
contemplated  by this  Agreement).  As soon as  practicable  after the Effective
Time, Parent


                                     - 9 -
<PAGE>


shall  deliver  to the  holders of the  Substitute  Options  appropriate  notice
setting  forth such  holders'  rights  pursuant  thereto.  Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Parent Common Stock for delivery under the Company Stock Option Plans,  which
shall be assumed in accordance with this Section 2.14.

            (b)   As soon as is reasonably  practicable  after the Effective
Time,  Parent shall file a registration  statement on Form S-8 (if available and
required)  (or any  successor  or other  appropriate  forms) with respect to the
shares of Parent  Common Stock  subject to such options and rights and shall use
its reasonable best efforts to maintain the  effectiveness of such  registration
statement  (and maintain the current  status of the  prospectus or  prospectuses
contained therein) for so long as such options remain  outstanding.  The Company
(or, if appropriate, any committee administering the Company Stock Option Plans)
shall use its reasonable best efforts,  prior to or as of the Effective Time, to
take all necessary actions,  pursuant to and in accordance with the terms of the
Company Stock Option Plans and the instruments  evidencing the Company  Options,
to provide for the conversion of the Company  Options into options and rights to
acquire  Parent Common Stock in accordance  with this Section 2.14. The Board of
Directors  of the Company  shall,  prior to or as of the  Effective  Time,  take
appropriate  action to approve  the  cancellation  of the  Company  Options  for
purposes of Section  16(b) of the  Securities  Exchange Act of 1934,  as amended
(the "Exchange Act").  Parent shall,  prior to or as of the Effective Time, take
      ------------
appropriate  action to approve the acquisition of options and rights to purchase
Parent Common Stock under the Company Options (as converted  pursuant to Section
2.14(a)) for purposes of Section 16(b) of the Exchange Act.

      Section 2.15 Warrants to Purchase  Company Shares.  (a) Prior to the
                   ------------------------------------
Effective  Time,  the  Company and Parent  together  shall use  reasonable  best
efforts to take all action  necessary  with respect to the Warrants such that as
of and after the Effective Time each Warrant shall entitle the holder thereof to
purchase such number of shares of Parent Common Stock as is equal to the product
of (x) the  number of shares of Company  Common  Stock  subject to such  Warrant
immediately  prior to the  Effective  Time and (y) the Exchange  Ratio;  and the
exercise price per share of Parent Common Stock subject to such Warrant shall be
equal to (A) the exercise  price per share of Company  Common Stock  immediately
prior to the Effective Time divided by (B) the Exchange Ratio. The Company shall
take no action to cause any Warrant which  pursuant to its terms as in effect as
of the date hereof would not become  exercisable  by reason of the  transactions
contemplated by this Agreement to become exercisable in connection herewith, and
nothing  contained in this  Agreement  shall be  interpreted as causing any such
Warrant to become  exercisable,  except as provided currently under the terms of
the  Warrants  (subject to the  adjustments  required by this Section 2.15 after
giving effect to the Merger).


                                     - 10 -
<PAGE>


            (b)   Notwithstanding  the  foregoing,  the number of shares of
Parent Common Stock  deliverable  upon exercise of each Warrant at and after the
Effective  Time as  contemplated  by  paragraph  (a) above shall be rounded,  if
necessary,  to the nearest  whole  share,  and the  exercise  price with respect
thereto shall be rounded,  if necessary,  to the nearest one  one-hundredth of a
cent.  Other than as  provided in Section  2.15(a) and in the prior  sentence of
this Section 2.15(b),  as of and after the Effective Time, each Warrant shall be
subject to substantially the same terms and conditions as in effect  immediately
prior to the Effective Time, but giving effect to the Merger.

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

            Except as set forth in the Company  Disclosure Letter or the Company
SEC Reports  filed with the SEC prior to the date  hereof,  the  Company  hereby
represents and warrants to Parent and Merger Sub as follows:

      Section 3.1 Organization and Qualification;  Subsidiaries. (a) The Company
                  ---------------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California.  The Company has the requisite  corporate power
and  authority  to own,  operate  or lease  its  properties  and to carry on its
business as it is now being  conducted.  Each of the Subsidiaries of the Company
is a corporation  or other business  entity duly organized and validly  existing
under the laws of its jurisdiction of  incorporation or organization.  Except as
would not,  individually or in the aggregate,  have a Company  Material  Adverse
Effect, (i) each of the Subsidiaries of the Company has the requisite  corporate
or other  organizational  power  and  authority  to own,  operate  or lease  its
properties and to carry on its business as it is now being conducted, is in good
standing under the laws of its  jurisdiction of  incorporation  or organization;
and (ii) each of the Company and its Subsidiaries is duly qualified as a foreign
corporation to do business,  and is in good standing, in each jurisdiction where
the character of its properties  owned,  operated or leased or the nature of its
activities makes such qualification necessary.

            (b)   Section  3.1(b) of the Company  Disclosure  Letter  contains a
list of all  Subsidiaries  of the  Company  together  with the  jurisdiction  of
incorporation  or  organization of each such Subsidiary and the number of shares
and percentage of each class of each Subsidiary's  capital stock or other equity
securities  owned directly or indirectly by the Company.  All of the outstanding
shares of capital stock and other equity  securities of the  Subsidiaries of the
Company have been validly issued and are fully paid and nonassessable and all of
such shares and securities  owned,  directly or  indirectly,  by the Company are
owned  free  and  clear  of all  liens,  pledges,  security  interests  or other
encumbrances.  Except as set forth in Section  3.1(b) of the Company  Disclosure
Letter,


                                     - 11 -
<PAGE>


there are no subscriptions,  options, warrants, calls, commitments,  agreements,
conversion  rights or other rights of any  character  (contingent  or otherwise)
entitling any Person to purchase or otherwise acquire from the Company or any of
its  Subsidiaries  at any time, or upon the  happening of any stated event,  any
shares of capital stock or other equity securities of any of the Subsidiaries of
the Company. There are no outstanding  obligations,  contingent or otherwise, of
the  Company  or any of its  Subsidiaries  to  repurchase,  redeem of  otherwise
acquire  any  shares  of  capital  stock  or  other  equity  securities,  or any
securities  convertible,  exchangeable  or  exercisable  for or into  shares  of
capital  stock or other equity  securities,  of any  Subsidiary  of the Company.
Except as disclosed  in the Company SEC Reports  filed prior to the date of this
Agreement,  the Company does not directly or indirectly own any interest  (debt,
equity or otherwise) in any corporation, partnership, limited partnership, joint
venture,  limited liability company or other business association or entity that
is not a  Subsidiary  of the  Company,  or have any  obligation,  commitment  or
undertaking  to acquire  any such  interest  or invest in any such  corporation,
partnership,   joint  venture,  limited  liability  company  or  other  business
association or entity.

            (c)   Except for interests in its Subsidiaries,  neither the Company
nor any of its  Subsidiaries  owns  directly or indirectly  any material  equity
interest  in any  Person or has any  obligation  or has made any  commitment  to
acquire any such interest or make any such investment.

      Section 3.2 Articles  of   Incorporation  and   Bylaws.  The  Company  has
                  ------------------------------------------
furnished to Parent a complete and correct copy of the Articles of Incorporation
and  Bylaws,  as amended to the date of this  Agreement,  of the  Company.  Such
Articles of Incorporation and Bylaws and all similar organizational documents of
the Subsidiaries of the Company are in full force and effect. The Company is not
in violation of any of the provisions of its Articles of Incorporation or Bylaws
and,  except as would  not,  individually  or in the  aggregate,  have a Company
Material Adverse Effect, none of the Subsidiaries of the Company is in violation
of any similar organizational documents of Subsidiaries of the Company.

      Section 3.3 Capitalization.  (a)  The  authorized  capital  stock  of  the
                  --------------
Company  consists of 50,000,000  shares of Company  Common Stock and  15,000,000
shares  of  preferred  stock,  of which  3,373,334  are  designated  as Series B
Convertible  Preferred  Stock. No classes or series of preferred stock have been
designated other than such Series B Convertible Preferred Stock. At the close of
business on May 25, 1999 (the "Company  Capital  Stock  Disclosure  Date"),  (i)
                               -----------------------------------------
5,577,572  shares of  Company  Common  Stock  and  3,208,534  shares of  Company
Preferred  Stock  were  issued  and  outstanding,  and (ii) no shares of Company
Common Stock and no shares of Company  Preferred  Stock were held by the Company
in its  treasury.  Section  3.3(a) of the Company  Disclosure  Letter  lists the
number of shares of Company  Common Stock and Company  Preferred  Stock reserved
for


                                     - 12 -
<PAGE>


issuance  as of the  Company  Capital  Stock  Disclosure  Date under each of the
Benefit Plans or otherwise  (including  shares of Company  Common Stock reserved
for future  grants of options or rights under the Company  Stock Option Plans as
of the date hereof and securities issuable upon exercise of the Warrants). Since
the Company Capital Stock  Disclosure Date, no shares of Company Common Stock or
Company  Preferred  Stock have been issued or reserved for issuance,  except for
(i) shares of Company Common Stock issued in respect of the exercise, conversion
or exchange of Company Equity Rights outstanding as of the Company Capital Stock
Disclosure  Date (ii) shares of Company  Common  Stock  issued or  reserved  for
issuance  in  connection  with the Stock  Option  Agreement  or (iii)  shares of
Company Common Stock reserved for issuance in connection with options granted in
accordance  with Section  5.1(viii).  Section  3.3(a) of the Company  Disclosure
Letter sets forth the number and type of Company  Equity Rights  (including  the
number and class of the  Company  Shares for or into which such  Company  Equity
Rights  are  exercisable,  convertible  or  exchangeable  and any  Benefit  Plan
pursuant to which such Company Equity Rights were granted or issued) outstanding
as of the Company  Capital Stock  Disclosure  Date.  As of the date hereof,  the
conversion price per share of the Company  Preferred Stock is $3.00 per share of
Company  Common  Stock,  entitling  the holder  thereof to acquire 2.5 shares of
Company Common Stock upon conversion of one Company Preferred Share.

            (b)   There are no outstanding  obligations of the Company or any of
its Subsidiaries to repurchase,  redeem or otherwise  acquire any Company Shares
or any Company Equity Rights (except in connection with the exercise, conversion
or  exchange  of  outstanding  Company  Equity  Rights).  There  are  no  bonds,
debentures,  notes or other indebtedness issued and outstanding having the right
to vote  together with the  Company's  shareholders  on any matter in respect of
which the  Company's  shareholders  are entitled to vote.  Except for the Voting
Agreements,  no shareholders  of the Company are party to any voting  agreement,
voting trust or similar  arrangement with respect to Company Shares to which the
Company  or any  Subsidiary  of the  Company  is a Party.  All of the issued and
outstanding  shares of Company  Common  Stock and  Company  Preferred  Stock are
validly issued,  fully paid,  nonassessable and free of preemptive  rights.  The
Company has not repurchased Company Shares since December 31, 1995.

            (c)   Section 3.3(c) of the Company Disclosure Letter sets forth the
following information for each of the Warrants: (i) the exercise price in effect
as of the date hereof,  (ii) the identity of the holder(s),  (iii) the number of
shares of Company  Common Stock into which such  Warrants are  exercisable,  and
(iv) a list of all  amendments  to the terms of such  Warrants and a list of any
agreements entered into in connection therewith. The Company has provided Parent
with true and correct  copies of the  Warrants and such  agreements  as may have
been amended.


                                     - 13 -
<PAGE>


      Section 3.4 Power and Authority;  Authorization;  Valid & Binding. (a) The
                  -----------------------------------------------------
Board of  Directors  of the  Company,  at a meeting  duly  called,  duly adopted
resolutions  approving  this  Agreement  and the Merger,  determining  that this
Agreement is advisable and that the Merger is fair to, and in the best interests
of, the Company's shareholders, and recommending that the Company's shareholders
adopt  this  Agreement.  The  Company  has the  necessary  corporate  power  and
authority  to  enter  into and  deliver  this  Agreement  and the  Stock  Option
Agreement  and to  perform  its  obligations  hereunder  and to  consummate  the
transactions  contemplated hereby and thereby, except that the Merger is subject
to the adoption and approval of this  Agreement and the Merger by the holders of
Company  Common Stock and Company  Preferred  Stock as required by the CGCL. The
execution and delivery of this  Agreement and the Stock Option  Agreement by the
Company,  the performance by it of its obligations  hereunder and thereunder and
the  consummation  by the Company of the  transactions  contemplated  hereby and
thereby, have been duly authorized by all necessary corporate action on the part
of the Company (other than with respect to the Merger, the adoption and approval
of this  Agreement  and the Merger by the  holders of Company  Common  Stock and
Company   Preferred   Stock  as  required  by  the  CGCL  and  the  Articles  of
Incorporation  of the  Company).  Each of this  Agreement  and the Stock  Option
Agreement  has been duly  executed and delivered by the Company and assuming the
due  authorization,  execution  and  delivery  by Parent  and  Merger Sub of the
Agreement,  and by Parent of the Stock Option  Agreement,  each of the Agreement
and the Stock Option Agreement constitutes a legal, valid and binding obligation
of the Company  enforceable  against it in  accordance  with the terms hereof or
thereof,  subject to bankruptcy,  insolvency,  fraudulent transfer,  moratorium,
reorganization  and  similar  laws  of  general  applicability  relating  to  or
affecting  creditors'  rights and to general  equity  principles  (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

      Section 3.5 No Conflict;  Required Filings and Consents. (a) The execution
                  -------------------------------------------
and delivery of this  Agreement  and the Stock  Option  Agreement by the Company
does not, and the  performance by the Company of its  obligations  hereunder and
thereunder and the consummation by the Company of the transactions  contemplated
hereby and  thereby  will not,  (i)  violate or  conflict  with the  Articles of
Incorporation or Bylaws of the Company,  (ii) subject to obtaining or making the
notices,  reports,  filings,  waivers,  consents,  approvals  or  authorizations
referred to in Section  3.5(b),  conflict  with or violate any law,  regulation,
court  order,  judgment  or  decree  applicable  to  the  Company  or any of its
Subsidiaries or by which any of their respective  property is bound or affected,
or (iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination,  cancellation,  vesting, modification,  alteration or
acceleration of any obligation under, result in the creation of a lien, claim or
encumbrance  on any of the  properties  or assets of the  Company  or any of its
Subsidiaries  pursuant  to,  result in the loss of any  material


                                     - 14 -
<PAGE>


benefit  under  (including  an  increase  in the price  paid by, or cost to, the
Company or any of its Subsidiaries),  require the consent of any other party to,
or  result  in  any  obligation  on  the  part  of  the  Company  or  any of its
Subsidiaries  to repurchase  (with respect to a bond or a note),  any agreement,
contract,  instrument,  bond, note, indenture,  permit,  license or franchise to
which the Company or any of its Subsidiaries is a party or by which the Company,
any of its  Subsidiaries  or  any of  their  respective  property  is  bound  or
affected,  except,  in the case of clauses (ii) and (iii)  above,  as would not,
           ------
individually or in the aggregate,  have a Company  Material  Adverse Effect,  or
materially  impair  the  ability  of  Parent  to own  all of the  equity  of the
Surviving  Corporation,  or operate its or any of its  Subsidiaries'  businesses
(including the businesses of the Surviving  Corporation  and its  Subsidiaries),
following the Effective Time.

            (b)   Except  for  applicable   requirements   under  the  premerger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the filing of the Agreement of Merger pursuant
                       -------
to the CGCL,  filings with the SEC under the  Securities Act of 1933, as amended
(the "Securities Act") and the Exchange Act and any filings required pursuant to
      --------------
any state  securities  or "blue sky" laws,  neither  the  Company nor any of its
Subsidiaries  is required to submit any notice,  report or other filing with any
Governmental Entity in connection with the execution,  delivery,  performance or
consummation of this Agreement,  the Stock Option Agreement or the Merger except
for such notices,  reports or filings that, if not made, would not, individually
or in the  aggregate,  have a Company  Material  Adverse  Effect,  or materially
impair  the  ability  of  Parent  to  own  all of the  equity  of the  Surviving
Corporation,  or operate its or any of its Subsidiaries'  businesses  (including
the businesses of the Surviving Corporation and its Subsidiaries), following the
Effective Time. Except as set forth in the immediately  preceding  sentence,  no
waiver,  consent,  approval or  authorization  of any governmental or regulatory
authority,  court,  agency,  commission  or  other  governmental  entity  or any
securities  exchange  or  other   self-regulatory   body,  domestic  or  foreign
("Governmental Entity"), is required to be obtained by the Company or any of its
  -------------------
Subsidiaries  in  connection  with  its  execution,   delivery,  performance  or
consummation of this Agreement,  the Stock Option  Agreement or the transactions
contemplated   hereby   except  for  such   waivers,   consents,   approvals  or
authorizations that, if not obtained or made, would not,  individually or in the
aggregate,  have a Company  Material  Adverse Effect,  or materially  impair the
ability  of Parent to own all of the  equity of the  Surviving  Corporation,  or
operate its or any of its Subsidiaries'  businesses (including the businesses of
the Surviving Corporation and its Subsidiaries), following the Effective Time.

      Section 3.6 SEC Reports;  Financial Statements. (a) The Company has timely
                  ----------------------------------
filed all forms,  reports and documents  (including all Exhibits,  Schedules and
Annexes thereto)  required to be filed by it with the SEC since January 1, 1996,
including any amendments or  supplements  thereto  (collectively,  including any
such forms,  reports and documents filed after the date hereof, the "Company SEC
                                                                     -----------
Reports"),  and,  with  respect to
- -------


                                     - 15 -
<PAGE>


the Company SEC Reports  filed by the Company after the date hereof and prior to
the Closing Date, will promptly deliver or make available,  to Parent all of its
Company SEC Reports in the form filed with the SEC.  The Company SEC Reports (i)
complied  (and any Company SEC Reports  filed after the date hereof will comply)
in all material  respects in accordance with the applicable  requirements of the
Securities  Act or the  Exchange  Act,  as the case may be,  and the  rules  and
regulations promulgated thereunder, and (ii) as of their respective filing dates
(or if amended or  superseded  by a filing prior to the date of this  Agreement,
then on the date of such  filing),  did not (and any Company  SEC Reports  filed
after the date hereof will not) contain any untrue  statement of a material fact
or omit to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

            (b)   The  financial  statements,  including  all related  notes and
schedules,  contained  in the Company SEC  Reports (or  incorporated  therein by
reference)  fairly  present  in all  material  respects  (or,  with  respect  to
financial  statements  contained in the Company SEC Reports filed after the date
hereof, will fairly present in all material respects) the consolidated financial
position of the Company and its  consolidated  Subsidiaries as of the respective
dates thereof and the consolidated results of operations,  retained earnings and
cash flows of the Company and its  consolidated  Subsidiaries for the respective
periods indicated,  in each case in accordance with GAAP applied on a consistent
basis  throughout  the  periods  involved  (except  for  changes  in  accounting
principles  disclosed in the notes thereto) and the rules and regulations of the
SEC,  except  that  interim  financial  statements  are  subject  to normal  and
recurring  year-end  adjustments  which  are not and  are  not  expected  to be,
individually or in the aggregate,  material in amount and do not include certain
notes which may be  required by GAAP but which are not  required by Form 10-Q of
the SEC. The financial  statements included (or which will be included after the
date of this  Agreement)  in the  Company  SEC  Reports  are (or will be) in all
material  respects in  accordance  with the books and records of the Company and
its Subsidiaries.

            (c)   Notwithstanding  the foregoing, no representation or  warranty
is being made in this  Section 3.6 with  respect to  information  or  statements
(including financial information and statements) that are provided by Parent and
set forth in any Company SEC Report  filed after the date hereof or with respect
to any Parent SEC Reports incorporated therein by reference.

      Section 3.7 Absence of Certain  Changes.  Except  pursuant to the terms of
                  ---------------------------
this Agreement,  the Stock Option  Agreement and the  transactions  contemplated
hereby and thereby,  since  December  31, 1998,  (a) the Company and each of its
Subsidiaries has conducted its business in all material respects in the ordinary
and usual course of its business consistent with past practice and there has not
been any change in the business,


                                     - 16 -
<PAGE>


assets, liabilities,  results of operation or condition (financial or otherwise)
of the  Company and its  Subsidiaries,  or any  development  or  combination  of
developments  that,  individually  or in the aggregate,  has had or would have a
Company  Material Adverse Effect and (b) there has not been (i) any declaration,
setting aside or payment of any dividend or other distribution in respect of the
capital stock of the Company;  (ii) any change by the Company to its  accounting
policies,  practices or methods  (except for  immaterial  changes  required by a
change in GAAP); (iii) any (x) incurrences of indebtedness for borrowed money by
the Company and its Subsidiaries except for indebtedness incurred after the date
hereof  as  permitted  by  Section  5.1(xi);  (y)  transfers,   sales  or  other
dispositions of, or encumbrances  placed on, assets or properties by the Company
and its Subsidiaries  outside of the ordinary course of business consistent with
past  practice;  or (z) damage,  destruction or other casualty loss of assets or
properties  of the  Company  and its  Subsidiaries,  whether  or not  covered by
insurance which has had, or would have, a Company Material Adverse Effect;  (iv)
any change or amendment to the terms of any  outstanding  securities or material
indebtedness  of the  Company or any of its  Subsidiaries;  (v) any  redemption,
repurchase or re-pricing or amendment to the exercise or conversion price of any
Company Equity Rights and, except as required by applicable law or pursuant to a
contractual  obligation in effect as of the relevant  date,  (A) any  execution,
adoption or amendment of any agreement or  arrangement  relating to severance or
any employee  benefit plan or  employment  or  consulting  agreement  (including
Benefit  Plans) or (B) any grant of any stock  options or other  equity  related
award  except for stock  option  grants  after the date hereof as  permitted  by
Section 5.1(iv);  (vi) any amendments to the Company's Articles of Incorporation
or Bylaws or similar  organizational  documents,  (vii) any  acquisition  of any
business or assets,  other than transactions that were in the ordinary course of
business  consistent  with past  practice;  (viii) any capital  expenditures  in
excess of $2,000,000 in the aggregate;  (ix) any settlement of any threatened or
pending material litigation, suit, action, proceeding or investigation;  (x) any
material  tax  election  made or  changed,  any  material  audit  settled or any
material amended Tax Returns filed; or (xi) any agreement or commitment  entered
into with respect to any of the foregoing.

      Section 3.8 Litigation  and  Liabilities.  (a) Except as disclosed in the
                  ----------------------------
Company SEC Reports filed prior to the date hereof, there are no civil, criminal
or administrative actions, suits or claims,  proceedings (including condemnation
proceedings)  or, to the  Knowledge of the Company,  hearings or  investigations
pending or, to the  Knowledge  of the Company,  threatened  against or otherwise
adversely  affecting  the  Company  or any of its  Subsidiaries  or any of their
respective  properties and assets,  except for any of the foregoing  which would
not, individually or in the aggregate, have a Company Material Adverse Effect.

            (b)   Neither  the  Company  nor any of its  Subsidiaries  has or is
subject to any liabilities  (absolute,  accrued,  contingent or otherwise) other
than  liabilities


                                     - 17 -
<PAGE>


(a) adequately  reflected on the December 1998 Company Balance Sheet  (including
any  related  notes  thereto)  or (b) which  would not,  individually  or in the
aggregate,  have a  Company  Material  Adverse  Effect  or (c)  permitted  to be
incurred pursuant to Section 5.1.

      Section 3.9 No Violation of Law; Permits.  The business of the Company and
                  ----------------------------
each of its  Subsidiaries  is being  conducted in accordance with all applicable
law, ordinances,  regulations,  judgments, orders or decrees of any Governmental
Entity,   and  not  in   violation  of  any   permits,   franchises,   licenses,
authorizations or consents granted by any Governmental  Entity,  and the Company
and each of its  Subsidiaries  has obtained all permits,  franchises,  licenses,
authorizations or consents necessary for the conduct of its business, except, in
each  case,  as would  not,  individually  or in the  aggregate,  have a Company
Material Adverse Effect.  Neither the Company nor any of its Subsidiaries is (i)
subject to any cease and desist or other order,  judgment,  injunction or decree
issued by any Governmental  Entity, or (ii) is a party to any written agreement,
consent agreement or memorandum of understanding  with any Governmental  Entity,
or (iii) is a party to any  commitment  letter  or  similar  undertaking  to any
Governmental  Entity, or (iv) to the Knowledge of the Company, is subject to any
order or  directive  by any  Governmental  Entity,  or (v) has adopted any board
resolutions at the request of any Governmental Entity that in the case of any of
the foregoing  clauses (i) through (v)  materially  restricts the conduct of its
business  (whether the type of business,  the location thereof or otherwise) and
which,  individually or in the aggregate,  would have a Company Material Adverse
Effect,  nor to the  Knowledge of the  Company,  has the Company been advised in
writing that any  Governmental  Entity has proposed issuing or requesting any of
the foregoing.

      Section 3.10 Benefit Plans. (a) Section 3.10(a) of the Company  Disclosure
                   -------------
Letter  contains  a list  of  all  Benefit  Plans  and  employment,  consulting,
severance  or  termination   agreements  between  the  Company  or  any  of  its
Subsidiaries and any Employee (a "Benefit  Agreement").  Neither the Company nor
                                  ------------------
any of its  Subsidiaries  has  adopted or amended in any  material  respect  any
Benefit  Plan since the date of the most  recent  audited  financial  statements
included in the Company SEC Reports filed prior to the date hereof.

            (b)   With respect to each Benefit Plan and Benefit  Agreement,  the
Company has made available to Parent true,  complete and correct  copies,  where
applicable  and to the extent that they exist as of the date of this  Agreement,
of (i) the current plan document or  agreement,  (ii) the two most recent annual
reports on Form 5500 filed with the Internal Revenue Service, (iii) the two most
recent actuarial reports, (iv) the most recent summary plan description, (v) the
most recent  determination  letter issued by the Internal Revenue  Service,  and
(vi) the two most recent audited financial reports concerning such Benefit Plans
or Agreements, and any trusts related thereto.


                                     - 18 -
<PAGE>


            (c)   None of the Company,  any of its Subsidiaries,  any officer of
the  Company or any of its  Subsidiaries  or any of the ERISA  Benefit  Plans or
Benefit  Agreements  has on or before  the date of this  Agreement  engaged in a
"prohibited  transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) with respect to any ERISA Benefit Plan or Benefit Agreement that could
reasonably be expected to subject the Company,  any of its  Subsidiaries  or any
officer  of the  Company  or any of its  Subsidiaries  to any tax on  prohibited
transactions  imposed  by  Section  4975 of the Code or to any  liability  under
ERISA.  None of the Company,  its Subsidiaries or any ERISA Affiliate has at any
time during the five-year  period  preceding the date hereof  contributed to any
ERISA Benefit Plan that is a  "multiemployer  plan" (as defined in Section 3(37)
of ERISA) or  maintained  any ERISA  Benefit Plan that is subject to Title IV of
ERISA or Section 412 of the Code.

            (d)   As of the date of this Agreement there is no pending  dispute,
arbitration,  claim,  suit or  grievance  involving  a Benefit  Plan or  Benefit
Agreement (other than routine claims for benefits payable under any such Benefit
Plan) that would have a Company Material Adverse Effect.

            (e)   Each  Benefit Plan and Benefit  Agreement has been established
and  maintained  in all material  respects in  accordance  with its terms and in
compliance with all applicable laws,  statutes,  orders,  rules and regulations,
including  without  limiting the  foregoing,  the timely  filing of all required
reports, documents and notices.

            (f)   Neither  the Company,  any of its  Subsidiaries  nor any ERISA
Affiliate (i) maintains or  contributes to any Benefit Plan which  provides,  or
has any  liability  to provide,  life  insurance,  medical,  severance  or other
employee  welfare  benefits  to any  Employee  upon or after his  retirement  or
termination  of  employment,  except as may be required by Section  4980B of the
Code or Title I,  subtitle  B,  part 6 of ERISA;  or (ii) has ever  represented,
promised or contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance,  medical, severance or other employee welfare benefits upon
or after their  retirement or termination  of  employment,  except to the extent
required by Section 4980B of the Code or Title I, subtitle B, part 6 of ERISA.

            (g)   The execution  of,  and   performance   of  the   transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any  additional or subsequent  events) (i) constitute an event under any Benefit
Plan,  Benefit  Agreement,  trust or loan that will or may result in any payment
(whether  of  severance  pay  or   otherwise),   acceleration,   forgiveness  of
indebtedness,  vesting, distribution, increase in benefits or obligation to fund
benefits  with  respect to any  Employee,  or (ii) result in the  triggering  or
imposition of any  restrictions  or  limitations  on the right of the Company or
Parent to amend or terminate any Benefit Plan and Benefit Agreement.  No payment
or


                                     - 19 -
<PAGE>


benefit agreed to by the Company or any of its Subsidiaries which will or may be
made by the Company, any of its Subsidiaries,  Parent or any of their respective
affiliates  with  respect to any  Employee  may or will be  characterized  as an
"excess  parachute  payment,"  within the meaning of Section  280G(b)(1)  of the
Code.

            (h)   The Company and each of its Subsidiaries (i) has  withheld all
material  amounts required by law or by agreement to be withheld from the wages,
salaries and other  payments to  Employees;  (ii) is not liable for any material
arrears of wages or any Taxes or any  penalty  for failure to comply with any of
the foregoing;  and (iii) is not liable for any material payment to any trust or
other fund or to any governmental or administrative  authority,  with respect to
unemployment  compensation  benefits,  social  security  or other  benefits  for
Employees.

      Section 3.11 Labor  Matters.  (a) Except for those matters that would not,
                   --------------
individually or in the aggregate,  have a Company  Material  Adverse Effect,  no
work  stoppage,  slowdown,  lockout or labor  strike  against the Company or any
Subsidiary of the Company by Employees (or any union that  represents  them) (i)
is pending or, to the Knowledge of the Company,  threatened or (ii) has occurred
since December 31, 1996.

            (b)   Except as, individually  or in the aggregate, would not have a
Company Material Adverse Effect,  as of the date of this Agreement,  neither the
Company nor any Subsidiary of the Company is involved in or, to the Knowledge of
the Company,  threatened  with any labor dispute,  grievance,  or arbitration or
union  organizing  activity  (by  it or  any of  its  Employees)  involving  any
Employees.

      Section 3.12 Environmental  Matters.   (a) Except  as  would  not  have  a
                   ----------------------
Company Material Adverse Effect:

                  (i)   the Company  and each  of its  Subsidiaries  has at  all
times been operated,  and is, in compliance  with all  applicable  Environmental
Laws,  and  neither the Company nor any of its  Subsidiaries  has  received  any
written  communication from any Person or Governmental  Entity that alleges that
the Company or any of its  Subsidiaries  is not in  compliance  with  applicable
Environmental Laws;

                  (ii)  the Company and each of its Subsidiaries has obtained or
has  applied  for all  applicable  environmental,  health  and  safety  permits,
licenses,  variances,  approvals and authorizations required under Environmental
Laws (collectively,  the "Environmental Permits") necessary for the construction
                          ---------------------
of its  facilities  or the  conduct of its  operations,  and such  Environmental
Permits  are in effect or,  where  applicable,  a renewal  application  has been
timely  filed  and  is  pending  agency  approval,   and  the  Company  and  its
Subsidiaries   are  in  compliance   with  all  terms  and  conditions  of  such
Environmental Permits;


                                     - 20 -
<PAGE>


                  (iii) there is no  Environmental  Claim  pending or threatened
(i)  against  the Company or any of its  Subsidiaries,  (ii)  against any Person
whose  liability  for any  Environmental  Claim  has been  retained  or  assumed
contractually  by the Company or any of its  Subsidiaries,  or (iii) against any
real  or  personal  property  or  operations  which  the  Company  or any of its
Subsidiaries owns, leases or operates, in whole or in part;

                  (iv)  there have been no Releases of any  Hazardous  Materials
that would be  reasonably  likely to form the basis of any  Environmental  Claim
against the Company,  any of its  Subsidiaries  or any predecessor  thereof,  or
against any Person whose liability for any Environmental Claim has been retained
or assumed contractually by the Company or any of its Subsidiaries;

                  (v)   there are, and have been, no underground  or aboveground
storage tanks, incinerators or surface impoundments, at, on, under or within any
real property  currently or formerly  owned,  leased or operated by the Company,
its Subsidiaries or any predecessor thereof,  that would be reasonably likely to
form the basis of any Environmental Claim against the Company,  its Subsidiaries
or any  predecessor  thereof,  or against  any Person  whose  liability  for any
Environmental Claim has been retained or assumed contractually by the Company or
any of its subsidiaries; and

                  (vi)  none of the  properties  currently  or  formerly  owned,
leased or operated by the Company,  its Subsidiaries or any predecessor thereof,
are  now,  or  were in the  past,  listed  on the  National  Priorities  List of
Superfund Sites or any analogous state list.

            (b)   For purposes of this Agreement:

                  (i)   "Environmental Claim" means any and all  administrative,
                         -------------------
regulatory or judicial  actions,  suits,  demands,  demand letters,  information
requests, directives,  claims, liens, investigations,  proceedings or notices of
noncompliance,  violation  or  status  as a  potentially  responsible  person or
otherwise  liable party (written or oral) by any person  (including any federal,
state,  local  or  foreign  governmental  authority)  relating  to  or  alleging
potential liability (including, without limitation, potential responsibility for
or liability for enforcement,  investigatory costs, cleanup costs,  governmental
response  costs,  removal costs,  remedial  costs,  natural  resources  damages,
property damages,  personal  injuries or penalties)  arising out of, based on or
resulting  from (A) the  presence,  or Release or  threatened  Release  into the
environment,  of  any  Hazardous  Materials  at  any  location,  whether  or not
currently or formerly owned, operated,  leased or managed by the Company, any of
its Subsidiaries or any predecessor  thereof;  or (B) circumstances  forming the
basis of any violation or alleged violation of any Environmental Law; or (C) any
and  all   claims   by  any   third   party   seeking   damages,


                                     - 21 -
<PAGE>


contribution,  indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.

                  (ii)  "Environmental   Laws"  means  all  applicable  foreign,
                         --------------------
federal, state and local laws, rules, requirements,  regulations and judicial or
administrative  opinions  relating to  pollution,  the  environment  (including,
without  limitation,  ambient air, surface water,  groundwater,  land surface or
subsurface  strata)  or  protection  of  human  or  employee  health  or  safety
including,  without  limitation,  laws and  regulations  relating to Releases of
Hazardous  Materials,  or  otherwise  relating to the  manufacture,  processing,
distribution,  use,  treatment,  storage,  disposal,  transport  or  handling of
Hazardous  Materials  or  relating  to  management  of  Hazardous  Materials  in
buildings.

                  (iii) "Hazardous  Materials"  means (A)  any  petroleum or any
                         --------------------
by-products or fractions  thereof,  asbestos or  asbestos-containing  materials,
urea  formaldehyde  foam  insulation,  any  form  of  natural  gas,  explosives,
polychlorinated biphenyls ("PCBs"),  radioactive materials,  ionizing radiation,
                            ----
electromagnetic field radiation or microwave  transmissions;  (B) any chemicals,
materials or  substances,  whether  waste  materials,  raw materials or finished
products,  which are now defined as or included in the  definition of "hazardous
substances,"  "hazardous wastes," "hazardous  materials,"  "extremely  hazardous
substances,"   "restricted   hazardous  wastes,"  "toxic   substances,"   "toxic
pollutants," "pollutants,"  "contaminants," or words of similar import under any
Environmental  Law; and (C) any other chemical,  material or substance,  whether
waste materials,  raw materials or finished  products,  regulated or forming the
basis of liability under any Environmental Law.

                  (iv)  "Release" means any release, spill,  emission,  leaking,
                         -------
injection, deposit, disposal,  discharge,  dispersal, leaching or migration into
the environment  (including without limitation  ambient air,  atmosphere,  soil,
surface water, groundwater or property).

      Section 3.13 Vote  Required;  Options.  (a) No state  takeover or similar
                   ------------------------
statute  or  regulation  of  any  state  in  which  the  Company  or  any of its
subsidiaries is organized,  incorporated or qualified to do business  applies to
the Merger, this Agreement,  the Stock Option Agreement  (including the purchase
of shares of Company Common Stock  thereunder),  the Voting Agreements or any of
the transactions contemplated hereby or thereby.

            (b)   The  Board of  Directors  of the Company has duly adopted (and
not withdrawn) a resolution  rescinding  any  authorization  previously  granted
permitting the Company to repurchase Company Shares.


                                     - 22 -
<PAGE>


            (c)   The  affirmative votes at the Company  Shareholder  Meeting of
(i) the holders of a majority of the outstanding  shares of Company Common Stock
and  (ii) the  holders  of a  majority  of the  outstanding  shares  of  Company
Preferred  Stock, in each case voting as a separate class, are the only votes of
the holders of any class or series of the Company's  capital stock  necessary to
approve and adopt this Agreement,  the Merger and the transactions  contemplated
hereby.

      Section 3.14 Opinion of  Financial  Advisor.  The Company or its Board of
                   ------------------------------
Directors has received the written opinion of Morgan Stanley & Co.  Incorporated
(the "Company  Financial  Advisor"),  dated as of the date hereof, to the effect
      ---------------------------
that, as of the date hereof,  the  consideration to be received in the Merger by
the  holders  of  Company  Common  Shares who hold such  Company  Common  Shares
immediately prior to the Effective Time is fair to the holders of Company Common
Shares from a financial  point of view.  The Company has been  authorized by the
Company Financial Advisor to permit, subject to prior review and consent by such
Company  Financial  Advisor,  the  inclusion of such  opinion  (and  appropriate
references thereto) in the Joint Proxy Statement/Prospectus.

      Section 3.15 Brokers.  The Company and its  Subsidiaries  have not engaged
                   -------
any broker,  finder,  investment  banker or other Person (other than the Company
Financial  Advisor) entitled to any brokerage,  finder's,  investment banking or
other similar fee or commission in connection with the transactions contemplated
by this Agreement.  The expected  amounts of such fees and commissions have been
disclosed in writing to Parent based upon  arrangements  made by or on behalf of
the Company or any of its Subsidiaries.  The Company has previously  provided to
Parent copies of any agreements giving rise to any such fee or commission.

      Section 3.16 Tax Matters.
                   -----------

            (a)   All  material Tax Returns  required to be filed by the Company
and each of its  Subsidiaries  either on a separate or combined or  consolidated
basis have been or will be  prepared  in good  faith and  timely  filed with the
appropriate  Governmental Entity on or prior to the Effective Time or by the due
date thereof including extensions granted by a Government Entity;

            (b)  all such Tax Returns are complete  and accurate in all material
respects;

            (c)   all  Taxes  owed by any of the  Company  and its  Subsidiaries
(whether or not shown on any Tax Return) have been paid;

            (d)   no deficiencies for any Taxes have been either (A) asserted in
writing,  proposed in writing or assessed in writing  against the Company or any
of its


                                     - 23 -
<PAGE>


Subsidiaries  or (B) as to which the Company has  Knowledge  based upon personal
contact with any agent of a taxing authority;

            (e)   none  of the  Company  and its  Subsidiaries  has  waived  any
statute of  limitations  in respect of Taxes or agreed to any  extension of time
with  respect to a Tax  assessment  or  deficiency  and no written  requests for
waivers of the time to assess any Taxes of the Company or its  Subsidiaries  are
pending;

            (f)   none  of the Company  and its  Subsidiaries  currently  is the
beneficiary of any extension of time within which to file any Tax Return;

            (g)   the  Company has delivered or made available to Parent correct
and complete copies of all federal income Tax Returns,  examination reports, and
statements of deficiencies  assessed against, or agreed to by any of the Company
and its Subsidiaries since December 31, 1994;

            (h)   the  unpaid Taxes of the Company and its  Subsidiaries (A) did
not, as of the month ended April 30,  1999,  exceed by any  material  amount the
reserve  for  Tax  liability   (rather  than  any  reserve  for  deferred  Taxes
established to reflect timing differences between book and tax income) set forth
on the face of the balance  sheet as of and for the months  ended April 30, 1999
(rather  than in any notes  thereto)  and (B) will not  exceed  by any  material
amount that  reserve as adjusted for  operations  and  transactions  through the
Closing Date in accordance with the past customs and practice of the Company and
its Subsidiaries in filing their income Tax Returns;

            (i)   the  Company has not  distributed  the stock of a  "controlled
corporation"  (within the meaning of that term as used in section  355(a) of the
Code) in a  transaction  subject to section  355 of the Code within the past two
years;

            (j)   no  written  claim,  and to the  Knowledge of the Company,  no
claim,  has ever been made by an  authority in a  jurisdiction  where any of the
Company  and its  Subsidiaries  does not file Tax  Returns  that it is or may be
subject to taxation by that jurisdiction;

            (k)   none of the Company and its Subsidiaries has any  unrecognized
gains relating to deferred intercompany transactions;

            (l)   there  are no excess  loss  accounts,  as defined in Reg.  S
1.1502-19,  between or among any members of the affiliated group of corporations
of which Company is the common parent; and

            (m)   Section  3.16  of the  Company  Disclosure  Letter  lists  all
federal,  state,  local and foreign Tax Returns filed with respect to any of the
Company and its


                                     - 24 -
<PAGE>


Subsidiaries  for taxable  periods ending on or after March 31, 1996,  indicates
those Tax Returns that have been audited,  and indicates  those Tax Returns that
currently are subject of an audit.

      Section 3.17 Intellectual  Property.  Neither  the Company nor  any of its
                   ----------------------
Subsidiaries  currently utilizes, or to the Knowledge of the Company,  including
the general counsel and members of the legal  department of the Company involved
in intellectual  property and the Company's chief technology officer, has in the
past utilized,  any existing or pending Intellectual Property Rights, except for
those  which  are  owned,  possessed  or  lawfully  used by the  Company  or its
Subsidiaries  in their business  operations,  and neither the Company nor any of
its  Subsidiaries  infringes upon or unlawfully uses any  Intellectual  Property
Right owned or validly claimed by another Person except,  in each case, as would
not,  individually or in the aggregate,  have a Company Material Adverse Effect.
The  Company  and  its  Subsidiaries  own  free  and  clear  of  all  liens  and
encumbrances,  have a valid  license to use or have the right validly to use all
existing and pending  Intellectual  Property Rights  necessary to carry on their
respective  business  substantially as currently conducted except the failure of
which to own, validly license or have the right validly to use,  individually or
in the  aggregate,  would not have a Company  Material  Adverse  Effect.  To the
Knowledge of the Company after due inquiry,  no person is infringing  the rights
of the  Company or any of its  Subsidiaries  with  respect  to any  Intellectual
Property  Right in a manner  that  would  result in a Company  Material  Adverse
Effect.

      Section 3.18 Title  to  Property.  (a)  The  Company  and  each  of  its
                   -------------------
Subsidiaries  have good title to all of their real properties and other material
assets, free and clear of all liens, charges and encumbrances,  except liens for
taxes not yet due and payable and such liens or other imperfections of title, if
any, as do not materially interfere with the marketability or the present use of
the  property  affected  thereby  or which  would  not,  individually  or in the
aggregate,  have a Company Material  Adverse Effect,  and except for liens which
secure  indebtedness  reflected in the December 1998 Company Balance Sheet; and,
to the Company's  Knowledge,  all leases pursuant to which the Company or any of
its  Subsidiaries  lease from others  material real or personal  property are in
good standing,  valid and effective in accordance with their  respective  terms,
and there is not, to the Knowledge of the Company, under any of such leases, any
existing  default or event of default  (or event  which with  notice or lapse of
time, or both, would  constitute a default),  except where the lack of such good
standing, validity and effectiveness,  or the existence of such default or event
of default would not, individually or in the aggregate,  have a Company Material
Adverse Effect.

            (b)   Section  3.18(b) of the Company  Disclosure  Letter identifies
all real  property  owned by the Company and its  Subsidiaries  and all material
real property leased or operated by the Company and its Subsidiaries.


                                     - 25 -
<PAGE>


      Section 3.19 Contracts and Commitments. (a) Section 3.19(a) of the Company
                   -------------------------
Disclosure  Letter  contains  a  complete  and  accurate  list  of all  material
contracts  (written  or  oral),  leases,  plans,  undertakings,  commitments  or
agreements  which  involve (or are  reasonably  likely to  involve)  payments or
receipts by the Company or any of its  Subsidiaries  in excess of $750,000 for a
period of two years from the date of this Agreement  ("Contracts")  to which the
                                                       ---------
Company or any of its  Subsidiaries  is a party or by which any of them is bound
as of the date of this Agreement. As of the date of this Agreement,  (i) each of
such  Contracts  is  valid  and  binding  upon  the  Company  or the  applicable
Subsidiary  (and, to the Company's  Knowledge,  on all other parties thereto) in
accordance  with its terms and is in full force and  effect,  (ii)  neither  the
Company nor any of its  Subsidiaries  is in breach or violation of or in default
in any material  respect,  or in breach or violation of or in default under,  in
any material respect, any Debt Instrument to which it or any of its Subsidiaries
is a party (in each case  whether or not such  breach,  violation or default has
been waived),  (iii) to the  Knowledge of the Company,  no  counter-party  is in
breach or  violation  of or in  default  under,  in any  material  respect,  any
Contract to which the Company or any of its Subsidiaries is a party, and (iv) no
event has occurred with respect to the Company or any of its Subsidiaries which,
with  notice  or lapse of time or both,  would  constitute  a  material  breach,
violation  or  default,  or give rise to a right of  termination,  modification,
cancellation,  foreclosure,  imposition of a lien,  prepayment  or  acceleration
under any of such Contracts or Debt Instruments.

            (b)   Section  3.19(b) of the Company Disclosure Letter sets forth a
list of each loan or credit agreement,  note, bond, mortgage,  indenture and any
other agreement and instrument  pursuant to which any  Indebtedness in excess of
$750,000 of the Company or any of its Subsidiaries (other than such Indebtedness
payable to the  Company or any of its  Subsidiaries)  is  outstanding  or may be
incurred (any of the foregoing, a "Debt Instrument").  "Indebtedness" shall mean
                                   ---------------      ------------
(i)  indebtedness  for  borrowed  money,  whether  secured  or  unsecured,  (ii)
obligations under conditional sale or other title retention  agreements relating
to property purchased by such person, (iii) capitalized lease obligations,  (iv)
obligations  under interest rate cap, swap,  collar or similar  transactions  or
currency hedging transactions (valued at the termination value thereof), and (v)
guarantees of any such indebtedness of any other person.

      Section 3.20 Proxy  Statement/Prospectus;  Registration Statement. None of
                   ----------------------------------------------------
the information to be supplied by the Company or its  Subsidiaries for inclusion
or  incorporation  by reference  from the Company SEC Reports in the Joint Proxy
Statement/Prospectus to be sent to the shareholders of the Company in connection
with the Company  Shareholder  Meeting or any  amendment  thereof or  supplement
thereto, will, on the date it becomes effective with the SEC, at the time of the
mailing of the Joint Proxy  Statement/Prospectus or any amendment or supplement,
at the time of the Company Shareholder Meeting or at the Effective Time, contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
required  to be stated  therein  or  necessary


                                     - 26 -
<PAGE>


in order to make the statements  therein,  in light of the  circumstances  under
which they are made, not  misleading.  None of the information to be supplied by
the Company or its Subsidiaries for inclusion or incorporation by reference from
the  Company  SEC  Reports in the Form S-4  pursuant  to which  shares of Parent
Common Stock issued in the Merger will be registered under the Act, of which the
Joint  Proxy  Statement/Prospectus  will  form a part,  will,  at the  time  the
Registration  Statement  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 are made, not misleading.

      Section 3.21 Pooling of  Interests;  Reorganization.  The Company  intends
                   --------------------------------------
that the Merger be accounted for under the "pooling of  interests"  method under
the  requirements  of  Opinion  16 of the  Accounting  Principles  Board  of the
American  Institute of Certified Public  Accountants,  the Financial  Accounting
Standards  Board,  and the rules and regulations of the SEC. Neither the Company
nor any of its affiliates  has taken or agreed to take any action,  nor does the
Company  have any  Knowledge  of any fact or  circumstance  with  respect to the
Company, which would prevent the business combination to be effected pursuant to
the Merger from being  accounted for as a "pooling of  interests"  under GAAP or
the rules and  regulations of the SEC or prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368 of the Code.

      Section 3.22 Restrictions  on  Business   Activities.   Except  for   this
                   ---------------------------------------
Agreement,  there is no  judgment,  injunction,  order  or  decree  or  material
agreement  (including,  without  limitation,  agreements  containing  provisions
restricting the Company or any of its Subsidiaries  from entering or engaging in
any line of  business,  agreements  containing  geographic  restrictions  on the
Company's  or any of its  Subsidiaries'  ability  to  operate  their  respective
businesses and agreements  containing  rights of first refusal,  rights of first
offer,  exclusivity,  "requirements"  or similar  provisions)  binding  upon the
Company  or any of its  Subsidiaries  which  has or  would  have the  effect  of
materially prohibiting or impairing the conduct of the businesses of the Company
or any of its  Subsidiaries  or, after the Effective Time,  Parent or any of its
Subsidiaries.

      Section 3.23 Related  Party  Transactions.  Neither the Company nor any of
                   ----------------------------
its  Subsidiaries is party to a Contract  involving  consideration  of more than
$100,000 for any  individual  Contract or series of related  Contracts  with any
Related  Party which are  currently in effect or which,  to the Knowledge of the
Company, were in effect or were consummated at any time on or after December 31,
1998. For the purpose of this Agreement,  "Related Party" means (i) any officer,
                                           -------------
director  or  greater  than  5%  shareholder  of  the  Company  or  any  of  its
Subsidiaries, (ii) any spouse, former spouse, child, parent, parent of a spouse,
sibling or grandchild of any of the persons  listed in clause (i), and (iii) any
affiliate  of any of the  persons  listed in clauses (i) and (ii) other than the
Company or any of its Subsidiaries.


                                     - 27 -
<PAGE>


      Section 3.24 Insurance.  All current  material  insurance  policies are in
                   ---------
full force and effect, all premiums with respect thereto covering all periods up
to and  including  the Closing  Date have been paid or will be paid prior to the
Closing,  and no notice of  cancellation  or termination  has been received with
respect to any such policy. Such policies (i) are sufficient for compliance with
all  requirements of law and of all Contracts to which the Company or any of its
Subsidiaries  is a party,  (ii)  provide  insurance  coverage for the assets and
operations  of the  Company  and each of its  Subsidiaries  consistent  with the
coverage customarily maintained by similarly situated companies,  and (iii) will
not in any  material way be affected by, or terminate or lapse by reason of, the
transactions  contemplated by this  Agreement.  To the Knowledge of the Company,
during the last three years neither the Company nor any of its  Subsidiaries has
been refused any insurance with respect to its assets or operations, nor has its
coverage been limited,  by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance.

      Section 3.25 Year 2000. (a) All products and services  currently  provided
                   ---------
by the Company or its Subsidiaries and all products  currently  supported by the
Company or its Subsidiaries  are (i) able to receive,  record,  store,  process,
calculate,  manipulate  and output  dates from and after  January 1, 2000,  time
periods that  include  January 1, 2000 and  information  that is dependent on or
relates  to such  dates or time  periods,  in the same  manner and with the same
accuracy,  functionality,  data integrity and  performance as when dates or time
periods  prior to January 1, 2000 are involved and (ii) able to store and output
date  information  in a manner  that is  unambiguous  as to century  ("Year 2000
                                                                       ---------
Compliant")  or can be  freely  modified  by the  Company  to be made  Year 2000
- ---------
Compliant  (without  breaching any third party  license  agreements or otherwise
infringing any  Intellectual  Property Rights of any third party),  except where
such failure to be Year 2000 Compliant would not have a Company Material Adverse
Effect.  The Company has the capacity to provide Year 2000 Compliant  substitute
products to its and its Subsidiaries' customers for any products which cannot be
so freely modified to be made Year 2000 Compliant  (without  breaching any third
party  license  agreements or otherwise  infringing  any  Intellectual  Property
Rights of any third  party),  except  where such  failure to have such  capacity
would not have a Material Adverse Effect. Except as disclosed in Section 3.25 of
the  Company   Disclosure   Letter,  all  agreements  by  the  Company  and  its
Subsidiaries   with  clients  that   represent   that  the   Company's  (or  its
Subsidiaries')   products  and/or  services  are  Year  2000  Complaint  contain
provisions excluding consequential, incidental and similar damages.

            (b)   All  systems owned by,  licensed to or operated or used by the
Company  or any of its  Subsidiaries  are Year 2000  Compliant  or can freely be
modified  to be made Year  2000  Compliant  without  breaching  any third  party
license agreements or otherwise  infringing any intellectual  property rights of
any third party,  except where such failure to be Year 2000 Compliant  would not
have a Company Material Adverse Effect.


                                     - 28 -
<PAGE>


            (c)   The   Company   has  the   capacity   to  effect  any  of  the
modifications  referred to in this Section 3.25 and the remaining  costs of such
modifications in the aggregate will not have a Company Material Adverse Effect.

      Section 3.26 Foreign Corrupt Practices,  etc. None of the Company,  any of
                   -------------------------------
its Subsidiaries nor any directors, officers, agents or employees of the Company
or any of its  Subsidiaries  has (i) used any funds for unlawful  contributions,
gifts,  entertainment or other unlawful expenses related to political  activity,
(ii) made any unlawful  payment to foreign or domestic  government  officials or
employees or to foreign or domestic  political  parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.

                                   ARTICLE IV

              REPRESENTATIONS & WARRANTIES OF PARENT AND MERGER SUB

            Except as set forth in the  Parent  Disclosure  Letter or the Parent
SEC Reports  filed with the SEC prior to the date hereof,  Parent and Merger Sub
hereby represent and warrant to the Company as follows:

      Section 4.1 Organization and Qualification;  Subsidiaries. (a) Parent is a
                  ---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.  Merger Sub is a corporation  duly organized,  validly
existing and in good standing under the laws of the State of California. Each of
Parent and Merger Sub has the requisite corporate or other  organizational power
and  authority  to own,  operate  or lease  its  properties  and to carry on its
business  as it is now  being  conducted,  and is duly  qualified  as a  foreign
corporation to do business,  and is in good standing, in each jurisdiction where
the character of its properties  owned,  operated or leased or the nature of its
activities makes such qualification necessary, in each case except as would not,
individually or in the aggregate, have a Parent Material Adverse Effect.

            (b)   All of the  outstanding  shares of capital stock of Merger Sub
have been  validly  issued  and are  fully  paid and  nonassessable.  All of the
outstanding  shares of capital  stock of Merger Sub are owned by Parent free and
clear of all liens, pledges, security interests or other encumbrances. There are
no subscriptions,  options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character  (contingent or otherwise) entitling any
Person to purchase or  otherwise  acquire from Parent or Merger Sub at any time,
or upon the happening of any stated event,  any shares of capital stock or other
equity securities of Merger Sub.

      Section 4.2 Certificate of Incorporation and Bylaws. Parent has furnished,
                  ---------------------------------------
or otherwise made  available,  to the Company a complete and correct copy of the
Certificate


                                     - 29 -
<PAGE>


of Incorporation and Bylaws,  as amended to the date of this Agreement,  of each
of Parent and Merger Sub. Such Certificate of  Incorporation  and Bylaws of each
of Parent and Merger Sub are in full force and effect. Neither Parent nor Merger
Sub is in violation of any of the  provisions of its  respective  Certificate of
Incorporation or Bylaws.

      Section 4.3  Capitalization.  (a) The  authorized  capital stock of Parent
                  ---------------
consists of 720,000,000  shares of Parent Common Stock and 40,000,000  shares of
Preferred Stock, par value $1.00 per share, of which 1,500,000 are designated as
Junior  Participating  Preferred Stock and 30,000,000 are designated as Series A
Cumulative  Convertible  Preferred  Stock ("Series A Preferred  Stock").  At the
                                            -------------------------
close of business on April 30, 1999,  (i)  271,478,652  shares of Parent  Common
Stock,  no shares of Junior  Preferred  Stock and 19,741,630  shares of Series A
Preferred Stock were issued and outstanding and (ii) 1,848,901  shares of Parent
Common Stock,  and no shares of Junior Preferred Stock and no shares of Series A
Preferred  Stock,  were held by Parent in its  treasury.  As of April 30,  1999,
28,212,136  shares of Parent  Common  Stock  were  reserved  for  issuance  upon
exercise of Parent Equity  Rights (other than the Series A Preferred  Stock) and
38,364,212  shares of Parent  Common  Stock  were  reserved  for  issuance  upon
conversion of the Series A Preferred Stock.

            (b)   There  are no outstanding  obligations of Parent or any of its
Subsidiaries  to  repurchase,  redeem or otherwise  acquire any shares of Parent
Common  Stock  or any  Parent  Equity  Rights  (except  in  connection  with the
exercise,  conversion or exchange of outstanding Parent Equity Rights and except
for  redemptions or repurchases of shares of Series A Preferred  Stock).  All of
the issued and  outstanding  shares of Parent  Common Stock are validly  issued,
fully paid,  nonassessable and free of preemptive rights. As of the date of this
Agreement,  there are no bonds,  debentures,  notes or other indebtedness issued
and outstanding having the right to vote together with Parent's  shareholders on
any matter in respect of which the Parent's  shareholders  are entitled to vote.
Except as  disclosed in the Parent SEC Reports,  no  shareholders  of Parent are
party to any voting agreement,  voting trust or similar arrangement with respect
to Parent Shares to which Parent or any Subsidiary of Parent is a party.

      Section 4.4 Power and Authority;  Authorization;  Valid & Binding. Each of
                  -----------------------------------------------------
Parent and Merger Sub has the necessary corporate power and authority to deliver
this Agreement and to perform its obligations hereunder,  as applicable,  and to
consummate the transactions  contemplated  hereby, as applicable.  The execution
and delivery by each of Parent and Merger Sub of this Agreement and, in the case
of Parent, the Voting Agreements and the Stock Option Agreement, the performance
by it of its  obligations  hereunder  and  thereunder,  as  applicable,  and the
consummation by Parent and Merger Sub of the  transactions  contemplated  hereby
and thereby, as applicable, have been duly authorized by all necessary corporate
action on the part of Parent  and Merger  Sub.  No vote of the  shareholders  of
Parent is required to approve the Merger,  this  Agreement  or


                                     - 30 -
<PAGE>


the  transactions  contemplated  hereby.  Each of  this  Agreement,  the  Voting
Agreements  and the Stock Option  Agreement has been duly executed and delivered
by Parent and Merger Sub and,  assuming  the due  authorization,  execution  and
delivery by the other parties  thereto,  constitutes a legal,  valid and binding
obligation  of Parent  and  Merger  Sub  enforceable  against  such  parties  in
accordance with the terms hereof or thereof, subject to bankruptcy,  insolvency,
fraudulent  transfer,  moratorium,  reorganization  and similar  laws of general
applicability  relating to or affecting  creditors' rights and to general equity
principles  (regardless  of  whether  such  enforceability  is  considered  in a
proceeding in equity or at law).

      Section 4.5 No Conflict;  Required Filings and Consents. (a) The execution
                  -------------------------------------------
and  delivery  of this  Agreement  by each of Parent  and/or  Merger Sub and the
Voting  Agreements  and  Stock  Option  Agreement  by Parent  does not,  and the
performance  by each of Parent and Merger Sub of its  obligations  hereunder and
thereunder  and the  consummation  by  each  of  Parent  and  Merger  Sub of the
transactions  contemplated  hereby and thereby will not, (i) violate or conflict
with the  Certificate of  Incorporation  or Bylaws of Parent or Merger Sub, (ii)
subject to obtaining or making the notices, reports, filings, waivers, consents,
approvals or authorizations referred to in paragraph (b) below, conflict with or
violate any law,  regulation,  court  order,  judgment or decree  applicable  to
Parent  or any of its  Subsidiaries  (including  Merger  Sub) or by which any of
their respective property is bound or affected, (iii) result in any breach of or
constitute  a default  (or an event  which with  notice or lapse of time or both
would  become a default)  under,  or give to others  any rights of  termination,
cancellation,   vesting,   modification,   alteration  or  acceleration  of  any
obligation under,  result in the creation of a lien, claim or encumbrance on any
of the  properties  or assets of  Parent or any of its  Subsidiaries  (including
Merger  Sub)  pursuant  to,  result in the loss of any  material  benefit  under
(including  an increase  in the price paid by, or cost to,  Parent or any of its
Subsidiaries  (including Merger Sub), require the consent of any other party to,
or result  in any  obligation  on the part of Parent or any of its  Subsidiaries
(including  Merger Sub) to repurchase  (with  respect to a bond or a note),  any
agreement,  contract,  instrument,  bond, note,  indenture,  permit,  license or
franchise to which Parent or any of its Subsidiaries (including Merger Sub) is a
party or by which Parent or any of its  Subsidiaries  (including  Merger Sub) or
any of their respective  property is bound or affected,  except,  in the case of
clauses (ii) and (iii) above,  as would not,  individually  or in the aggregate,
have a Parent Material Adverse Effect.

            (b)   Except  for  applicable   requirements   under  the  premerger
notification  requirements of the HSR Act, the filing of the Agreement of Merger
pursuant  to the CGCL,  filings  with the SEC under the  Securities  Act and the
Exchange Act, and any filings required pursuant to any state securities or "blue
sky" laws, neither Parent nor any of its Subsidiaries  (including Merger Sub) is
required to submit any  notice,  report or other  filing  with any  Governmental
Entity in connection with the execution,  delivery,  performance or consummation
of this  Agreement,  the Voting  Agreements,  the Stock


                                     - 31 -
<PAGE>


Option  Agreement  or the Merger  except for such  notices,  reports or filings,
that, if not made,  would not,  individually or in the aggregate,  have a Parent
Material  Adverse  Effect.  Except  as set  forth in the  immediately  preceding
sentence,  no waiver,  consent,  approval or  authorization  of any Governmental
Entity  is  required  to be  obtained  by  Parent  or any  of  its  Subsidiaries
(including Merger Sub) in connection with its execution,  delivery,  performance
or  consummation  of this  Agreement,  the Voting  Agreements,  the Stock Option
Agreement or the  transactions  contemplated  hereby and thereby except for such
waivers,  consents,  approvals or authorizations  that, if not obtained or made,
would not,  individually  or in the aggregate,  have a Parent  Material  Adverse
Effect.

      Section 4.6 SEC Reports; Financial Statements. (a) Parent has timely filed
                  ---------------------------------
all forms, reports and documents (including all Exhibits,  Schedules and Annexes
thereto)  required  to be  filed  by it with  the SEC  since  January  1,  1996,
including any amendments or  supplements  thereto  (collectively,  including any
such forms,  reports and documents filed after the date hereof,  the "Parent SEC
                                                                      ----------
Reports"), and, with respect to the Parent SEC Reports filed by Parent after the
- -------
date hereof and prior to the Closing Date,  will deliver or make  available,  to
the Company  all of its Parent SEC  Reports in the form filed with the SEC.  The
Parent SEC Reports (i) complied (and any Parent SEC Reports filed after the date
hereof will comply) in all material respects with the applicable requirements of
the  Securities  Act or the Exchange  Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) as of their respective filing dates
(or if amended or  superseded  by a filing prior to the date of this  Agreement,
then on the date of such  filing),  did not (and any  Parent SEC  Reports  filed
after the date hereof will not) contain any untrue  statement of a material fact
or omit to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

            (b)   The financial  statements, including  all  related  notes  and
schedules,  contained  in the Parent SEC  Reports  (or  incorporated  therein by
reference)  fairly  present  in all  material  respects  (or,  with  respect  to
financial  statements  contained in the Parent SEC Reports  filed after the date
hereof, will fairly present in all material respects) the consolidated financial
position of Parent and its consolidated  Subsidiaries as at the respective dates
thereof and the consolidated  results of operations,  retained earnings and cash
flows of Parent and its  consolidated  Subsidiaries  for the respective  periods
indicated,  in each case in accordance  with GAAP applied on a consistent  basis
throughout  the periods  involved  (except for changes in accounting  principles
disclosed in the notes thereto) and the rules and regulations of the SEC, except
that interim financial  statements are subject to normal and recurring  year-end
adjustments  which are not and are not  expected to be,  individually  or in the
aggregate,  material  in amount and do not  include  certain  notes which may be
required  by GAAP but  which  are not  required  by Form  10-Q of the  SEC.  The
financial  statements included (or which will be included after the date of


                                     - 32 -
<PAGE>


this  Agreement)  in the Parent  SEC  Reports  are (or will be) in all  material
respects  in   accordance   with  the  books  and  records  of  Parent  and  its
Subsidiaries.

            (c)   Notwithstanding  the foregoing,  no representation or warranty
is being made in this  Section 4.6 with  respect to  information  or  statements
(including  financial  information  and  statements)  that are  provided  by the
Company  and set forth in any Parent SEC Report  filed  after the date hereof or
with respect to any Company SEC Reports incorporated therein by reference.

      Section 4.7 Absence of Certain  Changes.  Except  pursuant to the terms of
                  ---------------------------
this Agreement,  the Stock Option  Agreement and the  transactions  contemplated
hereby and thereby (a) since December 31, 1998, there has not been any change in
the business, assets, liabilites,  results of operations or condition (financial
or otherwise) of Parent or any development or combination of developments  that,
individually  or in the  aggregate,  has had or  would  have a  Parent  Material
Adverse Effect and (b) since December 31, 1998 until the date hereof,  there has
not been (i) any declaration,  setting aside or payment of any dividend or other
distribution  in  respect  of the  capital  stock of  Parent,  other  than  cash
dividends  on the Series A Preferred  Stock  consistent  with past  practice and
payment of the redemption  price of shares of Series A Preferred Stock and other
amounts paid to induce  conversion of Series A Preferred Stock,  (ii) any split,
combination or reclassification of any of its capital stock, or (iii) any change
by Parent to its accounting policies,  practices or methods materially affecting
its assets, liabilities or business, except insofar as may have been required by
a change in GAAP.

      Section 4.8 Litigation and  Liabilities.  There are no civil,  criminal or
                  ---------------------------
administrative  actions, suits or claims,  proceedings  (including  condemnation
proceedings) or, to the Knowledge of Parent,  hearings or investigations pending
or, to the  Knowledge of Parent,  threatened  against,  or  otherwise  adversely
affecting  Parent  or any  of  its  Subsidiaries  or  any  of  their  respective
properties  and  assets,  except  for  any of the  foregoing  which  would  not,
individually or in the aggregate, have a Parent Material Adverse Effect.

      Section 4.9 No Violation of Law; Permits.  The business of Parent is being
                  ----------------------------
conducted  in  accordance  with all  applicable  law,  ordinances,  regulations,
judgments, orders or decrees of any Governmental Entity, and not in violation of
any permits,  franchises,  licenses,  authorizations  or consents granted by any
Governmental Entity, and Parent has obtained all permits, franchises,  licenses,
authorizations or consents necessary for the conduct of its business, except, in
each  case,  as  would  not,  individually  or in the  aggregate,  have a Parent
Material  Adverse  Effect.  Parent (i) is not subject to any cease and desist or
other order,  judgment,  injunction or decree issued by any Governmental Entity,
(ii) is not a party to any written agreement, consent agreement or memorandum of
understanding  with  any  Governmental  Entity,  (iii)  is  not a  party  to any
commitment letter


                                     - 33 -
<PAGE>


or similar  undertaking to any Governmental  Entity,  (iv) is not subject to any
order or directive  by any  Governmental  Entity,  (v) has not adopted any board
resolutions at the request of any Governmental  Entity,  that in the case of any
of clauses (i) - (v) materially  restricts the conduct of its business  (whether
the type of business, the location thereof or otherwise) and which, individually
or in the aggregate,  would have a Parent Material  Adverse  Effect,  nor to the
Knowledge of Parent,  has Parent been  advised in writing that any  Governmental
Entity has proposed issuing or requesting any of the foregoing.

      Section 4.10 Proxy  Statement/Prospectus;  Registration Statement. None of
                   ----------------------------------------------------
the  information to be supplied by Parent or its  Subsidiaries  for inclusion or
incorporation  by  reference  from the  Parent SEC  Reports  in the Joint  Proxy
Statement/Prospectus  or any amendment thereof or supplement  thereto,  will, on
the date it becomes  effective  with the SEC,  at the time of the mailing of the
Joint Proxy  Statement/Prospectus or any amendment or supplement, at the time of
the Company  Shareholder  Meeting or at the Effective  Time,  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 are  made,  not  misleading.  None of the
information  to be  supplied  by Parent or its  Subsidiaries  for  inclusion  or
incorporation by reference from the Parent SEC Reports in the Form S-4, of which
the Joint Proxy  Statement/Prospectus  will form a part,  will,  at the time the
Form S-4 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 are made, not misleading.

      Section 4.11 Pooling of Interests; Reorganization. Parent intends that the
                   ------------------------------------
Merger be  accounted  for under the  "pooling  of  interests"  method  under the
requirements  of Opinion 16 of the Accounting  Principles  Board of the American
Institute of Certified Public Accountants,  the Financial  Accounting  Standards
Board and the rules and  regulations  of the SEC.  Neither Parent nor any of its
affiliates  has taken or agreed to take any  action,  nor does  Parent  have any
Knowledge  of any fact or  circumstance  with  respect to Parent or Merger  Sub,
which would  prevent the  business  combination  to be effected  pursuant to the
Merger from being  accounted for as a "pooling of  interests"  under GAAP or the
rules and  regulations  of the SEC or prevent  the Merger from  qualifying  as a
"reorganization" within the meaning of Section 368 of the Code.

      Section 4.12 Merger Sub.  Merger Sub was formed  solely for the purpose of
                   ----------
engaging  in the  transactions  contemplated  hereby,  has  engaged  in no other
business  activities  and has  conducted  its  operations  only as  contemplated
hereby.


                                     - 34 -
<PAGE>


      Section 4.13 Valid  Issuance.  The Parent Common Stock to be issued in the
                   ---------------
Merger,  when issued in accordance with the provisions of this Agreement will be
validly issued, fully paid and nonassessable.

      Section 4.14 Brokers.  Parent  has not  engaged  any  broker,  finder or
                   -------
investment  banker  or  other  Person  entitled  to  any  brokerage,   finder's,
investment  banking or other similar fee or  commission  in connection  with the
transactions contemplated by this Agreement.


                                    ARTICLE V

                    COVENANTS RELATING TO CONDUCT OF BUSINESS

      Section 5.1 Interim  Operations  of the Company.  Between the date of this
                  -----------------------------------
Agreement and the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to (unless Parent shall otherwise provide its prior written consent
or except as otherwise contemplated by this Agreement):

                  (i)   conduct  its  business in all  material  respects in the
ordinary  course  consistent  with past practice  and, to the extent  consistent
therewith,  use  reasonable  best  efforts to (x)  preserve  intact its business
organization,  and  (y)  maintain  its  existing  relations  and  goodwill  with
customers, suppliers, regulators,  distributors,  creditors, lessors, and others
having business dealings with it;

                  (ii)  not (A) amend the Articles of Incorporation or Bylaws of
the Company or enter into any agreement  with any of its  shareholders  or other
holders of equity  interests  in their  capacity  as such;  (B) split,  combine,
subdivide or reclassify its outstanding  shares of capital stock or other equity
securities;  (C) declare,  set aside or pay any dividend or distribution payable
in cash,  stock or property in respect of any of its shares of capital  stock or
other equity securities, or securities convertible,  exercisable or exchangeable
for, any of its shares of capital stock or other equity  securities,  other than
dividends and distributions by wholly owned Subsidiaries of the Company;  or (D)
repurchase,  redeem or otherwise  acquire or permit any of its  Subsidiaries  to
purchase,  redeem or otherwise acquire, any shares of its capital stock or other
equity securities,  or securities convertible,  exercisable or exchangeable for,
any of its  shares  of  capital  stock  or other  equity  securities  (it  being
understood  that this clause (D) shall not prohibit the exercise,  or conversion
at the election of the holder  thereof of Company  Equity Rights  outstanding on
the date of this Agreement);

                  (iii) not take any action  that  would  prevent  the  business
combination to be effected  pursuant to the Merger from  qualifying for "pooling
of interests"  accounting  treatment under GAAP and the rules and regulations of
the SEC and


                                     - 35 -
<PAGE>


not take any action that would prevent the business  combination  to be effected
pursuant to the Merger from qualifying as a "reorganization"  within the meaning
of Section 368 of the Code;

                  (iv)  except as  required  by  applicable  law or  pursuant to
contractual  obligations  in  effect as of the date of this  Agreement,  not (A)
execute,  establish, adopt or amend, or accelerate rights or benefits under, any
Benefit Agreement, any Benefit Plan, or any collective bargaining agreement, (B)
grant any  severance or  termination  pay to any  Employee,  (C) grant any stock
options or other equity related  compensation  awards or (D) increase the salary
or wages  payable or to become  payable to its  Employees  (other than salary or
wage  increases  in  the  ordinary  course  of  business  consistent  with  past
practice);  provided,  that in the ordinary  course of business  consistent with
            --------
past practice and after giving prior or concurrent notice thereof to Parent, the
Company may grant stock  options to employees  of the Company  (other than those
persons  identified  on  Section  5.1  of  the  Company  Disclosure  Letter)  in
connection  with (x) newly hired employees (up to 30,000 Company Common Shares),
(y) retaining existing employees (up to 20,000 Company Common Shares) and (z) to
employees on certain  anniversaries  of their employment with the Company (up to
10,000  Company  Common  Shares)  except if the Effective  Time has not occurred
prior to September 1, 1999, the Company may thereafter grant options to purchase
up to 40,000  additional  Company Common Shares  pursuant to this proviso,  such
shares to be allocated among such three  categories in the Company's  discretion
and  provided  further  that the  exercise  price of any  such  options  granted
pursuant  to this  proviso  may not be less  than the fair  market  value of the
Company Common Stock as of the date of grant;

                  (v)   not forgive  any loans to Employees,  except as required
by the terms thereof as of the date hereof;

                  (vi)  not   make  any   material   capital   expenditures   or
acquisitions of any business (whether by merger,  purchase of stock or assets or
otherwise)  or other  acquisition  outside of the  ordinary  course of  business
consistent with past practice,  except as contemplated by the Company's  capital
budget set forth in Section 5.1 of the Company Disclosure Letter;

                  (vii) other than with respect to inventory and services in the
ordinary course of business consistent with past practice, not transfer,  lease,
license,  sell,  mortgage,  pledge,  encumber or otherwise dispose of any of its
material property or assets;

                  (viii) not issue,  pledge or sell, or authorize or propose the
issuance, pledge or sale of any shares of capital stock of any class (other than
(A) upon  exercise of the Company  Options upon  payment of the  exercise  price
thereof,  (B) upon  conversion of shares of Company Series B Preferred  Stock in
accordance  with the  terms of such


                                     - 36 -
<PAGE>


Company Series B Preferred  Stock or (C) pursuant to and in accordance  with the
terms of the  instruments  creating the  Imperial  Bank  Warrants,  the NEXTLINK
Warrants and the Other Warrants), or (D) as permitted by Section 5.1(iv);

                  (ix)  not accelerate,  amend, waive or otherwise modify any of
the terms of any option,  warrant or stock  option plan of the Company or any of
its  Subsidiaries,  including,  without  limitation,  the Company Options or the
Company  Stock Option  Plans,  or authorize  cash  payments as a result of or in
connection with the execution,  delivery or performance of this Agreement or the
transactions  contemplated  hereby  or in  exchange  for any  options  or rights
granted  under any such plans  except as  required by the terms of such plans or
any related agreements (including severance agreements) in effect as of the date
of this Agreement;

                  (x)   not change its accounting policies, practices or methods
except as required by GAAP or by the rules and regulations of the SEC;

                  (xi)  other than borrowings in the ordinary course of business
consistent  with past practice under lines of credit  existing as of the date of
this Agreement (including  extensions  thereof),  not incur, assume or guarantee
any additional  indebtedness for borrowed money in excess of $2,000,000  greater
than the amount of current borrowing capacity;

                  (xii) not release any third  party from,  or amend,  modify or
waive  any  provisions  or  terms  of,  or  grant  any  exemption   under,   any
confidentiality or standstill agreement except as provided in Section 5.3(e);

                  (xiii) not change or amend the terms of any of its outstanding
securities;

                  (xiv) not  make,  change or   revoke  any Tax  election  under
federal, state, local or foreign tax law;

                  (xv)  not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise)
other than the payment,  discharge  or  satisfaction  in the ordinary  course of
business  consistent  with past  practice of  liabilities  reflected or reserved
against in the December  1998 Company  Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since December 31, 1998 and
in accordance with the terms hereof;

                  (xvi) not (x) take any action  (other  than  pursuant  to this
Agreement) to cause the Company Shares to cease to be listed on the Nasdaq Stock
Market, (y) take any action to render inapplicable, or to exempt any third party
from,  any  provision  of the  Articles of  Incorporation  of the Company or any
statute referred to in


                                     - 37 -
<PAGE>


Section 6.15 or (z) take any action which would result in an  adjustment  to the
conversion  price or exercise  price of any Warrant or of the Company  Preferred
Stock;

                  (xvii) not take any action that would be reasonably  likely to
result in any of the  conditions  to the Merger set forth in Article VII of this
Agreement not being satisfied or that would impair the ability of the Company to
consummate  the  Merger  in  accordance  with the  terms  hereof  or delay  such
consummation; and

                  (xviii) not enter into any commitments or agreements to do any
of the foregoing.

      Section  5.2  Interim  Operations  of  Parent.  Between  the  date of this
                   --------------------------------
Agreement  and the  Effective  Time,  Parent  shall  (unless the  Company  shall
otherwise  provide its prior  written  consent or except as otherwise  expressly
contemplated by this Agreement):

                  (i)   not take any action that would be  reasonably  likely to
result  in any of the  conditions  set forth in  Article  VII  hereof  not being
satisfied or that would impair the ability of Parent or Merger Sub to consummate
the Merger in accordance with the terms hereof or delay such consummation;

                  (ii)  not  (A)  declare,  set  aside  or pay any  dividend  or
distribution payable in cash, stock or property in respect of any of its capital
stock,  other than cash  dividends  on the Series A  Preferred  Stock in amounts
consistent with past practice or dividends  payable in stock of Parent or any of
its  Subsidiaries  and  payment  of the  redemption  price of shares of Series A
Preferred  Stock  and  other  amounts  paid to  induce  conversion  of  Series A
Preferred Stock; or (B) repurchase,  redeem or otherwise acquire,  any shares of
its capital stock or other equity securities other than repurchases of shares of
its capital stock or other equity  securities in the ordinary course of business
and  redemptions or  repurchases  of shares of the Series A Preferred  Stock (it
being  understood that this provision shall not prohibit the exercise,  exchange
or conversion of outstanding Parent Equity Rights);

                  (iii) not take any action  that  would  prevent  the  business
combination to be effected  pursuant to the Merger from  qualifying for "pooling
of interests"  accounting  treatment under GAAP and the rules and regulations of
the SEC and not take any action that would prevent the business  combination  to
be effected pursuant to the Merger from qualifying as a "reorganization"  within
the meaning of Section 368 of the Code;

                  (iv)  not take any action to cause the shares of Parent Common
Stock to cease to be listed on the NYSE; and


                                     - 38 -
<PAGE>


                  (v)   not enter into  any commitments or agreements  to do any
of the foregoing.

      Section 5.3 No Solicitation.  (a) The Company shall  immediately cease and
                  ---------------
terminate  any  existing  solicitation,   initiation,  encouragement,  activity,
discussion or negotiation with any Persons conducted  heretofore by the Company,
its Subsidiaries or any of their respective  Representatives with respect to any
proposed, potential or contemplated Company Acquisition Proposal.

            (b)   From  and after the date  hereof,  without  the prior  written
consent of Parent, the Company will not, will not authorize or permit any of its
Subsidiaries  to, and shall use its reasonable  best efforts to cause all of its
and their respective officers, directors,  employees, financial advisors, agents
or  representatives  (each a  "Representative")  not to, directly or indirectly,
                               --------------
solicit,  initiate or encourage (including by way of furnishing  information) or
take any other action to facilitate  any inquiries or the making of any proposal
which constitutes or may reasonably be expected to lead to a Company Acquisition
Proposal  from any  Person (a "Third  Party"),  or engage in any  discussion  or
                               ------------
negotiations relating thereto or accept any Company Acquisition Proposal.

            (c)   Notwithstanding the provisions of paragraph (b) above, (i) the
Company  may, in  response  to an  unsolicited  written  offer or proposal  with
respect to a  potential  or  proposed  Company  Acquisition  Proposal  engage in
negotiations or discussions  with, or provide  information or data to, any Third
Party  relating  to  any  Company  Acquisition   Proposal  if  (i)  the  Company
Acquisition  Proposal is a Superior  Proposal  and (ii) the  Company's  Board of
Directors  determines,  upon advice from outside  legal  counsel to the Company,
that the failure to engage in the  negotiations  or  discussions  or provide the
information  would  result in a breach of the  fiduciary  duties of the Board of
Directors of the Company under applicable law. Any information  furnished to any
Third  Party  in  connection  with any  Company  Acquisition  Proposal  shall be
provided  pursuant to a  confidentiality  and standstill  agreement on customary
terms (including without  limitation  prohibitions on unsolicited tender offers,
acquisitions of equity  interests in the Company,  proposals to acquire stock or
assets,  formation of Section 13(d) groups,  public request for release from the
standstill,   actions   that  would   require  the  Company  to  make  a  public
announcement, engaging in proxy contests, etc.). Subject to all of the foregoing
requirements,  the Company will immediately  notify Parent orally and in writing
if any  discussions or negotiations  are sought to be initiated,  any inquiry or
proposal  is made,  or any  information  is  requested  by any Third  Party with
respect to any  Company  Acquisition  Proposal  or which could lead to a Company
Acquisition  Proposal and immediately notify Parent of all material terms of any
Company Acquisition  Proposal,  including the identity of the Third Party making
the Company Acquisition  Proposal or the request for information,  if known, and
thereafter  shall  inform  Parent on a timely,  ongoing  basis of the status and
content  of any  discussions  or  negotiations  with a  Third  Party,  including


                                     - 39 -
<PAGE>


immediately  reporting  any changes to the terms and  conditions  of the Company
Acquisition Proposal.

            (d)   In  the  event  the  Board of  Directors  of the  Company  has
determined that a potential or proposed Company Acquisition Proposal constitutes
a Superior  Proposal,  (i) the Company shall promptly  notify the Parent thereof
and (ii) for a period of five business days after  delivery of such notice,  the
Company and its Representatives, if requested by Parent, shall negotiate in good
faith with Parent to make such  adjustments  to the terms and conditions of this
Agreement  as would  enable  the  Company  to  proceed  with the  Merger on such
adjusted terms.  After such five business day period,  the Board of Directors of
the  Company  may then (and  only  then)  withdraw  or modify  its  approval  or
recommendation  of the Merger and this  Agreement  and  recommend  such Superior
Proposal.

            (e)   The  Company  agrees not to release any Third  Party from,  or
waive any provision of, any  standstill  agreement to which it is a party or any
confidentiality agreement between it and another Person who has made, or who may
reasonably be considered likely to make, a Company Acquisition  Proposal, or who
the Company or any of its Representatives  have had discussions with regarding a
proposed,  potential or contemplated Company Acquisition  Transaction unless the
Company's  Board of Directors shall  conclude,  in good faith,  that such action
will lead to a Superior Proposal and after considering  applicable provisions of
state law,  and upon advice from  outside  legal  counsel to the  Company,  with
respect to whether  such action is required for the Board of Directors to act in
a manner consistent with its fiduciary duties under applicable law.

            (f)   For purposes of this Agreement:

                  (i)   "Company Acquisition Proposal" shall mean,  with respect
                         ----------------------------
      to the  Company,  any  inquiry,  proposal  or offer  from any Third  Party
      relating  to any (A)  direct or  indirect  acquisition  or  purchase  of a
      business of the Company or any of its  Subsidiaries,  that constitutes 25%
      or more of the  consolidated  net  revenues,  net  income or assets of the
      Company  and its  Subsidiaries,  (B)  direct or  indirect  acquisition  or
      purchase of 25% or more of any class of equity  securities  of the Company
      or any of its Subsidiaries  whose business  constitutes 25% or more of the
      consolidated  net  revenues,  net income or assets of the  Company and its
      Subsidiaries, (C) tender offer or exchange offer that if consummated would
      result in any person  beneficially owning 25% or more of the capital stock
      of  the  Company,  or (D)  merger,  consolidation,  business  combination,
      recapitalization,   liquidation,   dissolution   or  similar   transaction
      involving  the  Company  or  any  of  its   Subsidiaries   whose  business
      constitutes 25% or more of the  consolidated  net revenues,  net income or
      assets of the Company and its Subsidiaries.


                                     - 40 -
<PAGE>


                  (ii)  Each of the transactions  referred to in clauses (A)-(D)
      of the  definition of Company  Acquisition  Proposal,  other than any such
      transaction  to which  Parent or any of its  Subsidiaries  is a party,  is
      referred to herein as a "Company Acquisition Transaction."
                               -------------------------------

                  (iii) "Superior  Proposal"  means  any bona fide written offer
                         ------------------
      made  by  a  Third  Party  to  acquire,   directly  or   indirectly,   for
      consideration  consisting of cash and/or securities,  all of the shares of
      Common Stock then  outstanding or all or  substantially  all the assets of
      the  Company  (i) on terms  that the  Board of  Directors  of the  Company
      determines in its good faith judgment (after consultation with a financial
      advisor of nationally  recognized  reputation  and taking into account all
      the terms and  conditions  of the offer  deemed  relevant by such Board of
      Directors,  including any break-up fees, expense reimbursement provisions,
      conditions  to  consummation,  and the  ability of the party  making  such
      proposal to obtain financing for such offer) are materially more favorable
      from a financial point of view to its  stockholders  than the Merger;  and
      (ii) that  constitutes  a  transaction  that,  in such Board of Directors'
      judgment,  is reasonably  likely to be consummated on the terms set forth,
      taking into account all legal, financial,  regulatory and other aspects of
      such proposal.

            (g)   Except as expressly  permitted by Section 5.3(d),  neither the
Board of Directors of the Company nor any  committee  thereof shall (i) withdraw
or modify,  or propose  publicly to withdraw or modify,  in a manner  adverse to
Parent,  the  approval  or  recommendation  by such Board of  Directors  of this
Agreement or the Merger,  or (ii) approve or recommend,  or propose  publicly to
approve or recommend,  any Company  Acquisition  Proposal or Company Acquisition
Transaction.  Nothing  contained in this Section 5.3 shall  prohibit the Company
from taking and disclosing to its  shareholders a position  contemplated by Rule
14e-2(a) promulgated under the Exchange Act.


                                     - 41 -
<PAGE>


                                   ARTICLE VI

                              ADDITIONAL COVENANTS

      Section 6.1 Meeting of  Shareholders;  Record  Date.  (a) The Company will
                  ---------------------------------------
take all action  necessary in accordance with applicable law and its Articles of
Incorporation and Bylaws to, and will,  convene a meeting of its shareholders as
promptly as practicable to consider and vote upon the approval of this Agreement
and the Merger (such meeting, the "Company Shareholder  Meeting").  Subject only
                                   ----------------------------
to Section 5.3(d), the Company shall, through its Board of Directors,  recommend
that its  shareholders  vote in favor of such  approval and such  recommendation
shall be included in the Joint Proxy  Statement/  Prospectus.  The Company shall
take  all  lawful  action  necessary  or  advisable  to  solicit  such  approval
including,  without  limitation,  timely  mailing  the  Joint  Proxy  Statement/
Prospectus.

            (b)   In the event that the  Registration  Statement of Form S-4 has
not been  declared  effective by the SEC as of the close of business on July 30,
1999,  the Company  shall  select a record date for  determining  the holders of
Company Shares entitled to vote at the Company Shareholders Meeting which is not
more than seven  calendar days before (i) the date agreed upon by Parent and the
Company as the likely  date upon which the  Registration  Statement  on Form S-4
will be  declared  effective  by the SEC,  or (ii)  after  the date on which the
Registration  Statement  on Form S-4 is declared  effective  by the SEC, in each
case, unless otherwise agreed by the Company and Parent.

      Section 6.2 Filings;  Other  Actions.  Subject to the terms and conditions
                  ------------------------
herein provided, the Company and Parent shall:

            (i)   within  20 business days from  the  date  hereof,  make  their
respective  filings under the HSR Act with respect to the Merger and  thereafter
shall promptly make any other required submissions under the HSR Act;

            (ii)  use  their  reasonable  best  efforts to  cooperate  with  one
another in (A)  determining  which  filings are required to be made prior to the
Effective Time with, and which consents,  approvals,  permits or  authorizations
are  required  to be obtained  prior to the  Effective  Time from,  Governmental
Entities in connection with the execution and delivery of this Agreement and the
consummation of the Merger and the transactions  contemplated hereby; (B) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations;  and (C) as promptly as practicable responding to any request
for information from such Governmental Entities; and

            (iii) furnish the other party with such  necessary  information  and
reasonable  assistance  as such other Party and its  affiliates  may  reasonably
request  in


                                     - 42 -
<PAGE>


connection  with their  preparation  of  necessary  filings,  registrations,  or
submissions  of  information  to any  Governmental  Entities with respect to the
Merger, including without limitation, any filings necessary or appropriate under
the provisions of the HSR Act.

      Section 6.3 Publicity.  The Parties  agree that the  initial press release
                  ---------
with respect to the Merger shall be a joint press release.  Thereafter,  subject
to their respective legal obligations (including requirements of stock exchanges
and other similar regulatory bodies), the Parties shall consult with each other,
and use  reasonable  best  efforts to agree upon the text of any press  release,
before issuing any such press release or otherwise making public statements with
respect  to the  Merger  and in making  any  filings  with any  federal or state
governmental or regulatory agency or with any national  securities exchange with
respect thereto.

      Section 6.4 Registration  Statement.  The  Parties  shall  cooperate   and
                  -----------------------
promptly  prepare and Parent  shall file with the SEC as soon as  practicable  a
Registration  Statement  on Form S-4 (the "Form S-4") under the  Securities  Act
                                           --------
with  respect to the Parent  Common Stock  issuable in the Merger,  a portion of
which Registration  Statement shall also serve as the joint proxy statement with
respect  to the  meeting of the  shareholders  of the  Company  to  approve  the
transactions contemplated hereby (the "Joint Proxy  Statement/Prospectus").  The
                                       ---------------------------------
Parties  will use their  respective  reasonable  best efforts to cause the Joint
Proxy  Statement/Prospectus  to be filed no later than July 6, 1999. The Parties
will cause the Joint Proxy Statement/Prospectus and the Form S-4 to comply as to
form in all material  respects with the applicable  provisions of the Securities
Act, the Exchange Act and the rules and regulations thereunder. Parent shall use
its  reasonable  best efforts to, and the Company will cooperate with Parent to,
have the Form S-4  declared  effective  by the SEC as  promptly  as  practicable
(taking  into  account  the  circumstances  described  in the Parent  Disclosure
Letter).  Parent shall use its reasonable  best efforts to obtain,  prior to the
effective date of the Form S-4, all necessary state securities law or "blue sky"
permits or  approvals  required  to carry out the Merger  (provided  that Parent
shall not be required to qualify to do business in any  jurisdiction in which it
is not now so  qualified).  Each  of the  Parties  agree  that  the  information
provided by it for  inclusion in the Joint Proxy  Statement/Prospectus  and each
amendment or supplement thereto, at the time it is filed or becomes effective at
the time of mailing  thereof,  and at the  Shareholder  Meeting  Date,  will not
include an untrue  statement of a material fact or omit to state a material fact
required to be stated  therein or necessary to make the statements  therein,  in
light of the circumstances under which they were made, not misleading.

      Section 6.5 Listing  Application.  Parent  shall  as soon  as  practicable
                  --------------------
prepare and submit to the NYSE and all other  securities  exchanges on which the
shares of Parent Common Stock are listed a listing  application  with respect to
the shares of Parent  Common  Stock  issuable in the  Merger,  and shall use its
reasonable best efforts to obtain,


                                     - 43 -
<PAGE>


prior to the  Effective  Time,  approval  for the listing of such Parent  Common
Stock on such exchange, subject to official notice of issuance.

      Section 6.6 Further  Action.  Each of the  Parties  shall,  subject to the
                  ---------------
fulfillment  at or  before  the  Effective  Time of each  of the  conditions  of
performance  set forth herein or the waiver  thereof,  use its  reasonable  best
efforts to perform  such  further  acts and  execute  such  documents  as may be
reasonably required to effect the transactions  contemplated hereby. Each of the
Parties will comply in all material  respects with all applicable  laws and with
all applicable  rules and regulations of any  Governmental  Entity in connection
with the  execution,  delivery and  performance  of this Agreement and the Stock
Option Agreement and the transactions  contemplated hereby and thereby.  Each of
the  Parties  agrees to use its  reasonable  best  efforts to obtain in a timely
manner all necessary waivers, consents, approvals and opinions and to effect all
necessary  registrations and filings,  and to use its reasonable best efforts to
take,  or cause to be taken,  all other  actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the Merger.

      Section 6.7 Expenses. Whether or not the Merger is consummated,  all costs
                  --------
and expenses  incurred in connection  with this  Agreement and the  transactions
contemplated  thereby,  including  the Merger  shall be paid by the Party hereto
incurring such expenses except as expressly provided elsewhere herein (including
Section 8.2) and except that (a) the filing fees in  connection  with the filing
of the Form S-4 and the Joint Proxy  Statement/Prospectus  with the SEC, (b) all
filing fees in connection with any filings,  permits or approvals required under
applicable state securities or "blue sky" laws, and (c) the expenses incurred in
connection  with  printing  and  mailing  of the  Form S-4 and the  Joint  Proxy
Statement/Prospectus shall be shared by Parent and the Company equally.

      Section 6.8 Notification of Certain  Matters. Each Party shall give prompt
                  --------------------------------
notice to the other Party of the following:

            (a)   the  occurrence  of or  failure  to  occur  of any  event  the
occurrence  or  failure  to occur of which  would be likely to result in (i) any
representation  or  warranty  of such Party being  untrue or  inaccurate  in any
material  respect at the date of this  Agreement and at the  Effective  Time (or
with respect to any  representation  or warranty made as of a specific date such
representation or warranty being untrue or inaccurate in any material respect as
of such  specific  date),  (ii) any  condition  set forth in  Article  VII being
incapable of being  satisfied or (iii) a Company  Material  Adverse  Effect or a
Parent Material Adverse Effect;

            (b)   any failure of such Party to  comply in any  material  respect
with any of its covenants or agreements hereunder;


                                     - 44 -
<PAGE>


            (c)   the  status of matters  relating to  completion of the Merger,
including  promptly  furnishing  the other  with  copies of any  notice or other
communication  received by any Party or any of its respective  Subsidiaries from
any  Governmental  Entity or other third party with respect to this Agreement or
the transactions contemplated hereby, including the Merger; and

            (d)   any facts relating to that Party which would make it necessary
or  advisable to amend the Joint Proxy  Statement/Prospectus  or the Form S-4 in
order to make the statements therein not misleading or to comply with applicable
law; provided, however, that the delivery of any notice pursuant to this Section
6.8 shall not limit or otherwise affect the remedies available  hereunder to the
Party receiving such notice.

      Section 6.9 Access to  Information.  (a) From this date  to the  Effective
                  ----------------------
Time,  each of the  Parties  shall,  and shall  cause its  officers,  directors,
employees,  auditors,  counsel  and  agents to afford the  officers,  employees,
auditors,  counsel and agents of the other Party reasonable access at reasonable
times  upon  reasonable  notice  to each  of the  Party's  officers,  employees,
auditors,  counsel, agents, properties,  offices and other facilities and to all
of their  respective  books and records,  and shall furnish the other Party with
all financial,  operating and other data and information as such other Party may
reasonably  request, in each case only to the extent, in the judgment of counsel
to such Party,  permitted by law, including antitrust law, and provided no Party
shall be  obligated  to make any  disclosure  which  would cause  forfeiture  of
attorney-client  privilege or would violate confidentiality  agreements (so long
as such  Party  shall  have used  commercially  reasonable  efforts  to obtain a
release or waiver from the  applicable  confidentiality  agreement in respect of
such disclosure).

            (b)   Each of Parent and the Company agrees that all  information so
received  from  the  other  party  shall  be  deemed  received  pursuant  to the
Confidentiality  Agreement, and that party shall, and shall cause its affiliates
and each of its and their  Representatives to, comply with the provisions of the
applicable Confidentiality Agreement with respect to such information.

            (c)   From  this  date  to  the  Effective  Time,   Parent  and  its
representatives  (including  without  limitation  any  environmental  consultant
engaged by Parent) shall have the right at reasonable  times and upon reasonable
notice to the  Company  to (i)  inspect  all data and  information  relating  to
environmental   matters  in  the  possession  of  the  Company  or  any  of  its
subsidiaries and (ii) conduct such environmental  assessments and investigations
(including without limitation any soil or groundwater sampling relating thereto)
of the Company or any of its Subsidiaries as Parent or its representatives shall
deem appropriate.


                                     - 45 -
<PAGE>


      Section 6.10 Review of Information. Subject to applicable laws relating to
                   ---------------------
the  exchange  of  information,  each  Party  shall  have the right to review in
advance,  and to the extent  practicable each will consult the other on, all the
information relating to it, or any of its respective  Subsidiaries,  that appear
in any filing  made with,  or written  materials  submitted  to, any third party
and/or any Governmental  Entity in connection with the Merger. In exercising the
foregoing  right,  each of the Parties shall act  reasonably  and as promptly as
practicable.

      Section 6.11 Insurance;  Indemnity.  (a) Parent  shall, or shall cause the
                   ---------------------
Surviving  Corporation to maintain in effect for a period of six years after the
Effective Time the Company's current directors' and officers' insurance policies
(or policies containing  substantially similar coverage) with respect to acts or
failures to act prior to or as of the  Effective  Time (other than to the extent
the available limit of any such insurance  policy may be reduced or exhausted by
reason of the payment of claims thereunder); provided, however, that in order to
                                             --------  -------
maintain or procure such coverage,  neither Parent nor the Surviving Corporation
shall be  required  to pay an annual  premium  in excess of 175% of the  current
annual premium paid by the Company for its existing coverage (the "Cap Amount");
                                                                   ----------
and provided, further, that if equivalent coverage cannot be obtained, or can be
    --------  -------
obtained  only by paying an annual  premium in excess of the Cap Amount,  Parent
and the Surviving  Corporation shall only be required to obtain as much coverage
as can be obtained by paying an annual premium equal to the Cap Amount. From and
after  the  Effective  Time,   Parent  shall,  and  shall  cause  the  Surviving
Corporation to,  indemnify and hold harmless to the full extent  permitted under
the  Articles of  Incorporation  of the Company as in effect on the date hereof,
each person who is a current or former  officer or director of the  Company,  or
its  Subsidiaries  (each,  an "Indemnified  Party") against all losses,  claims,
                               ------------------
damages, liabilities,  costs or expenses (including reasonable attorneys' fees),
judgments,  fines,  penalties and amounts paid in settlement in connection  with
any  claim,  action,  suit,  proceeding  or  investigation  arising  out  of  or
pertaining to matters  existing or occurring at or prior to the Effective  Time,
whether asserted or claimed prior to, at or after the Effective Time (and Parent
and the  Surviving  Corporation  shall also advance  expenses as incurred to the
fullest extent  permitted under the Articles of  Incorporation of the Company as
in effect on the date hereof provided the Indemnified Party to whom expenses are
advanced  provides an  undertaking  to repay such  advances if it is  ultimately
determined that such Indemnified Party is not entitled to  indemnification).  In
the event of any such claim,  action,  suit,  proceeding  or  investigation  (an
"Action"),  the indemnifying party shall control the defense of such Action with
 ------
counsel selected by it; provided,  however,  that the Indemnified Party shall be
                        --------
permitted to participate in the defense of such Action through counsel  selected
by it at the Indemnified Party's expense.

            (b)   Parent and the Surviving Corporation agree that the provisions
of the Company's  Articles of Incorporation  and Bylaws in effect as of the date
of this Agreement  affecting the Indemnified  Parties' rights to indemnification
and  limitation  of


                                     - 46 -
<PAGE>


liability  existing  in favor of the  Indemnified  Parties  as  provided  in the
Company's  Articles of  Incorporation  and Bylaws as in effect as of the date of
this  Agreement  shall  survive the Merger and shall  continue in full force and
effect,  without any amendment  thereto (unless  required by the CGCL or federal
law), for a period of six years from the Effective Time.

            (c)   In the event that Parent or any of its  successors  or assigns
consolidates  with or merges into any other person and is not the  continuing or
surviving corporation or entity of such consolidation or merger proper provision
shall  be  made so  that  the  successors  and  assigns  of  Parent  assume  the
obligations set forth in this Section 6.11.

      Section 6.12 Employee Benefits. (a) Parent shall take all necessary action
                   -----------------
so that, for eligibility  and vesting  purposes under each Benefit Plan (but not
benefit accrual or early  retirement  subsidies)  maintained by Parent or any of
its Subsidiaries in which Employees of the Company and its  Subsidiaries  become
eligible to participate upon or after the Effective Time, each such person shall
be given  credit for all service with the Company and its  Subsidiaries  (or all
service  credited by the Company or its  Subsidiaries)  to the same extent as if
rendered to Parent or any of its Subsidiaries.  Parent shall use reasonable best
efforts to permit  participation  by the Employees in Parent's  employee benefit
plans as soon as is reasonably practicable after the Effective Time.

            (b)   Except  as  otherwise  provided in this  Section or in Section
6.13,  nothing in this  Agreement  shall be interpreted as limiting the power of
Parent or Surviving  Corporation  to amend or terminate any  particular  Benefit
Plan, Benefit Agreement or any other particular  employee benefit plan, program,
agreement or policy or as requiring the Parent or the Surviving  Corporation  to
offer to continue  (other than as required by its terms) any written  employment
contract;  provided,  however,  that no such termination or amendment may impair
           --------   -------
the rights of any person with respect to benefits or any other payments  already
accrued as of the time of such  termination or amendment  without the consent of
such person.

            (c)   Parent  shall,  or shall cause the  Company and the  Surviving
Corporation  to,  (i)  waive  all  limitations  as  to  preexisting  conditions,
exclusions  and waiting  periods  with  respect to  participation  and  coverage
requirements  applicable  to the  Employees of the Company and its  Subsidiaries
under any welfare or fringe benefit plan in which such Employees may be eligible
to  participate  after the Effective  Time,  other than  limitations  or waiting
periods that are in effect with respect to such Employees and that have not been
satisfied under the  corresponding  welfare or fringe benefit plan maintained by
the Company for the Employees prior to the Effective Time, and (ii) provide each
Employee  with credit  under any welfare  plans in which such  Employee  becomes
eligible  to  participate  after  the  Effective  Time for any  co-payments  and


                                     - 47 -
<PAGE>


deductibles  paid by such  Employee  for the then  current  plan year  under the
corresponding  welfare  plans  maintained  by the Company prior to the Effective
Time.

      Section 6.13 Options.  (a)  Prior  to the  Effective  Time,  the  Board of
                   -------
Directors   of  the  Company  or  the   committee  of  the  Board  of  Directors
administering  the  Company  Stock  Option  Plans and the ESPP shall  adopt such
resolutions  or shall take such other  actions as are  required  to approve  the
transactions  contemplated  by this Section 6.13 and Section  2.14.  The Company
shall use  reasonable  best  efforts to obtain  any  necessary  consents  of the
holders of Company Options issued pursuant to the Company Stock Option Plans and
the ESPP to effect this Section 6.13 and Section 2.14.

            (b)   The  Company  shall cause each Company  stock  option  granted
pursuant to the Employee  Stock Purchase  Program (such program,  the "ESPP" and
                                                                       ----
any such option, the "ESPP Option") which is outstanding but not yet exercisable
                      -----------
to become immediately exercisable for a period of twenty (20) days preceding the
Company  Shareholder  Meeting.  The Company shall notify all participants twenty
(20) days prior to the anticipated  Company  Shareholder Meeting that the option
shall be fully  exercisable  for a period of  twenty  (20) days from the date of
such notice,  and the option will  terminate upon the expiration of such period.
At the  Effective  Time,  the Company shall cause any ESPP Option (to the extent
that such ESPP Stock Option has not yet been  exercised)  to be  terminated  and
cancelled, and shall ensure that no ESPP Option shall be exercisable for Company
Common Stock following the Effective Time.

      Section 6.14 Affiliates.  Not less than 45 days prior to the Closing Date,
                   ----------
the Company (i) shall have delivered to Parent a letter  identifying all Persons
who may be, as of the Shareholder  Meeting Date, the Company's  "affiliates" for
purposes of Rule 145 under the Securities Act, and (ii) shall use its reasonable
best efforts to cause each Person who is  identified  as an  "affiliate"  of the
Company in such letter to deliver,  as promptly as  practicable  but in no event
later than 35 days prior to the Closing (or after such later date as the parties
may agree),  a signed  agreement to the Company and Parent  substantially in the
form attached as Exhibit D hereto.  The Company shall notify Parent from time to
                 ---------
time after the  delivery of the letter  described  in the prior  sentence of any
Person not  identified on such letter who then is, or may be, an  "affiliate" of
the Company and use reasonable best efforts to cause each additional  Person who
is identified as an  "affiliate"  to execute a signed  agreement as set forth in
this Section 6.14.

      Section 6.15 Takeover  Statutes.  If   any  "fair  price,"   "moratorium,"
                   ------------------
"control share acquisition" or other similar anti-takeover statute or regulation
is or may become applicable to the transactions contemplated hereby, each of the
parties  hereto and its board of directors  shall grant such  approvals and take
all  such  actions  as  are  legally   permissible  so  that  the   transactions
contemplated  hereby may be  consummated as promptly as practicable on the terms
contemplated  hereby and  otherwise  act to eliminate


                                     - 48 -
<PAGE>


or minimize the effects of any such statute or  regulation  on the  transactions
contemplated hereby.

      Section 6.16 Pooling  of  Interests.  Each of  the  Parties  will use  its
                   ----------------------
reasonable  best efforts to cause the Merger to be accounted for as a pooling of
interests in accordance with GAAP and the rules and regulations of the SEC.

      Section 6.17 Tax-Free  Reorganization.  Each  of the Parties will  use its
                   ------------------------
reasonable   best  efforts  to  cause  the  Merger  to  qualify  as  a  tax-free
"reorganization" under Section 368 of the Code.

      Section 6.18 Accountant's  Comfort  Letters.  Each  Party  shall  use  its
                   ------------------------------
reasonable  best efforts to cause to be delivered to the other Party two letters
from its independent  public  accountants,  one dated a date within two business
days before the date on which the Form S-4 shall become  effective and one dated
the Closing Date, in form and substance reasonably satisfactory to the recipient
and  customary  in  scope  and  substance  for  comfort  letters   delivered  by
independent  accountants in connection with registration  statements  similar to
the Form S-4.

      Section 6.19 Accountant's  Pooling Letters.  (a) The Company shall use its
                   -----------------------------
reasonable  best  efforts to cause  Ernst & Young LLP  ("E&Y") to issue a letter
                                                         ---
dated as of the  Effective  Time  addressed  to the Company  (and shall  provide
Parent  with a copy of such  letter)  in which E&Y  concurs  with the  Company's
management's  conclusion  that no  conditions  exist related to the Company that
would preclude Parent from accounting for the Merger as a "pooling of interests"
in accordance with GAAP and the applicable rules and regulations of the SEC.

            (b)   Parent  shall use its reasonable  best efforts to cause E&Y to
issue a letter  dated as of the  Effective  Time  addressed to Parent (and shall
provide  the  Company  with a copy of such  letter)  in which E&Y  concurs  with
Parent's  management's  conclusion that the Merger will qualify as a "pooling of
interests" in accordance  with GAAP and the applicable  rules and regulations of
the SEC.

      Section 6.20 Warrants
                   --------

            (a)   Prior to the Effective  Time,  Parent shall  negotiate in good
faith with each of the holders of the Warrants new forms of Warrants and warrant
agreements  providing  for  substantially  similar  terms as provided for by the
terms of such  Warrants and warrant  agreements as in effect on the date hereof.
Each of the new forms of Warrants and new warrant  agreements  will provide that
the holder(s) of the Warrants will be entitled,  upon exercise of such Warrants,
to receive Parent Common Shares as provided by Section 2.15 hereof.


                                     - 49 -
<PAGE>


            (b)   Company  shall use its  reasonable  best efforts to facilitate
the  negotiations  contemplated by the foregoing  clause (a) and shall cooperate
with Parent in accomplishing the foregoing.


                                   ARTICLE VII

                              CONDITIONS TO MERGER

      Section 7.1 Conditions to  Obligations  of the Parties to  Consummate  the
                  --------------------------------------------------------------
Merger. The respective  obligations of each party to consummate the Merger shall
- ------
be subject to the satisfaction or waiver of each of the following conditions:

            (a)   Shareholder Approval. This Agreement and the Merger shall have
                  --------------------
been  approved and adopted by the  requisite  vote of the holders of the Company
Common Shares and the holders of the Company Preferred Shares in accordance with
the CGCL and the Articles of Incorporation and Bylaws of the Company.

            (b)   Legality. No statute, rule, regulation or other law shall have
                  --------
been enacted,  issued or promulgated  and no order,  decree or injunction  shall
have been entered or issued by any Governmental Entity of competent jurisdiction
which  (i) has  the  effect  of  making  the  consummation  of the  transactions
contemplated hereby illegal,  (ii) materially  restricts,  prevents or prohibits
consummation  of any of the  transactions  contemplated  hereby  or (iii)  would
impair the  ability  of Parent to own the  outstanding  shares of the  Surviving
Corporation,  or operate its or any of its Subsidiaries'  businesses  (including
the  businesses  of the  Surviving  Corporation  or  any  of its  Subsidiaries),
following the Effective Time. Each Party agrees that, in the event that any such
order,  decree  or  injunction  shall be  entered  or  issued,  it shall use all
reasonable  best efforts to cause such order,  decree or injunction to be lifted
or vacated.

            (c)   HSR Act. The waiting  period (or extension  thereof) under the
                  -------
HSR Act applicable to the Merger shall have expired or been terminated.

            (d)   Registration  Statement  Effective.  The Form S-4  shall  have
                  ----------------------------------
become  effective  prior  to the  mailing  by the  Company  of the  Joint  Proxy
Statement/Prospectus  to its  shareholders  and no  stop  order  suspending  the
effectiveness  of the Form S-4 shall  then be in effect and no  proceedings  for
that purpose  shall have been  initiated  or, to the  Knowledge of Parent or the
Company,  threatened by the SEC. All necessary state  securities  authorizations
relating to the issuance of the Parent Common Stock shall have been received.


                                     - 50 -
<PAGE>


            (e)   Stock  Exchange Listing.  The shares of Parent Common Stock to
                  -----------------------
be issued  pursuant to the Merger  shall have been duly  approved for listing on
the NYSE, subject to official notice of issuance.

            (f)   Dissenting  Shareholders.  Effective demands for payment under
                  ------------------------
Chapter  13 of the CGCL  shall not have been  received  with  respect to Company
Shares such that cash would be payable with  respect to such Company  Shares and
payable in respect of fractional  shares in an aggregate  amount equal to 10% or
more  of  the  value  of  the  Total   Merger   Consideration.   "Total   Merger
                                                                  --------------
Consideration"  means the aggregate value as of the Effective Time of the Parent
- -------------
Common  Stock to be issued in the  Merger  together  with any cash to be paid in
respect of such  dissenters'  demands and cash to be paid in lieu of  fractional
shares to be issued in the Merger.

      Section 7.2 Additional Conditions to Obligations of Parent and Merger Sub.
                  -------------------------------------------------------------
The  obligations of Parent and Merger Sub to consummate the Merger shall also be
subject to the satisfaction or waiver of each of the following conditions:

            (a)   Representations  and Warranties.  Each of the  representations
                  -------------------------------
and  warranties of the Company  contained in this Agreement that is qualified by
materiality shall be true and correct at and as of the Effective Time as if made
at and as of the Effective Time and each of such  representations and warranties
that is not so qualified  shall be true and correct in all material  respects at
and as of the Effective Time as if made as of the Effective  Time, in each case,
except (i) as contemplated or permitted by this Agreement and (ii) to the extent
that such  representations or warranties shall have been expressly made as of an
earlier date, in which case such  representations and warranties shall have been
true and correct as of such earlier date.

            (b)   Agreements and Covenants.  The Company shall have performed or
                  ------------------------
complied in all material respects with all agreements and covenants  required by
this Agreement to be performed or complied with by it on or before the Effective
Time.

            (c)   Certificates.  Parent shall have received a certificate of the
                  ------------
Company  executed  on its behalf by the Chief  Executive  Officer  and the Chief
Financial  Officer of the Company,  certifying  that the conditions set forth in
paragraphs (a) and (b) above have been satisfied.

            (d)   Consents.  The  Company  shall  have  obtained  all  consents,
                  --------
approvals,  releases or authorizations  ("Consents") from, and the Company shall
                                          --------
have made all  filings and  registrations  ("Filings")  to or with,  any Person,
                                             -------
including without limitation any Governmental  Entity,  necessary to be obtained
or made in order for Parent and  Merger  Sub to  consummate  the Merger or issue
shares of Parent  Common  Stock  pursuant  thereto,


                                     - 51 -
<PAGE>


as  applicable,  unless the failure to obtain such Consents or make such Filings
would not,  individually or in the aggregate,  have a Company  Material  Adverse
Effect.

            (e)   Tax  Opinion.  Parent shall have received an opinion of Fried,
                  ------------
Frank,  Harris,  Shriver & Jacobson,  dated as of the Closing  Date, in form and
substance  reasonably  satisfactory to it,  substantially to the effect that, on
the basis of the facts and  assumptions  described  in the  opinion,  the Merger
constitutes a  reorganization  within the meaning of Section 368 of the Code. In
rendering such opinion,  counsel may require and rely upon  representations  and
covenants  including  those  contained in this Agreement or in  certificates  of
officers of the Parties and others.

            (f)   Accountants  Letters.   Parent shall have received each of the
                  --------------------
accountants'  letters  contemplated  by Sections 6.18 and 6.19 to be received by
it.

            (g)   Voting   Agreements.   Each  of  the  parties  to  the  Voting
                  -------------------
Agreements  other than Parent shall have complied in all material  respects with
all  agreements  and  covenants  under  the  Voting  Agreements  required  to be
performed by it on or before the Effective Time.

      Section 7.3 Additional  Conditions  to  Obligations  of the Company.  The
                  -------------------------------------------------------
obligations of the Company to consummate the Merger shall also be subject to the
satisfaction or waiver of each of the following conditions:

            (a)   Representations  and Warranties.  Each of the  representations
                  -------------------------------
and  warranties  of Parent and Merger Sub  contained in this  Agreement  that is
qualified by  materiality  shall be true and correct at and as of the  Effective
Time as if made at and as of the Effective Time and each of such representations
and  warranties  that is not so  qualified  shall  be true  and  correct  in all
material respects at and as of the Effective Time as if made as of the Effective
Time, in each case,  except (i) as  contemplated  or permitted by this Agreement
and (ii) to the extent that such  representations  or warranties shall have been
expressly  made as of an earlier  date, in which case such  representations  and
warranties shall have been true and correct as of such earlier date.

            (b)   Agreements and Covenants.  Each of Parent and Merger Sub shall
                  ------------------------
have  performed or complied in all material  respects  with all  agreements  and
covenants  required by this  Agreement to be performed or complied with by it on
or before the Effective Time.

            (c)   Certificates. The Company shall have received a certificate of
                  ------------
Parent  executed on its behalf by two  officers of Parent at the level of senior
vice president or above,  certifying that the conditions set forth in paragraphs
(a) and (b) above have been satisfied.


                                     - 52 -
<PAGE>


            (d)   Consents.  Parent shall have obtained all Consents  from,  and
                  --------
Parent  shall have made all Filings to or with,  any Person,  including  without
limitation any  Governmental  Entity,  necessary to be obtained or made in order
for the  Company to  consummate  the  Merger,  unless the failure to obtain such
Consents or make such Filings would not, individually or in the aggregate,  have
a Parent Material Adverse Effect.

            (e)   Tax  Opinion.  The Company  shall have  received an opinion of
                  ------------
Latham & Watkins (or other counsel  reasonably  satisfactory to it), dated as of
the  Closing  Date,  in  form  and  substance  reasonably  satisfactory  to  it,
substantially  to the  effect  that,  on the basis of the facts and  assumptions
described in the opinion,  the Merger  constitutes a  reorganization  within the
meaning of Section  368 of the Code.  In  rendering  such  opinion,  counsel may
require and rely upon representations and covenants including those contained in
this Agreement or in certificates of officers of the Parties and others.

            (f)   Accountants  Letters.  The Company shall have received each of
                  --------------------
the  accountants'  letters  contemplated  by Sections 6.18 and 6.19 hereof to be
received by it.

                                  ARTICLE VIII

                            TERMINATION AND AMENDMENT

      Section 8.1 Termination.  This  Agreement  may be  terminated at  any time
                  -----------
before the Effective Time (except as otherwise provided) as follows:

            (a)   by mutual written consent of each of Parent  and  the Company;

            (b)   by  either Parent or the Company,  if the Effective Time shall
not have  occurred  on or before  December  31, 1999 (the  "Termination  Date");
                                                            -----------------
provided, however, that the right to terminate this Agreement under this Section
- --------  -------
8.1(b)  shall not be  available  to any  Party  whose  failure  to  fulfill  any
obligation  under  this  Agreement  has been the cause of, or  resulted  in, the
failure of the Effective Time to occur on or before the Termination Date;

            (c)   by  either  Parent or the Company,  if a  Governmental  Entity
shall have issued an order, decree or injunction having the effect of making the
Merger illegal or permanently  prohibiting the  consummation of the Merger,  and
such order,  decree or injunction shall have become final and nonappealable (but
only if such Party  shall have used its  reasonable  best  efforts to cause such
order, decree or injunction to be lifted or vacated);

            (d)   by either Parent or the Company,  if (x) there shall have been
a breach by the other (or Merger Sub if the Company is the terminating party) of
any of its  representations,  warranties,  covenants or agreements  contained in
this Agreement,  which


                                     - 53 -
<PAGE>


breach would result in the failure to satisfy one or more of the  conditions set
forth in  Section  7.2(a)  or (b) (in the case of a breach  by the  Company)  or
Section  7.3(a) or (b) (in the case of a breach by  Parent or Merger  Sub),  and
such breach  shall be  incapable  of being cured or, if capable of being  cured,
shall not have been cured within 30 days after written notice thereof shall have
been received by the Party alleged to be in breach;

            (e)   by  Parent,  if the Board of  Directors  of the Company or any
committee of the Board of Directors of the Company (w) shall  withdraw or modify
in any  manner  adverse  to  Parent,  its  approval  or  recommendation  of this
Agreement  or  the  Merger,   (x)  shall  fail  to  reaffirm  such  approval  or
recommendation  within  15  days of  Parent's  request,  (y)  shall  approve  or
recommend any Company Acquisition Proposal or Company Acquisition Transaction or
(z) shall  resolve to take any of the actions  specified  in clauses (w), (x) or
(y) above;

            (f)   by either Parent or the Company,  if the required approval and
adoption of this  Agreement  and the Merger by the  shareholders  of the Company
shall not have been obtained at a duly held shareholders  meeting called for the
purpose of obtaining such approval,  including any adjournments or postponements
thereof;

            (g)   by Parent if any of the parties to the Voting Agreements other
than Parent shall have violated any of the terms of the Voting Agreements in any
material respect; or

            (h)   by  Parent,  if (x) as of the  close of  business  on July 30,
1999, the Registration  Statement on Form S-4 has not been declared effective by
the SEC  and  (y) as of  August  13,  1999,  the  Requisite  Conversion  has not
occurred;  provided that the termination right under this clause (h) may only be
           --------
exercised by Parent prior to August 20, 1999.

            The term "Requisite Conversion" means the conversion (or the written
                      --------------------
agreement  to convert on or before the  Trigger  Date) by one or more  Preferred
Holders of such  number of shares of  Company  Preferred  Stock  into  shares of
Company  Common  Stock so that,  as of the Trigger  Date,  at least 37.9% of the
shares of the Company  Common Stock are committed to vote in favor of the Merger
at the Company Shareholder Meeting pursuant to the Voting Agreements.

            The term  "Trigger  Date" means the record date  established  by the
                       -------------
Company for  determining  the holders of Company Shares  entitled to vote at the
Company Shareholder Meeting.

      Section 8.2 Effect of Termination.  (a)  In the event that
                  ---------------------


                                     - 54 -
<PAGE>


            (x) (1) any person shall have made a Company Acquisition Proposal to
            the Company or to its  shareholders and thereafter this Agreement is
            terminated (i) by either party pursuant to Section 8.1(b) or Section
            8.1(h) or (ii) by either  party  pursuant to Section  8.1(f) and (2)
            within 18 months after the termination of this Agreement any Company
            Acquisition  Transaction  shall have been consummated or any written
            agreement with respect to a Company Acquisition  Transaction entered
            into, or

            (y) this  Agreement  is  terminated  by Parent  pursuant  to Section
            8.1(e),

then, in any such case, the Company shall in no event later than (A) the date of
consummation  of  such  Company  Acquisition  Transaction,  in  the  case  of  a
termination described in clause (x), or (B) two days after such termination,  in
the  case  of a  termination  described  in  clause  (y),  pay  Parent  a fee of
$4,000,000 (a "Termination Fee"), which amount shall be payable by wire transfer
               ---------------
of same day funds to a bank account designated by Parent.

            (b)   In  the event  that (x) any  person  shall have made a Company
Acquisition  Proposal to the Company or its  shareholders  and  thereafter  this
Agreement is terminated (i) by either party pursuant to Section  8.1(b),  or (y)
this Agreement is terminated by Parent pursuant to Section 8.1(e),  or by either
party pursuant to Section 8.1(f), after any such termination,  the Company shall
reimburse  Parent,  promptly after being  requested to do so by Parent,  for all
out-of-pocket  costs and  expenses  incurred by Parent in  connection  with this
Agreement  and  the  transactions   contemplated  hereby,   including,   without
limitation,  fees and expenses of accountants,  attorneys,  financial  advisors,
commercial  banks,  experts  and  consultants  and fees and  expenses  otherwise
allocated to the Parent pursuant to Section 6.7.

            (c)   The Company acknowledges that the agreements contained in this
Section  8.2 are an  integral  part  of the  transactions  contemplated  in this
Agreement,  and that, without these agreements,  Parent and Merger Sub would not
enter into this Agreement; accordingly, if the Company fails to promptly pay the
amount due  pursuant to this  Section  8.2,  and in order to obtain such payment
Parent  commences a suit which results in a judgment against the Company for the
fees and expenses set forth in this Section 8.2, the Company shall pay to Parent
its costs and expenses (including attorneys' fees) in connection with such suit.

            (d)   In the event of termination of this Agreement pursuant to this
Article  VIII,  this  Agreement  (other than as set forth in Section  9.1) shall
become void and of no effect with no liability  under the terms of the Agreement
(other than as set forth in this Section  8.2) on the part of any party  hereto;
provided,  however,  no such termination shall relieve any party hereto from any
liability for breach of this Agreement.


                                     - 55 -
<PAGE>


      Section 8.3 Amendment.  This  Agreement may  be amended at any time before
                  ---------
the Effective Time,  whether before or after this Agreement and the Merger shall
have been  approved and adopted by the  shareholders  of the  Company,  but only
pursuant to a writing executed and delivered by Parent and the Company.

                                   ARTICLE IX

                               GENERAL PROVISIONS

      Section 9.1 Non-Survival of  Representations,  Warranties  and Agreements.
                  --------------------------------------------------------------
The representations, warranties and agreements in this Agreement shall terminate
at the Effective  Time or upon the  termination  of this  Agreement  pursuant to
Section  8.1, as the case may be,  except that (a) the  agreements  set forth in
Sections  1.3,  6.11 and 6.12 shall  survive  the  Effective  Time,  and (b) the
agreements  set  forth  in  Sections  6.7  and  8.2  shall  survive  termination
indefinitely.

      Section 9.2 Notices.  All notices and other  communications  given or made
                  -------
pursuant  hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid,  return receipt requested),  sent
by  overnight  courier  or sent by  telecopy,  to the  applicable  party  at the
following  addresses or telecopy  numbers (or at such other  address or telecopy
number for a party as shall be specified by like notice):

            (a)   if to the Company:

                  PulsePoint Communications
                  6307 Carpinteria Avenue
                  Carpinteria, California 93013
                  Attention:  Corporate Counsel
                  Telecopy No.:  (805) 566-2000

                  With a copy to:

                  Latham & Watkins
                  633 West Fifth Street, Suite 4000
                  Los Angeles, California 90071-2007
                  Attention:  Paul D. Tosetti
                  Telecopy No.:  (213) 891-8763

                           and


                                     - 56 -
<PAGE>


                  Latham & Watkins
                  650 Town Center Drive, Suite 2000
                  Costa Mesa, CA 92626
                  Attention:  Cary K. Hyden
                  Telecopy No.:  (714) 755-8290

            (b)   if to Parent or Merger Sub:

                  Unisys Corporation
                  Unisys Way
                  Blue Bell, Pennsylvania  19424
                  Attention:  General Counsel
                  Telecopy No.:  (215) 986-0624


                  With a copy to:

                  Fried, Frank, Harris, Shriver & Jacobson
                  One New York Plaza
                  New York, New York  10004
                  Attention:  Arthur Fleischer, Jr.
                              Charles M. Nathan
                  Telecopy No.:(212) 859-4000

      Section 9.3 Certain Definitions;  Interpretation. (a) For purposes of this
                  ------------------------------------
Agreement,   the  following  terms  shall  have  the  following  meanings  (such
definitions  to be equally  applicable  to both the singular and plural forms of
the terms defined):

                  "affiliate"  of a  Person  means a  Person  that  directly  or
                   ---------
indirectly,  through one or more intermediaries,  Controls, is controlled by, or
is under common control with, the first mentioned Person.

                  "Benefit  Plan"  means any  bonus,  pension,  profit  sharing,
                   -------------
deferred compensation,  incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement,  vacation, severance, disability, death
benefit, hospitalization,  medical, employee stock purchase, stock appreciation,
restricted  stock  or  other  employee  benefit  plan,  policy,  arrangement  or
understanding (whether in writing or not) providing benefits to any Employees.

                  "Company   Disclosure  Letter"  means  the  disclosure  letter
                   ----------------------------
delivered by the Company to Parent dated as of the date hereof.


                                     - 57 -
<PAGE>


                  "Company   Equity   Rights"  means   subscriptions,   options,
                   -------------------------
warrants, calls, commitments,  agreements,  conversion rights or other rights of
any character  (contingent  or otherwise) to purchase or otherwise  acquire from
the Company or any of its Subsidiaries at any time, or upon the happening of any
stated event, any shares of the capital stock of the Company.

                  "Company  Material  Adverse  Effect"  means  any  change in or
                   ----------------------------------
effect (x) that is or would be likely to be materially  adverse to the business,
assets, liabilities, results of operations or condition (financial or otherwise)
of the Company and its Subsidiaries  taken as a whole, or (y) that will or would
be likely to prevent or  materially  impair or  materially  delay the  Company's
ability to consummate the transactions contemplated by this Agreement; provided,
                                                                       --------
that in  determining  whether a Company  Material  Adverse  Effect has occurred,
changes or effects  relating to United States  economic  conditions or financial
markets  in  general  or to the  telecommunications  or  information  technology
industries in general, shall not be considered.

                  "Company  Preferred Stock" or "Company Preferred Shares" means
                   ------------------------      ------------------------
the Series B Convertible Preferred Stock, no par value, of the Company.

                  "Company  Shares"  means Company  Common Shares  together with
                   ---------------
Company Preferred Shares.

                  "Confidentiality  Agreement"  means the Mutual  Non-Disclosure
                   --------------------------
Agreement between Parent and Company as of the date hereof.

                  "Control"  (including  the terms  "controlled  by" and  "under
                   -------
common control with") means the possession,  direct or indirect, of the power to
direct  or cause the  direction  of the  management  and  policies  of a Person,
whether through the ownership of stock,  as trustee or executor,  by contract or
credit arrangement or otherwise.

                  "December  1998  Company  Balance  Sheet"  means  the  audited
                   ---------------------------------------
consolidated  balance  sheet of the Company as of December 31, 1998  included in
the Company's Form 10-K for the fiscal year ended December 31, 1998.

                  "December   1998  Parent  Balance  Sheet"  means  the  audited
                   ---------------------------------------
consolidated  balance  sheet of Parent  as of  December  31,  1998  included  in
Parent's Form 10-K for the fiscal year ended December 31, 1998.

                  "Employee" means each current,  former,  or retired  employee,
                   --------
officer  or  director  of the  Company  or any  of  its  Subsidiaries  as of the
Effective Time (including each such person who is on vacation,  layoff, approved
leave of absence, sick leave, or short term or long term disability).


                                     - 58 -
<PAGE>


                  "ERISA" means the Employee  Retirement  Income Security Act of
                   -----
1974,  as  amended,   together  with  the  rules  and  regulations   promulgated
thereunder.

                  "ERISA  Affiliate"  means each  business or entity  which is a
                   ----------------
member of a "controlled  group of  corporations,"  under "common  control" or an
"affiliated  service  group"  with the  Company  within the  meaning of Sections
414(b),  (c) or (m) of the Code, or required to be  aggregated  with the Company
under Section 414(o) of the Code, or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA.

                  "ERISA Benefit Plan" means a Benefit Plan maintained as of the
                   ------------------
date of this  Agreement  which is also an "employee  pension  benefit  plan" (as
defined in Section 3(2) of ERISA) or which is also an "employee  welfare benefit
plan" (as defined in Section 3(1) of ERISA).

                  "Excluded  Shares"  means (i) those  shares of Company  Common
                   ----------------
Stock and Company Preferred Stock held in the treasury of the Company, by any of
its  Subsidiaries or by Parent or any of its Subsidiaries  immediately  prior to
the Effective Time and (ii) those Company Shares as to which dissenters'  rights
are perfected.

                  "Imperial  Bank  Warrants"  shall mean the warrants to acquire
                   ------------------------
shares of the Company  Common  Stock  issued  pursuant to that  certain  Warrant
Purchase  Agreement  dated  October  30,  1997 by and  between  the  Company and
Imperial Bank.

                  "Intellectual Property Rights" means all intellectual property
                   ----------------------------
rights worldwide,  including patents, trademarks, service marks, copyrights, and
registrations and applications therefor,  trade names, know-how,  trade secrets,
computer software programs and proprietary information, firmware and mask works,
whether owned, used or licensed for use.

                  "Junior  Preferred  Stock"  means  the  junior   participating
                   ------------------------
preferred stock issuable pursuant to the Parent Rights Agreement.

                  "Knowledge" means to the knowledge of a Party,  without a duty
                   ---------
of investigation.

                  "Nasdaq" means the National  Association of Securities Dealers
                   ------
Automated Quotation System.

                  "NEXTLINK Warrants" means the warrants issued and to be issued
                   -----------------
to NEXTLINK Communications Inc. pursuant to that certain Warrant Agreement dated
June 5, 1998 by and between the Company and NEXTLINK Communications Inc.


                                     - 59 -
<PAGE>


                  "Nondisclosure  Agreement" means the  Nondisclosure  Agreement
                   ------------------------
between Parent and Company dated as of October 12, 1998.

                  "NYSE" means the New York Stock Exchange.
                   ----

                  "Other Warrants" means the warrants issued and to be issued to
                   --------------
TBCC  Funding   Trust  II,   Priority   Capital   Resources  and  Leap  Wireless
International,  Inc.  pursuant to those  certain  agreements  by and between the
Company and those Persons dated November 10, 1998, November 10, 1998 and January
21, 1999, respectively.

                  "Parent   Disclosure   Letter"  means  the  disclosure  letter
                   ----------------------------
delivered by the Parent to the Company dated as of the date hereof.

                  "Parent Equity Rights" means subscriptions, options, warrants,
                   --------------------
calls,  commitments,  agreements,  conversion  rights  or  other  rights  of any
character (contingent or otherwise) to purchase or otherwise acquire from Parent
at any time,  or upon the  happening  of any  stated  event,  any  shares of any
capital stock of Parent; provided that Parent Equity Rights does not include the
                         --------
Rights (as defined in the Parent Rights Agreement).

                  "Parent Material Adverse Effect" means any change in or effect
                   ------------------------------
(x) that is or would be likely to be materially adverse to the business, assets,
liabilities,  results of  operations  or condition  (financial  or otherwise) of
Parent  and its  Subsidiaries  taken  as a whole,  or (y) that  will or would be
likely to prevent or materially  impair or materially  delay Parent's ability to
consummate the transactions  contemplated by this Agreement;  provided,  that in
                                                              --------
determining  whether a Parent Material  Adverse Effect has occurred,  changes or
effects  relating to United States economic  conditions or financial  markets in
general or to the  telecommunications  or information  technology  industries in
general, shall not be considered.

                  "Parent Rights  Agreement" means the Rights Agreement dated as
                   ------------------------
of March 7, 1986 between  Burroughs  Corporation and Harris Trust Company of New
York, as Rights Agent, as amended.

                  "Person"  or  "person"  means  an   individual,   corporation,
                   ------        ------
partnership,  limited  liability  company,  association,  trust,  unincorporated
organization, entity or group (as defined in the Exchange Act).

                  "Shareholder  Meeting Date" means the date of the  Shareholder
                   -------------------------
Meeting.

                  "Subsidiary"  of a Person means any corporation or other legal
                   ----------
entity of which such Person  (either alone or through or together with any other
Subsidiary  or


                                     - 60 -
<PAGE>


Subsidiaries) is the general partner or managing entity or of which at least 50%
of the stock or other  equity  interests  the  holders  of which  are  generally
entitled to vote for the election of the board of directors or others performing
similar  functions  of such  corporation  or other  legal  entity is directly or
indirectly  owned or  controlled  by such  Person  (either  alone or  through or
together with any other Subsidiary or Subsidiaries).

                  "Tax" " means any federal, state, local or foreign net income,
                   ---
gross income, gross receipts, windfall profit, severance,  property, production,
sales, use,  license,  excise,  franchise,  employment,  profits,  environmental
(including  Taxes under  section  59A of the Code),  capital  stock,  severance,
stamp,  unemployment,  disability,  transfer,  occupation,  social  security (or
similar) registration,  payroll,  withholding,  alternative or add-on minimum or
any other tax, custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever,  together with any interest or penalty,  addition to tax
or additional amount imposed by any Governmental Entity.

                  "Tax  Return"  means any return,  report or similar  statement
                   -----------
required to be filed with respect to any tax including,  without limitation, any
schedule  or  attachment  thereto,  any  information  return,  claim for refund,
amended return or declaration of estimated tax.

                  "Warrants" means collectively the Imperial Bank Warrants,  the
                   --------
Other Warrants and the NEXTLINK Warrants.

             (b)  When a  reference  is  made  in this  Agreement  to  Articles,
Sections,  or Exhibits,  such  reference is to an Article or a Section of, or an
Exhibit to, this Agreement,  unless otherwise  indicated.  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.
Whenever  the  words  "include,"  "includes"  or  "including"  are  used in this
Agreement,  they  shall be  understood  to be  followed  by the  words  "without
limitation."

      Section 9.4 Headings.  The headings  contained in  this  Agreement are for
                  --------
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

      Section 9.5 Severability. If any term or other provision of this Agreement
                  ------------
is invalid,  illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the  economic or legal  substance  of
the transactions  contemplated  hereby is not affected in any manner  materially
adverse to any Party.  Upon a determination  that any term or other provision is
invalid,  illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this  Agreement so as to effect


                                     - 61 -
<PAGE>


the  original  intent of the  Parties as closely as  possible  in an  acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
maximum extent possible.

      Section 9.6 Entire   Agreement;   No  Third-Party    Beneficiaries.   This
                  ------------------------------------------------------
Agreement, the Stock Option Agreement, the Voting Agreements,  the Nondisclosure
Agreement and the Confidentiality  Agreement constitute the entire agreement and
supersede any and all other prior agreements and undertakings,  both written and
oral,  among the parties  hereto,  or any of them,  with  respect to the subject
matter hereof and,  except for Section  6.11,  does not, and is not intended to,
confer  upon any Person  other than the  parties  hereto any rights or  remedies
hereunder.

      Section 9.7 Assignment.  This Agreement shall not be assigned by any party
                  ----------
hereto by operation of law or otherwise  without the express  written consent of
each of the other parties.

      Section 9.8 Governing Law; Jurisdiction.  This Agreement shall be governed
                  ---------------------------
by and construed in accordance  with,  the laws of the State of New York without
regard,  to the  fullest  extent  permitted  by law,  to the  conflicts  of laws
provisions  thereof  which might  result in the  application  of the laws of any
other  jurisdiction.  (The laws of the  State of  California  pertaining  to the
fiduciary  obligations of directors of a California  corporation  shall apply to
such  directors.)  Each  of the  parties  hereto  submits  to the  non-exclusive
jurisdiction of the state and federal courts of the United States located in the
City of New  York,  County of New York,  with  respect  to any claim or cause of
action arising out of this Agreement or the transactions contemplated hereby.

      Section 9.9 Trial by Jury.  Each of the Parties hereto hereby  irrevocably
                  -------------
and unconditionally  waives any right it may have to trial by jury in connection
with any  litigation  arising out of or relating  to this  Agreement,  the Stock
Option  Agreement,  the Voting  Agreements,  the  Nondisclosure  Agreement,  the
Confidentiality   Agreement   or  Merger  or  any  of  the  other   transactions
contemplated hereby or thereby.

      Section 9.10 Enforcement. The parties hereto agree that irreparable damage
                   -----------
would occur in the event that any of the  provisions of this  Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is  accordingly  agreed that the parties  shall be entitled to an  injunction or
injunctions to prevent  breaches of this  Agreement and to enforce  specifically
the terms and  provisions  hereof in any court of the United States or any state
having jurisdiction,  such remedy being in addition to any other remedy to which
any party is entitled at law or in equity.

      Section 9.11 Obligations of Subsidiaries. Whenever this Agreement requires
                   ---------------------------
any  Subsidiary  of the  Company  to take any  action or Merger  Sub to take any
action,  such requirement  shall be deemed to include an undertaking on the part
of the Company to


                                     - 62 -
<PAGE>


cause such  Subsidiary to take such action or Parent to cause Merger Sub to take
such action, as the case may be.

      Section 9.12 Counterparts.  This Agreement may be  executed in one or more
                   ------------
counterparts,  and by the different  Parties in separate  counterparts,  each of
which when  executed  shall be deemed to be an original,  but all of which shall
constitute one and the same agreement; it being understood that all parties need
not execute the same counterpart.

            [Remainder of Page Intentionally Left Blank]


                                     - 63 -
<PAGE>


            IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be  executed as of the date first  written  above by their  respective  officers
thereunto duly authorized.


                                        UNISYS CORPORATION

                                        By:  /s/ Robert H. Brust
                                           -----------------------------
                                           Name:   Robert H. Brust
                                           Title:  Senior Vice President and
                                                   Chief Financial Officer



                                        SHELLCO INC.

                                        By:  /s/ Robert H. Brust
                                           -----------------------------
                                           Name:   Robert H. Brust
                                           Title:  President



                                        PULSEPOINT COMMUNICATIONS

                                        By:  /s/ Mark C. Ozur
                                           -----------------------------
                                           Name:   Mark C. Ozur
                                           Title:  President and C.E.O.







                                [Signature Page to Agreement and Plan of Merger]


                                     - 64 -


<PAGE>


                                                                       EXHIBIT A
                                                         TO THE MERGER AGREEMENT


                   LIST OF PERSONS EXECUTING VOTING AGREEMENTS

1.  Frederick J. Warren and Robin G. Warren
2.  Citiventure 96 Partnership Fund, L.P.
    Chancellor Private Capital Offshore Partners II, L.P.
    Chancellor Private Capital Partners III, L.P.
    Chancellor Private Capital Offshore Partners I, C.V.
3.  Microsoft Corporation
4.  Oak Investment Partners III, L.P.
    Oak Investment Partners VII, L.P.
    Oak VII Affiliates Fund, L.P.
    Oak Investment Partners V, LP
    Oak V Affiliates Fund, L.P.
    Bandel L. Carano
5.  Moore Global Investments, Ltd.
    Remington Investment Strategies, L.P.





                             STOCK OPTION AGREEMENT


            STOCK   OPTION   AGREEMENT,   dated  as  of  June  14,   1999  (this
"Agreement"), by and between PulsePoint Communications, a California corporation
(the "Company"), and Unisys Corporation, a Delaware corporation ("Parent").

                                    RECITALS
                                    --------

            A. The Company and Parent have entered into an Agreement and Plan of
Merger,  dated as of the date hereof (as may be amended  from time to time,  the
"Merger  Agreement"),  providing for, among other things, a business combination
between Parent and the Company.

            B. As a condition and  inducement to Parent's  willingness  to enter
into the Merger Agreement,  Parent has requested that the Company agree, and the
Company has agreed, to grant Parent the option contemplated hereby.

            C. Capitalized  terms not defined herein shall have the meanings set
forth in the Merger Agreement.

            D. This  Agreement  and the Merger  Agreement are being entered into
simultaneously.

            NOW, THEREFORE, in consideration of the foregoing and the respective
representations,  warranties,  covenants and  agreements  set forth herein,  the
Company and Parent agree as follows:

            1. Grant of Option.  Subject to the terms and  conditions  set forth
               ---------------
herein, the Company hereby grants to Parent an irrevocable option (the "Option")
to purchase up to  1,385,688 (as adjusted as  set forth  herein)  fully paid and
non-assessible  shares (the "Option  Shares") of the Company's  Common Stock, no
par value  ("Company  Stock"),  at a purchase price of $6.60 (as adjusted as set
forth herein) per Option Share (the "Purchase Price").

            2. Exercise of Option.  (a) Parent may exercise the Option, in whole
               ------------------
or in part, at any time or from time to time after but only after the occurrence
of any event as a result of which Parent is entitled to receive the  Termination
Fee pursuant to Section 8.2 of the Merger  Agreement and the Merger Agreement is
being or has been  terminated (an "Exercise  Event");  provided,  however,  that
except as provided in the last sentence of this Section  2(a),  the Option shall
terminate  and be of no further  force and effect upon the  earliest to occur of
(A) the  Effective  Time and (B) nine months  after the first  occurrence  of an
Exercise Event.  Notwithstanding the termination of the Option,  Parent shall be
entitled  to  purchase  the  Option  Shares if it has  exercised  the  Option in
accordance  with the terms hereof prior to the termination of the Option and the
termination of the Option shall not affect any rights  hereunder  which by their
terms do not terminate or expire prior to or as of such termination.

                  (b) Notice of  Exercise.  In the event that  Parent  wishes to
                      -------------------
exercise the Option,  it shall send to the Company a written notice (the date of
each such notice  being herein


<PAGE>


referred to as a "Notice  Date") to that effect,  which notice also  specifies a
date not earlier than three  business  days nor later than 30 business days from
the Notice Date for the closing of such  purchase  (an "Option  Closing  Date");
provided,  however,  that (i) if the closing of a purchase and sale  pursuant to
the  Option  (an  "Option  Closing")  cannot  be  consummated  by  reason of any
applicable judgment,  decree, order, law or regulation,  the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which such  restriction on consummation  has expired or been terminated and (ii)
without  limiting the  foregoing,  if prior  notification  to or approval of any
regulatory  authority is required in connection  with such purchase,  Parent and
the Company shall promptly file the required  notice or application for approval
and shall cooperate in the expeditious filing of such notice or application, and
the period of time that otherwise  would run pursuant to this sentence shall run
instead  from  the  date  on  which,  as the  case  may  be,  (A)  any  required
notification  period has expired or been terminated or (B) any required approval
has been obtained, and in either event, any requisite waiting period has expired
or been  terminated.  Each of Parent and the Company agrees to use  commercially
reasonable  efforts to cooperate with and provide  information to the other, for
the purpose of any required notice or application for approval.  Any exercise of
the Option  shall be deemed to occur on the Notice Date  relating  thereto.  The
place of any Option  Closing  shall be at the offices of Fried,  Frank,  Harris,
Shriver & Jacobson,  One New York Plaza, New York, New York, and the time of the
Option  Closing  shall be 10:00 a.m.  (Eastern  Time) on the  applicable  Option
Closing Date.

            3. Payment and Delivery of Certificates.  (a) At any Option Closing,
               ------------------------------------
Parent shall pay to the Company in immediately  available funds by wire transfer
to a bank  account  designated  in writing by the Company an amount equal to the
Purchase Price multiplied by the number of Option Shares for which the Option is
being exercised; provided, that failure or refusal of the Company to designate a
bank account shall not preclude Parent from  exercising the Option,  in whole or
in part.

                  (b) At any Option Closing, simultaneously with the delivery of
immediately  available  funds as provided  in Section  3(a),  the Company  shall
deliver to Parent a certificate or certificates  representing  the Option Shares
to be purchased at such Option  Closing,  which Option  Shares shall be free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever.  If
at the time of issuance  of the Option  Shares  pursuant to the  exercise of the
Option  hereunder,  the Company shall have issued any share  purchase  rights or
similar  securities  ("Rights")  to holders of Company  Stock,  then each Option
Share issued  pursuant to such exercise shall be accompanied by a  corresponding
Right  or new  rights  with  terms  substantially  the  same as and at  least as
favorable to Parent as those issued to other holders of Company Stock.

                  (c) Restrictive  Legend.  Certificates  for the  Option Shares
                      -------------------
delivered  at  any  Option  Closing  shall  have  typed  or  printed  thereon  a
restrictive legend which shall read substantially as follows:

                  "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
            REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  AND MAY


                                       2
<PAGE>


            BE REOFFERED OR  SOLD  ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM
            SUCH REGISTRATION IS AVAILABLE."

It is  understood  and  agreed  that the  foregoing  legend  shall be removed by
delivery of substitute  certificate(s)  without such legend upon the sale of the
Option  Shares  pursuant to a registered  public  offering or Rule 144 under the
Securities  Act or any other sale as a result of which such  legend is no longer
required.

            4. Adjustment upon Changes in Capitalization,  Etc. (a) In the event
               -----------------------------------------------
of any change in Company Stock by reason of a stock dividend,  split-up, merger,
recapitalization,  combination,  exchange of shares or similar transaction,  the
type and number of shares or securities  subject to the Option, and the Purchase
Price therefor,  shall be adjusted appropriately,  and proper provision shall be
made in the agreements governing such transaction,  so that Parent shall receive
upon  exercise of the Option the number and class of shares or other  securities
or property  that Parent would have  received in respect of Company Stock if the
Option had been  exercised  immediately  prior to such event or the record  date
therefor, as applicable.

                  (b) Without  limiting  the  parties'   relative   rights   and
obligations  under the Merger  Agreement,  in the event that the Company  enters
into an agreement (i) to consolidate  with or merge into any person,  other than
Parent or one of its  subsidiaries,  and the Company shall not be the continuing
or surviving  corporation in such  consolidation  or merger,  (ii) to permit any
person,  other  than  Parent  or one of  its  subsidiaries,  to  merge  into  or
consolidate  with  the  Company  and the  Company  shall  be the  continuing  or
surviving corporation, but in connection with such merger or consolidation,  the
shares of Company Stock  outstanding  immediately  prior to the  consummation of
such merger or  consolidation  shall be changed into or  exchanged  for stock or
other  securities  of the  Company  or any  other  person  or cash or any  other
property,  or the shares of Company Stock  outstanding  immediately prior to the
consummation  of such  merger  or  consolidation  shall,  after  such  merger or
consolidation,  represent less than 50% of the outstanding  voting securities of
the merged or consolidated  company,  or (iii) to sell or otherwise transfer all
or  substantially  all of its assets to any person,  other than Parent or one of
its  subsidiaries,  then,  and in each such case,  the agreement  governing such
transaction  shall make  proper  provision  so that the Option  shall,  upon the
consummation of any such transaction and upon the terms and conditions set forth
herein,  be converted  into, or exchanged  for, an option with  identical  terms
appropriately  adjusted  to  acquire  the  number  and  class of shares or other
securities,  cash or  property  that  Parent  would have  received in respect of
Company  Stock  if the  Option  had  been  exercised  immediately  prior to such
consolidation,  merger,  sale or  transfer,  or the  record  date  therefor,  as
applicable.

                  (c) If, prior to the  termination  of the Option in accordance
with Section 2, the Company  enters into any agreement (x) pursuant to which all
outstanding  shares of Company Stock are to be purchased  for, or converted into
the right to receive in whole or in part  (other  than in respect of  fractional
shares)  cash or (y) with respect to any  transaction  described in clauses (i),
(ii) and (iii) of paragraph (b) (each of (x) and (y), a "Transaction"),  and, in
the case of each of clauses  (x) and (y),  the Option is then  exercisable,  the
Company  covenants  that proper  provision


                                       3
<PAGE>


shall be made in such  agreement  to  provide  that,  if the  Option  shall  not
theretofore  have been exercised,  then upon the consummation of the Transaction
(which  in the case of a  Transaction  involving  a tender  offer  shall be when
shares of Company Stock are accepted for payment),  Parent shall have the right,
at its election, by not less than two business days' prior written notice to the
Company,  to receive in exchange for the cancellation of the Option an amount in
cash equal to the Spread.  For  purposes of this  Agreement,  the term  "Spread"
means the number of Option Shares  multiplied by the excess of (A) the higher of
the closing sales price per share of Company  Stock on the principal  securities
exchange  or  quotation  system on which  the  Company  Stock is then  listed or
traded,  as reported by The Wall Street  Journal,  on the day (i) the average of
                        ------------------------
the closing prices of the shares of Company Stock as reported by The Wall Street
                                                                 ---------------
Journal over the ten-trading day period beginning on the trading day immediately
- -------
following the  announcement of such agreement or (ii) the average of the closing
prices of the shares of Company  Stock as reported  by The Wall  Street  Journal
                                                       -------------------------
over the ten-trading  day period ending on the trading day immediately  prior to
the   consummation   of  such   Transaction,   over  (B)  the  Purchase   Price.
Notwithstanding  the  foregoing,  the  amount of the  Spread,  when added to any
Termination Fee paid or payable to Parent, shall not exceed $4 million.

                  (d) Following  exercise of the Option by Parent,  in the event
that  Parent  sells,  pledges  or  otherwise  disposes  of  (including,  without
limitation, by merger or exchange) any of the Option Shares (a "Sale"), then:

                        (i)   any  Termination  Fee  due  and  payable  by the
Company  following such time shall be reduced by an amount, if any, equal to the
excess of (1) the total of (A) the Termination Fee and (B) the excess of (w) the
aggregate amounts received (whether in cash,  securities or otherwise) by Parent
in all such Sales,  over (x) the aggregate  Purchase  Price of the Option Shares
sold in such  Sales  (such  excess in this  sub-clause  (B)  being  the  "Offset
Amounts") over (2) $4 million; and
                        (ii)  if  the   Company   has  paid  to   Parent   the
Termination  Fee prior to the Sale, then Parent shall  immediately  remit to the
Company, as additional Purchase Price for the Option Shares, the excess, if any,
of (y) the total of the Termination Fee and the Offset Amounts of all Sales over
(z) $4 million.

                  (e) Notwithstanding anything to the contrary in this Agreement
or the Merger Agreement, in no event shall the aggregate of any Termination Fee,
all Offset Amounts and the Spread exceed $4 million.

            5. Covenants of the Company and Parent.  (a) The Company  covenants
               -----------------------------------
(i) to maintain, free from preemptive rights, sufficient authorized but unissued
or treasury  shares of Company  Stock so that the Option may be fully  exercised
without  additional  authorization  of Company  Stock after giving effect to all
other  options,  warrants,  convertible  securities  and  other  rights of third
parties  to  purchase  shares of  Company  Stock;  (ii) not to seek to avoid the
observance or performance  of any of the covenants,  agreements or conditions to
be observed  or  performed  hereunder  by the Company and not to take any action
which would cause any of its  representations  or warranties not to be true; and
(iii) not to engage in any  action or omit to take

                                       4
<PAGE>


any action which would have the effect of  preventing  or disabling  the Company
from  delivering  the Option  Shares to Parent  upon  exercise  of the Option or
otherwise performing its obligations under this Agreement.


               (b) Parent covenants not to sell,  assign,  transfer or otherwise
dispose of the Option, any part thereof, or any of its other rights hereunder to
any third party without the prior  written  consent of the Company which consent
shall not be unreasonably  withheld or delayed.  Parent may offer or sell Option
Shares only pursuant to a registration  under the Securities Act or an exemption
therefrom.

            6. Listing.  If Company Stock or any other securities to be acquired
               -------
upon  exercise of the Option are then listed on the Nasdaq  Stock Market (or any
other national securities exchange or national securities quotation system), the
Company,  upon the request of Parent, shall promptly file an application to list
the shares of Company Stock or other  securities to be acquired upon exercise of
the Option on the Nasdaq  Stock Market (and any such other  national  securities
exchange or national securities  quotation system) and shall use reasonable best
efforts to obtain approval of such listing as promptly as practicable.

            7. Loss or  Mutilation.  Upon  receipt by the  Company  of  evidence
               -------------------
reasonably  satisfactory to it of the loss, theft,  destruction or mutilation of
this  Agreement,  and (in the case of loss,  theft or destruction) of reasonably
satisfactory  indemnification,  and  upon  surrender  and  cancellation  of this
Agreement,  if mutilated,  the Company shall execute and deliver a new Agreement
of like tenor and date.  Any such new  Agreement  executed and  delivered  shall
constitute  an  additional  contractual  obligation  on the part of the Company,
whether or not the Agreement so lost, stolen,  destroyed,  or mutilated shall at
any time be enforceable by anyone.

            8. Registration Rights. The Company shall, if requested by Parent at
               -------------------
any time and from time to time within two years after the date of first exercise
of  the  Option,  as  expeditiously  as  possible  prepare  and  file  up to two
registration  statements  under  the  Securities  Act if  such  registration  is
necessary  in  order to  permit  the  sale or  other  disposition  of any or all
securities  that have been  acquired by  exercise  by Parent of the  Option,  in
accordance  with the  intended  method  of sale or other  disposition  stated by
Parent,  including  a "shelf"  registration  statement  under Rule 415 under the
Securities  Act  or  any  successor   provision;   and  the  Company  shall  use
commercially  reasonable efforts to qualify such securities under any applicable
state  securities  laws.  Parent agrees to use reasonable best efforts to cause,
and to cause any  underwriters  of any sale or other  disposition to cause,  any
sale or other disposition pursuant to such registration statement to be effected
on a widely  distributed basis. The Company shall use reasonable best efforts to
cause  each such  registration  statement  to become  effective,  to obtain  all
consents or waivers of other  parties which are required  therefor,  and to keep
such  registration  statement  effective  for such  period  not in  excess of 90
calendar days from the day such  registration  statement first becomes effective
as may be  reasonably  necessary to effect such sale or other  disposition.  The
obligations of the Company to file a registration  statement and to maintain its
effectiveness  may be suspended for one or more periods of time not exceeding 90
calendar days in the aggregate with respect to any registration statement if the
Board of Directors of the Company shall have  determined that the filing of such
registration  statement or


                                       5
<PAGE>


the  maintenance  of its  effectiveness  would  require  disclosure of nonpublic
information  that would  materially  and  adversely  affect the Company or would
interfere with a planned merger,  sale of material assets,  recapitalization  or
other   significant   corporate  action  (other  than  the  issuance  of  equity
securities).  Any registration  statement prepared and filed under this Section,
and any sale  covered  thereby,  shall be at the  Company's  expense  except for
underwriting  discounts or commissions  and brokers' fees,  which shall be borne
solely by Parent.  Parent shall  provide in writing all  information  reasonably
requested by the Company for inclusion in any registration statement to be filed
hereunder. If, during the time periods referred to in the first sentence of this
Section,  the Company  effects a  registration  under the  Securities Act of the
Company's  equity  securities  for  its own  account  or for  any  other  of its
stockholders  (other than on Form S-4 or Form S-8, or any  successor  form),  it
shall allow Parent the right to participate in such registration; provided that,
if the managing  underwriters  of such offering advise the Company that in their
opinion the number of securities  requested to be included in such  registration
exceeds  the  number  which  can be  sold  in such  offering  on a  commercially
reasonable  basis,  priority  shall be given to the  securities  intended  to be
included therein by the Company for its own account and, thereafter, the Company
shall include the securities requested to be included therein by Parent pro rata
with the securities intended to be included therein by other stockholders of the
Company.  In connection with any registration  pursuant to this Section,  Parent
and the Company  shall  provide each other and any  underwriter  of the offering
with customary  representations,  warranties,  covenants,  indemnification,  and
contribution in connection with such registration.

            9. Miscellaneous.
               -------------

                  (a) Fees and  Expenses.  Except as  otherwise  provided in the
                      ------------------
Merger  Agreement,  all costs and  expenses  incurred  in  connection  with this
Agreement and the transactions  contemplated  hereby shall be borne by the party
incurring such expenses.

                  (b) Amendment.  This Agreement may not be amended except by an
                      ---------
instrument in writing signed on behalf of each of the parties.

                  (c) GOVERNING  LAW. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
                      --------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,  WITHOUT REGARD
TO ITS CONFLICT OF LAWS RULES OR PRINCIPLES.

                  (d) Notices.  All notices or other  communications  under this
                      -------
Agreement  shall be in  writing  and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable,  telegram,  telex
or other  standard  form of  telecommunications,  or by  registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:


                                       6
<PAGE>


                        If to the Company:

                        PulsePoint Communications
                        6307 Carpinteria Avenue
                        Carpinteria, California 93013
                        Attention:   General Counsel
                        Telecopy No.: (805) 566-2000

                        With a copy to:

                        Latham & Watkins
                        633 West Fifth Street, Suite 4000
                        Los Angeles, California 90071-2007
                        Attention: Paul D. Tosetti
                        Telecopy No.: (213) 891-8763

                        If to Parent:

                        Unisys Corporation
                        Unisys Way
                        Blue Bell, Pennsylvania 19424
                        Attention: General Counsel
                        Telecopy No.: (215) 986-0624

                        With a copy to:

                        Fried, Frank, Harris, Shriver & Jacobson
                        One New York Plaza
                        New York, New York 10004
                        Attention: Arthur Fleischer, Jr.
                                   Charles M. Nathan
                        Telecopy No.: (212) 859-4000

or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.

                  (e) Assignment;  Binding Effect; No Third Party Beneficiaries.
                      ---------------------------------------------------------
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be sold,  assigned,  disposed of or  otherwise  transferred  by any of the
parties  hereto  (whether by  operation of law or  otherwise)  without the prior
written consent of the other parties.  Subject to the preceding  sentence,  this
Agreement  shall be binding  upon and shall  inure to the benefit of the parties
hereto and their  respective  successors and assigns.  Notwithstanding  anything
contained  in  this  Agreement  to the  contrary,  nothing  in  this  Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto  or  their  respective  successors  and  assigns  any  rights,  remedies,
obligations or liabilities under or by reason of this Agreement.


                                       7
<PAGE>


                  (f) Further  Assurances.  In the event of any  exercise of the
                      -------------------
Option by Parent,  the  Company  and Parent  shall  execute and deliver all such
documents  and  instruments  and  take  all  such  further  action  that  may be
reasonably  necessary in order to consummate  the  transactions  provided for by
such exercise.

                  (g) Survival.  All the Company's  representations,  warranties
                      --------
and covenants contained herein shall survive each Option Closing.

                  (h) ENFORCEMENT.  THE PARTIES  HERETO AGREE THAT  IRREPARABLE
                      ------------
DAMAGE  WOULD OCCUR IN THE EVENT THAT ANY OF THE  PROVISIONS  OF THIS  AGREEMENT
WERE NOT PERFORMED IN ACCORDANCE  WITH THEIR  SPECIFIC  TERMS OR WERE  OTHERWISE
BREACHED.  IT IS  ACCORDINGLY  AGREED  THAT  SUBJECT TO THE NEXT  SENTENCE,  THE
PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF
THIS AGREEMENT AND TO ENFORCE  SPECIFICALLY  THE TERMS AND PROVISIONS  HEREOF IN
ANY COURT OF THE UNITED STATES OR ANY STATE HAVING  JURISDICTION,  THIS BEING IN
ADDITION  TO ANY OTHER  REMEDY TO WHICH THEY ARE  ENTITLED  AT LAW OR IN EQUITY.
EACH OF THE  PARTIES  HERETO  (I)  CONSENTS  TO SUBMIT  ITSELF  TO THE  PERSONAL
JURISDICTION  OF ANY  FEDERAL  COURT  LOCATED  IN THE STATE OF  DELAWARE  OR ANY
DELAWARE  STATE COURT IN THE EVENT ANY DISPUTE  ARISES OUT OF THIS  AGREEMENT OR
ANY OF THE  TRANSACTIONS  CONTEMPLATED  BY THIS  AGREEMENT,  (II) AGREES THAT IT
SHALL NOT  ATTEMPT TO DENY OR DEFEAT  SUCH  PERSONAL  JURISDICTION  BY MOTION OR
OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT,  AND (III) AGREES THAT IT SHALL NOT
BRING  ANY  ACTION  RELATING  TO  THIS  AGREEMENT  OR ANY  OF  THE  TRANSACTIONS
CONTEMPLATED  BY THIS  AGREEMENT IN ANY COURT OTHER THAN A FEDERAL COURT SITTING
IN THE STATE OF NEW YORK OR A NEW YORK STATE COURT.

                  (i) Counterparts.  This  Agreement  may  be  executed  by  the
                      ------------
parties  hereto in separate  counterparts,  each of which when so  executed  and
delivered  shall  be an  original,  but all  such  counterparts  shall  together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.



                 [Remainder of Page Intentionally Left Blank]



                                       8
<PAGE>



            IN  WITNESS  WHEREOF,  the  Company  and  Parent  have  caused  this
Agreement to be signed by their respective officers thereunto duly authorized as
of the day and year first written above.

                                          PULSEPOINT COMMUNICATIONS

                                          By:   /s/ Mark C. Ozur
                                             ----------------------------
                                             Name:  Mark C. Ozur
                                             Title: President and C.E.O.

                                          UNISYS CORPORATION

                                          By:   /s/ Robert H. Brust
                                             ----------------------------
                                             Name:  Robert H. Brust
                                             Title: Senior Vice President and
                                                    Chief Financial Officer




[Signature Page to Stock Option Agreement]




                                       9



                                                                       EXHIBIT B
                                                         TO THE MERGER AGREEMENT


                                VOTING AGREEMENT

            VOTING   AGREEMENT,   dated  as  of  June  14,  1999  (this  "Voting
Agreement"),   by  and  between  Unisys  Corporation,   a  Delaware  corporation
("Parent"),    and    ___________________________________,    a   ______________
("Shareholder").

            WHEREAS, Parent, Pulsepoint Communications, a California corporation
(the "Company"),  and Shellco Inc., a newly-formed  California corporation and a
      -------
direct, wholly-owned subsidiary of Parent ("Merger Sub"), have contemporaneously
                                            ----------
with the execution of this Voting  Agreement  entered into an Agreement and Plan
of  Merger of even  date  herewith  (as may be  amended  from time to time,  the
"Merger Agreement") which provides, among other things, that Merger Sub shall be
 ----------------
merged  (the  "Merger")  with and into the  Company  pursuant  to the  terms and
               ------
conditions thereof;

            WHEREAS, as an essential condition and inducement to Parent to enter
into  the  Merger  Agreement  and in  consideration  therefor,  the  undersigned
Shareholder and Parent have agreed to enter into this Voting Agreement; and

            WHEREAS,  as of the date  hereof,  Shareholder  owns of  record  and
beneficially  the shares of common  stock,  no par value,  of the  Company  (the
"Company Common Stock") and the shares of series B convertible  preferred stock,
 --------------------
no par value, of the Company (the "Preferred  Stock" and  collectively  with the
Company  Common  Stock,  the  "Company  Stock") set forth  opposite  its name on
                               --------------
Schedule A hereto and desires to enter into this  Agreement with respect to such
- ----------
shares of Company Stock.

            NOW,  THEREFORE,  in  consideration  of the foregoing and the mutual
covenants and agreements  contained herein and in the Merger Agreement,  and for
other good and valuable consideration,  the receipt and sufficiency of which are
hereby  acknowledged,  and  intending to be legally  bound  hereby,  the parties
hereto hereby agree as follows:

                                    ARTICLE I
                                VOTING OF SHARES

            Section 1.1 Voting  Agreement.  Shareholder  hereby   agrees  to (a)
                        -----------------
appear, or cause the holder of record on any applicable record date (the "Record
                                                                          ------
Holder")  to  appear,  for the  purpose of  obtaining  a quorum at any annual or
- ------
special meeting of shareholders of the Company and at any adjournment thereof at
which matters  relating to the Merger,  the Merger  Agreement or any transaction
contemplated  thereby are considered and (b) vote, or cause the Record Holder to
vote,  in person or by proxy,  all of the shares of the  Company  Stock owned by
Shareholder,  or with  respect to which such  Shareholder  has or shares  voting
power or control,  and all of the shares of Company  Stock which shall,  or with
respect to which  voting power or control  shall,  hereafter be acquired by such
Shareholder  (collectively,  the  "Shares")  in favor of the Merger,  the Merger
                                   ------
Agreement and the  transactions  contemplated  by the Merger  Agreement (in each
case as provided for in the Merger Agreement as in effect on the date hereof and
including  amendments  thereto  that do not effect a change to the  transactions
contemplated  thereby as of the date hereof that would  materially and adversely
affect the Shareholder).


<PAGE>


            Section 1.2. Irrevocable  Proxy.   As   security  for  Shareholder's
                         ------------------
obligations under Section 1.1 hereof, Shareholder hereby irrevocably constitutes
and  appoints  Parent as his or its attorney  and proxy in  accordance  with the
provisions of Sections 705 and 706 of the California  General  Corporation  Law,
with full power of substitution  and  resubstitution,  to vote the Shares at any
annual or special meeting of shareholders of the Company, however called, as and
to the extent provided in clauses (a) and (b) of Section 1.1 hereof.  THIS PROXY
AND POWER OF ATTORNEY IS IRREVOCABLE  AND COUPLED WITH AN INTEREST.  Shareholder
hereby  revokes all other  proxies and powers of attorney with respect to his or
its  Shares  that he or it may have  heretofore  appointed  or  granted,  and no
subsequent  proxy or power of attorney  shall be granted (and if granted,  shall
not be effective) by Shareholder with respect  thereto,  other than for the sole
purpose of voting the Shares as contemplated by Section 1.1 hereof.

            Section 1.3 No Ownership Interest.  Nothing contained in this Voting
                        ---------------------
Agreement shall be deemed to vest in Parent any direct or indirect  ownership or
incidence of ownership of or with respect to any Shares.  All rights,  ownership
and  economic  benefits of and relating to the Shares shall remain and belong to
Shareholder,  and Parent shall have no authority to manage, direct, superintend,
restrict,  regulate,  govern, or administer any of the policies or operations of
the Company or exercise  any power or  authority  to direct  Shareholder  in the
voting  of any of the  Shares,  except  as  otherwise  provided  herein,  or the
performance of Shareholder's  duties or responsibilities as a shareholder of the
Company.

            Section 1.4 No Inconsistent Agreements. Shareholder hereby covenants
                        --------------------------
and agrees that,  except as contemplated by this Voting Agreement and the Merger
Agreement,  Shareholder  (a) has not  entered,  and  shall not enter at any time
while this Voting  Agreement  remains in effect,  into a voting  agreement  with
respect to the Shares;  (b) has not  deposited and shall not deposit at any time
while this Voting Agreement  remains in effect,  any Shares into a voting trust;
(c) has not granted, and shall not grant at any time while this Voting Agreement
remains in effect, a proxy, power of attorney or other authorization or consent,
in any case set out in  paragraphs  (a) through (c) which is  inconsistent  with
this  Voting  Agreement;  and (d) shall not take any action  that would make any
representation  or warranty of Shareholder  contained herein untrue or incorrect
or have the effect of preventing or disabling Shareholder from performing his or
its obligations under this Voting Agreement.

                                   ARTICLE II
                              TRANSFER; CONVERSION

            Section 2.1 Transfer of Title.
                        -----------------

            (a)   Shareholder  hereby covenants and agrees that such Shareholder
will not, except as provided in Section 2.2 hereof,  prior to the termination of
this Voting Agreement,  either directly or indirectly,  offer or otherwise agree
to sell, assign, pledge,  hypothecate,  transfer,  exchange,  convert or dispose
("Transfer")  of  any  Shares  or  options  to  purchase  Company  Common  Stock
  --------
("Options") or any other  securities or rights  convertible into or exchangeable
  -------
for shares of Company  Common  Stock,  owned either  directly or  indirectly  by
Shareholder or with respect to which  Shareholder  has the power of disposition,
whether now or hereafter  acquired,


                                     - 2 -
<PAGE>


without the prior written consent of Parent (provided  nothing  contained herein
will be deemed to restrict the  exercise of Options),  unless the Person to whom
Shares or Options have been sold, assigned, pledged, hypothecated,  transferred,
exchanged or disposed agrees to be bound by this Voting  Agreement as if a party
hereto.

            (b)   Shareholder  hereby agrees and  consents  to the entry of stop
transfer  instructions  by the  Company  against  the  transfer  of  any  Shares
inconsistent with the terms of Section 2.1(a) or the Section 2.2 hereof.

            Section 2.2 Conversion.  (a) Shareholder  hereby agrees that it will
                        ----------
not  convert  any shares of  Preferred  Stock held by it during the term of this
Voting Agreement except as follows:  (i) such shares of Preferred Stock shall be
converted in accordance  with the provisions of the letter from the  undersigned
dated as of the date hereof to Unisys Corporation and PulsePoint  Communications
(the  "Letter  Agreement")  and (ii)  such  shares  of  Preferred  Stock  may be
converted at any time in an automatic conversion pursuant to Section 4(l)(2) and
(3) of the  Company's  Certificate  of  Determination  of  Rights,  Preferences,
Privileges and Restriction of the Preferred Stock (a "Forced Conversion").

            (b)  Shareholder  hereby agrees to cause a Forced  Conversion of all
shares of Preferred  Stock held by all holders  thereof,  such  conversion to be
effective  immediately upon approval of the Merger by the holders of the Company
Common  Stock and the  holders  of the  Preferred  Stock at the  meeting  of the
shareholders of the Company called in connection with the Merger. Promptly after
the date hereof,  Shareholder shall execute a conversion letter substantially in
the form of the letter  attached  hereto as Exhibit  I, and shall  deliver  such
letter to the Company along with stock certificates and such other documents and
instruments  as may be  necessary  to effect such  conversion  under this Voting
Agreement and the Letter  Agreement,  such documents to be held in escrow by the
Company until satisfaction of conditions precedent hereunder or under the Letter
Agreement, as the case may be.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES
                                 OF SHAREHOLDER

            Shareholder hereby represents and warrants to Parent as follows:

            Section 3.1 Authority  Relative To This  Agreement.  Shareholder  is
                        --------------------------------------
competent to execute and deliver this Voting Agreement and the Letter Agreement,
to  perform  its  obligations  hereunder  and  to  consummate  the  transactions
contemplated  hereby.  The execution and delivery of this Voting Agreement,  the
Letter Agreement and the consummation of the  transactions  contemplated  hereby
have been duly and validly  authorized  by all  necessary  action on the part of
Shareholder,  and no other  proceedings on the part of Shareholder are necessary
to authorize this Voting  Agreement,  the Letter  Agreement or to consummate the
transactions  contemplated  hereby. Each of this Voting Agreement and the Letter
Agreement has been duly and validly  executed and delivered by Shareholder  and,
assuming the due  authorization,  execution  and  delivery by all other  parties
thereto,  constitutes  a legal,  valid and binding  obligation  of  Shareholder,
enforceable against such Shareholder in accordance with its terms.


                                     - 3 -
<PAGE>


            Section 3.2 No Conflict.  No authorization,  consent or approval of,
                        -----------
or filing with,  any court or any public body or authority is necessary  for the
consummation  by Shareholder  of the  transactions  contemplated  by this Voting
Agreement  and the Letter  Agreement.  The execution and delivery of this Voting
Agreement and the Letter  Agreement by Shareholder does not, and the performance
of this Voting  Agreement  and the Letter  Agreement by  Shareholder  shall not,
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both  would  become a  default)  under,  or give to others  any
rights of termination,  amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on, any of the Shares or Options  pursuant
to, any note, bond, mortgage,  indenture,  contract,  agreement, lease, license,
permit,  franchise or other  instrument or obligation to which  Shareholder is a
party or by which Shareholder or the Shares or Options are bound or affected.

            Section 3.3 Title to the  Shares.  The Shares and  Options  held by
                        --------------------
Shareholder are owned free and clear of all security interests,  liens,  claims,
pledges,   options,  rights  of  first  refusal,   agreements,   limitations  on
Shareholder's  voting  rights,  charges  and other  encumbrances  of any  nature
whatsoever,  and  Shareholder  has not  appointed  or granted  any proxy,  which
appointment or grant remains effective, with respect to the Shares.

                                   ARTICLE IV
                                CERTAIN COVENANTS

            Section 4.1 No  Solicitation.  From  the  date  hereof  until  the
                        ----------------
Effective  Time (as  defined  in the  Merger  Agreement)  or,  if  earlier,  the
termination of the Merger Agreement,  Shareholder shall not (whether directly or
indirectly  through  advisors,  agents  or other  intermediaries)  (a)  solicit,
initiate or encourage any Company  Acquisition  Proposal (as also so defined) or
(b) engage in  discussions  or  negotiations  with,  or disclose any  non-public
information  relating to the Company or its Subsidiaries to, any Person (as also
so  defined)  that  has  made a  Company  Acquisition  Proposal  or has  advised
Shareholder,  or to his knowledge,  any other  shareholder of the Company,  that
such Person is interested in making a Company Acquisition Proposal.

            Section 4.2 Termination.   This  Agreement  shall   automatically
                        -----------
terminate  upon  the  earlier  to  occur of (a) the  termination  of the  Merger
Agreement in  accordance  with its terms or (b) the  Effective  Time.  Upon such
termination,  no  party  shall  have  any  further  obligations  or  liabilities
hereunder,  provided that no such  termination  shall relieve  either party from
liability for any breach of this Voting  Agreement or the Letter Agreement prior
to such termination.

                                    ARTICLE V
                                  MISCELLANEOUS

            Section 5.1 Enforcement of Agreement.  The parties hereto agree that
                        ------------------------
irreparable  damage would occur in the event that any of the  provisions of this
Voting  Agreement were not performed in accordance  with its specified  terms or
were  otherwise  breached.  It is  accordingly  agreed that the parties shall be
entitled to an  injunction  or  injunctions  to prevent  breaches of this Voting
Agreement  and to specific  performance  of the terms and  provisions  hereof in
addition to any other remedy to which they are entitled at law or in equity.


                                     - 4 -
<PAGE>


            Section 5.2 Successors and Affiliates; No Third Party Beneficiaries.
                        -------------------------------------------------------
Except  pursuant to a Transfer  permitted  by Section 2.1 hereof,  neither  this
Voting Agreement nor any of the rights, interests or obligations hereunder shall
be  assigned  by any of the  parties  hereto  (whether  by  operation  of law or
otherwise) without the prior written consent of the other party.  Subject to the
preceding  sentence,  this Voting Agreement and the Letter Agreement shall inure
to the  benefit  of and  shall be  binding  upon the  parties  hereto  and their
respective heirs, legal  representatives  and permitted assigns.  If Shareholder
shall at any time hereafter  acquire  ownership of, or voting power with respect
to, any additional Shares in any manner, by operation of law or otherwise,  such
Shares shall be held subject to all of the terms and  provisions  of this Voting
Agreement and the Letter Agreement. Without limiting the foregoing,  Shareholder
specifically  agrees that the obligations of Shareholder  hereunder shall not be
terminated by operation of law, whether by death or incapacity of Shareholder or
otherwise.

            Section 5.3 Entire Agreement.  This Voting Agreement,  together with
                        ----------------
the Letter  Agreement  and the  Affiliate  Agreement  (as  defined in the Merger
Agreement),  if and to the extent  entered into by the  Shareholder  and Parent,
constitute the entire agreement among Parent and Shareholder with respect to the
subject  matter hereof and supersede all prior  agreements  and  understandings,
both written and oral,  among Parent and Shareholder with respect to the subject
matter hereof.

            Section 5.4 Captions and  Counterparts.  The captions in this Voting
                        --------------------------
Agreement  are for  convenience  only and shall not be  considered  a part of or
affect the  construction  of  interpretation  of any  provision  of this  Voting
Agreement.  This Voting Agreement may be executed in several counterparts,  each
of which shall  constitute  one in the same  instrument.  Each  counterpart  may
consist of a number of copies  hereof each signed by less than all, but together
signed by all of the parties hereto.

            Section 5.5 Amendment.  This Voting  Agreement  may not be amended
                        ---------
except by an instrument in writing signed by the parties hereto.

            Section 5.6 Waivers. Except as provided in this Voting Agreement, no
                        -------
action taken pursuant to this Voting Agreement, including without limitation any
investigation  by or on behalf of any  party,  shall be deemed to  constitute  a
waiver by the party taking such action of compliance  with any  representations,
warranties,  covenants or  agreements  contained in this Voting  Agreement.  The
waiver by any party  hereto of a breach  of any  provision  hereunder  shall not
operate or be  construed  as a wavier of any prior or  subsequent  breach of the
same or any other provision hereunder.

            Section 5.7 Severability.  If  any term or other  provision  of this
                        ------------
Voting Agreement is invalid,  illegal or incapable of being enforced by any rule
of law, or public  policy,  all other  conditions  and provisions of this Voting
Agreement  shall  nevertheless  remain  in full  force  and  effect.  Upon  such
determination that any term or other provision is invalid,  illegal or incapable
of being  enforced,  the parties hereto shall  negotiate in good faith to modify
this  Voting  Agreement  so as to effect the  original  intent of the parties as
closely as possible to the  fullest


                                     - 5 -
<PAGE>


extent permitted by applicable law in a mutually acceptable manner in order that
the terms of this Voting  Agreement  remain as  originally  contemplated  to the
fullest extent possible.

            Section 5.8 Notices.  All notices and other  communications given or
                        -------
made  pursuant  hereto shall be in writing and shall be deemed to have been duly
given or made and shall be effective upon receipt, if delivered personally, upon
receipt of a transmission  confirmation  if sent by facsimile (with a confirming
copy sent by overnight  courier) and on the next business day if sent by Federal
Express,  United  Parcel  Service,  Express  Mail or other  reputable  overnight
courier to the parties at the following  addresses (or at such other address for
a party as shall be specified by notice):

            If to Shareholder:

            ________________________
            ________________________
            ________________________
            Attn:       ____________
            Telephone:  ____________
            Facsimile:  ____________

            With a copy to:

            ________________________
            ________________________
            ________________________
            Attn:       ____________
            Telephone:  ____________
            Facsimile:  ____________


            If to Parent:

            Unisys Corporation
            Unisys Way
            Blue Bell, Pennsylvania  19424
            Attention:    General Counsel
            Telecopy No.: (215) 986-0624

            with a copy to:

            Fried, Frank, Harris, Shriver & Jacobson
            One New York Plaza
            New York, New York, 10004
            Attention:  Arthur Fleischer, Jr.
                        Charles Nathan
            Telephone:  (212) 859-8000
            Facsimile:  (212) 859-4000


                                     - 6 -
<PAGE>


            Section 5.9 Governing Law. This Voting  Agreement  shall be governed
                        -------------
by,  and  construed  in  accordance  with,  the laws of the  State  of  Delaware
regardless of the laws that might otherwise govern under  applicable  principles
of conflicts of law.

            Section 5.10 Jurisdiction.  Each of the parties  hereto (i) consents
                         ------------
to submit  itself to the personal  jurisdiction  of any Federal Court located in
the State of  Delaware  or any  Delaware  State  Court in the event any  dispute
arises out of this Voting Agreement or any of the  transactions  contemplated by
this Voting  Agreement;  (ii) agrees that it shall not attempt to deny or defeat
such  personal  jurisdiction  by motion or other request for leave from any such
Court,  and (iii)  agrees  that it shall not bring any action  relating  to this
Voting  Agreement  or  any of  the  transactions  contemplated  by  this  Voting
Agreement  in any Court  other  than a  Federal  Court  sitting  in the State of
Delaware or a Delaware State Court.

            IN WITNESS  WHEREOF,  each of the  parties  hereto  have caused this
Voting Agreement to be duly executed as of the date first written above.

                                    UNISYS CORPORATION


                                    By:____________________________
                                    Name:__________________________
                                    Title:_________________________



                                    SHAREHOLDER


                                    By:____________________________
                                    Name:__________________________
                                    Title:_________________________


                                     - 7 -
<PAGE>


                                   SCHEDULE A


Shareholder Name Company Common Stock Held Company Series B Preferred Stock Held
- ---------------- ------------------------- -------------------------------------


                                     - 8 -
<PAGE>


                                    EXHIBIT I

                            FORM OF CONVERSION LETTER

                                                                          [date]


PulsePoint Communications
6307 Carpinteria Avenue
Carpinteria, California 93013
Attn: Secretary

            RE:   Series B Convertible Preferred Stock of PulsePoint
                  Communications (the "Company") -- Automatic Conversion
                  ------------------------------------------------------


Ladies and Gentlemen:

            This letter is being  delivered to you in connection with the Voting
Agreements  dated as of June __, 1999 by and among each of the  undersigned  and
Unisys  Corporation.   The  undersigned  hold  shares  of  the  above-referenced
Preferred  Stock  (the  "Preferred  Stock")  in excess of fifty  percent  of the
outstanding shares of such Preferred Stock.

            Notice  is  hereby  given   pursuant  to  Section   4(l)(2)  of  the
Certificate of Determination of Rights, Preferences, Privileges and Restrictions
of Series B  Convertible  Preferred  Stock of the Company  that the  undersigned
shall cause an automatic  conversion of all shares of Preferred Stock under such
Section,  such conversion to be effective immediately upon the occurrence of the
approval of the Merger defined below by the  shareholders  of the Company at the
shareholder's  meeting called by the Company to approve the Merger. No automatic
conversion  shall be deemed to have  occurred  until such time as the  foregoing
condition has occurred.

            The term  "Merger"  means the merger of Shellco Inc., a wholly owned
subsidiary of Unisys  Corporation,  with and into the Company as contemplated by
the  Agreement and Plan of Merger dated as of June __, 1999 by and among Unisys,
Shellco Inc. and the Company.


                                      - 1 -
<PAGE>


            This  letter may be executed  in one or more  counterparts,  each of
which shall constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof signed by less than all, but together signed by all
the parties hereto.



                                             Sincerely,



                                      - 2 -
<PAGE>


                                                                       EXHIBIT C
                                                         TO THE MERGER AGREEMENT


                            ARTICLES OF INCORPORATION
                                       OF
                                  SHELLCO INC.

                                      Name
                                      ----

      One:  The name of the corporation is: SHELLCO INC.

                                     Purpose
                                     -------

      Two:  The  purpose of this  corporation  is to engage in any lawful act or
 activity for which a corporation may be organized under the General Corporation
 Law of California other than the banking  business,  the trust company business
 or the practice of a profession  permitted to be incorporated by the California
 Corporations Code.

                                Agent for Service
                                -----------------

      Three: The name of this corporation's initial agent for service of process
 is CT Corporation  System, 818 West Seventh Street, 2nd Floor, Los Angeles,  CA
 90017.

                                Authorized Shares
                                -----------------

      Four:  This corporation is authorized to issue only one class of shares of
 stock;  and the total number of shares which this  corporation is authorized to
 issue is one thousand (1,000) shares of common stock, no par value.

                               Director Liability
                               ------------------

      Five:  The  liability of the directors of  the  corporation  for  monetary
 damages  shall   be  eliminated  to  the  fullest  extent   permissible   under
 California law.

                            Indemnification of Agents
                            -------------------------

      Six: This corporation is authorized to provide  indemnification  of agents
 (as defined in Section 317 of the California  Corporations  Code) through bylaw
 provisions,  agreements  with agents,  vote of  shareholders  or  disinterested
 directors or otherwise, in excess of the indemnification otherwise permitted by
 Section 317 of the California Corporations Code, subject only to the applicable
 limits  set  forth in  Section  204 of the  California  Corporations  Code with
 respect to actions for breach of duty to the corporation and its shareholders.

 Date:  June 11, 1999.

                                          ______________________________
                                          Anna Czege
                                          Incorporator


<PAGE>


                                                                       EXHIBIT D
                                                         TO THE MERGER AGREEMENT




                        FORM OF COMPANY AFFILIATE LETTER
                        --------------------------------


                                                           ______________, _____

Unisys Corporation
Unisys Way
Blue Bell, Pennsylvania 19424
Attention: General Counsel

PulsePoint Communications
6307 Carpinteria Avenue
Carpinteria, California  93013

Ladies and Gentlemen:

      The  undersigned,  [each] a holder of shares of common stock, no par value
per share (the "Company  Common  Stock") and shares of preferred  stock,  no par
                ----------------------
value per  share  (the  "Preferred  Stock"),  of  PulsePoint  Communications,  a
                         ----------------
California  corporation  (the  "Company"),  has been advised that as of the date
                                -------
hereof,  the undersigned  may be deemed to be an "affiliate" of the Company,  as
the term  "affiliate"  is (i) defined for purposes of paragraphs  (c) and (d) of
Rule 145 of the Rules and Regulations of the Securities and Exchange  Commission
(the  "Commission")  and/or (ii) used in and for purposes of  Accounting  Series
       ----------
Releases 130 and 135, as amended, of the Commission.

      The undersigned has been further advised that pursuant to the terms of the
Agreement  and  Plan  of  Merger,  dated  as  of  June  14,  1999  (the  "Merger
                                                                          ------
Agreement"),  by  and  between  the  Company,  Unisys  Corporation,  a  Delaware
- ---------
corporation ("Parent"),  and Shellco Inc., a California corporation and a wholly
              ------
owned  subsidiary  of Parent  ("Shellco"),  Shellco will merge with and into the
                                -------
Company,  and as a result of such merger (the "Parent Merger"),  the undersigned
                                               -------------
will receive shares of Parent Common Stock (as defined in the Merger  Agreement)
in exchange for shares of Company Common Stock and Preferred  Stock owned by the
undersigned.

      1.  The   undersigned   represents,   warrants  and  covenants   that  the
undersigned:


                                      - 1 -
<PAGE>


            A.  Has  read  carefully   this  letter  and  discussed   applicable
      limitations  upon the  ability of the  undersigned  to sell,  transfer  or
      otherwise  dispose of Parent  Common  Stock to the extent the  undersigned
      believes  necessary  with  counsel of the  undersigned  or counsel for the
      Company.

            B.  Has been advised that the issuance of Parent Common Stock to the
      undersigned  pursuant to the Merger will be registered with the Commission
      under  the Act on a  Registration  Statement  on Form  S-4.  However,  the
      undersigned  has also  been  advised  that,  since at the time the  Merger
      Agreement, and the Merger will be submitted for a vote of the stockholders
      of the Company, the undersigned may be deemed to have been an affiliate of
      the Company and the distribution by the undersigned of Parent Common Stock
      has not been registered  under the Securities Act of 1933, as amended (the
      "Securities  Act"),  the undersigned  may not sell,  transfer or otherwise
      dispose of Parent  Common Stock issued to the  undersigned  in the Merger,
      unless (i) such sale,  transfer or other  disposition  has been registered
      under the Securities Act, (ii) such sale, transfer or other disposition is
      made in  conformity  with the  volume  and other  limitations  of Rule 145
      promulgated  by the  Commission  under the  Securities  Act,  or (iii) the
      undersigned  delivers  an  opinion  of counsel  reasonably  acceptable  to
      Parent,  or a  "no-action"  or  interpretive  letter of the  Commission is
      furnished  to  Parent,   stating  that,  such  sale,   transfer  or  other
      disposition  is otherwise  exempt from  registration  under the Securities
      Act.

            C.  Understands  that Parent is under no  obligation to register the
      sale,  transfer  or  other  disposition  of  Parent  Common  Stock  by the
      undersigned or on behalf of the undersigned under the Securities Act or to
      take any  other  action  necessary  in order  to make  compliance  with an
      exemption from such registration available.

            D.  Also understands that Parent may give stop transfer instructions
      to its transfer  agent with respect to Parent  Common Stock to enforce the
      restrictions  on the undersigned set forth herein and that it reserves the
      right to place on the  certificates  for Parent Common Stock issued to the
      undersigned, or any substitutions therefor, a legend stating in substance:

            "The securities  represented by this certificate have been issued in
      a transaction  to which Rule 145  promulgated  under the Securities Act of
      1933 applies and may only be sold or otherwise  transferred  in compliance
      with the requirements of Rule 145 or pursuant to a registration  statement
      under said Act or an exemption from such registration."


                                      - 2 -
<PAGE>


            E.  Also understands  that unless the transfer by the undersigned of
      Parent Common Stock of the undersigned  has been registered  under the Act
      or is a sale made in conformity  with the  provisions of Rule 145,  Parent
      reserves the right to put the following legend on the certificates  issued
      to transferees of the undersigned:

            "The  securities  represented  by this  certificate  have  not  been
      registered  under  the  Securities  Act of 1933 and were  acquired  from a
      person  who  received  such  shares  in a  transaction  to which  Rule 145
      promulgated under the Securities Act of 1933 applies.  The securities have
      been  acquired  by the  holder  not  with  a view  to,  or for  resale  in
      connection  with,  any  distribution  thereof  within  the  meaning of the
      Securities  Act  of  1933  and  may  not be  sold,  pledged  or  otherwise
      transferred  except in accordance with an exemption from the  registration
      requirements of the Securities Act of 1933."

            F.  Further  represents, warrants and covenants  that, from the date
      that is 30 days  prior to the  Effective  Time (as  defined  in the Merger
      Agreement) the undersigned  will not sell,  transfer or otherwise  dispose
      of, or, as  contemplated  by  Accounting  Series  Releases 130 and 135, as
      amended,  of the  Commission,  reduce his, her or its risk relative to any
      shares of Company Common Stock held by the undersigned and the undersigned
      will not sell,  transfer or otherwise  dispose of, or as  contemplated  by
      Accounting Series Releases 130 and 135, as amended, reduce his, her or its
      risk  relative  to any  shares of Parent  Company  Stock  received  by the
      undersigned  in the Merger or other  shares of Parent  Common  Stock until
      after  such  time as  results  covering  at  least  30  days  of  combined
      operations of Parent and the Company have been published by Parent, in the
      form of a quarterly earnings report, an effective  registration  statement
      filed with the Commission,  a report to the Commission on Form 10-K, 10-Q,
      or 8-K, or any other  public  filing or  announcement  which  includes the
      results of at least 30 days of combined operations.

            G. Neither the execution of this letter nor any provisions set forth
      herein shall be  construed as an admission on the part of the  undersigned
      that the  undersigned  is an  affiliate of the Company as described in the
      first  paragraph  of  this  letter,  or as a  waiver  of  any  rights  the
      undersigned  may have to object to any claim that the  undersigned is such
      an affiliate on or after the date of this letter.

      2. By Parent's and the Company's  acceptance  of this letter,  each of the
Company and Parent hereby  severally  agrees with the  undersigned to the extent
applicable as follows:

            A.  For so  long  as  and to the  extent  necessary  to  permit  the
undersigned


                                      - 3 -
<PAGE>


      to sell  Parent  Common  Stock  pursuant  to Rule 145 and,  to the  extent
      applicable,  Rule 144 under the Act,  Parent shall (a) use its  reasonable
      efforts to (i) file, on a timely  basis,  all reports and data required to
      be  filed  with  the  Commission  by it  pursuant  to  Section  13 of  the
      Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii)
                                                        ------------
      furnish to the undersigned upon request a written  statement as to whether
      Parent has complied with such reporting  requirements during the 12 months
      preceding  any proposed  sale of Parent  Common  Stock by the  undersigned
      under Rule 145, and (b)  otherwise  use its  reasonable  efforts to permit
      such sales pursuant to Rule 145 and Rule 144.  Parent and the Company have
      filed all reports  required to be filed with the Commission  under Section
      13 of the Exchange Act during the preceding 12 months.

            B. It is understood and agreed that certificates with the legend set
      forth in  paragraphs  D and E above will be  substituted  by  delivery  of
      certificates  without  such legend if (i) one year shall have elapsed from
      the date the  undersigned  acquired  Parent Common Stock,  received in the
      Merger and the  provisions  of Rule  145(d)(2)  are then  available to the
      undersigned,  (ii)  two  years  shall  have  elapsed  from  the  date  the
      undersigned  acquired  Parent Common Stock  received in the Merger and the
      provisions of Rule 145(d)(3) are then  applicable to the  undersigned,  or
      (iii) Parent has received either an opinion of counsel,  which opinion and
      counsel  shall be  reasonably  satisfactory  to it,  or a  "no-action"  or
      interpretive  letter  obtained  by the  undersigned  from the staff of the
      Commission,  to the effect that the  restrictions  imposed by Rule 144 and
      Rule 145 under the Securities Act no longer apply to the undersigned.


                                          Very truly yours,

                                          __________________________
                                          Signature


                                          __________________________
                                          Print Name


                                      - 4 -
<PAGE>


ACCEPTED:

Dated:

UNISYS CORPORATION

By:_____________________________
Name:___________________________
Title:__________________________

Dated:

PULSEPOINT COMMUNICATIONS

By:_____________________________
Name:___________________________
Title:__________________________

Dated:



                                      - 5 -




                                                                    EXHIBIT 10.3


                                  June 14, 1999

Unisys Corporation
Unisys Way
Blue Bell, Pennsylvania  19424

PulsePoint Communications
6307 Carpinteria Avenue
Carpinteria, California  93013

Ladies and Gentlemen:

      The  undersigned  gives this letter in connection with the proposed merger
(the   "Merger")  of  PulsePoint   Communications,   a  California   corporation
("PulsePoint") with and into a wholly-owned subsidiary of Unisys Corporation,  a
Delaware  corporation  ("Unisys").  As an  inducement  and  condition to Unisys'
willingness  to enter  into the  Agreement  and Plan of Merger  between  Unisys,
PulsePoint and Shellco Inc. (the "Merger Agreement"), the undersigned gives this
letter agreement in favor of Unisys and PulsePoint.

      1. The undersigned  agrees,  subject to the satisfaction of the conditions
set forth in paragraph 2 hereof and upon receipt of written notice  delivered to
the  undersigned  at the  address  set forth below (by  facsimile  or  overnight
courier) to the effect that such  conditions  have been  satisfied,  to promptly
convert that  percentage  of its  holdings of  PulsePoint  Series B  Convertible
Preferred  Stock,  no par value  (the  "Preferred  Stock")  that is equal to the
lesser of (i) the  percentage  of  Preferred  Stock held by the Oak Entities (as
such term is defined below) agreed to be converted by the Oak Entities  pursuant
to a  substantially  identical  letter  agreement dated as of the date hereof or
(ii) thirty-seven percent (37%), such conversion to occur in accordance with the
terms of the Certificate of Determination of Rights, Preferences, Privileges and
Restrictions  of  Series  B  Convertible  Preferred  Stock  of  PulsePoint  (the
"Certificate  of  Determination")  prior to the record date (the "Record  Date")
established  for the special  meeting of  PulsePoint  shareholders  at which the
Merger will be considered (the "Special Meeting").

      2. The  obligations  of the  undersigned  set forth in  paragraph 1 hereof
shall be conditioned  upon the  satisfaction  or waiver of each of the following
conditions  precedent:  (1) the  registration  statement  containing  the  Proxy
Statement/Prospectus to be prepared with respect to the Special Meeting will, in
the reasonable  judgment of PulsePoint and Unisys,  be declared  effective (such
date, the  "Effective  Date") by the  Securities  and Exchange  Commission  (the
"SEC") on or before July 30, 1999, and (2) the registration statement containing
such  Proxy  Statement/Prospectus  identifies  a proposed  closing  date for the
Merger to occur on or before  August 31,  1999,  and such  Merger is  reasonably
expected to be consummated on or before such date.

      3. Unless otherwise agreed by the undersigned,  Unisys and PulsePoint,  if
the Effective  Date occurs or will occur on or before July 30, 1999,  the Record
Date shall be no later  than July 30,  1999 and will not,  in any case,  be more
than seven (7)  calendar  days prior to the date agreed upon by  PulsePoint  and
Unisys as the likely date on which the  registration  statement  containing  the
Proxy  Statement/Prospectus  will be declared effective by the SEC. In the event
that the Effective  Date is later than July 30, 1999, the  undersigned  shall no
longer be required to convert its shares of Preferred  Stock and the Record Date
may be a date later than July 30, 1999.

      4. The undersigned has been informed that each of Oak Investment  Partners
V, Limited Partnership;  Oak Investment Partners VII, Limited  Partnership;  Oak
Investment Partners III, A Limited Partnership; Oak VII Affiliates Fund, Limited
Partnership;  Oak V  Affiliates  Fund,  Limited  Partnership;  Bandel L.  Carano
(collectively, the "Oak Entities"); Citiventure 96 Partnership, L.P.; Chancellor
Private Capital Offshore Partners II, L.P.;  Chancellor Private Capital Partners
III, L.P.;  Chancellor  Private  Capital  Offshore  Partners I, C.V.;  Microsoft
Corporation and Frederick J. Warren have executed a letter agreement  similar to
that given hereto and gives this letter agreement in reliance thereon.


                                        1
<PAGE>


Unisys Corporation
PulsePoint Communications
June 14, 1999
Page 2


      5. The  shares of  PulsePoint  Common  Stock,  no par value  (the  "Common
Stock") received upon conversion of the shares of Preferred Stock shall continue
to be subject to the terms of the Voting  Agreement  dated as of the date hereof
by and between Unisys and the undersigned (the "Voting Agreement").

      6. This letter  agreement shall be governed by and construed in accordance
with the laws of the  State  of  Delaware  regardless  of the  laws  that  might
otherwise govern under applicable principals of conflict of laws. The provisions
of Section 5.12 of the Voting Agreement shall apply to this letter agreement.

      7. The undersigned agrees that irreparable damage would occur in the event
that any of the  provisions  of this  letter  agreement  were not  performed  in
accordance with its specified terms or were otherwise breached.  The undersigned
accordingly agrees that Unisys and PulsePoint shall be entitled to an injunction
or  injunctions  to prevent  breaches of this letter  agreement  and to specific
performance of the terms and  provisions  hereof in addition to any other remedy
to which they are entitled at law or in equity.

                                    By:_________________________
                                    Name:_______________________
                                    Title:______________________

                                    Address for notices:


                                    ____________________________
                                    ____________________________
                                    ____________________________
                                    Attn: ______________________
                                    Telephone:  ________________
                                    Facsimile:  ________________

ACKNOWLEDGED AND AGREED TO BY:

UNISYS CORPORATION, a Delaware
corporation

By:___________________________
Name:_________________________
Title:________________________

PULSEPOINT COMMUNICATIONS,
a California corporation

By:___________________________
Name:_________________________
Title:________________________



                                        2





            Unisys Corporation
            PO Box 500
            Blue Bell PA 19424 0001

                                                     NEWS RELEASE
                                                     ------------


Contacts    Brian Daly, Unisys  (215) 986-2214
                        Internet: [email protected]


            Pam Thompson, PulsePoint Communications (805) 566-2000
                        Internet: [email protected]

UNISYS TO ACQUIRE PULSEPOINT COMMUNICATIONS

Will target  new-breed  communications  services  providers  with solutions that
- --------------------------------------------------------------------------------
leverage network convergence
- ----------------------------

BLUE BELL, PA, AND CARPINTERIA,  CA, JUNE 15, 1999 -- Unisys  Corporation (NYSE:
UIS) and PulsePoint Communications (NASDAQ: PLPT) today announced that they have
signed an agreement  for Unisys to acquire  PulsePoint,  a leading  developer of
carrier-class enhanced services solutions for the communications  industry, in a
tax-free,  stock-for-stock  merger.  The purchase price will be dependent on the
value of the Unisys common stock to be issued in the transaction at the closing.
Based on yesterday's closing price of Unisys stock, the value of the transaction
would be  approximately  $100  million on a fully  diluted  basis,  or $6.60 per
PulsePoint common share.

PulsePoint  has  developed  the  industry's  first  "next-generation"  messaging
platform based on Microsoft Windows NT Server and an open-standards architecture
to provide carrier-class that is,  ultra-high-reliability - performance.  Unisys
will use the PulsePoint solutions as multimedia messaging solutions designed for
new-breed  communications services providers,  who are emerging as the result of
telecommunications   industry   deregulation   worldwide  and   leveraging   the
convergence of voice and data networking.


<PAGE>


Page 2

These  solutions will give customers easy access to all their messages -- voice,
FAX and e-mail -- from a single mailbox using a variety of devices: conventional
telephones,  cellular  and smart  phones and  personal  computers.  For example,
consumers  or business  users will be able to retrieve a voice  message  through
their  PC's  e-mail  client  or have an  e-mail  message  read to them  over the
telephone. Page 2

The  acquisition  will  significantly  expand  Unisys  portfolio  of  repeatable
messaging  solutions from those applicable in large telephony companies to those
used by small/mid-size and "next-generation" services providers, who represent a
substantial portion of the worldwide market,  while accelerating the addition of
new features to Unisys current messaging solutions.  Unisys repeatable solutions
for   communications  and  other  key  market  sectors  combine  consulting  and
integration services with software components that can be assembled and modified
quickly  and   cost-effectively   to  meet  the  customer's   specific  business
requirements.

"Best-in-class  repeatable  solutions  for Unisys  strategic  markets  are a key
driver in the  growth  of our  information  services  business  and our  overall
success,"  said  Lawrence  A.  Weinbach,  Unisys  chairman  and chief  executive
officer.   "By  pairing  the   leading-edge   PulsePoint   technology  with  our
comprehensive suite of information  services,  Unisys will be poised to take our
repeatable  messaging  solutions in a new and exciting  direction to address the
needs of new-breed services providers who are revolutionizing the communications
marketplace."

These providers specialize in "next-generation"  solutions that exploit emerging
network  technologies  - such as  Internet  Protocol  (IP)  telephony - that are
different from the conventional telephony networks used by traditional carriers.
The  PulsePoint   solutions  will  provide  a  platform  for  rapid  application
development   and   customization,   enabling  Unisys  to  respond  to  clients'
requirements for applications deployable across all networks.

"The  executives  and  employees  of  PulsePoint  are excited to join the Unisys
team," said Mark C. Ozur, PulsePoint president and chief executive officer. "The
combination  of our  technologies  and  services  positions  Unisys  to lead the
industry in delivering  value added  solutions to the  new-breed  communications
services  providers  while  continuing  to  provide  leading-edge  solutions  to
telephony providers as well.  Together,  we can seize this unique opportunity to
help all customers benefit quickly and economically from the explosive growth of
IP telephony and network convergence."


<PAGE>


Page 3

In the merger,  each PulsePoint share will be converted into Unisys common stock
using an exchange ratio based on the average price of Unisys common stock during
a 20-trading-day period preceding the PulsePoint  shareholder meeting to approve
the transaction. The ratio will provide for a maximum consideration of $6.60 (if
the  average  price  of  Unisys  common  stock  is  above  $33)  and  a  minimum
consideration  of $5.40 (if the average price is below $27) for each  PulsePoint
common share.  If the Unisys  average  price is between $27 and $33,  PulsePoint
shareholders  will receive 0.2 Unisys common shares for each  PulsePoint  share.
PulsePoint  convertible preferred stock will be converted into PulsePoint common
stock prior to the merger.

Based on  yesterday's  closing  price  of  $37.4375  per  Unisys  common  share,
PulsePoint  shareholders  would receive the maximum  consideration  of $6.60, or
0.176 shares of Unisys common stock for each PulsePoint common share. This would
result in a total of approximately 2.4 million Unisys shares being issued in the
merger.  In addition,  all outstanding  PulsePoint  options and warrants will be
converted into Unisys options and warrants.  On a fully diluted basis, the value
of the transaction would be approximately $100 million.

The  acquisition,  which will be  accounted  for as a pooling of  interests,  is
expected to close in the third quarter of 1999.  The  transaction  is subject to
approval by  PulsePoint  common and  preferred  shareholders,  each class voting
separately,  as well as  regulatory  approvals,  including  registration  of the
Unisys shares to be issued in the merger and  Hart-Scott-Rodino  Act review, and
customary closing conditions.

Certain  institutional  holders  owning  more than 90 percent of the  PulsePoint
convertible  preferred  shares and  approximately  10 percent of the  PulsePoint
common  shares have agreed to vote in favor of the merger.  These  holders  have
also agreed, subject to completion of the registration process by July 30, 1999,
to convert a portion of their preferred  holdings into common stock prior to the
PulsePoint  shareholder meeting and to also vote those common shares in favor of
the merger. In such event, 89 percent of the PulsePoint  preferred shares and 38
percent of the PulsePoint common shares will be committed to approve the merger.
If the  registration  process is not  completed by July 30, 1999 and the holders
elect not to convert,  Unisys has the right to terminate the transaction  before
August 20, 1999.


<PAGE>


Page 4

The merger agreement also includes customary  non-solicitation,  termination fee
and expense reimbursement provisions. In addition, PulsePoint has granted Unisys
an option to purchase 19.9% of its outstanding common stock,  exercisable if the
merger is terminated under certain circumstances.

The executive team of PulsePoint and the approximately 150 PulsePoint  personnel
will  continue  to operate  PulsePoint  as a Unisys  company  from  PulsePoint's
Carpinteria, California facility. PulsePoint had 1998 revenue of $25.4 million.

"By  merging  with  PulsePoint,   Unisys  is  gaining  very  talented  solutions
professionals,"  said  Weinbach.  "We  are  certain  that  their  expertise  and
enthusiasm  will  help  further  the  success  of  Unisys  information  services
business."

About PulsePoint Communications
PulsePoint  Communications  develops carrier-grade solutions for progressive and
competitive   telecommunication  service  providers  worldwide.  The  PulsePoint
Enhanced  Application  Platform and PulsePoint  NextGen  Messaging  applications
bring PC  economies  to the  telecommunications  industry.  Users of  PulsePoint
Communications'   enhanced  services   applications  enjoy  anytime,   anywhere,
any-network and  any-device-access to messages and a full range of features that
put them in control of their communications. PulsePoint Communications is an ISO
9001 registered  company.  For more information,  please visit the Company's web
site at www.plpt.com.

About Unisys
Unisys is more than 33,000  employees  helping  customers in 100 countries apply
information  technology to solve their business  problems.  Unisys solutions are
based on a broad portfolio of global information  services including  electronic
business,  systems  integration  including custom and  "repeatable"  application
solutions,  outsourcing,  Microsoft Windows NT services,  network services,  and
multivendor maintenance and support,  coupled with enterprise-class  servers and
associated middleware, software and storage. Repeatable solutions are focused on
key   vertical   markets   including   financial    services,    transportation,
telecommunications, government, publishing,


<PAGE>


Page 5

and other  commercial  markets.  The  company  is  headquartered  in Blue  Bell,
Pennsylvania,  in the Greater  Philadelphia  area.  For more  information on the
company,  access the Unisys  home page on the World Wide Web at  www.unisys.com.
Investor information can be found at  www.unisys.com/investor.

###

RELEASE NO.:  0699/XXXX

NOTE: Statements made in this document that are not historical facts,  including
those regarding future  performance,  are  forward-looking  statements under the
Private Securities  Litigation Reform Act of 1995. These statements are based on
current  expectations and assumptions and involve risks and  uncertainties  that
could  cause  actual  results  to  differ  from  expectations.  These  risks and
uncertainties  are discussed in the company's  latest  quarterly  report on Form
10-Q.

Unisys is a  registered  trademark of Unisys  Corporation.  All other brands and
products  referenced  herein are  acknowledged  to be  trademarks  or registered
trademarks of their respective holders.




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