OBJECTIVE COMMUNICATIONS INC, SB-2/A, 1999-06-07

OBJECTIVE COMMUNICATIONS INC
SB-2/A, 1999-06-07
TELEGRAPH & OTHER MESSAGE COMMUNICATIONS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1999

REGISTRATION NO. 333-72429
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3

TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------

OBJECTIVE COMMUNICATIONS, INC.
(Name of small business issuer in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3669 54-1707962
(State or other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>

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

<TABLE>
<S> <C>
OBJECTIVE COMMUNICATIONS, INC. ROBERT H. EMERY
50 INTERNATIONAL DRIVE 50 INTERNATIONAL DRIVE
PORTSMOUTH, NEW HAMPSHIRE 03801 PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 334-6700 (603) 334-6700
(Address, and telephone number of principal executive (Name, address and telephone
offices and principal place of business) of number agent for service)
</TABLE>

COPY TO:

<TABLE>
<S> <C>
ELLEN C. GRADY, ESQ. DAVID ALAN MILLER, ESQ.
SHAWPITTMAN GRAUBARD MOLLEN & MILLER
1676 INTERNATIONAL DRIVE 600 THIRD AVENUE
MCLEAN, VIRGINIA 22102 NEW YORK, NEW YORK 10016
(703) 790-7946 (212) 818-8661
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, as amended, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, as amended, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE AGGREGATE OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Units, each consisting of three shares of
common stock and two redeemable common
stock purchase warrants(1)................. N/A N/A $17,250,000(2) (3)
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Common stock included as part of the units... N/A N/A N/A N/A
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Warrants included as part of the units....... N/A N/A N/A N/A
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Common stock underlying the warrants included
in the units............................... N/A N/A $18,400,000(4) $2,335(5)
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Representative's purchase option............. 1 $ 100 $ 100 (6)
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Units underlying representative's purchase
option(7).................................. N/A N/A $ 2,475,000 (8)
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Common stock underlying representative's
purchase option units(7)................... N/A N/A N/A N/A
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Warrants underlying representative's purchase
option units(7)............................ N/A N/A N/A N/A
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Common stock underlying warrants underlying
representative's purchase option(7)........ N/A N/A $ 1,600,000(4) $ 167(9)
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Common stock issued in February 1999 private
placement(10).............................. 160,701 (11) (11) (11)
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Common stock issuable upon conversion of
convertible debentures(12)................. 3,433(13) $2.84375(14) $ 9,763 $ 3(13)
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Total........................................ N/A N/A N/A $2,505
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</TABLE>

(Footnotes continue on next page.)
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(1) The Registrant initially filed this registration statement on Form SB-2
(Registration No. 333-72429) on February 16, 1999 to register a public offering
of common stock with a maximum aggregate value of $17,250,000 and paid the
requisite registration fee. Subsequently, the Registrant has determined to
change the offering to which this Registration Statement relates to an offering
of units, with each unit consisting of three shares of common stock and two
redeemable common stock purchase warrants. The units being registered on this
registration statement also have a maximum aggregate value of $17,250,000, and
the Registrant is applying the registration fee previously paid with respect to
the common stock to the units being registered hereunder.

(2) Pursuant to Rule 457(o) under the Securities Act, the Registrant
proposes to offer and sell a maximum aggregate of $17,250,000 in value of units
in this offering, consisting of (i) $15,000,000 in maximum aggregate value of
units issuable in this offering, and (ii) $2,250,000 in maximum aggregate value
of units which the underwriters have the option to purchase from the Registrant
to cover over-allotments, if any.
<PAGE> 2

(3) On February 16, 1999, the Registrant paid a fee of $4,795.50 with
respect to the securities covered by this registration statement. Pursuant to
Rule 457(a), no additional registration fee is required.
(4) Pursuant to Rule 457(g), calculated based on the initial exercise price
to be paid to the Company by the holder upon exercise of the warrant.

(5) The Registrant registered $10,000,000 in value of common stock
underlying the warrants included in the units at the time it filed Amendment No.
2 to this Registration Statement and paid a fee of $2,780 with respect to those
securities. Pursuant to Rule 457(a), the Registrant is paying an additional
registration fee of $2,335 with this filing to cover the additional $8,400,000
in value of common stock underlying the warrants included in the units
registered on this Amendment No. 3 to the Registration Statement.

(6) Pursuant to Rule 457(g), no fee is required.

(7) Pursuant to Rule 416, there are also being registered such additional
securities as may be issued pursuant to the anti-dilution provisions of the
representative's purchase option.

(8) The Registrant has previously paid fees of $688.00 with respect to the
securities underlying the representative's purchase option.

(9) The Registrant registered $1,000,000 in value of common stock underlying
the warrants included in the units at the time it filed Amendment No. 2 to this
Registration Statement and paid a fee of $278 with respect to those securities.
Pursuant to Rule 457(a), the Registrant is paying an additional registration fee
of $167 with this filing to cover the additional $600,000 in value of common
stock underlying the warrants included in the units registered on this Amendment
No. 3 to the Registration Statement.

(10) Consists of shares issued in a private placement completed in February
1999 that may be sold by certain stockholders of the Registrant on a delayed or
continuous basis.

(11) The Registrant previously registered for sale an aggregate of 162,844
shares of common stock issued in the February 1999 private placement for
offering and sale by certain selling stockholders of the Registrant and paid the
applicable filing fee. The filing fee was calculated using a proposed maximum
aggregate price per share determined in accordance with Rule 457(c) under the
Securities Act. Accordingly, pursuant to Rule 457(a), no additional registration
fee is required to be paid with respect to those shares of common stock.

(12) Consists of shares of common stock issuable upon the automatic
conversion of the Registrant's outstanding 5% convertible debentures due 2003
(the "Convertible Debentures") upon the completion of the offering, based on a
conversion price of $3.75 per share. The Convertible Debentures will
automatically convert to shares of common stock upon the completion of the
public offering of units by the Registrant to which this registration statement
relates, at a conversion price of $3.75 per share.

(13) The Registrant previously registered 868,260 shares of common stock for
sale by certain selling stockholders of the Registrant upon conversion of the
Convertible Debentures. In this Amendment No. 3 to the Registration Statement,
the Registrant is increasing to 871,693 the number of shares of common stock
registered for sale by certain selling stockholders upon conversion of the
Convertible Debentures as a result of additional accrued interest on the
Convertible Debentures that will convert to common stock upon completion of this
offering. Pursuant to Rule 457(a), an additional fee of $3 is paid with this
filing to pay the registration fee for the additional shares of common stock
registered on this Amendment No. 3 to the Registration Statement.

(14) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act, based on the average of the high
and low trading prices of the Registrant's common stock as reported on the
Nasdaq SmallCap on June 4, 1999.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 3

EXPLANATORY NOTE

This registration statement contains forms of prospectus relating to (1) a
primary offering of units, each consisting of three shares of common stock and
two warrants to purchase one share of common stock each, in an underwritten
offering (the "Company Prospectus") and (2) shares of common stock owned by
certain stockholders of the Company which may be sold by such holders from time
to time (the "Selling Stockholder Prospectus").

The Selling Stockholder Prospectus will be identical to the Company
Prospectus in all respects except for the front cover page, an addition to the
"Table of Contents," the replacement of the second paragraph on page (i), a
replacement for the "Recent Developments" section in the "Prospectus Summary,"
the deletion from the "Prospectus Summary" of the section entitled "The
Offering," a replacement for the section entitled "Use of Proceeds," the
deletion of the section entitled "Dilution," the addition of a section entitled
"Selling Stockholders," and the replacement of the section entitled
"Underwriting" with a section entitled "Plan of Distribution."

The form of the Company Prospectus is included herein, and the form of the
alternate pages of the Selling Stockholder Prospectus are included herein on
pages X-1 through X-5.
<PAGE> 4

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JUNE 7, 1999

PROSPECTUS

OBJECTIVE COMMUNICATIONS, INC. [OBJECTIVE COMMUNICATIONS LOGO]

2,000,000 Units

Each unit consisting of three shares of common stock
and two redeemable common stock purchase warrants

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

All 2,000,000 units are being sold by Objective Communications, Inc. We
also have given the underwriters the option to purchase an additional 300,000
units to cover over-allotments.

The common stock is traded on The Nasdaq SmallCap Market under the symbol
OCOMC. Until April 30, 1999, our common stock traded on the Nasdaq National
Market under the symbol OCOM. On June 4, 1999, the last sale price of the common
stock as reported on The Nasdaq SmallCap Market was $2.8125 per share.

Prior to this offering, there has been no public market for the units or
the warrants and we cannot assure you that one will develop. We have applied for
quotation of the units and the warrants on The Nasdaq SmallCap Market under the
symbols "OCOMU" and "OCOMW." The common stock and the warrants comprising the
units will not be detachable or separately transferable, and may be traded only
as units, until 90 days after the effective date of the registration statement
of which this prospectus is a part, or such earlier date as Southeast Research
Partners, Inc., the representative of the underwriters of this offering, may
determine. The units will initially be evidenced by separate unit certificates,
and certificates representing the common stock and warrants included in the
units will not be issued until such securities become detachable and separately
transferable. We provide you with additional information regarding the units and
the common stock and warrants comprising the units later in this prospectus
under the caption "Description of Securities."

INVESTING IN THE UNITS INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD INVEST IN
THE UNITS ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.

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PER UNIT TOTAL
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<S> <C> <C>
Public Offering Price...................................... $ $
Underwriting Discounts and Commissions.....................
Proceeds to the Company....................................
</TABLE>

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The underwriters are offering the units on a firm commitment basis subject
to various conditions and may reject all or part of any order.

SOUTHEAST RESEARCH PARTNERS, INC. LADENBURG THALMANN & CO. INC.

, 1999
<PAGE> 5

[Inside Front Cover]

VidPhone Video Network System

[Image of a photograph of a user looking at a desktop computer equipped with a
VidPhone system.]

The VidPhone system is a full-motion, high resolution cost-effective video
network system that uses the same wiring as the telephone. Users of the VidPhone
video network system can view broadcast video, stored video and participate in
multi-party video conferences.

VidPhone Switch

[Image of a VidPhone Switch]

The VidPhone switch is the video, audio and data
switch that is the cornerstone of our VidPhone video
network system. It enables users to access all
VidPhone system functions within a building or
across a small business campus and, using one of our
gateway products, to communicate with remote
locations through a wide area network. A VidPhone
switch is a scalable, modular video network switch
that supports from five to 50 concurrent users. The
VidPhone switch can be mounted in standard 19-inch
racks. Up to four VidPhone switches may be connected
to support up to 150 concurrent users.

<PAGE> 6

FOR CALIFORNIA RESIDENTS:

This offering was approved in California on the basis of a limited offering
qualification. Offers and sales in California may only be made to investors who
meet a suitability standard of either (A) $65,000 gross annual income plus an
exclusive net worth (net worth exclusive of home, home furnishings and
automobiles) of not less than $250,000; or (B) an exclusive net worth of
$500,000 liquid net worth, or (C) $1,000,000 net worth (inclusive); or (D)
$200,000 gross annual income. The Company did not have to demonstrate compliance
with some or all of the merit regulations of the Department of Corporations of
California. There will be no immediate secondary trading of the securities
because the Commissioner of Corporations will withhold the secondary trading
exemption provided under California Corporations Code Section 25104(h).

FOR NEW JERSEY RESIDENTS:

Offers and sales in this offering in New Jersey may only be made to
accredited investors as defined in Rule 501 under the Securities Act of 1933, as
amended. Under Rule 501, to be an accredited investor an individual must have
(A) a net worth or joint net worth with such individual's spouse of more than
$1,000,000 or (B) income of more than $200,000 in each of the two most recent
years or joint income with such individual's spouse of more than $300,000 in
each of those years and a reasonable expectation of reaching the same income
level in the current year. Other standards apply to investors who are not
individuals. There will be no secondary sales of the securities to persons who
are not accredited investors for 90 days after the date of this offering by the
Underwriters and selected dealers.

(i)
<PAGE> 7

TABLE OF CONTENTS

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PAGE
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<S> <C>
Prospectus Summary................ 1
Risk Factors...................... 6
Use of Proceeds................... 12
Price Range of Common Stock....... 13
Dividend Policy................... 14
Dilution.......................... 14
Capitalization.................... 15
Selected Financial Data........... 16
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 17
Business.......................... 27
</TABLE>

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Management........................ 37
Executive Compensation............ 40
Principal Stockholders............ 43
Certain Transactions.............. 45
Description of Securities......... 48
Shares Eligible for Future Sale... 53
Underwriting...................... 56
Legal Matters..................... 58
Experts........................... 58
Additional Information............ 58
Index to Financial Statements..... F-1
</TABLE>

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

Objective Communications was incorporated in 1993. Our executive offices
are located at 50 International Drive, Portsmouth, New Hampshire 03801, and our
telephone number is (603) 334-6700.

Each unit offered by this prospectus consists of three shares of common
stock and two redeemable common stock purchase warrants with an initial exercise
price of $4.00 per share. Unless otherwise indicated in this prospectus, all
information in this prospectus, other than the financial statements and the
notes thereto included in this prospectus beginning on page F-1, assumes that
the underwriters will not exercise their option to purchase up to 300,000 units
to cover over-allotments and gives effect to a one share for seven shares
reverse stock split of the issued and outstanding common stock effected on April
14, 1999. In addition, unless otherwise indicated in this prospectus, all
outstanding share information after the offering also gives effect to the
automatic conversion of the outstanding Series B 5% Cumulative Convertible
Preferred Stock (and accrued and unpaid dividends on the preferred stock through
June 9, 1999) to 62,098 shares of common stock upon completion of this offering
at a conversion price of $19.25 per share, and gives effect to the automatic
conversion of the outstanding 5% Convertible Debentures due 2003 (and accrued
and unpaid interest on the convertible debentures through June 9, 1999) to
871,693 shares of common stock upon completion of this offering at a conversion
price of $3.75. References in this prospectus to the number and percentage of
shares of common stock have not been adjusted to give effect to the cashing out
of fractional shares as a result of the reverse stock split effected on April
14, 1999. We do not believe that the cashing out of fractional shares will
materially change these numbers or percentages.

Some of the statements contained in this prospectus including statements
under "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" are
forward-looking and may involve a number of risks and uncertainties. Actual
results and future events may differ significantly based upon a number of
factors, including:

- risks in product and technology development;

- customer and market acceptance of new products;

- demand for our products; and

- the impact of competitive products and pricing.

In this prospectus, we refer to Objective Communications, Inc., a Delaware
corporation, as we, the Company or Objective Communications. We refer to
Southeast Research Partners, Inc. as the representative of the underwriters and
to Southeast Research Partners, Inc., Ladenburg Thalmann & Co. Inc. and the
other underwriters listed on page 56 of this prospectus as the underwriters. We
refer to prospective investors as you or the investor(s).

Objective Communications(R), VidPhone(R) and VidModem(R) are registered
trademarks of Objective Communications. This prospectus also contains trademarks
and trade names of other companies.

(ii)
<PAGE> 8

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before investing in the common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section.

GENERAL

Objective Communications designs, develops and markets the VidPhone system,
a full-motion, high resolution, cost-effective video network system that uses
the same wiring as the telephone. Users of the VidPhone video network system can
view broadcast video from a variety of sources including direct broadcasts of
"live" communications, satellite broadcasts and stored video, and participate in
multi-party video conferences from desktop personal computers or conference
rooms. With the introduction of Release 1.5 of our VidPhone software, which we
expect to occur in late June 1999, users also will be able to retrieve and view
stored video on demand. The VidPhone system is designed to be compatible with
existing video conferencing systems while offering additional features.

The VidPhone video network system:

- enables simultaneous two-way transmission of TV-quality full-motion
video, FM-quality audio, and data;

- has no transmission delays within a building or small business campus so
audio and video are fully synchronized;

- uses the same wiring as the telephone;

- is independent of the local area network ("LAN"), so no additional
wiring or local area network management is required; and

- requires minimal computer processing power, which permits concurrent use
of other computer applications.

We introduced the VidPhone system in July 1997, and we shipped the first
commercial version of the system in August 1998. To date, we have recognized
minimal revenues from sales of the VidPhone system and its components.

We market our video network system primarily through telephone product and
service providers, systems integrators and value-added resellers ("VARs") that
sell it as an enhancement to existing information and telephone systems. These
distribution partners provide sales, service and support to their customers, and
often have large existing customer bases. We currently have agreements with 16
resellers to market and sell the VidPhone system, including Unisys Corp., Sprint
Communications Corporation and Bell Atlantic Corp.

RECENT DEVELOPMENTS

approximately 90 from approximately 135. Since then, we have reduced our staff
by approximately 40 additional people. We also implemented new cash management
and expense policies. We believe that these changes will reduce our total
operating expenses in 1999 by approximately 50% compared to 1998.

During this period we also refined our sales and marketing strategy,
focusing on promoting the VidPhone system to our large resellers and their
customers. In October 1998, we entered into a strategic partnership with Unisys,
under which Unisys is the preferred systems integrator that will sell our
VidPhone system to the federal government. We are also pursuing a number of
other joint marketing initiatives with Unisys. In particular, Unisys exhibited
the VidPhone system at 11 trade shows in 1998 and at two trade shows in the
first quarter of 1999. Bell Atlantic and Sprint also recently renewed their
reseller agreements with us.

Our financial results for the first quarter of 1999 reflect the positive
effects of the restructuring that we began last July. As a result of the
introduction of the first commercial version of the VidPhone system in August
1998, which incorporated our Release 1.4 software, we reported revenues of
$655,457 for the quarter ended March 31, 1999, an increase of $255,628 or 64%
compared to the fourth quarter of 1998. As a result of our aggressive cost
reduction program, total operating expenses were reduced in the first quarter of
1999 to $2,240,797, a decrease of $2,058,291 or 48% compared to the fourth
quarter of 1998. We believe that our first quarter results are a positive first
step toward our goal of achieving commercial acceptance of the VidPhone system.

We require additional cash to fund our operations. To date in 1999, we
funded our operations principally with the net proceeds of a private placement
of units consisting of $2,850,000 principal amount of unsecured promissory notes
and 160,701 shares of common stock completed in February 1999. We used the net
proceeds of approximately $2,393,000 from the February 1999 private placement
for working capital and general corporate purposes, including approximately
$560,000 used to repay certain outstanding accounts payable. At March 31, 1999,
we had approximately $640,000 in cash and, as of the date of this prospectus, we
are essentially out of cash. We intend to fund our operations until the closing
of this offering with cash generated from customer payments on outstanding
accounts receivable. However, the timing and amount of customer payments is
uncertain. We estimate that the net proceeds from this offering will fund our
operations for approximately 12 months.

STRATEGY

Our objective is to become a leading provider of video network systems. The
key elements of our strategy are to:

- create brand-name recognition of the VidPhone system;

- position the VidPhone system as an enhancement to existing telephone and
information systems; and

- distribute the VidPhone system through established distribution channels
with large customer bases.
2
<PAGE> 10

THE OFFERING

Securities offered(1)........... 2,000,000 units, each consisting of three
shares of common stock and two warrants.
Each warrant entitles the holder to purchase
one share of common stock for an initial
exercise price of $4.00 during the four-year
period commencing one year after the date of
this prospectus. We may redeem the warrants
at any time after they become exercisable,
at a price of $.01 per warrant on not less
than 30 days' prior written notice if the
last sale price of the common stock has been
at least 200% of the then exercise price per
warrant (initially $8.00) for the 20
consecutive trading days ending on the third
day prior to the date on which the notice is
given. The common stock and the warrants
comprising the units will not be detachable
or separately transferable, and may be
traded only as units, until 90 days after
the effective date of the registration
statement of which this prospectus is a
part, or such earlier date as the
representative of the underwriters may
determine. The units will initially be
evidenced by separate unit certificates, and
certificates representing the common stock,
and warrants included in the units will not
be issued until such securities become
detachable and separately transferable. We
provide you with additional information
regarding the units and the common stock and
warrants comprising the units later in this
prospectus under the caption "Description of
Securities."

Common stock outstanding prior
to the offering................. 980,848 shares

Common stock to be outstanding
after the offering (1)(2)(3).... 7,914,639 shares

Use of proceeds................. We intend to use the net proceeds of this
offering to pay (i) approximately $2,900,000
in principal amount of outstanding
promissory notes issued in the February 1999
private placement; (ii) approximately
$2,660,000 to fund research and development;
(iii) approximately $2,320,000 for sales and
marketing and customer support operations;
(iv) approximately $2,770,000 of the net
proceeds from this offering to repay certain
outstanding indebtedness and other
outstanding obligations; (v) approximately
$300,000 for investments in capital
equipment; and (vi) $132,000 to make overdue
payments on capital lease obligations. We
intend to use the remainder of the net
proceeds for working capital and general
corporate purposes.

3
<PAGE> 11

Nasdaq SmallCap Market symbol... Common Stock: OCOMC

Proposed Nasdaq SmallCap Market
symbols (4):.................... Units: OCOMU
Warrants: OCOMW
- ---------------

(1) If the underwriters exercise their option to purchase additional units, the
total number of units to be offered in this offering would increase by up to
300,000 units and the total number of shares to be outstanding after this
offering would increase by up to 900,000 shares.

(2) Includes (i) the 62,098 shares of common stock to be issued upon the
automatic conversion of the 209,091 outstanding shares of Series B 5%
Cumulative Convertible Preferred Stock upon completion of this offering at a
conversion price of $19.25 per share, and (ii) 871,693 shares of common
stock to be issued upon the automatic conversion of the outstanding
$3,125,000 original principal amount 5% Convertible Debentures due 2003 upon
completion of this offering at a conversion price of $3.75. Excludes shares
issuable as a part of the units that may be issued upon exercise of the
representative's purchase option and the underwriters' over-allotment
option.

(3) Does not include (i) 22,142 shares of common stock issuable upon exercise of
outstanding options granted to outside directors in August 1994, (ii) 38,477
shares of common stock issuable upon exercise of outstanding options granted
under our 1994 Stock Option Plan, (iii) 206,812 shares of common stock
reserved for issuance upon the exercise of options under our 1996 Stock
Incentive Plan under which plan we have granted options to purchase 125,768
shares of common stock as of the date of this prospectus, (iv) 43,571 shares
of common stock issuable upon exercise of other outstanding options, (v)
4,000,000 shares of common stock issuable upon exercise of the warrants
issued as part of the units being offered in this offering (up to 4,600,000
shares if the underwriters exercise their option to purchase additional
units), and (vi) 157,056 shares of common stock issuable upon exercise of
other outstanding warrants.

(4) We may voluntarily terminate the quotation of the units on The Nasdaq
SmallCap Market at any time without notice to our securityholders. The
termination of quotation of the units will not affect the continued trading
and quotation of the common stock or warrants on The Nasdaq SmallCap Market.
4
<PAGE> 12

SUMMARY FINANCIAL DATA

The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
QUARTER ENDED FOR THE PERIOD
YEAR ENDED DECEMBER 31, MARCH 31, OCTOBER 5, 1993
----------------------------------------- ------------------------- (DATE OF INCEPTION) TO
1996 1997 1998 1998 1999 MARCH 31, 1999
----------- ------------ ------------ ----------- ----------- ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues-net......... $ 81,375 $ -0- $ 765,617 $ 110,505 $ 655,457 $ 1,916,734
Cost of sales........ 62,353 -0- 544,853 64,304 368,702 1,162,930
----------- ------------ ------------ ----------- ----------- ------------
Gross margin......... 19,022 -0- 220,764 46,201 286,755 753,804
Operating expenses:
Research and
development........ 1,106,901 6,218,637 11,488,262 2,616,588 823,244 21,034,896
Selling, general and
administrative..... 1,043,553 4,334,754 9,015,437 1,741,344 1,123,655 16,743,714
Depreciation and
amortization....... 158,714 829,462 2,240,878 398,008 293,898 3,587,012
----------- ------------ ------------ ----------- ----------- ------------
Total operating
expenses....... 2,309,168 11,382,853 22,744,577 4,755,940 2,240,797 41,365,622
----------- ------------ ------------ ----------- ----------- ------------
Loss from
operations......... (2,290,146) (11,382,853) (22,523,813) (4,709,739) (1,954,042) (40,611,818)
Interest (income)
expense, net....... 404,290 203,441 (120,236) (166,040) 460,577 944,587
----------- ------------ ------------ ----------- ----------- ------------
Net loss............. $(2,694,436) $(11,586,294) $(22,403,577) $(4,543,699) $(2,414,619) $(41,556,405)
----------- ------------ ------------ ----------- ----------- ------------
Cumulative Series B
dividend........... -0- -0- (23,958) -0- (116,450)
----------- ------------ ------------ ----------- -----------
Net loss attributable
to common
stockholders....... $(2,694,436) $(11,586,294) $(22,427,535) $(4,543,699) $(2,531,069)
=========== ============ ============ =========== ===========
Net loss per common
share -- basic and
diluted............ $ (5.23) $ (19.90) $ (27.45) $ (5.60) $ (2.76)
=========== ============ ============ =========== ===========
Weighted average
shares
outstanding -- basic
and diluted........ 515,376 582,307 816,972 810,979 916,568
=========== ============ ============ =========== ===========
</TABLE>

<TABLE>
<CAPTION>
AT MARCH 31, 1999
--------------------------
ACTUAL PRO FORMA(1)
----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 640,349 $ 7,681,123
Working capital (deficit)................................... (2,515,429) 11,869,852
Total assets................................................ 11,581,169 18,078,073
Total liabilities........................................... 14,028,055 6,393,245
Total stockholders' equity (deficit)........................ (2,446,886) 11,684,828
</TABLE>

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

(1) The pro forma column presents our unaudited financial information at March
31, 1999, on a pro forma basis adjusted to reflect (i) the issuance of the
2,000,000 units in this offering at an assumed public offering price of
$7.50 per unit, after deducting the underwriting discounts and commissions
and estimated offering expenses payable by us, (ii) the issuance of 62,098
shares of common stock upon the automatic conversion of the Series B
preferred stock, (iii) the issuance of 871,693 shares of common stock upon
the automatic conversion of the convertible debentures, and (iv) the
application of a portion of the net proceeds of this offering to repay
certain outstanding indebtedness. You should read the information presented
in this prospectus under the caption "Use of Proceeds" for more information
about how we intend to use the net proceeds of this offering.

5
<PAGE> 13

RISK FACTORS

Investing in our common stock is very risky. You should be able to bear a
complete loss of your investment. You should consider carefully the following
factors, among others.

WE REQUIRE THE PROCEEDS OF THIS OFFERING TO CONTINUE OPERATIONS

At December 31, 1998, we had essentially no cash remaining to fund
operations and at March 31, 1999, we had only $640,349 in cash and cash
equivalents. We intend to fund operations through the date of completion of this
offering with customer payments on outstanding accounts receivable. A more
complete discussion of our cash position appears later in this prospectus under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

WE MAY NEED SUBSTANTIAL ADDITIONAL FINANCING

After the proceeds from this offering are exhausted, we will depend on cash
flows from operations for funding. If our cash flows cannot satisfy our capital
needs, we will have to raise additional capital through debt or equity
financings. We do not currently have any lines of credit or bank financing, and
we do not anticipate having access to bank financing for the foreseeable future.
We may not be able to raise any additional money through equity or debt
financings on acceptable terms or at all. If we were to raise additional funds
through the issuance of equity or convertible debt securities, your investment
in Objective Communications could be substantially diluted and those securities
could have preferences and privileges that your securities do not have. If we
are not able to complete additional financings when needed, we will not be able
to continue operating. A more complete discussion of our cash position appears
later in this prospectus under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

CUSTOMERS MAY NOT BUY OUR PRODUCTS DUE TO CONCERNS OVER OUR VIABILITY

Due to our recurring losses from operations and lack of cash, some
potential customers may decide not to purchase the VidPhone system because of
concerns that we may be unable to service, enhance or upgrade the systems. If we
are not able to alleviate concerns about our long-term viability, we may not be
able to market and sell the VidPhone system successfully and continue
operations.

WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND EXPECT LOSSES TO CONTINUE

We have incurred substantial losses from operations to date and had an
accumulated deficit of approximately $41.6 million through March 31, 1999 and
negative stockholders' equity of approximately $2.4 million at March 31, 1999.
As reflected in our financial statements for the year ended and as of December
31, 1998, and the report of our independent accountants on those financial
statements, there is substantial doubt about our ability to continue as a going
concern. We expect to continue to lose money for the foreseeable future.

We recognized only $765,617 in revenues from the sale of products during
the year 1998, and recognized only $655,457 in revenues during the quarter ended
March 31, 1999. We did not recognize any revenues in 1997. Accordingly, there is
no historical basis for you to expect that we will be able to realize operating
revenues or profits in the future. We have a limited number of orders for
delivery in the second quarter of 1999. Our ability to

6
<PAGE> 14

recognize operating revenues in the future will depend on a number of factors,
certain of which are beyond our control, including:

- customer acceptance of products shipped and installed to date and in the
future;

- our ability to generate new sales of products and secure customer
acceptance; and

- the timing of customer payments.

WE HAVE A LIMITED OPERATING HISTORY

Although Objective Communications was incorporated in 1993, we focused on
research and development until we shipped our first commercial VidPhone system
in the third quarter of 1998. James F. Bunker, our President and Chief Executive
Officer, has been with us since only July 1998. Accordingly, we have limited
experience managing the Company since we shipped our first commercial VidPhone
system. Because of our limited operating history, you have limited information
on which to assess our ability to realize operating revenues or profits in the
future.

WE NEED THE PROCEEDS OF THIS OFFERING TO AVOID BEING DELISTED FROM NASDAQ AND
BECOMING SUBJECT TO PENNY STOCK REGULATION

As of May 3, 1999, our common stock is listed on the Nasdaq SmallCap Market
system. Previously, from October 31, 1997 to April 30, 1999, our common stock
traded on the Nasdaq National Market system. As a result of our failure to meet
certain Nasdaq National Market system continued listing requirements, Nasdaq
determined to transfer the listing of our common stock to the Nasdaq SmallCap
Market effective as of the opening of business on May 3, 1999. Our common stock
will continue to be listed on the Nasdaq SmallCap Market only if (i) on or
before June 30, 1999, we make a public filing with the SEC and Nasdaq containing
a May 31, 1999 balance sheet (with pro forma adjustments for any significant
events or transactions occurring on or before the filing date) evidencing a
minimum of $9,000,000 in net tangible assets, and (ii) we demonstrate compliance
with all requirements for continued listing on the Nasdaq SmallCap Market. We
believe that with the net proceeds of this offering, we will have in excess of
$9,000,000 in net tangible assets on a pro forma basis as of May 31, 1999 and
that we will be able to demonstrate to Nasdaq compliance with the additional
requirements of the exception under which our common stock is currently trading
within the time required. However, there can be no assurance that we will meet
these requirements. If we fail to meet any of the terms of this exception, our
common stock will be delisted from the Nasdaq SmallCap Market and the trading,
if any, in our securities would thereafter be on the OTC-Bulletin Board.

Trading on the OTC-Bulletin Board may:

- adversely affect the securities' trading market and prices;
- limit the ability of investors and market professionals to determine the
market prices of our securities;
- diminish the likelihood that our press releases and other news about us
will be republished;
- diminish investors' interest in our securities; and
- restrict our ability to issue additional securities or to secure
additional financing.

If our common stock is delisted from Nasdaq and its trading price is below
$5.00 per share, our common stock may become subject to regulations of the
Securities and Exchange Commission relating to the market for penny stocks.
These regulations generally require that a disclosure schedule explaining the
penny stock market and the risks

7
<PAGE> 15

associated therewith be delivered to purchasers of penny stocks and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors. If our
securities become subject to the regulations applicable to penny stocks, the
market liquidity for our common stock could be severely affected. In such event,
the regulations on penny stocks could limit your ability to sell your common
stock in the secondary market.

WE MAY NOT BE ABLE TO MARKET OUR PRODUCTS EFFECTIVELY

We Are Dependent on Resellers. We distribute our products primarily
through major sellers of telephony products, system integrators and VARs.
Currently, we have agreements with 16 resellers. These arrangements are for
relatively short contractual periods and may be terminated under certain
circumstances. We cannot assure you that we will be able to maintain existing
relationships or establish new relationships. We compete with larger,
better-established companies with substantially greater financial resources for
relationships with third-party resellers. If we cannot maintain our current
reseller relationships and cannot develop new relationships, we may not be able
to sell our video network system.

Resellers May Not Be Effective Distributors. Sales to third-party
resellers are expected to generate a significant part of our future revenues.
However, we have sold only a limited number of VidPhone systems and components
under our reseller arrangements, and to date have recognized minimal revenues
from those sales. We currently have limited orders from our resellers for
additional sales of VidPhone systems. If our resellers fail to market and sell
our products, or our products fail to become an accepted part of the resellers'
product offerings, the value of your investment could be reduced.

We May Not Be Able To Develop Direct Sales and Marketing Capabilities. We
expect to depend on the marketing efforts of our resellers for the foreseeable
future. However, we are developing a small direct marketing capability to
promote our VidPhone system and to support our resellers. We cannot assure you
that we will be able to create awareness of, and demand for, our products
through our marketing efforts, or that the development of our direct marketing
capabilities will lead to sales of our products and services. If we cannot
successfully develop our own sales and marketing capabilities, we may not
succeed in building brand-name recognition of the VidPhone system, and we will
remain solely dependent on reseller efforts. A more complete discussion of our
dependence upon resellers and our efforts to develop direct sales and marketing
capabilities appears later in this prospectus under the heading "Business--Sales
and Marketing."

THE MARKET FOR VIDEO COMMUNICATIONS PRODUCTS MAY NOT DEVELOP

The market for video communications products is new and is rapidly
evolving. As is typical for a new technology, demand for and market acceptance
of new products is unpredictable. If the market for video communications
products fails to develop or develops more slowly than expected, our business
and financial condition could be materially and adversely affected. A more
complete discussion of the market for video communications products appears
later in this prospectus under the heading "Business--Industry Background."

UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY

Our success will depend, in part, on our ability to protect our
intellectual property rights to our proprietary hardware products. Toward that
end, we rely in part on trademark, copyright and trade secret law to protect our
intellectual property in the U.S. and abroad.

8
<PAGE> 16

The degree of protection provided by patents is uncertain and involves largely
unresolved complex legal and factual questions.

The process of seeking patent and trademark protection can be long and
expensive, and there is no assurance that any pending or future applications
will result in patents
and/or registered trademarks. Further, we cannot assure you that any proprietary
rights granted will provide meaningful protection or any commercial advantage to
us. We also cannot assure you that claims for infringement will not be asserted
or prosecuted against us in the future, although we are not presently aware of
any basis for claims. A number of companies have developed and received
proprietary rights to technologies that may be competitive with our
technologies. Most of these entities are larger and have significantly greater
resources than we do. Given the rapid development of technology in the
telecommunications industry, we cannot assure you that our products do not or
will not infringe upon the proprietary rights of others. A more complete
discussion of our intellectual property rights appears later in this prospectus
under the heading "Business--Intellectual Property."

WE ARE DEPENDENT ON THIRD PARTIES FOR MANUFACTURING

We outsource the manufacturing and assembly of many of the components of
our products. To date, we have relied on a single manufacturer, Sanmina
Corporation, for the manufacture and assembly of the components used in the
VidPhone switch. Several other manufacturers also produce smaller sub-assemblies
and components for us on a per-project basis. We cannot assure you that our
subcontractors will continue to perform under our agreements with them or that
we will be able to negotiate continuing arrangements with these manufacturers on
acceptable terms and conditions, or at all. In particular, our failure to pay
these manufacturers could affect their willingness to continue working with us.
If we cannot maintain relationships with our current subcontractors, we may not
be able to find other suitable manufacturers. Any difficulties encountered with
these manufacturers could cause product defects and/or delays and cost overruns
and may cause us to be unable to fulfill orders on a timely basis. Any of these
difficulties could materially and adversely affect us and the value of your
investment. A more complete discussion of our dependence on third party
manufacturers appears later in this prospectus under the heading
"Business -- Manufacturing."

A SIGNIFICANT PORTION OF THE NET PROCEEDS OF THIS OFFERING WILL BE USED TO PAY
DEBT

We expect to repay indebtedness and trade payables totaling approximately
$5,800,000 from the net proceeds of this offering, of which approximately
$161,000 will be paid to our officers, directors or affiliates. Accordingly, a
substantial portion of the net proceeds of this offering will be used to pay
existing debt and will not be available for other corporate purposes, such as
product development or sales and marketing. The "Use of Proceeds" section of
this prospectus provides you with additional information about our expected use
of net proceeds of this offering.

OUR MANAGEMENT HAS BROAD DISCRETION AS TO THE USE OF THE NET PROCEEDS FROM THIS
OFFERING

We estimate that we will use approximately $1,518,000, or 12%, of the net
proceeds from this offering for working capital and general corporate purposes.
Our management will have broad discretion as to the specific purposes for which
that portion of the net proceeds will be used. Therefore, you have little
information as to how our management will use a substantial portion of the net
proceeds from this offering. However, we are not

9
<PAGE> 17

committed to any designated use of proceeds, and we have broad discretion as to
how to use the net proceeds from this offering. We provide you with additional
information regarding the uses of the net proceeds from this offering later in
this prospectus under the caption "Use of Proceeds."

THE BOOK VALUE OF THE SHARES YOU BUY WILL BE SUBSTANTIALLY LESS THAN THE
PURCHASE PRICE YOU PAY

After the completion of this offering, our pro forma net tangible book
value per share of common stock as of March 31, 1999 would have been
approximately $1.45 based on an assumed offering price of $7.50 per unit
(attributing no value to the warrants). This is $1.05, or approximately 42%,
less than the price you are paying per share in this offering. A more complete
discussion of the dilution suffered by investors in this offering appears later
in this prospectus under the heading "Dilution."

SALES OF A LARGE NUMBER OF SHARES IN THE PUBLIC MARKET COULD REDUCE OUR STOCK
PRICE

Substantially all of our currently outstanding shares of common stock have
been registered for sale under the Securities Act, are eligible for sale under
an exemption from the registration requirements or are subject to registration
rights pursuant to which holders may require us to register their shares in the
future. Sales or the expectation of sales of a substantial number of shares of
our common stock in the public market could adversely affect the prevailing
market price of our common stock. A more complete discussion of shares eligible
for future sale appears later in this prospectus under the heading "Shares
Eligible for Future Sale."

EXERCISE OF OPTIONS AND WARRANTS MAY ADVERSELY AFFECT OUR STOCK PRICE AND YOUR
PERCENTAGE OF OWNERSHIP

Upon completion of this offering, there will be outstanding options and
warrants to purchase an aggregate of 4,387,014 shares of common stock. In the
future, we may grant more warrants or options under stock option plans. The
exercise or conversion of outstanding stock options, warrants or other
convertible securities will dilute the percentage ownership of our other
stockholders. The "Description of Securities" section of this prospectus
provides you with more information about options and warrants to purchase our
common stock that will be outstanding after this offering.

OUR MARKET VALUE IS HIGHLY VOLATILE

The market price of our common stock has been highly volatile and may
continue to fluctuate in the future. We completed an initial public offering of
295,714 shares of our common stock at a price of $38.50 per share in April 1997.
Subsequently, in November 1997 we completed a follow-on public offering of
142,857 shares of common stock at a price of $161.875 per share. On June 4,
1999, the last sale price per share of our common stock as reported on the
Nasdaq SmallCap Market was $2.8125. As a result of our stock price volatility,
it is difficult to determine the market value of Objective Communications. You
cannot be sure how the price of the common stock might change after you purchase
it. More information regarding the historical volatility of the market for our
common stock appears later in this prospectus under the heading "Price Range of
Common Stock."

10
<PAGE> 18

POSSIBLE TERMINATION OF SEPARATE QUOTATION/TRADING OF UNITS

Once the common stock and warrants are detached and become separately
transferable, we may voluntarily terminate the trading and/or quotation of the
units on the Nasdaq SmallCap Market at any time without notice to our
securityholders. The termination of trading and/or quotation of the units would
result in a securityholder having to sell the common stock and warrants
separately, thereby possibly resulting in increased brokerage commissions as
contrasted with selling the units separately.

GOVERNMENT REGULATION

The VidModem and VidPhone Switch components of the VidPhone system must
comply with certain regulations of the Federal Communications Commission
("FCC"). Under FCC regulations, we will be required to follow a verification
procedure consisting of a self-certification that the VidModem complies with
applicable regulations pertaining to radio frequency devices. A qualified,
independent testing facility tested the VidModem, and it was found to comply
with FCC regulations. We obtained equipment registrations from the FCC for
certain VidPhone system components, including the VidPhone switch, that are
connected to the public switched telephone network.

Although we believe that at present the VidPhone system complies with all
applicable government regulations, future government regulations could increase
the cost of bringing products to market or adversely affect our ability to
market and sell our products and technology.

11
<PAGE> 19

USE OF PROCEEDS

We estimate that we will receive net proceeds from the sale of units in
this offering (at an assumed offering price of $7.50 per unit) of approximately
$12,600,000 (approximately $14,602,000 if the underwriters exercise their
over-allotment option in full), after deducting underwriting discounts and
commissions and other expenses payable by us estimated at approximately
$2,400,000 (approximately $2,648,000 if the underwriters exercise the
over-allotment option in full). We intend to use the net proceeds as follows,
approximately:

<TABLE>
<CAPTION>
APPLICATION OF PROCEEDS AMOUNT PERCENT
<S> <C> <C>
Repayment of unsecured promissory notes........... $ 2,900,000 23.0%
Research and development.......................... 2,660,000 21.1
Sales and marketing and customer support
operations...................................... 2,320,000 18.4
Repayment of certain outstanding indebtedness and
other obligations............................... 2,770,000 22.0
Investment in capital equipment................... 300,000 2.4
Overdue payments on capital lease obligations..... 132,000 1.1
Working capital and general corporate purposes.... 1,518,000 12.0
----------- -----
Total........................................ $12,600,000 100.0%
</TABLE>

Approximately $2,900,000 of the net proceeds will be used to pay the
unsecured promissory notes issued in the February 1999 private placement, which
had an aggregate original principal amount of $2,850,000, mature on the date on
which this offering is consummated, and bear interest at 10% per year;

We intend to use approximately $2,660,000 of the net proceeds from this
offering to fund research and development.

We anticipate that we will use approximately $2,320,000 of the net proceeds
from this offering for sales and marketing and customer support operations.

We expect to use approximately $2,770,000 of the net proceeds from this
offering to repay certain outstanding indebtedness and other outstanding
obligations, as follows. We expect to use approximately $120,000 to repay in
full four outstanding notes payable, of which $20,000 bears interest at a rate
of 12% annually and matured on December 8, 1998, $21,000 bears interest at 12%
annually and matured on January 1, 1999, $43,000 bears interest at 8.4% annually
and is due on June 24, 1999, and $36,000 bears interest at 10% annually and
matures upon the completion of this offering. We expect to use $1,100,000 to pay
a portion of the outstanding principal amount of certain trade payables that
were converted to a term loan that matures in January 2002 and bears interest at
7% per year. We also intend to use $50,000 to pay a portion of a note to our
counsel for outstanding bills, which matures in January 2001 and bears interest
at 7% per year. We also anticipate using approximately $1,500,000 to pay certain
other outstanding obligations, including trade payables.

We anticipate that we will use approximately $300,000 to invest in capital
equipment. We intend to use approximately $132,000 to pay overdue payments on
outstanding capital lease obligations.

We intend to use the remaining $1,518,000 for working capital and general
corporate purposes, which may include product enhancement and sales and
marketing expenses and the repayment of accrued salary to an executive officer.

12
<PAGE> 20

Our management will have broad discretion in allocating the proceeds to be
applied for working capital and general corporate purposes. If the underwriters
exercise their over-allotment option in full, we intend to use the net proceeds
from the sale of the units sold pursuant to the exercise of the over-allotment
option for working capital and general corporate purposes.

Pending application of the net proceeds as described above, we intend to
invest the net proceeds in short-term, interest-bearing investment grade
securities, money market accounts, certificates of deposit, or direct or
guaranteed obligations of the United States government.

PRICE RANGE OF COMMON STOCK

Our common stock traded on the Nasdaq SmallCap Market from April 3, 1997 to
October 30, 1997 and traded on the Nasdaq National Market from October 31, 1997
to April 30, 1999. As of May 3, 1999, our common stock trades on the Nasdaq
SmallCap Market. The following table sets forth, for the periods indicated, the
range of high and low sales prices per share reported on such quotation systems
as adjusted to reflect the one share for seven shares reverse split in the
common stock that occurred on April 14, 1999.

<TABLE>
<CAPTION>
AS ADJUSTED
---------------------
HIGH LOW
-------- ---------
<S> <C> <C>
PERIOD ENDING:
June 30, 1997 (from April 3, 1997).... $ 99.750 $ 41.125
September 30, 1997.................... 267.750 77.875
December 31, 1997..................... 257.250 89.250
March 31, 1998........................ 173.250 101.066
June 30, 1998......................... 141.750 46.375
September 30, 1998.................... 67.375 18.375
December 30, 1998..................... 38.500 12.250
March 31, 1999........................ 24.941 5.908
June 4, 1999.......................... 7.658 2.8125
</TABLE>

The market price of our common stock historically has been highly volatile.
We completed an initial public offering of 295,714 shares of our common stock at
a price of $38.50 per share in April 1997. Subsequently, in November 1997 we
completed a follow-on public offering of 142,858 shares of common stock at a
price of $161.875 per share. On June 4, 1999, the last sale price per share of
our common stock as reported on the Nasdaq SmallCap Market was $2.8125 per
share. It is difficult to predict the future market price per share of our
common stock, and you cannot be sure how the price per share of our common stock
may change after this offering.

As of February 16, 1999, there were approximately 157 holders of record of
our common stock. The Company believes there are over 3,000 beneficial owners of
its common stock.

13
<PAGE> 21

DIVIDEND POLICY

We expect to retain all earnings generated by our operations for the
development and growth of our business, and do not anticipate paying any cash
dividends to our stockholders in the foreseeable future. The payment of future
dividends on the common stock and the rate of such dividends, if any, will be
determined by our Board of Directors in light of our earnings, financial
condition, capital requirements and other factors.

DILUTION

A company's net tangible book value is equal to its total tangible assets
minus its total liabilities. A company's net tangible book value per share is
calculated by dividing its net tangible book value by the total number of shares
of common stock outstanding. As of March 31, 1999, we had net tangible book
value (deficit) of ($2,647,213), or approximately ($2.70) per share of common
stock.

As of March 31, 1999, after giving pro forma effect to (i) the issuance of
62,098 shares of common stock upon the automatic conversion of the Series B
preferred stock upon the completion of this offering, (ii) the issuance of
871,693 shares of common stock upon the automatic conversion of the convertible
debentures upon the completion of this offering, and (iii) the sale of the
2,000,000 units (attributing no value to the warrants) in this offering at an
assumed public offering price of $7.50 per unit, the receipt by us of the net
proceeds from this offering and the application of a portion of the net proceeds
to repay certain outstanding indebtedness as described under the caption "Use of
Proceeds," our pro forma net tangible book value at March 31, 1999, would have
been approximately $11,484,501, or approximately $1.45 per share of common
stock. This represents an immediate increase in our net tangible book value at
March 31, 1999 of approximately $4.15 per share of common stock to existing
stockholders and an immediate dilution of approximately $1.05 per share, or
approximately 42%, to new investors purchasing units in this offering. The
following table illustrates this dilution using an assumed public offering price
of $7.50 per unit:

<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $2.50
Net tangible book value per share of common stock as of
March 31, 1999......................................... ($2.70)
Increase per share after conversion of the Series B
preferred stock and the convertible debentures to
common stock upon the completion of this offering...... 3.01
Increase per share attributable to sale of units in this
offering............................................... 1.14
------
Pro forma net tangible book value per share of common stock
after this offering....................................... 1.45
-----
Dilution per share of common stock to investors in this
offering.................................................. $1.05
=====
</TABLE>

14
<PAGE> 22

CAPITALIZATION

The following table sets forth our capitalization. The actual column shows
our capitalization on March 31, 1999. The pro forma column shows our
capitalization on March 31, 1999, on a pro forma basis adjusted to reflect the
issuance of the 2,000,000 units in this offering at an assumed public offering
price of $7.50 per unit and without attributing any value to the warrants issued
as part of the units, the issuance of 62,098 shares of common stock upon the
automatic conversion of the Series B preferred stock (including accrued and
unpaid dividends through June 9, 1999) upon the completion of this offering, the
issuance of 871,693 shares of common stock upon the automatic conversion of the
convertible debentures (including accrued and unpaid interest through June 9,
1999) upon the completion of this offering, and the application of a portion of
the net proceeds from this offering to pay certain outstanding obligations as
set forth under the caption "Use of Proceeds."

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------------
ACTUAL PRO FORMA
------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Long-term debt and obligations under capital lease, less
current portion........................................ $ 3,126,538 $ 3,126,538
------------ ------------
Stockholders' equity:
Preferred stock, Series B, at liquidation preference,
par value $.01, 954,545 shares authorized; 209,091
issued and outstanding at March 31, 1999; none
issued and outstanding pro forma.................... 1,188,333 --
Common stock, par value $.01, 30,000,000 shares
authorized; 980,848 issued and outstanding at March
31, 1999; and 7,914,639 shares issued and
outstanding, pro forma (a).......................... 9,808 79,146
Additional paid-in capital............................. 38,318,275 55,015,803
Deficit accumulated during development stage........... (41,963,302) (43,410,121)
------------ ------------
Total stockholders' equity (deficit)................ (2,446,886) 11,684,828
------------ ------------
Total capitalization........................... $ 679,652 $ 14,811,366
============ ============
</TABLE>

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

(a) Does not include options and warrants to purchase 387,014 shares of common
stock outstanding prior to the offering or options and warrants to purchase
4,387,014 shares of common stock to be outstanding after the offering.

15
<PAGE> 23

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
our financial statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus. The selected financial data as of December 31, 1996, 1997, and
1998, and for each of the three years in the period ended December 31, 1998 have
been derived from our financial statements included in this prospectus, which
have been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report thereon, which includes an explanatory paragraph on our ability to
continue as a going concern, is also included in this prospectus. The selected
financial data for the quarters ended March 31, 1998 and 1999 have been derived
from our unaudited financial statements, which in the opinion of our management,
include all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the information set forth in those financial
statements. The results for the quarter ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the full year or for any
future period.

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 31, MARCH 31, OCTOBER 5, 1993
----------------------------------------- ------------------------- (DATE OF INCEPTION) TO
1996 1997 1998 1998 1999 MARCH 31, 1999
----------- ------------ ------------ ----------- ----------- ----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues -- net.......... $ 81,375 $ -0- $ 765,617 $ 110,505 $ 655,457 $ 1,916,734
Cost of sales............ 62,353 -0- 544,853 64,304 368,702 1,162,930
----------- ------------ ------------ ----------- ----------- ------------
Gross margin............. 19,022 -0- 220,764 46,201 286,755 753,804
OPERATING EXPENSES:
Research and
development............. 1,106,901 6,218,637 11,488,262 2,616,588 823,244 21,034,896
Selling, general and
administrative.......... 1,043,553 4,334,754 9,015,437 1,741,344 1,123,655 16,743,714
Depreciation and
amortization............ 158,714 829,462 2,240,878 398,008 293,898 3,587,012
----------- ------------ ------------ ----------- ----------- ------------
Total operating
expenses............ 2,309,168 11,382,853 22,744,577 4,755,940 2,240,797 41,365,622
----------- ------------ ------------ ----------- ----------- ------------
Loss from operations..... (2,290,146) (11,382,853) (22,523,813) (4,709,739) (1,954,042) (40,611,818)
Interest (income)
expense, net............ 404,290 203,441 (120,236) (166,040) 460,577 944,587
----------- ------------ ------------ ----------- ----------- ------------
Net loss................. $(2,694,436) $(11,586,294) $(22,403,577) $(4,543,699) $(2,414,619) $(41,556,405)
=========== ============ ============ =========== =========== ============
Cumulative Series B
dividend................ -0- -0- (23,958) -0- (116,450)
----------- ------------ ------------ ----------- -----------
Net loss attributable to
common stockholders..... $(2,694,436) $(11,586,294) $(22,427,535) $(4,543,699) $(2,531,069)
=========== ============ ============ =========== ===========
Net loss per common
share -- basic and
diluted................. $ (5.23) $ (19.90) $ (27.45) $ (5.60) $ (2.76)
=========== ============ ============ =========== ===========
Weighted average shares
outstanding --
basic and diluted....... 515,376 582,307 816,972 810,979 916,568
=========== ============ ============ =========== ===========
</TABLE>

<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31,
------------------------- -----------
1997 1998 1999
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $18,199,434 $ 8,532 $ 640,349
Working capital (deficit)................................. 16,422,283 (4,905,789) (2,515,429)
Total assets.............................................. 23,082,700 9,622,989 11,581,169
Obligations under capital lease, less current portion..... 57,196 76,008 60,358
Total liabilities......................................... 4,210,571 11,219,509 14,028,055
Total stockholders' equity (deficit)...................... $18,872,129 $(1,596,520) $(2,446,886)
</TABLE>

16
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our audited
financial statements and notes thereto which are included elsewhere in this
prospectus.

OVERVIEW

Our financial results for the quarter ended March 31, 1999 reflect the
positive effects of our cost reduction program and the introduction of the first
commercial version of the VidPhone(R) system, both of which occurred in the
second half of 1998. We reported revenues of $655,457 in the first quarter of
1999, an increase of $255,628, or 64% when compared with revenues reported in
the fourth quarter of 1998. Total operating expenses were reduced to $2,240,797
in the first quarter of 1999, a decrease of $2,058,291, or 48% compared to the
fourth quarter of 1998. We believe that our first quarter results reflect a
positive first step towards our goal of achieving commercial acceptance of our
VidPhone system.

Objective Communications was formed in 1993 to design, develop and market a
full motion, high resolution, cost-effective video network system, the VidPhone
system. Users of the VidPhone video network system can view broadcast video and
participate in multi-party video conferences. With the introduction of Release
1.5 of our VidPhone software, which we expect to occur in late June 1999, users
also will be able to retrieve and view stored video on demand. Our VidPhone
system distributes video to and from desktop or laptop personal computers and
conference rooms configured with a VidPhone station, over the same wiring used
by the telephone.

Our operations focused on research and development until we shipped our
first commercial VidPhone system in the third quarter of 1998. To date, we have
not generated substantial revenues from the sale of our VidPhone system. Since
shipping our first commercial VidPhone system, we have focused on sales and
marketing of our product and customer support, while continuing to enhance our
product's development.

In July 1998, we began a significant restructuring of our operations,
including changes in senior management. We hired James Bunker, who has extensive
experience "turning-around" businesses, as our President and Chief Executive
Officer. Steven Rogers, our founder, became Chief Technology Officer and Vice
President, Engineering and assumed responsibility for completing the development
of our commercial VidPhone system. We shipped the first commercial version of
our VidPhone system in August 1998. To lower our operating expenses, in July
1998, we reduced the number of our employees to approximately 90 from
approximately 135. Since then, we have reduced our staff by approximately 40
additional people. We also implemented new cash management and expense policies.
We believe that these changes will reduce our total operating expenses in 1999
by approximately 50% compared to 1998.

Our first commercial VidPhone system included Release 1.4 of our VidPhone
software. Release 1.4 enabled certain features of the VidPhone system, including
asynchronous transmission mode (ATM) and enhanced Integrated Services Digital
Network (ISDN) wide area connectivity. Release 1.5, which we expect to introduce
in late June 1999, will add additional features to our VidPhone system,
including the VidServer and enhancements to the VidPhone gateways. VidPhone
gateways can be used to connect VidPhone systems or a VidPhone system and
another vendor's video network across a wide area network. The VidServer will
permit VidPhone users access to and control of stored video on demand. With the
introduction of Release 1.5, our VidPhone

17
<PAGE> 25

system will offer a complete video network system providing the following video
functions to users: broadcast video, videoconferencing, and retrieval of stored
video on demand.

We have a limited operating history and, therefore, we do not have any
substantial basis on which to predict our sales cycle. However, we expect that
the sales cycle for our products will be relatively long primarily for two
reasons. First, it takes substantial time for us to establish relationships with
our resellers. It also takes time to familiarize resellers with the VidPhone
system and to train their sales forces. Second, our VidPhone video network
system is a new product that requires a substantial capital commitment.
Accordingly, we believe that it is likely to take the end-user customer at least
several months to decide to purchase our VidPhone video network system. We
expect our sales cycle will decrease after we establish customer reference
accounts, create brand name recognition of the VidPhone system and have longer,
more established relationships with resellers.

Although we distribute and sell our products through resellers, we
typically ship VidPhone systems directly to end-user customers and install the
systems at customers' locations. The VidPhone system technology is new and the
purchase of a VidPhone system requires a significant capital investment.
Generally, our policy currently is to permit new prospective end-user customers
to evaluate the VidPhone system for 30 to 45 days. Following that period, our
policy generally requires customers to pay for the VidPhone system in full
within 30 days, or to return the product. In some cases, we require a down
payment at the time an order is placed.

For the remainder of 1999, we intend to focus on sales and marketing of the
VidPhone system, and continuing product development to meet customer demands for
new functionality and to lower costs. Specifically, we intend to: (i) use
current strategic and reseller arrangements to increase sales of the VidPhone
system and create brand name recognition of our product, (ii) distribute the
VidPhone system through established distribution channels, (iii) position the
VidPhone system as an enhancement to existing telephone and information systems,
(iv) develop our direct sales capabilities, and (v) continue engineering on our
VidPhone system to refine and improve current functionality to meet new customer
requirements and to lower costs through improved design. However, we cannot
assure you that we will be able to meet these objectives. We plan to continue to
subcontract all major manufacturing and production activities for the
foreseeable future, but we will continue to retain test and quality assurance
functions until all subcontractors are certified with respect to quality.

In 1999, we expect to continue to incur operating expenses to support our
product development efforts and to enhance our sales and marketing capabilities
and organization but we anticipate that our development expenditures will be
lower than in prior years due to the commercial introduction of the VidPhone
system in 1998. Our results of operations may vary significantly from quarter to
quarter during this period of product introduction and initial sales.

YEAR 2000

As many computer systems and other equipment with embedded chips or
processors use only two digits to represent the year, they may be unable to
process accurately certain data before, during or after the year 2000. As a
result, business and governmental entities are at risk for possible
miscalculations or systems failures causing disruptions in their business
operations. This is commonly known as the Year 2000 (or "Y2K") issue. The

18
<PAGE> 26

Y2K issue can arise at any point in a company's supply, manufacturing,
processing, distribution, and financial chains.

We have evaluated the impact of the Y2K issue on our operations. This
evaluation consisted of identifying the sources of potential exposure to risk of
systems malfunction or failure in internal information technology ("IT")
infrastructure, in our product, including embedded systems and software, and in
systems utilized by significant vendors and customers. The evaluation process
also developed contingency plans in order to mitigate the negative effects to us
of any failure of these systems. We have completed our review process, and the
costs associated with our Y2K compliance evaluation were not material.

We believe that the VidPhone system is not susceptible to Y2K problems
because the VidPhone system does not contain an internal clock. We also have
evaluated whether equipment and software that we use or that is embedded in the
VidPhone system is Y2K compliant. Our evaluation consisted principally of
securing certifications from each of the vendors of these products that their
product is Y2K compliant and we did not independently assess whether a product
has Y2K problems. With respect to our internal IT infrastructure, including the
commercial financial software that we use, we have also obtained certifications
that the products that we use are Y2K compliant.

If, however, the equipment or software currently used or produced by us
proves to be susceptible to the Y2K issue, we may incur significant costs to
modify, re-program or replace the affected equipment or software. In addition,
because the VidPhone operates in a Windows environment, any susceptibility of
the Microsoft Windows operating system to Y2K issues could affect the operation
of the VidPhone system.

We began an evaluation of the compliance of our current and future major
supplier's systems in the fourth quarter of 1998. Failure of any of our
significant supplier's systems could result in our inability to supply products
to our customers and adversely affect our operating results and cash flow. Our
Y2K plan includes contingency plans to reduce the risk of a disruption to normal
access to required components and materials or services. Our evaluation consists
of obtaining Y2K compliance certification from major software and hardware
suppliers. Although the cost of assessing Y2K compliance by third parties has
not been material to date and we believe that it will not be material in the
future, at this time we cannot estimate the costs of any steps that will need to
be taken to resolve any problems or secure alternative relationships with Y2K
compliant third parties.

In addition, we have evaluated the impact of the existence of Y2K issues on
our customer base. Based on those evaluations, we do not expect our potential
customers to reduce their capital expenditure budgets or to defer purchases of
the VidPhone system because of concern about potential Y2K issues. We provide
all of our customers with Y2K certifications with respect to our VidPhone
system, and we do not believe that the existence of Y2K issues with respect to
other technologies will materially adversely impact sales of the VidPhone
system.

Our assessment of the impact of Y2K on our operations is based on current
facts and our assessment process is not complete. Accordingly, we cannot assure
you that there will not be interruptions or other limitations of financial and
operation systems functionality or that we will not incur greater costs than
projected to avoid such interruptions. Our expectations about future costs
associated with the Y2K issue are subject to certain uncertainties that could
cause actual results to have a greater financial impact than currently
anticipated. Factors that could influence the amount and timing of future costs
include our success in identifying Y2K issues, the costs of remediation or
avoidance, the

19
<PAGE> 27

costs of assessing third-party compliance and its impact on our operations, and
other factors. The forward-looking statements discussed in this section
regarding Y2K compliance involve a number of risks and uncertainties, including
those described above, and general economic conditions, the competitive
environment in which we operate, and other risks and uncertainties identified
elsewhere in this prospectus.

RESULTS OF OPERATIONS

COMPARISON OF THE QUARTERS ENDED MARCH 31, 1999 AND MARCH 31, 1998

Revenues. We recognized $655,457 in revenues during the three months ended
March 31, 1999 compared to approximately $110,500 in the comparable period in
1998, representing an increase of approximately $545,000, or 493%. The revenues
recognized in 1999 relate primarily to shipments of VidPhone systems shipped to
and accepted by three customers in the first three months of 1999. We believe
that the significant increase in sales and revenues during the first quarter of
1999 is reflective of initial commercial acceptance of our technology
incorporated into our VidPhone system. We believe that the sales and revenues
reflect customer acceptance of our VidPhone software Release 1.4, which added
features to the VidPhone system.

Cost of sales. Cost of sales for the three months ended March 31, 1999 was
approximately $368,700. This represents an increase of approximately $304,400
over the $64,300 recorded in the comparable period in 1998. Cost of sales as a
percentage of sales was approximately 56% and 58% in the periods ending March
31, 1999 and 1998, respectively.

Gross Margin on Sales. Gross margin on sales was approximately $286,800,
or 44%, for the period ending March 31, 1999 compared to gross margin of
$46,200, or 42%, for the comparable period in 1998.

Research and Development. Research and development costs decreased to
$823,000 in the three months ended March 31, 1999, a decrease of approximately
$1,800,000, or 69%. The overall decrease in costs is a result of our
cost-reduction plan implemented in mid-1998. Approximately $407,000 of the
reduction resulted from reduced staffing costs as overall staffing in the
research and development departments declined from 56 at March 31, 1998 to 25 at
March 31, 1999, the use of contract labor was reduced, and recruiting costs were
eliminated. Materials and supplies purchased to support research and development
activities also decreased by approximately $811,000. In addition, decreased use
of rented or uncapitalized equipment resulted in approximately $181,000 in cost
reductions. Lower fees associated with design and consulting services also
contributed approximately $254,000 to the cost reductions during the three
months ended March 31, 1999, compared to the same period in 1998. Allocated
costs from service departments were reduced by approximately $118,000 as
research and development benefited by cost reductions attained in those
departments.

Selling, General and Administrative Expenses. Selling, general, and
administrative expenses decreased to approximately $1,124,000 during the three
months ended March 31, 1999, from approximately $1,740,000 during the three
months ended March 31, 1998, a decrease of approximately $616,000 or 35%. The
decrease in selling, general and administrative expenses reflects the results of
our cost reduction program implemented in mid-1998.

Sales and marketing expenses decreased approximately $416,000 in the first
three months of 1999 as compared to the same period of 1998. Approximately
$225,000 of this

20
<PAGE> 28

reduction was due to lower marketing personnel costs, partially offset by an
increase of approximately $89,000 in staffing costs related to sales personnel.
Approximately $70,000 of the reduction was due to the elimination of recruiting
costs, $72,000 was due to reduced costs associated with advertising and
trade-show attendance, and $54,000 was due to lower professional services fees.
Customer support costs decreased by approximately $138,000 in the three months
ended March 31, 1999 compared to the same period in 1998. Approximately $56,000
of the decrease was due to lower costs associated with materials and
uncapitalized tools and equipment, $46,000 was due to a decline in travel costs,
and approximately $16,000 was due to lower staffing costs.

General and administrative costs declined by approximately $64,000 in the
three months ended March 31, 1999 compared to the same period in 1998. General
and administrative staff costs were reduced by approximately $55,000, and
recruiting and relocation costs were reduced by approximately $26,000. Overall
costs allocated to the sales, general and administrative department from service
departments also were reduced by $115,000.

Depreciation and Amortization. Depreciation and amortization decreased to
approximately $294,000 during the three months ended March 31, 1999, from
$398,000 in the three months ended March 31, 1998, a decrease of approximately
$104,000, or 26%. We use the accelerated depreciation method for book purposes
and, accordingly, we experience higher levels of depreciation in the early years
of depreciable assets' service lives. Also contributing to the overall reduction
in depreciation expense was the disposition or retirement of assets held at one
of our locations in January 1999.

Net Interest (Income) Expense. We recorded approximately $460,600 of net
interest expense in the three months ended March 31, 1999, compared to
approximately $166,000 of net interest income in the comparable period of 1998.
Interest expense totaled approximately $464,000 during the first quarter of
1999, compared to approximately $12,000 during the first quarter of 1998. Of the
interest expense recorded in the 1999 period, approximately $309,000 was
interest expense on the outstanding unsecured promissory notes with an aggregate
principal amount of $2,850,000, that we issued in a unit offering completed in
February of 1999. Included in the interest expense recorded in connection with
the unsecured promissory notes was approximately $198,000 of amortization of
debt discount and $67,000 of amortization of debt issuance costs. In addition,
during the first quarter of 1999, we incurred approximately $81,000 in interest
expense related to long-term debt issued in connection with restructured vendor
accounts payable (including $11,000 of amortization of debt discount), $41,000
in interest incurred on our outstanding convertible debentures, and an
additional $22,000 related to capital lease obligations.

We earned approximately $4,000 in interest income during the first quarter
of 1999, compared to $178,000 in interest income during the first quarter of
1998. The interest income recorded in the first quarter of 1998 was earned on
the invested proceeds of the public offering of common stock that we completed
in November 1997 (the "1997 Follow-on Offering"). We had less cash during the
first quarter of 1999 available for investment and accordingly earned less
interest income.

Net Loss. As a result of the foregoing factors, the net loss for the
period ended March 31, 1999 decreased to approximately $2,400,000, from
$4,500,000 in the three months ended March 31, 1998, a decrease of approximately
$2,100,000 or 47%.

21
<PAGE> 29

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997

Revenues. We had $765,617 in revenues in 1998, compared to no revenues in
1997. Revenues are presented net of a $22,000 reserve for returns and
allowances.

Gross Margin. Cost of sales for 1998 were $544,853, resulting in a gross
margin of $220,764 or approximately 28.8% of revenues. Cost of sales includes
the costs of materials, labor, and production overhead necessary to convert
purchased components to finished products. In the future, we expect to lower the
costs of production through engineering advances and purchasing economies, and
to increase gross margin while also reducing the cost of the VidPhone system per
user.

Research and Development. Research and development expenses increased
significantly to $11,488,000 in 1998, from $6,219,000 in the prior year, an
increase of $5,269,000, or 85%. Of the increase, $2,342,000 was attributable to
higher staffing costs as we added a significant number of product development
personnel during the first half of 1998. Product development staffing costs
declined during the second half of 1998, as we reduced personnel as part of our
overall cost-reduction plan. Of the overall increase in research and development
costs, $1,705,000 was due to increased materials costs, again primarily in the
first half of 1998. We also incurred approximately $610,000 in additional costs
in 1998 related to the increased use of facilities and information technology,
representing a 139% increase over 1997. In addition, equipment and equipment
rental costs to support research and development increased to $544,000 in 1998,
compared to $187,000 in 1997, an increase of approximately $357,000, or 191%.
Computer and software costs increased to $215,000 in 1998 from $91,000 in 1997,
an increase of $124,000, or 136%.

Selling, General, and Administrative Expenses. Selling, general and
administrative expenses increased significantly to $9,015,000 in 1998 from
$4,335,000 in 1997, an increase of $4,680,000, or 108%. Staffing-related costs
increased to $3,798,000 in 1998 from $1,927,000 in 1997, an increase of
$1,871,000, or 97%. Of this increase, $2,075,000 was attributable to additional
sales and marketing staff, offset by a reduction of $204,000 in general and
administrative staffing costs. General and administrative staffing costs
declined in 1998 compared to 1997 because we had a one-time, non-cash
compensation charge of $340,000 in 1997 related to a warrant exchange
transaction. Costs associated with the use of consultants and other professional
services increased during 1998 relative to 1997 by $767,000, or 123%. Of that
increase, $564,000 was attributable to non-cash charges associated with granting
options to an investment banking firm in December 1997. Sales and marketing
costs increased significantly during 1998 compared to 1997 as we introduced the
first commercial version of our VidPhone system. Advertising and promotion
costs, including installations of demonstration equipment at potential customer
or reseller sites and attendance at trade shows (exclusive of travel expenses)
increased to $1,085,000 in 1998, representing an approximately 258% increase
over 1997. In January 1999, we sold furniture and equipment to a third party in
connection with our relinquishment of a lease on excess space in Portsmouth, New
Hampshire. The loss on the sale of this equipment and on the abandonment of
leasehold improvements was an estimated $195,000, which was accrued in 1998. We
did not record any similar charge in 1997. Allocated costs related to facilities
and information technology infrastructure also increased to $580,000 in 1998
from $407,000 in 1997, an increase of $173,000, or 43%. This increase primarily
is due to significantly higher telephone costs in 1998, as we increased the
testing of the VidPhone system over ISDN lines, and higher personnel costs and
uncapitalized equipment in our information technology department. Recruiting and
relocation costs declined in 1998 by

22
<PAGE> 30

approximately $190,000 to approximately $203,000. The higher level of such costs
in 1997 was associated with the move of the Company's headquarters.

Depreciation and Amortization. Depreciation and amortization increased to
$2,241,000 in 1998 from $829,000 in 1997, an increase of $1,412,000, or 170%.
The $1,616,000 increase in depreciation costs was offset by a $209,000 decrease
in amortization costs. Depreciation increased as a result of the significantly
higher level of depreciable fixed assets in 1998. Amortization decreased because
we amortized $209,000 of capitalized debt issuance costs upon the repayment of
debt paid from the proceeds of our initial public offering in April 1997, but we
did not incur any similar charge in 1998.

Interest Income, Net. We earned $120,000 in net interest income in 1998
compared to incurring $203,000 of net interest expense in 1997. We earned
interest income of $292,000 on invested excess cash during 1998, compared to
interest income of $272,000 in 1997. We paid interest expense of $172,000 in
1998 related to capital lease obligations and notes payable, compared to
$475,000 in 1997. Of the interest expense incurred in 1997, $385,000 related to
the write-off of unamortized debt discount representing the fair value of
warrants we issued to holders of notes in connection with a financing completed
in November 1996.

Net Loss. Our net loss for 1998 increased by $10.8 million, or 93%, to
$22.4 million, from $11.6 million for 1997.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996

Revenues. We had no revenues in the year ended December 31, 1997 compared
to revenues of $81,375 in the same period in 1996. The revenues recorded in 1996
were generated from software development and equipment testing consulting
contracts. The services provided involved software and hardware similar to that
used in our product, but were not directly transferable to our VidPhone system
development activities. After these consulting contracts were completed, we
reassigned these resources to VidPhone system development activities. In 1997,
we devoted all of our resources to the development, production, and sale and
delivery of the VidPhone system and related software products.

Gross Margin. We recorded no revenues in 1997 and correspondingly had no
gross margin to report, as compared to a gross margin of approximately 23.3% of
total revenues for 1996.

Research and Development. Research and development expenses increased by
approximately $5,112,000, or 462%, for the year ended December 31, 1997, to
approximately $6,219,000 as compared to $1,107,000 for the year ended December
31, 1996. The increase was primarily due to hiring of technical staff and
increasing levels of spending in connection with final product design and, to a
lesser extent, costs incurred in connection with preparing our new production
facilities. Research and development expenses include the costs associated with
all personnel, materials and contract personnel engaged in research and
development for Objective Communications, as well as an allocated portion of
overhead expenses, such as rent, telephone, and office supplies.

Selling, General, and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $3,291,000, or 315%, in the
year ended December 31, 1997 to approximately $4,335,000 from approximately
$1,044,000 in the same period in 1996. Sales and marketing costs increased in
preparation for the introduction of our products to the marketplace. Significant
expenses were incurred during 1997 in connection with a multi-city product
introduction tour and the addition of sales, marketing, and

23
<PAGE> 31

customer support staff. Legal, accounting, personnel and insurance expenses
increased as a result of our growth, becoming a publicly traded company and the
increased size and complexity of operations.

Depreciation and Amortization. Depreciation and amortization increased
approximately $670,000, or 421%, to $829,000 in the year ended December 31, 1997
from $159,000 in the year ended December 31, 1996. During 1997, we charged to
amortization expense $209,000 of capitalized debt issuance costs upon the
repayment of the debt from the proceeds of our initial public offering. The
remainder of the increase was primarily due to approximately $614,000 in
depreciation of fixed assets and approximately $6,000 in amortization of
trademarks and patents.

Interest Expense. We incurred approximately $203,000 in net interest
expense for the year ended December 31, 1997 compared to approximately $404,000
in net interest expense for the year ended December 31, 1996. Interest income of
approximately $272,000 was earned in 1997, principally derived from the invested
proceeds of our initial public offering completed in April 1997 and the 1997
Follow-on Offering. Interest expense in 1997 included a write-off of
approximately $385,000 of unamortized debt discount representing the fair value
of warrants we issued to holders of notes issued in connection with a financing
completed in November 1996.

Net Loss. As a result of the foregoing factors, the net loss increased by
approximately $8.9 million, or 330%, to approximately $11.6 million for the year
ended December 31, 1997 from approximately $2.7 million during the year ended
December 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

We have incurred cumulative losses aggregating approximately $41.6 million
from our inception through March 31, 1999. We expect to incur additional
operating losses for the foreseeable future, principally as a result of expenses
associated with our product development efforts and anticipated sales, marketing
and general and administrative expenses. As of December 31, 1998, we had
essentially no cash remaining from which to finance our operations. During the
first three months of 1999 we satisfied our cash requirements from the
approximately $2,393,000 in net proceeds from the February 1999 private
placement of $2,850,000 in aggregate principal amount of unsecured promissory
notes and 160,701 shares of our common stock.

During 1998, we satisfied our cash requirements principally from the
proceeds of the 1997 Follow-on Offering and approximately $3.1 million of net
proceeds from the issuance of the 5% convertible debentures and approximately
$1.1 million of proceeds from the issuance of the Series B preferred stock. In
June 1998, we sold to the Portsmouth Development Authority ("PDA") certain
leasehold improvements that we had made to our principal office building. We
received approximately $1.5 million from the sale, but we also are obligated to
pay higher rental costs on our current headquarters in the future as a result of
the transaction. Our primary uses of cash were to fund research and development,
sales, general and administrative expenses, and to build inventory levels to
support future sales.

We had cash and cash equivalents of $640,349 at March 31, 1999, compared to
$8,532 at December 31, 1998. Net cash used in operations during the three months
ended March 31, 1999 was approximately $1,728,000. The net loss in the first
quarter of 1999, reduced by depreciation, amortization, non-cash compensation
and other non-cash charges

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<PAGE> 32

was approximately $1,663,000. Inventory decreased by approximately $232,000
during the first quarter of 1999, primarily as a result of sales made during the
quarter. Accounts receivable increased by $412,000 during the first quarter of
1999 as a result of $619,000 of new sales during the quarter, offset by
approximately $207,000 in cash received from customers relating to outstanding
accounts receivable.

We generated $81,000 in cash from investing activities during the quarter
ended March 31, 1999 through the sale of certain office furniture and equipment
to a third party who assumed a lease on property that we previously occupied. We
did not use any cash in investing activities during the period.

Net cash used in operating activities for 1998 was $19.6 million. The net
loss reduced by depreciation and amortization and the non-cash compensation and
other non-cash charges, was $19.5 million. Inventories increased by $4.1
million, funded in part by an increase of $3.7 million in accounts payable.
Inventory at December 31, 1998 was $5.8 million, compared to $1.7 million at
December 31, 1997. Inventory at December 31, 1998 included $43,000 of finished
goods representing the cost of equipment shipped in the fourth quarter of 1998
which was not recorded as sales in that quarter.

Net cash used in investing activities in 1998 was $2.3 million. The $3.8
million in cash used for capital items was partially offset by the $1.5 million
received from the sale of leasehold improvements to the PDA. Of the $3.0 million
in additions to property and equipment in 1998, $719,000 was financed by
additions to capital lease obligations. Total additions to property and
equipment consisted of additions to offices, furniture and fixtures and related
items, and computer and telecommunications equipment and software.

We generated approximately $2,280,000 in cash from financing activities
during the three months ended March 31, 1999. We received approximately
$2,393,000 in net proceeds from the February 1999 private placement of units,
consisting of $2,850,000 aggregate principal amount of unsecured promissory
notes and 160,701 shares of common stock. The net proceeds from the February
1999 private placement provided most of our operating funds during the period.
We also received $36,000 as an unsecured loan from an employee. Offsetting these
sources of funds was the repayment of $42,000 of notes payable, a payment of
$25,000 against newly issued long-term debt, and the payment $82,000 of capital
lease obligations.

Net cash provided by financing activities was $3.6 million in 1998. In
July, we raised $3.125 million from the issuance of 5% convertible debentures,
$625,000 of which was purchased by certain directors and executive officers and
certain other affiliated investors. In August, we raised $1.15 million by
issuing Series B preferred stock. We also received $221,000 of proceeds from the
exercise of warrants and options by certain warrant and option holders in the
second quarter of 1998. The proceeds from financing activities were partially
offset by $703,000 of principal payments on capital lease obligations and
$145,000 of principal payments on a note payable.

To date, we have not generated substantial revenues from the sale of our
products and services. We earned $765,600 in revenues for the year 1998, and
recognized $655,457 in revenues for the three months ended March 31, 1999. We
have suffered recurring losses from operations, recurring negative cash flow
from operations and had an accumulated deficit of $41,963,300 at March 31, 1999
that raise substantial doubt about our ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty. We have required substantial funding

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<PAGE> 33

through debt and equity financings since our inception to complete our
development plans and commence full-scale operations.

We require additional cash to fund operations. At December 31, 1998, we had
essentially no cash from which to fund operations. In February 1999, we
completed a private placement of units consisting of an aggregate of $2,850,000
unsecured promissory notes and 160,701 shares of common stock, from which we
received net proceeds of $2,393,000. We used the net proceeds from the February
1999 private placement to fund our operations, including approximately $560,000
used to repay certain outstanding accounts payable. Before completing the
February 1999 private placement, we were able to pay only those expenses that
were essential to continue operations and we have continued to monitor payments
carefully.

At March 31, 1999, we had $640,349 in cash and, as of the date of this
prospectus, we are again essentially out of cash. We intend to fund operations
until the closing of this offering with cash generated from customer payments on
outstanding accounts receivable. However, the timing and amount of customer
payments is uncertain. We anticipate that this offering will be completed in
June. As a result of our liquidity problems, we have not been able to fund any
significant further development of the VidPhone system or any expansion of our
operations since mid-1998, and we anticipate that this will continue until we
complete this offering. In addition, we have not paid many of our creditors,
including trade creditors, on a timely basis and remain in default on a number
of significant overdue obligations. Some of these creditors have initiated or
threatened to initiate legal proceedings against us to obtain repayment of these
debts. If we continue not paying our debts as they become due, it is likely that
other creditors will take legal action against us and that other firms will
refuse to sell us the products and services we need to continue operations. We
estimate that the net proceeds from this offering will be sufficient to fund our
operations for approximately 12 months.

With respect to our plan of operations, we intend to continue to focus on
seeking to operate efficiently and preserve cash by closely monitoring
expenditures and payments to vendors on outstanding payables, reviewing
appropriate staffing levels without sacrificing product performance, and
continuing to increase product functionality and promote customer acceptance of
the VidPhone system.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. The statement requires companies to recognize all
derivatives as either assets or liabilities, with the instruments measured at
fair value. The accounting for changes in fair value, gains or losses, depends
on the intended use of the derivative and its resulting designation. The
statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. Adoption of this standard will not have a material impact our
financial results.

INFLATION

The impact of inflation on our business has been insignificant to date, and
we believe that it will continue to be insignificant for the foreseeable future.

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BUSINESS

INTRODUCTION

Objective Communications is a Delaware corporation formed in 1993 to
design, develop and market a full motion, high resolution, cost-effective video
network system. Users of the VidPhone video network system can view broadcast
video from a variety of sources and participate in multi-party video
conferences. With the introduction of Release 1.5 of our VidPhone software,
which we expect to occur in late June 1999, users also will be able to retrieve
and view stored video on demand. Our VidPhone system distributes video to and
from desktop or laptop personal computers and conference rooms configured with a
VidPhone station, over the same wiring used by the telephone. We believe that
the VidPhone system offers greater functionality and compatibility with existing
infrastructure and higher quality than other video network or conferencing
systems available today.

STRATEGY

Our objective is to become a leading provider of video network systems. The
key elements of our strategy are:

- Seek Brand-Name Recognition of the VidPhone System. We intend to
promote the VidPhone system as a brand-name video network. The
initiatives that we are pursuing include press releases, presentations
to industry analysts, technology announcements, formal product launches
and participation in trade shows.

- Position the VidPhone System as an Upgrade to Existing Telephone
Systems. We market the VidPhone system as an enhancement to existing
telephone systems to capitalize on the drive by telephone product and
service companies to regain prominence in the corporate information
systems market. These resellers can offer the VidPhone system as a fully
functional video network that we believe outperforms video network
functionality deployed on the LAN. We believe that the VidPhone system
is more attractive to information technology administrators than
LAN-based systems because it does not use LAN bandwidth, compromise LAN
integrity, affect LAN reliability or impede the performance of the
desktop personal computer.

- Distribute the VidPhone System Through Large Established Distribution
Channels. We are marketing the VidPhone system primarily through
telephone product and service providers, systems integrators and VARs.
These resellers provide us with immediate access to large,
well-established sales forces and credibility for our product. Most
telephone system providers have large sales, service and support
organizations and have long-term relationships with significant customer
bases, including large corporate customers. We currently have agreements
with 16 resellers, including Unisys, Sprint and Bell Atlantic, and we
intend to add more resellers.

INDUSTRY BACKGROUND

Business demand for video communications, historically limited primarily to
video conferencing, is driven by the desire to achieve the most effective means
of communication. Information that is exchanged or presented visually, such as
during in-person meetings or video presentations, has a stronger impact on the
end-user than non-visual communication. People cannot always exchange or present
information in person, and

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technology limitations and cost constraints have restricted the use of video
applications. Consequently, people rely on non-visual forms of communication,
such as telephony, voice mail and e-mail. Recent video application developments
such as targeted broadcasting and conferencing achieve the effectiveness of
face-to-face meetings while retaining the convenience of a telephone call.

We believe that video networks that fully support video broadcast, video
retrieval and video conferencing applications address many of the communications
requirements of the business community. Video networks can improve worker
productivity by facilitating the efficient exchange of information between
geographically dispersed parties and reducing travel expenses. In addition, they
can enable the use of video material for training and research at the
convenience of the user rather than the presenter and permit businesses to
access business broadcasts, such as CNN, CNNfn and CNBC, at a desktop or laptop
computer. To date, however, infrastructure and transmission constraints, costs
and other limitations have precluded business quality video broadcast, retrieval
and conferencing applications at desktop computers.

Until recently, most video communications systems were boardroom video
conferencing systems. These systems were expensive for most businesses. Even
today, most boardroom video conferencing systems require substantial capital
expenditures and trained personnel for set up and maintenance during video
conferencing calls. Most boardroom systems also do not provide video quality
adequate for video broadcast and retrieval and are limited by distracting
latency transmission delays that result in unsynchronized audio and video. In
addition, these systems normally require the use of the public telephone system
for all video calls, including those within a building or across a small
business campus, thereby incurring telephone usage charges for each call.

Over the past decade, video conferencing systems have begun to evolve from
high cost, low quality, stand-alone boardroom systems to desktop systems.
However, desktop systems have not been widely adopted. We believe that this is
primarily because most video network systems produce inadequate video quality
for business purposes.

Most desktop video conferencing systems use either dedicated telephone
lines or the LAN to transmit video data. Some desktop video conferencing systems
use dedicated Integrated Services Digital Network ("ISDN") lines to achieve
acceptable video quality (384 Kbps) for business purposes. However, to achieve
this quality, a minimum of three dedicated ISDN lines with six associated
telephone numbers must be provided to each desktop. The installation costs of
these additional lines and line use charges render this approach prohibitively
expensive on any significant scale. In addition, these systems require the
installation of either expensive and complex hardware coder-decoders ("CODECs")
in each PC, or software CODECs that render the PC unavailable for other
applications during video conferencing.

Some video conferencing systems attempt to use the LAN rather than
dedicated telephone lines. These are referred to as IP or H.323 systems.
LAN-based systems also require the installation of hardware or software CODECs
in each user's desktop or laptop computer. Data LANs were not designed for
isochronous, i.e., time dependent, data such as video and audio. LANs were
designed to be shared by individuals using the transmission medium for short
periods of time. Most LANs today do not have the bandwidth to accommodate the
volume of data inherent in full-motion video applications. Consequently, even a
single video conference would significantly diminish the capacity of most LANs
to support other users. Information technology managers resist LAN-based video
applications because of the additional volume of data and new infrastructure and
the

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associated maintenance required to support them. Although high speed Ethernet
and gigabit routing switches may alleviate some of the bandwidth problems
resulting from the transmission of video on the LAN, we believe that these new
technologies do not adequately address the transmission delay problems plaguing
such systems. We believe that, in the future, synchronous fiber optic networks
and Asynchronous Transfer Mode ("ATM") switching will dominate in the wide area
network ("WAN"). However, we do not believe that ATM will reach desktop
computers due to the high cost.

We believe that business users will not adopt video applications on any
significant scale until video systems are capable of providing TV-quality video
and FM-quality stereo audio and are cost effective. We believe that our VidPhone
video network meets these requirements because it takes advantage of existing
telephone wiring and supports high quality video and audio, but does not
interfere with the existing LAN-based computer system or impede the performance
of an individual desktop or laptop computer.

PRODUCTS AND TECHNOLOGY

Our VidPhone system is a full-motion, high resolution, cost-effective video
network system that uses the same wiring as the telephone, which gives it a
competitive cost advantage over other types of video network systems. Users of
the VidPhone video network system can view broadcast video from a variety of
sources including direct broadcasts of "live" communications, satellite
broadcasts and stored video, and participate in multi-party video conferences
from desktop personal computers or conference rooms. With the introduction of
Release 1.5 of our VidPhone software, which we expect to occur in late June
1999, users also will be able to retrieve and view stored video on demand.

[chart]

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[Image of a remote terminal (wide area network) connected by a line to a
VidPhone switch which in turn is connected by three telephone lines equipped
with VidModems to a laptop computer, a television or large screen display and a
desktop computer within a building or small business campus. A fourth line
connects the Vidphone switch to a PBX or Centrex.]

Typical VidPhone(R) System Configuration

<PAGE> 38

Our VidPhone system is comprised of the following core components:

VidPhone Switch. The VidPhone switch is the video, audio and data switch
that is the cornerstone of our VidPhone video network system. It enables users
to access all VidPhone system functions within a building or across a small
business campus and, using one of our gateway products, to communicate with
remote locations through a WAN. A VidPhone switch is a scalable, modular video
network switch that supports from five to 50 concurrent users. Up to four
VidPhone switches may be connected to support up to 150 concurrent users. The
VidPhone switches normally reside near the PBX or CENTREX point of entry and can
be mounted in standard 19-inch racks.

VidModem. The VidModem connects the desktop and the VidPhone switch using
the existing telephone wiring. The desktop and VidPhone switch versions of the
VidModem incorporate the patented VidModem technology that enables distribution
of TV-quality video, FM-quality stereo audio and high speed data over the single
twisted pair of copper wire that connects the telephone to the PBX or CENTREX.
The transmission does not require compression or decompression of data. The
connection is transparent to the telephone and the PBX, so the user also can use
the telephone concurrently with the VidPhone system, and the telephone operates
independent of any video applications.

VidPhone Station Software. VidPhone station software is the software
platform supporting users of the VidPhone system. It provides an easy-to-use
graphical user interface for all video applications offered by the VidPhone
system and transforms a user's desktop or laptop computer into a VidPhone
station. The user's computer is configured with non-proprietary equipment such
as a microphone, speakers and a camera. VidPhone stations connect to the
VidPhone switch through a VidModem. A VidPhone station user can view broadcast
video and participate in video conferences. VidPhone stations may be located up
to 1,000 feet from the VidPhone switch when using category 3 wiring, and up to
2,000 feet when using category 5 wiring. We believe that most modern business
telephone systems use at least category 3 wire. VidPhone stations do not need a
terminal-resident ISDN or ATM CODECs because they connect directly to the
VidPhone switch. VidPhone stations may be easily and inexpensively modified for
conference room systems. The VidPhone system also supports all video network
applications in a large screen multi-party conference room setting.

VidPhone Remote Terminal. VidPhone remote terminals connect remote users
who are not directly connected to a VidPhone switch through a VidModem to the
VidPhone system. Employees in branch offices, individuals working from home, and
other parties outside a building or business campus are potential users of
VidPhone remote terminals. VidPhone remote terminal users have access to all
video network functions of the VidPhone switch to which they connect; however,
the quality of the video and audio presentation will be limited by the bandwidth
of the external communications connection. VidPhone remote terminal connectivity
may be over a variety of communications circuits, such as single or multi-line
ISDN.

We also have developed and are continuing to develop additional components
that enhance the VidPhone system. Three of these components are the VidPhone
Gateway2, the ATM Gateway2 and our VidServer video storage and access device.
Our VidPhone Gateway2 and ATM Gateway2 can be used to connect VidPhone systems
across a wide area network. The VidPhone Gateway2 interfaces with and transmits
signals across a WAN using the public telephone system's ISDN lines, which are a
network of ISDN lines operating worldwide. The VidPhone system ATM Gateway2
interfaces with and transmits signals over a fiber optic network WAN. Both the
VidPhone Gateway2 and the ATM

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Gateway2 compress the video data signal at the location where the video call is
initiated, interface with the WAN, decompress the video signal at the location
where the video call is received, and transmit the video signal to the VidModem
switch for distribution to the VidPhone user to whom the call is directed. The
VidPhone VidServer will be available with software Release 1.5 expected to occur
in late June 1999. The VidServer will permit VidPhone users access to and
control of stored video.

SYSTEM FUNCTIONALITY

The VidPhone system is capable of supporting three business video
requirements.

Broadcast Video. Users of the VidPhone system can view video broadcast
from a variety of sources. Sources of broadcast video material include, but are
not limited to, direct broadcasts of "live" communications, satellite
broadcasts, stored video, cable television, and narrowcasts over an ATM network.
These sources are connected to the VidPhone switch through a specially designed
circuit card. The user selects the desired broadcast from a menu using standard
point-and-click techniques. The non-blocking architecture of the VidPhone switch
permits multiple users to simultaneously access the same broadcast video source
without degrading system performance.

Video Conferencing. The VidPhone system supports two-way and multi-party
video conferencing. A VidPhone system user can maintain a telephone directory
and contact other VidPhone users using standard point-and-click techniques at
any time without prior coordination.

Retrieval of Stored Video. With the commercial introduction of Release 1.5
of the VidPhone software, which we expect to occur in late June 1999, VidPhone
system users will be able to access stored video material. The stored video
material may reside on a variety of different types of devices, such as a video
server, a video jukebox or a video tape player. Users will be able to access
stored video using point-and-click techniques similar to those used to access
broadcast video.

SALES AND MARKETING

Our sales and marketing strategy is to create brand-name recognition of the
VidPhone video network system. We actively promote the VidPhone system through
various initiatives including press releases, targeting key media outlets,
presentations to industry analysts and consultants, technology announcements,
formal product launches, and participation in trade shows. In the first quarter
of 1999, our VidPhone system was exhibited at three trade shows, including two
trade shows at which our strategic partner, Unisys, exhibited the VidPhone. In
1998, we exhibited the VidPhone system at five trade shows held in Washington,
D.C., Boston and three cities in California. Our strategic partner, Unisys,
exhibited the VidPhone system at 11 additional trade shows. Those shows targeted
the federal government, including the Department of Defense and U.S. military
bases. We also made a presentation and exhibited the VidPhone system at the
Sprint ATM User's Conference held in Atlanta in 1998.

Resellers. We market our VidPhone system primarily through telephone
product and service companies, systems integrators and VARs who generally will
market and sell our video network system as an upgrade to their existing
customers' telephone and information systems. We currently have agreements with
16 resellers. In part, our strategy is to capitalize on the drive by some of the
telephone product and service resellers to gain prominence in the corporate
information systems market. The attributes of the VidPhone system enable our
resellers to offer a fully functional video network that competes directly

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with video network functions offered by computer and LAN vendors. We believe the
VidPhone system is more attractive to information technology administrators than
LAN-based systems because it does not use LAN bandwidth, compromise LAN
integrity, affect LAN reliability or use significant personal computer
processing power. The VidPhone system architecture also enables information
technology administrators to centrally manage system resources and feature
upgrades. The VidPhone system provides higher quality video and audio than any
LAN-based system currently available.

Telephone product and service providers, systems integrators and VARs offer
sales, service and support and have large customer bases. These distribution
channels have a large existing customer base that is generally receptive to
system upgrades. We have an agreement with Bell Atlantic, expiring in October
1999, to market and sell our video network to the Department of Defense and
other governmental agencies. We also have a reseller agreement with Sprint to
market and sell VidPhone systems worldwide which terminates in July 1999. In
October 1998, we entered into a strategic alliance with Unisys under which
Unisys is the preferred systems integrator that resells our VidPhone system to
the federal government.

We have a limited operating history and, therefore, we do not have any
substantial basis on which to predict our sales cycle. However, we expect that
we will have a relatively long sales cycle for our products, in part because of
our strategy of marketing our VidPhone system through resellers. It takes a
relatively long time for us to establish a relationship with our resellers. It
also takes time for us to familiarize our resellers and their personnel with the
VidPhone system and to train the resellers' sales force. However, we also expect
that the time involved in our sales cycle will decrease after we establish
customer reference accounts, create brand name recognition of the VidPhone
system and have longer, more established relationships with our resellers.

Direct Sales. We have a small internal direct sales force to promote our
VidPhone system, to create reference accounts in major markets, and to support
our third-party resellers. We intend to continue to develop our direct sales
force, focusing on adding a small number of sales people in specific geographic
areas to further our sales and marketing efforts.

Vertical Distribution Channels. We are developing vertical distribution
channels for our VidPhone system. Initially, our sales and marketing efforts
target the government sector and the financial and medical industries. We are
targeting the government sector because it tends to adopt technology early and
has many uses for a video network system. We are targeting the financial and
medical industries because these industries have a demonstrated need to
broadcast and distribute video to many users at their desktop computers.

Customer Service and Support. We expect that our resellers will provide
their customers with service and support for the VidPhone system. In addition,
we maintain a customer support department that assists our resellers and
end-user customers with problems related to our video network system, including
the initial installation of the VidPhone system, technical questions, problem
resolution and systems engineering. As our resellers become more familiar with
the VidPhone system, we expect that they will be the primary customer support
for our products to their customers, and that our customer support department
will become a secondary customer support, focusing on providing service
regarding issues like software performance and hardware re-engineering
requirements. We also expect that, in the future, our customer support
department will provide services to our resellers rather than to the end-user
customer.

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Training. To promote reseller sales and marketing efforts, as well as
resellers' support for our products, we hold in-depth training programs to
educate our resellers about our products. During 1998, we held training classes
for reseller sales, support and service personnel, both at our facilities and at
our resellers' facilities. We intend to increase the number and availability of
our training programs in the future, which we believe will help build brand
awareness, promote reseller sales and marketing of the VidPhone system, and
improve reseller service and support for our VidPhone systems.

PRODUCT RESEARCH AND DEVELOPMENT

We spent $17,707,000 on research and development during 1997 and 1998.
During 1997, our research and development efforts focused on completing the
initial development and production of the VidPhone system. We introduced the
VidPhone system in the fourth quarter of 1997, and we made the first shipments
of the commercial VidPhone system in the third quarter of 1998. Since then, our
research and development has focused on:

- adding new features requested by our customers;

- adding additional user capacity to the VidPhone system; and

- lowering production costs.

Our engineering staff closely monitors technical developments and works
with our marketing personnel to assess evolving business video network
requirements. We will monitor emerging technologies that support new video
applications for business and tailor our research and development accordingly.
In addition to our internal research and development resources, we engage
contract engineering services when we believe that the use of such services will
be efficient. Research and development efforts target both hardware and software
enhancements to video network capabilities. Our research and development efforts
are complemented by internal quality and assurance procedures.

INTELLECTUAL PROPERTY

Our proprietary VidModem transmission technology, incorporated in our
VidPhone system, is covered by two U.S. patents issued in April 1997 and July
1998 and a Taiwanese patent issued in November 1998, which relate to a method
and apparatus for transmitting video information over telephone wiring and
variations of the basic VidModem technology.

We also have pending a patent application covering the VidPhone system's
networking and switching technology, and patent applications with respect to a
scalable high-speed packet switch and a U-channel interface device. We cannot
predict when we will receive dispositive rulings from the U.S. Patent and
Trademark Office concerning these patent applications. We expect to file
approximately six to nine new U.S. patent applications in 1999 covering various
improvements in the field of video distribution, but we do not expect to receive
notice from the U.S. Patent and Trademark Office for at least one year after
filing. The success of our products depends in part on our continuing ability to
obtain and protect patents, licenses and other intellectual property rights
covering our significant hardware and software products. We have registered the
trademarks Objective Communications, VidPhone, and VidModem.

The process of seeking patent and trademark protection can be long and
expensive, and there can be no assurance that patents and trademarks will issue
from currently pending or future applications or that any patents or trademarks
that are issued will be of sufficient scope to provide meaningful protection or
any commercial advantage to us.

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MANUFACTURING

We outsource the manufacture and assembly of components used in the
VidPhone system. In particular, we outsource to Sanmina Corporation the
manufacture and assembly of components used in the VidPhone switch. Several
other manufacturers are producing smaller sub-assemblies and components for us.
We believe we will be able to continue to outsource production and that there
are a number of manufacturers qualified to produce components of our VidPhone
system, because the production process is relatively routine and does not
require any unique expertise. Although our products incorporate unique, patented
technology, we also believe that all of the components used in our equipment are
readily available from commercial suppliers. As a result, we do not believe that
we depend on any single manufacturer or supplier to a material extent. All
products produced by third-party manufacturers are shipped to us for final
assembly, systems integration and quality assurance testing. We plan to retain
test and quality assurance functions until subcontractors can be certified with
respect to quality. Any difficulties encountered with third-party manufacturers
could result in product defects, production delays, cost overruns or the
inability to fulfill orders on a timely basis. Any of these difficulties could
have a material adverse effect on us.

As of December 31, 1998, we had overdue accounts payable to Sanmina of an
aggregate of approximately $3,200,000 and additional commitments to purchase our
inventory and other materials located at Sanmina of approximately $1,100,000 in
value. In January 1999, we restructured these obligations by converting the
outstanding $3,200,000 obligation to Sanmina and the $1,100,000 in inventory
commitments to a three-year term note in the principal amount of $4,300,000. The
note bears interest at 7% per year. We also issued to Sanmina warrants to
purchase 39,285 shares of our common stock at an exercise price of $19.25 per
share. We are obligated to pay Sanmina $1,100,000 in principal on the note at
the time this offering is completed and, at that time, Sanmina will transfer to
us title to our inventory and materials located at its facilities. We provide
you with more information about the restructuring later in this prospectus under
the caption "Description of Securities -- Other Warrants."

COMPETITION

The market for our products is new, highly competitive and rapidly
evolving. We believe that the principal competitive factors in the markets in
which we compete are product performance, price and product support. Our
principal competitors in the video network market are Viewcast.com, FVC.com and
DataPoint Corp. We believe that it is difficult to compare the prices of
competitive systems, because the VidPhone offers different features and
capabilities than the systems offered by our competitors in the video network
market. However, we also believe that customers can purchase our VidPhone system
at a price that is competitive with, or lower than, the systems offered by our
competitors, when the systems being compared are similarly configured. We also
expect to compete with new entrants in the market and with providers supporting
IP and LAN-based video networks, including Intel, Microsoft, and Cisco. To date,
no desktop system has captured any significant portion of the potential market.

Our video network system permits users to view broadcast video and
participate in multi-party video conferences from the desktop and, upon the
introduction of our Release 1.5 software, will permit retrieval of stored video
on demand. As a result, we also compete with companies that offer video
broadcast and video retrieval products. Competitors in the

34
<PAGE> 43

video broadcast market include cable television and direct satellite broadcast
system providers such as DirecTV, TCI, and News Network Vision.

Our principal competitors in the video conferencing market have been
PictureTel, DataPoint and its wholly-owned subsidiary CLI, Intel and Polycom. We
believe that PictureTel currently has the largest market share in both the group
and desktop video conferencing markets. We also expect to compete with new
market entrants in the video conferencing market. We are not aware of any
current competitors in the video retrieval market.

Virtually all of our competitors have longer operating histories, greater
name recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we do. We believe that we will be able to
compete effectively against larger companies with substantially greater
resources on the basis of our product's capabilities, our distribution strategy,
and price. We do not believe that LAN-based competitors will be able to provide
business quality video network systems in the foreseeable future. There can be
no assurance, however, that we will be able to compete successfully against
these or future competitors.

GOVERNMENT REGULATION

The Federal Communications Commission ("FCC") regulates the operation of
telecommunications equipment for use in the United States. The VidModem and
VidPhone switch components of the VidPhone system must comply with certain FCC
regulations.

VidModem. The VidModem is a Class A digital device that may be operated
without an individual license. Under FCC regulations, we will be required to
follow a verification procedure consisting of a self-certification that the
radio frequency device complies with applicable regulations. A qualified,
independent testing facility tested the VidModem, and it was found to comply
with FCC regulations.

VidPhone. We obtained equipment registrations from the FCC for certain
VidPhone system components, including the VidPhone switch, that are connected to
the public switched telephone network.

Future government regulations could increase the cost of bringing products
to market or adversely affect our ability to market and sell our products or
technology.

EMPLOYEES

As of the date of this prospectus, we have approximately 50 employees, all
of whom are full-time. Of our current employees, 21 are employed in research and
development, eight are employed in sales and marketing, seven are employed in
customer support, seven are employed in operations, and seven are administrative
employees. We also use the services of technical consultants and subcontractors
on an as-needed basis. Each employee and consultant has executed both a
confidentiality agreement and an agreement not to compete with us for a period
of 24 months after performing services for us. We do not have employment
agreements with any of our employees, except for James F. Bunker, our President
and Chief Executive Officer, and Steven A. Rogers, our founder, Chief Technology
Officer and Vice President.

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<PAGE> 44

PROPERTIES

We lease one facility in Portsmouth, New Hampshire at a current monthly
rental rate of $11.00 per square foot under a lease that expires in March 2008.
Rent on the facility increases over the term of the lease from an initial rate
of $11.00 per square foot to $15.00 per square foot. That facility consists of
approximately 26,000 square feet, of which approximately 13,000 square feet is
office space, approximately 6,500 square feet is a research and development
laboratory, and approximately 6,500 square feet is a production facility used
for equipment assembly and testing, customer support, and training.

LEGAL PROCEEDINGS

We are a party to a number of pending lawsuits and proceedings relating to
overdue obligations. Most of these proceedings seek to recover relatively small
amounts of money and, as of the date of this prospectus, the total amount of
damages sought in these proceedings is approximately $99,000, plus in certain
cases, court costs and attorney's fees. We are seeking to negotiate payment
terms regarding many of these obligations, but to date our efforts to resolve
them have not been successful. We have numerous other overdue obligations and
other creditors have threatened to bring lawsuits against us. These could result
in additional lawsuits being filed against us. We are not aware of any other
legal proceedings pending or threatened against us.

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<PAGE> 45

MANAGEMENT

Our current directors and executive officers are set forth below.
Biographical information concerning each of the directors and executive officers
is presented on the following pages. Information is presented as of the date of
this prospectus.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mr. James F. Bunker.................................. 64 President, Chief Executive
Officer and Director
Mr. Roger A. Booker.................................. 44 Vice President, Operations
Mr. Robert H. Emery.................................. 54 Vice President, Administration
and Finance and Secretary
Mr. David P. Martin.................................. 40 Vice President, Sales
Mr. Steven A. Rogers................................. 47 Chief Technology Officer and
Vice President, Engineering and
Director
Mr. Anthony M. Agnello............................... 49 Director
Dr. Eugene R. Cacciamani............................. 62 Director
Mr. Marc S. Cooper................................... 37 Director
Mr. Richard S. Friedland............................. 48 Director
Mr. John B. Torkelsen................................ 53 Director
</TABLE>

James F. Bunker has served as President and Chief Executive Officer since
July 1998 and was elected as a director in January 1999. From January 1994 until
he joined our company in July 1998, Mr. Bunker was actively involved as an
outside consultant to high technology companies, advising them with respect to
the development of a business plan, funding, recruiting management and other key
personnel, and serving as an executive member of management teams. Previously,
from 1986 until his retirement at the end of 1993, Mr. Bunker served in various
capacities with M/A-COM and General Instrument Corporation, most recently as the
President of the VideoCipher Division of General Instrument. Mr. Bunker also is
a director of Viasat, a public satellite telecommunications company located in
Carlsbad, California.

Roger A. Booker has served as Vice President, Operations since February
1996. From June 1994 to February 1996, Mr. Booker served as the Vice President,
International Development and Operations at Global Partnership, Inc., where he
directed international development and operations. From February 1990 to June
1994, Mr. Booker also served as the Vice President, Manufacturing Operations at
Cryptek, Inc., an encrypted facsimile machine manufacturer, and served in the
same position at General Kinetics, Inc. until July 1990, when it acquired
Cryptek, Inc., where he was responsible for overseeing operations, including
several acquisitions and divestitures. From August 1986 to February 1990, Mr.
Booker was Director of Operations for Magnavox Government and Industrial
Electronics Company, where he managed the development of a new 200,000 square
foot manufacturing facility.

Robert H. Emery has served as Vice President, Administration and Finance
and Secretary since December 1996, and previously served as Vice President,
Administration from May 1995 to December 1996. From May 1986 to May 1995, he
served as Vice President of Aries Systems International, Inc., an information
services company. From August 1983 to July 1986, Mr. Emery served as the ADP
Security Officer for the military's largest secure computer network. He is a
CPA.

37
<PAGE> 46

David P. Martin has served as Vice President, Sales since October 1998.
Previously, Mr. Martin served as the Chief Information Officer from April 1998
to October 1998. Prior to joining Objective Communications, Mr. Martin served as
the Director of Information Systems at Healthsource Inc., a healthcare
maintenance organization, from 1990 until October 1998. He also served in sales
and sales management positions at IBM Corporation in the ROLM (PBX) division and
with Western Union in the advanced transmission (ATS) division.

Steven A. Rogers founded Objective Communications in 1993, and currently
serves as our Chief Technology Officer and Vice President, Engineering and as a
director. He served as President and Chief Executive Officer from our inception
until July 1998 and has served as a director since our inception. From July 1990
to July 1992, he served as a Senior Vice President of General Kinetics, Inc.
where he managed the Cryptek division. In January 1986, he founded Cryptek, Inc.
and, from January 1986 to July 1990, when it was acquired by General Kinetics,
Inc., served as its President and Chief Operating Officer. Mr. Rogers is a
co-author of the Company's patent covering the VidModem technology, and holds
several other patents.

Anthony M. Agnello has served as a director since January 1997. Mr. Agnello
co-founded Ariel Corporation, a digital signal processing equipment provider, in
1982 and currently serves as Chairman of the Board of Ariel Corporation. Mr.
Agnello holds several patents in digital signal processing.

Eugene R. Cacciamani has served as a director since August 1994. Dr.
Cacciamani has been a Senior Vice President of Hughes Network Systems, Inc.,
which furnishes private communications networks to business, government and
common carriers since 1987, where he is responsible for developing new
technologies, systems and businesses, including lead efforts in the Hughes DBS
DirecTV system and the systems design in the ICO global satellite personal
communications systems. Dr. Cacciamani is on the Engineering Advisory Boards at
Union College and The Catholic University of America and serves as an advisor to
Aloha Networks, Inc. and Qwest Communications.

Marc S. Cooper has served as a director since April 1997. Mr. Cooper has
been a Managing Director of Peter J. Solomon since June 1999. Previously, Mr.
Cooper served as Vice Chairman of Barington Capital Group, L.P. responsible for
the Syndicate, Investment Banking and Research Departments from January 1998 to
June 1999. From March 1992 until January 1998, Mr. Cooper served as Executive
Vice President, Director of Investment Banking and Research at Barington. He
also serves as a director of Thinking Tools, Inc., a software developer.

Richard S. Friedland was elected as a director in March 1999. Since October
1997, Mr. Friedland has been actively involved as an investor and consultant to
emerging high technology companies, with a focus on video and communications.
From 1978 to October 1997, Mr. Friedland served in various capacities with
General Instrument Corporation, a provider of systems and equipment to the cable
telephone and telephony industries. Most recently, from September 1995 to
October 1997, he served as Chairman of the Board of Directors and Chief
Executive Officer of General Instrument, and he served as President, Chief
Operating Officer and Director of that company from September 1993 to September
1995. Mr. Friedland also is a director of Premark International, Zilog, Inc. and
Tech-Sym, Inc.

John B. Torkelsen has served as a director since March 1996. Mr. Torkelsen
has served as President of Princeton Venture Research, Inc. since 1984,
President of its

38
<PAGE> 47

affiliate PVR Securities, Inc. since 1987, President of its affiliate, PVR
Management, Inc. since 1997, and General Partner of its affiliate, Acorn
Technology Fund, L.P. since 1997. Mr. Torkelsen also is a director of Voice
Control Systems, Inc., Mikros Systems Corporation and Princeton Video Image,
Inc.

The Board of Directors currently has two standing committees, an Audit
Committee and a Compensation Committee. Messrs. Cooper and Friedland are the
current members of the Audit Committee. Messrs. Agnello, Cacciamani and
Torkelsen currently serve as members of the Compensation Committee.

DIRECTOR COMPENSATION

We reimburse directors for expenses incurred in connection with attending
Board and committee meetings, but we have not paid cash compensation for
services rendered as a director.

In August 1994, we granted options to purchase an aggregate of 28,568
shares of common stock ("Directors' Non-Qualified Options") to the persons then
serving as our directors. The options are exercisable until the fifth
anniversary of the closing of this offering, have an exercise price of $14.00
per share and vest 20% per year on each of the first, second, third, fourth and
fifth anniversaries of the date of grant. Directors may forfeit options if they
do not meet certain performance requirements. As of April 30, 1999, Directors'
Non-Qualified Options to purchase 21,427 shares of common stock were vested,
Directors' Non-Qualified Options to purchase 1,428 shares of common stock had
been exercised and Directors' Non-Qualified Options to purchase 4,998 shares of
common stock had been forfeited.

In April 1997, we granted options to purchase an aggregate of 9,224 shares
of common stock under the 1996 Stock Incentive Plan to the persons then serving
as our directors (other than Mr. Steven A. Rogers). The options are exercisable
for a period of five years from the date of grant, have an exercise price of
$46.38 per share and vest ratably on each of the first, second and third
anniversaries of the date of grant. Directors may forfeit options if they do not
meet certain performance requirements. As of April 30, 1999, 4,295 of these
options were vested, and 3,711 had been forfeited.

In May 1998, we granted options to purchase an aggregate of 12,780 shares
of common stock under the 1996 Stock Incentive Plan to the persons then serving
as our directors (other than Mr. Steven A. Rogers). The options are exercisable
for a period of five years from the date of grant, have an exercise price of
$92.75 per share and vest ratably on each of the first, second and third
anniversaries of the date of grant. Directors may forfeit options if they do not
meet certain performance requirements. As of April 30, 1999, none of these
options were vested and 7,639 had been forfeited.

The compensation committee of the Board of Directors will meet annually to
determine option grants to the directors.

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<PAGE> 48

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table lists the cash remuneration paid or accrued during 1998
and 1997 to our President and Chief Executive Officer, and to each of our other
three most highly compensated executive officers who earned more than $100,000
in 1998 (the "Named Executive Officers"). We do not have any pension or
long-term incentive plans, and did not grant any restricted stock awards, bonus
stock awards or stock appreciation rights to any of the executive officers named
in this table during 1998 or 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
------------------
AWARDS
ANNUAL COMPENSATION ------------------
-------------------- SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James F. Bunker(1) 1998 $ 93,151 $ -0- 14,285
President & Chief Executive Officer
- ---------------------------------------------------------------------------------------
Roger A. Booker 1998 $105,000 $ -0- 6,428
Vice President, Operations 1997 85,000 45,000 5,000
- ---------------------------------------------------------------------------------------
Robert H. Emery 1998 $105,000 $ -0- 9,285
Vice President, Administration and 1997 90,000 45,000 5,000
Finance
- ---------------------------------------------------------------------------------------
Steven A. Rogers(2) 1998 $165,000 $ -0- 9,285
Chief Technology Officer and Vice 1997 120,000 60,000 7,142
President, Engineering
- ---------------------------------------------------------------------------------------
</TABLE>

(1) Mr. Bunker joined the Company as President and Chief Executive Officer on
July 13, 1998.

(2) Mr. Rogers served as President and Chief Executive Officer of the Company
until July 13, 1998, when he became Chief Technology Officer and Vice
President, Engineering.

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<PAGE> 49

STOCK OPTION GRANTS IN 1998

The following table sets forth certain information about the stock options
granted during 1998 to the Named Executive Officers. As of the date of this
prospectus, we have not granted any stock appreciation rights under the 1996
Stock Incentive Plan.

STOCK OPTION GRANTS IN 1998

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS OPTIONS GRANTED TO EXERCISE PRICE EXPIRATION
NAME GRANTED EMPLOYEES IN 1998 ($/SH) DATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James F. Bunker 14,285(1) 9.8% $38.50 (3)

- ---------------------------------------------------------------------------------------------
Roger A. Booker 6,428(2) 4.4 $92.75 (3)

- ---------------------------------------------------------------------------------------------
Robert H. Emery 6,428(2) 4.4 $92.75 (3)
2,857(4) 2.0 30.63 (3)

- ---------------------------------------------------------------------------------------------
Steven A. Rogers 9,285(2) 6.4 $92.75 (3)

- ---------------------------------------------------------------------------------------------
</TABLE>

(1) Options to purchase 7,143 shares vested on January 13, 1999, six months from
the date of grant, and the remaining options to purchase 7,142 shares vest
ratably on a monthly basis over the period from February 13, 1999 through
July 13, 2000. Vesting of these options will accelerate in the event of a
"change in control" of Objective Communications.

(2) These options vest on May 27, 2004, the date that is six years from the date
of grant.

(3) These options expire on the fifth anniversary of the closing of this
offering.

(4) These options vest ratably over a three-year period, annually on the
anniversary of the date of grant.

STOCK OPTION EXERCISES IN 1998

The Named Executive Officers did not exercise any options in 1998. The
following table sets forth the number of shares of common stock underlying
unexercised options held by the Named Executive Officers at December 31, 1998.
At December 31, 1998, no Named Executive Officer held any "in-the-money" stock
options.

1998 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
- -----------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS AT
DECEMBER 31, 1998
EXERCISABLE/
NAME UNEXERCISABLE
- -----------------------------------------------------------------
<S> <C>
James F. Bunker............................... 0/14,285
Roger A. Booker............................... 4,108/12,533
Robert H. Emery............................... 6,179/16,534
Steven A. Rogers.............................. 3,808/16,190
- -----------------------------------------------------------------
</TABLE>

41
<PAGE> 50

FUTURE STOCK OPTION GRANTS

As a result of the reverse stock split in our outstanding common stock
effective on April 14, 1999, the number of shares of common stock held by our
stockholders and the number of shares of common stock underlying options held by
our directors, management and employees has been reduced by more than eighty
five percent (85%). The exercise prices of substantially all of these options
are significantly above the current market value per share of common stock. Our
management and Board of Directors believe that granting additional stock options
with an exercise price that approximates the current market value to
substantially all of our directors and employees is important for the future
success of the Company. As of the date of this prospectus, only approximately
81,000 shares of common stock were available for issuance to directors,
executive officers and employees under our existing stock option plans.
Accordingly, we expect in the near future to seek stockholder approval of a new
stock option plan providing for the issuance of up to the number of shares of
common stock equal to 30% of the number of shares of common stock outstanding
after this offering, including shares issued upon conversion of the Series B
preferred stock and the convertible debentures. Whether or not the new plan is
adopted, however, we will not grant options to promoters, employees or
affiliates in an amount that, when combined with all outstanding options issued
to such persons, exceeds 15 percent of the outstanding shares of our common
stock on the date of this prospectus, plus the shares of common stock included
in the units being offered in this prospectus and the shares of common stock
underlying the warrants included in the units offered in this prospectus.

We have agreed with the representative of the underwriters of this offering
that, if the proposed new stock option plan is approved, in the future we will
not issue any options under our other existing stock option plans including the
1996 Stock Incentive Plan, and that all future options issued to directors,
officers, employees and consultants during the 12 months following this offering
will be granted under that new stock option plan. We also have agreed with the
representative of the underwriters that all future options granted during the 12
months following this offering, whether or not granted under the new stock
option plan, will have exercise prices of not less than the greater of the
public offering price per share of common stock in this offering, or the fair
market value of the common stock on the date of grant.

EXECUTIVE EMPLOYMENT CONTRACTS

We entered into an Employment and Consulting Agreement with Mr. Bunker as
of July 13, 1998. The agreement is for a one-year term, unless earlier
terminated or extended as provided in the agreement. At the conclusion of the
initial term, the term may be extended by mutual agreement for additional
successive one-month periods. If the aggregate term of employment is for less
than two years, then the agreement provides that Mr. Bunker will provide us with
consulting and advisory services for not fewer than two days per month through
July 13, 2000. The agreement also provides for a base salary of $200,000 per
year. Under the agreement, Mr. Bunker was granted stock options to purchase
14,285 shares of common stock at an exercise price of $38.50 per share, which
was the fair market value of the common stock on the date the options were
granted. The options are subject to certain vesting requirements. Mr. Bunker
also has entered into a Confidentiality, Inventions and Noncompetition Agreement
with Objective Communications.

We also entered into an employment agreement with Mr. Rogers effective on
March 13, 1997. The agreement was for an initial period of one year and renews
automatically for successive one-year periods on the anniversary date of the
agreement unless terminated by either party upon 90 days' written notice prior
to the end of the applicable term. The agreement also is terminable at any time
by the Company for

42
<PAGE> 51

"cause," or by Mr. Rogers for "good reason," in each case as defined in the
agreement. Under the terms of this agreement, Mr. Rogers currently has an annual
base salary of $165,000. The agreement also includes a non-competition
commitment during and after the term of the agreement, confidentiality
commitments, non-solicitation of employee provisions and assignment of work
product agreements.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the date of this prospectus, by (i) all
persons known by us to beneficially own 5% or more of the outstanding shares of
common stock, (ii) each current director, (iii) each of the Named Executive
Officers and (iv) all of our current directors and executive officers, as a
group. Unless otherwise noted, each stockholder named has sole voting and
investment power with respect to such shares, subject to community property laws
where applicable.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(1)
------------------------- ---------------------
NUMBER OF NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
------------------------ ----------- --------- ---------- --------
<S> <C> <C> <C> <C>
Anthony M. Agnello(2)................ 994 *% 994 *%
Roger A. Booker(3)................... 7,527 * 7,527 *
James F. Bunker(4)................... 19,671 2.0 19,671 *
Eugene R. Cacciamani(5).............. 8,168 * 8,168 *
Marc S. Cooper(6).................... 42,720 4.2 42,720 *
Robert H. Emery(7)................... 18,938 1.9 18,938 *
Richard S. Friedland(8).............. -- -- -- --
Steven A. Rogers(9).................. 141,414 14.3 141,414 1.8
John B. Torkelsen(10)................ 59,973 6.0 59,973 *
All directors and executive officers
as a group (10 persons)(11)........ 299,415 27.3% 299,415 3.7%
</TABLE>

- -------------------------
* Less than one percent.

(1) Applicable percentage of ownership prior to this offering is based on
980,848 shares of common stock outstanding as of the date of this
prospectus. Applicable percentage of ownership after this offering is based
on 7,914,639 shares of common stock outstanding after the offering,
including 933,791 shares of common stock to be issued upon conversion of
the outstanding Series B preferred stock and convertible debentures upon
completion of this offering. Beneficial ownership is determined in
accordance with rules of the Securities and Exchange Commission. For each
beneficial owner, shares of common stock subject to options or warrants
exercisable within 60 days of the date of this prospectus are deemed
outstanding.

(2) The address of Mr. Agnello is 2540 Route 130, Cranbury, New Jersey 08512.
Consists of 994 shares of common stock issuable upon exercise of options.

(3) The address of Mr. Booker is c/o Objective Communications, Inc., 50
International Drive, Portsmouth, New Hampshire 03801. Consists of 6,132
shares of common stock issuable upon exercise of options and 1,395 shares
of common stock issuable upon conversion of outstanding convertible
debentures of which Mr. Booker owns $5,000 original principal amount.

(4) The address of Mr. Bunker is c/o Objective Communications, Inc., 50
International Drive, Portsmouth, New Hampshire 03801. Consists of 9,126
shares of common stock that may be acquired upon exercise of outstanding
options, 3,571 shares of common stock purchased in the February 1999
private placement by a limited

43
<PAGE> 52

partnership controlled by Mr. Bunker and 6,974 shares of common stock
issuable upon conversion of outstanding convertible debentures of which Mr.
Bunker beneficially owns, through a limited partnership, $25,000 original
principal amount.

(5) The address of Dr. Cacciamani is 10100 New London Drive, Potomac, Maryland
20854. Includes 3,961 shares of common stock issuable upon exercise of
options and 2,789 shares of common stock issuable upon conversion of
outstanding convertible debentures of which Dr. Cacciamani owns $10,000
original principal amount.

(6) The address of Mr. Cooper is c/o Barington, Capital Group, L.P., 888
Seventh Avenue, 17th Floor, New York, New York 10019. Consists of 25,714
shares of common stock that may be acquired upon exercise of an option held
by Barington (the "Barington Option"), 8,928 shares of common stock
issuable upon the exercise of another option held by Barington, 1,104
shares of common stock issuable upon the exercise of other options held by
Mr. Cooper and 6,974 shares of common stock issuable upon conversion of
outstanding convertible debentures of which Mr. Cooper owns $25,000
original principal amount. We granted Barington the Barington Option in
connection with our initial public offering in April 1997. Mr. Cooper also
is a stockholder in LNA Capital Corp., the corporate general partner of
Barington. Includes options to acquire 3,857 shares of common stock which
Cross Connect, L.L.C. has the right to acquire from Barington under certain
conditions. Cross Connect, L.L.C. is not affiliated with Barington or Mr.
Cooper, and Mr. Cooper disclaims beneficial ownership of the 3,857 shares
of common stock that may be acquired upon exercise of such options.

(7) The address of Mr. Emery is c/o Objective Communications, Inc., 50
International Drive, Portsmouth, New Hampshire 03801. Includes 833 shares
of common stock issuable upon exercise of warrants, 8,989 shares of common
stock issuable upon exercise of options, 1,428 shares of common stock
purchased in the February 1999 private placement by Mr. Emery and 6,974
shares of common stock issuable upon conversion of outstanding convertible
debentures of which Mr. Emery owns $25,000 original principal amount.

(8) The address of Mr. Friedland is 5894 Partridge Lane, Long Grove, Illinois
60047.

(9) The address of Mr. Rogers is c/o Objective Communications, Inc., 50
International Drive, Portsmouth, New Hampshire 03801. All of the shares of
common stock owned by Mr. Rogers are pledged to Merrill Lynch Credit
Corporation to secure certain obligations. Includes 2,380 shares of common
stock issuable upon exercise of warrants and 6,189 shares of common stock
issuable upon exercise of options.

(10) The address of Mr. Torkelsen is 240 Library Place, Princeton, New Jersey
08540. Includes (i) 947 shares of common stock issuable upon the exercise
of options; (ii) 40,082 shares of common stock beneficially owned by
Princeton Venture Research, Inc. ("PVR"), of which Mr. Torkelsen is the
President and majority stockholder, and which are pledged to BT Alex. Brown
to secure certain obligations; (iii) 15,373 shares of common stock that may
be acquired upon the exercise of warrants beneficially owned by PVR; and
(iv) 2,857 shares of common stock owned by Pamela Torkelsen, Mr.
Torkelsen's wife, and 714 shares of common stock that may be acquired upon
the exercise of warrants beneficially owned by Pamela Torkelsen. Mr.
Torkelsen disclaims beneficial ownership of common stock and warrants owned
by Mrs. Torkelsen.

(11) Includes 91,384 shares of common stock issuable to executive officers and
directors upon exercise of warrants and options, and 25,106 shares of
common stock issuable to executive officers and directors upon conversion
of outstanding convertible debentures.

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<PAGE> 53

CERTAIN TRANSACTIONS

RELATED PARTY LOANS

The following is a description of loan transactions of $60,000 or more
between Objective Communications and its directors, executive officers and 5% or
greater stockholders (or members of their families) since February 1997.

In April 1996, Clifford M. Kendall, then Chairman of the Board of
Directors, loaned us $100,000 in aggregate principal amount, on which interest
accrued quarterly at a fixed rate of 7% per year. We repaid the principal amount
of and accrued interest on the loan after our initial public offering of common
stock was completed in April 1997. In July 1997, Mr. Kendall exercised an option
granted by Mr. Steven A. Rogers and purchased 7,142 shares of common stock from
Mr. Rogers at an exercise price of $14.00 per share.

Mr. Rogers, our founder, Chief Technology Officer and Vice President,
Engineering and a director of Objective Communications, loaned us an aggregate
of $30,000 during 1995 and an additional $70,000 during 1996. The loans accrued
interest at a fixed rate of 7% per year. The principal amount of and accrued
interest on the loans were repaid in full in April 1997. As an inducement to
extend the loans to us, we also issued to Mr. Rogers warrants to purchase an
aggregate of 2,380 shares of common stock. The warrants have an exercise price
of $28.00 per share and are exercisable for a period of five years from the date
of issuance. We paid all loans outstanding to Mr. Rogers in full in April 1997
upon the completion of our initial public offering.

On January 8, 1999, a limited partnership controlled by Mr. Bunker made a
loan to us to permit us to continue operations. The principal amount of the loan
made by Mr. Bunker was $100,000. The principal amount of the loan was converted
into units in the February 1999 private placement. The purchases of securities
made by Mr. Bunker in the February 1999 private placement was made on the same
terms and conditions as unaffiliated third parties purchasing units in the
offering, except that Mr. Bunker was issued only 3,571 shares of common stock in
the February 1999 private placement and unaffiliated third party investors
investing the same dollar amount were issued 5,714 shares of the units purchased
in that private placement. We will use a portion of the net proceeds from this
offering to repay the notes issued in the February 1999 private placement,
including the note held by Mr. Bunker.

Mr. Bunker has voluntarily deferred the payment of his salary from November
9, 1998, through the date on which this offering is completed. As of June 9,
1999, we will owe Mr. Bunker $115,385 in accrued and unpaid salary. Following
the closing of this offering, we will again pay Mr. Bunker his salary on a
current basis in accordance with our normal payroll practices. In addition,
under a letter agreement between us and Mr. Bunker dated February 4, 1999, after
the closing of this offering, we are obligated to repay Mr. Bunker his accrued
and unpaid salary at the rate of $5,000 per week, until the obligation is repaid
in full. We may also, at our discretion, repay the obligation in full at any
time after completion of this offering.

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EQUITY TRANSACTIONS

The following is a description of equity transactions between us and our
directors, executive officers and 5% or greater stockholders (or members of
their families) since February 1997.

Barington Capital Group, L.P.

Barington acted as underwriter of our initial public offering of common
stock completed in April 1997, for which it received underwriting discounts and
commissions of approximately $1,100,000. In addition, Barington received a
non-accountable expense allowance of $341,550, and was issued an option to
purchase 25,714 shares of common stock. That option is exercisable until April
8, 2002 at an exercise price of $63.53 per share. Barington also served as an
underwriter of our follow-on offering of common stock completed in October 1997,
for which it received underwriting fees and commissions of approximately
$500,000. Mr. Marc S. Cooper, a director of the Company, is the Vice Chairman of
Barington.

In December 1997, we granted Barington an option to acquire 17,857 shares
of common stock at an exercise price of $96.67 per share, the fair market value
of the common stock on the date of grant. The option was granted as
consideration for business and financial services to be provided to us over a
two-year period, including investment banking services and consulting services
relating to mergers and acquisitions.

We have agreed to use our best efforts (including the solicitation of
proxies, if necessary) to elect one designee of Barington to the Board of
Directors until April 8, 2002. Mr. Cooper has served as a director since April
1997 and was elected pursuant to this agreement. Mr. Cooper currently is a
member of the Audit Committee of the Board of Directors.

In July 1998, the Company issued $3,125,000 aggregate principal amount of
convertible debentures in a private placement. Directors and executive officers
purchased an aggregate of $315,000 aggregate original principal amount of
convertible debentures. The purchasers included Mr. Cooper, who purchased
$25,000 original principal amount of convertible debentures. In addition, other
principals and employees of Barington purchased in the aggregate $135,000
original principal amount of convertible debentures. The convertible debentures
will automatically convert into shares of common stock upon the completion of
this offering.

PVR Securities, Inc.

John B. Torkelsen, the President of Princeton Venture Research and its
affiliate, PVR Securities, Inc., has served as a director since March 1996 and
is a member of the Compensation Committee of the Board of Directors. In
connection with private placements of our equity securities by PVR Securities in
1995 and 1996, Mr. Torkelsen and Mr. Rogers entered into an agreement that
provides that, until December 5, 2000, each of them will vote any shares of
common stock that he controls for the election to the Board of Directors of an
individual nominated by the other and, on a best efforts basis, will seek
additional votes for the other party's nominee. Mr. Torkelsen was elected to the
Board pursuant to this agreement.

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PVR Securities, a corporation of which Mr. Torkelsen is the President,
acted as the investment advisor to the two investors that purchased the
$1,150,000 stated value of Series B preferred stock in a private placement
completed in August 1998. Neither PVR Securities nor Mr. Torkelsen received any
compensation for acting in that capacity.

ISSUANCE OF 5% CONVERTIBLE DEBENTURES DUE 2003

As described above, in July 1998, we issued $3,125,000 aggregate principal
amount of convertible debentures. $2,500,000 aggregate original principal amount
of convertible debentures were purchased by certain institutional investors (the
"Institutional Investors"), and $625,000 aggregate original principal amount of
convertible debentures were purchased by certain directors and executive
officers of, and outside consultants to, the Company. Messrs. Kendall, Cooper,
Liebhaber and Dr. Cacciamani, then directors of the Company, and Messrs. Bunker,
Booker and Emery and Ms. Murphy, then executive officers of the Company,
purchased convertible debentures in the offering. Following the issuance of the
convertible debentures, the following persons held beneficially the principal
amount of debentures indicated: Mr. Bunker -- $25,000; Mr. Booker -- $5,000; Mr.
Emery -- $25,000; Ms. Murphy -- $25,000; Mr. Kendall -- $100,000; Dr.
Cacciamani -- $10,000; Mr. Cooper -- $25,000; and Mr. Liebhaber -- $100,000. The
offering, issuance and sale of the convertible debentures to certain directors
and executive officers was a condition precedent to the consummation of the
financing with the Institutional Investors.

It was a condition precedent to the consummation of the February 1999
private placement that we enter into an agreement with the holders of the
convertible debentures, including the directors and executive officers indicated
above, amending certain terms of those securities. In the letter agreements,
each of the holders of the convertible debentures agreed that: (i) it would not
exercise its right to convert the convertible debentures to common stock until
the date on which a public or private equity financing with specified minimum
gross proceeds to us (a "qualified financing") is completed; (ii) upon the
closing of a qualified financing, the principal amount of and accrued and unpaid
interest on the convertible debentures will automatically convert into the
securities issued in the qualified financing at a conversion price of $3.75 and
that the anti-dilution provisions of the convertible debentures would be
inapplicable to the conversion; and (iii) it waives any default by us with
respect to our obligation to register or maintain the effectiveness of a
registration statement for the shares of common stock issuable upon conversion
of the convertible debentures. The holders of the convertible debentures also
agreed to hold the shares of common stock issued upon conversion of the
convertible debentures for at least 12 months following the effective date of
our registration statement that relates to the qualified financing. We agreed to
include the shares of common stock issuable upon conversion of the convertible
debentures in the registration statement filed with the SEC relating to the
qualified financing.

We believe that all of the above transactions were made on terms no less
favorable to us than could have been obtained from unaffiliated third parties,
and all of the transactions since our initial public offering were approved by
at least a majority of our Board of Directors, including a majority of the
disinterested members of the Board of Directors. All future transactions between
us and any of our officers, directors and principal stockholders and their
affiliates will be approved by at least a majority of the Board of Directors,
including a majority of the disinterested members of the Board of Directors, and
will be on terms no less favorable to us than could be obtained from
unaffiliated third parties.

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DESCRIPTION OF SECURITIES

COMMON STOCK

Our Certificate of Incorporation authorizes us to issue up to 30,000,000
shares of common stock, par value $.01 per share. Of the 30,000,000 shares of
common stock authorized, 980,848 shares are issued and outstanding as of the
date of this prospectus. Upon completion of this offering, there will be
7,914,639 shares of common stock issued and outstanding.

Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors from funds legally available for such
dividends. Upon liquidation, holders of shares of common stock are entitled to a
pro rata share in any distribution available to holders of common stock. The
holders of common stock have one vote per share on each matter to be voted on by
stockholders, but are not entitled to vote cumulatively. Holders of common stock
have no preemptive rights. All of the outstanding shares of common stock are,
and all of the shares of common stock to be issued in connection with this
offering will be, validly issued, fully paid and non-assessable.

PREFERRED STOCK

Our Certificate of Incorporation authorizes the Board of Directors, without
stockholder approval, to issue up to 2,500,000 shares of preferred stock, par
value $0.01 per share, to establish one or more series of preferred stock and to
determine, with respect to each such series, the preferences, voting rights and
other terms thereof. Any issuance of preferred stock will be approved by a
majority of the independent directors who do not have an interest in the
transaction and who have access, at our expense, to our counsel or to
independent counsel. We currently have outstanding 209,091 shares of Series B
preferred stock. The holders of the Series B preferred stock have registration
rights with respect to the shares of common stock issuable upon conversion of
the Series B preferred stock. The holders waived any registration rights with
respect to those shares in connection with this offering. The Series B preferred
stock will automatically convert into common stock upon consummation of this
offering. Upon completion of this offering, no shares of preferred stock will be
outstanding, and the Board has no present intention to issue any such shares.

THE UNITS

Each Unit consists of three shares of common stock and two warrants. The
common stock and the warrants comprising the units will not be detachable or
separately transferable, and may be traded only as units, until 90 days after
the effective date of the registration statement of which this prospectus is a
part, or such earlier date as the representative of the underwriters may
determine. The units will initially be evidenced by separate unit certificates,
and certificates representing the common stock and warrants included in the
units will not be issued until such securities become detachable and separately
transferable.

WARRANTS OFFERED AS PART OF THE UNITS

Each of the warrants offered hereby, and the warrants included in the units
issuable upon exercise of the representative's purchase option, will entitle the
holder to purchase

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one share of common stock at an initial exercise price of $4.00 per share during
a four-year period commencing one year after the date of this prospectus. No
fractional shares of common stock will be issued in connection with the exercise
of warrants. Upon exercise, we will pay the holder the value of any such
fractional shares in cash, based upon the market value of the common stock at
the time of exercise.

The warrants will expire at 5:00 p.m., New York time, on the fifth
anniversary of the date of this prospectus. In the event that a holder of
warrants fails to exercise the warrants prior to their expiration, the warrants
will expire and the holder thereof will have no further rights with respect to
the warrants.

We may, with the consent of the representative, redeem the warrants, at any
time after they become exercisable, at a price of $.01 per warrant upon not less
than 30 days' prior written notice if the last sale price of the common stock
has been at least 200% of the then exercise price of the warrants (initially
$8.00 per share) for the 20 consecutive trading days ending on the third day
prior to the day on which notice is given.

No warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of common stock issuable upon exercise of
such warrants under an effective registration statement filed with the SEC and
such shares have been qualified for sale or are exempt from qualification under
the securities laws of the state of residence of the holder of such warrants. We
have undertaken to file and keep current a prospectus which will permit the
purchase and sale of the common stock underlying the warrants, but there can be
no assurance that we will be able to do so. Although we intend to seek to
qualify for sale the shares of common stock underlying the warrants in those
states where the units are being offered, there can be no assurance that we will
be able to do so.

A holder of warrants will not have any rights, privileges or liabilities as
a stockholder of Objective Communications prior to the exercise of the warrants.
We are required to keep available a sufficient number of authorized shares of
common stock to permit exercise of the warrants. The exercise price of the
warrants and the number of shares issuable upon exercise of the warrants will be
subject to adjustment to protect against dilution in the event of stock
dividends, stock splits, combinations, subdivisions and reclassifications. No
assurance can be given that the market price of our common stock will exceed the
exercise price of the warrants at any time during the exercise period.

OTHER WARRANTS

Upon completion of this offering, in addition to the warrants described
above, the following warrants to purchase an aggregate of 200,627 shares of
common stock will be outstanding: warrants to purchase 46,662 shares at an
exercise price of $28.00 per share; warrants to purchase 2,142 shares at $56.00
per share; the 1996 warrants to purchase 41,501 shares at an exercise price of
$23.10 per share; the Series A warrants to purchase 14,284 at an exercise price
of $28.00 per share; warrants to purchase 7,467 shares at $19.25 per share;
warrants to purchase 39,286 shares at $19.25 per share; warrants to purchase
5,714 shares at $18.59 per share; options to purchase 25,714 shares of common
stock at $63.53 per share; and options to purchase 17,857 shares of common stock
at $96.67 per share. The following discussion of the material terms and
provisions of the warrants is qualified in its entirety by reference to the
detailed provisions of the agreements relating to the issuance of the warrants
and the forms of warrants, which are filed as exhibits to the Registration
Statement on Form SB-2 of which this prospectus constitutes a part.

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PVR Warrants. In connection with our private placement of common stock in
June 1995 and August 1996, we issued warrants to purchase an aggregate of 63,981
shares of common stock, of which warrants to purchase 49,363 shares of common
stock were issued to investors and warrants to purchase 14,618 shares of common
stock were issued as inducements to make loans to us. We also issued to Mr. John
B. Torkelsen, President of PVR Securities, as partial compensation for the
services of PVR Securities as placement agent for the offering, warrants to
purchase 9,872 shares of common stock. Including those warrants issued to Mr.
Torkelsen as compensation, we originally issued warrants to acquire 4,936 shares
of common stock with an exercise price of $46.20 per share, warrants to acquire
63,981 shares of common stock with an exercise price of $56.00 per share, and
warrants to acquire 4,936 shares of common stock with an exercise price of
$61.60 per share. Certain of these warrants were issued to our directors,
officers and affiliates to induce them to make loans to us. Certain investors
subsequently converted the principal amount of and accrued interest on their
outstanding loans to us to units consisting of common stock and warrants.

The exercise price of the warrants and the number of shares of common stock
issuable upon exercise thereof are subject to adjustment in certain
circumstances, including the event of a stock dividend, subdivision or
combination of the common stock, the issuance of common stock or rights, options
or warrants to acquire common stock at a price per share less than the exercise
price of the warrants in effect immediately prior to such issuance. These
warrants are exercisable in whole or in part. Warrants to purchase 46,662 shares
of common stock at an exercise price of $28.00 per share and warrants to
purchase 2,142 shares of common stock at an exercise price of $56.00 per share
expire on January 24, 2001. The holders of these warrants have certain
registration rights with respect to the warrants and the shares of common stock
underlying the warrants.

The holders of the warrants issued in the private placements by PVR
Securities in 1995 and 1996 waived any registration rights with respect to the
warrants and the shares of common stock issuable upon exercise of these warrants
in connection with this offering.

1996 Warrants. In October and November 1996, we issued to investors
warrants to purchase, in the aggregate, up to 49,976 shares of common stock at
an exercise price equal to $23.10 per share. Warrants to purchase 41,501 shares
of common stock are outstanding as of the date of this offering. The 1996
warrants are exercisable in whole or in part and expire on dates ranging from
October 2001 to December 2001. The exercise price of the 1996 warrants and the
number of shares of common stock issuable upon exercise of the warrants are
subject to adjustment in certain circumstances, including stock dividends, stock
splits, combinations or reclassifications involving or in respect of our common
stock. In addition, the holders of these warrants have certain registration
rights with respect to the warrants and the shares of common stock issuable upon
exercise of these warrants. Holders of these warrants have waived any
registration rights for the warrants and the shares issuable upon exercise of
the warrants in connection with this offering. In addition, the holders also
waived any anti-dilution adjustment in the number of shares of common stock
issuable upon exercise of the warrants and the warrant exercise price as a
result of the February 1999 private placement and this offering.

Series A Warrants. In connection with the private placement of Series A
preferred stock in December 1996 and January 1997, all of which converted to
common stock upon our initial public offering, we issued warrants to purchase an
aggregate of 14,284 shares of common stock at an exercise price of $28.00 per
share. The Series A warrants are currently exercisable and expire on December
20, 2001 and January 22, 2002. The holders

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of the Series A warrants have certain registration rights with respect to the
shares of common stock underlying the Series A warrants. The exercise price of
these warrants and the number of shares of common stock issuable upon exercise
thereof are subject to adjustment in certain circumstances, including the event
of a stock dividend, subdivision or combination of the common stock, the
issuance of common stock or rights, options or warrants to acquire common stock
at a price per share less than the exercise price of the warrants in effect
immediately prior to such issuance. Holders of the Series A warrants waived any
registration rights for the shares issuable upon exercise of the warrants in
connection with this offering. They also waived any anti-dilution adjustment in
the number of shares of common stock issuable upon exercise of the warrants and
the exercise price as a result of the February 1999 private placement and this
offering.

Series B Warrants. In August 1998, in connection with our private
placement of 209,091 shares of Series B preferred stock to two institutional
investors, we issued warrants to purchase an aggregate of 7,467 shares of common
stock with an original exercise price of $42.00 per share. In connection with
the February 1999 private placement, under a letter agreement with each of the
holders of the Series B warrants, we agreed that: (i) the holders would not
exercise their right to convert the Series B preferred stock to common stock, or
exercise the Series B warrants for common stock, until the date on which we
complete a public or private equity financing with gross proceeds to us of not
less than $8 million (a "qualified financing"); (ii) upon the closing of a
qualified financing, the stated value of and accrued and unpaid dividends on the
Series B preferred stock will automatically convert into shares of common stock
at a conversion price equal to $19.25 per share, and the exercise price of
Series B warrants would be reduced to $19.25 per share; (iii) the anti-dilution
provisions of the Series B preferred stock and the Series B warrants would not
apply to a qualified financing which would include this offering, the
convertible debenture conversion, the February 1999 private placement, the
conversion of the Series B preferred stock or the exercise of the Series B
warrants; (iv) the holders waived and agreed not to exercise any registration
rights they may have as to the common stock issuable upon conversion of the
Series B preferred stock or the exercise of the Series B warrants in connection
with this offering; and (v) the holders would not sell any common stock issuable
upon conversion of the Series B preferred stock for at least six months after
the effectiveness of this registration statement (or up to 24 months, if
necessary to obtain regulatory approval of this offering).

Other Warrants. In January 1999, in connection with the restructuring of
certain outstanding obligations to Sanmina Corporation, we issued to Sanmina
warrants to purchase 39,286 shares of our common stock, with a $19.25 exercise
price per share. As part of the transaction, we converted outstanding accounts
payable of $3,200,000 and $1,100,000, the latter amount representing the value
of our inventory and materials located at Sanmina, to a $4,300,000 three-year
term loan accruing interest at 7% per year. We are obligated to pay Sanmina
$1,100,000 in principal on the note at the time this offering is completed and,
at that time, Sanmina will transfer to us the title to our inventory and
materials located at Sanmina. In January 1999, we also converted outstanding
bills to our counsel totaling approximately $375,000 to a two-year term loan
accruing interest at 7% per year. In connection with the transaction, we issued
to our counsel warrants to purchase 5,714 shares of common stock with a $18.59
per share exercise price. We are obligated to pay our counsel $50,000 in
principal on the note at the time this offering is completed.

Barington Options. We issued to Barington options to purchase 25,714
shares of common stock at an exercise price of $63.53 per share in connection
with our initial public

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offering. Cross Connect, L.L.C. has the right to acquire options to purchase
3,857 shares of common stock from Barington in certain circumstances. Cross
Connect, L.L.C. is not affiliated with Barington or Marc S. Cooper. The
Barington option is exercisable until April 8, 2002. The Barington option may be
exercised as to all or a lesser number of shares covered by the option, and has
certain registration rights and anti-dilution provisions providing for
appropriate adjustment of the exercise price and number of shares which may be
purchased upon exercise, upon the occurrence of certain events. Barington waived
any registration rights relating to its options and the shares issuable upon
exercise of its options in connection with this offering. We also issued to
Barington in December 1997 options to purchase 17,857 shares of common stock at
an exercise price of $96.67 per share. These options were granted as
consideration for business and financial services to be provided to us over a
two-year period. Barington also waived any anti-dilution adjustment in the
number of shares issuable upon exercise of its options or the option exercise
price as a result of the February 1999 private placement and this offering.

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SHARES ELIGIBLE FOR FUTURE SALE

GENERAL

Upon completion of this offering, there will be outstanding 7,914,639
shares (8,814,639 shares if the underwriters' over-allotment option is exercised
in full) of our common stock (including 62,098 shares of common stock issuable
upon the automatic conversion of the Series B preferred stock at a conversion
price of $19.25 per share upon completion of this offering, and 871,693 shares
of common stock issuable upon the automatic conversion of the outstanding
convertible debentures at a conversion price of $3.75 upon completion of this
offering). Of such shares, 6,532,690 shares (7,432,690 shares if the
underwriters' over-allotment option is exercised in full) of common stock,
consisting of (i) the 6,000,000 shares of common stock being sold as part of the
units in this offering, (ii) 438,571 shares sold in our prior public offerings
of common stock, (iii) 85,637 shares previously resold in reliance on Rule 144
under the Securities Act, and (iv) 8,482 shares sold under an effective
registration statement filed by us on Form S-3 with the Securities and Exchange
Commission, will be freely transferable without restriction by persons other
than our affiliates, subject to certain lock-up arrangements. The lock-up
arrangements are described in detail below.

In addition, subject to the lock-up arrangements, certain selling
stockholders may offer and sell from time to time up to 1,032,394 outstanding
shares of common stock in negotiated transactions or otherwise, consisting of
the 160,701 shares of common stock issued by the Company in the February 1999
private placement and 871,693 shares of common stock issuable upon the
conversion of the outstanding convertible debentures upon completion of this
offering. The registration statement we filed relating to this offering also
registers those shares, all of which are freely transferable under the
Securities Act without restriction by persons other than our affiliates. Sales
of shares of common stock by the selling stockholders may have an adverse effect
on the market price of the common stock.

The remaining 349,555 outstanding shares of common stock will be
"restricted securities" under Rule 144. These shares may be sold in the future
without registration under the Securities Act to the extent permitted by Rule
144, pursuant to another exemption from registration under the Securities Act,
or under an effective registration statement. Certain of our outstanding shares
of common stock that are restricted securities have registration rights, which
are discussed below in this prospectus under the heading "-- Registration
Rights." As currently in effect, Rule 144 provides that any person (or persons
whose shares are aggregated) holding "restricted securities," and any of our
affiliates, who has beneficially owned the shares for at least one year (as
computed under Rule 144), is entitled to sell within any three-month period the
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of the common stock (approximately 79,146 shares after the
offering and giving effect to the conversion of the convertible debentures and
the Series B preferred stock) and (ii) the reported average weekly trading
volume of the then outstanding shares of common stock during the four calendar
weeks immediately preceding the date on which the notice of sale is filed with
the Securities and Exchange Commission. Sales under Rule 144 also are subject to
certain provisions relating to the manner and notice of sale and the
availability of current public information about Objective Communications. A
person (or persons whose shares are aggregated) who is not deemed one of our
affiliates at any time during the 90 days immediately preceding a sale, and who
has beneficially owned the shares for at least two years (as computed under Rule
144), would be entitled to sell such shares under Rule 144(k) without regard to
the volume limitation and the other conditions mentioned above.

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We cannot predict the effect that any future sales of shares of common
stock, or the availability of such shares for sale, will have on the market
price of the common stock from time to time. We believe that sales of
substantial numbers of shares of common stock, or the perception that such sales
could occur, would adversely affect prevailing market prices of the common stock
and our ability to raise capital in the future through the sale of additional
securities.

In addition to the outstanding shares of common stock and the shares
issuable upon the conversion of the convertible debentures and the Series B
preferred stock upon the completion of the offering, we have reserved a total of
6,968,058 shares of common stock for issuance upon exercise of other outstanding
warrants and options including (i) the warrants that constitute part of the
units issued in connection with this offering (ii) the shares of common stock
and warrants issuable as part of the units to be issued upon exercise of the
underwriters' over-allotment option, and (iii) the shares of common stock and
warrants issuable as part of the units to be issued upon exercise of the
representative's purchase option. Shares of common stock issuable in the future
could hinder future financings. In addition, the holders of some of these
options and warrants have registration rights, and the sale of shares of common
stock upon exercise of those rights or the availability of such shares for sale
could adversely affect the market price of the common stock.

REGISTRATION RIGHTS

Subject to the lock-up arrangements described below, we have granted demand
and/or "piggyback" registration rights to the holders of 160,701 shares of
common stock, the holders of 933,791 shares of common stock issuable upon
conversion of the Series B preferred stock and the convertible debentures upon
completion of this offering, and the holders of options and warrants to purchase
an additional 137,770 shares of common stock. Subject to certain conditions and
limitations, the registration rights grant to the holders the right to register
all or any portion of the common stock held by them or issuable upon the
exercise of warrants or options held by them. In addition, the holders of
warrants to purchase 97,800 shares of common stock also have the right to cause
us to register the warrants for resale by the holders in certain circumstances.
The registration rights are subject to certain notice requirements, timing
restrictions and volume limitations which may be imposed by the underwriters of
an offering. We generally are required to bear the expenses of all such
registrations, except for the underwriting discounts and commissions relating to
the sale of the shares of common stock by the holders.

LOCK-UP AGREEMENTS

The sale of certain of the shares of common stock available for sale in the
public market after completion of this offering is limited by restrictions under
agreements entered into with Southeast Research Partners, Inc., the
representative of the underwriters of this offering. Without the prior written
consent of the representative of the underwriters of this offering, the holders
of the following securities have agreed not to offer, sell, transfer or
otherwise dispose of the number of shares of common stock for the periods
indicated: (i) the holders of 160,701 shares of common stock we issued in the
February 1999 private placement have agreed not to dispose of any of such shares
for a period of six months from the effective date of the registration statement
filed with respect to this offering; (ii) directors and executive officers
holding an aggregate of 208,031 shares of common stock (including 4,999 shares
of common stock purchased in the February 1999 private

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placement) have agreed not to dispose of any shares of common stock for fifteen
months from the effective date of the registration statement filed with respect
to this offering; (iii) the holders of the 871,693 shares of common stock
issuable upon the conversion of the convertible debentures have agreed not to
dispose of any shares of common stock issuable upon conversion of the debentures
for one year (including 25,106 shares of common stock issuable to certain of our
directors and executive officers upon conversion of the convertible debentures)
following the effective date of the registration statement filed with respect to
this offering; and (iv) the holders of the 62,098 shares of common stock
issuable upon the conversion of the Series B preferred stock have agreed not to
dispose of any shares of common stock issuable upon conversion of the preferred
stock or the 7,467 shares of common stock issuable upon exercise of the warrants
issued in connection with the original issuance of the Series B preferred stock
for six months following the effective date of the registration statement filed
with respect to this offering.

55
<PAGE> 64

UNDERWRITING

The underwriters named below, for whom Southeast Research Partners, Inc.
("SERP") is acting as representative, have severally agreed, subject to the
terms and conditions of the underwriting agreement, to purchase from us a total
of 2,000,000 units. The number of units that each such underwriter has agreed to
purchase is set forth opposite its name:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF UNITS
- ----------- ----------------
<S> <C>
Southeast Research Partners, Inc. .........................
Ladenburg Thalmann & Co. Inc. .............................
----------
Total............................................ 2,000,000
</TABLE>

The obligations of the underwriters under the underwriting agreement are subject
to approval of certain legal matters by counsel and various other conditions
precedent, and the underwriters are obligated to purchase all of the units
offered by this prospectus (other than the units covered by the over-allotment
option described below) if any are purchased.

The representative has advised us that the underwriters propose to offer
the units to the public at the public offering price set forth on the cover page
of this prospectus and to certain dealers at that price less a concession not in
excess of $ per unit (8% of the per unit offering price). The underwriters
may allow and such dealers may reallow a concession not in excess of $ per
unit to certain other dealers. After this offering the offering price and other
selling terms may be changed by the underwriters.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act. We have also agreed to pay to
the representative of the underwriters an expense allowance on a non-accountable
basis equal to 3% of the gross proceeds derived from the sale of the units
underwritten (including the sale of any units subject to the underwriters'
over-allotment option), $50,000 of which has been paid to date. We have also
agreed to pay all expenses in connection with qualifying the units offered
hereby for sale under the laws of such states as the representative may
designate and registering this offering with the National Association of
Securities Dealers, Inc. including fees and expenses of counsel retained for
such purposes by the representative.

We have granted to the underwriters an option, exercisable during the
45-day period after the date of this prospectus, to purchase from us at the
offering price, less underwriting discounts and the non-accountable expense
allowance, up to an aggregate of 300,000 additional units for the sole purpose
of covering over-allotments, if any.

In connection with this offering, we have agreed to sell to the
representative for an aggregate of $100 the representative's purchase option,
consisting of the right to purchase up to an aggregate of 200,000 units. The
representative's purchase option will be exercisable at any time between the
first and the fifth anniversary of the date of this prospectus at a price of
$ per unit (165% of the per unit offering price). The representative's
purchase option may not be transferred, sold, assigned or hypothecated during
the one-year period following the date of this prospectus except to the
underwriters,

56
<PAGE> 65

the selected dealers and to officers or partners of the representative, the
underwriters and the selected dealers. The representative's purchase option
grants to the holders thereof certain "piggyback" and demand rights for periods
of five and seven years, respectively, from the date of this prospectus with
respect to the registration under the Securities Act of the securities directly
and indirectly issuable upon exercise of the representative's purchase option.

The underwriting agreement provides that for a period of three years from
the date of this prospectus we will appoint or elect a designee of SERP as a
member of our Board of Directors. Alternatively, if SERP chooses, SERP may send
a non-voting representative to observe each meeting of the Board of Directors.
To the extent permitted by Delaware law, we have agreed to indemnify SERP and
its designee for the actions of such designee as a director of Objective
Communications. SERP has not yet selected a designee.

Until February 4, 2002, SERP has the right to purchase for its account or
to sell for the account of our officers and directors and certain stockholders
(and any family member or affiliate of any of the foregoing persons), any
securities sold by any of such persons in the open market.

In connection with this offering, the representative, on behalf of the
underwriters, may over-allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of common stock in excess of the number of shares to be purchased by the
underwriters in this offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of common stock made for the purpose of preventing or retarding a
decline in the market price of the common stock while this offering is in
progress. Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the representative, in covering syndicate short
positions, repurchases shares originally sold by that syndicate member. These
activities may cause the price of our common stock to be higher than the price
that otherwise would exist in the open market in the absence of such
transactions. These transactions may be effected on the Nasdaq Small Cap Market,
in the over-the-counter market or otherwise and, if commenced, may be
discontinued at any time.

In addition, in connection with this offering, the underwriters (and
selling group members) may engage in passive market making transactions in the
common stock on the Nasdaq Small Cap Market, prior to the pricing and completion
of this offering. Passive market making consists of displaying bids on the
Nasdaq Small Cap Market no higher than the bid prices of independent market
makers and making purchases at prices no higher than those independent bids and
effected in response to order flow. Net purchases by a passive market maker on
each day are limited to a specific percentage of the passive market maker's
average daily trading volume in the common stock during a specified period and
must be discontinued when such limit is reached. Passive market making may cause
the price of our common stock to be higher than the price that otherwise would
exist in the open market in the absence of such transactions. If passive market
making is commenced, it may be discontinued at any time.

We have engaged the representative, on a non-exclusive basis, as our agent
for the solicitation of the exercise of the warrants. To the extent not
inconsistent with the guidelines of the NASD and the rules and regulations of
the Commission, we have agreed to pay the representative for bona fide services
rendered a commission equal to 5% of the

57
<PAGE> 66

exercise price of each warrant exercised after one year from the date of this
prospectus if the exercise was solicited by the representative. In addition to
soliciting, either orally or in writing, the exercise of the warrants, such
services may also include disseminating information, either orally or in
writing, to warrant holders about the Company or the market for our securities,
and assisting in the processing of the exercise of the warrants. No compensation
will be paid to the representative in connection with the exercise of the
warrants if the market price of the underlying shares of common stock is lower
than the exercise price, the warrants are held in a discretionary account, the
warrants are exercised in an unsolicited transaction, the warrant holder has not
confirmed in writing that the representative solicited such exercise or the
arrangement to pay the commission is not disclosed in the prospectus provided to
warrant holders at the time of exercise. In addition, unless granted an
exemption by the Commission from Regulation M under the Exchange Act, any
broker-dealer soliciting the exercise of the warrants, including the
representative, may be prohibited from engaging in any market activities or
solicited brokerage activities with regard to our securities. If one or more
broker-dealers making a market in our securities are required temporarily to
suspend such market making, such suspension could adversely affect the liquidity
of the market for such securities.

The representative has advised us that the underwriters do not intend to
sell any of our securities to any accounts over which they exercise
discretionary authority.

SERP and Ladenburg Thalmann & Co. Inc. acted as the placement agents for
the February 1999 private placement and were paid aggregate commissions of
$228,000 and a non-accountable expense allowance of $85,500.

LEGAL MATTERS

ShawPittman, Washington, D.C., a partnership including professional
corporations, will pass on the validity of the units, common stock and warrants
offered in this offering and certain legal matters for us. Graubard Mollen &
Miller, New York, New York, has served as counsel to the underwriters in
connection with this offering.

EXPERTS

The balance sheets as of December 31, 1997 and 1998 and the statements of
operations, changes in stockholders' equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1998 and for the period October
5, 1993 (date of inception) to December 31, 1998, included in this prospectus,
have been included herein in reliance on the report, which includes an
explanatory paragraph on our ability to continue as a going concern, of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

We are subject to the information requirements of the Securities Exchange
Act of 1934, and, in accordance therewith, file reports and other information
with the SEC. Such reports, proxy statements, and other information can be
inspected without charge at the public reference facilities maintained by the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Seven
World Trade Center, 13th Floor, New York, New

58
<PAGE> 67

York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the public reference section of
the SEC, 450 Fifth Street, N.W., Washington, D.C., 20549, at prescribed rates.
The registration statement is also publicly available through the SEC's web site
located at http://www.sec.gov. Our common stock is quoted on the Nasdaq SmallCap
Market and other information concerning the Company can be inspected at the
office of the Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C.
20006-1500.

We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act with respect to the units offered under this prospectus. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement, certain
terms of which are omitted in accordance with the rules and regulations of the
SEC. Statements contained in this prospectus as to the contents of any contract
or other documents are not necessarily complete, and in each instance, reference
is made to the copy of such contract or documents filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding Objective Communications and the units offered under this prospectus,
we refer you to the registration statement and such exhibits and schedules which
may be obtained from the SEC at its principal office in Washington, D.C. upon
payment of the fees prescribed by the SEC.

59
<PAGE> 68

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets as of December 31, 1997 and 1998 and March
31, 1999 (Unaudited)...................................... F-3
Statements of Operations for the years ended December 31,
1996, 1997 and 1998 and for the period October 5, 1993
(date of inception) to December 31, 1998, and for the
quarters ended March 31, 1998 and 1999 (Unaudited) and for
the period October 5, 1993 (date of inception) to March
31, 1999 (Unaudited)...................................... F-4
Statements of Changes in Stockholders' Equity (Deficit) for
the period October 5, 1993 (date of inception) to December
31, 1998 and for the quarter ended March 31, 1999
(Unaudited)............................................... F-5
Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998 and for the period October 5, 1993
(date of inception) to December 31, 1998, and for the
quarters ended March 31, 1998 and 1999 (Unaudited) and for
the period October 5, 1993 (date of inception) to March
31, 1999 (Unaudited)...................................... F-8
Notes to Financial Statements............................... F-12
</TABLE>

F-1
<PAGE> 69

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Objective Communications, Inc.:

In our opinion, the accompanying balance sheets and the related statements
of operations, changes in stockholders' equity (deficit) and cash flows present
fairly, in all material respects, the financial position of Objective
Communications, Inc. (the "Company") at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998 and for the period October 5, 1993 (date of
inception) to December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
has negative cash flows from operations and has an accumulated deficit that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

PricewaterhouseCoopers
LLP
Boston, Massachusetts
February 26, 1999, except for
Note 14, as to which the
date is April 14, 1999

F-2
<PAGE> 70

OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1997 1998 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 18,199,434 $ 8,532 $ 640,349
Accounts receivable, less allowance for
doubtful accounts of $22,246 at December 31,
1998 and $25,952 at March 31, 1999.......... -- 184,670 596,439
Inventory..................................... 1,700,935 5,793,801 5,561,762
Advance payment............................... -- -- 1,100,000
Other current assets.......................... 675,289 250,709 487,538
------------ ------------ ------------
Total current assets.......................... 20,575,658 6,237,712 8,386,088
Property and equipment, net................... 2,306,048 3,096,752 2,544,353
Trademarks and patents, less accumulated
amortization of $22,660, $11,220, and
$26,417 at December 31, 1997 and 1998, and
March 31, 1999, respectively................ 108,475 200,204 200,327
Other assets.................................. 92,519 88,321 450,401
------------ ------------ ------------
$ 23,082,700 $ 9,622,989 $ 11,581,169
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable................................. $ -- $ 125,543 $ 119,281
Unsecured promissory notes, net of unamortized
debt discount............................... -- -- 1,743,360
Subordinated convertible debentures........... -- 3,200,674 3,241,450
Accounts payable.............................. 3,077,723 6,748,538 3,347,617
Deferred revenue.............................. 133,180 40,000 40,000
Accrued liabilities........................... 752,018 841,526 840,871
Current portion of long term debt............. -- -- 1,448,254
Obligations under capital lease, current
portion..................................... 190,454 187,220 120,684
------------ ------------ ------------
Total current liabilities..................... 4,153,375 11,143,501 10,901,517
Obligations under capital lease............... 57,196 76,008 60,358
Long term debt................................ -- -- 3,066,180
Commitments (Notes 6 and 13)
Stockholders' equity (deficit):
Series B Convertible Preferred Stock, par
value $.01, 954,545 shares authorized; none
issued and outstanding at December 31, 1997,
209,091 issued and outstanding at December
31, 1998 and March 31, 1999, respectively... -- 1,173,958 1,188,333
Common stock, par value $.01, 30,000,000
shares authorized; 810,978, 820,147 and
980,848 issued and outstanding at December
31, 1997 and 1998, and March 31, 1999,
respectively................................ 8,110 8,201 9,808
Additional paid-in capital.................... 36,009,125 36,770,004 38,318,275
Deficit accumulated during development
stage....................................... (17,145,106) (39,548,683) (41,963,302)
------------ ------------ ------------
Total stockholders' equity (deficit).......... 18,872,129 (1,596,520) (2,446,886)
------------ ------------ ------------
$ 23,082,700 $ 9,622,989 $ 11,581,169
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE> 71

OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED DECEMBER 31, OCTOBER 5, 1993
----------------------------------------- (DATE OF INCEPTION) TO
1996 1997 1998 DECEMBER 31, 1998
----------- ------------ ------------ ----------------------

<S> <C> <C> <C> <C>
Revenues-net....................... $ 81,375 $ -- $ 765,617 $ 1,261,277
Cost of sales...................... 62,353 -- 544,853 794,228
----------- ------------ ------------ ------------
19,022 -- 220,764 467,049
Operating expenses:
Research and development........... 1,106,901 6,218,637 11,488,262 20,211,652
Selling, general and
administrative................... 1,043,553 4,334,754 9,015,437 15,620,059
Depreciation and amortization...... 158,714 829,462 2,240,878 3,293,114
----------- ------------ ------------ ------------
Total operating
expenses......................... 2,309,168 11,382,853 22,744,577 39,124,825
----------- ------------ ------------ ------------
Loss from operations............... (2,290,146) (11,382,853) (22,523,813) (38,657,776)
Interest (income)
expense, net..................... 404,290 203,441 (120,236) 484,010
----------- ------------ ------------ ------------
Net loss........................... (2,694,436) (11,586,294) (22,403,577) $(39,141,786)
----------- ------------ ------------ ============
Cumulative Series B dividend....... -- -- (23,958)
----------- ------------ ------------
Net loss attributable to common
stockholders..................... $(2,694,436) $(11,586,294) $(22,427,535)
=========== ============ ============
Net loss per common share -- basic
and diluted...................... $ (5.23) $ (19.90) $ (27.45)
=========== ============ ============
Weighted average shares outstanding
-- basic and diluted............. 515,376 582,307 816,972
=========== ============ ============

<CAPTION>
FOR THE QUARTER ENDED FOR THE PERIOD
MARCH 31, OCTOBER 5, 1993
------------------------- (DATE OF INCEPTION) TO
1998 1999 MARCH 31, 1999
----------- ----------- ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues-net....................... $ 110,505 $ 655,457 $ 1,916,734
Cost of sales...................... 64,304 368,702 1,162,930
----------- ----------- ------------
46,201 286,755 753,804
Operating expenses:
Research and development........... 2,616,588 823,244 21,034,896
Selling, general and
administrative................... 1,741,344 1,123,655 16,743,714
Depreciation and amortization...... 398,008 293,898 3,587,012
----------- ----------- ------------
Total operating
expenses......................... 4,755,940 2,240,797 41,365,622
----------- ----------- ------------
Loss from operations............... (4,709,739) (1,954,042) (40,611,818)
Interest (income)
expense, net..................... (166,040) 460,577 944,587
----------- ----------- ------------
Net loss........................... (4,543,699) (2,414,619) $(41,556,405)
----------- ----------- ============
Cumulative Series B dividend....... -- (116,450)
----------- -----------
Net loss attributable to common
stockholders..................... $(4,543,699) $(2,531,069)
=========== ===========
Net loss per common share -- basic
and diluted...................... $ (5.60) $ (2.76)
=========== ===========
Weighted average shares outstanding
-- basic and diluted............. 810,979 916,568
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE> 72

OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD OCTOBER 5, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1998
AND FOR THE QUARTER ENDED MARCH 31, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
DEFICIT
SERIES B ACCUMULATED
ADDITIONAL CONVERTIBLE DURING
COMMON PAID-IN PREFERRED DEVELOPMENT
SHARES STOCK CAPITAL STOCK STAGE TOTAL
--------- ------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 5,
1993................. 71 $ 1 $ 999 $ -- $ -- $ 1,000
Net loss............... -- -- -- -- (4,521) (4,521)
Balance, December 31,
1993................. 71 1 999 -- (4,521) (3,521)
Stock dividend......... 185,644 1,856 11,139 -- (12,995) --
Issuance of common
stock at $14/share... 24,429 244 341,756 -- -- 342,000
Issuance of common
stock at $14/share
(issued in exchange
for services)........ 2,380 24 33,310 -- -- 33,334
Issuance of common
stock at $42/share... 6,429 64 269,936 -- -- 270,000
Expenses associated
with issuance of
common stock......... -- -- (47,418) -- -- (47,418)
Issuance of common
stock at $18.76/share
(issued in exchange
for services)........ 1,196 12 22,488 -- -- 22,500
Net loss............... -- -- -- -- (406,842) (406,842)
--------- ------- ----------- ------------ ------------
Balance, December 31,
1994................. 220,149 2,201 632,210 -- (424,358) 210,053
Issuance of common
stock at $42/share... 15,952 160 669,840 -- -- 670,000
Expenses associated
with issuance of
common stock......... -- -- (81,389) -- -- (81,389)
Notes payable converted
to commons stock at
$42/share............ 8,386 84 352,139 -- -- 352,223
Net loss............... -- -- -- -- (2,046,116) (2,046,116)
--------- ------- ----------- ------------ ------------
Balance, December 31,
1995................. 244,487 2,445 1,572,800 -- (2,470,474) (895,229)
The accompanying notes are an integral part of these financial statements.
</TABLE>

F-5
<PAGE> 73
OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD OCTOBER 5, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1998
AND FOR THE QUARTER ENDED MARCH 31, 1999 (UNAUDITED)
(CONTINUED)

<TABLE>
<CAPTION>
DEFICIT
SERIES B ACCUMULATED
ADDITIONAL CONVERTIBLE DURING
COMMON PAID-IN PREFERRED DEVELOPMENT
SHARES STOCK CAPITAL STOCK STAGE TOTAL
--------- ------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Exercise of common
stock options at
$14/share............ 1,428 14 19,986 -- -- 20,000
Issuance of common
stock at $42/share... 25,024 250 1,053,733 -- -- 1,053,983
Expenses associated
with issuance of
common stock......... -- -- (166,936) -- -- (166,936)
Interest expense
incurred for issuance
of
warrants............. -- -- 907,789 -- -- 907,789
Net loss............... -- -- -- -- (2,694,436) (2,694,436)
--------- ------- ----------- ---------- ------------ ------------
Balance, December 31,
1996................. 270,939 2,709 3,387,372 -- (5,164,910) (1,774,829)
Issuance of common
stock pursuant to
warrant exchange
agreement............ 23,610 236 660,832 -- (320,902) 340,166
Reversal of interest
expense upon
surrender of Bridge
Warrants............. -- -- (201,000) -- -- (201,000)
Shares issued in
connection with
initial public
offering, net of
expenses............. 295,714 2,957 9,349,122 -- -- 9,352,079
Conversion of
Redeemable Series A
Convertible Preferred
Stock to common
stock................ 71,429 714 1,809,929 -- -- 1,810,643
Exercise of warrants... 6,429 64 29,936 -- -- 30,000
Shares issued in
connection with
secondary public
offering, net of
expenses............. 142,857 1,430 20,899,934 -- -- 20,901,364
The accompanying notes are an integral part of these financial statements.
</TABLE>

F-6
<PAGE> 74
OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD OCTOBER 5, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1998
AND FOR THE QUARTER ENDED MARCH 31, 1999 (UNAUDITED)
(CONTINUED)

<TABLE>
<CAPTION>
DEFICIT
SERIES B ACCUMULATED
ADDITIONAL CONVERTIBLE DURING
COMMON PAID-IN PREFERRED DEVELOPMENT
SHARES STOCK CAPITAL STOCK STAGE TOTAL
--------- ------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest expense
incurred for issuance
of
warrants............. -- -- 73,000 -- (73,000) --
Net loss............... -- -- -- -- (11,586,294) (11,586,294)
--------- ------- ----------- ---------- ------------ ------------
Balance, December 31,
1997................. 810,978 8,110 36,009,125 -- (17,145,106) 18,872,129
Exercise of warrants... 8,839 88 205,849 -- -- 205,937
Exercise of common
stock options at
$48.38/share......... 330 3 15,301 -- -- 15,304
Compensation expense
related to options
granted to financial
advisor.............. -- -- 563,687 -- -- 563,687
Issuance of Series B
Convertible Preferred
Stock................ -- -- -- 1,150,000 -- 1,150,000
Dividend............... -- -- (23,958) 23,958 -- --
Net loss............... -- -- -- -- (22,403,577) (22,403,577)
--------- ------- ----------- ---------- ------------ ------------
Balance, December 31,
1998................. 820,147 8,201 36,770,004 1,173,958 (39,548,683) (1,596,520)
Compensation expense
related to options
granted to financial
advisor.............. -- -- 140,922 -- -- 140,922
Issuance of common
stock from private
placement of units,
net of expenses...... 160,701 1,607 1,275,382 -- -- 1,276,989
Issuance of warrants
associated with long-
term debt............ -- -- 146,342 -- -- 146,342
Dividend............... -- -- (14,375) 14,375 -- --
Net loss............... -- -- -- -- (2,414,619) (2,414,619)
--------- ------- ----------- ---------- ------------ ------------
Balance, March 31, 1999
(unaudited).......... 980,848 $9,808 $38,318,275 $1,188,333 $(41,963,302) $ (2,446,886)
========= ======= =========== ========== ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE> 75

OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED DECEMBER 31, OCTOBER 5, 1993
------------------------------------------ (DATE OF INCEPTION) TO
1996 1997 1998 DECEMBER 31, 1998
------------ ------------ ------------ ----------------------

<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.......................... $ (2,694,436) $(11,586,294) $(22,403,577) $(39,141,786)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation...................... 109,025 614,467 2,229,437 3,016,989
Amortization...................... 49,689 214,995 11,440 276,124
Interest expense related to
issuance of warrants............ 321,789 385,000 -- 706,789
Interest accrued on debentures.... -- -- 75,674 75,674
Amortization of debt discount..... -- -- -- --
Amortization of debt issuance
costs........................... -- -- -- --
Non-cash compensation expense..... -- 340,166 563,687 903,853
Stock issued in exchange for
services rendered............... -- -- -- 55,834
Other non-cash charges............ -- -- 18,819 18,819
Changes in operating assets and
liabilities:
Accounts receivable............... (19,385) 84,855 (184,670) (184,670)
Other current assets.............. (166,792) (496,913) 654,643 (20,646)
Inventory......................... (335,105) (1,689,140) (4,125,091) (5,826,026)
Other assets...................... -- (87,852) 4,198 (83,654)
Trademarks and patents............ (19,595) (81,202) (103,169) (222,864)
Accounts payable.................. (324,937) 2,687,285 3,710,956 6,788,679
Deferred revenues................. -- 133,180 (93,180) 40,000
Accrued liabilities............... 163,038 488,642 89,508 841,526
------------ ------------ ------------ ------------
Net cash used in operating
activities................. (2,916,709) (8,992,811) (19,551,325) (32,755,359)

<CAPTION>
FOR THE QUARTER ENDED FOR THE PERIOD
MARCH 31, OCTOBER 5, 1993
--------------------------- (DATE OF INCEPTION) TO
1998 1999 MARCH 31, 1999
------------ ------------ ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss.......................... $ (4,543,699) $ (2,414,619) $(41,556,405)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation...................... 395,871 290,141 3,307,130
Amortization...................... 2,137 3,757 279,881
Interest expense related to
issuance of warrants............ -- 10,776 717,565
Interest accrued on debentures.... -- 40,776 116,450
Amortization of debt discount..... -- 198,360 198,360
Amortization of debt issuance
costs........................... -- 67,058 67,058
Non-cash compensation expense..... 140,922 140,922 1,044,775
Stock issued in exchange for
services rendered............... -- -- 55,834
Other non-cash charges............ -- -- 18,819
Changes in operating assets and
liabilities:
Accounts receivable............... -- (411,769) (596,439)
Other current assets.............. (189,554) 19,088 (1,558)
Inventory......................... (4,588,621) 232,039 (5,593,987)
Other assets...................... 2,553 -- (83,654)
Trademarks and patents............ (24,082) (3,880) (226,744)
Accounts payable.................. 2,116,530 (81,838) 6,706,841
Deferred revenues................. (54,746) -- 40,000
Accrued liabilities............... (146,756) 181,023 1,022,549
------------ ------------ ------------
Net cash used in operating
activities................. (6,889,445) (1,728,166) (34,483,525)
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-8
<PAGE> 76

OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

STATEMENTS OF CASH FLOWS

(CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED DECEMBER 31, OCTOBER 5, 1993
------------------------------------------ (DATE OF INCEPTION) TO
1996 1997 1998 DECEMBER 31, 1998
------------ ------------ ------------ ----------------------

<S> <C> <C> <C> <C>
Cash flows from investing
activities:
Proceeds from sale of property and
equipment....................... $ -- $ -- $ -- $ --
Purchase of property and
equipment....................... (116,892) (2,036,190) (3,763,231) (6,455,724)
Sale of leasehold improvements.... -- -- 1,470,000 1,470,000
------------ ------------ ------------ ------------
Net cash provided by (used in)
investing activities....... (116,892) (2,036,190) (2,288,231) (4,980,724)
------------ ------------ ------------ ------------
Cash flows from financing
activities:
Net proceeds from the issuance
of Series A preferred stock... 848,440 962,203 -- 1,810,643
Net proceeds from the issuance
of Series B preferred stock... -- -- 1,150,000 1,150,000
Net proceeds from the issuance
of common stock............... 887,047 30,253,443 -- 32,294,683
Net proceeds from the exercise
of stock options.............. 20,000 -- 15,304 35,304
Net proceeds from the exercise
of warrants................... -- 30,000 205,937 235,937
Net proceeds from the issuance
of debentures................. -- -- 3,125,000 3,125,000
Net proceeds from the issuance
of notes payable.............. 2,300,000 -- -- 2,550,000
Net proceeds from the issuance
of unsecured promissory notes
and common stock..............

<CAPTION>
FOR THE QUARTER ENDED FOR THE PERIOD
MARCH 31, OCTOBER 5, 1993
--------------------------- (DATE OF INCEPTION) TO
1998 1999 MARCH 31, 1999
------------ ------------ ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from investing
activities:
Proceeds from sale of property and
equipment....................... $ -- $ 80,580 $ 85,580
Purchase of property and
equipment....................... (2,615,306) -- (6,455,724)
Sale of leasehold improvements.... -- -- 1,470,000
------------ ------------ ------------
Net cash provided by (used in)
investing activities....... (2,615,306) 80,580 (4,900,144)
------------ ------------ ------------
Cash flows from financing
activities:
Net proceeds from the issuance
of Series A preferred stock... -- -- 1,810,643
Net proceeds from the issuance
of Series B preferred stock... -- -- 1,150,000
Net proceeds from the issuance
of common stock............... -- -- 32,294,683
Net proceeds from the exercise
of stock options.............. -- -- 35,304
Net proceeds from the exercise
of warrants................... -- -- 235,937
Net proceeds from the issuance
of debentures................. -- -- 3,125,000
Net proceeds from the issuance
of notes payable.............. -- -- 2,550,000
Net proceeds from the issuance
of unsecured promissory notes
and common stock.............. 2,392,851 2,392,851
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-9
<PAGE> 77

OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

STATEMENTS OF CASH FLOWS

<S> <C> <C> <C> <C>
Repayments of notes payable..... $ (250,000) $ (2,300,000) $ (144,661) $ (2,694,661)
Repayment of long term debt..... -- -- -- --
Proceeds from the issuance of
notes payable to related
parties....................... 170,000 -- -- 716,223
Repayments of notes payable to
related parties............... (135,000) (199,000) -- (364,000)
Debt issuance costs............. (258,131) -- -- (258,131)
Principal payments on capital
leases........................ (12,005) (141,452) (702,926) (856,383)
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities....... 3,570,351 28,605,194 3,648,654 37,744,615
------------ ------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents............ 536,750 17,576,193 (18,190,902) 8,532
Cash and cash equivalents, at
beginning of period............. 86,491 623,241 18,199,434 --
------------ ------------ ------------ ------------
Cash and cash equivalents, at end
of period....................... $ 623,241 $ 18,199,434 $ 8,532 $ 8,532
============ ============ ============ ============
Supplemental disclosure of cash
flow information:
Interest paid..................... $ 57,628 $ 115,739 $ 94,272 $ 280,777
Supplemental disclosure of
non-cash investing and financing
activities:
Conversion of notes payable-
related parties and accrued
interest into common
stock...................... -- -- -- $ 352,223

<CAPTION>
FOR THE QUARTER ENDED FOR THE PERIOD
MARCH 31, OCTOBER 5, 1993
--------------------------- (DATE OF INCEPTION) TO
1998 1999 MARCH 31, 1999
------------ ------------ ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Repayments of notes payable..... $ -- $ (42,262) $ (2,736,923)
Repayment of long term debt..... -- (25,000) (25,000)
Proceeds from the issuance of
notes payable to related
parties....................... -- 36,000 752,223
Repayments of notes payable to
related parties............... -- -- (364,000)
Debt issuance costs............. -- -- (258,131)
Principal payments on capital
leases........................ (153,535) (82,186) (938,569)
------------ ------------ ------------
Net cash provided by (used in)
financing activities....... (153,535) 2,279,403 40,024,018
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents............ (9,658,286) 631,817 640,349
Cash and cash equivalents, at
beginning of period............. 18,199,434 8,532 --
------------ ------------ ------------
Cash and cash equivalents, at end
of period....................... $ 8,541,148 $ 640,349 $ 640,349
============ ============ ============
Supplemental disclosure of cash
flow information:
Interest paid.....................
Supplemental disclosure of
non-cash investing and financing
activities:
Conversion of notes payable-
related parties and accrued
interest into common
stock...................... -- -- $ 352,223
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-10
<PAGE> 78

OBJECTIVE COMMUNICATIONS, INC.
(A Development Stage Enterprise)

STATEMENTS OF CASH FLOWS

<S> <C> <C> <C> <C>
Capital lease obligations..... $ 53,158 $ 347,950 $ 718,504 $ 1,119,612
Reclassification of inventory
to fixed assets............ -- 354,304 32,225 32,225
Current asset financed by
issuance of note payable... -- -- 230,063 230,063
Dividend on preferred stock... -- -- 23,958 23,958
Accounts payable transferred
to notes payable........... -- -- 40,141 40,141
Accounts payable transferred
to long term debt.......... -- -- -- --
Common stock issued with
private placement.......... -- -- -- --
Warrants issued with long term
debt....................... -- -- -- --
Advanced payment financed with
long term debt............. -- -- -- --
Prepaid equity financing costs
financed in accounts
payable.................... -- -- -- --
Reduction in accrued
liabilities due to sale of
assets..................... -- -- -- --
Cost of fixed assets
sold -- net................ -- -- -- --
Debt issuance costs related to
unsecured promissory
notes...................... -- -- -- --
Costs related to issuing
common stock with unit
financing.................. $ -- $ -- $ -- $ --

<CAPTION>
FOR THE QUARTER ENDED FOR THE PERIOD
MARCH 31, OCTOBER 5, 1993
--------------------------- (DATE OF INCEPTION) TO
1998 1999 MARCH 31, 1999
------------ ------------ ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Capital lease obligations..... $ -- $ -- $ 1,119,612
Reclassification of inventory
to fixed assets............ -- -- 32,225
Current asset financed by
issuance of note payable... 230,063 -- 230,063
Dividend on preferred stock... -- 14,375 38,333
Accounts payable transferred
to notes payable........... -- -- 40,141
Accounts payable transferred
to long term debt.......... -- 3,575,000 3,575,000
Common stock issued with
private placement.......... -- 1,305,000 1,305,000
Warrants issued with long term
debt....................... -- 146,342 146,342
Advanced payment financed with
long term debt............. -- 1,100,000 1,100,000
Prepaid equity financing costs
financed in accounts
payable.................... -- 255,917 255,917
Reduction in accrued
liabilities due to sale of
assets..................... -- 181,678 181,678
Cost of fixed assets
sold -- net................ -- 262,258 262,258
Debt issuance costs related to
unsecured promissory
notes...................... -- 429,138 429,138
Costs related to issuing
common stock with unit
financing.................. $ -- $ 28,011 $ 28,011
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-11
<PAGE> 79

OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

1. NATURE OF BUSINESS

Objective Communications is a Delaware corporation formed in 1993 to
design, develop and market a full motion, high resolution, cost-effective video
network system. Users of the VidPhone video network system can view broadcast
video and participate in multi-party video conferences. With the introduction of
Release 1.5 of the VidPhone software, which management expects to occur in the
first half of 1999, users also will be able to retrieve stored video on demand.
The VidPhone system distributes video to and from desktop or laptop personal
computers and conference rooms configured with a VidPhone station, over the same
wiring used by the telephone.

To date, the Company has not generated substantial revenues from the sale
of its products and services. The Company did not earn any revenues from the
sale of products or services during 1997, and recognized only $765,617 in
revenues from the sale of products during 1998. The Company has suffered
recurring losses from operations, has recurring negative cash flow from
operations and an accumulated deficit that raise substantial doubt about its
ability to continue as a going concern. The Financial Statements do not include
any adjustments that might result from the outcome of this uncertainty. The
Company has required substantial funding through debt and equity financings
since its inception to complete its development plans and commence full-scale
operations. At December 31, 1998, the Company had essentially no cash from which
to fund operations. In February 1999, the Company completed a private placement
of $2,850,000 of unsecured promissory notes and 162,844 shares of common stock,
from which the Company received net proceeds of approximately $2,430,000. Before
completing the February 1999 private placement, the Company was able to pay only
those expenses that were essential to continue operations. The Company estimates
that the net proceeds from the private placement will fund operations only
through April 1999. Those net proceeds are not sufficient to fund the continued
development of the VidPhone system or any expansion of the Company's business
operations. As a result of these liquidity problems, the Company has not paid
many of its creditors, including trade creditors, on a timely basis and remains
in default on a number of significant overdue obligations. Some of these
creditors have instituted or threatened to institute legal proceedings against
the Company to obtain repayment of these debts. If the Company continues not
paying its debts as they become due, it is likely that other creditors will take
legal action against the Company and that other firms will refuse to sell the
products and services the Company need to continue operations. In February 1999,
the Company announced that it had filed a registration statement relating to a
proposed $15,000,000 underwritten offering of common stock. The Company
anticipates that the public offering will be completed in the second quarter of
1999; however, its ability to complete the offering, the timing of the offering
and its terms are subject to a number of conditions, some of which are beyond
its control, including market conditions. There can be no assurance that the
Company will complete the public offering. If the Company is not successful in
securing additional financing, the Company will be forced to consider
alternative methods of maximizing shareholder value, which could include sales
of the Company's assets, a sale of the Company, workout alternatives, or
bankruptcy. (Information in this Note 1 is presented as of February 26,

F-12
<PAGE> 80
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

1999, the date on which these financial statements were issued. See Note 15,
"Subsequent Events (Unaudited)" pertaining to an update of the items described
in Note 1.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING

The Company's principal activities to date have been planning and
organizing, initiating research and development projects, conducting market
research and securing adequate financing for the development of its products.
Accordingly, the Company's financial statements are presented as those of a
development stage enterprise, as prescribed by Statement of Financial Accounting
Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage
Enterprises".

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and investments with original
maturities of three months or less. Cash and cash equivalents are stated at
cost, which approximates fair value because of the short maturity of these
investments.

REVENUE RECOGNITION

The Company's revenues, consisting principally of sales of the Company's
video network system and related products, are recognized upon delivery and
acceptance by customers.

RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS

Software development costs are included in research and development and are
expensed as incurred. SFAS No. 86, "Accounting for the Cost of Computer Software
to be Sold, Leased or Otherwise Marketed" requires the capitalization of certain
software development costs once technological feasibility is established.
Capitalization ceases when the products are available for general release to
customers, at which time amortization of the capitalized costs begins on a
straight-line basis over the estimated product life, or on the ratio of current
revenues to total projected product revenues, whichever is greater. To date, the
period between achieving technological feasibility and the general availability
of such software has been short, and the software development costs qualifying
for capitalization have been insignificant. Accordingly, the Company has not
capitalized any software development costs.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Expenditures for maintenance and
repairs are charged to expense as incurred. Upon retirement or disposition of
property and equipment, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in income.
The Company uses accelerated methods of depreciation for book and for tax
purposes. The annual provisions for depreciation have been computed principally
in accordance with the following ranges of

F-13
<PAGE> 81
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

asset lives: computer and lab equipment, 3 to 5 years; capitalized software, 3
years; furniture and fixtures, 5 years; office equipment, 5 years; and leasehold
improvements over the lesser of 7 years or the term of the lease relating to the
improved asset. Assets held under the construction in progress caption are not
depreciated until the asset is completed and placed in service.

TRADEMARKS AND PATENTS

Trademarks and patents are stated at cost and are amortized on a
straight-line basis over 15 years.

LONG-LIVED ASSETS

The Company periodically evaluates the net realizable value of long-lived
assets, including trademarks and patents and property and equipment, relying on
a number of factors including operating results, business plans, economic
projections and anticipated future cash flows. An impairment in the carrying
value of an asset is recognized when the expected future operating cash flows
derived from the asset are less than its carrying value. In addition, the
Company's evaluation considers non-financial data such as market trends, product
and development cycles, and changes in management's market emphasis.

INVENTORY

Inventory, consisting principally of hardware for the Company's video
networking products, is valued at the lower of cost or market, with the cost
being determined using the FIFO ("first-in, first-out") method of accounting.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Company's cash and cash equivalents are held with a
U.S. commercial bank. The Company has not experienced any losses related to its
cash and cash equivalents. The Company generally grants uncollateralized credit
terms to its customers and has not experienced any credit-related losses.

INCOME TAXES

Deferred income taxes are recognized for the tax consequences in future
years for differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end, based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets and liabilities.

NET LOSS PER COMMON SHARE

The Company computes basic and diluted earnings per share in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings per Share".
Net loss per

F-14
<PAGE> 82
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

common share is based on the weighted average number of common shares and
dilutive common share equivalents outstanding during the periods presented.
Basic earnings (loss) per share are calculated by dividing net income (loss) by
the weighted average shares outstanding. Diluted earnings (loss) per share
reflect the dilutive effect of stock options, warrants, convertible preferred
stock, and convertible debentures and are presented only if the effect is not
anti-dilutive. As the Company incurred losses for all periods, there is no
difference between basic and diluted earnings per share. Had options, warrants
and convertible preferred stock been included in the computation, shares for the
diluted computation would have increased by 283,786 and 397,026 as of December
31, 1997 and 1998, respectively. The convertible debentures would also be
included in the diluted computation based on the conversion calculation in note
9. See note 10, Subsequent Events, with regards to shares issued subsequent to
year-end.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, accounts receivable and
notes payable approximate fair value because of the relatively short maturity of
those instruments.

STOCK-BASED COMPENSATION

The Company adopted Statement of Financial Accounting Standards No. 123
("SFAS No. 123"), "Accounting for Stock-Based Compensation" in 1996. SFAS No.
123 permits companies to account for stock-based compensation based on the
provisions prescribed in SFAS No. 123 or based on the authoritative guidance in
the Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees." The Company has elected to continue to account for its
stock-based compensation in accordance with APB 25; however, as required by SFAS
No. 123, the Company has disclosed the pro forma impact on the financial
statements assuming the measurement provisions of SFAS No. 123 had been adopted
(see Note 10).

SEGMENT INFORMATION

The Company is in one business segment; the design, development, and
marketing of a video network system. The Company follows the requirements of
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information."

F-15
<PAGE> 83
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

RECLASSIFICATIONS

Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.

INTERIM INFORMATION (UNAUDITED)

The interim information as of March 31, 1999 and for the three months ended
March 31, 1999 and 1998 is unaudited. The unaudited interim financial statements
reflect, in the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to fairly present the results of
operations, changes in cash flows and financial position as of and for the
periods presented. The unaudited interim financial information should be read in
conjunction with the audited financial statements and related notes thereto. The
results for the interim periods presented are not necessarily indicative of
results to be expected for the full year.

3. INVENTORIES

Inventories consist of the following at:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1997 1998 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials...................... $ 901,548 $5,750,733 $ 4,794,179
Work in process.................... 24,272 -- --
Finished goods..................... 775,115 43,068 767,583
---------- ---------- -----------
$1,700,935 $5,793,801 $ 5,561,762
========== ========== ===========
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1997 1998 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and laboratory
equipment........................ $2,070,415 $3,186,976 $ 3,186,976
Computer software.................. 220,711 368,441 368,441
Leasehold improvements............. 174,697 787,484 606,912
Furniture and fixtures............. 342,835 1,148,210 850,432
Office equipment................... 5,190 173,333 173,333
Construction in progress........... 279,754 443,116 443,116
---------- ---------- -----------
3,093,602 6,107,560 5,629,210
Accumulated depreciation........... (787,554) (3,010,808) (3,084,857)
---------- ---------- -----------
$2,306,048 $3,096,752 $ 2,544,353
========== ========== ===========
</TABLE>

F-16
<PAGE> 84
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

5. SALE OF LEASEHOLD IMPROVEMENTS

In the fourth quarter of 1997, the Company reached an agreement with the
Portsmouth Development Authority ("PDA") to enter into a lease agreement for
additional office space and, in exchange for a favorable rental rate, the
Company agreed to fund significant improvements to the facility. Through June
1998 the Company had invested in excess of $1.8 million in improvements to the
new offices. In June 1998, the Company and the PDA modified the previous
agreement in that the PDA agreed to purchase $1,470,000 of the leasehold
improvements in consideration of the Company's agreement to adjust the
previously agreed rental rate to a market rate. In June 1998, the Company
received the proceeds from the sale, less accrued rent of $83,870.

6. COMMITMENTS

The Company leases office and manufacturing space and miscellaneous office
and testing equipment under various operating and capital leases. Commitments
for minimum rentals under non-cancelable leases at December 31, 1998 are as
follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ----------
<S> <C> <C>
1999.......................................... $214,772 $ 295,800
2000.......................................... 49,031 315,139
2001.......................................... 17,040 321,350
2002.......................................... 17,040 321,585
2003.......................................... 2,840 328,759
Thereafter.................................... -- 1,511,646
-------- ----------
Total minimum lease payments.................. 300,723 $3,094,279
==========
Less amount representing interest............. (37,495)
--------
Present value of net minimum lease payments... $263,228
========
</TABLE>

Property, plant, and equipment at year-end include the following amounts
for capitalized leases:

<TABLE>
<CAPTION>
1997 1998
-------- ----------
<S> <C> <C>
Computer and laboratory equipment............. $275,608 $ 407,039
Furniture and fixtures........................ 273,320 760,041
Office equipment.............................. -- 64,545
-------- ----------
548,928 1,231,625
Less: allowance for depreciation.............. (78,752) (447,864)
-------- ----------
$470,176 $ 783,761
======== ==========
</TABLE>

Rent payments made in 1996, 1997, and 1998 were $228,000, $293,000, and
$793,000, respectively.

F-17
<PAGE> 85
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

7. INCOME TAXES

At December 31, 1998, the Company has available net operating loss
carryforwards for federal and state tax purposes of approximately $35,518,000
and $5,633,000, respectively. The federal and state net operating losses begin
to expire in 2009 and 1999, respectively. As of December 31, 1998, a valuation
allowance of $11,685,000 has been recorded against total deferred tax assets,
due to the uncertainty surrounding their realization.

The components of the Company's net deferred tax position and the tax
effects of the temporary differences giving rise to the Company's deferred tax
assets (liabilities) as of December 31, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
1997 1998
----------- ------------
<S> <C> <C>
Net operating loss carryforwards......... $ 5,817,000 $ 10,598,000
Accrued liabilities...................... 116,000 158,000
Reserves................................. 68,000 539,000
Depreciation and amortization............ 144,000 390,000
Valuation allowance...................... (6,145,000) (11,685,000)
----------- ------------
Total deferred tax asset................. $ -- $ --
=========== ============
</TABLE>

Ownership changes, as defined in the Internal Revenue Code Section 382, may
have limited the amount of net operating loss carryforwards that can be utilized
annually to offset future taxable income. Subsequent ownership changes could
further affect the limitation in future years.

8. NOTES PAYABLE

During 1995 and 1996, the Company borrowed $224,000 and $170,000,
respectively, from various stockholders of the Company. The loans accrued
interest at 7% per annum and were payable, along with all accrued interest, upon
demand. In connection with the loans made in 1995, the Company issued warrants
to purchase common stock equal to the principal balance of the loans divided by
$42.00 per share, for an aggregate of 5,333 warrants. The exercise price of
these warrants was $56.00 per share. In June 1995, one of the lenders converted
a $30,000 loan plus accrued interest into 715 shares of common stock.

Additionally, during 1995, the Company borrowed an aggregate of $320,000
from a financial advisory firm hired to assist the Company in raising equity.
This amount and $2,166 in accrued interest were converted to common stock during
1995.

In November 1995, the Company received a letter of intent from a potential
investor pursuant to which the potential investor agreed to pay $250,000 to the
Company as an initial installment of a larger investment which would be
finalized in early 1996. The letter of intent provided that in the event that a
final agreement was not reached within a specified period of time, the letter of
intent could be canceled by the Company or the potential investor and the
$250,000 investment would be converted to a note payable, with

F-18
<PAGE> 86
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

interest accruing at 6% per annum, payable 90 days from the date of such
cancellation. The letter of intent was canceled by the investor in June 1996,
and the Company repaid the $250,000 note, together with $5,548 in accrued
interest at 6%.

In August 1996, the Company borrowed $300,000 from an investment company.
The loan bore interest at the NationsBank prime rate plus 1.5% per annum,
adjusted quarterly beginning September 30, 1996. Interest was payable
semi-annually in arrears on the last day of January and August of each year,
commencing January 31, 1997. The full balance of this note was due and payable
on the earlier of: (1) August 14, 1997, or (2) the closing date of an initial
public offering of securities of the Company. In consideration for this loan,
the Company issued to the lender warrants to purchase 4,821 shares of the
Company's common stock at an initial exercise price of $62.30 per share. Each
time the Company declared a stock split or dividend, sold previously unissued
shares, or issued additional options, warrants or rights to purchase shares of
the Company's common stock, the Company applied a formula, pursuant to the terms
of the warrant, to determine if the number of warrants and the exercise price
thereof was required to be adjusted. As of December 31, 1996, the number of
shares subject to the warrant pursuant to the loan agreement was 6,107 at an
exercise price of $49.21.

In November 1996, the underwriter of the Company's proposed initial public
offering of common stock (IPO) placed $2,000,000 in bridge notes of the Company
to provide the Company with operating capital until the time of the expected
closing of the IPO. The bridge notes were collateralized by substantially all of
the assets of the Company. The bridge notes were due and payable upon the
earliest of the closing of the IPO, twelve months from the date of issuance, or
the closing of a series of sales of securities of the Company with aggregate
gross proceeds of at least $2,000,000, and the notes bore interest at the rate
of 10% per annum, due and payable quarterly, beginning January 1, 1997. The
notes were issued to a total of 38 investors, in three tranches: (1) $1,025,000
as of October 18, 1996, (2) $400,000 as of November 8, 1996, and (3) $575,000 as
of November 22, 1996. The individual note holders were also issued warrants to
purchase an aggregate of 71,428 shares of the Company's common stock at an
exercise price of $23.10 per share. These fee warrants were to be forfeited upon
the completion of the Company's initial public offering. Based on an analysis
utilizing the Black-Scholes option-pricing model giving consideration to the
features of the warrants and the external economic environment provided by an
independent valuation firm, the Company estimated that the fair value of the
warrants issued in connection with these debt financings was approximately
$782,000. This aggregate amount has been recorded as a discount against the
related notes payable and an increase to additional paid-in-capital. The
discount against the related notes payable was to be amortized to interest
expense over the terms of the related notes. As of December 31, 1996,
approximately $196,000 had been amortized to interest expense. The effective
interest rate of the bridge notes is 43.3% per annum based on the 10% stated
interest rate pursuant to the bridge notes and the fair value of the 71,428
warrants that were originally issued in connection with the notes.

All notes payable were repaid in full concurrent with the receipt of the
proceeds of the Company's IPO in April 1997. Of the $586,000 unamortized
discount recorded as at

F-19
<PAGE> 87
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

December 31, 1996, $385,000 was charged to interest expense. The remaining
$201,000 of the unamortized discount was charged against equity as the warrant
holder to whom the Bridge Warrants had been granted returned a portion thereof.

Notes payable outstanding at December 31, 1998 consisted of the remaining
balance due on a note that financed an insurance policy, $85,000, and two notes
to vendors for services rendered during the year, totaling $40,000.

9. 5% CUMULATIVE CONVERTIBLE DEBENTURES DUE 2003

In July 1998, the Company completed a private placement of 5% Cumulative
Convertible Debentures due 2003 ("5% Convertible Debentures") with certain
institutional, affiliated and other investors, from which it received gross
proceeds of approximately $3.125 million. Interest thereon accrues daily and is
payable quarterly in arrears, payable in cash or, at the Company's option, by
increasing the principal amount of the 5% Convertible Debentures. For the year
ended December 31, 1998, the Company elected to pay the interest due at that
date by increasing the principal amount by approximately $76,000. The 5%
Convertible Debentures are senior in right of payment to substantially all
existing and future indebtedness of the Company and the Company's equity
securities. The Company sold and issued such securities in reliance on an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, Regulation D and Rule 506.

At the option of each holder, the Company is obligated to redeem all or any
portion of such holder's 5% Convertible Debentures effective as of the effective
date of an "Extraordinary Transaction", as defined in such debenture, and the
holder shall be entitled to receive a redemption price per $100 principal amount
of 5% Convertible Debentures being redeemed equal to 112.5% of the aggregate
principal amount of the 5% Convertible Debentures, plus accrued and unpaid
interest thereon. Also at the option of each holder, the Company is obligated to
redeem all or any portion of such holder's outstanding 5% Convertible Debentures
effective as of the date of the occurrence of certain "Triggering Events", as
defined in such debenture, and the holder shall be entitled to receive a
redemption price per $100 principal amount of 5% Convertible Debentures being
redeemed equal to 130% of the principal amount of the 5% Convertible Debentures,
plus accrued and unpaid interest.

Subject to the contractual agreement described below, the holders of the
debentures may, in whole or in part, convert the 5% Convertible Debentures into
shares of common stock at any time. The original terms of the debentures provide
that the conversion rate of the 5% Convertible Debentures is determined by
dividing the principal amount of the 5% Convertible Debentures plus any accrued
and unpaid interest by a conversion price equal to the lesser of (i) the fixed
conversion price of $76.09, or (ii) a floating conversion price equal to the
average of the three lowest closing prices of the Common Stock on its principal
exchange during the 12 trading days immediately preceding the date upon which
the Company is notified of such conversion. The number of shares of Common Stock
issuable upon conversion of the 5% Convertible Debentures is subject to
adjustment in certain events, including without limitation a reclassification,
reorganization or exchange of the Company's Common Stock.

F-20
<PAGE> 88
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

On or after July 8, 2003, the Company has the option to cause the
outstanding 5% Convertible Debentures to be automatically converted to shares of
Common Stock pursuant to the Conversion Rate, as defined in such debenture, or
to redeem all outstanding 5% Convertible Debentures at a redemption price equal
to the principal amount of the 5% Convertible Debentures plus any accrued and
unpaid interest thereon. As a condition precedent to the consummation of a
private placement of units (consisting of unsecured promissory notes and common
stock) completed in February 1999, the Company entered into an agreement with
the holders of the convertible debentures, including the directors and executive
officers affiliated with the Company, amending certain terms of those
securities. In particular, each of the holders of the 5% Convertible Debentures
agreed that: (i) it would not exercise its right to convert the 5% Convertible
Debentures to common stock until the date on which the Company completes a
public or private equity financing with gross proceeds of not less than $8
million (a "qualified financing"); (ii) upon the closing of a qualified
financing, the principal amount of and accrued and unpaid interest on the
convertible debentures will automatically convert into the securities issued in
the qualified financing at a conversion price equal to the lesser of (A) $17.50
per share, or (B) 75% of the price at which the securities are sold in the
qualified financing and that the anti-dilution provisions of the convertible
debentures would be inapplicable to the conversion; and (iii) it waives any
default by the Company with respect to the obligation to register or maintain
the effectiveness of a registration statement for the shares of common stock
issuable upon conversion of the 5% Convertible Debentures. The holders of the 5%
Convertible Debentures also agreed to hold the shares of common stock issued
upon conversion of the 5% Convertible Debentures for at least 12 months
following the effective date of the registration statement that relates to the
qualified financing. The Company also agreed to include the shares of common
stock issuable upon conversion of the 5% Convertible Debentures in the
registration statement filed with the Securities and Exchange Commission
relating to the qualified financing. The Company currently has outstanding
$3.125 million original principal amount of 5% Convertible Debentures. If the
proposed public offering of common stock by the Company is completed, the 5%
Convertible Debentures will automatically convert into common stock upon
consummation of that offering (see Note 15).

10. CAPITAL STOCK TRANSACTIONS

COMMON STOCK

The Company was initially capitalized in the amount of $1,000 by the
issuance of 71 shares of common stock, par value $.01. On June 28, 1994, the
Company filed a Certificate of Amendment of Certificate of Incorporation
increasing the authorized shares to 10,000,000.

On June 28, 1994, the Company issued a stock dividend of 185,644 shares to
the Company's sole stockholder and then President and Chief Executive Officer,
Mr. Steven A. Rogers.

On August 3, 1994, the Company sold 26,809 shares of common stock for
$14.00 per share. Of the shares issued, 24,429 shares were sold for cash and
2,380 were issued in

F-21
<PAGE> 89
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

exchange for services rendered. On December 31, 1994, the Company sold an
additional 6,429 shares of common stock for $42.00 per share.

On December 31, 1994, the Company issued 1,196 shares in fulfillment of an
obligation of $22,500 for services rendered in connection with the previous
stock offerings.

In December 1994, the Company entered into a agreement with a financial
advisory firm to assist in raising a minimum of $600,000 in equity for the
Company. In return, the Company was required to issue warrants to the financial
advisor to purchase shares of the Company's common stock equal to 10% of the
number of shares of common stock sold by the financial advisor to investors and
10% of the number of warrants issued to investors. The exercise price for these
warrants is 110% of the common stock price or the warrant exercise price.

Pursuant to this agreement, the Company sold 15,952 shares of common stock
for $42.00 per share during June 1995. Each share of common stock sold entitled
the investor to a warrant to purchase an additional share of the Company's
common stock, at an exercise price of $56.00 per share. Further, the Company
converted $30,057 in notes payable and accrued interest into 716 shares of
common stock. Additionally, the Company converted $202,166 in outstanding notes
payable and accrued interest to the financial advisory firm into 4,813 shares of
common stock. Each share of common stock issued in the conversion as accompanied
by a warrant to purchase one share of common stock, at an exercise price of
$56.00 per share. The Company also converted an additional $120,000 loan from
the financial advisory firm into 2,857 shares of common stock, subject to the
warrant provision described above. In connection with this transaction, holders
of the converted notes were also issued an aggregate of warrants to purchase
12,238 shares of common stock at an exercise price of $56.00 per share.

Pursuant to its 1995 agreement with the financial advisory firm, during
June 1996, the Company sold 25,024 shares of common stock for $42.00 per share.
Each share of the common stock sold entitled the investor to a warrant to
purchase an additional share of the Company's common stock at an exercise price
of $56.00 per share. In connection with the provisions of the agreement, the
president of the financial advisory firm received 4,936 warrants at an exercise
price of $46.20 per share and 4,936 warrants at an exercise price of $61.60 per
share in consideration of the services performed to assist the Company in
obtaining equity financing. Additionally, the Company issued to certain lenders
as an inducement to make loans to the Company, warrants to purchase 2,381 shares
of common stock at $56.00 per share.

During January 1997, the Company executed a warrant exchange agreement (the
"Exchange Agreement") with investors who purchased shares of common stock and
received warrants through the financial advisory firm during 1995 and 1996. The
purpose of the warrant exchange was to induce such investors to enter into
lock-up arrangements with the underwriter of the IPO and into agreements
consolidating such investors' registration rights with those granted by the
Company to other investors, and to provide those investors with the opportunity
to invest in the Company upon terms and conditions that more closely reflect the
terms and conditions upon which the other investors invested

F-22
<PAGE> 90
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

in the Company during a comparable time period. Under the Exchange Agreement,
each such investor was given the opportunity to exchange existing warrants to
purchase 714 shares of common stock at an exercise price of $56.00 per share for
new warrants to purchase 357 shares of common stock at an exercise prices of
$28.00 per share and an additional 357 newly issued shares of common stock. In
addition, in the original offering, certain investors purchased shares of common
stock from Mr. Steven A. Rogers at a purchase price of $14.00 per share at a
time during which other investors were purchasing shares of common stock from
the Company at $42.00 per share. As part of the warrant exchange, such investors
also were required to pay Mr. Rogers $14.00 per share of common stock purchased
from him in the original offering, so as to cause such transactions to be
consummated upon terms and conditions more closely reflecting market conditions.
Mr. Rogers received an aggregate of $340,166 in the warrant exchange
transaction. As a result of the Exchange Agreement, the Company issued an
aggregate of 23,610 shares of common stock. Of the fair market value of such
shares, the Company reflected a non-cash compensation expense of $340,166, and
the remaining $320,902 was directly charged to equity as a cost of equity
financing. Additionally, an aggregate of 49,362 warrants with an exercise price
of $56.00 per share were exchanged for 23,610 warrants with an exercise price of
$28.00 per share and 2,143 warrants with an exercise price of $56.00 per share.
Further, in connections with the Warrant Agreement, the Company also exchanged
warrants held by the president of the financial advisory firm to purchase 4,936
warrants to purchase shares of common stock at an exercise price of $46.20 per
share, and 4,936 warrants to purchase shares of commons stock at an exercise
price of $61.60 per share, for an aggregate of 9,872 warrants to purchase shares
of common stock at an exercise price of $28.00 per share. Additionally, the
Company exchanged warrants originally issued to other investors as an inducement
to loan funds to the Company, representing the right to purchase an aggregate of
14,619 shares of common stock at an exercise price of $56.00 per share for
warrants to purchase 14,619 shares of common stock at an exercise price of
$28.00 per share. The Company did not receive any additional cash proceeds as a
result of the Exchange Agreement.

During April 1997, the Company issued 295,714 shares of common stock, par
value $.01 for approximately $9.5 million in proceeds, net of underwriting
discounts and commissions and certain other expenses of the initial public
offering of $1.9 million. The issuance of these shares was pursuant to an
initial public offering price of $38.50 per share. The net proceeds of the
initial public offering were used primarily to repay certain outstanding notes
payable and to fund the continued research and development and the working
capital deficiencies of the Company. In connection with the initial public
offering, all of the issued and outstanding shares of Redeemable Series A
Convertible Preferred Stock were converted into common stock on a one-for-one
basis.

In April 1997, in connection with the initial public offering, certain
holders of Bridge Warrants surrendered such warrants to acquire an aggregate of
21,428 shares of common stock with a fair value of $9.38 per warrant, resulting
in a decrease of $201,000 in stockholders' equity due to the reversal of
interest expense. The surrender and cancellation

F-23
<PAGE> 91
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

of such warrants did not have any other effect on the Bridge Financing, nor did
the Company pay any consideration in connection with such surrender.

On November 5, 1997, the company completed the offering and sale of 142,857
shares of the Company's common stock at a public offering price of $161.88 per
share, resulting in net proceeds to the Company of approximately $20.9 million
(net of underwriting discounts and commissions and other expenses of the
offering).

The Company's stockholders authorized the increase in the total number of
shares of common stock authorized for issuance from 10,000,000 shares to
30,000,000. The Company filed a Second Amended and Restated Certificate of
Incorporation to effectuate such increase in May 1998.

A summary of the number of shares of common stock subject to purchase under
all warrant agreements and related exercise prices as of December 31, 1998 is as
follows:

<TABLE>
<CAPTION>
NUMBER OF
EXERCISE PRICE SHARES
-------------- ----------------
<S> <C>
$28.00............................... 60,946
$23.10............................... 41,501
$42.00............................... 7,467
$56.00............................... 2,142
-------
112,056
=======
</TABLE>

STOCK OPTIONS

On August 3, 1994, the Company granted certain outside directors of the
Company options to purchase 28,568 shares of common stock. These options vest on
the anniversary of the options grant date in accordance with a five-year vesting
schedule, 20% each year. The exercise price is $14.00 per share, which was in
excess of the fair value of the stock on the date of the grant, as determined by
the Board of Directors. As of December 31, 1998, 1,428 of these options had been
exercised and 21,427 of these options were exercisable. The right to exercise
these options terminates ten years from the grant date.

In October 1994, the Board of Directors adopted the 1994 Stock Option Plan
(the "1994 Plan") pursuant to which 49,000 shares of common stock are reserved
for issuance. These options vest on the anniversary of the option grant date in
accordance with a vesting schedule ranging from two to five years. The options
granted under this plan are granted at an exercise price per share equal to the
fair value per share of the Company's common stock on the date of grant. As of
December 31, 1998, none of these options had been exercised and 24,814 of these
options were exercisable. The right to exercise these options terminates ten
years from the grant date.

In January 1997, the Board of Directors adopted the 1996 Stock Option Plan
(the "1996 Plan") pursuant to which 64,285 shares of common stock were reserved
for issuance. The Board of Directors, with shareholder approval, authorized the
increase in the number of shares reserved for issuance under the 1996 Plan to
207,142 shares during 1998.

F-24
<PAGE> 92
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

The options granted under this plan are granted at an exercise price per share
equal to the fair value per share of the Company's common stock on the date of
grant. As of December 31, 1998, 330 of these options had been exercised and
12,411 options were exercisable. The right to exercise these options ranges from
five to ten years from the grant date.

In connection with the IPO in April 1997, the Company issued to an
investment banking firm options to purchase 25,714 shares of common stock at an
exercise price equal to 165% of the price of the common stock offered to the
public, or $63.525 per share. The right to exercise these options terminates
five years from the grant date.

In December 1997, the Company granted to an investment banking firm options
to purchase 17,857 shares of common stock at an exercise price $96.67 per share,
which was the fair value of the stock on the date of the grant. Since this grant
is for future services to be provided, the related compensation expense, in
accordance with SFAS No. 123, will be recorded over two years, the expected term
of services. In 1997, the compensation expense was $20,355, in 1998 it was
$563,687, and will be $543,332 in 1999. The right to exercise these options
terminates five years from the grant date.

F-25
<PAGE> 93
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

Stock option activity is summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- --------------
<S> <C> <C>
1995
Granted.............................................. 33,214 $28.000
Forfeited............................................ -- --
Exercised............................................ -- --
Outstanding at December 31, 1995..................... 61,785 $21.525
Exercisable at December 31, 1995..................... 5,714 $14.000
Available for grant at December 31, 1995............. 15,785

1996
Granted.............................................. 19,714 $28.000
Forfeited............................................ (3,928) $28.000
Exercised............................................ 1,428 $14.000
Outstanding at December 31, 1996..................... 76,142 $23.009
Exercisable at December 31, 1996..................... 15,857 $22.498
Available for grant at December 31, 1996............. --

1997
Granted.............................................. 95,614 $76.531
Forfeited............................................ (1,428) $82.075
Exercised............................................ -- --
Outstanding at December 31, 1997..................... 170,328 $52.556
Exercisable at December 31, 1997..................... 31,228 $20.958
Available for grant at December 31, 1997............. 12,957

1998
Granted.............................................. 162,100 $61.677
Forfeited............................................ (77,104) $77.707
Exercised............................................ 330 $46.375
Outstanding at December 31, 1998..................... 254,994 $50.771
Exercisable at December 31, 1998..................... 92,940 $43.827
Available for grant at December 31, 1998............. 61,200
</TABLE>

F-26
<PAGE> 94
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------------- ------------------------------
WEIGHTED-
NUMBER AVE. WEIGHTED- NUMBER WEIGHTED-
OUTSTANDING REMAINING AVE. EXERCISABLE AVE.
RANGE OF AS OF CONTRACTUAL EXERCISE AS OF EXERCISE
EXERCISE PRICES 12/31/98 LIFE (YEARS) PRICE 12/31/98 PRICE
- --------------- -------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
$14.00 26,429 5.6 $14.00 21,429 $14.00
$21.00-$38.50 73,135 6.8 $30.66 24,457 $28.00
$42.875-$63.525 103,453 4.2 $52.64 37,650 $58.10
$80.50-$96.691 51,977 6.4 $94.01 9,404 $95.90
---------- --------
254,994 92,940
========== ========
</TABLE>

All stock options granted by the Company from its inception through
December 31, 1998 were granted with an exercise price per share equal to the
fair value of the Company's common stock on the date of grant. In December 1996,
the Company repriced the exercise price of all options previously granted to
$28.00 per share, to reflect an exercise price consistent with the price per
share paid by outside investors of the Series A preferred stock issued in
December of 1996 and January 1997 (see Note 11).

In July 1998, the Board approved a repricing plan to reprice employee stock
options under the Plan to restore the long-term employee retention and
performance incentives of the stock options outstanding. In accordance with the
repricing plan, all stock options held by current, active full-time employees,
with exercise prices above $50.75 or vesting periods in excess of three years,
were cancelled and replaced by the same number of options exercisable at $50.75
per share and vesting over a three year period. The options were granted at a
price equal to the fair value of the Company's common stock on the date of the
repricing.

The Company accounts for the fair value of its options granted to employees
and directors in accordance with APB 25. Accordingly, no compensation expense
has been recognized for the options granted, since the exercise price of the
options has been in excess of the fair value of the options on the date of
grant, as determined by the Board of Directors. Had compensation expense been
determined based on the fair value of the options at the grant dates consistent
with the method of accounting under SFAS 123, the

F-27
<PAGE> 95
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

Company's net loss and net loss per share would have increased to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Net loss:
As Reported................................... $(11,586,294) $(22,403,577)
Pro forma..................................... $(11,915,198) $(23,970,089)
Net loss per common share:
As Reported, basic............................ $ (19.90) $ (27.45)
Pro forma, basic.............................. $ (20.46) $ (29.34)
</TABLE>

The fair value of each option granted in 1997 and 1998 was estimated on the
date of grant using a type of Black-Scholes option-pricing model. The model used
the following weighted-average assumptions used for grants during the years
ended December 31, 1997 and 1998: expected volatility of 75% and 95%,
respectively, risk-free interest rate of 6.4% and 5.4%, respectively; dividend
of 0% for both 1997 and 1998; and an expected term of 5 years was assumed in
both 1997 and 1998.

PREFERRED STOCK

SERIES A CONVERTIBLE PREFERRED STOCK

On December 9, 1996, the Board of Directors and a majority of the holders
of the outstanding common stock authorized 2,500,000 shares of preferred stock,
with a par value of $.01 per share. In December 1996, the Company authorized the
issuance and sale of 500,000 shares of Series A Convertible Preferred Stock
("Series A") and warrants to purchase 14,284 shares of common stock for
aggregate consideration of $2,000,000. The Series A shares had liquidation
preferences over the common stock and any series of preferred stock authorized
in the future. The holders of Series A shares were entitled to non-cumulative
dividends when dividends are declared on the common stock as though the Series A
shares had been converted to common stock. At any time after five years
following the issuance of the Series A shares, or upon a merger in which the
Company is not the surviving entity, or upon a sale of all or substantially all
of the assets of the Company, at the request of at least 50% of the holders of
Series A shares and given sixty days notice, the Company is required to redeem
all or a portion of the outstanding Series A shares at a redemption price equal
to the amount such holders would be entitled to received had they converted the
Series A shares into common stock or the liquidation value of $28.00 per share,
whichever is greater. The Series A shares were convertible to common stock as
determined by multiplying the Series A stated value plus all declared but unpaid
dividends by $28.00 and dividing that result by the conversion price, which as
defined by the agreement will not exceed $28.00 per share. The Series A shares
automatically converted to shares of common stock upon the consummation of the
Company's IPO in April 1997.

The warrants issued in conjunction with the Series A shares had an exercise
price of $28.00 per share. As a fee for the placement of the Series A shares and
related

F-28
<PAGE> 96
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

warrants, the underwriting firm received a $140,000 underwriter's discount and
commission in consideration of its services on this transaction.

In December 1996 and January 1997, the Company issued 500,000 Series A
shares and 14,284 warrants for the purchase of common stock and had received
$1.8 million of consideration for the sale of the Series A shares. The Series A
shares were recorded net the underwriting discount and commission and
approximately $82,000 in other issuance costs. The 500,000 shares of Series A
shares outstanding at the time of the Initial Offering in April automatically
converted into 71,428 shares of common stock on the closing of the IPO.

5% CUMULATIVE CONVERTIBLE SERIES B PREFERRED STOCK

In August 1998, the Company issued to certain unaffiliated investors in a
private placement 209,091 shares of 5% Cumulative Convertible Series B Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock"), and warrants
to purchase an aggregate of 7,467 shares of Common Stock at an exercise price of
$42.00 per share which were valued at $94,000 (the "Series B Warrants"). The
shares of Series B Preferred Stock and the Series B Warrants were issued at an
original exercise price of $5.50 per share, resulting in gross proceeds to the
Company of $1.15 million. Dividends accrue at 5% annually, are cumulative, and
are payable in additional shares of Series B Preferred Stock. The Company sold
and issued such securities in reliance on an exemption from registration
provided by Section 4(2) of the Securities Act of 1933, Regulation D and Rule
506.

Shares of Series B Preferred Stock are convertible at any time after the
issuance date and at the option of the holder, into shares of common stock at an
initial conversion rate of $38.50 per share, subject to adjustment in connection
with certain events, including a reclassification, reorganization or exchange of
the Company's Common Stock. The shares of Series B Preferred Stock are subject
to automatic conversion, without further action on the part of the holder or the
Company, if the closing price of the Company's common stock equals or exceeds
$77.00 per share for 15 consecutive trading days.

In connection with the private placement by the Company of units completed
in February 1999, the Company entered into a letter agreement with both of the
holders of the Series B Preferred Stock modifying certain terms of those
securities. Specifically, the Company and the holders agreed that: (i) the
holders would not exercise their right to convert the Series B preferred stock
to common stock, or exercise the Series B Warrants for common stock, until the
date on which the Company completes a public or private equity financing with
gross proceeds to us of not less than $8 million (a "qualified financing"); (ii)
upon the closing of a qualified financing, the stated value of and accrued and
unpaid dividends on the Series B preferred stock will automatically convert into
shares of common stock at a conversion price equal to $19.25 per share, and the
exercise price of Series B Warrants would be reduced to $19.25 per share; (iii)
the anti-dilution provisions of the Series B preferred stock and the Series B
Warrants would not apply to the qualified financing, the 5% Convertible
Debenture conversion, the February 1999 private placement, the conversion of the
Series B preferred stock or the exercise of the Series B Warrants; (iv) the
holders waived and agreed not to exercise any registration rights they may have
as

F-29
<PAGE> 97
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

to the common stock issuable upon conversion of the Series B preferred stock or
the exercise of the Series B Warrants in connection with this offering; and (v)
the holders would not sell any common stock issuable upon conversion of the
Series B preferred stock for at least six months after the effectiveness of the
registration statement (or up to 24 months, if necessary to obtain regulatory
approval of this offering) filed relating to the qualified financing. The
Company currently has outstanding 209,091 shares of Series B preferred stock. If
the proposed public offering of common stock by the Company is completed, the
Series B preferred stock will automatically convert into common stock upon
consummation of that offering.

11. EMPLOYEE BENEFIT PLAN

The Company implemented a profit-sharing plan under Section 401(k) of the
Internal Revenue Code (the "Code") covering substantially all employees in 1998.
The plan allows employees to make contributions up to the maximum allowed by the
Code. The Company will contribute one dollar to an employees account for each
two dollars contributed by the employee until the employee's contribution equals
6% of the employee's annual salary. The Company contributed $183,000 to the
employees' accounts during 1998.

12. NEW ACCOUNTING PRONOUNCEMENTS

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". SOP 98-1 requires computer
software costs associated with internal use software to be charged to operations
as incurred until certain capitalization criteria are met. SOP 98-1 is effective
beginning January 1, 1999. The Company plans to adopt this method of accounting
in January 1999.

In April 1998, the Accounting Standards Executive Committee issued
Statement of Position No. 98-5, "Reporting on the Costs of Start-up Activities."
This statement provides guidance in the financial reporting of start-up costs
and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. The statement is effective for
fiscal years beginning after December 15, 1998. Adoption of this standard will
not impact the financial results of the Company.

F-30
<PAGE> 98
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

13. SUBSEQUENT EVENTS (ALSO SEE NOTE 15)

In January 1999, the Company restructured $3,575,000 in obligations to
vendors through the issuance of long-term notes of $4,675,000, including a
$1,100,000 increase in additional commitments to purchase inventory. In
connection with the restructuring of the commitments the Company issued warrants
to purchase an aggregate of 45,000 shares of common stock.

In February 1999, the Company completed a private placement of $2,850,000
of unsecured promissory notes and 160,701 shares of common stock, from which it
received net proceeds of approximately $2,430,000.

On February 16, 1999, the Company filed a registration statement with the
Securities and Exchange Commission relating to a proposed firm commitment
underwritten public offering of $15,000,000 of common stock.

14. REVERSE STOCK SPLIT

On April 14, 1999, the stockholders approved a one share for seven shares
reverse stock split of the issued and outstanding Common Stock which was
previously approved by the Board of Directors. The reverse stock split was
effected on April 14, 1999. All references throughout these financial statements
to number of shares, per share amounts, stock option and warrant data and market
prices of the Company's Common Stock have been restated. In addition, Common
Stock and additional paid-in capital for all periods presented, have been
restated to reflect this reverse stock split. The number of shares as restated
to reflect the reverse stock split has not been adjusted to give effect to the
cashing out of fractional shares. The Company believes that the cashing out of
fractional share interests will not materially change the number of shares of
Common Stock, as restated.

15. SUBSEQUENT EVENTS (UNAUDITED)

Going Concern Update. The Company has continued to suffer recurring losses
from operations and negative cash flows during the three months ended March 31,
1999, that raise substantial doubt about its ability to continue as a going
concern. At March 31, 1999, the Company had approximately $640,000 in cash and,
as of the date of this prospectus, the Company was again essentially out of
cash. The Company intends to obtain financing from a proposed public offering of
equity securities in the estimated amount of $15,000,000. The Company intends to
fund its operations until the closing of the proposed public offering with cash
generated from payments by customers on outstanding customer receivables.
However, the timing and amount of customer payments is uncertain. In May 1999,
the Company's Board of Directors approved a change of the securities to be
offered in the proposed $15,000,000 public offering. The Company intends to
offer and sell units, with each unit consisting of two shares of common stock
and one redeemable common stock purchase warrant. The Company anticipates that
the offering will be completed in late May. However, the Company's ability to
complete the offering, the timing of the offering and its terms are subject to a
number of conditions, some of which are beyond the Company's control, including
market conditions. There can be no assurance that the

F-31
<PAGE> 99
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

Company will complete the public offering or, if it is completed, the timing or
the terms of the offering. If the Company is not successful in securing
additional financing, it will be forced to consider alternative methods of
maximizing stockholder value, which could include sales of assets, workout
alternatives or bankruptcy.

Sanmina Note. In January 1999, the Company converted outstanding accounts
payable to Sanmina Corporation of $3,200,000 and $1,100,000, the latter
representing the value of inventory and materials located at a subcontract
manufacturer, to a $4,300,000 three-year term note accruing interest at 7% per
year. The Company is obligated to pay Sanmina $1,100,000 in principal on the
note at the time the proposed public offering is completed and, at that time,
Sanmina will transfer to the Company the title to the inventory and materials
located at Sanmina. During the first year, the note requires interest-only
payments, in arrears, semi-annually, beginning in July 1999. Thereafter, the
Company will amortize the remaining principal and interest in equal monthly
payments over the remaining life of the note.

In connection with converting the accounts payable balance, the Company
issued to Sanmina warrants to purchase 39,286 shares of common stock, with a
$19.25 exercise price per share. An independent appraisal assigned a market
value of $127,759 to these warrants. The Company has recorded the value of the
warrants as a discount against the face amount of the note and will amortize the
value over the life of the note.

Legal Counsel Note. In January 1999, the Company also converted $375,000
of outstanding accounts payable to legal counsel to a two-year term loan
accruing interest at 7% per year. The Company paid $25,000 of this initial
balance from the proceeds of the private placement in February 1999 and the
Company is obligated to pay an additional $50,000 in principal on the note at
the time the proposed public offering is completed. Other than the principal
repayments noted above, the Company is obligated to make two semi-annual
interest-only payments commencing in July 1999. Commencing in February 2000, the
Company will commence making twelve equal monthly payments to fully amortize the
remaining balance of the note.

In connection with converting the accounts payable balance, the Company
issued to legal counsel warrants to purchase 5,714 shares of common stock, with
a $18.59 exercise price per share. An independent appraisal assigned a market
value of $18,583 to these warrants. The Company has recorded the value of the
warrants as a discount against the face amount of the note and will amortize the
value over the life of the note.

Private Placement of Units. In February 1999, the Company completed a
private placement of 28.5 units of unsecured promissory notes with a principal
amount of $2,850,000 and 160,701 shares of common stock, from which the Company
received net proceeds of approximately $2,393,000. The notes accrue interest at
10% per year. The principal and accrued interest are payable at the earlier of
1) February 2000, 2) the closing date of the proposed public offering, or 3) one
of several specified events. Two principal officers of the Company invested a
total of $125,000 in units and were issued unsecured promissory notes with an
aggregate original principal amount of $125,000, and 4,999 shares of common
stock.

F-32
<PAGE> 100
OBJECTIVE COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)

An independent appraisal assigned a market value of $186,413 to the common
stock issued in the February 1999 private placement. The Company has recorded
the value of the common stock as a discount against the face amount of the
unsecured promissory notes and will amortize the value over the life of the
notes.

Convertible Debentures. In July 1998, the Company issued $3,125,000
aggregate principal amount of convertible debentures. It was a condition
precedent to the completion of the February 1999 private placement that the
Company enter into an agreement with the holders of the convertible debentures,
including the directors and officers who hold convertible debentures, changing
the terms upon which the convertible debentures will convert to equity
securities. Pursuant to letter agreements dated May 1999, each of the holders of
convertible debentures agreed that: (i) it would not exercise its right to
convert the convertible debentures to common stock until the date on which a
public or private equity financing with specified minimum gross proceeds to us
(a "qualified financing") is completed; (ii) upon the closing of a qualified
financing, the principal amount of and accrued and unpaid interest of the
convertible debentures will automatically convert into common at a fixed
conversion price of $3.75, and that the anti-dilution provisions of the
convertible debentures would not apply to the conversion; and (iii) it waives
any default by the Company with respect to the Company's obligations to register
or maintain the effectiveness of a registration statement for the shares of
common stock issuable upon conversion of the convertible debentures. The holders
of the convertible debentures also agreed to hold the shares of common stock
issued upon conversion of the convertible debentures for at least 12 months
following the effective date of the registration statement that relates to the
qualified financing. The Company agreed to include the shares of common stock
issuable upon conversion of the convertible debentures in the registration
statement filed with the SEC relating to the qualified financing. In the event
that the proposed public offering is not completed on or before June 30, 1999,
then the May 1999 letter agreements will be null and void and the terms of
conversion will revert to the original terms.

F-33
<PAGE> 101

[Inside Back Cover]

[Image of a satellite, a TV monitor, a video camera and a DVD connected by lines
to a direct access card with an arrow pointing from the direct access card to a
VidPhone switch. The VidPhone switch has an arrow pointing to a VidModem Card
which is in turn connected through four lines with VidModems to a laptop
computer, a large screen display, a monitor and a desktop computer.]

Video Inputs

Satellite Video Direct Access Card

A specially designed circuit card connects sources
of video material to the VidPhone switch. Sources of
broadcast video material include, but are not
limited to, satellite broadcasts, cable television,
and narrowcasts over an ATM network. The
non-blocking architecture of the VidPhone switch
permits multiple users to simultaneously access the
same broadcast video source without degrading system
performance. Users select video sources using
standard point-and-click

Broadcast & Cable TV techniques.
Video Recorders
Laser Disc Players

The VidPhone system can display or broadcast stored
video or video conferences on non-proprietary
display stations using a desktop or laptop computer.
The user's computer is configured with
non-proprietary equipment such as a microphone,
speakers and a camera. VidPhone stations can be
configured with a single-user display such as a
desktop or laptop computer monitor or a large screen
multi-party conference room display station.

User Stations

Single User Laptop VidModem Card

Group Configuration with Large Screen Display

Stand Alone Monitor for Video Viewing

Single User Desktop VidModem

<PAGE> 102

OBJECTIVE COMMUNICATIONS, INC.

[OBJECTIVE COMMUNICATIONS LOGO]

SOUTHEAST RESEARCH PARTNERS, INC. LADENBURG THALMANN & CO. INC.
<PAGE> 103

[ALTERNATIVE PAGES FOR SELLING STOCKHOLDER PROSPECTUS]

PROSPECTUS

OBJECTIVE COMMUNICATIONS, INC. [OBJECTIVE COMMUNICATIONS LOGO]

___ Shares of Common Stock

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

This prospectus relates to the offering by certain stockholders of
Objective Communications, Inc. of shares of our common stock. The
selling stockholders are identified under the heading "Selling Stockholders"
later in this prospectus. We will not receive any proceeds from sales of the
common stock. The common stock is traded on The Nasdaq SmallCap Market under the
symbol OCOM.

The stockholders may sell the common stock from time to time in
transactions on The Nasdaq SmallCap Market, in negotiated transactions, or a
combination of such selling methods, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices, or at negotiated prices. The stockholders may sell the common
stock to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or the purchasers of the common stock for whom the
broker-dealers may act as agent or to whom they may sell as principal, or both.
The selling stockholders may pay brokerage fees or commissions in connection
with the sales of the common stock.

INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
INVEST IN THE COMMON STOCK ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE
INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE OF THIS PROSPECTUS.

, 1999.
X-1
<PAGE> 104

[TO REPLACE THE "TABLE OF CONTENTS"]

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............
Risk Factors...................
Use of Proceeds................
Price Range of Common Stock....
Dividend Policy................
Capitalization.................
Selected Financial
Information..................
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations...................
Business.......................
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management.....................
Executive Compensation.........
Principal Stockholders.........
Certain Transactions...........
Description of Securities......
Shares Eligible For Future
Sale.........................
Underwriting...................
Legal Matters..................
Experts........................
Additional Information.........
Index to Financial
Statements................... F-1
</TABLE>

[TO REPLACE THE SECOND PARAGRAPH ON PAGE (i)]

Unless otherwise indicated in this prospectus, all information gives effect
to a one share for seven shares reverse stock split of the issued and
outstanding common stock effected on April 14, 1999, gives effect to the
conversion of the outstanding Series B 5% Cumulative Convertible Preferred Stock
to shares of common stock on , 1999, and gives effect to the
conversion of the outstanding 5% Convertible Debentures due 2003 to
shares of common stock on , 1999.

[TO BE ADDED TO THE END OF "RECENT DEVELOPMENTS" IN THE "PROSPECTUS SUMMARY"]

On June , 1999, we completed a public offering of units, each
consisting of three shares of common stock and two warrants, from which we
received net proceeds of $ . Upon the completion of that offering, all
of our outstanding convertible debentures automatically converted into
shares of common stock, all of our outstanding Series B preferred
stock automatically converted into shares of common stock, and we paid
all of the outstanding principal of and interest on the unsecured promissory
notes issued in the February 1999 private placement and certain other
obligations. We believe that the proceeds from the June 1999 public offering
will provide sufficient capital to fund our operations for at least twelve
months.

[TO REPLACE "USE OF PROCEEDS"]

USE OF PROCEEDS

We will not receive any proceeds from the sale of common stock by the
Selling Stockholders.

X-2
<PAGE> 105

[TO BE ADDED AFTER "CERTAIN TRANSACTIONS"]

SELLING STOCKHOLDERS

The following table sets forth certain information provided to us by each
Selling Stockholder regarding the beneficial ownership of shares of common stock
by each Selling Stockholder as of February 9, 1999. Unless otherwise noted, each
stockholder named has sole voting and investment power with respect to such
shares, subject to community property laws, where applicable.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING NUMBER OF AFTER THE OFFERING
--------------------- SHARES ---------------------
NUMBER OF BEING NUMBER OF
NAME OF SELLING STOCKHOLDER SHARES PERCENT SOLD SHARES PERCENT
--------------------------- ---------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
A.C. Providenti...............
AG Super Fund International
Partners, L.P...............
AGR Halifax Fund, Ltd.........
David Alexander...............
Applewood Associates, L.P.....
Aus Per #1, Inc...............
Marc C. Bailin................
Ralph A. Bard III.............
Kenneth Baronoff..............
Daniel L. Berger..............
Stanley H. Blum...............
Roger A. Booker...............
James F. Bunker...............
Eldon Burdo...................
Eugene R. Cacciamani..........
Concetta Capotorto, custodian
for Alexandra Capotorto,
UTMA/ NJ....................
Dr. Sidney Chonowski..........
John R. and Barbara
Constantino, JTWROS.........
Marc S. Cooper................
Edwin K. Dimes................
Robert H. Emery...............
Kenneth M. Endelson...........
Rick Etra & Ken Etra, JTWROS..
Steven Etra...................
Phillip H. Fauver.............
Andrew Feiner.................
GAM Arbitrage Investments,
Inc.........................
Gary C. Granoff...............
Martin Grant..................
Scott Greiper.................
John W. Heilshorn.............
Clifford M. Kendall...........
Carl G. Kleidman..............
</TABLE>

X-3
<PAGE> 106

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING NUMBER OF AFTER THE OFFERING
--------------------- SHARES ---------------------
NUMBER OF BEING NUMBER OF
NAME OF SELLING STOCKHOLDER SHARES PERCENT SOLD SHARES PERCENT
--------------------------- ---------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Leonardo, L.P.................
Richard T. Liebhaber..........
Kenneth F. Logue..............
Allan R. Lyons................
William R. Maines.............
James Mitarotonda.............
Howard W. Muchnick............
Mary C. Murphy................
Samuel Musnikow...............
Tony Peyser...................
Jerald S. Politzer............
Ramius Fund, Ltd..............
Raphael, L.P..................
Dr. Malladi Sudhakar Reddy....
Raymond D. Rice Revocable
Trust dated 4/11/96.........
Martin Rosenman and Ellen
Rosenman, JTWROS............
Stewart Shiman................
Carl E. Siegel................
Eric R. Sisser................
Edward and Linda Steinberg,
JTWROS......................
Jack M.Threadgill.............
Leonard Zelin.................
</TABLE>

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

* Less than one percent

The registration of the shares of common stock under the Securities Act shall
not be deemed an admission by the Selling Stockholders or us that the Selling
Stockholders are underwriters for purposes of the Securities Act of any shares
offered under this prospectus. See "Certain Transactions" for a discussion of
material transactions between Objective Communications and any selling
stockholders.

LOCK-UP ARRANGEMENTS

The Selling Stockholders selling shares of common stock received upon
conversion of the convertible debentures have agreed not to sell such shares
until the first anniversary of the effective date of the registration statement
of which this prospectus constitutes a part (the "Registration Statement").

The Selling Stockholders selling shares of common stock purchased in the
February 1999 private placement have agreed not to sell, transfer or otherwise
dispose of such shares, without the consent of Southeast Research Partners,
Inc., for a period of six months from the effective date of the Registration
Statement. If necessary to obtain regulatory approval of our June 1999 public
offering, this lock-up period may be extended until the second anniversary of
the effective date of the Registration Statement.

X-4
<PAGE> 107

In addition, six directors or former directors and executive officers of
the Company who are Selling Stockholders, in particular, Anthony M. Agnello,
Roger A. Booker, James F. Bunker, Eugene R. Cacciamani, Marc S. Cooper, Robert
H. Emery and Clifford M. Kendall, have agreed not to sell any of their shares of
common stock, including the shares of common stock offered by them in
this prospectus, for a period of 15 months from the effective date of the
Registration Statement.

PLAN OF DISTRIBUTION

The distribution of the common stock by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest, may be effected
from time to time in transactions on The Nasdaq SmallCap Market, other exchanges
or in the over-the-counter market, or in negotiated transactions or otherwise at
prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The common stock may be sold by one
or more of the following methods: (i) a block trade in which the broker or
dealer engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (ii)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this prospectus; (iii) an exchange distribution in
accordance with the rules of such exchange; and (iv) ordinary brokerage
transactions and transactions in which the broker solicits purchasers. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus. Broker-dealers through which transactions involving the common stock
are effected may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of the common
stock for whom such broker-dealers may act as agent or to whom they may sell as
principal, or both. Usual and customary or specifically negotiated brokerage
fees or commissions may be paid by the Selling Stockholders in connection with
sales of the common stock. The Selling Stockholders have not entered into any
underwriting arrangements.

In effecting sales, brokers or dealers engaged by the Selling Stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from Selling Stockholders in amounts to be
negotiated immediately prior to the sale. The Selling Stockholders and agents
who execute orders on their behalf may be deemed to be underwriters as that term
is defined in Section 2(11) of the Securities Act and a portion of any proceeds
of sales and discounts, commissions or other compensation may be deemed to be
underwriting compensation for purposes of the Securities Act. We have agreed to
indemnify the Selling Stockholders against certain liabilities, including
liabilities under the Securities Act.

X-5
<PAGE> 108

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses to be incurred by the
Registrant in connection with the issuance and distribution of the securities
registered hereby, all of which expenses are estimates:

<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- --------
<S> <C>
SEC registration fee........................................ $ 15,000
NASD filing fee............................................. 4,553
Nasdaq filing fee........................................... 17,500
Blue Sky fees and expenses (including fees of counsel)...... 15,000
Printing expenses........................................... 175,000
Transfer agent and registrar's fee.......................... 3,000
Legal fees and expenses (other than Blue Sky)............... 325,000
Accounting fees and expenses................................ 175,000
Miscellaneous............................................... 19,947
--------
Total.................................................. $750,000
========
</TABLE>

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

II-1
<PAGE> 109

<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
4.4 Form of Option for the purchase of 180,000 shares of common
stock, issued to Barington Capital Group, L.P. (Incorporated
by reference to Exhibit 3.8 to the 1997 SB-2).
4.5* Specimen certificate evidencing shares of common stock of
the Registrant.
4.6 Form of 5% Convertible Debentures due 2003 of the Registrant
(Incorporated by reference to Exhibits 4.3 and 4.4 forming a
part of the Registrant's Current Report on Form 8-K dated
July 1, 1998 and filed July 16, 1998 with the Securities and
Exchange Commission under the Securities Exchange Act of
1934, as amended (the "July 8-K")).
4.7 Form of Warrants to be issued upon redemption of the 5%
Cumulative Convertible Debentures due 2003 of the Registrant
(Incorporated by reference to Exhibit 4.5 forming a part of
the July 8-K).
4.8 Specimen certificate evidencing shares of the Series B 5%
Cumulative Convertible Preferred Stock of the Registrant
(Incorporated by reference to Exhibit 4.9 forming a part of
the 1998 S-3).
4.9 Form of Warrant issued in connection with the Series B 5%
Cumulative Convertible Preferred Stock of the Registrant
(Incorporated by reference to Exhibit 4.11 forming a part of
the 1998 S-3).
4.10 Senior Note issued to Sanmina Corporation by the Registrant
with a principal amount of $4,300,000. (Incorporated by
reference to Exhibit 4.10 forming a part of the Registrant's
Annual Report on Form 10-KSB for the year ended December 31,
1998 (the "1998 Form 10-KSB").
4.11 Note issued to Shaw Pittman Potts & Trowbridge by the
Registrant with a principal amount of $400,000.
(Incorporated by reference to Exhibit 4.11 forming a part of
the 1998 Form 10-KSB).
4.12 Form of Warrant for the purchase of 275,000 shares of common
stock, issued to Sanmina Corporation. (Incorporated by
reference to Exhibit 4.12 forming a part of the 1998 Form
10-KSB).
4.13 Form of Warrant for the purchase of 40,000 shares of common
stock, issued to Shaw Pittman Potts & Trowbridge.
(Incorporated by reference to Exhibit 4.13 forming a part of
the 1998 Form 10-KSB).
4.14* Form of Unsecured Promissory Note, issued on February 4,
1999 to various subscribers in a private placement.
4.15** Form of Representative's Purchase Option.
4.16* Specimen certificate evidencing Redeemable Common Stock
Purchase Warrant.
4.17** Form of Warrant Agreement.
4.18** Specimen certificate evidencing unit.
5.1* Form of Opinion of ShawPittman as to the legality of the
securities being registered.
10.1 1994 Stock Option Plan (Incorporated by reference to Exhibit
10.1 forming a part of the 1997 SB-2).
10.2 1996 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.2 forming a part of the 1997 SB-2).
10.3 Form of Consulting Agreement by and between the Registrant
and Barington Capital Group, L.P. (Incorporated by reference
to Exhibit No. 10.4 forming a part of the 1997 SB-2).
</TABLE>

II-2
<PAGE> 110

<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
10.4 Letter Agreement, dated October 7, 1996, between Barington
Capital Group and the Registrant (Incorporated by reference
to Exhibit No. 10.5 forming a part of Amendment No. 2 to the
1997 SB-2).
10.5 Letter Agreement, dated December 5, 1995, by and among PVR
Securities, Inc., the Registrant, Steven A. Rogers and John
B. Torkelsen (Incorporated by reference to Exhibit No. 10.6
forming a part of Amendment No. 2 to the 1997 SB-2).
10.6 Form of Stock Option Agreement, dated December 18, 1997, by
and between the Registrant and Barington Capital Group, L.P.
(Incorporated by reference to Exhibit 10.8 forming a part of
the Registrant's Annual Report on Form 10-KSB, as amended,
for the year ended December 31, 1997).
10.7 Subscription Agreement, dated as of July 1, 1998, by and
among the Registrant and certain Institutional Investors
(Incorporated by reference to Exhibit 4.1 forming a part of
the July 8-K).
10.8 Subscription Agreement, dated as of July 8, 1998, by and
among the Registrant and certain Investors (Incorporated by
reference to Exhibit 4.2 forming a part of the July 8-K).
10.9 Strategic Alliance and Marketing Agreement between the
Registrant and Unisys Corporation (Incorporated by reference
to Exhibit 10.9 to the 1998 Form 10-KSB.
10.10* Letter of Intent, dated January 14, 1999, between Southeast
Research Partners, Inc. and the Registrant.
10.11* Agency Agreement, dated as of January 25, 1999, between
Southeast Research Partners, Inc. and the Registrant.
10.12* Form of Subscription Agreement, dated January 25, 1999,
between the Registrant and certain Investors.
10.13* Employment Agreement, dated July 13, 1998, between the
Registrant and James F. Bunker.
10.14 Employment Agreement between the Registrant and Steven A.
Rogers (Incorporated by reference to Exhibit 10.3 forming a
part of Amendment No. 2 to the 1997 SB-2).
10.15 Letter Agreement dated January 12, 1999, between the
Registrant and Sanmina Corporation (Incorporated by
reference to Exhibit 10.15 to the 1998 Form 10-KSB).
10.16 Letter Agreement dated January 21, 1999 between the
Registrant and Shaw Pittman Potts & Trowbridge (Incorporated
by reference to Exhibit 10.16 to the 1998 Form 10-KSB).
10.17* Form of Letter Agreement between the Registrant and the
holders of the 5% Convertible Debentures due 2003, dated May
1999.
11.1* Statement re: computation of per share earnings.
21.1* Subsidiaries of the Registrant.
23.1* Consent of ShawPittman (included as part of Exhibit 5.1).
23.2** Consent of PricewaterhouseCoopers LLP.
24* Power of Attorney of Richard S. Friedland.
</TABLE>

- ---------------
* Previously filed.

** Filed herewith.

II-3
<PAGE> 111

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies it has reasonable grounds to believe it meets
all the requirements for filing this Amendment No. 3 to Form SB-2 and has duly
caused this Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the County of Rockingham, New Hampshire, on June 7, 1999.

OBJECTIVE COMMUNICATIONS, INC.

By: /s/ JAMES F. BUNKER
-----------------------------------
James F. Bunker
President and Chief Executive
Officer

In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and as of the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>

/s/ JAMES F. BUNKER President and Chief Executive June 7, 1999
- ------------------------------------------ Officer, Chairman and
James F. Bunker Director (Principal
Executive Officer)

/s/ ROBERT H. EMERY Vice President of June 7, 1999
- ------------------------------------------ Administration and Finance
Robert H. Emery and Secretary (Principal
Financial and Accounting
Officer)

/s/ STEVEN A. ROGERS* Director June 7, 1999
- ------------------------------------------
Steven A. Rogers

/s/ ANTHONY M. AGNELLO* Director June 7, 1999
- ------------------------------------------
Anthony M. Agnello

/s/ EUGENE R. CACCIAMANI* Director June 7, 1999
- ------------------------------------------
Eugene R. Cacciamani

/s/ MARC S. COOPER* Director June 7, 1999
- ------------------------------------------
Marc S. Cooper

/s/ RICHARD S. FRIEDLAND* Director June 7, 1999
- ------------------------------------------
Richard S. Friedland

/s/ JOHN B. TORKELSEN* Director June 7, 1999
- ------------------------------------------
John B. Torkelsen

*By: /s/ ROBERT H. EMERY Attorney-in-Fact June 7, 1999
------------------------------------
Robert H. Emery
</TABLE>

II-4
<PAGE> 112

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1* Third Amended and Restated Certificate of Incorporation of
the Registrant.
3.2 Amended and Restated Bylaws of the Registrant (Incorporated
by reference to Exhibit 3.2 to the Registrant's Registration
Statement on Form SB-2 (File No. 333-20625) filed with the
Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "1997 SB-2")).
3.3 Certificate of Designations of the Series B 5% Cumulative
Convertible Preferred Stock of the Registrant (Incorporated
by reference to Exhibit 4.10 forming a part of Amendment No.
1 to the Registrant's Registration Statement on Form S-3
(File No. 333-62971) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the
"1998 S-3")).
4.1 Form of Warrant for the purchase of shares of common stock,
issued in connection with the private placement of
$2,000,000 aggregate principal amount of Bridge Notes
(Incorporated by reference to Exhibit 3.4 to the 1997 SB-2).
4.2 Form of Warrant for the purchase of shares of common stock,
issued in connection with the private placement of units in
June 1995 and August 1996 (Incorporated by reference to
Exhibit 3.5 to the 1997 SB-2).
4.3 Form of Warrants for the purchase of 100,000 shares of
common stock, issued in connection with the private
placement of Series A Convertible Preferred Stock and
warrants in December 1996 and January 1997 (Incorporated by
reference to Exhibit 3.7 to the 1997 SB-2).
4.4 Form of Option for the purchase of 180,000 shares of common
stock, issued to Barington Capital Group, L.P. (Incorporated
by reference to Exhibit 3.8 to the 1997 SB-2).
4.5* Specimen certificate evidencing shares of common stock of
the Registrant.
4.6 Form of 5% Convertible Debentures due 2003 of the Registrant
(Incorporated by reference to Exhibits 4.3 and 4.4 forming a
part of the Registrant's Current Report on Form 8-K dated
July 1, 1998 and filed July 16, 1998 with the Securities and
Exchange Commission under the Securities Exchange Act of
1934, as amended (the "July 8-K")).
4.7 Form of Warrants to be issued upon redemption of the 5%
Cumulative Convertible Debentures due 2003 of the Registrant
(Incorporated by reference to Exhibit 4.5 forming a part of
the July 8-K).
4.8 Specimen certificate evidencing shares of the Series B 5%
Cumulative Convertible Preferred Stock of the Registrant
(Incorporated by reference to Exhibit 4.9 forming a part of
the 1998 S-3).
4.9 Form of Warrant issued in connection with the Series B 5%
Cumulative Convertible Preferred Stock of the Registrant
(Incorporated by reference to Exhibit 4.11 forming a part of
the 1998 S-3).
4.10 Senior Note issued to Sanmina Corporation by the Registrant
with a principal amount of $4,300,000. (Incorporated by
reference to Exhibit 4.10 forming a part of the Registrant's
Annual Report on Form 10-KSB for the year ended December 31,
1998 (the "1998 Form 10-KSB").
</TABLE>

II-5
<PAGE> 113

<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
4.11 Note issued to Shaw Pittman Potts & Trowbridge by the
Registrant with a principal amount of $400,000.
(Incorporated by reference to Exhibit 4.11 forming a part of
the 1998 Form 10-KSB.
4.12 Form of Warrant for the purchase of 275,000 shares of common
stock, issued to Sanmina Corporation. (Incorporated by
reference to Exhibit 4.12 forming a part of the 1998 Form
10-KSB.
4.13 Form of Warrant for the purchase of 40,000 shares of common
stock, issued to Shaw Pittman Potts & Trowbridge.
(Incorporated by reference to Exhibit 4.13 forming a part of
the 1998 Form 10-KSB.
4.14* Form of Unsecured Promissory Note, issued on February 4,
1999 to various subscribers in a private placement.
4.15** Form of Representative's Purchase Option.
4.16* Specimen certificate evidencing Redeemable Common Stock
Purchase Warrant.
4.17** Form of Warrant Agreement.
4.18** Specimen certificate evidencing unit.
5.1* Form of Opinion of ShawPittman as to the legality of the
securities being registered.
10.1 1994 Stock Option Plan (Incorporated by reference to Exhibit
10.1 forming a part of the 1997 SB-2).
10.2 1996 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.2 forming a part of the 1997 SB-2).
10.3 Form of Consulting Agreement by and between the Registrant
and Barington Capital Group, L.P. (Incorporated by reference
to Exhibit No. 10.4 forming a part of the 1997 SB-2).
10.4 Letter Agreement, dated October 7, 1996, between Barington
Capital Group and the Registrant (Incorporated by reference
to Exhibit No. 10.5 forming a part of Amendment No. 2 to the
1997 SB-2).
10.5 Letter Agreement, dated December 5, 1995, by and among PVR
Securities, Inc., the Registrant, Steven A. Rogers and John
B. Torkelsen (Incorporated by reference to Exhibit No. 10.6
forming a part of Amendment No. 2 to the 1997 SB-2).
10.6 Form of Stock Option Agreement, dated December 18, 1997, by
and between the Registrant and Barington Capital Group, L.P.
(Incorporated by reference to Exhibit 10.8 forming a part of
the Registrant's Annual Report on Form 10-KSB, as amended,
for the year ended December 31, 1997).
10.7 Subscription Agreement, dated as of July 1, 1998, by and
among the Registrant and certain Institutional Investors
(Incorporated by reference to Exhibit 4.1 forming a part of
the July 8-K).
10.8 Subscription Agreement, dated as of July 8, 1998, by and
among the Registrant and certain Investors (Incorporated by
reference to Exhibit 4.2 forming a part of the July 8-K).
10.9 Strategic Alliance and Marketing Agreement between the
Registrant and Unisys Corporation (Incorporated by reference
to Exhibit 10.9 to the 1998 Form 10-KSB).
</TABLE>

II-6
<PAGE> 114

<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
10.10* Letter of Intent, dated January 14, 1999, between Southeast
Research Partners, Inc. and the Registrant.
10.11* Agency Agreement, dated as of January 25, 1999, between
Southeast Research Partners, Inc. and the Registrant.
10.12* Form of Subscription Agreement, dated January 25, 1999,
between the Registrant and certain Investors.
10.13* Employment Agreement, dated July 13, 1998, between the
Registrant and James F. Bunker.
10.14 Employment Agreement between the Registrant and Steven A.
Rogers (Incorporated by reference to Exhibit 10.3 forming a
part of Amendment No. 2 to the 1997 SB-2).
10.15 Letter Agreement dated January 12, 1999, between the
Registrant and Sanmina Corporation (Incorporated by
reference to Exhibit 10.15 to the 1998 Form 10-KSB).
10.16 Letter Agreement dated January 21, 1999 between the
Registrant and Shaw Pittman Potts & Trowbridge (Incorporated
by reference to Exhibit 10.16 to the 1998 Form 10-KSB).
10.17* Form of Letter Agreement between the Registrant and the
holders of the 5% Convertible Debentures due 2003, dated May
1999.
11.1* Statement re: computation of per share earnings.
21.1* Subsidiaries of the Registrant.
23.1* Consent of ShawPittman (included as part of Exhibit 5.1).
23.2** Consent of PricewaterhouseCoopers LLP.
24* Power of Attorney of Richard S. Friedland.
</TABLE>

- ---------------
* Previously filed.

** Filed herewith.

II-7

<PAGE> 1
EXHIBIT 1.1

UNDERWRITING AGREEMENT

BETWEEN

OBJECTIVE COMMUNICATIONS, INC.

AND

SOUTHEAST RESEARCH PARTNERS, INC.

DATED: June __, 1999

<PAGE> 2

OBJECTIVE COMMUNICATIONS, INC.

2,000,000 Units

UNDERWRITING AGREEMENT

New York, New York
June __, 1999

Southeast Research Partners, Inc.
One State Street Plaza
New York, New York 10004
As Representative of the several Underwriters

Ladies and Gentlemen:

The undersigned, Objective Communications, Inc., a Delaware
corporation ("Company"), hereby confirms its agreement with Southeast Research
Partners, Inc. (being referred to herein variously as "you", "SERP" or the
"Representative") and with the other underwriters named on Schedule I hereto for
which SERP is acting as Representative (the Representative and the other
Underwriters being collectively called the "Underwriters" or, individually, an
"Underwriter") as follows:

1. Purchase and Sale of Securities.

1.1 Firm Units.

1.1.1 Purchase of Firm Units. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell, severally and
not jointly, to the several Underwriters, an aggregate of 2,000,000 units ("Firm
Units") at a purchase price (net of commissions) of $____ per Firm Unit. Each
Firm Unit consists of three shares of the Company's common stock, par value $.01
per share ("Common Stock"), and two Redeemable Common Stock Purchase Warrants
("Warrant(s)"). The shares of Common Stock and the Warrants included in the Firm
Units will not be detachable or separately transferable, and may be traded only
as Units, until 90 days from the date hereof or such earlier date as you may
determine. Each Warrant entitles its holder to purchase one share of Common
Stock at an initial purchase price of $4.00 per share commencing one year after
the Effective Date (as hereinafter defined) until the fifth anniversary of the
Effective Date. The Underwriters, severally

<PAGE> 3

and not jointly, agree to purchase from the Company the number of Firm Units set
forth opposite their respective names on Schedule I attached hereto and made a
part hereof at a purchase price (net of commissions) of $_____ per Unit.

1.1.2 Payment and Delivery. Delivery and payment for the Firm
Units shall be made at 10:00 A.M., New York time, on or before the third
business day following the date the Firm Units commence trading or at such
earlier time as the Representative shall determine, or at such other time as
shall be agreed upon by the Representative and the Company, at the offices of
the Representative or at such other place as shall be agreed upon by the
Representative and the Company. The hour and date of delivery and payment for
the Firm Units are called the "Closing Date." Payment for the Firm Units shall
be made on the Closing Date by wire transfer of immediately available funds to
the account of the Company upon delivery to the Representative of a certificate
of the Company's transfer agent stating that the Firm Units have been registered
in book entry form in such name or names and in such denominations as are
requested by the Representative. The Company shall not be obligated to sell or
deliver the Firm Units except upon tender of payment by the Underwriters for all
the Firm Units.

1.2 Over-Allotment Option.

1.2.1 Option Units. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
on the basis of the representations and warranties herein contained, but subject
to the terms conditions herein set forth, the Company hereby grants to the
Underwriters, severally and not jointly, an option ("Over-allotment Option") to
purchase up to an additional _______ Units from the Company ("Option Units").
Each Option Unit is identical to a Firm Unit. The Firm Units and the Option
Units are, together with the Common Stock and Warrants underlying such Units and
the shares of Common Stock issuable upon exercise of the Warrants, hereinafter
referred to collectively as the "Public Securities." The purchase price to be
paid for the Option Units will be the same price per Option Unit as the price
per Firm Unit set forth in Section 1.1.1 hereof.

1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Representative on
behalf of the Underwriters as to all or any part of the Option Units at any
time, from time to time, within forty-five days after the effective date
("Effective Date") of the Registration Statement (as hereinafter defined). The
Over-allotment Option granted hereunder is for use by the Underwriters solely in
covering any over-allotments in connection with the sale and distribution of the
Firm Units. The Underwriters will not be under any obligation to purchase any
Option Units prior to the exercise of the Over- allotment Option. The
Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company from the Representative, which must be confirmed by a
letter or telecopy setting forth the number of Option Units to be purchased, the
date and time for delivery of and payment for the Option Units and stating that
the Option Units referred to therein are to be used for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm Units.
If such notice is given at least two full business days prior to the Closing
Date, the date set forth therein for such delivery and payment will be the
Closing Date. If such notice is given thereafter, the date

<PAGE> 4

set forth therein for such delivery and payment will not be earlier than three
full business days after the date of the notice, unless we mutually agree to an
earlier date. If such delivery and payment for the Option Units does not occur
on the Closing Date, the date and time of the closing for such Option Units will
be as set forth in the notice (hereinafter the "Option Closing Date"). Upon
exercise of the Over-allotment Option, subject to the terms and conditions set
forth herein, the Company will become obligated to convey to the Underwriters
and the Underwriters will become obligated to purchase the number of Option
Units specified in such notice.

1.2.3 Payment and Delivery. Payment for the Option Units shall be
made by wire transfer on the Closing Date or the Option Closing Date, as the
case may be, of immediately available funds to the account of the Company upon
delivery to the Representative of a certificate of the Company's transfer agent
stating that the Option Units have been registered in book entry form in such
name or names and in such denominations as are requested by the Representative.

1.3 Representative's Purchase Option.

1.3.1 Purchase Option. The Company hereby agrees to issue and
sell to the Representative (and/or its designees) on the Closing Date, for an
aggregate purchase price of $100, an option ("Representative's Purchase Option")
exercisable, at any time, in whole or in part, for a period of four years
commencing one year from the Effective Date, for the purchase of an aggregate of
_______ Units ("Representative's Units") at an initial exercise price of 165% of
the initial offering price of a Unit (i.e., $____ per Unit). The
Representative's Units are identical to the Firm Units. The Representative's
Purchase Option, the Representative's Units, the shares of Common Stock and
Warrants ("Representative's Warrants") issuable upon exercise of the
Representative's Purchase Option and the shares of Common Stock issuable upon
exercise of the Representative's Warrants are hereinafter referred to
collectively as the "Representative's Securities." The Public Securities and the
Representative's Securities are hereinafter referred to collectively as the
"Securities."

1.3.2 Payment and Delivery. Delivery and payment for the
Representative's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Representative, upon payment therefor, certificates
evidencing the Representative's Purchase Option in the name or names and in
such authorized denominations as the Representative may request. The
Representative's Purchase Option shall be exercisable for a period of four
years commencing one year from the Effective Date.

2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriters as follows:

2.1 Filing of Registration Statement. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form SB-2 (File No. 333-72429),
including any related preliminary prospectus ("Preliminary Prospectus"),
covering the registration of the Securities under the Securities Act of 1933,
as amended ("Act"), which registration statement and amendment or

<PAGE> 5
amendments have been prepared by the Company in conformity with the
requirements of the Act, and the rules and regulations ("Regulations") of the
Commission under the Act. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein and all information deemed to be a part thereof as of
such time pursuant to paragraph (b) of Rule 430A of the Regulations), is herein
called the "Registration Statement," and the form of the final prospectus dated
the Effective Date (or, if applicable, the form of final prospectus filed with
the Commission pursuant to Rule 424 of the Regulations), is herein called the
"Prospectus." The Registration Statement has been declared effective by the
Commission under the Act.

2.2 No Stop Orders, Etc. No stop order suspending the effectiveness of
the Registration Statement or preventing or suspending the use of any
Preliminary Prospectus has been issued under the Act and no proceedings for that
purpose have been instituted or are pending or, to the best knowledge of the
Company, are contemplated. No state regulatory authority has issued, to the best
knowledge of the Company, any order preventing or suspending the offering or
sale of the Securities in such jurisdiction, or threatened to institute any
proceedings with respect to such order.

2.3 Disclosures in Registration Statement.

2.3.1 Securities Act Representation. At the time the Registration
Statement became effective and at all times subsequent thereto up to and
including the Closing Date and the Option Closing Date, if any, the Registration
Statement and the Prospectus and any amendment or supplement thereto contained
and will contain all material statements that are required to be stated therein
in accordance with the Act and the Regulations, and conformed and will conform
in all material respects to the requirements of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, during such time period and on such dates, contained or will
contain any untrue statement of a material fact or omitted or will omit to state
any 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. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied in all material respects
with the applicable provisions of the Act and the Regulations and did not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The representation and warranty made in this Section 2.3.1 does not
apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by the Representative expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.

<PAGE> 6

2.3.2 Disclosure of Contracts. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate in all material respects and presents fairly the information required
to be disclosed and there are no contracts or other documents required to be
described in the Registration Statement or the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement that have not been so
described or filed. Each contract or other instrument (however characterized or
described) to which the Company is a party or by which its property or business
is or may be bound or affected and (i) that is referred to in the Prospectus,
or (ii) is otherwise material to the Company's business, has been duly and
validly executed, is in full force and effect in all material respects and is
enforceable against the Company and, to the Company's knowledge, the other
parties thereto, in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought, and none of such contracts or instruments has been
assigned by the Company, and, except as described in the Prospectus, neither
the Company nor, to the best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the lapse of time or the giving of notice, or both, would
constitute a default thereunder. None of the provisions of such contracts or
instruments violates or will result in a violation of any existing applicable
law, rule, regulation, judgment, order or decree of any governmental agency or
court having jurisdiction over the Company or any of its respective assets or
businesses, including, without limitation, those relating to environmental laws
and regulations, except where such violation, singly or in the aggregate, would
not have a material adverse effect on the business, operations, assets,
financial condition or prospects of the Company (a "Material Adverse Effect").

2.4 Changes After Dates in Registration Statement.

2.4.1 No Material Adverse Changes. Since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the business, operations, assets, financial condition or
prospects of the Company, including, but not limited to, a material loss or
interference with its business from fire, storm, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, whether or not arising in the
ordinary course of business, (ii) there have been no transactions entered into
by the Company, other than those in the ordinary course of business, that are
material with respect to the condition, financial or otherwise, or to the
results of operations, business or business prospects of the Company; and (iii)
there has been no dividend or distribution of any kind declared, paid or made by
the Company on any class of capital stock or repurchase or redemption by the
Company of any class of capital stock.

2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as

<PAGE> 7
may otherwise be indicated or contemplated herein or therein, the Company has
not (i) issued any securities or incurred any liability or obligation, direct
or contingent, for borrowed money; or (ii) declared or paid any dividend or
made any other distribution on or in respect to its capital stock.

2.5 Independent Accountants. PricewaterhouseCoopers LLP, whose report is
filed with the Commission as part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.

2.6 Financial Statements. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus, fairly present in all material respects the financial position and
the results of operations of the Company at the dates and for the periods to
which they apply; and such financial statements have been prepared in conformity
with generally accepted accounting principles, consistently applied throughout
the periods involved except as may be otherwise stated therein; and the
supporting schedules included in the Registration Statement present fairly in
all material respects the information required to be stated therein. The pro
forma financial information set forth in the Registration Statement and
Prospectus reflects all significant assumptions and adjustments relating to the
business and operations of the Company. The historical financial data set forth
in the Prospectus under the captions "Prospectus Summary--Summary Financial
Data", "Selected Financial Data" and "Capitalization" fairly present in all
material respect the information set forth therein and have been compiled on a
basis consistent with that of the audited financial statements contained in the
Registration Statement.

2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding actual
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date
there will be no options, warrants, or other rights to purchase or otherwise
acquire, or preemptive rights with respect to the issuance or sale of, any
shares of Common Stock of the Company, including any obligations to issue any
shares pursuant to anti-dilution provisions, or any security convertible into
shares of Common Stock of the Company, or any contracts or commitments to issue
or sell shares of Common Stock or any such options, warrants, rights or
convertible securities.

2.8 Valid Issuance of Securities; Etc.

2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and warrants
to purchase shares of Common Stock constitute the valid and binding obligations
of the Company, enforceable in accordance with

<PAGE> 8
their terms. The authorized Common Stock and outstanding options and warrants
to purchase shares of Common Stock conform in all material respects to all
statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales of the outstanding Common Stock, options and
warrants to purchase shares of Common Stock were at all relevant times either
registered under the Act and registered or qualified under the applicable state
securities or Blue Sky Laws or exempt from such registration or qualification
requirements.

2.8.2 Securities Sold Pursuant to this Agreement. The Securities
have been duly authorized and, when issued and paid for in accordance with the
terms of this Agreement, will be validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal liability by
reason of being such holders; the Securities are not and will not be subject to
the preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company; and all corporate action required to
be taken for the authorization, issuance and sale of the Securities has been
duly and validly taken. When issued and paid for in accordance with the terms
of this Agreement, the Representative's Purchase Option, the Representative's
Warrants and the Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment of the respective
exercise prices therefor, the number and type of securities of the Company
called for thereby and the Representative's Purchase Option, the
Representative's Warrants and the Warrants will be enforceable against the
Company in accordance with their respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

2.9 Registration and Anti-Dilution Rights of Third Parties. Except as
described in the Prospectus, no holders of any securities of the Company or of
any options or warrants or other securities exercisable for or convertible or
exchangeable into securities of the Company (i) have the right to require the
Company to register any such securities of the Company under the Act or to
include any such securities in a registration statement to be filed by the
Company; or (ii) have rights to have the exercise or conversion prices of their
securities lowered and/or the number of securities that they may purchase
increased as a result of the issuance by the Company of securities for a price
less than such exercise or conversion price.

2.10 Validity and Binding Effect of Agreements. This Agreement, the
Representative's Purchase Option and the Warrant Agreement (as hereinafter
defined) have been duly and validly authorized by the Company and constitute, or
when executed and delivered, will constitute, the valid and binding agreements
of the Company, enforceable against the Company in accordance with their
respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable

<PAGE> 9
relief may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.

2.11 No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement, the Representative's Purchase Option and the Warrant
Agreement, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof and
thereof do not and will not, with or without the giving of notice or the lapse
of time or both, (i) result in a breach of, or conflict with any of the terms
and provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of, any indenture,
mortgage, deed of trust, note, loan or credit agreement or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets of the Company is
subject, except where such breach, conflict, default, creation, modification,
termination or imposition, singly or in the aggregate, would not have a Material
Adverse Effect; (ii) result in any violation of the provisions of the
certificate of incorporation or the bylaws of the Company; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business ("Laws"), except where such
violation singly or in the aggregate, would not have a Material Adverse Effect;
(iv) have any effect on any permit, license, certificate, registration,
approval, consent or franchise (collectively, "Permits") necessary for the
Company to own or lease and operate any of its properties or to conduct its
business, except for such effects as would not, singly or in the aggregate, have
a Material Adverse Effect.

2.12 No Defaults; Violations. Except as described in the Prospectus, no
default exists in the due performance and observance of any term, covenant or
condition of any license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject, including the Agency Agreement
dated as of January 25, 1999 by and between the Company and SERP, except where
such default, singly or in the aggregate, would not have a Material Adverse
Effect. The Company is not in violation of any term or provision of (i) its
certificate of incorporation or bylaws or (ii) any franchise, license, permit,
or applicable Law, except, in the case of (ii), where such violation, singly or
in the aggregate, would not have a Material Adverse Effect.

2.13 Corporate Power; Licenses; Consents.

2.13.1 Conduct of Business. The Company has all requisite
corporate power and authority, and has all necessary Permits of and from all
governmental or regulatory officials and bodies to own or lease its properties
and conduct its business as described in the Prospectus, except where the lack
of any Permit, singly or in the aggregate, would not have a Material Adverse
Effect. The Company is, and has been doing business, in compliance with all such
Permits and

<PAGE> 10
all applicable Laws, except where a lack of compliance, singly or in the
aggregate, would not have a Material Adverse Effect. The description in the
Registration Statement of federal, state and local regulation and their effects
on the Company's business as currently conducted and as contemplated to be
conducted is accurate in all material respects and does not omit to state a
material fact required to be stated therein or necessary, in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
approvals, authorizations or orders of, and no filing with, any court,
government agency or other body is required for the valid authorization,
issuance, sale and delivery of the Securities and the consummation of the
transactions and agreements contemplated by this Agreement, the Representative's
Purchase Option and the Warrant Agreement, and as contemplated by the
Prospectus, except with respect to applicable federal and state securities laws.

2.14 Title to Property; Insurance. The Company has good and defensible
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus (including the financial statements and notes thereto), purchase
money security interests, liens for taxes not yet due and payable and such as
would not, singly or in the aggregate, have a Material Adverse Effect. The
Company has insurance covering its properties against loss or damage by fire,
theft, damage, destruction, acts of vandalism or other casualty and maintains
insurance in commercially reasonable amounts.

2.15 Litigation; Governmental Proceedings. Except as described in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the
Company's knowledge, threatened against, or involving the properties or business
of, the Company that might, if determined adversely, have a Material Adverse
Effect, or that questions the validity of the capital stock of the Company or
this Agreement or of any action taken or to be taken by the Company pursuant to,
or in connection with, this Agreement. There are no outstanding orders,
judgments or decrees of any court, governmental agency or other tribunal,
domestic or foreign, naming the Company and enjoining the Company from taking,
or requiring the Company to take, any action, or to which the Company, its
properties or business is bound or subject, except as set forth in the
Prospectus or such as would not singly or in the aggregate, have a Material
Adverse Effect.

2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the state of
its incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such

<PAGE> 11
qualification or licensing, except where the failure to qualify would not have
a Material Adverse Effect.

2.17 Taxes. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof, except where the
failure to file would not, singly or in the aggregate, have a Material Adverse
Effect. The Company has paid all taxes (as hereinafter defined) shown as due on
such returns that were filed and has paid all taxes imposed on or assessed
against the Company, except where the failure to pay would not, singly or in the
aggregate, have a Material Adverse Effect. The provisions for taxes payable, if
any, shown on the financial statements filed with or as part of the Registration
Statement are sufficient for all accrued and unpaid taxes, whether or not
disputed, and for all periods to and including the dates of such financial
statements. No material issues have been raised (and are currently pending) by
any taxing authority in connection with any of the returns or taxes asserted as
due from the Company, and no waivers of statutes of limitation with respect to
the returns or collection of taxes have been given by or requested from the
Company. The term "taxes" mean all federal, state, local, foreign, and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or charges of any
kind whatever, together with any interest and any penalties, additions to tax,
or additional amounts with respect thereto. The term "returns" means all
returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.

2.18 Transactions Affecting Disclosure to NASD.

2.18.1 Finder's Fees. Except as set forth on SCHEDULE 2.18.1,
there are no claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's, consulting or origination fee with respect
to the introduction of the Company to the Representative or any of the other
Underwriters or the sale of the Securities hereunder and, except for the
arrangements, agreements, understandings, payments or issuances between the
Company and the Underwriters that are described in the "Underwriting" section of
the Prospectus, there are no other arrangements, agreements, understandings,
payments or issuances pursuant to which the Company has made or will make a
payment (i) to any member of the National Association of Securities Dealers,
Inc. ("NASD"), or (ii) to any person or entity that has any direct or indirect
affiliation or association with any NASD member.

2.18.2 Payments Within Twelve Months. Except as set forth on
SCHEDULE 2.18.2, and other than payments to the Representative and Ladenburg
Thalmann & Co. Inc., the Company has not made or become obligated to make any
direct or indirect payments (in cash, securities or otherwise) to (i) any
person, as a finder's fee, investing fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
provided capital to the Company, or (ii) to any NASD member, or (iii) to any
person or entity that has any direct or indirect affiliation or association with
any NASD member within the 12-month period prior to the

<PAGE> 12
date on which the Registration Statement was filed with the Commission ("Filing
Date") or thereafter.

2.18.3 Use of Proceeds. Except as set forth on SCHEDULE 2.18.3, or
as specifically authorized herein, none of the net proceeds of the offering
will be paid by the Company to any NASD member or any affiliate or associate of
any NASD member.

2.18.4 Insiders' NASD Affiliation. Except as set forth on
SCHEDULE 2.18.4, no officer or director of the Company or owner of any of the
Company's unregistered securities has any direct or indirect affiliation or
association with any NASD member. The Company will advise the Underwriters and
the NASD if any officer, director or stockholder of the Company is or becomes
an affiliate or associated person of an NASD member participating in the
offering.

2.19 Foreign Corrupt Practices Act. Neither the Company nor any of
its officers, directors, employees, agents or any other person acting on their
behalf has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist
it in connection with any actual or proposed transaction) that (i) might
subject the Company to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past, might
have had a Material Adverse Effect on the Company as reflected in any of the
financial statements contained in the Prospectus or (iii) if not continued in
the future, might have a Material Adverse Effect on the Company. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply with the Foreign Corrupt Practices Act of 1977, as amended.

2.20 Nasdaq SmallCap Market Eligibility. As of the Effective Date, the
Securities have been approved for quotation on the Nasdaq SmallCap Market.

2.21 Intangibles. The Company owns or possesses the requisite licenses
or other rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, copyrights, intellectual property rights
and other rights (collectively, "Intangibles") used by the Company in its
business or relating to products or services sold or currently proposed to be
sold by the Company. The Company's Intangibles are listed on SCHEDULE 2.21.
Intangibles that have been registered in the United States Patent and Trademark
Office have been fully maintained and are in full force and effect. There is no
claim or action by any person pertaining to, or proceeding pending or, to the
Company's knowledge, threatened, and the Company has not received any notice of
conflict with the asserted rights of others that challenges the exclusive
rights of the Company with respect to, any Intangibles used in the conduct of
the Company's business. To the Company's knowledge, the Intangibles and the
Company's current products, services and processes do not infringe on any
intangibles held by any third party, and no others have infringed upon the
Intangibles of the Company. The Company has in place all confidentiality
agreements

<PAGE> 13
with its employees, consultants and third parties as are reasonably necessary
to protect the Company's Intangibles.

2.22 Relations With Employees.

2.22.1 Employee Matters. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance with all federal, state and local laws and regulations respecting the
employment of its employees and employment practices, terms and conditions of
employment and wages and hours relating thereto, except where non-compliance,
singly or in the aggregate, would not have a Material Adverse Effect. There are
no pending investigations involving the Company by the U.S. Department of Labor
or any other governmental agency responsible for the enforcement of such
federal, state or local laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or threatened against or involving the Company or any predecessor
entity, and none has ever occurred. No question concerning representation exists
respecting the employees of the Company and no collective bargaining agreement
or modification thereof is currently being negotiated by the Company. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company, if any.

2.22.2 Employee Benefit Plans. Other than as set forth in the
Registration Statement, the Company neither maintains, sponsors nor contributes
to, nor is it required to contribute to, any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute
to, and has at no time maintained or contributed to, a defined benefit plan, as
defined in Section 3(35) of ERISA. If the Company does maintain or contribute to
a defined benefit plan, any termination of the plan on the date hereof would not
give rise to liability under Title IV of ERISA. No ERISA Plan (or any trust
created thereunder) has engaged in a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended ("Code"), that could subject the Company to any tax penalty for
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan that is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multi-employer
plan."

2.23 Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel on the
Closing Date and the Option Closing Date, if any, shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.

<PAGE> 14

2.24 Lock-Up Agreements. The Company has delivered legally binding and
enforceable agreements pursuant to which (i) the holders of the 162,844 shares
of Common Stock sold in the Company's private placement offering in February
1999 agree not to sell any shares of Common Stock owned by them (except by
means of a private transaction in connection with which the transferee agrees
to the same lockup agreement) for a period of 180 days following the Effective
Date, (ii) the directors and officers of the Company (including their family
members and affiliates) and certain other holders of Common Stock, all of which
are listed on SCHEDULE 2.24 attached hereto, agree not to sell any shares of
Common Stock owned by them (except by means of a private transaction in
connection with which the transferee agrees to the same lockup agreement) for a
period of 15 months following the Effective Date, (iii) the holders of the
[823,809] shares of Common Stock issuable upon conversion of the Company's 5%
Convertible Debentures due 2003 agree not to sell any shares of Common Stock
owned by them (except by means of a private transaction in connection with
which the transferee agrees to the same lockup agreement) for a period of 12
months following the Effective Date, and (iv) the holders of the 61,680 shares
of Common Stock issuable upon conversion of the Company's Series B 5%
Convertible Preferred Stock and ___ Shares of Common Stock issuable upon
exercise of warrants issued in connection with the Company's 5% Convertible
Debentures due 2003 agree not to sell any shares of Common Stock owned by them
for a period of 6 months following the Effective Date; in each case except with
the consent of the Representative.

2.25 Waivers of Registration Rights. The Company has delivered legally
binding and enforceable agreements pursuant to which any defaults by the Company
that may have occurred with respect to the Company's failure to register any of
its securities on a registration statement filed with the Commission and/or to
maintain the effectiveness of such registration statement have been waived by
the holders of all relevant registration rights.

2.26 Waivers of Anti-Dilution Provisions. Except as set forth on
SCHEDULE 2.26, the Company has delivered legally binding and enforceable
agreements pursuant to which the holders of a sufficient number of securities
effective to waive the application of any anti-dilution provisions that may be
triggered by the issuance of securities in the offering contemplated by this
Agreement to purchase (i) additional shares of Common Stock or other securities
of the Company, or (ii) any securities of the Company at a reduced price.

2.27 Subsidiaries. The Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity. The
Company has no subsidiaries.

2.28 Government Contracts. The Company is not a party to any
contract with any agency or instrumentality of the U.S. Government. The
Company has never been denied a security clearance.

2.29 Product Liability Insurance. The Company maintains product
liability insurance of the types and in the amounts that are commercially
reasonable for its business as currently conducted and as proposed to be
conducted.

<PAGE> 15

2.30 Year 2000. All operating codes, programs, utilities and other
software and all computer hardware used by the Company in its business or
manufactured and sold by the Company in its product are designed to record,
store, process and present calendar dates falling on or after January 1, 2000
in the same manner and with the same functionality as on or before December 31,
1999. After due inquiry, the Company has no reason to believe that it will
incur material expenses arising from or relating to the failure of any of its
products or material systems to record, store, process or present calendar
dates falling on or after January 1, 2000, in the same manner and with the same
functionality as on or before December 31, 1999.

2.31 Company not an Investment Company. The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Securities will not be, an "investment company" within the meaning of
the Investment Company Act, and will conduct its business in a manner so that it
will not become subject to the Investment Company Act.

2.32 Related-Party Transactions. There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in the Prospectus that have not been described as required.

2.33 Warrant Agreement. The Company has entered into a warrant agreement
with respect to the Warrants and the Representative's Warrants substantially in
the form filed as an exhibit to the Registration Statement ("Warrant Agreement")
with Continental Stock Transfer & Trust Company, in form and substance
satisfactory to the Representative, providing for, among other things, (i) no
redemption of the Warrants without the consent of the Representative and (ii)
the payment of a warrant solicitation fee as contemplated by Section 3.10.1
hereof.

3. Covenants of the Company. The Company covenants and agrees as follows:

3.1 Amendments to Registration Statement. The Company will deliver to
the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Representative
shall reasonably object.

3.2 Federal Securities Laws.

3.2.1 Compliance. During the time when a Prospectus or Selling
Stockholder Prospectus (as defined in the Registration Statement) is required to
be delivered under the Act, the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations, the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and the
regulations under the Exchange Act, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Public
Securities and the shares of common stock ("Selling Stockholder Shares") being
registered in the Registration Statement on behalf of certain selling
stockholders ("Selling Stockholders") in accordance with the provisions hereof,
the Prospectus and the Selling Stockholder Prospectus and, in the case of
Selling Stockholders who

<PAGE> 16
acquired such shares in the Company's private placement of Units that took
place in February 1999 ("February 1999 Private Placement"), the Subscription
Agreement between the Company and each of such Selling Stockholders. If at any
time when a Prospectus relating to the Public Securities or the Selling
Stockholder Shares is required to be delivered under the Act any event shall
have occurred as a result of which, in the opinion of counsel for the Company
or counsel for the Representative, the Prospectus or the Selling Stockholder
Prospectus, as then amended or supplemented, includes an untrue statement of a
material fact or omits to state any 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, or if it is necessary at any time
to amend the Prospectus or the Selling Stockholder Prospectus to comply with
the Act, the Company will notify the Representative promptly and prepare and
file with the Commission, subject to Section 3.1 hereof, an appropriate
amendment or supplement in accordance with Section 10 of the Act.

3.2.2 Filing of Final Prospectus. If required, the Company shall
file the Prospectus (in form and substance satisfactory to the Representative)
with the Commission (including the information required by Rule 430A of the
Regulations) pursuant to the requirements of Rule 424 of the Regulations; or
the Company shall file a post-effective amendment to the Registration Statement
(in form and substance satisfactory to the Representative) containing the
information required by such Rule 430A; or, if the Company elects to rely upon
Rule 434 of the Regulations and obtains the Representative's consent thereto,
the Company shall file a term sheet with the Commission in the manner and
within the time period required by Rule 424(b) of the Regulations.

3.2.3 Exchange Act Registration. For a period of five years from
the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock under the provisions of the Exchange Act.

3.3 Blue Sky Filings. The Company will endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Securities and the Selling
Stockholder Shares for offering and sale under the securities laws of such
jurisdictions as the Representative may reasonably designate, provided that no
such qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees that such action is not at the time necessary
or advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may be required by the laws of such
jurisdiction.

3.4 Delivery to Underwriters of Prospectuses. The Company will deliver
to each of the several Underwriters, without charge, from time to time during
the period when the Prospectus is required to be delivered under the Act or the
Exchange Act, such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriter may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to each of you two original executed Registration Statements, including
exhibits, and all

<PAGE> 17
post-effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and all original executed consents of
certified experts.

3.5 Events Requiring Notice to the Representative. The Company will
notify the Representative immediately and confirm the notice in writing (i) of
the effectiveness of the Registration Statement and any amendment thereto, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose, (iii) of the issuance by any
state securities commission of any proceedings for the suspension of the
qualification of the Securities for offering or sale in any jurisdiction or of
the initiation, or the threatening, of any proceeding for that purpose, (iv) of
the mailing and delivery to the Commission for filing of any amendment or
supplement to the Registration Statement or Prospectus, (v) of the receipt of
any comments or request for any additional information from the Commission, and
(vi) of the happening of any event during the period described in Section 3.4
hereof that, in the judgment of the Company, makes any statement of a material
fact made in the Registration Statement or the Prospectus untrue or that
requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.

3.6 Reserved.

3.7 Reserved.

3.8 Reserved.

3.9 Nasdaq Maintenance; De-listing of Units. For a period of five years
from the date hereof, the Company will use its best efforts to maintain the
quotation by The Nasdaq Stock Market of the Units, Common Stock and Warrants.
Upon request by the Representative, the Company agrees to take immediately all
actions necessary to de-list the Units from the Nasdaq Stock Market, provided
that at such time the Common Stock and Warrants are permitted to trade
separately.

3.10 Warrant Solicitation and Registration of Common Stock Underlying
the Warrants.

3.10.1 Warrant Solicitation and Representative Warrant
Solicitation Fees. The Company hereby engages the Representative, on a
non-exclusive basis, as its agent for the solicitation of the exercise of the
Warrants. The Company, at its cost, will (i) assist the Representative with
respect to such solicitation, if requested by the Representative and will (ii)
provide to the Representative, and direct the Company's transfer and warrant
agent to provide to the Representative, lists of the record and, to the extent
known, beneficial owners of the Company's Warrants. Commencing one year from the
Effective Date, the Company will pay to the Representative a commission of five
percent of the Warrant exercise price for each Warrant exercised, payable on the
date of such exercise, on the terms provided for in the Warrant Agreement, if
allowed under the rules and regulations of the NASD and only if the
Representative

<PAGE> 18
has provided bona fide services to the Company in connection with the exercise
of Warrants and has received written confirmation from the holder that the
Representative has solicited such exercise. In addition to soliciting, either
orally or in writing, the exercise of Warrants, such services may also include
disseminating information, either orally or in writing, to Warrantholders about
the Company or the market for the Company's securities, and the assisting in
the processing of the exercise of Warrants. The Representative may engage
sub-agents who are members of the NASD in its solicitation efforts, provided,
however, nothing herein shall obligate the Company to make any payment to any
such sub-agent. The Company will disclose the arrangement to pay such
solicitation fees to the Representative in any prospectus used by the Company
in connection with the registration of the shares of Common Stock underlying
the Warrants. The Company shall not be obligated to reimburse the
Representative for any of its expenses incurred in connection with such
solicitation.

3.10.2 Registration of Common Stock. The Company agrees that
prior to the date that the Warrants become exercisable, it shall file with the
Commission a post-effective amendment to the Registration Statement, if
possible, or a new registration statement, to register, under the Act, and it
shall take such action as is necessary to qualify for sale, in those states in
which the Warrants were initially offered by the Company, the Common Stock
issuable upon exercise of the Warrants. In either case, the Company shall cause
the same to become effective at or prior to the date that the Warrants become
exercisable, and maintain the effectiveness of such registration statement and
keep current a prospectus thereunder and maintain such qualification until the
expiration of the Warrants in accordance with the provisions of the Warrant
Agreement. The provisions of this Section 3.10.2 may not be modified, amended or
deleted without the prior written consent of the Representative.

3.11 Reserved.

3.12 Reports to the Representative and Others.

3.12.1 Periodic Reports, Etc. For a period of five years from the
Effective Date, the Company will promptly furnish to the Representative, and to
each other Underwriter that may so request, copies of such financial statements
and other periodic and special reports as the Company from time to time files
with any governmental authority or furnishes generally to holders of any class
of its securities (at substantially the same time as such information is filed
with the governmental authority or furnished to security holders), and promptly
furnish to the Representative (i) a copy of each periodic report the Company
shall be required to file with the Commission, (ii) a copy of every press
release issued by the Company, (iii) a copy of each Form 8-K or Schedules 13D,
13G, 14D-1 or 13E-4 received or prepared by the Company, and (iv) such
additional public documents and information with respect to the Company and the
affairs of any future subsidiaries of the Company as the Representative may from
time to time reasonably request.

3.12.2 Transfer Sheets and Weekly Position Listings. For a period
of five years from the Closing Date, the Company will furnish to the
Representative at the Company's sole expense such transfer sheets and position
listings of the Company's securities as the

<PAGE> 19
Representative may request, including the daily, weekly and monthly
consolidated transfer sheets of the transfer agent of the Company and the
weekly security position listings of the Depository Trust Company.

3.13 Representative's Purchase Option. On the Closing Date, the Company
will execute and deliver the Representative's Purchase Option to the
Representative substantially in the form filed as an exhibit to the Registration
Statement.

3.14 Disqualification of Form SB-2 or S-1 (or other appropriate form).
For a period equal to five years from the date hereof, the Company will use
its reasonable efforts to take such action or actions as may be necessary to
permit the Company to remain eligible to use Form SB-2 or Form S-1 (or other
appropriate form) for the registration of the Representative's Securities under
the Act and will not take any action or actions that may prevent the Company's
use of such forms.

3.15 Payment of Expenses.

3.15.1 General Expenses. The Company hereby agrees to pay on or
promptly after the Closing Date and, to the extent not paid on the Closing
Date, on the Option Closing Date, all expenses incident to the performance of
the obligations of the Company under this Agreement, including but not limited
to (i) the preparation, printing, filing, delivery and mailing (including the
payment of postage with respect to such mailing) of the Registration Statement,
any post-effective amendments thereto, the Prospectus and the Preliminary
Prospectuses and the printing and mailing of this Agreement and related
documents, including the cost of all copies thereof and any amendments thereof
or supplements thereto supplied to the Underwriters in quantities as may be
required by the Underwriters, (ii) the printing, engraving, issuance and
delivery of the Units, the shares of Common Stock and the Warrants included in
the Units and the Representative's Purchase Option, including any transfer or
other taxes payable thereon, (iii) the qualification of the Public Securities
under state or foreign securities or Blue Sky laws, including the filing fees
under such Blue Sky laws, the costs of printing and mailing the "Preliminary
Blue Sky Memorandum" and all amendments and supplements thereto, fees up to an
aggregate of $______ (of which $15,000 has been paid to date) and disbursements
of Representative's counsel, (v) filing fees, costs and expenses (including
fees and disbursements of the Representative's counsel) incurred in registering
the offering with the NASD, (vi) costs of placing "tombstone" advertisements in
the Wall Street Journal, The New York Times and a third publication to be
selected by the Representative, (vii) fees and disbursements of the transfer
agent, (viii) the Company's expenses associated with "due diligence" meetings
arranged by the Underwriters, (ix) the preparation, binding and delivery of
transaction "bibles," in quantity, form and style satisfactory to the
Representative and transaction lucite cubes or similar commemorative items in a
style and quantity as reasonably requested by the Representative, (x) any
listing of the Public Securities on The Nasdaq Stock Market, and (xi) all other
costs and expenses incident to the performance of its obligations hereunder
that are not otherwise specifically provided for in this Section 3.15.1. The
Representative may deduct from the net proceeds of the offering payable to the
Company on the Closing Date, or the Option Closing Date, if any, the expenses
set forth herein to be paid by the Company to the Representative and/or to
third parties.

<PAGE> 20
3.15.2 Non-Accountable Expenses. The Company further agrees that,
in addition to the expenses payable pursuant to Section 3.15.1, it will pay to
the Representative a non-accountable expense allowance equal to three percent
(3%) of the gross proceeds received by the Company from the sale of the Public
Securities, of which $50,000 has been paid to date, and the Company will pay
the balance on the Closing Date and any additional monies owed attributable to
the Option Securities or otherwise on the Option Closing Date by certified or
bank cashier's check or, at the election of the Representative, by deduction
from the proceeds of the offering contemplated herein. If, for any reason
whatsoever, the offering contemplated by this Agreement is not consummated,
then the following provisions shall apply: The Company's liability for payment
to the Representative of the non-accountable expense allowance shall be equal
to the sum of the Representative's actual out-of-pocket expenses (including,
but not limited to, counsel fees, "road- show" and due diligence expenses). The
Representative shall retain such part of the non-accountable expense allowance
previously paid as shall equal its actual out-of-pocket expenses. If the amount
previously paid is insufficient to cover such actual out-of-pocket expenses,
the Company shall remain liable for and promptly pay any other actual
out-of-pocket expenses. If the amount previously paid exceeds the amount of the
actual out-of-pocket expenses, the Representative shall promptly remit to the
Company any such excess.

3.16 Application of Net Proceeds. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "Use of Proceeds" in the Prospectus. The
Company hereby agrees that, except as so described, the Company will not apply
any net proceeds from the offering to pay (i) any debt for borrowed money; (ii)
any obligations (including indebtedness, both principal and any interest
thereon, for borrowed funds and unpaid salaries, fees or other compensation)
owed to any officers, directors, Significant Stockholders (as hereinafter
defined) of the Company or any of their respective family members of affiliates
(excluding salaries or fees payable on a current basis to officers and directors
in the ordinary course of the Company's business). The term "Significant
Stockholders" means those persons and entities that beneficially own at least
two percent of the Company's Common Stock as of the Effective Date.

3.17 Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.

3.18 Reserved.

<PAGE> 21
3.19 Stabilization. Neither the Company, nor, to its knowledge, any of
its employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.

3.20 Internal Controls. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

3.21 Sale of Securities. The Company agrees to take all reasonable
actions to prevent a private or public sale or private or public offering of any
of its securities (except by means of private transactions in connection with
which the transferee agrees to be bound by the same lockup agreement that the
transferor is bound by) owned nominally or beneficially by any of the security
holders referenced in Section 2.24 for the respective periods set forth in
Section 2.24 without obtaining the prior written consent of the Representative.

3.22 Options/Warrants. The Company agrees that (i) during the 12 months
following the Effective Date, the Company will not grant options to directors,
officers, employees or consultants of the Company for more than an aggregate
number of shares equal to 15% of the outstanding shares of Common Stock on the
Effective Date plus the number of shares included in the Firm Units and any
Option Units purchased pursuant to this Agreement and the shares underlying the
Warrants included in such Firm Units and Option Units (which number shall be
adjusted up or down for any stock splits or reverse stock splits effected during
such period), (ii) if the Company adopts a new stock option plan on or after the
Effective Date, all options issued to directors, officers, employees and
consultants during the 12 months following the Effective Date will be granted
under such new plan, and (iii) for a period of 12 months after the Effective
Date, the Company will not grant any option, or issue any warrants, pursuant to
the new stock option plan or otherwise, having an exercise price less than the
greater of $______ per share or the fair market value of the Common Stock on the
date of grant or the date of issue, as the case may be.

3.23 No Waivers, Etc. The Company shall not waive any provision of,
modify or amend in any respect, or terminate, without the prior written consent
of the Representative, any agreement between the Company and any securityholder
of the Company or any other person (i) relating to fees or compensation payable
to any member of the NASD or associated persons of a member of the NASD, (ii)
restricting the ability of security holders to sell securities of the Company,
(iii) waiving any registration and/or antidilution rights of securityholders
with respect to securities of the Company, (iv) waiving any defaults in the
Company's obligations under any registration rights, or (v) relating to the
deferred payment of accrued and unpaid salary.

<PAGE> 22

3.24 Amendment of Bylaws. On or before the Closing Date, the Company
shall have amended its Amended and Restated Bylaws to provide that special
meetings of stockholders shall be called at the request of the holders of at
least 10% of the outstanding shares of Common Stock entitled to vote at such
meetings.

3.25 Amendment of Outstanding Options and Warrants. On or before the
Closing Date, the Company shall have amended all outstanding options and
warrants that are not "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended, and that are exercisable
more than five years after the Effective Date, so that such options and warrants
may not be exercised more than five years after the Effective Date.

3.26 Preferred Stock. From and after the Closing Date, any issuance of
preferred stock of the Company will be approved by a majority of the Company's
independent directors who do not have an interest in any such issuance and have
access, at the Company's expense, to the Company's counsel or independent
counsel.

3.27 Nasdaq Filing. On the Effective Date, simultaneously with the
closing of the offering of Securities contemplated by this Agreement, the
Company shall file with The Nasdaq Stock Market, Inc. and the Commission a
report on Form 8-K evidencing the satisfaction of the conditions for continued
listing on the Nasdaq Small Cap market described in that certain letter from The
Nasdaq Stock Market, Inc. dated April 28, 1999, including (i) evidencing that
the Company has at least $9,000,000 in net tangible assets, and (ii)
demonstrating the Company's compliance with all of the requirements for
continued listing on the Nasdaq SmallCap Market, including the submission of all
outstanding forms and fees. Such filing shall include a May 31, 1999, balance
sheet with pro forma adjustments for any significant events or transactions
occurring on or before the date of such report is filed.

4. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Securities, as provided herein, shall
be subject to the continuing accuracy of the representations and warranties of
the Company as of the date hereof and as of each of the Closing Date and the
Option Closing Date, if any, to the accuracy of the statements of officers of
the Company made pursuant to the provisions hereof and to the performance by
the Company of its obligations hereunder and to the following conditions:

4.1 Regulatory Matters.

4.1.1 Effectiveness of Registration Statement. The Registration
Statement has been declared effective on the date of this Agreement and, at each
of the Closing Date and the Option Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for such purpose shall have been instituted or shall be pending or,
to the knowledge of the Company, contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Graubard Mollen & Miller,
counsel to the Underwriters.

<PAGE> 23

4.1.2 NASD Clearance. By the Effective Date, the Representative
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.

4.1.3 No Blue Sky Stop Orders. No order suspending the sale of
the Securities in any jurisdiction designated by the Representative pursuant to
Section 3.3 hereof shall have been issued on either on the Closing Date or the
Option Closing Date, and no proceedings for that purpose shall have been
instituted or shall be contemplated.

4.1.4 Unaudited Financials. The Company shall have furnished to
the Representative as early as practicable prior to the date hereof a copy of
the latest available unaudited interim financial statements ("Unaudited
Financials") of the Company (that in no event shall be as of a date more than 30
days prior to the Effective Date) which have been read by the Company's
independent accountants, as stated in their letter to be furnished pursuant to
Section 4.3 hereof.

4.2 Opinions of Counsel.

4.2.1 Opinion of Company Counsel. On each of the Closing Date and
the Option Closing Date, if any, the Representative shall have received the
favorable opinion of Shaw Pittman, counsel to the Company, dated the Closing
Date or the Option Closing Date, as the case may be, addressed to the
Representative and in form and substance satisfactory to Graubard Mollen &
Miller, counsel to the Representative, to the effect that:

(i) The Company is a corporation validly existing and
in good standing under the laws of the State of Delaware. The Company is duly
qualified and in good standing in the Commonwealth of Virginia and the State of
New Hampshire.

(ii) The Company has all corporate power and authority to
enter into this Agreement, the Representative's Purchase Option and the Warrant
Agreement and to carry out its obligations hereunder and thereunder. No
consents, approvals, authorizations or orders of, and no filings with, any
court or governmental agency or body, are required for the Company to execute,
deliver and perform its obligations under this Agreement, or to authorize,
issue, sell and deliver the Securities, and to consummate the transactions and
agreements contemplated by this Agreement, the Representative's Purchase Option
and the Warrant Agreement, except for those authorizations, approvals,
consents, orders and filings as have been made or obtained and are in full
force and effect and except for such authorizations, approvals, consents,
orders and filings under the Act and the Blue Sky laws of any state or
jurisdiction in the United States in which the Units may be offered, as to
which we express no opinion.

(iii) All issued and outstanding shares of Common Stock of
the Company have been duly authorized and validly issued and are fully paid and
non-assessable. The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column titled "Actual" under
the caption "Capitalization" as of the date stated therein, except

<PAGE> 24
that the Company also has authorized 500,000 shares of Series A Convertible
Preferred Stock, none of which is issued and outstanding as of the date of this
opinion. To such counsel's knowledge, all of the issued and outstanding shares
of Common Stock were issued in compliance with the registration requirements of
the Securities Act and the rules and regulations promulgated thereunder and the
applicable state securities or Blue Sky laws or pursuant to an exemption from
such registration requirements. None of the holders of the Common Stock are
subject to personal liability under the certificate of incorporation or bylaws
of the Company or the General Corporation Law of the State of Delaware solely
by reason of being such a holder. None of the issued and outstanding shares of
Common Stock were issued in violation of statutory preemptive rights of any
holders of such securities of the Company or, to such counsel's knowledge, were
issued in violation of similar contractual rights granted by the Company. All
of the issued and outstanding options and warrants to purchase shares of Common
Stock were validly authorized by the Board of Directors and constitute valid
and binding obligations of the Company enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.

(iv) The Securities have been duly authorized for issuance
and sale by the Company by all requisite corporate action by the Company. When
issued and delivered by the Company in accordance with the terms of this
Agreement, against payment of the consideration set forth herein, the
Securities will be fully paid and non-assessable. The holders of the Securities
will not be subject to personal liability under the Certificate of
Incorporation or Bylaws of the Company or the General Corporation Law of the
State of Delaware solely by reason of being such holders. The Securities are
not and will not be subject to the preemptive rights of any holders of any
security of the Company or, to the best of such counsel's knowledge after due
inquiry, similar contractual rights granted by the Company. The forms of
certificate used to evidence the Units, Common Stock and Warrants comply with
the applicable requirements of the Certificate of Incorporation and Bylaws of
the Company and the General Corporation Law of the State of Delaware.

(v) To the best of such counsel's knowledge, after due
inquiry, except as fully disclosed in the Prospectus, no holders of any
securities of the Company or of any options, warrants or other securities of the
Company exercisable for or convertible or exchangeable into securities of the
Company (i) have the right to require the Company to register any such
securities of the Company under the Act or to include any such securities in a
Registration Statement filed by the Company, or (ii) have rights to have the
exercise or conversion prices of their securities lowered and/or the number of
securities that they may purchase increased as a result of the issuance by the
Company of securities for a price less than such exercise or conversion price.

(vi) To the best of such counsel's knowledge, after due
inquiry, the Securities have been approved for quotation on the Nasdaq SmallCap
Market.

(vii) This Agreement, the Representative's Purchase
Option and the Warrant Agreement have each been duly and validly authorized
and, when executed and delivered by the

<PAGE> 25
Company, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to, in each case: (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity, (ii) the fact
that the indemnification and contribution provisions set forth in this
Agreement, the Representative's Purchase Option and the Warrant Agreement may
be limited under federal and applicable state securities laws and by public
policy, and (iii) the fact that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.

(viii) The execution, delivery and performance by the
Company of this Agreement, the Representative's Purchase Option and the Warrant
Agreement, the issuance and sale of the Securities, the performance by the
Company of its obligations hereunder and thereunder (other than the performance
by the Company of its obligations under the indemnification and contribution
provisions of this Agreement, the Representative's Purchase Option and the
Warrant Agreement, as to which no opinion need be rendered), do not and will
not, (a) result in any violation of the provisions of the certificate of
incorporation or the bylaws of the Company, (b) to such counsel's knowledge,
will not constitute a breach of, or a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company pursuant to, any material contracts, agreements, instruments,
leases or licenses to which the Company is a party or by which the Company or
any of its properties or assets may be bound, or (c) to such counsel's
knowledge, will not result in any violation of any law, administrative
regulation or administrative or court decree applicable to the Company.

(ix) The Registration Statement, each Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements and supporting schedules included
therein, or the financial statements and supporting schedules included in
exhibits to or excluded from the Registration Statement, as to which no opinion
need be rendered) comply as to form in all material respects with the applicable
requirements of the Act and Regulations. The Securities and all other securities
issued or issuable by the Company conform in all respects to the description
thereof contained in the Registration Statement and the Prospectus. The
statements in the Prospectus under "Description of Securities" and "Shares
Eligible for Future Sale," have been reviewed by such counsel, and insofar as
such statements constitute matters of law, summaries of legal matters, of the
Company's Certificate of Incorporation or of Bylaw provisions, or legal
conclusions, have been reviewed by such counsel and fairly present and
summarize, in all material respects, the matters referred to therein. No statute
or regulation or legal or governmental proceeding required to be described in
the Prospectus is not described as required. To such counsel's knowledge, there
are no contracts or documents to which the Company is a party required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement pursuant to the Act or the Regulations
that are not so described or filed as required.

(x) The Registration Statement was declared effective
under the Act on June __, 1999, and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness

<PAGE> 26
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the Act by the
Commission.

(xi) To such counsel's knowledge, the Company is not (i)
in violation of its Certificate of Incorporation or Bylaws or any law
applicable to the Company, or any administrative regulation or administrative
or court decree known to such counsel and applicable to the Company, or (ii) in
default in the performance or observance of any obligation, agreement, covenant
or condition contain in any material contracts, agreements, instruments, leases
and licenses to which the Company is a party or by which the Company or any of
its properties or assets may be bound, except in each such case for such
violations or defaults as would not, singly or in the aggregate, result in a
Material Adverse Effect.

(xii) To the best of such counsel's knowledge, after due
inquiry, except as set forth in the Prospectus, there is no action, suit or
proceeding pending or threatened against the Company that might reasonably be
expected to have a Material Adverse Effect.

(xiii) To the best of such counsel's knowledge, the
Company owns or possesses, free and clear of all liens or encumbrances and
rights thereto or therein by third parties, other than as described in the
Prospectus, the requisite licenses or other rights to use all Intangibles and
other rights necessary to conduct its business (including, without limitation,
any such licenses or rights described in the Prospectus as being licensed to or
owned or possessed by the Company) and there is no claim or action by any person
pertaining to, or proceeding, pending or threatened that challenges the
exclusive rights of the Company with respect to any Intangibles used in the
conduct of its business (including without limitation any such licenses or
rights described in the Prospectus as being owned or possessed by the Company).
To the best of such counsel's knowledge, the Company's current products,
services and processes do not infringe on any intangible held by third persons.
The Company's Intangibles that have been registered in the United States Patent
and Trademark Office have been fully maintained and are in full force and
effect.

(xiv) The statements in the Prospectus under the captions
"Risk Factors-- Uncertain Protection of Intellectual Property" and "Business--
Intellectual Property" have been reviewed by such counsel, and insofar as they
refer to statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions pertaining to intellectual property, do not
contain any 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. No
statute or regulation or legal or governmental proceeding pertaining to
intellectual property required to be described in the Registration Statement is
not described as required.

Counsel to the Company will also deliver the following
statement to the Representative with the foregoing opinions: On the basis of
such counsel's participation, as counsel to the Company, with representatives
of the Company in the preparation of the Registration Statement and the
Prospectus and such counsel's participation with representatives of the

<PAGE> 27
Company and the Underwriters at meetings in which the contents of the
Registration Statement and the Prospectus and related matters were discussed
and the examination by such counsel of such corporate records, statutes,
documents and questions of law as such counsel deemed necessary, but without
independent verification by such counsel of the accuracy, completeness and
fairness of the statements contained in the Registration Statement and the
Prospectus except as specifically set forth in such counsel's opinion, and
without commenting as to the financial statements and the notes thereto and the
schedules and other financial data included or incorporated by reference
therein, nothing has come to such counsel's attention that would lead such
counsel to believe that the Registration Statement or the Prospectus, or any
amendment or supplement thereto (except for the financial statements and the
notes thereto and the schedules and other financial data included or
incorporated by reference therein or omitted therefrom, as to which no
statement need be rendered), as of its date and as of the Closing Date,
contained or contains any untrue statement of material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

4.2.2 Reliance. In rendering such opinions, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deem proper and to the extent specified in such opinions, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' counsel) of other counsel reasonably acceptable to Underwriters'
counsel, familiar with the applicable laws, and (ii) as to matters of fact, to
the extent they deem proper, on certificates or other written statements of
officers of departments of various jurisdiction having custody of documents
respecting the corporate existence or good standing of the Company and
certificates of officers of the Company, provided that copies of any such
statements or certificates shall be delivered to Underwriters' counsel if
requested. The opinions relied upon by counsel to the Company and intellectual
property counsel to the Company, and the opinions of counsel to the Company and
intellectual property counsel to the Company, shall include statements to the
effect that they may be relied upon by counsel to the Underwriters in its
opinion delivered to the Underwriters.

4.3 Cold Comfort Letters.

4.3.1 Cold Comfort Letter of PricewaterhouseCoopers LLP. At the
time this Agreement is executed, and at each of the Closing Date and the Option
Closing Date, if any, you shall have received a letter, addressed to the
Underwriters and in form and substance satisfactory in all respects (including
the non-material nature of the changes or decreases, if any, referred to in
clause (iii) below) to you and to Graubard Mollen & Miller, counsel to the
Underwriters, from PricewaterhouseCoopers LLP dated, respectively, as of the
date of this Agreement and as of the Closing Date and the Option Closing Date,
if any:

(i) Confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable Regulations;

<PAGE> 28

(ii) Stating that in their opinion the financial statements and
the financial statement schedules of the Company included (or incorporated by
reference) in the Registration Statement and Prospectus comply as to form in
all material respects with the applicable accounting requirements of the Act
and the published Regulations thereunder;

(iii) Stating that, based on the performance of procedures
specified by the American Institute of Certified Public Accountants for a review
of the latest available unaudited interim financial statements of the Company
(as described in Statement on Auditing Standards ("SAS") No. 71-- "Interim
Financial Information"), with an indication of the date of the latest available
unaudited interim financial statements, a reading of the latest available
minutes of the stockholders and board of directors and the various committees of
the board of directors, consultations with officers and other employees of the
Company responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention that would lead
them to believe that (a) the unaudited financial statements of the Company
included or incorporated by reference in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or any material modification should
be made to the unaudited interim financial statements included in the
Registration Statement for them to be in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included or incorporated by
reference in the Registration Statement, (b) at a date not later than five days
prior to the Effective Date, Closing Date or Option Closing Date, as the case
may be, there was any change in the capital stock, increase in long-term debt or
any decreases in net current assets (working capital) or in stockholders' equity
of the Company as compared with amounts shown on the December 31, 1998 condensed
balance sheet included in the Registration Statement, (c) for the period from
January 1, 1999 to a specified date not later than five days prior to the
Effective Date, Closing Date or Option Closing Date, as the case may be, there
were any decreases, as compared with the corresponding period in the preceding
year, in net sales or in the total or per-share amounts of income before
extraordinary items or of net income;

(iv) Setting forth, at a date not later than five days prior to
the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial paper and notes payable to banks);

(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of net sales and net income, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records and work sheets
of the Company with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;

<PAGE> 29

(vi) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.

4.4 Officers' Certificates.

4.4.1 Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and the Secretary of the Company, dated the Closing Date or the Option Closing
Date, as the case may be, respectively, to the effect that the Company has
performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by the Company prior to and as of
the Closing Date, or the Option Closing Date, as the case may be, and that the
conditions set forth in Section 4.5 hereof have been satisfied as of such date
and that, as of the Closing Date and the Option Closing Date, as the case may
be, the representations and warranties of the Company set forth in Section 2
hereof are true and correct. In addition, the Representative will have received
such other and further certificates of officers of the Company as the
Representative may reasonably request.

4.4.2 Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the Bylaws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified,
(iii) all correspondence between the Company or its counsel and the Commission,
(iv) all correspondence between the Company or its counsel and the NASD
concerning inclusion of the Securities on the Nasdaq National Market or
SmallCap, and (v) as to the incumbency of the officers of the Company. The
documents referred to in such certificate shall be attached to such
certificate.

4.5 No Material Changes. Prior to and on each of the Closing Date and
the Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material change in the business,
operations, assets, financial condition or prospects of the Company from the
latest dates as of which such condition is set forth in the Registration
Statement and Prospectus, (ii) there shall have been no transaction, not in the
ordinary course of business, entered into by the Company from the latest date as
of which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is materially adverse to the Company, taken as a
whole, (iii) the Company shall not be in default under any provision of any
instrument relating to any outstanding indebtedness which default would have a
material adverse effect on the Company, (iv) no material amount of the assets of
the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus, (v) no action suit or proceeding, at law
or in equity, shall have been pending or threatened against the Company or
affecting any of its property or business before or by any court or federal or
state commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition

<PAGE> 30
or income of the Company, except as set forth in the Registration Statement and
Prospectus, (vi) no stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or threatened by the Commission,
and (vii) the Registration Statement and the Prospectus and any amendments or
supplements thereto contain all material statements that are required to be
stated therein in accordance with the Act and the Regulations and conform in
all material respects to the requirements of the Act and the Regulations, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto contains any untrue statement of a material fact or omits to
state any 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.

4.6 Delivery of Representative's Purchase Option. The Company shall have
delivered to the Representative an executed copy of the Representative's
Purchase Option dated the Closing Date.

4.7 Opinion of Counsel for the Underwriters. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Graubard Mollen & Miller, counsel for the Underwriters, and you shall have
received from such counsel a favorable opinion, dated the Closing Date and the
Option Closing Date, if any, with respect to such of these proceedings as you
may reasonably require. On or prior to the Effective Date, the Closing Date and
the Option Closing Date, as the case may be, counsel for the Underwriters shall
have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 4.7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.

5. Indemnification.

5.1 Indemnification of the Underwriters. Subject to the conditions set
forth below, the Company agrees to indemnify and hold harmless each of the
Underwriters, its directors, officers, agents and employees and each person, if
any, who controls any Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
loss, claim, damage, liability and expense whatsoever (including but not limited
to any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, or any claims whatsoever
commenced or threatened, whether arising out of any action between either of the
Underwriters and the Company or between either of the Underwriters and any third
party or otherwise) to which they or any of them may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries (including in settlement of any litigation,
if such settlement is effected with the written consent of the Company), arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact (i) contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time each may be amended and
supplemented, and including any information deemed to be a part thereof pursuant
to Rule 430A or Rule 434 of the

<PAGE> 31
Regulations); (ii) contained in any post-effective amendment or amendments or
any new registration statement and prospectus in which are included securities
of the Company issued or issuable upon exercise of the Underwriters' Purchase
Option; (iii) contained in any application or other document or written
communication (in this Section 5 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities or this offering under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, the NASD (including Nasdaq and NASD Regulation, Inc.) or
any securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; (iv) based in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; (v) based in
whole or in part upon any failure of the Company to perform its obligations
hereunder or under law; or (vi) based in whole or in part on any act or failure
to act or any alleged act or failure to act by any Underwriter in connection
with, or relating in any manner to, the Common Stock or the offering
contemplated hereby, and that is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon any
matter covered by clauses (i), (ii) or (iii) above; provided that the Company
shall not be liable under this clause (vi) to the extent that a court of
competent jurisdiction shall have determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts
or failures to act undertaken or omitted to be taken by such Underwriter
through its bad faith or willful misconduct; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment or supplement thereof,
or in any application, as the case may be, and provided further, that with
respect to any preliminary prospectus, the foregoing indemnity agreement shall
not inure to the benefit of any Underwriter from whom the person asserting any
loss, claim, damage, liability or expense purchased Securities, or any person
controlling such Underwriter, if copies of the Prospectus were timely delivered
to the Underwriters pursuant to Section 3.4 and a copy of the Prospectus (as
then amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Securities to such person,
and if the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, claim, damage, liability or expense. The
indemnity agreement set forth in this Section 5.1 shall be in addition to any
liabilities that the Company may otherwise have. The Company agrees promptly to
notify the Representative of the commencement of any litigation or proceedings
against the Company or any of its officers, directors or controlling persons in
connection with the issue and sale of the Securities or in connection with the
Registration Statement or Prospectus.

5.2 Indemnification of the Company. Each Underwriter, severally and not
jointly, agrees to indemnify and hold harmless the Company against any and all
loss, liability, claim, damage and expense described in the foregoing indemnity
from the Company to the several Underwriters, as

<PAGE> 32
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, directly relating to the transactions effected
by the Underwriters in connection with this offering made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any application in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
such Underwriter by or on behalf of such Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, any Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table following the first paragraph under the
caption "Underwriting" in the Prospectus and in the tenth, eleventh and
thirteenth paragraphs under the caption "Underwriting" in the Prospectus; and
the Underwriters confirm that such statements are correct. The indemnity
agreement set forth in this Section 5.2 shall be in addition to any liabilities
that each Underwriter may otherwise have.

5.3 Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 5 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 5, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability that
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 5 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnifying party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
upon advice of legal counsel that a conflict may arise between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying party's election so as to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 5 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than once separate counsel (together with local
counsel), approved by the indemnifying party (the Representative, in the case of
Sections 5.2 and 5.5), representing the indemnified parties who are parties to
such action) or

<PAGE> 33
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.

5.4 Settlements. The indemnifying party under this Section 5 shall not
be liable for any settlement of any proceedings effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
5.3 hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnifying party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party or
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.

5.5 Contribution. If the indemnification provided for in Sections 5.1
through 5.4 is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party, as incurred, as a result of any losses, claims, damages,
liabilities or expenses referred to therein (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Underwriters, on the other hand, from the offering of the Public
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above, but also the relative fault of the Company, on the one hand, and the
Underwriters, on the other hand, in connection with the statements or omissions
or inaccuracies in the representations and warranties herein that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Underwriters, on the other hand, in connection
with the offering of the Public Securities pursuant to this Agreement shall be
deemed to be in the same respective proportions as the total net proceeds from
the offering of the Public Securities pursuant to this Agreement (before
deducting expenses) received by the Company, and the total underwriting discount
received by the Underwriters, in each case as set forth on the front cover page
of the Prospectus (or, if Rule 434 of the Regulations is used, the corresponding
location on the term sheet filed pursuant to such Rule) bear to the aggregate
initial public offering price of the Public Securities as set forth on such
cover. The relative fault of the Company, on the one hand, and the Underwriters,
on the other hand, shall be determined by

<PAGE> 34
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact or any such inaccurate or alleged inaccurate representation or
warranty related to information supplied by the Company, on the one hand, or
the Underwriters, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
included, subject to the limitations set forth in Section 5.3, any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 5.3 with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 5.5; provided,
however, that no additional notice shall be required with respect to any action
for which notice has been given under Section 5.3 for purposes of
identification.

The Company and the Representative agree that it would not be
just and equitable if contribution pursuant to this Section 5.5 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in this Section 5.5.

Notwithstanding the provisions of this Section 5.5, no
Underwriter shall be required to contribute any amount in excess of the
underwriting commissions received by such Underwriter in connection with the
Public Securities underwritten by it and distributed to the public. No person
guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 5.5 are several and not joint, in proportion to their
respective underwriting commitments as set forth on Schedule I hereto. For
purposes of this Section 5.5, each officer and employee of an Underwriter and
each person, if any, who controls an Underwriter within the meaning of the
Securities Act and Exchange Act shall have the same rights to contribution as
such Underwriter.

6. Default by an Underwriter.

6.1 Default Not Exceeding 10% of Firm Units or Option Units. If any
Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Units or the Option Units if exercised, hereunder, and if the
number of the Firm Units or Option Units with respect to which such default
relates does not exceed in the aggregate 10% of the number of Firm Units or
Option Units that all Underwriters have agreed to purchase hereunder, then such
Firm Units or Option Units to which the default relates shall be purchased by
the non-defaulting Underwriters in proportion to their respective commitments
hereunder.

6.2 Default Exceeding 10% of Firm Units or Option Units. In the event
that such default relates to more than 10% of the Firm Units or Option Units,
you may in your discretion arrange for yourself or for another party or parties
to purchase such Firm Units or Option Units to which such

<PAGE> 35
default relates on the terms contained herein. If within one business day after
such default relating to more than 10% of the Firm Units or Option Units you do
not arrange for the purchase of such Firm Units or Option Units, then the
Company shall be entitled to a further period of one business day within which
to procure another party or parties satisfactory to you to purchase said Firm
Units or Option Units on such terms. In the event that neither you nor the
Company arrange for the purchase of the Firm Units or Option Units to which a
default relates as provided in this Section 6, this Agreement may be terminated
by you or the Company without liability on the part of the Company (except as
provided in Sections 3.15 and 5 hereof) or the several Underwriters (except as
provided in Section 5 hereof); provided, however, that if such default occurs
with respect to the Option Units, this Agreement will not terminate as to the
Firm Units; and provided further that nothing herein shall relieve a defaulting
Underwriter of its liability, if any, to the other several Underwriters and to
the Company for damages occasioned by its default hereunder.

6.3 Postponement of Closing Date. In the event that the Firm Units or
Option Units to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus that in the opinion of
counsel for the Representative may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to
this Agreement with respect to such Units.

7. Additional Covenants.

7.1 Board Designee. For a period of three years from the Effective Date,
the Company will appoint a designee of SERP who is reasonably acceptable to the
Company as a member of its Board of Directors. Alternatively, SERP shall have
the right to send a representative (who need not be the same individual from
meeting to meeting) to observe each meeting of the Board of Directors. Such
designee or representative, as the case may be, shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings,
including, but not limited to, food, lodging and transportation. The Company
agrees to give SERP written notice of each such meeting and to provide SERP with
an agenda and minutes of the meeting no later than it gives such notice and
provides such items to the other directors. To the extent permitted by law, the
Company will agree to indemnify SERP and its designee for the actions of such
designee as a director of the Company. In the event the Company maintains a
liability insurance policy affording coverage for the acts of its officers and
directors, it will, if possible, include each of SERP and its designee as an
insured under such policy.

7.2 Press Releases. The Company will not issue a press release or engage
in any other publicity (other than customary advertisements for its products and
services) until 10 days after the Effective Date without SERP's prior consent.

<PAGE> 36

8. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriters and Company, including the indemnity agreements
contained in Section 5 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter,
the Company or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the several
Underwriters until the earlier of the expiration of any applicable statute of
limitations and the seventh anniversary of the later of the Closing Date or the
Option Closing Date, if any, at which time the representations, warranties and
agreements shall terminate and be of no further force and effect.

9. Effective Date of This Agreement and Termination Thereof.

9.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective.

9.2 Termination. You shall have the right to terminate this Agreement at
any time prior to any Closing Date, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the Nasdaq National
Market, Nasdaq SmallCap Market or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction, or (iii) if the United States shall
have become involved in a war or major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or (v) if
a moratorium on foreign exchange trading has been declared that materially
adversely impacts the United States securities market, or (vi) if the Company
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act that, whether or
not such loss shall have been insured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Securities, or (vii) if the
Company has breached any of its representations or warranties, or failed to
perform in any material respect any of its obligations, hereunder, or (viii) if
the Representative shall have become aware after the date hereof of such a
material adverse change in the condition (financial or otherwise), business, or
prospects of the Company, or such adverse material change in general market
conditions as in the Representative's judgment would make it impracticable to
proceed with the offering, sale and/or delivery of the Securities or to enforce
contracts made by the Underwriters for the sale of the Securities.

9.3 Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms hereof, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.15 hereof.

<PAGE> 37

9.4 Indemnification. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.

10. Miscellaneous.

10.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed

If to the Representative:

Research Partners International, Inc.
One State Street Plaza
New York, New York 1000
Attention: Steven Levine

Copy to:

Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attention: David Alan Miller, Esq.

If to the Company:

Objective Communications, Inc.
50 International Drive
Portsmouth, New Hampshire 03801
Attention: Robert H. Emery

Copy to:

Shaw Pittman
1676 International Drive
McLean, Virginia 22102
Attention: Ellen Canan Grady, Esq.

10.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.

10.3 Amendment. This Agreement may be amended only by a written
instrument executed by each of the parties hereto.

<PAGE> 38

10.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) and the Agency Agreement, dated as of January 25, 1999, between SERP
and the Company, constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.

10.5 Binding Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Representative, the Underwriters, the Company,
the controlling persons, directors and officers referred to in Section 5 hereof,
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained.

10.6 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New York,
without giving effect to principles of conflicts of law. Each of the parties
hereto hereby agrees that any action, proceeding or claim against it arising out
of or relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York or the United States District Court for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. Each of the parties hereto hereby waives
any objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum. Any such process or summons to be served upon the Company
may be served by transmitting a copy thereof by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set
forth in Section 10.1 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company in any action, proceeding or claim.
The parties hereto agree that the prevailing party(ies) in any such action shall
be entitled to recover from the other party(ies) all of its reasonable
attorneys' fees and expenses relating to such action or proceeding and/or
incurred in connection with the preparation therefor.

10.7 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.

10.8 Waiver, Etc. The failure of any of the parties hereto at any time
to enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto thereafter to enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.

<PAGE> 39

10.9 Sophistication. Each of the parties hereto acknowledges that it is
a sophisticated business person who was adequately represented by counsel
during negotiations regarding the provisions hereof, including, without
limitation, the indemnification and contribution provisions of Section 5 and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Section 5 hereto fairly allocate the risks
in light of the ability of the parties to investigate the Company, its affairs
and its business in order to assure that adequate disclosure has been made in
the Registration Statement, any preliminary prospectus and the Prospectus (and
any amendments and supplements thereto), as required by the Act and the
Exchange Act.

10.10 Representative's Right to Assign. The Representative shall be
entitled at any time to assign any or all of its rights or duties hereunder,
without the consent of the Company or any other person, to any registered
broker-dealer a majority of the outstanding equity securities of which is owned
by Research Partners International, Inc.

If the foregoing correctly sets forth the understanding between
the Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.

Very truly yours,

OBJECTIVE COMMUNICATIONS, INC.

By:
---------------------------
Name: James F. Bunker
Title: President and Chief
Executive Officer

Accepted as of the date
first above written.

New York, New York

SOUTHEAST RESEARCH PARTNERS, INC.
Acting on behalf of itself and
as the Representative of the
several Underwriters named in
Schedule I hereto

By:
---------------------------
Name:
Title:

<PAGE> 40

SCHEDULE I

OBJECTIVE COMMUNICATIONS, INC.

2,000,000 UNITS

<TABLE>
<CAPTION>
Number of Firm Units
Underwriter to Be Purchased
----------- ---------------
<S> <C>
Southeast Research Partners, Inc.
Ladenburg Thalmann & Co. Inc.

---------------------
</TABLE>

<PAGE> 1
EXHIBIT 4.15

THE REGISTERED HOLDER OF THIS PURCHASE OPTION, BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN
PROVIDED.

NOT EXERCISABLE PRIOR TO JUNE __, 2000. VOID AFTER 5:00 P.M. EASTERN TIME,
JUNE __, 2004.

UNIT PURCHASE OPTION

FOR THE PURCHASE OF

2,000,000 UNITS

OBJECTIVE COMMUNICATIONS, INC.

(A DELAWARE CORPORATION)

1. Purchase Option.

THIS CERTIFIES THAT, in consideration of $100.00 duly paid by
or on behalf of Southeast Research Partners, Inc. ("Holder"), as registered
owner of this Purchase Option, to Objective Communications, Inc. ("Company"),
Holder is entitled, at any time or from time to time at or after June __, 2000
("Commencement Date"), and at or before 5:00 p.m., Eastern Time, June __, 2004
("Expiration Date"), but not thereafter, to subscribe for, purchase and
receive, in whole or in part, up to 2,000,000 Units. Each Unit consists of
three shares of common stock, par value $.01 per share (?Common Stock"), of the
Company and two Redeemable Common Stock Purchase Warrants, each exercisable to
purchase one share of Common Stock ("Warrant(s)") during the period commencing
on June __, 2000 and expiring June __, 2004 (five years from the effective date
of the registration statement on Form SB-2, No. 333-72429 ("Registration
Statement"), pursuant to which the Company has registered Units, shares of
Common Stock and warrants to purchase Common Stock ("Effective Date"). Each
Warrant is the same as the warrants that have been registered for sale to the
public pursuant to the Registration Statement ("Public Warrants"). The Units,
shares of Common Stock and Warrants are sometimes collectively referred to
herein as the "Securities." If the Expiration Date is a day on which banking
institutions are authorized by law to close, then this Purchase Option may be
exercised on the next succeeding day which is not such a day in accordance with
the terms herein. During the period commencing on the date of issue of the
Purchase Option and ending on the Expiration Date, the Company agrees not to
take any action that would terminate this Purchase Option. This Purchase
Option is initially exercisable at $____ per Unit purchased; provided, however,
that upon the occurrence of any of the events specified in Section 6 hereof,
the rights granted by this Purchase Option, including the exercise price and
the number of Units to be received upon such exercise, shall be adjusted as
therein
<PAGE> 2
specified. The term "Exercise Price" shall mean the initial exercise price or
the adjusted exercise price, depending on the context.

2. Exercise.

2.1. Exercise Form. In order to exercise this Purchase Option, the
exercise form attached hereto must be duly executed and completed and delivered
to the Company, together with this Purchase Option and payment of the Exercise
Price in cash or by certified check or official bank check for the Units being
purchased. If the subscription rights represented hereby shall not be
exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this
Purchase Option shall become void without further force or effect, and all
rights represented hereby shall cease and expire.

2.2. Legend. Each certificate for Securities purchased under this
Purchase Option shall bear a legend as follows unless such Securities have been
registered under the Securities Act of 1933, as amended ("Act"):

"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act"), or applicable state law. The securities may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act,
or pursuant to an exemption from registration under the Act
and applicable state law."

2.3. Conversion Right.

2.3.1. Determination of Amount. In lieu of the payment of
the Exercise Price in the manner required by Section 2.1, the Holder shall have
the right (but not the obligation) to convert any exercisable but unexercised
portion of this Purchase Option into securities ("Conversion Right") as
follows: Upon exercise of the Conversion Right, the Company shall deliver to
the Holder (without payment by the Holder of any of the Exercise Price in cash)
that number of Units equal to the quotient obtained by dividing (x) the "Value"
(as defined below) of the portion of the Purchase Option being converted by (y)
the "Market Price" (as defined below). The "Value" of the portion of the
Purchase Option being converted shall equal the remainder derived from
subtracting (a) the Exercise Price multiplied by the number of Units underlying
the portion of the Purchase Option being converted from (b) the Market Price of
the Units, multiplied by the number of Units underlying the portion of the
Purchase Option being converted. As used herein, the term "Market Price" shall
be deemed to be the last reported sale price of the Units on the date prior to
the date the Conversion Right is exercised, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
immediately preceding three trading days, in either case as officially reported
by the principal securities exchange on which the Units are listed or admitted
to trading, or, if the Units are not listed or admitted to trading on any
national securities exchange or if any such exchange on which the Units are
listed is not their principal trading market, the last reported sale price as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through the Nasdaq National Market or SmallCap Market, or, if applicable, the
OTC Bulletin Board, or if the Units are not listed or admitted to trading on
any of the foregoing markets, or similar organization, as determined in good
faith by resolution of the Board of Directors of the Company, based on the best
information available to it; provided, however, that if the Units are no longer
quoted on the principal trading market that the Common Stock is traded on, the
Market Price

2
<PAGE> 3
of the Units shall equal to three times the average last reported sale price of
the Common Stock for the five trading days immediately preceding such date
("Common Stock Price") plus two times the average last reported sale price of
the Public Warrants for the five trading days preceding such date, as quoted on
the principal trading market for such securities determined as described above;
and provided further that if the Common Stock is traded but the Public Warrants
are not, the Market Price of the units shall be equal to five times the Common
Stock Price less two times the then exercise price of the Warrants.

2.3.2. Exercise of Conversion Right. The Conversion Right
may be exercised by the Holder on any business day on or after the Commencement
Date and not later than the Expiration Date by delivering to the Company this
Purchase Option with a duly executed exercise form attached hereto with the
conversion section completed.

3. Transfer.

3.1. General Restrictions. The registered Holder of this Purchase
Option, by its acceptance hereof, agrees that it will not sell, transfer or
assign or hypothecate this Purchase Option prior to the Commencement Date to
anyone other than (i) an officer of Southeast Research Partners, Inc. ("SERP"
or the "Representative") or an officer or partner of any selected dealer that
executed the Selected Dealer Agreement between the Representative and the
members of the selling group ("Selected Dealer") or member of the underwriting
syndicate ("Underwriter") in connection with the Company's public offering with
respect to which this Purchase Option has been issued, or (ii) any Underwriter
or Selected Dealer. On and after the Commencement Date, transfers to others
may be made subject to compliance with or exemptions from applicable securities
laws. In order to make any permitted assignment, the Holder must deliver to
the Company the assignment form attached hereto duly executed and completed,
together with the Purchase Option and payment of all transfer taxes, if any,
payable in connection therewith. The Company shall immediately transfer this
Purchase Option on the books of the Company and shall execute and deliver a new
Purchase Option or Purchase Options of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
Units purchasable hereunder or such portion of such number as shall be
contemplated by any such assignment.

3.2. Restrictions Imposed by the Act. This Purchase Option and the
Securities underlying this Purchase Option shall not be transferred unless and
until (i) the Company has received the opinion of counsel for the Holder that
this Purchase Option or the Securities, as the case may be, may be transferred
pursuant to an exemption from registration under the Act and applicable state
law, the availability of which is established to the reasonable satisfaction of
the Company (the Company hereby agreeing that the opinion of Graubard Mollen &
Miller shall be deemed satisfactory evidence of the availability of an
exemption), or (ii) a registration statement relating to such Purchase Option
or Securities, as the case may be, has been filed by the Company and declared
effective by the Securities and Exchange Commission ("Commission") and is
effective at the time of such transfer and is in compliance with applicable
state law.

4. New Purchase Options to be Issued.

4.1. Partial Exercise, Conversion or Transfer. Subject to the
restrictions in Section 3 hereof, this Purchase Option may be exercised,
converted or assigned in whole or in part. In the event of the exercise,
conversion or assignment hereof in part only, upon surrender of this Purchase
Option for cancellation, together with the duly executed exercise or assignment
form and

3
<PAGE> 4
funds (except in the case of conversion) sufficient to pay any Exercise Price
and/or transfer tax, the Company shall cause to be delivered to the Holder
without charge a new Purchase Option of like tenor to this Purchase Option in
the name of the Holder evidencing the right of the Holder to purchase the
aggregate number of Units purchasable hereunder as to which this Purchase
Option has not been exercised, converted or assigned.

4.2. Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Purchase Option and of reasonably satisfactory indemnification, the Company
shall execute and deliver a new Purchase Option of like tenor and date. Any
such new Purchase Option executed and delivered as a result of such loss,
theft, mutilation or destruction shall constitute a substitute contractual
obligation on the part of the Company.

5. Registration Rights.

5.1. Demand Registration.

5.1.1. Grant of Right. The Company, upon written demand
("Initial Demand Notice") of the Holder(s) of at least 51% of the Purchase
Options and/or the underlying Units ("Majority Holders"), agrees to register,
on one occasion, all or any portion of the Purchase Options requested by the
Majority Holders in the Initial Demand Notice and all of the Securities
underlying such Purchase Options, including the Units, the Common Stock, the
Warrants and the Common Stock underlying the Warrants (collectively, the
"Registrable Securities"). On such occasion, the Company will file a
registration statement covering the Registrable Securities within 60 days after
receipt of the Initial Demand Notice and use its best efforts to have such
registration statement declared effective promptly thereafter. The demand for
registration may be made at any time during a period of four years beginning
one year from the Effective Date. The Company covenants and agrees to give
written notice of its receipt of any Initial Demand Notice by any Holder(s) to
all other registered Holders of the Purchase Options and/or the Registrable
Securities within ten days from the date of the receipt of any such Initial
Demand Notice.

5.1.2. Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. The Company agrees to use its best efforts to cause
the filing required herein to become effective promptly and to qualify or
register the Registrable Securities in such states as are reasonably requested
by the Holder(s); provided, however, that in no event shall the Company be
required to register the Registrable Securities in a state in which such
registration would cause (i) the Company to be obligated to register or license
to do business in such state or consent to general service of process in such
jurisdiction, or (ii) the principal stockholders of the Company to be obligated
to escrow their shares of capital stock of the Company. The Company shall
cause any registration statement filed pursuant to the demand rights granted
under Section 5.1.1 to remain effective until all of the Registrable Securities
covered by such registration statement have been sold.

5.2. "Piggy-Back" Registration.

5.2.1. Grant of Right. In addition to the demand right of
registration, the Holders of the Purchase Options shall have the right at any
time for a period of six years commencing one

4
<PAGE> 5
year from the Effective Date to include the Registrable Securities as part of
any other registration of securities filed by the Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the
Act or pursuant to Form S-8 or any equivalent form); provided, however, that
if, in the written opinion of the Company's managing underwriter or
underwriters, if any, for such offering, the inclusion of the Registrable
Securities, when added to the securities being registered by the Company or the
selling stockholder(s), will exceed the maximum amount of the Company's
securities that can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without materially and adversely affecting the
entire offering, the Company shall nevertheless register all or any portion of
the Registrable Securities required to be so registered but such Registrable
Securities shall not be sold by the Holders until 180 days after the
registration statement for such offering has become effective and provided
further that, if any securities are registered for sale on behalf of other
stockholders in such offering and such stockholders have not agreed to defer
such sale until the expiration of such 180 day period, the number of securities
to be sold by all stockholders in such public offering during such 180 day
period shall be apportioned pro rata among all such selling stockholders,
including all holders of the Registrable Securities, according to the total
amount of securities of the Company owned by said selling stockholders,
including all holders of the Registrable Securities. Notwithstanding the
foregoing, the Holders acknowledge and agree that the Company has granted
registration rights to other holders of securities of the Company that pre-date
the rights granted under this Purchase Option as of the initial date of
issuance of the Purchase Option by the Company, and each Holder agrees that
nothing in this Purchase Option shall obligate the Company to violate those
existing agreements.

5.2.2. Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. In the event of such a proposed registration, the
Company shall furnish the then Holders of outstanding Registrable Securities
with not less than 60 days' written notice prior to the proposed date of filing
of such registration statement. Such notice to the Holders shall continue to
be given for each registration statement filed by the Company until such time
as all of the Registrable Securities have been sold by the Holder. The holders
of the Registrable Securities shall exercise the "piggy-back" rights provided
for herein by giving written notice within 15 days of the receipt of the
Company's notice of its intention to file a registration statement. The
Company shall cause any registration statement filed pursuant to the above
"piggy-back" rights to remain effective until all of the Registrable Securities
covered by such registration statement have been sold.

5.3. General Terms.

5.3.1. Indemnification. The Company shall indemnify the
Holder(s) of the Registrable Securities to be sold pursuant to any registration
statement hereunder and each person, if any, who controls such Holders within
the meaning of Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), against all loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and
other expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject under the
Act, the Exchange Act or otherwise, arising from such registration statement
but only to the same extent and with the same effect as the provisions pursuant
to which the Company has agreed to indemnify the Underwriters contained in
Section 5 of the Underwriting Agreement between the Underwriters and the
Company, dated the Effective

5
<PAGE> 6
Date; except to the extent that any loss, claim, damage, expense or liability
arises out of or relates to written information furnished by or on behalf of
the Holders, or their successors or assigns, for specific inclusion in such
registration statement. The Holder(s) of the Registrable Securities to be sold
pursuant to such registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company against all loss,
claim, damage, expense or liability (including all reasonable attorneys' fees
and other expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under the Act,
the Exchange Act or otherwise, arising from information furnished by or on
behalf of such Holders, or their successors or assigns, in writing, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 5 of the Underwriting
Agreement pursuant to which the Underwriters have agreed to indemnify the
Company.

5.3.2. Exercise of Purchase Option or Warrants. Nothing
contained in this Purchase Option shall be construed as requiring the Holder(s)
to exercise their Purchase Options or the underlying Warrants prior to or after
the initial filing of any registration statement or the effectiveness thereof.

5.3.3. Documents Delivered to Holders. The Company shall
deliver promptly to each Holder participating in any of the foregoing offerings
requesting the correspondence and memoranda described below and to the managing
underwriter copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss
the business of the Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times and as often as any such
Holder shall reasonably request. The Company also shall furnish to each Holder
participating in any of the foregoing offerings that are underwritten, and to
each underwriter of any such offering, a signed counterpart, addressed to such
Holder and underwriter, of (i) an opinion of counsel to the Company, dated the
effective date of such registration statement (and an opinion dated the date of
the closing under the underwriting agreement relating to such offering), and
(ii) a "cold comfort" letter dated the effective date of such registration
statement (and a letter dated the date of the closing under the underwriting
agreement) signed by the independent public accountants who have issued a
report on the Company's financial statements included in such registration
statement, in each case covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities. In the event that any Holder
requests information pursuant to this Section 5.3.3, then, prior to furnishing
such information, the Company shall have the right to require the Holder to
enter into a confidentiality agreement with the Company with respect to any
information to be provided to the Holder that the Company reasonably considers
to be proprietary, non-public or otherwise confidential.

5.3.4. Underwriting Agreement. In the event that the demand
registration filed by the Holders pursuant to Section 5.1.1 is for an
underwritten offering, then the Majority Holders shall have the right to select
the underwriters of the offering. The Company shall enter into an underwriting
agreement with the managing underwriter selected by the Majority Holders whose

6
<PAGE> 7
Registrable Securities are being registered pursuant to Section 5.1. Such
agreement shall be reasonably satisfactory in form and substance to the
Company, each Holder and such managing underwriter, and shall contain such
representations, warranties and covenants by the Company and such other terms
as are customarily contained in agreements of that type used by the
underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may, at
their option, require that any or all of the representations, warranties and
covenants of the Company to or for the benefit of such underwriter shall also
be made to and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriter except as they may relate to such Holders, their
shares and their intended methods of distribution.

5.3.5. Documents to be Delivered by Holder(s). Each of the
Holder(s) participating in any of the foregoing offerings shall furnish to the
Company a completed and executed questionnaire provided by the Company
requesting information customarily sought of selling security holders
("Questionnaire"). In the event that the Company requests completed
Questionnaires from Holders participating in any of the foregoing offerings
necessary for inclusion in the registration statement, and a Holder does not
provide the Company with a completed Questionnaire within the time period
requested (which time period shall be reasonable), then the Company shall have
the right to exclude the Registrable Securities held by any such Holder from
the registration statement filed with respect to the Registrable Securities.
If no Holder of Registrable Securities timely responds to the Company's request
for information, then the Company shall not be obligated to file such
registration statement, provided, however, that the obligations of the Company
with respect to filing a registration statement upon a demand request shall be
reinstated upon the subsequent filing of a demand request by a Holder.

6. Adjustments.

6.1. Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of Units underlying the Purchase Option shall be
subject to adjustment from time to time as hereinafter set forth:

6.1.1. Stock Dividends, Recapitalization, Reclassification,
Split-Ups. If after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend payable in shares of Common Stock or by a split-up,
recapitalization or reclassification of shares of Common Stock or other similar
event, then, on the effective date thereof, the number of Units issuable on
exercise of this Purchase Option shall be increased in proportion to such
increase in outstanding shares; provided, however, that nothing in this section
is intended to provide for adjustment with respect to the Warrants beyond that
provided for in the Warrant Agreement between the Company and Continental Stock
Transfer & Trust Company. For example, if the Company declares a two-for-one
stock dividend and at the time of such dividend this Purchase Option is for the
purchase of 1,000 Units at $7.50 per Unit (each Warrant underlying the Units
exercisable for $4.00 per share), upon effectiveness of the dividend, this
Purchase Option will be adjusted to allow for the purchase of 2,000 Units at
$3.75 per Unit (each Warrant underlying the Units exercisable for $2.00 per
share).

6.1.2. Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.2, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification
of shares of Common Stock or other similar event,

7
<PAGE> 8
then, upon the effective date thereof, the number of Units issuable on exercise
of this Purchase Option shall be decreased in proportion to such decrease in
outstanding shares.

6.1.3. Adjustments in Exercise Price. Whenever the number
of Units issuable upon exercise of this Purchase Option is adjusted, as
provided in this Section 6.1, the Exercise Price shall be adjusted (to the
nearest cent) by multiplying such Exercise Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of
Units purchasable upon the exercise of this Purchase Option immediately prior
to such adjustment, and (y) the denominator of which shall be the number of
Units so purchasable immediately thereafter.

6.1.4. Replacement of Securities upon Reorganization, etc.
In case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 or 6.1.2 hereof or
that solely affects the par value of such shares of Common Stock, or in the
case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and that does not result in any reclassification or
reorganization of the outstanding shares of Common Stock), or in the case of
any sale or conveyance to another corporation or entity of the property of the
Company as an entirety or substantially as an entirety in connection with which
the Company is dissolved, the Holder of this Purchase Option shall have the
right thereafter (until the expiration of the right of exercise of this
Purchase Option) to receive upon the exercise hereof, for the same aggregate
Exercise Price payable hereunder immediately prior to such event, the kind and
amount of shares of stock or other securities or property (including cash)
receivable upon such reclassification, reorganization, merger or consolidation,
or upon a dissolution following any such sale or transfer, by a Holder of the
number of shares of Common Stock of the Company obtainable upon exercise of
this Purchase Option and the underlying Warrants immediately prior to such
event; and if any reclassification also results in a change in shares of Common
Stock covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made
pursuant to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.

6.1.5. Changes in Form of Purchase Option. This form of
Purchase Option need not be changed because of any change pursuant to this
Section, and Purchase Options issued after such change may state the same
Exercise Price and the same number of Units as are stated in the Purchase
Options initially issued pursuant to this Agreement. The acceptance by any
Holder of the issuance of new Purchase Options reflecting a required or
permissive change shall not be deemed to waive any rights to a prior adjustment
or the computation thereof.

6.2. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of Units upon the
exercise or transfer of this Purchase Option, nor shall it be required to issue
scrip or pay cash in lieu of any fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up or down to the nearest whole number of Units or other securities,
properties or rights.

7. Reservation and Listing. The Company shall at all times reserve and
keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon exercise of the Purchase Options, the Units or the
Warrants, such number of shares of Common Stock or other securities, properties
or rights as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Purchase Options and payment of
the Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall

8
<PAGE> 9
be duly and validly issued, fully paid and non-assessable and not subject to
preemptive rights of any stockholder. The Company further covenants and agrees
that upon exercise of the Warrants underlying the Units issuable upon exercise
of this Purchase Option and payment of the respective Warrant exercise price
therefor, all shares of Common Stock and other securities issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable and
not subject to preemptive rights of any shareholder. As long as the Purchase
Options shall be outstanding, the Company shall use its best efforts to cause
all (i) Units, (ii) shares of Common Stock underlying the Units issuable upon
exercise of the Purchase Options, (iii) Warrants underlying the Units issuable
upon exercise of the Purchase Options, and (iv) shares of Common Stock issuable
upon exercise of the Warrants underlying the Units to be listed (subject to
official notice of issuance) on all securities exchanges (or, if applicable on
Nasdaq) on which the Units, the Common Stock or the Warrants issued to the
public in connection herewith are then listed and/or quoted.

8. Certain Notice Requirements.

8.1. Holder's Right to Receive Notice. Nothing herein shall be
construed as conferring upon the Holders the right to vote or consent as a
stockholder for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Purchase Options and their exercise, any of the
events described in Section 8.2 shall occur, then, in one or more of said
events, the Company shall give each Holder written notice of such event at
least 10 days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the stockholders entitled to such
dividend, distribution, conversion or exchange of securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be. Notwithstanding the
foregoing, the Company shall deliver to each Holder a copy of each notice given
to the stockholders of the Company at the same time and in the same manner that
such notice is given to the stockholders.

8.2. Events Requiring Notice. The Company shall be required to
give the notice described in this Section 8 upon one or more of the following
events: (iii) if the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution, or (iv) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor, or (v) a dissolution,
liquidation or winding up of the Company (other than in connection with a
consolidation or merger) or a sale of all or substantially all of its property,
assets and business shall be proposed.

8.3. Notice of Change in Exercise Price. The Company shall,
promptly after an event requiring a change in the Exercise Price pursuant to
Section 6 hereof, send notice to the Holders of such event and change ("Price
Notice"). The Price Notice shall describe the event causing the change and the
method of calculating same and shall be certified as being true and accurate by
the Company's President and Chief Financial Officer.

8.4. Transmittal of Notices. All notices, requests, consents and
other communications under this Purchase Option shall be in writing and shall
be deemed to have been duly made on the date of delivery if delivered
personally or sent by overnight courier, with acknowledgment of receipt to the
party to which notice is given, or on the fifth day after mailing if mailed to
the party to whom

9
<PAGE> 10
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of the Purchase Option, to the address of such Holder as
shown on the books of the Company, or (ii) if to the Company, to its principal
executive office.

9. Miscellaneous.

9.1. Amendments. The Company and the Representative may from time
to time supplement or amend this Purchase Option without the approval of any of
the Holders in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder that the Company and the Representative may deem
necessary or desirable and that the Company and the Representative deem shall
not adversely affect the interests of the Holders. All other modifications or
amendments shall require the written consent of the party against whom
enforcement of the modification or amendment is sought.

9.2. Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Purchase Option.

9.3. Entire Agreement. This Purchase Option (together with the
other agreements and documents being delivered pursuant to or in connection
with this Purchase Option) constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings of the parties, oral and written, with respect to
the subject matter hereof.

9.4. Binding Effect. This Purchase Option shall inure solely to
the benefit of and shall be binding upon, the Holder and the Company and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Purchase Option or any
provisions herein contained.

9.5. Governing Law; Submission to Jurisdiction. This Purchase
Option shall be governed by and construed and enforced in accordance with the
laws of the State of New York, without giving effect to conflict of laws. The
Company hereby agrees that any action, proceeding or claim against it arising
out of, or relating in any way to, this Purchase Option shall be brought and
enforced in the courts of the State of New York or of the United States of
America for the Southern District of New York, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives
any objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum. Any process or summons to be served upon the Company may
be served by transmitting a copy thereof by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set
forth in Section 8.4 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company in any action, proceeding or claim.
The Company agrees that the prevailing party(ies) in any such action shall be
entitled to recover from the other party(ies) all of its reasonable attorneys'
fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.

9.6. Waiver, Etc. The failure of the Company or the Holder to at
any time enforce any of the provisions of this Purchase Option shall not be
deemed or construed to be a waiver of any

10
<PAGE> 11
such provision, nor to in any way affect the validity of this Purchase Option
or any provision hereof or the right of the Company or any Holder to thereafter
enforce each and every provision of this Purchase Option. No waiver of any
breach, non-compliance or non-fulfillment of any of the provisions of this
Purchase Option shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.

9.7. Execution in Counterparts. This Purchase Option may be
executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which shall be deemed to be an original, but all
of which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto.

9.8. Exchange Agreement. As a condition of the Holder's receipt
and acceptance of this Purchase Option, Holder agrees that, at any time prior
to the complete exercise of this Purchase Option by Holder, if the Company and
Research Partners International, Inc. enter into an agreement ("Exchange
Agreement") pursuant to which they agree that all outstanding Purchase Options
will be exchanged for securities or cash or a combination of both, then the
Holder shall agree to such exchange and become a party to the Exchange
Agreement.

9.9. Representative's Right to Assign. Notwithstanding the
provisions of Section 3 of this Agreement, and without the consent of the
Company or any of the Holders, the Representative shall be entitled at any time
to assign any of its rights or duties hereunder, including pursuant to Section
9.1, to any registered broker-dealer a majority of the outstanding equity
securities of which is owned by Research Partners International, Inc.

IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officer as of the ____ day of June, 1999.

Objective Communications, Inc.

By:
--------------------------------------
Name: James F. Bunker
Title: President and Chief Executive
Officer

11
<PAGE> 12
Form to be used to exercise Purchase Option:

Objective Communications, Inc.
50 International Drive
Portsmouth, New Hampshire 03801

Date:_________________, _____

The undersigned hereby elects irrevocably to exercise the
within Purchase Option and to purchase ________ Units of Objective
Communications, Inc. and hereby makes payment of $____________ (at the rate of
$_______ per Unit) in payment of the Exercise Price pursuant thereto. Please
issue the common stock and warrants as to which this Purchase Option is
exercised in accordance with the instructions given below.

If, on the date of exercise, the common stock and warrants
issuable upon exercise of this Purchase Option are not covered by a
registration statement filed with the Securities and Exchange Commission that
is then effective, the Holder hereby represents and warrants to the Company, as
of the date on which this Purchase Option is exercised in whole or in part, as
follows:

(1) Holder has such experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment
in the common stock and warrants purchased upon exercise of the Purchase
Option. Holder is purchasing the common stock and warrants for its own account
and not with a view to distribution and has no present intention or arrangement
to sell the shares of common stock and warrants to or through any person or
entity. The Holder understands that the common stock and warrants must be held
indefinitely unless such securities are subsequently registered under the Act
or an exemption therefrom is available. The Holder is aware of the provisions
of Regulation D and Rule 144 promulgated under the Act.

(2) Holder understands and acknowledges that the common
stock and warrants have not been registered under the Act, and are being
offered and sold to it in reliance on the exemption provided by Section 4(2) of
the Securities Act and that the Company is relying on the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of the Holder set forth herein in order to determine the availability of such
provisions. The Holder acknowledges that it is familiar with the nature of the
limitations imposed by the Securities Act and the rules and regulations
thereunder relating to the transfer of securities.

The undersigned hereby elects irrevocably to convert the
Purchase Option to purchase __________________ Units into _________________
Units of Objective Communications, Inc. The portion of this Purchase Option
being converted has a "Value" of $_______________ based on a "Market

12
<PAGE> 13
Price" of $___________ per share of common stock. Please issue the common
stock in accordance with the instructions given below.

---------------------------------
Signature

NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

Name
--------------------------------------------------------------
(Print in Block Letters)

Address
--------------------------------------------------------------

13
<PAGE> 14
Form to be used to assign Purchase Option:

ASSIGNMENT

(To be executed by the registered Holder to effect a transfer
of the within Purchase Option):

FOR VALUE RECEIVED,____________________________________ does
hereby sell, assign and transfer unto _______________________________ the right
to purchase _______________________ shares of common stock of Objective
Communications, Inc. ("Company") evidenced by the within Purchase Option and
does hereby authorize the Company to transfer such right on the books of the
Company.

The name and address of the person or entity to which the
Purchase Option is being transferred is as follows:

Name:
---------------------------------------------------------------
Name of Contact (if entity):
----------------------------------------
Address:
----------------------------------------------------------

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

Telephone:
----------------------------------------------------------
Facsimile:
----------------------------------------------------------

Dated:___________________, 19__

-----------------------------------
Signature

STATE OF )
: ss.:
COUNTY OF )

On this ______ day of ______________, ____, before me personally came
___________ ____________, to me known, who, being by me duly sworn, did depose
and say that he executed the foregoing assignment on his own behalf.

--------------------------------------------
Notary Public

14
<PAGE> 15
or

STATE OF )
: ss.:
COUNTY OF )

On this ______ day of ______________, ____, before me personally came
___________ ____________, to me known, who, being by me duly sworn, did depose
and say that he is the ___________________ of _________________________ and
executed the foregoing assignment on behalf of ______________________________.

--------------------------------------------
Notary Public

NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.

<PAGE> 1

EXHIBIT 4.17

WARRANT AGREEMENT

Agreement made as of June __, 1999, between Objective Communications,
Inc., a Delaware corporation with offices at 50 International Drive,
Portsmouth, New Hampshire 03801 ("Company"), and Continental Stock Transfer &
Trust Company, a New York corporation with offices at 2 Broadway, New York, New
York 10005 (herein called "Warrant Agent").

WHEREAS, the Company is engaged in a public offering of Units ("Public
Offering") and in connection therewith, has determined to issue and deliver up
to (i) 4,600,000 (including up to 600,000 that may be issued pursuant to the
Underwriters' over-allotment option) Redeemable Common Stock Purchase Warrants
("Public Warrants") to investors in the public offering, and (ii) an aggregate
of 400,000 Redeemable Common Stock Purchase Warrants to Southeast Research
Partners, Inc. ("SERP" or the "Representative") or its designees upon exercise
of the Unit Purchase Options to be issued to them ("Representative's Warrants"
and, together with the Public Warrants, the "Warrant(s)"), each of such
Warrants evidencing the right of the holder thereof to purchase one share of
the Company's common stock, $.01 par value per share ("Common Stock"), for an
initial exercise price of $4.00; and

WHEREAS, each Unit consists of three shares of Common Stock and two
Warrants; and

WHEREAS, the Company has filed with the Securities and Exchange
Commission ("Commission") a Registration Statement, No. 333-72429 on Form SB-2
("Registration Statement") for the registration, under the Securities Act of
1933, as amended ("Securities Act"), of, among other things, the sale of the
Warrants and the Common Stock issuable upon exercise of the Warrants; and

WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange, redemption and exercise of the
Warrants; and

WHEREAS, the Company desires to provide for the form and provisions of
the Warrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the Company, the
Warrant Agent, and the holders of the Warrants; and

WHEREAS, all acts and things have been done and performed that are
necessary to make the Warrants, when executed on behalf of the Company and
countersigned by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations of the Company, and to authorize the
execution and delivery of this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:

1. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company for the Warrants, and the Warrant Agent
hereby accepts such appointment and agrees to perform the same in accordance
with the terms and conditions set forth in this Agreement.
<PAGE> 2
2. Warrants.

2.1. Form of Warrant. Each Warrant certificate shall be issued in
registered form only, shall be in substantially the form of Exhibit A hereto,
the provisions of which are incorporated herein and shall be signed by, or bear
the facsimile signature of, the Chairman of the Board or President and
Secretary or Assistant Secretary of the Company and shall bear a facsimile of
the Company's seal. In the event the person whose facsimile signature has been
placed upon any Warrant certificate shall have ceased to be Chairman of the
Board or President and Secretary or Assistant Secretary of the Company before
such Warrant certificate is issued, it may be issued with the same effect as if
he had not ceased to be such at the date of issuance. The Warrants represented
by a Warrant certificate may not be exercised until such certificate has been
countersigned by the Warrant Agent as provided in Section 2.3 hereof.

2.2. Effect of Countersignature. Unless and until countersigned by
the Warrant Agent pursuant to this Agreement, a Warrant certificate shall be
invalid and of no effect.

2.3. Events for Countersignature. The Warrant Agent shall
countersign a Warrant certificate only upon the occurrence of either of the
following events:

(i) if the Warrant certificate is to be issued in
exchange or substitution for one or more previously countersigned Warrant
certificates, as hereinafter provided, or

(ii) if the Company instructs the Warrant Agent to do so.

2.4. Registration.

2.4.1. Warrant Register. The Warrant Agent shall maintain
books ("Warrant Register") for the registration of original issuance and the
registration of transfer of the Warrants. Upon the initial issuance of the
Warrants, the Warrant Agent shall issue and register the Warrants in the names
of the respective holders thereof in such denominations and otherwise in
accordance with instructions delivered to the Warrant Agent by the Company.

2.4.2. Registered Holder. Prior to due presentment for
registration of transfer of any Warrant certificate, the Company and the
Warrant Agent may deem and treat the person in whose name such Warrant
certificate shall be registered upon the Warrant Register ("registered holder")
as the absolute owner of such Warrant and of each Warrant represented thereby
(notwithstanding any notation of ownership or other writing on the Warrant
certificate made by anyone other than the Company or the Warrant Agent), for
the purpose of any exercise thereof, and for all other purposes, and neither
the Company nor the Warrant Agent shall be affected by any notice to the
contrary.

2.5. Detachability of Warrants. The Warrant Agent understands that
the Warrants are being issued as part of Units, together with shares of the
Company's Common Stock, and that the Warrants are neither detachable nor
separately tradable from the Common Stock with which they are issued for a
period of 90 days from the date hereof (unless earlier consented to by the
Representative).

2
<PAGE> 3
3. Terms and Exercise of Warrants

3.1. Warrant Price. Each Warrant certificate shall, when
countersigned by the Warrant Agent, entitle the registered holder thereof,
subject to the provisions of such Warrant certificate and of this Agreement, to
purchase from the Company the number of shares of Common Stock stated therein,
at the initial exercise price of $4.00 per whole share, subject to the
adjustments provided in Section 4 hereof. The term "Warrant Price" as used in
this Agreement refers to the price per share at which Common Stock may be
purchased at the time a Warrant is exercised.

3.2. Duration of Warrants. A Warrant may be exercised only during
the period ("Exercise Period") commencing on June __, 2000, and terminating on
the earlier of June __, 2004, or the date fixed for redemption of the Warrant
as provided in Section 6 of this Agreement ("Expiration Date"). Each Warrant
not exercised on or before its Expiration Date shall become void, and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease at the close of business on its Expiration Date. The Company in its sole
discretion may extend the duration of the Warrants by delaying the Expiration
Date.

3.3. Exercise of Warrants.

3.3.1. Payment. A Warrant, when countersigned by the
Warrant Agent, may be exercised by the registered holder thereof by
surrendering the certificate representing such Warrant, at the office of the
Warrant Agent, or at the office of its successor as Warrant Agent, in the
Borough of Manhattan, City and State of New York, with the subscription form,
as set forth on the Warrant certificate and in substantially the form of
Exhibit A hereto, duly executed, and by paying in full, in lawful money of the
United States, in cash, good certified check or bank draft payable to the order
of the Company, the Warrant Price for each full share of Common Stock as to
which the Warrant is exercised and any and all applicable taxes due in
connection with the exercise of the Warrant, the exchange of the Warrant for
the Common Stock, and the issuance of the Common Stock.

3.3.2. Issuance of Certificates. As soon as practicable
after the exercise of any Warrant and the clearance of the funds in payment of
the Warrant Price, the Company shall issue to the registered holder of such
Warrant a certificate or certificates for the number of full shares of Common
Stock to which he is entitled, registered in such name or names as may be
directed by him, and if such Warrant shall not have been exercised in full, a
new countersigned Warrant certificate for the number of shares as to which such
Warrant shall not have been exercised. Notwithstanding the foregoing, the
Company shall not be obligated to deliver any securities pursuant to the
exercise of a Warrant unless a registration statement under the Securities Act
with respect to the securities is effective. Warrants may not be exercised by,
or securities issued to, any registered holder in any state in which such
exercise would be unlawful.

3.3.3. Valid Issuance. All shares of Common Stock issued
upon the proper exercise of a Warrant in conformity with this Agreement shall
be validly issued.

3.3.4. Date of Issuance. Each person in whose name any such
certificate for shares of Common Stock is issued shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
the Warrant certificate was surrendered and payment of the Warrant Price was
made, irrespective of the date of delivery of such certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of

3
<PAGE> 4
the Company are closed, such person shall be deemed to have become the holder
of such shares at the close of business on the next succeeding date on which
the stock transfer books are open.

3.3.5. Warrant Solicitation and Warrant Solicitation Fee.

(a) The Company has engaged the Representative,
on a non-exclusive basis, as its agent for the solicitation of the exercise of
the Warrants. The Company, at its cost, will (i) assist the Representative
with respect to such solicitation, if requested by the Representative and (ii)
provide the Representative, and direct the Company's transfer and warrant agent
to deliver to the Representative, lists of the record, and to the extent known,
beneficial owners of the Company's Warrants. Accordingly, the Company hereby
instructs the Warrant Agent to cooperate with the Representative in every
respect in connection with the Representative's solicitation activities,
including, but not limited to, providing to the Representative, at the
Company's cost and at the Representative's request made from time to time, a
list of record and beneficial holders of the Warrants, and circulating a
prospectus or offering circular disclosing the compensation arrangements
referenced in Section 3.4.5(b) to holders of the Warrants at the time of
exercise of the Warrants.

(b) In each instance in which a Warrant is
exercised, the Warrant Agent shall promptly give written notice of such
exercise to the Company and the Representative ("Warrant Agent's Exercise
Notice"). The Representative and the Company may, at any time during business
hours, examine the records of the Warrant Agent, including its ledger of
original Warrant certificates returned to the Warrant Agent upon exercise of
Warrants. If, upon the exercise of any Warrant more than one year from the
Effective Date, (i) the market price of the Company's Common Stock is greater
than the Warrant Price, (ii) disclosure of compensation arrangements was made
both at the time of the original offering and at the time of exercise (by
delivery of the Prospectus or as otherwise required by applicable law, rule or
regulation), (iii) the exercise of the Warrant was solicited by the
Representative, (iv) the Warrant was not held in a discretionary account, and
(v) the solicitation of the exercise of the Warrant was not in violation of
Regulation M (as such rule or any successor rule may be in effect as of such
time of exercise) promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), then the Warrant Agent, simultaneously with the
distribution of proceeds to the Company received upon exercise of the
Warrant(s) so exercised, shall, on behalf of the Company, pay from the proceeds
received upon exercise of the Warrant(s), a fee of 5% of the Warrant Price to
the Representative, provided that the Representative delivers to the Warrant
Agent within ten (10) business days from the date on which the Representative
has received the Warrant Agent's Exercise Notice, a certificate that the
conditions set forth in the preceding clauses (iii), (iv) and (v) have been
satisfied. The Representative shall accept payment of the warrant solicitation
fee provided in this Section 3.4.5(b) only if it has provided bona fide
services in connection with the exercise of the Warrants. In addition to
soliciting, either orally or in writing, the exercise of Warrants by a Warrant
holder, such services may also include disseminating information, either orally
or in writing, to Warrant holders about the Company or the market for the
Company's securities, or assisting in the processing of the exercise of
Warrants.

(c) The Representative shall be entitled at any
time to assign any or all of its rights or duties hereunder, without the
consent of the Company, the Warrant Agent or any other person, to any
registered broker-dealer a majority of the outstanding equity securities of
which is owned by Research Partners International, Inc.

4
<PAGE> 5
4. Adjustments.

4.1. Stock Dividends - Split-Ups. If after the date hereof, and
subject to the provisions of Section 4.5 below, the number of outstanding
shares of Common Stock is increased by a stock dividend payable in shares of
Common Stock or by a split-up of shares of Common Stock or other similar event,
then, on the effective date thereof, the number of shares issuable on exercise
of each Warrant shall be increased in proportion to such increase in
outstanding shares and the then applicable Warrant Price shall be
correspondingly decreased.

4.2. Aggregation of Shares. If after the date hereof, and subject
to the provisions of Section 4.5, the number of outstanding shares of Common
Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date of
such consolidation, combination or reclassification, the number of shares
issuable on exercise of each Warrant shall be decreased in proportion to such
decrease in outstanding shares and the then applicable Warrant Price shall be
correspondingly increased.

4.3. Replacement of Securities Upon Reorganization, etc. If after
the date hereof any capital reorganization or reclassification of the Common
Stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation or other similar event shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, or sale, lawful
and fair provision shall be made whereby the Warrant holders shall thereafter
have the right to purchase and receive, upon the basis and upon the terms and
conditions specified in the Warrants and in lieu of the shares of Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented thereby, such shares of stock, securities,
or assets as may be issued or payable with respect to or in exchange for the
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented by the Warrants, had such reorganization,
reclassification, consolidation, merger, or sale not taken place and in such
event appropriate provision shall be made with respect to the rights and
interests of the Warrant holders to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant Price
and of the number of shares purchasable upon the exercise of the Warrants)
shall thereafter be applicable, as nearly as may be in relation to any share of
stock, securities, or assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any such consolidation, merger, or sale unless
prior to the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger, or the corporation
purchasing such assets, shall assume by written instrument executed and
delivered to the Warrant Agent the obligation to deliver to the Warrant holders
such shares of stock, securities, or assets as, in accordance with the
foregoing provisions, such holders may be entitled to purchase.

4.4. Notices of Changes in Warrant. Upon every adjustment of the
Warrant Price or the number of shares issuable on exercise of a Warrant, the
Company shall give written notice thereof to the Warrant Agent, which notice
shall state the Warrant Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Upon the
occurrence of any event specified in Sections 4.1., 4.2., or 4.3., then, in any
such event, the Company shall give written notice in the manner set forth above
of the record date for such dividend, distribution, or subscription rights, or
the effective date of such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, winding up or issuance. Such notice
shall also specify the date as of which the holders of Common Stock

5
<PAGE> 6
of record shall participate in such dividend, distribution, or subscription
rights, or shall be entitled to exchange their Common Stock for stock,
securities, or other assets deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding up or issuance. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such event.

4.5. No Fractional Shares. Notwithstanding any provision contained
in this Agreement to the contrary, the Company shall not issue fractional
shares upon exercise of Warrants. If, by reason of any adjustment made
pursuant to this Section 4, the holder of any Warrant would be entitled, upon
the exercise of such Warrant, to receive a fractional interest in a share, the
number of shares of Common Stock to be received shall be rounded off to the
nearest whole number.

4.6. Form of Warrant. The form of Warrant need not be changed
because of any adjustment pursuant to this Section 4, and Warrants issued after
such adjustment may state the same Warrant Price and the same number of shares
as is stated in the Warrants initially issued pursuant to this Agreement.
However, the Company may at any time in its sole discretion make any change in
the form of Warrant that the Company may deem appropriate and that does not
affect the substance thereof, and any Warrant thereafter issued or
countersigned, whether in exchange or substitution for an outstanding Warrant
or otherwise, may be in the form as so changed.

5. Transfer and Exchange of Warrants.

5.1. Registration of Transfer. The Warrant Agent shall register
the transfer, from time to time, of any outstanding Warrant upon the Warrant
Register, upon surrender of a Warrant certificate for transfer, properly
endorsed with signatures properly guaranteed and accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant certificate
representing an equal aggregate number of Warrants shall be issued and the old
Warrant certificate shall be canceled by the Warrant Agent. The Warrant
certificate so canceled shall be delivered by the Warrant Agent to the Company
from time to time upon request.

5.2. Procedure for Surrender of Warrants. Warrant certificates may
be surrendered to the Warrant Agent, together with a written request for
exchange, and thereupon the Warrant Agent shall issue in exchange therefor one
or more new Warrant certificates as requested by the registered holder of the
Warrant certificates so surrendered, representing an equal aggregate number of
Warrants; provided, however, that in the event that a Warrant certificate
surrendered for transfer bears a restrictive legend, the Warrant Agent shall
not cancel such Warrant certificate and issue new Warrant certificates in
exchange therefor until the Warrant Agent has received an opinion of counsel
for the Company stating that such transfer may be made and indicating whether
the new Warrant certificates must also bear a restrictive legend.

5.3. Fractional Warrants. The Warrant Agent shall not be required
to effect any registration of transfer or exchange which will result in the
issuance of a warrant certificate for a fraction of a warrant. The number of
Warrants to be delivered shall be rounded off to the nearest whole number.

5.4. Service Charges. No service charge shall be made for any
exchange or registration of transfer of Warrants.

6
<PAGE> 7
5.5. Warrant Execution and Countersignature. The Warrant Agent is
hereby authorized to countersign and to deliver, in accordance with the terms
of this Agreement, the Warrants required to be issued pursuant to the
provisions hereof, and the Company, whenever required by the Warrant Agent,
will supply the Warrant Agent with Warrant certificates duly executed on behalf
of the Company for such purpose.

6. Redemption.

6.1. Redemption. Not less than all of the outstanding Warrants may
be redeemed, at the option of the Company, after they become exercisable and
prior to the Expiration Date, at the office of the Warrant Agent, upon the
notice referred to in Section 6.2., at the price of $.01 per Warrant
("Redemption Price"), provided that the last sale price of the Common Stock has
been at least two hundred percent (200%) of the then effective exercise price
of the Public Warrants on the twenty (20) consecutive trading days ending on
the third day prior to the day on which notice of redemption is given, the
satisfaction of which condition shall be certified by the Company. In the
event of any voluntary reduction of the exercise price, which the Company may
do at any time, the Company shall not be entitled to exercise the foregoing
redemption right unless the last sale price of the Common Stock on the twenty
(20) consecutive trading days ending on the third day prior to the date on
which notice of redemption is given has been at least two hundred percent
(200%) of the exercise price of the Public Warrants prior to such voluntary
reduction, the satisfaction of which condition shall be certified by the
Company.

6.2. Date Fixed for, and Notice of, Redemption. In the event the
Company shall elect to redeem all or any part of the outstanding Warrants, the
Company shall fix a date for the redemption. Notice of redemption shall be
mailed by first class mail, postage prepaid, by the Company or the Company's
agent at its direction not less than 30 days from the date fixed for redemption
to the registered holders of the outstanding Warrants to be redeemed at their
last address as they shall appear on the registration books. Any notice mailed
in the manner herein provided shall be conclusively presumed to have been duly
given whether or not the registered holder received such notice.

6.3. Exercise After Notice of Redemption. The outstanding Warrants
may be exercised in accordance with Section 3 of this Agreement at any time
after notice of redemption shall have been given by the Company pursuant to
Section 6.2. hereof and prior to the date fixed for redemption. On and after
the redemption date, the record holder of the outstanding Warrants shall have
no further rights except to receive, upon surrender of the outstanding
Warrants, the redemption price.

6.4. Outstanding Warrants Only. The Company understands that the
redemption rights provided for by this Section 6 apply only to outstanding
Warrants. To the extent a person holds rights to purchase Warrants, such
purchase rights shall not be extinguished by redemption. However, once such
purchase rights are exercised, the Company may redeem the Warrants issued upon
such exercise provided that the criteria for redemption is then met.

7. Other Provisions Relating to Rights of Holders of Warrants.

7.1. No Rights as Stockholder. A Warrant does not entitle the
registered holder thereof to any of the rights of a stockholder of the Company,
including, without limitation, the right to receive dividends or other
distributions, to exercise any preemptive rights and to vote or to consent

7
<PAGE> 8
or to receive notice as a stockholder in respect of the meetings of
stockholders or the election of directors of the Company or any other matter.

7.2. Lost, Stolen, Mutilated, or Destroyed Warrants. If any
Warrant certificate is lost, stolen, mutilated, or destroyed, the Company and
the Warrant Agent may on such terms as to indemnity or otherwise as they may in
their discretion impose (which shall, in the case of a mutilated Warrant
certificate, include the surrender thereof), issue a new Warrant certificate of
like denomination and tenor to replace the Warrant certificate so lost, stolen,
mutilated, or destroyed. Any such new Warrant certificate shall constitute a
substitute contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated, or destroyed Warrant certificate shall be at any time
enforceable by anyone.

7.3. Reservation of Common Stock. The Company shall at all times
reserve and keep available a number of its authorized but unissued shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants issued pursuant to this Agreement.

7.4. Registration of Common Stock. The Company agrees that prior
to the date that the Warrants become exercisable it shall file with the
Commission a post-effective amendment to the Registration Statement, if
possible, or a new registration statement, to register, under the Securities
Act, and it shall take such action as is necessary to qualify for sale, in
those states in which the Warrants were initially offered by the Company, the
Common Stock issuable upon exercise of the Warrants. In either case, the
Company shall cause the same to become effective at or prior to the date the
Warrants become exercisable, and maintain the effectiveness of such
registration statement and keep current a prospectus thereunder and maintain
such qualification until the expiration of the Warrants in accordance with the
provisions of this Agreement.

8. Concerning the Warrant Agent and Other Matters.

8.1. Payment of Taxes. The Company will from time to time promptly
pay all taxes and charges that may be imposed upon the Company or the Warrant
Agent in respect of the issuance or delivery of shares of Common Stock upon the
exercise of Warrants, but the Company shall not be obligated to pay any
transfer taxes in respect of the Warrants or such shares.

8.2. Resignation, Consolidation, or Merger of Warrant Agent.

8.2.1. Appointment of Successor Warrant Agent. The Warrant
Agent, or any successor to it hereafter appointed, may resign its duties and be
discharged from all further duties and liabilities (other than those incurred
prior to such resignation or discharge) hereunder after giving sixty (60) days'
notice in writing to the Company. If the office of the Warrant Agent becomes
vacant by resignation or incapacity to act or otherwise, the Company shall
appoint in writing a successor Warrant Agent in place of the Warrant Agent. If
the Company shall fail to make such appointment within a period of 30 days
after it has been notified in writing of such resignation or incapacity by the
Warrant Agent or by a holder of Warrants (who shall, with such notice, submit
his Warrant for inspection by the Company), then the holder of any Warrant may
apply to the Supreme Court of the State of New York for the County of New York
for the appointment of a successor Warrant Agent. Any successor Warrant Agent,
whether appointed by the Company or by such court, shall be a corporation
organized, existing and in good standing and authorized under the laws of the
state in which it was incorporated to exercise corporate trust powers, shall
maintain an office in the Borough of Manhattan, City and State of New York for
the transfer of the Warrants and, if not incorporated in the State

8
<PAGE> 9
of New York, shall be authorized to do business in the State of New York as a
foreign corporation, and subject to supervision or examination by federal or
state authority and shall be authorized to serve as Warrant Agent for the
Warrants under the Exchange Act. After appointment, any successor Warrant
Agent shall be vested with all the authority, powers, rights, immunities,
duties, and obligations of its predecessor Warrant Agent with like effect as if
originally named as Warrant Agent hereunder, without any further act or deed;
but if for any reason it becomes necessary or appropriate, the predecessor
Warrant Agent shall execute and deliver, at the expense of the Company, an
instrument transferring to such successor Warrant Agent all the authority,
powers, and rights of such predecessor Warrant Agent hereunder; and upon
request of any successor Warrant Agent the Company shall make, execute,
acknowledge, and deliver any and all instruments in writing for more fully and
effectually vesting in and confirming to such successor Warrant Agent all such
authority, powers, rights, immunities, duties, and obligations.

8.2.2. Notice of Successor Warrant Agent. In the event a
successor Warrant Agent shall be appointed, the Company shall give notice
thereof to the predecessor Warrant Agent and the transfer agent for the Common
Stock not later than the effective date of any such appointment.

8.2.3. Merger or Consolidation of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, if it shall be eligible to serve as
Warrant Agent under Section 8.2.1, shall be the successor Warrant Agent under
this Agreement without any further act.

8.3. Fees and Expenses of Warrant Agent.

8.3.1. Remuneration. The Company agrees to pay the Warrant
Agent reasonable remuneration for its services as such Warrant Agent hereunder
and will reimburse the Warrant Agent upon demand for all expenditures that the
Warrant Agent may reasonably incur in the execution of its duties hereunder.

8.3.2. Further Assurances. The Company agrees to perform,
execute, acknowledge, and deliver or cause to be performed, executed,
acknowledged, and delivered all such further and other acts, instruments, and
assurances as may reasonably be required by the Warrant Agent for the carrying
out or performing of the provisions of this Agreement.

8.4. Liability of Warrant Agent.

8.4.1. Reliance on Company Statement. Whenever in the
performance of its duties under this Agreement, the Warrant Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established by a statement signed
by the President of the Company and delivered to the Warrant Agent. The
Warrant Agent may rely upon such statement for any action taken or suffered in
good faith by it pursuant to the provisions of this Agreement.

8.4.2. Indemnity. The Warrant Agent shall be liable
hereunder only for its own negligence, willful misconduct or bad faith. The
Company agrees to indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, costs and reasonable counsel fees,
for anything done or omitted by the Warrant Agent in the execution of this
Agreement except as a result of the Warrant Agent's gross negligence, willful
misconduct, or bad faith.

9
<PAGE> 10

8.4.3. Exclusions. Except as provided in clause 8.4.2
above, the Warrant Agent shall have no responsibility with respect to the
validity of this Agreement or with respect to the validity or execution of any
Warrant (except its countersignature thereof); nor shall it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant; nor shall it be responsible to make any
adjustments required under the provisions of Section 4. hereof or responsible
for the manner, method, or amount of any such adjustment or the ascertaining of
the existence of facts that would require any such adjustment; nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued
pursuant to this Agreement or any Warrant or as to whether any shares of Common
Stock will when issued be valid and fully paid and nonassessable.

8.5. Acceptance of Agency. The Warrant Agent hereby accepts the
agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth and, among other things, shall account
promptly to the Company with respect to Warrants exercised and concurrently
account for, and pay to the Company, all moneys received by the Warrant Agent
for the purchase of shares of the Company's Common Stock through the exercise
of Warrants.

9. Miscellaneous Provisions.

9.1. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Warrant Agent or the
Representative shall bind and inure to the benefit of their respective
successors and assigns.

9.2. Notices. Any notice, statement or demand authorized by this
Agreement to be given or made by the Warrant Agent or by the holder of any
Warrant to or on the Company shall be sufficiently given or made if sent by
certified mail, or private courier service, postage prepaid, addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:

OBJECTIVE COMMUNICATIONS, INC.
50 International Drive
Portsmouth, New Hampshire 03801
Attn: Robert H. Emery, Vice President

with copies to:

SHAW PITTMAN
1676 International Drive
McLean, Virginia 22102
Attn: Ellen Canan Grady, Esq.

and

GRAUBARD MOLLEN & MILLER
600 Third Avenue
New York, New York 10016-2097
Attn: David Alan Miller, Esq.

10
<PAGE> 11
Any notice, statement or demand authorized by this Agreement to be given or
made by the holder of any Warrant or by the Company to or on the Warrant Agent
shall be sufficiently given or made if sent by certified mail or private
courier service, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company), as follows:

CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Attention: Compliance Department
2 Broadway
New York, New York 10004

with copies to:

SHAW PITTMAN
1676 International Drive
McLean, Virginia 22102
Attn: Ellen Canan Grady, Esq.

and

GRAUBARD MOLLEN & MILLER
600 Third Avenue
New York, New York 10016-2097
Attn: David Alan Miller, Esq.

9.3. Applicable Law; Jurisdiction. The validity, interpretation,
and performance of this Agreement and of the Warrants shall be governed in all
respects by the law of the State of New York, without giving effect to
principles of conflicts of law. The Company hereby agrees that any action,
proceeding or claim against it arising out of or relating in any way to this
Agreement shall be brought and enforced in the courts of the State of New York
or the United States District Court for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any such
process or summons to be served upon the Company may be served by transmitting
a copy thereof by registered or certified mail, return receipt requested,
postage prepaid, addressed to it at the address set forth in Section 9.2
hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim.

9.4. Persons Having Rights Under This Agreement. Nothing in this
Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the parties hereto and the registered holders
of the Warrants and, for the purposes of Sections 2.5, 3.4.5, 6.4 and 7.4
hereof, the Representative, any right, remedy, or claim under or by reason of
this Agreement or of any covenant, condition, stipulation, promise, or
agreement hereof. The Representative shall be deemed to be a third-party
beneficiary of this Agreement with respect to such Sections. All covenants,
conditions, stipulations, promises, and agreements contained in this Agreement
shall be for the sole and exclusive benefit of the parties hereto (and the
Representative to the extent set forth above) and their successors and assigns
and of the registered holders of the Warrants.

9.5. Examination of the Warrant Agreement. A copy of this
Agreement shall be available at all reasonable times at the office of the
Warrant Agent in the Borough of Manhattan, City and

11
<PAGE> 12
State of New York, for inspection by the registered holder of any Warrant. The
Warrant Agent may require any such holder to submit his or her Warrant for
inspection by it.

9.6. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

9.7. Effect of Headings. The Section headings herein are for
convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.

9.8. Amendment. This Agreement may not be modified, changed or
amended without the prior written consent of the Company, the Warrant Agent and
the Representative.

IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto under their respective corporate seals as of the day and year
first above written.

<TABLE>
<S> <C>
Attest: OBJECTIVE COMMUNICATIONS, INC.

By:
---------------------------------------- --------------------------------------------------
Name: Name:
Title: Title:

Attest: CONTINENTAL STOCK TRANSFER
& TRUST COMPANY

By:
---------------------------------------- --------------------------------------------------
Name: Name:
Title: Title:
</TABLE>

<PAGE> 1
EXHIBIT 4.18

NUMBER UNITS
OBJECTIVE COMMUNICATIONS, INC.
SEE REVERSE FOR CUSIP
CERTAIN DEFINITIONS 674421 300

UNITS CONSISTING OF THREE COMMON SHARES AND TWO REDEEMABLE WARRANTS EACH TO
PURCHASE ONE COMMON SHARE

THIS CERTIFIES that

is the owner of Units

Each Unit ("Unit") consists of three shares of Common Stock, par
value $.01 per share ("Common Stock") of Objective Communications, Inc., a
Delaware corporation (the "Company") and two Redeemable Common Stock Purchase
Warrants ("Warrants") each to purchase one share of Common Stock at $____ per
share (subject to adjustment) until 5:00 p.m., New York City Time on June ___,
2004 (the "Expiration Date"). The Common Stock and Warrant included in each
Unit will not be detachable or separately transferable from each other until
September __, 1999 or earlier if consented by Southeast Research Partners, Inc.
(the "Separation Date"). After the Separation Date, Unit Holders must submit
their Unit certificates to the Transfer Agent and Register of the Company
(which form is also the Warrant Agent as defined below) to be exchanged for
Common Stock and Warrant certificates. The terms, rights and privileges of the
Warrants are set forth in the Warrant Agreement (the "Warrant Agreement") dated
June __, 1999, between the Company and Continental Stock Transfer and Trust
Company (the "Warrant Agent"). A copy of the Warrant Agreement and the
amendment thereto are on file at the office of the Warrant Agent at Two
Broadway, 19th Floor, New York, NY 10004, and are available to any Warrant
Holder on written request and without cost. The Warrants shall be void unless
exercised before 5:00 p.m. New York City Time on the Expiration Date. This
certificate is not valid unless countersigned and registered by the Transfer
Agent and Registrar of the Company.

<TABLE>
<CAPTION>
<S> <C>
OBJECTIVE COMMUNICATIONS, INC.
CORPORATE
SEAL
1993
DELAWARE
Dated:
Objective Communications, Inc.

Secretary President and Chief Executive Officer

Countersigned and Registered:
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
Transfer Agent
(Jersey City, New Jersey) and Registrar
By

Authorized Signature
</TABLE>

<PAGE> 2

OBJECTIVE COMMUNICATIONS, INC.

The Company will furnish without charge to each stockholder who so
requests, a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of shares or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.

The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations.

<S> <C> <C> <C>
UNIF GIFT MIN ACT .............Custodian............
TEN COM - as tenants in common (Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right of survivorship .................................
and not as tenants in common (State)
</TABLE>

Additional abbreviations may also be used though not in the above list.

For value received, ___________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

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

- --------------------------------------------------------------------------------
Please print or typewrite name and address including
postal zip code of assignee

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

__________________________________ Units represented by the within Certificate,
and do hereby irrevocably constitute and appoint

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

- --------------------------------------------------------------------------------
Attorney to transfer the said Units on the books of the within named Corporation
with full power of substitution in the premises.

Dated, ________________

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

NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
the Certificate in every particular without
alteration or enlargement, or any change whatever.

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

SIGNATURE(S) GUARATEED:

The signature(s) should be guaranteed by an
eligible guarantor institution, (banks,
stockbrokers, savings and loan associations and
credit unions with membership in an approved
signature guarantee medallion program). Pursuant to
S.E.C. Rule 17 Ad-5.

<PAGE> 1
Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement of Objective
Communications, Inc. (a development stage enterprise) on Form SB-2 of our
report, dated February 26, 1999, except for Note 14, as to which the date is
April 14, 1999, on our audits of the financial statements of Objective
Communications, Inc. We also consent to the references to our firm under the
captions "Experts" and "Selected Financial Data."

PricewaterhouseCoopers LLP

Boston, Massachusetts
June 7, 1999