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                                                                 CONFORMED COPY



                         AGREEMENT AND PLAN OF MERGER

                                 BY AND AMONG
                                       
                             ODS NETWORKS, INC.,

                            ECC ACQUISITION CORP.

                                     AND

                    ESSENTIAL COMMUNICATION CORPORATION
                                           
                                 DATED AS OF

                                APRIL 30, 1998

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                               TABLE OF CONTENTS

                                                                            Page
TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   i
INDEX OF SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  iv

INDEX OF EXHIBITS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  iv

ARTICLE I

                                   THE MERGER. . . . . . . . . . . . . . . .   2
     1.1  The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
     1.2  Closing; Effective Time. . . . . . . . . . . . . . . . . . . . . .   2
     1.3  Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . .   2
     1.4  Certificate of Incorporation; Bylaws . . . . . . . . . . . . . . .   2
     1.5  Directors and Officers.. . . . . . . . . . . . . . . . . . . . . .   2
     1.6  Taking of Necessary Action; Further Action . . . . . . . . . . . .   3

ARTICLE II

               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES. . . . . .   3
     2.1  Total Consideration. . . . . . . . . . . . . . . . . . . . . . . .   3
     2.2  Acquiror Stock Price . . . . . . . . . . . . . . . . . . . . . . .   3
     2.3  Effect on Capital Stock; Conversion of Securities. . . . . . . . .   4
     2.4  Exchange of Certificates . . . . . . . . . . . . . . . . . . . . .   5
     2.5  Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . .   8
     2.6  Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . .   8
     2.7  Exemption from Registration. . . . . . . . . . . . . . . . . . . .   8

ARTICLE III

                    REPRESENTATIONS AND WARRANTIES OF TARGET . . . . . . . .   9
     3.1  Organization, Standing and Power . . . . . . . . . . . . . . . . .   9
     3.2  Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . .   9
     3.3  Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
     3.4  Financial Statements . . . . . . . . . . . . . . . . . . . . . . .  11
     3.5  Absence of Certain Changes . . . . . . . . . . . . . . . . . . . .  12
     3.6  Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . .  12
     3.7  Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
     3.8  Restrictions on Business Activities. . . . . . . . . . . . . . . .  13
     3.9  Governmental Authorization . . . . . . . . . . . . . . . . . . . .  13
     3.10 Title to Property. . . . . . . . . . . . . . . . . . . . . . . . .  13
     3.11 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . .  13
     3.12 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . .  15
     3.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

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     3.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . .  17
     3.15 Certain Agreements Affected by the Merger. . . . . . . . . . . . .  19
     3.16 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . .  19
     3.17 Interested Party Transactions. . . . . . . . . . . . . . . . . . .  20
     3.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
     3.19 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . .  21
     3.20 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
     3.21 Complete Copies of Materials . . . . . . . . . . . . . . . . . . .  21
     3.22 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . .  21
     3.23 Stockholder Agreement; Irrevocable Proxies . . . . . . . . . . . .  21
     3.24 Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . .  21
     3.25 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . .  21
     3.26 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
     3.27 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . .  22
     3.28 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . .  22
     3.29 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . .  22
     3.30 No Breach of Material Contracts. . . . . . . . . . . . . . . . . .  23
     3.31 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . .  23
     3.32 Export Control Laws. . . . . . . . . . . . . . . . . . . . . . . .  23
     3.33 Representations Complete . . . . . . . . . . . . . . . . . . . . .  24

ARTICLE IV

                   REPRESENTATIONS AND WARRANTIES OF ACQUIROR. . . . . . . .  24
     4.1  Organization, Standing and Power . . . . . . . . . . . . . . . . .  24
     4.2  Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . .  24
     4.3  Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
     4.4  SEC Documents; Financial Statements. . . . . . . . . . . . . . . .  25
     4.5  Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . .  26
     4.6  Broker's and Finders' Fees . . . . . . . . . . . . . . . . . . . .  26
     4.7  Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . .  26
     4.8  No Material Adverse Change . . . . . . . . . . . . . . . . . . . .  26
     4.9  Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
     4.10 Taxable Transaction. . . . . . . . . . . . . . . . . . . . . . . .  27
     4.11 Representations Complete . . . . . . . . . . . . . . . . . . . . .  27

ARTICLE V

                       CONDUCT PRIOR TO THE EFFECTIVE TIME . . . . . . . . .  27
     5.1  Conduct of Business of Target and Acquiror . . . . . . . . . . . .  27
     5.2  Conduct of Business of Target. . . . . . . . . . . . . . . . . . .  28
     5.3  No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . .  30

ARTICLE VI

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                              ADDITIONAL AGREEMENTS. . . . . . . . . . . . .  31
     6.1  Consent of Stockholders. . . . . . . . . . . . . . . . . . . . . .  31
     6.2  Access to Information. . . . . . . . . . . . . . . . . . . . . . .  31
     6.3  Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . .  32
     6.4  Public Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .  32
     6.5  Consents; Cooperation. . . . . . . . . . . . . . . . . . . . . . .  32
     6.6  Stockholder Representation Agreements. . . . . . . . . . . . . . .  32
     6.7  Stockholder Agreements/Irrevocable Proxies . . . . . . . . . . . .  32
     6.8  Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . .  33
     6.9  Blue Sky Laws. . . . . . . . . . . . . . . . . . . . . . . . . . .  33
     6.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . .  33
     6.11 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . .  34
     6.12 Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  34
     6.13 Listing of Additional Shares . . . . . . . . . . . . . . . . . . .  34
     6.14 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  34
     6.15 Best Efforts and Further Assurances. . . . . . . . . . . . . . . .  35
     6.16 Amendment of Stock Option Plan . . . . . . . . . . . . . . . . . .  35
     6.17 Information Statement. . . . . . . . . . . . . . . . . . . . . . .  35
     6.18 Termination of 401(k) Plan . . . . . . . . . . . . . . . . . . . .  36
     6.19 Amended and Restated Certificate of Incorporation. . . . . . . . .  36

ARTICLE VII

                            CONDITIONS TO THE MERGER . . . . . . . . . . . .  36
     7.1  Conditions to Obligations of Each Party to Effect the Merger . . .  36
     7.2  Additional Conditions to Obligations of Target . . . . . . . . . .  37
     7.3  Additional Conditions to the Obligations of Acquiror . . . . . . .  38

ARTICLE VIII

                        TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . .  39
     8.1  Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .  39
     8.2  Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .  41
     8.3  Expenses Upon Termination. . . . . . . . . . . . . . . . . . . . .  41
     8.4  Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
     8.5  Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . .  41

ARTICLE IX

                           ESCROW AND INDEMNIFICATION. . . . . . . . . . . .  42
     9.1  Escrow Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
     9.2  Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . .  42
     9.3  Escrow Period. . . . . . . . . . . . . . . . . . . . . . . . . . .  43
     9.4  Claims upon Escrow Fund. . . . . . . . . . . . . . . . . . . . . .  43
     9.5  Objections to Claims . . . . . . . . . . . . . . . . . . . . . . .  43

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     9.6  Resolution of Conflicts; Arbitration . . . . . . . . . . . . . . .  44
     9.7  Stockholders' Agent. . . . . . . . . . . . . . . . . . . . . . . .  45
     9.8  Actions of the Stockholders' Agent . . . . . . . . . . . . . . . .  45
     9.9  Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . .  45
     9.10 No Claims Based on Consented Breaches. . . . . . . . . . . . . . .  46

ARTICLE X

                               GENERAL PROVISIONS. . . . . . . . . . . . . .  46
     10.1 Survival of Representations, Warranties and Agreements . . . . . .  46
     10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  46
     10.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . .  47
     10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
     10.5 Entire Agreement; Nonassignability; Parties in Interest. . . . . .  48
     10.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
     10.7 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . .  48
     10.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .  48
     10.9 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . .  49






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SCHEDULES:

Target Disclosure Schedule

     Schedule 3.1   -      Foreign Qualifications and Other Interests
     Schedule 3.2   -      Securityholders
     Schedule 3.4   -      Exceptions to Financial Statements
     Schedule 3.6   -      Undisclosed Liabilities
     Schedule 3.7   -      Litigation
     Schedule 3.8   -      Restrictions on Business Activities
     Schedule 3.10  -      Property Exceptions
     Schedule 3.11  -      Intellectual Property
     Schedule 3.14  -      Employee Benefit Plans
     Schedule 3.16  -      Employee Matters
     Schedule 3.29  -      Material Contracts
     Schedule 3.31  -      Third Party Consents

Acquiror Disclosure Schedule

Schedule 6.10  -    Holders of Outstanding Target Options


EXHIBITS:

Exhibit A      -    Calculation of the Common Exchange Ratio
                    and the Option Exchange Ratio
Exhibit B      -    Stockholder Agreement
Exhibit C      -    Stockholder Representation Agreement
Exhibit D      -    Escrow Agreement
Exhibit E      -    Amended and Restated Certificate of Incorporation
Exhibit F      -    FIRPTA Notice



                                       v
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                          AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered 
into as of April 30, 1998 by and among ODS Networks, Inc., a Delaware 
corporation ("ACQUIROR"), ECC Acquisition Corp., a Delaware corporation 
("MERGER SUB"), and Essential Communication Corporation, a Delaware 
corporation ("TARGET").

                               R E C I T A L S:

     WHEREAS, Merger Sub, upon the terms and subject to the conditions of 
this Agreement and in accordance with the General Corporation Law of the 
State of Delaware ("DELAWARE LAW"), will merge with and into Target (the 
"MERGER");

     WHEREAS, pursuant to the Merger, among other things, each outstanding 
share of capital stock of Target ("TARGET CAPITAL STOCK") shall be converted 
into cash and/or shares of Acquiror Common Stock (as defined in Section 4.2 
below), at the rates set forth herein;

     WHEREAS, the Board of Directors of Target has determined that the Merger 
is consistent with and in furtherance of the long-term business strategy of 
Target and is fair to, and in the best interests of, Target and its 
stockholders and has approved and adopted this Agreement and the transactions 
contemplated hereby, and recommended approval and adoption of this Agreement 
by the stockholders of Target;

     WHEREAS, the Board of Directors of Acquiror has determined that the 
Merger is consistent with and in furtherance of the long-term business 
strategy of Acquiror and is fair to, and in the best interests of, Acquiror 
and its stockholders and has approved and adopted this Agreement and the 
transactions contemplated hereby;

     WHEREAS, the Board of Directors of Merger Sub has determined that the 
Merger is consistent with and in furtherance of the long-term business 
strategy of Merger Sub and is fair to, and in the best interests of, Merger 
Sub and its stockholder and has approved and adopted this Agreement and the 
transactions contemplated hereby;

     WHEREAS, the parties intend that the Merger shall be treated as a 
taxable transaction to the securityholders of Target; and 

     WHEREAS, concurrent with the execution of this Agreement and as an 
inducement to Acquiror and Merger Sub to enter into this Agreement, certain 
of the affiliates of Target who are stockholders, officers or directors have 
on the date hereof entered into an agreement to vote the shares of Target 
Capital Stock owned by such person in the manner set forth in the Stockholder 
Agreements referenced herein and attached as EXHIBIT B hereto.  

                                       1
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                              A G R E E M E N T:

     NOW, THEREFORE, in consideration of the foregoing and the respective 
representations, warranties, covenants and agreements set forth in this 
Agreement, the receipt and sufficiency of which is hereby acknowledged, and 
intending to be legally bound hereby, the parties hereto agree as follows:

                                   ARTICLE I

                                   THE MERGER

          1.1  THE MERGER.  Upon the terms and subject to the conditions set 
forth in this Agreement, and in accordance with Delaware Law, at the 
Effective Time (as defined in Section 1.2), Merger Sub shall be merged with 
and into Target.  As a result of the Merger, the separate corporate existence 
of Merger Sub shall cease and Target shall continue as the surviving 
corporation of the Merger (the "SURVIVING CORPORATION").  

          1.2  CLOSING; EFFECTIVE TIME.  The closing of the transactions 
contemplated hereby (the "CLOSING") shall take place as promptly as 
practicable after the satisfaction or, if permissible, waiver of the 
conditions set forth in Article VII hereof or at such other time as the 
parties hereto agree (the "CLOSING DATE").  The Closing shall take place at 
the offices of Brobeck, Phleger & Harrison LLP, 301 Congress Avenue, Suite 
1200, Austin, Texas or such other location as the parties hereto agree.  In 
connection with the Closing, the parties hereto shall cause the Merger to be 
consummated by filing a certificate of merger (the "CERTIFICATE OF MERGER") 
with the Secretary of State of the State of Delaware, in such form as 
required by, and executed in accordance with the relevant provisions of, 
Delaware Law (the date and time of such filing being the "EFFECTIVE TIME").

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

          1.4  CERTIFICATE OF INCORPORATION; BYLAWS.  At the Effective Time, 
the Certificate of Incorporation of Target, as in effect immediately prior to 
the Effective Time and as may be amended by Certificate of Merger shall be 
the Certificate of Incorporation of the Surviving Corporation until 
thereafter amended.  The Bylaws of Target, as in effect immediately prior to 
the Effective Time, shall be the Bylaws of the Surviving Corporation until 
thereafter amended.

          1.5  DIRECTORS AND OFFICERS.  The directors of Merger Sub 
immediately prior to the Effective Time shall be the directors of the 
Surviving Corporation, each to hold office in accordance with the Certificate 
of Incorporation and Bylaws of the Surviving Corporation, and 

                                       2
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the officers of the Merger Sub immediately prior to the Effective Time shall 
be the officers of the Surviving Corporation, in each case until their 
respective successors are duly elected or appointed and qualified.

          1.6  TAKING OF NECESSARY ACTION; FURTHER ACTION.  If, at any time 
after the Effective Time, the Surviving Corporation shall consider or be 
advised that any deeds, bills of sale, assignments, assurances, or any other 
actions or things are necessary or desirable to vest, perfect or confirm, of 
record or otherwise, in the Surviving Corporation its rights, title or 
interest in, to or under any of the rights, properties or assets of either 
Merger Sub or Target acquired or to be acquired by the Surviving Corporation 
as a result of, or in connection with, the Merger or otherwise to carry out 
this Agreement, the officers and directors of the Surviving Corporation shall 
be authorized to execute and deliver, in the name and on behalf of each of 
Merger Sub and Target, all such deeds, bills of sale, assignments and 
assurances and to take and do, in the name and on behalf of each of Merger 
Sub and Target or otherwise, all such other actions and things as may be 
necessary or desirable to vest, perfect or confirm any and all right, title 
and interest in, to and under such rights, properties or assets of the 
Surviving Corporation or otherwise to carry out this Agreement.

                                  ARTICLE II

              CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

          2.1  TOTAL CONSIDERATION.  The total aggregate consideration to be 
exchanged for the acquisition by Acquiror of all outstanding shares of Target 
Capital Stock and all unexpired and unexercised options to acquire Target 
Capital Stock shall be $8.5 million (the "TOTAL CONSIDERATION"), consisting 
of (i) an aggregate of $5,000,001.25 in cash to be paid to the holders of 
Preferred Stock in accordance with Sections 2.3(a)(i) and 2.3(a)(ii) and (ii) 
an aggregate of $3,499,998.75 (the "COMMON EQUIVALENT CONSIDERATION") to be 
paid in cash and/or shares of Acquiror Common Stock to the holders of 
Acquiror Common Stock or to be reserved with respect to outstanding options 
to acquire shares of Target Common Stock to be assumed by Acquiror, in 
accordance with Sections 2.3(a)(iii) and 2.3(c). 

          2.2  ACQUIROR STOCK PRICE.  For purposes of the calculations 
herein, the number of shares of Acquiror Common Stock to be issued in the 
Merger (including the shares of Acquiror Common Stock to be reserved for 
issuance upon exercise of options to acquire Target Common Stock assumed by 
Acquiror), as calculated by using the average of the closing sale price for a 
share of Acquiror Common Stock as quoted on the Nasdaq National Market for 
the fifteen (15) trading days immediately preceding and ending on the trading 
day that is one (1) calendar day prior to the date hereof, is $6.6314 per 
share (the "ACQUIROR STOCK PRICE").  

                                       3
<PAGE>

          2.3  EFFECT ON CAPITAL STOCK; CONVERSION OF SECURITIES.  

               (a)  At the Effective Time, by virtue of the Merger and 
without any action on the part of Merger Sub or Target or the holders of any 
of Target's securities:

                    (i)    Each share of Series A Preferred (as defined in 
Section 3.2) of Target issued and outstanding immediately prior to the 
Effective Time, other than any shares to be canceled pursuant to Section 
2.3(b) and any Dissenting Shares (as defined in Section 2.6), shall be 
converted into the right to receive $3.75 in cash.

                    (ii)   Each share of Series B Preferred (as defined in 
Section 3.2) of Target issued and outstanding immediately prior to the 
Effective Time, other than any shares to be canceled pursuant to Section 
2.3(b) and any Dissenting Shares, shall be converted into the right to 
receive $5.00 in cash.

                    (iii)  Each share of Target Common Stock (as defined in 
Section 3.2) of Target issued and outstanding immediately prior to the 
Effective Time, other than any shares to be canceled pursuant to Section 
2.3(b) and any Dissenting Shares, shall be converted into the right to 
receive an amount of cash equal to the "PER SHARE CASH AMOUNT" determined 
pursuant to EXHIBIT A hereof and such number of shares of Acquiror Common 
Stock as shall be determined in accordance with the "COMMON EXCHANGE RATIO" 
determined pursuant to EXHIBIT A hereof.  A portion of the aggregate number 
of such shares of Acquiror Common Stock shall be subject to the escrow and 
indemnification provisions of Article IX hereof.

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

               (c)  TARGET STOCK OPTION PLAN AND OPTIONS.  At the Effective 
Time, Target's 1996 Stock Option Plan, as amended (the "TARGET STOCK OPTION 
PLAN"), and all options to purchase Target Common Stock then outstanding 
under the Target Stock Option Plan shall be assumed by Acquiror in accordance 
with Section 6.10.

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

                                       4
<PAGE>

          2.4  EXCHANGE OF CERTIFICATES.  

               (a)  EXCHANGE AGENT.  Promptly after the Effective Time, 
Acquiror shall deposit, or shall cause to be deposited, with a bank or trust 
company designated by Acquiror (the "EXCHANGE AGENT"), for the benefit of the 
holders of shares of Target Capital Stock for exchange in accordance with 
this Article II, through the Exchange Agent, (i) certificates evidencing such 
number of shares of Acquiror Common Stock issuable pursuant to Section 2.3 in 
exchange for shares of Target Capital Stock outstanding immediately prior to 
the Effective Time less the number of shares of Acquiror Common Stock to be 
deposited in an escrow fund (the "ESCROW FUND") pursuant to the requirements 
of Article IX; and (ii) cash in the amount payable pursuant to Section 2.3 in 
exchange for shares of Target Capital Stock outstanding immediately prior to 
the Effective Time and cash in the amount sufficient to permit payment of 
cash in lieu of fractional shares pursuant to Section 2.4(h) (such 
certificates for shares of Acquiror Common Stock together with any dividends 
or distributions with respect thereto and such cash, being hereinafter 
referred to as the "EXCHANGE FUND").  

               (b)  EXCHANGE PROCEDURES.  Promptly after the Effective Time, 
Acquiror will instruct the Exchange Agent to mail to each holder of record of 
a certificate or certificates which immediately prior to the Effective Time 
evidenced outstanding shares of Target Capital Stock (other than Dissenting 
Shares) (the "CERTIFICATES"), (i) a letter of transmittal (which shall 
specify that delivery shall be effected, and risk of loss and title to the 
Certificates shall pass, only upon proper delivery of the Certificates to the 
Exchange Agent and shall be in such form and have such other provisions as 
Acquiror may reasonably specify) and (ii) instructions for use in effecting 
the surrender of the Certificates in exchange for certificates evidencing 
shares of Acquiror Common Stock and/or cash.  Upon surrender of a Certificate 
for cancellation to the Exchange Agent together with such letter of 
transmittal, duly completed and validly executed in accordance with the 
instructions thereto, and such other customary documents as may be required 
pursuant to such instructions, the holder of such Certificate shall be 
entitled to receive in exchange therefor (A) a certificate or certificates 
evidencing that number of whole shares of Acquiror Capital Stock which such 
holder has the right to receive in respect of the shares of Target Capital 
Stock (less the number of shares of Acquiror Common Stock to be deposited in 
the Escrow Fund on such holders behalf pursuant to this subsection (b) and 
Article IX hereof) formerly evidenced by such Certificate in accordance with 
Section 2.3, (B) cash to which such holder is entitled to receive in 
accordance with Section 2.3, (C) cash in lieu of fractional shares of 
Acquiror Common Stock to which such holder is entitled pursuant to Section 
2.4(h), and (D) any dividends or other distributions to which such holder is 
entitled pursuant to Section 2.4(c), (the shares of Acquiror Common Stock, 
dividends, distributions and cash described in clauses (A), (B), (C) and (D) 
being collectively, the "MERGER CONSIDERATION") and the Certificate so 
surrendered shall forthwith be canceled.  Until so surrendered, each 
outstanding Certificate that prior to the Effective Time represented shares 
of Target Capital Stock will be deemed from and after the Effective Time, for 
all corporate purposes, other than the payment of dividends, to evidence the 
ownership of the number of full shares of Acquiror Common Stock into which 
such shares of Target Capital Stock shall have been so converted and the 
right to receive an amount of cash in accordance with Section 2.3 and an 
amount in cash in lieu of the issuance of any 

                                       5
<PAGE>

fractional shares in accordance with Section 2.4(h).  As soon as practicable 
after the Effective Time, and subject to and in accordance with the 
provisions of Article IX hereof, Acquiror shall cause to be distributed to 
the Escrow Agent (as defined in Article IX hereof) a certificate or 
certificates representing the number of shares of Acquiror Common Stock 
issued in the Merger specified in Section 9.1 which shall be registered in 
the name of the Escrow Agent as nominee for the holders of Certificates 
representing shares of Common Stock of Target canceled pursuant to this 
Section 2.4(b).  Such shares shall be beneficially owned by such holders and 
shall be held in escrow and shall be available to compensate Acquiror for 
certain damages in the manner provided and subject to the limitations 
contained in Article IX.  To the extent not used for such purposes, such 
shares shall be released to the holders of Certificates representing shares 
of Common Stock of Target canceled pursuant to this Section 2.4(b), all as 
provided in Article IX hereof.

               (c)  DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF 
ACQUIROR COMMON STOCK.  No dividends or other distributions declared or made 
with respect to Acquiror Common Stock with a record date after the Effective 
Time shall be paid to the holder of any unsurrendered Certificate with 
respect to the shares of Acquiror Common Stock represented thereby, and no 
other part of the Merger Consideration shall be paid to any such holder, 
until the holder of such Certificate shall surrender such Certificate.  
Subject to applicable law, following surrender of any such Certificate, there 
shall be paid to the holder of the certificates evidencing whole shares of 
Acquiror Common Stock issued in exchange therefor, without interest, (i) 
promptly, the amount of cash payable pursuant to Section 2.3, (ii) promptly, 
the amount of any cash payable with respect to a fractional share of Acquiror 
Common Stock to which such holder is entitled pursuant to Section 2.2(h) and 
the amount of dividends or other distributions with a record date after the 
Effective Time theretofore paid with respect to such whole shares of Acquiror 
Common Stock, and (iii) at the appropriate payment date, the amount of 
dividends or other distributions, with a record date after the Effective Time 
but prior to surrender and a payment date occurring after surrender, payable 
with respect to such whole shares of Acquiror Common Stock.  No interest 
shall be paid on the Merger Consideration.

               (d)  TRANSFERS OF OWNERSHIP.  If any certificate for shares of 
Acquiror Common Stock is to be issued in a name other than that in which the 
Certificate surrendered in exchange therefor is registered, it will be a 
condition of the issuance thereof that the Certificate so surrendered will be 
properly endorsed and otherwise in proper form for transfer and that the 
person requesting such exchange will have paid to Acquiror or any agent 
designated by it any transfer or other taxes required by reason of the 
issuance of a certificate for shares of Acquiror Common Stock in any name 
other than that of the registered holder of the Certificate surrendered, or 
established to the reasonable satisfaction of Acquiror or any agent 
designated by it that such tax has been paid or is not payable.  Until 
surrendered as contemplated by this Section 2.4, each Certificate shall be 
deemed at any time after the Effective Time to evidence only the right to 
receive upon such surrender the Merger Consideration.

               (e)  NO LIABILITY.  None of the Exchange Agent, Acquiror, 
Merger Sub or the Surviving Corporation shall be liable to any holder of 
shares of Target Capital Stock for any such shares of Acquiror Common Stock 
(or dividends or distributions with respect thereto) 

                                       6
<PAGE>

or cash delivered to a public official pursuant to any applicable abandoned 
property, escheat or similar law.

               (f)  DISSENTING SHARES.  The provisions of this Section 2.4 
shall also apply to Dissenting Shares (defined in Section 2.6 below) that 
lose their status as such, except that the obligations of Acquiror under this 
Section 2.4 shall commence on the date of loss of such status and the holder 
of such shares shall be entitled to receive in exchange for such shares the 
number of shares of Acquiror Common Stock to which such holder is entitled 
pursuant to Section 2.3 hereof and the amount of cash, if any, to which such 
holder is entitled pursuant to Sections 2.3 and 2.4(h) hereof.

               (g)  NO FURTHER RIGHTS IN TARGET CAPITAL STOCK.  All shares of 
Acquiror Common Stock issued and cash paid, if any, including cash paid in 
lieu of fractional shares upon conversion of the shares of Target Capital 
Stock in accordance with the terms hereof shall be deemed to have been issued 
or paid in full satisfaction of all rights pertaining to such shares of 
Target Capital Stock.

               (h)  NO FRACTIONAL SHARES.  No certificates or scrip 
evidencing a fraction of a share of Acquiror Common Stock shall be issued 
upon the surrender for exchange of Certificates, and such fractional share 
interests will not entitle the owner thereof to vote or to any rights of a 
stockholder of Acquiror. In lieu of any such fractional shares, each holder 
of Target Common Stock upon surrender of a Certificate for exchange pursuant 
to this Section 2.4 shall be paid an amount in cash (without interest), 
rounded to the nearest cent, equal to the product of (i) such fraction, 
multiplied by (ii) the Acquiror Stock Price.

               (i)  LOST, STOLEN OR DESTROYED CERTIFICATES.  In the event any 
Certificates shall have been lost, stolen or destroyed, the Exchange Agent 
shall issue and pay, as appropriate, in exchange for such lost, stolen or 
destroyed Certificates, upon the making of an affidavit of that fact by the 
holder thereof, such shares of Acquiror Common Stock, cash, and cash in lieu 
of fractional shares as may be required pursuant to Sections 2.3 and 2.4(h); 
provided, however, that Acquiror may, in its discretion and as a condition 
precedent to the issuance thereof, require the owner of such lost, stolen or 
destroyed Certificates to deliver a bond in such sum as it may reasonably 
direct as indemnity against any claim that may be made against Acquiror, the 
Surviving Corporation or the Exchange Agent with respect to the Certificates 
alleged to have been lost, stolen or destroyed.

               (j)  TERMINATION OF EXCHANGE FUND.  Any portion of the 
Exchange Fund which remains undistributed to the holders of Target Common 
Stock for twelve months after the Effective Time shall be delivered to 
Acquiror, upon demand, and any holders of Target Capital Stock who have not 
theretofore complied with this Article II shall thereafter look only to 
Acquiror for the Merger Consideration to which they are entitled.

               (k)  WITHHOLDING RIGHTS.  Acquiror shall be entitled to deduct 
and withhold from the consideration otherwise payable pursuant to this 
Agreement to any holder of shares of Target Capital Stock such amounts as 
Acquiror is required to deduct and withhold with 

                                       7
<PAGE>

respect to the making of such payment under the Code, or any provision of 
state, local or foreign tax law.  To the extent that amounts are so withheld 
by Acquiror, such withheld amounts shall be treated for all purposes of this 
Agreement as having been paid to the holder of the shares of Target Capital 
Stock in respect of which such deduction and withholding was made by Acquiror.

          2.5  STOCK TRANSFER BOOKS.  At the Effective Time, the stock 
transfer books of the Target shall be closed and there shall be no further 
registration of transfers of shares of Target Capital Stock thereafter on the 
records of the Target.  On or after the Effective Time, any Certificates 
presented to the Exchange Agent or Acquiror for any reason shall be converted 
into the Merger Consideration and canceled as provided by this Article II.

          2.6  DISSENTERS' RIGHTS.  Notwithstanding any other provisions of 
this Agreement to the contrary, shares of Target Capital Stock that are 
outstanding immediately prior to the Effective Time and which are held by 
stockholders who shall have not voted in favor of the Merger or consented 
thereto in writing and who shall have demanded properly in writing appraisal 
for such shares in accordance with Section 262 of Delaware Law (collectively, 
the "DISSENTING SHARES") shall not be converted into or represent the right 
to receive the Merger Consideration.  Such stockholders shall be entitled to 
receive payment of the appraised value of such shares of Target Capital Stock 
held by them in accordance with the provisions of such Section 262, except 
that all Dissenting Shares held by stockholders who shall have failed to 
perfect or who effectively shall have withdrawn or lost their rights to 
appraisal of such shares of Target Common Stock under such Section 262 shall 
thereupon be deemed to have been converted into and to have become 
exchangeable, as of the Effective Time, for the right to receive, without any 
interest thereon, the Merger Consideration, upon surrender, in the manner 
provided in Section 2.4, of the certificate or certificates that formerly 
evidenced such shares of Target Common Stock.

          2.7  EXEMPTION FROM REGISTRATION.  The shares of Acquiror Common 
Stock to be issued in connection with the Merger will be issued in a 
transaction exempt from registration under the Securities Act of 1933, as 
amended (the "SECURITIES ACT"), by reason of Section 4(2) thereof.  The 
Acquiror Common Stock issued in connection with the Merger will be 
"restricted securities" under the Securities Act and Rule 144 promulgated 
thereunder and may only be sold or otherwise transferred pursuant to an 
effective registration statement under the Securities Act or an exemption 
from the registration requirements of the Securities Act.  

                                ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF TARGET

          In this Agreement, any reference to any event, change, condition or 
effect being "MATERIAL" with respect to any entity or group of entities means 
any material event, change, condition or effect related to the condition 
(financial or otherwise), properties, assets (including intangible assets), 
liabilities, business, operations or results of operations of such entity or 
group of entities.  In this Agreement, any reference to a "MATERIAL ADVERSE 
EFFECT" with respect to any entity or group of entities means any event, 
change or effect that is materially adverse to the 

                                       8
<PAGE>

condition (financial or otherwise), properties, assets, liabilities, 
business, operations or results of operations of such entity and its 
subsidiaries, taken as a whole, but shall not include any of the following, 
either alone or in combination: any effect or change occurring as a result of 
(A) general economic conditions or (B) other developments which are not 
unique to Target but also affect other persons who participate or are engaged 
in the lines of business in which Target participate or are engaged.

          In this Agreement, any reference to a party's "KNOWLEDGE" means 
actual knowledge of such party's officers and directors provided that such 
persons shall have made due and diligent inquiry of those current employees 
of such party whom such officers and directors reasonably believe would have 
actual knowledge of the matters represented.

          Except as disclosed in a document of even date herewith and 
delivered by Target to Acquiror prior to the execution and delivery of this 
Agreement (the "TARGET DISCLOSURE SCHEDULE"), Target represents and warrants 
to each of Acquiror and Merger Sub as follows:

          3.1  ORGANIZATION, STANDING AND POWER.  Target is a corporation 
duly organized, validly existing and in good standing under the laws of its 
jurisdiction of organization.  Target has the corporate power to own its 
properties and to carry on its business as now being conducted and as 
proposed to be conducted and is duly qualified to do business and is in good 
standing in each jurisdiction in which the failure to be so qualified and in 
good standing would have a Material Adverse Effect on Target.  Set forth on 
SCHEDULE 3.1 to the Target Disclosure Schedule is a list of each jurisdiction 
in which Target is qualified to do business.  Target has delivered a true and 
correct copy of the Certificate of Incorporation and Bylaws of Target, each 
as amended to date, to Acquiror.  Target is not in violation of any of the 
provisions of its Certificate of Incorporation or Bylaws.  Except as set 
forth in SCHEDULE 3.1 of the Target Disclosure Schedule, Target does not 
directly or indirectly own any equity or similar interest in, or any interest 
convertible or exchangeable or exercisable for, any equity or similar 
interest in, any corporation, partnership, joint venture or other business 
association or entity.

          3.2  CAPITAL STRUCTURE.  The authorized capital stock of Target 
consists of 5,833,333 shares of Common Stock, par value $0.0001 per share 
("TARGET COMMON STOCK"), and 1,166,667 shares of Preferred Stock, par value 
$0.0001 per share (the "PREFERRED STOCK") divided into two series, a series 
designated as "Series A Preferred Stock" (the "SERIES A PREFERRED") 
consisting of 666,667 shares and a series designated as "Series B Preferred 
Stock" (the "SERIES B PREFERRED") consisting of 500,000 shares.  There were 
issued and outstanding as of the date hereof, 1,069,000 shares of Common 
Stock, 666,667 shares of Series A Preferred Stock, and 500,000 shares of 
Series B Preferred Stock.  There are no other outstanding shares of capital 
stock or voting securities and no outstanding commitments to issue any shares 
of capital stock or voting securities after the date hereof, other than 
pursuant to the exercise of options outstanding as of such date under the 
Target Stock Option Plan. Attached to or as set forth in SCHEDULE 3.2 to the 
Target Disclosure Schedule is a true and correct list of Target's 
stockholders and any persons with any right to acquire Target securities, 
which list will be promptly updated from time to time prior to Closing to 
reflect any changes (which changes are subject in any event to the 
restrictions imposed under Section 5.2 below).  All outstanding shares of 
Target Capital 

                                       9
<PAGE>

Stock are duly authorized, validly issued, fully paid and non-assessable and 
are free of any liens or encumbrances other than any liens or encumbrances 
created by or imposed upon the holders thereof, and are not subject to 
preemptive rights or rights of first refusal created by statute, the 
Certificate of Incorporation or Bylaws of Target or any agreement to which 
Target is a party or by which it is bound.  The Series A Preferred and the 
Series B Preferred are convertible into Target Common Stock on a one-to-one 
basis.  As of the date hereof, Target has reserved (i) 666,667 shares of 
Common Stock for issuance upon conversion of the Series A Preferred; (ii) 
500,000 shares of Common Stock for issuance upon conversion of the Series B 
Preferred; and (iii) 380,000 shares of Common Stock for issuance to 
directors, employees and consultants pursuant to the Target Stock Option Plan 
(subject in any event to restrictions contained in Section 5.2 below), of 
which no shares have been issued pursuant to option exercises or direct stock 
purchases and 251,550 shares are subject to outstanding, unexercised options, 
and no shares are subject to outstanding stock purchase rights.  SCHEDULE 
6.10 referenced in Section 6.10 below is a true and correct list of Target's 
optionees and the other information required to be set forth thereon with 
respect to such optionees and the Target Stock Options.  Target has not 
issued, granted or promised to issue or grant additional options.  Except as 
set forth on SCHEDULE 3.2 to the Target Disclosure Schedule and except for 
(i) conversion and redemption rights of the Preferred Stock as set forth in 
Certificate of Incorporation of Target; (ii) the rights created pursuant to 
this Agreement and (iii) Target's right to repurchase any unvested shares 
under the Target Stock Option Plan, there are no other options, warrants, 
calls, rights, commitments or agreements of any character to which Target is 
a party or by which it is bound obligating Target to issue, deliver, sell, 
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or 
redeemed, any shares of capital stock of Target or obligating Target to 
grant, extend, accelerate the vesting of, change the price of, or otherwise 
amend or enter into any such option, warrant, call, right, commitment or 
agreement.  Except for the agreements contemplated by this Agreement, there 
are no contracts, commitments or agreements relating to voting, purchase or 
sale of Target's capital stock (i) between or among Target and any of its 
securityholders and (ii) to the Target's knowledge, between or among any of 
Target's securityholders.  The terms of the Target Stock Option Plan and the 
applicable stock option agreements permit the assumption or substitution of 
options to purchase Acquiror Common Stock as provided in, and subject to the 
consents described in, Section 6.10 of this Agreement and the consummation of 
the Merger and the transactions contemplated by this Agreement will not 
accelerate the vesting or exercisability of any outstanding options.  True 
and complete copies of all agreements and instruments relating to or issued 
under the Target Stock Option Plan have been provided to Acquiror and such 
agreements and instruments have not been amended, modified or supplemented, 
and there are no agreements to amend, modify or supplement such agreements or 
instruments in any case from the form provided to Acquiror except as 
contemplated hereby.  All outstanding shares of Common Stock, Series A 
Preferred and Series B Preferred were issued in compliance with all 
applicable federal and state securities laws.

          3.3  AUTHORITY.  Target has all requisite corporate power and 
authority to enter into this Agreement and to consummate the transactions 
contemplated hereby.  The execution and delivery of this Agreement and the 
consummation of the transactions contemplated hereby have been duly 
authorized by all necessary corporate action on the part of Target, subject 
only to the approval of the Merger by Target's stockholders as contemplated 
by Section 7.1(a).  This 

                                      10
<PAGE>

Agreement has been duly executed and delivered by Target and constitutes the 
valid and binding obligation of Target enforceable against Target in 
accordance with its terms.  The execution and delivery of this Agreement by 
Target does not, and the consummation of the transactions contemplated hereby 
will not, conflict with, or result in any violation of, or default under 
(with or without notice or lapse of time, or both), or give rise to a right 
of termination, cancellation or acceleration of any obligation or loss of any 
benefit under (i) any provision of the Certificate of Incorporation or Bylaws 
of Target, as amended, or (ii) other than as set forth in SCHEDULE 3.3 to the 
Target Disclosure Schedule, any mortgage, indenture, lease, contract or other 
agreement or instrument, permit, concession, franchise, license, judgment, 
order, decree, statute, law, ordinance, rule or regulation applicable to 
Target or any of its properties or assets, except for such conflicts, 
violations, defaults, terminations, cancellations, accelerations or losses 
which would not (individually or in the aggregate) have a Material Adverse 
Effect on Target.  No consent, approval, order or authorization of, or 
registration, declaration or filing with, any court, administrative agency or 
commission or other governmental authority or instrumentality (each, a 
"GOVERNMENTAL ENTITY") is required by Target in connection with the execution 
and delivery of this Agreement or the consummation of the transactions 
contemplated hereby, except for (i) the filing of the Amended and Restated 
Certificate of Incorporation as provided in Section 6.19; (ii) the filing of 
the Certificate of Merger as provided in Section 1.2; (ii) such consents, 
approvals, orders, authorizations, registrations, declarations and filings as 
may be required under applicable state securities laws and the securities 
laws of any foreign country; and (iii) such other consents, authorizations, 
filings, approvals and registrations which, if not obtained or made, would 
not have a Material Adverse Effect on Target and would not prevent, or 
materially alter or delay any of the transactions contemplated by this 
Agreement.

          3.4  FINANCIAL STATEMENTS.  Target has delivered to Acquiror its 
audited financial statements (balance sheet, statement of operations and 
statement of cash flows) on a consolidated basis for the fiscal years ended 
March 31, 1997 and March 31, 1996, and its unaudited financial statements 
(balance sheet, statement of operations and statement of cash flows) as at, 
and for the eleven-month period ended February 28, 1998 (collectively, the 
"FINANCIAL STATEMENTS").  Except as set forth on SCHEDULE 3.4 to the Target 
Disclosure Schedule, the Financial Statements have been prepared from the 
books and records of accounts of the Company and in accordance with generally 
accepted accounting principles (except that the unaudited financial 
statements do not have notes thereto) applied on a consistent basis 
throughout the periods indicated and with each other.  Except as set forth on 
SCHEDULE 3.4 to the Target Disclosure Schedule, the Financial Statements 
fairly present in all material respects the financial condition and operating 
results of Target as of the dates, and for the periods, indicated therein, 
subject in the case of the unaudited financial statements to normal year-end 
audit adjustments which are not material individually or in the aggregate.  
Target maintains and will continue to maintain an adequate system of internal 
controls established and administered in accordance with generally accepted 
accounting principles.

          3.5  ABSENCE OF CERTAIN CHANGES.  Since February 28, 1998, (the 
"TARGET BALANCE SHEET DATE"), Target has conducted its business in the 
ordinary course consistent with past practice and there has not occurred:  
(i) any change, event or condition (whether or not covered by insurance) that 
has resulted in, or would reasonably be expected to result in, a 

                                      11
<PAGE>

Material Adverse Effect to Target; (ii) any acquisition, sale or transfer of 
any material asset of Target; (iii) any change in accounting methods or 
practices (including any change in depreciation or amortization policies or 
rates) by Target or any revaluation by Target of any of its assets; (iv) any 
declaration, setting aside, or payment of a dividend or other distribution 
with respect to the shares of Target, or any direct or indirect redemption, 
purchase or other acquisition by Target of any of its shares of capital 
stock; (v) any increase in or modification of the compensation or benefits 
payable or to become payable by Target to any of its directors or employees 
other than in the ordinary course of business in accordance with past 
practice; or (vi) any agreement by Target to do any of the things described 
in the preceding clauses (i) through (v) (other than negotiations with 
Acquiror and its representatives regarding the transactions contemplated by 
this Agreement).

          3.6  ABSENCE OF UNDISCLOSED LIABILITIES.  Except as set forth in
SCHEDULE 3.6 to the Target Disclosure Schedule, Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in the Financial Statements as of February 28, 1998 (the
"TARGET BALANCE SHEET"); (ii) those incurred in the ordinary course of business
and not required to be set forth in the Target Balance Sheet under generally
accepted accounting principles; (iii) those incurred in the ordinary course of
business since the Target Balance Sheet Date and consistent with past practice;
and (iv) those incurred in connection with the execution of this Agreement.

          3.7  LITIGATION.  SCHEDULE 3.7 to the Target Disclosure Schedule sets
forth each private or governmental action, suit, proceeding, claim, arbitration
or investigation pending before any agency, court or tribunal, foreign or
domestic, or, to the knowledge of Target, threatened against Target or any of
its properties or any of its officers or directors (in their capacities as
such).  There is no judgment, decree or order against Target, or, to the
knowledge of Target, any of its directors or officers (in their capacities as
such), that would prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that would reasonably be
expected to have a Material Adverse Effect on Target.  The Target Disclosure
Schedule also lists all litigation that Target has filed against other parties
which remains pending.

          3.8  RESTRICTIONS ON BUSINESS ACTIVITIES.  Except as set forth in
SCHEDULE 3.8 to the Target Disclosure Schedule, there is no agreement, judgment,
injunction, order or decree binding upon Target which has or would reasonably be
expected to have the effect of prohibiting or impairing any current or future
business practice of Target, any acquisition of property by Target or the
conduct of business by Target as currently conducted or as proposed to be
conducted by Target.

          3.9  GOVERNMENTAL AUTHORIZATION.  Target has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (i) pursuant to which Target
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Target's business or the holding of any such
interest (the items referenced in clauses (i) and (ii) herein collectively
called "TARGET 


                                      12

<PAGE>

AUTHORIZATIONS"), and all of such Target Authorizations are in full force and 
effect, except where the failure to obtain or have any such Target 
Authorizations would not reasonably be expected to have a Material Adverse 
Effect on Target.

          3.10 TITLE TO PROPERTY.  Except as described in SCHEDULE 3.10 to the
Target Disclosure Schedule, Target has good and marketable title to, or, with
respect to leased properties and assets, valid leasehold interests in, all of
its owned properties, interests in properties and assets, real and personal,
reflected in the Target Balance Sheet or acquired after the Target Balance Sheet
Date (except properties, interests in properties and assets sold or otherwise
disposed of since the Target Balance Sheet Date in the ordinary course of
business), free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) as reflected in the Financial
Statements, (ii) the lien of current taxes not yet due and payable, and
(iii) such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties.  All material (individually or in the aggregate)
plants, property and equipment of Target that are used in the operations of its
business are in good operating condition and repair, subject to normal wear and
tear.  All properties used in the operations of Target are reflected in the
Target Balance Sheet to the extent generally accepted accounting principles
require the same to be reflected.  SCHEDULE 3.10 to the Target Disclosure
Schedule also identifies each parcel of real property owned or leased by Target.

          3.11 INTELLECTUAL PROPERTY.

               (a)  To its knowledge (as to patents only), Target owns, or is
licensed or otherwise possesses legally enforceable rights to use all patents,
and Target owns or is licensed or otherwise possesses legally enforceable rights
to use all trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, schematics, technology, know-how, trade
secrets, inventory, ideas, algorithms, processes, computer software programs or
applications (in source code and/or object code form), and tangible or
intangible proprietary information or material (collectively, "INTELLECTUAL
PROPERTY") that are used or currently proposed to be used in the business of
Target as currently conducted or as currently proposed to be conducted by
Target.  Target has not (i) licensed any of its Intellectual Property in source
code form to any party or (ii) entered into any exclusive agreements relating to
its Intellectual Property with any party.

               (b)  SCHEDULE 3.11 to the Target Disclosure Schedule lists: (i)
all patents and current patent applications and all registered and unregistered
trademarks, trade names and service marks, registered copyrights, and registered
maskworks made by Target which are included in the Intellectual Property,
including the jurisdictions in which each such Intellectual Property right has
been issued or registered or in which any application for such issuance and
registration has been filed; (ii) all licenses, sublicenses and other
agreements, other than off-the-shelf licenses with customers in the ordinary
course of business, as to which Target is a party and pursuant to which any
other person is authorized to use any Intellectual Property; and (iii) all
licenses, sublicenses and other agreements other than off-the-shelf licenses as
to 


                                      13

<PAGE>

which Target is a party and pursuant to which Target is authorized to use any 
third party patents, trademarks or copyrights, including software 
(collectively, "THIRD PARTY INTELLECTUAL PROPERTY RIGHTS") which are 
incorporated in, are, or form a part of any Target product.

               (c)  To Target's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of Target, or any Intellectual Property right of any third party to the extent
licensed by or through Target, by any third party, including any employee or
former employee of Target.  Target has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
purchase orders or customer license agreements arising in the ordinary course of
business.

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

               (e)  All patents, registered trademarks, service marks and
copyrights held by Target are valid and subsisting.  Target (i) has not been
sued in any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party; (ii) has no knowledge that
the manufacturing, marketing, licensing or sale of its products infringes any
patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party; and (iii) has not brought any action, suit or
proceeding for infringement of Intellectual Property or breach of any license or
agreement involving Intellectual Property against any third party.

               (f)  Except as set forth on Schedule 3.11(f) to the Target
Disclosure Schedule, Target has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property in the course of performing services for Target of the
rights to such contributions that Target does not already own by operation of
law.

               (g)  Target has taken all reasonable and appropriate steps to
protect and preserve the confidentiality of all material Intellectual Property,
whether individually or in the aggregate, not otherwise protected by patents,
patent applications or copyright (collectively, "CONFIDENTIAL INFORMATION"). 
All use, disclosure or appropriation of Confidential Information owned by Target
by or to a third party has been pursuant to the terms of a written agreement
between Target and such third party. All use, disclosure or appropriation of
Confidential Information by Target not owned by Target has been pursuant to the
terms of a written agreement between Target and the owner of such Confidential
Information, or is otherwise lawful. 


                                      14

<PAGE>

          3.12 ENVIRONMENTAL MATTERS.  

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

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

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

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

                    (iv)   "FACILITIES" shall mean all buildings and
improvements on the Property of Target.

               (b)  Target represents and warrants as follows: (i) it has not
used at or released from the Facilities any methylene chloride or asbestos, and,
to its knowledge, no methylene chloride or asbestos is used at or has been
released from the Facilities by any third party; (ii) Target has disposed of all
Hazardous Materials and wastes generated or used by Target in accordance with
all Environmental Laws; (iii) Target has not received notice (verbal or written)
of any noncompliance of the Facilities or Target's past or present operations
with Environmental Laws; (iv) no notices, administrative actions or suits are
pending or, to Target's knowledge, threatened relating to a violation of any
Environmental Laws by Target; (v) during Target's occupation of the Facilities,
the Property has not had a release of Hazardous Materials which requires or will
reasonably be expected to require any investigation or remediation by Target
under applicable Environmental Laws; (vi) to Target's knowledge, there have not
been in the past any Hazardous Materials on, under or migrating to or from the
Facilities or Property, and there are not now any Hazardous Materials on, under
or migrating to or from the Property; (vii) there are not now any Hazardous
Materials on or migrating from the Facilities; (viii) to Target's knowledge,
there have not been in the past, and there are not now, any underground tanks or
underground improvements at, on or under the Property including without
limitation, treatment or storage tanks, pumps, or water, gas or oil wells; (ix)
to its knowledge, there are no polychlorinated biphenyls ("PCBS") deposited,
stored, disposed of or located on the Property or Facilities or any equipment on
the Property containing PCBs at levels in excess of 50 parts per million; (x) to
its knowledge, there is no formaldehyde on the Property or in the Facilities,
nor any insulating material containing urea formaldehyde in the Facilities; (xi)
the Facilities and Target's use of the Facilities and activities therein, and to
its knowledge all third parties' use and possession of the Facilities and
activities therein, have at all times materially complied with all 


                                      15

<PAGE>

Environmental Laws; and (xii) Target has all the permits and licenses 
required to be issued under applicable Environmental Laws for the operation 
of its business as currently conducted and is in full compliance with the 
terms and conditions of those permits.

          3.13 TAXES.  Target has timely filed all Tax Returns required to be
filed by it and has paid all Taxes shown thereon to be due.  Target has provided
adequate accruals in accordance with generally accepted accounting principles in
its financial statements for any Taxes that have not been paid, whether or not
shown as being due on any Tax Returns.  There is (i) no material claim for Taxes
that is a lien against the property of Target or is being asserted against
Target other than liens for Taxes not yet due and payable; (ii) no audit of any
Tax Return of Target being conducted by a Tax authority; (iii) no extension of
the statute of limitations on the assessment of any Taxes granted by Target and
currently in effect; and (iv) no agreement, contract or arrangement to which
Target is a party that would result in the payment of any amount that would not
be deductible by reason of Sections 280G (other than agreements or arrangements
for which stockholder approval meeting the requirements of Section 280G(b)(5)(B)
will be obtained prior to the Closing) or 404 of the Code.  Target has not been
and will not be required to include any material adjustment in Taxable income
for any Tax period (or portion thereof) pursuant to Section 481 or 263A of the
Code or any comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger.  Target
is not a party to any Tax sharing or Tax allocation agreement nor does Target
owe any amount under any such agreement.  For purposes of this Agreement, the
following terms have the following meanings: "TAX" (and, with correlative
meaning, "TAXES" and "TAXABLE") means: (i) any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Entity (a "TAX
AUTHORITY") responsible for the imposition of any such tax (domestic or
foreign); (ii) any liability for the payment of any amounts of the type
described in clause (i) of this sentence as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period; and
(iii) any liability for the payment of any amounts of the type described in
clauses (i) or (ii) of this sentence as a result of any express or implied
obligation to indemnify any other person.  As used herein, "TAX RETURN" shall
mean any return, statement, report or form (including, without limitation)
estimated Tax Returns and reports, withholding Tax Returns and reports and
information reports and Returns required to be filed with respect to Taxes. 
Target is in full compliance with all terms and conditions of any Tax exemptions
or other Tax-sparing agreement or order of a foreign government and the
consummation of the Merger shall not have any adverse effect on the continued
validity and effectiveness of any such Tax exemptions or other Tax-sparing
agreement or order.

          3.14 EMPLOYEE BENEFIT PLANS.

               (a)  SCHEDULE 3.14 to the Target Disclosure Schedule lists, with
respect to Target, within the meaning of Section 414(b), (c), (m) or (o) of the
Code: (i) all material 


                                      16

<PAGE>

employee benefit plans (as defined in Section 3(3) of the Employee Retirement 
Income Security Act of 1974, as amended ("ERISA"); (ii) each loan to a 
non-officer employee in excess of $10,000, loans to officers and directors 
and any stock option, stock purchase, phantom stock, stock appreciation 
right, supplemental retirement, severance, sabbatical, medical, dental, 
vision care, disability, employee relocation, cafeteria benefit (Code Section 
125) or dependent care (Code Section 129), life insurance or accident 
insurance plans, programs or arrangements; (iii) all bonus, pension, profit 
sharing, savings, deferred compensation or incentive plans, programs or 
arrangements; (iv) other fringe or employee benefit plans, programs or 
arrangements that apply to senior management of Target and that do not 
generally apply to all employees; and (v) any current or former employment or 
executive compensation or severance agreements, written or otherwise, as to 
which unsatisfied obligations of Target of greater than $10,000 remain for 
the benefit of, or relating to, any present or former employee, consultant or 
director of Target (together, the "TARGET EMPLOYEE PLANS").

               (b)  Target has furnished to Acquiror a copy of each of the
Target Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and any material employee communications
relating thereto) and has, with respect to each Target Employee Plan which is
subject to ERISA reporting requirements, provided copies of the Form 5500
reports filed since such plan's inception.  Any Target Employee Plan intended to
be qualified under Section 401(a) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has applied to the Internal
Revenue Service for such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination.  Target has
also furnished Acquiror with the most recent Internal Revenue Service
determination letter issued with respect to each such Target Employee Plan, and
nothing has occurred since the issuance of each such letter which would
reasonably be expected to cause the loss of the tax-qualified status of any
Target Employee Plan subject to Code Section 401(a).  Target has also furnished
Acquiror with all registration statements and prospectuses prepared in
connection with each Target Employee Plan.

               (c)  (i)  None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Target Employee Plan,
which would reasonably be expected to have, in the aggregate, a Material Adverse
Effect; (iii) each Target Employee Plan has been administered in accordance with
its terms and in compliance with the requirements prescribed by any and all
applicable statutes, rules and regulations (including ERISA and the Code),
except as would not have, in the aggregate, a Material Adverse Effect, and
Target has performed all obligations required to be performed by them under, are
not in any material respect in default under or violation of, and have no
knowledge of any material default or violation by any other party to, any of the
Target Employee Plans; (iv) neither Target nor any subsidiary or ERISA Affiliate
is subject to any liability or penalty under Sections 4976 through 4980 of the
Code or Title I of 


                                      17

<PAGE>

ERISA with respect to any of the Target Employee Plans; (v) all material 
contributions required to be made by Target to any Target Employee Plan have 
been made on or before their due dates and a reasonable amount has been 
accrued for contributions to each Target Employee Plan for the current plan 
years; (vi) with respect to each Target Employee Plan, no "reportable event" 
within the meaning of Section 4043 of ERISA (excluding any such event for 
which the thirty (30) day notice requirement has been waived under the 
regulations to Section 4043 of ERISA) nor any event described in Section 
4062, 4063 or 4041 or ERISA has occurred; (vii) no Target Employee Plan is 
covered by, and neither Target nor any subsidiary or ERISA Affiliate has 
incurred or expects to incur any liability under Title IV of ERISA or Section 
412 of the Code; and (viii) each Target Employee Plan can be amended, 
terminated or otherwise discontinued after the Effective Time in accordance 
with its terms, without liability to Acquiror (other than ordinary 
administrative expenses typically incurred in a termination event).  With 
respect to each Target Employee Plan subject to ERISA as either an employee 
pension benefit plan within the meaning of Section 3(2) of ERISA or an 
employee welfare benefit plan within the meaning of Section 3(1) of ERISA, 
Target has prepared in good faith and timely filed all requisite governmental 
reports (which were true and correct as of the date filed) and has properly 
and timely filed and distributed or posted all notices and reports to 
employees required to be filed, distributed or posted with respect to each 
such Target Employee Plan.  No suit, administrative proceeding, action or 
other litigation has been brought, or to the knowledge of Target is 
threatened, against or with respect to any Target Employee Plan, including 
any audit or inquiry by the IRS or United States Department of Labor.  No 
payment or benefit which will or may be made by Target to any Employee will 
be characterized as an "excess parachute payment" within the meaning of 
Section 280G(b)(1) of the Code.

               (d)  With respect to each Target Employee Plan, Target has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
regulations (including proposed regulations) thereunder, (ii) the applicable
requirements of the Family and Medical and Leave Act of 1993 and the regulations
thereunder, except to the extent that such failure to comply would not, in the
aggregate, have a Material Adverse Effect, and (iii) the applicable requirements
of the Health Insurance Portability and Accountability Act of 1996 and the
regulations (including proposed regulations) thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material Adverse
Effect.

               (e)  The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Target to severance benefits or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or service
provider. 

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


                                      18

<PAGE>

               (g)  PENSION PLANS.  Target does not currently maintain, sponsor,
participate in or contribute to, nor has it ever maintained,established,
sponsored, participated in, or contributed to, any pension plan (within the
meaning of Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 4.12 of the Code.

               (h)  MULTIEMPLOYER PLANS.  Target is not a party to, or has made
any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.

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

          3.16 EMPLOYEE MATTERS.  SCHEDULE 3.16 to the Target Disclosure
Schedule lists: (i) (x) all current employees of Target, their respective date
of hire and current rate of compensation and (y) each person who has either
accepted, has an outstanding offer, or whom Target proposes to offer employment
and such person's prospective or proposed date of hire, title and rate of
compensation; (ii) each employment and consulting agreement or arrangement to
which Target is a party and which is not terminable "at will" or upon such
notice as results by law from the termination of employment of an employee
without agreement as to notice or severance by Target; and (iii) the names of
each employee of Target who is subject to a non-competition, non-solicitation or
similar agreement, true and correct copies of which agreements have been
provided to Acquiror.  To its knowledge, Target is in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice.  Target has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries, and
other payments to employees; and is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing.  Target is
not liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice).  There are no pending claims against Target under any workers
compensation plan or policy or for long term disability.  There are no disputes
pending or, to the knowledge of Target, threatened, between Target and any of
its employees, which controversies have or would reasonably be expected to
result in an action, suit, proceeding, claim, arbitration or investigation
before any agency, court or tribunal, foreign or domestic.  Target is not a
party to any collective bargaining agreement or other labor unions contract nor
does Target know of any activities or proceedings of any labor union or organize
any such employees.  Except as set forth on SCHEDULE 3.16 to the Target
Disclosure Schedule, to Target's knowledge, no employees 


                                      19

<PAGE>

of Target are in violation of any term of any employment contract, patent 
disclosure agreement, noncompetition agreement, or any restrictive covenant 
to a former employer relating to the right of any such employee to be 
employed by Target because of the nature of the business conduced or 
presently proposed to be conducted by Target or to the use of trade secrets 
or proprietary information of others.  No employees of Target have given 
notice to Target, nor does Target otherwise have knowledge, that any such 
employee intends to terminate his or her employment with Target.

          3.17 INTERESTED PARTY TRANSACTIONS.  Target is not indebted to any
director, officer, employee or agent of Target (except for amounts due as normal
salaries and bonuses and in payment of ordinary fees and expenses), and no such
person is indebted to Target, except as set forth in SCHEDULE 3.14 to the Target
Disclosure Schedule.

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

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

          3.20 MINUTE BOOKS.  The minute books of Target made available to
Acquiror contain a complete and accurate summary of all meetings of directors
and stockholders or actions by written consent since the time of incorporation
of Target through the date of this Agreement.

          3.21 COMPLETE COPIES OF MATERIALS.  Target has delivered or made
available true and complete copies of each document set forth on the Target
Disclosure Schedule which has been requested by Acquiror or its counsel in
connection with their legal and accounting review of Target.

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

          3.23 STOCKHOLDER AGREEMENT; IRREVOCABLE PROXIES.  Holders of more than
63% of the outstanding shares of Target Capital Stock and more than 57% of
outstanding shares of the Target Preferred Stock have agreed in writing to vote
for approval of the Merger pursuant to 


                                      20

<PAGE>

voting agreements contained in the Stockholder Agreement attached hereto as 
EXHIBIT B (the "STOCKHOLDER AGREEMENTS"), and pursuant to the Irrevocable 
Proxies attached thereto as Exhibit A (the "IRREVOCABLE PROXIES").  

          3.24 VOTE REQUIRED.  After filing of the Certificate of Amendment with
the Secretary of State of the State of Delaware, the affirmative vote of the
holders of at least (i) a majority of the outstanding shares of Preferred Stock,
voting together as a single class, and (ii) a majority of the outstanding shares
of the Target Capital Stock, in each case outstanding on the record date set for
the special meeting of Target stockholders called for the purpose of approving
the Merger and related matters (the "TARGET STOCKHOLDERS' MEETING") (or any
written consent in lieu thereof) is the only vote (or consent) of the holders of
any of Target's Capital Stock necessary to approve this Agreement and the
transactions contemplated hereby.

          3.25 BOARD APPROVAL.  The Board of Directors of Target has
(i) approved this Agreement and the Merger, (ii) has determined that the Merger
is in the best interests of the stockholders of Target and is on terms that are
fair to such stockholders and (iii) will recommend that the stockholders of
Target approve this Agreement and the Merger.

          3.26 INVENTORY.  Subject to any reserves set forth in the Financial
Statements, the inventories shown on the Financial Statements or thereafter
acquired by Target, consisted of items of a quantity and quality usable or
salable in the ordinary course of business.  Since March 31, 1997, Target has
continued to replenish inventories in a normal and customary manner consistent
with past practices.  Target has not received written or oral notice that it
will experience in the foreseeable future any difficulty in obtaining, in the
desired quantity and quality and at a reasonable price and upon reasonable terms
and conditions, the raw materials, supplies or component products required for
the manufacture, assembly or production of its products.  The values at which
inventories are carried reflect the inventory valuation policy of Target, which
is consistent with its past practice and in accordance with generally accepted
accounting principles applied on a consistent basis.  Since the Balance Sheet
Date, due provision was made on the books of Target in the ordinary course of
business consistent with past practices to provide for all slow-moving,
obsolete, or unusable inventories to their estimated useful or scrap values and
such inventory reserves are adequate to provide for such slow-moving, obsolete
or unusable inventory and inventory shrinkage.  As of March 31, 1998, Target had
no stock rotation agreements for inventory to be returned to Target by its
customers. 

          3.27 ACCOUNTS RECEIVABLE.  Subject to any reserves set forth in the
Financial Statements, the accounts receivable shown on the Financial Statements
represent and will represent bona fide claims against debtors for sales and
other charges, and are not subject to discount except for normal cash and trade
discounts in the ordinary course of business consistent with past practices. 
The amount carried for doubtful accounts and allowances disclosed in the
Financial Statements is sufficient to provide for any losses which may be
sustained on realization of the receivables.

          3.28 CUSTOMERS AND SUPPLIERS.  No customer which individually
accounted for more than 5% of Target's gross revenues during the 12-month period
preceding the date hereof, 


                                      21

<PAGE>

and no supplier of Target, has canceled or otherwise terminated, or made any 
written threat to Target to cancel or otherwise terminate its relationship 
with Target, or has decreased materially its services or supplies to Target 
in the case of any such supplier, or its usage of the services or products of 
Target in the case of such customer, and to Target's knowledge, no such 
supplier or customer has threatened to cancel or otherwise terminate its 
relationship with Target or to decrease materially its services or supplies 
to Target or its usage of the services or products of Target, as the case may 
be.  Target has not knowingly breached, so as to provide a benefit to Target 
that was not intended by the parties, any agreement with, or engaged in any 
fraudulent conduct with respect to, any customer or supplier of Target.

          3.29 MATERIAL CONTRACTS.  Except for the material contracts described
in SCHEDULE 3.29 (collectively, the "MATERIAL CONTRACTS"), Target is not a party
to or bound by any material contract, including without limitation:

               (a)  any distributor, sales, advertising, agency or
manufacturer's representative contract;

               (b)  any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contact more
than $50,000 over the life of the contract;

               (c)  any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with generally accepted accounting
principles;

               (d)  any contract for capital expenditures in excess of $50,000
in the aggregate;

               (e)  any contract limiting the freedom of the Target to engage in
any line of business or to compete with any other Person as that term is defined
in the Exchange Act, as defined herein, or any confidentiality, secrecy or 
non-disclosure contract;

               (f)  any contract pursuant to which the Target is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property;

               (g)  any contract with any person with whom the Target does not
deal at arm's length within the meaning of the Internal Revenue Code; or

               (h)  any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person.

          3.30 NO BREACH OF MATERIAL CONTRACTS.  The Target has performed all of
the obligations required to be performed by it on or prior to the date hereof,
and to its knowledge is 


                                      22

<PAGE>

not alleged to be in default in respect of any Material Contract.  Each of 
the Material Contracts is in full force and effect, unamended, and there 
exists no default or event of default or event, occurrence, condition or act, 
with respect to Target or to Target's knowledge with respect to the other 
contracting party, which, with the giving of notice, the lapse of the time or 
the happening of any other event or conditions, would become a default or 
event of default under any Material Contract.  True, correct and complete 
copies of all Material Contracts have been delivered to the Acquiror.

          3.31 THIRD PARTY CONSENTS.   SCHEDULE 3.31 to the Target Disclosure
Schedule lists all Material Contracts that require a consent to a change in
control of Target or pursuant to which the Merger or the transactions
contemplated hereby would constitute a breach.  Such list is complete and
accurate.  

          3.32 EXPORT CONTROL LAWS.  Target represents and warrants that it has
conducted its export transactions in accordance with applicable provisions of
United States export control laws and regulations, including but not limited to
the Export Administration Act and implementing Export Administration
Regulations.  Without limiting the foregoing, Target represents and warrants
that:

               (a)  To its knowledge, Target has obtained all export licenses
and other approvals required for its exports of products, software and
technologies from the United States;

               (b)  Target is in compliance with the terms of all applicable
export licenses or other approvals;

               (c)  There are no pending or threatened claims against Target
with respect to such export licenses or other approvals;

               (d)  There are no actions, conditions or circumstances pertaining
to Target's export transactions that may give rise to any future claims; and

               (e)  No consents or approvals for the transfer of export licenses
to Acquiror are required, or such consents and approvals can be obtained
expeditiously without material cost.

          3.33 REPRESENTATIONS COMPLETE.  None of the representations or
warranties made by Target herein or in any Schedule hereto, including the Target
Disclosure Schedule, or certificate furnished by Target pursuant to this
Agreement,  when all such documents are read together in their entirety,
contains any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.


                                      23

<PAGE>

                                      ARTICLE IV

                      REPRESENTATIONS AND WARRANTIES OF ACQUIROR

          Except as disclosed in a document of even date herewith and delivered
by Acquiror to Target prior to the execution and delivery of this Agreement (the
"ACQUIROR DISCLOSURE SCHEDULE"), Acquiror represents and warrants to Target as
follows:

          4.1  ORGANIZATION, STANDING AND POWER.  Each of Acquiror and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization.  Each of Acquiror and Merger Sub
has the corporate power to own its properties and to carry on its business as
now being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on
Acquiror.  Neither Acquiror nor any of its subsidiaries is in violation of any
of the provisions of its Certificate of Incorporation or Bylaws or equivalent
organizational documents.  

          4.2  CAPITAL STRUCTURE.  The authorized capital stock of Acquiror
consists of 80,000,000 shares of Common Stock, par value $0.01 per share (the
"ACQUIROR COMMON STOCK"), and 5,000,000 shares of Preferred Stock, par value
$0.01 per share, of which there were issued and outstanding as of the close of
business on March 31, 1998, 16,538,087 shares of Acquiror Common Stock and no
shares of Preferred Stock.  All outstanding shares of Acquiror Common Stock have
been duly authorized, validly issued, fully paid and are nonassessable and free
of any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof.  The shares of Acquiror Common Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and non-assessable, and free of preemptive rights or rights of first
refusal created by statute, Acquiror's Certificate of Incorporation or Bylaws or
any agreement to which Acquiror is a party or by which it is bound.  The
authorized capital stock of Merger Sub consists of 1000 shares of Common Stock,
all of which are issued and outstanding, are owned by Acquiror and have been
duly authorized, validly issued, and are fully paid and nonassessable.

          4.3  AUTHORITY.  Each of Acquiror and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of Acquiror and
Merger Sub.  This Agreement has been duly executed and delivered by Acquiror and
Merger Sub and constitutes the valid and binding obligations of each of Acquiror
and Merger Sub.  The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of Acquiror or Merger Sub or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or 


                                      24

<PAGE>

regulation applicable to Acquiror or Merger Sub or their properties or 
assets.  No consent, approval, order or authorization of, or registration, 
declaration or filing with, any Governmental Entity, is required by or with 
respect to Acquiror or Merger Sub in connection with the execution and 
delivery of this Agreement by Acquiror and Merger Sub or the consummation by 
Acquiror and Merger Sub of the transactions contemplated hereby, except for: 
(i) the filing of the Certificate of Merger, as provided in Section 1.2; (ii) 
the filing of a Form 8-K with the SEC and the National Association of 
Securities Dealers (the "NASD") within 15 days after the Effective Date and 
any required amendments thereto; (iii) any filings as may be required under 
applicable state securities laws and the securities laws of any foreign 
country; (iv) the filing with the Nasdaq National Market of a Notification 
Form for Listing of Additional Shares with respect to the shares of Acquiror 
Common Stock issuable upon conversion of the Target Capital Stock in the 
Merger; (v) the filing of a registration statement on Form S-8 with the SEC, 
or other applicable form covering the shares of Acquiror Common Stock 
issuable pursuant to outstanding options under the Target Stock Option Plan 
assumed by Acquiror; and (vi) such other consents, authorizations, filings, 
approvals and registrations which, if not obtained or made, would not have a 
Material Adverse Effect on Acquiror and would not prevent, materially alter 
or delay any of the transactions contemplated by this Agreement.

          4.4  SEC DOCUMENTS; FINANCIAL STATEMENTS.  Acquiror has made available
to Target each statement, report, registration statement (with the prospectus in
the form filed pursuant to Rule 424(b) of the Securities Act), definitive proxy
statement, and other filing filed with the SEC by Acquiror since January 1, 1996
(collectively, the "ACQUIROR SEC DOCUMENTS").  In addition, Acquiror has made
available to Target all exhibits to the Acquiror SEC Documents filed prior to
the date hereof, and will promptly make available to Target all exhibits to any
additional Acquiror SEC Documents filed prior to the Effective Time.  As of
their respective filing dates, the Acquiror SEC Documents were filed on a timely
basis and complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and the
Securities Act, and none of the Acquiror SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Acquiror SEC Document.  The financial
statements of Acquiror, including the notes thereto, included in the Acquiror
SEC Documents (the "ACQUIROR FINANCIAL STATEMENTS") were complete and correct in
all material respects as of their respective dates, complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto or,
in the case of unaudited statements included in Quarterly Reports on Form 10-Qs,
as permitted by Form 10-Q of the SEC).  The Acquiror Financial Statements fairly
present the consolidated financial condition and operating results of Acquiror
and its subsidiaries at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments).

          4.5  ABSENCE OF UNDISCLOSED LIABILITIES.  Acquiror has no material
obligations 


                                      25

<PAGE>

or liabilities of any nature (matured or unmatured, fixed or contingent) 
other than (i) those set forth or adequately provided for in the Balance 
Sheet included in Acquiror's Annual Report on Form 10-K for the fiscal year 
ended December 31, 1997 (the "ACQUIROR BALANCE SHEET"), (ii) those incurred 
in the ordinary course of business and not required to be set forth in the 
Acquiror Balance Sheet under generally accepted accounting principles, and 
(iii) those incurred in the ordinary course of business since the Acquiror 
Balance Sheet Date and consistent with past practice.

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

          4.7  BOARD APPROVAL.  The Board of Directors of each of Acquiror and
Merger Sub has approved this Agreement and the Merger.  No vote or consent of
Acquiror's stockholders is required for the consummation of the transactions
contemplated hereby.

          4.8  NO MATERIAL ADVERSE CHANGE.  Since the date of the balance sheet
included in the Acquiror's most recently filed report on Form 10-Q or Form 10-K,
Acquiror has conducted its business in the ordinary course and there has not
occurred:  (a) any material adverse change in the financial condition,
liabilities, assets or business of Acquiror other than continuing operating
losses; (b) any amendment or change in the Certificate of Incorporation or
Bylaws of Acquiror; or (c) any damage to, destruction or loss of any assets of
the Acquiror, (whether or not covered by insurance) that materially and
adversely affects the financial condition or business of Acquiror.

          4.9  LITIGATION.  There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Acquiror has received any
notice of assertion against Acquiror which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.

          4.10 TAXABLE TRANSACTION.  Acquiror does not intend to treat the
Merger as a tax-free reorganization and therefore the Merger may be a taxable
event for the securityholders of Target.

          4.11 REPRESENTATIONS COMPLETE.  None of the representations or
warranties made by Acquiror herein or in any Schedule hereto, including the
Acquiror Disclosure Schedule, or certificate furnished by Acquiror pursuant to
this Agreement, or the Acquiror SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.


                                      26

<PAGE>

                                      ARTICLE V

                         CONDUCT PRIOR TO THE EFFECTIVE TIME

          5.1  CONDUCT OF BUSINESS OF TARGET AND ACQUIROR.  Subject to the
limitations set forth in Section 5.2, the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, each of Target and Acquiror agrees (except to the extent
expressly contemplated by this Agreement or as consented to in writing by the
other), to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted.  Subject to the
limitations set forth in Section 5.2, Target further agrees to pay debts and
Taxes when due subject (i) to good faith disputes over such debts or Taxes and
(ii) to Acquiror's consent to the filing of material Tax Returns if applicable,
to pay or perform other obligations when due, and to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organizations, and use its reasonable efforts to keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time.  Each of Target
and Acquiror agrees to promptly notify the other of any event or occurrence not
in the ordinary course of its business, and of any event which has or would
reasonably be expected to have a Material Adverse Effect.  

          5.2  CONDUCT OF BUSINESS OF TARGET.  During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as set forth in the Target Disclosure
Schedule or as expressly contemplated by this Agreement, Target shall not do,
cause or permit any of the following, or allow, cause or permit any of its
subsidiaries to do, cause or permit any of the following, without the prior
written consent of Acquiror:

               (a)  CHARTER DOCUMENTS.  Cause or permit any amendments to its
Certificate of Incorporation or Bylaws other than as set forth in the
Certificate of Amendment to the Certificate of Incorporation of Target, attached
hereto as Exhibit E (the "Certificate of Amendment");

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

               (c)  STOCK OPTION PLANS, ETC.  Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted under its
stock plans, or lowering 


                                      27

<PAGE>

the exercise price of such options below the fair market value of Target 
Common Stock (except for any amendment required pursuant to Section 6.16) or 
authorize cash payments in exchange for any options or other rights granted 
under any of such plans;

               (d)  MATERIAL CONTRACTS.  Enter into any contract or commitment
which would be required to be set forth as a Material Contract on SCHEDULE 3.29
to the Target Disclosure Schedule if it had been entered into prior to the date
hereof, or violate, amend or otherwise modify or waive any of the terms of any
of any such material contracts, other than in the ordinary course of business
consistent with past practice;

               (e)  ISSUANCE OF SECURITIES.  Issue, deliver or sell or authorize
or propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options therefor outstanding as of the date of
this Agreement.

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

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

               (h)  DISPOSITIONS.  Sell, lease, license or otherwise dispose of
or encumber any of its properties or assets which are material, individually or
in the aggregate, to its business, taken as a whole, except for sales of
products in the ordinary course;

               (i)  INDEBTEDNESS.  Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;

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

               (k)  PAYMENT OF OBLIGATIONS.  Pay, discharge or satisfy in an
amount in excess of $30,000 in any one case or $60,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business,
other than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the Target Financial Statements;

               (l)  CAPITAL EXPENDITURES.  Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;


                                      28

<PAGE>

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

               (n)  TERMINATION OR WAIVER.  Terminate or waive any right or
rights which individually or in the aggregate would reasonably be expected to be
material in value to Target, other than in the ordinary course of business;

               (o)  EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES.  Adopt or
amend any employee benefit or stock purchase or option plan (except as provided
in Section 6.16 below), or hire any new director level or officer level
employee, pay any special bonus or special remuneration to any employee or
director or increase the salaries or wage rates of its employees other than
pursuant to normal yearly adjustments in accordance with past practice;

               (p)  SEVERANCE ARRANGEMENTS.  Grant any severance or termination
pay (i) to any director or officer or (ii) to any other employee except payments
made pursuant to standard written agreements outstanding on the date hereof;

               (q)  LAWSUITS.  Commence a lawsuit or take any action in
connection with any existing or threatened lawsuit, administrative proceeding,
mediation, arbitration or other similar proceeding other than (i) for the
routine collection of bills, or (ii) in such cases where it in good faith
determines that failure to commence suit or take such action would result in the
material impairment of a valuable aspect of its business, the waiver of any
right or claim, and/or the violation of any statute of limitations, statutory or
judicial deadline, provided that it consults with Acquiror prior to the filing
of such a suit or taking of such action. 

               (r)  ACQUISITIONS.  Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its business;

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

               (t)  NOTICES.  Target shall give any notices and other
information required to be given prior to the Effective Date to the employees of
Target in connection with the transactions provided for in this Agreement; 

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


                                      29

<PAGE>

               (v)  OTHER.  Take or agree in writing or otherwise to take, any
of the actions described in Sections 5.2(a) through (u) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect in any material respect or prevent it from
performing or cause it not to perform its covenants hereunder in any material
respect.

          5.3  NO SOLICITATION.  During the period from the date of this
Agreement and continuing until the earlier of: (i) the termination of this
Agreement; (ii) the Effective Time; and  (iii) the Drop-Dead Date (as defined
in, and subject to the right to extend provided in, Section 8.1(b)), Target and
the officers, directors, employees or other agents of Target will not, directly
or indirectly, solicit, initiate, engage or participate in any discussions or
negotiations or enter into any agreement or arrangement regarding the sale of
assets of Target or any merger, business combination, restructuring,
recapitalization, liquidation or similar transaction involving Target, or the
sale or transfer of shares of Target Capital Stock (provided, however, that
stockholders who have executed Stockholder Agreements may make transfers prior
to the record date of the Target Stockholders' Meeting in accordance with
Section 1.1(b) of such Stockholder Agreement),  or afford access to the
properties, books or records of Target to any person that has advised Target
that it may be considering making, or that has made, a proposal for such a
transaction.  Target will promptly notify Acquiror after receipt of any such
proposal and will keep Acquiror fully informed of the status and details of any
such proposal, request or any correspondence or communications related thereto. 








                                      30

<PAGE>

                                      ARTICLE VI

                                ADDITIONAL AGREEMENTS

          6.1  CONSENT OF STOCKHOLDERS.  Target shall promptly after the date
hereof take all action necessary in accordance with Delaware Law and its
Certificate of Incorporation and Bylaws, as amended, to secure the written
consent of its stockholders within fifteen (15) days of the date of this
Agreement.  Target shall use its reasonable efforts to solicit from stockholders
of Target proxies or written consent in favor of the Merger and shall take all
other action necessary or advisable to facilitate the vote or consent of
stockholders required to effect the Merger.  To the extent Acquiror holds
proxies directing Acquiror to vote in favor of the Merger, Acquiror shall do so
in any such meeting or written consent in lieu thereof; provided that the
requirement to vote in favor of the Merger shall not be deemed to be, or to
require, a waiver by Acquiror of the satisfaction of any of the conditions to
Acquiror's obligation to consummate this Agreement and the transactions
contemplated hereby and Acquiror's obligation to consummate and effect the
Agreement and the transactions contemplated hereby shall continue to be subject
to the satisfaction of all such conditions.

          6.2  ACCESS TO INFORMATION.

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

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

               (c)  No information or knowledge obtained in any investigation
pursuant to this Section 6.2 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.

               (d)  With respect to such investigation, all inquiries, requests,
correspondence or other communications shall be directed to the attention
Michael McGowen for Target and to the attention of Tim Kinnear for Acquiror.    

          6.3  CONFIDENTIALITY.  The parties acknowledge that Acquiror and
Target have previously executed two non-disclosure agreements dated February 23,
1998 (the "CONFIDENTIALITY AGREEMENTS"), which Confidentiality Agreements shall,
except for paragraph 8 of the Confidentiality Agreements which shall be deemed
superseded by this Agreement, continue in full force and effect in accordance
with their terms.


                                      31

<PAGE>

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

          6.5  CONSENTS; COOPERATION.  

               (a)  Each of Acquiror, Merger Sub and Target shall promptly apply
for or otherwise seek, and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger, and
shall use commercially reasonable efforts to obtain all necessary consents,
waivers and approvals under any of its material contracts in connection with the
Merger for the assignment thereof or otherwise.  


          6.6  STOCKHOLDER REPRESENTATION AGREEMENTS.  Target shall cause to be
delivered prior to the Effective Time to each of the holders of Target Common
Stock not executing Stockholder Agreements in accordance with Section 6.7, a
Stockholder Representation Agreement (the "STOCKHOLDER REPRESENTATION
AGREEMENT") in the form attached hereto as EXHIBIT C.

          6.7  STOCKHOLDER AGREEMENTS/IRREVOCABLE PROXIES.  Target shall, on
behalf of Acquiror and pursuant to the request of Acquiror, cause holders of
more than 63% of the outstanding shares of Target Capital Stock which shall
include holders of more than 57% of all outstanding shares of Target Preferred
Stock, to execute and deliver to Acquiror a Stockholder Agreement substantially
in the form of EXHIBIT B and an Irrevocable Proxy substantially in the form of
Exhibit A attached thereto concurrently with the execution of this Agreement.

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


                                      32

<PAGE>

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

          6.10 EMPLOYEE BENEFIT PLANS.  

               (a)  ASSUMPTION OF OPTIONS.  At the Effective Time, the Target
Stock Option Plan and each outstanding option to purchase shares of Target
Common Stock under the Target Stock Option Plan, whether vested or unvested,
will be assumed by Acquiror in accordance with the provisions described below.
SCHEDULE 6.10 hereto sets forth a true and complete list as of the date hereof
of all holders of outstanding options under the Target Stock Option Plan
including the number of shares of Target Capital Stock subject to each such
option, the exercise or vesting schedule, the exercise price per share and the
term of each such option.  On the Closing Date, Target shall deliver to Acquiror
an updated SCHEDULE 6.10 hereto current as of such date.  Each such option so
assumed by Acquiror under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Target Stock Option Plan and
the applicable stock option agreement immediately prior to the Effective Time,
except that (i) such option will be exercisable for that number of whole shares
of Acquiror Common Stock equal to the product of the number of shares of Target
Common Stock that were issuable upon exercise of such option immediately prior
to the Effective Time multiplied by the Option Exchange Ratio (as defined in
EXHIBIT A) and rounded down to the nearest whole number of shares of Acquiror
Common Stock, and (ii) the per share exercise price for the shares of Acquiror
Common Stock issuable upon exercise of such assumed option will be equal to the
quotient determined by dividing the exercise price per share of Target Common
Stock at which such option was exercisable immediately prior to the Effective
Time by the Option Exchange Ratio, rounded up to the nearest whole cent. 
Consistent with the terms of the Target Stock Option Plan and the documents
governing the outstanding options under such plan, the Merger will not terminate
any of the outstanding options under the Target Stock Option Plan or accelerate
the exercisability or vesting of such options or the shares of Acquiror Common
Stock which will be subject to those options upon the Acquiror's assumption of
the options in the Merger.  Target shall take all appropriate action to solicit
(in order to obtain prior to the Closing Date) consents (in form satisfactory to
Acquiror) from the holders of such outstanding options for the assumption of
such options pursuant to this Section 6.10.  Within 20 business days after the
Effective Time, Acquiror will issue to each person who, immediately prior to the
Effective Time was a holder of an outstanding option under the Target Stock
Option Plan a document in form and substance satisfactory to Target evidencing
the foregoing assumption of such option by Acquiror.

               (b) ASSIGNMENT OF REPURCHASE OPTIONS. All outstanding rights of
Target which it may hold immediately prior to the Effective Time to repurchase
unvested shares of Target Common Stock (the "REPURCHASE OPTIONS") shall be
assigned to Acquiror in the Merger 


                                      33

<PAGE>

and shall thereafter be exercisable by Acquiror upon the same terms and 
conditions in effect immediately prior to the Effective Time, except that the 
shares purchasable pursuant to the Repurchase Options, the exercise price per 
share shall be adjusted to reflect the Option Exchange Ratio. 

               (c) BENEFITS.  Employees of the Surviving Corporation shall be
offered benefits similar to those provided to employees of Acquiror, including
credit for length of service with Target.

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

          6.12 FORM S-8.  Acquiror agrees to file, no later than 20 days after
the Closing, a registration statement on Form S-8 covering the shares of
Acquiror Common Stock issuable pursuant to outstanding options under the Target
Stock Option Plan assumed by Acquiror.  Target shall cooperate with and assist
Acquiror in the preparation of such registration statement.

          6.13 LISTING OF ADDITIONAL SHARES.  Prior to the Effective Time,
Acquiror shall file with the Nasdaq National Market a Notification Form for
Listing of Additional Shares with respect to the shares of Acquiror Common Stock
issuable upon conversion of the Target Capital Stock in the Merger and upon
exercise of the options under the Target Stock Option Plan assumed by Acquiror.

          6.14 EXPENSES.  Subject to the provisions of Article VIII below,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the Merger and the transactions contemplated
hereby and thereby shall be paid by the party incurring such expense; provided,
however, that any out-of-pocket expenses incurred by Target in excess of
$100,000 for fees and expenses of legal counsel shall remain an obligation of
Target's stockholders.  If Acquiror, Target or the Surviving Corporation
receives any invoices for amounts in excess of said amounts, it may, with
Acquiror's written approval, pay such fees; provided, however, that such payment
shall, if not promptly reimbursed by the stockholders of Target at Acquiror's
request, constitute "Damages" recoverable under the Escrow Agreement.  

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

          6.16 AMENDMENT OF STOCK OPTION PLAN.  The Board of Directors of Target
shall take all appropriate action to make any necessary amendments to the terms
of the Target Stock 


                                      34

<PAGE>

Option Plan or grants thereunder to permit the assumption of Target Stock 
Options by Acquiror in accordance with the terms hereof.

          6.17 INFORMATION STATEMENT.  As soon as practicable after the
execution of this Agreement, Acquiror and Target shall prepare an Information
Statement for the stockholders of Target to approve (by vote or written consent
in lieu thereof) this Agreement, and the transactions contemplated hereby, and
as notice to the other stockholders of Target of the Merger and their rights
under Delaware Law.  The Information Statement shall constitute a disclosure
document for the offer and issuance of the shares of Acquiror Common Stock to be
received by the holders of Target Capital Stock in the Merger.  Acquiror and
Target shall use their respective best efforts to cause the Information
Statement to comply with applicable federal and state securities laws
requirements.  Each of Acquiror and Target agrees to provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement.  Target will promptly advise Acquiror, and Acquiror will
promptly inform Target, in writing if at any time prior to the Effective Time
either Target or Acquiror shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Information Statement in
order to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law.  The Information Statement shall
contain the recommendation of the Board of Directors of Target that the Target
stockholders approve the Merger and this Agreement and the conclusion of the
Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the stockholders of Target.  Anything to the contrary contained
herein notwithstanding, Target shall not include in the Information Statement
any information with respect to Acquiror or its affiliates or associates, the
form and content of which information shall not have been approved by Acquiror
prior to such inclusion.  Target shall cause the Information Statement to be
delivered to the stockholders of Target with any other necessary documentation
to be delivered to the stockholders pursuant to Section 6.1 and Section 6.6 and
shall cause the Information Statement to be delivered to the holders of
outstanding and unexercised options to purchase shares of Target Common Stock in
connection with the solicitation of consents of such holders of options pursuant
to Section 6.10, as soon as practicable after the preparation of the Information
Statement.

          6.18 TERMINATION OF 401(K) PLAN. Target shall, prior to the Closing
Date, take all actions necessary and appropriate to terminate Target's 401(k)
Retirement Savings Plan (the "TARGET 401(K) PLAN") in form and substance
satisfactory to Acquiror and no further contributions shall be made to the
Target 401(k) Plan. 

          6.19 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.  Prior to the
date of the meeting of the stockholders of Target to approve the Merger as set
forth in Section 6.1, Target shall cause the Amended and Restated Certificate of
Incorporation to be approved by all necessary corporate and stockholder action
and the Amended and Restated Certificate of Incorporation shall have been filed
with, and accepted by, the Secretary of State of the State of Delaware.


                                      35

<PAGE>
                                       
                                  ARTICLE VII

                            CONDITIONS TO THE MERGER

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

               (a)  STOCKHOLDER APPROVAL.  This Agreement and the Merger 
shall have been approved and adopted (including by written consent) by the 
holders of at least 63% of the outstanding shares of Target Capital Stock, 
and holders of no more than 15% of the outstanding shares of Target Capital 
Stock shall have voted against the Merger or demanded appraisal rights under 
Delaware Law (it being understood that the period in which stockholders may 
demand appraisal rights may not have expired prior to the Closing Date).  Any 
agreements or arrangements that may result in the payment of any amount that 
would not be deductible by reason of Section 280G of the Code shall have been 
approved by such number of stockholders of Target as is required by the terms 
of Section 280G(b)(5)(B) and shall be obtained in a manner which satisfies 
all applicable requirements of such Code Section 280(G)(b)(5)(B) and the 
proposed Treasury Regulations thereunder, including (without limitation) Q-7 
of Section 1.280G-1 of such proposed regulations.

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

               (c)  GOVERNMENTAL APPROVAL.  Acquiror and Target and their 
respective subsidiaries shall have timely obtained from each Governmental 
Entity all approvals, waivers and consents (including the satisfaction of any 
applicable waiting period), if any, necessary for consummation of or in 
connection with the Merger and the several transactions contemplated hereby, 
including such approvals, waivers, consents and waiting periods as may be 
required under the Securities Act, and under state Blue Sky laws.

               (d)  ESCROW AGREEMENT.  Acquiror, Target, Escrow Agent and the 

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<PAGE>

Stockholder's Agent (as defined in Article IX hereto) shall have entered into 
an Escrow Agreement substantially in the form attached hereto as EXHIBIT D.

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

               (a)  REPRESENTATIONS, WARRANTIES AND COVENANTS.  Except as 
disclosed in the Acquiror Disclosure Schedule dated the date of this 
Agreement, (i) the representations and warranties of Acquiror in this 
Agreement shall be true and correct in all material respects (except for such 
representations and warranties that are qualified by their terms by a 
reference to materiality which representations and warranties as so qualified 
shall be true in all respects) on and as of the Closing Date as though such 
representations and warranties were made on and as of such date and (ii) 
Acquiror shall have performed and complied in all material respects with all 
covenants, obligations and conditions of this Agreement required to be 
performed and complied with by them as of the Closing Date.  

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

                  (i)      except as disclosed in the Acquiror Disclosure 
Schedule dated the date of this Agreement, all representations and warranties 
made by Acquiror under this Agreement are true and complete in all material 
respects (except for such representations and warranties that are qualified 
by their terms by reference to materiality which representations and 
warranties as so qualified are true in all respects); and

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

               (c)  NASDAQ ADDITIONAL SHARES APPLICATION.  The Notification 
Form for Listing of Additional Shares referred to in Section 6.13 above shall 
have been filed by Acquiror.

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

               (a)  REPRESENTATIONS, WARRANTIES AND COVENANTS.  Except as 
disclosed in the Target Disclosure Schedule dated the date of this Agreement 
(i) the representations and warranties of Target in this Agreement shall be 
true and correct in all material respects (except for such representations 
and warranties that are qualified by their terms by a reference to 
materiality which representations and warranties as so qualified shall be 
true in all respects) on

                                      37
<PAGE>

and as of the Closing Date as though such representations and warranties were 
made on and as of such time and (ii) Target shall have performed and complied 
in all material respects with all covenants, obligations and conditions of 
this Agreement required to be performed and complied with by it as of the 
Closing Date.

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

                  (i)      except as set forth in the Target Disclosure 
Schedule dated the date of this Agreement, all representations and warranties 
made by Target under this Agreement are true and complete in all material 
respects (except for such representations and warranties that are qualified 
by their terms by reference to materiality which representations and 
warranties as so qualified are true in all respects); and 

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

               (c)  THIRD PARTY CONSENTS.  Acquiror shall have been furnished 
with evidence satisfactory to it of the consent or approval of those persons 
whose consent or approval shall be required in connection with the Merger set 
forth on SCHEDULE 3.31 to the Target Disclosure Schedule.

               (d)  INJUNCTIONS OR RESTRAINTS ON CONDUCT OF BUSINESS.  No 
temporary restraining order, preliminary or permanent injunction or other 
order issued by any court of competent jurisdiction or other legal or 
regulatory restraint provision limiting or restricting Acquiror's conduct or 
operation of the business of Target, following the Merger shall be in effect, 
nor shall any proceeding brought by an administrative agency or commission or 
other Governmental Entity, domestic or foreign, seeking the foregoing be 
pending.

               (e)  NO MATERIAL ADVERSE CHANGES.  There shall not have 
occurred any event which has had a Material Adverse Effect with respect to 
Target.

               (f)  STOCKHOLDER AGREEMENTS.  Acquiror shall have received 
from holders of more than 63% of the outstanding shares of Target Capital 
Stock and more than 57% of the outstanding shares of Target Preferred Stock 
an executed Stockholder Agreement in substantially the form attached hereto 
as EXHIBIT B.

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

                                      38
<PAGE>

requirements of Treasury Regulation Section 1.897-2(h)(2) and substantially 
in the form of EXHIBIT F attached hereto along with written  authorization 
for Acquiror to deliver such notice form to the Internal Revenue Service on 
behalf of Target upon the Closing of the Merger.

               (h)  RESIGNATION OF DIRECTORS AND OFFICERS.  The directors and 
officers of Target in office immediately prior to the Effective Time shall 
have resigned as directors and officers, as applicable, of Target effective 
as of the Effective Time.  

               (i)  CERTIFICATES OF GOOD STANDING.  Target shall, prior to 
the Closing Date, provide Acquiror a certificate from the Secretary of State 
of Delaware, and from each other jurisdiction in which Target or any 
subsidiary is qualified to do business, as to Target's or any subsidiary's 
good standing and payment of all applicable taxes.

               (j)  TERMINATION OF 401(K) PLAN.  Target shall have terminated 
the Target 401(k) Plan in accordance with Section 6.18.

                                 ARTICLE VIII

                      TERMINATION, AMENDMENT AND WAIVER

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

               (a)  by mutual consent duly authorized by the Board of 
Directors of Acquiror, Merger Sub and Target;

               (b)  by either Acquiror or Target, if the Closing shall not 
have occurred on or before May 15, 1998 (the "DROP-DEAD DATE"), (provided, a 
later date may be agreed upon in writing by the parties hereto, and provided 
further that the right to terminate this Agreement under this Section 8.1(b) 
shall not be available to Target in the event an action or failure to act on 
the part of Target or its stockholders has been the cause or resulted in the 
failure of the Merger to occur on or before such date and such action or 
failure to act constitutes a breach of this Agreement, and in such event 
Acquiror shall have the right to extend the Drop-Dead Date to June 15, 1998);

               (c)  by Acquiror, if: (i) Target shall breach in any material 
respect any representation, warranty, obligation or agreement hereunder 
(unless any such representation, warranty, obligation or agreement is 
qualified by materiality, then such breach shall be deemed to have occurred 
if Target breached such provision in any respect) and such breach shall not 
have been cured within five (5) business days of receipt by Target of written 
notice of such breach; (ii) the Board of Directors of Target shall have 
withdrawn or modified its recommendation of this Agreement or the Merger in a 
manner adverse to Acquiror or shall have resolved to do any of the foregoing; 
or (iii) for any reason Target fails to obtain written consents 

                                      39
<PAGE>

of the stockholders of Target in accordance with Section 6.1 by the date 
which is fifteen (15) days from the date hereof (provided that the right to 
terminate this Agreement by Acquiror under Sections 8.1(c)(i) and (ii) shall 
not be available to Acquiror where Acquiror is at that time in breach in any 
material respect (unless any such representation, warranty, obligation or 
agreement is qualified by materiality, then such breach shall be deemed to 
have occurred if Acquiror breached such provision in any respect) of this 
Agreement);

               (d)  by Target, if Acquiror shall breach in any material 
respect any representation, warranty, obligation or agreement hereunder 
(unless any such representation, warranty, obligation or warranty is 
qualified by materiality, then such breach shall be deemed to have occurred 
if Acquiror breached such provision in any respect) and such breach shall not 
have been cured within five (5) business days following receipt by Acquiror 
of written notice of such breach (provided that the right to terminate this 
Agreement by Target under this Section 8.1(d) shall not be available to 
Target where Target is at that time in breach in any material respect (unless 
any such representation, warranty, obligation or agreement is qualified by 
materiality, then such breach shall be deemed to have occurred if Target 
breached such provision in any respect) of this Agreement);

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

               (f)  by Target if any permanent injunction or other order of a 
court or other competent authority preventing the consummation of the Merger 
shall have become final and nonappealable.

          8.2  EFFECT OF TERMINATION.  In the event of termination of this 
Agreement as provided in Section 8.1, this Agreement shall forthwith become 
void and there shall be no liability or obligation on the part of Acquiror or 
Target or their respective officers, directors, stockholders or affiliates, 
except to the extent that such termination results from the breach by a party 
hereto of any of its representations, warranties or covenants set forth in 
this Agreement; provided that the provisions of Section 6.3 
(Confidentiality), Section 8.3 (Expenses Upon Termination) and this Section 
8.2 shall remain in full force and effect and survive any termination of this 
Agreement.

          8.3  EXPENSES UPON TERMINATION.

               (a)  Subject to Sections 6.14 and 8.3(b), whether or not the 
Merger is consummated, all costs and expenses incurred in connection with 
this Agreement and the transactions contemplated hereby (including, without 
limitation, the fees and expenses of its advisers, accountants and legal 
counsel) shall be paid by the party incurring such expense.

                                      40
<PAGE>

               (b)  In the event that (i) Acquiror shall terminate this 
Agreement pursuant to Section 8.1(c) or (ii) Acquiror shall terminate this 
Agreement pursuant to clause (ii) of Section 8.1(e) following a failure of 
the stockholders of Target to approve this Agreement, then Target shall 
reimburse Acquiror for all of the out-of-pocket costs and expenses incurred 
by Acquiror in connection with this Agreement and the transactions 
contemplated hereby (including, without limitation, the reasonable fees and 
expenses of its advisors, accountants and legal counsel).

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

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

                                  ARTICLE IX

                          ESCROW AND INDEMNIFICATION

          9.1  ESCROW FUND.  As soon as practicable after the Effective 
Time, the number of shares of Acquiror Common Stock which is equal to the 
number obtained by dividing $675,000 by the Acquiror Stock Price (the "ESCROW 
SHARES") shall be registered in the name of, and be deposited with a 
financial or other institution selected by Acquiror with the reasonable 
consent of Target as escrow agent (the "ESCROW AGENT"), such deposit 
(together with any shares of Acquiror capital stock received upon a stock 
split or stock dividend thereon) to constitute the Escrow Fund and to be 
governed by the terms set forth herein and in the Escrow Agreement attached 
hereto as EXHIBIT D. The Escrow Fund shall be available to compensate 
Acquiror pursuant to the indemnification obligations of the stockholders of 
Target.  Such Escrow Shares shall be set aside out of the shares of Acquiror 
Common Stock issuable upon conversion of Target Common Stock in the Merger, 
pro rata for each holder of Target Common Stock based on the number of shares 
of Target Common Stock held by such holder and the total number of shares of 
Target Common Stock outstanding immediately prior to the Effective Time.

                                      41
<PAGE>

          9.2  INDEMNIFICATION.  

               (a)  Subject to the limitations set forth in this Article IX, 
the stockholders of Target immediately prior to the Effective Time will 
indemnify and hold harmless Acquiror and its officers, directors, agents and 
employees, and each person, if any, who controls or may control Acquiror 
within the meaning of the Securities Act (hereinafter referred to 
individually as an "INDEMNIFIED PERSON" and collectively as "INDEMNIFIED 
PERSONS") from and against any and all losses, costs, damages, liabilities 
and expenses arising from claims, demands, actions, causes of action, 
including, without limitation, reasonable legal fees (collectively, 
"DAMAGES") arising out of any misrepresentation or breach of or default in 
connection with any of the representations, warranties, covenants and 
agreements given or made by Target or the stockholders in this Agreement, the 
Target Disclosure Schedules or any exhibit or schedule to this Agreement.  
The amount of such indemnification obligation shall be limited to the Escrow 
Fund; provided, however, that such limitation shall not apply to any claims 
based on fraud.

               (b)  Acquiror and Target each acknowledge that such Damages, 
if any, would relate to unresolved contingencies existing at the Effective 
Time, which if resolved at the Effective Time would have led to a reduction 
in the total number of shares Acquiror would have agreed to issue in 
connection with the Merger.  Nothing in this Agreement shall limit the 
liability (i) of Target for any breach of any representation, warranty or 
covenant if the Merger does not close, or (ii) of any Target stockholder in 
connection with any breach by such stockholder of the Stockholder Agreement, 
the Stockholder Representation Agreement or the Irrevocable Proxy.

          9.3  ESCROW PERIOD.  The Escrow Period shall terminate at the 
expiration of twelve (12) months after the Effective Time; provided, however, 
that a portion of the Escrow Shares, which is necessary to satisfy any 
unsatisfied claims specified in any Officer's Certificate (defined in Section 
9.4 below) theretofore delivered to the Escrow Agent prior to termination of 
the Escrow Period with respect to facts and circumstances existing prior to 
expiration of the Escrow Period, shall remain in the Escrow Fund until such 
claims have been resolved. 

          9.4  CLAIMS UPON ESCROW FUND.

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

                    (i) stating that Damages exist and the amount thereof, and

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

the Escrow Agent shall, subject to the provisions of Section 9.5 and 9.6 
below, deliver to Acquiror out of the Escrow Fund, as promptly as 
practicable, Acquiror Common Stock or other assets held in the Escrow Fund 
having a value equal to such Damages.

                                      42
<PAGE>

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

          9.5  OBJECTIONS TO CLAIMS.  At the time of delivery of any 
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's 
Certificate shall be delivered to the Stockholders' Agent (defined in Section 
9.7 below) and for a period of thirty (30) days after such delivery to the 
Escrow Agent of such Officer's Certificate, the Escrow Agent shall make no 
delivery of Acquiror Common Stock or other property pursuant to Section 9.4 
hereof unless the Escrow Agent shall have received written authorization from 
the Stockholders' Agent to make such delivery.  After the expiration of such 
thirty (30) day period, the Escrow Agent shall make delivery of the Acquiror 
Common Stock or other property in the Escrow Fund in accordance with Section 
9.4 hereof, provided that no such payment or delivery may be made if the 
Stockholders' Agent shall object in a written statement to the claim made in 
the Officer's Certificate, and such statement shall have been delivered to 
the Escrow Agent and to Acquiror prior to the expiration of such thirty (30) 
day period.  

          9.6  RESOLUTION OF CONFLICTS; ARBITRATION.

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

               (b)  If no such agreement can be reached after good faith 
negotiation after expiration of the second 30-day period provided above, 
either Acquiror or the Stockholders' Agent may, by written notice to the 
other, demand arbitration of the matter unless the amount of the damage or 
loss is at issue in pending litigation with a third party, in which event 
arbitration shall not be commenced until such amount is ascertained or both 
parties agree to arbitration; and in either such event the matter shall be 
settled by arbitration conducted by three arbitrators.  Within fifteen (15) 
days after such written notice is sent, Acquiror and the Stockholders' Agent 
shall each select one arbitrator, and the two arbitrators so selected shall 
select a third arbitrator.  The decision of the arbitrators as to the 
validity and amount of any claim in such Officer's Certificate shall be 
binding and conclusive upon the parties to this Agreement, and 
notwithstanding anything in Section 9.6 hereof, the Escrow Agent shall be 
entitled to act in accordance with such decision and make or withhold 
payments out of the Escrow Fund in 

                                      43
<PAGE>

accordance therewith.

               (c)  Judgment upon any award rendered by the arbitrators may 
be entered in any court having jurisdiction.  Any such arbitration shall be 
held in Dallas County, Texas under the commercial rules then in effect of the 
American Arbitration Association.  For purposes of this Section 9.7(c), in 
any arbitration hereunder in which any claim or the amount thereof stated in 
the Officer's Certificate is at issue, Acquiror shall be deemed to be the 
"NON-PREVAILING PARTY" unless the arbitrators award Acquiror more than 
three-fifths (3/5) of the amount in dispute, plus any amounts not in dispute; 
otherwise, the Target stockholders for whom shares of Target Common Stock 
otherwise issuable to them have been deposited in the Escrow Fund shall be 
deemed to be the "NON-PREVAILING PARTY."  The Non-Prevailing Party to an 
arbitration shall pay its own expenses, the fees of each arbitrator, the 
administrative fee of the American Arbitration Association, and the expenses, 
including without limitation, attorneys' fees and costs, reasonably incurred 
by the other party to the arbitration.

          9.7  STOCKHOLDERS' AGENT.

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

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

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

                                      44

<PAGE>

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

          9.9  THIRD-PARTY CLAIMS.  In the event Acquiror becomes aware of a 
third-party claim which Acquiror believes may result in a demand against the 
Escrow Fund, Acquiror shall promptly notify the Stockholders' Agent of such 
claim, and the Stockholders' Agent and the Target stockholders for whom 
shares of Acquiror Common Stock otherwise issuable to them are deposited in 
the Escrow Fund shall be entitled, at their expense, to participate in any 
defense of such claim.  Acquiror may not effect the settlement of any such 
claim without the consent of the Stockholders' Agent, which consent shall not 
be unreasonably withheld.  In the event that the Stockholders' Agent has 
consented to any such settlement, the Stockholders' Agent shall have no power 
or authority to object under Section 9.7 or any other provision of this 
Article IX to the amount of any claim by Acquiror against the Escrow Fund for 
indemnity with respect to such settlement.

          9.10 NO CLAIMS BASED ON CONSENTED BREACHES.  The indemnification 
obligations of the holders of Target Common Stock immediately prior to the 
Effective Time pursuant to this Article IX shall not apply to any Damages 
arising out of any misrepresentation, breach or default in connection with 
any of the representations, warranties, covenants or agreements given or made 
by Target in this Agreement, the Target Disclosure Schedules or any exhibit 
or schedule to this Agreement to the extent such misrepresentation, breach or 
default has been specifically identified and explained in writing by Target 
in a Notice of Breaches certified by the President of Target and delivered by 
Target to the Chief Financial Officer of Acquiror prior to the Closing Date.

                                  ARTICLE X

                              GENERAL PROVISIONS

          10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  The 
representations, warranties and agreements of each party hereto shall remain 
operative and in full force and effect regardless of any investigation made 
by or on behalf of any other party hereto, any person controlling any such 
party or any of their officers or directors, whether prior to or after the 
execution of this Agreement.  The representations, warranties and agreements 
of each party hereto shall survive the execution and delivery of this 
Agreement until the expiration of the Escrow Period; provided, however, that 
the representations and warranties of Target in Section 3.13 hereof and for 
matters involving fraud shall survive for a period equal to the statute 

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<PAGE>

of limitations for such matters. 

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

               (a)  if to Acquiror, to:

                    ODS Networks, Inc.
                    1101 E. Arapaho Road
                    Richardson, Texas  75081
                    Attention:  Tim Kinnear
                    Facsimile No.:  (972) 301-3841 


                    with a copy to:
                    
                    Brobeck, Phleger & Harrison LLP
                    301 Congress, Suite 1200
                    Austin, Texas 78701
                    Attention:     Ronald G. Skloss, Esq.
                    Facsimile No.: (512) 477-5813 

               (b)  if to Target, to:

                    Essential Communication Corporation
                    4374 Alexander Blvd. NE, Suite T
                    Albuquerque, New Mexico  87107
                    Attention:  Michael McGowen
                    Facsimile No.:  (505) 344-0408


                    with a copy to:

                    Cooley Godward LLP
                    One Maritime Plaza, 20th Floor
                    San Francisco, California  94111
                    Attention:     Isobel A. Jones, Esq.
                    Facsimile No.: (415) 951-3699
     
          10.3 INTERPRETATION.  When a reference is made in this Agreement to 
Exhibits, such reference shall be to an Exhibit to this Agreement unless 
otherwise indicated.  The words "include," "includes" and "including" when 
used herein shall be deemed in each case to be 

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<PAGE>

followed by the words "without limitation."  The phrase "made available" in 
this Agreement shall mean that the information referred to has been furnished 
and made available if requested by the party to whom such information is to 
be made available or in the case of the Acquiror SEC Documents, that such 
documents were furnished and available on the SEC's website.  The phrases 
"the date of this Agreement", "the date hereof", and terms of similar import, 
unless the context otherwise requires, shall be deemed to refer to the date 
first written above.  The table of contents and headings contained in this 
Agreement are for reference purposes only and shall not affect in any way the 
meaning or interpretation of this Agreement.

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

          10.5 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST.  This 
Agreement and the documents and instruments and other agreements specifically 
referred to herein or delivered pursuant hereto, including the Exhibits, the 
Schedules, including the Target Disclosure Schedule and the Acquiror 
Disclosure Schedule: (a) constitute the entire agreement among the parties 
with respect to the subject matter hereof and supersede all prior agreements 
and understandings, both written and oral, among the parties with respect to 
the subject matter hereof, except for the Confidentiality Agreements, which, 
except for paragraph 8 thereof, shall continue in full force and effect, and 
shall survive any termination of this Agreement or the Effective Time, in 
accordance with their terms; (b) are not intended to confer upon any other 
person any rights or remedies hereunder; and (c) shall not be assigned by 
operation of law or otherwise except as otherwise specifically provided.

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

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

          10.8 GOVERNING LAW.  This Agreement shall be governed by and 
construed in accordance with the laws of the State of Delaware without 
reference to such state's principles of conflicts of law.  Each of the 
parties hereto irrevocably consents to the exclusive jurisdiction of any 
court located within the State of Delaware, in connection with any matter 
based upon or arising out of this Agreement or the matters contemplated 
herein, agrees that process may be 

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<PAGE>

served upon them in any manner authorized by the laws of the State of 
Delaware for such persons and waives and covenants not to assert or plead any 
objection which they might otherwise have to such jurisdiction and such 
process.

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

                          [Signature page follows]








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<PAGE>

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

                           ODS NETWORKS, INC.




                           By: /s/ Timothy W. Kinnear
                               ----------------------------------
                           Name:   Timothy W. Kinnear
                           Title:  Vice President and 
                                   Chief Financial Officer


                           ECC ACQUISITION CORP.



                           By: /s/ Timothey W. Kinnear  
                               ----------------------------------
                           Name:   Timothy W. Kinnear
                           Title:  Chief Financial Officer
                                   and Secretary



                           ESSENTIAL COMMUNICATION CORPORATION



                           By: /s/ Michael McGowen       
                               ----------------------------------
                           Name:   Michael McGowen
                           Title:  President



                [SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

<PAGE>

                                  EXHIBIT A


                   CALCULATION OF THE COMMON EXCHANGE RATIO
                        AND THE OPTION EXCHANGE RATIO



     Capitalized terms used but not defined in this Exhibit A shall have the 
respective meanings ascribed to such terms in the Agreement and Plan of 
Merger by and among ODS Networks, Inc., ECC Acquisition Corp. and Essential 
Communication Corporation.

     The Common Exchange Ratio shall be calculated as follows:


           Per Share Amount (1)  =  Common Equivalent Consideration
                                    Common Equivalents


           Common Equivalents    =  number of shares of issued and outstanding
                                    shares of Target Common Stock and all
                                    unexpired and unexercised options to acquire
                                    Target Common Stock

           Per Share Cash Amount =  Per Share Amount x 28.5%


                                    Per Share Amount - Per Share Cash Amount
                                    ----------------------------------------
           Common Exchange Ratio =            Acquiror Stock Price


The Option Exchange Ratio shall be calculated as follows:

     For consenting optionholders:


                                      Per Share Amount  
                                    --------------------
          Option Exchange Ratio =   Acquiror Stock Price

---------------------
(1)                  3,499,998.75
                     ------------
     2.6504098671 =   1,320,550

<PAGE>

     For optionholders who fail to consent, each outstanding option will be
     converted into the right to receive upon exercise of such option the Per
     Share Cash Amount and that number of whole shares of Acquiror Common Stock
     that were issuable upon exercise of such option immediately prior to the
     Effective Time multiplied by the Common Exchange Ratio and rounded down to
     the nearest whole number of shares of Acquiror Common Stock.  The per share
     exercise price for the shares of Acquiror Common Stock issuable upon
     exercise of such assumed option will be equal to the quotient determined by
     dividing the exercise price per share of Target Common Stock at which such
     option was exercisable immediately prior to the Effective Time by the
     Common Exchange Ratio, rounded up to the nearest whole cent.

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









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