Exhibit 4.(a)5

                          Agreement and Plan of Merger
                            dated as of May 15, 2005.

<PAGE>


                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                                ECI TELECOM INC.,

                           SYMPHONY ACQUISITION CORP.,

                             LAUREL NETWORKS, INC.,

                                PETER BARRIS, as
                           Stockholder Representative

                                       and

                              ECI TELECOM LTD., as
                                    Guarantor

                            DATED AS OF MAY 15, 2005

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                                TABLE OF CONTENTS
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<S>                        <C>                                                                                   <C>
ARTICLE I.                 CERTAIN DEFINITIONS....................................................................1
   SECTION 1.01            Certain Definitions....................................................................1

ARTICLE II.                THE MERGER.............................................................................7
   SECTION 2.01            The Merger.............................................................................7
   SECTION 2.02            Effective Time.........................................................................7
   SECTION 2.03            Effect of the Merger...................................................................7
   SECTION 2.04            Certificate of Incorporation; By-Laws..................................................7
   SECTION 2.05            Directors and Officers.................................................................7
   SECTION 2.06            Effect on Capital Stock................................................................8
   SECTION 2.07            Escrow Accounts; Transaction Expenses.................................................12
   SECTION 2.08            Surrender and Payment.................................................................13
   SECTION 2.09            Dissenting Shares.....................................................................15
   SECTION 2.10            Further Action........................................................................15

ARTICLE III.               REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................15
   SECTION 3.01            Organization and Qualification; Subsidiaries..........................................15
   SECTION 3.02            Certificate of Incorporation and By-Laws..............................................16
   SECTION 3.03            Capitalization........................................................................16
   SECTION 3.04            Authority Relative to This Agreement..................................................18
   SECTION 3.05            No Conflict; Required Filings and Consents............................................18
   SECTION 3.06            Compliance, Permits...................................................................19
   SECTION 3.07            Financial Statements..................................................................19
   SECTION 3.08            Absence of Certain Changes or Events..................................................20
   SECTION 3.09            No Undisclosed Liabilities............................................................20
   SECTION 3.10            Absence of Litigation.................................................................20
   SECTION 3.11            Employee Benefit Plans; Employment Agreements.........................................21
   SECTION 3.12            Employees; Labor Matters..............................................................23
   SECTION 3.13            Restrictions on Business Activities...................................................23
   SECTION 3.14            Taxes.................................................................................23
   SECTION 3.15            Environmental Matters.................................................................26
   SECTION 3.16            Brokers...............................................................................26
   SECTION 3.17            Intellectual Property.................................................................26
   SECTION 3.18            Material Contracts....................................................................30
   SECTION 3.19            Title to Properties; Absence of Encumbrances..........................................32
   SECTION 3.20            Real and Personal Property............................................................33
   SECTION 3.21            Transactions with Affiliates; Management Relationships................................33
   SECTION 3.22            Insurance.............................................................................34
   SECTION 3.23            Books and Records.....................................................................34
   SECTION 3.24            Accounts Receivable...................................................................34
   SECTION 3.25            Customers and Suppliers...............................................................34
   SECTION 3.26            Employee Conflicts....................................................................34
   SECTION 3.27            Certain Business Practices............................................................35
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                                        i
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<S>                        <C>                                                                                   <C>
   SECTION 3.28            Bank Accounts.........................................................................35
   SECTION 3.29            No Required Disclosure................................................................35
   SECTION 3.30            Internal Controls.....................................................................35
   SECTION 3.31            Inventory.............................................................................35
   SECTION 3.32            Ciena Fee.............................................................................35

ARTICLE IV.                REPRESENTATIONS AND WARRANTIES OF ECI AND MERGER SUB..................................35
   SECTION 4.01            Organization and Qualification........................................................36
   SECTION 4.02            Authority Relative to this Agreement..................................................36
   SECTION 4.03            No Conflict; Required Filings and Consents............................................36
   SECTION 4.04            Financial Ability.....................................................................37
   SECTION 4.05            Brokers...............................................................................37
   SECTION 4.06            Absence of Litigation.................................................................37

ARTICLE V.                 COVENANTS.............................................................................37
   SECTION 5.01            Conduct of Business by the Company....................................................37
   SECTION 5.02            No Solicitation of Transactions.......................................................40
   SECTION 5.03            Access to Information; Confidentiality................................................40
   SECTION 5.04            Consents, Approvals; Taking of Necessary Action.......................................40
   SECTION 5.05            Existing Options......................................................................41
   SECTION 5.06            Notification of Certain Matters.......................................................41
   SECTION 5.07            Public Announcements..................................................................42
   SECTION 5.08            Management Agreements.................................................................42
   SECTION 5.09            Litigation............................................................................42
   SECTION 5.10            Certain Tax Covenants.................................................................42
   SECTION 5.11            Update Schedule.......................................................................46
   SECTION 5.12            [Reserved]............................................................................46
   SECTION 5.13            Necessary Actions; Notice.............................................................46
   SECTION 5.14            Existing Option Certificate...........................................................46
   SECTION 5.15            Directors' and Officers' Insurance....................................................46

ARTICLE VI.                CONDITIONS TO THE MERGER..............................................................47
   SECTION 6.01            Conditions to Obligation of Each Party to Effect the Merger...........................47
   SECTION 6.02            Additional Conditions to Obligations of ECI and Merger Sub............................47
   SECTION 6.03            Additional Conditions to Obligation of the Company....................................49

ARTICLE VII.               INDEMNIFICATION.......................................................................50
   SECTION 7.01            General Indemnification of ECI........................................................50
   SECTION 7.02            ECI Indemnification Obligation........................................................51
   SECTION 7.03            Tax Indemnity.........................................................................51
   SECTION 7.04            [Reserved]............................................................................52
   SECTION 7.05            Procedure.............................................................................52
   SECTION 7.06            Certain Limits on Indemnification.....................................................54

ARTICLE VIII.              TERMINATION...........................................................................55
   SECTION 8.01            Termination...........................................................................55
   SECTION 8.02            Effect of Termination.................................................................56
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                                       ii
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<S>                        <C>                                                                                   <C>
ARTICLE IX.                GENERAL PROVISIONS....................................................................57
   SECTION 9.01            Survival of Representations and Warranties............................................57
   SECTION 9.02            Notices...............................................................................57
   SECTION 9.03            Waiver................................................................................58
   SECTION 9.04            Guaranty..............................................................................59
   SECTION 9.05            Headings..............................................................................59
   SECTION 9.06            Severability..........................................................................59
   SECTION 9.07            Entire Agreement; Amendment...........................................................59
   SECTION 9.08            Assignment............................................................................59
   SECTION 9.09            Parties in Interest...................................................................60
   SECTION 9.10            Failure or Indulgence Not Waiver; Remedies Cumulative.................................60
   SECTION 9.11            Governing Law.........................................................................60
   SECTION 9.12            Counterparts..........................................................................60
   SECTION 9.13            Waiver of Jury Trial..................................................................60
   SECTION 9.14            Jurisdiction; Forum...................................................................60
   SECTION 9.15            Definition of Knowledge...............................................................60
   SECTION 9.16            Specific Performance and Injunctive Relief............................................61
   SECTION 9.17            Appointment of Stockholder Representative.............................................61
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                                       iii
<PAGE>

Exhibits and Annexes

Exhibit A     Written Consent of Stockholders
Exhibit B     Form of Management Agreement
Exhibit C     Form of Initial Escrow Agreement
Exhibit D     Form of IP Escrow Agreement
Exhibit E     Form of Letter of Transmittal
Exhibit F     Form of Affidavit of Lost Stock Certificate

Annex A       [Reserved]
Annex B       [Reserved]
Annex C       Existing Options Table
Annex D       Transaction Expenses
Annex E       Prepaid Transaction Expenses

Schedule 5.08         Management Agreements
Schedule 6.02         Company Required Consents
Schedule 9.15         Knowledge

                                       iv
<PAGE>

                          AGREEMENT AND PLAN OF MERGER

      AGREEMENT AND PLAN OF MERGER, dated as of May 15, 2005 (this "Agreement"),
by and among ECI Telecom Inc., a Delaware corporation ("ECI"), Symphony
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of ECI
("Merger Sub"), Laurel Networks, Inc., a Delaware corporation (the "Company"),
with respect to Sections 2.06(c)(3), 5.04(c), 5.10 and 9.17, Peter Barris, as
representative of the Company Stockholders (the "Stockholder Representative")
and, with respect to Section 9.04, ECI Telecom Ltd., an Israeli company and the
parent company of ECI ("Parent").

                                   WITNESSETH:

      WHEREAS, each of ECI, Merger Sub and the Company has determined that it is
advisable and in the best interests of its stockholders for the parties to enter
into a business combination upon the terms and subject to the conditions set
forth herein;

      WHEREAS, in furtherance of such combination, the boards of directors of
each of Merger Sub and the Company have approved, and the board of directors of
ECI has authorized, the merger of Merger Sub with and into the Company (the
"Merger") in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware ("Delaware Law"), and the board of
directors of Parent has approved the guaranty set forth in Section 9.04 and the
payment of the Gross Purchase Price at the Closing, all upon the terms and
subject to the conditions set forth herein;

      WHEREAS, the board of directors of the Company (the "Company Board") has
unanimously recommended that the stockholders of the Company approve and adopt
this Agreement, the Merger and the other transactions contemplated hereby; and

      WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition to ECI's willingness to enter into this Agreement,
stockholders of the Company holding at least 9,000,000 shares of Company Common
Stock and shares of Company Preferred Stock representing more than eighty
percent (80%) of the voting power of the Company Preferred Stock on an
as-converted to Company Common Stock basis and more than sixty percent (60%) of
the voting power of the Company Common Stock and the Company Preferred Stock
voting together as a single class on an as-converted to Company Common Stock
basis, have delivered their written consent in the form attached hereto as
Exhibit A (the "Written Consent of Stockholders"), pursuant to which such
stockholders have approved this Agreement and the transactions contemplated
hereby.

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

                                   ARTICLE I.
                               CERTAIN DEFINITIONS

      SECTION 1.01 Certain Definitions. For purposes of this Agreement, the
term:


<PAGE>

            (a) "affiliate" means, with respect to any person, any other person
who, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with the person specified.

            (b) "Ancillary Agreements" means the Initial Escrow Agreement, the
IP Escrow Agreement, the Management Agreements and any certificates required to
be delivered under this Agreement.

            (c) "business day" means any day other than a Saturday, Sunday or
other day on which banks in New York City are required or authorized to be
closed.

            (d) "Code" means the Internal Revenue Code of 1986, as amended.

            (e) "Company Capital Stock" means, collectively, the Company Common
Stock and the Company Preferred Stock.

            (f) "Company Common Stock" means the common stock, par value $.001
per share, of the Company.

            (g) "Company Group" means (i) with respect to federal income Taxes,
any affiliated group of corporations (within the meaning of Section 1504(a) of
the Code) that, at any time on or before the Closing Date, as defined in Section
2.01, includes or has included the Company as a member, and (ii) with respect to
foreign, state or local income or franchise Taxes, any affiliated, consolidated,
combined, unitary or similar group of corporations that, at any time on or
before the Closing Date, includes or has included the Company as a member.

            (h) "Company Material Adverse Effect" means (i) a material adverse
effect on or change to the business, operations, financial condition, assets,
properties (including intangible properties) or liabilities of the Company and
its subsidiaries, taken as a whole, excluding effects or changes (x) resulting
from developments in worldwide, national or local conditions (political,
economic or regulatory) that adversely affect enterprises or the Company's
industry generally and do not specifically relate to or have a materially
disproportionate effect on the Company and its subsidiaries, taken as a whole or
(y) resulting solely from the identity of the prospective purchaser of the
Company or the announcement or pendency of the Merger or (ii) an effect or
change that materially impairs or delays the ability of the Company to
consummate the transactions contemplated hereby.

            (i) "Company Net Working Capital" means (x) the sum of the Company's
accounts receivable, net of applicable reserves, inventory, net of applicable
reserves, cash, cash equivalents, marketable securities, prepaid expenses and
other current assets, and the Prepaid Transaction Expenses less (y) current
liabilities, in each case determined in accordance with GAAP, consistently
applied in accordance with the Company's customary practices.

            (j) "Company Option Plans" means the Company's 1999 Stock Incentive
Plan and 2004 Stock Incentive t 12 Option Plan.

            (k) "Company Preferred Stock" means, collectively, the Company's
Series A-1 Convertible Preferred Stock, par value $.001 per share (the "Series
A-1 Preferred Stock"), Series A-1 Prime Convertible Preferred Stock, par value
$.001 per share (the "Series A-1 Prime Preferred Stock"), Series A-2 Convertible
Preferred Stock, par value $.001 per share (the "Series A-2 Preferred Stock"),
Series A-2 Prime Convertible Preferred Stock, par value $.001 per share (the
"Series A-2 Prime Preferred Stock"), Series B Convertible Preferred Stock, par
value $.001 per share (the "Series B Preferred Stock"), Series B Prime
Convertible Preferred Stock, par value $.001 per share (the "Series B Prime
Preferred Stock"), Series C Convertible Preferred Stock, par value $.001 per
share (the "Series C Preferred Stock"), Series C Prime Convertible Preferred
Stock, par value $.001 per share (the "Series C Prime Preferred Stock"), and
Series D Convertible Preferred Stock, par value $.001 per share (the "Series D
Preferred Stock").

                                       2
<PAGE>

            (l) "Company Stockholders" means each of the holders of record (as
of the Effective Time) of the Company Capital Stock.

            (m) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person, whether
through the ownership of voting securities or securities or debt convertible
into voting securities, by contract or otherwise.

            (n) "Encumbrances" means any lien (other than mechanics' liens),
pledge, hypothecation, claim (other than infringement), charge, mortgage,
security interest, encumbrance, prior assignment, interference, option, right of
first refusal, preemptive right, community property interest or restriction of
any nature whatsoever (including any restriction on the voting of any security,
any restriction on the transfer of any security or other asset, any restriction
on the receipt of any income derived from any asset, any restriction on the use
of any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).

            (o) "Environmental Laws" means any applicable foreign, federal,
state or local law, rule, regulation, ordinance, code, order or judgment
(including any written judicial or administrative interpretations, guidances,
directives, policy statements or opinions) relating to human health and safety
or, injury to, or the pollution or protection of, the environment.

            (p) "Environmental Liabilities" means any claims, judgments, damages
(including punitive damages), losses, penalties, fines, liabilities,
Encumbrances, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation, monitoring or defense of any
matter relating to human health, safety or the Environment of whatever kind or
nature by any party, entity or authority, that arise under Environmental Laws or
that are incurred as a result of (i) the existence of Hazardous Substances in,
on, under, at or emanating from any Company Real Property (as defined in Section
3.15) or in connection with the operation of the business of the Company or its
subsidiaries, (ii) the offsite transportation, treatment, storage or disposal of
Hazardous Substances generated by the Company or its subsidiaries, (iii) the
violation of or non-compliance with any Environmental Laws or (iv) exposure to
any Hazardous Substances.

            (q) "Escrow Amount" means an aggregate amount equal to the sum of
the following: (i) Eight Million Eight Hundred Thousand Dollars ($8,800,000)
minus ten percent (10%) of the Working Capital Holdback Amount, if any (the
"Initial Escrow Amount") plus (ii) Five Million Dollars ($5,000,000) (the "IP
Escrow Amount").

                                       3
<PAGE>

            (r) "Existing Options" means all options to purchase capital stock
of the Company granted pursuant to the Company Option Plans or pursuant to any
other arrangement adopted by the board of directors of the Company (the "Company
Board") to provide options or other rights to purchase capital stock of the
Company to directors, officers, employees or consultants of the Company.

            (s) "GAAP" means United States generally accepted accounting
principles.

            (t) "Governmental Entity" means any foreign or United States
federal, state or local governmental, administrative or regulatory authority,
commission, body, agency, court or any judicial body or other similar authority.

            (u) "Gross Purchase Price" means Eighty Eight Million Dollars
($88,000,000) in cash minus the Prepaid Transaction Expenses and the Working
Capital Holdback Amount, if any, which amount is subject to adjustment pursuant
to Section 2.06(c)(3).

            (v) "Hazardous Substances" means any chemicals, substances,
materials or wastes regulated under any Environmental Law.

            (w) "Indebtedness" means, with respect to any person, (a) all
indebtedness of such person, whether or not contingent, for borrowed money, (b)
all obligations of such person for the deferred purchase price of property or
services under any installment sale contract, other than ordinary trade payables
not overdue and, in any case, with payment terms not in excess of sixty (60)
days, (c) all obligations of such person evidenced by notes, bonds, debentures
or other similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such person as lessee under
leases that have been, in accordance with GAAP, recorded as capital leases, (f)
all reimbursement obligations, contingent or otherwise, of such person to the
issuer under acceptance, letter of credit or similar facilities, (g) all
indebtedness of others referred to in clauses (a) through (f) above guaranteed
by such person through an agreement (1) to pay or purchase such Indebtedness or
to advance or supply funds for the payment or purchase of such Indebtedness, or
(2) to otherwise assure a creditor against loss, and (h) all Indebtedness
referred to in clauses (a) through (f) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Encumbrance on property (including, without limitation, accounts
and contract rights) owned by such person, even though such person has not
assumed or become liable for the payment of such Indebtedness.

            (x) "Management Agreements" means the agreements between the
Company, ECI and the employees party thereto, in the form set forth as Exhibit
B.

            (y) "Net Aggregate Merger Consideration" means the Gross Purchase
Price, minus the sum of (x) the Transaction Expenses plus (y) the Transaction
Escrow Payment.

                                       4
<PAGE>

            (z) "Net Merger Consideration Per Share" means the consideration
payable in respect of a share of Company Capital Stock, as more fully set forth
in Section 2.06(c), it being understood that in no event shall the aggregate
payments of Net Merger Consideration Per Share by ECI exceed the Net Aggregate
Merger Consideration.

            (aa) "Overlap Period" means any taxable period beginning on or
before and ending after the Closing Date.

            (bb) "person" means a natural person, a governmental entity, agency
or representative (at any level of government), a corporation, partnership,
joint venture or other association, as context requires.

            (cc) "Post-Closing Tax Period" means (i) any taxable period
beginning after the Closing Date and (ii) the portion of any Overlap Period
beginning immediately after the Closing Date and ending at the close of the last
day of such Overlap Period.

            (dd) "Pre-Closing Tax Period" means (i) any taxable period ending at
or before the close of the Closing Date and (ii) the portion of any Overlap
Period beginning on the first day of such Overlap Period and ending at the close
of the Closing Date.

            (ee) "Prepaid Transaction Expenses" means the amount of all fees and
expenses incurred by the Company in connection with the transactions
contemplated by this Agreement and paid by the Company prior to the signing of
this Agreement, all of which are set forth on Annex E to this Agreement.

            (ff) "Pro Rata Interest" means, with respect to a Company
Stockholder, a fraction, the numerator of which is the aggregate portion of the
Net Aggregate Merger Consideration that such Company Stockholder is entitled to
receive pursuant to Section 2.06(c) and the denominator of which is the Net
Aggregate Merger Consideration being delivered to all Company Stockholders
pursuant to Section 2.06(c).

            (gg) "Reference Amount" means (i) if the Closing occurs during the
month of May 2005, $16.0 million, (ii) if the Closing occurs during the month of
June 2005, $14.5 million and, (iii) if the Closing occurs during the month of
July 2005, $13.0 million.

            (hh) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary) owns,
directly or indirectly, more than 50% of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.

            (ii) "Tax" or "Taxes" means (i) all taxes, including, but not
limited to, income (whether net or gross), excise, real or personal property,
sales, transfer, gains, gross receipts, occupation, privilege, payroll, wage,
unemployment, workers' compensation, social security, occupation, use, value
added, capital, gross receipts, franchise, license, severance, stamp, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), capital
stock, profits, withholding, disability, registration, customs duties,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
(whether disputed or not) imposed by any Tax Authority, including any related
charges, fees, interest, penalties, additions to tax or other assessments
imposed with respect thereto and (ii) any liability of the Company or its
subsidiaries for the payment of amounts of the type described in clause (i) as a
result of any obligation of the Company or its subsidiaries under any tax
sharing or tax indemnity agreement, provision or arrangement, whether formal or
informal or under Treasury Regulation ss. 1.1502-6 or similar provisions under
state, local or non-U.S. law.

                                       5
<PAGE>

            (jj) "Tax Authority" means any federal, national, foreign, state,
municipal or other local government, or any subdivision, agency, commission or
authority thereof, or any quasi-governmental body or other authority exercising
any regulatory authority with respect to Taxes.

            (kk) "Tax Liabilities" means (i) all liabilities for Taxes and (ii)
all reasonable costs and expenses related thereto (including, without
limitation, reasonable attorneys' and accountants' fees) without regard to
whether Tax for the applicable period is ultimately due.

            (ll) "Tax Proceeding" means any audit or investigation, other
administrative proceeding or judicial proceeding involving Taxes.

            (mm) "Tax Reserve" means, with respect to the Company and its
subsidiaries, (i) the amount of current Taxes (excluding any provision for
deferred Taxes) reflected as a liability on the Unaudited Balance Sheet, as
defined in Section 3.07, and (ii) any additional Taxes accrued in the ordinary
course of business between the date of the Unaudited Balance Sheet and the close
of the Closing Date, to the extent the Taxes referred to in clause (i) or clause
(ii) have not been paid prior to the Closing Date.

            (nn) "Tax Returns" means all returns, reports, estimates,
information returns and statements (including any related or supporting
information) filed or to be filed with any Tax Authority in connection with the
determination, assessment, collection or administration of any Taxes.

            (oo) "Transaction Escrow Payment" means Five Million Two Hundred
Eighty Thousand Dollars ($5,280,000) in cash.

            (pp) "Transaction Expenses" means the amount of all unpaid
attorneys', investment bankers' and accountants' fees and expenses and other
similar fees and expenses incurred or to be incurred by the Company in
connection with the transactions contemplated by this Agreement, including the
fees and costs of the Paying Agent. All Transaction Expenses, including the name
of the party and the amount due, on the date hereof shall be set forth on Annex
D, along with estimates of any changes in such amounts during the period between
the date hereof and the anticipated Closing Date.

            (qq) "Working Capital Estimate" has the meaning set forth in Section
2.06(c)(3).

            (rr) "Working Capital Holdback Amount" means an amount equal to 94%
of the product of (x) 1.40, multiplied by (y) the difference between (i) the
applicable Reference Amount and (ii) the Working Capital Estimate; provided,
that in the event (A) the Working Capital Estimate exceeds the applicable
Reference Amount or (B) the Working Capital Holdback Amount calculated pursuant
to the preceding formula is less than $1,000,000, the Working Capital Holdback
Amount shall be $0.

                                       6
<PAGE>

                                   ARTICLE II.
                                   THE MERGER

      SECTION 2.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement and the Certificate of Merger (as defined below), and in
accordance with Delaware Law, at the Effective Time (as defined below), Merger
Sub shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Merger Sub in accordance with Delaware Law. Unless this Agreement has been
terminated pursuant to Article VIII, and subject to the satisfaction or waiver
of the conditions set forth in Article VI, the consummation of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
two (2) business days) after satisfaction or waiver of the conditions set forth
in Article VI, at the offices of Kramer Levin Naftalis & Frankel LLP, 1177
Avenue of the Americas, New York, New York 10036, unless another date, time or
place is agreed to in writing by ECI and the Company (the "Closing Date").

      SECTION 2.02 Effective Time. On the Closing Date, the parties hereto shall
file a certificate of merger (the "Certificate of Merger") with the Secretary of
State of the State of Delaware in accordance with the Delaware Law. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with such Secretary of State, or at such other time as ECI and the Company shall
agree and specify in the Certificate of Merger (the time the Merger becomes
effective being the "Effective Time").

      SECTION 2.03 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, at the Effective Time all the property, goodwill, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.

      SECTION 2.04 Certificate of Incorporation; By-Laws.

            (a) At the Effective Time, the Certificate of Incorporation of
Merger Sub shall be the Certificate of Incorporation of the Surviving
Corporation.

            (b) At the Effective Time, the By-Laws of Merger Sub shall be the
By-Laws of the Surviving Corporation.

      SECTION 2.05 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation and the persons designated by ECI shall be the initial
officers of the Surviving Corporation.

                                       7
<PAGE>

      SECTION 2.06 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any Company Stockholder or the
holder of any shares of the capital stock of Merger Sub:

            (a) Cancellation of Treasury Shares. Each share of Company Common
Stock held by the Company or any subsidiary of the Company as treasury stock and
each share of Company Preferred Stock held by the Company or any subsidiary of
the Company as treasury stock immediately prior to the Effective Time
(collectively, "Treasury Shares") shall automatically be canceled and retired
and cease to exist, and no consideration or payment shall be delivered therefor
or in respect thereof.

            (b) Capital Stock of Merger Sub. Each share of capital stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into one share of common stock, par value $0.001 per share, of the
Surviving Corporation ("Surviving Corporation Common Stock"), with the same
rights, powers and privileges as the shares so converted and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation. Each
stock certificate of Merger Sub evidencing ownership of any such shares shall
remain outstanding and evidence ownership of shares of Surviving Corporation
Common Stock.

            (c) (1) Conversion of Shares of Company Common Stock and Company
Preferred Stock. The following calculation of the Net Merger Consideration Per
Share is based on the Transaction Expenses set forth on Annex D and the Working
Capital Holdback Amount being $0. Immediately prior to the Effective Time, the
Company shall deliver to ECI a revised calculation of the amounts set forth in
this Section 2.06(c)(1), which shall give effect to any change in the amount of
Transaction Expenses and the actual Working Capital Holdback Amount, if any. It
is understood and agreed that in no event shall the aggregate payments of Net
Merger Consideration Per Share made by ECI exceed the Net Aggregate Merger
Consideration.

                  (i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and extinguished
without payment of consideration therefor;

                  (ii) each share of Series A-1 Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury Shares)
shall be cancelled and extinguished and thereafter shall represent the right to
receive $0.06282;

                  (iii) each share of Series A-1 Prime Preferred Stock issued
and outstanding immediately prior to the Effective Time (other than Treasury
Shares) shall be cancelled and extinguished and thereafter shall represent the
right to receive $1.32723;

                  (iv) each share of Series A-2 Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury Shares)
shall be cancelled and extinguished and thereafter shall represent the right to
receive $0.06282;

                  (v) each share of Series A-2 Prime Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury Shares)
shall be cancelled and extinguished and thereafter shall represent the right to
receive $1.32723;

                                       8
<PAGE>

                  (vi) each share of Series B Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury Shares)
shall be cancelled and extinguished and thereafter shall represent the right to
receive $0.29702;

                  (vii) each share of Series B Prime Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury Shares)
shall be cancelled and extinguished and thereafter shall represent the right to
receive $6.30880;

                  (viii) each share of Series C Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury Shares)
shall be cancelled and extinguished and thereafter shall represent the right to
receive $0.38718;

                  (ix) each share of Series C Prime Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury Shares)
shall be cancelled and extinguished and thereafter shall represent the right to
receive $0.92950; and

                  (x) each share of Series D Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Treasury Shares)
shall be cancelled and extinguished and thereafter shall represent the right to
receive $1.54566.

      (2) [Reserved]

      (3) Net Working Capital Adjustment to Net Aggregate Merger Consideration.

                  (i) Company's Delivery of Pre-Closing Estimate. Not later than
the fifth business day prior to the Closing Date, the Company will deliver to
ECI a good faith estimate, prepared in accordance with GAAP, and otherwise on a
basis consistent with the Company's Unaudited Balance Sheet, of the likely
Company Net Working Capital on the Closing Date (the "Working Capital
Estimate"), setting forth in reasonable detail the basis of the calculation
thereof. Subject to ECI's approval of the amount thereof (which approval shall
not be unreasonably withheld, conditioned or delayed and which shall be deemed
to be unreasonably withheld if the amount thereof is shown by reasonable
evidence to be based upon GAAP, the Company's books and records and in
accordance with the Company's past practices, consistently applied) the Working
Capital Estimate shall be used to determine the Working Capital Holdback Amount,
if any, as provided herein.

                  (ii) ECI's Delivery of Post-Closing Statement. As soon as
practicable but in any event within forty-five (45) days after the Closing Date,
ECI will prepare (or cause to be prepared) and deliver to the Stockholder
Representative a statement (the "Post-Closing Statement") showing ECI's
calculation of the Company Net Working Capital as of the Closing Date in
reasonable detail. Such statement shall be prepared in accordance with GAAP and
the Company's past practice and on a basis consistent with the Company's
Unaudited Balance Sheet. ECI shall provide to the Stockholder Representative
such back-up or supporting data relating to the preparation of the Post-Closing
Statement and the calculation of Company Net Working Capital as of the Closing
Date reflected thereon as the Stockholder Representative may reasonably request.
ECI shall also provide, and cause the Company or any successor thereto to
provide the Stockholder Representative and its accountants and other
representatives with such reasonable access to the books, records and personnel
of the Company, at reasonable times and upon reasonable notice, as the
Stockholder Representative may reasonably request, including without limitation
the work papers prepared by or for ECI's accountants, for the purposes of
evaluating the Post-Closing Statement and the calculation of Company Net Working
Capital as of the Closing Date reflected thereon.

                                       9
<PAGE>

                  (iii) Acceptance Period; Delivery of Dispute Notice. The
Stockholder Representative shall, within the thirty (30) day period (the
"Acceptance Period") following receipt of the Post-Closing Statement, notify ECI
of its acceptance or non-acceptance of the Post-Closing Statement and the
calculation of Company Net Working Capital as of the Closing Date reflected
thereon. If no such notice is delivered to ECI by the Stockholder Representative
within the Acceptance Period, the Post-Closing Statement and the calculation of
Company Net Working Capital as of the Closing Date reflected thereon shall be
deemed to have been accepted by the Stockholder Representative on behalf of the
Company Stockholders and shall be binding upon all of the parties to this
Agreement and the Company Stockholders for all purposes of this Agreement. If
the Stockholder Representative gives notice (a "Dispute Notice") to ECI within
the Acceptance Period that the Stockholder Representative does not agree with
the calculation of the Company Net Working Capital as of the Closing Date
reflected in the Post-Closing Statement, the Stockholder Representative shall
describe in such Dispute Notice in reasonable detail the basis for its
disagreement (such disagreement, a "Dispute Item"). ECI and the Stockholder
Representative shall endeavor in good faith to resolve all such disagreements
within the thirty (30) day period (the "Negotiating Period") following the
delivery by the Stockholder Representative of such Dispute Notice.

                  (iv) Determination of Disputes by Neutral Accounting Firm. If
ECI and the Stockholder Representative are unable to resolve any Dispute Item
within the Negotiating Period, the dispute shall be promptly referred to
Deloitte & Touche, LLP or, if such firm declines to serve, then such other
independent accounting or valuation firm as is mutually acceptable to ECI and
Stockholder Representative (the "Neutral Accounting Firm"). The Neutral
Accounting Firm shall be instructed to resolve all outstanding Dispute Items
relating to the Post-Closing Statement and the calculation of the Company Net
Working Capital as of the Closing Date. The parties shall instruct the Neutral
Accounting Firm to render its determination within thirty (30) days of the
referral of such Dispute Items thereto, and the determination of the Neutral
Accounting Firm shall be final and binding upon all parties to this Agreement
for all purposes of this Agreement, absent manifest error, which error may only
be corrected by such Neutral Accounting Firm and must be corrected by such firm
within ten (10) days of the initial determination, in the absence of which
correction the initial determination shall be final and binding as aforesaid.
None of the Company Stockholders or ECI shall have any ex parte communications
or meetings with the Neutral Accounting Firm without reasonable prior notice
(which notice shall provide the other party a reasonable opportunity to
participate in such communications or meetings), to ECI (in the case of any
Company Stockholder) or the Stockholder Representative (in the case of ECI). The
fees and expenses of the Neutral Accounting Firm shall be borne by ECI, on the
one hand, and the Company Stockholders, on the other hand, in the same
proportion that the dollar amount of Disputed Items which are not resolved in
favor of ECI and the Company Stockholders, as applicable, bears to the total
dollar amount of Disputed Items resolved by the Neutral Accounting Firm. For
illustration purposes only, (A) if the total amount of Disputed Items by the
Company Stockholders is $100,000, and the Company Stockholders are awarded
$50,000 by the Neutral Accounting Firm, ECI and the Company Stockholders shall
bear the Neutral Accounting Firm's fees and expenses equally; and (B) if the
total amount of Disputed Items by the Company Stockholders is $100,000, and the
Company Stockholders are awarded $25,000 by the Neutral Accounting Firm, the
Company Stockholders shall bear seventy five percent (75%) and ECI shall bear
twenty five percent (25%) of the Neutral Accounting Firm's fees and expenses.

                                       10
<PAGE>

                  (v) Final Adjustment for Company Net Working Capital. Promptly
following the final resolution of all Dispute Items, if any, relating to the
Post-Closing Statement calculations and amounts reflected thereon in accordance
with this Section 2.06(c)(3)(v), but in no event more than five (5) business
days thereafter:

                  (A) if (x) the finally determined actual Company Net Working
            Capital as of the Closing Date exceeds the Reference Amount or (y)
            the Reference Amount exceeds the finally determined actual Company
            Net Working Capital as of the Closing Date by less than One Million
            Dollars ($1,000,000), then in either case ECI shall deliver (i) to
            the Escrow Agent ten percent (10%) of the Working Capital Holdback
            Amount, which amount shall be added to the Initial Escrow Amount and
            (ii) to the Paying Agent (as defined below) ninety percent (90%) of
            the Working Capital Holdback Amount, following which the Paying
            Agent shall as promptly as practicable pay to each of the Company
            Stockholders as of the Effective Time an amount equal to such
            Company Stockholder's Pro Rata Interest in such amount, rounded to
            the nearest cent; and

                  (B) if the Reference Amount equals or exceeds the finally
            determined actual Company Net Working Capital as of the Closing Date
            by One Million Dollars ($1,000,000) or more (all of such excess,
            including the One Million Dollars ($1,000,000), being referred to as
            the "Shortfall"), then:

                  (i) if the Working Capital Holdback Amount exceeds the
Shortfall, then ECI shall deliver (i) to the Escrow Agent ten percent (10%) of
such excess amount, which amount shall be added to the Initial Escrow Amount and
(ii) to the Paying Agent ninety percent (90%) of such excess amount, following
which the Paying Agent shall as promptly as practicable pay to each of the
Company Stockholders as of the Effective Time an amount equal to such Company
Stockholder's Pro Rata Interest in such amount, rounded to the nearest cent; and

                  (ii) if the Shortfall equals or exceeds the Working Capital
Holdback Amount, then (x) the Company Stockholders shall not be entitled to any
payment under this Section 2.06(c)(3)(v) and (y) 94% of such excess amount shall
be deemed to be Losses for which ECI may seek indemnification pursuant to
Section 7.01 hereof.

                                       11
<PAGE>

            (d) Existing Options. ECI is not assuming any Existing Options in
the Merger. All Existing Options that are outstanding immediately prior to the
Effective Time shall be subject to the provisions of Section 5.05.

      SECTION 2.07 Escrow Accounts; Transaction Expenses; Stockholder
Representative.

            (a) At or as soon as practicable after the Effective Time, ECI shall
deliver from the Net Aggregate Merger Consideration to the escrow agent (the
"Escrow Agent"), (i) under the initial escrow agreement dated the Closing Date,
substantially in the form of Exhibit C hereto (the "Initial Escrow Agreement"),
the Initial Escrow Amount and, if applicable, the additional amount delivered by
ECI to the Escrow Agent pursuant to Section 2.06(c)(3)(v)(A) or Section
2.06(c)(3)(v)(B) above, to be held in an escrow account (the "Escrow Indemnity
Account") in accordance with the terms of the Initial Escrow Agreement and (ii)
under the intellectual property escrow agreement dated the Closing Date,
substantially in the form of Exhibit D hereto (the "IP Escrow Agreement" and ,
together with the Initial Escrow Agreement, the "Escrow Agreements") the IP
Escrow Amount, to be held in an escrow account (the "IP Indemnity Account") in
accordance with the terms of the IP Escrow Agreement. Each of the Initial Escrow
Amount and the IP Escrow Amount will be available to satisfy claims for Losses
made by the ECI Indemnitees pursuant and subject to Article VII hereof.

                  (i) Unless all of the Initial Escrow Amount is released
earlier to an ECI Indemnitee pursuant to the Initial Escrow Agreement, the
Initial Escrow Amount (or any portion thereof remaining in the Escrow Indemnity
Account) will be held by the Escrow Agent until the first business day after the
first anniversary of the Closing Date (the "Initial Escrow Termination Date").
Upon the Initial Escrow Termination Date, each Company Stockholder shall be
entitled to receive its Pro Rata Interest of the Initial Escrow Amount, and ECI
shall cause any of the Initial Escrow Amount remaining in the Escrow Indemnity
Account at such time to be released to the Paying Agent to be paid to the
Company Stockholders in accordance with their respective Pro Rata Interests.
Notwithstanding the foregoing, to the extent that any then pending and
unresolved claims for indemnification under Article VII exist for which ECI has
timely provided notice in accordance with Section 7.06(c), the funds necessary
to satisfy such claims will be retained by the Escrow Agent pursuant to the
terms of the Initial Escrow Agreement until such claims are resolved.

                  (ii) Unless all of the IP Escrow Amount is released earlier to
an ECI Indemnitee pursuant to the Escrow Agreement, the IP Escrow Amount (or any
portion thereof remaining in the Escrow Indemnity Account) will be held by the
Escrow Agent until the first business day after the second anniversary of the
Closing Date (the "IP Escrow Termination Date"). Upon the IP Escrow Termination
Date, each Company Stockholder shall be entitled to receive its Pro Rata
Interest of the IP Escrow Amount, and ECI shall cause any amount remaining in
the IP Indemnity Account at such time to be released to the Paying Agent to be
paid to the Company Stockholders in accordance with their respective Pro Rata
Interests. Notwithstanding the foregoing, to the extent that any then pending
and unresolved claims for indemnification under Article VII exist for which ECI
has timely provided notice in accordance with Section 7.06(c), the funds
necessary to satisfy such claims (from the Initial Escrow Amount or the IP
Escrow Amount, as applicable) will be retained by the Escrow Agent pursuant to
the terms of the applicable Escrow Agreement until such claims are resolved.

                                       12
<PAGE>

            (b) At or as soon as practicable after the Effective Time, ECI shall
deliver to the Escrow Agent under the additional escrow agreement dated the
Closing Date (the "Additional Escrow Agreement") the Transaction Escrow Payment
(the aggregate amount of which shall reduce the Gross Purchase Price), to be
paid from and/or held in an escrow account for the benefit of the parties
thereto in accordance with the terms of the Additional Escrow Agreement, it
being understood and agreed that ECI shall not be entitled to any distributions
therefrom.

            (c) On or immediately prior to the Closing Date, the Company shall
deliver to ECI a statement of all Transaction Expenses, including final invoices
for any hourly or similar unfixed Transaction Expenses being presented by
vendors immediately prior to Closing. At or as soon as practicable after the
Effective Time, ECI shall pay the Transaction Expenses (the aggregate amount of
which shall reduce the Gross Purchase Price) to the parties to whom such
Transaction Expenses are payable.

            (d) At or as soon as practicable after the Effective Time, ECI shall
deliver from the Net Aggregate Merger Consideration Three Hundred Thousand
Dollars ($300,000) to the Stockholder Representative for the payment of any
expenses incurred by the Stockholder Representative acting in such capacity
after the Effective Time.

      SECTION 2.08 Surrender and Payment

            (a) Prior to the Effective Time, ECI shall appoint, with the
reasonable approval of the Company, a bank or trust company as paying agent (the
"Paying Agent") for the purpose of exchanging certificates representing shares
of Company Capital Stock outstanding as of the Effective Time for the Net
Aggregate Merger Consideration and such other functions as are described in this
Agreement. Immediately prior to the Effective Time, ECI will deposit the Net
Aggregate Merger Consideration with the Paying Agent, for the benefit of the
holders of shares of Company Capital Stock, for exchange in accordance with the
provisions of this Agreement.

            (b) Each holder of shares of Company Capital Stock that have been
converted into a right to receive Net Merger Consideration Per Share, upon
surrender to the Paying Agent of a certificate or certificates representing such
shares of Company Capital Stock or as contemplated by Section 2.08(d), together
with a properly completed letter of transmittal, in the form attached hereto as
Exhibit E, covering such shares of Company Capital Stock, will be entitled to
receive the Net Merger Consideration Per Share payable in respect of such shares
less such holder's Pro Rata Interest of the Escrow Amount, which shall be
delivered to the Escrow Agent and placed in the Escrow Indemnity Account and the
IP Indemnity Account described in Section 2.07 above, and such holder's Pro Rata
Interest of the Working Capital Holdback Amount, if applicable, which shall be
retained or paid to the Company Stockholders as set forth in Section 2.06(c).
Any Company Stockholder that surrenders its stock certificates, together with a
properly completed letter of transmittal, on or prior to the date that is three
business days prior to the anticipated Closing Date, shall have the portion of
the Net Merger Consideration Per Share payable in respect of the shares
represented by such certificates paid to it by wire transfer of immediately
available funds or check on the Closing Date. After the Effective Time, each
such certificate shall, until so surrendered, represent for all purposes only
the right to receive such Net Merger Consideration Per Share.

                                       13
<PAGE>

            (c) After the Effective Time, there shall be no further registration
of transfers of shares of Company Capital Stock outstanding prior to the
Effective Time. If, after the Effective Time, certificates representing shares
of Company Capital Stock outstanding prior to the Effective Time are presented
to the Surviving Corporation, they shall be cancelled and exchanged for the
applicable Net Merger Consideration Per Share, and in accordance with the
procedures set forth in this Agreement.

            (d) [Reserved.]

            (e) If any of the Company Capital Stock certificates shall have been
lost, stolen or destroyed, the Paying Agent shall deliver in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof in the form set forth as Exhibit F, the applicable
Net Merger Consideration Per Share; provided, however, that the Paying Agent or
ECI may, in its discretion and as a condition precedent to the issuance and
delivery thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a reasonable and customary indemnity or bond as it may
reasonably direct against any claim that may be made against the Paying Agent,
ECI or the Company with respect to such certificates alleged to have been lost,
stolen or destroyed.

            (f) All amounts of cash paid upon the surrender of certificates
representing shares of Company Capital Stock in accordance with the terms hereof
(including any cash or other distributions paid pursuant to Section 2.06(c))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Capital Stock.

            (g) To the extent permitted by applicable Law, none of ECI, Merger
Sub, the Company or the Surviving Corporation shall be liable to any holder of
shares of Company Capital Stock for any Net Merger Consideration Per Share (or
dividends or distributions with respect thereto) required to be delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.

            (h) Each of ECI, the Paying Agent and the Surviving Corporation
shall be entitled to deduct and withhold from the Net Merger Consideration Per
Share otherwise payable pursuant to this Agreement to any holder of Company
Capital Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code or any provision of state, local,
provincial or foreign tax law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of Company Capital Stock in respect of which such
deduction and withholding was made.

                                       14
<PAGE>

      SECTION 2.09 Dissenting Shares. Notwithstanding Section 2.06(c) or Section
2.08, Company Capital Stock outstanding immediately prior to the Effective Time
and held by a Company Stockholder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such shares
("Dissenting Shares") in accordance with Section 262 of the Delaware Law shall
not be converted into a right to receive the applicable Net Merger Consideration
Per Share, unless such Company Stockholder fails to perfect or withdraws or
otherwise loses its right to appraisal in accordance with the Delaware Law. If,
after the Effective Time, any such Company Stockholder fails to perfect or
withdraws or loses its right to appraisal or, if applicable, dissent, such
Dissenting Shares shall be treated as if they had been converted as of the
Effective Time into the right to receive the Net Merger Consideration Per Share
to which such Company Stockholder is entitled, without interest thereon. The
Company shall give ECI prompt notice of any demands received by the Company for
appraisal of Company Capital Stock, or, if applicable, dissent and, prior to the
Effective Time, ECI shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of ECI, make any
payment with respect to, or settle or offer to settle, any such demands.

      SECTION 2.10 Further Action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company and Merger Sub, the officers and directors of the Company and Merger
Sub are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.

                                  ARTICLE III.
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      The Company represents and warrants to ECI and Merger Sub as of the date
hereof that the statements contained in this Article III are true and correct,
except as set forth in the disclosure schedule delivered by the Company to ECI
on the date hereof (the "Company Disclosure Schedule"). The Company Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs in this Article III and the disclosure in any paragraph
shall qualify other paragraphs in this Article III only to the extent that it is
specifically indicated in such paragraph.

      SECTION 3.01 Organization and Qualification; Subsidiaries. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority necessary to own, lease and
operate the properties it owns, leases or operates and to carry on its business
as it is now being conducted. Each of the Company and its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
Each jurisdiction in which the Company or a subsidiary is so qualified or
licensed is set forth in Section 3.01 of the Company Disclosure Schedule. A true
and complete list of all of the Company's subsidiaries, together with the
jurisdiction of incorporation of each subsidiary, the percentage of each
subsidiary's outstanding capital stock owned by the Company or another
subsidiary and the directors and officers of each subsidiary, is set forth in
Section 3.01 of the Company Disclosure Schedule. Other than as set forth in
Section 3.01 of the Company Disclosure Schedule, neither the Company nor any
subsidiary owns, directly or indirectly, any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture, limited
liability company or other business association or entity, whether incorporated
or unincorporated.

                                       15
<PAGE>

      SECTION 3.02 Certificate of Incorporation and By-Laws. The Company has
previously furnished to ECI a complete and correct copy of its Amended and
Restated Certificate of Incorporation (as amended and restated, the "Company
Certificate of Incorporation") and By-Laws (the "Company By-Laws"), and a
complete and correct copy of the equivalent organizational documents of the
Company's subsidiaries, each as amended to date. Such Company Certificate of
Incorporation and Company By-Laws, and such equivalent organizational documents
of the Company's subsidiaries, are in full force and effect. The Company is not
in violation of any of the provisions of the Company Certificate of
Incorporation or Company By-Laws and the Company's subsidiaries are not in
violation of any of the provisions of their equivalent organizational documents.

      SECTION 3.03 Capitalization.

            (a) The authorized capital stock of the Company consists of
110,582,290 shares of Company Common Stock and 112,195,643 shares of Company
Preferred Stock, par value $0.001 per share, of which 7,833,334 shares are
designated as Series A-1 Preferred Stock, 7,833,334 shares are designated as
Series A-1 Prime Preferred Stock, 2,391,222 shares are designated as Series A-2
Preferred Stock, 2,391,222 shares are designated as Series A-2 Prime Preferred
Stock, 11,346,874 shares are designated as Series B Preferred Stock, 11,346,874
shares are designated as Series B Prime Preferred Stock, 24,248,426 shares are
designated as Series C Preferred Stock, 24,248,426 shares are designated as
Series C Prime Preferred Stock and 20,555,931 shares are designated as Series D
Preferred Stock. As of the date hereof, (i) 23,193,842 shares of Company Common
Stock are issued and outstanding, (ii) no shares of Company Common Stock are
held in the treasury of the Company, (iii) 5,766,902 shares of Company Common
Stock are reserved for issuance pursuant to outstanding Existing Options, (iv)
432,788 shares of Series A-1 Preferred Stock are issued and outstanding, (v)
7,396,423 shares of Series A-1 Prime Preferred Stock are issued and outstanding,
(vi) 2,040,786 shares of Series A-2 Preferred Stock are issued and outstanding,
(vii) 354,559 shares of Series A-2 Prime Preferred Stock are issued and
outstanding, (viii) 8,338,480 shares of Series B Preferred Stock are issued and
outstanding; (ix) 3,008,394 shares of Series B Prime Preferred Stock are issued
and outstanding, (x) 2,629,204 shares of Series C Preferred Stock are issued and
outstanding, (xi) 21,619,222 shares of Series C Prime Preferred Stock are issued
and outstanding, (xii) 17,480,025 shares of Series D Preferred Stock are issued
and outstanding; (xiii) no shares of Company Preferred Stock are held in the
treasury of the Company, and (xiv) 74,519,443 shares of Company Common Stock are
reserved for issuance upon conversion of issued and outstanding shares of
Company Preferred Stock. As of the date hereof, there are no other shares of
Company Capital Stock issued and outstanding or reserved for future issuance.

                                       16
<PAGE>

      All of the issued and outstanding shares of Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable. None of the issued
and outstanding shares of Company Capital Stock has been issued in violation of
the Company Certificate of Incorporation, any applicable federal or state Law or
any preemptive rights or rights to subscribe for or purchase securities. All
shares of Company Capital Stock subject to issuance as aforesaid in clauses
(iii) and (xiv) upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and non-assessable and, assuming such issuance prior
to the Effective Time, will not have been issued in violation of the Company
Certificate of Incorporation, any applicable federal or state Law or any
preemptive rights or rights to subscribe for or purchase securities. Except as
set forth in this Section 3.03 or Section 3.11 hereof, there are no options,
warrants, calls or preemptive rights relating to the issued or unissued capital
stock of the Company or its subsidiaries or obligating the Company or its
subsidiaries to issue, transfer, deliver or sell, or cause to be issued,
transferred, delivered or sold, any shares of capital stock of, or any
securities directly or indirectly convertible into or exercisable or
exchangeable for any shares of capital stock of, the Company or its
subsidiaries. Neither the Company nor its subsidiaries have issued and
outstanding any stock appreciation rights, phantom stock, performance based
rights or similar rights or obligations. There are no obligations, contingent or
otherwise, of the Company or its subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or capital stock of any
subsidiaries or to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in the Company, any subsidiary or any
other entity. Except as set forth in Section 3.03(a) of the Company Disclosure
Schedule, there are no shares of restricted stock of the Company ("Company
Restricted Stock"). There are no voting trusts, proxies or other agreements or
understandings with respect to any Company Capital Stock to which the Company
or, to the knowledge of the Company, any other person is a party or by which the
Company or any such other person is bound. All of the outstanding shares of
capital stock of the Company's subsidiaries are duly authorized, validly issued,
fully paid and non-assessable and all such shares are owned of record and
beneficially by the Company or a wholly owned subsidiary thereof free and clear
of any and all Encumbrances other than Permitted Encumbrances, as defined below.

            (b) Section 3.03(b) of the Company Disclosure Schedule lists (i) all
holders of Company Capital Stock as of the date hereof, as well as the number,
class and series of shares of Company Capital Stock held by each such holder and
(ii) all holders of warrants for Company Capital Stock as of the date hereof, as
well as the number, class and series of shares of Company Capital Stock subject
thereto, the date upon which each such warrant is exercisable and the exercise
price of each such warrant.

            (c) Section 3.03(c) of the Company Disclosure Schedule sets forth a
true and complete list of each current or former employee, officer, director or
consultant of the Company or other person who holds an Existing Option as of the
date hereof, together with the number of shares of Company Common Stock subject
to such Existing Option, the date of grant of such Existing Option, the exercise
price of such Existing Option, the expiration date of such Existing Option, the
vesting schedule for such Existing Option and whether or not such Existing
Option is intended to qualify as an "incentive stock option" within the meaning
of Section 422(b) of the Code. Section 3.03(c) of the Company Disclosure
Schedule also sets forth the total number of outstanding Existing Options.

                                       17
<PAGE>

            (d) The Company has never declared, nor is there accrued, any
dividend or other distribution with respect to any class or series of Company
Capital Stock.

      SECTION 3.04 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and each of the Ancillary Agreements to which it is a party and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements to which it is a party by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of the Company. This Agreement has been, and the Ancillary Agreements to
which it is a party have been or, if executed after the date hereof and at or
prior to the Effective Time, will be, duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery of this
Agreement and the Ancillary Agreements by each of the other parties hereto and
thereto, constitutes, or, in the case of the Ancillary Agreements to which it is
a party have been or, if executed after the date hereof and at or prior to the
Effective Time, will constitute, legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.

      SECTION 3.05 No Conflict; Required Filings and Consents.

            (a) The execution and delivery of this Agreement and the Ancillary
Agreements to which it is a party by the Company do not, and the performance of
this Agreement and the Ancillary Agreements to which it is a party by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby will not, (i) conflict with or violate the Company
Certificate of Incorporation or Company By-Laws or the equivalent organizational
documents of the Company's subsidiaries, (ii) conflict with or violate any Law
applicable to the Company or its subsidiaries or by which any of its or its
subsidiaries' properties or operations is bound or affected, (iii) conflict
with, result in any breach of, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair the
Company's or its subsidiaries' rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
any of the properties or assets of the Company or its subsidiaries pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or its subsidiaries are a party or by which the Company or its
subsidiaries, or any of its or its subsidiaries' properties, is bound or
affected except, with respect to clauses (ii) and (iii), for any such conflicts,
breaches, defaults or other occurrences that would not reasonably be expected to
have a Company Material Adverse Effect.

                                       18
<PAGE>

            (b) Except as set forth in Section 3.05(b) of the Company Disclosure
Schedule (the "Company Required Consents") the execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party by the Company do
not, and the performance of this Agreement and the Ancillary Agreements to which
it is a party by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not, require the Company to
obtain any waiver, consent, approval, authorization or permit of, or make any
filing with or notification to, any Governmental Entity or other third party,
except (i) the filing of the Certificate of Merger as required by Delaware Law,
and (ii) compliance with and filings under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended (the "HSR Act").

      SECTION 3.06 Compliance, Permits.

            (a) Each of the Company and its subsidiaries, and each of its
subsidiaries properties and operations, are and since inception have been in
compliance in all material respects with all foreign, federal, state and local
statutes, laws, rules, regulations, ordinances, orders, judgments, decrees and
other authorizations and approvals of Governmental Entities (collectively,
"Laws"), applicable to the Company or its subsidiaries or by which any of its or
its subsidiaries' properties or operations is bound or affected. Neither the
Company nor any of its subsidiaries has received any written or, to its
knowledge, oral notice from any Governmental Entity regarding any violation of,
or any failure to comply with, any Law. This Section 3.06(a) does not apply to
those Laws that are the subject of the representations in Sections 3.11(c),
3.12, 3.14, 3.15 and 3.17.

            (b) Each of the Company and its subsidiaries possesses all permits,
licenses, consents, franchises, orders, approvals, certifications, registrations
and authorizations from Governmental Entities necessary to enable it to continue
to own, lease, operate and use its assets and properties and conduct its
business as presently conducted (collectively, the "Company Permits"). All of
the Company Permits are valid and in full force and effect, and the Company has
not received any written or, to its knowledge, oral notice that any Governmental
Entity will revoke, cancel, rescind, refuse to renew in the ordinary course or
modify any of the Company Permits, nor is any proceeding pending for any such
purpose. Each of the Company and its subsidiaries is in compliance in all
material respects with the terms of the Company Permits and with all material
requirements, standards and procedures of the Governmental Entities that issued
them, and with any limitation on any Company Permit.

      SECTION 3.07 Financial Statements. Attached as Section 3.07 of the Company
Disclosure Schedule are (i) the unaudited consolidated balance sheet of the
Company as of April 30, 2005 (the "Unaudited Balance Sheet") and the related
consolidated statements of income and cash flows for the nine months then ended
(the "Interim Financial Statements"), and (ii) the audited consolidated balance
sheets of the Company as of July 31, 2004 and the related consolidated
statements of income and cash flows for the three years then ended, accompanied
by the report of the Company's independent public accountants thereon (the
"Audited Financial Statements" and, together with the Interim Financial
Statements, the "Financial Statements"). Each of the Financial Statements
(including, in each case, the related notes thereto) was prepared in accordance
with the books and records of the Company and its subsidiaries and in accordance
with GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated therein or in the notes thereto) and fairly presents in all
material respects the consolidated financial position of the Company and its
subsidiaries as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated consistent with the
books and records of the Company, except that the Interim Financial Statements
are subject to normal and recurring year-end adjustments which will not be
material in amount and such Interim Financial Statements may not contain all
notes required by GAAP.

                                       19
<PAGE>

      SECTION 3.08 Absence of Certain Changes or Events. Since the date of the
Unaudited Balance Sheet, each of the Company and its subsidiaries has conducted
its business in the ordinary course consistent with past practice and there has
not been: (i) any Company Material Adverse Effect; (ii) any damage to,
destruction or loss of any material assets of the Company or its subsidiaries
(whether or not covered by insurance); (iii) any revaluation by the Company or
its subsidiaries of any of its assets, including, without limitation, writing
down the value of capitalized software or inventory or writing off notes or
accounts receivable, other than, in each case, in the ordinary course of
business; (iv) any transaction, commitment, contract or agreement entered into
by the Company or its subsidiaries, or any relinquishment by the Company or its
subsidiaries of any contract or other right, in any case having a value of or
involving aggregate payments or value in excess of $25,000 other than in the
ordinary course of business; (v) any material adverse change in any customer,
supplier, licensee or licensor relationship, including any cancellation,
termination or adverse modification or, to the knowledge of the Company,
threatened cancellation, termination or adverse modification of any such
relationship; or (vi) any grant of any severance or termination pay to any
Company employee or consultant or any increase in the rate or terms of
compensation payable or to become payable by the Company to any of its employees
or consultants or any increase in the rate or terms of any bonus, pension or
other employee benefit plan covering any of the Company's employees (including
any new or amended employment, consulting or other compensation agreement).

      SECTION 3.09 No Undisclosed Liabilities. Neither the Company nor its
subsidiaries have any liabilities (absolute, accrued, contingent or otherwise)
whether or not required to be disclosed in financial statements, including the
notes thereto, prepared in accordance with GAAP, except liabilities (i) provided
for in the Unaudited Balance Sheet, (ii) incurred since the date of the
Unaudited Balance Sheet in the ordinary course of business and consistent with
past practice and that would not reasonably be expected to have a Company
Material Adverse Effect, (iii) contractual and service obligations arising in
the ordinary course of business (other than obligations arising out of a
material default or alleged material default), (iv) set forth in Section 3.09 of
the Company Disclosure Schedule or (v) not required to be disclosed in financial
statements, including the notes thereto, prepared in accordance with GAAP, that
are immaterial in amount.

      SECTION 3.10 Absence of Litigation. Except as set forth in Section 3.10 of
the Company Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or its subsidiaries, or any properties or rights
of the Company or its subsidiaries, or, to the knowledge of the Company, against
any officers, directors or employees of the Company or its subsidiaries in their
capacity as such, before any arbitrator or arbitral forum or tribunal or
Governmental Entity. None of the Company, its subsidiaries, any of its or its
subsidiaries' properties or, to the knowledge of the Company, any of the
Company's or its subsidiaries' officers, directors or employees in their
capacity as such is subject or party to any judgment, order, decree or other
direction of, or stipulation with, any Governmental Entity.

                                       20
<PAGE>

      SECTION 3.11 Employee Benefit Plans; Employment Agreements.

            (a) Section 3.11(a) of the Company Disclosure Schedule sets forth a
true and complete list of all "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other bonus, profit sharing, compensation, pension,
severance, deferred compensation, fringe benefit, insurance, welfare,
post-retirement, health, life, stock option, stock purchase, restricted stock,
tuition refund, service award, company car, scholarship, relocation, disability,
accident, sick, vacation, holiday, termination, unemployment, individual
employment, consulting, executive compensation, incentive, commission, payroll
practices, retention, change in control, non-competition and other plans,
agreements, policies, trust funds or arrangements (whether written or unwritten,
insured or self-insured, domestic or foreign) (1) established, maintained,
sponsored or contributed to (or with respect to which there is any obligation to
contribute) by the Company or any entity that would be deemed a "single
employer" with the Company under Section 414(b), (c), (m) or (o) of the Code or
Section 4001 of ERISA (an "ERISA Affiliate") or on behalf of any employee,
officer, director, consultant or stockholder of the Company or its subsidiaries
(whether current, former or retired) or their beneficiaries or (2) with respect
to which the Company or any ERISA Affiliate has or has had any obligation on
behalf of any such employee, officer, director, consultant, stockholder or
beneficiary (each a "Company Plan" and, collectively, the "Company Plans").

            (b) With respect to each Company Plan, the Company has delivered to
ECI true, accurate and complete copies of each of the following: (i) the plan
document together with all amendments thereto or a written summary of all
material plan terms in the case of an unwritten plan, (ii) to the extent
applicable, any trust agreements, custodial agreements, insurance policies,
administrative agreements and similar agreements, and investment management or
investment advisory agreements, (iii) the summary plan description, employee
handbooks and similar employee communications, (iv) to the extent applicable,
the most recent determination letter from the IRS and any related
correspondence, and any pending request for such determination, (v) to the
extent applicable, the three most recently filed Forms 5500, with schedules
attached.

            (c) No Company Plan (i) is subject to, and no circumstances exist
under which the Company could have any liability under, Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA; (ii) that is a welfare plan is funded
through a "welfare benefit fund" within the meaning of Section 419 of the Code;
(iii) provides or promises welfare benefits after the termination of employment
or other service, except as required by applicable Law; (iv) is funded through a
trust intended to meet the requirements of Section 501(c)(9) of the Code; (v) is
subject to the laws of a jurisdiction outside of the United States; or (vi) is a
nonqualified employee pension benefit plan, deferred compensation plan or excess
benefit plan.

                                       21
<PAGE>

            (d) (i) Each Company Plan intended to qualify under Section 401(a)
of the Code is so qualified and has received a favorable determination letter
from the United States Internal Revenue Service (the "IRS") covering all tax law
changes prior to the Economic Growth and Tax Relief Reconciliation Act of 2001
and nothing has occurred or, to the knowledge of the Company, is expected to
occur through the date of the Effective Time that could cause the loss of such
qualification or the imposition of any material penalty or material tax
liability; (ii) all payments required to be made with respect to a Company Plan,
whether under the terms of such plan, a collective bargaining agreement,
insurance policy, other agreement, or by law, have been made on or before the
applicable due date or have been provided for by the Company in accordance with
the provisions of such Company Plan, applicable Law and GAAP; (iii) no claim,
lawsuit, arbitration or other action has been threatened, asserted, instituted
or, to the knowledge of the Company, is anticipated against any Company Plan
(other than routine claims for benefits and appeals of such claims), any trustee
or fiduciaries thereof, the Company (including any subsidiary thereof), any
ERISA Affiliate, any director, officer or employee thereof, or any of the assets
of any trust of any Company Plan; (iv) each Company Plan complies in all
material respects with and has been maintained and operated, in all material
respects, in accordance with its terms and applicable Law, including, without
limitation, ERISA and the Code; (v) no non-exempt "prohibited transaction,"
within the meaning of Section 4975 of the Code and Section 406 of ERISA, has
occurred or is reasonably expected to occur with respect to a Company Plan; (vi)
no Company Plan is under, and the Company has not received any notice of, an
audit or investigation by the IRS, U.S. Department of Labor or any other
Governmental Entity and no such completed audit, if any, has resulted in the
imposition of any tax or penalty; and (vii) with respect to each Company Plan
that is funded wholly or partially through an insurance policy, neither the
Company (including any subsidiary thereof) nor any ERISA Affiliate has any
liability in the nature of retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring on or before the date of this Agreement or is reasonably
expected to have such liability with respect to periods through the Effective
Time.

            (e) Neither the Company, nor any director, officer or employee of
the Company (including any subsidiary or ERISA Affiliate thereof) has made any
promise or commitment, whether or not legally binding, to create any new Company
Plan, or to modify or amend any existing Company Plan. No event, condition or
circumstance exists (or will exist following the consummation of the
transactions contemplated hereby) that (i) would reasonably be expected to
result in a material increase of the benefits provided under any Company Plan or
the expense of maintaining any Company Plan from the level of benefits or
expense incurred for the most recent fiscal year ended before the Effective Time
or (ii) would limit the right of the Company or any of its subsidiaries to
amend, merge or terminate any Company Plan or its related trust.

            (f) The Company does not have, and no circumstances exist under
which the Company would reasonably be expected to have, any liability for the
misclassification of employees as independent contractors, leased employees or
otherwise, or vice versa.

            (g) The consummation of the transactions contemplated by this
Agreement, either alone or in combination with any other event, will not give
rise to any liability under any Company Plan, including, without limitation,
liability for severance or termination pay, unemployment compensation or
withdrawal liability, or accelerate the time of payment or vesting or increase
the amount of compensation or benefits due to any employee, director or
stockholder of the Company or its subsidiaries (whether current, former or
retired) or their beneficiaries.

                                       22
<PAGE>

      SECTION 3.12 Employees; Labor Matters.

            (a) No employee or former employee of the Company or its
subsidiaries is owed any wages, benefits or other compensation for past services
(other than wages, benefits and compensation accrued in the ordinary course of
business during the current pay period and accrued vacation).

            (b) There are no labor disputes, including, without limitation,
charges of unfair labor practices within the meaning of the National Labor
Relations Act, pending or, to the knowledge of the Company, threatened against
the Company or its subsidiaries. Neither the Company nor its subsidiaries has or
is knowingly engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. Neither the Company nor any of its subsidiaries is
presently a party to, bound by, or in the process of negotiating any collective
bargaining agreement or union contract. No organizing activities are presently
being made or, to the knowledge of the Company, are anticipated by or on behalf
of any labor union with respect to any employees of the Company or its
subsidiaries. There are no strikes, slowdowns, work stoppages, picketing or
lockouts pending or, to the knowledge of the Company, threatened, by or with
respect to any employees of the Company or its subsidiaries, and there have been
no such strikes, slowdowns, work stoppages, picketing or lockouts within the
past two (2) years. Each of the Company and its subsidiaries is in material
compliance with all applicable Laws relating to employment and employment
practices, workers' compensation, terms and conditions of employment, worker
safety, wages and hours and the Worker Adjustment and Retraining Notification
Act. There has been no harassment, discrimination, retaliatory act or similar
claim against any officer, director or employee of the Company or its
subsidiaries at any time during the past two (2) years.

      SECTION 3.13 Restrictions on Business Activities. Other than this
Agreement, there is no non-competition or similar agreement, commitment,
judgment, injunction, order or decree binding upon the Company or its
subsidiaries which has the effect of prohibiting or impairing any business
operations of the Company or its subsidiaries as currently conducted. Neither
the Company nor any of its subsidiaries has entered into any agreement under
which it is restricted from selling, licensing or otherwise distributing any of
its technology or products, or providing services to, customers or potential
customers, in any geographic area, during any period of time or any segment of
the market or line of business.

      SECTION 3.14 Taxes.

            (a) All Tax Returns required to be filed on or before the date
hereof by, or with respect to, the Company or its subsidiaries have been filed
when due. All such Tax Returns were prepared in compliance with all applicable
laws and regulations and accurately reflect in all material respects the Taxes
due with respect to such Tax Returns. All Taxes (whether or not shown on any Tax
Return) owed by, or with respect to, the Company or its subsidiaries on or
before the date hereof, have been timely paid, except those, if any, which are
presently being contested in good faith (which are set forth on Section 3.14 of
the Company Disclosure Schedule) and for which exist adequate Tax Reserves. The
Company has provided to ECI, for the last three (3) taxable years, copies of all
income or franchise Tax Returns, including amendments thereto, of the Company
and its subsidiaries. The Company also has provided to ECI copies of all
examination reports and statements of deficiencies assessed with respect to the
Company or its subsidiaries for the last three (3) taxable years.

                                       23
<PAGE>

            (b) No Tax Proceeding is currently being conducted with respect to
the Company or its subsidiaries, no issues that had been raised by a Tax
Authority are pending, no information related to Tax matters has been requested
by any Tax Authority and neither the Company nor its subsidiaries have received
notification from any Tax Authority that it intends to commence a Tax Proceeding
with respect to the Company or its subsidiaries. All deficiencies asserted or
assessments made as a result of any Tax Proceeding have been paid in full. Any
adjustment of Taxes of the Company or its subsidiaries made by the Internal
Revenue Service in any Tax Proceeding which adjustment is required to be
reported to the appropriate state, local or foreign Tax Authority has been so
reported.

            (c) All Tax Returns filed by, or with respect to, the Company and
its subsidiaries for Tax years through the Tax year ended July 31, 2001 have
been examined and closed or are Tax Returns with respect to which the applicable
period for assessment under applicable law, after giving effect to extensions or
waivers, has expired. There are no agreements for the extension or waiver of the
time for assessment of any Taxes relating to the Company or its subsidiaries.
There are no liens other than liens for Taxes not yet due and payable for any
Tax on the assets of the Company or its subsidiaries.

            (d) No claim has been made by any Tax Authority in a jurisdiction
where neither the Company nor its subsidiaries file Tax Returns that the Company
or its subsidiaries are or may be subject to taxation by that jurisdiction.

            (e) Neither the Company nor its subsidiaries are a party to any
joint venture, partnership, or other arrangement or contract which is treated as
a partnership for federal income tax purposes.

            (f) None of the assets owned or used by the Company or its
subsidiaries constitutes tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code. None of such assets is
subject to a safe-harbor lease under Section 168 of the Code or other lease or
arrangement which is not a "true" lease for Federal income tax purposes, and no
event has occurred that would require indemnification by the Company or its
subsidiaries of any tax lessor under any such safe-harbor lease agreement.

            (g) Neither the Company nor its subsidiaries is a party to any
arrangement that could result in the payment of any "parachute payment", as
defined in Section 280G of the Code (determined without regard to subsection
(b)(4)(B) thereof).

            (h) Neither the Company nor its subsidiaries are a party to, are
bound by, or have any obligation under any Tax sharing or Tax indemnification
agreement, provision or arrangement, whether formal or informal, and from and
after the Closing Date, neither the Company nor its subsidiaries shall have any
rights, obligations or liabilities under any such agreement, provision or
arrangement (other than this Agreement). No power of attorney, which is
currently in effect, has been granted with respect to any matter relating to
Taxes of the Company or its subsidiaries.

                                       24
<PAGE>

            (i) Neither the Company nor its subsidiaries are presently required
or will be required to include any adjustment in taxable income under Section
481 of the Code (or any similar provision of the Tax laws of any jurisdiction)
as a result of any change in method of accounting or otherwise. No application
is pending with respect to the Company or its subsidiaries with any Tax
Authority requesting permission for any change in accounting method.

            (j) All Taxes the Company and its subsidiaries are or were obligated
to withhold from amounts owing or paid to any past or present employee,
shareholder, creditor or other party have been withheld and remitted to the
appropriate Tax Authority within the time required by law.

            (k) The amount of Taxes (excluding any provision for deferred Taxes)
reflected as a liability on the Unaudited Balance Sheet is a full and adequate
reflection of the amount of accrued and unpaid Taxes with respect to the Company
and its subsidiaries for all periods through the date of the Unaudited Balance
Sheet for which Tax Returns have not been filed and, since the date of the
Unaudited Balance Sheet, neither the Company nor its subsidiaries have incurred
or accrued any liability for Taxes of any nature (matured, unmatured, fixed or
contingent) except for those Taxes incurred or accrued in the ordinary course of
business of the Company and its subsidiaries.

            (l) There are no Tax rulings, requests for rulings or closing
agreements relating to the Company or its subsidiaries which could affect the
Company's or any subsidiary's liability for Taxes after the Closing Date.

            (m) Neither the Company nor its subsidiaries own any interest in
real property in any jurisdiction in which a Tax is imposed on the transfer of a
controlling interest in an entity that owns any interest in real property.

            (n) Schedule 3.14(n) of the Company Disclosure Schedule sets forth a
list of all jurisdictions to which any Tax is properly payable by, or with
respect to, the Company or its subsidiaries.

            (o) Neither the Company nor its subsidiaries have at any time been a
member of any affiliated, consolidated, combined, unitary or similar group of
corporations other than such a group of which Laurel Networks, Inc. is the
common parent corporation.

            (p) Neither the Company nor its subsidiaries have knowledge of any
facts that, if known to any Tax Authority, would likely result in the issuance
of a proposed deficiency or a similar notice of intention to assess Taxes
against the Company or its subsidiaries.

            (q) Neither the Company nor its subsidiaries have entered into any
"intercompany transaction" as to which any item of deferred income or gain has
not been restored, and no "excess loss account" exists with respect to the stock
of the Company or its subsidiaries, as those terms are defined in the Treasury
Regulations issued under Section 1502 of the Code.

                                       25
<PAGE>

            (r) Neither the Company nor its subsidiaries have any corporate
acquisition indebtedness as described in Section 279 of the Code.

            (s) Neither the Company nor its subsidiaries have engaged in any
"reportable transaction," as such term is defined in Treasury Regulation Section
1.6011-4(b). SECTION 3.15 Environmental Matters. Except as set forth in Section
3.15 of the Company Disclosure Schedule:

            (a) The operations of the Company and its subsidiaries have been and
are currently being conducted in compliance in all material respects with all
applicable Environmental Laws and neither the Company nor its subsidiaries are
aware of the existence of any condition or event regarding any real property
presently, or formerly used, leased, occupied, managed or operated by the
Company or its subsidiaries (collectively, the "Company Real Property"), that
would constitute a violation of any applicable Environmental Laws.

            (b) Other than leases for office space entered into upon customary
terms and conditions, neither the Company nor its subsidiaries have
contractually, by operation of law or otherwise, assumed or succeeded to any
Environmental Liabilities of any predecessors or any other person or entity.

            (c) Neither the Company nor its subsidiaries have received any
notice, whether oral or written, from any Governmental Entity or third party
asserting any liability under or violation of any Environmental Laws that
remains outstanding or unresolved.

            (d) The Company has provided to ECI all material environmental
reports, assessments, audits, studies, investigations, data, Company
Environmental Permits and other written environmental information in its
custody, possession or control concerning the business of the Company and its
subsidiaries and the Company Real Property.

            (e) None of the items set forth in Section 3.15 of the Company
Disclosure Schedule has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.

      SECTION 3.16 Brokers. Except for Credit Suisse First Boston, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.

      SECTION 3.17 Intellectual Property.

            (a) "Intellectual Property" means all intellectual property owned,
used or licensed (as licensor or licensee) by the Company (including for
purposes of this Section 3.17 any subsidiaries of the Company), including:

                                       26
<PAGE>

                  (i) all domestic and foreign copyright interests in any
original work of authorship, whether registered or unregistered, including but
not limited to all copyright registrations or foreign equivalent, all
applications for registration or foreign equivalent, all moral rights, and all
rights to register and obtain renewals and extensions of copyright
registrations, together with all other copyright interests accruing by reason of
international copyright convention ("Copyrights");

                  (ii) all domestic and foreign patents (including certificates
of invention and other patent equivalents), provisional applications, patent
applications and patents issuing therefrom as well as any division, continuation
or continuation in part, reissue, extension, reexamination, certification,
revival or renewal of any patent ("Patents");

                  (iii) all domestic and foreign trademarks, trade dress,
service marks, trade names, icons, logos, slogans, and any other indicia of
source or sponsorship of goods and services, designs and logotypes related to
the above, in any and all forms, all trademark registrations and applications
for registration related to such trademarks (including, but not limited to
intent to use applications), and all goodwill related to the foregoing
("Trademarks");

                  (iv) all domain name registrations ("Domain Names");

                  (v) any formula, design, device, database or compilation, or
other information which is used or held for use by a business, which gives the
holder thereof an advantage over competitors which do not have or use the same,
and which is not generally known by the public. Trade Secrets can include, by
way of example, formulas, algorithms, market surveys, market research studies,
information contained on drawings and other documents, and information relating
to research, development or testing ("Trade Secrets");

                  (vi) novel devices, processes, compositions of matter,
methods, techniques, know how, discoveries and apparatuses or machines, whether
or not patentable ("Inventions");

                  (vii) (A) any and all computer programs and/or software
programs (including all source code, object code, firmware, programming tools
and/or documentation), (B) machine readable databases and compilations,
including any and all data and collections of data, and (C) all content
contained on Internet site(s) ("Software");

                  (viii) all documentation and media constituting, describing or
relating to the above, including memoranda, manuals, technical specifications
and other records wherever created throughout the world; and

                  (ix) the right to sue for past, present, or future
infringement and to collect and retain all damages and profits related to the
foregoing.

            (b) Schedule 3.17(b) lists (i) all issued Patents, and all pending
applications for Patents, owned by the Company; (ii) all registered Trademarks,
and all pending applications for Trademarks, owned by the Company; (iii) all
registered Copyrights, and all pending applications for Copyrights, owned by the
Company; and (iv) all Domain Names owned by the Company.

                                       27
<PAGE>

            (c) Schedule 3.17(c) lists all licenses, sublicenses, agreements or
instruments involving the Intellectual Property of the Company including (i)
licenses by the Company to any person of any Intellectual Property; and (ii) all
licenses by any other person to the Company of any Intellectual Property (except
with respect to generally available "off-the-shelf" software) (each a
"License"). Except as set forth in Schedule 3.17(c) (i) with respect to each
License, there is no material default (or event that with the giving of notice
or passage of time would constitute a material default) by the Company, or to
the knowledge of the Company, the other party thereto, (ii) no License contains
any indemnity by the Company in favor of a third party with respect to the
Intellectual Property, (iii) there are no pending or, to the knowledge of the
Company, threatened claims with respect to any License and (iv) each License is
valid, subsisting, in full force and effect and binding upon the Company and, to
the knowledge of the Company, the other parties thereto, in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.

            (d) Except as set forth in Schedule 3.17(d), the Company has good
and valid title to, or otherwise possesses the rights to use, all Intellectual
Property necessary to permit the Company to conduct the business and operations
of the Company from and after the Closing Date, in the same manner as it is
being conducted as of the date hereof, and to the knowledge of the Company, as
currently contemplated to be conducted by the Company. Except as set forth in
Schedule 3.17(d), neither the consummation of the transactions contemplated by
this Agreement nor the Company's performance hereunder will result in the
termination or forfeiture of the Company's rights in such Intellectual Property
or the Licenses. All officers, employees and contractors of the Company who have
created Intellectual Property that is owned by the Company, have executed an
agreement under which all rights, title and ownership in and to such
Intellectual Property have been assigned to the Company.

            (e) Except as disclosed in Schedule 3.17(e), to the knowledge of the
Company, the Company has not infringed upon, misappropriated or misused any
intellectual property rights of another person or entity. Except as set forth in
Schedule 3.17(e), the Company has not received notice of any alleged
infringement, misappropriation or misuse by the Company of the intellectual
property rights of another person or entity. Except as disclosed in Schedule
3.17(e), there are no pending, and to the knowledge of the Company, threatened
claims or proceedings contesting or challenging the Company's Intellectual
Property, or the Company's use of the Intellectual Property owned by another
person or entity. To the knowledge of the Company, no third party, including any
current or former employee or contractor of the Company, is infringing upon,
misappropriating, or otherwise violating the Company's rights to the
Intellectual Property owned by the Company.

            (f) Patents. Except as set forth on Schedule 3.17(f):

                                       28
<PAGE>

                  (i) All of the issued Patents and pending applications for
Patents of the Company are currently in compliance with all legal requirements
(including payment of filing, examination, and maintenance fees).

                  (ii) No Patent of the Company has been or is now involved in
any infringement, interference, reissue or reexamination proceeding and, to the
knowledge of the Company, no such action is threatened with respect to any of
the Patents of the Company.

            (g) Trademarks.

                  (i) All registered Trademarks, and pending applications for
Trademarks with the United States Patent and Trademark Office ("PTO") or any
other country's trademark office, of the Company are currently in compliance
with all legal requirements (including the filing of affidavits of use and
renewal applications as applicable).

                  (ii) No Trademark of the Company has been or is now involved
in any opposition, infringement, dilution, unfair competition or cancellation
proceeding and, to the knowledge of the Company, no such action is threatened
with respect to any of the Trademarks of the Company.

            (h) Copyrights:

                  (i) All registered Copyrights and pending applications for
Copyrights of the Company are currently in compliance with all legal
requirements.

                  (ii) No Copyright of the Company has been or is now the
subject of any invalidation or infringement Proceeding and, to the knowledge of
the Company, no such action is threatened with respect to any Copyright of the
Company.

            (i) Domain Names:

                  (i) All registered Domain Names of the Company are currently
in compliance with all legal requirements.

                  (ii) No Domain Name of the Company has been or is now the
subject of any dispute resolution or infringement Proceeding and, to the
knowledge of the Company, no such action is threatened with respect to any
Domain Name of the Company.

            (j) Schedule 3.17(j) lists all products distributed or sold by the
Company.

            (k) The Company has taken commercially reasonable steps to protect
the proprietary nature of the Intellectual Property owned by the Company and to
maintain in confidence all Trade Secrets owned or used by the Company. To the
knowledge of the Company, no Trade Secret of the Company has been disclosed or
authorized to be disclosed to any person, including any employee, agent,
contractor, or other entity, other than pursuant to a non-disclosure agreement
or other conditional obligation that protects the Company's proprietary
interests in and to such Trade Secrets.

                                       29
<PAGE>

            (l) Schedule 3.17(l) contains a true and complete list of all of the
Software included, embedded or incorporated in or developed for inclusion in the
Company's products or websites, or used in the delivery of the Company's
services (the "Company Software"). The Company owns full and unencumbered right
and good, valid and marketable title or has valid licenses to the Company
Software, and the Company Software owned by the Company is free and clear of all
Encumbrances other than Permitted Encumbrances. The Company has not incorporated
any third party intellectual property into the Company Software not identified
in Schedule 3.17(l) of the Company Disclosure Schedule. Except as identified in
Schedule 3.17(l), no open source or public library software, including any
version of any software licensed pursuant to any GNU public license, is, in
whole or in part, embodied or incorporated in the Company Software Programs.

            (m) The Company employs commercially reasonable measures to ensure
that the Company Software contain no "viruses." For the purposes of this
Agreement, "virus" means any computer code intentionally designed to wrongfully
disrupt, disable or harm in any manner the operation of any software or
hardware.

            (n) The Intellectual Property owned by the Company (and, to the
knowledge of the Company, the Intellectual Property of third parties licensed to
the Company), is free and clear of any and all Encumbrances other than Permitted
Encumbrances.

            (o) Schedule 3.17(o) sets forth all agreements by which the Company
is obligated to make to third parties any payments related to Intellectual
Property.

            (p) Other than as set forth in Schedule 3.17(p) of the Company
Disclosure Schedule, to the knowledge of Company, there has been no breach of
security involving any the Company websites or information assets. All data
which has been collected, stored, maintained or otherwise used by the Company
and its subsidiaries has been, to the knowledge of the Company, collected,
stored, maintained and used in accordance with all applicable U.S. and foreign
laws, rules, regulations, guidelines and industry standards. The Company has not
received a notice of noncompliance with applicable data protection laws, rules,
regulations, guidelines or industry standards.

      SECTION 3.18 Material Contracts. Section 3.18 of the Company Disclosure
Schedule contains a list of each of the following contracts (or, in the case of
oral contracts, summaries thereof) to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries, or
any of the Company's or its subsidiaries' assets or properties, is bound or
subject (collectively, the "Material Contracts"):

            (a) any agreement or series of related agreements requiring
aggregate payments by or to the Company or its subsidiaries of more than $50,000
per year;

            (b) any agreement with or for the benefit of any current or former
officer or director, holder of any security, employee or consultant of the
Company or its subsidiaries under which the Company or its subsidiaries have any
obligations as of the date hereof and that (i) involves the making of payments
exceeding $50,000 in any year, (ii) contains non-competition provisions imposing
restrictions on the Company or a senior executive officer or key employee of the
Company, or (iii) involves any severance or termination payments or other
similar obligation;

                                       30
<PAGE>

            (c) any agreement with any labor union or association representing
any employee of the Company or its subsidiaries;

            (d) any agreement for the purchase of any materials, supplies,
equipment, merchandise or services that is not terminable on thirty (30) days'
notice or less (without penalty or premium) and which involves future payments
by the Company of more than $50,000;

            (e) any agreement for the sale of any of the assets, properties or
securities of the Company or its subsidiaries other than in the ordinary course
of business or for the grant to any person of any option, right of first refusal
or preferential or similar right to purchase any such assets, properties or
securities;

            (f) any agreement of surety, guarantee or indemnification, other
than agreements in the ordinary course of business with respect to obligations
in an aggregate amount not in excess of $50,000;

            (g) any agreement with customers or suppliers for the sharing of
fees, the rebating of charges or other similar arrangements;

            (h) any agreement obligating the Company or its subsidiaries to
deliver future product enhancements other than in the ordinary course of
business or containing a "most favored nation" pricing clause;

            (i) any agreement relating to the acquisition by the Company or its
subsidiaries of any operating business or the capital stock of any other person;

            (j) any agreement requiring the payment to any person of a brokerage
or sale commission or a finder's or referral fee (other than arrangements to pay
commissions or fees to employees or agents in the ordinary course of business);

            (k) any agreement, note or other document relating to or evidencing
outstanding indebtedness of the Company or its subsidiaries for borrowed money
(including capitalized lease obligations) in excess of $50,000;

            (l) any lease, sublease or other agreement under which the Company
or its subsidiaries is lessor or lessee of any real property or equipment or
other tangible property which involves the future payment by the Company of more
than $50,000 per year;

            (m) any agreement with a change of control provision or otherwise
requiring any consent, approval, waiver or other action by any person in
connection with the Merger;

            (n) any phantom stock plan or bonus, incentive or similar agreement,
arrangement or understanding;

                                       31
<PAGE>

            (o) any agreement involving the assignment, transfer, license
(whether as licensee or licensor), pledge or Encumbrance of any Intellectual
Property owned or used by the Company, except for any generally available
"off-the-shelf" Software;

            (p) any distribution or sales representative agreement or agreement
appointing any agent; and

            (q) any other agreement that is material to the business, operations
or financial condition of the Company.

      True and complete copies of all Material Contracts (and all amendments,
waivers or other modifications thereto) have been furnished or made available to
ECI. Each Material Contract is valid, subsisting, in full force and effect and
binding upon the Company or any of its subsidiaries that is party thereto and,
to the knowledge of the Company, the other parties thereto in accordance with
its terms. Neither the Company nor any of its subsidiaries is in default (and,
to the knowledge of the Company, no condition exists that, with notice or lapse
of time or both, would constitute a default by the Company or such subsidiary)
under any Material Contract, which default would give the other party the right
to terminate or modify such Material Contract or would accelerate any obligation
or payment by the Company, nor, to the knowledge of the Company, is any other
party to any Material Contract in default thereunder (or, does any condition
exist that, with notice or lapse of time or both, would constitute a default by
any such party). None of the Material Contracts is currently being renegotiated.
The validity and effectiveness of each of the Material Contracts will not be
materially adversely affected solely as a result of the transactions
contemplated by this Agreement. To the knowledge of the Company, no party to any
of the Material Contracts has made, asserted or has any defense, setoff or
counterclaim under its Material Contract or has exercised any option granted to
it to cancel, terminate or shorten the term of its Material Contract.

      SECTION 3.19 Title to Properties; Absence of Encumbrances. Each of the
Company and its subsidiaries has good and valid title to or, in the case of
leased property, valid and subsisting leasehold interests in, all of its
properties and assets of whatever kind (whether real or personal) used or held
for use in its business, including, without limitation, all properties and
assets that are shown on the Unaudited Balance Sheet (except for assets sold in
the ordinary course of business since the date of such Unaudited Balance Sheet),
which represent all such property and assets that are used in the conduct of its
businesses as presently conducted, in each case free and clear of any and all
Encumbrances, except (i) for those securing Taxes, assessments and other
governmental charges or levies not yet due and payable (excluding any imposed
pursuant to any of the provisions of ERISA), (ii) such imperfections in title,
liens and easements as do not materially detract from or interfere with the use
of the properties subject thereto or affected thereby or otherwise impair
business operations involving such properties, and (iii) Encumbrances securing
debt which is reflected in the Financial Statements (encumbrances in clauses (i)
- (iii) being "Permitted Encumbrances"). All assets, properties and rights
relating to each of the Company's and its subsidiaries' businesses are held by,
and all agreements, obligations and transactions relating to each of the
Company's and its subsidiaries' businesses have been entered into, incurred and
conducted by, the Company and its subsidiaries rather than any of their
affiliates, and the Company does not use any other assets, properties or rights
in the conduct of its business as presently conducted. No person, including
without limitation any Company Stockholder or any holder of Existing Options,
has any option, right of first refusal, right of first offer, preemptive right
or any other right of any nature to acquire any material assets of the Company
or its subsidiaries. The tangible assets of the Company and its subsidiaries,
taken as a whole, are free from material defects, have been maintained in
accordance with normal industry practice, are in good operating condition and
repair (subject to normal wear and tear) and are suitable for the purpose for
which they are presently used. This Section 3.19 does not relate to Intellectual
Property, which is the subject of Section 3.17.

                                       32
<PAGE>

      SECTION 3.20 Real and Personal Property. Section 3.20 of the Company
Disclosure Schedule contains a complete and correct list of all real property
(including buildings and structures) leased or subleased by the Company or its
subsidiaries and all interests therein (including a street address). The Company
does not own and has never owned any real property. All material work required
to be done by the Company or its subsidiaries under law or any contract or
arrangement to which the Company or any of its subsidiaries is subject or a
party as landlord or tenant has been duly performed. No condemnation or other
proceeding is pending or, to the knowledge of the Company, threatened which
would affect the use of any such property by the Company or its subsidiaries.
Each of the Company and its subsidiaries enjoys peaceful and undisturbed
possession under all real property leases under which it is operating in
accordance with the terms of such leases, and all rents and additional rents due
to date from each of the Company and its subsidiaries under such leases have
been paid in full. Section 3.20 of the Company Disclosure Schedule also contains
a complete and correct list of all equipment, machinery, computers, furniture,
leasehold improvements, vehicles and other personal property owned by the
Company or its subsidiaries with an original cost in excess of $10,000
individually. Except as set forth in Section 3.20 of the Company Disclosure
Schedule, none of the Company's or any of its subsidiaries' personal property is
held under any lease, security agreement, conditional sales contract or other
title retention or security arrangement.

      SECTION 3.21 Transactions with Affiliates; Management Relationships.

            (a) Neither the Company nor any subsidiary has, directly or
indirectly, engaged in any transactions or financial or commercial arrangements
(i) with any stockholder of the Company, other than as a board member or
pursuant to the Company's financing activities or (ii) (except for employment
arrangements with its employees) with any officer or director or, to the
knowledge of the Company, with any of their respective affiliates or relatives
(each a "Related Party"). Except for (i) employment arrangements with its
employees, (ii) the Company Certificate of Incorporation, (iii) the Company
By-Laws, (iv) applicable Law and (v) the agreements evidencing Existing Options
or Company Restricted Stock, neither the Company nor its subsidiaries have any
obligation to or claim against any Related Party, and no Related Party has any
obligation to or claim against the Company or its subsidiaries. Section 3.21 of
the Company Disclosure Schedule describes the nature and extent of any products,
services or benefits provided to the Company or any of its subsidiaries by any
Related Party without a corresponding charge equal to the fair market value of
such products, services or benefits.

            (b) No executive officer or director of the Company or its
subsidiaries owns any interest in any property or assets of the Company or its
subsidiaries (except as a stockholder of the Company) and, to the knowledge of
the Company, no executive officer of the Company or its subsidiaries owns any
interest in (i) any current competitor, customer or supplier of the Company or
its subsidiaries or (ii) any person that is currently a party to any material
contract or agreement with the Company or its subsidiaries, other than holdings
of less than 1% of a class of a company's publicly traded securities.

                                       33
<PAGE>

      SECTION 3.22 Insurance. Section 3.22 of the Company Disclosure Schedule
lists all insurance policies owned or held by the Company and its subsidiaries
on the date hereof. All such policies are in full force and effect, all premiums
with respect thereto have been paid to the extent due, no notice of cancellation
or termination has been received with respect to any such policy and no claim is
currently pending under any such policy involving an amount in excess of
$20,000.

      SECTION 3.23 Books and Records.

            (a) The books and records of each of the Company and its
subsidiaries are complete and correct in all material respects and have been
maintained in accordance with sound business practices.

            (b) The minute books of each of the Company and its subsidiaries,
which have been previously provided to ECI, contain complete and accurate
records of all meetings in all material respects and accurately reflect in all
material respects all other corporate action of the stockholders and board of
directors of each of the Company and its subsidiaries through the date of this
Agreement.

      SECTION 3.24 Accounts Receivable. All accounts receivable of the Company
and its subsidiaries, whether reflected in the Unaudited Balance Sheet or
otherwise, represent sales actually made in the ordinary course of business,
have been reflected properly in their books and records and represent valid
obligations to the Company or a subsidiary.

      SECTION 3.25 Customers and Suppliers. Section 3.25 of the Company
Disclosure Schedule sets forth (a) the ten largest customers of the Company and
its subsidiaries, and (b) the ten largest suppliers of the Company and its
subsidiaries, in each case on the basis of cost of goods or services purchased,
for the fiscal year ended July 31, 2004 (collectively, the "Customers and
Suppliers"). The Company knows of no plan or intention of any of the Customers
or Suppliers to terminate, cancel or otherwise adversely modify in any material
respect its relationship with the Company or its subsidiaries or to decrease
materially or limit any of its products or services to the Company or its
subsidiaries or its usage or purchase of any of the services or products of the
Company or its subsidiaries. Neither the Company nor any of its subsidiaries
offers or uses any current customer incentive programs, whether written or oral
and whether or not deemed or considered to be legally enforceable, which involve
the payment of rebates or issuance of credits by the Company or any of its
subsidiaries or the sharing of marketing expenses by the Company or its
subsidiaries.

      SECTION 3.26 Employee Conflicts. To the knowledge of the Company, no
employee of the Company or its subsidiaries is in violation of any term of any
employment contract, inventions disclosure agreement, confidentiality agreement,
non-competition agreement or restrictive covenant to or with a former employer
relating to the right of any such employee to be employed by the Company or any
of its subsidiaries because of the nature of the business conducted or presently
proposed to be conducted by the Company or its subsidiaries or relating to the
use of trade secrets or proprietary information of others.

      SECTION 3.27 Certain Business Practices. Neither the Company nor any of
its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments related to a political activity or (ii)
made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended.

                                       34
<PAGE>

      SECTION 3.28 Bank Accounts. Schedule 3.28 of the Company Disclosure
Schedule sets forth a complete and correct list of each bank in which the
Company or its subsidiaries have an account or safe deposit or lockbox, the
account or box number, as the case may be, and the name of every person
authorized to draw thereon or having access thereto.

      SECTION 3.29 No Required Disclosure. The Company is not required to
disclose the existence of this Agreement, the terms hereof, or the transactions
contemplated hereby, to any person (other than to its directors, officers and,
to the extent required by applicable Law, any Company Stockholder or any holder
of Existing Options).

      SECTION 3.30 Internal Controls. Except as set forth in Section 3.30 of the
Company Disclosure Schedule, the Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

      SECTION 3.31 Inventory. The Company's and its subsidiaries' inventory as
set forth in the Unaudited Balance Sheet has been valued in accordance with GAAP
consistently applied and consists of items of quality useable and saleable in
the normal course of the Company's business except for items of obsolete
materials and materials of below standard quality, all of which have been
written down to realizable market value or for which adequate reserves have been
provided in the Unaudited Balance Sheet.

      SECTION 3.32 Ciena Fee. Ciena Corporation is not entitled to any payment
by the Company in connection with the transactions contemplated hereby.

                                   ARTICLE IV.
              REPRESENTATIONS AND WARRANTIES OF ECI AND MERGER SUB

      ECI and Merger Sub represent and warrant to the Company as of the date
hereof that the statements contained in this Article IV are true and correct,
except as set forth in the disclosure schedule delivered by ECI to the Company
on the date hereof (the "ECI Disclosure Schedule"). The ECI Disclosure Schedule
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs in this Article IV and the disclosure in any paragraph shall qualify
other paragraphs in this Article IV only to the extent that it is specifically
indicated in such paragraph.

                                       35
<PAGE>

      SECTION 4.01 Organization and Qualification. Each of ECI and Merger Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the requisite corporate
power and authority necessary to own, lease and operate the properties it owns,
leases or operates and to carry on its business as it is now being conducted.

      SECTION 4.02 Authority Relative to this Agreement. Each of ECI and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement and each of the Ancillary Agreements to which it is a party and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party by ECI and Merger
Sub and the consummation by ECI and Merger Sub of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of ECI and Merger Sub, as the case may be, and no
other corporate or stockholder proceedings on the part of ECI or Merger Sub are
necessary to authorize this Agreement or any of the Ancillary Agreements to
which it is a party or to consummate the transactions so contemplated. This
Agreement has been, and the Ancillary Agreements to which it is a party have
been or, if executed after the date hereof, will be, duly and validly executed
and delivered by ECI and Merger Sub and, assuming the due authorization,
execution and delivery of this Agreement and the Ancillary Agreements by each of
the other parties hereto and thereto, constitutes, or, in the case of the
Ancillary Agreements have been or, if executed after the date hereof and prior
to the Effective Time, will constitute, legal, valid and binding obligations of
ECI and Merger Sub, enforceable against ECI and Merger Sub in accordance with
their respective terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.

      SECTION 4.03 No Conflict; Required Filings and Consents.

            (a) The execution and delivery of this Agreement and the Ancillary
Agreements to which it is a party by ECI and Merger Sub do not, and the
performance of this Agreement and the Ancillary Agreements by ECI and Merger Sub
and the consummation by ECI and Merger Sub of the transactions contemplated
hereby and thereby will not, (i) conflict with or violate the organizational
documents of ECI or Merger Sub, (ii) conflict with or violate any Law applicable
to ECI or Merger Sub or by which any of their respective properties is bound or
affected or (iii) conflict with, result in any breach of, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or impair ECI's or Merger Sub's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the properties or assets of ECI or Merger
Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which ECI
or Merger Sub is a party or by which ECI or Merger Sub or any of their
respective properties is bound or affected except, in the case of clauses (ii)
and (iii), for such conflicts, breaches, violations, defaults, impairments or
alterations that would not prevent or delay consummation of the Merger, or
otherwise prevent or delay ECI or Merger Sub from performing its obligations
under this Agreement.

                                       36
<PAGE>

            (b) The execution and delivery of this Agreement and the Ancillary
Agreements by ECI and Merger Sub, as applicable, do not, and the performance of
this Agreement and the Ancillary Agreements by ECI and Merger Sub, as
applicable, and the consummation by ECI and Merger Sub of the transactions
contemplated hereby and thereby, as applicable, will not, require any waiver,
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity or other third party, except (i) for the filing of
the Certificate of Merger as required by Delaware Law, (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Merger,
or otherwise prevent or delay ECI or Merger Sub from performing its obligations
under this Agreement and (iii) compliance with and filings under the HSR Act.

      SECTION 4.04 Financial Ability. ECI, together with Parent, has sufficient
cash available to enable it to pay the Gross Purchase Price at the Closing and
to satisfy its other obligations hereunder.

      SECTION 4.05 Brokers. Except for Mercator Capital, no broker, finder or
investment banker is entitled to any brokerage, finder's fee or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of ECI, Parent or Merger Sub.

      SECTION 4.06 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of ECI, threatened
against ECI or Merger Sub that question the validity of this Agreement, the
Ancillary Agreement or any of the transactions contemplated hereby or thereby.

                                   ARTICLE V.
                                    COVENANTS

      SECTION 5.01 Conduct of Business by the Company. Except as set forth in
Section 5.01 of the Company Disclosure Schedule, during the period from the date
of this Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement pursuant to Article VIII, the Company covenants
and agrees that, unless ECI shall otherwise agree in writing and unless
otherwise expressly permitted hereunder, (i) the Company and its subsidiaries
shall conduct their businesses, and the Company and its subsidiaries shall not
take any action other than, in the ordinary course of business and in a manner
consistent with past practice; and (ii) the Company shall use commercially
reasonable efforts (x) to preserve the business organization of the Company and
its subsidiaries, (y) to keep available the services of the present officers,
employees and consultants of the Company and its subsidiaries and (z) to
preserve the present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or its
subsidiaries has significant business relations. By way of amplification and not
limitation, except as set forth in Section 5.01 of the Company Disclosure
Schedule, during the period from the date of this Agreement and continuing until
the earlier to occur of the termination of this Agreement and the Effective
Time, the Company shall not and shall cause its subsidiaries not to, directly or
indirectly, do or propose to do any of the following without the prior written
consent of ECI (which consent shall not be unreasonably withheld or delayed),
unless otherwise expressly permitted hereunder:

                                       37
<PAGE>

            (a) amend or otherwise change the Company Certificate of
Incorporation or Company By-Laws or any of the Company's subsidiaries'
equivalent organizational documents;

            (b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible or exchangeable
securities, or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest (including, without limitation, any phantom
interest), of the Company or its subsidiaries or affiliates except for the
issuance of shares of Company Capital Stock pursuant to the exercise of Existing
Options or warrants outstanding as of the date hereof;

            (c) sell, lease, license, pledge, dispose of or encumber any assets
of the Company or its subsidiaries except (i) in the ordinary course of business
and in a manner consistent with past practice and that individually do not have
a book value in excess of $10,000 and in the aggregate do not have a book value
in excess of $50,000, (ii) dispositions of obsolete or worthless assets) and
(iii) sales of inventory in the ordinary cause of business consistent with past
practice;

            (d) except as set forth in Section 5.05 (Existing Options),
accelerate, amend or change the period (or permit any acceleration, amendment or
change) of exercisability of any Existing Options or Company Restricted Stock or
authorize cash payments in exchange for any such Existing Options;

            (e) i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of the Company Capital Stock, except that a wholly owned
subsidiary of the Company may declare and pay a dividend to its parent, (ii)
split, combine or reclassify any of the Company Capital Stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any shares of the Company Capital Stock or (iii) amend the
terms of, repurchase, redeem or otherwise acquire any of its securities, or
propose to do any of the foregoing;

            (f) sell, transfer, license, sublicense or otherwise dispose of, or
allow any rights to lapse with respect to, any Company Intellectual Property,
other than in the ordinary course of business, or amend or modify any existing
agreements with respect to any Company Intellectual Property, other than in the
ordinary course of business and provided that, in any event, such action does
not involve Company Intellectual Property that is material to the business of
the Company or its subsidiaries, other than licenses granted by the Company to
its customers in connection with the sale of the Company's products in the
ordinary course of business;

            (g) ii) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money, or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances to any person other than ordinary advances for business expenses; (iii)
enter into or amend any contract or agreement other than in the ordinary course
of business or that involves payments by the Company or its subsidiaries in
excess of $50,000; (iv) authorize or make any capital expenditures or purchase
of fixed assets that individually exceed $25,000 or in the aggregate exceed
$50,000, (v) terminate any Material Contract or amend any material terms of any
Material Contract; or (vi) enter into or amend any contract, agreement,
commitment or arrangement to effect any of the matters prohibited by this
Section 5.01(g);

                                       38
<PAGE>

            (h) except as required by applicable Law or the terms of an
agreement existing on the date hereof and identified in Section 5.01(h) of the
Company Disclosure Schedule, increase the compensation, bonus or other benefits
payable or to become payable to any of the Company's or its subsidiaries'
officers, directors or employees, grant any severance or termination pay or
rights to, or enter into any employment or severance agreement with, any of the
Company's or its subsidiaries' officers, directors or employees, increase any
benefits payable under existing severance or termination pay policies or
employment agreements or establish, adopt, enter into or, except as required by
law, terminate or amend, any Company Plan;

            (i) take any action, other than as required by GAAP, to change
accounting policies, principles, methods or practices (including, without
limitation, procedures with respect to reserves, revenue recognition,
capitalization of development costs, payments of accounts payable and collection
of accounts receivable);

            (j) make any material Tax election or settle or compromise any Tax
liability, except to the extent the amount of any such settlement or compromise
is reflected in the Tax Reserve;

            (k) iii) pay, discharge, settle or satisfy any lawsuits, claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
compliance with agreements existing on the date hereof or in the ordinary course
of business and consistent with past practice, of liabilities reflected or
reserved against in the Financial Statements or incurred in the ordinary course
of business and consistent with past practice, (ii) waive the benefits of any
confidentiality, standstill or similar agreements to which the Company or its
subsidiaries is a party or (iii) cancel any indebtedness in excess of $10,000,
individually or in the aggregate, or waive any claims or rights of substantial
value;

            (l) permit any material increase in the number of employees employed
by the Company or its subsidiaries on the date hereof;

            (m) terminate or fail to renew any Company Permit that is required
for continued operations;

            (n) enter into any collective bargaining agreement or union contract
with any labor organization or union;

            (o) accelerate or defer any obligation or payment by or to the
Company, other than in the ordinary course of business and in an amount not in
excess of $50,000, in each case;

            (p) take or fail to take, or agree in writing or otherwise to take
or fail to take, any of the actions described in Section 5.01(a) through (o)
above, or that would result in any of the conditions to the Merger set forth
herein not being satisfied.

                                       39
<PAGE>

            SECTION 5.02 No Solicitation of Transactions. From and after the
date hereof until the earlier to occur of the Effective Time and the date of
termination of this Agreement pursuant to Article VIII, the Company shall not,
directly or indirectly, through any officer, director, agent, stockholder or
otherwise, solicit, initiate, or encourage submission of or permit, proposals or
offers from any person relating to any acquisition or purchase of all or a
substantial portion of the assets of, or any equity interest in, the Company or
any business combination with the Company or participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing. The Company will immediately cease and cause to be terminated any
existing activities, discussions, or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and shall immediately demand
the return or destruction of any non-public information concerning the Company
distributed to other persons for the purpose of soliciting or encouraging any of
the foregoing. The Company shall immediately (a) notify ECI if any such proposal
or offer, or any inquiry or contact with any person with respect thereto, is
made and (b) disclose to ECI the terms and conditions of such proposal or offer
and the identity of the offeror or potential offeror.

      SECTION 5.03 Access to Information; Confidentiality.

            (a) Upon reasonable notice, the Company shall (and shall cause its
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of ECI reasonable access during normal business hours,
during the period from the date of this Agreement and until the earlier of the
termination of this Agreement pursuant to Article VIII hereof and the Effective
Time, to all its properties, books, contracts, commitments and records, and,
during such period, the Company shall (and shall cause its subsidiaries to)
furnish promptly to ECI all information concerning its business, properties and
personnel as ECI may reasonably request, and shall make available to ECI the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of its business, properties and personnel as ECI
may reasonably request. Notwithstanding the foregoing, no such review, inquiry
or investigation shall affect any representations or warranties of the Company
contained herein or in any Ancillary Agreement or the conditions to the
obligations of ECI and Merger Sub.

            (b) The parties acknowledge that ECI and the Company have previously
executed a letter agreement dated December 5, 2004 (the "Confidentiality
Agreement"), the confidentiality provisions of which will continue in full force
and effect in accordance with the terms of such agreement.

      SECTION 5.04 Consents, Approvals; Taking of Necessary Action.

            (a) Subject to the terms hereof, each of the Company and ECI shall
use its commercially reasonable efforts to (i) take, or cause to be taken, all
actions, and do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated hereby as promptly as practicable,
(ii) obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by the Company or ECI or any of their respective subsidiaries,
and make any notifications required to be made, in connection with the
authorization, execution and delivery of this Agreement, the Ancillary
Agreements and the consummation of the Merger and transactions contemplated
hereby and thereby, including the Company Required Consents (it being understood
and agreed that the Company shall not be obligated to make any payments to
obtain any consents), (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under any applicable Law and (iv) execute
or deliver any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. The
Company and ECI shall cooperate with each other in connection with the making of
all such filings. Each of the Company and ECI shall use their respective
commercially reasonable efforts to furnish to each other all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable Law in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements.

                                       40
<PAGE>

            (b) As soon as reasonably practicable, the Company and ECI shall
each file with the United States Federal Trade Commission ("FTC") and the
Antitrust Division of the United States Department of Justice ("DOJ")
Notification and Report Forms relating to the transactions contemplated hereby
as required by the HSR Act, as well as any additional pre-merger notification
forms required by control laws and regulations of any other applicable
jurisdiction, as reasonably agreed by the parties to be required. The Company
and ECI shall each promptly: (i) supply the other with any information that may
be required in order to effectuate such filings; and (ii) supply any additional
information which reasonably may be required by the FTC, the DOJ or the
competition or merger control authorities of any other jurisdiction and which
the parties may reasonably deem appropriate; provided, however, that neither the
Company nor ECI shall be required to agree to any divestiture by itself of any
of its subsidiaries or affiliates of shares of capital stock or of any material
business, assets or property, or the imposition of any material limitation on
the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock.

            (c) The Stockholder Representative agrees that he shall, immediately
prior to the Effective Time, execute and deliver the Escrow Agreements.

      SECTION 5.05 Existing Options. In accordance with the terms of the Company
Option Plans, each of the Existing Options that is not exercised prior to the
Effective Time shall be canceled.

      SECTION 5.06 Notification of Certain Matters.

            (a) The Company shall give prompt notice to ECI of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause any representation or warranty of the Company
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company materially to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available hereunder to ECI or Merger Sub.

                                       41
<PAGE>

            (b) ECI shall give prompt notice to the Company of (i) the
occurrence, or non- occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause any representation or warranty of ECI
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
ECI or Merger Sub materially to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section shall not
limit or otherwise affect the remedies available hereunder to the Company.

      SECTION 5.07 Public Announcements. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
ECI and the Company. Thereafter, so long as this Agreement is in effect, ECI and
the Company shall consult with each other before issuing any press release or
otherwise making any public statement with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which consent shall not
be unreasonably withheld or delayed; provided, however, that ECI may, without
the prior consent of the other party, issue such press release or make such
public statement as may upon the advice of counsel be required by Law.

      SECTION 5.08 Management Agreements. On the date hereof and simultaneously
with the execution of this Agreement, the Company and ECI shall enter into a
Management Agreement with each employee specified on Schedule 5.08 hereto, each
such Management Agreement to become effective immediately upon the Effective
Time.

      SECTION 5.09 Litigation. Until the earlier of the termination of this
Agreement pursuant to Article VIII or the Effective Time, (a) the Company shall
promptly advise ECI if any claim, suit, governmental proceeding, or litigation
is commenced against the Company or, to the knowledge of the Company, is
threatened against the Company, and (b) ECI shall promptly advise the Company if
any claim, suit, governmental proceeding, or litigation is commenced against ECI
or Merger Sub or, to the knowledge of ECI, is threatened against ECI or Merger
Sub that questions the validity of this Agreement, the Ancillary Agreements or
the transactions contemplated hereby.

      SECTION 5.10 Certain Tax Covenants.

            (a) Preparation and Filing of Returns.

                  (i) The Company shall be responsible for the preparation and
timely filing of all Tax Returns of or which include the Company and its
subsidiaries for Pre-Closing Tax Periods that are due before the Closing Date.
The Company shall cause the amount shown as due on such Tax Returns to be timely
paid.

                  (ii) At least ten (10) days prior to the due date of any
income or franchise Tax Return referred to in Section 5.10(a)(i), the Company
shall cause such Tax Return to be delivered to ECI for its review, and such Tax
Return shall not be filed without ECI's written consent, which shall not be
unreasonably withheld or delayed.

                  (iii) ECI shall prepare or cause to be prepared and timely
file or cause to be timely filed all Tax Returns of the Company and/or its
subsidiaries that include Pre-Closing Tax Periods and are due after the Closing
Date. At least fifteen (15) business days prior to the due date (reflecting any
extension of such due date) of any such Tax Return, ECI shall cause such Tax
Return to be delivered to the Stockholder Representative for its review, comment
and approval, which shall not be unreasonably withheld and which shall be deemed
given if such Tax Return is materially accurate and is prepared on a basis
consistent with past practices or current law or if the Stockholder
Representative has not responded to ECI by the date that is five (5) days prior
to such due date of the Tax Return. At least three (3) days prior to the due
date of each such Tax Return, the Company Stockholders, in accordance with their
Pro Rata Interests, shall pay to ECI an amount equal to the Taxes due and
attributable to the Pre-Closing Tax Period included in such Tax Return (as
determined under Section 5.10(b) in the case of a Tax Return for an Overlap
Period), which amount shall be taken by ECI from the Escrow Indemnity Account,
but only to the extent that the amount due from the Company Stockholders exceeds
the Tax Reserve reduced by any prior offsets pursuant to Section 5.10 or Section
7.03(a)(i).

                                       42
<PAGE>

                  (iv) If a Tax Return referred to in the first sentence of
Section 5.10(a)(iii) is to be filed pursuant to a valid extension, the Company
Stockholders in accordance with their Pro Rata interests, shall pay to ECI, at
least two (2) days prior to the due date of the Tax Return without regard to
such extension, an amount equal to the Taxes due from the Company and/or its
subsidiaries and attributable to the applicable Pre-Closing Tax Period, which
amount shall be taken by ECI from the Escrow Indemnity Account, but only to the
extent that the amount due from Company Stockholders exceeds the Tax Reserve
reduced by any prior offsets pursuant to Section 5.10 or Section 7.03(a). If ECI
determines that such Tax due on the due date without regard to extensions
exceeds the Tax Reserve reduced by any prior offsets pursuant to Section 5.10 or
Section 7.03(a), ECI shall deliver to the Stockholder Representative, at least
fifteen (15) business days before such due date, a schedule supporting the
calculation of such Taxes for its review, comment and approval, which shall not
be unreasonably withheld and shall be deemed given if such schedule is
materially accurate and is prepared on a basis consistent with past practices or
current law involving the calculation of Taxes or if the Stockholder
Representative has not responded to ECI by the date that is five (5) days prior
to the due date of the payment of such Taxes. ECI shall cause the Taxes due on
the due date, without regard to extensions, to be timely paid. Appropriate
adjustments shall be made between the parties as necessary if, at the time the
Tax Return is actually filed, the Taxes due and attributable to the Pre-Closing
Tax Period are more or less than the amount, if any, previously paid by ECI.

            (b) Allocation of Tax Liability.

                  (i) In the case of a Tax Return with respect to the Company or
a subsidiary for an Overlap Period based upon income, gross receipts (such as
sales Taxes) or specific transactions involving Taxes other than Taxes based
upon income or gross receipts, the amount of Taxes attributable to any
Pre-Closing Tax Period or Post-Closing Tax Period included in the Overlap Period
shall be determined by closing the books of the Company or the applicable
subsidiary as of the close of the Closing Date and by treating each of such
Pre-Closing Tax Period and Post-Closing Tax Period as a separate taxable year,
except that exemptions, allowances or deductions that are calculated on an
annual basis shall be apportioned on a per diem basis; provided, however, that
such per diem allocation shall not apply to property placed in service or
purchased or capitalized costs incurred after the Closing Date.

                                       43
<PAGE>

            (ii) If the liability for Taxes for an Overlap Period is determined
on a basis other than income, gross receipts or specific transactions, the
amount of Taxes attributable to any Pre-Closing Tax Period included in the
Overlap Period shall be equal to the amount of such Taxes for the Overlap Period
multiplied by a fraction, the numerator of which is the number of days in the
Pre-Closing Tax Period included in the Overlap Period and the denominator of
which is the total number of days (not to exceed 365) in the Overlap Period, and
the amount of such Taxes attributable to any Post-Closing Tax Period included in
an Overlap Period shall be the excess of the amount of the Taxes for the Overlap
Period over the amount of Taxes attributable to the Pre-Closing Tax Period
included in such Overlap Period.

            (iii) For clarification purposes, any subpart F income, within the
meaning of Section 952 of the Code, of any subsidiary that is realized in an
Overlap Period on or prior to the Closing Date shall be attributable to the
Pre-Closing Tax Period and any such subpart F income of any subsidiary that is
realized in an Overlap Period following the Closing Date shall be attributable
to the Post-Closing Tax Period.

      (c) Consistency. The Company shall cause no accounting method to be
adopted and no position to be taken by, or with respect to, the Company or any
subsidiary in any Tax Return for any Pre-Closing Tax Period that has not yet
been filed and that the Company has the responsibility to prepare or to cause to
be prepared pursuant to Section 5.10(a)(i), or in a Tax Proceeding, that is
inconsistent with any accounting method or position adopted or taken in a Tax
Return that has previously been filed, unless ECI shall provide its written
consent or unless otherwise required by law.

      (d) Tax Elections; Amended Returns and Refund Claims. The Company shall
cause no Tax election to be made by, or with respect to, the Company or any
subsidiary and shall cause no amended Tax Return or refund claim to be filed by,
or with respect to, the Company or any subsidiary on or after the date of this
Agreement, unless ECI shall provide its written consent.

      (e) Cooperation and Exchange of Information. As soon as practicable after
the Closing Date, but not later than thirty (30) days thereafter, the Company
will cause to be delivered to ECI all of the original books and records
(including, without limitation, work papers) and Tax Returns of the Company and
its subsidiaries relating to Taxes which are in the possession of the Company,
its subsidiaries their affiliates or their accountants or other advisors. The
Company and ECI agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information (including access to books
and records) and such other cooperation and assistance as is reasonably
necessary to complete and file any Tax Return, respond to audits, make any
determination under this Agreement (including, but not limited to, the
determination of the responsibility for the payment of Taxes under this
Agreement), verify issues and negotiate settlements with Tax Authorities, or
defend or prosecute any claims.

                                       44
<PAGE>

      (f) Tax Proceedings.

            (i) If, subsequent to the Closing Date, ECI shall receive notice of
a Tax Proceeding with respect to the Company or a subsidiary for which the
Company Stockholders could have an indemnification obligation under Section
7.03, ECI shall promptly notify the Stockholder Representative in writing of
such Tax Proceeding, provided that the failure of ECI to give such notice shall
not relieve the Company Stockholders of their indemnification obligations under
Section 7.03, except to the extent that such failure materially prejudices the
rights of the Company Stockholders. A majority in interest of the Company
Stockholders (based on the amount of proceeds delivered pursuant to this
Agreement as Net Aggregate Merger Consideration) shall have the right, by
notifying ECI in writing within fifteen (15) business days of the receipt from
ECI of the notice specified in the prior sentence (or within such shorter period
of time as may be required by such notice), to cause the Stockholder
Representative to assume control of the conduct and resolution of the issues in
such Tax Proceeding for which they could have an indemnification obligation
under Section 7.03, provided that the Company Stockholders shall have
acknowledged in writing to ECI that they have such indemnification obligation.
ECI and its representatives shall be entitled to attend the portion of such Tax
Proceeding controlled by the Stockholder Representative, the Stockholder
Representative shall keep ECI informed on a timely basis of all developments,
including without limitation, furnishing ECI with a copy of all written
submissions to the Tax Authority or court, and the Tax Authority or court shall
be notified to send ECI copies of all notices and correspondence sent by the Tax
Authority or court.

            (ii) If the resolution of the issues referred to in this Section
5.10(f) could have the effect of increasing the Tax Liabilities of, or
attributable to, the Company or its subsidiaries in a Post-Closing Tax Period
and the Company Stockholders have not agreed to indemnify ECI and its affiliates
fully for such increase, the Stockholder Representative shall afford ECI the
opportunity to control jointly the conduct and resolution of the portion of such
Tax Proceeding that could have the effect of increasing the Tax Liabilities of,
or attributable to, the Company in a Post-Closing Tax Period. If ECI shall
decline in writing to participate in the control of the conduct of such Tax
Proceeding, the Stockholder Representative shall have the right to control the
conduct of such Tax Proceeding, provided that the Stockholder Representative
shall not resolve such Tax Proceeding without ECI's written consent, which shall
not be unreasonably withheld.

            (iii) If the Company Stockholders shall elect in writing not to
control or participate in the control of the conduct of a Tax Proceeding
described in Section 5.10(f)(i), ECI shall have the right to control the conduct
of such Tax Proceeding, provided that ECI shall not resolve such Tax Proceeding
without the Stockholder Representative's written consent, which shall not be
unreasonably withheld.

            (iv) Any Tax Proceeding which is currently being conducted or is
conducted at the Closing Date shall be subject to the procedures and principles
set forth in the above provisions of this Section 5.10(f).

                                       45
<PAGE>

            (v) The provisions of this Section 5.10(f) take precedence over any
conflicting provisions in Section 7.05.

      (g) Stockholder Representative. The person designated and appointed as the
"Stockholder Representative" shall act as the Company Stockholders' agent and
attorney-in-fact, with full power to act on behalf of and to bind the Company
Stockholders in connection with the review of Tax Returns (pursuant to Section
5.10(a)).

      SECTION 5.11 Update Schedule. The Company shall provide to ECI, three (3)
business days prior to the scheduled Effective Time, a schedule (the "Update
Schedule") listing all holders of Company Capital Stock as of such date, as well
as the number, class and series of shares of Company Capital Stock held by each
such holder. In the event that any of the information contained in the Update
Schedule shall not be true and correct as of immediately prior to the Effective
Time, the Company shall provide to ECI, prior to the Effective Time, a revised
Update Schedule setting forth in reasonable detail all relevant changes thereto.

      SECTION 5.12 [Reserved].

      SECTION 5.13 Necessary Actions; Notice. Each of the parties hereto
covenants and agrees that, at or before the Effective Time, it shall take steps
so that all corporate actions, proceedings, instruments, and documents required
to carry out the transactions contemplated hereby or incidental hereto and all
other related legal matters are reasonably satisfactory to each of the parties'
counsel and shall furnish such counsel with such certified copies of such
corporate actions and proceedings and such other instruments and documents as it
shall have reasonably requested. Without limiting the foregoing, as soon as
practicable after the date hereof, the Company shall, in accordance with Section
228 of the Delaware Law, provide notice of the Written Consent of Stockholders
to the Company Stockholders who did not execute such consent.

      SECTION 5.14 Existing Option Certificate. The Company shall provide to
ECI, substantially simultaneously with the Effective Time, a certificate
executed by a senior executive of the Company certifying that all of the
Existing Options have been canceled.

      SECTION 5.15 Directors' and Officers' Insurance.

            (a) From and after the Effective Time, ECI will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to any indemnification and exemption agreements in effect immediately
prior to the Effective Time between the Company and its current and former
directors and officers (the "Indemnified Parties") and any indemnification and
exculpation provisions under the Company's Certificate of Incorporation and
Bylaws as in effect on the date hereof. The Certificate of Incorporation and
Bylaws of the Surviving Corporation will contain provisions with respect to
indemnification and exculpation that are at least as favorable to the
Indemnified Parties as those contained in the Company's Certificate of
Incorporation and Bylaws as in effect on the date hereof for a period of six (6)
years from the Effective Time.

            (b) For a period of six (6) years after the Effective Time, ECI will
cause the Surviving Corporation to maintain in effect the current policies of
directors' and officers' liability insurance maintained by the Company. ECI may
substitute therefor policies of substantially similar coverage containing terms
and conditions that are not less advantageous in all material respects to the
Indemnified Parties; provided, however, that in no event will ECI or the
Surviving Corporation be required to expend an amount per year in excess of 150%
of current annual premiums paid by the Company for such coverage.

                                       46
<PAGE>

            (c) The provisions of this Section 5.15 shall survive the
consummation of the transactions contemplated by this Agreement at the Effective
Time and continue for the periods specified in this Section 5.15 and are
intended to be for the benefit of, and will be enforceable by, each of the
Indemnified Parties and their respective heirs and representatives. In the event
the Surviving Corporation or any of its successors or assigns consolidates or
amalgamates with or merges into any other person and shall not be the continuing
or surviving corporation or entity of such consolidation, amalgamation or
merger, or transfers all or substantially all of its assets to any person in a
single transaction or series of related transactions, then, and in each such
case, ECI shall make or cause to be made proper provision so that the successors
and assigns of the Surviving Corporation shall assume the indemnification
obligations set forth in this Section 5.15 for the benefit of the Indemnified
Parties.

                                   ARTICLE VI.
                            CONDITIONS TO THE MERGER

      SECTION 6.01 Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:

            (a) No judgment, order, injunction, decree or ruling issued by any
Governmental Entity restraining, enjoining or otherwise prohibiting the
consummation of the Merger shall have been issued and then be in effect
(provided that the parties hereto shall use their commercial reasonable efforts
to have any such judgment, order, injunction, decree or ruling vacated or
lifted), nor shall there have been any Law enacted, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal or
would subject ECI to any penalty or liability as a result of the consummation at
the Merger, nor shall any litigation by any Governmental Entity or any other
person have been commenced or, to the knowledge of the Company, threatened that
seeks to restrain, enjoin or otherwise prohibit the Merger and/or other
transactions contemplated hereby; except for threatened litigation that (a) does
not have a reasonable likelihood of success or (b) if successful, would be
immaterial.

            (b) HSR. Any waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.

      SECTION 6.02 Additional Conditions to Obligations of ECI and Merger Sub.
The obligations of ECI and Merger Sub to effect the Merger are also subject to
the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived by ECI in writing:

            (a) The representations and warranties of the Company contained in
this Agreement and any Ancillary Agreement to which it is a party shall be true
and correct in all material respects or, if subject to materiality, shall be
true and correct in all respects, as of the date hereof and on and as of the
Effective Time (or, to the extent such representations and warranties speak as
of an earlier date, as of such earlier date), except for such failures to be
true and correct that in the aggregate would not reasonably be expected to have
a Company Material Adverse Effect. ECI shall have received a certificate signed
on behalf of the Company by the Chief Executive Officer of the Company to such
effect;

                                       47
<PAGE>

            (b) The Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement and by
each Ancillary Agreement to be performed or complied with by it on or prior to
the Effective Time, and ECI shall have received a certificate signed on behalf
of the Company by the Chief Executive Officer of the Company to such effect;

            (c) There shall not have been any action taken, or any Law enacted,
promulgated, issued or deemed applicable to the Merger, by any Governmental
Entity or any other person, which would (i) prohibit the Surviving Corporation's
ownership or operation of all or a material portion of the Company's business or
assets, or compel the Surviving Corporation or ECI to dispose of or hold
separate all or a material portion of the Company's or ECI's business or assets,
as a result of the Merger; (ii) render ECI unable to consummate the Merger;
(iii) impose or confirm material limitations on the ability of ECI effectively
to exercise full rights of ownership of shares of the capital stock of the
Surviving Corporation, including without limitation, the right to vote any such
shares on all matters properly presented to the stockholders of the Surviving
Corporation;

            (d) All directors of the Company and its subsidiaries whom ECI has
requested in writing not less than five days prior to the scheduled Closing Date
to resign shall have resigned or otherwise been removed from office;

            (e) Company Stockholders holding not more than 10% of the Company
Common Stock on an as-converted basis shall have properly demanded or preserved
appraisal rights under Section 262 of the Delaware General Corporation Law;

            (f) Company Required Consents listed on Schedule 6.02 (and, in any
event, all consents, approvals or clearances from Governmental Entities) shall
have been obtained or made in a form and manner reasonably acceptable to ECI;

            (g) There shall have not occurred any Company Material Adverse
Effect; provided, that the matters set forth on Schedule 3.08 shall not be
deemed to constitute a Company Material Adverse Effect for purposes of this
Section 6.02(g);

            (h) The Stockholder Representative shall have executed and delivered
the Initial Escrow Agreement in the form attached hereto as Exhibit C and the IP
Escrow Agreement in the form attached hereto as Exhibit D;

            (i) ECI shall have received a certificate signed on behalf of the
Company by the Chief Financial Officer of the Company, which shall certify that
the allocation of the Net Aggregate Merger Consideration among the Company
Stockholders set forth thereon is accurate and shall constitute the Net Merger
Consideration Per Share issuable to the Company Stockholders in exchange for
Company Capital Stock, pursuant to this Agreement. The information and the
calculations set forth in such certificate shall be binding on the Company
Stockholders and ECI and the Paying Agent shall have the right to rely on such
information and calculations;

                                       48
<PAGE>

            (j) [Reserved];

            (k) Pay-off letters evidencing either receipt in full of the
Transaction Expenses or indicating the amount required to be paid in order to
satisfy in full the Transaction Expenses shall have been executed and delivered
by each party receiving any portion of the Transaction Expenses (other than the
Stockholder Representative) to the Company;

            (l) ECI shall have received a certificate, in the form and manner
that complies with all of the requirements of Treasury Regulation Section
1.1445-2(c)(3) that its capital stock is not a U.S. real property interest;

            (m) a certificate of the Secretary of the Company dated as of the
Closing Date in form and substance reasonably satisfactory to ECI attesting to
the incumbency of the officers of the Company executing the Agreement or any
Ancillary Agreements to which the Company is a party and certifying as to the
following: (i) a true and correct copy of the Certificate of Incorporation of
the Company in effect as of the Closing, certified by the Secretary of State of
the State of Delaware, (ii) a true and correct copy of the Bylaws of the Company
in effect as of the Closing, (iii) a true and correct copy of the resolutions of
the Company's Board of Directors authorizing the execution, delivery and
performance of this Agreement and all agreements and transactions contemplated
hereby, including the termination or cancellation of Existing Options, and (iv)
a true and correct copy of the notice to Company Stockholders described in
Section 5.13 above; and

            (n) a certificate of good standing of the Company and each of its
subsidiaries from their respective jurisdictions of incorporation dated no more
than five (5) business days prior to the Closing Date (or, with respect to
foreign jurisdictions, the most recent practicable date).

      SECTION 6.03 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived by the Company:

            (a) The representations and warranties of ECI Merger Sub contained
in this Agreement and any Ancillary Agreements to which it is a party shall be
true and correct in all material respects or, if subject to materiality, shall
be true and correct in all respects, as of the date hereof and on and as of the
Effective Time (or, to the extent such representations and warranties speak as
of an earlier date, as of such earlier date), except for such failures to be
true and correct which in the aggregate would not prevent or materially delay
ECI or Merger Sub from consummating the Merger. The Company shall have received
a certificate signed on behalf of ECI by an executive officer of ECI to such
effect; and

            (b) Each of ECI and Merger Sub shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement and any Ancillary Agreements to which it is a party to be performed or
complied with by it on or prior to the Effective Time, and the Company shall
have received a certificate signed on behalf of ECI and Merger Sub by an
executive officer of ECI and Merger Sub, as the case may be, to such effect.

                                       49
<PAGE>

                                  ARTICLE VII.
                                 INDEMNIFICATION

      SECTION 7.01 General Indemnification of ECI. Subject to Section 7.06, ECI,
Merger Sub, the Surviving Corporation and their respective officers, directors,
stockholders, partners, employees, agents and affiliates and their heirs,
successors and assigns (collectively, the "ECI Indemnitees") shall be
indemnified, defended and held harmless by (x) the Company, prior to the Closing
(but only with respect to Losses based upon, arising out of or otherwise in
respect of Third Party Claims, except for claims by shareholders of ECI made
against ECI based upon, arising out of or otherwise in respect of this Agreement
or the transactions contemplated hereby), and (y) the Company Stockholders,
after the Closing, from and against any and all liabilities, obligations,
losses, assessments, damages, deficiencies, demands, claims, actions, causes of
action, costs and expenses (including, without limitation, interest, penalties,
court costs and reasonable attorneys' fees and expenses and any reasonable
amounts paid in investigation, defense or settlement of any of the foregoing) of
any kind, manner or nature whatsoever, whether arising out of third-party claims
or claims by one or more parties hereto against any other party(ies) hereto
(collectively, "Losses"), if, as and when incurred by the ECI Indemnitees, based
upon, arising out of or otherwise in respect of:

            (a) any misrepresentation or breach of warranty by the Company or
any Company Stockholder contained herein or any claim by a third party which
would constitute such a misrepresentation or breach;

            (b) any breach of or failure to perform any covenant or agreement by
the Company or any Company Stockholder or the Stockholder Representative
contained herein or in any Ancillary Agreement or any claim by a third party
which would constitute such a breach or failure;

            (c) any claim arising out of any dispute among any Company
Stockholders, or between any Company Stockholder(s) and the Stockholder
Representative, or any claims by Company Stockholders regarding the allocation
of consideration in the Merger to them; provided, that this subsection (c) shall
not include any claim regarding the payment by ECI of the Transaction Escrow
Payment or any claim made against ECI with respect to appraisal rights under
Section 262 of the Delaware General Corporation Law;

            (d) any Shortfall exceeding the Working Capital Holdback Amount;

            (e) any Transaction Expenses; or

                                       50
<PAGE>

            (f) any Third-Party Claim that the Intellectual Property of the
Company, including without limitation any product or technology of the Company,
or the use thereof, infringes, misappropriates or otherwise violates the
intellectual property rights or other rights of any third party, including
without limitation any patent, trademark, trade secret, copyright or other
intellectual property right, regardless of whether such claim constitutes a
breach of a representation or warranty of this Agreement, made prior to the
two-year anniversary of the Closing Date; provided, however, that the documents
listed in Section 3.17(e) of the Company Disclosure Schedule shall not be
considered Third-Party Claims solely in and of themselves, although the parties
explicitly agree that Third Party Claims arising out of, related to or otherwise
in respect of the substance of the matters set forth therein shall be fully
indemnifiable, notwithstanding the disclosures on Section 3.17(e) of the Company
Disclosure Schedule; and provided, further, that ECI Indemnitees shall not be
entitled to indemnification for any Third-Party Claim to the extent such claim
solely results from (i) the combination, operation or use of the Company's
Intellectual Property with the Intellectual Property of any third party
(including ECI and its Affiliates) after the Closing Date (ii) any modification
to, or change in the use of, the Company's Intellectual Property after the
Closing Date under circumstances in which if the Company's Intellectual Property
had not been so modified, or the use thereof had not been so changed, it would
not have been the subject of a Third Party Claim, and (iii) any use of the
Company's Intellectual Property after the Closing Date in contravention of an
agreement between the Company and a third party, to the extent such misuse is
the basis for a Third Party Claim.

      SECTION 7.02 ECI Indemnification Obligation. Subject to Section 7.06, the
Company (prior to the Closing (but only with respect to Third Party Claims)) and
the Company Stockholders (following the Closing) and their respective officers,
directors, employees, stockholders, partners, affiliates and agents and their
heirs, successors and assigns (collectively, the "Company Stockholder
Indemnitees") shall be indemnified, defended and held harmless by ECI and Merger
Sub, joint and severally, from and against any and all Losses, if, as and when
incurred by the Company Stockholder Indemnitees based upon, arising out of or
otherwise in respect of:

            (a) any misrepresentation or breach of warranty by ECI contained
herein, or any claim by a third party which would constitute such a
misrepresentation or breach; or

            (b) any breach of or failure to perform any covenant or agreement by
ECI contained herein or in any Ancillary Agreement, or any claim by a third
party which would constitute such a breach or failure.

      SECTION 7.03 Tax Indemnity.

            (a) Company Stockholders' Tax Indemnification Obligation. Subject to
Section 7.06, the Company Stockholders shall severally and not jointly indemnify
and hold harmless the ECI Indemnitees from and against, for, and in respect of:
(i) all Tax Liabilities of, or attributable to, the Company or its subsidiaries
with respect to Pre-Closing Tax Periods in excess of the current Taxes
(excluding any provision for deferred Taxes) reflected as a liability on the
Unaudited Balance Sheet reduced by any prior offsets pursuant to Section 5.10 or
this Section 7.03(a)(i), except to the extent otherwise provided in Section
7.03(b); (ii) all Tax Liabilities of, or attributable to, the Company or its
subsidiaries resulting from the failure by the Company to perform, or the breach
by the Company, any covenant made by the Company in Section 5.10; (iii) all Tax
Liabilities imposed on the Company or its subsidiary pursuant to Treasury
Regulations Section 1.1502-6 (or any comparable provision under foreign, state
or local law) by reason of any Company having been a member of any Company Group
on or prior to the Closing Date; and (iv) any stamp or transfer taxes, real
property taxes or recording fees assessed in connection with the Merger,
including, without limitation, any stock transfer taxes and real property gains
or transfer taxes. Without limiting the foregoing, the amount of Tax Liabilities
of, or attributable to, the Company and its subsidiaries with respect to
Pre-Closing Tax Periods indemnified hereunder shall be determined without regard
to any deductions, losses or credits from Post-Closing Tax Periods and such Tax
Liabilities shall include all interest, penalties and additions to tax, whether
accruing for periods before, on or after the Closing Date.

                                       51
<PAGE>

            (b) ECI Tax Indemnification Obligation. Subject to Section 7.06, ECI
shall indemnify and hold harmless the Company Stockholder Indemnitees from and
against, for, and in respect of: (i) all Tax Liabilities of, or attributable to,
the Company or its subsidiaries with respect to Post-Closing Tax Periods, and
(ii) all Tax Liabilities of, or attributable to, the Company or any of its'
subsidiaries resulting from the failure by ECI to perform any covenant made by
ECI in Section 5.10.

            (c) Timing of Tax Indemnification. An indemnifying party shall be
required to make an indemnification payment to an indemnified party with respect
to Tax Liabilities at such time that the indemnified party has paid, directly or
indirectly (for example, by offsetting a refund to which the indemnified party
is otherwise entitled), such Tax Liabilities. The indemnified party shall give
written notice to the indemnifying party that such Tax Liabilities have been
paid, and the indemnifying party shall make the indemnification payment within
ten (10) days of receipt of such notice. If the amount of Tax Liabilities is
subsequently changed, the amount of such indemnification shall be likewise
adjusted. This paragraph shall not affect the timing of the Company
Stockholders' obligation to make payments pursuant to Section 5.10.

      SECTION 7.04 [Reserved]

      SECTION 7.05 Procedure.

            (a) For the purposes of this Section 7.05, the term "Indemnitee"
shall refer to the ECI Indemnitee or the Company Stockholder Indemnitee, as
applicable, indemnified or entitled, or claiming to be entitled, to be
indemnified pursuant to the provisions of Sections 7.01, 7.02 or 7.03 and the
term "Indemnitors" shall refer to the Company, Company Stockholders, ECI or
Merger Sub, as applicable. All actions to be taken by or on behalf of the
Company Stockholders shall be taken by the Stockholder Representative, and all
notices by the Company Stockholders or the Company Stockholder Indemnitees shall
be given to or by the Stockholder Representative.

            (b) Subject to subsection (vi) below, the Indemnitee shall promptly
give the Indemnitor notice of any matter which the Indemnitee reasonably
believes has given rise to a right of indemnification under this Agreement (a
"Claim"), stating the amount of the Losses or Tax Liability, as applicable,
(whether actual or reasonably estimated), the method of computation thereof and
the basis for the Claim and shall specify the provision or provisions of this
Agreement under which the Claim is asserted, in each case with reasonable
particularity. Failure to give timely notice of a matter that may give rise to a
Claim shall not affect the rights of the Indemnitee to collect such Claim from
the Indemnitors except to the extent that it materially and adversely prejudices
the Indemnitor's ability to defend such Claim and except to the extent the
notice is not given during the time period for which indemnification claims may
be asserted under this Agreement. The obligations and liabilities of the
Indemnitors under this Article VII with respect to Losses arising from Claims of
any third party against the Indemnitee that are subject to the indemnification
provided for in this Article VII ("Third-Party Claims") shall be governed by the
following additional terms and conditions:

                                       52
<PAGE>

                  (i) if the Indemnitee shall receive notice of any Third-Party
Claim, the Indemnitee shall give the Indemnitor prompt notice of such
Third-Party Claim, and shall permit the Indemnitor, at its option, to assume the
defense and/or management of such Third-Party Claim at the Indemnitor's expense
and through counsel of its choice if the Indemnitor gives prompt notice of its
intention to do so to the Indemnitee (the "Election Notice") and does so
promptly thereafter;

                  (ii) if the Indemnitor exercises its right to undertake the
defense and/or management of any such Third-Party Claim, the Indemnitee shall
cooperate with the Indemnitor in such defense and/or management and make
available to the Indemnitor (if the Indemnitors are the Company Stockholders,
the Stockholder Representative) all witnesses, pertinent records, materials and
information in the Indemnitee's possession or under its control relating thereto
as is reasonably required by the Indemnitor;

                  (iii) if the Indemnitor does not exercise its right to assume
the defense and/or management of any Third-Party Claim as provided above, or the
Indemnitor does exercise such right but does not diligently pursue the defense
of the Third Party Claim, the Indemnitee may, directly or indirectly, conduct
the defense and/or management of any such Third-Party Claim in any manner it
reasonably may deem appropriate and at the expense of Indemnitors, for which the
Indemnitee (x) if it is an ECI Indemnitee, may seek reimbursement from the
Escrow Indemnity Account, and (y) if it is a Company Stockholder Indemnitee, may
seek reimbursement from the Indemnitor, and the Indemnitor shall cooperate with
the Indemnitee in such defense and/or management and make available to the
Indemnitee all witnesses, pertinent records, materials and information in the
Indemnitor's possession or under its control relating thereto as is reasonably
required by the Indemnitee;

                  (iv) the Indemnitor will not consent to the entry of any
judgment or enter into any settlement with respect to a Third-Party Claim
without the prior written consent of the Indemnitee (not to be unreasonably
withheld or delayed), unless (x) the judgment or proposed settlement does not
impose an injunction or other equitable relief upon the Indemnitee and (y) the
judgment or proposed settlement includes as an unconditional term thereof the
giving by the claimant or plaintiff to the Indemnitee of an unconditional
release from all liability in respect of such Third-Party Claim;

                  (v) if the Indemnitee conducts the defense and/or management
of a Third-Party Claim, as provided above, the Indemnitee will not consent to
the entry of any judgment or enter into any settlement with respect to a
Third-Party Claim without the prior written consent of the Indemnitor, which
will not be unreasonably withheld;

                                       53
<PAGE>

                  (vi) with respect to Losses based on, arising out of or
otherwise in respect of (x) subsection 7.01(f) above, or (y) any Third Party
Claim arising out, related to or otherwise in respect of any breach of or
misrepresentation made by the Company in Section 3.17 above or any Third Party
Claim which would constitute such a breach, ECI Indemnitees shall assume the
defense of the Third Party Claim(s) and be entitled to reimbursement in
accordance with subsection (iii) above. ECI Indemnitees will not consent to the
entry of any judgment or enter into any settlement with respect to such a
Third-Party Claim without the prior written consent of the Indemnitor, which
will not be unreasonably withheld, conditioned or delayed; provided, that with
respect to Losses to be paid solely from the IP Escrow Amount (in connection
with which ECI shares Losses as provided in Section 7.06(a)(v) below) there
shall be a presumption that the withholding of a consent would be unreasonable.

            (c) Characterizations of Indemnification Payment.

                  (i) The Company Stockholders and ECI agree that they shall
treat, and they shall cause their respective Affiliates to treat, any and all
indemnification payments made hereunder as an adjustment to the purchase price
of the Company Capital Stock.

                  (ii) No provision in this Agreement shall be interpreted to
allow an indemnified party to be indemnified more than once for the same Tax
Liabilities.

      SECTION 7.06 Certain Limits on Indemnification.

            (a) Indemnification Caps and Other Limitations.

                  (i) The ECI Indemnitees shall, in full and complete
satisfaction of any claims for indemnification arising under Section 7.01 or
Section 7.03 above, be entitled to receive from the Escrow Indemnity Account
(and delivered by the Escrow Agent) such amount as is equal to the value of the
Losses as to which the ECI Indemnitees are entitled to indemnification, as
determined pursuant to the terms of this Agreement and the Escrow Agreement;
provided, that ECI Indemnitees shall not be entitled to receive indemnification
under subsections 7.01(a), 7.01(b) or 7.01(f) unless and until the sum of the
aggregate amount of Losses under such subsections exceeds Two Hundred Thousand
Dollars ($200,000), after which ECI Indemnitees shall be entitled to
indemnification of all Losses incurred under such subsections. The sole recourse
and exclusive post-Closing remedy that the ECI Indemnitees shall have to satisfy
any claims for Losses or Tax Liabilities arising pursuant to this Agreement
shall be the Escrow Indemnity Account, other than in connection with any claim
for fraud.

                  (ii) The sole recourse and exclusive post-Closing remedy that
the Company Stockholder Indemnitees shall have to satisfy any claims for Losses
arising pursuant to this Agreement is as provided in this Article VII, other
than in connection with any claim for fraud.

                  (iii) In no event whatsoever shall the liability of ECI and
Merger Sub with respect to Losses or Tax Liabilities under Section 7.02 or
Section 7.03 exceed ten percent (10%) of the Gross Purchase Price.

                                       54
<PAGE>

                  (iv) The IP Escrow Amount shall be available to indemnify ECI
Indemnitees solely for the following Losses and for no other Losses:

                        (i)   during the period from the Closing through the
                              first anniversary of the Closing Date, for Losses
                              based upon, arising out of or otherwise in respect
                              of (x) any Third Party Claim arising out of a
                              breach of or misrepresentation made by the Company
                              in Section 3.17 or any Third Party Claim which
                              could constitute such a breach or (y) subsection
                              7.01(f) above, in each case only to the extent
                              such Losses exceed the Initial Escrow Amount; and

                        (ii)  during the period from the first anniversary of
                              the Closing Date through and including the second
                              anniversary of the Closing Date, for Losses based
                              upon, arising out of or otherwise in respect of
                              (x) any Third Party claim arising out of a breach
                              of or misrepresentation made by the Company in
                              Section 3.17 or any Third Party Claim which could
                              constitute such a breach or (y) subsection 7.01(f)
                              above.

                  (v) With respect to indemnification for Losses relating to
claims paid out of the IP Escrow Amount, ECI Indemnitees shall be entitled to
receive indemnification for an aggregate of seventy five percent (75%) of such
Losses, the other twenty five percent (25%) of such Losses to be borne by ECI.
Each of the indemnifiable portion of such Loss and the portion borne by ECI
shall be paid upon the same terms and conditions.

            (b) For purposes of this Article VII, the amount of any Losses shall
be determined net of any insurance proceeds actually received by the applicable
Indemnitees in connection with the matter out of which such Losses shall arise.

            (c) Subject to the proviso of this Section 7.06(c), no claim under
this Article VII shall be made after the expiration of the survival periods
referred to in Section 9.01 hereof, provided, however, that (x) if written
notice of a claim is made in good faith prior to the expiration of the survival
period (such notice setting forth in reasonable detail the basis for such
claim), then the relevant representation, warranty or covenant shall survive as
to such claim only until the claim has been fully and finally resolved and (y)
claims may be made by ECI Indemnitees under subsection 7.01(f) and with respect
to any Third Party Claim arising out of, related to or otherwise in respect of a
breach of or misrepresentation made by the Company in Section 3.17 or any Third
Party Claim which would constitute such a breach until the second anniversary of
the Closing Date.

                                  ARTICLE VIII.
                                   TERMINATION

      SECTION 8.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (with respect to
Section 8.01(b) through (g), by written notice by the terminating party to the
other party):

            (a) by mutual written consent of the Company and ECI; or

                                       55
<PAGE>

            (b) by either ECI or the Company if the Merger shall not have been
consummated on or prior to July 31, 2005 (provided that the right to terminate
this Agreement under this Section 8.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such date); or

            (c) by either ECI or the Company if a Governmental Entity shall have
(i) issued a non-appealable final judgment, order, injunction, decree or ruling
or taken any other action or (ii) enacted, enforced or deemed applicable to the
Merger a Law in final form, in each case having the effect of permanently
restraining, enjoining, prohibiting or making illegal the consummation of the
Merger; or

            (d) by ECI, upon a breach of any representation, warranty, covenant
or agreement of the Company set forth in this Agreement such that any of the
conditions set forth in Section 6.02(a) or Section 6.02(b) would not be
satisfied (a "Company Terminating Breach"), provided that, if such Company
Terminating Breach is reasonably curable prior to the expiration of thirty (30)
days from notice to the Company of its occurrence through the exercise of the
Company's commercially reasonable efforts, and for so long as the Company
continues to exercise such commercially reasonable efforts, ECI may not
terminate this Agreement under this Section 8.01(d) until the expiration of such
period without such Company Terminating Breach having been cured (but in no
event shall the preceding proviso be deemed to extend the date set forth in
Section 8.01(b)); or

            (e) by the Company, upon a breach of any representation, warranty,
covenant or agreement of ECI or Merger Sub set forth in this Agreement such that
any of the conditions set forth in Section 6.03(a) or Section 6.03(b) would not
be satisfied (an "ECI Terminating Breach"), provided that, if such ECI
Terminating Breach is curable prior to the expiration of thirty (30) days from
notice to ECI of its occurrence through the exercise of ECI's commercially
reasonable efforts, and for so long as ECI continues to exercise such
commercially reasonable efforts, the Company may not terminate this Agreement
under this Section 8.01(e) until the expiration of such period without such ECI
Terminating Breach having been cured (but in no event shall the preceding
proviso be deemed to extend the date set forth in Section 8.01(b)).

      SECTION 8.02 Effect of Termination.

            (a) If this Agreement is terminated pursuant to Section 8.01, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 8.02(b) will survive; provided, however, that if
this Agreement is terminated by a party because of the breach (other than a
breach of representation or warranty or a non-willful breach of the covenant of
the Company contained in Section 5.01(ii); provided, that the foregoing
exception shall not apply to a breach by the Company of any of the specific
covenants contained in paragraphs (a) - (p) of Section 5.01)) of this Agreement
by the other party, or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations (other than a breach of
representations and warranties or a non-willful breach of the covenant of the
Company contained in 5.01(ii); provided, that the foregoing exception shall not
apply to a breach by the Company of any of the specific covenants contained in
paragraphs (a) - (p) of Section 5.01)) under this Agreement, the terminating
party's right to pursue all legal remedies will survive such termination
unimpaired.

                                       56
<PAGE>

            (b) Notwithstanding the occurrence of any termination pursuant to
Section 8.01 hereof, no such termination shall have any effect upon the
Confidentiality Agreement, which shall remain in full force and effect following
any such termination.

                                   ARTICLE IX.
                               GENERAL PROVISIONS

      SECTION 9.01 Survival of Representations and Warranties. The
representations and warranties made by the Company in this Agreement, any
Ancillary Agreement or in the certificates delivered pursuant to Sections
6.02(a) and (b) hereof shall survive the Effective Time until the first
anniversary of the Closing Date, except for the representations and warranties
made by the Company in Section 3.17 of this Agreement, which shall survive the
Effective Time until the second anniversary of the Closing Date (but, during the
period from the first to the second anniversary of the Closing Date, only with
respect to Third Party Claims which arise out of such representations and
warranties), in each case notwithstanding any investigation made by or on behalf
of any party. The representations and warranties made by ECI in this Agreement
or in the certificates delivered pursuant to Sections 6.03(a) and (b) hereof
shall survive the Effective Time until the first anniversary of the Closing
Date.

      SECTION 9.02 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date received if delivered personally, on the day after
sending if sent by nationally recognized overnight courier or the third day
after mailing if mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like changes of address, which
shall be effective upon receipt), or on the date of sending if sent by
electronic transmission, with confirmation received, to the telecopy numbers
specified below:

            (a) If to ECI or Merger Sub:

                ECI Telecom Inc.
                c/o ECI Telecom Ltd.
                30 Hasivim Street
                Petach Tikva 49133
                Israel
                Attn:  Martin Ossad, Esq.
                Facsimile:  011-972-3926-8282

            With a copy to:

                Kramer Levin Naftalis & Frankel LLP
                1177 Avenue of the Americas
                New York, New York 10036
                Attn:  Ernest S. Wechsler, Esq.
                Facsimile:  212-715-8000

                                       57
<PAGE>

            If to the Company:

                Laurel Networks, Inc.
                Omega Corporate Center
                1300 Omega Drive
                Pittsburgh, PA  15219
                Attn:  Chief Executive Officer
                Facsimile: 412-809-4201

            With a copy to:

                Morgan, Lewis & Bockius LLP
                One Oxford Centre
                301 Grant Street
                Pittsburgh, PA  15219
                Attn:  Marlee S. Myers, Esq.
                Facsimile: 412-560-7001

            If to the Stockholder Representative:

                Peter Barris
                c/o New Enterprise Associates
                One Freedom Square
                11951 Freedom Drive, Suite 1240
                Reston, VA  20190
                Facsimile:  703-834-7579

            or such other Person appointed pursuant to Section 9.17.

            With a copy to:

                Kirkland & Ellis LLP
                655 15th Street, N.W., Suite 1200
                Washington, DC  20005
                Attn:  Mark D. Director, Esq.
                Facsimile:  202-879-5200

      SECTION 9.03 Waiver. ECI may, with respect to the Company, and the Company
or the Stockholder Representative may, with respect to ECI or Merger Sub, (a)
extend the time for the performance of any of its obligations or other acts, (b)
waive any inaccuracies in its representations and warranties contained herein or
in any document delivered pursuant hereto or (c) waive compliance with any of
its agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.

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<PAGE>

      SECTION 9.04 Guaranty. Parent unconditionally guarantees the obligations
of ECI under this Agreement and the Ancillary Agreements in the event and to the
extent that ECI fails to perform any such obligation as and when due. This is a
continuing, absolute and unconditional guaranty of performance and payment and
not of collection. Parent specifically waives any right to subrogation, setoff
or counterclaim, and any defense for changes in applicable Law or any other
circumstances which might constitute a legal or equitable defense or discharge
of a guarantor or surety. Parent waives notice of acceptance hereof and of
defaults hereunder. Parent waives any right to require a proceeding first
against ECI or to exhaust any security for the performance of the obligations of
ECI, and agrees that the liability of Parent shall not be affected or decreased
by the rejection or disaffirmance thereof in bankruptcy or like proceedings. The
execution, delivery and performance of this Agreement by Parent has been duly
and validly authorized by all necessary action on the part of Parent; this
Agreement has been duly and validly executed and delivered by Parent and
constitutes the legal, valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms. Parent acknowledges and agrees that
the provisions of Article IX of this Agreement, including, without limitation,
the provisions of Section 9.11 (Governing Law) and Section 9.14 (Jurisdiction;
Forum), shall apply to this Section 9.04 as if all of such provisions were fully
set forth herein.

      SECTION 9.05 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

      SECTION 9.06 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.

      SECTION 9.07 Entire Agreement; Amendment. This Agreement (including any
exhibits and schedules hereto), the Company Disclosure Schedule, the Ancillary
Agreements and the Confidentiality Agreement constitute the entire agreement
among the parties hereto and supersede all prior and contemporaneous agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement may be amended in writing
executed by the parties hereto, and any provision of this Agreement may only be
waived by the party for whose benefit the applicable provision exists.

      SECTION 9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties, and any such assignment
without such prior written consent shall be null and void, except that ECI
and/or Merger Sub may assign this Agreement to any direct or indirect wholly
owned subsidiary of ECI without consent of the Company, provided that ECI shall
remain liable for all of its obligations under this Agreement. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties hereto and their respective successors
and permitted assigns.

                                       59
<PAGE>

      SECTION 9.09 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, including for purposes of
Article VII Indemnitees, and its successors and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than as provided in Section 5.15.

      SECTION 9.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.

      SECTION 9.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT
THAT DELAWARE LAW SHALL APPLY TO THE MERGER.

      SECTION 9.12 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

      SECTION 9.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.

      SECTION 9.14 Jurisdiction; Forum. Each of the parties hereto (i) consents
to submit itself to the non-exclusive personal jurisdiction of any federal court
located in New York County of the State of New York in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement and (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.

      SECTION 9.15 Definition of Knowledge. As used herein, the words
"knowledge" or "known" shall, with respect to the Company, mean the actual
knowledge of the persons whose names are set forth on Schedule 9.15, and with
respect to ECI or Parent, the persons whose names are set forth on Schedule
9.15, in each case after such individuals have made reasonable due and diligent
inquiry as to the matters which are the subject of the statements which are
"known" by the Company or made to the "knowledge" of the Company.

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<PAGE>

      SECTION 9.16 Specific Performance and Injunctive Relief. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached or threatened to be breached. It is
accordingly agreed that the parties shall be entitled to seek a preliminary and
permanent injunction or injunctions to prevent breaches, or threatened breaches,
of this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, without the
need to post bond or other security, this being in addition to any other remedy
to which they are entitled at law or in equity.

      SECTION 9.17 Appointment of Stockholder Representative.

            (a) Each Company Stockholder that accepts payment of Net Merger
Consideration Per Share as contemplated herein shall be deemed, by such
acceptance of payment, to have thereby (i) irrevocably constituted and appointed
Peter Barris (such person and any successor or successors being the "Stockholder
Representative") as such Company Stockholder's true and lawful agent, proxy and
attorney-in-fact pursuant to this Section 9.17 and (ii) agreed to the provisions
of this Section 9.17. The Stockholder Representative shall have full power and
authority to act for each Company Stockholder and in each Company Stockholder's
name, place and stead, and in any and all capacities to do and perform every act
and thing required or permitted to be done in connection with the transactions
contemplated by this Agreement and the Escrow Agreement upon and immediately
following the Effective Time, as fully to all intents and purposes as such
Company Stockholder might or could do in person, including, without limitation,
all decisions relating to the defense and/or settlement of any claims for which
any ECI Indemnitee may claim to be entitled to indemnity pursuant to Article VII
hereof, the amendment of this Agreement, the receipt of all payments and notices
and the giving of all consents and waivers. All decisions and actions by the
Stockholder Representative shall be binding upon all of the Company
Stockholders, and no Company Stockholder shall have the right to object to,
dissent from, protest or otherwise contest the same.

            (b) Each Company Stockholder that accepts payment of Net Merger
Consideration Per Share as contemplated herein shall be deemed, by such
acceptance of payment, to have agreed that (i) the provisions of this Section
9.17 are independent and severable, are irrevocable and coupled with an interest
and shall be enforceable notwithstanding any rights or remedies any Company
Stockholder may have in connection with the transactions contemplated by this
Agreement, (ii) the remedy at law for any breach of the provisions of this
Section 9.17 would be inadequate, (iii) ECI shall be entitled to temporary and
permanent injunctive relief without the necessity of proving damages if ECI
brings an action to enforce the provisions of this Section 9.17 and (iv) the
provisions of this Section 9.17 shall be binding upon the heirs, successors and
assigns of each Company Stockholder.

                                       61
<PAGE>

            (c) Any notice or communication delivered by ECI, Merger Sub or the
Surviving Corporation to the Stockholder Representative shall, as between ECI,
Merger Sub and the Surviving Corporation, on the one hand, and the Company
Stockholders, on the other, be deemed to have been delivered to all Company
Stockholders. ECI, Merger Sub and the Surviving Corporation shall be entitled to
rely exclusively upon any communications or writings given or executed by the
Stockholder Representative and shall not be liable in any manner whatsoever for
any action taken or not taken in reliance upon the actions taken or not taken or
communications or writings given or executed by the Stockholder Representative.
Any Company Stockholder that wishes to deliver any notice, or take any other
action with respect to any matter arising, under this Agreement must do so
through the Stockholder Representative, and ECI, Merger Sub and the Surviving
Corporation shall be explicitly entitled to disregard any notices or
communications given or made by the Company Stockholders unless given or made
through the Stockholder Representative, and such notices or communications shall
be of no force or effect.

            (d) Each Company Stockholder acknowledges that the Stockholder
Representative is acting as his, her or its agent as set forth above and each
agrees to severally, in proportion to its Pro Rata Interest, indemnify and hold
harmless and defend the Stockholder Representative, his agents and assigns
(collectively, the "Indemnitees"), against all liabilities, claims, actions,
damages, losses and expenses (including, without limitation, legal and other
professional fees and expenses, and litigation costs) of any kind (whether known
or unknown, fixed or contingent) arising out of or in connection with (i) the
Stockholder Representative's omissions to act, or actions taken, resulting from,
arising out of, or incurred in connection with, or otherwise with respect to
this Agreement and the Escrow Agreement, or (ii) services taken with respect to
this Agreement and the Escrow Agreement or believed to be in the scope of the
Indemnitee's authority, provided that the Indemnitee in question has not acted
with intentional misconduct or fraud.

            (e) The Stockholder Representative may consult with legal counsel,
independent public accountants and other experts selected by the Stockholder
Representative. The Stockholder Representative shall not be responsible or
liable to any Company Stockholder for any act or omission of any kind so long as
he has acted in good faith (any such action or omission pursuant to an order,
judgment or decree of any court or administrative agency, or advice of legal
counsel, public accountants and other experts selected by the Stockholder
Representative shall be conclusive evidence of such good faith), or for the
expiration of rights under any statute of limitations with respect to this
Agreement and the Escrow Agreement.

            (f) The Stockholder Representative shall apply the $300,000
delivered to it at the Closing to the payment of expenses incurred by the
Stockholder Representative acting in such capacity pursuant to this Agreement.
Any portion of the $300,000 not expended pursuant to the immediately preceding
sentence shall be delivered to the Escrow Agent, for distribution to the Company
Stockholders, on the later of the second anniversary of the Closing Date or the
resolution of the final pending claim with respect to the Escrow Amount, as set
forth in the Escrow Agreement.

            (g) Prior to the Effective Time, in the case of the death,
disability, unwillingness to serve or other unavailability of the Stockholder
Representative, the Company Stockholders who own a majority in interest of
Company Capital Stock (on an as-converted to common basis) shall have the right,
exercisable by written notice to ECI, to designate a replacement Stockholder
Representative. Upon and after the Effective Time, in the case of the death,
disability, unwillingness to serve or other unavailability of the Stockholder
Representative, the Company Stockholders who receive a majority in interest of
the Net Aggregate Merger Consideration shall have the right, exercisable by
written notice to ECI and the Escrow Agent, to designate a replacement
Stockholder Representative.

                                       62
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                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       63
<PAGE>

      IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first written above by a duly authorized officer
or other person.


                                        ECI TELECOM INC.


                                        By: /s/ Doron Inbar
                                          --------------------------------------
                                        Name: Doron Inbar
                                        Title:

                                        SYMPHONY ACQUISITION CORP.


                                        By: /s/ Giora Bitan
                                          --------------------------------------
                                        Name: Giora Bitan
                                        Title: Chief Financial Officer


                                        LAUREL NETWORKS, INC.


                                        By: /s/ Atul Bansul
                                          --------------------------------------
                                        Name: Atul Bansul
                                        Title: President & COO


                                        /s/ Peter Barris
                                        ----------------------------------------
                                        as Stockholder Representative

                                        With respect to Section 9.04 only,


                                        ECI TELECOM LTD.


                                        By: /s/ Giora Bitan
                                          --------------------------------------
                                        Name: Giora Bitan
                                        Title: Executive Vice President &
                                        Chief Financial Officer


                                       64
<PAGE>

                      Schedule 5.08 - Management Agreements

Atul Bansal

Jeffrey Prem

Donald Pyle

Robert Rennison

Dimitris Varotsis

Stephen Vogelsang

Robert Warden


                                       65
<PAGE>

                            Schedule 6.02 - Consents

            Notice:

            Omega Corporate Center Office Lease by and between Omega Corporate
            Center, L.P. and the Company.

            Software License Agreement dated as of February, 2000, by and
            between phase2 networks Incorporated and the Company.

            Software License Agreement, between the Company and Data Connection
            Limited dated February 29, 2000.

            Warrant to Purchase shares of Series A-2 Convertible Preferred Stock
            to CommVest, LLC.


                                       66
<PAGE>

                            Schedule 9.15 - Knowledge

Atul Bansal

Jonathan Bierman

Gary Mitcheltree

Jeffrey Prem

Donald Pyle

Robert Rennison

Dimitris Varotsis

Stephen Vogelsang

Robert Warden



                                       67