AGREEMENT AND PLAN OF REORGANIZATION



                                  BY AND AMONG


                                  SAFENET, INC.


                           SAPPHIRE ACQUISITION CORP.

                                       AND

                               CYLINK CORPORATION




                          Dated as of October 30, 2002



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                                TABLE OF CONTENTS

AGREEMENT AND PLAN OF REORGANIZATION...........................................1

TABLE OF CONTENTS .............................................................2
SECTION 1.            THE MERGER...............................................2
1.1            MERGER OF MERGER SUB INTO THE COMPANY...........................2
1.2            EFFECT OF THE MERGER............................................2
1.3            CLOSING; EFFECTIVE TIME.........................................2
1.4            ARTICLES OF INCORPORATION AND BYLAWS............................2
1.5            CONVERSION OF SHARES IN THE MERGER..............................3
1.6            CLOSING OF THE COMPANY'S TRANSFER BOOKS.........................4
1.7            EXCHANGE OF CERTIFICATES........................................4
1.8            FURTHER ACTION..................................................6
1.9            TAX CONSEQUENCES................................................6
SECTION 2.            REPRESENTATIONS AND WARRANTIES OF THE COMPANY............6
2.1            DUE ORGANIZATION; SUBSIDIARIES..................................6
2.2            AUTHORITY; BINDING NATURE OF AGREEMENT..........................7
2.3            CAPITALIZATION, ETC.............................................7
2.4            SEC FILINGS; FINANCIAL STATEMENTS...............................9
2.5            ABSENCE OF CHANGES..............................................9
2.6            PROPRIETARY ASSETS.............................................11
2.7            CONTRACTS......................................................12
2.8            LIABILITIES....................................................15
2.9            COMPLIANCE WITH LEGAL REQUIREMENTS.............................15
2.10           GOVERNMENTAL AUTHORIZATIONS....................................15
2.11           TAX MATTERS....................................................15
2.12           EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS......................17
2.13           ENVIRONMENTAL MATTERS..........................................21
2.14           LEGAL PROCEEDINGS; ORDERS......................................22
2.15           VOTE REQUIRED..................................................22
2.16           NON-CONTRAVENTION; CONSENTS....................................22
2.17           FAIRNESS OPINION...............................................23
2.18           FINANCIAL ADVISOR..............................................23
2.19           TAKEOVER STATUTES; NO DISCUSSIONS..............................23
2.20           INFORMATION TO BE SUPPLIED.....................................23
2.21           FOREIGN CORRUPT PRACTICES ACT..................................24
2.22           DISCLOSURE.....................................................24
SECTION 3.            REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.25
3.1            DUE ORGANIZATION; SUBSIDIARIES.................................25


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3.2            AUTHORITY; BINDING NATURE OF AGREEMENT.........................25
3.3            CAPITALIZATION, ETC............................................26
3.4            SEC FILINGS; FINANCIAL STATEMENTS..............................26
3.5            LIABILITIES....................................................27
3.6            NON-CONTRAVENTION; CONSENTS....................................27
3.7            INTERIM OPERATIONS OF MERGER SUB...............................28
3.8            INFORMATION TO BE SUPPLIED.....................................28
3.9            ABSENCE OF CHANGES.............................................28
3.10           LEGAL PROCEEDINGS; ORDERS......................................28
3.11           VOTE REQUIRED..................................................29
3.12           DISCLOSURE.....................................................29
SECTION 4.            CERTAIN COVENANTS OF THE COMPANY AND PARENT.............29
4.1            ACCESS AND INVESTIGATION.......................................29
4.2            OPERATION OF THE COMPANY'S BUSINESS............................30
4.3            NO SOLICITATION BY THE COMPANY.................................33
4.4            NO SOLICITATION OF EMPLOYEES PRIOR TO CLOSE....................35
4.5            INTEGRATION PLAN...............................................35
SECTION 5.            ADDITIONAL COVENANTS OF THE PARTIES.....................35
5.1            REGISTRATION STATEMENT AND PROXY STATEMENT FOR SHAREHOLDER
                      APPROVAL................................................35
5.2            COMPANY SHAREHOLDERS' MEETING AND PARENT STOCKHOLDERS'
                      MEETING.................................................36
5.3            REGULATORY APPROVALS...........................................38
5.4            ASSUMPTION OF STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN;
                      401(K) PLAN; EMPLOYEES AND BENEFITS.....................38
5.7            PUBLIC DISCLOSURE..............................................42
5.8            TAX MATTERS....................................................42
5.9            RESIGNATION OF DIRECTORS.......................................43
5.10           LISTING........................................................43
5.11           TAKEOVER LAWS; ADVICE OF CHANGES...............................43
5.12           FORM S-8; SECTION 16...........................................43
5.13           AFFILIATES.....................................................44
5.14           LITIGATION.....................................................44
5.15           KEY EMPLOYEES..................................................44
SECTION 6.            CONDITIONS TO THE MERGER................................45
6.1            CONDITIONS TO EACH PARTY'S OBLIGATION..........................45
6.2            ADDITIONAL CONDITIONS TO PARENT'S AND MERGER SUB'S
                      OBLIGATIONS.............................................46
6.3            ADDITIONAL CONDITIONS TO THE COMPANY'S OBLIGATIONS.............47
SECTION 7.            TERMINATION.............................................48


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7.1            TERMINATION....................................................48
7.2            EFFECT OF TERMINATION..........................................49
7.3            EXPENSES; TERMINATION FEES.....................................49
SECTION 8.            MISCELLANEOUS PROVISIONS................................51
8.1            AMENDMENT......................................................51
8.2            WAIVER.........................................................51
8.3            NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................51
8.4            ENTIRE AGREEMENT; COUNTERPARTS.................................52
8.5            APPLICABLE LAW; JURISDICTION...................................52
8.6            ATTORNEYS' FEES................................................52
8.7            ASSIGNABILITY; THIRD PARTY BENEFICIARIES.......................52
8.8            NOTICES........................................................53
8.10           COOPERATION....................................................54
8.11           CONSTRUCTION...................................................54
EXHIBIT A             CERTAIN DEFINITIONS
EXHIBIT B-1           COMPANY SHAREHOLDERS SIGNING VOTING aGREEMENTS
EXHIBIT B-2           FORM OF COMPANY SHARHEOLDER VOTING AGREEMENTS
EXHIBIT B-3           PARENT STOCKHOLDER SIGNING VOTING AGREEMENTS
EXHIBIT B-4           FORM OF PARENT STOCKHOLDER VOTING AGREEMENT
EXHIBIT C             AGREEMENT OF MERGER
EXHIBIT D             FORM OF WAIVER AGREEMENT
EXHIBIT E             FORM OF AFFILIATE AGREEMENT
EXHIBIT F             FORM OF NONCOMPETITION AGREEMENT
EXHIBIT G             FORM OF RELEASE
EXHIBIT H             FORM OF STIPULATION


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<PAGE>

                      AGREEMENT AND PLAN OF REORGANIZATION

         THIS AGREEMENT AND PLAN OF  REORGANIZATION  (this  "Agreement") is made
and entered into on October 30,  2002,  by and among  SAFENET,  INC., a Delaware
corporation ("Parent"), SAPPHIRE ACQUISITION CORP., a California corporation and
a wholly owned  subsidiary of Parent  ("Merger Sub"),  and CYLINK  CORPORATION a
California  corporation (the "Company").  Certain capitalized terms used in this
Agreement are defined in Exhibit A.


                                    RECITALS

         WHEREAS,  Parent,  Merger Sub and the Company intend to effect a merger
(the "Merger") of Merger Sub into the Company in accordance  with this Agreement
and the General  Corporation Law of the State of California  (the "CGCL").  Upon
consummation of the Merger, Merger Sub will cease to exist, and the Company will
become a wholly owned subsidiary of Parent;

         WHEREAS,   it  is  intended   that  the  Merger  shall   qualify  as  a
"reorganization"  within the meaning of Section  368(a) of the Internal  Revenue
Code of 1986, as amended (the "Code");

         WHEREAS,  the Board of Directors of the Company (i) has determined that
the Merger is in the best  interests of the Company and its  shareholders,  (ii)
has approved and adopted this Agreement, the Agreement of Merger, the Merger and
the other transactions  contemplated by this Agreement, and (iii) has determined
to  recommend  that the  shareholders  of the  Company  adopt and  approve  this
Agreement, the Agreement of Merger and the Merger;

         WHEREAS,  the Board of Directors of Parent (i) has determined  that the
Merger is in the best  interests  of the Parent and its  stockholders,  (ii) has
approved and adopted this Agreement, the Agreement of Merger, the Merger and the
other transactions  contemplated by this Agreement,  and (iii) has determined to
recommend that the stockholders of Parent adopt and approve this Agreement,  the
Agreement of Merger, the Merger and certain of the transactions  contemplated by
this Agreement;

         WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition  and  inducement  to Parent and Merger Sub to enter into this
Agreement,  Parent and certain shareholders of the Company listed on Exhibit B-1
(collectively,  the  "Shareholders")  are entering into Voting Agreements in the
form of Exhibit B-2 (the "Voting Agreements") pursuant to which the Shareholders
have agreed to vote all of their shares of Company  Common Stock in favor of the
adoption and approval of this Agreement,  the Agreement of Merger and the Merger
and  to  take  certain  other  actions  in  connection  with  the   transactions
contemplated hereby; and

         WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and  inducement to the Company to enter into this  Agreement,
Company and the  stockholder  of the Parent  listed in Exhibit B-3 are  entering
into a voting  agreement  in the form of  Exhibit  B-4  pursuant  to which  such
stockholder has agreed to vote all of his shares of Parent Common Stock in favor
of the  adoption  and  approval of this  Agreement,  Agreement of Merger and the
Merger and to take certain  other actions in  connection  with the  transactions
contemplated hereby.

                                    AGREEMENT

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                  The parties to this Agreement,  intending to be legally bound,
agree as follows:


SECTION 1.        THE MERGER


         1.1      MERGER OF MERGER SUB INTO THE COMPANY.

                  Upon the terms and subject to the conditions set forth in this
Agreement,  at the Effective Time (as defined in Section 1.3),  Merger Sub shall
be merged with and into the Company,  and the  separate  existence of Merger Sub
shall  cease.  The Company will  continue as the  surviving  corporation  in the
Merger (the "Surviving  Corporation")  and will be a wholly owned  subsidiary of
Parent.


         1.2      EFFECT OF THE MERGER.

                  The Merger shall have the effects set forth in this  Agreement
and the applicable provisions of the CGCL.


         1.3      CLOSING; EFFECTIVE TIME.

                  The  consummation  of the Merger  (the  "Closing")  shall take
place at the offices of Venable, Baetjer and Howard, LLP, 1800 Mercantile Bank &
Trust Building, 2 Hopkins Plaza, Baltimore,  Maryland 21201 at 10:00 a.m. on the
date (the "Closing Date"), which date shall be no later than the second business
day after the last to be  satisfied  or  waived of the  conditions  set forth in
Section 6 shall have been so  satisfied or waived  (other than those  conditions
that by their  nature are to be  satisfied  at the  Closing,  but subject to the
satisfaction or waiver of such conditions), or such other date as Parent and the
Company shall  mutually  agree;  and provided that the Closing shall in no event
take  place  prior to  December  6,  2002.  Subject  to the  provisions  of this
Agreement, the agreement of merger in the form attached hereto as Exhibit C (the
"Agreement of Merger"), together with such other documents as may be required by
the  relevant  provision  of the CGCL,  shall be duly  executed on behalf of the
Company and simultaneously  with the Closing delivered to the Secretary of State
of the State of California  for filing.  The Merger shall become  effective upon
the date and time of the filing of the Agreement of Merger with the Secretary of
State of the State of  California or such other date and time as may be mutually
agreed upon by Parent and the Company and set forth in the  Agreement  of Merger
(the "Effective Time").


         1.4      ARTICLES OF INCORPORATION AND BYLAWS.

                  Unless  otherwise  determined by Parent prior to the Effective
Time:

                  (a) The articles of incorporation of the Surviving Corporation
shall be amended and restated immediately after the Effective Time to conform to
the articles of incorporation of the Merger Sub as in effect  immediately  prior
to the Effective  Time,  except the name of the Surviving  Corporation  shall be
"Crystal Corporation."

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<PAGE>


                  (b) The bylaws of the Surviving  Corporation  shall be amended
and restated  immediately  after the Effective  Time to conform to the bylaws of
the Merger Sub as in effect immediately prior to the Effective Time.

                  (c) The directors  and officers of the  Surviving  Corporation
immediately after the Effective Time shall be the respective individuals who are
directors and officers of Merger Sub immediately prior to the Effective Time.


         1.5      CONVERSION OF SHARES IN THE MERGER.

                  (a) At the Effective Time, by virtue of the Merger and without
any  further  action on the part of  Parent,  Merger  Sub,  the  Company  or any
shareholder of the Company, subject to Sections 1.5(b) and 1.5(c), each share of
Company Common Stock then issued and outstanding, other than Excluded Shares, if
any, shall be converted  into 0.05 of a share (the  "Exchange  Ratio") of Parent
Common Stock,  plus (B) any cash in lieu of  fractional  shares of Parent Common
Stock as set forth in Section 1.5(c) (collectively, the "Merger Consideration").

                  (b) If,  between the date of this  Agreement and the Effective
Time, the outstanding  shares of Company Common Stock or Parent Common Stock are
changed into a different number or class of shares by reason of any stock split,
stock dividend, reverse stock split, reclassification, recapitalization or other
like  change,   decrease  or  increase,   then  the  Exchange   Ratio  shall  be
appropriately  adjusted  to the  extent  the  record  date for any such event is
between the date of this  Agreement  and the  Effective  Time,  so as to provide
holders  of  Company  Common  Stock  and  Parent  the same  economic  effect  as
contemplated by this Agreement prior to such stock split,  reverse split,  stock
dividend,  reorganization,   recapitalization,   or  like  change,  decrease  or
increase.

                  (c) No  fractional  shares of  Parent  Common  Stock  shall be
issued in connection with the Merger,  and no certificates or scrip for any such
fractional shares shall be issued.  Any holder of Company Common Stock who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock in
the Merger  (after  aggregating  all  fractional  shares of Parent  Common Stock
issuable to such  holder)  shall,  in lieu of such  fraction of a share and upon
surrender of such holder's Company Stock  Certificate(s)  (as defined in Section
1.6),  be paid in cash the dollar  amount  (rounded to the nearest  whole cent),
without  interest equal to the product obtained by multiplying (A) that fraction
of a share of Parent Common Stock to which such  shareholder is entitled  (after
aggregating  all  fractional  shares of Parent  Common  Stock  issuable  to such
holder) by (B) the closing  sales price of one (1) share of Parent  Common Stock
as  reported  on the Nasdaq  National  Market (as  reported  in the Wall  Street
Journal or, if not  reported  therein,  any other  authoritative  source) on the
trading day immediately preceding the Closing Date.

                  (d) Notwithstanding anything to the contrary contained in this
Agreement,  to the extent that the  provisions  of Chapter 13 of the CGCL are or
prior to the Effective  Time may become  applicable to the Merger by reason of a
delisting  of the Company  Common  Stock from the Nasdaq  National  Market,  any
shares of Company Common Stock that, as of the Effective Time, are or may become
"dissenting  shares" within the meaning of Section 1300(b) of the CGCL shall not
be  converted  into or  represent  the right to receive  Parent  Common Stock in
accordance  with  Section  1.5(a)  (or  cash  in lieu of  fractional  shares  in
accordance with Section 1.5(c)),  and the holder or holders of such shares shall
be  entitled  only to such rights as may be granted to such holder or

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<PAGE>

holders in Chapter 13 of the CGCL; provided,  however, that if the status of any
such shares as "dissenting shares" shall not be perfected, or if any such shares
shall lose their status as  "dissenting  shares",  then,  as of the later of the
Effective  Time or the time of the failure to perfect such status or the loss of
such  status,  such  shares  shall  automatically  be  converted  into and shall
represent  only the right to receive (upon the surrender of the  certificate  or
certificates  representing  such shares) Parent Common Stock in accordance  with
Section 1.5(a) (and cash in lieu of fractional shares in accordance with Section
1.5(c)).

                  (e) The  Company  shall give  Parent (i) prompt  notice of any
written  demand  received by the Company prior to the Effective  Time to require
the Company to purchase shares of Company Common Stock pursuant to Chapter 13 of
the CGCL and of any other demand,  notice or instrument delivered to the Company
prior to the Effective  Time pursuant to the CGCL,  and (ii) the  opportunity to
participate in all negotiations and proceedings with respect to any such demand,
notice or instrument  upon the reasonable  request of Parent.  The Company shall
not make any  payment  or  settlement  offer  prior to the  Effective  Time with
respect to any such demand unless Parent shall have consented in writing to such
payment or settlement offer,  which consent shall not be unreasonably  withheld,
and  provided  that  Company may make  payments or offers to settle such demands
provided that (A) such  settlement or payment is made in respect of  "dissenting
shares";  (B) the per share  payment or  settlement  amount  does not exceed the
closing market price per share of the Company's  Common Stock as of the last day
of trading  prior to the  announcement  of the Merger;  and (C) the  "dissenting
shares" so settled do not exceed 10% of the outstanding Company Common Stock.


         1.6      CLOSING OF THE COMPANY'S TRANSFER BOOKS.

                  At the Effective  Time: (a) all shares of Company Common Stock
("Shares")   outstanding   immediately   prior  to  the  Effective   Time  shall
automatically  be canceled and retired and shall cease to exist, and all holders
of certificates  representing Shares that were outstanding  immediately prior to
the  Effective  Time  shall  cease to have any  rights  as  shareholders  of the
Company;  and (b) the stock  transfer  books of the Company shall be closed with
respect to all Shares  outstanding  immediately  prior to the Effective Time. No
further  transfer of any such Shares shall be made on such stock  transfer books
after the  Effective  Time.  If, after the Effective  Time, a valid  certificate
previously  representing any Shares (a "Company Stock Certificate") is presented
to  the  Exchange  Agent  (as  defined  in  Section  1.7)  or to  the  Surviving
Corporation  or Parent,  such Company  Stock  Certificate  shall be canceled and
shall be exchanged as provided in Section 1.7.


         1.7      EXCHANGE OF CERTIFICATES.

                  (a) Prior to the Closing Date, Parent shall select a reputable
bank or trust  company to act as  exchange  agent in the Merger  (the  "Exchange
Agent").  Within one (1) business  day after the  Effective  Time,  Parent shall
deposit with the Exchange Agent,  for the benefit of the holders of Shares,  (i)
certificates representing the shares of Parent Common Stock issuable pursuant to
this Section 1, and (ii) cash  sufficient to make payments in lieu of fractional
shares in accordance  with Section 1.5(c) (such cash and shares of Parent Common
Stock, together with any dividends or distributions with respect thereto,  being
referred to as the "Exchange Fund").

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<PAGE>

                  (b) Parent shall use its commercially  reasonable best efforts
to cause the Exchange Agent to mail, as soon as reasonably practicable after the
Effective Time (but in any event within one (1) business day after the Effective
Time),  to the  record  holders of Company  Stock  Certificates  (i) a letter of
transmittal in customary form and containing  such  provisions as Parent and the
Company may reasonably specify  (including a provision  confirming that delivery
of Company Stock Certificates  shall be effected,  and risk of loss and title to
Company Stock  Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent),  and (ii) instructions for use in effecting
the  surrender  of  Company  Stock  Certificates  in  exchange  for  the  Merger
Consideration.  Upon  surrender of a Company Stock  Certificate  to the Exchange
Agent for exchange, together with a duly executed letter of transmittal and such
other  documents as may be reasonably  required by the Exchange Agent or Parent,
(A) the holder of such Company Stock Certificate shall be entitled to receive in
exchange  therefor  the  Merger   Consideration,   and  (B)  the  Company  Stock
Certificate so surrendered shall be immediately  canceled.  Until surrendered as
contemplated  by this  Section  1.7,  each Company  Stock  Certificate  shall be
deemed,  from and after  the  Effective  Time,  to  represent  only the right to
receive the Merger  Consideration  and any  distribution  or dividend the record
date for which is after the Effective  Time.  If any Company  Stock  Certificate
shall have been lost, stolen or destroyed,  Parent may, in its discretion and as
a condition  precedent to the issuance of any  certificate  representing  Parent
Common Stock,  require the owner of such lost, stolen or destroyed Company Stock
Certificate  to  provide  an  appropriate  affidavit  and,  in the  case  of any
shareholder of the Company holding at least 1,000 shares of Company Common Stock
to deliver a bond (in such reasonable sum as Parent may reasonably  direct),  as
indemnity against any claim that may be made against the Exchange Agent,  Parent
or the Surviving  Corporation  with respect to such Company  Stock  Certificate,
and, in such case,  the  Exchange  Agent will issue in  exchange  for such lost,
stolen or destroyed Company Stock Certificates the Merger Consideration.  Parent
shall use  commercially  reasonable  best efforts to cause the Exchange Agent to
issue shares of Parent Common Stock to the Company shareholders of record within
three (3) business  days after each such  shareholder  surrenders  their Company
Stock  Certificate(s)  and/or  a duly  executed  letter  of  transmittal  to the
Exchange Agent.

                  (c) No dividends or other distributions  declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the  holder  of any  unsurrendered  Company  Stock  Certificate  with
respect to the shares of Parent  Common  Stock that such holder has the right to
receive  in  the  Merger  until  such  holder   surrenders  such  Company  Stock
Certificate in accordance with this Section 1.7 (at which time such holder shall
be  entitled,  subject to the  effect of  applicable  escheat  or similar  Legal
Requirements,   to  receive  all  such  dividends  and  distributions,   without
interest).

                  (d)  Any   portion   of  the   Exchange   Fund  that   remains
undistributed  to holders of Company Stock  Certificates  as of the date one (1)
year after the Effective Time shall be delivered to Parent upon demand,  and any
holders of Company Stock Certificates who have not theretofore surrendered their
Company Stock Certificates to the Exchange Agent in accordance with this Section
1.7 shall  thereafter  look only to Parent for  satisfaction of their claims for
the Merger  Consideration  to which such  holder is  entitled  pursuant  hereto,
provided,  however,  that the failure of any Company  shareholder to deliver its
Company Stock  Certificates  and/or a duly executed letter of transmittal to the
Exchange  Agent  within  such year period  shall in no way affect  such  Company
shareholder's right to receive Merger Consideration in exchange for such Company
Common Stock hereunder.

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<PAGE>

                  (e)  Each of the  Exchange  Agent,  Parent  and the  Surviving
Corporation  shall be entitled  to deduct and  withhold  from any  consideration
payable or  otherwise  deliverable  pursuant to this  Agreement to any holder or
former  holder of Company  Common  Stock such  amounts as may be  required to be
deducted or withheld  therefrom under the Code or any provision of state,  local
or  foreign  tax law or under any other  applicable  Legal  Requirement.  To the
extent such amounts are so deducted or withheld,  such amounts  shall be treated
for all purposes  under this Agreement as having been paid to the Person to whom
such amounts would otherwise have been paid.

                  (f)  Neither  Parent nor the  Surviving  Corporation  shall be
liable to any holder or former  holder of Company  Common  Stock or to any other
Person  with  respect  to any shares of Parent  Common  Stock (or  dividends  or
distributions with respect thereto),  or for any cash amounts,  delivered to any
public  official in  compliance  with any  applicable  abandoned  property  law,
escheat law or similar Legal Requirement.


         1.8      FURTHER ACTION.

                  If, at any time after the Effective  Time,  any further action
is  determined  by Parent to be necessary or desirable to carry out the purposes
of this Agreement or to vest the Surviving  Corporation  with full right,  title
and  possession of and to all rights and property of Merger Sub and the Company,
the officers  and  directors of the  Surviving  Corporation  and Parent shall be
fully  authorized  (in the name of Merger  Sub,  in the name of the  Company and
otherwise) to take such action.  Parent,  Merger Sub and  Surviving  Corporation
also shall take such further  actions as may be necessary or desirable to ensure
that the Exchange Agent sends out the letters of transmittal to the shareholders
of the Company and issues certificates  representing Parent Common Stock to such
shareholders in accordance with Section 1.7.


         1.9      TAX CONSEQUENCES.

                  For  federal  income tax  purposes,  the Merger is intended to
constitute a  reorganization  within the meaning of Section 368 of the Code. The
parties  to  this   Agreement   hereby  adopt  this  Agreement  as  a  "plan  of
reorganization"  within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.


SECTION 2.        REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  Except as  specifically  set forth in the Disclosure  Schedule
delivered  by the  Company to Parent and Merger Sub prior to the  execution  and
delivery of this Agreement (the "Company Disclosure Schedule") and referenced in
the Company  Disclosure  Schedule to the  section(s)  of this Section 2 to which
such disclosure  applies,  the Company hereby  represents and warrants to Parent
and Merger Sub that:


         2.1      DUE ORGANIZATION; SUBSIDIARIES.

                  Each of the  Acquired  Corporations  (as  defined  below) is a
corporation  duly  organized,  validly  existing and in good standing  under the
Legal  Requirements  of the  jurisdiction  of


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<PAGE>

its incorporation. Each of the Acquired Corporations has all necessary power and
authority:  (a) to conduct its  business in the manner in which its  business is
currently being conducted;  (b) to own and use its assets in the manner in which
its  assets  are  currently  owned and used;  and (c) to  perform  its  material
obligations  under  all  Company  Material  Contracts.   Each  of  the  Acquired
Corporations  is  qualified to do business as a foreign  corporation,  and is in
good  standing,  under the Legal  Requirements  of all  jurisdictions  where the
failure to be so qualified would have a Material  Adverse Effect on the Acquired
Corporations.  The Company has delivered to Parent  accurate and complete copies
of the articles of  incorporation,  bylaws and other  charter or  organizational
documents of each of the Acquired Corporations, including all amendments thereto
(collectively,  the  "Company  Organization  Documents").  The  Company  has  no
Subsidiaries,  except for the  corporations  identified  in Schedule  2.1 of the
Company Disclosure Schedule. The Company and each of its Subsidiaries identified
in Schedule 2.1 of the Company Disclosure Schedule are collectively  referred to
herein as the "Acquired Corporations". None of the Acquired Corporations has any
equity  interest or similar  interest  in, or any interest  convertible  into or
exchangeable or exercisable  for any equity or similar  interest in, any Entity,
other than the Acquired Corporations' interests in their Subsidiaries identified
in Schedule 2.1 of the Company Disclosure Schedule.


         2.2      AUTHORITY; BINDING NATURE OF AGREEMENT.

                  The Company has all requisite corporate power and authority to
enter into and to perform its obligations  under this Agreement.  This Agreement
constitutes a legal,  valid and binding  obligation of the Company,  enforceable
against  the  Company  in  accordance  with  its  terms,  subject  to (a)  Legal
Requirements of general application  relating to bankruptcy,  insolvency and the
relief  of  debtors,  and  (b)  rules  of law  governing  specific  performance,
injunctive  relief and other equitable  remedies.  The Company hereby represents
that its Board of  Directors,  at a meeting  duly called and held on or prior to
the date hereof,  has by unanimous vote (i) determined that the Merger is in the
best interests of the Company, (ii) approved and adopted the this Agreement, the
Agreement of Merger, the Merger and the other transactions  contemplated by this
Agreement,  and (iii) resolved to recommend that the shareholders of the Company
adopt and approve this  Agreement,  the  Agreement of Merger and the Merger (the
unanimous  recommendations  referred  to in this clause  (iii) are  collectively
referred to in this Agreement as the "Company Recommendations").


         2.3      CAPITALIZATION, ETC.

                  (a) The authorized  capital stock of the Company  consists of:
55,000,000  shares of  Company  Common  Stock and  5,000,000  shares of  Company
Preferred  Stock.  As of October 29, 2002,  33,157,621  shares of Company Common
Stock  have  been  issued  and are  outstanding  and no  shares  of the  Company
Preferred  Stock have been issued and are  outstanding.  All of the  outstanding
shares of Company Common Stock have been duly authorized and validly issued, and
are fully paid and  nonassessable.  There are no shares of Company  Common Stock
held by any of the Company's  Subsidiaries.  None of the  outstanding  shares of
Company  Common Stock is entitled or subject to any preemptive  right,  right of
participation, right of maintenance or any similar right or subject to any right
of first  refusal in favor of the  Company.  There is no  Contract  to which the
Company is a party and, to the Company's knowledge, there is no Contract between
other Persons,  relating to the voting or  registration  of, or restricting  any
Person from purchasing, selling, pledging or otherwise disposing of (or granting
any  option or similar  right with  respect  to),  any shares of Company

                                       7
<PAGE>

Common  Stock,  other  than  the  Voting   Agreements.   None  of  the  Acquired
Corporations  is under any obligation,  or is bound by any Contract  pursuant to
which it may become  obligated,  to repurchase,  redeem or otherwise acquire any
outstanding shares of Company Common Stock.

                  (b) As of October 29, 2002: (i)  12,424,000  shares of Company
Common  Stock are  reserved for  issuance  pursuant to stock  options  under the
Amended and Restated 1994 Flexible Stock  Incentive  Plan, as amended,  of which
options to acquire  5,844,523  shares of Company  Common Stock are  outstanding;
(ii) 2,000,000 shares of Company Common Stock are reserved for issuance pursuant
to stock options under the 2001  Non-Qualified  Stock  Incentive  Plan, of which
options to acquire 874,083 shares of Company Common Stock are outstanding; (iii)
300,000  shares of Company  Common Stock are  reserved for issuance  pursuant to
stock options under the ATM  Technology  Center 2000 Stock Option Plan, of which
options to acquire 213,000 shares of Company Common Stock are outstanding;  (iv)
410,000  shares of Company  Common Stock are  reserved for issuance  pursuant to
stock options under the  Cylink/ARL  1997 Stock Option Plan, of which options to
acquire 119,784 shares of Company Common Stock are outstanding;  and (v) 322,430
shares of Company  Common Stock remain  available  for purchase  pursuant to the
2000  Employee  Stock  Purchase  Plan of the  Company  (the  "ESPP  Plan").  The
outstanding  stock  options  listed  above under the Amended and  Restated  1994
Flexible Stock  Incentive Plan include  options  exercisable for 1,000 shares of
Company Common Stock that were granted under the 1987 Non-Qualified Stock Option
Plan,  with the shares  reserved  for such  options  having been rolled into the
Amended and Restated 1994 Flexible Stock Incentive  Plan.  Stock options granted
by the Company  pursuant to the Company Stock Option Plans, as well as any stock
options  granted  outside of the Company  Stock  Option  Plans,  are referred to
collectively  herein  as  "Company  Options."  Schedule  2.3(b)  of the  Company
Disclosure  Schedule sets forth the following  information  with respect to each
Company  Option  outstanding  as of October 29, 2002:  (i) the  particular  plan
pursuant  to  which  such  Company  Option  was  granted;  (ii)  the name of the
optionee;  (iii) the number of shares of Company  Common  Stock  subject to such
Company Option;  (iv) the current exercise price of such Company Option; (v) the
date on which such  Company  Option was  granted;  (vi) the extent to which such
Company Option is vested and exercisable as of the date of this Agreement; (vii)
the vesting  schedule of such  Company  Option  including  any  acceleration  of
vesting upon a change in control of the Company;  (viii) the expiration  date of
the  Company  Option;  and (ix) the  period  of time  following  termination  of
employment during which the Company Option may be exercised if not expired.  The
Company has delivered to Parent accurate and complete copies of all stock option
plans pursuant to which the Company has granted Company  Options,  and the forms
of all stock  option  agreements  evidencing  such  options.  There have been no
repricings  of  any  Company  Options  through   amendments,   cancellation  and
reisssuance or other means during the current or prior two calendar years.

                  (c)  Except as set forth in Section  2.3(a) or Section  2.3(b)
above,  as of  the  date  of  this  Agreement,  there  is  no:  (i)  outstanding
subscription,   option,  call,  warrant  or  right  (whether  or  not  currently
exercisable)  to acquire any shares of the capital stock or other  securities of
any of the Acquired  Corporations;  (ii)  outstanding  security,  instrument  or
obligation that is or may become convertible into or exchangeable for any shares
of the capital stock or other  securities  of any of the Acquired  Corporations;
(iii)  rights  agreement,  shareholder  rights  plan (or similar  plan  commonly
referred  to as a "poison  pill") or Contract  under  which any of the  Acquired
Corporations  are or may become  obligated to sell or otherwise issue any shares
of its capital stock or any other securities;  or (iv) current  investigation by
the  Company  of any  condition  or  circumstance  that the  Company  reasonably
believes  would give rise to or provide a basis for the  assertion of a claim by
any Person to

                                       8
<PAGE>

the effect  that such  Person is  entitled  to acquire or receive  any shares of
capital stock or other securities of any of the Acquired Corporations (items (i)
through (iv) above, collectively, "Company Stock Rights").

                  (d) All  outstanding  shares  of  Company  Common  Stock,  all
outstanding  Company Options and all outstanding shares of capital stock of each
Subsidiary  of the Company have been issued and granted in  compliance  with (i)
all applicable securities laws and other applicable Legal Requirements, and (ii)
all  requirements  set forth in  applicable  Contracts.  All of the  outstanding
shares of capital  stock of each of the  Company's  Subsidiaries  have been duly
authorized  and are validly  issued,  are fully paid and  nonassessable  and are
owned  beneficially  and of  record  by  the  Company,  free  and  clear  of any
Encumbrances.


         2.4      SEC FILINGS; FINANCIAL STATEMENTS.

                  (a) All  registration  statements,  proxy statements and other
statements,  reports,  schedules,  forms (including  exhibits thereto) and other
documents  filed by the Company with the SEC since January 1, 1999 (the "Company
SEC Documents")  have been made available to Parent.  All  statements,  reports,
schedules,  forms,  exhibits and other documents  required to have been filed by
the Company with the SEC since  January 1, 1999 have been so filed.  As of their
respective  dates (or, if amended or superseded by a filing prior to the date of
this Agreement,  then on the date of such amendment or superseding  filing): (i)
each of the Company SEC  Documents  complied in all material  respects  with the
applicable  requirements  of the Securities Act or the Exchange Act (as the case
may be);  and (ii)  none of the  Company  SEC  Documents  contained  any  untrue
statement of a material  fact or omitted to state a material fact required to be
stated  therein or necessary  in order to make the  statements  therein,  in the
light of the circumstances under which they were made, not misleading.

                  (b) The financial statements (including related notes, if any)
contained in the Company SEC Documents (the "Company Financial Statements"): (i)
complied  as to form in all  material  respects  with the  published  rules  and
regulations of the SEC applicable thereto; (ii) were prepared in accordance with
generally accepted accounting  principles ("GAAP") applied on a consistent basis
throughout the periods  covered (except as may be indicated in the notes to such
financial  statements or, in the case of unaudited  statements,  as permitted by
Form 10-Q of the SEC, and except that the unaudited financial statements may not
have  contained  footnotes  and were  subject to normal and  recurring  year-end
adjustments which were not, or are not reasonably  expected to be,  individually
or in the  aggregate,  material in amount);  and (iii)  fairly  presented in all
material  respects the  consolidated  financial  position of the Company and its
consolidated   subsidiaries   as  of  the  respective   dates  thereof  and  the
consolidated  results  of  operations  and  cash  flows of the  Company  and its
consolidated  subsidiaries for the periods covered thereby. For purposes of this
Agreement,  "Company Balance Sheet" means that consolidated balance sheet of the
Company and its  consolidated  subsidiaries as of June 30, 2002 set forth in the
Company's  Quarterly  Report on Form 10-Q  filed  with the SEC and the  "Company
Balance Sheet Date" means June 30, 2002.


         2.5      ABSENCE OF CHANGES.

                  Except  as  set  forth  on  Schedule  2.5  of  the  Disclosure
Schedule,  since the Company Balance Sheet Date  (provided,  that after the date
hereof,  nothing  listed  below  shall be deemed to


                                       9
<PAGE>

prohibit the Company  from  conducting  its  business as  permitted  pursuant to
Section 4.2 hereof and any actions  taken by Company  pursuant to Section 4.2 or
upon written request of Parent shall not be a breach of this Section 2.5):

                  (a)  each  of  the  Acquired  Corporations  has  operated  its
respective  business  in all  material  respects  in  the  ordinary  course  and
consistent with past practices;

                  (b) except  for facts,  events,  circumstances  or  conditions
which  exist or have  occurred  which are  reasonably  attributable  to  general
economic   conditions  or  general  conditions   affecting   similarly  situated
corporations  in the same industry as the Acquired  Corporations,  there has not
been  any  event  that  has  had a  Material  Adverse  Effect  on  the  Acquired
Corporations,  and no fact,  event,  circumstance  or  condition  exists  or has
occurred that could  reasonably be expected to have a Material Adverse Effect on
the Acquired Corporations;

                  (c)  none  of the  Acquired  Corporations  has  (i)  declared,
accrued,  set  aside or paid any  dividend  or made any  other  distribution  in
respect of any shares of capital stock; (ii) repurchased,  redeemed or otherwise
reacquired any shares of capital stock or other  securities;  (iii) sold, issued
or granted,  or  authorized  the  issuance  of, (A) any  capital  stock or other
security  (except for Company  Common  Stock  issued upon the valid  exercise of
outstanding  Company Options),  (B) any option,  warrant or right to acquire any
capital stock or any other security  (except for Company Options  outstanding on
the date hereof or issued in accordance with Section 4.2), or (C) any instrument
convertible into or exchangeable  for any capital stock or other security;  (iv)
made any capital expenditure which, when added to all other capital expenditures
made on behalf of the  Acquired  Corporations  since the Company  Balance  Sheet
Date,  exceeds  $150,000 in the  aggregate;  (v) made any material Tax election;
(vi)  commenced  or  settled  any Legal  Proceeding;  or (vii)  entered  into or
consummated any transactions with any affiliate;

                  (d)  none  of  the  Acquired  Corporations  has  (i)  sold  or
otherwise disposed of, or acquired, leased, licensed, waived or relinquished any
material right or other material asset to, from or for the benefit of, any other
Person except for rights or other assets sold,  disposed of,  acquired,  leased,
licensed,  waived  or  relinquished  in the  ordinary  course  of  business  and
consistent with past practice; (ii) mortgaged,  pledged or subjected to any lien
any of their respective property,  business or assets, except for purchase money
or  similar  security  interests  granted in  connection  with the  purchase  of
equipment  or  supplies  in the  ordinary  course of  business  in an amount not
exceeding $100,000 in the aggregate;  (iii) entered into or amended any lease of
real property or material personal  property  (whether as lessor or lessee);  or
(iv) canceled or compromised any debt or claim other than accounts receivable in
the ordinary course of business consistent with past practice;

                  (e)  none of the  Acquired  Corporations  has (i)  amended  or
waived any of its material  rights  under,  or  permitted  the  acceleration  of
vesting  under,  any  provision  of any of the  Company  Employee  Plans  or any
provision  of  any  agreement  or  Company  Stock  Option  Plan  evidencing  any
outstanding  Company Option;  (ii)  established or adopted any Company  Employee
Plan;  (iii) caused or permitted any Company  Employee Plan to be amended in any
material respect;  or (iv) paid any bonus or made any  profit-sharing or similar
payment  to,  or  materially   increased  the  amount  of  the  wages,   salary,
commissions,  fringe benefits or other compensation or remuneration  payable to,
any of its directors, officers, employees, consultants or agents;

                                       10
<PAGE>

                  (f) there has been no material  labor trouble  (including  any
work slowdown,  stoppage or strike)  involving the Acquired  Corporations or any
material change in any of their respective personnel or the terms and conditions
of the employment of such personnel;

                  (g) none of the Acquired  Corporations  has made any change in
(i) their respective methods of accounting or accounting practices or (ii) their
respective  pricing policies or payment or credit practices or failed to pay any
creditor any amount owed to such creditor when due or granted any  extensions or
credit  other  than in the  ordinary  course of  business  consistent  with past
practice;

                  (h) none of the Acquired Corporations has terminated or closed
any material facility, business or operation;

                  (i) none of the  Acquired  Corporations  has  made  any  loan,
advance or capital  contributions  to, or any other  investment  in, any Person,
except for travel and payroll  advances made to employees in the ordinary course
of business which are disclosed on Schedule 2.5(i);

                  (j)  none  of the  Acquired  Corporations  has  written  up or
written down any of its respective material assets other than has been disclosed
in subsequent financial reports or other filings made by the Company pursuant to
the Securities Act or the Exchange Act;

                  (k)  there  has been no loss,  destruction  or  damage  to any
material item of property of the Acquired Corporations,  whether or not insured,
which has had or could  reasonably be expected to have a Material Adverse Effect
on the Acquired Corporations; and

                  (l) none of the  Acquired  Corporations  has entered  into any
contractual  obligation  to do any of the things  referred to  elsewhere in this
Section 2.5.


         2.6      PROPRIETARY ASSETS.

                  (a) Schedule  2.6(a) of the Company  Disclosure  Schedule sets
forth all U.S. and foreign patents, patent applications,  trademarks,  trademark
applications, copyright registrations and copyright applications owned by any of
the  Acquired  Corporations.  Each  Acquired  Corporation  has  good,  valid and
marketable title to, or has a valid right to use, license or otherwise  exploit,
all of the Acquired Corporation  Proprietary Assets necessary for the conduct of
such Acquired Corporation's  business as presently conducted,  free and clear of
all Encumbrances, except for any lien for current taxes not yet due and payable.
None of the Acquired  Corporations  have developed jointly with any other Person
any  Acquired  Corporation  Proprietary  Asset with  respect to which such other
Person has any rights. There is no Company Material Contract (with the exception
of end user license  agreements and software and  maintenance  agreements in the
forms similar in all material respects to the forms previously  delivered by the
Company to Parent)  pursuant  to which any Person has any right  (whether or not
currently  exercisable)  to use,  license  or  otherwise  exploit  any  Acquired
Corporation  Proprietary  Asset  owned  or  exclusively  licensed  by any of the
Acquired Corporations.

                  (b) (i) To the Company's  knowledge,  all Acquired Corporation
Proprietary  Assets  owned by any of the  Acquired  Corporations  are  valid and
enforceable;  (ii) all Acquired  Corporation  Proprietary Assets owned by any of
the Acquired  Corporations are subsisting and in


                                       11
<PAGE>

effect;  (iii) to the  Company's  knowledge,  none of the  Acquired  Corporation
Proprietary Assets owned by any of the Acquired  Corporations and no Proprietary
Asset that is currently  being  developed  by any of the  Acquired  Corporations
(either by itself or with any other  Person)  infringes or  misappropriates  any
Proprietary Asset owned or used by any other Person;  (iv) (iv) to the knowledge
of the Company, none of the products or services that are or have been designed,
created,  developed,  assembled,  performed,  manufactured or sold by any of the
Acquired Corporations is infringing,  misappropriating or making any unlawful or
unauthorized  use of any  Proprietary  Asset owned or used by any other  Person,
and, to the  knowledge of the Company,  none of such products or services has at
any time infringed,  misappropriated or made any unlawful or unauthorized use of
any  Proprietary  Asset  owned  or used by any  other  Person;  (v)  none of the
Acquired  Corporations has received any written notice or other communication of
any actual,  alleged,  possible or potential  infringement,  misappropriation or
unlawful  or  unauthorized  use of, any  Proprietary  Asset owned or used by any
other Person, (vi) to the Company's knowledge,  the operation of the business of
each  Acquired  Corporation  as it currently  is conducted  does not infringe or
misappropriate or make any unlawful or unauthorized use of any Proprietary Asset
of any other Person;  and (vii) to the Company's  knowledge,  no other Person is
infringing,  misappropriating or making any unlawful or unauthorized use of, and
no  Proprietary  Asset owned or used by any other Person  infringes or conflicts
with,  any  Acquired  Corporation   Proprietary  Asset  owned  by  the  Acquired
Corporations.  None of the Acquired  Corporations has (A) except with respect to
the Company Material  Contracts and end user license agreements and software and
maintenance  agreements in the forms which are the same in all material respects
to the forms previously delivered by the Company to Parent,  licensed any of the
Acquired  Corporation  Proprietary Assets to any Person, or (B) entered into any
covenant  not to compete or any Contract  limiting its ability to exploit  fully
any Acquired  Corporation  Proprietary  Assets owned or exclusively  licensed by
such Acquired Corporation.

                  (c) Each Acquired  Corporation has taken all reasonable  steps
that are required to protect such Acquired  Corporation's rights in confidential
information  and trade  secrets of the Acquired  Corporation  or provided by any
other person to the Acquired Corporation.  Without limiting the foregoing,  each
Acquired  Corporation  has, and  enforces,  a policy  requiring  each  employee,
consultant   and   contractor   to  execute  a   proprietary   information   and
confidentiality  agreement,  substantially  in the forms attached to the Company
Disclosure  Schedule as Schedule 2.6(c),  and all current and former  employees,
consultants and contractors of such Acquired  Corporation  have executed such an
agreement.

                  (d) The Acquired  Corporation  Proprietary Assets owned by the
Acquired  Corporations  do not  contain  any  shareware,  open  source  code  or
freeware.  The Company has used commercially  reasonable efforts to prohibit the
public disclosure of any of its source code.


         2.7      CONTRACTS.

                  (a) For  purposes  of this  Agreement,  each of the  following
shall be deemed to  constitute  a  "Company  Material  Contract"  which  Company
Material Contracts are listed on Schedule 2.7 and copies of which have been made
available to Parent:

                           (i)  any  Acquired   Corporation   Contract  that  is
required  by the rules and  regulations  of the SEC to be filed as an exhibit to
the Company SEC Documents;

                                       12
<PAGE>

                           (ii) any Acquired  Corporation  Contract  relating to
the  employment of any employee,  and any Contract  pursuant to which any of the
Acquired  Corporations  is or  may  become  obligated  to  make  any  severance,
termination,  bonus or  relocation  payment  or any other  payment  (other  than
payments  in respect of salary) in excess of  $20,000,  to any current or former
employee or director;

                           (iii) any Acquired  Corporation  Contract relating to
the  acquisition,  transfer,  development,  sharing or  license of any  material
Proprietary  Asset  (except for any Acquired  Corporation  Contract  pursuant to
which  (A)  any  material   Proprietary   Asset  is  licensed  to  the  Acquired
Corporations under any third party software license generally available for sale
to the public,  or (B) any material  Proprietary Asset is licensed by any of the
Acquired Corporations to any Person on a non-exclusive basis);

                           (iv) any Acquired Corporation Contract which provides
for indemnification of any current or former officer, director or employee;

                           (v) any  Acquired  Corporation  Contract  creating or
relating  to any  partnership  or joint  venture  or any  sharing  of  revenues,
profits, losses, costs or liabilities;

                           (vi) any Acquired  Corporation Contract that involves
the payment or expenditure of in excess of $50,000 that may not be terminated by
the applicable  Acquired  Corporation  (without  penalty) within sixty (60) days
after  the  delivery  of  a  termination  notice  by  the  applicable   Acquired
Corporation;

                           (vii) any Acquired Corporation Contract contemplating
or involving  (A) the payment or delivery of cash or other  consideration  in an
amount  or having a value in excess of  $100,000  in the  aggregate,  or (B) the
performance of services having a value in excess of $100,000 in the aggregate;

                           (viii)  any  Government   Contract  (A)  creating  or
relating to the creation of any  Encumbrance  with respect to any asset owned or
used by any  Acquired  Corporation  having a value in  excess  of  $50,000;  (B)
involving  or  incorporating  any  liability,   obligation,   guaranty,  pledge,
performance or completion  bond,  indemnity  (other than customary  intellectual
property   indemnities   for  hardware   and  software   sold  by  any  Acquired
Corporation),  right  of  contribution  or  surety  arrangement,  any  of  which
obligations  involve or may  reasonably  be  expected  to  involve  an  Acquired
Corporation  obligation in excess of $50,000 per year; or (C)  contemplating  or
involving  (1) the  payment or  delivery  of cash or other  consideration  in an
amount  or  having a value in excess of  $50,000  in the  aggregate,  or (2) the
performance  of services  having a value in excess of $50,000 in the  aggregate;
and

                           (ix) any Acquired  Corporation  Contract imposing any
restriction  on the right or ability of any Acquired  Corporation to (A) compete
with any other Person,  (B) acquire any material product or other material asset
or any  services  from any other  Person,  sell any  material  product  or other
material  asset to or perform  any  services  for any other  Person or  transact
business or deal in any other  manner with any other  Person,  or (C) develop or
distribute any material technology.

                                       13
<PAGE>

                           (x) any other  Acquired  Corporation  Contract,  if a
breach of such  Acquired  Corporation  Contract  would have a  Material  Adverse
Effect on the Acquired  Corporations by itself,  and specifically  excluding any
Acquired  Corporation  Contract  which would have been  disclosed  under (ii) or
(vi)-(viii) above, but for the thresholds set forth in such subsections.

                  (b)      (i) As against the  Company,  each  Company  Material
Contract is valid and in full force and effect, and is enforceable in accordance
with its terms subject to (A) Legal Requirements of general application relating
to  bankruptcy,  insolvency  and the  relief  of  debtors,  and (B) rules of law
governing specific performance,  injunctive relief and other equitable remedies;
and (ii) to the knowledge of Company, as against the other parties thereto, each
Company Material Contract is valid and in full force and effect, and enforceable
in  accordance  with its terms  subject  to (A) Legal  Requirements  of  general
application  relating to bankruptcy,  insolvency and the relief of debtors,  and
(B) rules of law governing  specific  performance,  injunctive  relief and other
equitable remedies.

                  (c) None of the Acquired  Corporations has materially violated
or breached,  or committed  any material  default  under,  any Company  Material
Contract. To the Company's knowledge,  no other Person has violated or breached,
or committed any default under, any Company Material Contract.

                  (d) To the Company's knowledge,  no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
could  reasonably be expected to (i) result in a material  violation or material
breach of any provision of any Company Material  Contract by any of the Acquired
Corporations;  (ii) give any Person  the right to declare a default or  exercise
any material remedy under any Company Material  Contract;  (iii) give any Person
the right to  receive  or  require a rebate,  chargeback,  penalty  or change in
delivery schedule under any Company Material Contract;  (iv) give any Person the
right  to  accelerate  the  maturity  or  performance  of any  Company  Material
Contract; or (v) give any Person the right to cancel or terminate,  or modify in
any material respect, any Company Material Contract.

                  (e)  To  the  knowledge  of the  Acquired  Corporations,  with
respect to Government  Contracts,  there is, as of the date hereof, no (i) civil
fraud  or  criminal  investigation  by  any  Governmental  Body,  (ii)  Acquired
Corporation,  or current officers,  employees or affiliates  thereof,  currently
suspended or debarred,  or suspension  of debarment  proceeding  (or  equivalent
proceeding)  against any of the Acquired  Corporations,  their current officers,
employees or affiliates,  (iii) request by any Governmental  Body for a contract
price adjustment based on a claimed  disallowance by any Governmental Body or at
the direction of any  Governmental  Body or written notice of defective  pricing
other than as reserved for on the Company  Financial  Statements  in  accordance
with GAAP,  (iv) claim or  equitable  adjustment  by the  Acquired  Corporations
against  the U.S.  Government  or any third  party in excess of  $50,000  in the
aggregate,  (v) written  notice  challenging,  questioning  or  disallowing  any
cost(s)  in  excess  of  $50,000  in the  aggregate,  (vi)  notice  of  contract
termination,  cure  notice  or show  cause  notice,  or (vii)  violation  of any
statutory,  regulatory or contractual provision that could result in any fine or
penalty of a criminal, civil or administrative nature.

                                       14
<PAGE>


         2.8      LIABILITIES.

                  None of the Acquired  Corporations  has any material  accrued,
contingent  or other  liabilities  of any nature,  either  matured or  unmatured
(whether or not required to be reflected  in  financial  statements  prepared in
accordance  with  GAAP and  whether  due or to  become  due),  except  for:  (a)
liabilities  that are  reflected  in the  "Liabilities"  column  of the  Company
Balance Sheet and the notes  thereto,  and (b) normal and recurring  liabilities
that have been incurred by the Acquired  Corporations  since the Company Balance
Sheet Date in the ordinary course of business and consistent with past practices
that, individually or in the aggregate, are not material in nature.


         2.9      COMPLIANCE WITH LEGAL REQUIREMENTS.

                  Each of the Acquired  Corporations  is, and at all times since
September 30, 1997,  has been,  in compliance in all material  respects with all
applicable  Legal  Requirements.  Since September 30, 1997, none of the Acquired
Corporations  has received any written  notice or, to the  Company's  knowledge,
other  communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.


         2.10     GOVERNMENTAL AUTHORIZATIONS.

                  Each  of the  Acquired  Corporations  holds  all  Governmental
Authorizations  necessary  to enable such  Acquired  Corporation  to conduct its
business  in the manner in which such  business  is  currently  being  conducted
except where the failure to hold such Governmental  Authorizations  would not be
reasonably   likely  to  have  a  Material   Adverse   Effect  on  the  Acquired
Corporations.  All such Governmental  Authorizations are valid and in full force
and effect.  Each Acquired  Corporation is, and at all times since September 30,
1997 has  been,  in  compliance  in all  material  respects  with the  terms and
requirements of such Governmental Authorizations. Since September 30, 1997, none
of the Acquired Corporations has received any notice or other communication from
any  Governmental  Body  regarding  (a) any actual or possible  violation  of or
failure  to  comply   with  any  term  or   requirement   of  any   Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization.


         2.11     TAX MATTERS.

                  (a) The  Acquired  Corporations  have paid or reserved for all
Taxes,  due and payable by any of them  (whether or not shown on any Tax Return)
for or with respect to all periods up to and including the date hereof  (without
regard to whether or not such Taxes are or were disputed),  whether or not shown
on any Tax Return.

                  (b) Each of the  Acquired  Corporations  has filed on a timely
basis (taking into account any  extensions of time an Acquired  Corporation  was
granted)  all  material  Tax Returns that it was required to file except for Tax
Returns for the year which  includes the Closing Date. All such Tax Returns were
accurate  and  complete  in  all  material   respects.   None  of  the  Acquired
Corporations  currently is the beneficiary of any extension of time within which
to file any Tax Return.  No claim that has not been  resolved has ever been made
to an Acquired  Corporation by an authority in a

                                       15
<PAGE>

jurisdiction  where the Acquired  Corporations  do not file Tax Returns that any
one of them is or may be subject to taxation by that  jurisdiction.  None of the
Acquired Corporations has given any currently effective waiver of any statute of
limitations in respect of Taxes or agreed to any currently  effective  extension
of time with respect to a Tax  assessment or  deficiency.  There are no security
interests on any of the assets of any of the Acquired Corporations that arose in
connection  with any  failure  (or  alleged  failure) to pay any Tax (other than
liens for Taxes not yet due and payable).

                  (c) The Acquired Corporations have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee,  independent contractor,  creditor,  shareholder or other third
party except for such withholding or payments to be made at or before Closing.

                  (d) The Company is not  currently  investigating  any facts or
circumstances  which  the  Company  reasonably  believes  could  give rise to an
expectation that any relevant taxing  authority may assess  additional Taxes for
any period for which Tax Returns  have been filed.  There is no dispute or claim
concerning  any  liability  for Taxes of the  Acquired  Corporations  either (i)
claimed or raised by any  authority in writing or (ii) as to which such Acquired
Corporation  has knowledge  based upon  personal  contact with any agent of such
authority.  Schedule  2.11(d) to the Company  Disclosure  Schedule  sets forth a
complete and accurate  list of all federal and state  income and  franchise  Tax
Returns filed by or on behalf of the Acquired Corporations with any Governmental
Body with respect to the taxable periods of the Acquired  Corporations  ended on
or after December 31, 2001 (the "Company Tax Returns");  and Schedule 2.11(d) to
the Company  Disclosure  Schedule  indicates those Company Tax Returns that have
been audited and  indicates  those  Company Tax Returns that  currently  are the
subject of an audit.

                  (e) The unpaid Taxes of the Acquired Corporations (i) did not,
as of the date of the most  recent  Company  Financial  Statements,  exceed  the
aggregate  reserve for Tax  Liability  (as  opposed to any reserve for  deferred
Taxes established to reflect timing differences between book and Tax income) set
forth in the Company  Balance  Sheet and (ii) will not, as of the Closing  Date,
exceed that  aggregate  reserve as adjusted  for the passage of time through the
Closing  Date in  accordance  with the past custom and  practice of the Acquired
Corporations in filing their Tax Returns.

                  (f) None of the  Acquired  Corporations  is a party to any Tax
allocation or sharing agreement.  None of the Acquired Corporations has made any
distribution of any "Controlled  Corporation" as that term is defined in Section
355(a)(1) of the Code. None of the Acquired  Corporations  (i) has been a member
of an "affiliated  group," as defined in Section  1504(a) of the Code,  filing a
consolidated federal income Tax Return other than an affiliated group the common
parent of which is the  Company or (ii) has any  Liability  for the Taxes of any
Person (other than any of the Acquired  Corporations)  under Treas. Reg. Section
1.1502-6  (or any similar  provision  of state,  local,  or foreign  law),  as a
transferee or successor, by contract or otherwise.

                  (g) None of the  Acquired  Corporations  have  filed a consent
under Section 341(f) of the Code concerning  collapsible  corporations.  None of
the acquired  corporations will be required to include any item of income in, or
exclude any item of deduction  from,  taxable  income for any taxable  period or
portion  thereof  ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing Date
under  Section 481 of the Code,  (ii) closing  agreement as described in Section
7121 of the Code  executed  on or  prior to


                                       16
<PAGE>

the Closing Date,  (iii) deferred  intercompany  gain on any excess loss account
described in regulations under Section 1502 of the Code or (iv) installment sale
or open transaction disposition made on or prior to the Closing Date.



         2.12     EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.

                  (a) Schedule 2.12(a) of the Company Disclosure  Schedule lists
(i) all  employee  pension  benefit  plans (as  defined in  Section  3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) all
employee welfare benefit plans (as defined in Section 3(1) of ERISA),  (iii) all
other  pension,  bonus,  stock  option,  stock  purchase,   incentive,  deferred
compensation,  supplemental  retirement,  severance,  fringe  benefits and other
similar benefit plans (including,  without limitation,  any fringe benefit under
Section  132  of  the  Code  and  any  foreign  plans),   programs,   Contracts,
arrangements  or policies  (including a specific  identification  of those which
contain change of control  provisions or pending change of control  provisions),
and  (iv)  any  employment,   executive  compensation  or  severance  agreements
(including a specific  identification  of those which contain  change of control
provisions  or  pending  change  of  control  provisions),  whether  written  or
otherwise, as amended, modified or supplemented,  of any Acquired Corporation or
any other Entity (whether or not incorporated) which is a member of a controlled
group which includes any of the Acquired  Corporations  or which is under common
control  with any of the  Acquired  Corporations  within the meaning of Sections
414(b),  (c),  (m) or (o) of the Code or  Section  4001(a)  (14) or (b) of ERISA
("ERISA  Affiliates")  (all  such  plans,   programs,   Contracts,   agreements,
arrangements  or  policies  as  described  in this  Section  2.12  (a)  shall be
collectively referred to as the "Company Employee Plans") for the benefit of, or
relating  to, any former or current  employee,  officer or  director  (or any of
their  beneficiaries) of any Acquired  Corporation or any other ERISA Affiliate.
The  Company has made  available  to Parent,  in a  reasonable  time,  place and
manner,  true and complete copies of (i) each such written Company Employee Plan
(or a written description of any Company Employee Plan which is not written) and
all  related  trust  agreements,   insurance  and  other  contracts   (including
policies),  summary  plan  descriptions,  summaries  of material  modifications,
registration   statements   (including  all   attachments),   prospectuses   and
communications  distributed  to plan  participants,  (ii) the three most  recent
annual reports on Form 5500 series, with accompanying schedules and attachments,
filed with respect to each Company Employee Plan required to make such a filing,
(iii) the most recent actuarial valuation for each Company Employee Plan subject
to Title IV of ERISA,  (iv) the  latest  reports  which have been filed with the
U.S.  Department of Labor with respect to each Company Employee Plan required to
make such filing, (v) the most recent favorable determination letters issued for
each Company  Employee  Plan and related trust which is intended to be qualified
under Section 401(a) of the Code (and, if an application for such  determination
is  pending,  a copy  of the  application  for  such  determination),  and  (vi)
financial and other information regarding current and projected liabilities,  if
any, with respect to each Company Employee Plan for which the filings  described
in (ii), (iii) or (iv) above are not required under ERISA.

                  (b)  (i)  None  of the  Company  Employee  Plans  promises  or
provides  retiree medical or other retiree welfare benefits to any person (other
than  continuation  coverage to the extent required by law,  whether pursuant to
the Consolidated Omnibus Budget  Reconciliation Act of 1985 or otherwise),  (ii)
none of the Company Employee Plans is a "Multiple Employer Welfare


                                       17
<PAGE>

Arrangement" (as defined in Section 3(40) of ERISA),  or a "Multiemployer  Plan"
(as  defined  in  Section  3(37)  of  ERISA),  (iii) no  party  in  interest  or
disqualified  person (as defined in Section  3(14) of ERISA and Section  4975 of
the Code, respectively) has at any time engaged in a transaction with respect to
any Company Employee Plan which could subject any of the Acquired  Corporations,
directly or indirectly,  to any material tax, material penalty or other material
liability for prohibited  transactions  under ERISA or Section 4975 of the Code;
(iv)  no  fiduciary  of  any  Company  Employee  Plan  has  breached  any of the
responsibilities  or obligations imposed upon fiduciaries under Title I of ERISA
which shall subject any of the Acquired Corporations, directly or indirectly, to
any material  penalty or liability for breach of fiduciary duty; (v) all Company
Employee Plans have been  established  and  maintained in accordance  with their
terms and have been operated in substantial compliance with all applicable Legal
Requirements;  (vi) all  Company  Employee  Plans may by their  terms be amended
and/or terminated at any time without the consent of any other Person subject to
applicable Legal Requirements and the terms of each Company Employee Plan; (vii)
each of the Acquired  Corporations has performed all obligations  required to be
performed by them under, and are not in any material respect in default under or
in  violation  of,  any  Company  Employee  Plan;  (viii)  none of the  Acquired
Corporations  has any  knowledge of any default or violation by any other Person
with respect to any of the Company  Employee Plans;  (ix) each Company  Employee
Plan which is intended to be qualified  under Section  401(a) of the Code is the
subject of a favorable determination letter from the Internal Revenue Service as
to such plan's  qualified status under Section 401(a) of the Code (or comparable
letter, such as an opinion or notification letter as to the form of plan adopted
by one or more Acquired  Corporations)  or has time remaining  under  applicable
Treasury guidance to seek such a determination,  and nothing has occurred to the
knowledge of the Company since the issuance of such letter (or could  reasonably
be  expected to occur)  which  might  impair  such  favorable  determination  or
otherwise impair the qualified status of such plan; (x) no Acquired  Corporation
is currently  subject to any penalty or tax with respect to any Company Employee
Plan under  Section  502(i) of ERISA or 4975 through 4980 F of the Code,  or has
any  outstanding  liability  for any such penalty or tax which is not  otherwise
reserved  for or  reflected on the Company  Financial  Statements;  and (xi) all
contributions  required to be made or reserved,  and all premiums required to be
paid by the Acquired Corporations,  as appropriate,  with respect to any Company
Employee  Plan  pursuant to the terms of the Company  Employee  Plan,  any Legal
Requirements  or any collective  bargaining  agreement,  have been made, paid or
reserved on or before their due dates (including any extensions thereof).

                  (c)  None of the  Acquired  Corporations  or any  other  ERISA
Affiliate currently  maintains,  sponsors or participates in, or within the last
five years has maintained,  sponsored or participated in, any "Employee  Benefit
Plan" (as  defined in Section  3(3) of ERISA)  that is subject to Section 412 of
the Code or Title IV of ERISA.

                  (d) The consummation of the transactions  contemplated by this
Agreement will not cause or result in an increase in the amount of  compensation
or benefits or  accelerate  the vesting or timing of payment of any  benefits or
compensation  payable in respect of any former or current employee,  independent
contractor or consultant (or any of their  beneficiaries) of any of the Acquired
Corporations.

                  (e)  There  are  no  Legal  Proceedings  pending  or,  to  the
knowledge  of the Company,  threatened  in respect of or relating to any Company
Employee Plan.

                                       18
<PAGE>

                  (f) The Company is not  currently  investigating  any facts or
circumstances  which the Company  reasonably  believes could be expected to give
rise to any such Legal  Proceeding  (other  than  routine,  uncontested  benefit
claims) in respect of or relating to any Company Employee Plan.

                  (g) (i) None of the Acquired  Corporations has ever maintained
an employee stock  ownership  plan (within the meaning of Section  4975(e)(7) of
the Code) or any other  Company  Employee  Plan that invests in Company  capital
stock;  (ii) since  August  23,  2002,  none of the  Acquired  Corporations  has
proposed or agreed to any increase in benefits  under any Company  Employee Plan
(or the  creation of new  benefits) or change in employee  coverage  which would
materially  increase the expense of maintaining  any Company  Employee Plan; and
(iii) except as disclosed on Schedule 2.12(g), no person will be entitled to any
severance  benefits or the  acceleration  of any options  under the terms of any
Company  Employee  Plan as a  result  of the  consummation  of the  transactions
contemplated by this Agreement.

                  (h) To the extent that any Company  Employee  Plan is required
by any applicable Legal Requirement to be covered by any bond (e.g., fidelity or
otherwise) in any particular amount, each such Company Employee Plan required to
be covered by such bond has at all times been covered by such bond in accordance
and compliance with all applicable Legal Requirements.

                  (i)  (i)  There  are  no  controversies  pending  or,  to  the
knowledge of the Company,  threatened,  between any of the Acquired Corporations
and any of their  respective  foreign or domestic  former or current  employees,
officers,  directors,  independent  contractors or consultants  (or any of their
beneficiaries);  (ii) there is no labor strike, dispute, slowdown, work stoppage
or lockout  actually  pending or, to the  knowledge of the  Company,  threatened
against or  affecting  any  Acquired  Corporation;  (iii)  none of the  Acquired
Corporations  is a party to or bound by any  collective  bargaining  or  similar
agreement with any labor organization, or work rules or practices agreed to with
any labor  organization or employee  association  applicable to employees of the
Acquired  Corporations,  (iv) none of the employees of the Acquired Corporations
are represented by any labor organization and none of the Acquired  Corporations
have  any  knowledge  of any  current  union  organizing  activities  among  the
employees of the Acquired Corporations,  (v) the Acquired Corporations have each
at all times been in  compliance in all material  respects  with all  applicable
Legal Requirements  respecting employment,  employment and labor practices,  and
with any collective  bargaining  agreements  (both foreign and  domestic),  (vi)
there is no  unfair  labor  practice  charge  or  complaint  against  any of the
Acquired  Corporations  pending or, to the knowledge of the Company,  threatened
before  the  National  Labor  Relations  Board or any  similar  state or foreign
agency, (vii) there is no grievance or arbitration proceeding arising out of any
collective  bargaining  agreement or other grievance  procedure  relating to the
Acquired Corporations  pending, or to the knowledge of the Company,  threatened,
before  the  National  Labor  Relations  Board or any  similar  state or foreign
agency, (viii) to the knowledge of the Company,  neither the Occupational Safety
and Health  Administration nor any corresponding  state agency is threatening to
file any citation, and there are no pending citations,  relating to the Acquired
Corporations, and (ix) there are no pending or, to the knowledge of the Company,
threatened claims by any current or former employee of the Acquired Corporations
or  any   employment-related   claims  or  investigations  by  any  Governmental
Authority,  including any charges to the Equal Employment Opportunity Commission
or state employment practice agency,  investigations  regarding  compliance with
federal,  state or local wage and hour Legal Requirements,  audits by the Office
of Federal Contractor  Compliance  Programs,

                                       19
<PAGE>

complaints  of sexual  harassment  or any  other  form of  unlawful  harassment,
discrimination, or retaliation.

                  (j)  No  Company  Employee  Plan  is  a  Voluntary  Employees'
Beneficiary Association within the meaning of Section 501(c)(9) of the Code.

                  (k) All Welfare  Plans and the related  trusts that are "group
health plans" as defined  under the  respective  provision  comply with and have
been   administered   in   substantial   compliance   with   the   health   care
continuation-coverage  requirements under Section 4980B(f) of the Code (formerly
Section  162(k) of the Code),  Sections 601 through 607 of ERISA,  and all final
Treasury   regulations   under  Section  4890B  of  the  Code  explaining  those
requirements, and all other applicable Legal Requirements regarding continuation
and/or  conversion  coverage and with Code Section 4980D and ERISA  Sections 701
through 734.

                  (l) Set forth on Schedule  2.12(l) is a list of all  employees
of each Acquired  Corporation as of the date of the Agreement.  Schedule 2.12(l)
also  contains,  with respect to each such  employee:  (i) the  employee's  base
salary,  whether such employee is a bonus or commission employee, an approximate
calculation  of any  bonus  payable  to  such  employee  as of the  date of this
Agreement, and any commission schedule applicable to such employee; (ii) accrued
paid time off payable to such employee as of October 29, 2002; (iii) any amounts
payable to any employee as salary,  severance or bonus which were withheld under
an austerity  program for fiscal years ending before the date of this Agreement,
and (iv) any severance that would be due upon  termination with or without cause
of such  employee.  Copies  of all  loans and  commission  plans  have been made
available to Parent.

                  (m) None of the Acquired  Corporations  has  effectuated (i) a
"plant closing" (as defined in the Worker Adjustment and Retraining Notification
Act) ("WARN Act")  affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of the Acquired
Corporations  or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site  of  employment  or  facility  of the  Acquired  Corporations,  nor has the
Acquired  Corporations been affected by any transaction or engaged in layoffs or
employment  terminations  sufficient  in number to  trigger  application  of any
similar state or local law.

                  (n) None of the Acquired  Corporations  has received a written
notice, or to the Company's knowledge any other communication,  of any violation
of any immigration and naturalization  laws relating to employment and employees
and all of the Acquired  Corporations have properly  completed and maintained in
all material respects all applicable forms  (including,  but not limited to, I-9
forms) and each of the Acquired  Corporations  is in  compliance in all material
respects with all such  immigration and  naturalization  Legal  Requirements and
there are no citations,  investigations,  administrative  proceedings  or formal
complaints of violations of immigration  or  naturalization  Legal  Requirements
pending or, to the knowledge of the Company  threatened,  before the Immigration
and  Naturalization  Service of any federal,  state or administrative  agency or
court against or involving the Acquired Corporations.

                                       20
<PAGE>


         2.13     ENVIRONMENTAL MATTERS.

                  (a) Each of the Acquired  Corporations is in compliance in all
material  respects with all  applicable  Environmental  Laws,  which  compliance
includes the  possession  by each of the Acquired  Corporations  of all material
permits  and  other  Governmental   Authorizations   required  under  applicable
Environmental Laws, and compliance with the terms and conditions  thereof.  None
of the  Acquired  Corporations  has  received  any  written  notice  or,  to its
knowledge other communication, whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that any of the Acquired Corporations is not
in  compliance  with  any  Environmental  Law.  The  Company  is  not  currently
investigating  any  circumstances  that the Company  reasonably  believes  could
prevent  or  interfere  with  the  material  compliance  by any of the  Acquired
Corporations with any Environmental Law. To the Company's knowledge,  no current
or prior  owner of any  property  leased or  controlled  by any of the  Acquired
Corporations  has received any written  notice or other  communication,  whether
from a Governmental Body,  citizens group,  employee or otherwise,  that alleges
that such current or prior owner or any of the Acquired  Corporations  is not in
compliance with any Environmental Law. To the Company's knowledge,  all property
that  is  or  has  been  leased  to,  controlled  by or  used  by  the  Acquired
Corporations,  and all surface water,  groundwater  and soil  associated with or
adjacent to such property is in clean and healthful condition and is free of any
material  environmental  contamination  of any nature  and none of the  Acquired
Corporations  has any  liability  for any  clean-up  or  remediation  under  any
Environmental Law. To the Company's  knowledge,  all property that is leased to,
controlled by or used by any of the Acquired Corporations is free of any friable
asbestos or asbestos-containing material.

                  (b) For purposes of this Section 2.13:

                           (i)  "Environmental  Law"  shall  mean  any  foreign,
federal, state or local statute, law, rule, regulation, ordinance, treaty, code,
policy or rule of common law now or from time to time in effect and in each case
as amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative  order,  consent decree or judgment,  relating to
the  environment,  natural  resources,  health,  safety or Hazardous  Materials,
including the Comprehensive  Environmental Response,  Compensation and Liability
Act of 1980, as amended; the Resource Conservation and Recovery Act, as amended;
the Hazardous Materials  Transportation Act, as amended; the Clean Water Act, as
amended;  the Toxic  Substances  Control Act, as amended;  the Clean Air Act, as
amended;  the Safe  Drinking  Water Act, as amended;  the Atomic  Energy Act, as
amended; the Federal Insecticide, Fungicide and Rodenticide Act, as amended; and
the Occupational Safety and Health Act, as amended; and

                           (ii) "Hazardous  Materials"  shall mean (A) petroleum
or petroleum products (including crude oil or any fraction thereof, natural gas,
natural gas liquids,  liquefied  natural gas, or synthetic gas useable for fuel,
or any mixture thereof),  polychlorinated biphenyls (PCBs), asbestos or asbestos
containing materials, urea formaldehyde foam insulation,  and radon gas; (B) any
substance  defined as or included in the  definition of  "hazardous  substance,"
"hazardous   waste,"   "hazardous   material,"   "extremely   hazardous  waste,"
"restricted  hazardous  waste,"  "waste,"  "special  waste," "toxic  substance,"
"toxic  pollutant,"  "contaminant"  or  "pollutant," or words of similar import,
under any  applicable  Environmental  Law (as  defined  below);  (C)  infectious
materials and other regulated medical wastes;  (D) any substance which is toxic,
explosive,  corrosive,  flammable,  radioactive,   carcinogenic,   mutagenic  or
otherwise hazardous and is or becomes regulated by any governmental

                                       21
<PAGE>

agency;  and (E) any other  substance,  material or waste the  presence of which
requires investigation or remediation under any Environmental Law.


         2.14     LEGAL PROCEEDINGS; ORDERS.

                  Except as set forth in the Company SEC Documents,  there is no
pending material Legal Proceeding and, to the Company's knowledge, no Person has
threatened to commence any material Legal  Proceeding,  that involves any of the
Acquired  Corporations or any of the material assets owned or used by any of the
Acquired  Corporations;  and there is no Order,  writ,  injunction,  judgment or
decree to which any of the Acquired Corporations,  or any of the material assets
owned or used by any of the Acquired Corporations, is subject.


         2.15     VOTE REQUIRED.

                  The  affirmative  vote of the  holders  of a  majority  of the
shares of Company  Common Stock  outstanding  on the record date for the Company
Shareholders'  Meeting is the only vote of the holders of any class or series of
the  Company's  capital  stock  necessary to adopt this  Agreement and otherwise
approve the Merger.


         2.16     NON-CONTRAVENTION; CONSENTS.

                  Neither  the  execution,   delivery  or  performance  of  this
Agreement nor the consummation of the Merger,  or any of the other  transactions
contemplated  by this  Agreement,  will directly or indirectly  (with or without
notice or lapse of time):

                  (a) contravene,  conflict with or result in a violation of any
of the  provisions  of the  Company  Organization  Documents  or any  resolution
adopted by the  shareholders,  the Board of  Directors  or any  committee of the
Board of Directors of any of the Acquired Corporations;

                  (b) contravene,  conflict with or result in a violation of, or
give any Governmental Body the right to challenge the Merger or any of the other
transactions  contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any Order, writ, injunction, judgment
or decree  to which any of the  Acquired  Corporations,  or any of the  material
assets owned or used by any of the Acquired Corporations, is subject;

                  (c) contravene,  conflict with or result in a violation of any
of the  terms or  requirements  of, or give any  Governmental  Body the right to
revoke,  withdraw,  suspend,  cancel,  terminate  or  modify,  any  Governmental
Authorization  that is held by any of the Acquired  Corporations or is otherwise
material to the  business of any of the Acquired  Corporations  or to any of the
assets owned or used by any of the Acquired Corporations; or

                  (d)  contravene,  conflict  with or result in a  violation  or
breach of, or result in a default under,  any provision of any Company  Material
Contract,  or give any Person the right to (i) declare a default or exercise any
remedy under any Company Material Contract, (ii) a rebate,  chargeback,  penalty
or change in  delivery  schedule  under any  Company  Material  Contract,  (iii)
accelerate the maturity or performance of any Company Material Contract, or (iv)
cancel, terminate

                                       22
<PAGE>

or modify any term of any Company Material Contract,  except in each case to the
extent that such violations, breaches or defaults would not result in a Material
Adverse Effect.

                  Except as may be required by the  Exchange  Act,  the CGCL and
the  rules  and  regulations  of the  Nasdaq  Stock  Market  (as such  rules and
regulations relate to the Registration  Statement and the Proxy Statement),  and
such  filings  as  may  be  required  under  the   Hart-Scott-Rodino   Antitrust
Improvements  Act of 1976, as amended ("HSR") none of the Acquired  Corporations
was,  is or will be  required  to make any filing with or give any notice to, or
obtain any  Consent  from,  any  Person in  connection  with (x) the  execution,
delivery or performance of this Agreement, or (y) the consummation of the Merger
or any of the other transactions contemplated by this Agreement,  except in each
case, where the failure to obtain any Consent would not,  individually or in the
aggregate, have a Material Adverse Effect on the Acquired Corporations.


         2.17     FAIRNESS OPINION.

                  The  Company's  Board of  Directors  has  received the written
opinion  of First  Analysis  Securities  Corporation,  financial  advisor to the
Company, as of the date of this Agreement,  to the effect that the consideration
to be received by the  shareholders  of the Company in the Merger is fair to the
shareholders  of the Company  from a financial  point of view.  The Company will
furnish an accurate and complete copy of said opinion to Parent.


         2.18     FINANCIAL ADVISOR.

                  Except with respect to First Analysis Securities  Corporation,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other  fee or  commission  in  connection  with the  Merger  or any of the other
transactions  contemplated by this Agreement based upon  arrangements made by or
on behalf of any of the  Acquired  Corporations.  The Company has  furnished  to
Parent accurate and complete copies of all agreements under which any such fees,
commissions  or other  amounts  have been  paid or may  become  payable  and all
indemnification and other agreements related to any such engagement.


         2.19     TAKEOVER STATUTES; NO DISCUSSIONS

                  No Takeover Laws are applicable to the Merger,  this Agreement
or any  of  the  transactions  contemplated  hereby.  As of  the  date  of  this
Agreement,  none of the Acquired  Corporations,  and no Representative of any of
the  Acquired  Corporations,   is  engaged,   directly  or  indirectly,  in  any
discussions  or  negotiations  with any other  Person  relating  to any  Company
Acquisition Proposal.


         2.20     INFORMATION TO BE SUPPLIED.

                  None of the  information  supplied  or to be supplied by or on
behalf of the  Company  for  inclusion  or  incorporation  by  reference  in the
Registration  Statement  will, at the time the  Registration  Statement is filed
with the SEC or becomes  effective under the Securities Act,  contain any untrue
statement of a material  fact or omit to state any material  fact required to be
stated  therein or necessary  in order to make the  statements  therein,  in the
light of the  circumstances  under which

                                       23
<PAGE>

they  are  made,  not  misleading.  None of the  information  supplied  or to be
supplied  by or on behalf of the  Company  for  inclusion  or  incorporation  by
reference in the Proxy Statement will, at the time the Proxy Statement is mailed
to the  shareholders of the Company or at the time of the Company  Shareholders'
Meeting,  contain any untrue  statement of a material  fact or omit to state any
material  fact  required to be stated  therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not  misleading.  The Proxy  Statement  will  comply as to form in all  material
respects with the  provisions of the Exchange Act and the rules and  regulations
promulgated by the SEC thereunder.  Notwithstanding  the foregoing,  the Company
makes no representation or warranty with respect to any information  supplied by
Parent or Merger Sub that is contained in the foregoing documents.


         2.21     FOREIGN CORRUPT PRACTICES ACT.

                  Neither the Company,  any other Acquired  Corporation,  any of
the Acquired Corporation's officers, directors, nor, to the Company's knowledge,
any  employees or agents (or  shareholders),  distributors,  representatives  or
other  persons  acting on the  express,  implied or  apparent  authority  of any
Acquired  Corporation,  have paid, given or received or have offered or promised
to pay, give or receive,  any bribe or other unlawful  payment of money or other
thing of value, any unlawful discount,  or any other unlawful inducement,  to or
from any  person or  Governmental  Body in the  United  States or  elsewhere  in
connection  with  or in  furtherance  of the  business  of  any of the  Acquired
Corporations  (including,  without  limitation,  any unlawful offer,  payment or
promise  to pay  money or other  thing of  value  (a) to any  foreign  official,
political party (or official  thereof) or candidate for political office for the
purposes  of  influencing  any act,  decision or omission in order to assist any
Acquired  Corporation in obtaining  business for or with, or directing  business
to, any person,  or (b) to any person,  while  knowing  that all or a portion of
such money or other thing of value will be offered, given or promised unlawfully
to any such  official or party for such  purposes).  Neither the business of the
Company nor any other Acquired  Corporation is in any manner  dependent upon the
making or receipt of such  unlawful  payments,  discounts or other  inducements.
Neither the Company nor any other Acquired  Corporation  has otherwise taken any
action that could cause the Company or any other  Acquired  Corporation to be in
violation  of the  Foreign  Corrupt  Practices  Act of  1977,  as  amended,  the
regulations thereunder, or any applicable Legal Requirements of similar effect.


         2.22     DISCLOSURE.

                  Between  the Company  Balance  Sheet Date and the date of this
Agreement,  no event has occurred  which has not been  disclosed to Parent which
the Company would have been required to disclose in a registration statement for
the offering of securities  under the Securities  Act. The  representations  and
warranties of the Company  contained in Section 2 of this Agreement (as modified
by the  Company  Disclosure  Schedule)  do not  contain  any  representation  or
warranty  that is materially  false or  misleading  with respect to any material
fact,  and the Company  Disclosure  Schedule does not omit to state any material
fact  necessary  in order  to make the  representations  and  warranties  of the
Company  contained  in  Section  2 of  this  Agreement  (in  the  light  of  the
circumstances  under which such  representations  and warranties were or will be
made or provided) not materially false or misleading.


                                       24
<PAGE>

SECTION 3.        REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

                  Except as disclosed in the  Disclosure  Schedule  delivered by
Parent and Merger Sub to the Company prior to the execution and delivery of this
Agreement  (the  "Parent  Disclosure  Schedule")  and  referenced  in the Parent
Disclosure Schedule to the section(s) of this Section 3 to which such disclosure
applies, Parent and Merger Sub represent and warrant to the Company as follows:


         3.1      DUE ORGANIZATION; SUBSIDIARIES.

                  Parent is a corporation  duly organized,  validly existing and
in good standing under the Legal  Requirements of the State of Delaware.  Merger
Sub is a corporation duly organized, validly existing and in good standing under
the Legal Requirements of the State of California.  Each Subsidiary is an Entity
duly  organized,   validly  existing  and  in  good  standing  under  the  Legal
Requirements  of its state of  incorporation  or  formation.  Each of Parent and
Merger Sub has all  necessary  corporate  power and  authority  to  conduct  its
business in the manner in which its business is currently being conducted and to
own and use its assets in the manner in which its assets are currently owned and
used.  Each of Parent and Merger Sub is  qualified  to do  business as a foreign
corporation,  and is in good  standing,  under  the  Legal  Requirements  of all
jurisdictions  where the nature of its business requires such  qualification and
where the failure to be so  qualified  would have a Material  Adverse  Effect on
Parent. Parent has made available to the Company accurate and complete copies of
the  certificate of  incorporation  and bylaws of each of Parent and Merger Sub,
including  all  amendments  thereto  (collectively,   the  "Parent  Organization
Documents").


         3.2      AUTHORITY; BINDING NATURE OF AGREEMENT.

                  Each of Parent  and  Merger  Sub has all  requisite  corporate
power and  authority,  subject  to  stockholder  approval,  to enter into and to
perform its obligations  under this Agreement.  The Board of Directors of Parent
(at a meeting duly called and held) has  authorized  and approved the execution,
delivery and  performance  of this  Agreement by Parent and approved the Merger.
This Agreement constitutes the legal, valid and binding obligation of Parent and
Merger Sub,  enforceable  against  Parent and Merger Sub in accordance  with its
terms,  subject to (a) Legal  Requirements  of general  application  relating to
bankruptcy, insolvency and the relief of debtors, and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies and (c) the
approval of the stockholders of Parent.  Parent hereby represents that its Board
of Directors,  at a meeting duly called and held on or prior to the date hereof,
has by unanimous vote (i) determined that the Merger is in the best interests of
Parent,  (ii) approved and adopted this Agreement,  the Agreement of Merger, the
Merger and the other  transactions  contemplated  by this  Agreement,  and (iii)
resolved to  recommend  that the  stockholders  of Parent adopt and approve this
Agreement,  the  Agreement  of Merger,  the Merger and the  issueance  of Parent
Common Stock in accordance herewith (the unanimous  recommendations  referred to
in this  clause  (iii) are  collectively  referred to in this  Agreement  as the
"Parent Recommendations").


                                       25
<PAGE>

         3.3      CAPITALIZATION, ETC.

                  (a) As of September 26, 2002, the authorized  capital stock of
Parent  consists  of:  (i)  50,000,000  shares of Parent  Common  Stock and (ii)
500,000 shares of Parent  Preferred  Stock. As of September 26, 2002,  7,772,285
shares of Parent Common Stock have been issued and are outstanding, no shares of
Parent Preferred Stock have been issued or are outstanding.  No shares of Parent
Common Stock are held in Parent's  treasury.  All of the  outstanding  shares of
Parent Common Stock have been duly authorized and validly issued,  and are fully
paid and nonassessable. None of the outstanding shares of Parent Common Stock is
entitled or subject to any preemptive right,  right of  participation,  right of
maintenance  or any  similar  right or subject to any right of first  refusal in
favor of Parent.

                  (b) All  outstanding  shares  of Parent  Common  Stock and all
outstanding  shares of  capital  stock of each  Subsidiary  of Parent  have been
issued and granted in compliance  with (i) all  applicable  securities  laws and
other  applicable  Legal  Requirements,  and (ii) all  requirements set forth in
applicable Parent Contracts.  All of the outstanding  shares of capital stock of
each of the  Subsidiaries  of Parent have been duly  authorized  and are validly
issued,  are fully  paid and  nonassessable  and are owned  beneficially  and of
record by Parent, free and clear of any Encumbrances. The Parent Common Stock to
be issued in the Merger will,  when issued in accordance  with the provisions of
this  Agreement,  be  validly  issued,  fully  paid  and  nonassessable  and  in
compliance  with all  applicable  securities  laws and  other  applicable  Legal
Requirements.  The shares of Parent  Common Stock to be issued upon  exercise of
Company  Options  assumed by Parent in  connection  with the Merger  will,  when
issued,  be issued and granted in compliance with (i) all applicable  securities
laws and other  applicable  Legal  Requirements,  and (ii) all  requirements set
forth in applicable Parent Contracts.

                  (c)  Parent  owns  directly  all of the  outstanding  stock of
Merger Sub.


         3.4      SEC FILINGS; FINANCIAL STATEMENTS.

                  (a) All  registration  statements,  proxy statements and other
statements,  reports,  schedules, forms (including exhibits) and other documents
filed by Parent with the SEC since January 1, 1999 (the "Parent SEC  Documents")
are available to Company on EDGAR. All statements, reports, schedules, forms and
other documents required to have been filed by Parent with the SEC since January
1, 1999 have been so filed.  As of their  respective  dates  (or,  if amended or
superseded by a filing prior to the date of this Agreement,  then on the date of
such  amendment or  superseding  filing):  (i) each of the Parent SEC  Documents
complied  in all  material  respects  with the  applicable  requirements  of the
Securities  Act or the  Exchange  Act (as the case may be); and (ii) none of the
Parent SEC  Documents  contained  any  untrue  statement  of a material  fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

                  (b) The financial  statements  (including  any related  notes)
contained in the Parent SEC Documents (the "Parent Financial  Statements"):  (i)
complied  as to form in all  material  respects  with the  published  rules  and
regulations of the SEC applicable thereto; (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered (except as may
be  indicated  in the  notes to such  financial  statements  or,  in the case of
unaudited statements,  as


                                       26
<PAGE>

permitted  by Form 10-Q of the SEC,  and  except  that the  unaudited  financial
statements  may not have  contained  footnotes  and were  subject  to normal and
recurring year-end adjustments which were not, or are not reasonably expected to
be,  individually  or in the  aggregate,  material in amount),  and (iii) fairly
presented in all material respects the consolidated financial position of Parent
and its  consolidated  subsidiaries  as of the respective  dates thereof and the
consolidated results of operations and cash flows of Parent and its consolidated
subsidiaries  for the periods covered  thereby.  For purposes of this Agreement,
"Parent Balance Sheet" means that consolidated  balance sheet of the Company and
its  consolidated  subsidiaries  as of June 30, 2002 set forth in the  Company's
Quarterly  Report on Form 10-Q filed with the SEC and the "Parent  Balance Sheet
Date" means June 30, 2002.


         3.5      LIABILITIES.

                  Neither  of  Parent  nor  any  Subsidiary  of  Parent  has any
accrued,  contingent  or other  liabilities  of any  nature,  either  matured or
unmatured  (whether or not  required to be  reflected  in  financial  statements
prepared in  accordance  with  generally  accepted  accounting  principles,  and
whether  due or to become  due),  except  for:  (a)  liabilities  required to be
identified  as such in the  "Liabilities"  column of the Parent  Balance  Sheet,
including the notes thereto; (b) normal and recurring liabilities that have been
incurred by Parent and its  Subsidiaries  since the Parent Balance Sheet Date in
the  ordinary  course of  business  and  consistent  with past  practices  that,
individually  or in the  aggregate,  have not had or  could  not  reasonably  be
expected  to have,  a Material  Adverse  Effect on Parent;  and (c)  liabilities
incurred under this Agreement.


         3.6      NON-CONTRAVENTION; CONSENTS.

                  Neither  the  execution,   delivery  or  performance  of  this
Agreement nor the  consummation  of the Merger or any of the other  transactions
contemplated  by this  Agreement,  will directly or indirectly  (with or without
notice or lapse of time):

                  (a) contravene,  conflict with or result in a violation of any
of the provisions of the Parent Organization Documents or any resolution adopted
by the  stockholders,  the Board of Directors  or any  committee of the Board of
Directors of Parent or any Subsidiary of Parent; or

                  (b) contravene,  conflict with or result in a violation of, or
give any Governmental Body the right to challenge the Merger or any of the other
transactions  contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or  decree  to which  Parent,  or any of the  material  assets  owned or used by
Parent, is subject.

                  Except as may be required by the Securities  Act, the Exchange
Act, and the rules and  regulations of the Nasdaq Stock Market (as it relates to
the approval of the Merger by stockholders of Parent and Registration  Statement
and the Proxy Statement), and such filings as may be required under HSR, none of
Parent or any  Subsidiary  of Parent  was,  is or will be  required  to make any
filing  with or give any notice to, or obtain any  Consent  from,  any Person in
connection with (x) the execution, delivery or performance of this Agreement, or
(y) the consummation of the Merger or any of the other transactions contemplated
by this  Agreement,  except in each case,  where the failure to


                                       27
<PAGE>

make any filing, give any notice or obtain any Consent would not have a Material
Adverse Effect on Parent.


         3.7      INTERIM OPERATIONS OF MERGER SUB.

                  Merger Sub was formed  solely for the  purpose of  engaging in
the  transactions  contemplated  by this  Agreement,  has  engaged  in no  other
business  activities and has conducted its operations  only as  contemplated  by
this Agreement.


         3.8      INFORMATION TO BE SUPPLIED.

                  None of the  information  supplied  or to be supplied by or on
behalf of Parent for inclusion or incorporation by reference in the Registration
Statement will, at the time the Registration  Statement is filed with the SEC or
becomes  effective under the Securities Act,  contain any untrue  statement of a
material fact or omit to state any material  fact required to be stated  therein
or  necessary  in order  to make the  statements  therein,  in the  light of the
circumstances under which they are made, not misleading. None of the information
supplied  or to be  supplied  by  or  on  behalf  of  Parent  for  inclusion  or
incorporation  by reference in the Proxy  Statement  will, at the time the Proxy
Statement  is mailed to the  shareholders  of the  Company or at the time of the
Company Shareholders'  Meeting,  contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they are made, not misleading. Notwithstanding the foregoing, Parent makes
no  representation  or warranty with respect to any information  supplied by the
Company that is contained in the foregoing documents.


         3.9      ABSENCE OF CHANGES.

                  Since June 30,  2002 and except as set forth in any  documents
filed by Parent or any Subsidiary with the SEC since June 30, 2002:

                  (a) Each of  Parent  and its  Subsidiaries  has  operated  its
business in all material  respects in the ordinary  course and  consistent  with
past practices; and

                  (b) Except  for facts,  events,  circumstances  or  conditions
which  exist or have  occurred  which are  reasonably  attributable  to  general
economic   conditions  or  general  conditions   affecting   similarly  situated
corporations  in the same  industry as the Parent,  there has not been any event
that  has  had a  Material  Adverse  Effect  on  Parent,  and  no  fact,  event,
circumstance  or  condition  exists or has  occurred  that could  reasonably  be
expected to have a Material Adverse Effect on Parent.


         3.10     LEGAL PROCEEDINGS; ORDERS.

                  Except as set forth in the Parent SEC  Documents,  there is no
pending material Legal Proceeding and, to the Parent's knowledge,  no Person has
threatened  to commence  any material  Legal  Proceeding,  that  involves any of
Parent,  the  Merger  Sub or any  material  subsidiary  of  Parent or any of the
material  assets  owned  or used by the  same;  and  there  is no  Order,  writ,
injunction,


                                       28
<PAGE>

judgment  or decree to which  any of  Parent,  the  Merger  Sub or any  material
subsidiary of Parent,  or any of the material assets owned or used by any of the
same, is subject.


         3.11     VOTE REQUIRED.

                  The  affirmative  vote of the  holders  of a  majority  of the
shares of Parent  Common  Stock  outstanding  on the record  date for the Parent
Shareholders'  Meeting is the only vote of the holders of any class or series of
the Parent's  capital stock  necessary to approve the Merger and the issuance of
Parent  Common  Stock as Merger  Consideration  pursuant to this  Agreement  and
otherwise allow Parent to consummate the Merger as set forth herein.


         3.12     DISCLOSURE.

                  Between  the  Parent  Balance  Sheet Date and the date of this
Agreement,  no event has occurred  which has not been disclosed to Company which
Parent would have been required to disclose in a registration  statement for the
offering  of  securities  under the  Securities  Act.  The  representations  and
warranties  of Parent  contained in Section 3 of this  Agreement (as modified by
the Parent  Disclosure  Schedule) do not contain any  representation or warranty
that is materially  false or misleading  with respect to any material  fact, and
the  Parent  Disclosure  Schedule  does  not  omit to state  any  material  fact
necessary  in  order  to make  the  representations  and  warranties  of  Parent
contained  in  Section 3 of this  Agreement  (in the light of the  circumstances
under  which  such  representations  and  warranties  were  or  will  be made or
provided) not materially false or misleading.


SECTION 4.        CERTAIN COVENANTS OF THE COMPANY AND PARENT


         4.1      ACCESS AND INVESTIGATION.

                  During the period from the date of this Agreement  through the
Effective  Time unless this  Agreement  shall be terminated  in accordance  with
Section 7 (the "Pre-Closing  Period"),  subject to applicable antitrust laws and
regulations relating to the exchange of information,  (a) the Company shall, and
shall cause the respective  Representatives of the Acquired Corporations to: (i)
provide Parent and Parent's Representatives with reasonable access during normal
business  hours to the Acquired  Corporations'  Representatives,  personnel  and
assets and to all existing books,  records,  Tax Returns,  work papers and other
documents  and  information  relating  to the  Acquired  Corporations;  and (ii)
provide  Parent and  Parent's  Representatives  with such copies of the existing
books,  records,  Tax Returns,  work papers and other  documents and information
relating  to the  Acquired  Corporations,  and with such  additional  financial,
operating and other data and information regarding the Acquired Corporations, in
each case, as Parent may reasonably  request.  Each party  acknowledges that the
Company and Parent have previously entered into a Mutual Nondisclosure Agreement
dated July 5, 2001,  as  amended by an  amendment  dated July 5, 2002 which will
continue in full force and effect in accordance with its terms.

                                       29
<PAGE>


         4.2      OPERATION OF THE COMPANY'S BUSINESS.

                  (a)  During the  Pre-Closing  Period the  Company  shall:  (i)
ensure  that  each  of the  Acquired  Corporations  conducts  its  business  and
operations (A) in the ordinary course in accordance with past practices, and (B)
in  material   compliance  with  all  applicable  Legal   Requirements  and  the
requirements of all Company Material  Contracts;  (ii) use reasonable efforts to
ensure  that each of the  Acquired  Corporations  preserves  intact its  current
business organization,  keeps available the services of its current officers and
employees  and  maintains its relations and goodwill at least as favorable as at
the  date  of  this  Agreement  with  all  suppliers,  customers,  distributors,
landlords,  creditors,  licensors,  licensees and other Persons having  business
relationships  with the  respective  Acquired  Corporations;  (iii)  provide all
notices,  assurances  and  support  required by any  Company  Material  Contract
relating to any Proprietary Asset to prevent the occurrence of a condition under
such Contract which would result in any transfer of a material Proprietary Asset
or disclosure of material source code by any Acquired Corporation; and (iv) keep
in full  force and  effect  (with the same  scope and  limits of  coverage)  all
insurance  policies  in effect  as of the date of this  Agreement  covering  all
material assets of the Acquired Corporations.

                  (b)  During  the  Pre-Closing  Period,  except as set forth in
Schedule  4.2(b) of the  Company  Disclosure  Schedule,  the  Company  shall not
(without the prior written  consent of Parent),  and shall not permit any of the
other Acquired Corporations to:

                           (i) declare, accrue, set aside or pay any dividend or
make any  other  distribution  in  respect  of any  shares of  capital  stock or
repurchase,  redeem or otherwise  reacquire any shares of capital stock or other
securities;

                           (ii) sell, issue,  grant or authorize the issuance or
grant of (A) any capital stock, other security  (including the sale, transfer or
grant of any treasury shares) or any obligation  convertible or exchangeable for
capital  stock  or (B) any  Company  Stock  Right  (except  that,  prior  to the
Effective  Time,  the  Company  may issue  Company  Common  Stock upon the valid
exercise of Company Options  outstanding as of the date of this Agreement and in
connection with issuances of shares previously authorized under the ESPP Plan);

                           (iii)  amend or waive  any of its  rights  under,  or
accelerate the vesting  under,  any provision of any of the Company Stock Option
Plans, any provision of any agreement evidencing any outstanding stock option or
any restricted stock purchase agreement, or otherwise modify any of the terms of
any outstanding option, warrant, or other security or any related Contract;

                           (iv) amend or permit the adoption of any amendment to
the Company Organization  Documents,  or effect or become a party to any Company
Acquisition  Transaction,  recapitalization,  reclassification of shares,  stock
split, reverse stock split or similar transaction;

                           (v)  form  any   Subsidiary  or  acquire  any  equity
interest or other interest in any other Entity;

                           (vi) make any capital  expenditure to the extent such
new capital expenditures exceed $200,000 in the aggregate;

                                       30
<PAGE>

                           (vii) enter into or become bound by, or permit any of
the assets owned or used by it to become bound by, any Contract with obligations
in excess of $100,000,  or waive,  release,  or assign any rights or claims,  or
modify or terminate any Company Material  Contract with obligations in excess of
$100,000,  except for  standard  purchase  agreements  with no minimum  quantity
requirements entered into in the ordinary course of business;

                           (viii)  acquire  or agree to  acquire,  by merging or
consolidating  with,  by  purchasing  an equity  interest in or a portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business  organization  or division  thereof,  or otherwise
acquire  or agree to  acquire  any assets of any other  person  (other  than the
purchase  of  assets  from  suppliers  or  vendors  in the  ordinary  course  of
business);

                           (ix)  sell,  lease,   exchange,   mortgage,   pledge,
transfer  or  otherwise  subject  to any  Encumbrance  or  dispose of any of its
assets,  except for sales,  dispositions  or transfers in the ordinary course of
business;

                           (x) (A) incur any  indebtedness for borrowed money or
guarantee  any  such  indebtedness  of  another  Person,  issue or sell any debt
securities or warrants or other rights to acquire any debt securities, guarantee
any debt  securities  of another  Person,  enter  into any "keep  well" or other
agreement to maintain any  financial  statement  condition of another  person or
enter into any  agreement  having the economic  effect of any of the  foregoing,
except for borrowings  incurred in the ordinary course of business,  or (B) make
any loans,  advances or capital  contributions  to, or investments in, any other
person other than travel and payroll  advances made to employees in the ordinary
course of business;

                           (xi) pay,  discharge,  settle or satisfy  any claims,
liabilities  or  obligations   (whether  absolute  or  contingent,   matured  or
unmatured,   known  or  unknown),   other  than  the  payments,   discharges  or
satisfactions (A) of less than $75,000 or (B) in the ordinary course of business
which are materially in accordance with their terms, of liabilities reflected or
reserved  against in, or contemplated  by, the Company  Financial  Statements or
waive any material benefits of, or agree to modify in any material respect,  any
confidentiality,  standstill or similar agreements to which any Acquired Company
is a party;

                           (xii) (A) except as set forth in Schedule 4.2.(b)(ii)
increase in any manner the  compensation or fringe benefits of, or pay any bonus
to, any director,  officer or employee;  (B) grant any severance or  termination
pay  (other  than  pursuant  to  the  normal  severance  practices  or  existing
agreements of the Company in effect on the date of this  Agreement) to, or enter
into any severance agreement with, any director,  officer or employee,  or enter
into any  employment  agreement  with  any  director,  officer  or  employee  or
otherwise  without the prior written  consent of Parent;  (C) establish,  adopt,
enter into or amend any Company Benefit Plan or other arrangement, except as may
be required to comply with Applicable  Legal  Requirements;  (D) pay any benefit
not provided for under any Company Benefit Plan or other arrangement;  (E) grant
any awards under any bonus, incentive, performance or other compensation plan or
arrangement or Company Benefit Plan or other arrangement (including the grant of
stock options,  stock appreciation rights,  stock-based or stock-related awards,
performance units or restricted  stock, or the removal of existing  restrictions
in any Company  Benefit  Plan or other  arrangement  or agreement or awards made
thereunder);  (F) take any  action to fund prior to when due or in any other way
secure the payment of compensation or


                                       31
<PAGE>

benefits  under any agreement;  or (G) hire or promote any director,  officer or
employee, or fire any employee without first giving Parent 24 hours prior notice
and an opportunity to discuss the termination with the Company;

                           (xiii)  change any of its  methods of  accounting  or
accounting practices in any respect, except as required by GAAP;

                           (xiv) make or rescind any material  election relating
to Taxes, settle or compromise any claim, action, suit, litigation,  proceeding,
arbitration,  investigation,  audit or controversy relating to Taxes which would
reasonably  be expected to result in a Material  Adverse  Effect on the Acquired
Corporations, or change any of its methods of reporting income or deductions for
federal  income tax  purposes  from those  employed  in the  preparation  of the
federal income tax returns;

                           (xv) commence or settle any Legal Proceeding;

                           (xvi)  take any other  material  action  outside  the
ordinary course of business or inconsistent with past practices;

                           (xvii)   except  as   otherwise   disclosed  in  this
Agreement or the Company Disclosure Schedule, or as otherwise directed by Parent
or the terms of this Agreement,  take, or permit the taking of any action, which
could  reasonably be expected to cause the vesting of any Company  Options to be
accelerated  in  accordance  with the terms of any of the Company  Stock  Option
Plans;

                           (xviii)  take,  agree  to  take,  or omit to take any
action  which  would  cause the  Company  not to be able to  satisfy  any of the
conditions set forth in Section 6 prior to the Termination Date; or

                           (xix)  agree or  commit  to take  any of the  actions
described in clauses (i) through (xviii) of this Section 4.2(b).

The Parent  shall  respond  promptly  to a request by the Company for consent to
take any action contemplated in this Section 4.2.

                  (c) During the Pre-Closing  Period, the Company shall promptly
notify  Parent in writing  of: (i) the  discovery  by the  Company of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this  Agreement and that caused or  constitutes a material  inaccuracy in any
representation  or  warranty  made by the  Company in this  Agreement;  (ii) any
event,  condition,  fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material  inaccuracy
in any  representation  or warranty made by the Company in this Agreement if (A)
such  representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event,  condition,  fact or circumstance,  or (B)
such event, condition,  fact or circumstance had occurred,  arisen or existed on
or  prior  to the date of this  Agreement;  (iii)  any  material  breach  of any
covenant  or  obligation  of  the  Company;   (iv)  any  employee  who  resigns,
voluntarily  terminates,  or otherwise gives the Company notice of his intent to
resign,  or voluntarily  terminate his employment with the Company;  and (v) any
event,  condition,  fact



                                       32
<PAGE>

or  circumstance  that would make the timely  satisfaction  of any condition set
forth in Section 6 impossible or unlikely or that has had or could reasonably be
expected to have a Material  Adverse  Effect on the  Acquired  Corporations.  No
notification  given to Parent  pursuant to this  Section  4.2(c)  shall limit or
otherwise  affect  any  of  the   representations,   warranties,   covenants  or
obligations of the Company contained in this Agreement.

                  (d) During  the  Pre-Closing  Period,  Parent  shall  promptly
notify the Company in writing of: (i) the  discovery  by Parent or Merger Sub of
any event, condition,  fact or circumstance that occurred or existed on or prior
to the  date of this  Agreement  and  that  caused  or  constitutes  a  material
inaccuracy  in any  representation  or warranty  made by Parent or Merger Sub in
this Agreement;  (ii) any event,  condition,  fact or circumstance  that occurs,
arises  or exists  after  the date of this  Agreement  and that  would  cause or
constitute  a material  inaccuracy  in any  representation  or warranty  made by
Parent in this Agreement if (A) such representation or warranty had been made as
of the time of the occurrence,  existence or discovery of such event, condition,
fact or  circumstance,  or (B) such event,  condition,  fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement; (iii) any
material  breach of any covenant or obligation of Parent or Merger Sub; and (iv)
any  event,  condition,   fact  or  circumstance  that  would  make  the  timely
satisfaction  of any  condition set forth in Section 6 impossible or unlikely or
that has had or could  reasonably be expected to have a Material  Adverse Effect
on Parent. No notification  given to the Company pursuant to this Section 4.2(d)
shall  limit  or  otherwise  affect  any  of  the  representations,  warranties,
covenants or obligations of Parent or Merger Sub contained in this Agreement.


         4.3      NO SOLICITATION BY THE COMPANY.

                  (a) During  the  Pre-Closing  Period,  the  Company  shall not
directly  or  indirectly,  and shall not  authorize  or permit  any of the other
Acquired  Corporations or any Representative of any of the Acquired Corporations
directly or indirectly to, (i) take any action to solicit,  initiate,  induce or
seek to  facilitate  the  making,  submission  or  announcement  of any  Company
Acquisition  Proposal,  (ii) furnish any nonpublic  information regarding any of
the  Acquired  Corporations  to any Person  (other than Parent or Merger Sub) in
connection with or in response to a Company  Acquisition  Proposal or an inquiry
or indication of interest that the Company reasonably believes could be expected
to lead to a  Company  Acquisition  Proposal,  (iii)  engage in  discussions  or
negotiations with any Person with respect to any Company  Acquisition  Proposal,
(iv) approve,  endorse or recommend  any Company  Acquisition  Proposal,  or (v)
enter  into  any  letter  of  intent  or  similar   document  or  any   Contract
contemplating  or  otherwise  relating to any Company  Acquisition  Transaction;
provided,  however, that this Section 4.3 shall not prohibit (A) the Company, or
the Board of Directors of the Company,  from  furnishing  nonpublic  information
regarding  the  Acquired  Corporations  to,  or  entering  into  discussions  or
negotiations  with,  any Person in response to a Company  Superior Offer that is
submitted to the Company by such Person (and not  withdrawn)  if (1) neither the
Company nor any  Representative of any of the Acquired  Corporations  shall have
violated any of the restrictions set forth in this Section 4.3, (2) the Board of
Directors of the Company  concludes in good faith,  after  consultation with its
outside legal  counsel,  that such action with respect to such Company  Superior
Offer is required to comply with the fiduciary  duties of the Board of Directors
of the Company to the Company  shareholders under applicable Legal Requirements,
and (3) the Board of Directors determines in good faith, after consultation with
its outside legal counsel, that taking such action would be reasonably likely to
lead to the  consummation  of a Company

                                       33
<PAGE>

Superior  Offer,  (4) the Company  gives Parent  prompt  written  notice (in any
event,  within 24 hours of receipt of any Company  Acquisition  Proposal) of the
identity  of such Person and of the  Company's  intention  to furnish  nonpublic
information to, or enter into  discussions  with,  such Person,  and the Company
receives  from such  Person an  executed  confidentiality  agreement  containing
customary  limitations  on the use and  disclosure of all nonpublic  written and
oral   information   furnished   to  such   Person  or  any  of  such   Person's
Representatives  by or on behalf of the Company,  and (5) the Company  furnishes
such  nonpublic  information to such Person and to Parent at  substantially  the
same time (to the extent  such  nonpublic  information  has not been  previously
furnished  by the Company to Parent);  or (B) the Company  from  complying  with
Rules  14d-9 and 14e-2  promulgated  under the  Exchange  Act with regard to any
Company Acquisition Proposal.  Without limiting the generality of the foregoing,
the  Company   acknowledges  and  agrees  that  any  violation  of  any  of  the
restrictions set forth in the preceding sentence by any Representative of any of
the Acquired  Corporations,  whether or not such Representative is purporting to
act on behalf of any of the Acquired Corporations, shall be deemed to constitute
a breach of this Section 4.3 by the Company.

                  (b) The  Company  shall  promptly  (and in no event later than
twenty four (24) hours after receipt of any Company  Acquisition  Proposal,  any
indication of interest that the Company  reasonably  believes  could result in a
Company Acquisition  Proposal, or any request for nonpublic information relating
to any of the Acquired Corporations) advise Parent orally and in writing of such
Company Acquisition Proposal,  such indication of interest or request (including
providing  the  identity  of  the  Person  making  or  submitting  such  Company
Acquisition  Proposal,  indication of interest or request,  and a summary of the
material terms thereof, if the Company  Acquisition  Proposal is not in writing,
or a copy of the Company Acquisition  Proposal if it is in writing) that is made
or submitted by any Person during the Pre-Closing Period. The Company shall keep
Parent fully informed on a reasonably prompt basis with respect to the status of
any such Company Acquisition Proposal, indication of interest or request and any
modification or proposed modification thereto.

                  (c) Upon the  execution of this  Agreement,  the Company shall
immediately cease and cause to be terminated any discussions  existing as of the
date of this  Agreement  with any Person  (other than Parent) that relate to any
Company Acquisition Proposal.

                  (d) Except  with  respect  to the  execution  of a  definitive
agreement with respect to a Company  Superior  Offer,  the Company agrees not to
release  any Person  (other  than  Parent)  from or waive any  provision  of any
confidentiality,  "standstill"  or similar  agreement  to which the Company is a
party and will use its reasonable best efforts to enforce each such agreement at
the request of Parent.

                  (e)   Notwithstanding   anything  in  this  Agreement  to  the
contrary, the Board of Directors of the Company may withhold, withdraw or modify
the  Company   Recommendations  in  a  manner  adverse  to  Parent  if:  (i)  an
unsolicited,  bona  fide  offer is made to the  Company  by a third  party for a
Company  Acquisition  Transaction,  and such  offer is not  withdrawn;  (ii) the
Company's Board of Directors  determines in good faith,  after consultation with
its financial advisor,  that such offer constitutes a Company Superior Offer and
that  such  offer  is  reasonably  likely  to be  consummated;  (iii)  following
consultation  with  outside  legal  counsel,  the  Company's  Board of Directors
determines that the withdrawal or  modification of such Company  Recommendations
is required to comply with the  fiduciary  duties of the Board of  Directors  of
Company to the



                                       34
<PAGE>

shareholders of Company under  applicable Legal  Requirements;  (iv) the Company
Recommendations  are not withdrawn or modified in a manner  adverse to Parent at
any time prior to three (3) business days after Parent  receives  written notice
from the Company confirming that the Company's Board of Directors has determined
that such offer is a Company  Superior Offer,  and (v) for a period of three (3)
business days after  notifying  Parent of such  determination,  the Company,  if
requested  by Parent,  shall  negotiate  in good faith with  Parent to make such
adjustments  to the terms and  conditions of this  Agreement as would enable the
Board of Directors  of the Company to continue to  recommend  the Merger on such
adjusted terms.


         4.4      NO SOLICITATION OF EMPLOYEES PRIOR TO CLOSE

                  Without the prior written consent of the Company or Parent, as
the case may be,  during the  Pre-Closing  Period or prior to August  23,  2003,
neither  the Parent or  Company,  directly  or  indirectly,  shall  solicit  for
employment  any  employee  of the  other  party,  provided  that  the  foregoing
restriction  shall not prevent Parent from employing any Company  employees upon
the  consummation  of this Merger or prevent  either  party from making  general
solicitations for employment or employing any person who either responds to such
general  solicitations  or  otherwise  contacts  such  party  on his or her  own
initiative  without  solicitation  by such party in  contravention  of the above
restrictions.

         4.5      INTEGRATION PLAN

                  The Parent shall direct its  representatives no later than two
(2) weeks subsequent to the date hereof to present as fully developled a plan as
commercially reasonably possible with respect to the integration of the business
of the Company with the Parent to the  Company's  management  (the  "Integration
Plan"). The Integration Plan shall, at a minimum,  identify (i) Parent's overall
integration strategy, (ii) functional areas that are not critical to the initial
integration period, (iii) integration  initiatives and synergy identification by
functional area, (iv) integration focus areas and (v) the integration management
team that will provide centralized oversight and coordination of the Integration
Plan.  Parent and the Company shall cooperate and use their reasonable  combined
efforts to implement the Integration Plan prior to Closing.


SECTION 5.        ADDITIONAL COVENANTS OF THE PARTIES


         5.1      REGISTRATION STATEMENT AND PROXY STATEMENT FOR
                  SHAREHOLDER APPROVAL.

                  As  soon  as  practicable  following  the  execution  of  this
Agreement,  Parent and the Company shall jointly prepare,  and Parent shall file
with the SEC, a joint  registration  and proxy  statement  consisting of a proxy
statement of the Company in connection with the Merger complying with applicable
Legal  Requirements and including the opinion of First Analysis  Securities (the
"Company Proxy  Statement"),  a proxy statement of Parent in connection with the
Merger and  issuance of Parent  Common  Stock in the Merger and  complying  with
applicable Legal  Requirements (the "Parent Proxy Statement") and a registration
statement on Form S-4 (such registration statement, together with the amendments
thereto  being the  "Registration  Statement")  for the offer


                                       35
<PAGE>

and sale of Parent Common Stock  pursuant to the Merger and in which the Company
Proxy Statement and the Parent Proxy Statement will be included as a prospectus.
Each of the Company and Parent shall use commercially reasonable efforts to have
the  Registration  Statement  declared  effective  under the  Securities  Act as
promptly  as  practicable  after its  filing.  The  Company  and Parent will use
reasonable  efforts to cause the  Company  Proxy  Statement  to be mailed to the
Company's shareholders,  the Parent Proxy Statement to be mailed to the Parent's
stockholders,  as promptly as practicable  after the  Registration  Statement is
declared  effective  under the Securities Act. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified or filing a general  consent to service of process)  required to be
taken under any applicable  state  securities  laws and other  applicable  Legal
Requirements  in  connection  with the  issuance of Parent  Common  Stock in the
Merger and the Company shall furnish all information  concerning the Company and
the holders of capital  stock of the Company as may be  reasonably  requested in
connection with any such action and the preparation,  filing and distribution of
the Company Proxy  Statement.  No filing of, or amendment or  supplement  to, or
correspondence  to the  SEC or its  staff  with  respect  to,  the  Registration
Statement or Parent Proxy  Statement will be made by Parent,  or with respect to
the Company Proxy Statement will be made by the Company,  without  providing the
other party a reasonable opportunity to review and comment thereon.  Parent will
advise the Company,  promptly after it receives notice thereof, of the time when
the  Registration  Statement has become effective or any supplement or amendment
has  been  filed,  the  issuance  of  any  stop  order,  the  suspension  of the
qualification  of the Parent Common Stock issuable in connection with the Merger
for  offering  or  sale  in any  jurisdiction,  or any  request  by the  SEC for
amendment  of the  Registration  Statement  or comments  thereon  and  responses
thereto or  requests by the SEC for  additional  information.  The Company  will
advise Parent,  promptly after it receives notice thereof, of any request by the
SEC for the  amendment of the Company  Proxy  Statement or comments  thereon and
responses thereto or requests by the SEC for additional information. Parent will
advise the Company, promptly after it receives notice thereof, of any request by
the SEC for the  amendment  of the  Registration  Statement  or the Parent Proxy
Statement or comments  thereon and responses  thereto or requests by the SEC for
additional  information.  If at  any  time  prior  to  the  Effective  Time  any
information  relating  to the  Company  or  Parent,  or any of their  respective
affiliates,  officers or directors, is discovered by the Company or Parent which
should be set forth in an amendment  or  supplement  to either the  Registration
Statement,  the Company Proxy Statement or the Parent Proxy  Statement,  so that
any of such documents  would not include any  misstatement of a material fact or
omit to state any material fact  necessary to make the  statements  therein,  in
light of the circumstances under which they were made, not misleading, the party
which discovers such information  shall promptly notify the other parties hereto
and an appropriate  amendment or supplement describing such information shall be
promptly  filed with the SEC and,  to the extent  required by  applicable  Legal
Requirements,   disseminated   to  the   shareholders  of  the  Company  or  the
stockholders of Parent, as the case may be.


         5.2      COMPANY   SHAREHOLDERS'   MEETING  AND  PARENT   STOCKHOLDERS'
                  MEETING.

                  (a) Parent  and the  Company  shall take all action  necessary
under all  applicable  Legal  Requirements  to call,  give  notice of and hold a
meeting of the  holders of Company  Common  Stock to vote on a proposal to adopt
this   Agreement,   the  Agreement  of  Merger  and  the  Merger  (the  "Company
Shareholders' Meeting"). The Company Shareholders' Meeting shall be held as soon

                                       36
<PAGE>

as reasonably practicable after the Registration Statement is declared effective
under the  Securities  Act.  Subject  to  Section  4.3,  the  Company  shall use
reasonable efforts to take all actions necessary or advisable to solicit proxies
in favor of the Merger and shall ensure that all proxies solicited in connection
with the Company  Shareholders'  Meeting are  solicited in  compliance  with all
applicable Legal Requirements.  Once the Company  Shareholders' Meeting has been
called and  noticed,  the  Company  shall not  postpone  or adjourn  the Company
Shareholders'  Meeting  (other  than for the  absence of a quorum)  without  the
consent of Parent.

                  (b) The  Company  Proxy  Statement  shall  include the Company
Recommendations,  and,  subject to Section 4.3(e),  the Company  Recommendations
shall not be  withdrawn  or  modified  in a manner  adverse  to  Parent,  and no
resolution by the Board of Directors of the Company or any committee  thereof to
withdraw or modify the  Company  Recommendations  in a manner  adverse to Parent
shall be adopted or proposed.

                  (c) The Company's  obligation to call, give notice of and hold
the Company Shareholders' Meeting in accordance with Section 5.2(a) shall not be
limited or otherwise affected by the commencement,  disclosure,  announcement or
submission of any Company Superior Offer or other Company Acquisition  Proposal,
or by any withdrawal or modification of the Company Recommendations.

                  (d) The Company and Parent  shall  cooperate  with one another
(i) in  connection  with the  preparation  of the Company Proxy  Statement,  the
Parent Proxy  Statement  and the  Registration  Statement,  (ii) in  determining
whether any action by or in respect of, or filing with, any Governmental Body is
required,  or any  actions,  consents,  approvals  or waivers are required to be
obtained  from  parties  to any  material  contracts,  in  connection  with  the
consummation  of the  transactions  contemplated  by this Agreement and (iii) in
seeking  any such  actions,  consents,  approvals  or waivers or making any such
filings,  furnishing  information  required in connection  therewith or with the
Company  Proxy  Statement,  the  Parent  Proxy  Statement  and the  Registration
Statement and seeking timely to obtain any such actions, consents,  approvals or
waivers.

                  (e)  Parent  shall  take  all  action   necessary   under  all
applicable Legal  Requirements to call, give notice of and hold a meeting of the
holders of Parent  Common  Stock to vote on a proposal to adopt this  Agreement,
the Merger and the issuance of Parent  Common Stock  pursuant to the Merger (the
"Parent Stockholders'  Meeting"). The Parent Stockholders' Meeting shall be held
as soon as reasonably  practicable after the Registration  Statement is declared
effective under the Securities Act. The Parent Proxy Statement shall include the
Parent  Recommendations,  and such Parent Recommendations shall not be withdrawn
or modified in a manner adverse to the Company and no resolution by the Board of
Directors  of the Parent or any  committee  thereof to  withdraw  or modify such
Parent  Recommendations  in a manner  adverse to the Company shall be adopted or
proposed.  Parent shall use reasonable  efforts to take all actions necessary or
advisable  to solicit  proxies in favor of the Merger and shall  ensure that all
proxies  solicited  in  connection  with the Parent  Stockholders'  Meeting  are
solicited  in  compliance  with  all  applicable  Legal  Requirements.  Once the
Parent's  Stockholders'  Meeting has been called and noticed,  the Company shall
not  postpone or adjourn  the Parent  Stockolders'  Meeting  (other than for the
absence of a quorum) without the consent of Company or unless otherwise required
by applicable Legal Requirements.

                                       37
<PAGE>


         5.3      REGULATORY APPROVALS.

                  Each of the  Company  and  Parent  shall  use  its  reasonable
efforts to file, as soon as practicable  after the date of this  Agreement,  all
notices,  reports and other documents required to be filed with any Governmental
Body with respect to the Merger and the other transactions  contemplated by this
Agreement,  and to submit promptly any additional  information  requested by any
such Governmental  Body. Each of the Company and Parent shall (i) give the other
party prompt notice of the  commencement  or threat of commencement of any Legal
Proceeding by or before any Governmental  Body with respect to the Merger or any
of the other  transactions  contemplated by this Agreement,  (ii) keep the other
party  informed  as to the status of any such Legal  Proceeding  or threat,  and
(iii)  promptly  inform  the  other  party of any  communication  to or from any
Governmental Body regarding the Merger.


         5.4      ASSUMPTION OF STOCK  OPTIONS;  EMPLOYEE  STOCK  PURCHASE PLAN;
                  401(K) PLAN; EMPLOYEES AND BENEFITS

                  (a)      (i) At the Effective Time (A) the Warrant to purchase
shares of Company  Common  Stock  issuable  to Orchard  Gateway  Investors,  LLC
described in Section 4.2(b) of the Disclosure Schedule (the "Warrant"),  (B) all
Company  Options then  outstanding  under all Company Stock Option Plans held by
individuals  who are employees  (including  officers) of the Company at any time
within 30 days of the  Effective  Time which are then vested and would have,  if
then  exchanged in the Merger on the terms  described  below,  an exercise price
equal to or less than the greater of (I) the average of the closing sales prices
of the Parent  Common  Stock for the five (5)  trading  days ending on the fifth
business  day prior to the date of the  Company  Stockholders'  Meeting  or (II)
$12.50 ("Option Price") and (C) all outstanding Company Options issued under the
Cylink/ARL  1997  Stock  Option  Plan,  shall be assumed by Parent and each such
Company  Option and Warrant  shall be converted  into an option (or warrant with
respect to the Warrant) to purchase  shares of Parent  Common  Stock.  Except as
provided  herein,  each such assumed,  vested Company Option shall be subject to
the other terms and conditions  (as in effect as of the date of this  Agreement)
of the  Company  Stock  Option  Plan under which it was issued and the terms and
conditions  of its  respective  stock option  agreement,  if any, by which it is
evidenced.  All remaining  Company  Options shall  terminate as of the Effective
Time and shall not be assumed by Parent.  From and after the Effective Time, (i)
each Company  Option and Warrant  assumed by Parent may be exercised  solely for
shares of Parent Common Stock,  (ii) the number of shares of Parent Common Stock
subject to each such Company  Option or Warrant  shall be equal to the number of
shares of Company Common Stock subject to such Company Option  immediately prior
to the Effective  Time  multiplied by the Exchange  Ratio,  rounding down to the
nearest whole share,  (iii) the per share exercise price under each such Company
Option or Warrant  shall be adjusted by dividing  the per share  exercise  price
under such Company  Option or Warrant by the  Exchange  Ratio and rounding up to
the nearest cent,  and (iv) any  restriction on the exercise of any such Company
Option or Warrant  shall  continue in full force and effect  and,  except as set
forth in Section  5.4(a)(ii) the term,  exercisability  and other  provisions of
such Company  Option or Warrant  shall  otherwise  remain  unchanged;  provided,
however,  that  reference to service for the Company in any such Company  Option
shall mean service for the Surviving  Corporation  after the Effective  Time. As
soon as  practicable  following  Closing,  but in any  event,  within  three (3)
business days thereof,  Parent shall deliver to each holder of a Company  Option
assumed by Parent hereunder (i) a duly executed


                                       38
<PAGE>

replacement  option agreement which  replacement  option agreement shall exactly
mirror the terms of the holder's  option  agreement  with the Company except for
the  adjustments  to (A) vesting as provided under Section  5.4(a)(ii),  (B) the
number of shares of Parent Common Stock subject to each such Company Option; and
(C) the per share  exercise  price under each such Company Option to reflect the
Exchange  Ratio or (ii) an  amendment  to such  Company  Option  having the same
effect.

                           (ii)  Immediately  prior to the Effective  Time,  all
Company Options then  outstanding  under all Company Stock Option Plans (whether
vested or  unvested)  with an  exercise  price  equal to or less than the Option
Price which are held by individuals  who are at that time  employees  (including
officers)  of any  Acquired  Corporation  and who have been offered and accepted
employment  with the Parent or the  Surviving  Corporation  effective  after the
Closing and who have executed a nondisclosure  agreement satisfactory to Parent,
shall, notwithstanding anything to the contrary regarding vesting in any Company
Stock Option Plan or any stock option  agreement,  with respect thereto,  become
one hundred percent (100%) vested as of immediately prior to the Effective Time.

                  (b) Prior to the Effective  Time, the Company and Parent shall
take all action that may be necessary (under the plans pursuant to which Company
Options are  outstanding  and  otherwise) to effectuate  the  provisions of this
Section 5.4. Such actions shall include without  limitation notice to holders of
Company Options not being assumed by Parent in such form reasonably satisfactory
to Parent and Company as to the termination of such option at the Effective Time
of the Merger.  Such  actions  shall also include the  Company's  using its best
efforts to obtain from holders of all outstanding  Company Options granted under
the Company 1987 Non-Qualified  Stock Option Plan signed written consents to the
termination  of such Company  Options on or before the Closing Date in such form
and for such  consideration as is satisfactory to Parent.  The Company shall, if
requested  by Parent,  take all action  that may be  necessary  (under the plans
pursuant to which Company  Options are  outstanding and otherwise) to accelerate
the vesting of Company  Options as provided in Section 5.4 (a)(ii) or  otherwise
provided in the respective Company Option.

                  (c)  Parent  shall  take all  corporate  action  necessary  to
reserve for  issuance a sufficient  number of shares of Parent  Common Stock for
delivery  under the Company Stock Options Plans assumed in accordance  with this
Section 5.4.

                  (d) Parent  shall not assume the ESPP Plan or any  outstanding
options to purchase shares of the Company under the ESPP Plan. The Company shall
take all actions  necessary to cause all  outstanding  purchase rights under the
ESPP Plan to be exercised  upon the earlier of (i) the next  scheduled  purchase
date  under  the  Company  ESPP,  or (ii)  immediately  prior to the date of the
Company  Shareholders  Meeting,  and each  participant  in the Company ESPP Plan
shall  accordingly  be issued  shares of  Company  Common  Stock at that time in
accordance  with the provisions of the ESPP which shall be converted into shares
of Parent  Common  Stock in the  Merger.  The  Company  shall  take all  actions
necessary to terminate the Company ESPP immediately following such exercise date
(including  without  limitation  providing notice to ESPP participants as to the
termination in such form  reasonably  satisfactory  to Parent),  and no purchase
rights shall be subsequently granted or exercised under the Company ESPP.

                  (e)  The  Company  shall  terminate,  effective  as of the day
immediately  preceding the Effective Time, any and all 401(k) plans sponsored or
maintained by Company and any other


                                       39
<PAGE>

Acquired  Corporation  unless Parent provides written notice to Company prior to
the  Effective  Time that any such 401(k) plan shall not be  terminated.  Parent
shall receive from Company  evidence that Company's  plan(s)  and/or  program(s)
have been  terminated  pursuant to resolutions  of Company's  Board of Directors
(the form and  substance  of such  resolutions  shall be  subject  to review and
approval of Parent), effective as of the day immediately preceding the Effective
Time.  The Company shall cause any such 401(k) plan to be filed with the IRS for
a determination  letter as to the  qualification of the plan under Code Sections
401(a) and (k) at its termination and shall cause such plan to provide for final
distributions  to  participants  after  receipt  of such  determination  letter.
Company employees shall be eligible to participate in a 401(k) plan sponsored by
Parent as soon as  administratively  practicable after the Effective Time in the
event the respective company 401(k) plan is terminated under this Section.

                  (f) If the Parent or the Surviving Corporation  terminates any
Company employee without cause (provided that a failure to sign Parent's form of
nondisclosure/proprietary  information agreement will not be considered a reason
for Parent to terminate  with cause) within one (1) year of the Effective  Time,
Parent  shall pay, or shall cause the  Surviving  Corporation  to pay,  any such
terminated  employee severance pursuant to the Company's  severance policies set
forth on Schedule 5.4(f) and provided that any such terminated  employee signs a
release reasonably satisfactory to Parent.

                  (g) If requested by Parent,  Company shall,  immediately prior
to the  Closing  Date,  terminate  the  Company  Employee  Plans and no  further
contributions  shall  be made  to the  Company  Employee  Plans.  Parent  and/or
Surviving  Corporation  shall  provide or cause to be  provided  that under each
employee benefit plan, policy,  program or arrangement where service is relevant
to a  determination  of an employee's  eligibility to participate,  vesting,  or
level or amount of benefits (other than benefit  accruals under a pension plan),
employees of Company who become employees of Parent and/or Surviving Corporation
shall be  credited  with  their  period of  service  with  Company  prior to the
Closing,   to  the  extent  permitted  by  applicable  law  and  applicable  tax
qualification  requirements,  and subject to any generally  applicable  break in
service or similar rules.  Subject to the approval of any insurance  carrier and
to the extent  consistent with  applicable law and applicable tax  qualification
requirements, Parent and/or Surviving Corporation shall make available, or cause
to be made  available,  to those  employees  of Company who become  employees of
Parent  and/or  Surviving  Corporation,  employee  benefit  plans and  programs,
without  regard  to  any  preexisting  condition  limitation,   actively-at-work
requirement or similar  limitation,  provided,  and only to the extent, that any
analogous  restriction  applied  to such  employee  under an  analogous  plan of
Company had been  satisfied as of the Closing Date. In determining an employee's
share  of the cost of  coverage  under  any plan or  program  of  Parent  and/or
Surviving  Corporation for the year in which the Closing  occurs,  Parent and/or
Surviving  Corporation shall make commercially  reasonable efforts to credit the
employee with any pre-Closing  co-pays and  deductibles  made by or on behalf of
such  employee  under each  comparable  plan  maintained by Company prior to the
Effective  Time  for  such  year.  Parent  shall  not be  required  to have  any
preexisting  condition  limitation,   actively-at-work  requirement  or  similar
limitation  waived or to credit any pre-Closing  co-pays and deductibles made by
or on behalf of such employee  unless  Company (or its successor  entity) or the
applicable  insurance  carrier makes  available a HIPAA  Certificate  evidencing
prior coverage under the corresponding or analogous Company plan.  Company shall
provide to Parent (i) executed  resolutions by the Board of Directors of Company
authorizing the termination of any of its Company  Employee Plans that are to be
terminated  and (ii) an executed  amendment  to the Plans  sufficient  to


                                       40
<PAGE>

assure  compliance with all applicable  requirements of the Code and regulations
thereunder  so that the  tax-qualified  status of the Plan will be maintained at
the time of termination. Nothing in this subsection 5.4(g) shall be construed to
prohibit or restrict Parent or Surviving  Corporation from amending,  suspending
or terminating  any of its employee  benefit plans following the Closing Date or
terminating  any of its  employees or modifying  their pay or employee  benefits
following such date.

                   (h) Company shall obtain a release, in substantially the form
attached hereto as Exhibit G, from each of its employees to the extent a release
is required  under any written  employment  agreement  with such  employees with
respect to the payment of any severance,  benefit or other compensation due upon
Closing as the result of this  Agreement or otherwise.  The Company shall obtain
releases in  substantially  the form attached hereto as Exhibit G from all other
employees  with  respect  to the  payment  of any  severance,  benefit  or other
compensation  due on or prior to the Closing in  accordance  with the  Company's
severance practices as described in Schedule 2.12. The Company shall arrange for
tax withholding as required by applicable Legal Requirements with respect to any
such  payment,  benefit,  compensation  or  severance  (regardless  of whether a
release  is  required  or  obtained)   and  shall   provide   evidence  of  such
arrangement(s) to Parent upon request.

         5.5      INDEMNIFICATION OF OFFICERS AND DIRECTORS.

                  (a) The  Surviving  Corporation  shall  cause  all  rights  to
indemnification  existing  in  favor of those  Persons  (i) who are  named as an
insured party in any officers' and directors' liability insurance policy held by
the Company as of the date of this  Agreement  (the  "Indemnified  Persons") and
(ii) who have indemnification agreements with the Company as of the date of this
Agreement,  for acts and omissions  occurring prior to or at the Effective Time,
as provided in the Company's articles of incorporation and bylaws and under each
indemnification agreement with the Indemnified Persons to which the Company is a
party (as each is in effect as of the date of this  Agreement),  to  continue in
effect without  modification or amendment  after the  consummation of the Merger
and to be observed by the Surviving  Corporation to the fullest extent permitted
by California law.

                  (b) The  Surviving  Corporation  shall  provide  officers' and
directors'  liability  insurance for the benefit of each such Person (other than
the Company) named as an insured party in any officers' and directors' liability
insurance policy held by the Company as of the date of this Agreement,  covering
only  those  acts or  omissions  occurring  prior  to or at the  Effective  Time
provided  that the Surviving  Corporation  will not be required to maintain such
policies except to the extent that the aggregate cost of maintaining such policy
is not in excess of one hundred fifty percent (150%) of the current annual cost,
in which  case the  Surviving  Corporation  shall  obtain and  maintain  as much
comparable  insurance  for an annual  cost equal to one  hundred  fifty  percent
(150%) of the current annual amount.

                  (c) The  provisions of this Section 5.5 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Person, his or her
heirs and representatives.

                  (d)  In  the  event  Surviving   Corporation  or  any  of  its
successors or assigns (i) consolidates  with or merges into any other Person and
shall  not  be the  continuing  or  surviving  corporation  or  entity  in  such
consolidation  or  merger  or (ii)  transfers  all or  substantially  all of its
properties and assets to any Person,  then, and in each case,  proper  provision
shall be made so that the


                                       41
<PAGE>

successors and assigns of Surviving  Corporation,  as the case may be, honor the
indemnification obligations set forth in this Section 5.5.

                  (e) All current  employees  and  directors  of the Company who
have  indemnification  agreements  with  the  Company  as of the  date  of  this
Agreement  or who are  entitled  to enter into  indemnity  agreements  under the
Company's  standard form shall  execute a waiver in the form attached  hereto as
Exhibit  D  pursuant  to  which  such  employees   waive  their  rights  to  the
establishment of a trust pursuant to Section 7 of such agreements and agree that
such  Agreement  shall  not be  binding  upon  Parent  as a direct  or  indirect
successor of the Company.

         5.6      ADDITIONAL AGREEMENTS.

                  Each of Parent and the Company shall use its  reasonable  best
efforts to take, or cause to be taken,  all actions  necessary to consummate the
Merger and make effective the other transactions contemplated by this Agreement.
Without  limiting the  generality of the foregoing  each party to this Agreement
(a) shall make all filings (if any) and give all notices (if any) required to be
made and  given by such  party in  connection  with  the  Merger  and the  other
transactions  contemplated by this Agreement;  (b) shall use its reasonable best
efforts to obtain each Consent (if any) required to be obtained (pursuant to any
applicable  Legal  Requirement  or  Contract,  or  otherwise)  by such  party in
connection with the Merger or any of the other transactions contemplated by this
Agreement;  and (c) shall use its reasonable best efforts to lift any restraint,
injunction or other legal bar to the Merger.  The Company shall promptly deliver
to Parent a copy of each such filing made,  each such notice given and each such
Consent obtained by it during the Pre-Closing Period.


         5.7      PUBLIC DISCLOSURE.

                  The initial press release  relating to this Agreement shall be
a joint press release  prepared  jointly by both Parent and Company.  Thereafter
Parent and the Company shall consult with each other and use reasonable  efforts
to agree upon the text of any press release or public  statement  before issuing
any press release or otherwise making any public  statements with respect to the
transactions  contemplated  hereunder and shall not issue any such press release
or make any such public statement prior to such  consultation,  except as may be
required by Legal  Requirements or any listing  agreement with, or the rules of,
Nasdaq.


         5.8      TAX MATTERS.

                  At or prior to the filing of the Registration  Statement,  the
Company and Parent shall execute and deliver to Morrison and Foerster LLP and to
Venable,  Baetjer and Howard, LLP tax  representation  letters in customary form
satisfactory  to such  counsel.  Parent,  Merger Sub and the Company  shall each
confirm to Morrison and Foerster LLP and to Venable,  Baetjer and Howard, LLP on
such dates as shall be  reasonably  requested  by Morrison  and Foerster LLP and
Venable,  Baetjer and Howard,  LLP,  the accuracy  and  completeness  of the tax
representation letters delivered pursuant to the immediately preceding sentence.
Upon the request of counsel,  the Company and Parent  shall  execute and deliver
updated  tax  representation  letters in  customary  form  satisfactory  to such
counsel on or before the Closing Date in connection with the opinions of counsel
referred to in Section 6.2(g) and Section 6.3(e). Each of Parent and the Company
shall use its reasonable  best



                                       42
<PAGE>

efforts prior to and following the Effective Time to cause the Merger to qualify
as a reorganization  under Section 368(a) of the Code. Following delivery of the
tax representations  letters pursuant to the first sentence of this Section 5.8,
each of  Parent  and the  Company  shall  use its  reasonable  efforts  to cause
Morrison and Foerster LLP and Venable, Baetjer and Howard, LLP, respectively, to
deliver  to  it a tax  opinion  satisfying  the  requirements  of  Item  601  of
Regulation S-K promulgated under the Securities Act. In rendering such opinions,
each of such counsel shall be entitled to rely on the tax representation letters
referred to in this Section 5.8.


         5.9      RESIGNATION OF DIRECTORS.

                  The Company  shall use its best  efforts to obtain and deliver
to Parent prior to the Closing the  resignation  of each director of each of the
Acquired Corporations, effective as of the Effective Time.


         5.10     LISTING.

                  Parent  shall  use its best  efforts  to cause  the  shares of
Parent  Common  Stock  being  issued in the Merger to be  approved  for  listing
(subject to official notice of issuance) on the Nasdaq National Market.


         5.11     TAKEOVER LAWS; ADVICE OF CHANGES.

                  (a) If any  Takeover  Law may  become,  or may  purport to be,
applicable to the  transactions  contemplated in this Agreement,  each of Parent
and the Company and the members of their  respective  Boards of  Directors  will
grant  such  approvals  and  take  such  actions  as are  necessary  so that the
transactions  contemplated  by this  Agreement may be consummated as promptly as
practicable,  and in any event prior to the  Termination  Date, on the terms and
conditions  contemplated  hereby and thereby and  otherwise act to eliminate the
effect  of any  Takeover  Law on any of the  transactions  contemplated  by this
Agreement.

                  (b) Each of the Company and Parent will give prompt  notice to
the other (and will  subsequently  keep the other informed on a current basis of
any  developments  related  to such  notice)  upon  its  becoming  aware  of the
occurrence  or  existence  of  any  fact,  event  or  circumstance  that  (i) is
reasonably  likely to  result in any  Material  Adverse  Effect on the  Acquired
Corporations or on Parent and its Subsidiaries,  respectively,  (ii) would cause
or constitute a breach of any representations, warranties or covenants contained
herein or (iii) is  reasonably  likely to  result in any of the  conditions  set
forth in Section 6 not being able to be satisfied prior to the Termination Date.


         5.12     FORM S-8; SECTION 16.

                  (a) Parent agrees to file one or more registration  statements
on Form S-8 for the  shares of Parent  Common  Stock  issuable  with  respect to
assumed  Company  Options within five (5) days  subsequent to the Effective Time
and keep any such registration  statements effective until all shares registered
thereunder have been issued, provided,  however, that it shall not be considered
a breach of this  Section  5.13 by Parent if Parent  cannot file such S-8 within
five  (5)  days  due to the  fact  that  Parent  does  not  receive  a  required
independent  auditors  consent  within  five (5) days after


                                       43
<PAGE>

using commercially  reasonable efforts to obtain such consent; and provided that
Parent continues to use commercially  reasonable  efforts to obtain such consent
and file such S-8 promptly after such consent is obtained.

                  (b) Parent shall,  prior to the Effective Time, cause Parent's
Board of Directors  to approve the issuance of shares of Parent  Common Stock in
connection with the Merger (including shares of Parent Common Stock to be issued
in connection  with the exercise of any Company  Options assumed by Parent under
Section  5.4),  with  respect  to any  employees  of the  Company  who as of the
Effective Time are subject or will become subject to the reporting  requirements
of Section 16 of the Exchange Act to the extent  necessary  for such issuance to
be an exempt acquisition  pursuant to SEC Rule 16b-3,  provided,  however,  that
Parent shall not be deemed to have  violated  this  covenant if the Company does
not provide to the Board of Directors of Parent at least five (5) business  days
prior to the Effective Time, all information  reasonably requested by Parent for
the purpose of effecting such exemption.  Prior to the Effective Time, the Board
of Directors of the Company  shall  approve the  disposition  of Company  Common
Stock in  connection  with the Merger by those  directors  and  officers  of the
Company subject to the reporting  requirements of Section 16 of the Exchange Act
to the  extent  necessary  for  such  disposition  to be an  exempt  disposition
pursuant to SEC Rule 16b-3.


         5.13     AFFILIATES.

                  Attached as Schedule  5.13 to this  Agreement is a list of all
Persons  who are,  to the  Company's  knowledge,  affiliates  of the Company for
purposes of Rule 145 under the Securities Act. Prior to the effectiveness of the
Registration  Statement,  the Company shall deliver or cause to tbe delivered an
executed Rule 145 affiliate  agreement in the form attached  hereto as Exhibit E
from each of the  persons  listed  on  Schedule  5.13.  Parent  shall  place the
appropriate Rule 145 legend on the stock certificates representing Parent Common
Stock issued in the Merger to such  affiliates.  Parent shall use its reasonable
efforts to remove such legends promptly when such legends are no longer required
by applicable Legal Requirements.


         5.14     LITIGATION.

                  The Company shall give Parent the  opportunity  to participate
in the  defense of any  litigation  against  the  Company  and/or its  directors
relating  to the  transactions  contemplated  by this  Agreement  and the Voting
Agreements.


         5.15     KEY EMPLOYEES

                  (a) Each of the Key Company  Employees shall have entered into
noncompetition  agreements in substantially  the form attached hereto as Exhibit
F.

                  (b) Parent shall,  or shall cause  Surviving  Corporation  to,
expressly  assume  each of the  employment  or  severance  agreements  listed on
Schedule  5.15(b).  Prior to  Closing,  Parent  shall  notify  each party to the
agreements  listed on  Schedule  5.15(b)  whether  the  Surviving  Company  will
continue their  employment  pursuant to such  agreements  following the Closing.
Prior to  Closing,  with  respect to each party that is not  offered  continuing
employment,  or is otherwise



                                       44
<PAGE>

entitled to terminate his employment upon a change of control, the Company shall
pay all amounts (subject to the receipt of an executed release  substantially in
the form  attached  hereto as  Exhibit G by such  party) and take all action due
under such agreements with respect to each party that is not offered  continuing
employment pursuant to such agreements  immediately prior to the consummation of
the  Merger.   Effective  as  of  the  Closing,  Parent  hereby  unconditionally
guarantees the payment when due of all amounts set forth on Schedule 5.15(b).

                  (c) Parent  will create a pool of funds equal to the amount of
reduction taken by certain executive  officers in their bonus for the year ended
December 31, 2002 to be  available  for any  payments  that Parent,  in its sole
discretion,  deems advisable to employees who agree to continue  employment with
the  Company  if  asked  by  Parent  and  who  complete  established  transition
objectives. Parent has no obligation to make any such payments.


SECTION 6.  CONDITIONS TO THE MERGER


         6.1      CONDITIONS TO EACH PARTY'S OBLIGATION.

                  The respective  obligations of the Company,  Parent and Merger
Sub to consummate the Merger are subject to the  satisfaction  or, to the extent
permitted  by Legal  Requirements,  the  waiver by each party on or prior to the
Effective Time of each of the following conditions:

                  (a) This  Agreement,  the  Agreement  of Merger and the Merger
shall have been adopted and approved by requisite  vote of the  shareholders  of
the Company and this Agreement,  the Merger and the issuance of shares of Parent
Common  Stock  issuable  pursuant  to the  Merger  shall have been  adopted  and
approved by requisite vote of the stockholders of the Parent;

                  (b) No provision of any applicable Legal  Requirements and no
judgment,  injunction,  Order or decree shall prohibit the  consummation  of the
Merger or the other transactions contemplated by this Agreement;

                  (c) The  Registration  Statement  shall have become  effective
under  the  Securities  Act and shall not be the  subject  of any stop  order or
proceedings  seeking a stop order,  and any material  "blue sky" and other state
securities laws applicable to the registration  and  qualification of the Parent
Common Stock shall have been complied with;

                  (d) The  shares  of  Parent  Common  Stock to be issued in the
Merger  shall have been  authorized  for listing on the Nasdaq  National  Market
(subject to official notice of issuance); and

                  (e) Parent,  Merger Sub and Company shall have timely obtained
from  each  Governmental  Body all  approvals,  waivers  and  consents,  if any,
necessary  for   consummation  of  the  Merger  and  any  material   transaction
contemplated  hereby,  including but not limited to such approvals,  waivers and
consents as may be required under HSR.

                                       45
<PAGE>


         6.2      ADDITIONAL CONDITIONS TO PARENT'S AND MERGER SUB'S
                  OBLIGATIONS.

                  The  respective  obligations  of the  Parent and Merger Sub to
consummate  the  Merger  are  subject  to the  satisfaction  or,  to the  extent
permitted by Legal Requirements, the waiver by Parent and Merger Sub on or prior
to the Effective Time of each of the following conditions:

                  (a)  there  shall  not be  pending  or  threatened  any  Legal
Proceeding  in which a  Governmental  Body is:  (i)  challenging  or  seeking to
restrain  or  prohibit  the  consummation  of the  Merger or any other  material
transactions  contemplated  by this  Agreement;  or (ii)  seeking to prohibit or
limit in any material respect Merger Sub's or Parent's ability to vote,  receive
dividends with respect to or otherwise exercise ownership rights with respect to
the  stock  of the  Surviving  Corporation;  (iii)  seeking  to  materially  and
adversely  affect  the  right  of  Parent,  the  Surviving  Corporation  or  any
Subsidiary  of Parent to own the assets or operate the  business of the Acquired
Corporations; or (iv) seeking to compel Parent or the Company, or any subsidiary
of Parent or the Company, to dispose of or hold separate any material assets, as
a result of the  Merger or any of the other  transactions  contemplated  by this
Agreement;

                  (b) the  Company  shall  have  performed  or  complied  in all
material respects with its covenants,  obligations or agreements  required to be
performed or complied with under the Agreement prior to the Effective Time;

                  (c) (i) the  representations  and  warranties  of the  Company
contained in this  Agreement not qualified with any  "materiality"  or "Material
Adverse Effect"  qualifiers and (ii) the  representations  and warranties of the
Company  contained  in  this  Agreement  qualified  with  any  "materiality"  or
"Material Adverse Effect" qualifiers,  shall be accurate in all respects, in the
case of each of (i) and (ii) above,  as of the date of this  Agreement and as of
the date of the Effective Time;  except to the extent such  representations  and
warranties speak as of an earlier date, in which case such  representations  and
warranties  shall be accurate as of such date;  and except in each case, (A) for
changes contemplated by this Agreement,  or (B) where the failure to be accurate
has not had, and would not  reasonably  be expected to have, a Material  Adverse
Effect on the Company;

                  (d) there shall not have been a Material Adverse Effect on the
Acquired Corporations; and

                  (e) Holders of less than ten percent (10%) in the aggregate of
the Company  Common Stock shall have filed  demands for payment under Chapter 13
of the CGCL or shall otherwise continue to have dissenters' rights under Chapter
13 of the CGCL;

                  (f) Parent shall have received a certificate from an executive
officer of the Company certifying as to the matters set forth in paragraphs (b),
(c), (d) and (e) of this Section 6.2; and

                  (g) Parent  shall  have  received  and  Venable,  Baetjer  and
Howard, LLP shall not have subsequently rescinded an opinion of Venable, Baetjer
and Howard, LLP, in form and substance reasonably satisfactory to Parent, on the
basis of customary  facts,  representations  and  assumptions  set forth in such
opinion,  to the effect that the Merger  will be treated for federal  income tax
purposes as a  reorganization  within the meaning of Section 368(a) of the Code.
In  connection  with the


                                       46
<PAGE>

opinion  referred to in this Section 6.2(g),  Venable,  Baetjer and Howard,  LLP
shall be  entitled to request  and rely upon the tax  representation  letters of
Parent and the Company referred to in Section 5.8.

                  (h) The Stipulation and Settlement Agreement  substantially in
the form attached  hereto as Exhibit H shall be executed by Defendant's  Counsel
(as defined  therein)  and  Plaintiff's  Counsel (as  defined  therein)  and the
Company  shall have  entered  into  agreements  with  insurance  carriers  which
agreements  provide  for the  payment of all  amounts  due under the  Settlement
Agreement to be made by such insurance carriers.

                  (i) The  amendment to the Orchard Jay lease and Warrant  shall
have been  approved  by all  required  parties on terms and  conditions  no less
favorable to the Company set forth in the draft  amendment and warrant  provided
by the Company to Parent.

                  The  foregoing  conditions  are for the sole benefit of Parent
and Merger  Sub and may,  subject  to the terms of the  Agreement,  be waived by
Parent and Merger Sub, in whole or in part at any time and from time to time, in
the sole  discretion  of Parent and Merger Sub. The failure by Parent and Merger
Sub at any time to exercise  any of the  foregoing  rights shall not be deemed a
waiver of any such  right and each such right  shall be deemed an ongoing  right
which may be asserted at any time and from time to time.


         6.3      ADDITIONAL CONDITIONS TO THE COMPANY'S OBLIGATIONS.

                  The  obligations  of the Company to consummate  the Merger are
subject to the satisfaction  or, to the extent permitted by Legal  Requirements,
the  waiver  by the  Company  on or prior to the  Effective  Time of each of the
following conditions:

                  (a) Parent or Merger Sub shall have  performed  or complied in
all material  respects  with all of its  covenants,  obligations  or  agreements
required to be  performed  or  complied  with under the  Agreement  prior to the
Effective Time;

                  (b) (i) the  representations  and  warranties  of  Parent  and
Merger Sub contained in this Agreement not qualified with any  "materiality"  or
"Material  Adverse  Effect"   qualifiers,   and  (ii)  the  representations  and
warranties of Parent and Merger Sub contained in this  Agreement  qualified with
any "materiality" or "Material Adverse Effect" qualifiers,  shall be accurate in
all respects,  in the case of each of (i) and (ii) above, as of the date of this
Agreement  and as of the date of the Effective  Time;  except to the extent such
representations  and warranties  speak as of an earlier date, in which case such
representations  and  warranties  shall have been accurate as of such date;  and
except in each case,  (A) for changes  contemplated  by this  Agreement,  or (B)
where the  failure  to be  accurate  has not had,  and would not  reasonably  be
expected to have, a Material Adverse Effect on the Parent;

                  (c) there shall have not been a Material Adverse Effect on the
Parent;

                  (d) the  Company  shall have  received a  certificate  from an
executive officer of Parent certifying as to the matters set forth in paragraphs
(a), (b) and (c) of this Section 6.3; and

                                       47
<PAGE>

                  (e) the Company  shall have received and Morrison and Foerster
LLP shall not have  subsequently  rescinded  an opinion of Morrison and Foerster
LLP in form and substance  reasonably  satisfactory to the Company, on the basis
of customary facts,  representations  and assumptions set forth in such opinion,
to the effect that the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code. In connection
with the opinion  referred to in this Section 6.3(e),  Morrison and Foerster LLP
shall be  entitled to request  and rely upon the tax  representation  letters of
Parent and the Company referred to in Section 5.8.

                  The  foregoing  conditions  are for the  sole  benefit  of the
Company  and may,  subject  to the  terms of the  Agreement,  be  waived  by the
Company,  in whole or in part at any  time  and from  time to time,  in the sole
discretion  of the  Company.  The failure by the Company at any time to exercise
any of the  foregoing  rights shall not be deemed a waiver of any such right and
each such right  shall be deemed an ongoing  right  which may be asserted at any
time and from time to time.


SECTION 7.        TERMINATION


         7.1      TERMINATION.

                  This Agreement may be terminated  prior to the Effective Time,
whether   before  or  after   adoption  of  this   Agreement  by  the  Company's
shareholders:

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

                  (b) by either  Parent or the  Company if (i) the Merger  shall
not have been  consummated by the date which is one hundred and fifty (150) days
after the date of this Agreement  (provided,  a later date may be agreed upon in
writing by the parties hereto,  and provided further that the right to terminate
this  Agreement  under this  Section  7.1(b) shall not be available to any party
whose  action or failure to act has been the cause of the  failure of the Merger
to occur on or before such date and such action or failure to act  constitutes a
breach of this Agreement);  or (ii) a Company  Shareholders  Meeting is held and
the  holders of Company  Common  Stock do not  approve  this  Agreement  and the
Merger; or (iii) a Parent Stockholder  Meeting is held and the holders of Parent
Securities  do not approve the issuance of Parent  Common Stock  pursuant to the
terms hereof;

                  (c) by either  Parent or the  Company if a court of  competent
jurisdiction  or  other   Governmental  Body  shall  have  issued  a  final  and
nonappealable  Order,  decree or ruling,  or shall have taken any other  action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;

                  (d) by Parent,  at any time prior to the Effective  Time, if a
Company Triggering Event shall have occurred;

                  (e) by Parent, at any time prior to the Effective Time, if (i)
any of the Company's  representations and warranties contained in this Agreement
shall be  inaccurate  as of the date of this  Agreement,  or shall  have  become
inaccurate as of a date  subsequent to the date of this Agreement (as if made on
such  subsequent  date),  such that the  condition set forth in paragraph (c) of
Section 6.2 would not be satisfied and such inaccuracy shall not have been cured
within  twenty (20) days of


                                       48
<PAGE>

receipt by Company of written notice of such breach  (describing  the details of
such breach) provided that the right to terminate this Agreement by Parent under
this Section  7.1(e)(i) shall not be available to Parent where Parent is at that
time in breach of this Agreement,  (ii) any of the Company's covenants contained
in this Agreement shall have been breached  (except for a breach of Sections 4.3
and 5.7 which by the terms cannot be cured) such that the condition set forth in
paragraph  (b) of Section 6.2 would not be  satisfied  and such breach shall not
have been cured within twenty (20) days of receipt by Company of written  notice
of such breach  (describing the details of such breach)  provided that the right
to terminate this Agreement by Parent under this Section 7.1(e)(ii) shall not be
available to Parent where Parent is at that time in breach of this Agreement, or
(iii)  there  shall  have  been  a  Material  Adverse  Effect  on  the  Acquired
Corporations; and

                  (f) by Company,  at any time prior to the  Effective  Time, if
(i)  any of the  Parent's  representations  and  warranties  contained  in  this
Agreement  shall be inaccurate as of the date of this  Agreement,  or shall have
become  inaccurate as of a date  subsequent to the date of this Agreement (as if
made on such  subsequent  date),  such that the condition set forth in paragraph
(c) of Section 6.3 would not be  satisfied  and such  inaccuracy  shall not have
been cured  within  twenty  (20) days of receipt by Parent of written  notice of
such breach  (describing the details of such breach)  provided that the right to
terminate  this Agreement by Company under this Section  7.1(f)(i)  shall not be
available to Company where Company is at that time in breach of this  Agreement,
(ii) any of the Parent's  covenants  contained in this Agreement shall have been
breached (except for a breach of Section 5.7 which by its terms cannot be cured)
such that the  condition  set forth in paragraph (b) of Section 6.3 would not be
satisfied  and such breach shall not have been cured within  twenty (20) days of
receipt by Parent of written  notice of such breach  (describing  the details of
such  breach)  provided  that the right to terminate  this  Agreement by Company
under this Section 7.1(f)(ii) shall not be available to Company where Company is
at that time in breach  of this  Agreement,  or (iii)  there  shall  have been a
Material Adverse Effect on Parent.


         7.2      EFFECT OF TERMINATION.

                  In the event of the  termination of this Agreement as provided
in Section 7.1, this Agreement shall be of no further force or effect; provided,
however,  that (i) this Section 7.2, Section 7.3 and Section 8 shall survive the
termination  of this  Agreement  and shall remain in full force and effect,  and
(ii) the  termination  of this  Agreement  shall not  relieve any party from any
liability  or  damages  for  any  breach  of any  provision  contained  in  this
Agreement.


         7.3      EXPENSES; TERMINATION FEES.

                  (a)  Expenses.  Except as set forth in this  Section  7.3, all
fees  and  expenses   incurred  in  connection   with  this  Agreement  and  the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, whether or not the Merger is consummated.

                  (b)      Expense Reimbursement.

                           (i) If Parent  terminates this Agreement  pursuant to
Section 7.1(e), then Company shall promptly (and within two (2) business days of
its receipt of such termination  notice from Parent) reimburse Parent for all of
the actual, documented,  reasonable out-of-pocket costs and


                                       49
<PAGE>

expenses   incurred  by  Parent  in  connection  with  this  Agreement  and  the
transactions  contemplated hereby (including,  without limitation,  the fees and
expenses  of  its  outside  advisors,  outside  accountants  and  outside  legal
counsel).

                           (ii) If Company terminates this Agreement pursuant to
Section 7.1(f),  then Parent shall promptly (and within two (2) business days of
its receipt of such termination  notice from Company)  reimburse the Company for
all of the  actual,  documented,  reasonable  out-of-pocket  costs and  expenses
incurred by the Company in connection  with this Agreement and the  transactions
contemplated hereby (including, without limitation, the fees and expenses of its
outside advisors, outside accountants and outside legal counsel).

                           (iii) In  addition  to the right to receive the above
expense  reimbursement,  the Party invoking the right to terminate under Section
7.1(e) or 7.1(f), as appropriate,  shall also have the right to seek recovery of
any actual  damages  incurred by such Party,  provided that actual damages shall
not include  damages in the nature of speculative,  consequential  or incidental
damages,  including  damage  to  reputation  or  goodwill  or  other  items of a
speculative  nature.  The right to receive an expense  reimbursement and to seek
actual  damages shall be such Party's sole and exclusive  remedies in connection
with the termination of the Agreement pursuant to the above Sections.

                  (b)      Termination Fee.

                           (i) If (A) this  Agreement is terminated by Parent or
the Company  pursuant to Section  7.1(b) (i) or (ii) and at or prior to the time
of such  termination a Company  Acquisition  Proposal shall have been disclosed,
announced,  commenced,  submitted or made, and within nine (9) months after such
termination  pursuant to Section  7.1(b) (i) or (ii) the  Company  enters into a
definitive agreement for, or consummates, a Company Acquisition Transaction with
any Person,  or (B) this  Agreement is terminated by Parent  pursuant to Section
7.1(d),  then,  in the case of each of (A) and (B),  the  Company  shall  pay to
Parent, in immediately available funds a nonrefundable fee in the amount of five
percent  (5%) of the total  value of the  Merger  Consideration  based  upon the
closing  price of the Parent's  Common Stock as reported on the Nasdaq  National
Market  on the  business  day  prior to the  execution  of this  Agreement  (the
"Termination Fee").

                           (ii) Upon a termination  of this  Agreement by Parent
or Company  pursuant to Section 7.1(b) (i) or (ii), the Termination Fee shall be
paid  to  Parent  by the  Company  within  fifteen  (15)  business  days  of the
consummation  of  the  transactions  contemplated  by  the  Company  Acquisition
Proposal.  In the case of termination  of this  Agreement by Parent  pursuant to
Section  7.1(d),  the  Termination  Fee shall be paid to  Parent by the  Company
within fifteen (15) business days of such termination.

                           (iii)  The  above  payments  shall  be  made  to  the
applicable parties in immediately available funds and shall be such party's sole
and  exclusive  remedy  in  connection  with its  termination  of the  Agreement
pursuant to the above Sections.

                  (c) The Company  acknowledges that the agreements contained in
this Section 7.3 are an integral part of the  transaction  contemplated  by this
Agreement, and that, without these agreements,  Parent would not enter into this
Agreement.  Accordingly,  if either  party fails to pay the

                                       50
<PAGE>

Termination Fee or other amounts due under Section 7.3 in a timely manner and if
a party makes a claim against the other party in order to obtain payment of such
amounts  and the claim  results in a judgment  against  such for the amounts due
under this  Section 7.3, the  non-prevailing  party shall pay to the  prevailing
party its  actual,  documented,  reasonable  out-of-pocket  costs  and  expenses
incurred by the prevailing  party  (including  attorneys'  fees and expenses) in
connection  with such suit,  together  with interest on the amounts due from and
including  the date on which  such  payment  was to be made in  accordance  with
Section  7.3 but  excluding  the date of  payment  thereof,  at the  prime  rate
published by The Wall Street  Journal,  as that rate may vary from time to time,
or if no longer published,  a comparable rate.  Payment of the fees and expenses
described  in this  Section 7.3 shall not be in lieu of damages  incurred in the
event of a fraudulent breach of this Agreement.


SECTION 8.        MISCELLANEOUS PROVISIONS


         8.1      AMENDMENT.

                  This  Agreement  may  be  amended  with  the  approval  of the
respective  boards of directors  of the Company and Parent at any time  (whether
before or after adoption of the Agreement of Merger by the  shareholders  of the
Company);  provided, however, that after any such adoption of the Plan of Merger
by the Company's shareholders,  no amendment shall be made which by law requires
further approval of the shareholders of the Company without the further approval
of such shareholders.  This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.


         8.2      WAIVER.

                  (a) No failure on the part of any party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right,  privilege or remedy under this Agreement,
shall  operate as a waiver of such power,  right,  privilege  or remedy;  and no
single or partial exercise of any such power,  right,  privilege or remedy shall
preclude any other or further  exercise  thereof or of any other  power,  right,
privilege or remedy.

                  (b) No party shall be deemed to have waived any claim  arising
out of this  Agreement,  or any power,  right,  privilege  or remedy  under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly  set forth in a written  instrument  duly  executed  and  delivered on
behalf of such party;  and any such waiver shall not be  applicable  or have any
effect except in the specific instance in which it is given.


         8.3      NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

                  None  of  the   representations,   warranties   or  agreements
contained in this  Agreement or in any  certificate  delivered  pursuant to this
Agreement shall survive the Effective Time, except for agreements which by their
terms survive the Effective  Time. This Section 8.3 shall not limit any covenant
or agreement of the parties which by its terms  contemplates  performance  after
the Effective Time.

                                       51
<PAGE>


         8.4      ENTIRE AGREEMENT; COUNTERPARTS.

                  This  Agreement  constitutes  the entire  agreement  among the
parties hereto and all other prior agreements and  understandings,  both written
and oral, among or between any of the parties with respect to the subject matter
hereof and thereof. This Agreement may be executed in several counterparts, each
of which shall be deemed an original and all of which shall  constitute  one and
the same instrument.


         8.5      APPLICABLE LAW; JURISDICTION.

                  This  Agreement   shall  be  governed  by,  and  construed  in
accordance with, the Legal Requirements of the State of Delaware,  regardless of
the Legal  Requirements that might otherwise govern under applicable  principles
of conflicts of laws  thereof;  provided that the  applicable  provisions of the
CGCL and the Legal  Requirements  of the State of  California  shall  govern the
Merger.  In any action between any of the parties  arising out of or relating to
this Agreement or any of the  transactions  contemplated by this Agreement:  (a)
each of the parties irrevocably and unconditionally  consents and submits to the
exclusive  jurisdiction and venue of courts in the State of Maryland; (b) if any
such action is commenced in a state court,  then,  subject to applicable law, no
party shall object to the removal of such action to any federal court located in
the State of Maryland;  (c) each of the parties  irrevocably waives the right to
trial by jury;  and (d) each of the parties  irrevocably  consents to service of
process  by first  class  certified  mail,  return  receipt  requested,  postage
prepaid,  to the address at which such party is to receive  notice in accordance
with Section 8.8.


         8.6      ATTORNEYS' FEES.

                  In any  action  at law or  suit  in  equity  to  enforce  this
Agreement or the rights of any of the parties hereunder, the prevailing party in
such  action or suit  shall be  entitled  to  receive a  reasonable  sum for its
attorneys'  fees and all other  reasonable  costs and expenses  incurred in such
action or suit.


         8.7      ASSIGNABILITY; THIRD PARTY BENEFICIARIES.

                  This Agreement shall be binding upon, and shall be enforceable
by and inure solely to the benefit of, the parties  hereto and their  respective
successors and permitted assigns; provided, however, that neither this Agreement
nor any of the Company's rights hereunder may be assigned by the Company without
the prior  written  consent  of Parent,  and any  attempted  assignment  of this
Agreement or any of such rights by the Company  without  such  consent  shall be
void and of no effect; provided,  further, however, that, except for assignments
by Merger Sub to a wholly owned Subsidiary of Parent, neither this Agreement nor
any of Parent's or Merger  Sub's rights  hereunder  may be assigned by Parent or
Merger Sub without the prior written  consent of the Company,  and any attempted
assignment of this  Agreement or any of such rights by the Company  without such
consent shall be void and of no effect.  Nothing in this  Agreement,  express or
implied,  is intended to or shall confer upon any Person (other than the parties
hereto) any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement,  except for rights,  benefits and remedies granted to


                                       52
<PAGE>

Company  employees  and option  holders  under  Section 5.4, to the  Indemnified
Persons under Section 5.5 and to the Company employees under Section 5.15.


         8.8      NOTICES.

                  Any notice or other communication  required or permitted to be
delivered  to any party  under this  Agreement  shall be in writing and shall be
deemed properly delivered,  given and received when actually delivered (by hand,
by registered  mail, by courier or express  delivery service or by facsimile) to
the address or  facsimile  telephone  number set forth  beneath the name of such
party  below (or to such other  address or  facsimile  telephone  number as such
party  shall  have  specified  in a written  notice  given to the other  parties
hereto); provided,  however, that a written notice delivered via facsimile shall
be deemed  delivered  only if at the time of, or shortly  after,  such facsimile
transmission  the party  giving  the notice  confirms  by  telephone  the actual
receipt by the other party of such facsimile transmission:

         If to Parent or Merger Sub:

                  SafeNet, Inc.
                  8029 Corporate Drive
                  Baltimore, Maryland  21236
                  Facsimile No. (410) 931-2229
                  Attention: Anthony Caputo, Chief Executive Officer

         with a copy to (which copy shall not constitute notice hereunder):

                  Venable, Baetjer and Howard, LLP
                  8010 Towers Crescent Drive
                  Vienna, Virginia  22182
                  Facsimile No. (703) 821-8949
                  Attention: Elizabeth R. Hughes, Esq.

         If to the Company:

                  Cylink Corporation
                  3131 Jay Street
                  Santa Clara, California 95056-0952
                  Facsimile No.: (408) 855-6106
                  Attention: Robert B. Fougner, Esq.

         with a copy to (which copy shall not constitute notice hereunder):

                  Morrison & Foerster LLP
                  755 Page Mill Road
                  Palo Alto, California 94304-1018
                  Facsimile No.: (650) 494-0792
                  Attention: Paul "Chip" Lion, III, Esq.


                                       53
<PAGE>


         8.10     COOPERATION.

                  The parties  agree to  cooperate  fully with each other and to
execute  and  deliver  such  further  documents,  certificates,  agreements  and
instruments and to take such other actions as may be reasonably requested by the
other  party to  evidence  or  reflect  the  transactions  contemplated  by this
Agreement  and to carry  out the  intent  and  purposes  of this  Agreement.  In
addition,  Company  shall take such actions prior to the Closing with respect to
employees,  employee  benefits  and  accounting  matters  as may  be  reasonably
requested  by  Parent,  subject  to the prior  approval  of  Company,  not to be
unreasonably withheld.


         8.11     CONSTRUCTION.

                  (a) For  purposes  of this  Agreement,  whenever  the  context
requires:  the singular  number shall  include the plural,  and vice versa;  the
masculine  gender shall  include the feminine and neuter  genders;  the feminine
gender shall  include the masculine  and neuter  genders;  and the neuter gender
shall include masculine and feminine genders.

                  (b) The parties hereto agree that any rule of  construction to
the effect that  ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.

                  (c) As  used  in  this  Agreement,  the  words  "include"  and
"including,"  and  variations  thereof,  shall  not be  deemed  to be  terms  of
limitation,  but rather  shall be deemed to be  followed  by the words  "without
limitation."

                  (d) Except as  otherwise  indicated,  all  references  in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.

                                       54
<PAGE>

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


                                        SAFENET, INC.



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

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



                                        SAPPHIRE ACQUISITION CORP.




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


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


                                        CYLINK CORPORATION


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


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



                                       55
<PAGE>


                                    EXHIBIT A


                               CERTAIN DEFINITIONS


                  For purposes of the Agreement (including this Exhibit A):

                  "Acquired Corporation  Contract" shall mean any Contract:  (a)
to which any of the Acquired  Corporations  is a party;  (b) by which any of the
Acquired Corporations or any asset of any of the Acquired Corporations is or may
become bound or under which any of the Acquired  Corporations has, or may become
subject to, any obligation;  or (c) under which any of the Acquired Corporations
has or may acquire any right or interest.

                  "Acquired  Corporation   Proprietary  Asset"  shall  mean  any
Proprietary  Asset owned by or licensed to any of the Acquired  Corporations  or
otherwise used by any of the Acquired Corporations.

                  "Acquired  Corporations"  is defined  in Section  2.1 to this
Agreement.

                  "Agreement" is defined in the Preamble to this Agreement.

                  "Agreement  of  Merger"  is  defined  in  Section  1.3 to this
Agreement.

                  "CGCL" is defined in the Recitals to this Agreement.

                  "Closing" is defined in Section 1.3 to this Agreement.

                  "Closing Date" is defined in Section 1.3 to this Agreement.

                  "Code" is defined in the Recitals to this Agreement.

                  "Company" is defined in the Preamble to this Agreement.

                  "Company Acquisition Proposal" shall mean any bona fide offer,
proposal or  indication  of interest  received from a third party (other than an
offer,  proposal,  inquiry or indication of interest by Parent) contemplating or
otherwise relating to any Company Acquisition Transaction.

                  "Company  Acquisition  Transaction" shall mean any transaction
or series of transactions involving:

                  (a)  any  merger,  consolidation,   share  exchange,  business
combination,   issuance  of  securities,   direct  or  indirect  acquisition  of
securities,  tender offer,  exchange offer or other similar transaction in which
(i) any of the Acquired Corporations is a constituent corporation, (ii) a Person
or "Group" (as defined in the Exchange Act and the rules promulgated thereunder)
of Persons  directly or indirectly  acquires  beneficial or record  ownership of
securities representing more than 20% of the outstanding securities of any class
of voting  securities of any of the Acquired  Corporations,  or (iii) any of the
Acquired  Corporations  issues  securities  representing  more  than

                                       56
<PAGE>

20% of the  outstanding  securities of any class of voting  securities of any of
the Acquired Corporations;

                  (b) any direct or indirect sale,  lease,  exchange,  transfer,
license,  acquisition  or disposition of any business or businesses or of assets
or rights that  constitute  or account for 20% or more of the  consolidated  net
revenues, net income or assets of the Acquired Corporations; or

                  (c) any  liquidation  or  dissolution  of any of the  Acquired
Corporations.

                  "Company  Balance  Sheet" is defined in Section 2.4(b) to this
Agreement.

                  "Company  Balance Sheet Date" is defined in Section  2.4(b) to
this Agreement.

                  "Company  Common Stock" shall mean the Common Stock,  $.01 par
value, of the Company.

                  "Company Disclosure  Schedule" is defined in Section 2 to this
Agreement.

                  "Company Employee Plans" is defined in Section 2.12(a) to this
Agreement.

                  "Company Financial Statements" is defined in Section 2.4(b) to
this Agreement.

                  "Company  Material  Contract" is defined in Section  2.7(a) to
this Agreement.

                  "Company  Options"  is  defined  in  Section  2.3(b)  to  this
Agreement.

                  "Company Organization  Documents" is defined in Section 2.1 to
this Agreement.

                  "Company Preferred Stock" shall mean the Preferred Stock, $.01
par value per share, of the Company.

                  "Company  Proxy  Statement"  is defined in Section 5.1 to this
Agreement.

                  "Company  Recommendations"  is defined in Section  2.2 to this
Agreement.

                  "Company SEC  Documents" is defined in Section  2.4(a) to this
Agreement.

                  "Company  Shareholders'  Meeting" is defined in Section 5.2(a)
to this Agreement.

                  "Company Stock  Certificate" is defined in Section 1.6 to this
Agreement.

                  "Company  Stock  Option  Plans"  shall  mean the  Company,  as
amended,  1994 Flexible Stock Incentive Plan, 2001 Non-Qualified Stock Incentive
Plan, the 1987  Non-Qualified  Stock Option Plan, the ATM Technology Center 2000
Stock  Option Plan and the  Cylink/ARL  1997

                                       57
<PAGE>

Stock Option Plan,  and all stock option  agreements  evidencing  option  grants
under each of the foregoing stock option plans.

                  "Company  Superior  Offer"  shall  mean a Company  Acquisition
Proposal on terms that the Board of Directors of the Company determines, in good
faith,  after  consultation  with its outside legal counsel and its  independent
financial advisor, if accepted,  is reasonably likely to be consummated,  taking
into account all legal,  financial and  regulatory  aspects of the offer and the
Person making the offer, and would, if consummated,  be in the best interests of
the  Company  when  compared  to the Merger;  provided,  however,  that any such
Company  Acquisition  Proposal  shall not be deemed  to be a  "Company  Superior
Offer" if any financing  required to consummate the transaction  contemplated by
such  offer is not  committed  or is not,  in the  good  faith  judgment  of the
Company,  reasonably  capable of being  obtained by such third party on a timely
basis.

                  "Company  Tax  Returns" is defined in Section  2.11(d) to this
Agreement.

                  A "Company  Triggering Event" shall be deemed to have occurred
if: (i) the Board of  Directors  of the  Company  shall have  failed to make the
Company  Recommendations or shall have withdrawn or modified in a manner adverse
to Parent or Merger  Sub the  Company  Recommendations  (including  by issuing a
public  announcement  or other public release that makes it reasonably  apparent
that the Board of Directors of the Company desires to withdraw,  modify or amend
the Company Recommendations);  (ii) the Company shall have failed to include the
Company  Recommendations  in the Registration  Statement or the Proxy Statement;
(iii) the Board of Directors  of the Company  shall have  approved,  endorsed or
recommended any Company Acquisition Proposal or shall have resolved or announced
an  intention  to do so; (iv) the Company  shall have  entered  into a letter of
intent or similar document or any Contract  relating to any Company  Acquisition
Proposal;  (v) a tender or exchange  offer relating to securities of the Company
shall have been commenced and (A) the Company shall have recommended such tender
offer, or (B) the Company shall not have sent to its securityholders, within ten
(10) business days after the  commencement  of such tender or exchange  offer, a
statement  disclosing  that the Company  recommends  rejection of such tender or
exchange  offer (it being  understood  that taking no position or indicating its
inability to take a position  does not  constitute  recommending  a rejection of
such tender or exchange  offer),  or (C) the Board of  Directors  of the Company
fails to  reaffirm  in  writing  the  Company  Recommendations  within  five (5)
business days after Parent requests in writing that such Company Recommendations
be reaffirmed,  (vi) a Company Acquisition  Proposal is publicly announced,  and
the Company (A) fails to issue a press release announcing its opposition to such
Company  Acquisition  Proposal  within five (5) business days after such Company
Acquisition Proposal is announced,  or (B) the Board of Directors of the Company
fails to  reaffirm  in  writing  the  Company  Recommendations  within  five (5)
business days after Parent requests in writing that such Company Recommendations
be reaffirmed;  or (vii) the Company breaches its obligations  under Section 4.3
of this  Agreement,  except for any inadvertent  breach of any notice  provision
contained  in Section 4.3 which breach has been cured  within  forty-eight  (48)
hours of its occurrence.

                  "Consent"  shall  mean any  approval,  consent,  ratification,
permission, waiver or authorization (including any Governmental Authorization).

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<PAGE>

                  "Contract"  shall mean any written,  oral or other  agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license,  sublicense,  insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.

                  "Effective Time" is defined in Section 1.3 to this Agreement.

                  "Encumbrance"  shall  mean any  lien,  pledge,  hypothecation,
charge, mortgage, security interest,  encumbrance, claim, option, right of first
refusal,  preemptive  right,  community  property interest or restriction of any
nature (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);  provided that the term Encumbrance  shall
not be deemed to include (a) liens for current Taxes or income Taxes not yet due
and payable,  (b) such  imperfections  of title and easements as do not and will
not materially  detract from or interfere with the use of the properties subject
thereto or affected thereby or otherwise materially impair the operations of the
Acquired Corporations  involving such properties,  and (c) liens of mechanics or
materialmen  securing  obligations  incurred in the ordinary  course of business
that are not yet due and payable.  Notwithstanding the foregoing,  encumbrances,
claims,  options,  rights  of first  refusal,  licenses  and  other  rights  and
restrictions   relating  to  intellectual  property  rights  do  not  constitute
Encumbrances.

                  "Entity" shall mean any corporation  (including any non-profit
corporation),   general  partnership,  limited  partnership,  limited  liability
partnership,  joint  venture,  estate,  trust,  company  (including  any limited
liability   company  or  joint  stock  company),   firm  or  other   enterprise,
association, organization or entity.

                  "Environmental  Law" is defined in Section  2.13(b)(i) to this
Agreement.

                  "ERISA" is defined in Section 2.12(a) to this Agreement.

                  "ERISA  Affiliates"  is  defined  in  Section  2.12(a) to this
Agreement.

                  "ESPP Plan" is defined in Section 2.3(b) to this Agreement.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the regulations promulgated thereunder.

                  "Exchange   Agent"  is  defined  in  Section  1.7(a)  to  this
Agreement.

                  "Exchange   Fund"  is  defined  in  Section   1.7(a)  to  this
Agreement.

                  "Exchange   Ratio"  is  defined  in  Section  1.5(a)  of  this
Agreement.

                  "Excluded  Shares"  shall mean any  shares of  Company  Common
Stock held as of the Effective Time (a) by Parent,  Merger Sub or any Subsidiary
of  Parent  or Merger  Sub,  (b) by any  Subsidiary.  or (c) by the  Company  as
treasury shares.

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<PAGE>

                  "GAAP" is defined in Section 2.4(b) to this Agreement.

                  "Government   Contract"   shall   mean  any  prime   contract,
subcontract,  letter contract,  purchase order or delivery order, task order, or
other  agreement  of any kind  executed  or  submitted  to or on  behalf  of any
Governmental Body or any prime contractor or higher-tier subcontractor, or under
which any Governmental  Body or any such prime  contractor  otherwise has or may
acquire any right or interest.

                  "Governmental  Authorization"  shall  mean  any:  (a)  permit,
license, certificate,  franchise, permission, variance, clearance, registration,
qualification  or  authorization  issued,   granted,  given  or  otherwise  made
available by or under the authority of any Governmental  Body or pursuant to any
Legal Requirement; or (b) right under any Contract with any Governmental Body.

                  "Governmental  Body"  shall  mean  any:  (a)  nation,   state,
commonwealth,  province,  territory,  county,  municipality,  district  or other
jurisdiction of any nature; (b) federal,  state,  local,  municipal,  foreign or
other  government;  or (c) governmental or  quasi-governmental  authority of any
nature (including any governmental  division,  department,  agency,  commission,
instrumentality,  official,  organization, unit, body or Entity and any court or
other tribunal).

                  "Hazardous  Materials"  is defined in Section  2.13(b)(ii)  to
this Agreement.

                  "Indemnified  Persons"  is defined  in Section  5.6(a) to this
Agreement.

                  "Key Company  Employee"  shall mean the executive  officers of
the Company and the following employees of the Company: Terry Hirsh, Mel Snyder,
Kane Hardy and Gary Bacon.

                  "Legal  Proceeding" shall mean any action,  suit,  litigation,
arbitration,   proceeding  (including  any  civil,   criminal,   administrative,
investigative or appellate proceeding),  hearing, inquiry, audit, examination or
investigation commenced,  brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.

                  "Legal  Requirement"  shall mean any  federal,  state,  local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution,   ordinance,  code,  edict,  decree,  rule,  regulation,  ruling  or
requirement issued, enacted, adopted, promulgated,  implemented or otherwise put
into effect by or under the  authority  of any  Governmental  Body (or under the
authority  of the NYSE,  NASD or Nasdaq),  including,  without  limitation,  any
Environmental Law.

                  "Liability"  means any  liability  (whether  known or unknown,
whether asserted or unasserted,  whether absolute or contingent, whether accrued
or unaccrued,  whether liquidated or unliquidated,  and whether due or to become
due), including any liability for Taxes.

                  An event, violation, inaccuracy,  circumstance or other matter
will be deemed to have a "Material  Adverse Effect" on, or shall be deemed to be
"material"  to, the  Acquired  Corporations,  taken as a whole,  if such  event,
violation,  inaccuracy,  circumstance or other matter had or could reasonably be
expected  to have a  material  adverse  effect on (i) the  business,  condition,
capitalization,



                                       60
<PAGE>

assets,  liabilities,  operations  or  financial  performance  of  the  Acquired
Corporations  taken as a whole, or (ii) the ability of the Company to consummate
the Merger or any of the other transactions contemplated by this Agreement or to
perform any of its  obligations  under this Agreement  prior to the  Termination
Date such  that the  conditions  in  Section  6 would  not be  satisfied  by the
Company;  provided,  however,  that  none of the  following  shall be  deemed in
themselves,  either  alone or in  combination,  to  constitute,  and none of the
following  shall be taken into account in determining  whether there has been or
will be, a Material Adverse Effect on the Acquired Corporations:  (a) any change
in the market price or trading volume of Company's  stock after the date hereof;
(b) the delisting of the Company from the Nasdaq  National  Market or the Nasdaq
SmallCap  Market of Nasdaq;  (c) any adverse change  attributable  to conditions
affecting  the  industries  as a whole in which the Acquired  Corporations  have
material  operations,  the U.S. economy as a whole or the foreign economies as a
whole in any  locations  where any of the  Acquired  Corporations  has  material
operations;  or (d) any adverse  change due to compliance  with the terms of, or
the taking of any action  required  by,  this  Agreement.  An event,  violation,
inaccuracy,  circumstance  or other  matter  will be deemed to have a  "Material
Adverse  Effect"  on, or shall be deemed to be  "material"  to,  Parent  and its
Subsidiaries,   taken  as  a  whole,  if  such  event,  violation,   inaccuracy,
circumstance or other matter had or could reasonably be expected to have or give
rise  to  a   material   adverse   effect  on  (i)  the   business,   condition,
capitalization,  assets,  liabilities,  operations or financial  performance  of
Parent and its  Subsidiaries  taken as a whole or (ii) the  ability of Parent to
consummate  the  Merger or any of the other  transactions  contemplated  by this
Agreement or to perform any of its obligations under this Agreement prior to the
Termination Date provided,  however,  that none of the following shall be deemed
in themselves,  either alone or in combination,  to constitute,  and none of the
following  shall be taken into account in determining  whether there has been or
will be, a Material Adverse Effect on the Parent and its  Subsidiaries:  (a) any
change in the market  price or trading  volume of Parent's  stock after the date
hereof;  or (b) any adverse  change  attributable  to  conditions  affecting the
industries  as a whole in which the Parent and its  Subsidiaries  have  material
operations,  the U.S. economy as a whole or the foreign  economies as a whole in
any  locations  where  any of the  Parent  and  its  Subsidiaries  has  material
operations.

                  "Merger" is defined in the Recitals to this Agreement.

                  "Merger Consideration" is defined in Section 1.5(a)(i) to this
Agreement.

                  "Merger Sub" is defined in the Preamble to this Agreement.

                  "Multiemployer  Plan" is defined  in  Section  2.12(b) to this
Agreement.

                  "Multiple Employer Welfare  Arrangement" is defined in Section
2.12(b) to this Agreement.

                  "NASD"  shall  mean the  National  Association  of  Securities
Dealers, Inc.

                  "Nasdaq"  shall mean the National  Association  of  Securities
Dealers automated quotation system.

                                       61
<PAGE>

                  "Order"  shall  mean any:  (a)  order,  judgment,  injunction,
edict, decree, ruling, pronouncement, determination, decision, opinion, verdict,
sentence,  subpoena, writ or award issued, made, entered,  rendered or otherwise
put into effect by or under the authority of any court, administrative agency or
other  Governmental Body or any arbitrator or arbitration panel; or (b) Contract
with any Governmental Body entered into in connection with any Legal Proceeding.

                  "Parent" is defined in the Preamble to this Agreement.

                  "Parent Balance Sheet Date" shall mean June 30, 2002.

                  "Parent  Common Stock" shall mean the Common Stock,  $0.01 par
value per share, of Parent.

                  "Parent Contract" shall mean any Contract: (a) to which Parent
or any Subsidiary of Parent is a party; (b) by which Parent or any Subsidiary of
Parent or any asset of Parent or any Subsidiary of Parent is or may become bound
or under which Parent or any Subsidiary of Parent has, or may become subject to,
any obligation; or (c) under which Parent or any Subsidiary of Parent has or may
acquire any right or interest.

                  "Parent  Disclosure  Schedule" is defined in Section 3 to this
Agreement.

                  "Parent  Preferred Stock" shall mean the Preferred Stock, $.01
par value, of Parent.

                  "Parent Financial  Statements" is defined in Section 3.4(b) to
this Agreement.

                  "Parent  Organization  Documents" is defined in Section 3.1 to
this Agreement.

                  "Parent  Proxy  Statement"  is defined in Section  5.1 to this
Agreement.

                  "Parent  Recommendations"  is defined  in Section  3.2 to this
Agreement.

                  "Parent SEC  Documents"  is defined in Section  3.4(a) to this
Agreement.

                  "Parent Stockholders' Meeting" is defined in Section 5.2(e) to
this Agreement.

                  "Person"  shall mean any  individual,  Entity or  Governmental
Body.

                  "Pre-Closing  Period"  is  defined  in  Section  4.1  to  this
Agreement.

                  "Proprietary  Asset"  shall  mean  any:  (a)  patent,   patent
application,   trademark   (whether   registered  or  unregistered),   trademark
application,  trade  name,  fictitious  business  name,  service  mark  (whether
registered  or  unregistered),  service  mark  application,  copyright  (whether
registered  or  unregistered),  domain name,  copyright  application,  copyright
registration,  maskwork right, maskwork right application,  trade secret, or any
other  intellectual  property  right,  including  any  of the  foregoing  rights
relating to any know-how,  customer list, franchise,  system, computer


                                       62
<PAGE>

software,  source code, algorithm,  invention,  design,  blueprint,  engineering
drawing, proprietary product, technology or other intangible asset; or (b) right
to use or exploit any of the foregoing.

                  "Registration  Statement"  is defined  in Section  5.1 of this
Agreement.

                  "Representatives" shall mean officers,  directors,  employees,
agents, attorneys, accountants, advisors, consultants and representatives.

                  "SEC" shall mean the U.S. Securities and Exchange Commission.

                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
amended and the regulations promulgated thereunder.

                  "Shareholders" is defined in the Recitals to this Agreement.

                  "Shares" is defined in Section 1.6 of this Agreement.

                  An  entity  shall be deemed to be a  "Subsidiary"  of  another
Person if such Person  directly or indirectly  owns,  beneficially or of record,
(a) an amount of voting  securities  of other  interests  in such Entity that is
sufficient  to enable such Person to elect at least a majority of the members of
such Entity's Board of Directors or other governing body, or (b) at least 50% of
the outstanding equity or financial interests of such Entity.

                  "Surviving  Corporation"  is defined  in  Section  1.1 to this
Agreement.

                  "Takeover  Laws"  means  any   "Moratorium,"   "Control  Share
Acquisition,"  "Fair  Price,"  "Supermajority,"   "Affiliate  Transactions,"  or
"Business Combination Statute or Regulation" or other similar state antitakeover
laws and regulations.

                  "Tax" shall mean any tax (including any income tax,  franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
ad valorem tax,  transfer  tax,  stamp tax,  sales tax, use tax,  property  tax,
business tax,  withholding tax or payroll tax), levy,  assessment,  tariff, duty
(including  any customs  duty),  deficiency or other fee in the nature of a tax,
and any related  charge or amount  (including  any fine,  penalty or  interest),
imposed,  assessed or  collected by or under the  authority of any  Governmental
Body.

                  "Tax Return" shall mean any return  (including any information
return),   report,   statement,   declaration,   estimate,   schedule,   notice,
notification, form, election, certificate or other document or information filed
with or  submitted  to,  or  required  to be filed  with or  submitted  to,  any
Governmental Body in connection with the determination,  assessment,  collection
or payment of any Tax or in connection with the  administration,  implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.

                  "Termination  Date"  is  defined  in  Section  7.1(b)  to this
Agreement.

                  "Termination  Fee" is  defined in  Section  7.3(b)(i)  to this
Agreement.

                                       63
<PAGE>

                  "U.S.  Government"  shall mean the federal  government  of the
United  States  of  America  and  any of  its  branches  and  instrumentalities,
including its  departments,  agencies,  bureaus,  commissions,  boards,  courts,
corporations, offices, and other entities, and any divisions or units thereof.

                  "Voting  Agreements"  is  defined  in  the  Recitals  to  this
Agreement.


                                       64
<PAGE>

                                   EXHIBIT B-1


                 COMPANY SHAREHOLDERS SIGNING VOTING AGREEMENTS



Leo A. Guthart
James H. Simons
Topspin Associates, L.P.
Topspin Partners, L.P.
William P. Crowell
Robert B. Fougner
R. Christopher Chillingworth
Shining Sea Limited
Paul Gauvreau
Regis McKenna
Howard Morgan
William Harris
Richard Walsh
Philip Breeden



                                       65
<PAGE>

                                   EXHIBIT B-3





                  PARENT STOCKHOLDER SIGNING VOTING AGREEMENTS



Anthony Caputo




                                       66