EXHIBIT 10.1
                                                     ------------

                                                     January 18, 2000

















                          AGREEMENT AND PLAN OF MERGER

                                  By and Among

                          HEADS UP TECHNOLOGIES, INC.,

                                INTELLICALL, INC.

                         and H.U.T.I. ACQUISITION, INC.












                          Dated as of January 18, 2000














<PAGE>




                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                  <C>                                                                                          <C>
ARTICLE I.           THE MERGER...................................................................................2

   SECTION 1.1           THE MERGER...............................................................................2
   SECTION 1.2           EFFECTIVE TIME OF THE MERGER.............................................................2
   SECTION 1.3           CONVERSION AND CANCELLATION OF SECURITIES................................................3
   SECTION 1.4           EXCHANGE OF CERTIFICATES.................................................................3
   SECTION 1.5           AGREEMENT BY SHAREHOLDERS................................................................5

ARTICLE II.          DETERMINATION OF EXCHANGE RATIO..............................................................5

   SECTION 2.1           DISCLOSURE SCHEDULES.....................................................................5
   SECTION 2.2           DETERMINATION OF EXCHANGE RATIO..........................................................6
   SECTION 2.3           NO FRACTIONAL SHARES.....................................................................6

ARTICLE III.         REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................7

   SECTION 3.1           ORGANIZATION AND AUTHORITY...............................................................7
   SECTION 3.2           NO BREACH................................................................................8
   SECTION 3.3           CONSENTS AND APPROVALS...................................................................8
   SECTION 3.4           CAPITALIZATION...........................................................................8
   SECTION 3.5           FINANCIAL STATEMENTS.....................................................................8
   SECTION 3.6           ABSENCE OF CERTAIN CHANGES...............................................................9
   SECTION 3.7           ABSENCE OF THE UNDISCLOSED LIABILITIES...................................................9
   SECTION 3.8           COMPLIANCE WITH LAW......................................................................9
   SECTION 3.9           TAXES...................................................................................10
   SECTION 3.10          ABSENCE OF LITIGATION...................................................................10
   SECTION 3.11          TITLE TO PROPERTY.......................................................................10
   SECTION 3.12          INTELLECTUAL PROPERTY...................................................................10
   SECTION 3.13          EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS...........................................11
   SECTION 3.14          MATERIAL CONTRACTS......................................................................13
   SECTION 3.15          LABOR MATTERS...........................................................................14
   SECTION 3.16          ENVIRONMENTAL MATTERS...................................................................14
   SECTION 3.17          INSURANCE...............................................................................15
   SECTION 3.18          VOTE REQUIRED...........................................................................15
   SECTION 3.19          AFFILIATES..............................................................................15
   SECTION 3.20          CERTAIN BUSINESS PRACTICES..............................................................15
   SECTION 3.21          CUSTOMERS AND SUPPLIERS.................................................................16
   SECTION 3.22          BANK ACCOUNTS...........................................................................16
   SECTION 3.23          BUSINESS PLAN...........................................................................16
   SECTION 3.24          YEAR 2000 ISSUES........................................................................16
   SECTION 3.25          PROXY STATEMENT AND OTHER INFORMATION...................................................16
   SECTION 3.26          BROKERS AND FINDERS.....................................................................16


                                      (i)
<PAGE>
ARTICLE IV.          REPRESENTATIONS AND WARRANTIES OF PARENT AND
                     MERGER SUB..................................................................................17

   SECTION 4.1           ORGANIZATION AND AUTHORITY..............................................................17
   SECTION 4.2           NO BREACH...............................................................................18
   SECTION 4.3           CONSENTS AND APPROVALS..................................................................18
   SECTION 4.4           CAPITALIZATION..........................................................................18
   SECTION 4.5           SEC REPORTS; FINANCIAL STATEMENTS.......................................................19
   SECTION 4.6           ABSENCE OF CERTAIN CHANGES..............................................................19
   SECTION 4.7           ABSENCE OF UNDISCLOSED LIABILITIES......................................................19
   SECTION 4.8           COMPLIANCE WITH LAW.....................................................................19
   SECTION 4.9           TAXES...................................................................................20
   SECTION 4.10          ABSENCE OF LITIGATION...................................................................20
   SECTION 4.11          TITLE TO PROPERTY.......................................................................20
   SECTION 4.12          INTELLECTUAL PROPERTY...................................................................21
   SECTION 4.13          EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS...........................................21
   SECTION 4.14          MATERIAL CONTRACTS......................................................................23
   SECTION 4.15          LABOR MATTERS...........................................................................23
   SECTION 4.16          ENVIRONMENTAL MATTERS...................................................................23
   SECTION 4.17          INSURANCE...............................................................................24
   SECTION 4.18          VOTE REQUIRED...........................................................................24
   SECTION 4.19          AFFILIATES..............................................................................24
   SECTION 4.20          CERTAIN BUSINESS PRACTICES..............................................................24
   SECTION 4.21          CUSTOMERS AND SUPPLIERS.................................................................24
   SECTION 4.22          YEAR 2000 ISSUES........................................................................24
   SECTION 4.23          PROXY STATEMENT AND OTHER INFORMATION...................................................24
   SECTION 4.24          BROKERS.................................................................................25

ARTICLE V.           OTHER AGREEMENTS............................................................................25
   SECTION 5.1           ELECTION OF NEW PARENT DIRECTORS AND OFFICERS...........................................25
   SECTION 5.2           CONDUCT OF BUSINESS PENDING MERGER......................................................25
   SECTION 5.3           ACCESS TO INFORMATION...................................................................27
   SECTION 5.4           PREPARATION OF FORM S-4 AND PROXY STATEMENT.............................................28
   SECTION 5.5           AMEX EXCHANGE LISTING...................................................................30
   SECTION 5.6           REASONABLE BEST EFFORTS.................................................................30
   SECTION 5.7           PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY...................................................30
   SECTION 5.8           NOTIFICATION............................................................................30
   SECTION 5.9           MEETINGS OF STOCKHOLDERS................................................................30
   SECTION 5.10          REGULATORY AND OTHER AUTHORIZATIONS.....................................................31
   SECTION 5.11          FURTHER ASSURANCES......................................................................31
   SECTION 5.12          EMPLOYEE BENEFITS.......................................................................31
   SECTION 5.13          MERGER SUB..............................................................................32
   SECTION 5.14          LETTER FROM ACCOUNTANTS.................................................................32
   SECTION 5.15          NO SOLICITATION.........................................................................33


                                      (ii)
<PAGE>
ARTICLE VI.          CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING.............................................34

   SECTION 6.1           CLOSING AND CLOSING DATE................................................................34
   SECTION 6.2           CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, PARENT AND
                         MERGER SUB..............................................................................34
   SECTION 6.3           ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB...........................35
   SECTION 6.4           ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.....................................36

ARTICLE VII.         TERMINATION.................................................................................37

   SECTION 7.1           TERMINATION.............................................................................37
   SECTION 7.2           EFFECT OF TERMINATION...................................................................40
   SECTION 7.3           FEES AND EXPENSES.......................................................................40

ARTICLE VIII.        MISCELLANEOUS...............................................................................40

   SECTION 8.1           SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................................40
   SECTION 8.2           AMENDMENT...............................................................................41
   SECTION 8.3           WAIVER..................................................................................41
   SECTION 8.4           ENTIRE AGREEMENT........................................................................41
   SECTION 8.5           NOTICES.................................................................................41
   SECTION 8.6           GOVERNING LAW...........................................................................42
   SECTION 8.7           DESCRIPTIVE HEADINGS....................................................................42
   SECTION 8.8           PARTIES IN INTEREST.....................................................................42
   SECTION 8.9           COUNTERPARTS............................................................................43
   SECTION 8.10          CERTAIN DEFINITIONS.....................................................................43
   SECTION 8.11          PERSONAL LIABILITY......................................................................43
   SECTION 8.12          BINDING EFFECT, ASSIGNMENT..............................................................43
   SECTION 8.13          SEVERABILITY............................................................................44
   SECTION 8.14          SPECIFIC PERFORMANCE....................................................................44
   SECTION 8.15          LEGAL FEES; COSTS.......................................................................44
   SECTION 8.16          FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE...................................44

</TABLE>
                                     (iii)



<PAGE>




2377311
                          AGREEMENT AND PLAN OF MERGER

         This  Agreement  and  Plan of  Merger  (this  "Agreement"),  dated as
of  January  18,  2000,  is made by and  among  Heads Up Technologies,  Inc., a
Texas  corporation  (the "Company"),  Intellicall,  Inc., a Delaware
corporation  (the "Parent"),  and H.U.T.I. Acquisition, Inc., a Texas
corporation and wholly-owned subsidiary of Parent ("Merger Sub").

                              W I T N E S S E T H:
                               - - - - - - - - - -

         WHEREAS, Merger Sub will merge into the Company (the "Merger") pursuant
to the  Texas  Business  Corporation  Act (the  "TBCA")  and upon the  terms and
subject to the conditions set forth in this Agreement, and pursuant thereto each
outstanding share of Common Stock of the Company,  par value $.01 per share (the
"Company  Common  Stock"),  not owned  directly or  indirectly by the Company or
Parent or their  respective  subsidiaries  will be converted  into the number of
shares of Common  Stock of the  Parent,  par value $.01 per share  (the  "Parent
Common Stock"), to be determined in the manner set forth herein;

         WHEREAS,  the Board of Directors of the Company has determined that the
Merger  is  fair  to,  and in  the  best  interests  of,  the  Company  and  its
shareholders and has approved this Agreement and the  transactions  contemplated
hereby and  recommended  approval of this Agreement by the  shareholders  of the
Company;

         WHEREAS,  the Board of  Directors  of Parent  has  determined  that the
Merger is fair to, and in the best interests of, Parent and its stockholders and
has  approved  this  Agreement  and the  transactions  contemplated  hereby  and
recommended  approval by the  stockholders  of Parent of the  issuance of Parent
Common Stock in connection with this Agreement;

         WHEREAS,  the  Board of  Directors  of  Merger  Sub has  approved  this
Agreement and Parent,  as the sole  stockholder of Merger Sub, will approve this
Agreement promptly after the execution hereof by the parties hereto; and

         WHEREAS,  for federal  income tax  purposes,  it is  intended  that the
Merger qualify as a reorganization under the provisions of section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code");

         NOW,  THEREFORE,  in consideration  of the respective  representations,
warranties,  covenants,  agreements and conditions set forth below,  the parties
hereto, intending to be legally bound, hereby agree as follows:


                                       1
<PAGE>




                                   ARTICLE I.

                                   THE MERGER

Section 1.1       The Merger.

(a) Subject to the terms and conditions  hereof and in accordance with the TBCA,
at the  Effective  Time (as  defined  in Section  1.2):  (i) Merger Sub shall be
merged with and into the Company and the separate  existence of Merger Sub shall
cease;  (ii) the  Company,  as the  surviving  corporation  in the  Merger  (the
"Surviving Corporation"),  (A) shall be a wholly-owned subsidiary of Parent, (B)
shall continue its corporate existence under the laws of the State of Texas, (C)
shall  change its present  name to a name  designated  by Parent,  and (D) shall
succeed to all rights, assets, liabilities and obligations of Merger Sub and the
Company in accordance with the TBCA; (iii) except as provided in Section 1.1(b),
the Articles of Incorporation of the Company,  as in effect immediately prior to
the  Effective  Time,  shall  continue as the articles of  incorporation  of the
Surviving Corporation;  (iv) the Bylaws of the Company, as in effect immediately
prior to the  Effective  Time,  shall  continue  as the bylaws of the  Surviving
Corporation;  (v) the  directors  of the  Merger  Sub  immediately  prior to the
Effective Time shall be the directors of the Surviving Corporation, each to hold
office in  accordance  with the  articles  of  incorporation  and  bylaws of the
Surviving Corporation, and (vi) the officers of the Merger Sub immediately prior
to the Effective Time shall be the officers of the Surviving  Corporation,  each
to hold office in accordance  with the bylaws of the Surviving  Corporation,  in
each case until their  respective  successors  are duly elected or appointed and
qualified.  From and after the  Effective  Time,  the Merger  shall have all the
effects provided by applicable law.

(b)      At the Effective  Time:  (i) The Articles of  Incorporation  of the
Company shall be amended to change the name of the Company to a name designated
by Parent; and (ii) the Articles of Incorporation of the Company shall be
amended to provide as follows:


        The  aggregate  number  of  shares  which  the  corporation  shall  have
        authority to issue is one thousand (1,000), of the par value of one cent
        ($.01) each, to be designated 'Common Stock'."

Section 1.2  Effective  Time of the  Merger.  As soon as  practicable  after the
Closing  Date (as defined in Section  6.1  hereof)  the parties  shall cause the
Merger to be  consummated  by the filing of Articles of Merger (the "Articles of
Merger") with the Secretary of State of Texas,  in such form as required by, and
executed in accordance with the relevant  provisions of, the TBCA, (the date and
time of such  filing,  or such later date or time  agreed upon by Parent and the
Company and set forth therein, being called the "Effective Time").

                                       2
<PAGE>
Section 1.3       Conversion and Cancellation of Securities.

(a) At the  Effective  Time,  each  share of  Company  Common  Stock  issued and
outstanding  immediately  prior to the  Effective  Time  (other  than  shares of
Company Common Stock described in Section 1.3(b) hereof) shall, by virtue of the
Merger and without any action on the part of the holder  thereof,  be  converted
into a number of shares of Parent Common Stock (rounded to four decimal  places)
equal to the Exchange Ratio. The Exchange Ratio shall be the number  established
in the manner described in Article II.

(b) At the  Effective  Time,  each  share of  Company  Common  Stock held in the
treasury of the Company and each share of Company  Common  Stock owned by Parent
or any direct or  indirect  wholly  owned  subsidiary  of the  Company or Parent
immediately  prior to the  Effective  Time,  shall by virtue of the  Merger  and
without any action on the part of the holder thereof, be automatically  canceled
and retired and cease to exist, and no cash,  securities or other property shall
be payable in respect thereof.

(c) At the Effective Time, each share of Merger Sub common stock, par value $.01
per  share  ("Merger  Sub  Common   Stock"),   validly  issued  and  outstanding
immediately  prior to the  Effective  Time  shall,  by virtue of the  Merger and
without any action by the holder thereof,  be converted into one validly issued,
fully paid and nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation ("Surviving Corporation Common Stock").

(d) Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time, the outstanding  shares of Parent Common Stock or Company Common
Stock shall have been changed  into a different  number of shares or a different
class,  by  reason  of  any  stock  dividend,   subdivision,   reclassification,
recapitalization,  split,  combination or exchange of shares, the Exchange Ratio
shall be correspondingly  adjusted to reflect such stock dividend,  subdivision,
reclassification, recapitalization, split, combination or exchange of shares.

Section 1.4       Exchange of Certificates.

(a) Parent's stock transfer agent (or another bank or trust company  selected by
Parent and  reasonably  acceptable to the Company)  shall act as exchange  agent
(the  "Exchange  Agent")  in  connection  with  the  surrender  of  certificates
evidencing shares of Company Common Stock converted into shares of Parent Common
Stock  pursuant to the Merger.  On or prior to the Closing  Date,  Parent  shall
deposit with the Exchange Agent one or more certificates representing the shares
of Parent  Common Stock to be issued in the Merger (the "Merger  Stock"),  which
shares of Merger Stock shall be deemed to be issued at the Effective Time.

(b) As soon as  practicable  after the  Effective  Time,  Parent shall cause the
Exchange  Agent to mail to each person who was, at the Effective  Time, a holder
of  record  of a  certificate  or  certificates  that  immediately  prior to the

                                       3
<PAGE>
Effective  Time  evidenced  outstanding  shares of  Company  Common  Stock  (the
"Certificates")  (i) a letter of transmittal  specifying  that delivery shall be
effected,  and risk of loss and title to the Certificates  shall pass, only upon
delivery of the Certificates to the Exchange Agent, which shall be in a form and
contain any other  provisions as Parent and the Company may reasonably agree and
(ii)  instructions  for use in effecting  the surrender of the  Certificates  in
exchange  for  certificates  representing  the  Merger  Stock.  Upon the  proper
surrender  of  Certificates  to the  Exchange  Agent,  together  with a properly
completed and duly executed  letter of transmittal  and such other  documents as
may be reasonably required by the Exchange Agent, the holder of such Certificate
shall,  subject to the  provisions  of Section  2.3,  be  entitled to receive in
exchange therefor certificates representing the shares of Merger Stock that such
holder has the right to receive  pursuant to the terms hereof (together with any
dividend or distribution  with respect  thereto made after the Effective  Time),
and the Certificate so surrendered shall be canceled. In the event of a transfer
of ownership  of Company  Common  Stock that is not  registered  in the transfer
records of the Company,  a certificate  representing the proper number of shares
of Merger Stock may be issued to a transferee  if the  Certificate  representing
such Company Common Stock is presented to the Exchange Agent, accompanied by all
documents  required  to  evidence  and  effect  such  transfer  and by  evidence
reasonably  satisfactory  to the  Surviving  Corporation  and  Parent  that  any
applicable stock transfer tax has been paid.

(c) Except as  specified  in Section  1.4(h),  after the  Effective  Time,  each
outstanding  Certificate which theretofore  represented shares of Company Common
Stock shall, until surrendered for exchange in accordance with this Section 1.4,
be deemed for all purposes to evidence ownership of the number of full shares of
Parent Common Stock into which the shares of Company Common Stock (which,  prior
to the Effective Time, were represented thereby) shall have been so converted.

(d) Except as otherwise expressly provided herein,  Parent shall pay all charges
and expenses,  including  those of the Exchange  Agent,  in connection  with the
exchange of Certificates  for shares of Merger Stock. Any Merger Stock deposited
with the Exchange Agent  pursuant to Section  1.4(a)  hereof,  and not exchanged
pursuant to Section  1.4(b)  hereof for Company  Common  Stock within six months
after the  Effective  Time,  shall be returned by the Exchange  Agent to Parent,
which shall  thereafter act as exchange agent,  subject to the rights of holders
of Company Common Stock hereunder.

(e) At the  Effective  Time,  the stock  transfer  books of the Company shall be
closed and no transfer of shares of Company  Common  Stock shall  thereafter  be
made.

(f) None of Parent,  Merger Sub, the Company,  the Surviving  Corporation or the
Exchange  Agent will be liable to any holder of shares of Company  Common  Stock
for any shares of Merger Stock,  dividends or distributions with respect thereto
delivered to a state abandoned  property  administrator or other public official
pursuant to any applicable abandoned property, escheat or similar law.

(g) If any  Certificates  shall have been lost,  stolen or  destroyed,  upon the
making of an affidavit of that fact by the person claiming such  Certificates to
be lost,  stolen or destroyed,  and delivery of such bond or other  indemnity as
the Exchange Agent may reasonably  request,  the Exchange Agent will, subject to
the  provisions  of Section 2.2,  deliver in exchange  for such lost,

                                       4
<PAGE>

stolen or destroyed  Certificates one or more  certificates  representing the
Merger Stock deliverable  in respect  thereof,  as determined  in  accordance
with the terms hereof.

(h) No  dividend  or other  distribution  declared  or made with  respect to the
Merger  Stock with a record date after the  Effective  Time shall be paid to the
holder of any  unsurrendered  Certificate  with  respect to the shares of Merger
Stock issuable upon surrender thereof until the holder of such Certificate shall
surrender such  Certificate in accordance  with Section  1.4(b).  Subject to the
effect of applicable  law,  following  surrender of any such  Certificate  there
shall be paid,  without  interest,  to the  record  holder  of each  certificate
representing  whole shares of Merger Stock issued in exchange  therefor:  (i) at
the time of such surrender,  the amount of dividends or other distributions with
a record date after the  Effective  Time  theretofore  paid with respect to such
whole shares of Merger Stock,  and (ii) at the  appropriate  payment  date,  the
amount  of  dividends  or other  distributions  with a  record  date  after  the
Effective  Time but prior to  surrender of such  Certificate  and a payment date
subsequent to such surrender payable with respect to such whole shares of Merger
Stock.

(i) The Parent shall be entitled to deduct and withhold  from the  consideration
otherwise  payable  pursuant to this  Agreement to any former  holder of Company
Common Stock such amounts as the Parent is required to deduct and withhold  with
respect to the making of such payment under the Code, or any other  provision of
federal,  state,  local or foreign tax law.  To the extent  that  amounts are so
withheld by the Parent,  the withheld  amounts shall be treated for all purposes
of this Agreement as having been paid to the former holder of the Company Common
Stock Shares in respect of which such deduction and  withholding was made by the
Parent.

Section 1.5  Agreement by  Shareholders.  Notwithstanding  any  provision to the
contrary,  no holder of Shares of Company  Common  Stock  shall be  entitled  to
receive any Shares of Merger  Stock until such holder  agrees to be bound by the
terms of Section 5.4(c) of this Agreement.

                                  ARTICLE II.

                         DETERMINATION OF EXCHANGE RATIO

Section 2.1       Disclosure Schedules.

(a) The Company and Parent  acknowledge that the Company and the Parent have not
had an adequate  opportunity to (i) prepare the Company  Disclosure  Schedule or
Parent Disclosure Schedule referred to in Articles III and IV, respectively,  or
(ii)  complete its  investigation  of the business and  operations of the other.
Accordingly,  the Company and the Parent shall,  on or before the thirteenth day
after  the date of this  Agreement,  deliver  to the  other  party a  Disclosure
Schedule   setting  forth,   in  reasonable   detail,   any  exceptions  to  the
representations  made by such party in Article III or IV, as the case may be, or
any additional information required to be disclosed pursuant to such Articles.

(b) The  information  provided in the  Company  Disclosure  Schedule  and Parent
Disclosure  Schedule  shall contain a specific  reference to the Section of this
Agreement  to  which  such

                                       5

<PAGE>
information   relates.   Any   inaccuracy   of  any representation  or
warranty  made by the  Company or the Parent (and the Merger Sub) in this
Agreement shall not be deemed to be a breach of such representation or warranty
if such inaccuracy is remedied by the  information  contained in the
Company Disclosure Schedule or Parent Disclosure Schedule, as the case may be.

Section 2.2       Determination of Exchange Ratio.

(a) No later than five days after the Parent  receives the Company's  Disclosure
Schedule,  the Parent  shall  deliver  to the  Company a notice  (the  "Parent's
Notice") that either (i) states the Exchange  Ratio,  which,  subject to Section
2.3,  shall not be less than 1.30 nor more than 1.40,  or (ii)  states  that the
Company  Disclosure  Schedule,  or the due diligence  investigation  theretofore
conducted by the Parent, causes the Board of Directors of the Parent to conclude
that there exists  material  information  concerning the Company that (A) may be
reasonably expected to materially and adversely affect the financial  condition,
operations,  business or prospects of the Company or the  enforceability of this
Agreement,  and (B) if known at the date of this Agreement, the Parent would not
have entered into this  Agreement,  at least not at an Exchange  Ratio of 1.3 or
higher.  If the Parent's Notice contains the statement  described in clause (ii)
of the  preceding  sentence,  then the Parent may, at its option:  (i) within 10
days  after  the  date on which  the  Parent  receives  the  Company  Disclosure
Schedule,  terminate this Agreement  pursuant to Section 7.1(c); or (ii) proceed
with the transactions  contemplated by this Agreement, with an Exchange Ratio of
1.3. If the Parent's Notice states an Exchange Ratio of 1.3 or higher,  then the
Exchange Ratio stated in the notice shall, subject to Section 2.3, be conclusive
and binding on each party,  and shall be the Exchange Ratio for purposes of this
Agreement, unless within five business days after its receipt of both the Parent
Disclosure  Schedule and the Parent's Notice, the Company delivers to the Parent
notice  stating that (x) the Parent  Disclosure  Schedule,  or the due diligence
investigation  conducted  by the  Company,  causes the Board of Directors of the
Company to conclude that there exists material information concerning the Parent
that may be reasonably expected to materially and adversely affect the financial
condition,  operations,  business  of the Parent or the  enforceability  of this
Agreement, and (y) if known at the date of this Agreement, the Company would not
have entered into this Agreement, at least not at the Exchange Ratio proposed by
the Parent.  If the Company  delivers  such written  notice within such five day
period,  then the Company and the Parent  shall  negotiate  in good faith with a
view toward  agreement upon the amount of the Exchange Ratio. If the Company and
the Parent are unable to resolve  their  differences  within  five days from the
Parent's receipt of the Company's notice of objection,  either party may, at its
option terminate this Agreement pursuant to Section  7.1(b)(iii) or 7.1(c)(iii),
as appropriate.

(b) If the Company  and the Parent  establish  an  Exchange  Ratio in the manner
provided  above,  they will promptly  enter into an amendment of this  Agreement
modifying  Section 1.3 of this Agreement to provide for the agreed upon Exchange
Ratio.

Section 2.3 No Fractional Shares. No certificates or scrip evidencing fractional
shares of Merger Stock shall result from the  application of the Exchange Ratio.
Instead,  if the Exchange Ratio  established in the manner  described in Section
2.2 would otherwise result in a fractional interest, the Exchange Ratio shall be
adjusted  so that  (a) if the  fractional

                                       6

<PAGE>
interest  is less  than one half of a share,  the  interest  will be  eliminated
or rounded  down to the nearest full share,  and (b) if the fractional
interest is equal to or greater than one half of a share, the interest will be
rounded up to the nearest full share.

                                  ARTICLE III.

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         Except as set forth on the  disclosure  letter to be  delivered  by the
Company  to the  Parent  pursuant  to  Section  2.1 (the  "Company's  Disclosure
Schedule"), the Company represents and warrants to Parent as follows:

Section 3.1       Organization and Authority.

(a) The Company is a corporation  duly organized,  validly  existing and in good
standing under the laws of the State of Texas, has all requisite corporate power
and  authority  to own,  lease and  operate its  properties  and to carry on its
business as it is now being conducted and is duly qualified and in good standing
to do  business  in each  jurisdiction  in  which  the  nature  of the  business
conducted  by it or the  ownership  or  leasing  of its  properties  makes  such
qualification  necessary,  other than where the failure to be so duly  qualified
and in good standing would not have a Company Material Adverse Effect. (The term
"Company  Material  Adverse  Effect"  as used in this  Agreement  shall mean any
change or effect that,  individually  or when taken together with all other such
changes or effects,  would be  materially  adverse to the  financial  condition,
operations or current business of the Company,  excluding,  however, all changes
or effects caused by general economic or  industry-wide  conditions or resulting
from any change in law or GAAP (as  defined in Section  3.5).) The  Company  has
delivered true and complete copies of its articles of incorporation  and by-laws
to the Parent.  The Company has all requisite  corporate  power and authority to
execute  and  deliver  this  Agreement  and  to  consummate   the   transactions
contemplated hereby. All necessary action,  corporate or otherwise,  required to
have been taken by or on behalf of it by  applicable  law,  its  certificate  of
incorporation or otherwise to authorize (i) the approval, execution and delivery
on its behalf of this  Agreement  and (ii) its  performance  of its  obligations
under this  Agreement  and the  consummation  of the  transactions  contemplated
hereby has been  taken,  except  that the  transactions  must be approved by the
stockholders of the Company.  This Agreement constitutes the Company's valid and
binding agreement,  enforceable  against it in accordance with its terms, except
(A) as the same may be limited by applicable bankruptcy,  insolvency, moratorium
or similar  laws of general  application  relating  to or  affecting  creditors'
rights,  including  without  limitation,  the effect of  statutory or other laws
regarding  fraudulent  conveyances and preferential  transfers,  and (B) for the
limitations imposed by general principles of equity.

(b) The Company does not have any subsidiary (as that term is defined in Section
8.10(e)).  Except as  disclosed  in  Section  2.1(b) of the  Company  Disclosure
Schedule,  the Company does not directly or  indirectly  own any interest in any
other corporation,  partnership,  joint venture or other business association or
entity which is material to the Company.

                                       7

<PAGE>
Section 3.2 No Breach.  The execution and delivery of this Agreement do not, and
the consummation of the transactions  contemplated  hereby will not, (i) violate
or conflict with the Company's  articles  certificate of incorporation or bylaws
or (ii) constitute a breach or default (or an event that with notice or lapse of
time or both would  become a breach or default) or give rise to any lien,  third
party right of termination,  cancellation, material modification or acceleration
under any  agreement,  understanding  or undertaking to which the Company or any
subsidiary  is a party  or by which  it is  bound,  except  where  such  breach,
default,  lien,  third party right,  cancellation,  modification or acceleration
would  not  have a  Company  Material  Adverse  Effect,  or (iii)  constitute  a
violation of any law, rule or regulation to which the Company is subject.

Section 3.3 Consents and  Approvals.  Neither the  execution and delivery by the
Company  of  this  Agreement  nor  the   consummation  by  the  Company  of  the
transactions contemplated hereby will require the Company to obtain any consent,
approval,  authorization  or permit of, or to make any  filing  with or give any
notification to, any governmental or regulatory authority, except (i) for filing
of the  Articles  of Merger  pursuant  to the TBCA and (ii) where the failure to
obtain such  consents,  approvals,  authorizations  or permits,  or to make such
filings or  notifications,  would not prevent the Company  from  performing  its
obligations  under this  Agreement  without  having a Company  Material  Adverse
Effect.

Section 3.4       Capitalization.

(a) The  Company's  authorized  capital stock  consists of 20,000,000  shares of
Company  Common Stock,  of which  8,388,400  were issued and  outstanding  as of
January 1, 2000 (with zero shares held in  treasury).  Since January 1, 2000, no
shares of Company  Common Stock were issued.  As of January 1, 2000,  there were
outstanding  options and warrants to purchase  530,000  shares of Company Common
Stock with no  warrants  or option  issued  after  January 1, 2000.  Each of the
issued shares of capital stock of the Company is duly authorized, validly issued
and fully paid and  nonassessable,  and has not been issued in violation of (nor
are any of the authorized  shares of capital stock of, or other equity interests
in, the Company subject to) any preemptive or similar rights created by statute,
the  Articles of  Incorporation  or Bylaws of the Company,  or any  agreement to
which the  Company is a party or is bound.  Except for such  stock  options  and
warrants,  there are no existing options,  warrants,  calls,  subscriptions,  or
other rights or other agreements or commitments obligating the Company to issue,
transfer or sell any shares of capital stock of the Company. There are no voting
trusts or other  agreements  or  understandings  to which the Company is a party
with respect to the voting of capital stock of the Company.

(b) No bonds, debentures,  notes or other indebtedness of the Company having the
right to vote (or convertible into or exchangeable or exercisable for securities
having  the  right to vote) on any  matters  on which  stockholders  may vote is
issued or outstanding.

Section 3.5 Financial  Statements.  The Company has delivered to the Parent true
and complete  copies of (i) its balance sheets as of December 31, 1997 and 1998,
(ii) its statements of operations,  stockholders' equity and cash flows for each
of the three fiscal  years in the period  ended  December 31, 1998 and (iii) the
notes  thereto,  certified by Deloitte & Touche LLP,  whose reports

                                       8

<PAGE>
thereon are included therewith.  Such financial  statements were prepared in
accordance with United States  generally  accepted  accounting  principles
("GAAP") and present fairly the Company's  financial  position and the results
of its  operations and cash flows as of the relevant dates thereof and for the
periods covered thereby.  The Company has also delivered to the Parent true and
complete copies of (i) its balance  sheets as of  September  30,  1998 and
September  30,  1999,  (ii) its consolidated  statements of operations,
stockholder's equity and cash flows for the nine months ended  September 30,
1998 and 1999 and (iii) the notes  thereto.  Such unaudited  financial
statements were prepared in accordance with GAAP, and present  fairly  the
Company's  financial  position  and  the  results  of  its operations  and
cash flows as of the relevant  dates thereof and for the periods covered
thereby, subject to year-end adjustments.

Section 3.6       Absence of Certain Changes.

(a) Except as otherwise disclosed in the Company's Disclosure  Statement,  since
September 30, 1999 there have not been any events or conditions of any character
that, individually or in the aggregate,  have or would reasonably be expected to
have a Company Material Adverse Effect.

(b) During the period from September 30, 1999 to the date of this Agreement, the
Company has not engaged in any conduct that is proscribed during the period from
the date of this  Agreement to the Effective  Time by clauses (i) through (x) of
Section 5.2(b).

Section 3.7 Absence of the  Undisclosed  Liabilities.  The Company does not have
any material indebtedness,  liability or obligation of the type required by GAAP
to be reflected on a balance sheet that is not reflected or reserved  against in
the balance  sheet,  dated as of September 30, 1999,  delivered to the Parent or
otherwise disclosed in Section 3.7 of the Company Disclosure  Statement,  except
for such  indebtedness,  liabilities or obligations which have arisen after such
date in the ordinary course of business.

Section 3.8  Compliance  With Law. The Company holds all  licenses,  franchises,
certificates,   consents,  permits  and  authorizations  from  all  governmental
authorities  necessary for the lawful conduct of its business,  except where the
failure to hold any of the foregoing would not have a Company  Material  Adverse
Effect.  The  Company  has not  violated,  nor is it in  violation  of, any such
licenses, franchises,  certificates,  consents, permits or authorizations or, to
the Company's knowledge,  any applicable statutes,  laws, ordinances,  rules and
regulations  (including,  without  limitation,  any of the foregoing  related to
occupational  safety,  environmental  protection,   unfair  competition,   labor
practices or corrupt  practices) of any governmental  authorities,  except where
such violations do not, and insofar as reasonably can be foreseen will not, have
a Company Material  Adverse Effect,  and the Company has not received any notice
from a  governmental  or  regulatory  authority  within  three years of the date
hereof of any such violation.

                                       9

<PAGE>
Section 3.9       Taxes.

(a) All Tax Returns  required to be filed  before the date hereof by the Company
with respect to any of its income, properties or operations, are in all material
respects true, complete and correct and have been duly filed in a timely manner,
and all taxes shown as due on such Tax Returns have been paid,  except where the
failure to so file or pay would not have a Company Material Adverse Effect.  For
purposes of this Agreement,  "Tax Return" means any return,  report,  statement,
information  statement and the like required to be filed with any authority with
respect to any tax imposed by any governmental authority.

(b) To the  Company's  knowledge,  (i) there are no  claims,  investigations  or
assessments pending or threatened against the Company for any alleged deficiency
in taxes, and (ii) there is no audit or investigation  currently being conducted
that could cause the Company to be liable for any taxes, which in any case would
have a Company Material Adverse Effect.

(c) The Company has complied in all material  respects with all tax  withholding
provisions of applicable federal, state and local laws and have paid over to the
proper  governmental  authorities all amounts required to be so withheld or paid
over  before the date  hereof,  except  where the  failure to so withhold or pay
would not have a Company Material Adverse Effect.

Section  3.10  Absence  of  Litigation.  There are no  claims,  actions,  suits,
proceedings  or  investigations  pending or, to the  knowledge  of the  Company,
threatened  against the  Company,  or any  properties  or rights of the Company,
before any court,  arbitrator  or  administrative,  governmental  or  regulatory
authority  or body,  domestic  or  foreign,  that,  in the  event of an  adverse
decision or outcome,  could  reasonably  be expected to have a Company  Material
Adverse Effect.

Section 3.11 Title to Property.  The Company has defensible  title to all of its
properties  and assets,  free and clear of all liens,  charges and  encumbrances
except  liens  for  taxes  not yet due and  payable  and  such  liens  or  other
imperfections  of title, if any, as do not materially  detract from the value of
or  interfere  with the present use of the  property  affected  thereby or which
would not have a Company  Material Adverse Effect.  To the Company's  knowledge,
all leases  pursuant  to which the  Company  leases from others real or personal
property are valid and effective in accordance with their respective  terms, and
there is not, to the  knowledge  of the Company,  under any of such leases,  any
existing  default or event of default  (or event  which with  notice or lapse of
time, or both,  would  constitute a material  default or event of default and in
respect of which the  Company  has not taken  adequate  steps to prevent  such a
default  from   occurring)   except   where  the  lack  of  such   validity  and
effectiveness,  or the  existence of such default or event of default  would not
have a Company Material Adverse Effect.

Section 3.12      Intellectual Property.

(a) Section 3.12 of the Company  Disclosure  Schedule lists each existing United
States and foreign patent, trademark, trade name, service mark, copyright, trade
secret, and applications therefor that are material to the Company's business as
currently conducted (the "Company

                                       10

<PAGE>
Intellectual  Property Rights").  The Company owns, or possesses  adequate
licenses or other valid rights to use, the Company Intellectual Property Rights.

(b) The conduct of the business of the Company as now conducted does not, to the
Company's  knowledge,  infringe  any valid  patents,  trademarks,  trade  names,
service marks or  copyrights of others.  The  consummation  of the  transactions
contemplated  hereby  will not result in the loss or  impairment  of any Company
Intellectual  Property Rights. To the best of the Company's knowledge,  no third
party has interfered with, infringed upon, misappropriated, diluted, violated or
otherwise  come into conflict  with any Company  Intellectual  Property  Rights,
except  for  misappropriations  and  violations  which,  individually  or in the
aggregate, would not have a Material Adverse Effect on the Company.

(c)      The Company has started the process for two  internet-related  patent
applications  and has formally  established the date of invention.

Section 3.13      Employee Benefit Plans; Employment Agreements.

(a) The  Company's  Disclosure  Schedule  lists all employee  benefit  plans (as
defined in Section 3(3) of the Employee  Retirement Income Security Act of 1974,
as amended  ("ERISA")) and all bonus, stock option,  stock purchase,  incentive,
deferred  compensation,  supplemental  retirement,  severance  and other similar
fringe or employee benefit plans,  programs or arrangements,  and any current or
former employment or executive compensation or severance agreements,  written or
otherwise,  for the benefit of, or relating to, any employee of the Company, any
trade  or  business  (whether  or  not  incorporated)  which  is a  member  of a
controlled group including the Company or which is under common control with the
Company (a "Company ERISA  Affiliate")  within the meaning of section 414 of the
Code,  as well as each plan with respect to which the Company or a Company ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or was
terminated)  or  Section  4212(c)  of ERISA  (together,  the  "Benefit  Plans"),
excluding   former   agreements   under  which  the  Company  has  no  remaining
obligations.  Copies of each of the following,  to the extent  applicable,  have
been made available to Parent with respect to each Benefit Plan: the most recent
annual report (Form 5500) filed with the Internal  Revenue  Service (the "IRS"),
the plan document, the trust agreement, the most recent summary plan description
if required by ERISA, the most recent actuarial report or valuation  relating to
each  Benefit  Plan  subject  to  Title  IV  of  ERISA,   and  the  most  recent
determination letter issued by the IRS with respect to any Benefit Plan intended
to be qualified under section 401 of the Code.

(b) With  respect  to each  Benefit  Plan,  no event has  occurred  and,  to the
knowledge of the Company,  there exists no condition or set of  circumstances in
connection  with which the Company could be subject to any  liability  under the
terms of such Benefit Plan,  ERISA, the Code, or any other applicable law, other
than any condition or set of circumstances that could not reasonably be expected
to have a Company Material Adverse Effect.

(c) Each Benefit Plan intended to be qualified under section 401 of the Code (i)
satisfies  in  form  the  requirements  of such  section  except  to the  extent
amendments  are not required by law

                                       11

<PAGE>
to be made until a date after the  Effective Time, (ii) has received a
favorable  determination letter from the IRS regarding such  qualified
status,  and (iii) has not,  since  receipt of the most  recent favorable
determination  letter,  been  amended in a way that  would  adversely
affect its qualified status.

(d) There are no actions,  suits,  or claims  pending (other than routine claims
for benefits) or, to the knowledge of the Company,  threatened  against, or with
respect to, any Benefit Plan or its assets that could  reasonably be expected to
have a Company Material Adverse Effect.

(e) To the  knowledge of the  Company,  there is no matter  pending  (other than
routine qualification  determination  filings) with respect to any Benefit Plans
before the IRS,  the U.S.  Department  of Labor,  the Pension  Benefit  Guaranty
Corporation (the "PBGC") or any other governmental authority.

(f) All material  contributions required to be made to Benefit Plans pursuant to
their terms and the provisions of ERISA,  the Code, or any other  applicable law
have been timely made.

(g) As to each Benefit Plan subject to Title IV of ERISA,  (i) there has been no
event or condition which presents a significant risk of plan  termination,  (ii)
no accumulated funding deficiency,  whether or not waived, within the meaning of
Section  302 of ERISA or  section  412 of the Code has been  incurred,  (iii) no
reportable  event  within the  meaning  of Section  4043 of ERISA (for which the
disclosure requirements of Regulation section 4043.1 et seq., promulgated by the
PBGC,  have not been waived) has occurred  within six years prior to the date of
this Agreement, (iv) no notice of intent to terminate such Benefit Plan has been
given under Section 4041 of ERISA,  (v) no proceeding has been instituted  under
Section 4042 of ERISA to terminate  such Benefit Plan,  (vi) no liability to the
PBGC has been incurred (other than with respect to required  premium  payments),
(vii) no withdrawal liability,  within the meaning of Section 4201 of ERISA, has
been incurred, which withdrawal liability has not been satisfied, and (viii) the
assets of the Benefit Plan equal or exceed the  actuarial  present  value of the
benefit  liabilities,  within the  meaning of Section  4041 of ERISA,  under the
Benefit  Plan,  based  upon  reasonable  actuarial  assumptions  and  the  asset
valuation principles established by the PBGC.

(h)      No Benefit Plan provides retiree medical or retiree life insurance
benefits to any person.

(i) Neither the Company nor any Company ERISA  Affiliate  contributes  or has an
obligation to contribute, and has not within six years prior to the date of this
Agreement  contributed  or had an obligation to contribute  to, a  multiemployer
plan within the meaning of Section 3(37) of ERISA.

(j) The Company's Disclosure Schedule sets forth a true and complete list, as of
the date of this  Agreement,  of each  current  or former  employee,  officer or
director of the Company who holds any option to purchase Company Common Stock as
of the date hereof  (collectively,  the "Company Stock Options"),  together with
the number of shares of Company  Common  Stock which are subject to such option,
the date of grant of such option,  the extent to which such option is vested (or
will

                                       12

<PAGE>

become  vested  within six months from the date hereof,  or as a result of,
the Merger), the option price of such option (to the extent determined as of the
date hereof),  whether such option is intended to qualify as an incentive  stock
option  within the  meaning of Section  422(b) of the Code (an  "ISO"),  and the
expiration  date of such option.  The  Company's  Disclosure  Schedule also sets
forth the total number of such ISOs and such nonqualified  options.  The Company
has  furnished  Parent  with  complete  copies of the plans  (collectively,  the
"Company Option Plans") pursuant to which the Company Stock Options were issued.

(k) Prior to the 30th day after the date of this  Agreement,  the  Company  will
make available to Parent: (i) copies of all employment  agreements with officers
of the  Company;  (ii) a schedule  listing all  officers of the Company who have
executed  a  non-competition  agreement  with  the  Company;  (iii)  copies  (or
descriptions) of all severance agreements,  programs and policies of the Company
with or relating to its employees,  except programs and policies  required to be
maintained by law; and (iv) copies of all plans, programs,  agreements and other
arrangements  of the Company  with or relating to its  employees  which  contain
change in control provisions.

(l) The  Company has not taken any of the  following  or other  similar  actions
since  January 1, 2000:  the  acceleration  of vesting,  waiving of  performance
criteria  or the  adjustment  of awards or any other  actions  permitted  upon a
change in control of the Company with respect to any of the Benefit Plans or any
of the plans or other arrangements described in Section 3.13(j).

Section 3.14      Material Contracts.

(a) Section  3.14 of the Company  Disclosure  Schedule  contains a complete  and
accurate  list,  and the Company has  delivered  to the Parent true and complete
copies, of the following (a "Company Material Contract"):

(i)      each  contract that  involves  performance  of services or delivery of
         goods or materials by or to the Company of an amount or value
         in excess of $100,000;

(ii)     each  contract,   including  notes,  loan  agreements  and  other  debt
         instruments,  that  was not  entered  into in the  ordinary  course  of
         business and that involves  potential  expenditures  or receipts of the
         Company in excess of $100,000;

(iii)    each lease,  rental or occupancy  agreement,  license,  installment and
         conditional sale agreement,  and other contract affecting the ownership
         of,  leasing of, title to, use of, or any  leasehold or other  interest
         in, any real or personal  property (except personal property leases and
         installment and conditional sales agreements having a value per item or
         aggregate  payments of less than  $250,000  and with terms of less than
         one year);

(iv)     each joint venture,  partnership,  and other contract  (however  named)
         involving a sharing of profits,  losses,  costs,  or liabilities by the
         Company with any other person;

                                       13

<PAGE>

(v)      each contract containing covenants that in any way purport to
         restrict the business activity of the Company;

(vi)     each  contract  providing  for  payments  to or by any person  based on
         sales,  purchases or profits of the Company, other than direct payments
         for goods or services;

(vii)    each power of attorney granted by the Company that is currently
         effective and outstanding;

(viii)   each contract of the Company for capital expenditures in excess
         of $50,000;

(ix)     each written warranty,  guaranty,  and or other similar  undertaking
         with respect to contractual  performance  extended by the Company;

(x)      each  contract  pursuant to which the Company has granted  preemptive,
         first  refusal,  registration  or similar  rights with respect to its
         capital stock; and

(xi)     any other contract that is material to the condition, operations,
         business or prospects of the Company.

(b) All Company Material Contracts are in full force and effect, the Company has
performed  its  obligations  thereunder  to date and,  to the  knowledge  of the
Company,  each other party thereto has performed its  obligations  thereunder to
date, other than any failure of any such Company Material Contract to be in full
force and effect or any  nonperformance  thereof  that could not  reasonably  be
expected to have a Company Material Adverse Effect.

(c) The Company has no reason to believe  that it will not be able to  negotiate
and enter into a  satisfactory  agreement  relating  to the matters set forth on
Section 3.14(c) of the Company Disclosure Schedule.

Section 3.15      Labor Matters.

(a) There are no  controversies  pending or, to the  knowledge  of the  Company,
threatened,  between the Company and any of its employees,  which  controversies
have or may reasonably be expected to have a Company Material Adverse Effect.

(b) The Company is not a party to any collective  bargaining  agreement or other
labor union contract  applicable to persons employed by the Company nor does the
Company know of any activities or proceedings of any labor union to organize any
such employees.

(c) The Company has no  knowledge  of any strikes,  slowdowns,  work  stoppages,
lockouts or threats thereof, by or with respect to any employees of the Company.

Section 3.16  Environmental  Matters.  Except in all cases as, in the aggregate,
have not had and could not  reasonably  be expected  to have a Company  Material
Adverse Effect, the Company,  to

                                       14

<PAGE>

the Company's  knowledge,  (i) has obtained all applicable permits,  licenses
and other  authorizations which are required under foreign, federal, state or
local laws relating to pollution or protection of the environment,  including
laws  relating to  emissions,  discharges,  releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into
ambient  air,  surface  water,  ground water or land or otherwise relating to
the manufacture,  processing, distribution, use, treatment, storage, disposal,
transport  or handling of  pollutants,  contaminants  or hazardous or toxic
materials or wastes by the Company (or its agents);  (ii) is in compliance
with  all  terms  and  conditions  of  such  required   permits,   licenses  and
authorizations,   and  also  are  in  compliance  with  all  other  limitations,
restrictions,  conditions, standards, prohibitions,  requirements,  obligations,
schedules and timetables  contained in such laws or contained in any regulation,
code, plan, order, decree,  judgment,  notice or demand letter issued,  entered,
promulgated  or  approved  thereunder;  (iii) is not  aware of nor has  received
notice of any event,  condition,  circumstance,  activity,  practice,  incident,
action or plan which is reasonably likely to interfere with or prevent continued
compliance  with or  which  would  give  rise  to any  common  law or  statutory
liability, or otherwise form the basis of any claim, action, suit or proceeding,
based on or resulting  from the Company's  (or any of its agents')  manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling or the  emission,  discharge  or release into the  environment,  of any
pollutant,  contaminant,  or hazardous or toxic material or waste;  and (iv) has
taken all actions necessary under applicable  requirements of foreign,  federal,
state or local laws,  rules or regulations to register any products or materials
required to be registered by the Company (or any of its agents) thereunder.

Section 3.17      Insurance.  The Company  maintains  general  liability and
other business  insurance that the Company  believes to be reasonably prudent
for its business.

Section  3.18  Vote  Required.  The  affirmative  vote of the  holders  of a 2/3
majority of the outstanding  Common Stock is the only vote of the holders of any
class or series  of the  Company's  capital  stock  necessary  to  approve  this
Agreement.

Section 3.19  Affiliates.  The  Company's  Disclosure  Schedule  identifies  all
persons who, to the knowledge of the Company,  may be deemed to be affiliates of
the  Company  under Rule 145 of the  Securities  Act of 1933,  as  amended  (the
"Securities  Act").  The Company will use its reasonable best efforts to deliver
to Parent  within 30 days after the date of this  Agreement  an executed  letter
agreement,  in form reasonably acceptable to Parent, from each of the persons so
identified,  in which  such  person  acknowledges,  and  agrees to abide by, the
requirements of affiliates under Rule 145.

Section 3.20 Certain Business  Practices.  None of the Company or any directors,
officers, agents or employees of the Company has (a) used any funds for unlawful
contributions,  gifts,  entertainment  or other  unlawful  expenses  relating to
political  activity,  (b) made any  unlawful  payment  to  foreign  or  domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated  any  provision of the Foreign  Corrupt  Practices  Act of
1977,  as amended  (the  "FCPA"),  (c)  consummated  any  transaction,  made any
payment,  entered into any

                                       15

<PAGE>

agreement or arrangement or taken any other action in violation of Section
1128B(b) of the Social  Security  Act, as amended,  or (d) made any other
unlawful payment, which in any case would have a Company Material Adverse
Effect.

Section 3.21  Customers and  Suppliers.  Section 3.21 of the Company  Disclosure
Schedule sets forth the 10 most significant third-party suppliers to, and the 10
most significant  third-party customers of, the Company (in terms of payments to
or by such person) during the  eleven-month  period ending on November 30, 1999.
To the knowledge of the Company,  there is no present intent of any  significant
customer or supplier of the Company to  discontinue or  substantially  alter its
relationship with the Company or do so upon consummation of the Merger.

Section 3.22 Bank  Accounts.  Schedule 3.22 of the Company  Disclosure  Schedule
sets forth each bank, savings  institution and other financial  institution with
which  the  Company  has an  account  or safe  deposit  box and the names of all
persons authorized to draw thereon or have access thereto.

Section 3.23 Business  Plan.  The Company has delivered to the Parent a true and
accurate  copy of its  business  plan for the year 2000.  Except as disclosed in
Section 3.23 of the Company  Disclosure  Schedule,  the Company has no reason to
believe that the plans, objectives,  actions and projections contemplated by the
business plan will not be realized.

Section 3.24 Year 2000 Issues. Except for matters which, individually and in the
aggregate,  would  not  have a  Material  Adverse  Effect  on the  Company,  all
proprietary  and  third-party  licensed  computer  systems,  including  computer
hardware  and  software,  owned,  leased or licensed by the Company and computer
software incorporated in products manufactured by the Company (a) can accurately
and without  interruption  recognize and manipulate date information relating to
dates prior to, on and after January 1, 2000 and (b) can  accurately and without
interruption  interact  with  other year 2000  compliant  computer  systems  and
computer  software in a way that does not compromise  their ability to correctly
recognize the advent of the year 2000 or to accurately and without  interruption
recognize  and  manipulate  date  information  relating to dates prior to, on or
after  January 1, 2000.  The Company has not  experienced  any year 2000 related
problems to date and it does not anticipate that it will have to incur any costs
in the future to achieve year 2000 compliance of its computer systems, hardware,
software, or products.

Section 3.25 Proxy  Statement  and Other  Information.  None of the  information
related to Company  which is supplied by the Company for  inclusion in the Proxy
Statement  described  in  Section  5.4(a)  hereof  will,  at the time the  Proxy
Statement is mailed or at the time of the meeting of  stockholders  to which the
Proxy Statement relates, contain any untrue statement 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,  except that no
representation  or warranty is otherwise made by the Company with respect to the
Proxy Statement.

Section 3.26 Brokers and Finders.  Neither the Company nor any of its  officers,
directors  or  employees  has  employed  any  broker or finder or  incurred  any
liability for any  brokerage  fees,  commissions  or finder's fees in connection
with the transactions  contemplated  herein,  except that

                                       16

<PAGE>

the Company intends to employ a financial advisor. As soon as practicable,
the Company will deliver to Parent a copy of all agreements pursuant to which
such financial advisor will be entitled  to any  payment  relating  to the
transactions  contemplated  by this Agreement.

                                  ARTICLE IV.

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

         Except as set forth on the  disclosure  letter to be  delivered  by the
Parent and the Merger Sub to the Company  pursuant to Section 2.1 (the "Parent's
Disclosure  Schedule"),  Parent  and  Merger Sub each,  jointly  and  severally,
represents and warrants to the Company as follows:

Section 4.1       Organization and Authority.

(a) Each of the  Parent  and the Merger  Sub is a  corporation  duly  organized,
validly  existing and in good standing  under the laws of the State of Delaware,
in the case of Parent,  and Texas,  in the case of Merger Sub, has all requisite
corporate  power and authority to own,  lease and operate its  properties and to
carry on its business as it is now being  conducted and is duly qualified and in
good  standing to do business  in each  jurisdiction  in which the nature of the
business  conducted by it or the  ownership or leasing of its  properties  makes
such  qualification  necessary,  other  than  where  the  failure  to be so duly
qualified and in good standing would not have a Parent Material  Adverse Effect.
(The term "Parent  Material Adverse Effect" as used in this Agreement shall mean
any change or effect that,  individually  or when taken  together  with all such
other  changes  or  effects,  would  be  materially  adverse  to  the  financial
condition,  operations or current business of Parent,  excluding,  however,  all
changes or effects  caused by general  economic or  industry-wide  conditions or
resulting from any change in law or GAAP.) It has all requisite  corporate power
and  authority  to execute and deliver  this  Agreement  and to  consummate  the
transactions  contemplated hereby. All necessary action, corporate or otherwise,
required to have been taken by or on behalf of it by applicable law, its charter
document or otherwise to authorize (i) the  approval,  execution and delivery on
its behalf of this Agreement and (ii) its performance of its  obligations  under
this Agreement and the consummation of the transactions  contemplated hereby has
been taken,  except that the transactions  must be approved by its stockholders.
This Agreement constitutes its valid and binding agreement,  enforceable against
it in  accordance  with its  terms,  except  (A) as the same may be  limited  by
applicable  bankruptcy,  insolvency,  moratorium  or  similar  laws  of  general
application  relating  to or  affecting  creditors'  rights,  including  without
limitation,   the  effect  of  statutory  or  other  laws  regarding  fraudulent
conveyances and preferential  transfers,  and (B) for the limitations imposed by
general principles of equity.

(b) The Parent does not have any subsidiary.  Except as disclosed in Section 4.1
on the Parent's Disclosure Schedule,  Parent does not directly or indirectly own
any  interest  in any other  corporation,  partnership,  joint  venture or other
business association or entity which is material to Parent.

                                       17

<PAGE>

Section 4.2 No Breach.  Assuming  that the consents  described in Section 4.2 of
the Parent Disclosure Schedule are obtained,  the execution and delivery of this
Agreement do not, and the consummation of the transactions  contemplated  hereby
will not, (i) violate or conflict with its charter or bylaws or (ii)  constitute
a breach or default (or an event that with notice or lapse of time or both would
become a breach  or  default)  or give rise to any lien,  third  party  right of
termination,  cancellation,  material  modification  or  acceleration  under any
agreement,  understanding  or  undertaking  to  which  it is a party or by which
Parent is bound,  except where such breach,  default,  lien,  third party right,
cancellation,  modification  or  acceleration  would not have a Parent  Material
Adverse Effect,  or (iii)  constitute a violation of any law, rule or regulation
to which Parent is subject.

Section 4.3 Consents and  Approvals.  Neither the execution and delivery of this
Agreement by it nor its  consummation of the  transactions  contemplated  hereby
will require Parent or Merger Sub to obtain any consent, approval, authorization
or permit  of,  or to make any  filing  with or give any  notification  to,  any
governmental or regulatory authority,  except (i) for filings required under the
Securities  Exchange Act of 1934 (the  "Exchange  Act"),  (ii) for filing of the
Certificate of Merger  pursuant to the DGCL,  (iii) for  registration  of Parent
Company  Stock  and  related  filings  under  the  Securities  Act of 1933  (the
"Securities  Act") and  applicable  state  securities  or blue sky laws and (iv)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or  notifications,  would not prevent it from performing
its obligations  under this Agreement  without having a Parent Material  Adverse
Effect.

Section 4.4       Capitalization.

(a) Parent's  authorized  capital  stock  consists of (i)  20,000,000  shares of
Parent Common  Stock,  of which  12,080,175  were issued and  outstanding  as of
September 30, 1999, and (ii) 1,000,000 shares of Preferred Stock, par value $.01
per share,  of which 0 shares were issued and  outstanding  as of September  30,
1999.  Since  September 30, 1999,  1,000,000  shares of Parent Common Stock have
been  issued.  No other shares of Parent  Common Stock have been issued,  except
upon  exercise  of  employee  stock  options  or upon  conversion  of  shares of
Preferred Stock or pursuant to the Parent's  Employee Stock Purchase Plan and no
additional shares of Preferred Stock have been issued. As of September 30, 1999,
there were  outstanding  options to purchase  4,588,768  shares of Parent Common
Stock and no options  have been granted  after  September  30, 1999,  except for
options granted to employees in the ordinary course of business  consistent with
past practice. As of the date of this Agreement,  warrants to purchase 2,097,123
shares of Parent Common Stock are issued outstanding.  Each of the issued shares
of  capital  stock  of, or other  equity  interests  in,  of the  Parent is duly
authorized,  validly issued and, in the case of shares of capital  stock,  fully
paid and nonassessable, and have not been issued in violation of (nor are any of
the  authorized  shares of capital  stock of, or other equity  interests in, the
Parent  subject to) any  preemptive or similar  rights  created by statute,  the
Certificate of Incorporation or Bylaws of the Parent,  or any agreement to which
the Parent is a party or is bound.

(b) Except as disclosed  in Section 4.4 of the Parent  Disclosure  Schedule,  no
bonds, debentures, notes or other indebtedness of the Parent having the right to
vote (or convertible  into or

                                       18

<PAGE>

exchangeable or exercisable for securities  having the right to vote) on any
matters on which  stockholders  may vote is issued or outstanding.

(c) Merger Sub's authorized capital stock consists of 1,000 shares of Merger Sub
Common Stock, all of which have been issued to the Parent and are outstanding.

Section 4.5 SEC  Reports;  Financial  Statements.  Parent has filed all required
forms,  reports and  documents  with the SEC  pursuant to the Exchange Act since
December  31, 1998  (collectively,  the  "Parent's  SEC  Reports").  The audited
financial  statements of Parent  contained,  or  incorporated  by reference,  in
Parent's Annual Report on Form 10-K for the year ended December 31, 1998,  which
consist of (i)  consolidated  balance  sheets as of December  31, 1997 and 1998,
(ii) consolidated statements of income,  stockholders' equity and cash flows for
each of the three fiscal years in the period ended  December 31, 1998, and (iii)
the  notes   thereto,   certified  by   PriceWaterhouseCoopers   LLP  ("Parent's
Auditors"),  whose  report  thereon is  included  therewith,  were  prepared  in
accordance  with GAAP and present fairly  Parent's  financial  condition and the
results of its  operations as of the relevant  dates thereof and for the periods
covered thereby.  The unaudited financial  statements of Parent contained in its
Quarterly  Report on Form 10-Q for the quarterly period ended September 30, 1999
(the "Parent 10-Q"),  which consist of condensed  consolidated balance sheets as
of September 30, 1998 and September 30, 1999, condensed consolidated  statements
of  income,  stockholder's  equity  and cash  flows  for the nine  months  ended
September 30, 1998 and 1999, and notes thereto, were prepared in accordance with
GAAP, and present  fairly  Parent's  financial  condition and the results of its
operations as of the relevant dates thereof and for the period covered  thereby,
subject to year-end adjustments.

Section 4.6       Absence of Certain Changes.

(a) Except as  otherwise  disclosed  in Parent's  SEC Reports  (without  further
amendment) or the Parent's Disclosure  Schedule,  since September 30, 1999 there
have not been any events or conditions of any character that, individually or in
the aggregate,  have or would  reasonably be expected to have a Parent  Material
Adverse Effect.

(b) During the period from September 30, 1999 to the date of this Agreement, the
Parent has not engaged in any conduct that is proscribed  during the period from
the date of this  Agreement to the Effective  Time by clauses (i) through (x) of
Section 5.2(b).

Section 4.7  Absence of  Undisclosed  Liabilities.  The Parent does not have any
material  indebtedness,  liability or obligation of the type required by GAAP to
be reflected on a balance sheet that is not reflected or reserved against in the
balance  sheet dated as of September 30, 1999  included or  incorporated  in the
Parent 10-Q or  otherwise  disclosed  in the Parent SEC Reports or the  Parent's
Disclosure  Schedule,  except for such indebtedness,  liabilities or obligations
which have arisen after such date in the ordinary course of business.

Section 4.8  Compliance  With Law.  The Parent holds all  licenses,  franchises,
certificates,   consents,  permits  and  authorizations  from  all  governmental
authorities  necessary for the lawful

                                       19

<PAGE>

conduct of its business,  except where the failure to hold any of the foregoing
would not have a Parent  Material  Adverse Effect.  The  Parent  has not
violated,  nor is it in  violation  of,  any such licenses, franchises,
certificates,  consents, permits or authorizations or, to Parent's  knowledge,
any  applicable  statutes,  laws,  ordinances,  rules  and regulations
(including,  without  limitation,  any of the foregoing  related to occupational
safety,  storage,  disposal,  discharge  into the  environment  of hazardous
wastes,  environmental protection,  conservation,  unfair competition, labor
practices or corrupt  practices) of any governmental  authorities,  except
where such  violations  do not, and insofar as  reasonably  can be foreseen will
not, have a Parent Material Adverse Effect,  and the Parent has not received any
notice from a  governmental  or regulatory  authority  within three years of the
date hereof of any such violation.

Section 4.9       Taxes.

(a) All Tax Returns  required to be filed  before the date hereof by Parent with
respect to any of the income,  properties  or  operations,  are in all  material
respects true, complete and correct and have been duly filed in a timely manner,
and all taxes shown as due on such Tax Returns have been paid,  except where the
failure to so file or pay would not have a Parent Material Adverse Effect.

(b)  To  Parent's  knowledge,  (i)  there  are  no  claims,   investigations  or
assessments  pending or threatened  against Parent or its  subsidiaries  for any
alleged  deficiency  in  taxes,  and (ii)  there  is no  audit or  investigation
currently  being  conducted  that could cause Parent to be liable for any taxes,
which in any case would have a Parent Material Adverse Effect.

(c)  Parent has  complied  in all  material  respects  with all tax  withholding
provisions of applicable federal, state and local laws and have paid over to the
proper  governmental  authorities all amounts required to be so withheld or paid
over  before the date  hereof,  except  where the  failure to so withhold or pay
would not have a Parent Material Adverse Effect.

Section  4.10  Absence  of  Litigation.  There are no  claims,  actions,  suits,
proceedings or investigations pending or, to the knowledge of Parent, threatened
against  Parent,   or  any  properties  or  rights  of  Parent  or  any  of  its
subsidiaries,  before any court,  arbitrator or administrative,  governmental or
regulatory  authority  or body,  domestic or foreign,  that,  in the event of an
adverse  decision  or  outcome,  could  reasonably  be expected to have a Parent
Material Adverse Effect.

Section  4.11  Title to  Property.  Parent  has  defensible  title to all of its
properties  and assets,  free and clear of all liens,  charges and  encumbrances
except  liens  for  taxes  not yet due and  payable  and  such  liens  or  other
imperfections  of title, if any, as do not materially  detract from the value of
or  interfere  with the present use of the  property  affected  thereby or which
would not have a Parent Material  Adverse  Effect.  To Parent's  knowledge,  all
leases pursuant to which Parent leases from others real or personal property are
valid and effective in accordance with their respective terms, and there is not,
to the knowledge of Parent,  under any of such leases,  any existing  default or
event of default (or event which with  notice or lapse of time,  or both,  would
constitute  a material  default or event of default  and in respect of which the
Parent has not taken  adequate  steps to prevent such a

                                       20

<PAGE>

default from  occurring) except where the lack of such good standing,
validity and effectiveness,  or the existence of such default or event of
default  would not have a Parent  Material Adverse Effect.

Section 4.12      Intellectual Property.

(a) Section 4.12 of the Parent  Disclosure  Schedule  lists all existing  United
States and foreign patents,  trademarks, trade names, service marks, copyrights,
trade  secrets,  and  applications  therefor  that are  material to the Parent's
business as currently conducted (the "Parent Intellectual Property Rights"). The
Parent owns, or possesses  adequate  licenses or other valid rights to use, such
Parent Intellectual Property Rights.

(b) The conduct of the business of the Parent as now conducted  does not, to the
Parent's knowledge, infringe any valid patents, trademarks,  tradenames, service
marks or copyrights of others. The consummation of the transactions contemplated
hereby  will not result in the loss or  impairment  of any  Parent  Intellectual
Property  Rights.  To the best of the  Parent's  knowledge,  no third  party has
interfered with, infringed upon, misappropriated, diluted, violated or otherwise
come into  conflict with any Parent  Intellectual  Property  Rights,  except for
misappropriations and violations which, individually or in the aggregate,  would
not have a Material Adverse Effect on the Parent.

Section 4.13      Employee Benefit Plans; Employment Agreements.

(a) The  Parent's  Disclosure  Schedule  lists all  employee  benefit  plans (as
defined  in ERISA) and all  bonus,  stock  option,  stock  purchase,  incentive,
deferred  compensation,  supplemental  retirement,  severance  and other similar
fringe or employee benefit plans,  programs or arrangements,  and any current or
former employment or executive compensation or severance agreements,  written or
otherwise,  for the benefit of, or relating to, any employee of the Parent,  any
trade  or  business  (whether  or  not  incorporated)  which  is a  member  of a
controlled  group including the Parent or which is under common control with the
Parent (a "Parent  ERISA  Affiliate")  within the  meaning of section 414 of the
Code,  as well as each plan with  respect to which the Parent or a Parent  ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or was
terminated) or Section 4212(c) of ERISA (together,  the "Parent Benefit Plans"),
excluding former agreements under which the Parent has no remaining obligations.
Copies  of each of the  following,  to the  extent  applicable,  have  been made
available  to the Company  with respect to each Parent  Benefit  Plan:  the most
recent  annual  report  (Form 5500) filed with the IRS, the plan  document,  the
trust agreement,  the most recent summary plan description if required by ERISA,
the most recent  actuarial  report or  valuation  relating to each  Benefit Plan
subject to Title IV of ERISA, and the most recent determination letter issued by
the IRS with respect to any Benefit Plan intended to be qualified  under section
401 of the Code.

(b) With respect to each Parent  Benefit Plan, no event has occurred and, to the
knowledge   of  Parent,   there   currently   exists  no  condition  or  set  of
circumstances,  in connection with which Parent or any of its subsidiaries could
be subject to any liability under the terms of such Parent Benefit Plan,  ERISA,
the Code or any other  applicable law which would have a Parent Material Adverse
Effect.

                                       21

<PAGE>

(c) Each Parent  Benefit Plan intended to be qualified  under section 401 of the
Code (i) satisfies in form the requirements of such section except to the extent
amendments  are not required by law to be made until a date after the  Effective
Time, (ii) has received a favorable  determination letter from the IRS regarding
such  qualified  status,  and (iii) has not,  since  receipt of the most  recent
favorable  determination  letter,  been  amended in a way that  would  adversely
affect its qualified status.

(d) There are no actions,  suits,  or claims  pending (other than routine claims
for benefits) or, to the knowledge of the Parent,  threatened  against,  or with
respect  to, any Parent  Benefit  Plan or its assets  that could  reasonably  be
expected to have a Parent Material Adverse Effect.

(e) To the  knowledge  of the  Parent,  there is no matter  pending  (other than
routine qualification  determination filings) with respect to any Parent Benefit
Plans  before  the IRS,  the U.S.  Department  of  Labor,  the PBGC or any other
governmental authority.

(f) All  material  contributions  required  to be made to Parent  Benefit  Plans
pursuant  to their terms and the  provisions  of ERISA,  the Code,  or any other
applicable law have been timely made.

(g) As to each Parent  Benefit Plan subject to Title IV of ERISA,  (i) there has
been  no  event  or  condition  which  presents  a  significant   risk  of  plan
termination,  (ii) no  accumulated  funding  deficiency,  whether or not waived,
within the  meaning of Section  302 of ERISA or section 412 of the Code has been
incurred,  (iii) no reportable event within the meaning of Section 4043 of ERISA
(for which the  disclosure  requirements  of Regulation  section 4043.1 et seq.,
promulgated  by the PBGC,  have not been waived) has  occurred  within six years
prior to the date of this Agreement,  (iv) no notice of intent to terminate such
Parent  Benefit  Plan  has  been  given  under  Section  4041 of  ERISA,  (v) no
proceeding  has been  instituted  under Section 4042 of ERISA to terminate  such
Parent Benefit Plan, (vi) no liability to the PBGC has been incurred (other than
with  respect to required  premium  payments),  (vii) no  withdrawal  liability,
within the meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been  satisfied,  and (viii) the assets of the Parent  Benefit
Plan equal or exceed the  actuarial  present  value of the benefit  liabilities,
within the  meaning of Section  4041 of ERISA,  under the Parent  Benefit  Plan,
based upon reasonable  actuarial  assumptions and the asset valuation principles
established by the PBGC.

(h)  Neither  the Parent  nor  Parent  ERISA  Affiliates  contributes  or has an
obligation to contribute, and has not within six years prior to the date of this
Agreement  contributed  or had an obligation to contribute  to, a  multiemployer
plan within the meaning of Section 3(37) of ERISA.

                                       22

<PAGE>

Section 4.14      Material Contracts.

(a) Set forth in Section 4.14(a) of the Parent Disclosure  Schedule is a list of
each contract,  lease,  indenture,  agreement,  arrangement or  understanding to
which  Parent is subject that is of a type that would be required to be included
as an exhibit to a Form S-1  Registration  Statement  pursuant  to the rules and
regulations of the SEC if such  registration  statement was filed by Parent (the
"Parent Material Contracts").

(b) All Parent Material  Contracts are in full force and effect,  the Parent has
performed  its  obligations  thereunder  to date and,  to the  knowledge  of the
Parent,  each other party thereto has performed  its  obligations  thereunder to
date, other than any failure of any such Parent Material  Contract to be in full
force and effect or any  nonperformance  thereof  that could not  reasonably  be
expected to have a Parent Material Adverse Effect.

Section 4.15      Labor Matters.

(a) There are no  controversies  pending  or, to the  knowledge  of the  Parent,
threatened,  between the Parent and any of its  employees,  which  controversies
have or may reasonably be expected to have a Parent Material Adverse Effect.

(b) The Parent is not a party to any  collective  bargaining  agreement or other
labor union contract  applicable to persons  employed by the Parent nor does the
Parent know of any  activities or proceedings of any labor union to organize any
such employees.

(c) The Parent has no  knowledge  of any  strikes,  slowdowns,  work  stoppages,
lockouts or threats thereof, by or with respect to any employees of the Parent.

Section 4.16  Environmental  Matters.  Except in all cases as, in the aggregate,
have not had and could not  reasonably  be  expected  to have a Parent  Material
Adverse Effect,  Parent, to Parent's knowledge,  (i) has obtained all applicable
permits,  licenses and other  authorizations  which are required  under foreign,
federal,  state or  local  laws  relating  to  pollution  or  protection  of the
environment,  including  laws  relating to  emissions,  discharges,  releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or wastes into ambient  air,  surface  water,  ground water or land or otherwise
relating to the manufacture,  processing, distribution, use, treatment, storage,
disposal,  transport  or handling of  pollutants,  contaminants  or hazardous or
toxic materials or wastes by Parent (or its agents);  (ii) is in compliance with
all terms and conditions of such required permits,  licenses and authorizations,
and also are in compliance with all other limitations, restrictions, conditions,
standards,  prohibitions,  requirements,  obligations,  schedules and timetables
contained  in such laws or  contained  in any  regulation,  code,  plan,  order,
decree,  judgment,  notice or demand  letter  issued,  entered,  promulgated  or
approved  thereunder;  (iii) as of the  date  hereof,  is not  aware of nor have
received  notice of any  event,  condition,  circumstance,  activity,  practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued  compliance  with  or  which  would  give  rise to any  common  law or
statutory  liability,  or otherwise form the basis of any claim, action, suit or
proceeding,  based  on or  resulting  from  Parent's  (or  any

                                       23

<PAGE>

of  its  agents') manufacture,   processing,  distribution,  use,  treatment,
storage,  disposal, transport  or  handling  or  the   emission,   discharge
or  release  into  the environment,  of any pollutant,  contaminant,  or
hazardous or toxic material or waste; and (iv) have taken all actions  necessary
under applicable  requirements of foreign,  federal,  state or local laws, rules
or regulations to register any products or  materials  required to be registered
by the Parent (or any of its agents) thereunder.

Section 4.17      Insurance.  Parent  maintains  general  liability and other
business  insurance that Parent believes to be reasonably prudent for its
business.

Section 4.18 Vote Required.  The only vote of the holders of any class or series
of Parent's capital stock necessary to approve the issuance of the Parent Common
Stock in the  Merger  (other  than  the vote  required  to amend  the  Company's
authorized  number of shares of Parent Common Stock) is pursuant to the rules of
AMEX. In accordance  with such rule,  the  affirmative  vote of the holders of a
majority of the outstanding shares of Parent Common Stock voting on the proposal
to so issue the Parent  Common Stock is required and the total vote cast on such
proposal must  represent over 50% in interest of the  outstanding  Parent Common
Stock.  Parent,  as the sole  stockholder  of Merger Sub,  will promptly vote to
approve this Agreement.

Section 4.19  Affiliates.  Except for the directors  and  executive  officers of
Parent,  there are no persons who, to the knowledge of Parent,  may be deemed to
be affiliates of Parent under Rule 1-02 of Regulation S-X of the SEC.

Section  4.20  Certain  Business  Practices.  None of Parent  or any  directors,
officers,  agents or  employees  of Parent  has (a) used any funds for  unlawful
contributions,  gifts,  entertainment  or other  unlawful  expenses  relating to
political  activity,  (b) made any  unlawful  payment  to  foreign  or  domestic
government officials or employees or to foreign or domestic political parties or
campaigns  or  violated  any  provision  of  the  FCPA,  (c)   consummated   any
transaction,  made any payment,  entered into any  agreement or  arrangement  or
taken any other action in violation of Section 1128(B)(b) of the Social Security
Act, as amended, or (d) made any other unlawful payment, which in any case would
have a Parent Material Adverse Effect.

Section 4.21  Customers  and  Suppliers.  Section 4.21 of the Parent  Disclosure
Schedule sets forth the 10 most significant third-party suppliers to, and the 10
most significant  third-party  customers of, the Parent (in terms of payments to
or by such persons) during the eleven-month  period ending on November 30, 1999.
To the knowledge of the Parent,  there is no present  intent of any  significant
customer, vendor or supplier of the Parent to discontinue or substantially alter
its relationship with the Parent or upon consummation of the Merger.

Section  4.22 Year 2000  Issues.  The  disclosures  set forth in the  Parent SEC
Reports concerning  potential computer hardware and software problems associated
with the year 2000 are true and correct in all material respects.

Section 4.23 Proxy  Statement  and Other  Information.  None of the  information
related  to Parent  which is  supplied  by  Parent  for  inclusion  in the Proxy
Statement  described  in  Section  5.4(a)

                                       24

<PAGE>

hereof  will,  at the time the  Proxy Statement is mailed or at the time of the
meeting of  stockholders  to which the Proxy Statement relates, contain any
untrue statement 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,  except that no representation  or  warranty
is  otherwise  made by Parent  or Merger Sub with respect to the Proxy
Statement.

Section  4.24  Brokers.  Neither  the  Parent,  the  Merger Sub nor any of their
officers,  directors or employees  has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated herein.

                                   ARTICLE V.

                                OTHER AGREEMENTS

Section 5.1 Election of New Parent Directors and Officers. Subject to occurrence
of the Merger and subject to the rights of Banca Del  Gottardo to appoint two of
the  members of the Board of  Directors  of the  Parent,  Parent  shall take all
action  necessary  under its bylaws or  otherwise to cause the number of members
constituting  the whole Board of Directors of the Parent to be five and to elect
Messrs.William O. Hunt, John J. McDonald, Jr., Robert C. Harshaw, Nick Stanfield
and a person to be agreed upon by Parent and the  Company to  Parent's  Board of
Directors,  effective the Effective  Time.  Such persons shall hold office until
the next annual  meeting of  Parent's  stockholders  and until their  successors
shall  have been  elected  and  qualified.  Parent's  Board of  Directors  shall
nominate  such  persons  for  re-election  at Parent's  next  annual  meeting of
stockholders,  if such persons are then willing and able to continue to serve on
Parent's Board of Directors.

Section 5.2       Conduct of Business Pending Merger.

(a) From the date of this Agreement until the Effective Time,  unless  otherwise
contemplated  by this  Agreement  or consented to in writing by the other party,
each of the Company and the Parent shall:

(i)      operate its business in all material respects in the usual and
         ordinary course consistent with past practice; and

(ii)     use all reasonable  best efforts to preserve  substantially  intact its
         business  organization,  maintain and keep its material  properties and
         assets in as good repair and condition as at present, ordinary wear and
         tear excepted,  retain the services of its respective key employees and
         maintain its relationships with its material customers and suppliers.

(b) Except as  contemplated  by this  Agreement  or  otherwise  consented  to in
writing by the other party,  from the date of this Agreement until the Effective
Time, each of the Company and the Parent shall not do any of the following:

                                       25
<PAGE>

(i)      adopt any amendments to its  certificate  or articles of  incorporation
         which  would  alter the  terms of the  Company  Common  Stock or Parent
         Common Stock or would have an adverse impact on the consummation of the
         transactions contemplated by this Agreement;

(ii)     declare,  set aside or pay any dividend or other distribution  (whether
         in cash,  stock or property or any  combination  thereof) in respect of
         its capital stock,  or, except as provided in the terms of the Parent's
         Preferred Stock, redeem or otherwise acquire any of its securities;

(iii)    issue,  sell,  deliver  or agree or commit to  issue,  sell or  deliver
         (whether  through  the  issuance  or  granting  of  options,  warrants,
         commitments,  subscriptions, rights to purchase or otherwise) any stock
         of any class or any other  securities  or amend any of the terms of any
         such securities or agreements outstanding on the date hereof; provided,
         however,  the Company or the Parent may issue shares of Company  Common
         Stock or  Parent  Common  Stock,  respectively,  upon the  exercise  of
         employee  stock  options,  warrants  outstanding  on the  date  of this
         Agreement,  the Parent's  Employee  Stock Purchase Plan or the Parent's
         Preferred Stock outstanding on the date hereof;

(iv)     (A) create,  incur or assume any long-term debt (including  obligations
         in  respect  of  capital   leases  but   excluding   any   intercompany
         indebtedness)  that is material  to the  Company or the Parent,  as the
         case may be, (B) assume, guarantee,  endorse or otherwise become liable
         or responsible  (whether  directly,  contingently or otherwise) for the
         obligations  of any person other than the Company or the Parent that is
         material to the Company or the Parent,  as the case may be, or (C) make
         any loans, advances or capital contributions to, or investments in, any
         person other than the Company or the Parent,  which loans,  advances or
         capital contributions are material to the Company or the Parent, as the
         case may be;

(v)      acquire,  sell, lease or dispose of any assets that are material to the
         Company or the Parent, as the case may be, other than sales that are in
         the ordinary and usual course of business consistent with past practice
         and, in the case of the Parent,  sales or dispositions of shares or the
         assets of ILD Telecommunications, Inc.;

(vi)     mortgage,  pledge or subject to any lien,  lease,  security interest or
         other charge or encumbrance  any of its properties or assets,  tangible
         or intangible,  material to the Company or the Parent,  as the case may
         be;

(vii)    (A) increase the  compensation  payable to or to become  payable to any
         director or officer, except for increases in salary or wages payable or
         to become  payable in the ordinary  course of business  and  consistent
         with past practice;  (B) grant any severance or termination  pay (other
         than pursuant to  agreements  in effect on the date of this  Agreement)
         to, or enter into or amend any benefit plan (except for  administrative
         or technical amendments necessary to comply with applicable law) or any
         employment  or  severance  agreement  with,  any  director,  officer or
         employee;

                                       26

<PAGE>

(viii)   (A) effect any reorganization or recapitalization or (B) split, combine
         or reclassify any of its capital stock or issue or authorize or propose
         the  issuance of any other  securities  in respect of, in lieu of or in
         substitution for, shares of its capital stock;

(ix)     change any of its methods of accounting in effect at September 30,
         1999, except as may be required by law or GAAP; or

(x)      take,  or agree in writing or otherwise to take,  any of the  foregoing
         actions  or any  actions  that  would  (A) make any  representation  or
         warranty of the Company or the Parent, as the case may be, contained in
         this  Agreement  untrue or  incorrect as of the date when made or as of
         the Closing Date, (B) result in any of the conditions of this Agreement
         not  being  satisfied,  or (C) be  inconsistent  with the terms of this
         Agreement or the transactions contemplated hereby.

Section 5.3       Access to Information.

(a) Between the date of this Agreement and the Effective  Time, the Company will
(i) give Parent and its authorized  representatives  reasonable  access,  during
regular  business  hours  upon  reasonable  notice,  to all  offices  and  other
facilitates and to all of its books and records, (ii) permit Parent to make such
reasonable inspections as it may require, and (iii) cause its officers and those
of its subsidiaries to furnish Parent with such financial and operating data and
other information with respect to the business and properties of the Company, as
Parent may from time to time  reasonably  request and as the Company may have on
hand or be able to produce without hardship.

(b) Between the date of this Agreement and the Effective  Time,  Parent will (i)
give the Company and its authorized  representatives  reasonable access,  during
regular  business  hours  upon  reasonable  notice,  to all  offices  and  other
facilitates and to all of its books and records, (ii) permit the Company to make
such reasonable  inspections as it may require,  and (iii) cause its officers to
furnish the Company with such financial and operating data and other information
with respect to the business  and  properties  of Parent as the Company may from
time to time  reasonably  request  and as Parent  may have on hand or be able to
produce without hardship.

(c) Notwithstanding the foregoing  provisions of this Section 5.3, neither party
shall be required to grant access or furnish  information  to the other party to
the extent that such access or the furnishing of such  information is prohibited
by law or by confidentiality agreements with third parties in effect on the date
hereof.

(d)  Each  party  to this  Agreement  shall  hold in  confidence  all  nonpublic
information  received from the other party to this Agreement  until such time as
such  information  is otherwise  publicly  available  and, if this  Agreement is
terminated,  each party  will  deliver to the other  party all  documents,  work
papers and other materials  (including  copies) obtained by such party or on its
behalf  from the other  party as a result  of this  Agreement  or in  connection
herewith, whether so obtained before or after the execution hereof.

                                       27

<PAGE>

Section 5.4       Preparation of Form S-4 and Proxy Statement.

(a)  Parent  shall  prepare  and file with the SEC at such  appropriate  time as
determined by Parent, a proxy statement relating to the shareholders  meeting of
Parent to be held in connection with the Merger, as amended or supplemented from
time to time (as so amended or supplemented,  the "Proxy  Statement") and Parent
shall  prepare and file with the SEC at such  appropriate  time as determined by
Parent,  a registration  statement on Form S-4 with respect to the Parent Common
Stock issuable in the Merger,  and in which the Proxy Statement will be included
within the prospectus.  Parent and the Company shall use all reasonable  efforts
to have the Form S-4 declared  effective  by the SEC as promptly as  practicable
after such  filing.  Prior to the  Effective  Date,  Parent  shall also take any
action  (other than  qualifying  as a foreign  corporation  or taking any action
which would subject it to service of process in any jurisdiction where Parent is
not now so qualified  or subject)  required to be taken under  applicable  state
blue sky or  securities  laws in  connection  with the issuance of Parent Common
Stock in connection with the Merger and will pay all expenses  incident thereto.
If at any time prior to the Effective  Time any event shall occur that should be
set forth in an  amendment  of or a  supplement  to the Form S-4,  Parent  shall
prepare and file with the SEC such amendment or supplement as soon thereafter as
is  reasonably  practicable.  Parent and the Company shall  cooperate  with each
other  in the  preparation  of the  Form  S-4 and the  Proxy  Statement  and any
amendment or supplement thereto,  and each shall notify the other of the receipt
of any  comments of the SEC with  respect to the Form S-4 and any  amendment  or
supplement thereto or for additional information, and shall provide to the other
promptly copies of all correspondence between Parent or the Company, as the case
may be, and the SEC with respect to the Form S-4 or the Proxy Statement. Each of
Parent  and  the  Company  agrees  to use its  reasonable  best  efforts,  after
consultation  with each other,  to respond  promptly to all such comments of and
requests  by the SEC and to cause (i) the Form S-4 to be declared  effective  by
the SEC at the earliest  practicable  time  following such filing and to be kept
effective as long as is necessary to consummate  the Merger,  and (ii) the Proxy
Statement to be mailed to the holders of Parent Common Stock entitled to vote at
the meeting of the stockholders of Parent at the earliest practicable time.

(b) Parent agrees that the Form S-4,  when  declared  effective by the SEC, will
not contain an untrue  statement of a material  fact or omit to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the  circumstances  under  which  they were  made,  not  misleading;
provided,  however,  that the  foregoing  shall not apply to the extent that any
such untrue  statement of a material  fact or omission to state a material  fact
was made by Parent in reliance upon and in conformity  with written  information
concerning  the  Company  or any of its  affiliates  furnished  to Parent by the
Company or any of its affiliates. Parent will advise the Company, promptly after
it receives notice thereof,  of the time when the Form S-4 has become  effective
or any  supplement  or  amendment  has been filed,  of the  issuance of any stop
order, or the suspension of the qualification of Parent Common Stock issuable in
connection  with the Merger for offering or selling in any  jurisdiction  or any
request  by the SEC for  amendment  of the  Proxy  Statement  or the Form S-4 or
comments thereon and responses thereto or requests for additional information.

                                       28

<PAGE>

(c) Each shareholder of the Company receiving Merger Stock agrees that, although
the Merger Stock has been registered  under the Securities Act, the Merger Stock
may  only be  transferred,  sold  or  otherwise  disposed  of  according  to the
following schedule:

     Days Following The                     Total % of Merger Stock Issued
      Effective Date                   To Such Shareholder Which May Be Sold

         0-90 days                                       0%
        91-180 days                                     10%
       181-270 days                                     30%
       271-360 days                                     60%
      Over 360 days                                    100%



; and each of such shareholders  agrees to hold the Merger Stock subject to such
restriction,  and further agrees that all  certificates  representing the Merger
Stock shall contain substantially the following legend:

         THE  SHARES   REPRESENTED  BY  THIS  CERTIFICATE  ARE  SUBJECT  TO  THE
         PROVISIONS OF AN AGREEMENT AND PLAN OF MERGER,  DATED AS OF JANUARY 18,
         2000, AS MAY BE AMENDED,  AND MAY NOT BE TRANSFERRED  SOLD OR OTHERWISE
         DISPOSED OR EXCEPT AS OTHERWISE PROVIDED THEREIN.  THE CORPORATION WILL
         FURNISH  A  COPY  OF  SUCH  AGREEMENT  TO THE  RECORD  HOLDER  OF  THIS
         CERTIFICATE  WITHOUT  CHARGE  ON  REQUEST  TO  THE  CORPORATION  AT ITS
         PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.

Notwithstanding the foregoing,  the limitations set forth in this Section 5.4(c)
shall not apply to individuals  that hold 2000 or fewer shares of Company Common
Stock as of the date of this Agreement.

(d) Notwithstanding the preceding provisions of this Section 5.4, as a condition
(which  shall be for the  benefit  of both the  Company  and the  Parent) to the
recommendation  of the Board of  Directors of the Company or the Parent to their
stockholders,  the  holding of a  stockholders'  meeting  and the mailing of the
Proxy Statement, (i) the Parent must receive (A) the opinion of Houlihan, Lokey,
Howard & Zukin to the  effect  that the  Merger  is fair to the  Parent  and its
stockholders  from a  financial  point of view,  and (B) the letters of KPMG LLP
referred to in Section  5.14,  and (ii) neither of such opinion or letters shall
have been withdrawn,  revoked,  or modified.  Additionally,  the Parent need not
hold a  stockholders  meeting,  mail the Proxy  Statement or complete the Merger
unless,  prior to the filing of  preliminary  proxy  materials  and, at Parent's
option  filing of the Form S-4 with the SEC,  the  Parent  shall  have  received
copies  of an  agreement,  satisfactory  in form and  substance  to the  Parent,
pursuant to which the holders of at least 6,000,000 shares of the Company


                                       29

<PAGE>

Common Stock shall have  irrevocably  agreed to vote, or granted  Parent an
irrevocable proxy to vote, all their shares in favor of this  Agreement, the
Merger and all other related transactions and events.

Section 5.5 AMEX Exchange Listing.  Parent shall use all reasonable best efforts
to obtain,  prior to the  Effective  Time,  approval  for  listing of the Parent
Common  Stock to be issued  pursuant  to the  Merger  on the AMEX upon  official
notice of issuance.

Section 5.6  Reasonable  Best Efforts.  Subject to the  fiduciary  duties of the
Company's and the Parent's Board of Directors, each of the parties hereto agrees
to use  its  reasonable  best  efforts  to  take,  or  cause  to be  taken,  all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable  under  applicable  laws and  regulations  to  consummate  and make
effective  the   transactions   contemplated  by  this  Agreement  in  the  most
expeditious manner practicable,  including, but not limited to, the satisfaction
of all conditions to the Merger.

Section 5.7 Public Announcements;  Confidentiality. Except as may be required by
applicable law, no party hereto shall make any public announcements or otherwise
communicate  with any  news  media  or any  other  party  with  respect  to this
Agreement  or  any  of  the  transactions   contemplated  hereby  without  prior
consultation  with the other  parties as to the timing and  contents of any such
announcement or  communications  as may be reasonable  under the  circumstances;
provided,  however,  that nothing  contained herein shall prevent any party from
(i) promptly  making all filings with  governmental  authorities  as may, in its
judgment, be required or advisable in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby or
(ii)  disclosing  the terms of this  Agreement  to such party's  legal  counsel,
financial   advisors  or  accountants   in   furtherance  of  the   transactions
contemplated by this Agreement.  The press release  announcing the execution and
delivery of this  Agreement  shall be a joint  press  release of the Company and
Parent.

Section 5.8 Notification.  Each party hereto shall, in the event of, or promptly
after  obtaining  knowledge of the  occurrence or threatened  occurrence of, any
fact or circumstance  that would cause or constitute a material breach of any of
its  representations and warranties set forth herein, give notice thereof to the
other parties and shall use its  reasonable  best efforts to prevent or promptly
to remedy such breach.

Section  5.9  Meetings of  Stockholders.  Subject to the  provisions  of Section
5.4(d),  each of Parent and the  Company  shall take all  action  necessary,  in
accordance with the Delaware  General  Corporation Law (the "DGCL") and the TBCA
and its  charter and bylaws,  to duly call,  give notice of,  convene and hold a
meeting of its  stockholders  as  promptly  as  practicable,  in the case of the
Company,  to consider and vote upon the approval of this Agreement,  and, in the
case of Parent, to vote upon the issuance of Parent Common Stock pursuant to the
Merger and amendments of the Parent's Certificate of Incorporation to change its
name to the name  designated  by Parent and to increase the number of authorized
shares  of  Parent  Common  Stock  (collectively,   the   "Transactions").   The
stockholder  votes  required for the approval of the  Transactions  shall be the
vote  required  by the  TBCA  and its  charter  and  bylaws,  in the case of the
Company,  and the DGCL and the rules of AMEX, in the case of Parent.  Subject to
the fiduciary  duties of the Boards of Directors under

                                       30

<PAGE>

applicable law as advised by outside counsel and the provisions of Section
5.4(d),  the Company and Parent shall use their  reasonable  best efforts  to
solicit  from  their  respective stockholders  proxies in favor of approval
of the  Transactions  and to take all other action  necessary to secure the
votes of  stockholders  required to effect the Transactions.

Section 5.10      Regulatory and Other Authorizations

(a) Each party hereto  agrees to use its  reasonable  best efforts to obtain all
authorizations,  consents,  orders and  approvals of federal,  state,  local and
foreign regulatory bodies and officials and non-governmental  third parties that
may be or become  necessary  for (i) its  execution  and  delivery  of,  and the
performance  of its  obligations  pursuant  to,  this  Agreement  and  (ii)  the
ownership of the Surviving  Corporation by Parent, and each party will cooperate
fully  with  the  other   parties  in  promptly   seeking  to  obtain  all  such
authorizations, consents, orders and approvals.

(b) In  connection  with and without  limiting  the  foregoing,  the Company and
Parent  shall (i) take all action  necessary  to ensure  that no state  takeover
statute or  similar  statute  (including  Articles  13.01-13.08  of the TBCA) or
regulation is or becomes applicable to the Merger,  this Agreement or any of the
other transaction  contemplated hereby and (ii) if any state takeover statute or
similar statute or regulation becomes  applicable to the Merger,  this Agreement
or any of the other transactions  contemplated hereby, take all action necessary
to ensure that the Merger and the other transactions  contemplated hereby may be
consummated  as  promptly  as  practicable  on the  terms  contemplated  by this
Agreement  and otherwise to minimize the effect of such statute or regulation on
the Merger and the other transactions contemplated by this Agreement.

Section 5.11 Further  Assurances.  Each of the parties hereto shall execute such
documents  and  other  instruments  and  take  such  further  actions  as may be
reasonably  required  or  desirable  to  carry  out the  provisions  hereof  and
consummate the transactions  contemplated  hereby or, at and after the Effective
Time, to evidence the  consummation  of the  transactions  contemplated  by this
Agreement.  Upon the terms and  subject to the  conditions  hereof,  each of the
parties hereto shall take or cause to be taken all actions and to do or cause to
be done all other things  necessary,  proper or advisable to consummate and make
effective  as promptly as  practicable  the  transactions  contemplated  by this
Agreement and to obtain in a timely manner all necessary  waivers,  consents and
approvals and to effect all necessary registrations and filings.

Section 5.12      Employee Benefits.

(a) Parent hereby agrees to provide to officers and employees of the Company who
become  or  remain  regular  (full-time)  employees  of  Parent  or  any  of its
subsidiaries  ("Continuing  Employees"),  employee  benefits,  other  than stock
options,  no less  favorable  than those  provided by Parent to their  similarly
situated  officers  and  employees.  Any  employee  of the Company who becomes a
participant in any employee  benefit plan,  program,  policy,  or arrangement of
Parent or any of its subsidiaries after the Effective Time shall be given credit
under such plan,  program,  policy,  or  arrangement  for all  service  with the
Company  prior to becoming such a participant  for purposes of  eligibility  and
vesting.

                                       31

<PAGE>

(b) The Parent shall  assume,  effective  at the  Effective  Time,  each Company
Option Plan and each Company Stock Option that remains  unexercised  in whole or
in part as of the Effective  Time and  substitute  shares of Parent Common Stock
for the shares of  Company  Common  Stock  purchasable  under each such  assumed
option ("Assumed  Option"),  which assumption and substitution shall be effected
as follows:

(i)      the  Assumed  Option  shall  have the same  terms and  conditions
         as the  Company  Stock  Option  being  assumed,  subject to
         Section 5.12(b)(ii) and (iii) below;

(ii)     the  number  of shares of Parent  Common  Stock  purchasable  under the
         Assumed  Option shall be equal to the number of shares of Parent Common
         Stock that the holder of the Company  Stock Option being  assumed would
         have  received   (without   regard  to  any  vesting   schedule)   upon
         consummation of the Merger had such Company Stock Option been exercised
         in full immediately prior to consummation of the Merger; and

(iii)    the per share  exercise price of such Assumed Option shall be an amount
         (rounded to the nearest cent) equal to the per share  exercise price of
         the Company Stock Option being assumed  divided by the number of shares
         of Parent Common Stock issuable in the Merger for each share of Company
         Common Stock.

If the foregoing  calculation results in an Assumed Option being exercisable for
a  fraction  of a share of Parent  Common  Stock,  then the  number of shares of
Parent Common Stock subject to such Assumed  Option shall be rounded down to the
nearest  whole number of shares,  and the total  exercise  price for the Assumed
Option shall be reduced by the exercise price of the fractional share.

(c) Parent shall take all corporate  action  necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise of
the Assumed Options.

Section  5.13  Merger Sub.  Prior to the  Effective  Time,  Merger Sub shall not
conduct  any  business  or make  any  investments  other  than  as  specifically
contemplated  by this  Agreement  and will not have any assets  (other than a de
minimis  amount  of cash  paid to Merger  Sub for the  issuance  of its stock to
Parent) or liabilities.

Section 5.14 Letter from  Accountants.  The Company  shall use  reasonable  best
efforts to cause to be delivered to the Company and Parent two letters from KPMG
LLP,  one dated no earlier than three  business  days prior to the date on which
the Proxy  Statement  is mailed to the  Parent's  stockholders  and one dated no
earlier than three  business days prior to the Closing Date,  each  addressed to
the Boards of Directors  of the Company and Parent  concerning  the Company,  in
form  reasonably  satisfactory  to Parent  and  customary  in scope for  comfort
letters  delivered  by  independent   public   accountants  in  connection  with
registration statements containing a prospectus similar to the Proxy Statement.

                                       32

<PAGE>

Section 5.15               No Solicitation.

(a)  Subject to Section  5.15(c),  Parent  shall not (and  Parent  shall use its
reasonable   best  efforts  to  cause  its   officers,   directors,   employees,
representatives and agents,  including,  but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly,  encourage, solicit,
participate  in or  initiate  discussions  or  negotiations  with,  provide  any
information  to, or enter into any  agreement  with,  any person (other than the
Company,  any of its  affiliates  or  representatives)  concerning  any  merger,
business  combination,  tender offer, exchange offer, sale of assets (other than
as expressly  permitted by Section 5.2), sale of shares of capital stock or debt
securities or similar transactions involving Parent or any division or operating
or principal business unit of Parent (a "Parent Acquisition  Proposal").  Parent
will immediately cease any existing activities, discussions or negotiations with
any parties (other than the Company) conducted heretofore with respect to any of
the foregoing.

(b)  Subject  to  Section  5.15(c),  the  Company  shall not (and  shall use its
reasonable   best  efforts  to  cause  its   officers,   directors,   employees,
representatives and agents,  including,  but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly,  encourage, solicit,
participate  in or  initiate  discussions  or  negotiations  with,  provide  any
information to, or enter into any agreement with, any person (other than Parent,
any of its  affiliates  or  representatives)  concerning  any  merger,  business
combination,  tender  offer,  exchange  offer,  sale of  assets  (other  than as
expressly  permitted by Section  5.2),  sale of shares of capital  stock or debt
securities  or similar  transactions  involving  the Company or any  division or
operating  or  principal  business  unit of the Company (a "Company  Acquisition
Proposal").   The  Company  will  immediately  cease  any  existing  activities,
discussions or negotiations  with any parties (other than the Parent)  conducted
heretofore with respect to any of the foregoing.

(c)  Notwithstanding  the  provisions of Section  5.15(a) and (b),  prior to the
approval by its stockholders of the transactions contemplated by this Agreement,
Parent or the Company, as the case may be, may, directly or indirectly,  provide
access to furnish information  concerning its business,  properties or assets to
any person pursuant to appropriate confidentiality agreements, and may negotiate
and participate in discussions and  negotiations  with such person,  if (i) such
person has submitted an unsolicited  bona fide written  proposal to the Board of
Directors  of Parent or the  Company,  as the case may be,  relating to any such
transaction,  (ii) such proposal  provides for the  acquisition  for cash and/or
publicly  traded  securities  of all of the  outstanding  Parent Common Stock or
Company Common Stock, (iii) the Board of Directors of Parent or the Company,  as
the  case  may be,  determines  in  good  faith,  after  consultation  with  its
independent  financial  advisor,  that such  proposal is more  favorable  to the
holders of Parent  Common  Stock or Company  Common Stock than the Merger and is
fully financed or reasonably capable of being financed or otherwise consummated,
and (iv) the Board of Directors  of Parent or the  Company,  as the case may be,
determines in good faith,  after  consultation  with independent  legal counsel,
that the  failure to  provide  such  information  or access or to engage in such
discussions or negotiations would be inconsistent with their fiduciary duties to
Parent's or the Company's  stockholders under applicable law. A proposal meeting
all of the  criteria  in the  preceding  sentence  is referred to as a "Superior
Proposal." Parent or the Company

                                       33

<PAGE>

will immediately  notify the other party of the Parent Acquisition Proposal,
or Company Acquisition Proposal,  respectively, and will keep the other party
fully apprised of all developments with respect to any such Acquisition
Proposal.  Subject to the last sentence of this Section 5.15(c) and
notwithstanding anything to the contrary contained in this Agreement, except
in connection with the valid  termination of this Agreement  pursuant to Section
7.1(b)(ii) or 7.1(c)(ii) hereof, neither the Board of Directors of Parent or the
Company nor any committee thereof shall (i) approve or recommend,  or propose to
approve or recommend,  any Parent  Acquisition  Proposal or Company  Acquisition
Proposal,   respectively,   (ii)  enter  into  any   agreement   (other  than  a
confidentiality  agreement)  with  respect to any Parent or Company  Acquisition
Proposal  or (iii)  withdraw or modify,  or propose to withdraw or modify,  in a
manner adverse to the other party, the approval or  recommendation  by its Board
of  Directors  or a  committee  thereof of the  Merger,  this  Agreement  or the
issuance of the Parent Common Stock to be issued pursuant to the Merger. Nothing
contained in this Section shall  prohibit  Parent or its Board of Directors from
taking and disclosing to their  stockholders a position with respect to a tender
offer by a third party  pursuant to Rules 14d-9 and 14e-2(a)  promulgated  under
the Exchange Act.

                                  ARTICLE VI.

                 CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING

Section  6.1  Closing  and  Closing  Date.  As soon  as  practicable  after  the
satisfaction  or waiver of the  conditions  set  forth  herein  and prior to the
filing of the  Certificate  of Merger and  Articles of Merger,  a closing of the
transactions contemplated hereby (the "Closing") shall take place at the offices
of Jackson Walker,  L.L.P. 901 Main Street, Suite 6000, Dallas, Texas or at such
other  location  as the  parties  may  agree in  writing.  The date on which the
Closing occurs is referred to as the "Closing Date."

Section 6.2 Conditions to the Obligations of the Company, Parent and Merger Sub.
The  respective  obligations  of the  Company,  on the one hand,  and Parent and
Merger Sub, on the other  hand,  to  consummate  the  transactions  contemplated
hereby are subject to the  satisfaction  at or prior to the Closing  Date of the
following  conditions,  any or all of which  may be  waived  in  writing  by the
parties hereto, in whole or in part, to the extent permitted by applicable law:

(a)      this Agreement shall have been approved by the shareholders of the
Company as contemplated hereby;

(b) the issuance of Parent  Common Stock  pursuant to the Merger,  the change of
the  Parent's  name and the increase in the number of  authorized  shares of the
Parents' Common Stock shall have been approved by the  stockholders of Parent as
contemplated hereby;

(c)      the shares of Parent  Common Stock to be issued in the Merger shall
have been  approved for listing on the AMEX upon  official notice of issuance;

                                       34

<PAGE>

(d) any  governmental  or regulatory  notices or approvals,  including  blue sky
approvals,  required with respect to the transactions  contemplated hereby shall
have been either filed or received;

(e) no  federal,  state or foreign  governmental  authority  or other  agency or
commission  or court of  competent  jurisdiction  shall  have  enacted,  issued,
promulgated,  enforced or entered any statute or rule, regulation, injunction or
other order (whether  temporary or  preliminary  or permanent)  which remains in
effect and which has the effect of making the transactions  contemplated  hereby
illegal  or  otherwise   prohibiting  the  transactions   contemplated  by  this
Agreement,  or which questions the validity or the legality of the  transactions
contemplated  hereby and which could  reasonably be expected to  materially  and
adversely affect the value of the business of the Company or the Parent;

(f) the Form S-4 shall have become  effective in accordance  with the Securities
Act, and no stop order suspending such effectiveness  shall have been issued and
remain in effect and no  proceeding  seeking  such an order  shall be pending or
threatened.

(g)      the Board of Directors of the Company  shall be  reasonably  satisfied
with the Parent's  liquidation,  disposition  or other plans for the shares of
stock of ILD Telecommunications, Inc. held by the Parent as of the date hereof.

Section 6.3  Additional  Conditions to Obligations of Parent and Merger Sub. The
obligations  of  Parent  and  Merger  Sub to  effect  the  Merger  and the other
transactions  contemplated  hereby are also  subject to the  satisfaction  at or
prior to the Closing Date of the following  conditions,  any or all of which may
be waived in writing by Parent,  in whole or in part, to the extent permitted by
applicable law:

(a) each of the  representations and warranties of the Company contained in this
Agreement shall be true and correct except to the extent that the breach thereof
shall not constitute a Company Material Adverse Effect as of the Closing Date as
though  made  on  and  as of  the  Closing  Date  (except  to  the  extent  such
representations and warranties  specifically relate to an earlier date, in which
case such  representations  and warranties  shall be true and correct as of such
earlier  date),  and Parent and Merger Sub shall have received a certificate  of
the President or Chief Financial Officer of the Company, dated the Closing Date,
to such effect;

(b) the Company shall have  performed or complied in all material  respects with
all  agreements  and  covenants  required by this  Agreement  to be performed or
complied with by it on or prior to the Closing  Date,  and Parent and Merger Sub
shall have  received  a  certificate  of the  President  or the Chief  Financial
Officer of the Company, dated the Closing Date, to that effect;

(c) since the date of this  Agreement,  there  shall not have been any  material
adverse change, or changes which in the aggregate are materially adverse, in the
financial  condition,  operations or current business of the Company  (excluding
changes caused by general economic or industry-wide conditions or resulting from
any change in law or GAAP);

                                       35

<PAGE>

(d) Jackson Walker L.L.P. shall have delivered to the Parent its written opinion
(which may be based upon certain  representations  of  management of the Company
and  Parent and others  and upon  certain  assumptions)  as of the date that the
Proxy Statement is first mailed to the Parent's  stockholders  substantially  to
the effect  that (i) the Merger  will  constitute  a  reorganization  within the
meaning  of  Section  368(a)  of the Code and (ii)  Parent,  Merger  Sub and the
Company  will  each be a party to that  reorganization  within  the  meaning  of
Section  368(b) of the Code,  and such opinion shall not have been  withdrawn or
modified in any material respect;

(e) the opinion referred to in Section  5.4(d)(i) shall not have been withdrawn,
rescinded or revoked and the Parent shall have received the letters  referred to
in Section 5.14;

(f) the Parent shall have obtained the consent or approval of each person (other
than the governmental approvals referred to in Section 6.2(d)), whose consent or
approval  shall be  required  in order to permit  the Parent to  consummate  the
transactions  contemplated hereby, except those for which failure to obtain such
consents and  approvals  would not,  individually  or in the  aggregate,  have a
material  adverse effect (i) on the Parent or (ii) upon the  consummation of the
transactions contemplated by this Agreement;

(g) Robert  Harshaw  shall have entered into an  employment  agreement  with the
Parent or the Company and John J. McDonald shall have entered into an employment
agreement with the Parent,  each  agreement  having a term of at least three (3)
years and other terms and conditions satisfactory to the Parent;

(h)      the condition set forth in the last sentence of Section 5.4(d) above
shall have been satisfied as provided therein.

         (i) The  holders of shares of Parent  Common  Stock and the  holders of
shares of Company Common Stock shall not have exercised dissenters' or appraisal
rights.

Section 6.4 Additional Conditions to Obligations of the Company. The obligations
of the  Company to effect the  Merger  and the other  transactions  contemplated
hereby are also subject to the  satisfaction  at or prior to the Closing Date of
the  following  conditions,  any or all of which may be waived in writing by the
Company, in whole or in part, to the extent permitted by applicable law:

(a)  each of the  representations  and  warranties  of  Parent  and  Merger  Sub
contained in this Agreement  shall be true and correct except to the extent that
the breach thereof shall not constitute a Parent  Material  Adverse Effect as of
the Closing  Date as though made on and as of the  Closing  Date  (except to the
extent such  representations  and warranties  specifically  relate to an earlier
date,  in which  case  such  representations  and  warranties  shall be true and
correct  as of such  earlier  date),  and the  Company  shall  have  received  a
certificate  of the President or the Chief  Financial  Officer of each of Parent
and Merger Sub, dated the Closing Date, to such effect;

(b)  Parent and Merger Sub shall have  performed  or  complied  in all  material
respects  with all  agreements  and covenants  required by this  Agreement to be
performed  or  complied  with by them

                                       36

<PAGE>

on or prior to the Closing  Date,  and the Company  shall  have  received  a
certificate  of the  President  or the  Chief Financial  Officer of each of
Parent and Merger Sub,  dated the Closing Date, to that effect;

(c) Since the date of this  Agreement,  there  shall not have been any  material
adverse change or change which in the aggregate are materially  adverse,  in the
financial  condition,  operations or current  business of the Parent  (excluding
changes caused by general economic or industry-wide conditions or resulting from
any change in law or GAAP);

(d)  Jackson  Walker  L.L.P.  shall have  delivered  to the  Company its written
opinion  (which may be based upon certain  representations  of management of the
Company and Parent and others and upon certain  assumptions) as of the date that
the Proxy Statement is first mailed to the Company's shareholders  substantially
to the effect that (i) the Merger will  constitute a  reorganization  within the
meaning of section 368(a) of the Code,  (ii) Parent,  Merger Sub and the Company
will each be a party to that reorganization within the meaning of section 368(b)
of the Code, and (iii) no gain or loss for U.S. federal income tax purposes will
be recognized  by the holders of Company  Common Stock upon receipt of shares of
Parent  Common Stock in the Merger,  except with respect to any cash received in
lieu of a fractional  share  interest in Parent Common  Stock,  and such opinion
shall not have been withdrawn or modified in any material respect;

(e) The Bylaws of Parent shall have been amended,  effective as of the Effective
Time, in compliance with Section 5.1 of this Agreement and the persons specified
in such Section  shall have been elected or appointed to the position  described
in that Section; and

(f) The  Company  shall have  obtained  the  consent or  approval of each person
(other than the governmental  approvals  referred to in Section  6.1(d)),  whose
consent  or  approval  shall be  required  in order to  permit  the  Company  to
consummate the transactions  contemplated hereby, except those for which failure
to  obtain  such  consents  and  approvals  would  not,  individually  or in the
aggregate,  have a material  adverse  effect (i) on the Company or (ii) upon the
consummation of the transactions contemplated by this Agreement.

                                  ARTICLE VII.

                                   TERMINATION

Section 7.1  Termination.  This Agreement may be terminated and the transactions
contemplated  hereby may be abandoned at any time prior to the  Effective  Time,
whether  before or after  approval of this  Agreement  by the  Company's  or the
Parent's stockholders:

(a)      by mutual written consent duly authorized by the Boards of Directors
of the Company and Parent;

(b)      by Parent:

                                       37

<PAGE>

(i)      upon a breach of any representation, warranty, covenant or agreement on
         the  part  of the  Company  set  forth  in  this  Agreement,  or if any
         representation  or warranty of the Company shall have become untrue, in
         either  case such that the  conditions  set forth in Section  6.3(a) or
         Section  6.3(b)  of  this  Agreement,  as the  case  may be,  would  be
         incapable of being  satisfied by April 15, 2000 (the  "Outside  Date");
         provided,  however, that in any case a willful material breach shall be
         deemed to cause such  conditions to be incapable of being satisfied for
         purposes of this Section 7.1(b); or

(ii)     if,  prior to the  Effective  Time,  the Board of Directors  of Parent
         (or any  committee  hereof)  shall have  withdrawn,  or modified or
         changed in a manner  adverse to the Company,  its approval or
         recommendation  of the issuance of shares of Parent Common Stock
         pursuant to the Merger in order to approve and permit Parent to
         executive a definitive  agreement  providing for a Superior
         Proposal;  provided that (A) at least 5 business days prior to
         terminating this Agreement pursuant to this Section 7.1(b)(ii)
         Parent has provided the Company  with  written  notice  advising the
         Company that the Board of Directors of Parent has received a Superior
         Proposal that it intends to accept,  specifying  the material  terms
         and  conditions of such Superior Proposal and  identifying  the
         person  making such  Superior  Proposal,  (B) Parent shall have
         caused its  financial and legal advisors to negotiate in good faith
         with the Company to make such  adjustments  in the terms and
         conditions of this Agreement as would enable Parent to proceed with
         the transactions  contemplated  herein on such adjusted terms,
         (C) simultaneously  with any  termination of this Agreement
         pursuant to Section  7.1(b)(ii),  Parent shall pay to the Company
         the  Termination Fee (as defined in Section 7.3(c)),  and (D) Parent
         may not terminate this Agreement  pursuant to this Section 7.1(b)(ii)
         if Parent is in material breach of this Agreement; or

(iii)    within 10 days  after the date the  Company  shall have  delivered  the
         Company Disclosure  Schedule pursuant to Section 2.1 if, as a result of
         the Company  Disclosure  Schedule,  or the due diligence  investigation
         theretofore  conducted by the Parent  (regardless of whether Disclosure
         Schedule is  delivered),  the Board of  Directors  of Parent shall have
         concluded that there exists information concerning the Company that (x)
         may  reasonably  be expected to  materially  and  adversely  affect the
         financial  condition,  operations or current business of the Company or
         the enforceability of this Agreement,  and (y) if such information were
         known at the date of this Agreement,  the Parent would not have entered
         into this Agreement; or

(c)      by the Company:

(i)      upon a breach of any representation, warranty, covenant or agreement on
         the part of Parent or Merger Sub set forth in this Agreement, or if any
         representation  or warranty  of Parent  shall have  become  untrue,  in
         either  case such that the  conditions  set forth in Section  6.4(a) or
         Section  6.4(b)  of  this  Agreement,  as the  case  may be,  would  be
         incapable of being  satisfied by the Outside Date;  provided,  however,
         that in any case,  a  willful  breach  shall be

                                       38

<PAGE>

         deemed  to cause  such conditions  to be  incapable of being satisfied
         for purposes of this Section 7.1(c);

(ii)     if, prior to the Effective  Time, the Board of Directors of the Company
         (or any committee  thereof) shall have  withdrawn,  or modified or
         changed in a manner adverse to the Parent,  its approval or
         recommendation  of the Merger in order to approve and permit the
         Company  to execute a  definitive  agreement  providing  for a
         Superior  Proposal;  provided  that (A) at least 5 business days
         prior to terminating  this Agreement  pursuant to this Section
         7.1(c)(ii)  Company has provided the Parent with written  notice
         advising  the Parent that the Board of  Directors  of the Company has
         received a Superior  Proposal  that it intends to accept,
         specifying the material terms and conditions of such Superior
         Proposal and  identifying the person making such Superior  Proposal,
         (B) the Company  shall have caused its financial and legal  advisors
         to negotiate in good faith with the Parent to make such  adjustments
         in the terms and conditions of this Agreement as would enable Parent
         to proceed with the transactions  contemplated  herein on such
         adjusted terms; (C) simultaneously  with any termination of this
         Agreement pursuant to this Section  7.1(c)(ii),  the Company shall
         pay to the Parent the Termination Fee (as defined in Section 7.3(c)),
         and (D) the Company may not terminate  this  Agreement  pursuant to
         this Section  7.1(c)(ii)  if the Company is in material  breach of
         this Agreement; or

(iii)    within 10 days  after the date the  Parent  shall  have  delivered  the
         Parent  Disclosure  Schedule pursuant to Section 2.1 if, as a result of
         such Parent  Disclosure  Schedule,  or the due diligence  investigation
         theretofore  conducted  by the  Company,  the Board of Directors of the
         Company shall have  concluded  that there exists  material  information
         concerning the Parent that (x) may reasonably be expected to materially
         and  adversely  affect the financial  condition,  operations or current
         business of the Parent or the enforceability of this Agreement, and (y)
         if such  information  were  known  at the date of this  Agreement,  the
         Company would not have entered into this Agreement; or

(d)      by either Parent or the Company if the Merger shall not have been
consummated on or before the Outside Date; or

(e) by either Parent or the Company if this Agreement  shall fail to receive the
requisite vote for approval by the  stockholders of the Company at the Company's
stockholders'  meeting  referred  to in Section  5.9 or if the  issuance  of the
Parent Common Stock in connection  with the Merger or the increase in the number
of authorized  shares of Parent Common Stock shall fail to receive the requisite
vote for approval by the  stockholders  of Parent at the  Parent's  stockholders
meeting referred to in Section 5.9.

         The right of any party hereto to terminate this  Agreement  pursuant to
this Section 7.1 shall remain operative and in full force and effect  regardless
of any  investigation  made by or on behalf of any party  hereto or any of their
respective officers,  directors,  representatives or agents, whether prior to or
after the execution of this Agreement.

                                       39

<PAGE>

Section  7.2  Effect of  Termination.  In the event of the  termination  of this
Agreement pursuant to Section 7.1 hereof, this Agreement,  except as provided in
Sections 7.3 and 8.15,  shall forthwith become null and void and have no effect,
without any  liability  on the part of any party or its  directors,  officers or
stockholders except as set forth in Sections 7.3 and 8.15.

Section 7.3       Fees and Expenses.

(a) Subject to Section 7.3(c), all Expenses (as defined in paragraph (b) of this
Section  7.3)  incurred  by the  parties  hereto  shall be (i) borne  solely and
entirely by the party which has incurred such Expenses;  provided, however, that
(i) the allocable  share of Parent and Merger Sub as a group and the Company for
all  Expenses  related to  printing  and mailing  the Proxy  Statement  shall be
three-fourths  by Parent and one-fourth by the Company  one-half each; (ii) that
Parent may, at its option,  pay any  Expenses of the  Company,  and (iii) Parent
shall pay all SEC filing fees.

(b)  "Expenses"  as used in  this  Agreement  shall  include  all  out-of-pocket
expenses  (including,  without  limitation,  all fees and  expenses  of counsel,
accountants,  investment bankers,  experts and consultants to a party hereto and
its  affiliates)  incurred  by a party or on its  behalf in  connection  with or
related  to  the   authorization,   preparation,   negotiation,   execution  and
performance of this Agreement, the preparation,  printing, filing and mailing of
the Proxy  Statement,  the  solicitation of stockholder  approvals and all other
matters related to the consummation of the transactions contemplated hereby.

(c) If the Parent shall terminate this Agreement  pursuant to Section 7.1(b)(ii)
or the Company shall terminate the Agreement pursuant to Section 7.1(c)(ii), the
party  terminating  this Agreement  shall pay to the other party (not later than
five business days after such  termination of this Agreement) an amount equal to
the reasonable Expenses of such other party (the "Termination Fee").

(d) Parent and the Company agree that the agreements contained in Section 7.3(c)
are an integral  part of the  transactions  contemplated  by this  Agreement and
constitute  liquidated damages and not a penalty. If one party fails to promptly
pay to the other any amounts due under such Section 7.3(c), the defaulting party
shall  pay the  costs  and  expenses  (including  legal  fees and  expenses)  in
connection  with any action,  including the filing of any lawsuit or other legal
action,  taken to collect payment,  together with interest on any unpaid amounts
at the  publicly  announced  prime or base  rate of The Wall  Street  Journal  -
Southwest Edition from the date such amount was required to be paid.

                                 ARTICLE VIII.

                                  MISCELLANEOUS

Section 8.1 Survival of Representations and Warranties.  The representations and
warranties  contained  herein shall not survive beyond the Effective  Time. This
Section 8.1 shall not limit any  covenant  or  agreement  of the parties  hereto
which by its terms requires performance after the Effective Time.

                                       40

<PAGE>

Section 8.2  Amendment.  This  Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective  Time;  provided,  however,  that after  approval of this
Agreement by the  stockholders  of the Company or the Parent,  (i) no amendment,
which  under  applicable  law  may  not be  made  without  the  approval  of the
shareholders  of the Company,  may be made without  such  approval,  and (ii) no
amendment,  which under the applicable  rules of the AMEX or applicable law, may
not be made  without the  approval of the  stockholders  of Parent,  may be made
without such approval. This Agreement may not be amended except by an instrument
in writing signed by all parties hereto.

Section 8.3 Waiver. At any time prior to the Effective Time, either party hereto
may (a) extend the time for the  performance of any of the  obligations or other
acts  of  the  other  party   hereto,   (b)  waive  any   inaccuracies   in  the
representations  and  warranties of the other party  contained  herein or in any
document  delivered  pursuant hereto and (c) waive compliance by the other party
with any of the agreements or covenants  contained herein. Any such extension or
waiver shall be valid only if set forth in an  instrument  in writing  signed by
the party or parties to be bound  thereby.  For  purposes of this  Section  8.3,
Parent and Merger Sub shall be deemed to be one party.

Section 8.4 Entire Agreement.  This Agreement  (together with the Exhibits,  the
Company's Disclosure Statement and Parent's Disclosure Statement) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.

Section 8.5 Notices. All notices and other communications  hereunder shall be in
the  English  language,  in writing  and shall be deemed to have been duly given
when  delivered  in person,  by telecopy,  or by  registered  or certified  mail
(postage  prepaid,  return  receipt  requested)  to the  respective  parties  as
follows:


                           if to Parent or Merger Sub:

                           Intellicall Inc.
                           2155 Chenault, Suite 410
                           Carrollton, TX  75006-5023
                           Telecopy:   972-416-9454
                           Attention:  John McDonald






                                       41

<PAGE>

                           with a copy to:

                           Richard F. Dahlson, Esq.
                           Jackson Walker, L.L.P.
                           901 Main Street, Suite 6000
                           Dallas, TX  75202
                           Telecopy:   214-953-6187

                           if to the Company:

                           Heads Up Technologies, Inc.
                           2033 Chenault, Suite 100
                           Carrollton, TX  75006
                           Telecopy:  972-407-1758
                           Attention: Rob Harshaw

                           with a copy to:

                           Lewis T. Sweet, Jr.
                           3811 Turtlecreek Blvd., Suite 320
                           Dallas, TX  75219
                           Telecopy:   214-651-3008

or to such  other  address  as the  party  to whom  notice  is  given  may  have
previously furnished to the others in writing in the manner set forth above. Any
notice or  communication  delivered  in  person  shall be  deemed  effective  on
delivery. Any notice or communication sent by telecopy shall be deemed effective
on the first business day at the place of which such notice or  communication is
received  following the day on which such notice or communication  was sent. Any
notice or  communication  sent by registered  or certified  mail shall be deemed
effective  on the fifth  business  day at the place from  which  such  notice or
communication was mailed following the day in which such notice or communication
was mailed.

Section 8.6 Governing Law. This Agreement  shall be governed by and construed in
accordance with the laws of the State of Texas regardless of the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.

Section 8.7 Descriptive  Headings.  The descriptive headings herein are inserted
for  convenience  of  reference  only and are not  intended  to be part of or to
affect the meaning or interpretation of this Agreement.

Section 8.8 Parties in Interest.  This Agreement shall be binding upon and inure
solely to the  benefit  of each party  hereto,  and  nothing in this  Agreement,
express or implied,  is  intended

                                       42

<PAGE>

to confer upon any other  person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.

Section 8.9  Counterparts.  This Agreement may be executed in  counterparts,  by
original  or  facsimile  signatures,  each of  which  shall be  deemed  to be an
original, but all of which shall constitute one and the same agreement.

Section 8.10      Certain Definitions.  For the purposes of this Agreement,
                                        the term:

(a) "affiliate" means a person that directly or indirectly,  through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned person;

(b)      "business day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to close;

(c)  "knowledge" or "known" shall mean,  with respect to any matter in question,
if an executive officer of the Company or Parent, as the case may be, has actual
knowledge of such matter or should have had  knowledge  with the exercise of due
diligence;

(d)      "person" means an individual, corporation, partnership, association,
trust, unincorporated organization or other entity; and

(e)  "subsidiary"  or  "subsidiaries"  of the  Company,  Parent,  the  Surviving
Corporation  or any other  person,  means any  corporation,  partnership,  joint
venture  or other  legal  entity of which the  Company,  Parent,  the  Surviving
Corporation  or any such  other  person,  as the case  may be  (either  alone or
through or together with any other  subsidiary),  owns,  directly or indirectly,
50% or more of the stock or other  equity  interests,  the  holders of which are
generally  entitled to vote for the  election of the board of directors or other
governing body of such corporation or other legal entity.  References  herein to
the shares of capital  stock of any  subsidiary  not  organized as a corporation
shall be deemed to relate to the equity  interests in such  subsidiary,  however
denominated.

         When used in this Agreement, the plural includes the singular, and vice
versa,  a neuter  pronoun  includes the  masculine and  feminine,  and,  whether
expressly  stated  or  not,  the  term  "including"   means  including   without
limitation.

Section 8.11 Personal Liability. This Agreement shall not create or be deemed to
create or permit any personal  liability or obligation on the part of any direct
or  indirect  stockholder  of the  Company or Parent or any  officer,  director,
employee, agent, representative or investor of any party hereto.

Section 8.12  Binding  Effect,  Assignment.  This  Agreement  shall inure to the
benefit of and be binding  upon the parties  hereto and their  respective  legal
representatives and successors.  This Agreement may not be assigned by any party
hereto.

                                       43

<PAGE>

Section 8.13  Severability.  If any term or other provision of this Agreement is
invalid,  illegal or  incapable  of being  enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the  economic or legal  substance  of
the transactions  contemplated  hereby is not affected in any manner  materially
adverse to any party. Upon such  determination  that any term or other provision
is invalid,  illegal or incapable of being  enforced,  the parties  hereto shall
negotiate  in good faith to modify this  Agreement  so as to effect the original
intent of the parties as closely as possible in an acceptable  manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.

Section 8.14 Specific Performance. The parties hereby acknowledge and agree that
the  failure of any party to perform its  agreements  and  covenants  hereunder,
including  its failure to take all actions as are  necessary  on its part to the
consummation of the Merger,  will cause irreparable  injury to the other parties
for  which  damages,  even  if  available,  will  not  be  an  adequate  remedy.
Accordingly,  each party hereby consents to the issuance of injunctive relief by
any court of  competent  jurisdiction  to  compel  performance  of such  party's
obligations  and to the  granting  by  any  court  of  the  remedy  of  specific
performance of its obligations hereunder.

Section 8.15 Legal Fees;  Costs.  If any party hereto  institutes  any action or
proceeding,  whether before a court or arbitrator,  prior to the Effective Date,
to enforce any provision of this Agreement,  the prevailing  party therein shall
be entitled to receive  from the losing  party  reasonable  attorneys'  fees and
costs  incurred  in such  action or  proceeding,  whether or not such  action or
proceeding is prosecuted to judgment.

Section 8.16 Failure or Indulgence Not Waiver;  Remedies Cumulative.  No failure
or delay on the part of any party hereto in the exercise of any right  hereunder
shall impair such right or be construed to be a waiver of, or  acquiescence  in,
any breach of any  representation,  warranty or agreement herein,  nor shall any
single or partial  exercise of any such right preclude other or further exercise
thereof  or of any other  right.  All rights and  remedies  existing  under this
Agreement  are  cumulative  to, and not  exclusive to, and not exclusive of, any
rights or remedies otherwise available.


                                       44
<PAGE>


         IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed  on  its  behalf  by one of its  officers  thereunto  duly  authorized,
effective as of the day and year first above written.

                     HEADS UP TECHNOLOGIES, INC.


                     By:_________________________________________________
                        Name:____________________________________________
                        Title:___________________________________________


                     INTELLICALL, INC.


                     By:_________________________________________________
                        Name:____________________________________________
                        Title:___________________________________________


                     H.U.T.I. ACQUISITION, INC.


                     By:
                        Name:___________________________________________
                        Title:__________________________________________




                                       45
<PAGE>




                          FIRST AMENDMENT TO AGREEMENT
                               AND PLAN OF MERGER


         THIS FIRST  AMENDMENT TO AGREEMENT  AND PLAN OF MERGER  (this
"Amendment")  is executed as of January 31, 2000,  by and among Heads Up
Technologies,  Inc.,  a Texas  corporation,  (the  "Company"),  Intellicall,
Inc., a Delaware  corporation  (the  "Parent"),  and H.U.T.I.  Acquisition,
Inc.,  a Texas  corporation  and  wholly-owned subsidiary of Parent
("Merger Sub").


                                    RECITALS:


         WHEREAS,  the Company, the Parent, and the Merger Sub entered into that
certain  Agreement  and  Plan of  Merger  dated  as of  January  18,  2000  (the
"Agreement"); and

         WHEREAS,  pursuant to Section 2.1(a) of the Agreement,  the Company and
the Parent agreed to deliver the other disclosure schedules by January 31, 2000;
and

         WHEREAS,  the Company,  the Parent,  and the Merger Sub desire to amend
Section  2.1(a) of the  Agreement to provide an extension of time to the Company
and the Parent for delivering such disclosure schedules.

         NOW,  THEREFORE,  in  consideration  of the mutual  covenants set forth
herein  and for good and  valuable  consideration,  the  adequacy,  receipt  and
sufficiency of which are hereby  acknowledged,  the undersigned  hereby agree as
follows:

         1.       Amendment.  Section 2.1(a) of the Agreement is hereby
deleted and the following  provision  shall replace it:

         Section 2.1       Disclosure Schedules.

                  (a) The  Company and Parent  acknowledge  that the Company and
         the Parent  have not had an  adequate  opportunity  to (i)  prepare the
         Company Disclosure  Schedule or Parent Disclosure  Schedule referred to
         in  Articles   III  and  IV,   respectively,   or  (ii)   complete  its
         investigation of the business and operations of the other. Accordingly,
         the Company  and the Parent  shall,  on or before  February  14,  2000,
         deliver to the other party a  Disclosure  Schedule  setting  forth,  in
         reasonable detail, any exceptions to the  representations  made by such
         party in  Article  III or IV,  as the case  may be,  or any  additional
         information required to be disclosed pursuant to such Articles.

         2.       Deadlines on Business  Days.  The Agreement is hereby
augmented by the addition of the following Section 8.17:


<PAGE>

         Section 8.17 Deadlines to Fall on Business Days. To the extent that any
         deadline for an event to occur under this Agreement falls on a day that
         is not a business day, such deadline shall automatically be extended to
         the following business day.

         3.       Continuing  Effect.  Except as modified and amended hereby,
the Agreement is and shall remain in force and effect in accordance with
its terms.

         4.       Counterparts;  Telecopies.  This Amendment may be executed
in several counterparts,  all of which are identical,  each of which shall be
deemed an original,  and all of which counterparts together shall constitute
one and the same instrument.

         5.       Governing  Law. This  Amendment  shall be governed by and
construed in accordance  with, the laws of the State of Texas,  regardless of
the laws that might  otherwise  govern under  principles of conflicts of laws
applicable thereto.



                           [Intentionally Left Blank]

<PAGE>


         IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed  on  its  behalf  by one of its  officers  thereunto  duly  authorized,
effective as of the day and year first above written.

                                   HEADS UP TECHNOLOGIES, INC.


                                   By:_______________________________________
                                      Name:__________________________________
                                      Title:_________________________________


                                   INTELLICALL, INC.


                                   By:_______________________________________
                                      Name:__________________________________
                                      Title:_________________________________


                                   H.U.T.I. ACQUISITION, INC.


                                   By:_______________________________________
                                      Name: _________________________________
                                      Title:_________________________________










<PAGE>

                          AMENDMENT NO. 3 TO AGREEMENT
                               AND PLAN OF MERGER


         THIS  AMENDMENT  NO. 3 TO  AGREEMENT  AND PLAN OF MERGER  (this
"Amendment")  is executed as of April 15, 2000,  by and among Heads Up
Technologies,  Inc.,  a Texas  corporation,  (the  "Company"),  Intellicall,
Inc., a Delaware  corporation  (the  "Parent"),  and H.U.T.I.  Acquisition,
Inc.,  a Texas  corporation  and  wholly-owned subsidiary of Parent
("Merger Sub").

                                    RECITALS:


A.       The Company,  Parent,  and Merger Sub are parties to that certain
Agreement and Plan of Merger,  dated as of January 18, 2000, as amended
(the "Agreement").

B.       The Company, Parent, and Merger Sub desire to amend the Agreement to
the extent provided below.

C. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
for good and valuable  consideration,  the adequacy,  receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby agree as follows:

                                   AMENDMENTS


1.       Amendment.  The term "Outside  Date" (as defined in Section  7.1(c) of
the  Agreement)  is hereby  changed from April 15, 2000, to July 30, 2000.

                                  MISCELLANEOUS


1.       Continuing  Effect.  Except as modified  and amended  hereby,  the
Agreement is and shall remain in force and effect in accordance with its terms.

2.       Counterparts;  Telecopies.  This  Amendment  may be  executed  in
several  counterparts,  all of which are identical,  each of which shall be
deemed an original,  and all of which counterparts together shall constitute one
and the same instrument.

3.       Governing  Law. This  Amendment  shall be governed by and construed
in  accordance  with,  the laws of the State of  Texas,  regardless  of the
laws that  might  otherwise  govern  under  principles  of  conflicts  of laws
applicable thereto.



<PAGE>


         IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed  on  its  behalf  by one of its  officers  thereunto  duly  authorized,
effective as of the day and year first above written.



                                        HEADS UP TECHNOLOGIES, INC.


                                        By:__________________________________
                                           Name:_____________________________
                                           Title:____________________________



                                        INTELLICALL, INC.


                                        By:__________________________________
                                           Name:_____________________________
                                           Title:____________________________



                                        H.U.T.I. ACQUISITION, INC.


                                        By:__________________________________
                                           Name:_____________________________
                                           Title:____________________________



                                       2