<PAGE>

                                                                    EXHIBIT 2.11

                            ASSET PURCHASE AGREEMENT


               ASSET  PURCHASE  AGREEMENT  dated  as of  June 1,  1998  between
CREDENCE SYSTEMS CORPORATION,  a Delaware corporation  ("Purchaser") and YERVANT
DAVID  LEPEJIAN  and  LAWRENCE   KRAUS,  as  authorized   representatives   (the
"Shareholder  Representatives")  of all of the shareholders of Heuristic Physics
Laboratories, Inc., a California corporation (the "Company").

               WHEREAS,  the  Shareholder  Representatives  desire  to cause the
Company and its  wholly-owned  subsidiary,  Heuristic  Physics  Laboratories  of
Armenia,  a company  organized  under the laws of the  Republic of Armenia  (the
"Subsidiary" and, collectively with the Company, the "HPL Companies") to sell to
Purchaser,  and Purchaser desires to purchase from the HPL Companies, all of the
Assets (as defined in Section 1.1);

               WHEREAS,  the  Shareholder  Representatives  desire  to cause the
transfer  from the HPL  Companies to Purchaser  of, and  Purchaser is willing to
accept such transfer from the HPL Companies, the Assumed Liabilities (as defined
in Section 2.1);

               NOW,  THEREFORE,  in  consideration  of the mutual  promises  and
covenants set forth herein, the parties hereby agree as follows:

                                    ARTICLE I

                           PURCHASE AND SALE OF ASSETS
                           ---------------------------

               SECTION 1. 1 DESCRIPTION OF ASSETS TO BE ACQUIRED. Upon the terms
and subject to the conditions set forth in this  Agreement,  at the Closing Time
(as defined in Section 7.1), the Shareholder  Representatives agree to cause the
HPL Companies to convey, sell,  transfer,  assign, and deliver to Purchaser (and
any  wholly-owned  subsidiary of Purchaser  designated by Purchaser prior to the
Closing Time to receive  title to any of the  Assets),  and  Purchaser  (and any
wholly-owned  subsidiary  of  Purchaser  designated  by  Purchaser  prior to the
Closing Time to receive title to any of the Assets) shall  purchase from the HPL
Companies,  all right,  title,  and interest of the HPL  Companies in and to the
assets,  properties, and rights of the HPL Companies specifically referred to in
this Section 1. 1 (collectively,  the "Assets"). The Shareholder Representatives
represent and warrant to the Purchaser  that the Assets are all of the assets of
the HPL Companies used exclusively by the Automatic Test Equipment  Division and
the Design For Test  Division  of the HPL  Companies  (the  business  of the HPL
Companies'  Automatic Test  Equipment  Division and the Design For Test Division
being, the "Business"):

               (a) All interests in machinery, equipment,  instruments, computer
hardware and software, tooling, furniture,  fixtures, motor vehicles,  supplies,
repair and  maintenance  parts,  demonstration  units,  and other fixed  assets,
together with manufacturer or vendor warranties associated therewith,  listed on
Schedule 1.1 (a);

<PAGE>


               (b)  All   inventories  of  raw  materials   (together  with  any
manufacturer  or  vendor  warranties  associated  therewith),   work-in-process,
finished goods and supplies,  including scrapwork and rework, listed on Schedule
1.1 (b) (collectively, the "Inventory");

               (c) All  claims  and  rights  under  all  agreements,  contracts,
licenses, leases, franchises,  instruments,  documents, purchase and sale orders
and other executory commitments,  and all permits, consents, and certificates of
any regulatory,  administrative or other governmental  agency or body, listed on
Schedule 1.1 (c) hereto (collectively, the "Contracts");

               (d) All  interests  in the  real  property,  including  leasehold
interests (the "Leasehold Interests") listed on Schedule 1.1(d), and all related
rights,   easements   and  uses  which  benefit  or  burden  any  such  property
(collectively, the "Real Property");

               (e) All  right,  title  and  interest  to  trademarks,  trademark
rights, service marks, service mark rights, copyrights,  trade names, trade name
rights,  fictitious business names,  nondisclosure  agreements,  confidentiality
agreements,  assignment of inventions  agreements,  proprietary in formation and
inventions agreements, works of authorship,  inventions,  software, source code,
industrial  models,  industrial  designs,  utility  models and  certificates  of
invention,  designs emblems and logos,  trade secrets,  know-how,  manufacturing
formulae,  technical  information,   patents,  patent  applications,  mask  work
registrations,  inventions,  franchises, franchise rights, customer and supplier
lists together with the goodwill associated  therewith and all other proprietary
rights,  information  and processes,  in each case,  related  exclusively to the
Business,  all of  which  are  listed  on  Schedule  1.1(e)  (collectively,  the
"Proprietary Rights");

               (f)   All accounts and  notes  receivable  of the  HPL  Companies
relating  exclusively to the Business,  all of which are listed on Schedule 1(f)
(collectively, the "Accounts");

               (g)  All  original  books  of  account,  general  ledgers,  sales
invoices, purchase orders, accounts payable and payroll records, tax returns and
supporting  schedules,  drawings,  files, papers, and all other records relating
exclusively to the Business and duplicates of all of the foregoing relating (but
not exclusively relating) to the Business (the "Records");

               (h) All rights under express or implied warranties from suppliers
of the Business only to the extent such warranties relate to the Business;

               (i) All of the causes of action, judgments, and claims or demands
of whatever kind or  description  arising out of the activities of the Business,
but only to the extent such causes of action, judgments, and claims or documents
relate to the Business; and

               (j)  All goodwill of the Business (the "Goodwill").
<PAGE>


               SECTION  1.2 NON  ASSIGNMENT  OF  CERTAIN  ASSETS.  Neither  this
Agreement nor any action taken  pursuant to its provisions  shall  constitute an
assignment  if such  assignment  would  constitute  a breach of the terms of any
agreement or result in the loss or diminution or any rights  thereof;  provided,
however,  that in each such  case,  the  Shareholder  Representatives  shall use
their best efforts to obtain the consent to an assignment to Purchaser.  If such
consent is not obtained by the Closing  Time,  the  Shareholder  Representatives
shall  cooperate  with  Purchaser in any  arrangement  designed for Purchaser to
perform  the HPL  Companies'  obligations  with  respect to such Asset after the
Closing  Time and for  Purchaser  to receive the  benefits  under any such Asset
after the Closing Time,  which  arrangements  may include  enforcement,  for the
account and  benefit of  Purchaser,  of any and all rights of the HPL  Companies
against any other person arising out of the breach or cancellation by such other
person or otherwise,  all of such actions of the Shareholder  Representatives to
be at  the  direction  and  expense  of  the  Shareholder  Representatives.  The
Shareholder   Representatives  shall  reimburse  Purchaser  for  all  reasonable
documented costs and expenses,  including increased obligations,  resulting from
an inability of Purchaser to receive the benefits of any such assignment.

                                   ARTICLE II

                              LIABILITIES OF SELLER
                              ---------------------

               SECTION  2.1  ASSUMED  LIABILITIES.  Purchaser  hereby  agrees to
assume,  satisfy,  or perform when due only those liabilities and obligations of
the HPL  Companies  specifically  identified  on Schedule  2.1  attached  hereto
(collectively, the "Assumed Liabilities").

               SECTION  2.2  LIABILITIES  NOT  ASSUMED.  Other than the  Assumed
Liabilities,  Purchaser shall not assume,  nor shall Purchaser or any affiliate,
or any officer, director, employee, stockholder or agent of Purchaser, be deemed
to  have  assumed  or  guaranteed,  any  liabilities,  obligations,  litigation,
disputes,  debts,  payables,  counterclaims,  rights of set-off  or  return,  or
commitments or claims, whether such liabilities are contingent or otherwise,  or
direct or indirect,  of either of the HPL  Companies or any  shareholder  of the
Company in  existence  on or prior to or after the Closing  Time or based on any
events,  facts or  circumstances in existence prior to or in connection with the
sale of the Assets or in  connection  with or  arising  from any  activities  of
either of the HPL Companies or any services  provided by or goods or assets sold
by or products delivered by or to either of the HPL Companies (collectively, the
"Excluded Liabilities").


<PAGE>

                                  ARTICLE III

                                 PURCHASE PRICE
                                 --------------

               SECTION  3.1  CONSIDERATION.  Upon the terms and  subject  to the
conditions  contained in this Agreement,  in consideration for the Assets and in
full payment  therefor,  Purchaser will pay, or cause to be paid, to the Company
the Purchase Price set forth in Section 3.2.

               SECTION  3.2  PAYMENT  OF  PURCHASE  PRICE.  The  purchase  price
("Purchase  Price") to be paid or  payable by  Purchaser  to the  Company  shall
consist of cash in the amount of SEVEN MILLION NINE HUNDRED EIGHTY-TWO  THOUSAND
FIVE HUNDRED TWENTY-SIX Dollars ($7,982,526).

               SECTION 3.3 ROYALTY PAYMENTS.  In addition to the Purchase Price,
for a period of two (2) years following the date of the Closing, Purchaser shall
pay to the Shareholder  Representatives in the proportions set forth on Schedule
3.3  hereto  royalty  payments  in the  amount  equal  to ten  percent  (10%) of
Purchaser's  net sales to third  parties of products  derived  from those Assets
attributable  to the HPL  Companies  Design  For  Test  Division  (subject  to a
reasonable  reserve for returns).  Purchaser  shall  maintain  books and records
relating to its sales of such products and the Shareholder Representatives shall
be  entitled,  at their  own  expense,  to  audit  such  books  and  records  at
Purchaser's  place of business  during normal  business hours upon five (5) days
prior written notice.

                                   ARTICLE IV

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER
                   -------------------------------------------

               Purchaser  hereby  represents  and  warrants  to the  Shareholder
Representatives that:

               SECTION  4.1  ORGANIZATION.   Purchaser  is  a  corporation  duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.

               SECTION 4.2 AUTHORIZATION. Purchaser has full corporate power and
authority to enter into this Agreement,  to perform its  obligations  hereunder,
and to consummate the transactions  contemplated hereby. Purchaser has taken all
necessary  and  appropriate  corporate  action with respect to the execution and
delivery of this Agreement,  and this Agreement  constitutes a valid and binding
obligation of Purchaser,  enforceable in accordance  with its respective  terms:
(i)  except  as  limited  by  applicable  bankruptcy,   insolvency,  moratorium,
reorganization,   or  other  laws  affecting   creditors'  rights  and  remedies
generally,  (ii) except as may be required by the  applicable  provisions of the
bulk sales laws  provisions of applicable  state law, and ('iii')  except as the
indemnification  provisions  contained  in  this  Agreement  may be  limited  by
principles of public policy.


<PAGE>

                                    ARTICLE V

                        REPRESENTATIONS AND WARRANTIES OF
                        ---------------------------------
                         THE SHAREHOLDER REPRESENTATIVES
                         -------------------------------

               Except as set forth in the corresponding  sections or subsections
of the disclosure  letter delivered to Purchaser by Shareholder  Representatives
prior to entering into this Agreement  (the  "Disclosure  Letter"),  Shareholder
Representatives hereby represent and warrant to Purchaser:

               SECTION 5.1 ORGANIZATION; GOOD STANDING.

               The  HPL  Companies  are  corporations  duly  organized,  validly
existing  and in good  standing  under  the  laws of their  respective  state or
country of  organization,  and have the  corporate  power and  authority to own,
lease and operate their  properties and to carry on their businesses as the same
are now being conducted. The HPL Companies are qualified as foreign corporations
and are in good  standing  in such other  jurisdictions  in which the conduct of
their  business  or  their  ownership  or  leasing  of  property  requires  such
qualification.  Except as set forth on Schedule  5.1,  the HPL  Companies do not
own,  directly  or  indirectly,  any equity or other  ownership  interest  in or
control any corporation, partnership, joint venture or other entity. The Company
owns one hundred percent (100%) of the proprietary  interests in the Subsidiary.
All of the  proprietary  or equity  interests in the  Subsidiary are fully paid,
nonassessable and not subject to any lien or encumbrance.

               SECTION 5.2 AUTHORIZATION.

               Shareholder  Representatives  have full power and  authority,  on
behalf of all of the  shareholders of the Company,  to enter into this Agreement
and the  Related  Agreements  to  which  they  are a  party,  to  perform  their
obligations  hereunder  and  thereunder,  and  to  consummate  the  transactions
contemplated  hereby and thereby,  including  the execution and delivery of this
Agreement, general conveyances,  bills of sale, assignments, and other documents
and  instruments  evidencing  the  conveyance  of the  Assets  or  delivered  in
accordance with Section 7.2 hereunder (the "Closing  Documents") and the Related
Agreements to which they are a party. The HPL Companies have taken all necessary
and appropriate  corporate  action with respect to the execution and delivery of
any Closing  Documents and any Related  Agreements to which they are a party. No
other  corporate  proceedings  on the part of the HPL Companies are necessary to
authorize  this  Agreement  and the  Related  Agreements  or to  consummate  the
transactions  contemplated  hereby and thereby (other than,  with respect to the
sale of Assets,  the approval and adoption of this Agreement by the holders of a
majority  of the  outstanding  shares  of the HPL  Companies'  capital  stock in
accordance  with  California  law,  Armenian law and the HPL Companies'  charter
documents).  This Agreement and the Related Agreements to which they are a party
constitute  valid and binding  obligations of the  Shareholder  Representatives,
enforceable in accordance with their terms:  (i) except as limited by applicable

<PAGE>

bankruptcy,  insolvency,  moratorium,  reorganization,  or other laws  affecting
creditors' rights and remedies generally, and (ii) except as the indemnification
provisions  contained in this  Agreement  may be limited by principles of public
policy.

               SECTION 5.3 FINANCIAL STATEMENTS.

               (a) Each of the consolidated financial statements (including,  in
each  case,  any  related  notes  thereto)  delivered  by the HPL  Companies  to
Purchaser (the "Financial Statements") was prepared in accordance with generally
accepted  accounting  principles  applied on a consistent  basis  throughout the
periods involved and each fairly presented the consolidated  financial  position
of the Company and its  Subsidiaries as at the respective  dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited  interim  financial  statements were or are subject to
normal and recurring year-end  adjustments which were not or are not expected to
be material in amount. The Company's revenue  recognition  policies with respect
to the Financial Statements have been made in accordance with generally accepted
accounting principles.  The Company maintains a standard system of accounting in
accordance with generally accepted accounting  principles.  All of the Company's
general ledgers,  books and records are located at the Company's principal place
of  business.  The  Company's  financial  reserves  are adequate to cover claims
incurred.

               (b) The projections  which the Company has delivered to Purchaser
have been  prepared  by the  Company in good faith and are based on  assumptions
that are reasonable.  Such  projections do not contain any assumptions  that are
false or  misleading  with respect to any material fact and do not omit to state
any material fact necessary in order to make such projections reasonable.

               SECTION 5.4 ABSENCE OF CERTAIN CHANGES AND EVENTS.

               1. Since  March 31,  1998,  there had not  occurred  any  adverse
change in the financial condition,  results of operation,  assets,  liabilities,
business,  or  prospects  of the Business or any  occurrence,  circumstance,  or
combination  thereof which  reasonably could have been expected to result in any
such adverse change.

               2. Since March 31, 1998, there has not been:

               a.  Any  event,  including,   without  limitation,   shortage  of
materials or  supplies,  fire,  explosion,  accident,  requisition  or taking of
property  by any  governmental  agency,  flood,  drought,  earthquake,  or other
natural event,  riot, act of God or a public enemy, or damage,  destruction,  or
other  casualty,  whether  covered by insurance or not, which has had an adverse
effect on the Business or the Assets or any such event which reasonably could be
expected to have such an effect on the Business or the Assets;

               b. Any  transaction  relating to or involving the Business (other
than the transactions contemplated herein) which was entered into or carried out
other than in the ordinary and usual course of business;

<PAGE>

               c. Any change made by the Company in its method of operating  the
Business or its accounting practices relating thereto;

               d. Any mortgage, pledge, lien, security interest,  hypothecation,
charge, or other encumbrance  imposed or agreed to be imposed on or with respect
to the Assets  other than liens  arising  with  respect to taxes not yet due and
payable,  and such minor  liens and  encumbrances,  if any,  which  arise in the
ordinary  course  of  business  and which do not  detract  from the value of the
Assets;

               e. Any sale,  lease, or disposition of, or any agreement to sell,
lease,  or  dispose  of  any  of  the  Assets,  other  than  sales,  leases,  or
dispositions  in the usual and ordinary  course of business and consistent  with
prior practice;

               f.  Any  modification,   waiver,  change,   amendment,   release,
rescission,  accord and satisfaction, or termination of, or with respect to, any
term,  condition,  or provision of any contract,  agreement,  license,  or other
instrument  to which either  Seller is a party and relating to or affecting  the
Business or the Assets, other than any satisfaction by performance in accordance
with the terms  thereof  in the  usual  and  ordinary  course  of  business  and
consistent with prior practice;

               g.   Any labor disputes or disturbances  materially  affecting in
an adverse  manner  the  Business or financial condition  of the HPL  Companies,
including,  without  limitation,  the filing of any petition or charge of unfair
labor practices with the National Labor Relations Board;

               h.   Any notice  (written or  unwritten)from any  engineering  or
technical  personnel  of the Business  that such  employee  has  terminated,  or
intends to terminate, such employee's employment in the Business;

               i.   Any waivers of any rights of substantial  value by either of
the HPL Companies related to the Business; or

               j.   Any purchase or lease of, or any  agreements  to purchase or
lease,  capital assets for the Business by either of the HPL Companies in excess
of $10,000 individually, or in excess of $50,000 in the aggregate.

               SECTION 5.5 UNDISCLOSED LIABILITIES.

               There are no debts,  liabilities or  obligations,  other than the
Excluded  Liabilities with respect to which the Assets are subject,  liquidated,
unliquidated,   accrued,  absolute,  contingent,  or  otherwise,  that  are  not
specifically  identified  in  the  Financial  Statements.  Neither  of  the  HPL
Companies has  guaranteed  the repayment of any  obligations of any third party,
including affiliates and affiliated entities or persons.


<PAGE>

               SECTION 5.6 PROPERTIES.

               The HPL Companies have good,  valid and  marketable  title to all
Assets,  tangible  and  intangible,  purported  to be owned by  either  of them,
including  the Assets  reflected on the  Financial  Statements.  All such Assets
purported to be owned by the HPL Companies are free and clear of all  mortgages,
liens,  charges,   security  interests  or  other  encumbrances  of  any  nature
whatsoever except as reflected in the Financial  Statements and except for liens
for current  taxes not  delinquent,  liens imposed by operation of law and liens
incurred in the ordinary course of business. All Assets, including machinery and
equipment,  owned,  leased or otherwise  used by the HPL  Companies  are in good
operating  condition  and repair,  reasonable  wear and tear  excepted,  and are
suitable and adequate for use in the ordinary  course of business and conform in
all  material  respects  to all  applicable  laws.  All leases  relating  to the
Business are binding,  valid and  enforceable  in  accordance  with their terms.
After the Closing  Time,  Purchaser  will be entitled to the  continued  use and
possession  of the  property  leased by them,  for the terms  specified  in such
leases and for the purposes for which such property is used. There is no pending
or  threatened  condemnation  or similar  proceeding  affecting  any of the real
property used in the Business owned or leased by the HPL Companies.

               SECTION 5.7 TAXES.

               1. No Tax is required to be withheld  pursuant to Section 1445 of
the Code as a result of the transfers contemplated by this Agreement.

               2. There are no liens for Taxes upon the Assets  except liens for
current  Taxes not yet due. The unpaid Taxes of the HPL  Companies do not exceed
the reserve for Taxes  established  on the books and records of the Company.  No
governmental entity (a "Taxing Authority") responsible for the imposition of any
Tax  (domestic or foreign),  has asserted  that the HPL  Companies owe any Taxes
other than as shown on their tax returns and paid with such returns.

               3. None of the assets (including the Assets) of the HPL Companies
(i) is  property  that is  required  to be treated as owned by any other  person
pursuant to the  so-called  "safe harbor  lease"  provisions  of former  Section
168(f)(8) of the Code, (ii) directly or indirectly secures any debt the interest
on which is tax exempt under Section  103(a) of the Code or (iii) is "tax exempt
use property" within the meaning of Section 168(h) of the Code. The transactions
contemplated  herein are not subject to the tax  withholding  provisions of Code
Section  3406,  or of  Subchapter  A of  Chapter  3 of the Code or of any  other
provision of law in any  jurisdiction.  The HPL Companies are not and have never
been members of a group permitted or required to file  consolidated  Tax returns
and are not  party to any  agreement  relating  to the  payment  or  sharing  of
liability for Taxes. The Company has not filed a consent under Section 341(f) of
the Code.

               4. For purposes of this Agreement,  "Tax" (and, with  correlative
meaning, "Taxes" and "Taxable") means (i) any net income,  alternative or add-on
minimum tax, gross income,  gross receipts,  sales,  use, ad valorem,  transfer,

<PAGE>

franchise,   profits,  license,   withholding,   payroll,  employment,   excise,
severance,  stamp,  occupation,  premium,  property,  environmental  or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind  whatsoever,  together  with any  interest or any penalty,
addition to tax or additional amount imposed by any Taxing Authority responsible
for the imposition of any such tax (domestic or foreign), (ii) any liability for
the payment of any amounts of the type  described  in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period  and  (iii) any  liability  for the  payment  of any  amounts of the type
described  in (i) or (ii) as a result of any  express or implied  obligation  to
indemnify any other person.

               SECTION 5.8 COMPLIANCE WITH LAWS.

               Each of the HPL Companies has complied and is in compliance  with
all applicable  foreign,  federal,  state, and local laws,  statutes,  licensing
requirements,  rules, and regulations,  and judicial or administrative decisions
applicable  to the  Business.  Each of the HPL  Companies  has been  granted all
licenses, permits (temporary and otherwise),  authorizations, and approvals from
foreign,  federal,  state, and local government  regulatory  bodies necessary to
carry on the Business as currently  conducted,  all of which are currently valid
and in full  force and  effect.  There is no claim,  action,  litigation,  order
investigation,  or  proceeding  pending or  threatened,  or notice  served  with
respect to any violation of any law,  ordinance,  order, writ, decree,  rule, or
regulation issued by any federal, state, local, or foreign court or governmental
agency or instrumentality applicable to the Business.

               SECTION 5.9 CONSENTS.

               The execution and delivery of this Agreement by the HPL Companies
does not, and the  performance of this  Agreement and the Related  Agreements by
the HPL Companies shall not,  require any consent,  approval,  authorization  or
permit of, or filing with or  notification  to, any  governmental  or regulatory
authority,  domestic or foreign,  or any other third party,  including licensors
and lenders, except for applicable requirements, if any, of the bulk sales laws.

               SECTION 5.10 PRODUCT LIABILITY.

               There are no defects in the design or technology  embodied in any
product of the Business which HPL Companies currently market or have marketed in
the past that impair or are likely to impair the  intended use of the product or
injure any consumer of the product or third party,  except that warranty  claims
may arise in the normal  course of business,  for products  shipped prior to the
Closing  Time,  in an  aggregate  amount of no more than the  warranty  reserves
established on the most recent balance sheet of the Company.  HPL Companies have
delivered to Purchaser  copies of their  warranty  policies and all  outstanding
warranties or guarantees  relating to any of products of the Business other than
warranties or  guarantees  implied by law.  There is no claim  asserting (a) any
damage, loss or injury caused by any product of the Business,  or (b) any breach
of any  express or implied  product  warranty  or any other  similar  claim with

<PAGE>

respect to any product of the Business other than standard warranty  obligations
(to replace,  repair or refund) made by HPL Companies in the ordinary  course of
business.

               SECTION 5.11 PROPRIETARY RIGHTS.

               1. Schedule 5.11 sets forth all of the Proprietary Rights. Any of
the Proprietary Rights that require the execution and filing with an appropriate
governmental agency have been so indicated on Schedule 5.11.

               2.  Schedule  5.11  sets  forth a true and  complete  list of all
contracts, licenses and other agreements to which either of the HPL Companies is
a party, which affect any item of the Proprietary  Rights,  except  commercially
available (i.e., off-the-shelf) software.  Schedule 5.11 specifically designates
all such  contracts,  licenses or other  agreements (i) pursuant to which either
Seller is a direct or indirect licensor or licensee of Proprietary  Rights, (ii)
under which either of the HPL  Companies  has granted or been granted  exclusive
rights,  (iii) under which  either of the HPL  Companies  is obligated to pay in
excess of (or under which the  consideration  is reasonably  expected to exceed)
$50,000 in any one year  period and (iv) all  parties to whom  either of the HPL
Companies  has  delivered  their  source  code,  whether  pursuant  to an escrow
arrangement  or  otherwise  and all parties  who have the right to receive  such
source code.

               3. Except in each case as set forth in Schedule 5.11:

                    a.   The HPL Companies  either own  or  have  the  exclusive
          right to use,  sell,  license and dispose of, to bring actions for the
          infringement  of  and  otherwise  exercise  all  Proprietary   Rights,
          including  Proprietary  Rights which comprise trade secret rights,  to
          the extent permitted by law (hereinafter,  "Trade Secrets"),  free and
          clear of all encumbrances.

                    b.  The  HPL  Companies  have  the  non-exclusive  right  to
          use,  sell,  license and dispose of all  Proprietary  Rights listed on
          Schedule 5.11 as exceptions to the previous paragraph.

                    c.   The HPL Companies  have  taken all appropriate  actions
          and  made  all  applicable   applications   and  filings  pursuant  to
          applicable   laws  to  perfect  or  protect  their  interests  in  all
          Proprietary Rights.

                    d.   The  execution,   delivery  and   performance  of  this
          Agreement  and the  Related  Agreements  and the  consummation  of the
          transactions  contemplated  hereby and  thereby  will not (A)  breach,
          violate or conflict  with any  instrument  or agreement  governing any
          Proprietary  Right,  (B) cause the  forfeiture or  termination or give
          rise to a right of forfeiture or termination of any Proprietary Right,
          or (C) in any way impair the right of Purchaser to use, sell,  license
          or  dispose of or to bring any  action  for the  infringement  of, any
          Proprietary Right or any products or technology  designed,  developed,
          manufactured,   sold  or  serviced  by  the  Business   (collectively,
          "Products").
<PAGE>

                    e.  The manufacture,  marketing, license, sale or use of any
          Products  anywhere  in the world does not or would not (A) violate any
          license  or  agreement  with any  third  party,  (B)  infringe  on any
          non-patent  Proprietary  Right of any third party or (C)  infringe any
          third party patent rights.  Neither the HPL Companies nor any of their
          employees have misappropriated any third party trade secrets. There is
          no claim or litigation pending or threatened  contesting the validity,
          ownership or right to use, sell, license or dispose of any Proprietary
          Right,  or claiming that the HPL  Companies or any of their  employees
          have  misappropriated  any third party trade  secrets nor is there any
          basis for any such claim.

                    f.    No third party is infringing on any Proprietary  Right
          where such  infringement  could limit the  protection  afforded by the
          Proprietary   Rights  to  the  use,  sale,   license,   sublicense  or
          disposition of the Products or prevent the future  enforcement of such
          Proprietary Right.

                    g.  The  HPL  Companies  have  taken  all  steps  reasonably
          necessary  or  appropriate   (including,   entering  into  appropriate
          confidentiality,  nondisclosure  and  noncompetition  agreements,  the
          forms of which have been delivered to Purchaser or their counsel, with
          all  officers,  directors,  subcontractors,  employees,  licensees and
          entities  that serve the  Business)  to  safeguard  and  maintain  the
          secrecy and  confidentiality  of, and the  proprietary  rights in, all
          Proprietary Rights.

                    h.   All Trade Secrets are  presently  and as of the Closing
          Time will be located at the HPL Companies'  addresses as shown in this
          Agreement  and have not been used,  divulged or  appropriated  for the
          benefit of any person other than the HPL Companies or to the detriment
          of the HPL Companies.

               4. Except in each case as set forth in Schedule 5.11:

                    a.   Each of the licenses and  agreements listed or required
          to be listed in the  Schedules  to this  Section 5.11 is in full force
          and effect and is a valid obligation  enforceable  against each of the
          HPL Companies (to the extent it is a party  thereto),  and against the
          other party thereto in accordance with its terms.

                    b.   HPL  Companies  have performed, or are now  performing,
          their  obligations,  and HPL Companies are not in default (or would by
          the lapse of time or the  giving  of  notice  or both be in  default),
          under any  license or  agreement  listed or  required  to be listed in
          Schedule  5.11. No other party to such  licenses and  agreements is in
          default  (or  would by the  lapse of time or the  giving  of notice or
          both,  be  in  default)  thereunder  or  has  breached  any  terms  or
          provisions thereof.
<PAGE>

                    c.    No third party  has raised against  either  of the HPL
          Companies  or any of their  current or former  service  providers  any
          claim,  dispute or controversy  with respect to any of the licenses or
          agreements  which is listed or required to be listed in Schedule 5.11.
          Neither of the HPL Companies has received notice or warning of alleged
          nonperformance,  delay in delivery or other noncompliance by either of
          the HPL  Companies  with respect to their  obligations  under any such
          licenses or agreements.

               SECTION 5.12 CONTRACTS AND COMMITMENTS.

               1. Schedule 5.12 lists all outstanding Contracts,  whether or not
in writing,  to which either of the HPL  Companies is a party or to which any of
the  Assets  are  subject  that may:  (i)  involve  obligations  (contingent  or
otherwise)  or  unwritten  agreements  of,  or  payments  to,  either of the HPL
Companies in excess of $50,000;  (ii) involve written  agreements with suppliers
and customers of either of the HPL  Companies;  (iii) involve the license of any
Proprietary Rights to or from either Seller; (iv) contain provisions restricting
and/or affecting the development, manufacture, or distribution of HPL Companies'
products  or  services;  (v) relate to any aspect of the  Business  in which any
person who was or is an  officer,  director,  or  employee  of either of the HPL
Companies (or any person, firm,  partnership,  trust, or corporation  affiliated
with any such persons or any family members of such persons) has an interest; or
(vi)  involve  agreements  (written  or  unwritten)  on which  the  Business  is
dependent.

               2. Each of the HPL Companies has performed all of its obligations
under the terms of each Contract listed in Schedule 5.12 to which it is a party,
and is not in default thereunder. No event has occurred which but for the giving
of  notice or lapse of time or both  would  constitute  a  default  by any party
thereto under any such Contract.  Each such Contract is valid and binding on all
parties  thereto and in full force and effect.  Neither of the HPL Companies has
received a notice of default,  cancellation,  or termination in connection  with
any such Contract.

               SECTION 5.13  ASSETS.

               The Assets  include all intellectual  property, inventory and all
other  property,  in which either of the HPL Companies has any right,  title and
interest,  necessary  to operate the Business in the same manner as the Business
was  operated by the HPL  Companies  prior to the Closing  Time.  The Assets are
suitable for the purpose or purposes for which they are being used,  are in good
operating  condition and in reasonable  repair, and free from any known defects,
except such minor  defects as do not  interfere  with the continued use thereof.
Each  tangible  Asset  has been  serviced  and  maintained  in  accordance  with
customary industry practices.  Subject to normal wear and tear, and to financial
reserves on the Company's  most recent  balance  sheet that are  adequate,  such
plants,  facilities,  machinery,  and equipment are capable of and are producing
sound and merchantable products.


<PAGE>

                SECTION 5.14   NO CONFLICT OR DEFAULT.

                Neither the  execution  and  delivery  of this  Agreement or the
Related  Agreements,  nor compliance  with the terms and  provisions  hereof and
thereof,  including the consummation of the transactions contemplated hereby and
thereby, will violate any statute,  regulation, or ordinance of any governmental
authority,  or conflict with or result in the breach of any term, condition,  or
provision of either of the HPL Companies'  Articles of  Incorporation  or Bylaws
(or similar constituent documents), as presently in effect, or of any agreement,
deed, contract,  mortgage,  indenture, writ, order, decree, legal obligation, or
instrument  to which  either of the HPL  Companies  is a party or by which it or
they or any of the Assets are or may be bound,  or  constitute  a default (or an
event  which,  with the lapse of time or the  giving of notice,  or both,  would
constitute a default) thereunder.

               SECTION 5.15  LABOR RELATIONS.

               1.  With respect to the  Business, the Company  has not failed to
comply  in any  respect  with  Title  VII of the Civil  Rights  Act of 1964,  as
amended,  the Fair Labor Standards Act, as amended,  the Occupational Safety and
Health Act of 1970, as amended,  all applicable federal,  state, and local laws,
rules,  and regulations  relating to employment,  and all applicable laws, rules
and regulations  governing  payment of minimum wages and overtime rates, and the
withholding and payment of taxes from compensation of employees.

               2.  There  are  no  labor  controversies  pending  or  threatened
between  either  Seller  and any of its  employees  or any labor  union or other
collective bargaining unit representing any of the employees.

               3.  Neither  of  the  HPL  Companies  has  ever  entered  into  a
collective  bargaining  agreement or other labor union contract  relating to the
Business and applicable to the employees.

               4.   There are no written employment or separation agreements, or
oral  employment  or  separation  agreements  other than those  establishing  an
"at-will" employment relationship between either of the HPL Companies and any of
the employees.

               SECTION 5.16  EMPLOYEE BENEFIT PLANS.

               1.   Schedule 5.16 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 HPL
Companies, any trade or business (whether or not incorporated) which is a member
or which is under common control with the Company (an "ERISA  Affiliate") within

<PAGE>

the  meaning  of  Section  414 of the  Code  or any  Subsidiary  of the  Company
(together, the "Employee Plans"), and a copy of each such Employee Plan has been
provided to Purchaser.

               2. a. None of the  Employee  Plans  promises or provides  retiree
medical or other retiree welfare benefits to any person;  (ii) there has been no
"prohibited  transaction,"  as such term is defined in Section  406 of ERISA and
Section 4975 of the Code, with respect to any Employee Plan,  which could result
in any material  liability of the Company or any of its Subsidiaries;  (iii) all
Employee  Plans  are  in  compliance  in  all  respects  with  the  requirements
prescribed by any and all statutes  (including ERISA and the Code),  orders,  or
governmental  rules and  regulations  currently in effect with  respect  thereto
(including all applicable  requirements  for notification to participants or the
Department of Labor, Internal Revenue Service or Secretary of the Treasury), and
the Company and each of its Subsidiaries have performed all material obligations
required to be  performed  by them  under,  are not in any  material  respect in
default under or violation of, and have no knowledge of any default or violation
by any other  party to,  any of the  Employee  Plans;  (iv) each  Employee  Plan
intended to qualify under Section  401(a) of the Code and each trust intended to
qualify  under  Section 501(a)  of the  Code  does so  qualify  and a  favorable
determination  letter with respect to each such Employee Plan and trust has been
received from the Internal Revenue Service (the "IRS"), and nothing has occurred
which may  reasonably  be  expected to cause the loss of such  qualification  or
exemption;  (v) all  contributions  required  to be made  to any  Employee  Plan
pursuant  to  Section  412 of the Code,  the terms of the  Employee  Plan or any
collective bargaining agreement, have been made on or before their due dates and
a reasonable amount has been accrued for contributions to each Employee Plan for
the current plan years;  (vi) with respect to each Employee Plan, no "reportable
event" within the meaning of Section 4043 of ERISA (excluding any such event for
which  the  thirty  (30) day  notice  requirement  has  been  waived  under  the
regulations to Section 4043 of ERISA) nor any event  described in  Section 4062,
4063 or 4041 of ERISA has  occurred;  and (vii) no Employee  Plan is covered by,
and neither the Company nor any  Subsidiary has incurred or expects to incur any
liability under, Title IV of ERISA or Section 412 of the Code.

               SECTION 5.17  BROKERS' AND FINDERS' FEES/CONTRACTUAL LIMITATIONS.

               Neither  of the HPL  Companies is  obligated  to pay  any fees or
expenses of any broker or finder in connection with the origin,  negotiation, or
execution of this Agreement or in connection with any transactions  contemplated
hereby. Neither of the HPL Companies, nor any officer, director, employee, agent
or   representative    of   either   of   the   HPL   Companies    (collectively
"Representatives") are or have been subject to any agreement,  letter of intent,
or understanding of any kind which prohibits, limits, or restricts either of the
HPL  Companies  or the  Representatives  from  negotiating,  entering  into  and
consummating  this  Agreement,  the  Related  Agreements  and  the  transactions
contemplated hereby and thereby.

               SECTION 5.18  INTERESTED PARTY RELATIONSHIPS.

               Except as set forth in the footnotes to the Company's most recent
financial statements provided to Purchaser,  neither the HPL Companies,  nor any

<PAGE>

shareholder  of the  Company,  nor any  officer and  director  or family  member
thereof,  or any corporation,  partnership,  or other entity which,  directly or
indirectly,  alone or together with others, controls, is controlled by, or is in
common  control with any officer and director or family  member  thereof has any
material  financial  interest,  direct or indirect,  in any material supplier or
customer,  any party to any contract  which is material to the Business,  or any
competitor with the Business.

               SECTION 5.19  ENVIRONMENTAL MATTERS.

               The  Company  and the  Subsidiary (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 and the Subsidiary (or their respective
agents);  (ii) are in compliance  with all terms and conditions of such required
permits,  licenses and authorization,  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,  judgement,  notice or demand  letter
issued, entered,  promulgated or approved thereunder; (iii) are 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  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 the  Subsidiary  (or any of their
respective  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 waste;  (iv) have taken all actions  necessary  under  applicable
requirements of Federal, state or local environmental laws, rules or regulations
to register any products or materials  required to be  registered by the Company
or the Subsidiary (or any of their respective  agents)  thereunder;  and (v) are
not aware of any  contaminated  soil or  groundwater at any of the properties or
portions thereof owned or operated,  leased or previously owned or leased by the
Company or the Subsidiary.  The Company does not require any permits 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 the Subsidiary (or their respective  agents).  The Company has
disclosed to Purchaser in the Disclosure Letter all documents  relating to tests
previously   conducted  or  to  be   conducted  in  the  future  for   potential
contamination at any of the Company's or such Subsidiary's  facilities,  whether
owned or leased, including soil and water tests.


<PAGE>

               SECTION 5.20 CERTAIN PAYMENTS.

               In connection  with the Business,  the HPL Companies have not and
no person  directly or  indirectly  on behalf of the HPL  Companies  has made or
received any payment that was not legal to make or receive.

               SECTION 5.21 BOOKS AND RECORDS.

               The books and records of the HPL Companies to which Purchaser has
been given access are the true books and records of the HPL  Companies and truly
and fairly reflect the underlying facts and transactions in all respects.

               SECTION 5.22 COMPLETE DISCLOSURE.

               No   representations   or  warranties  made  by  the  Shareholder
Representatives  in this Agreement,  nor any financial  statements  prepared and
furnished  or to be  prepared  and  furnished  by the  HPL  Companies  or  their
representatives   to  Purchaser  pursuant  hereto  or  in  connection  with  the
transactions  contemplated hereby, contains or will contain any untrue statement
of a material  fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained herein or therein not misleading.

               SECTION 5.23 BACKLOG.

               Schedule  5.23 sets  forth  the  backlog  of orders  that the HPL
Companies  are to ship and  contract  work to be performed as of March 31, 1998.
The HPL Companies either possess  sufficient  inventory of parts,  materials and
personnel  to produce the same within  their  scheduled  delivery  dates or such
parts or materials  have lead times such that the HPL Companies can acquire such
parts and materials in time to produce and ship such backlog in accordance  with
its schedule shipping date.

               SECTION 5.24 CUSTOMERS AND SUPPLIERS.

               None of the HPL Companies' ten largest  customers and ten largest
suppliers during the twelve months ended March 31, 1998 (determined on the basis
of both revenues and bookings during such period) has terminated,  or intends to
materially  reduce  or  terminate,  the  amount  of its  business  with  the HPL
Companies,  and no such  termination or alteration will occur as a result of the
consummation of this Agreement.

               SECTION 5.25 BEST EFFORTS.

               Each of the  Shareholder  Representatives  shall use  their  best
efforts to effectuate the  transactions  contemplated  hereby and to fulfill and
cause to be fulfilled the  conditions to Closing under this  Agreement.  Each of
the Shareholder  Representatives shall promptly apply for or otherwise seek, and
use their best efforts to obtain,  all consents and  approvals  required for the
consummation of the transactions set forth hereby.


<PAGE>

               SECTION 5.26 EMPLOYMENT AGREEMENTS.

               Prior   to  the   Closing   Time,   each   of   the   Shareholder
Representatives  shall use their best efforts to assist  Purchaser in persuading
employees of the Business to be willing to accept employment with Purchaser.

               SECTION 5.27 INVENTORY.

               Schedule 5.27 sets forth a list of all of the  inventories of the
Business as of the date hereof (the  "Inventories").  The Inventories are valued
at cost  (determined  on a first-in  first-out  basis) or market,  whichever  is
lower, with adequate  allowances for excess and obsolete materials and materials
below standard quality in accordance with GAAP consistently applied. The quality
and quantity of the Inventories are such that the Inventories are readily usable
and  saleable  in the normal  course of business  of the  Business,  except such
amounts as are reserved in accordance with GAAP consistently  applied. All items
included in such  Inventories  are owned by the HPL Companies.  All  Inventories
materially in excess of reasonable estimated requirements for the Business based
on  current  operations  for the three (3) months  from the date  hereof are set
forth in Schedule 5.27.  Except as disclosed in Schedule 5.27, the HPL Companies
hold  no  Inventories   manufactured  to  customer  specifications   effectively
rendering the Inventories saleable only to that customer.

               SECTION 5.28 PAYABLES; RECEIVABLES.

               All the accounts  receivable  and notes  receivable  owing to the
Business  as of the date hereof are set forth in  Schedule  5.28 and  constitute
valid and enforceable claims arising from bona fide transactions in the ordinary
course of business, and there are no contingent or asserted claims,  refusals to
pay, rights of return, or other rights of set-off against any thereof. As of the
date  hereof,  except as set forth in  Schedule  5.28,  there is (i) no  account
debtor or note debtor  delinquent  in its payment by more than 30 days,  (ii) no
account  debtor or note debtor that has refused (or threatened to refuse) to pay
its obligations  for any reason,  (iii) no account debtor or note debtor that is
insolvent or bankrupt,  and (iv) no account  receivable or note receivable which
is pledged to any third party by either of the HPL Companies. Neither of the HPL
Companies holds deposits from customers or has received prepaid service contract
revenue or other prepaid revenue.

               SECTION 5.29 SERVICE PROVIDER AGREEMENTS.

               No service  provider of the HPL  Companies is in violation of any
term  of any  employment  agreement  (whether  written  or  verbal),  patent  or
trademark  disclosure  agreement or any other contract or agreement  relating to
the  relationship  of any such service  provider  with the HPL  Companies or any
other party (including prior employers) or any term of any judgment,  decree, or
order, because of the nature of the business now conducted or now proposed to be
conducted by the HPL Companies.  Each current and former service provider of the
HPL Companies has executed a proprietary  information  and inventions  agreement
(or similar agreement) with the HPL Companies in the form then being used by the
HPL Companies, all of which forms have been previously delivered to Purchaser by

<PAGE>

the HPL Companies.  Each employee or consultant-inventor  has executed a written
agreement  validly  assigning  his or her  rights  to the HPL  Companies  on all
inventions,  pending  patent  applications,  all patents  issued,  and all other
intellectual  property rights  developed by such service  provider while working
for or on behalf of the HPL Companies. To the extent the HPL Companies have ever
utilized consultants or independent contractors,  each consultant or independent
contractor  has  executed  a written  agreement,  validly  assigning  to the HPL
Companies  his or her rights in and to all  copyrights  and works of  authorship
relating to products, services or technology designed, developed,  manufactured,
licensed,  sold, marketed or serviced by the HPL Companies and its business. The
HPL  Companies  are not aware that any of its service  providers is in violation
thereof  and  will use all  efforts  to  prevent  any  such  violation.  The HPL
Companies are not aware that any of its service  providers  are obligated  under
any contract  (including  licenses,  covenants or  commitments of any nature) or
other  agreement,  or subject to any  judgment,  decree or order of any court or
administrative  agency,  that  would  interfere  with the use of his or her best
efforts to promote the  interests of the HPL  Companies  or that would  conflict
with the HPL  Companies  business as conducted or as proposed to be conducted or
that would prevent any such service  provider from  assigning  inventions to the
HPL Companies.  The HPL Companies do not believe that it is or will be necessary
for the HPL Companies to utilize any inventions of any of its service  providers
(or people it currently  intends to hire) made prior to their  employment  by or
relationship with the HPL Companies.

                                   ARTICLE VI

                                    COVENANTS
                                    ---------

               SECTION 6.1 CONSENTS.  The Shareholder  Representatives shall use
their best  efforts  to obtain,  or to cause the HPL  Companies  to obtain,  all
consents of and authorizations by third parties and to make all filings with and
give all notices to third  parties that may be necessary or required in order to
consummate  the sale of the Assets,  and shall take such  additional  actions as
Purchaser may reasonably  request so that the transactions  contemplated by this
Agreement may be expeditiously consummated.

               SECTION 6.2 EMPLOYMENT  OFFERS.  Purchaser  shall offer to employ
all employees of the HPL Companies employed exclusively in the Business,  all of
such employees (and only such employees) being listed on Schedule 6.2; provided,
however,  that  Purchaser  shall not agree to maintain such  employment  for any
particular period of time and, if such offers are accepted,  such employees will
be employed on an "at will" basis.  Purchaser shall not solicit any employees of
the HPL Companies other than those set forth on Schedule 6.2.

               SECTION 6.3 COBRA. The Shareholder  Representatives  shall ensure
that  the HPL  Companies  comply  with the  health  care  continuation  coverage
requirements  of the  Consolidated  Omnibus  Budget  Reconciliation  Act of 1985
("COBRA") applicable to employees of the HPL Companies who are terminated by the
HPL Companies on or before the Closing Time.
<PAGE>

               SECTION  6.4 MAIL AND  RECEIVABLES  PAYMENTS.  From and after the
Closing Time, the  Shareholder  Representatives  shall endorse,  or shall ensure
that the HPL Companies endorse,  any check or any other evidence of indebtedness
or payment  received by the HPL  Companies on account of any Accounts  after the
Closing  Time to the order of Purchaser  or take other  appropriate  actions and
shall promptly forward such payment to Purchaser no later than five (5) business
days after actual  receipt by the HPL Companies.  Purchaser and the  Shareholder
Representatives  shall each provide to the other all the  cooperation  which the
other may reasonably request in connection with the collection of the Accounts.

               SECTION 6.5  NOTIFICATION  OF CERTAIN  MATTERS.  Each party shall
give prompt notice to the other of (i) the occurrence, or non-occurrence, of any
event the occurrence,  or non-occurrence,  of which would be likely to cause any
representation  or  warranty  contained  in  this  Agreement  to  be  untrue  or
inaccurate and (ii) any failure of Purchaser or the Shareholder Representatives,
as the case may be,  to  comply  with or  satisfy  any  covenant,  condition  or
agreement to be complied with or satisfied by them hereunder; provided, however,
that the delivery of any notice  pursuant to this Section 6.5 shall not limit or
otherwise  affect the remedies  available  hereunder to the party receiving such
notice.

               SECTION  6.6  FURTHER  ACTION.  Upon the terms and subject to the
conditions   hereto,   each  of  the  Purchaser  and  each  of  the  Shareholder
Representatives  hereto shall use all reasonable efforts to 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 to obtain in a timely manner all
necessary   waivers,   consents  and  approvals  and  to  effect  all  necessary
registrations and filings, and to otherwise satisfy or cause to be satisfied all
conditions  precedent to its obligations under this Agreement.  The Shareholders
Representatives  shall ensure that the Company changes its corporate name within
30 days of the Closing  Time to a name which does not uses any of the words,  or
any combination thereof, "Heuristic", "Physics" and "Laboratories" and to ensure
that  Purchaser  have all rights to the name  "Heuristic  Physics  Laboratories,
Inc."

               SECTION  6.7  COVENANTS  AGAINST   DISCLOSURE.   The  Shareholder
Representatives and Purchaser agree to maintain the confidentiality of the terms
and  conditions  of this  Agreement;  provided,  however,  that the  Shareholder
Representatives  may provide copies of this  Agreement and related  documents to
the  Company  or to any party who  acquires,  or  proposes  to  acquire,  all or
substantially all of the capital stock or remaining assets of the HPL Companies;
provided,  further,  however,  any party hereto may disclose  information to the
extent  required by securities  laws or as compelled by court order.  Neither of
the Shareholder  Representatives nor Purchaser shall disseminate (except to each
other)  any  press  release  or   announcement   concerning   the   transactions
contemplated  by this Agreement  without the prior written  consent of the other
parties;  provided,  however,  that any of the  parties  hereto may  disseminate
information to employees and legal and accounting representatives.

               SECTION 6.8. NO SHOP. The Shareholder  Representatives shall not,
nor shall they permit any of their legal or  financial  advisors or any officers
or directors of the Company to, solicit, negotiate or discuss the disposition of
any of the Assets to any person other than Purchaser.
<PAGE>

                                  ARTICLE VII

                                    CLOSING
                                    -------

               SECTION 7.1 CLOSING TIME. The  transactions  contemplated by this
Agreement  shall be  completed  on June 4, 1998 (the time of the Closing on such
date  being,  the  "Closing  Time"),  unless  otherwise  agreed to in writing by
Purchaser and the Shareholder  Representatives.  The Closing shall take place at
the offices of Brobeck, Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng
Road, Palo Alto, California 94303, or at such other place as may be agreed to in
writing by Purchaser and the Shareholder  Representatives.  The "Closing," shall
mean  the  deliveries  to be made  by the  Shareholder  Representatives  and the
Purchaser at the Closing Time in accordance with this Agreement.

               SECTION 7.2 DELIVERIES BY THE SHAREHOLDER REPRESENTATIVES. At the
Closing, the Shareholder Representatives shall deliver to Purchaser all duly and
properly executed, the following:

               (a) (1) A good and  sufficient  bill of sale in the form attached
as Exhibit 7.2(a) (the "Bill of Sale") for the Assets to be transferred from the
Company to Purchaser and (ii) if Purchaser  designates  any of its  wholly-owned
subsidiaries  to receive  the Assets  currently  held by  Subsidiary  a good and
sufficient Bill of Sale for the Assets to be transferred  from the Subsidiary to
such  designated  subsidiary  of Purchaser,  in each case  selling,  delivering,
transferring,  and assigning to Purchaser (and any designated  subsidiary) title
to all of the HPL Companies' right,  title, and interest to the Assets, free and
clear  of all  mortgages,  pledges,  liens,  encumbrances,  security  interests,
equities, charges, and restrictions of any nature whatsoever.

               (b)  An opinion of General Counsel Associates LLP, counsel to the
HPL  Companies,  dated the date of the Closing,  in the form attached  hereto as
Exhibit 7.2(b).

               (c) An opinion of Armenian legal counsel to the Subsidiary, dated
the date of the Closing, in the form attached hereto as Exhibit 7.2(c).

               (d)  An affidavit of the Shareholder Representatives, in the form
attached  hereto as Exhibit  7.2(d),  stating,  under  penalty of  perjury,  the
Shareholder  Representatives'  United States taxpayer identification numbers and
that the  Shareholder  Representatives  are not  foreign  persons,  pursuant  to
Section 1445(b)(2) of the Code.

               (e)  Valid  assignments  of  rights for  all Contracts  and other
third party or governmental consents necessary in order for Purchaser to operate
the Business.
<PAGE>

               (f)  Valid  patent,  patent  application,   trademark,  trademark
application,   trade  secret,   domain  name  and  other  intellectual  property
assignments in the forms attached as Exhibit 7.2(f).

               (g)  Valid  proprietary   information  and  invention  agreements
executed by the employees of the Business listed in Schedule 6.2.

               (h) Evidence,  satisfactory  to Purchaser,  of the HPL Companies'
title to all of the Assets and right to fully  convey all Assets  free and clear
of any lien, encumbrances or restrictions on transfer.

               (i)  Evidence   satisfactory  to  Purchaser  of  the  Shareholder
Representatives'  authority to act on behalf of all the  Company's  shareholders
including with respect to receipt of the Purchase Price and the royalty payments
referred to in Section 3.4.

               (j) A certificate  executed by the  Shareholder  Representatives,
dated the date of the  Closing,  to the  effect  that all of the  conditions  to
Closing set forth in this Section 7.2 have been satisfied.

               (k) An accepted  offer of employment  with Purchaser from all the
employees of the Business listed on Schedule 6.2.

               (l) All licenses from all  appropriate  governmental  agencies or
third  parties to operate the  Business in the same manner as the HPL  Companies
operated the Business prior to the Closing Time, including a file format license
in the form attached hereto as Exhibit 7.2(l).

               (m) all books and  records  (or  copies  thereof)  related to the
Business.

               SECTION 7.3  DELIVERIES BY PURCHASER.  At the Closing,  Purchaser
shall deliver, or cause to be delivered,  to the Company, the Purchase Price and
a Waiver and Release in the form attached hereto as Exhibit 7.3.

               SECTION 7.4  FURTHER  ASSURANCES.  At or after the Closing  Time,
each of the Shareholder  Representatives  and Purchaser shall prepare,  execute,
and deliver,  at its expense,  such further  instruments  of  conveyance,  sale,
assignment,  or  transfer,  and shall  take or cause to be taken  such  other or
further action, as any party shall reasonably  request of any other party at any
time or from  time  to  time in  order  to  perfect,  confirm,  or  evidence  in
Purchaser's  title to all or any part of the  Assets  or to  consummate,  in any
other manner, the terms and provisions of this Agreement.

<PAGE>

                                 ARTICLE VIII

                         SETTLEMENT AND GENERAL RELEASE
                         ------------------------------

               SECTION 8.1 SETTLEMENT AND GENERAL RELEASE. For the consideration
set forth in Article III herein, each of the Shareholder  Representatives waives
and  releases  Purchaser  and  each  of  its  successors,  officers,  directors,
affiliates,  agents,  employees  and/or  assigns,  and  covenants  not to sue or
otherwise  institute  or cause to be  instituted  or in any way  participate  in
(except at the request of  Purchaser or as required by legal  process)  legal or
administrative  proceedings  against  Purchaser  and  each  of  its  successors,
officers, directors, affiliates, agents, employees and/or agents with respect to
any  matter  of any kind  arising  out of,  relating  to or  connected  with any
Excluded Liabilities.

               This waiver and release extends to all claims of every nature and
kind,  known or unknown,  suspected  or  unsuspected,  past,  present or future,
arising from Excluded Liabilities.  The Shareholder  Representatives acknowledge
that any and all rights  granted to them under  Section  1542 of the  California
Civil Code or any analogous  state law or federal law or  regulation  are hereby
expressly waived. Said Section 1542 of the Civil Code of the State of California
reads as follows:

               "A GENERAL  RELEASE  DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
               DOES NOT  KNOW OR  SUSPECT  TO EXIST IN HIS  FAVOR AT THE TIME OF
               EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
               AFFECTED ITS SETTLEMENT WITH THE DEBTOR."

               This Section 8.1 shall constitute a complete defense to any claim
released  herein.  Notwithstanding  any other provision of this Agreement,  this
Section 8.1 shall survive indefinitely.


                                   ARTICLE IX

                       CONDITIONS PRECEDENT TO OBLIGATIONS
                       -----------------------------------

               SECTION 9.1  CONDITIONS TO  OBLIGATIONS  OF  PURCHASER.  Each and
every obligation of Purchaser to be performed at the Closing shall be subject to
the  satisfaction  as of or before the Closing Time of the following  conditions
(unless waived in writing by Purchaser):

               (a)  Representations  and  Warranties.  The  representations  and
warranties of the Shareholder  Representatives set forth in this Agreement shall
have been true and correct  when made and shall be true and correct at and as of
the Closing Time as if such  representations and warranties were made as of such
date and time.

               (b)  Performance  of Agreement.  All covenants,  conditions,  and
other obligations  under this Agreement and the Related  Agreements which are to
be  performed or complied  with by the  Shareholder  Representatives,  including
necessary  approvals of the HPL Companies' Boards of Directors and shareholders,

<PAGE>

shall have been fully  performed  and  complied  with at or prior to the Closing
Time, including the delivery of the instruments and documents in accordance with
Section 7.2 hereof.

               (c)  No  Material  Adverse  Change.  There  shall  have  been  no
material  adverse  change in the financial  condition,  business,  properties or
prospects of the Business since March 31, 1998.

               (d) Absence of Governmental or Other Objection. There shall be no
pending or threatened lawsuit  challenging the transaction by any body or agency
of the  federal,  state,  or local  government  or by any third  party,  and the
consummation  of the  transaction  shall  not have been  enjoined  by a court of
competent jurisdiction as of the Closing Time.

               (e)  Evidence of Title.  Purchase  shall have  received  evidence
satisfactory to it, at or prior to the Closing Time, of the HPL Companies' title
to all of the Assets and right to fully  convey all Assets free and clear of any
lien, encumbrances or restrictions on transfer.

               (f)  Certificate  of  Shareholder  Representatives.   Shareholder
Representatives  shall have  delivered  to Purchaser a  certificate  executed by
them, dated the date of the Closing, to the effect that all of the conditions to
Closing set forth in this Section 9.1 have been satisfied.

               (g)  Approval of  Documentation.  The form and  substance  of all
certificates,  instruments,  opinions,  and other  documents  delivered or to be
delivered to Purchaser  under this Agreement  shall be satisfactory to Purchaser
in all respects.

               (h) Key  Employees.  All  employees  of the  Business  listed  on
Schedule 6.2 shall have accepted offers of employment with Purchaser.

               (i) Licenses. Purchaser shall have received all licenses from all
appropriate  governmental  agencies or third  parties to operate the Business in
the same manner as the HPL Companies  operated the Business prior to the Closing
Time.

               SECTION  9.2  CONDITIONS  TO   OBLIGATIONS  OF  THE   SHAREHOLDER
REPRESENTATIVES. Each and every obligation of the Shareholder Representatives to
be performed at the Closing Time shall be subject to the  satisfaction  as of or
before such time of the following  conditions  (unless  waived in writing by the
Shareholder Representatives):

               (a) Representations and Warranties.  Purchaser's  representations
and warranties set forth in this Agreement shall have been true and correct when
made and  shall be true and  correct  at and as of the  Closing  Time as if such
representations and warranties were made as of such time and date.


<PAGE>

               (b) Absence of Governmental or Other Objection. There shall be no
pending or threatened lawsuit  challenging the transaction by any body or agency
of the  federal,  state,  or local  government  or by any third  party,  and the
consummation  of the  transaction  shall  not have been  enjoined  by a court of
competent jurisdiction as of the Closing Time.


                                    ARTICLE X

                                 INDEMNIFICATION
                                 ---------------

               SECTION 10.1 SURVIVAL OF REPRESENTATIONS,  WARRANTIES,  COVENANTS
AND AGREEMENTS.

               (a) Notwithstanding any investigation  conducted at any time with
regard  thereto  by  or  on  behalf  of  any  party  to  this   Agreement,   all
representations,  warranties,  covenants,  and  agreements of each party in this
Agreement  shall  survive for eighteen  (18) months  following  the Closing.  No
investigation  made  by or on  behalf  of  Purchaser  with  respect  to the  HPL
Companies  or  the  Shareholder   Representatives  shall  be  deemed  to  affect
Purchaser's   reliance  on  the  representations,   warranties,   covenants  and
agreements made by the Shareholder  Representatives  contained in this Agreement
and shall not be a waiver of Purchaser'  rights to indemnity as provided  herein
for the breach or  inaccuracy of or failure to perform or comply with any of the
Shareholder   Representative's   representations,   warranties,   covenants   or
agreements under this Agreement.

               (b) Nothing in this  Agreement  shall be construed as limiting in
any way the  remedies  that may be  available  to a party in the  event of fraud
relating to the representations, warranties, agreements or covenants made by any
party in this Agreement.

               SECTION 10.2 INDEMNIFICATION BY SHAREHOLDER REPRESENTATIVES.

               The Shareholder Representatives hereby agree to indemnify, defend
and hold  harmless  Purchaser  and its  affiliates  against  any and all losses,
liabilities,  damages, demands, claims, suits, actions, judgments, and causes of
action,  assessments,   costs,  and  expenses,  including  interest,  penalties,
attorneys' fees, any and all expenses incurred in investigating,  preparing, and
defending  against  any  litigation,  commenced  or  threatened,  and any  claim
whatsoever,  and  any  and  all  amounts  paid in  settlement  of any  claim  or
litigation (collectively,  "Damages"), asserted against, resulting from, imposed
upon, or incurred or suffered by Purchaser and any of its  affiliates,  directly
or  indirectly,  as a  result  of or  arising  from or in  connection  with  any
inaccuracy  in or  breach  or  nonfulfillment  of any  of  the  representations,
warranties,  covenants, or agreements made by the Shareholder Representatives in
this Agreement or any facts or  circumstances  constituting  such an inaccuracy,
breach,  or  nonfulfillment   (all  of  which  shall  also  be  referred  to  as
"Identifiable Claims");  provided, however, that, except with respect to Damages
arising out of (i) any  violation of any  applicable  bulk sales laws,  (ii) the
Excluded Liabilities,  (iii) Taxes accruing prior to, or in connection with, the
Closing,  (iv) any  breach of Section  5.11  (Proprietary  Rights),  and (v) any
breach  of  the  last  sentence  of  Section  5.1  including  any  claim  by any
shareholder of the Company  (other than the  Shareholder  Representatives)  that
such person has not received their share of the Purchase Price or their share of
the royalty payments  provided for in Section 3.3.  Shareholder  Representatives

<PAGE>

shall be so  liable  only to the  extent  of  aggregate  Damages  in  excess  of
$250,000.  The maximum  monetary  liability of the  Shareholder  Representatives
under this  Section  10.2 shall be (i) with  respect to any notice or notices of
Identifiable Claims delivered by Purchaser to Shareholder Representatives during
the thirty day period  following the Closing Time, the Purchase Price,  and (ii)
with  respect  to any  notice of notices of  Identifiable  Claims  delivered  by
Purchaser to Shareholder  Representatives from the period commencing on the 31st
day after Closing Time until the 540th day after the Closing Time, $2,000,000.

               SECTION  10.3   PROCEDURE  FOR   NOTIFICATION   WITH  RESPECT  TO
THIRD-PARTY CLAIMS.

               (a) If Purchaser  determines to seek  indemnification  under this
Article IX with  respect to the  existence  of any claim  giving rise to Damages
resulting from the assertion of liability by third parties, Purchaser shall give
notice to the Shareholder  Representatives  within 20 days of Purchaser becoming
aware  of  any  such  Identifiable  Claim  or  of  facts  upon  which  any  such
Identifiable  Claim  will be based.  The notice  shall set forth  such  material
information  with respect thereto as is then reasonably  available to Purchaser.
In case any such liability is asserted against Purchaser, and Purchaser notifies
the Shareholder  Representatives thereof, the Shareholders  Representatives will
be entitled, if they so elect by written notice delivered to Purchaser within 20
days after  receiving  Purchaser's  notice,  to assume the defense  thereof with
counsel satisfactory to Purchaser.  Notwithstanding the foregoing, (i) Purchaser
shall  also have the right to employ its own  counsel in any such case,  but the
fees and  expenses of such counsel  shall be at the expense of Purchaser  unless
Purchaser  shall  reasonably  determine  that  there is a conflict  of  interest
between  Purchaser  and the  Shareholder  Representatives  with  respect to such
Identifiable  Claim, in which case the fees and expenses of such counsel will be
borne by the Shareholder Representatives, and (ii) the rights of Purchaser to be
indemnified  hereunder  in respect of  Identifiable  Claims  resulting  from the
assertion of liability by third parties shall not be adversely affected by their
failure to give notice pursuant to the foregoing unless, and, if so, only to the
extent that, the Shareholder  Representatives are materially prejudiced thereby.
With  respect to any  assertion of liability by a third party that results in an
Identifiable  Claim,  the parties  hereto shall make available to each other all
relevant information in their possession material to any such assertion.

               (b) In the event that the Shareholder Representatives,  within 20
days after receipt of the aforesaid  notice of an  Identifiable  Claim,  fail to
assume the defense of Purchaser against such Identifiable Claim, Purchaser shall
have the right to  undertake  the defense,  compromise,  or  settlement  of such
action on behalf of and for the account,  expense,  and risk of the  Shareholder
Representatives.

               (c)  Notwithstanding  anything in this Agreement to the contrary,
if there is a reasonable  probability that an Identifiable  Claim may materially
adversely  affect  Purchaser,  Purchaser  shall have the right to participate in
such defense,  compromise,  or settlement and Shareholder  Representatives shall
not, without Purchaser' written consent (which consent shall not be unreasonably

<PAGE>

withheld),  settle or compromise any  Identifiable  Claim or consent to entry of
any judgment in respect thereof unless such settlement,  compromise,  or consent
includes as an  unconditional  term  thereof  the giving by the  claimant or the
plaintiff  to  Purchaser  a  release  from  all  liability  in  respect  of such
Identifiable Claim.

               SECTION  10.4  PROCEDURE  FOR  INDEMNIFICATION  WITH  RESPECT  TO
NON-THIRD PARTY CLAIMS.

               In the event that  Purchaser  asserts  the  existence  of a claim
giving rise to Damages (but  excluding  claims  resulting  from the assertion of
liability by third  parties),  it shall give written  notice to the  Shareholder
Representatives. Such written notice shall state that it is being given pursuant
to this Section  10.4,  specify the nature and amount of the claim  asserted and
indicate  the date on which  such  assertion  shall be deemed  accepted  and the
amount  of the  claim  deemed a valid  claim  (such  date to be  established  in
accordance with the next sentence). If the Shareholder  Representatives,  within
20 days after the mailing of notice by Purchaser,  shall not give written notice
to Purchaser  announcing  their intent to contest such  assertion of  Purchaser,
such assertion  shall be deemed accepted and the amount of claim shall be deemed
a valid  claim.  In the event,  however,  that the  Shareholder  Representatives
contest the  assertion  of a claim by giving such  written  notice to  Purchaser
within said period,  then the parties shall act in good faith to reach agreement
regarding such claim. In the event that  litigation  shall arise with respect to
any such claim, the prevailing party shall be entitled to reimbursement of costs
and expenses  incurred in connection  with such  litigation  including  attorney
fees, if the parties hereto,  acting in good faith,  cannot reach agreement with
respect to such claim within ten days after such notice.

               SECTION 10.5 INDEMNIFICATION BY PURCHASER.

               Purchaser  hereby agrees to  indemnify,  defend and hold harmless
the Shareholder  Representatives and their respective affiliates against any and
all Damages  asserted  against,  resulting  from,  imposed  upon, or incurred or
suffered by Shareholders Representatives, directly or indirectly, as a result of
or arising from or in connection with (i) any of the Assumed Liabilities or (ii)
the  Purchaser's  conduct of the  Business  after the  Closing  Time;  provided,
however,  that no payment shall be payable by Purchaser  under this Section 10.5
at any time when Shareholder  Representatives shall be in breach of any of their
representations, warranties, covenants and agreements in this Agreement.


                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS
                            ------------------------

               SECTION  11.1  NOTICE.  All  notices  and  other   communications
required or permitted  under this Agreement shall be delivered to the parties at
the address set forth below,  or at such other  address  that they  designate by
notice to all other  parties in accordance  with this Section 11.1.  All notices
and  communications  shall be deemed to have been  received:  (i) in the case of
personal  delivery,  on the date of such delivery;  (ii) in the case of telex or
facsimile transmission, on the date on which the sender receives confirmation by
telex or facsimile  transmission that such notice was received by the addressee,
provided that a copy of such  transmission is  additionally  sent by mail as set

<PAGE>

forth in (iv) below;  (iii) in the case of overnight air courier,  on the second
business day following the day sent, with receipt confirmed by the courier;  and
(iv) in the case of mailing by first class certified or registered mail, postage
prepaid,  return  receipt  requested,  on the fifth  business day following such
mailing:

If to the Purchaser: Credence Systems Corporation
                     215 Fourier Avenue
                     Fremont, CA 94539
                     Attention- Chief Executive Officer
                     Telephone: (510) 657-7400
                     Telecopy:  (510) 623-2522

    with a copy to:  Brobeck, Phleger & Harrison LLP Two Embarcadero Place
                     2200 Geng Road Palo Alto, CA 94303
                     Attention: Warren T. Lazarow, Esq. & Robert H. Sweeny, Esq.
                     Telephone: (650) 496-2887
                     Telecopy:  (650) 496-2733

If to the Shareholder
   Representatives:  David Lepejian
                     340 Cowper Street
                     Palo Alto, CA 94301
                     Telephone: (650) 321-9947
                     Telecopy:  (650) 321-1830

   with a copy to:
                     Charles Wagner
                     1022 W. Hedding Street
                     San Jose, CA 95126
                     Telephone: (408) 244-6222
                     Telecopy:  (408) 247-7081

               SECTION  11.2  ENTIRE AGREEMENT. This Agreement, the exhibits and
schedules  hereto,  and the  documents  referred  to herein  embody  the  entire
agreement and  understanding  of the parties  hereto with respect to the subject
matter  hereof,  and  supersede  all prior and  contemporaneous  agreements  and
understandings, oral or written, relative to said subject matter.

               SECTION   11.3   REMEDIES   OF   PURCHASER.    The    Shareholder
Representatives  agree that the Assets  are  unique  and not  otherwise  readily
available to Purchaser. Accordingly, the Shareholder Representatives acknowledge
that,  in  addition  to all other  remedies  to which  Purchaser  are  entitled,
Purchaser  shall  have the right to  enforce  the terms of this  Agreement  by a
decree of specific  performance,  provided  Purchaser is not in material default
hereunder.
<PAGE>

               SECTION 11.4  BINDING EFFECT, ASSIGNMENT.  This Agreement and the
various rights and obligations  arising  hereunder shall inure to the benefit of
and be  binding  upon the  Shareholder  Representatives,  their  successors  and
permitted  assigns,  and Purchaser  and its  successors  and permitted  assigns.
Neither  this  Agreement  nor  any  of the  rights,  interests,  or  obligations
hereunder shall be transferred or assigned (by operation of law or otherwise) by
either of the  parties  hereto  without the prior  written  consent of the other
party.

               SECTION 11.5  EXPENSES OF  TRANSACTION,  TAXES.  Each party shall
bear  its own  costs  and  expenses  in  connection  with  this  Agreement.  The
Shareholder  Representatives  shall  pay or cause the HPL  Companies  to pay all
applicable Taxes, including,  without limitation,  sales, use, excise, transfer,
documentary and any other similar Taxes, arising out of the purchase and sale of
the Assets.

               SECTION 11.6  WAIVER, CONSENT.  This Agreement may not be amended
except by a writing executed by the parties hereto,  and no waiver of any of the
provisions  or  conditions  of this  Agreement  or any of the  rights of a party
hereto shall be effective or binding  unless such waiver shall be in writing and
signed by the party  claimed to have given or consented  thereto.  Except to the
extent that a party hereto may have  otherwise  agreed in writing,  no waiver by
that party of any  condition  of this  Agreement or breach by the other party of
any of its  obligations  or  representations  hereunder or  thereunder  shall be
deemed to be a waiver of any other  condition or  subsequent  or prior breach of
the same or any other obligation or representation by the other party, nor shall
any  forbearance  by the first party to seek a remedy for any  noncompliance  or
breach  by the other  party be  deemed to be a waiver by the first  party of its
rights and remedies with respect to such noncompliance or breach.

               SECTION  11.7  THIRD-PARTY  BENEFICIARIES.  Except  as  otherwise
expressly provided for in this Agreement,  nothing herein, expressed or implied,
is intended or shall be  construed  to confer upon or give to any person,  firm,
corporation,  or legal  entity,  other  than the  parties  hereto,  any  rights,
remedies, or other benefits under or by reason of this Agreement.

               SECTION  11.8  SEVERABILITY.  If one or more  provisions  of this
Agreement are held to be  unenforceable  under  applicable  law, such  provision
shall be excluded from this Agreement and the balance of the Agreement  shall be
interpreted  as if such  provision  were so excluded and shall be enforceable in
accordance with its terms.

               SECTION 11.9 GOVERNING LAW. This Agreement  shall in all respects
be  construed  in  accordance  with and  governed  by the  laws of the  State of
California as applied to agreements among California  residents entered into and
to be performed entirely within the State of California.

               SECTION 11.10  ATTORNEYS' FEES. If any action at law or in equity
is necessary to enforce or interpret  the terms of this  Agreement or to protect
the rights  obtained  hereunder  the  prevailing  party shall be entitled to its
reasonable  attorneys' fees,  costs, and  disbursements in addition to any other
relief to which it may be entitled.

               SECTION 11.11 COOPERATION AND RECORDS RETENTION.  The Shareholder
Representatives  and  Purchaser  shall  (i) each  provide  the  other  with such
assistance  as may  reasonably  be  requested  by them in  connection  with  the
preparation  of any  tax  return,  statement,  report  form  or  other  document
(hereinafter  collectively a "Tax Return"),  or in connection  with any audit or
other  examination  by any taxing  authority or any  judicial or  administrative
proceedings  relating to liability  for Taxes,  (ii) each retain and provide the
other,  with any records or other  information which may be relevant to any such
Tax Return,  audit or examination,  proceeding or  determination,  and (ii) each
provide the other with any final determination of any such audit or examination,
proceeding or determination  that affects any amount required to be shown on any
Tax Return of the other for any period.  Without  limiting the generality of the
foregoing, the Shareholder Representatives and Purchaser shall retain, until the

<PAGE>

applicable  statute of  limitations  (including  any  extensions)  have expired,
copies of all Tax  Returns,  supporting  work  schedules  and other  records  or
information  which may be  relevant  to such Tax  Returns for all tax periods or
portions  thereof  ending  before or  including  the Closing  Time and shall not
destroy or otherwise  dispose of any such records  without  first  providing the
other party with a reasonable opportunity to review and copy the same. Purchaser
shall keep the original  copies of the records at its  facilities  in California
and elsewhere, if applicable, and, at the Shareholder  Representatives' expense,
shall  provide  copies of the Records to the  Shareholder  Representatives  upon
request.

               SECTION  11.12  COUNTERPARTS.  This  Agreement  may  be  executed
simultaneously  in  multiple  counterparts,  each of which  shall be  deemed  an
original,  but all of which taken  together  shall  constitute  one and the same
instrument.

               IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.

                              CREDENCE SYSTEMS CORPORATION



                              By:   /s/  WILMER R. BOTTOMS
                              -----------------------------------------
                              Name:  Wilmer R. Bottoms
                              Title: President, Chief Executive Officer


                             SHAREHOLDER REPRESENTATIVES:


                                 /s/  YERVANT DAVID LEPEJIAN
                              -----------------------------------------
                              Yervant David Lepejian


                                 /s/  LAWRENCE KRAUSE
                              -----------------------------------------
                              Lawrence Krause



The Company shall furnish  supplementally  a copy of any omitted schedule to the
Commission upon request.