Document:

<PAGE>

                                                                   Exhibit 10.91

                           ASSET PURCHASE AGREEMENT

                                by and between

                            Sherwood Partners, Inc.

                                 as "Seller,"

                                      and

                               drkoop.com, Inc.

                                  as "Buyer"

                            Dated: November 1, 2000
<PAGE>

                           ASSET PURCHASE AGREEMENT

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
ARTICLE I. DEFINITIONS..................................................   1

    1.1      Defined Terms..............................................   1
    1.2      Other Defined Terms........................................   8

ARTICLE II. PURCHASE AND SALE OF ASSETS.................................   8

    2.1      Transfer of Purchased Assets...............................   8
    2.2      Assumption of Liabilities..................................   8
    2.3      Excluded Liabilities.......................................   8
    2.4      Purchase Price.............................................   9
    2.5      Closing Costs; Transfer Taxes and Fees.....................  10

ARTICLE III. CLOSING....................................................  10

    3.1      Closing....................................................  10
    3.2      Conveyances at Closing.....................................  10

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER....................  11

    4.1      Organization of Seller.....................................  11
    4.2      Authorization..............................................  11
    4.3      General Assignment.........................................  11
    4.4      Purchased Assets...........................................  12
    4.5      Consents and Approvals.....................................  12
    4.6      Contracts and Commitments..................................  12
    4.7      Permits....................................................  14
    4.8      No Conflict or Violation...................................  14
    4.9      Books and Records..........................................  14
    4.10     Litigation.................................................  15
    4.11     Liabilities................................................  15
    4.12     Compliance with Law........................................  15
    4.13     No Brokers.................................................  15
    4.14     No Other Agreements to Sell the Purchased Assets...........  15
    4.15     Proprietary Rights.........................................  16
    4.16     Transactions with Certain Persons..........................  16
    4.17     Tax Returns and Payments...................................  16
    4.18     [Intentionally Omitted]............Error! Bookmark not defined.
    4.19     Service Commitments and Outstanding Bids...................  17
    4.20     Environmental and Safety Laws..............................  17
    4.21     Material Misstatements Or Omissions........................  17

ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER......................  18
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                       <C>
    5.1      Organization of Buyer.....................................   18
    5.2      Authorization.............................................   18
    5.3      No Conflict or Violation..................................   18
    5.4      Consents and Approvals....................................   18
    5.5      No Brokers................................................   18

ARTICLE VI. COVENANTS OF SELLER AND BUYER..............................   19

    6.1      Further Assurances........................................   19
    6.2      Press Releases and Public Announcements...................   19
    6.3      Transition Assistance.....................................   19
    6.4      Technology Leases.........................................   19

ARTICLE VII. CONDITIONS TO SELLER'S OBLIGATIONS........................   20

    7.1      Representations, Warranties and Covenants.................   20
    7.2      Consents; Regulatory Compliance and Approval..............   20
    7.3      Certificates..............................................   21
    7.4      Corporate Documents.......................................   21

ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS........................   21

    8.1      Representations, Warranties and Covenants.................   21
    8.2      Consents; Regulatory Compliance and Approval..............   21
    8.3      Certificates..............................................   21
    8.4      Corporate Documents.......................................   21
    8.5      Conveyancing Documents; Release of Encumbrances...........   21
    8.6      Permits...................................................   22
    8.7      Tax Clearance Certificate.................................   22

ARTICLE IX. CONSENTS TO ASSIGNMENT.....................................   22

    9.1      Consents to Assignment....................................   22

ARTICLE X. ACTIONS BY SELLER AND BUYER AFTER THE CLOSING...............   22

   10.1      Books and Records; Tax Matters............................   22
   10.2      Survival of Representations, Etc..........................   23
   10.3      Indemnifications..........................................   23
   10.4      Holdback; Remedies Generally..............................   25
   10.5      Taxes.....................................................   26

ARTICLE XI. MISCELLANEOUS..............................................   26

   11.1      Assignment................................................   26
   11.2      Notices...................................................   26
   11.3      Choice of Law.............................................   27
   11.4      Entire Agreement; Amendments and Waivers..................   27
   11.5      Multiple Counterparts.....................................   27
   11.6      Expenses..................................................   28
   11.7      Invalidity................................................   28
</TABLE>

                                      ii
<PAGE>

<TABLE>
   <S>                                                                    <C>
   11.8      Titles; Gender............................................   28
   11.9      Confidential Information..................................   28
   11.10     Cumulative Remedies.......................................   29
   11.11     Service of Process, Consent to Jurisdiction...............   29
   11.12     Attorneys' Fees...........................................   30
   11.13     Knowledge.................................................   30
</TABLE>

                                      iii
<PAGE>

                                   EXHIBITS

Exhibit

A      Bill of Sale........................................................  A-1

B      Assignment of Contract Rights.......................................  B-1

C      Assignment of Proprietary Rights....................................  C-1

D      Escrow Indemnification Agreement....................................  D-1

E      drDrew Board and Stockholder Resolutions............................  E-1

F      General Assignment..................................................  F-1

G      Dr. Drew Pinsky Employment and License Agreement....................  G-1

                                      iv
<PAGE>

                           ASSET PURCHASE AGREEMENT

          This Asset Purchase Agreement, dated as of November 1, 2000, is by and
among drKoop.com, Inc., a Delaware corporation ("Buyer"), and Sherwood Partners,
Inc., a California corporation ("Seller").

                                   RECITALS
                                   --------

          A.   By resolutions adopted by its board of directors and the written
consent of its stockholders, each attached hereto as Exhibit E, drDrew.com,
                                                     ---------
Inc., a Delaware corporation ("drDrew"), with its principal executive office
located at 210 Delacey Ave., Suite 105, Pasadena, CA 91105, has transferred
ownership of all of its tangible and intangible assets ("drDrew Assets") to
Seller for the benefit of its creditors pursuant to that certain General
Assignment, dated October 2, 2000 by and between drDrew and Seller ("General
Assignment"), attached hereto as Exhibit F, pursuant to which, among other
                                 ---------
things, drDrew designated Seller as the assignee of the drDrew Assets.

          B.   Seller has identified all of the drDrew Assets required to
continue operating the drDrew website and Business (the "Purchased Assets"). The
Purchased Assets are set forth below in Section 1.1. After consummation of the
transactions contemplated under this Agreement, Seller will liquidate the
remaining drDrew Assets (the "Remaining Assets"), and will undertake the winding
down of drDrew, which shall include, but not be limited to, the sale of the
Remaining Assets and distribution of the net proceeds from such sale to the
drDrew creditors.

          C.   Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, such Purchased Assets upon the terms and subject to the conditions of
this Agreement.

                                   AGREEMENT
                                   ---------

          NOW THEREFORE, in consideration of the respective covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:

                                  ARTICLE I.

                                  DEFINITIONS
                                  -----------

          1.1  Defined Terms.  As used herein, the terms below shall have the
               -------------
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.

          "Action" shall mean any action, claim, suit, litigation, proceeding,
           ------
labor dispute, arbitral action, governmental audit, inquiry, criminal
prosecution, investigation or unfair labor practice charge or complaint.
<PAGE>

          "Affiliate" shall have the meaning set forth in the Securities
           ---------
Exchange Act of 1934, as amended, and the rules and regulations thereunder.

          "Books and Records" shall mean (a) all records and lists of drDrew
           -----------------
pertaining to the Purchased Assets, (b) all records and lists pertaining to the
Business, customers, suppliers or personnel of Seller, (c) all product, business
and marketing plans of Seller relating to drDrew or the Purchased Assets or
Liabilities and (d) all books, ledgers, files, reports, plans, drawings and
operating records of every kind maintained by Seller relating to drDrew or the
Purchased Assets, but excluding the originals of Seller's minute books, stock
books and tax returns.

          "Business" shall mean the assets, liabilities and operations of drDrew
           --------
transferred to the Seller pursuant to the General Assignment.

          "Business Days" shall mean any date excluding Saturday, Sunday or any
           -------------
day, which shall be a day on which banking institutions are authorized by law to
close or any day the Nasdaq National Market is closed.

          "Closing Date" shall mean November 1, 2000, or such other date as
           ------------
Buyer and Seller shall mutually agree upon.

          "Code" shall mean the Internal Revenue Code of 1986, as amended.
           ----

          "Contract" shall mean any agreement, contract, note, loan, evidence of
           --------
indebtedness, purchase, order, letter of credit, indenture, security or pledge
agreement, franchise agreement, undertaking, practice, covenant not to compete,
employment agreement, license, instrument, obligation or commitment to which
Seller, solely as drDrew's assignee, is a party or is bound and which relates to
the Business or the Purchased Assets, whether oral or written, but excluding the
Lease.

          "Contract Rights" shall mean all of Seller's rights and obligations
           ---------------
under the Contracts listed in Schedule 4.6 and not rejected by Buyer and under
any Contracts not so listed which Buyer, in its sole discretion, elects to
accept and assume.

          "Copyrights" shall mean registered copyrights, copyright applications
           ----------
and unregistered copyrights held in drDrew's name, transferred to the Seller
pursuant to the General Assignment or otherwise related or necessary to the
operation of the Business.

          "Court Order" shall mean any judgment, decision, consent decree,
           -----------
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any person or its property
under applicable law.

          "Default" shall mean (a) a breach of or default under any Contract or
           -------
Lease, (2) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute a breach of or default under any
Contract or Lease, or (3) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right of
termination, renegotiation or acceleration under any Contract or Lease.

                                       2
<PAGE>

          "Disclosure Schedule" shall mean a schedule executed and delivered by
           -------------------
Seller to Buyer as of the date hereof which sets forth the exceptions to the
representations and warranties contained in Article IV hereof and certain other
information called for by this Agreement.  Unless otherwise specified, each
reference in this Agreement to any numbered schedule is a reference to that
numbered schedule which is included in the Disclosure Schedule.

          "Encumbrance" shall mean any claim, lien, pledge, option, charge,
           -----------
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.

          "Environmental Laws" shall mean all Regulations which regulate or
           ------------------
relate to the protection or clean-up of the environment, the use, treatment,
storage, transportation, generation, manufacture, processing, distribution,
handling or disposal of, or emission, discharge or other release or threatened
release of, Hazardous Materials or otherwise dangerous substances, wastes,
pollution or materials (whether, gas, liquid or solid), the preservation or
protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources, or the health and safety of persons or property,
including without limitation protection of the health and safety of employees.
Environmental Laws shall include, without limitation, the Federal Insecticide,
Fungicide, Rodenticide Act, Resource Conservation & Recovery Act, Clean Water
Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and Health
Act, Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental
Response, Compensation and Liability Act, Emergency Planning and Community
Right-to-Know Act, Hazardous Materials Transportation Act and all analogous or
related federal, state or local law, each as amended.

          "Facilities" shall mean all offices, stores, warehouses, improvements,
           ----------
administration buildings, and all real property and related facilities related
to or used in the operation of the Business.

          "Former Facility" shall mean each office, store, warehouse,
           ---------------
improvement, administrative building and all real property and related
facilities that was owned, leased or operated by Seller or related to the
Business at any time prior to the date hereof, but excluding any Facilities.

          "Liabilities" shall mean any direct or indirect liability,
           -----------
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any person of any type, whether accrued, absolute,
contingent, matured, unmatured or other, but excluding the Excluded Liabilities.

          "Material Adverse Effect" or "Material Adverse Change" shall mean with
           -----------------------      -----------------------
respect to the Business or the Purchased Assets any adverse effect or change in
the condition (financial or other), business, results of operations, prospects,
assets, Liabilities or operations of the Business and/or the Purchased Assets or
on the ability of Seller to consummate the transactions contemplated hereby, or
any event or condition which would, with the passage of time, constitute a
"material adverse effect" or "material adverse change."

                                       3
<PAGE>

          "Ordinary Course of Business" or "Ordinary Course" or any similar
           ---------------------------      ---------------
phrase shall mean the ordinary course of the Business and consistent with
drDrew's past practice.

          "Patents" shall mean all patents and patent applications and
           -------
registered design and registered design applications.

          "Permits" shall mean all licenses, permits, franchises, approvals,
           -------
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of the Business.

          "Pre-Closing Tax Period" shall mean (i) any Tax period ending on or
           ----------------------
before the Closing Date and (ii) with respect to a Tax period that commences
before but ends after the Closing Date, the portion of such period up to and
including the Closing Date.

          "Proprietary Rights" shall mean all of Seller's Copyrights, Patents,
           ------------------
Trademarks, technology rights and licenses, computer software (including without
limitation any source or object codes therefor or documentation relating
thereto), trade secrets, franchises, know-how, inventions, designs,
specifications, plans, drawings and intellectual property rights necessary to
operate the drDrew website and the Business.

          "Purchased Assets" shall mean all of Seller's right, title and
           ----------------
interest in and to the following:

          (a)  Customer and Subscriber Lists. All of drDrew's web site
               -----------------------------
               subscriber information, customer and prospect lists, including
               all data and databases regarding such web site subscribers,
               customers and prospects.  Upon the Closing, Buyer shall acquire
               and have sole and exclusive ownership of, access to and use of
               all customer lists, databases and other information described in
               Schedule 1.1(a).

          (b)  Contracts.  All of the Contract Rights under the Contracts set
               ---------
forth in Schedule 4.6.

          (c)  Technology; Products.  All of Seller's rights, title and interest
               --------------------
               in and to the software products (the "Software Products")
               developed by the drDrew engineers and used on the drDrew web
               site, including but not limited to the following:

               (i)  "Chat"--Community chat tool;
                       Format: C code, source and binary available.
                       Components: Combination of Apache C module, IRC gateway
                       buffer application, and IRC Efnet Hybrid code.

               (ii) "Messageboards"--Web-based usenet tool;
                       Format:  Embedded Perl code, source available.

                                       4
<PAGE>

                       Components: Embedded Perl code along with Oracle DB
                       tables.

               (iii)  "Instant Messaging"--Web-based user paging tool;
                         Format: Embedded Perl code and C code, source and
                         binary available.
                         Components: Apache C module, Embedded Perl, and Oracle
                         DB tables.

               (iv)   "Hook'd Up"--Web-based anonymous user crush tool;
                         Format: Embedded Perl code, source available.
                         Components: Embedded Perl code, Oracle DB tables,
                         Oracle DB triggers.

               (v)    User web-based e-mail--web-based e-mail system;
                         Format: Embedded Perl code, source available.
                         Components: Embedded Perl code, flat file format.

               (vi)   "Diet and Fitness Journal"--Web-based diet and fitness
                         utility;
                         Format: Embedded Perl code, source available.
                         Components: Embedded Perl code, Oracle DB tables.

               (vii)  "Admintools"--Content management software
                         Format: Embedded Perl code, source available.
                         Components: Embedded Perl code, Oracle DB tables.

               (viii) Home Page creation tools - Web-based user homepage
                         creation utility.
                         Format:  Embedded Perl code, source available.
                         Components: Embedded Perl code, Oracle DB tables, flat
                         data files.

               (ix)   "Guestbook" - Web-based guestbook utility.
                         Format:  Embedded Perl code, source available.
                         Components:  Embedded Perl code, Oracle DB tables, flat
                         data files.

               (x)    "Buddy List" - Web-based buddy tracking utility.
                         Format:  Embedded Perl code, source available.
                         Components: Embedded Perl code, Oracle DB tables.

               (xi)   "Who's Online" - Web-based member search utility.
                         Format: Embedded Perl code, source available.
                         Components: Embedded Perl code, Oracle DB tables,
                         Oracle batch jobs.

                                       5
<PAGE>

          (d)  Site Content.  All of Seller's rights, title and interest in the
               ------------
               content Drew employees and contractors created exclusively for
               the drDrew web site, including up to (i) five hundred sixty-nine
               (569) "Question of the Day" articles, (ii) one hundred ninety-
               eight (198) "Health Brief" articles, (iii) one hundred seventy-
               five (175) "Celebrity Stories," (iv) fifty-five "55 Five Minutes
               With ..." articles, (v) seventy-seven (77) movie reviews, (vi)
               ninety-four (94) music reviews, and (vii) forty-eight (48) book
               reviews.

          (e)  Proprietary Rights. All of Seller's rights, title and interest in
               ------------------
               and to all Proprietary Rights.

          (f)  Domain Name; Web Site.  All of Seller's rights, title and
               ---------------------
               interest in and to the drDrew web site, and the associated
               scripts, files and databases (the contents of such databases are
               as set forth in Schedule 1.1(f)) required to recreate and operate
               a completely functioning version of such site, and the exclusive
               right to use the name "drDrew.com," "doctordrew.com,"
               "drivemecrazytour.com," and "drivemecrazyvantour.com" or any
               variations thereof, except as may otherwise be restricted by the
               Dr. Drew Pinsky Employment and License Agreement, as amended,
               attached hereto as Exhibit G, and the exclusive right for Buyer
                                  ---------
               to hold itself out as the successor to the drDrew business.

          (g)  Webcasts. The fifty-five (55) webcasts featuring Dr. Drew
               --------
               Pinsky's celebrity interviews, panel discussions and speeches
               (the "Webcasts") set forth in Schedule 1.1(g).  All such Webcasts
               are archived on the current drDrew web site.

          (h)  all Books and Records;

          (i)  all Proprietary Rights;

          (j)  to the extent transferable, all Permits;

          (k)  all computer hardware and software, including

               (i)   Three (3) Sun E250 servers each with 2 gigabyte memory and
                     two (2) 18 gigabyte hard drives;

               (ii)  One (1) Sun E450 server with 4 gigabyte memory and two (2)
                     18 gigabyte hard drives and two (2) fiber channel Ethernet
                     boards;

               (iii) Three (3) Clone rack mount Intel based personal computers;

               (iv)  Network Appliances file server, which includes the
                     controller and five (5) disk shelves containing twenty-
                     eight (28) 18 gigabyte hard drives;

                                       6
<PAGE>

               (v)   Cisco PIX 520 firewall with 2 interface boards; and

               (vi)  Two (2) Sun Ultra 5 workstations each containing a .5
                     gigabyte memory and one (1) 9 gigabyte hard drive.

          (l)  that certain Massachusetts Mutual Policy No. 11605794;

          (m)  all available sales literature, promotional literature, customer,
               supplier and distributor lists, art work, display units and
               purchasing records related to the Business; and

          (n)  all rights under or pursuant to all warranties, representations
               and guarantees made by suppliers in connection with the assets or
               services furnished to Seller pertaining to the Business or
               affecting the assets, to the extent such warranties,
               representations and guarantees are assignable.

          "Regulations" shall mean any laws, statutes, ordinances, regulations,
           -----------
rules, notice requirements, court decisions, agency guidelines, principles of
law and orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation Environmental
Laws, energy, motor vehicle safety, public utility, zoning, building and health
codes, occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.

          "Representative" shall mean any officer, director, principal,
           --------------
attorney, agent, employee or other representative.

          "Tax" shall mean any federal, state, local, foreign or other tax,
           ---
levy, impost, fee, assessment or other similar charge, including, without
limitation, income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, interest, penalties
and additions in connection therewith.

          "Tax Return" shall mean any report, return, document, declaration or
           ----------
other information or filing and any schedule or attachment thereto or amendment
thereof, required to be supplied to any taxing authority or jurisdiction
(foreign or domestic) with respect to Taxes, including, without limitation,
information returns, any documents with respect to or accompanying payments of
estimated Taxes, or with respect to or accompanying requests for the extension
of time in which to file any such report, return, document, declaration or other
information.

          "Trademarks" shall mean registered trademarks, registered service
           ----------
marks, trademark and service mark applications and unregistered trademarks and
service marks related to or used in connection with the Business.

          "Treasury Regulations" shall mean the Treasury Regulations promulgated
           --------------------
under the Code.

                                       7
<PAGE>

          1.2  Other Defined Terms.  The following terms shall have the meanings
               -------------------
defined for such terms in the Sections set forth below:

          Term                                    Section
          ----                                    -------

          Allocation                              2.4(d)
          Assumed Liabilities                     2.2
          Cash Consideration                      2.4(a)
          Claim                                   10.3(d)
          Claim Notice                            10.3(d)
          Closing                                 3.1
          Confidential Information                11.9
          Damages                                 10.3(a)
          Escrow Amount                           2.4(c)
          Escrow Indemnification Agreement        2.4(c)
          Escrow Fund                             2.4(c)
          Excluded Liabilities                    2.3
          Hazardous Materials                     4.19
          Purchase Price                          2.4(b)
          Stock Consideration                     2.4(b)
          Technology Leases                       6.4

                                  ARTICLE II.

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

          2.1  Transfer of Purchased Assets.  Upon the terms and subject to the
               ----------------------------
conditions contained herein, at the Closing, Seller will sell, convey, transfer,
assign and deliver to Buyer, and Buyer will acquire from Seller, the Purchased
Assets, free and clear of all Encumbrances.

          2.2  Assumption of Liabilities.  Upon the terms and subject to the
               -------------------------
conditions contained herein, at the Closing, Buyer shall assume the following,
and only the following, Liabilities of Seller (the "Assumed Liabilities"): all
Liabilities accruing, arising out of, or relating to events or occurrences
happening after the Closing Date under the Contracts listed in Schedule 4.6, and
not rejected by Buyer, but not including any Liability for any Default under any
such Contract occurring on or prior to the Closing Date.

          2.3  Excluded Liabilities.  Notwithstanding any other provision of
               --------------------
this Agreement, except for the Assumed Liabilities expressly specified in
Section 2.2, Buyer shall not assume, or otherwise be responsible for, any
Liabilities of Seller or drDrew, whether liquidated or unliquidated, or known or
unknown, whether arising out of occurrences prior to, at or after the date
hereof ("Excluded Liabilities"), which Excluded Liabilities include, without
limitation:

          (a)  Any Liability to or in respect of any employees or former
employees of drDrew including without limitation (i) any employment agreement,
whether or not written, between drDrew and any person, (ii) any Liability under
any Employee Plan at any time maintained, contributed to or required to be
contributed to by or with respect to drDrew or under

                                       8
<PAGE>

which Seller, as assignee, or drDrew may incur Liability, or any contributions,
benefits or Liabilities therefor, or any Liability with respect to Seller's
withdrawal or partial withdrawal from or termination of any Employee Plan and
(iii) any claim of an unfair labor practice, or any claim under any state
unemployment compensation or worker's compensation law or regulation or under
any federal or state employment discrimination law or regulation, which shall
have been asserted on or prior to the Closing Date or is based on acts or
omissions which occurred on or prior to the Closing Date;

          (b)  Any Liability of Seller in respect of any Tax;

          (c)  Any Liability arising from any injury to or death of any person
or damage to or destruction of any property, whether based on negligence, breach
of warranty, strict liability, enterprise liability or any other legal or
equitable theory arising from defects in products manufactured or from services
performed by or on behalf of Seller or any other person or entity on or prior to
the Closing Date;

          (d)  Any Liability of Seller arising out of or related to any Action
against Seller or any Action which adversely affects the Purchased Assets and
which shall have been asserted on or prior to the Closing Date or to the extent
the basis of which shall have arisen on or prior to the Closing Date;

          (e)  Any Liability of Seller resulting from entering into, performing
its obligations pursuant to or consummating the transactions contemplated by,
this Agreement (including without limitation any Liability of Seller pursuant to
Article X hereof); and

          (f)  Any Liability related to any Former Facility.

          2.4  Purchase Price.
               --------------

          (a)  Cash Consideration.  At the Closing, upon the terms and subject
               ------------------
to the conditions set forth herein, Buyer shall pay to Seller for the sale,
transfer, assignment, conveyance and delivery of the Purchased Assets, the
aggregate amount of One Hundred Fifty Thousand Dollars ($150,000) (the "Cash
Consideration"), by check payable to Seller or by wire transfer of immediately
available funds to an account designated by Seller and shall assume the Assumed
Liabilities pursuant to this Agreement.

          (b)  Stock Consideration; Escrow Account. Within thirty (30) days of
the Closing Date, Buyer shall deliver to Seller a stock grant for One Million
Five Hundred Eighty-One Thousand (1,581,000) shares of Buyer's common stock (the
"Stock Consideration," together with the Cash Consideration, the "Purchase
Price").

          (c)  Escrow Indemnification Agreement; Escrow Fund. In order to
establish a procedure for the satisfaction of Buyer's claims for indemnification
pursuant to Section 10.3 of this Agreement (up to the Escrow Amount (as defined
below)), the Seller and Buyer shall enter into an escrow indemnification
agreement (the "Escrow Indemnification Agreement") in the form attached hereto
as Exhibit D, pursuant to which the Stock Consideration (the "Escrow Amount")
   ---------
shall be held in or made subject to an escrow fund (the "Escrow Fund") for a
period of one hundred twenty (120) days from the delivery of the Stock
Consideration

                                       9
<PAGE>

           (d)  The Purchase Price shall be allocated among the Purchased Assets
for all purposes (including financial accounting and tax purposes) in the manner
determined by the Buyer within 30 calendar days of the Closing Date and in the
manner required by Section 1060 of the Code and Treasury Regulations thereunder.
The parties agree to revise such allocation in the event the Purchase Price is
adjusted pursuant to Section 2.4(c) hereof (such allocation, as revised, the
"Allocation"). Seller and Buyer agree to (i) be bound by the Allocation, (ii)
 ----------
act in accordance with the Allocation in the preparation of financial statements
and filing of all Tax Returns (including, without limitation, filing Form 8594
with its United States federal income Tax Return for the taxable year that
includes the date of the Closing) and in the course of any Tax audit, Tax review
or Tax litigation relating thereto and (iii) take no position and cause their
affiliates to take no position inconsistent with the Allocation for income Tax
purposes, including United States federal and state income Tax and foreign
income Tax. Not later than 30 days prior to the filing of their respective Forms
8594 relating to this transaction, each party shall deliver to the other party a
copy of its Form 8594.

         2.5  Closing Costs; Transfer Taxes and Fees.  Seller shall be
              --------------------------------------
responsible for any documentary and transfer Taxes and any sales, use or other
Taxes imposed by reason of the transfers of Purchased Assets provided hereunder.
Seller shall pay the fees and costs of recording or filing all applicable
conveyancing instruments described in Section 3.2(a). Seller shall pay all costs
of applying for new Permits and obtaining the transfer of existing Permits which
may be lawfully transferred.

                                 ARTICLE III.

                                    CLOSING
                                    -------

         3.1  Closing.  The Closing of the transactions contemplated herein
              -------
(the "Closing") shall be held at 10:00 a.m. local time on the Closing Date at
the offices of Latham & Watkins at 633 W. Fifth St., Suite 4000, Los Angeles, CA
90071, unless the parties hereto otherwise agree.

         3.2  Conveyances at Closing.
              ----------------------

           (a)   Instruments and Possession.  To effect the sale and transfer
                 --------------------------
referred to in Section 2.1 hereof, Seller will, at the Closing, execute and
deliver to Buyer:

           (i)   one or more bills of sale, in the form attached hereto as
Exhibit A, conveying in the aggregate all of drDrew's owned personal property
---------
included in the Purchased Assets;

           (ii)  subject to Section 9.1, Assignment of Contract Rights, in the
form attached hereto as Exhibit B, with respect to the Contract Rights;
                        ---------

           (iii) Assignment of Proprietary Rights (including an assignment of
all of Seller's rights, title and interest to the name "drDrew.com," "drDrew,"
"doctordrew.com," "drivemecrazytour.com," or "drivemecrazyvantour.com," and all
variations thereof) each in the form attached hereto as Exhibit C, in recordable
                                                        ---------
form to the extent necessary to assign such
rights;

                                       10
<PAGE>

               (iv) such other instruments as shall be requested by Buyer to
vest in Buyer title in and to the Purchased Assets in accordance with the
provisions hereof.

               (b)  Form of Instruments.  To the extent that a form of any
                    -------------------
document to be delivered hereunder is not attached as an Exhibit hereto, such
documents shall be in form and substance, and shall be executed and delivered in
a manner, satisfactory to Buyer.

               (c)  Certificates.  Buyer and Seller shall deliver the
                    ------------
certificates and other matters described in Articles VII and VIII.

               (d)  Consents.  Subject to Section 9.1, Seller shall deliver all
                    --------
Permits and any other third party consents required for the valid transfer of
the Purchased Assets as contemplated by this Agreement.

                                  ARTICLE IV.

                   REPRESENTATIONS AND WARRANTIES OF SELLER
                   ----------------------------------------

               Seller hereby represents and warrants to Buyer as follows, except
as otherwise set forth on the Disclosure Schedule, which representations and
warranties are, as of the date hereof, and will be, as of the Closing Date, true
and correct:

               4.1  Organization of Seller.  Seller is a corporation duly
                    ----------------------
organized, validly existing and in good standing under the laws of the State of
California with full corporate power and authority to conduct the Business as it
is presently being conducted and to own and lease its properties and assets.
drDrew is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. drDrew is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its activities make
such qualification necessary, except where the failure to be so qualified or in
good standing would not have a material adverse effect on the Purchased Assets
or the Business. Copies of the articles or certificate of incorporation, as the
case may be, and Bylaws of Seller and drDrew, and all amendments thereto,
heretofore delivered to Buyer are accurate and complete as of the date hereof.

               4.2  Authorization.  Seller has all requisite corporate power and
                    -------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and thereby
and to perform its obligations hereunder and thereunder. The execution and
delivery of this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby and thereby have been duly approved by the
boards of directors and shareholders of Seller. No other corporate proceedings
on the part of Seller are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and is the legal, valid and binding obligations of Seller
enforceable against Seller in accordance with its terms.

               4.3  General Assignment. Each of drDrew and the Seller has all
                    ------------------
requisite corporate power and authority, and has taken all corporate action
necessary, to execute and deliver this General Assignment, to consummate the
transactions contemplated thereby and to perform their respective obligations
thereunder. The execution and delivery of the General

                                       11
<PAGE>

Assignment by drDrew and the consummation by drDrew of the transactions
contemplated thereby have been duly approved by the board of directors of and
stockholders of drDrew. The execution and delivery of the General Assignment by
the Seller and the consummation by the Seller of the transactions contemplated
thereby have been duly approved by the board of directors of the Seller. No
other corporate proceedings on the part of drDrew or the Seller are necessary to
authorize the General Assignment and the transactions contemplated thereby. The
General Assignment has been duly executed and delivered by drDrew and the Seller
and is the legal, valid and binding obligations of drDrew and the Seller
enforceable against each of them in accordance with its terms. The General
Assignment is valid, binding and enforceable in accordance with its terms.
Seller and drDrew have each fulfilled, or taken all action necessary to enable
each of them to fulfill when due, all of their respective obligations under the
General Assignment. Each of the Seller and drDrew has complied in all material
respects with the provisions of the General Assignment, no party is in Default
thereunder and no notice of any claim of Default has been given to Seller or
drDrew.

               4.4  Purchased Assets.
                    ----------------

               (a)  Seller has and will transfer good and marketable title to
the Purchased Assets and upon the consummation of the transactions contemplated
hereby, Buyer will acquire good and marketable title to all of the Purchased
Assets, free and clear of any Encumbrances, except for Permitted Encumbrances.
The Purchased Assets include, without limitation, all Assets necessary for the
conduct of the Business. All tangible assets and properties which are part of
the Purchased Assets are in good operating condition and repair and are usable
in the ordinary course of business and conform in all material respects to all
applicable Regulations (including Environmental Laws) relating to their
construction, use and operation.

               (b)  The Seller has retained Stratagem Partnering, a California
corporation with principal offices at One Sansome St., San Francisco, California
94104 ("Stratagem") to solicit offers from potential purchasers to purchase the
        ---------
Purchased Assets. News of the asset sale also appeared in local and national
publications, providing additional interested third parties an opportunity to
submit an offer. Stratagem, on behalf of the Seller or on behalf of drDrew.com,
has contacted 20 or more potential purchasers of the Purchased Assets and
solicited offers to purchase the Purchased Assets and the Business from such
entities. Stratagem has received and has presented to Seller, two written offers
to purchase the Purchased Assets, not including the offer submitted by Buyer.

               4.5  Consents and Approvals. Except as disclosed on Schedule 4.5,
                    ----------------------
no notice to, declaration, filing or registration with, or authorization,
consent or approval of, or permit from, any domestic or foreign governmental or
regulatory body or authority, or any other person or entity, is required to be
made or obtained by Seller in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.

               4.6  Contracts and Commitments.
                    -------------------------

                                       12
<PAGE>

          (a)    Contracts.  Schedule 4.6 sets forth a complete and accurate
                 ---------
list of all of the Contracts relating to drDrew or the operation of the
Business, including but not limited to the following categories:

          (i)    Contracts not made in the ordinary course of business;

          (ii)   Employment contracts and severance agreements, including
without limitation Contracts (A) to employ or terminate executive officers or
other personnel and other contracts with present or former officers, directors
or shareholders of drDrew or (B) that will result in the payment by, or the
creation of any Liability to pay on behalf of Buyer or Seller, as assignee, any
severance, termination, "golden parachute," or other similar payments to any
present or former personnel following termination of employment or otherwise as
a result of the consummation of the transactions contemplated by this Agreement;

          (iii)  All distribution, franchise, license, technical assistance,
sales, commission, consulting, agency or advertising contracts related to the
Purchased Assets or the Business;

          (iv)   Options with respect to any property, real or personal, whether
Seller shall be the grantor or grantee thereunder;

          (v)    All contracts involving future expenditures or Liabilities,
actual or potential, material to the Business or the Purchased Assets and not
cancelable (without Liability) within 30 calendar days;

          (vi)   Contracts or commitments relating to commission arrangements
with others;

          (vii)  All promissory notes, loans, agreements, indentures, evidences
of indebtedness, letters of credit, guarantees, or other instruments relating to
an obligation to pay money relating to the Business whether Seller shall be the
borrower, lender or guarantor thereunder or whereby any Purchased Assets are
pledged (excluding credit provided by Seller in the ordinary course of business
to purchasers of its products);

          (viii) Contracts, relating to the Business or the Purchased Assets,
containing covenants limiting the freedom of Seller or any officer, director,
shareholder or affiliate of Seller, to engage in any line of business or compete
with any person;

          (ix)   Any Contract with the United States, state or local government
or any agency or department thereof; and

          (x)    Seller has delivered to Buyer true, correct and complete copies
of all of the Contracts listed in Schedule 4.6, including all amendments and
supplements thereto.

          (b)    Absence of Defaults.  All of the Contracts set forth in
                 -------------------
Schedule 4.6 to which Seller is party or by which it or any of the Purchased
Assets is bound or affected are valid, binding and enforceable in accordance
with their terms. Seller has fulfilled, or taken all action necessary to enable
it to fulfill when due, all of its material obligations under each such
Contracts. All parties to such Contracts have complied in all material respects
with the

                                       13
<PAGE>

provisions thereof, no party is in Default thereunder and no notice of any claim
of Default has been given to Seller. Seller has no reason to believe that the
products and services called for by any unfinished Contract set forth in
Schedule 4.6 cannot be supplied in accordance with the terms of such Contract,
including time specifications, and have no reason to believe that any unfinished
Contract will upon performance by Seller result in a loss to Seller.

          4.7  Permits.
               --------

           (a) Schedule 4.7 sets forth a complete list of all Permits used in
the operation of the Business or otherwise held by Seller. Seller has, and at
all times has had, all Permits required under any Regulation in the operation of
the Business or in the ownership of the Purchased Assets, and owns or possesses
such Permits free and clear of all Encumbrances, except such Permits the failure
of which to obtain would not have a material adverse effect on the Purchased
Assets or the Business. Seller is not in Default, nor has it received any notice
of any claim of Default, with respect to any such Permit. Except as otherwise
governed by law, all such Permits are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees
and will not be adversely affected by the completion of the transactions
contemplated by this Agreement. No present or former shareholder, director,
officer or employee of Seller or any affiliate thereof, or any other person,
firm, corporation or other entity, owns or has any proprietary, financial or
other interest (direct or indirect) in any Permit which Seller owns, possesses
or uses.

           (b) Except as disclosed in Schedule 4.7 hereto, no notice to,
declaration, filing or registration with, or Permit from, any domestic or
foreign governmental or regulatory body or authority, or any other person or
entity, is required to be made or obtained by Seller in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.

          4.8  No Conflict or Violation.  Neither the execution, delivery or
               ------------------------
performance of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Seller with any of the provisions hereof,
will (a) violate or conflict with any provision of its Articles of Incorporation
or Bylaws, (b) violate, conflict with, or result in or constitute a Default
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result in the
creation of any Encumbrance upon any of the Purchased Assets under, any of the
terms, conditions or provisions of any Contract, Lease or Permit, (i) to which
Seller is a party or (ii) by which the Purchased Assets are bound, (c) violate
any Regulation or Court Order, (d) impose any Encumbrance on the Purchased
Assets or the Business, except in the case of each of clauses (a), (b), (c) and
(d) above, for such violations, Defaults, terminations, accelerations or
creations of Encumbrances which, in the aggregate would not have a material
adverse effect on the Purchased Assets, the Business or on the ability of Seller
to consummate the transactions contemplated hereby.

          4.9  Books and Records.  The minute books of drDrew and, as
               -----------------
applicable, Seller previously delivered to Buyer accurately and adequately
reflect all action previously taken by the stockholders, board of directors and
committees of the board of directors of drDrew and by the shareholders, board of
directors and committees of the board of directors of Seller after

                                       14
<PAGE>

the transfer of the Drew Assets pursuant to the General Assignment. The copies
of the stock book records of drDrew previously delivered to Buyer are true,
correct and complete, and accurately reflect all transactions effected in
drDrew's or Seller's stock, as the case may be, through and including the date
hereof.

          4.10      Litigation.  Except as set forth in Schedule 4.10, there are
                    ----------
no Actions pending, threatened or anticipated (a) against, related to or
affecting (i) Seller, drDrew, the Business or the Purchased Assets (including
with respect to Environmental Laws), (ii) any officers or directors of drDrew or
Seller as such, or (iii) any shareholder of drDrew or Seller in such
shareholder's capacity as a shareholder of Seller, (b) seeking to delay, limit
or enjoin the transactions contemplated by this Agreement (c) that involve the
risk of criminal liability, or (d) in which drDrew or Seller is a plaintiff,
including any derivative suits brought by or on behalf of drDrew or Seller.
drDrew or Seller is not in Default with respect to or subject to any Court
Order, and there are no unsatisfied judgments against Seller, drDrew, the
Business or the Purchased Assets. There is not a reasonable likelihood of an
adverse determination of any pending Actions.

          4.11      Liabilities.  Other than Excluded Liabilities, Seller has no
                    -----------
Liabilities due or to become due, except (a) Liabilities arising in the ordinary
course of business under Contracts, the Lease, Permits and other business
arrangements described in the Disclosure Schedule (and under those Contracts,
the Lease and Permits which are not required to be disclosed on the Disclosure
Schedule) and (b) Liabilities incurred in the ordinary course of business and in
accordance with this Agreement (none of which relates to any Default under any
Contract or Lease, breach of warranty, tort, infringement or violation of any
Regulation or Court Order or arose out of any Action) and none of which,
individually or in the aggregate, has or would have a material adverse effect on
the Business or the Purchased Assets.

          4.12      Compliance with Law.  Seller and the conduct of the Business
                    -------------------
have not violated and are in compliance with all Regulations and Court Orders
relating to the Purchased Assets or the Business or operations of Seller, except
where the violation or failure to comply, individually or in the aggregate,
would not have a material adverse effect on the Purchased Assets or the
Business. Seller has not received any notice to the effect that, or otherwise
been advised that, it is not in compliance with any such Regulations or Court
Orders, and Seller is not aware of any existing circumstances which are likely
to result in violations of any of the foregoing which failure or violation
could, in any one case or in the aggregate, have a material adverse effect on
the Purchased Assets of the Business.

          4.13      No Brokers.  Neither Seller nor any of its officers,
                    ----------
directors, employees, shareholders or affiliates has employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of Buyer or any of its affiliates to pay any
finder's fee, brokerage fees or commission or similar payment in connection with
the transactions contemplated hereby.

          4.14      No Other Agreements to Sell the Purchased Assets.  Neither
                    ------------------------------------------------
Seller nor any of its officers, directors, shareholders or affiliates has any
commitment or legal obligation, absolute or contingent, to any other person or
firm other than the Buyer to sell, assign, transfer or effect a sale of any of
the Purchased Assets, to sell or effect a sale of a majority of the capital

                                       15
<PAGE>

stock of Seller, to effect any merger, consolidation, liquidation, dissolution
or other reorganization of Seller, or to enter into any agreement or cause the
entering into of an agreement with respect to any of the foregoing.

          4.15      Proprietary Rights.
                    ------------------

            (a)     Proprietary Rights.  Schedule 4.15 lists all of Seller's
                    ------------------
Proprietary Rights in the Business and the Purchased Assets. The Proprietary
Rights listed in the Disclosure Schedule are all those used in connection with
the Business. There are no Patents (including any and all pending applications)
owned, controlled, created or used by or on behalf of Seller or in which Seller
has any interest whatsoever.

            (b)     Royalties and Licenses.  Seller does not have any obligation
                    ----------------------
to compensate any person for the use of any such Proprietary Rights nor has
Seller granted to any person any license, option or other rights to use in any
manner any of its Proprietary Rights, whether requiring the payment of royalties
or not .

            (c)     Ownership and Protection of Proprietary Rights. Seller owns
                    ----------------------------------------------
or has a valid right to use each of the Proprietary Rights. All of the pending
Patent applications have been duly filed. Seller has not received any notice of
invalidity or infringement of any rights of others with respect to such
Trademarks. No other person (i) has the right to use any of Seller's Trademarks
on the goods on which they are now being used either in identical form or in
such near resemblance thereto as to be likely, when applied to the goods of any
such person, to cause confusion with such Trademarks or to cause a mistake or to
deceive, (ii) has notified Seller that it is claiming any ownership of or right
to use such Proprietary Rights, or (iii) to the best of Seller's knowledge, is
infringing upon any such Proprietary Rights in any way. Seller's use of the
Proprietary Rights does not and will not conflict with, infringe upon or
otherwise violate the valid rights of any third party in or to such Proprietary
Rights, and no Action has been instituted against or notices received by Seller
that are presently outstanding alleging that Seller's use of the Proprietary
Rights infringes upon or otherwise violates any rights of a third party in or to
such Proprietary Rights. There are not, and it is reasonably expected that after
the Closing there will not be, any restrictions on Seller's, or Buyer's, as the
case may be, right to sell products or services of Seller or Buyer, as the case
may be, in connection with the Business.

          4.16      Transactions with Certain Persons.  No officer, director or
                    ---------------------------------
employee of Seller nor any member of any such person's immediate family is
presently, or within two (2) years has been, a party to any transaction with
Seller relating to the Business, including without limitation, any contract,
agreement or other arrangement (a) providing for the furnishing of services by,
(b) providing for the rental of real or personal property from, or (c) otherwise
requiring payments to (other than for services as officers, directors or
employees of Seller) any such person or corporation, partnership, trust or other
entity in which any such person has an interest as a shareholder, officer,
director, trustee or partner.

          4.17      Tax Returns and Payments.  Seller or drDrew, as applicable,
                    ------------------------
has timely filed, or has had timely filed on its behalf, all material Tax
Returns that it was required to file. Such Tax Returns were compete and correct
in all material respects. Seller or drDrew, as applicable, has timely paid, or
has had timely paid on its behalf, all Taxes in respect of the Pre-

                                       16
<PAGE>

Closing Period. All Taxes that Seller or drDrew has been required to collect or
withhold have been duly collected or withheld and, to the extent required when
due, have been or will be duly paid to the proper Tax authority. Seller or
drDrew has not requested any extension of time within which to file any material
Tax Returns that have not been filed. There are no liens for Taxes (other than
for current Taxes not yet due and payable) on any of the Purchased Assets. None
of the Purchased Assets, directly or indirectly, secures any debt the interest
on which is tax-exempt under Section 103(a) of the Code. None of the Purchased
Assets is required to be treated as being owned by any other person pursuant to
the so-called safe harbor lease provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the TRA of
1986. None of the Purchased Assets is "tax exempt bond financed property" or
"tax exempt use property" within the meaning of Section 168 of the Code.

          4.18      [Intentionally omitted]

          4.19      Service Commitments and Outstanding Bids. As of the date of
                    ----------------------------------------
this Agreement, the aggregate of all accepted and unfulfilled orders for
services entered into by drDrew is at least $81,667, all of which orders and
commitments were made in the ordinary course of business. As of the date of this
Agreement, there are no claims against Seller to refund any customer funds by
reason of alleged defective or poor service, or of merchandise in the hands of
customers under an understanding that such merchandise would be returnable. No
outstanding purchase or outstanding lease commitment of Seller presently is in
excess of the normal, ordinary and usual requirements of the Business or was
made at any price in excess of the now current market price or contains terms
and conditions more onerous than those usual and customary in the Business.
There is no outstanding bid, proposal, Contract or unfilled order which relates
to the Purchased Assets which will or would, if accepted, have a material
adverse effect, individually or in the aggregate, on the Business or the
Purchased Asset.

          4.20      Environmental and Safety Laws. Neither Seller nor drDrew is
                    -----------------------------
in violation of any applicable statue, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. No Hazardous Materials (as defined below) are used
or have been used, stored, or disposed of by the Seller or drDrew or, to
Seller's knowledge after reasonable investigation, by any other person or entity
or any property owned, leased or used by Seller. For the purposed of the
preceding sentence, "Hazardous Materials" shall mean (a) materials which are
listed or otherwise defined as "hazardous" or "toxic" under any applicable
local, state, federal and/or foreign laws and regulations that govern the
existence and/or remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials or (b)
petroleum products or nuclear materials.

          4.21      Material Misstatements Or Omissions. No representations or
                    -----------------------------------
warranties by Seller in this Agreement, nor any document, exhibit, statement,
certificate or schedule heretofore or hereinafter furnished to Buyer pursuant
hereto, or in connection with the transactions contemplated hereby, including
without limitation the Disclosure Schedule, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary to make the statements or facts contained therein not misleading.
Seller has

                                       17
<PAGE>

disclosed all events, conditions and facts materially affecting the Business,
prospects and financial condition of Seller.

                                  ARTICLE V.
                    REPRESENTATIONS AND WARRANTIES OF BUYER
                    ---------------------------------------

          Buyer hereby represents and warrants to Seller as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct, to:

          5.1       Organization of Buyer.  Buyer is a corporation duly
                    ---------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.

          5.2       Authorization.  Buyer has all requisite corporate power and
                    -------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and thereby
and to perform its obligations hereunder and thereunder. The execution and
delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby and thereby have been duly approved by the
board of directors of Buyer and the shareholders of Buyer. No other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and is the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with its terms.

          5.3       No Conflict or Violation. Neither the execution, delivery or
                    ------------------------
performance of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions hereof,
will (a) violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Buyer, (b) violate, conflict with, or result in or
constitute a Default under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Encumbrance upon any of Buyer's assets
under, any of the terms, conditions or provisions of any contract, indebtedness,
note, bond, indenture, security or pledge agreement, commitment, license, lease,
franchise, permit, agreement, authorization, concession, or other instrument or
obligation to which Buyer is a party, (c) violate any Regulation or Court Order,
except, in the case of each of clauses (a), (b) and (c) above, for such
violations, Defaults, terminations, accelerations or creations of Encumbrances
which, in the aggregate, would not have a material adverse effect on the
business of Buyer or its ability to consummate the transactions contemplated
hereby.

          5.4       Consents and Approvals. No notice to, declaration, filing or
                    ----------------------
registration with, or authorization, consent or approval of, or permit from, any
domestic or foreign governmental or regulatory body or authority, or any other
person or entity, is required to be made or obtained by Buyer in connection with
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby.

          5.5       No Brokers. Neither Buyer nor any of its officers,
                    ----------
directors, employees, shareholders or affiliates has employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in the obligation of Seller or any of its affiliates to

                                       18
<PAGE>

pay any finder's fee, brokerage fees or commission or similar payment in
connection with the transactions contemplated hereby.

                                  ARTICLE VI.
                         COVENANTS OF SELLER AND BUYER
                         -----------------------------

          Seller and Buyer each covenant with the other as follows:

          6.1       Further Assurances.  From time to time, as and when
                    ------------------
requested by any party hereto, the other party shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and shall
take, or cause to be taken, all such further or other actions as such requesting
party may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.

          6.2       Press Releases and Public Announcements.
                    ---------------------------------------

          (a)       Neither party shall issue any press release or make any
disclosure or public announcement relating to the terms of this Agreement or
relating to the other party without the prior written approval of such party,
which shall not be unreasonably withheld. Notwithstanding the foregoing, either
party may disclose certain information relating to this Agreement if required to
do so by law or applicable governmental regulation.

          (b)       Within thirty (30) calendar days of the Closing Date, Seller
and Buyer shall issue a mutually agreeable joint press release regarding the
sale of the Business by Seller to Buyer.

          6.3       Transition Assistance. In order to facilitate the successful
                    ---------------------
transition of the Purchased Assets from Buyer to Seller, Seller agrees to make
available to Buyer one former drDrew technical employee, Khanh Nguyen, former
chief technology officer of drDrew, who will assist with the transfer and
operation of the drDrew.com website, and two former drDrew employees, Curtis
Giesen, former chief executive officer of drDrew, and Sara Buffington, a former
marketing manager of drDrew, who will assist with the closing of the Business,
with the understanding that Buyer will compensate such individuals for providing
such assistance, the amount of such compensation to be negotiated between Buyer
and each individual.

          6.4       Technology Leases. Seller agrees that from the Closing Date
                    -----------------
until November 30, 2000 it shall, or it shall cause drDrew.com to, pay any and
all amounts that become due under, and shall at all times remain in compliance
with the material terms of, the following technology leases:

          (a)       Cisco Systems Capital Corporation Lease # 72100003AA dated
     8/23/99 (monthly payment: $3,175);

          (b)       Cisco Systems Capital Corporation Lease # 72200753AA dated
     2/11/00 (monthly payment: $20,890);

          (c)       Leasing Technologies International dated 11/29/99 (monthly
     payment: $4,886);

                                       19
<PAGE>

          (d)       Sun Microsystems Finance Lease # 64600253 dated 3/23/00
     (monthly payment: $2,892);

          (e)       Sun Microsystems Finance Lease # 64309083 dated 3/23/00
     (monthly payment: $11,536);

          (f)       InterNAP Network Services Corporation dated 1/20/00 (monthly
     payment: $10,000); and

          (g)       NEXTLINK Communications, Inc. dated 3/2/2000 (monthly
     payment: $8,000)

(the "Technology Leases").  Seller agrees to provide Buyer the right to use the
      -----------------
property leased pursuant to the Technology Leases from the Closing Date until
November 30, 2000, in connection with the operation of the Business.  Seller
expressly agrees to retain all liabilities under the Technology Leases.  Buyer
agrees to pay $61,379 in cash to Seller on the Closing Date in consideration of
the covenants of Buyer set forth herein and Seller agrees to pay to each lessor
under each of the Technology Leases on or prior to November 30, 2000, the
respective monthly payments listed in clauses (a) through (g) above next to each
such Technology Lease.

                                 ARTICLE VII.
                      CONDITIONS TO SELLER'S OBLIGATIONS
                      ----------------------------------

          The obligations of Seller to consummate the transactions provided for
hereby are subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Seller:

          7.1       Representations, Warranties and Covenants.  All
                    -----------------------------------------
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date, except as and to the extent that
the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms hereof, and
Buyer shall have performed and satisfied in all material respects all agreements
and covenants required hereby to be performed by it prior to or on the Closing
Date.

          7.2       Consents; Regulatory Compliance and Approval.  All consents,
                    --------------------------------------------
approvals and waivers from governmental authorities and other parties necessary
to permit Seller to transfer the Purchased Assets to Buyer as contemplated
hereby shall have been obtained, unless (a) the failure to obtain any such
consent, approval or waiver would not have a material adverse effect upon
Seller, (b) Seller indemnifies Buyer with respect thereto or (c) with respect to
any Asset, Buyer determines that such Asset shall be excluded from the transfers
consummated at the Closing (in which case the consideration to be paid by Buyer
shall be reduced by the amount allocated to such Purchased Asset. Seller shall
be satisfied that all approvals required under any Regulations to carry out the
transactions contemplated by this Agreement shall have been obtained and that
the parties shall have complied with all Regulations applicable to the
Acquisition.

                                       20
<PAGE>

          7.3       Certificates.  Buyer shall furnish Seller with such
                    ------------
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Seller.

          7.4       Corporate Documents.  Seller shall have received from Buyer
                    -------------------
resolutions adopted by the board of directors of Buyer approving this Agreement
and the transactions contemplated hereby or thereby, certified by Buyer's
corporate secretary.

                                 ARTICLE VIII.
                       CONDITIONS TO BUYER'S OBLIGATIONS
                       ---------------------------------

          The obligations of Buyer to consummate the transactions provided for
hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions, any of which may be
waived by Buyer:

          8.1       Representations, Warranties and Covenants.  All
                    -----------------------------------------
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date, except as and to the extent that
the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms hereof, and
Seller shall have performed and satisfied in all material respects all
agreements and covenants required hereby to be performed by it prior to or on
the Closing Date.

          8.2       Consents; Regulatory Compliance and Approval.  All Permits,
                    --------------------------------------------
consents, approvals and waivers from governmental authorities and other parties
necessary to the consummation of the transactions contemplated hereby and for
the operation of the Business by Buyer (including, without limitation, all
required third party consents to the assignment of the Lease and Contracts to be
assumed by Buyer) shall have been obtained. Buyer shall be satisfied that all
approvals required under any Regulations to carry out the transactions
contemplated by this Agreement shall have been obtained and that the parties
shall have complied with all Regulations applicable to the Acquisition.

          8.3       Certificates.  Seller shall furnish Buyer with such
                    ------------
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VIII as may be reasonably requested by
Buyer.

          8.4       Corporate Documents.  Buyer shall have received from Seller
                    -------------------
resolutions adopted by its board of directors approving this Agreement and the
transactions contemplated hereby and thereby, certified by Seller's corporate
secretary.

          8.5       Conveyancing Documents; Release of Encumbrances.  Seller
                    -----------------------------------------------
shall have executed and delivered each of the documents described in Section 3.2
hereof so as to effect the transfer and assignment to Buyer of all right, title
and interest in and to the Purchased Assets and Seller shall have filed (where
necessary) and delivered to Buyer all documents necessary to release the
Purchased Assets from all Encumbrances, which documents shall be in a form
reasonably satisfactory to Buyer's counsel.

                                       21
<PAGE>

          8.6       Permits. Buyer shall have obtained or been granted the right
                    -------
to use all Permits necessary to its operation of the Business.

          8.7       Tax Clearance Certificate. Seller shall provide Buyer with a
                    -------------------------
clearance certificate or similar document(s) that may be required by any state
taxing authority in order to relieve Buyer of any obligation to withhold any
portion of the Purchase Price.

                                  ARTICLE IX.
                            CONSENTS TO ASSIGNMENT
                            ----------------------

          9.1       Consents to Assignment.  Anything in this Agreement to the
                    ----------------------
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any Contract, Lease, Permit or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a Default thereof or in
any way adversely affect the rights of Buyer thereunder. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
Seller will cooperate with Buyer, in all reasonable respects, to provide to
Buyer the benefits under any such Contract, Lease, Permit or any claim or right,
including without limitation enforcement for the benefit of Buyer of any and all
rights of Seller against a third party thereto arising out of the Default or
cancellation by such third party or otherwise. Nothing in this Section 9.1 shall
affect Buyer's right to terminate this Agreement under Section 8.2 in the event
that any consent or approval to the transfer of any Purchased Asset is not
obtained.

                                  ARTICLE X.
                          ACTIONS BY SELLER AND BUYER
                          ---------------------------
                               AFTER THE CLOSING
                               -----------------

          10.1      Books and Records; Tax Matters.
                    ------------------------------

          (a)       Books and Records.  Buyer and Seller agree to furnish or
                    -----------------
cause to be furnished to the other, upon request, as promptly as practicable,
such information and assistance relating to the Purchased Assets, including,
without limitation, access to Books and Records, as is reasonably necessary for
the filing of all Tax Returns by Seller or Buyer, the making of any election
relating to Taxes, the preparation for any audit by any taxing authority, and
the prosecution or defense of any claim, suit or proceeding relating to any Tax.
Each of Buyer and Seller shall retain all Books and Records with respect to
Taxes pertaining to the Purchased Assets for a period of at least six (6) years
following the Closing Date. At the end of such period, each party shall provide
the other with at least ten (10) days prior written notice before destroying any
such Books and Records, during which period the party receiving such notice can
elect to take possession, at its own expense, of such Books and Records, Buyer
and Seller shall cooperate with each other in the conduct of any audit or other
proceeding relating to Taxes involving the Purchased Assets.

          (b)       Cooperation and Records Retention.  Seller shall be
                    ---------------------------------
responsible for and shall promptly pay when due all Taxes levied with respect to
the Purchased Assets attributable to the Pre-Closing Period. All Taxes levied
with respect to the Purchased Assets for a taxable

                                       22
<PAGE>

period which includes (but does not end on) the Closing Date (collectively, the
"Apportioned Obligations") shall be apportioned between Seller and Buyer based
on the number of days of such taxable period included in the Pre-Closing Tax
Period and the number of days of such taxable period after the Closing Date
(with respect to any such taxable period, the "Posting-Closing Tax Period").
Seller shall be liable for the proportionate amount of such Taxes attributable
to the Purchased Assets that is attributable to the Pre-Closing Tax Period, and
Buyer shall be liable for the proportionate amount of such Taxes that is
attributable to the Post-Closing Tax Period. Upon receipt of any bill for such
Taxes relating to the Purchased Assets, Seller and Buyer shall present a
statement to the other setting forth the amount of reimbursement to which each
is entitled under this Section 10.2 together with such supporting evidence as is
reasonably necessary to calculate the proration amount. The proration amount
shall be paid by the party owing it to the other within ten (10) days after
delivery of such statement. In the event that Seller or Buyer shall make any
payment for which it is entitled to reimbursement under this Section 10.2, the
applicable party shall make such reimbursement promptly but in no event later
than ten (10) days after the presentation of a statement setting forth amount of
reimbursement to which the presenting party is entitled along with such
supporting evidence as is reasonably necessary to calculate the amount of
reimbursement.

          (c)       Preparation of Form W-2's. Pursuant to Revenue Procedure 84-
                    -------------------------
77 (1984-2 C.B. 753), provided that Seller provides Buyer with all necessary
payroll records for the calendar year which includes the Closing Date, Buyer
shall furnish a Form W-2 to each employee employed by Buyer who had been
employed by Seller disclosing all wages and other compensation paid for such
calendar year, and taxes withheld therefrom, and Seller shall be relieved of the
responsibility to do so.

          (d)       Payment of Liabilities.  Following the Closing Date, Seller
shall pay promptly when due all of the debts and Liabilities of Seller,
including any Liability for Taxes, other than Assumed Liabilities; provided,
                                                                   --------
however, this covenant shall not apply to that portion (or all) of any debt that
-------
Seller is contesting in good faith.

          10.2      Survival of Representations, Etc.  All of the
                    --------------------------------
representations, warranties, covenants and agreements made by each party in this
Agreement or in any attachment, Exhibit, the Disclosure Schedule, certificate,
document or list delivered by any such party pursuant hereto shall survive the
Closing for a period of (and claims based upon or arising out of such
representations, warranties, covenants and agreements may be asserted at any
time before the date which shall be) one hundred twenty days following the
Closing. Each party hereto shall be entitled to rely upon the representations
and warranties of the other party set forth in this Agreement. The termination
of the representations and warranties provided herein shall not affect the
rights of a party in respect of any Claim made by such party in a writing
received by the other party prior to the expiration of the applicable survival
period provided herein.

          10.3      Indemnifications.
                    ----------------

          (a)       By Seller.  Seller shall indemnify, save and hold harmless
                    ---------
Buyer, its affiliates and subsidiaries, and its Representatives, from and
against any and all costs, losses (including without limitation diminution in
value), Taxes, Liabilities, obligations, damages, lawsuits, deficiencies,
claims, demands, and expenses (whether or not arising out of third-party

                                       23
<PAGE>

claims), including without limitation interest, penalties, costs of mitigation,
losses in connection with any Environmental Law (including without limitation
any clean-up or remedial action), lost profits and other losses resulting from
any shutdown or curtailment of operations, damages to the environment,
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing (herein, "Damages"), incurred in connection with, arising
                               -------
out of, resulting from or incident to (i) any breach of any representation or
warranty or the inaccuracy of any representation, made by Seller in or pursuant
to this Agreement; (ii) any breach of any covenant or agreement made by Seller
in or pursuant to this Agreement; (iii) any Excluded Liability or (iv) any
Liability imposed upon Buyer by reason of Buyer's status as transferee of the
Business or the Purchased Assets.

          The term "Damages" as used in this Section 10.3 is not limited to
matters asserted by third parties against Seller or Buyer, but includes Damages
incurred or sustained by Seller or Buyer in the absence of third party claims.
Payments by Buyer of amounts for which Buyer is indemnified hereunder, and
payments by Seller of amounts for which Seller is indemnified, shall not be a
condition precedent to recovery.  Seller's obligation to indemnify Buyer, and
Buyer's obligation to indemnify Seller, shall not limit any other rights,
including without limitation rights of contribution which either party may have
under statute or common law.

          (b)       By Buyer.  Buyer shall indemnify and save and hold harmless
                    --------
Seller, its affiliates and subsidiaries, and its Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty
or the inaccuracy of any representation, made by Buyer in or pursuant to this
Agreement; (ii) any breach of any covenant or agreement made by Buyer in or
pursuant to this Agreement; or (iii) from and after the Closing, any Assumed
Liability.

          (c)       Cooperation.  The indemnified party shall cooperate in all
                    -----------
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
                   --------  -------
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.

          (d)       Defense of Claims.  If a claim for Damages (a "Claim") is to
                    -----------------                              -----
be made by a party entitled to indemnification hereunder against the
indemnifying party, the party claiming such indemnification shall, subject to
Section 10.2, give written notice (a "Claim Notice") to the indemnifying party
                                      ------------
as soon as practicable after the party entitled to indemnification becomes aware
of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.3. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects at its own cost, risk

                                       24
<PAGE>

and expense, (i) to take control of the defense and investigation of such
lawsuit or action, (ii) to employ and engage attorneys of its own choice to
handle and defend the same unless the named parties to such action or proceeding
include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such indemnified party that are different
from or additional to those available to the indemnifying party, in which event
the indemnified party shall be entitled, at the indemnifying party's cost, risk
and expense, to separate counsel of its own choosing, and (iii) to compromise or
settle such claim, which compromise or settlement shall be made only with the
written consent of the indemnified party, such consent not to be unreasonably
withheld. If the indemnifying party fails to assume the defense of such claim
within fifteen (15) calendar days after receipt of the Claim Notice, the
indemnified party against which such claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the defense, compromise
or settlement of such claim on behalf of and for the account and risk of the
indemnifying party; provided, however, that such Claim shall not be compromised
                    --------  -------
or settled without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld. In the event the indemnified party assumes
the defense of the claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
action effected pursuant to and in accordance with this Section 10.3 and for any
final judgment (subject to any right of appeal), and the indemnifying party
agrees to indemnify and hold harmless an indemnified party from and against any
Damages by reason of such settlement or judgment.

          (e)       Buyer's Right of Offset.  Anything in this Agreement to the
                    -----------------------
contrary notwithstanding, Buyer may withhold and set off against any other
amounts otherwise due Seller any amount as to which Seller is obligated to
indemnify Buyer pursuant to any provision of this Section 10.3.

          (f)       Limitations.
                    -----------

          (i)       Notwithstanding anything to the contrary herein, the maximum
amount of Damages for which Buyer shall be liable under this Agreement shall be
limited to One Million Four Hundred Twenty Two Thousand Nine Hundred Dollars
($1,422,900) (the "Buyer Indemnification Cap").
                   -------------------------

          (ii)      Notwithstanding anything to the contrary herein, the maximum
amount of Damages for which Seller shall be liable under this Agreement shall be
limited to the cash value of the Escrow Fund. For purposes of this Section
10.3(f), the per share value of the Stock Consideration comprising the Escrow
Fund shall be $.90 per share.

          (g)       Representatives.  No individual Representative of any party
                    ---------------
shall be personally liable for any Damages under the provisions contained in
this Section 10.3. Nothing herein shall relieve either party of any Liability to
make any payment expressly required to be made by such party pursuant to this
Agreement.

          10.4      Holdback; Remedies Generally.  Absent a showing of fraud,
                    ----------------------------
the terms and conditions contained in this Article X shall apply to and be the
sole remedy for any claim for

                                       25
<PAGE>

money Damages available to Buyer or Seller for breach of any of representations,
warranties, covenants and agreements contained herein and Buyer and Seller shall
have no recourse against Seller or its Representatives or Buyer or its
Representatives, respectively, for any Claim for money damages, except to the
Escrow Fund, in the case of Claims brought by Buyer, or in the amount of the
Buyer Indemnification Cap, in the case of Claims brought by Seller; provided,
                                                                    --------
however, that nothing herein shall preclude a party from exercising its rights
-------
under this Agreement and applicable law to such equitable remedies, including
without limitation, specific performance and injunctions. Except as specifically
limited in accordance with the immediately preceding sentence, the remedies
provided to an indemnified Party herein shall be cumulative and shall not
preclude an indemnified Party from asserting any other rights or seeking any
other remedies against an indemnitor or his, her or its respective heirs,
successors and assigns.

          10.5      Taxes.  Seller shall pay, or cause to be paid, when due all
                    -----
Taxes for which Seller is or may be liable or that are or may become payable
with respect to all taxable periods ending on or prior to the Closing Date.

                                  ARTICLE XI.
                                 MISCELLANEOUS
                                 -------------

          11.1      Assignment.  Neither this Agreement nor any of the rights or
                    ----------
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Buyer may, without such consent,
assign all such rights to any lender as collateral security and assign all such
rights and obligations to a wholly-owned subsidiary (or a partnership controlled
by Buyer) or subsidiaries of Buyer or to a successor in interest to Buyer which
shall assume all obligations and Liabilities of Buyer under this Agreement.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, and no other person shall have any right, benefit or obligation under
this Agreement as a third party beneficiary or otherwise.

          11.2      Notices.  All notices, requests, demands and other
                    -------
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
                                                                         ----
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:

          If to Seller:

                 Sherwood Partners, Inc.
                 1849 Sawtelle Blvd., Suite 543
                 Los Angeles, CA  90025-7011
                 Telephone:  (310) 477-8990
                 Facsimile:  (310) 477-8402
                 Attention:  Martin Pichinson

                                       26
<PAGE>

          With a copy to:

                 Sulmeyer, Kupetz, Baumann & Rothman
                 300 S. Grand Avenue, 14th Floor
                 Los Angeles, CA 90071
                 Telephone:  (213) 626-2311
                 Facsimile:  (213) 629-4520
                 Attention:  David Kupetz, Esq.

          If to Buyer, addressed to:

                 drkoop.com, Inc.
                 7000 North Mopac, Suite 400
                 Austin, TX  78731
                 Telephone:  (512) 583-5667
                 Facsimile:  (512) 583-5727
                 Attention: Edward Cespedes

          With a copy to:

                 Latham & Watkins
                 633 W. Fifth St., Suite 4000
                 Los Angeles, CA  90071
                 Telephone:  (213) 485-1234
                 Facsimile:  (213) 891-8763
                 Attention: W. Alex Voxman, Esq.

or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.

          11.3      Choice of Law.  This Agreement shall be construed,
                    -------------
interpreted and the rights of the parties determined in accordance with the laws
of the State of California (without reference to the choice of law provisions of
California law).

          11.4      Entire Agreement; Amendments and Waivers.  This Agreement,
                    ----------------------------------------
together with all exhibits and schedules hereto and thereto (including the
Disclosure Schedule), constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.

          11.5      Multiple Counterparts.  This Agreement may be executed in
                    ---------------------
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

                                       27
<PAGE>

          11.6      Expenses.  Except as otherwise specified in this Agreement,
                    --------
each party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.

          11.7      Invalidity.  In the event that any one or more of the
                    ----------
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.

          11.8      Titles; Gender.  The titles, captions or headings of the
                    --------------
Articles and Sections herein, and the use of a particular gender, are for
convenience of reference only and are not intended to be a part of or to affect
or restrict the meaning or interpretation of this Agreement.

          11.9      Confidential Information.
                    ------------------------

          (a)       No Disclosure.  The parties acknowledge that the transaction
                    -------------
described herein is of a confidential nature and shall not be disclosed except
to consultants, advisors and affiliates, or as required by law, until such time
as the parties make a public announcement regarding the transaction as provided
in Section 6.2.

          (b)       Preservation of Confidentiality.  In connection with the
                    -------------------------------
negotiation of this Agreement, the preparation for the consummation of the
transactions contemplated hereby, and the performance of obligations hereunder,
Buyer acknowledges that it will have access to confidential information relating
to Seller, including technical, manufacturing or marketing information, ideas,
methods, developments, inventions, improvements, business plans, trade secrets,
scientific or statistical data, diagrams, drawings, specifications or other
proprietary information relating thereto, together with all analyses,
compilations, studies or other documents, records or data prepared by Seller or
Buyer or their respective Representatives which contain or otherwise reflect or
are generated from such information ("Confidential Information"). The term
"Confidential Information" does not include information received by Buyer in
connection with the transactions contemplated hereby which (i) is or becomes
generally available to the public other than as a result of a disclosure by
Buyer or its Representatives, (ii) was within Buyer's possession prior to its
being furnished to Buyer by or on behalf of Seller in connection with the
transactions contemplated hereby, provided that the source of such information
was not known by Buyer to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to Seller or any
other Person with respect to such information or (iii) becomes available to
Buyer on a non-confidential basis from a source other than Seller or any of
their respective Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to Seller or any other Person with respect to such
information.

          (c)       Buyer shall treat all Confidential Information as
confidential, preserve the confidentiality thereof and not disclose any
Confidential Information, except to its Representatives and Affiliates who need
to know such Confidential Information in connection

                                       28
<PAGE>

with the transactions contemplated hereby. Buyer shall use all reasonable
efforts to cause its Representatives to treat all Confidential Information as
confidential, preserve the confidentiality thereof and not disclose any
Confidential Information. Buyer shall be responsible for any breach of this
Agreement by any of its Representatives. If, however, Confidential Information
is disclosed, Buyer shall immediately notify Seller in writing and take all
reasonable steps required to prevent further disclosure.

          (d)       Until the Closing or the termination of this Agreement, all
Confidential Information shall remain the property of the party who originally
possessed such information. In the event of the termination of this Agreement
for any reason whatsoever, Buyer shall, and shall cause its Representatives to,
return to Seller all Confidential Information (including all copies, summaries
and extracts thereof) furnished to Buyer by Seller in connection with the
transactions contemplated hereby.

          (e)       If Buyer or any of its Representatives or Affiliates is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) or is required by operation of law to disclose
any Confidential Information, Buyer shall provide Seller with prompt written
notice of such request or requirement, which notice shall, if practicable, be at
least 48 hours prior to making such disclosure, so that Seller may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. If, in the absence of a protective order or other
remedy or the receipt of such a waiver, Buyer or any of its Representatives are
nonetheless, in the opinion of counsel, legally compelled to disclose
Confidential Information, then Buyer may disclose that portion of the
Confidential Information which such counsel advises is legally required to be
disclosed, provided that Buyer uses its reasonable efforts to preserve the
           --------
confidentiality of the Confidential Information, whereupon such disclosure shall
not constitute a breach of this Agreement.

          11.10     Cumulative Remedies.  All rights and remedies of either
                    -------------------
party hereto are cumulative of each other and of every other right or remedy
such party may otherwise have at law or in equity, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.

          11.11     Service of Process, Consent to Jurisdiction.
                    -------------------------------------------

          (a)       Service of Process.  Each parties hereto irrevocably
                    ------------------
consents to the service of any process, pleading, notices or other papers by the
mailing of copies thereof by registered, certified or first class mail, postage
prepaid, to such party at such party's address set forth herein, or by any other
method provided or permitted under California law.

          (b)       Consent and Jurisdiction.  Each party hereto irrevocably and
                    ------------------------
unconditionally (1) agrees that any suit, action or other legal proceeding
arising out of this Agreement may be brought in the United States District Court
for the Central District of California or, if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in the County of Los Angeles, California; (2) consents to the
jurisdiction or any such court in any such suit, action or proceeding; and (3)
waives any objection which such

                                       29
<PAGE>

Shareholder may have to the laying of venue of any such suit, action or
proceeding in any such court.

          11.12     Attorneys' Fees.  If any party to this Agreement brings an
                    ---------------
action to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.

          11.13     Knowledge.  Whenever a phrase herein is qualified by "to the
                    ---------
best of Seller's knowledge," or a similar phrase, such phrase indicates that
such persons have no current actual knowledge of the accuracy of such statement.

                           (Signature Page Follows)

                                       30
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.

SELLER                                  BUYER

By /s/ Martin Pichinson                 By /s/ Richard Rosenblatt
  ---------------------------             ---------------------------

Name:________________________           Name:________________________

Its__________________________           Its__________________________

                                      S-1
<PAGE>

                                   EXHIBIT A

                                 BILL OF SALE
                                 ------------

          For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Sherwood Partners, Inc., a California corporation
("Seller"), does hereby grant, bargain, transfer, sell, assign, convey and
deliver to drkoop.com, Inc., a Delaware corporation ("Buyer"), all right, title
and interest in and to the Purchased Assets as such terms are defined in the
Asset Purchase Agreement dated as of November 1, 2000, by and between Seller and
Buyer (the "Agreement"). Buyer hereby acknowledges that Seller is making no
representation or warranty with respect to the assets being conveyed hereby
except as specifically set forth in the Agreement. Seller for itself, its
successors and assigns hereby covenants and agrees that, at any time and from
time to time forthwith upon the written request of Buyer, Seller will do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered, each and all of such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may reasonably be required by
Buyer in order to assign, transfer, set over, convey, assure and confirm unto
and vest in Buyer, its successors and assigns, title to the assets sold,
conveyed, transferred and delivered by this Bill of Sale.

          This Bill of Sale is being executed and delivered by Seller as of the
Closing Date pursuant to the terms of the Agreement. Executed at
________________________________, this ______ day of ___________, _______.

                                    _____________________________

                                    By __________________________

                                    Its___________________________

STATE OF ______________________ )
                                ) ss.
COUNTY OF _____________________ )

On _____________________, before me, __________________, personally appeared
_____________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

                      WITNESS my hand and official seal.

                   _________________________________  [SEAL]
                         Notary Public in and for said
                           County and State

                                      A-1
<PAGE>

                                   EXHIBIT B

                         ASSIGNMENT OF CONTRACT RIGHTS
                         -----------------------------

          For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Sherwood Partners, Inc., a California corporation
("Seller"), does hereby assign, grant, bargain, sell, convey and transfer to
drkoop.com, Inc., a Delaware corporation, all of Seller's right, title and
interest in and to the following contracts which drDrew.com assigned to it
pursuant to the General Assignment:

          (a)  that certain contract dated April 1, 2000, between iTurf, Inc.,
               and Seller, together with all amendments and clarifications
               attached thereto (the "Contract") entitled "Web Content Mutual
               License Agreement."

          (b)  that certain contract dated January 24, 2000, between Yahoo,
               Inc., and Seller, together with all amendments and clarifications
               attached thereto (the "Contract") entitled "Yahoo! Inc. Content
               License Agreement."

          (c)  that certain contract dated June 19, 2000, between RealNetworks,
               Inc., and Seller, together with all amendments and clarifications
               attached thereto (the "Contract") entitled "RealNetworks, Inc. TS
               Show Agreement."

          (d)  that certain letter agreement dated August 8, 2000, between
               Uzone/28th Street Publishing, and Seller, together with all
               amendments and clarifications attached thereto (the "Contract").

          (e)  that certain contract dated May 1, 2000, between College
               Broadcast, Inc., and Seller, together with all amendments and
               clarifications attached thereto (the "Contract") entitled
               "Sitelink Agreement."

          (f)  that certain letter agreement executed as of January 26, 2000,
               between Planned Parenthood Federation of America, and Seller,
               together with all amendments and clarifications attached thereto
               (the "Contract").

          (g)  that certain undated license agreement between Oracle, and
               Seller, together with all amendments and clarifications attached
               thereto (the "Contract") entitled "Oracle License Terms."

          (h)  that certain insertion order dated September 7, 2000, between
               ONDCP, and Seller, together with all amendments and
               clarifications attached thereto (the "Contract").

          (i)  that certain insertion order dated October 3, 2000, between BMG,
               and Seller, together with all amendments and clarifications
               attached thereto (the "Contract").

                                      B-1
<PAGE>

          (j)  that certain insertion order dated December 3, 1999, between
               Glaxo, and Seller, together with all amendments and
               clarifications attached thereto (the "Contract").

          (k)  that certain undated contract between Seller and Registered Users
               of drDrew.com, together with all amendments and clarifications
               attached thereto entitled "Terms and Conditions" (the
               "Contract").

          Executed at _____________________ this ____ day of _______________.

                                          ____________________________

                         By  _________________________
                         Its _________________________

                                      B-2
<PAGE>

                                   EXHIBIT C

                        ASSIGNMENT OF PROPRIETARY RIGHTS
                        --------------------------------

     WHEREAS, Sherwood Partners, Inc., (the "Assignor"), has been assigned the
trademarks, service marks, trade names, logos, designs, and the goodwill
associated therewith (collectively the "Marks") and domain names registered with
a domain name registration company (the "Domain Names," as set forth in Schedule
1) which have been in continuous use by and related to the business of
drDrew.com, Inc.;

     WHEREAS, by virtue of the Asset Purchase Agreement, dated November 1, 2000,
among drkoop.com, Inc., a Delaware corporation ("Assignee"), and the Assignor,
the Assignor has agreed to assign the Marks and the Domain Names and the
goodwill attendant thereto to Assignee; and

     WHEREAS, the Assignor desires to memorialize the transfer of the Marks, the
Domain Names and the goodwill attendant thereto to Assignee.

     NOW, THEREFORE THE ASSIGNOR AGREES TO THE FOLLOWING:

1. Assignment of the Marks. The Assignor hereby transfers, jointly or
   ------------------------
   separately, to Assignee all right, title, and interest in the Marks
   (including the related goodwill throughout the world). The Assignor further
   agrees to execute any necessary documents to transfer any registrations and
   applications relating to the Marks and to give written notice to Assignee of
   any correspondence or filings which need to be made with any office in order
   to properly register the Marks.

2. Registrant Name Change Agreement. The Assignor hereby promises to file a
   ---------------------------------
   Registrant Name Change Agreement with Network Solutions at
   http://www.networksolutions.com/makechanges/rnca/pdf/RNCA3 transfers.pdf
   (attached hereto as Exhibit 1) in order to transfer the Domain Names listed
   above and to have the agreement signed and notarized for each of the Domain
   Names. The Assignor hereby promises to abide by any other reasonable requests
   to effect this transfer. Furthermore, the Assignors expressly warrant and
   represent that Schedule 1 is a complete and accurate listing of any and all
   Domain Names owned or controlled by the Assignor, jointly or separately,
   domestically and worldwide, relating to the business of drDrew.com, Inc.

     Executed in counterparts to be effective this 1st day of November, 2000.

______________________________                     _____________________________

By ___________________________                     By___________________________
Its___________________________                     Its__________________________

Dated ___________________                          Dated ___________________

                                      C-1
<PAGE>

                                  SCHEDULE 1
                                 Domain Names

Domain Names
------------

drDrew.com
doctordrew.com
drivemecrazytour.com
drivemecrazyvantour.com

                                      C-2
<PAGE>

                                   EXHIBIT D

                       ESCROW INDEMNIFICATION AGREEMENT
                       --------------------------------

                                (see attached)

                                      D-1
<PAGE>

                                   EXHIBIT E

                [DRDREW.COM BOARD AND STOCKHOLDER RESOLUTIONS]
                ----------------------------------------------

                                      E-1
<PAGE>

                                   EXHIBIT F

                              GENERAL ASSIGNMENT
                              ------------------

                                      F-1
<PAGE>

                                   EXHIBIT G

               DR. DREW PINSKY EMPLOYMENT AND LICENSE AGREEMENT
               ------------------------------------------------

                                  G-1<PAGE>

                                                                   EXHIBIT 10.39

                          AGREEMENT AND PLAN OF MERGER

                                  by and among

                             LEVEL 8 SYSTEMS, INC.

                     LEVEL 8 TECHNOLOGIES ACQUISITION CORP.

                                      and

                            STARQUEST SOFTWARE, INC.

                         Dated as of September __, 2000

<PAGE>

                               Table of Contents

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                        --------
<S>                                   <C>                                               <C>
ARTICLE I                             THE MERGER                                               1
  Section 1.1                         The Merger                                               1
  Section 1.2                         Closing                                                  1
  Section 1.3                         Effective Time                                           2
  Section 1.4                         Effects of the Merger                                    2
  Section 1.5                         Certificate of Incorporation; Bylaws                     2
  Section 1.6                         Directors; Officers                                      2

ARTICLE II                            CONSIDERATION; EFFECT OF THE MERGER ON THE
                                      CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS            2
  Section 2.1                         Consideration                                            2
  Section 2.2                         Effect on Capital Stock                                  3

ARTICLE III                           EXCHANGE OF CERTIFICATES                                 7
  Section 3.1                         Exchange of Certificates                                 7

ARTICLE IV                            REPRESENTATIONS AND WARRANTIES                          11
  Section 4.1                         Representations and Warranties of Company               11
  Section 4.2                         Representations and Warranties of Parent and            27
                                      Merger Sub

ARTICLE V                             CONDUCT OF BUSINESS OF COMPANY                          30
  Section 5.1                         Conduct of Business of Company                          30
  Section 5.2                         No Solicitation                                         32

ARTICLE VI                            ADDITIONAL COVENANTS                                    33
  Section 6.1                         Stockholder Approval                                    33
  Section 6.2                         Access to Information, Confidentiality                  33
  Section 6.3                         Reasonable Best Efforts                                 34
  Section 6.4                         Public Announcements                                    34
  Section 6.5                         Consents, Approvals and Filings                         34
  Section 6.6                         Employee Benefit Matters                                34
  Section 6.7                         Affiliates and Certain Stockholders                     35
  Section 6.8                         Indemnification                                         35
  Section 6.9                         Subsidiaries' Directors and Officers                    36
  Section 6.10                        Employment Agreements                                   36
  Section 6.11                        Employee Retention Incentive Pool                       36
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                  <C>                                                     <C>
ARTICLE VII                           CONDITIONS PRECEDENT                                    36
  Section 7.1                         Conditions to Each Party's Obligation to Effect         36
                                      the Merger
  Section 7.2                         Conditions to Obligations of Parent and Merger          37
                                      Sub
  Section 7.3                         Conditions to Obligation of Company                     38

ARTICLE VIII                          TERMINATION, AMENDMENT AND WAIVER                       39
  Section 8.1                         Termination                                             39
  Section 8.2                         Effect of Termination                                   40
  Section 8.3                         Amendment                                               41
  Section 8.4                         Extension; Waiver                                       41
  Section 8.5                         Procedure for Termination, Amendment, Extension         41
                                      or Waiver

ARTICLE IX                            GENERAL PROVISIONS                                      41
  Section 9.1                         Nonsurvival of Representations and Warranties           41
  Section 9.2                         Fees and Expenses                                       41
  Section 9.3                         Definitions                                             42
  Section 9.4                         Notices                                                 45
  Section 9.5                         Interpretation                                          46
  Section 9.6                         Entire Agreement; Third-Party Beneficiaries             46
  Section 9.7                         Governing Law                                           46
  Section 9.8                         Assignment                                              46
  Section 9.9                         Enforcement                                             46
  Section 9.10                        Severability                                            47
  Section 9.11                        Counterparts                                            47

EXHIBIT A                             Agreement of Merger
EXHIBIT B                             Non-Accredited Stockholder Questionnaire
EXHIBIT C                             Accredited Stockholder Questionnaire
EXHIBIT D                             Registration Rights Agreement
EXHIBIT E                             Affiliate Letter
EXHIBIT F                             Opinion Letter from Powell, Goldstein, Frazer &
                                      Murphy LLP
EXHIBIT G                             Opinion Letter from Crosby, Heafey, Roach &
                                      May Professional Corporation
</TABLE>

                                      ii
<PAGE>

                          Agreement and Plan of Merger

  This AGREEMENT AND PLAN OF MERGER, dated as of September ___ 2000 (this
"Agreement"), is made and entered into by and among Level 8 Systems, Inc., a
Delaware corporation ("Parent"), Level 8 Technologies Acquisition Corp., a
Delaware corporation ("Merger Sub") and a wholly owned subsidiary of Level 8
Technologies, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent, and StarQuest Software, Inc., a California corporation ("Company").
Parent, Merger Sub and Company are sometimes hereinafter collectively referred
to as the "Parties."  Capitalized terms as used herein shall have the meaning
set forth in Section 9.3 below.

                                   Recitals:

  WHEREAS, the respective Boards of Directors of the Parties have determined
that it would be advisable and in the best interests of their respective
corporations and their respective stockholders for Parent to acquire Company, by
means of a merger of Merger Sub with and into Company (the "Merger"), on the
terms and subject to the conditions set forth in this Agreement; and

  WHEREAS, the Parties desire to make certain representations, warranties and
covenants in connection with the Merger and to prescribe various conditions to
the consummation of the Merger.

  NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained in this Agreement, the Parties hereto hereby agree as
follows:

                                   ARTICLE I

                                  THE MERGER

  Section 1.1 The Merger.  On the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL") and the California General Corporation Law (the "CGCL"), the Merger
shall be effected and Merger Sub shall be merged with and into Company at the
Effective Time (as defined in Section 1.3). At the Effective Time, the separate
existence of Merger Sub shall cease and Company shall continue as the surviving
corporation (sometimes hereinafter referred to as the "Surviving Corporation").

  Section 1.2 Closing.  Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article
VIII, and subject to the satisfaction or waiver of all of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the second business day (the "Closing Date") following
satisfaction or waiver of all of the conditions set forth in Article VII, other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions, at the offices of
Crosby, Heafey, Roach & May Professional
<PAGE>

Corporation, Two Embarcadero Center, Suite 2000, San Francisco, California,
unless another date, time or place is agreed to in writing by the Parties.

  Section 1.3 Effective Time.  The Parties shall file with the Secretary of
State of the State of Delaware (the "Delaware Secretary of State") and the
Secretary of State of the State of California (the "California Secretary of
State") on the Closing Date (or on such other date as Parent and Company may
agree) a certificate and/or agreement of merger and any other appropriate
documents, including an agreement of merger, in the form attached hereto as
Exhibit A (the "Agreement of Merger"), executed in accordance with the relevant
---------
provisions of the CGCL, and make all other filings or recordings required under
the DGCL and CGCL in connection with the Merger. The Merger shall become
effective upon the filing of the Agreement of Merger with the California
Secretary of State, or at such later time as is specified in the Agreement of
Merger (the "Effective Time").

  Section 1.4 Effects of the Merger.  The Merger shall have the effects set
forth in the applicable provisions of the DGCL, the CGCL and the Agreement of
Merger. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all property of Merger Sub and Company shall vest in the
Surviving Corporation, and all liabilities of Merger Sub and Company shall
become the liabilities of the Surviving Corporation.

  Section 1.5 Certificate of Incorporation; Bylaws.  At the Effective Time, (a)
the articles of incorporation of Company as in effect at the Effective Time
shall, from and after the Effective Time, be the articles of incorporation of
the Surviving Corporation until thereafter changed or amended in accordance with
the provisions thereof and applicable law, and (b) the bylaws of Company as in
effect at the Effective Time shall, from and after the Effective Time, be the
bylaws of the Surviving Corporation until thereafter changed or amended in
accordance with the provisions thereof and applicable law.

  Section 1.6 Directors; Officers.  From and after the Effective Time, the
directors and officers of Merger Sub shall be the directors and officers of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.

                                  ARTICLE II

              CONSIDERATION; EFFECT OF THE MERGER ON THE CAPITAL
                     STOCK OF THE CONSTITUENT CORPORATIONS

     Section 2.1 Consideration.  Subject to the terms and conditions of Section
2.2, the maximum number of shares of common stock of Parent, $.001 par value per
share (the "Parent Common Stock"), and the maximum number of Warrants to
purchase Parent Common Stock (the "Warrants") to be issued and paid by Parent in
exchange for the acquisition by Parent of all outstanding capital stock, no par
value per share, of the Company (the "Shares") shall be 450,000 shares of Parent
Common Stock (the "Aggregate Share Number") and 250,000 Warrants (the "Aggregate
Warrant Number") (collectively, the "Merger Consideration").

                                       2
<PAGE>

     Section 2.2 Effect on Capital Stock.  Subject to the terms and conditions
of this Agreement, as of the Effective Time, by virtue of the Merger and without
any action on the part of Merger Sub, the Company or the holder of any Shares,
the following shall occur (which is intended to comply fully with the
liquidation preference provisions set forth in the Articles of Incorporation of
the Company, as amended through the date hereof):

     (a) Common Stock of Merger Sub.  Each share of common stock, par value
$0.001 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $0.001 per share, of the
Surviving Corporation.

     (b) Cancellation of Treasury Shares and Parent-Owned Shares.  Each Share
issued and outstanding immediately prior to the Effective Time that is owned by
Company or any Subsidiary (as defined in Section 9.3(q)) of Company or by
Parent, Merger Sub or any other Subsidiary of Parent (other than shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) shall automatically be canceled and retired
and shall cease to exist, and no cash or other consideration shall be delivered
or deliverable in exchange therefor.

     (c) Conversion of Company Preferred Stock.

     (i)  Series E Preferred Stock. Each share of Series E Preferred Stock
of the Company, no par value per share, ("Series E Preferred") issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares (as defined and to the extent provided in Section 3.1(j)) will be
canceled and extinguished and be converted automatically into the right to
receive the following and any additional shares of Parent Common Stock and/or
Warrants as provided in Section 2.2(d):

          (A) Parent Common Stock. That number of shares of Parent Common Stock,
which shall be computed by (1) dividing the Series E Aggregate Preference Amount
by the Aggregate Consideration (such quotient shall be referred to as the
"Series E Quotient"), and then (2) multiplying the Series E Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series E Shares upon
surrender of the certificate representing such share of Series E Preferred in
the manner provided in Section 3.1(b); and

          (B) Warrants. That number of Warrants, which shall be computed by (1)
multiplying the Series E Quotient by the Aggregate Warrant Number, and then (2)
dividing by the Total Series E Shares upon surrender of the certificate
representing such share of Series E Preferred in the manner provided in Section
3.1(b).

     Notwithstanding any of the foregoing in this Section 2.2(c)(i), in the
event that the Series E Aggregate Preference Amount exceeds the Aggregate
Consideration, the results reached  in each of 2.2(c)(i)(A) Parent Common Stock
and 2.2(c)(i)(B) Warrants shall be independently reduced by multiplying each
such result by the ratio of (a) the Aggregate Consideration divided by (b) the
Series E Aggregate Preference Amount.

                                       3
<PAGE>

     (ii)   Series D Preferred Stock. If the Aggregate Consideration exceeds the
Series E Aggregate Preference Amount, each share of Series D Preferred Stock of
the Company, no par value per share, ("Series D Preferred") issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and be converted automatically into
the right to receive the following and any additional shares of Parent Common
Stock and/or Warrants as provided in Section 2.2(d):

     (A)    Parent Common Stock. That number of shares of Parent Common Stock,
which shall be computed by (1) dividing the Series D Aggregate Preference Amount
by the Aggregate Consideration (such quotient shall be referred to as the
"Series D Quotient"), and then (2) multiplying the Series D Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series D Shares upon
surrender of the certificate representing such share of Series D Preferred in
the manner provided in Section 3.1(b); and

     (B)    Warrants. That number of Warrants, which shall be computed by (1)
multiplying the Series D Quotient by the Aggregate Warrant Number, and then (2)
dividing by the Total Series D Shares upon surrender of the certificate
representing such share of Series D Preferred in the manner provided in Section
3.1(b).

     Notwithstanding any of the foregoing in this Section 2.2(c)(ii), in the
event that the sum of the Series E Aggregate Preference Amount and the Secondary
Aggregate Preference Amount exceeds the Aggregate Consideration, the results
reached  in each of 2.2(c)(ii)(A) Parent Common Stock and 2.2(c)(ii)(B) Warrants
shall be independently reduced by multiplying each such result by the ratio of
(a) the Aggregate Consideration less the Series E Aggregate Preference Amount
divided by (b) the Secondary Aggregate Preference Amount.

     (iii)  Series C Preferred Stock. If the Aggregate Consideration exceeds the
Series E Aggregate Preference Amount, each share of Series C Preferred Stock of
the Company, no par value per share, ("Series C Preferred") issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and be converted automatically into
the right to receive the following and any additional shares of Parent Common
Stock and/or Warrants as provided in Section 2.2(d):

            (A) Parent Common Stock. That number of shares of Parent Common
Stock, which shall be computed by (1) dividing the Series C Aggregate Preference
Amount by the Aggregate Consideration (such quotient shall be referred to as the
"Series C Quotient"), and then (2) multiplying the Series C Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series C Shares upon
surrender of the certificate representing such share of Series C Preferred in
the manner provided in Section 3.1(b); and

            (B) Warrants. That number of Warrants, which shall be computed by
(1) multiplying the Series C Quotient by the Aggregate Warrant Number, and then
(2) dividing by the Total Series C Shares upon surrender of the certificate
representing such share of Series C Preferred in the manner provided in Section
3.1(b).

     Notwithstanding any of the foregoing in this Section 2.2(c)(iii), in the
event that the sum of the Series E Aggregate Preference Amount and the Secondary
Aggregate Preference Amount

                                       4
<PAGE>

exceeds the Aggregate Consideration, the results reached in each of
2.2(c)(iii)(A) Parent Common Stock and 2.2(c)(iii)(B) Warrants shall be
independently reduced by multiplying each such result by the ratio of (a) the
Aggregate Consideration less the Series E Aggregate Preference Amount divided by
(b) the Secondary Aggregate Preference Amount.

     (iv) Series B Preferred Stock. If the Aggregate Consideration exceeds the
Series E Aggregate Preference Amount, each share of Series B Preferred Stock of
the Company, no par value per share, ("Series B Preferred") issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and be converted automatically into
the right to receive the following and any additional shares of Parent Common
Stock and/or Warrants as provided in Section 2.2(d):

          (A) Parent Common Stock. That number of shares of Parent Common Stock,
which shall be computed by (1) dividing the Series B Aggregate Preference Amount
by the Aggregate Consideration (such quotient shall be referred to as the
"Series B Quotient"), and then (2) multiplying the Series B Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series B Shares upon
surrender of the certificate representing such share of Series B Preferred in
the manner provided in Section 3.1(b); and

          (B) Warrants. That number of Warrants, which shall be computed by (1)
multiplying the Series B Quotient by the Aggregate Warrant Number, and then (2)
dividing by the Total Series B Shares upon surrender of the certificate
representing such share of Series B Preferred in the manner provided in Section
3.1(b).

     Notwithstanding any of the foregoing in this Section 2.2(c)(iv), in the
event that the sum of the Series E Aggregate Preference Amount and the Secondary
Aggregate Preference Amount exceeds the Aggregate Consideration, the results
reached in each of 2.2(c)(iv)(A) Parent Common Stock and 2.2(c)(iv)(B) Warrants
shall be independently reduced by multiplying each such result by the ratio of
(a) the Aggregate Consideration less the Series E Aggregate Preference Amount
divided by (b) the Secondary Aggregate Preference Amount.

     (v)  Series A Preferred Stock.  If the Aggregate Consideration exceeds the
sum of the Series E Aggregate Preference Amount and the Secondary Aggregate
Preference Amount, each share of Series A Preferred Stock of the Company, no par
value per share, ("Series A Preferred") issued and outstanding immediately prior
to the Effective Time (other than any Dissenting Shares) will be canceled and
extinguished and be converted automatically into the right to receive the
following and any additional shares of Parent Common Stock and/or Warrants as
provided in Section 2.2(d):

     (A)  Parent Common Stock.  That number of shares of Parent Common Stock,
which shall be computed by (1) dividing the Series A Aggregate Preference Amount
by the Aggregate Consideration (such quotient shall be referred to as the
"Series A Quotient"), and then (2) multiplying the Series A Quotient by the
Aggregate Share Number, and then (3) dividing by the Total Series A Shares upon
surrender of the certificate representing such share of Series A Preferred in
the manner provided in Section 3.1(b); and

                                       5
<PAGE>

     (B)  Warrants. That number of Warrants, which shall be computed by (1)
multiplying the Series A Quotient by the Aggregate Warrant Number, and then (2)
dividing by the Total Series A Shares upon surrender of the certificate
representing such share of Series A Preferred in the manner provided in Section
3.1(b).

     Notwithstanding any of the foregoing in this Section 2.2(c)(v), in the
event that the sum of the Series E Aggregate Preference Amount, the Secondary
Aggregate Preference Amount and the Series A Aggregate Preference Amount exceeds
the Aggregate Consideration, the results reached in each of 2.2(c)(v)(A) Parent
Common Stock and 2.2(c)(v)(B) Warrants shall be independently reduced by
multiplying each such result by  the ratio of (a) the Aggregate Consideration
less the sum of the Series E Aggregate Preference Amount and the Secondary
Aggregate Preference Amount, divided by (b) the Series A Aggregate Preference
Amount.

     (d)  Conversion of Company Common and As-Converted Preferred Stock.  If the
Aggregate Consideration Exceeds the Total Liquidation Preference Amount, each
share of Common Stock and As-Converted Preferred Stock of the Company, no par
value per share, ("Company As-Converted Common Stock") issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares) will
be cancelled and extinguished and be converted automatically into the right to
receive the following:

               (A)  Parent Common Stock. That number of shares of Parent Common
Stock, which shall be computed by (1) subtracting the aggregate number of shares
of Parent Common Stock issuable under paragraphs 2.2(c)(i), 2.2(c)(ii),
2.2(c)(iii), 2.2(c)(iv) and 2.2(c)(v) from the Aggregate Share Number, and then
(2) dividing by the Total As-Converted Common Shares upon surrender of the
certificate representing such share of Company As-Converted Common Stock in the
manner provided in Section 3.1(b); and

               (B)  Warrants. That number of shares of Warrants, which shall be
computed by (1) subtracting the aggregate number of Warrants issuable under
paragraphs 2.2(c)(i), 2.2(c)(ii), 2.2(c)(iii), 2.2(c)(iv) and 2.2(c)(v) from the
Aggregate Warrant Number, and then (2) dividing by the Total As-Converted Common
Shares upon surrender of the certificate representing such share of Company As-
Converted Common Stock in the manner provided in Section 3.1(b).

     (e)  Warrants.  To the extent any warrant to purchase Shares (the "Company
Warrants") remain exercisable immediately prior to the Effective Time, the
Company Warrants shall, in connection with the Merger be terminated and shall
not be assumed by Parent.  After the Effective Time, any unexercised portion of
the Company Warrants shall not represent any right to purchase any Shares or any
Parent Common Stock.

     (f)  Debt.  To the extent there is debt of the Company that is convertible
to capital stock of the Company (the "Convertible Debt") immediately prior to
the Effective Time, the Convertible Debt shall, in connection with the Merger
and pursuant to its terms, become unsecured debt of the Company equal to the
principal amount of the underlying promissory note(s).  No adjustment shall be
made to the principal amount of any remaining Convertible Debt to reflect the
termination of the conversion rights.  After the Effective Time, any unconverted
portion of the Convertible Debt shall not represent any right to purchase any
Shares or any Parent Common Stock.

6
<PAGE>

     Section 2.3 Stock Options.  To the extent any Company Options (as defined
in Section 4.1(d)) remain exercisable immediately prior to the Effective Time,
the Company Options shall, in connection with the Merger, be terminated and
shall not be assumed by Parent.

     Section 2.4 Employee Retention Incentive Pool. Parent shall reserve up to
50,000 shares of Parent Common Stock in connection with the Company's Employee
Retention Incentive Pool as provided in Section 6.11 below.

                                  ARTICLE III

                           EXCHANGE OF CERTIFICATES

  Section 3.1 Exchange of Certificates.

  (a) Exchange Agent.  Prior to or concurrently with the Effective Time, Parent
shall enter into an agreement with Parent's stock transfer agent or such bank or
trust company as may be designated by Parent and approved by the Company (the
"Exchange Agent"), which shall provide that Parent shall deposit with the
Exchange Agent as of the Effective Time, for the benefit of the holders of
Shares, for exchange in accordance with this Article III, through the Exchange
Agent, sufficient cash payable in lieu of any fractional shares of Parent Common
Stock and certificates representing the shares of Parent Common Stock and
Warrants (such shares of Parent Common Stock and Warrants, together with any
dividends or distributions with respect thereto with a record date after the
Effective Time, and any cash payable in lieu of any fractional shares of Parent
Common Stock, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.2 in exchange for outstanding Shares.

  (b) Letters of Transmittal; Surrender of Certificates.  As soon as reasonably
practicable after the Effective Time not to exceed three (3) Business days after
receipt of confirmation of the Effective Time, Parent shall instruct the
Exchange Agent to mail to each holder of record (other than Company or any of
its Subsidiaries or Parent, Merger Sub or any other Subsidiary of Parent) of the
Shares, (i) a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the certificate or certificates
that evidence outstanding Shares immediately prior to the Effective Time (the
"Certificates") shall pass, only upon proper delivery of the Certificates to the
Exchange Agent, and shall be in such form and have such other provisions as
Parent and Company may reasonably specify), and shall include (A) for those
Company non-accredited stockholders who have not previously executed and
delivered to Parent a Non-Accredited Stockholder Questionnaire, a Non-Accredited
Stockholder Questionnaire substantially in the form of Exhibit B; (B) for those
                                                       ----------
Company accredited stockholders who have not previously executed and delivered
to Parent an Accredited Stockholder Questionnaire, a Accredited Stockholder
Questionnaire substantially in the form of Exhibit C; and (C) a Registration
                                           ----------
Rights Agreement substantially in the form of Exhibit D; and (ii) instructions
                                              ---------
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. The letter of transmittal shall also contain a provision
pertaining to lost, destroyed or stolen Certificates.  Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be

                                       7
<PAGE>

required pursuant to such instructions, (including the Non-Accredited
Stockholder Questionnaire and the Accredited Stockholder Questionnaire, as
applicable, and the Registration Rights Agreement) the holder of such
Certificate shall be entitled to receive in exchange therefor the applicable
amount of the Merger Consideration, (and cash in lieu of fractional shares of
Parent Common Stock as contemplated by this Section 3.1) that the aggregate
number of Shares previously represented by such Certificate shall have been
converted into the right to receive pursuant to Section 2.2, and the Certificate
so surrendered shall forthwith be canceled, provided, however, that no holder of
a Certificate shall receive any Merger Consideration until such holder has
delivered to Parent an executed Non-Accredited Stockholder Questionnaire or
Accredited Stockholder Questionnaire, as the case may be, and an executed
Registration Rights Agreement.  No interest shall be paid or accrued on any cash
payable upon the surrender of any Certificate.  If payment is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the surrendered Certificate or established to the satisfaction of
Parent and the Surviving Corporation that such taxes have been paid or are not
applicable.

  (c) Distributions with Respect to Unexchanged Shares.  No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock issuable upon the surrender of such
Certificate pursuant to Section 3.1(b), and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 3.1(e),
and all dividends, other distributions and cash in lieu of fractional shares of
Parent Common Stock shall be paid by Parent to the Exchange Agent and shall be
included in the Exchange Fund, in each case until the surrender of such
Certificate pursuant to Section 3.1(b). Subject to the effect of applicable
escheat or similar laws, following the surrender of any such Certificate
pursuant to Section 3.1(b) there shall be paid to the holder of the Certificate
representing the whole shares of Parent Common Stock issued in exchange
therefor, without interest, in addition to such holder's shares of Parent Common
Stock and Warrants, (i) at the time of such surrender, the amount of dividends
or other distributions with respect to such whole shares of Parent Common Stock
with a record date after the Effective Time theretofore paid with respect to
such whole shares of Parent Common Stock, and the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 3.1(e), and (ii) at the appropriate payment date,
the amount of dividends or other distributions with respect to such whole shares
of Parent Common Stock with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.

  (d) Cancellation and Retirement of Shares, No Further Rights.  As of the
Effective Time, all Shares (other than Dissenting Shares and Shares to be
canceled in accordance with Section 2.2(b)) issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a Certificate theretofore representing any such Shares shall cease to have
any rights with respect thereto (including without limitation the right to
vote), except the right to receive the Merger Consideration, without interest,
upon surrender of such Certificate in accordance with

                                       8
<PAGE>

Section 3.1(b), and until so surrendered, each such Certificate shall represent
for all purposes only the right to receive the Merger Consideration, without
interest. The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article III shall be deemed to
have been paid in full satisfaction of all rights pertaining to the Shares
theretofore represented by such Certificates.

  (e) No Fractional Shares.

     (i)  No certificates or scrip representing fractional shares of Parent
  Common Stock shall be issued upon the surrender for exchange of Certificates
  which have been converted pursuant to Section 2.2, and such fractional share
  interests shall not entitle the owner thereof to vote or to any rights of a
  stockholder of Parent.

     (ii) In lieu of any such fractional shares, each holder of Shares who would
  otherwise have been entitled to a fraction of a share of Parent Common Stock
  upon surrender of Certificates for exchange pursuant to this Section 3.1
  (after taking into account all Certificates delivered by such holders) will be
  paid an amount in cash (without interest), rounded to the nearest cent,
  determined by multiplying (A) the Average Closing Price of Parent's Common
  Stock (as reported on The Nasdaq Stock Market) on the trading day immediately
  prior to the date on which the Effective Time occurs, by (B) the fractional
  interest to which such holder otherwise would be entitled. Such amount in cash
  shall be deemed to be substituted for any such fractional share and constitute
  a portion of the Merger Consideration with respect to the related Shares. The
  fractional share interest of each holder of Shares will be aggregated, and no
  holder of Shares will receive cash in an amount equal to or greater than the
  value of one full share of Parent Common Stock.

  (f) Investment of Exchange Fund.  The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, in (i) direct obligations
of the United States of America with maturities of 90 days or less, (ii)
obligations for which the full faith and credit of the United States of America
is pledged to provide for the payment of principal and interest, or (iii)
interest bearing accounts of commercial banks with capital exceeding $500
million. Any net earnings with respect to the Exchange Fund shall be the
property of and paid over to Parent twelve months after the Effective Time, and
Parent shall include any income earned by the Exchange Fund on its applicable
Returns (as defined in Section 4.1(o)(i)) and pay any Taxes (as defined in the
last paragraph of Section 4.1(o)) with respect thereto.

  (g) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates for twelve months after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Certificates that have not theretofore complied with this Article III shall
thereafter look only to Parent, and only as general creditors thereof, for
payment of their claim for any Merger Consideration, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to Parent Common Stock provided for in Section 3.1(c).

  (h) No Liability.  None of Parent, Merger Sub, the Surviving Corporation or
the Exchange Agent shall be liable to any person in respect of any payments or
distributions payable from the

                                       9
<PAGE>

Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to five years after the Effective Time (or immediately
prior to such earlier date on which any Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 4.1(c)), any amounts payable in
respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto.

  (i) Withholding Rights.  Parent shall be entitled to deduct and withhold, or
cause to be deducted or withheld, from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares or Certificates such amounts
as are required to be deducted and withheld with respect to the making of such
payment under the Code, or any provision of applicable state, local or foreign
tax law. To the extent that amounts are so deducted and withheld, such deducted
and withheld amounts shall be treated for all purposes of this Agreement as
having been paid to such holders in respect of which such deduction and
withholding was made.

  (j) Dissenting Shares.

        (i)   Notwithstanding any provision of this Agreement to the contrary,
any Shares held by a stockholder who has demanded and perfected dissenters'
rights for such Shares in accordance with Chapter 13 of the CGCL and who has not
effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting
Shares"), shall not be converted into or represent a right to receive a portion
of the Merger Consideration pursuant to Section 2.2, but the holder thereof
shall only be entitled to such rights as are granted by CGCL. From and after the
Effective Time, a holder of Dissenting Shares shall not be entitled to exercise
any of the voting rights or other rights of a stockholder of the Surviving
Corporation.

        (ii)  Notwithstanding the provisions of Section 2.2 hereof, if any
holder of Shares who demands appraisal of such shares under CGCL shall
effectively withdraw or lose (through failure to perfect or otherwise) the right
to appraisal, then, as of the later of the Effective Time and the occurrence of
such event, such holder's shares shall automatically be converted into and
represent only the right to receive the Merger Consideration as provided in
Section 2.2, without interest thereon, upon surrender of the certificate
representing such shares.

        (iii) The Company shall give Parent (A) prompt notice of any written
demands for appraisal of any Shares, withdrawals of such demands, and any other
instruments served pursuant to CGCL and received by the Company and (B) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under CGCL. The Company shall not, except with the prior
written consent of Parent, which will not be unreasonably withheld, voluntarily
make any payment with respect to any demands for appraisal of capital stock of
the Company or offer to settle or settle any such demands.

                                      10
<PAGE>

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

  Section 4.1 Representations and Warranties of Company.  Company represents and
warrants to Parent and Merger Sub that the statements contained in this Section
4.1 are true, correct and complete as of the date hereof, and will be true,
correct and complete as of the Closing Date (unless specifically made as of
another date), except as specified to the contrary in the corresponding
paragraph of the disclosure schedule prepared by the Company accompanying this
Agreement (the "Company Disclosure Schedule").  The Company Disclosure Schedule
will be arranged in paragraphs corresponding to the letter and numbered
paragraphs contained in this Section 4.1.  The representations and warranties of
Company contained in this Section 4.1 shall be deemed to be made without giving
effect to the planned transfer of certain of the Company's assets pursuant to
that certain Asset Purchase Agreement to be executed immediately prior to the
Closing Date by Company and Level 8 Technologies, Inc., which is a wholly-owned
subsidiary of Parent ("Level 8 Technologies"), and, accordingly, the materiality
of the Company's representations and warranties hereunder shall not be reduced
or otherwise affected as a result of such asset transfer.

     (a) Organization and Standing. Each of Company and each Subsidiary of
  Company is a corporation duly organized, validly existing and in good standing
  under the laws of the jurisdiction in which it is incorporated and has the
  requisite corporate power and authority to carry on its business as now being
  conducted. Each of Company and each Subsidiary of Company is duly qualified or
  licensed to do business and is in good standing in each jurisdiction in which
  the nature of its business or the ownership or leasing of its properties makes
  such qualification or licensing necessary, other than in such jurisdictions
  where the failure to be so qualified or licensed could not reasonably be
  expected to have, individually or in the aggregate, a Material Adverse Effect
  (as defined in Section 9.3(k)) on Company. Company has delivered to Parent
  true, complete and correct copies of the articles of incorporation and bylaws
  or comparable governing documents of Company and each Subsidiary of Company,
  in each case as amended to the date of this Agreement. A true, correct and
  complete list of all Subsidiaries of Company, together with the jurisdiction
  of incorporation of each such Subsidiary and the percentage of each such
  Subsidiary's capital stock owned by Company or another Subsidiary, is set
  forth in the Company Disclosure Schedule.

     (b) Authority; Noncontravention; and Corporate Power. Company has the
  requisite corporate power and authority to enter into this Agreement and to
  consummate the transactions contemplated hereby. The execution and delivery of
  this Agreement by Company and the consummation by Company of the transactions
  contemplated hereby have been duly authorized by all necessary corporate
  action on the part of Company, subject, in the case of the Merger, to the
  approval of this Agreement by its stockholders as contemplated by Section 6.1.
  This Agreement has been duly executed and delivered by Company and, assuming
  that this Agreement constitutes a valid and binding obligation of Parent and
  Merger Sub, constitutes a valid and binding obligation of Company, enforceable
  against Company in accordance with its terms, subject to applicable
  bankruptcy, insolvency, fraudulent

                                      11
<PAGE>

conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity. None of
Company or its Subsidiaries is in violation of its articles of incorporation (or
the comparable governing documents) or bylaws. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not, (i) conflict with any
of the provisions of the articles of incorporation or bylaws of Company or the
comparable governing documents of any Subsidiary of Company, in each case as
amended to the date of this Agreement, (ii) subject to the governmental filings
and other matters referred to in the next section, conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a material obligation, a right of termination, cancellation or
acceleration of any obligation or a loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Company or any of its Subsidiaries is a party or by which Company or any of its
Subsidiaries or any of their respective assets is bound or affected, or (iii)
subject to the governmental filings and other matters referred to in Section
4.1(c), contravene any domestic or foreign law, rule or regulation or any order,
writ, judgment, injunction, decree, determination or award currently in effect
and applicable to the Company, which, in the case of clauses (ii) and (iii)
above could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company.

  (c) Consents and Approvals. No consent, approval or authorization of, or
declaration or filing with, or notice to, any domestic or foreign court,
governmental agency or regulatory authority (a "Governmental Entity") or any
other third party which has not been received or made (or has been received or
made but is not otherwise in full force and effect) is required by or with
respect to Company or any of its Subsidiaries in connection with the execution
and delivery of this Agreement by Company or the consummation by Company of the
transactions contemplated hereby, except for (i) the approval of the Merger by
Company's stockholders, (ii) the filing of the certificate and/or agreement of
merger with the California Secretary of State and the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which Company is qualified to do business, (iii) such other consents, approvals,
authorizations, filings or notices as are specified in the Company Disclosure
Schedule, and (iv) any other consents, approvals, authorizations, filings or
notices the failure to make or obtain which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company.

  (d) Capital Structure. The authorized capital stock of the Company consists
solely of 10,000,000 shares of authorized Common Stock, of which 1,040,027
shares are issued and outstanding as of the date of this Agreement, and
6,000,000 shares of authorized Preferred Stock (the "Preferred Stock"). The
authorized Preferred Stock consists of 474,875 shares of authorized Series A
Preferred, of which 418,250 shares are issued and outstanding as of the date of
this Agreement, 387,423 shares of authorized Series B Preferred, all of which
shares are issued and outstanding as of the date of this Agreement, 400,000
shares of authorized Series C Preferred, all of which shares are issued and
outstanding as of the date of this Agreement, 478,866 shares of authorized
Series D Preferred, of which 341,331 shares are issued and outstanding as of the
date of this Agreement, 3,666,667 shares of authorized

                                      12
<PAGE>

Series E Preferred, of which 3,385,911 shares are issued and outstanding as of
the date of this Agreement, and of which 592,169 shares are undesignated and are
not issued or outstanding. The Company has delivered to Parent accurate and
complete copies of the Company's 1992 Stock Option Plan and 1995 Stock Option
Plan (collectively, the "Option Plans"). Stock options granted by Company
pursuant to the Option Plans that are currently in effect or that have been in
effect and otherwise are referred to in this Agreement are referred to herein as
"Company Options." There are no Company Options other than Company Options
outstanding under the Option Plans. The Company has delivered to Parent accurate
and complete copies of all Option Plans pursuant to which Company has ever
granted stock options, and the forms of all stock option agreements evidencing
such options. Except as otherwise contemplated in this Agreement, there are no
commitments or agreements of any nature to which Company is bound obligating
Company to accelerate the vesting of any Company Option. Except as set forth in
this Section 4.1(d), no shares of capital stock or other equity securities of
Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of Company are duly authorized, validly issued, fully
paid and nonassessable and are not subject to preemptive rights. Except as
specified above, neither Company nor any Subsidiary of Company has or after the
Effective Time will have, any outstanding option, warrant, call, subscription or
other right, agreement or commitment which (A) obligates Company or any
Subsidiary of Company to issue, sell or transfer, or repurchase, redeem or
otherwise acquire, any shares of the capital stock of Company or any Subsidiary
of Company, (B) restricts the transfer of any shares of capital stock of Company
or any of its Subsidiaries (other than arising under applicable securities
laws), or (C) relates to the voting of any shares of capital stock of Company or
any of its Subsidiaries. No bonds, debentures, notes or other indebtedness of
Company or any Subsidiary of Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which the stockholders of Company or any Subsidiary of Company may vote are
issued or outstanding. All the outstanding shares of capital stock of each
Subsidiary of Company have been duly authorized and are validly issued, fully
paid and nonassessable and are owned by Company, by one or more Subsidiaries of
Company or by Company and one or more of such Subsidiaries, free and clear of
all Liens (as defined in Section 9.3(j)). Neither Company nor any of its
Subsidiaries has any contract, commitment or other obligation to repurchase,
redeem or otherwise acquire any Shares or any capital stock of any of Company's
Subsidiaries, or make any investment (whether by loan, capital contribution or
otherwise) in any person. Neither Company nor any of its Subsidiaries owns, or
has any contract, commitment or other obligation to acquire, any other
securities of any person or any direct or indirect equity or ownership interest
in any other business.

  (e)  [DELETED.]

                                      12
<PAGE>

(f)  Absence of Certain Changes or Events; No Undisclosed Material Liabilities.

     (i) Since December 31, 1999 (the date of the most recent audited financial
statements), Company and its Subsidiaries have conducted their businesses only
in the ordinary course, and there has not been: (A) any change, event or
occurrence which has had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Company; (B) any declaration,
setting aside or payment of any dividend or other distribution in respect of
shares of Company's capital stock, or any redemption or other acquisition by
Company of any shares of its capital stock; (C) any increase in the rate or
terms of compensation payable or to become payable by Company or its
Subsidiaries to their directors, officers or key employees, except increases
occurring in the ordinary course of business consistent with past practices; (D)
any entry into, or increase in the rate or terms of, any bonus, insurance,
severance, pension or other employee or retiree benefit plan, payment or
arrangement made to, for or with any such directors, officers or key employees,
except with respect to the Employee Retention Incentive Pool described in
Section 6.11, or increases occurring in the ordinary course of business
consistent with past practices or as required by applicable law; (E) any entry
into any agreement, commitment or transaction by Company or any of its
Subsidiaries which is material to Company and its Subsidiaries taken as a whole,
except for agreements, commitments or transactions entered into in the ordinary
course of business consistent with past practice; (F) any change by Company in
accounting methods, principles or practices, except as required or permitted by
generally accepted accounting principles; (G) any write-off or write-down of, or
any determination to write-off or write-down, any asset of Company or any of its
Subsidiaries or any portion thereof which write-off, write-down or determination
exceeds $25,000 individually or $50,000 in the aggregate; (H) any announcement
or implementation of any reduction in force, lay-off, early retirement program,
severance program or other program or effort concerning the termination of
employment of employees of Company or its Subsidiaries; or (I) any announcement
of or entry into any agreement, commitment or transaction by Company or any of
its Subsidiaries to do any of the things described in the preceding clauses (A)
through (H) otherwise than as expressly provided for herein.

     (ii) Except liabilities incurred in the ordinary course of business
consistent with past practice, since December 31, 1999, there are no liabilities
of Company or its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, due, to become due, determined, determinable or otherwise
required by generally accepted accounting principles ("GAAP") to be reflected on
a consolidated balance sheet of Company and its consolidated Subsidiaries or in
the notes, exhibits or schedules thereto, having, or which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company other than liabilities arising under contracts of the Company which are
identified in the Company's Disclosure Schedule.

(g) Real Property; Other Assets.

     (i) The Company does not own, and has never owned, any real property.

                                      14
<PAGE>

     (ii)  Company or one of its Subsidiaries has good and marketable fee simple
title to each asset reflected in the latest audited balance sheet of Company
(other than any such other asset disposed of or consumed in the ordinary course
of business) free and clear of all Liens except (A) those reflected or reserved
against in the latest audited balance sheet of Company, (B) taxes and general
and special assessments not in default and payable without penalty and interest,
(C) those Liens set forth in the Company's Disclosure Schedule, and (D) such
other Liens and other imperfections of title, if any, as do not detract from the
value or materially interfere with the present use of the property affected
thereby.

     (iii) The Company's Disclosure Schedule sets forth a true and complete
list, and Company has heretofore delivered to Parent true, correct and complete
copies of all leases, subleases and other agreements (the "Real Property
Leases") under which Company or any of its Subsidiaries uses or occupies or has
the right to use or occupy, now or in the future, real property or facility (the
"Leased Real Property"), including all modifications, amendments and supplements
thereto. Except where the failure could not reasonably be expected to have,
individually, a Material Adverse Effect on Company: (A) Company or one of its
Subsidiaries has a valid and subsisting leasehold interest in each parcel of
Leased Real Property free and clear of all Liens and each Real Property Lease is
in full force and effect; (B) all rent and other sums and charges payable by
Company or its Subsidiaries as tenants thereunder are current in all respects;
(C) no termination event or condition or uncured default on the part of Company
or any such Subsidiary or, to Company's knowledge, the landlord, exists under
any Real Property Lease; (D) to Company's knowledge, Company or one of its
Subsidiaries is the sole undisputed lessee of each Leased Real Property, is in
actual possession thereof and is entitled to quiet enjoyment thereof in
accordance with the terms of the applicable Real Property Lease; and (E) no
consent or approval from the lessor under the Real Property Leases is required
for the consummation by Company of the transactions contemplated hereby.

     (iv) To Company's knowledge, Company's, or any of its Subsidiaries',
current use of the Leased Real Property and the improvements and buildings
located thereon and the presently anticipated future use by Company of the
Leased Real Property in connection with the operation of Company's, or any of
its Subsidiaries', business is in compliance in all material respects and
substantially conforms with all applicable zoning and building regulation
requirements.

(h)  Software.

     (i) The Company's Disclosure Schedule sets forth under the caption "Owned
Software" a true, correct and complete list (other than off-the-shelf computer
programs that are validly and properly licensed under a shrink-wrap license) of
all material computer programs (source code or object code) which were developed
for or on behalf of, or have been purchased by, Company or any Subsidiary of
Company and which are currently used internally by Company or which have been
distributed by Company or any of its Subsidiaries and all material computer
programs under development by Company or its Subsidiaries but not currently
distributed (collectively, the "Owned Software"), and the Company's Disclosure
Schedule sets forth under the caption "Licensed Software" a true,

                                      15
<PAGE>

correct and complete list of all material computer programs (source code or
object code) licensed to Company or any Subsidiary of Company by another person
which are currently used internally by Company or which have been distributed by
Company or any of its Subsidiaries, whether as integrated or bundled with any of
Company's or its Subsidiaries' computer programs or as a separate stand-alone
product (specifically excluding any off-the-shelf computer program that is
validly and properly licensed under a shrink-wrap license) (collectively, the
"Licensed Software" and, together with the Owned Software, the "Software").

     (ii) Company, directly or through its Subsidiaries, has good, marketable
and exclusive title to, and the valid and enforceable power and unqualified
right to sell, license, lease, transfer, use, create derivative works of, or
otherwise exploit, all versions and releases of the Owned Software and all
copyrights thereof, free and clear of all Liens. Company, directly or through
its Subsidiaries, is in actual possession of the source code and object code for
each computer program included in the Owned Software, and Company, directly or
through its Subsidiaries, is in possession of all other documentation, including
without limitation all related engineering specifications, program flow charts,
installation and user manuals and know-how necessary for the effective use of
the Software as currently used in Company's business or as offered or
represented to Company's customers or potential customers. Company, directly or
through its Subsidiaries, is in actual possession of the object code and user
manuals for each computer program included in the Licensed Software. The
Software constitutes all of the computer programs necessary to conduct Company's
business as now conducted, and includes all of the computer programs licensed or
offered for license to Company's customers and potential customers or otherwise
used in the development, marketing, licensing, sale or support of the products
and the services presently offered by Company. No person other than Company and
its Subsidiaries has any right or interest of any kind or nature in or with
respect to the Owned Software or any portion thereof or any rights to sell,
license, lease, transfer, use or otherwise exploit the Owned Software or any
portion thereof.

     (iii) The Company's Disclosure Schedule sets forth a true, correct and
complete list, by computer program, of (A) all persons other than Company and
its Subsidiaries that have been provided with the source code or have a right to
be provided with the source code (including any such right that may arise after
the occurrence of any specified event or circumstance, either with or without
the giving of notice or passage of time or both) for any of the Owned Software,
and (B) all source code escrow agreements relating to any of the Owned Software
(setting forth as to any such escrow agreement the source code subject thereto
and the names of the escrow agent and all other persons who are actual or
potential beneficiaries of such escrow agreement), and identifies with
specificity all agreements and arrangements pursuant to which the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby would entitle any third party or parties to
receive possession of the source code for any of the Owned Software or any
related technical documentation. No person (other than Company and its
Subsidiaries and any person that is a party to a contract referred to in clause
(F) of Section 4.1(k) that restricts such person from disclosing any information
concerning such source code) is in possession of, or has or has had access to,
any source code for any computer program included in the Owned Software.

                                      16
<PAGE>

     (iv) There are no defects in any computer program included in the Software
that would materially adversely affect the functioning thereof in accordance
with any published specifications therefor or in accordance with any warranties
given with respect thereto. Without limiting the generality of the foregoing,
all of the Software has the following properties and capabilities: (A) the
capability to correctly recognize and accurately process dates expressed as a
four-digit number (or the binary equivalent or other machine readable iteration
thereof) (collectively, "Four-Digit Dates"); (B) the capability to accurately
execute calculations using Four-Digit Dates; (C) the functionality (both on-line
and batch), including entry, inquiry, maintenance and update, to support
processing involving Four-Digit Dates; (D) the capability to generate interfaces
and reports that support processing involving Four-Digit Dates; (E) the
capability to generate and successfully transition, without human intervention,
into the year 2000 using the correct system date and to thereafter continue
processing with Four-Digit Dates; (F) the capability to provide correct results
in forward and backward data calculations spanning century boundaries, including
the conversion of pre-2000 dates currently stored as two-digit dates; and (G)
the capability to correctly recognize leap years, including the year 2000, and
to properly process date calculations involving or spanning leap years. Each
computer program included in the Software is in machine readable form and
contains all current revisions. The Company's Disclosure Schedule sets forth a
true, correct and complete list of current claims of defects by customers of
Company or any of its Subsidiaries under warranties or support and maintenance
agreements.

     (v)   None of the sale, license, lease, transfer, use, reproduction,
distribution, modification or other exploitation by Company or any Subsidiary of
Company of any version or release of any computer program included in the
Software obligates or will obligate Company or any Subsidiary of Company to pay
any royalty, fee or other compensation to any other person.

     (vi)  Neither Company nor any of its Subsidiaries markets, or has marketed,
and none of them have supported or is obligated to support, any Licensed
Software separate from the Owned Software.

     (vii) No material agreement, license or other arrangement pertaining to any
of the Software (including, without limitation, any development, distribution,
marketing, user or maintenance agreement, license or arrangement) to which
Company or any Subsidiary of Company is a party will terminate or become
terminable by any party thereto as a result of the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. All licenses covering Licensed Software are of perpetual
duration (subject to provisions allowing Company to terminate and provisions
allowing the respective licensors to terminate in the event of a breach by
Company).

     (i)  Intellectual Property.

     (i) The Company's Disclosure Schedule sets forth a true, correct and
complete list (including, to the extent applicable, registration, application or
file numbers) of all patents, and all material copyrights, trade dress,
trademarks, trade names, service marks, domain names and other material
intellectual property rights, including, without limitation, trade

                                      17
<PAGE>

          secrets, processes, formulae, designs and know-how used by Company or
     any Subsidiary of Company in connection with the conduct of Company's
     business, and all registrations of or applications for registration of any
     of the foregoing, including any additions thereto or extensions,
     continuations, renewals or divisions thereof (setting forth the
     registration, issue or serial number and a description of the same)
     (collectively, the "Intellectual Property"). Parent has heretofore been
     furnished with true, correct and complete copies of each registration or
     application for registration covering any of the Intellectual Property or
     Software which is registered with, or in respect of which any application
     for registration has been filed with, any Governmental Entity.

          (ii) The Intellectual Property includes all of the material
     intellectual property rights owned by or licensed by or to Company and its
     Subsidiaries that are necessary to conduct Company's business as it is now
     conducted, and includes all of the material intellectual property rights
     owned by or licensed by or to Company and its Subsidiaries that are used in
     the development, marketing, licensing or support of the Software or are
     licensed by Company to, or offered for license to, Company's customers or
     potential customers. Company, directly or through its Subsidiaries, has
     good, marketable and exclusive title to, and the valid and enforceable
     power and unqualified right to use, the Intellectual Property free and
     clear of all Liens. No person or entity other than Company and its
     Subsidiaries has any right or interest of any kind or nature in or with
     respect to the Intellectual Property or any portion thereof or any rights
     to use, market or exploit the Intellectual Property or any portion thereof.

    (j)   No Infringement. Neither the existence nor the sale, license, lease,
transfer, use, reproduction, distribution, modification or other exploitation by
Company, any Subsidiary of Company or any of their respective successors or
assigns of any Owned Software or Intellectual Property (and, to Company's
knowledge, the Licensed Software), as such Software or Intellectual Property, as
the case may be, is or was, or is currently contemplated by the Company to be
sold, licensed, leased, transferred, used or otherwise exploited by such
persons, does, did or will (A) infringe on any patent, trademark, copyright or
other right of any other person,(B) constitute a misuse or misappropriation of
any trade secret, know-how, process, proprietary information or other right of
any other person or a violation of any relevant agreement governing the license
of the Licensed Software to Company or its Subsidiaries, or (C) entitle any
other person to any interest therein, or right to compensation from Company, any
Subsidiary of Company or any of their respective successors or assigns, by
reason thereof, in each case, except as could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company.
Neither Company nor any of its Subsidiaries has received any complaint,
assertion, threat or allegation or otherwise has notice of any lawsuit, claim,
demand, proceeding or investigation involving matters of the type contemplated
by the immediately preceding sentence or has knowledge of any facts or
circumstances that could reasonably be expected to give rise to any such
lawsuit, claim, demand, proceeding or investigation. Except as provided in the
relevant agreements governing the license of the Licensed Software to Company or
its Subsidiaries, there are no restrictions on the ability of Company, any
Subsidiary of Company or any of their respective successors or assigns to sell,
license, lease, transfer, use, reproduce, distribute, modify or otherwise
exploit any Software or Intellectual Property.

                                      18
<PAGE>

     (k) Material Contracts.  There have been made available to Parent and its
representatives true, correct and complete copies of all of the following
contracts to which Company or any of its Subsidiaries is a party or by which any
of them is bound (collectively, the "Material Contracts"): (A) contracts with
any current officer, director or employee of Company or any of its Subsidiaries;
(B) contracts pursuant to which Company or any of its Subsidiaries licenses
other persons to use any of the Software or has agreed to support, maintain,
upgrade, enhance, modify, port, or consult with respect to any of the Software,
or pursuant to which other persons license Company or any of its Subsidiaries to
use the Licensed Software; (C) contracts (1) for the sale of any of the assets
of Company or any of its Subsidiaries, other than contracts entered into in the
ordinary course of business, or (2) for the grant to any person of any
preferential rights to purchase any of its assets; (D) contracts by which
Company has agreed to design, develop, author or create any new custom, or
customized software for any third party; (E) contracts which restrict Company or
any of its Subsidiaries from competing in any line of business or with any
person in any geographical area or which restrict any other person from
competing with Company or any of its Subsidiaries in any line of business or in
any geographical area; (F) contracts which restrict Company or any of its
Subsidiaries from disclosing any information concerning or obtained from any
other person or which restrict any other person from disclosing any information
concerning or obtained from Company or any of its Subsidiaries; (G) indentures,
credit agreements, security agreements, mortgages, guarantees, promissory notes
and other contracts relating to the borrowing of money; and (H) all other
agreements, contracts or instruments entered into outside of the ordinary course
of business or which are material to Company. Except as could not reasonably be
expected to have a Material Adverse Effect on Company, all of the Material
Contracts are in full force and effect as to Company and are the legal, valid
and binding obligation of Company and/or its Subsidiaries, enforceable against
them in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Neither Company nor any of its Subsidiaries is
in breach or default (with or without notice or lapse of time, or both) in any
material respect under any Material Contract nor, to the knowledge of Company,
is any other party to any Material Contract in breach or default (with or
without notice or lapse of time, or both) thereunder in any material respect.
Neither Company nor any of its Subsidiaries is a party to any existing contract,
obligation or commitment of any type in any of the following categories: (1) any
sales contract, including any open bid or quotation, which is of an open-end or
blanket nature; (2) contracts for the purchase of materials, supplies or
equipment which have not been entered into in the ordinary course of business
and consistent with past practice or for capital expenditures in excess of
$50,000; (3) contracts with distributors, manufacturers' representatives or
sales agents, except those which are terminable at the option of Company or any
of its Subsidiaries on 60 days' notice or less without incurring any liability
in excess of $25,000; (4) contracts under which Company or any of its
Subsidiaries has, except by way of endorsement of negotiable instruments for
collection in the ordinary course of business and consistent with past practice,
become absolutely or contingently or otherwise liable for (aa) the performance
of any other person, firm or corporation under a contract, or (bb) the whole or
any part of the indebtedness or liabilities of any other person, firm or
corporation; (5) powers of attorney outstanding from

                                      19
<PAGE>

Company or any of it Subsidiaries other than as issued in the ordinary course of
business and consistent with past practice with respect to customs, insurance,
patent, trademark or tax matters, or to agents for service of process; (6)
contracts under which any amount payable by Company or any of its Subsidiaries
is dependent upon the revenues or profits of Company or any of its Subsidiaries
(other than employment contracts containing bonus payment provisions dependent
on Company's or any of its Subsidiaries' financial performance which are
contained in the Company's Disclosure Schedule); (7) contracts with any party
for the loan of money or availability of credit to or from Company or any of its
Subsidiaries (except trade credit extended by Company or any of its Subsidiaries
to its or their customers or travel advances to its or their employees in the
ordinary course of business and consistent with past practice); or (8) any
hedging, option, derivative or other similar transaction.

     (l) Litigation.

     (i) There is no suit, claim, action or proceeding (at law or in equity)
pending or, to the knowledge of Company, threatened against Company or any of
its Subsidiaries, and to the knowledge of Company, there is no investigation
pending or threatened against Company or any of its Subsidiaries, in each case,
before any court or other Governmental Entity, (ii) neither Company nor any of
its Subsidiaries is subject to any outstanding order, writ, judgement,
injunction, decree or arbitration order or award, and (iii) to the knowledge of
Company, no event, fact or circumstance which could reasonably be expected to
give rise to a suit, claim, action, or proceeding (at law or in equity) against
Company or any of its Subsidiaries exist that, in any such case described in
clauses (i), (ii) and (iii), could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Company. As of the date
hereof, there are no suits, claims, actions, proceedings or investigations
pending or, to the Company's Knowledge, threatened, seeking to prevent, hinder,
modify or challenge the transactions contemplated by this Agreement.

     (m) Compliance with Applicable Laws. All federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights (collectively, "Permits") necessary for
each of Company and its Subsidiaries to own, lease or operate its properties and
assets and to carry on its business as now conducted have been obtained or made,
and there has occurred no default (with or without notice or lapse of time or
both) under any such Permit, except for the lack of Permits and for defaults
under Permits which lack or default could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company. Company
and its Subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity, except for
non-compliance which could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company.

     (n) Environmental Laws. To Company's Knowledge: (i) neither Company nor any
of its Subsidiaries has violated or is in violation of any Environmental Law (as
defined in Section 9.3(g)); (ii) none of the Leased Real Property (including
without limitation soils and surface and ground waters) has been or are
contaminated with any Hazardous Substance (as defined in Section 9.3(h)); (iii)
neither Company nor any of its Subsidiaries is potentially liable or liable for
any off-site contamination; (iv) neither Company nor any of its Subsidiaries has
any

                                      20
<PAGE>

notice of an actual liability, remediation obligation or reporting duty under
any Environmental Law; (v) no assets of Company or any of its Subsidiaries are
subject to pending or threatened Liens under any Environmental Law; (vi) Company
and its Subsidiaries have all Permits required under any Environmental Law
("Environmental Permits"), other than Environmental Permits where the failure to
have such permits could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company; and (vii) Company and
its Subsidiaries are in compliance with their respective Environmental Permits.

     (o) Taxes.

     (i) Except where the failure to do so could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company,
each of Company and each Subsidiary of Company (and any affiliated or unitary
group of which any such person was a member) has (A) timely filed all federal,
state, local and foreign returns, declarations, reports, estimates, information
returns and other statements of any kind ("Returns") required to be filed by or
for it in respect of any Taxes (as defined in the last paragraph of this Section
4.1(o)), the Company has not filed for an extension to file any Returns, and has
caused such Returns as so filed to be true, correct and complete, (B)
established reserves that are reflected in Company's December 31, 1999 audited
financial statements and that as so reflected are adequate for the payment of
all Taxes with respect to the results of operations of Company and its
Subsidiaries through the date of such financial statements, and (C) timely
withheld and paid over to the proper taxing authorities all Taxes required to be
so withheld and paid over through the date hereof. Each of Company and each
Subsidiary of Company (and any affiliated or unitary group of which any such
person was a member) has timely paid all Taxes with respect to any Returns
referred to in the immediately preceding sentence and that became due and
payable on or before the date hereof.

     (ii) To the Company's Knowledge, (A) there has been no taxable period for
which a Return of Company or any of its Subsidiaries has been examined on audit
by the Internal Revenue Service (the "IRS") or an applicable state, local or
foreign taxing authority that remains open as of the date hereof, and (B) except
for alleged deficiencies which have been finally and irrevocably resolved,
Company has not received formal or informal notification that any deficiency for
any Taxes, the amount of which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company, has been
or will be proposed, asserted or assessed against Company or any of its
Subsidiaries by any federal, state, local or foreign taxing authority or court
with respect to any period.

     (iii) Neither Company nor any of its Subsidiaries has (A) executed or
entered into with the IRS or any other taxing authority any agreement or other
document that continues in force and effect beyond the Effective Time and that
extends or has the effect of extending the period for assessments or collection
of any Taxes, (B) executed or entered into with the IRS or any other taxing
authority any closing agreement or other similar agreement (nor has Company or
any of its Subsidiaries received any ruling, technical advice memorandum or
similar determination) affecting the determination of Taxes required to be shown
on any

                                      21
<PAGE>

     Return not yet filed, or (C) requested any extension of time to be granted
     to file after the Effective Date any Return required by applicable law to
     be filed by it.

          (iv) Neither Company nor any of its Subsidiaries has made an election
     under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
     Code apply to any disposition of a subsection (f) asset (as such term is
     defined in Section 341(f)(4) of the Code) owned by Company or any of its
     Subsidiaries. None of the assets of Company or any of its Subsidiaries is
     required to be treated as being owned by any other person pursuant to the
     "safe harbor" leasing provisions of Section 168(f)(8) of the Internal
     Revenue Code of 1954 as formerly in effect.

          (v)   Neither Company nor any of its Subsidiaries is a party to, is
     bound by or has any obligation under any tax sharing agreement or similar
     agreement or arrangement.

          (vi)  Company has no pending application with the IRS under Section
     481(a) of the Code requesting a change in accounting method or otherwise.

          (vii) Neither Company nor any of its Subsidiaries is, or has been, a
     United States Real Property Holding Corporation within the meaning of
     Section 897(c)(2) of the Code during the applicable period specified in
     Section 897(c)(1)(A)(ii) of the Code.

          (viii) Except for the group of which Company is presently the common
     parent, Company has never been a member of an affiliated group of
     corporations, within the meaning of Section 1504 of the Code, and each of
     Company's Subsidiaries has never been a member of an affiliated group of
     corporations, within the meaning of Section 1504 of the Code, except where
     Company was the common parent of such affiliated group.

     For purposes of this Agreement, "Taxes" shall mean all federal, state,
  local, foreign or other jurisdiction taxes including, but without limitation,
  income, property, sales, excise, employment, payroll, franchise, withholding
  and other taxes, tariffs, charges, fees, levies, imposts, duties, licenses or
  other assessments of every kind and description, together with any interest
  and any penalties, additions to tax or additional amounts imposed by any
  taxing authority.

    (p)  Benefit Plans.  The Company's Disclosure Schedule sets forth a true,
  correct and complete list of all the employee benefit plans (as that phrase is
  defined in Section 3(3) of the Employee Retirement Income Security Act of
  1974, as amended ("ERISA")) maintained or contributed to for the benefit of
  any current or former employee, officer or director of Company or any of its
  Subsidiaries ("Company ERISA Plans") and any other benefit or compensation
  plan, program or arrangement maintained or contributed to for the benefit of
  any current or former employee, officer or director of Company or any of its
  Subsidiaries (Company ERISA Plans and such other plans being referred to as
  "Company Plans"). Company has delivered to Parent and its representatives a
  true, correct and complete copy of every document pursuant to which each
  Company Plan is established or operated (including any summary plan
  descriptions), a written description of any Company Plan for which there is no
  written document, and the three most recent annual reports, financial
  statements and

                                      22
<PAGE>

actuarial valuations with respect to each Company Plan, if required. Except as
specified in the Company's Disclosure Schedule:

          (i)   No member of Company Group (as defined below) maintains, or has
     at any time established or maintained, or has at any time obligated to
     make, or made, contributions to or under any multiemployer plan (as defined
     in Section 3(37) and Section 4001(a)(3) of ERISA).

          (ii)  None of Company Plans promises or provides retiree health or
     life insurance benefits to any person (other than continuation health
     coverage benefits under the Consolidated Omnibus Budget Reconciliation
     Act).

          (iii) None of Company Plans provides for payment of a benefit, the
     increase of a benefit amount, the payment of a contingent benefit or the
     acceleration of the payment or vesting of a benefit by reason of the
     execution of this Agreement or the consummation of the transactions
     contemplated by this Agreement.

          (iv)  Neither Company nor any of its Subsidiaries has an obligation to
     adopt, or is considering the adoption of, any new Company Plan or, except
     as required by law, the amendment of an existing Company Plan.

          (v)   The IRS has issued favorable determination letters to the effect
     that each Company ERISA Plan intended to be qualified under Section 401(a)
     of the Code qualifies under Code Section 401(a) and that any related trust
     is exempt from taxation under Code Section 501(a), and such determination
     letters remain in effect and have not been revoked. Copies of the most
     recent determination letters and any outstanding requests for a
     determination letter with respect to each Company ERISA Plan have been
     delivered to Parent. No Company ERISA Plan has been amended since the
     issuance of each respective determination letter. The Company ERISA Plans
     currently comply in all material respects in form with the requirements
     under Code Section 401(a), other than changes required by statutes,
     regulations and rulings for which amendments are not yet required.

     No issue concerning the qualification of Company ERISA Plans is pending
before or, to the knowledge of Company, is threatened by the IRS. The Company
ERISA Plans have been administered in all material respects according to their
terms (except for those terms which are inconsistent with the changes required
by statutes, regulations, and rulings for which changes are not yet required to
be made, in which case Company ERISA Plans have been administered in accordance
with the provisions of those statutes, regulations and rulings) and in all
material respects in accordance with the requirements of Code Section 401(a), in
each case, except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company. Neither Company nor any
of its Subsidiaries or any other entities which now or in the past constitute a
single employer within the meaning of Code Section 414 (the "Company Group") or
any fiduciary of any Company ERISA Plan has done anything that would adversely
affect the qualified status of Company ERISA Plans or the related trusts.

                                      23
<PAGE>

     Any Company ERISA Plan which is required to satisfy Code Section 401(k)(3)
and 401(m)(2) has been tested for compliance with, and has satisfied the
requirements of, Code Section 401(k)(3) and 401(m)(2) for each plan year ending
prior to the Closing Date.

          (vi) Each Company Plan has been operated in accordance with its terms
     and the requirements of all applicable law, in each case, except as could
     not, individually or in the aggregate, reasonably be expected to have a
     Material Adverse Effect on Company.

          (vii) To the Company's Knowledge, no member of Company Group (other
     than the Company or any of its Subsidiaries) nor any other "disqualified
     person" or "party in interest" (as defined in Code Section 4975 and ERISA
     Section 3(14), respectively) with respect to Company Plans, has engaged in
     any "prohibited transaction" (as defined in Code Section 4975 or ERISA
     Section 406). All members of Company Group and all "fiduciaries" (as
     defined in ERISA Section 3(21)) with respect to Company Plans, including
     any members of Company Group which are fiduciaries as to a Company ERISA
     Plan, have complied in all respects with the requirements of ERISA Section
     404. To the Company's knowledge, no member of Company Group (other than the
     Company or any of its Subsidiaries) and no party in interest or
     disqualified person with respect to Company Plans has taken or omitted any
     action which could lead to the imposition of an excise tax under the Code
     or a fine under ERISA. To the Company's knowledge, no member of Company
     Group (other than the Company or any of its Subsidiaries) is subject to any
     material liability, tax or penalty whatsoever to any person whomsoever as a
     result of any member of Company Group engaging in a prohibited transaction
     under ERISA or the Code, and Company Group has no knowledge of any
     circumstances which reasonably might result in any such material liability,
     tax or penalty as a result of a breach of fiduciary duty under ERISA.

          (viii) To the Company's Knowledge, no member of Company Group (other
     than the Company or any of its Subsidiaries) maintains or has maintained an
     "employee benefit pension plan" within the meaning of ERISA Section 3(2)
     that is or was subject to Title IV of ERISA or has incurred any direct or
     indirect liability under, arising out of or by operation of Title IV of
     ERISA in connection with the termination of, or withdrawal from, any
     Company ERISA Plan or other retirement plan or arrangement, and no fact or
     event exists that could reasonably be expected to give rise to any such
     liability.

          (ix) To the Company's Knowledge, each member of Company Group (other
     than the Company or any of its Subsidiaries) has made full and timely
     payment of, or has accrued pending full and timely payment, all amounts
     which are required under the terms of each of Company Plans and in
     accordance with applicable laws to be paid as a contribution to each
     Company Plan and no excise taxes are assessable as a result of any
     nondeductible or other contributions made or not made to a Company Plan.
     The assets of all Company Plans which are required under applicable laws to
     be held in trust are in fact held in trust, and the assets of each such
     Company Plan equal or exceed the liabilities of each such plan. The
     liabilities of each other plan are properly and accurately reported on the
     financial statements and records of Company. The assets of each Company
     Plan are reported at their fair market value on the books and records of
     each plan.

                                      24
<PAGE>

   (x) There are no claims relating to Company Plans, other than routine
claims for benefits.

   (xi) Each member of Company Group has complied with the continuation
coverage requirements of Section 1001 of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608. Each
member of Company Group has also complied with the portability, access, and
renewability provisions of Section K, Chapter 100 of the Code and Section 701
et. seq. of ERISA.

   (xii) No member of Company Group is obligated, contingently or otherwise,
under any agreement to pay any amount which would be treated as a "parachute
payment," as defined in Code Section 280G(b) (determined without regard to Code
Section 280G(b)(2)(A)(ii)).

   (xiii) None of Company Plans provide for benefits or other participation
therein, and Company has received no claims or demands for participation in or
benefits under any Company Plan, by any individual classified or treated by
Company as an independent contractor.

    (q) Absence of Changes in Benefit Plans. Since December 31, 1999, neither
Company nor any of its Subsidiaries has adopted or agreed to adopt any
collective bargaining agreement or any Company Plan.

   (r)  Labor Matters.

        (i) Neither Company nor any of its Subsidiaries is a party to any
   employment, labor or collective bargaining agreement, and there are no
   employment, labor or collective bargaining agreements which pertain to
   employees of Company or any of its Subsidiaries. Company has heretofore
   delivered to Parent true, complete and correct copies of the agreements
   referred to in the previous sentence, together with all amendments,
   modifications, supplements or side letters affecting the duties, rights and
   obligations of any party thereunder.

     (ii) No employees of Company or any of its Subsidiaries are represented
   by any labor organization and, to the knowledge of Company, no labor
   organization or group of employees of Company or any of its Subsidiaries has
   made a pending demand for recognition or certification. There are no
   representation or certification proceedings or petitions seeking a
   representation proceeding presently pending or threatened in writing to be
   brought or filed with the National Labor Relations Board or any other labor
   relations tribunal or authority and, to the knowledge of Company, there are
   no organizing activities involving Company or any of its Subsidiaries pending
   with any labor organization or group of employees of Company or any of its
   Subsidiaries.

     (iii) There are no (A) unfair labor practice charges, grievances or
   complaints pending or threatened in writing by or on behalf of any employee
   or group of employees of Company or any of its Subsidiaries, or (B)
   complaints, charges or claims against Company or any of its Subsidiaries
   pending, or threatened in writing to be brought or filed, with any

                                      25
<PAGE>

   Governmental Entity or arbitrator based on, arising out of, in connection
   with, or otherwise relating to the employment or termination of employment of
   any individual by Company or any of its Subsidiaries.

   (s) State Takeover Statutes; Company Rights Plan. As of the date hereof and
at all times on or prior to the Effective Time, the restrictions applicable to
business combinations contained in affiliated transactions and control share
acquisitions contained in the CGCL or any other applicable state takeover
statute, are, and will be, inapplicable to the execution, delivery and
performance of this Agreement and to the consummation of the Merger and the
other transactions contemplated by this Agreement.

    (t) Brokers. No broker, investment banker, financial advisor or other
person, other than Merrill, Lynch, Pierce, Fenner & Smith Incorporated, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Company.

    (u) Voting Requirements. The affirmative vote of the (i) holders of at least
a majority of the outstanding Common Stock entitled to vote at a meeting of the
Company's stockholders with respect to the approval of this Agreement, voting
together as a single class, (ii) the holders of at least a majority of the
outstanding Preferred Stock entitled to vote at a meeting of the Company's
stockholders with respect to the approval of this Agreement, voting together as
a single class; and (iii) the holders of at least a majority of the outstanding
Common Stock and Preferred Stock entitled to vote at a meeting of the Company's
stockholders with respect to the approval of this Agreement, voting together as
a combined class, are the only votes of the holders of any class or series of
Company's capital stock or other securities required in connection with the
consummation by Company of the Merger and the other transactions contemplated
hereby to be consummated by Company.

    (v) Insurance. Company has insurance policies and fidelity bonds covering
its and its Subsidiaries' assets, business, equipment, properties, operations,
employees, officers and directors of the type and in amounts customarily (to the
Company's knowledge) carried by persons conducting business similar to that of
Company. All premiums due and payable under all such policies and bonds have
been paid, and Company is otherwise in full compliance with the terms and
conditions of all such policies and bonds, except where the failure to have made
payment or to be in full compliance could not reasonably be expected to have a
Material Adverse Effect. The reserves established by Company in respect of all
matters as to which Company self-insures, including for workers' compensation
and workers' medical coverage, are adequate and appropriate. The Company's
Disclosure Schedule sets forth a true and complete list of all insurance
policies, fidelity bonds and self-insurance provisions of Company.

    (w) Business Relationships. The relationships of Company and its
Subsidiaries with their significant customers, distributors, licensors,
designers and suppliers are satisfactory in all material respects to the Company
and, to Company's knowledge, the execution of this Agreement and the
consummation of the Merger and the other transactions contemplated

                                      26
<PAGE>

  hereby will not materially adversely affect the relationships of Company and
  its Subsidiaries with such customers, distributors, licensors, designers and
  suppliers.

    (x) HSR Compliance.  The Company is not a person (nor is it included in a
  person), that has total assets of $100 million or more or annual net sales of
  $100 million or more, within the meaning of, and all as determined in
  accordance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
  amended.

  Section 4.2 Representations and Warranties of Parent and Merger Sub.  Parent
and Merger Sub represent and warrant to Company that the statements contained in
this Section 4.2 are true, correct and complete as of the date hereof, and will
be true, correct and complete as of the Closing Date (unless specifically made
as of another date), except as specified to the contrary in the corresponding
paragraph of the Disclosure Schedule prepared by Parent accompanying this
Agreement (the "Parent Disclosure Schedule").  The Parent Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.2.

    (a) Organization and Standing.  Each of Parent and Merger Sub is a
  corporation duly organized, validly existing and in good standing under the
  laws of the jurisdiction in which it is incorporated and has the requisite
  corporate power and authority to carry on its business as now being conducted.
  Each of Parent and Merger Sub is duly qualified or licensed to do business and
  is in good standing in each jurisdiction in which the nature of its business
  or the ownership or leasing of its properties makes such qualification or
  licensing necessary, other than in such jurisdictions where the failure to be
  so qualified or licensed could not reasonably be expected to have,
  individually or in the aggregate, a Material Adverse Effect on Parent or
  Merger Sub.

    (b) Authority; Noncontravention; and Corporate Power.  Each of Parent and
  Merger Sub  has the requisite corporate power and authority to enter into this
  Agreement, the Warrants and the Registration Rights Agreement (collectively,
  the "Transaction Documents"), as applicable, and to consummate the
  transactions contemplated hereby and thereby. The execution and delivery of
  the Transaction Documents by Parent and Merger Sub, as applicable, and the
  consummation by Parent and Merger Sub of the transactions contemplated thereby
  have been duly authorized by all necessary corporate action on the part of
  Parent and Merger Sub.  The Agreement has been duly executed and delivered by
  Parent, and the Warrants and Registration Rights Agreement will, when issued
  and delivered in accordance with this Agreement, be duly executed and
  delivered by Parent and, assuming that the Transaction Documents constitute a
  valid and binding obligation of the other parties, constitute a valid and
  binding obligation of Parent and Merger Sub, as applicable, enforceable
  against each of them in accordance with their terms, subject to applicable
  bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
  similar laws affecting creditors' rights and remedies generally and to general
  principles of equity. Neither Parent or Merger Sub is in violation of its
  articles of incorporation (or the comparable governing documents) or bylaws.
  The execution and delivery of the Transaction Documents do not, and the
  consummation of the transactions contemplated thereby and compliance with the
  provisions thereof will not, (i) conflict with any of the provisions of the
  articles of

                                      27
<PAGE>

  incorporation or bylaws of Parent or Merger Sub (ii) subject to the
  governmental filings and other matters referred to in the next section,
  conflict with, result in a breach of or default (with or without notice or
  lapse of time, or both) under, or give rise to a material obligation, a right
  of termination, cancellation or acceleration of any obligation or a loss of a
  material benefit under, or require the consent of any person under, any
  indenture or other agreement, permit, concession, franchise, license or
  similar instrument or undertaking to which Parent or Merger Sub is a party or
  by which Parent or Merger Sub or any of their respective assets is bound or
  affected, or (iii) subject to the governmental filings and other matters
  referred to in Section 4.1(c), contravene any domestic or foreign law, rule or
  regulation or any order, writ, judgment, injunction, decree, determination or
  award currently in effect and applicable to Parent or Merger Sub, which, in
  the case of clauses (ii) and (iii) above could reasonably be expected to have,
  individually or in the aggregate, a Material Adverse Effect on Parent or
  Merger Sub.

    (c) Consents and Approvals. No consent, approval or authorization of, or
  declaration or filing with, or notice to, any Governmental Entity or any other
  third party which has not been received or made (or has been received or made
  but is not otherwise in full force and effect) is required by or with respect
  to Parent or Merger Sub in connection with the execution and delivery of the
  Transaction Documents by Parent or Merger Sub or the consummation by Parent or
  Merger Sub of the transactions contemplated thereby, except for (i) the filing
  of the certificate and/or agreement of merger with the California Secretary of
  State and the Delaware Secretary of State, (ii) such other consents,
  approvals, authorizations, filings or notices as are specified in the Parent
  Disclosure Schedule, and (iii) any other consents, approvals, authorizations,
  filings or notices the failure to make or obtain which could not reasonably be
  expected to have, individually or in the aggregate, a Material Adverse Effect
  on Parent or Merger Sub.

    (d) Parent Company Stock and Warrants.  The shares of Common Stock of Parent
  to be issued pursuant to the Merger and upon exercise of the Warrants (in
  compliance with their respective terms, including the payment of any required
  additional consideration) will, when issued and delivered in accordance with
  this Agreement, be duly authorized, validly issued, fully paid and non-
  assessable and, based in part on the representations and warranties of the
  Company's stockholders contained in the NonAccredited Stockholder
  Questionnaires and Accredited Stockholder Questionnaires delivered to Parent
  in connection with this Agreement, will be issued in compliance with all
  applicable securities laws; provided, however, the Parent Common Stock to be
  issued hereunder may be subject to restrictions on transfer under applicable
  federal and state securities laws.

    (e) SEC Filings; Parent Financial Statements.

     (i) Parent has filed all forms, reports, registration statements and
   documents with the Securities and Exchange Commission (the "SEC") since
   January 1, 1998, and has made available to the Company such forms, reports
   and documents in the form filed with the SEC.  All such required forms,
   reports and documents (including those that Parent may file subsequent to the
   date hereof until the Closing) are referred to herein as the "Parent SEC
   Reports"; provided, that any Parent SEC Report shall be deemed to include all
   amendments

                                      28
<PAGE>

   to such report through the date hereof. As of their respective filing dates
   (or if amended or superseded by a filing prior to the date of this Agreement,
   then on the date of such filing), the Parent SEC Reports (A) complied in all
   material respects with the requirements of the Securities Act of 1933, as
   amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
   amended, as the case may be, and the rules and regulations of the SEC
   thereunder applicable to such Parent or SEC Reports and (B) did not contain
   any untrue statement of a material fact or omit to state a material fact
   required to be stated therein or necessary in order to make the statements
   therein, in the light of the circumstances under which they were made, not
   misleading.

     (ii) The consolidated financial statements of Parent (including, in each
   case, the notes thereto), included in the Parent SEC Reports (the "Parent
   Financial Statements"), including each Parent SEC Report filed after the date
   hereof until the Closing, (A) complied as to form in all material respects
   with the applicable rules and regulations of the SEC with respect thereto;
   (B) was prepared in accordance with GAAP applied on a consistent basis
   throughout the periods indicated (other than the provision of notes to the
   financial statements for quarterly periods); and (C) fairly presented the
   consolidated financial position of Parent and its subsidiaries at the
   respective dates thereof and the consolidated results of Patent's operations
   and cash flows for the periods indicated (subject, in the case of unaudited
   financial statements, to audit adjustments).  There has been no change in
   Parent's accounting policies except as described in the notes to the Parent
   Financial Statements.

    (f) Parent Capital Structure.  The authorized capital stock of Parent as of
  the date of this Agreement consists of 40,000,000 shares of Common Stock,
  $0.001 par value per share, of which 14,883,501 shares are issued and
  outstanding, and 10,000,000 shares of Preferred Stock, $0.001 par value per
  share, of which 11,570 shares of Series A 4% Convertible Redeemable Preferred
  Stock are issued and outstanding and 30,000 shares of Series B 4% Convertible
  Redeemable Preferred Stock are issued and outstanding.

    (g) Merger Sub Capital Structure.  The authorized capital stock of the
  Merger Sub consists of 1,000 shares of authorized Common Stock, $0.001 par
  value per share, of which 1,000 shares are issued and outstanding and owned by
  Level 8 Technologies.

    (h) Litigation.  Other than as set forth in the Parent SEC Reports, there is
  no legal action, suit or proceeding of any nature pending or to the Parent's
  Knowledge threatened against the Parent, its properties or any of its
  officers, directors or employees, nor, to the Knowledge of the Parent, is
  there any reasonable basis therefor.

    (i) No Material Adverse Change.  Since the date of the balance sheet
  included in the Parent's most recently filed SEC Report, there has not
  occurred any material adverse change in the financial condition, liabilities,
  assets, business or results of operations of Parent.  For purposes of this
  section, changes in economic conditions or changes in the industry and markets
  in which the Parent competes shall not constitute a material adverse change,
  whether occurring at any time or from time to time.

                                      29
<PAGE>

    (j) Merger Sub.  All of the outstanding capital stock of Merger Sub is owned
  by Level 8 Technologies free and clear of any Lien, claim or encumbrances or
  any agreement with respect thereto.  Since the date of its incorporation,
  Merger Sub has not engaged in any activity of any nature except in connection
  with or as contemplated by this Agreement and the Merger Agreement.

    (k) Brokers' and Finders' Fees.  Except as otherwise provided herein, the
  Parent and Merger Sub have not incurred, nor will they incur, directly or
  indirectly, any liability for brokerage or finders' fees or agent's
  commissions or any similar charges in connection with this Agreement or any
  transaction contemplated hereby.

    (l) Representations Complete.  Neither this Agreement nor the information
  provided by the Parent or Merger Sub (including information incorporated by
  reference from Parent SEC Reports) for the purpose of making statements or
  furnishing in or in connection with documents mailed or delivered to the
  stockholders of the Company in connection with soliciting their consent to the
  principal terms of this Agreement and the Merger (to the extent that such
  documents were prepared by or include information provided by the Parent or
  Merger Sub), contains any untrue statement of a material fact, or omits to
  state any material fact necessary in order to make the statements contained
  herein or therein, in the light of the circumstances under which made, not
  misleading.

                                   ARTICLE V

                         CONDUCT OF BUSINESS OF COMPANY

  Section 5.1 Conduct of Business of Company.  Except as expressly provided for
herein, during the period from the date of this Agreement to the Effective Time,
Company shall, and shall cause each of its Subsidiaries to, act and carry on its
business only in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, use reasonable best efforts to preserve
intact its current business organizations, keep available the services of its
current key officers and employees and preserve the goodwill of those engaged in
material business relationships with Company, and to that end, without limiting
the generality of the foregoing, Company shall not, and shall not permit any of
its Subsidiaries to, without the prior written consent of Parent, which consent
shall not be unreasonably withheld:

    (a) (i) declare, set aside or pay any dividends on, or make any other
  distributions (whether in cash, securities or other property) in respect of,
  any of its outstanding capital stock (other than, with respect to a Subsidiary
  of Company, to its corporate Parent), (ii) split, combine or reclassify any of
  its outstanding capital stock or issue or authorize the issuance of any other
  securities in respect of, in lieu of or in substitution for shares of its
  outstanding capital stock, or (iii) purchase, redeem or otherwise acquire any
  shares of its outstanding capital stock or any rights, warrants or options to
  acquire any such shares, except, in the case of this clause (iii), for the
  acquisition of Shares from holders of Company Options in full or partial
  payment of the exercise price payable by such holder upon exercise of Company
  Options;

                                      30
<PAGE>

    (b) issue, sell, grant, pledge or otherwise encumber any shares of its
  capital stock, any other voting securities or any securities convertible into
  or exchangeable for, or any rights, warrants or options to acquire, any such
  shares, voting securities or convertible or exchangeable securities, other
  than upon the exercise of Company Options outstanding on the date of this
  Agreement;

    (c) amend its articles of incorporation, bylaws or other comparable charter
  or organizational documents;

    (d) directly or indirectly acquire, make any investment in, or make any
  capital contributions to, any person other than in the ordinary course of
  business consistent with past practice;

    (e) directly or indirectly sell, pledge or otherwise dispose of or encumber
  any of its properties or assets that are material to its business, except for
  sales, pledges or other dispositions or encumbrances in the ordinary course of
  business consistent with past practice;

    (f) incur any indebtedness for borrowed money or guarantee any such
  indebtedness of another person, other than indebtedness owing to or guarantees
  of indebtedness owing to Company or any direct or indirect wholly owned
  Subsidiary of Company, or (ii) make any loans or advances to any other person,
  other than to Company or to any direct or indirect wholly owned Subsidiary of
  Company and other than routine travel advances to employees or customer trade
  credit consistent with past practice, except, in the case of clause (i), for
  borrowings under existing credit facilities described in the Company's
  Disclosure Schedule in the ordinary course of business consistent with past
  practice;

    (g) grant or agree to grant to any officer, employee or consultant any
  increase in wages or bonus, severance, profit sharing, retirement, deferred
  compensation, insurance or other compensation or benefits, or establish any
  new compensation or benefit plans or arrangements, or amend or agree to amend
  any existing Company Plans, except as may be required under existing
  agreements or by law and normal, regularly scheduled increases in respect of
  non-officer employees consistent with past practices;

    (h) enter into or amend any employment, consulting, severance or similar
  agreement with any individual, except with respect to new hires of nonofficer
  employees in the ordinary course of business consistent with past practice;

    (i) adopt or enter into a plan of complete or partial liquidation,
  dissolution, merger, consolidation, restructuring, recapitalization, share
  exchange or other material reorganization or any agreement involving any sale,
  lease, exchange, mortgage, pledge, transfer or other disposition of all or any
  significant portions of the assets of the Company or any of its Subsidiaries,
  in a single transaction or series of related transactions which could
  reasonably be expected to interfere with the completion of the Merger;

    (j) make any tax election or settle or compromise any income tax liability
  of Company or of any of its Subsidiaries involving on an individual basis more
  than $25,000;

                                      31
<PAGE>

    (k) make any change in any method of accounting or accounting practice or
  policy, except as required by any changes in generally accepted accounting
  principles;

    (l) enter into any agreement, understanding or commitment that restrains,
  limits or impedes Company's ability to compete with or conduct any business or
  line of business, except for any such agreement, understanding or commitment
  entered into in the ordinary course of business consistent with past practice;

    (m) plan, announce, implement or effect any reduction in force, lay-off,
  early retirement program, severance program or other program or effort
  concerning the termination of employment of employees of Company or its
  Subsidiaries;

    (n) except as previously approved by the Board of Directors of Company prior
  to the date hereof and as identified to Parent prior to the date hereof,
  authorize or commit to make capital expenditures in excess of $50,000; or

    (o) authorize any of, or commit or agree to take any of, the foregoing
  actions in respect of which it is restricted by the provisions of this Section
  5.1.

  Section 5.2 No Solicitation.  Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1,
the Company shall, and shall cause its subsidiaries and all of its or their
affiliates, officers, directors, employees, agents and representatives
(including without limitation any investment banker, financial advisor, attorney
or accountant retained by the Company or any of its subsidiaries or affiliates)
to discontinue any solicitation efforts, discussions or negotiations with
respect to any Acquisition Proposal (as hereinafter defined) with any person or
entity other than Parent and Merger Sub.  The Company shall not, and shall not
authorize or permit any of its subsidiaries or any of its or their affiliates,
officers, directors, employees, agents or representatives (including without
limitations any investment banker, financial advisor, attorney or accountant
retained by the Company or any of its subsidiaries or affiliates) to, directly
or indirectly, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any action to facilitate, any inquiries, any
expression of interest or the making of any proposal that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal, or enter into or
maintain or continue discussions or negotiate with any person in furtherance of
such inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal.  For Purposes of this Agreement, "Acquisition Proposal"
means an inquiry, offer, proposal or other indication of interest (other than
the potential acquisition) regarding any of the following matters involving the
Company: (a) any merger, consolidation, share exchange, tender or exchange
offer, recapitalization, business combination or other similar transaction; (b)
any acquisitions of voting stock or other securities issued by the Company or
any of its subsidiaries; (c) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or any substantial portion of the assets of
the Company and its subsidiaries, taken as a whole, in a single transaction or
series of related transactions; or (d) any proposal, plan or intention to do any
of the foregoing or any agreement in principle or other agreement to engage in
any of the foregoing.  Each of the Company, the Parent and Merger Sub
acknowledge that this Section 5.2 was a significant inducement for Parent and
Merger Sub to

                                      32
<PAGE>

enter into this Agreement and the absence of such provision would have resulted
in either (i) a material reduction in the Merger Consideration to be paid to the
stockholders of the Company, or (ii) a failure to induce Parent and Merger Sub
to enter into this Agreement.

                                  ARTICLE VI

                             ADDITIONAL COVENANTS

  Section 6.1 Stockholder Approval.  As soon as practicable following the date
hereof Parent shall take any action required to be taken under the securities
laws and applicable Blue Sky or securities laws in connection with the issuance
of the shares of Parent's Common Stock upon consummation of the Merger.  The
Company shall solicit the written consent of each stockholder as soon as
reasonably practicable following the date hereof for the purpose of voting upon
approval of this Agreement and the transactions contemplated hereby, and such
other related matters as it deems appropriate.  In connection with such
solicitation, (a) Parent shall prepare, and Company shall assist in the
preparation of an offering statement, satisfying the requirements set forth in
Rule 502(b)(2) under the Securities Act, and comparable, applicable state Blue
Sky or securities laws (the "Offering Statement") and Company shall cause such
Offering Statement to be mailed or otherwise delivered to the stockholders of
the Company, (b) Company shall furnish to the Parent all information concerning
it that the Parent may reasonably request in connection with the Offering
Statement, (c) the Board of Directors of the Company shall recommend to its
stockholders the approval of the matters submitted for approval, and (d) the
Board of Directors and officers of the Company shall use their reasonable
efforts to obtain such stockholders' approval.  The Parties shall take all
action necessary or appropriate to cause the Merger to qualify for the exemption
from the registration requirements of the Securities Act provided by Rule 506
and comparable state Blue Sky or securities laws.  The Company shall use its
reasonable best efforts to obtain executed Non-Accredited Stockholder
Questionnaires and Accredited Stockholder Questionnaires from each holder of
Preferred Stock of the Company as soon as practicable after delivery of the
Offering Statement.  Parent shall make all necessary filings with respect to the
Merger under the securities laws.

  Section 6.2 Access to Information, Confidentiality.  Upon reasonable notice,
Company shall, and shall cause each of its Subsidiaries to, afford to Parent and
to Parent's officers, employees, counsel, financial advisors and other
representatives access during the period prior to the Effective Time to all its
properties, books, contracts, commitments, Returns, personnel (with the prior
consent of the Company) and records and, during such period, Company shall, and
shall cause each of its Subsidiaries to, furnish as promptly as practicable to
Parent such information concerning its business, properties, financial
condition, operations and personnel as Parent may from time to time reasonably
request, provided, however, that Company shall not be required to disrupt its
business operations with respect to the provision of such information. Any such
investigation by Parent shall not affect the representations or warranties
contained in this Agreement. Except as required by law, Parent will hold, and
will cause its directors, officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any non-public
information obtained from Company in confidence to the extent required by, and
in accordance with the provisions of, the letter agreement(s) between Parent and

                                      33
<PAGE>

Company with respect to confidentiality and other matters, and Parent agrees
that, prior to the Effective Time, it will not use any such non-public
information to, directly or indirectly, divert or attempt to divert any
business, customer or employee of Company or any of its Subsidiaries.

  Section 6.3 Reasonable Best Efforts.  On the terms and subject to the
conditions set forth in this Agreement, each of the Parties shall use its
reasonable best efforts to take, or cause to be taken, all actions, and do, or
cause to be done, and assist and cooperate with the other Parties in doing, all
things necessary, proper or advisable (a) to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated hereby, including the satisfaction of the respective conditions set
forth in Article VII, and (b) to maintain Company's current customer
relationships.

  Section 6.4 Public Announcements.  Parent and Merger Sub, on the one hand, and
Company, on the other hand, shall consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press
release, SEC filing or other public statements with respect to the transactions
contemplated hereby, including the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law, by court process or by obligations pursuant
to the rules of The Nasdaq Stock Market.

  Section 6.5  Consents, Approvals and Filings.  Upon the terms and subject to
the conditions hereof, each of the Parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do, or
cause to be done, and assist and cooperate with the other Parties in doing, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Merger and the other transactions contemplated
hereby, including without limitation using its reasonable best efforts to obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with Company and its
Subsidiaries as are necessary for the consummation of the Merger and the other
transactions contemplated hereby and to fulfill the conditions to the Merger;
provided, however, that in no event shall Parent or any of its Subsidiaries be
required to agree or commit to divest, hold separate, offer for sale, abandon,
limit its operation or similar action with respect to any material assets
(tangible or intangible) or any business interest of it or any of its
Subsidiaries (including, without limitation, the Surviving Corporation after
consummation of the Merger) in connection with or as a condition to receiving
the consent or approval of any Governmental Entity. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall use their reasonable best efforts to take all such action.

  Section 6.6 Employee Benefit Matters.

  (a) Any Company Plans that have been disclosed in the Company's Disclosure
Schedule and are in effect at the Effective Time will continue to be sponsored
by and maintained without material change (except as required by law) by the
Parent and Surviving Corporation until such time as those Company Plans are
merged into Parent's benefit plans or the participants in the Company Plan
otherwise become covered under the Parent's benefit plans. Parent shall, and
shall

                                      34
<PAGE>

cause its Subsidiaries following the Effective Time (including the Surviving
Corporation) to, honor and provide for prompt payment of all accrued obligations
and benefits under all Company Plans and employment or severance agreements
between Company and persons who are or had been employees of Company or any of
its Subsidiaries at or prior to the Effective Time ("Covered Employees") that
are specifically identified in the Company's Disclosure Schedule, all in
accordance with their respective terms.

  (b) If Covered Employees are included in any benefit plan of Parent or its
Subsidiaries, Parent agrees that the Covered Employees shall receive credit
under such plan (other than any such plan providing for sabbaticals) for service
prior to the Effective Time with Company and its Subsidiaries to the same extent
such service was counted under similar Company Plans for purposes of
eligibility, vesting, eligibility for retirement (but not for benefit accrual)
and, with respect to vacation, disability and severance, benefit accrual. If
Covered Employees are included in any medical, dental or health plan other than
the plan or plans they participated in at the Effective Time, Parent agrees that
any such plans shall not include pre-existing condition exclusions, except to
the extent such exclusions were applicable under the similar Company Plan at the
Effective Time, and shall provide credit for any deductibles and co-payments
applied or made with respect to each Covered Employee in the calendar year of
the change.

  (c) Notwithstanding anything in this Agreement to the contrary, from and after
the Effective Time, the Surviving Corporation will have sole discretion over the
hiring, promotion, retention, firing and other terms and conditions of the
employment of employees of the Surviving Corporation. Except as otherwise
provided in this Section 6.6, nothing herein shall prevent Parent or the
Surviving Corporation from amending or terminating any Company Plan in
accordance with its terms.

  Section 6.7 Affiliates and Certain Stockholders.  Prior to the Closing Date,
Company shall deliver to Parent a letter identifying all persons who are, at the
time the Merger is submitted for approval to the stockholders of Company,
"affiliates" of Company for purposes of Rule 145 under the Securities Act.
Company shall use its best efforts to cause each such person to deliver to
Parent on or prior to the Closing Date a written agreement substantially in the
form attached as Exhibit E hereto.
                 ---------

  Section 6.8  Indemnification.

  (a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification provision under Company's articles of
incorporation or bylaws as each is in effect on the date hereof.

  (b) This Section 6.8 shall survive the consummation of the Merger and the
Effective Time, is intended to benefit and may be enforced by Company, Parent,
the Surviving Corporation and the indemnified parties, and shall be binding on
all successors and assigns of Parent and the Surviving Corporation.

                                      35
<PAGE>

  Section 6.9 Subsidiaries' Directors and Officers.  To the extent requested by
Parent, Company shall use its reasonable best efforts to obtain and deliver to
Parent prior to the Closing Date the resignation of each director and officer of
the Company and the Company's Subsidiaries.

  Section 6.10 Employment Agreements.  Company shall use its reasonable best
efforts to cause the persons identified by Parent to execute and deliver, prior
to the Effective Time, Employment Agreements on terms reasonably satisfactory to
Parent and such persons.

  Section 6.11 Employee Retention Incentive Pool.  Parent agrees to reserve up
to fifty thousand (50,000) shares of Parent Common Stock to be issued to
employees of Company who are eligible to receive such shares pursuant to the
Company's Employee Retention Incentive Pool (the "Retention Pool").  Generally,
employees of the Company who become employees of Parent following the Merger
shall be eligible to participate in the Retention Pool if such employees remain
employed by Parent at the time the Retention Pool is distributed; provided,
however, that employees of the Company who are employed by the Company as of the
Closing Date and (a) who do not become employees of Parent or (b) who are not
employed by Parent on the date of the Retention Pool is distributed and (c) who
did not voluntarily terminate their employment by Parent during such time frame
shall also be eligible to participate in the Retention Pool.  On or prior to the
Closing Date, the Company shall provide Parent with a list of Company employees
who are eligible to participate in the Retention Pool, accompanied by a ledger
indicating the number of shares to be issued to each such employee.  No more
than ninety (90) days following the Closing Date, Parent shall issue the shares
to such employees in accordance with the ledger; provided, however, Parent shall
have the right to issue such shares to employees of the Company who become
employees of Parent after the Effective Time in accordance with a Parent benefit
plan from which such shares may be issued. Parent shall register such shares
with the SEC by filing a Registration Statement on Form S-8 (or any successor
form) pertaining to the shares as soon as practicable following the Closing
Date, but in no event later than ninety (90) days following the Closing Date.
Any shares of Parent Common Stock to be issued pursuant to the Retention Pool
that are not issued under the Parent benefit plan and registered with the SEC
prior to the issuance of such shares shall be issued after December 31, 2000,
and registered by Parent under the terms and subject to the conditions of the
Registration Rights Agreement, which agreement shall be signed by Parent and
such persons requesting such registration.

                                  ARTICLE VII

                             CONDITIONS PRECEDENT

  Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.  The
respective obligation of each party to effect the Merger is subject to the
satisfaction or written waiver on or prior to the Closing Date of the following
conditions:

   (a) Stockholder Approval. The stockholders of the Company shall have approved
       this Agreement, and the consummation of the transactions contemplated
       hereby, including the Merger as and to the extent required by the CGCL or
       by the provisions of any governing instruments.

                                      36
<PAGE>

     (b) No action or Proceeding. No claim, action, suit or other proceeding
         shall be pending or threatened by any public authority or person before
         any court, agency or administrative body which would have the effect of
         making illegal, materially delaying or otherwise restraining or
         prohibiting the transactions contemplated hereby or allowing any
         material damages to be recovered or other material relief to be
         obtained as a result of the transactions contemplated hereby or as a
         result of any agreement entered into in connection with, or as a
         condition precedent to, the consummation of the transactions
         contemplated hereby.

     (c) No Injunctions or Restraints. No temporary restraining order,
         preliminary or permanent injunction or other order issued by any court
         of competent jurisdiction or other legal restraint or prohibition
         preventing the consummation of the Merger shall be in effect, provided,
         however, that the party invoking this condition shall have complied
         with its obligations under Section 6.5.

  Section 7.2 Conditions to Obligations of Parent and Merger Sub.  The
obligation of each of Parent and Merger Sub to effect the Merger is further
subject to satisfaction or written waiver on or prior to the Closing Date of the
following conditions:

     (a) Representations and Warranties.  Representations and warranties of
  Company contained in this Agreement (other than representations and warranties
  expressly made only as of a specific date, which shall be accurate as of such
  date) shall have been accurate in all respects as of the date of this
  Agreement and shall be accurate in all respects as of the Closing Date as if
  made on and as of the Closing Date, except for any such failure which,
  individually or in the aggregate, could not reasonably be expected to have a
  Material Adverse Effect on Company, and Parent and Merger Sub shall have
  received a certificate signed on behalf of Company by an authorized officer of
  Company to such effect.

    (b) Performance of Obligations of Company.  Company shall have performed in
  all material respects all obligations required to be performed by it under
  this Agreement at or prior to the Closing Date, and Parent and Merger Sub
  shall have received a certificate signed on behalf of Company by an authorized
  officer of Company to such effect.

    (c) No Material Adverse Change.  Since the date of this Agreement, Company
  and its Subsidiaries, taken as a whole, shall not have experienced any change,
  event or occurrence that has had or could reasonably be expected to have,
  individually or in the aggregate, a Material Adverse Effect on Company.

    (d) Consents.  All consents, authorizations, orders and approvals of (or
  filings or registrations with) any Governmental Entity or any other person
  required to be obtained or made prior to the Effective Time in connection with
  the execution, delivery and performance of this Agreement shall have been
  obtained or made, except for the filing of the certificate/agreement of merger
  pursuant to Section 1.3 and except where the failure to have obtained or made
  such consents, authorizations, orders, approvals, filings or registrations

                                      37
<PAGE>

  could not reasonably be expected to have, individually or in the aggregate, a
  Material Adverse Effect on Parent or the Surviving Corporation.

    (e) Affiliate Letters.  Parent shall have received from each person
  identified as an "affiliate" of Company pursuant to Section 6.7 an executed
  copy of an agreement in the form attached as Exhibit E hereto.
                                               ---------

    (f) Legal Opinion.  Parent shall have received a legal opinion from Crosby,
  Heafey, Roach & May Professional Corporation, legal counsel to the Company,
  substantially in the form attached hereto as Exhibit F.
                                               ---------

    (g) Dissenting Shares.  Holders of not more than five percent (5%) of the
  outstanding Shares shall have perfected dissenters' rights of their Shares in
  the manner required by the CGCL.

    (h) Delivery of Questionnaires.  Parent shall have received from the holders
  of not less than 95% of the outstanding Preferred Stock executed NonAccredited
  Stockholder Questionnaires and Accredited Stockholder Questionnaires, as
  applicable.

    (i) NonAccredited Stockholders.  There shall be no more than thirty-five
  (35) persons receiving Parent Common Stock and Warrants who are not deemed to
  be "accredited investors" as that term is defined in Rule 501 of Regulation D
  promulgated by the SEC, excluding Company employees who become employees of
  Parent after the Effective Time or are otherwise eligible to participate in
  the Retention Pool and who receive Parent Common Stock pursuant to Section
  6.11 hereof.

    (j) Closing of Asset Acquisition.  The transactions contemplated by that
certain Asset Purchase Agreement by and between Level 8 Technologies and the
Company shall have closed to the reasonable satisfaction of the Parent.

    (k) Conversion of Company Debt.  The outstanding indebtedness of the Company
identified on Schedule 7.2(k) shall have been converted into shares of Parent
              ---------------
Common Stock; provided, however, that in connection with the conversion of such
indebtedness, Parent shall have agreed to prepare and file with the SEC a
registration statement as soon as practicable following the Closing Date and to
use its best efforts to have such registration statement declared effective not
later than ninety (90) days after the Effective Time pursuant to a registration
rights agreement containing customary terms and conditions, including
indemnification and contribution provisions..

    (l) Additional Closing Documents.  Company shall have furnished to Parent
and Merger Sub such additional certificates, opinions and other documents as
Parent may have reasonably requested as to any of the conditions set forth in
this Section 7.2.

  Section 7.3 Conditions to Obligation of Company.  The obligation of Company to
effect the Merger is further subject to satisfaction or written waiver on or
prior to the Closing Date of the following conditions:

                                      38
<PAGE>

    (a) Representations and Warranties.  Representations and warranties of
  Parent and Merger Sub contained in this Agreement (other than representations
  and warranties expressly made as of a certain date, which shall be accurate as
  of such date) shall have been accurate in all respects as of the date of this
  Agreement and shall be accurate in all respects as of the Closing Date as if
  made on and as of the Closing Date, except for any such failure which,
  individually or in the aggregate, could not reasonably be expected to have a
  Material Adverse Effect on Parent, and Company shall have received a
  certificate signed on behalf of Parent and Merger Sub by an authorized officer
  of Parent to such effect.

    (b) Performance of Obligations of Parent and Merger Sub.  Each of Parent and
  Merger Sub shall have performed in all material respects all obligations
  required to be performed by it under this Agreement at or prior to the Closing
  Date, and Company shall have received a certificate signed on behalf of Parent
  by an authorized officer of Parent to such effect.

    (c) No Material Adverse Change.  Since the date of this Agreement, Parent
  and its Subsidiaries, taken as a whole, shall not have experienced any change,
  event or occurrence that has had or could reasonably be expected to have,
  individually or in the aggregate, a Material Adverse Effect on Parent.

    (d) Legal Opinion.  The Company shall have received a legal opinion from
  Powell, Goldstein, Frazer & Murphy LLP, legal counsel to Parent, substantially
  in the form attached hereto as Exhibit G.
                                 ----------

    (e) Registration Rights Agreement.  The Parent shall have executed and
  delivered to the Company on behalf of the persons listed as signatories
  thereto a Registration Rights Agreement in substantially the form of Exhibit
                                                                       -------
  D.
  -

    (f) Additional Closing Documents.  Parent and Merger Sub shall have
  furnished to Company such additional certificates and other documents as
  Company may have reasonably requested as to any of the conditions set forth in
  this Section 7.3.

    (g) Noteholder Registration Rights.  In connection with the conversion of
  the outstanding indebtedness of the Company identified on Schedule 7.2(k),
                                                            ---------------
  Parent shall have agreed to prepare and file with the SEC a registration
  statement as soon as practicable following the Closing Date and to use its
  best efforts to have such registration statement declared effective not later
  than ninety (90) days after the Effective Time pursuant to a registration
  rights agreement containing customary terms and conditions, including
  indemnification and contribution provisions.

                                      39
<PAGE>

                                 ARTICLE VIII

                       TERMINATION, AMENDMENT AND WAIVER

      Section 8.1 Termination.

      (a)  This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Effective Time, notwithstanding
adoption thereof by the stockholders of the Company, in any one of the following
circumstances:

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

       (ii) By Parent or Company, if the Effective Time shall not have occurred
     on or before November 30, 2000, otherwise than as a result of any material
     breach of any provision of this Agreement by the party seeking to effect
     such termination;

       (iii) By Parent or Company, if any federal or state court of competent
     jurisdiction or other Governmental Entity shall have issued an order,
     decree or ruling, or taken any other action permanently restraining,
     enjoining or otherwise prohibiting the Merger and such order, decree,
     ruling or other action shall have become final and non-appealable, provided
     that neither party may terminate this Agreement pursuant to this Section
     8.1(a)(iii) unless such party has used its reasonable best efforts to
     remove such order, decree, ruling or injunction;

       (iv) By Parent, if this Agreement and the transactions contemplated
     hereby shall not have been adopted by the affirmative vote of the holders
     of the requisite number of shares;

       (v) By Parent if any of Company's representations and warranties
     contained in this Agreement shall have been materially inaccurate as of the
     date of this Agreement or shall have become materially inaccurate as of the
     Closing Date as if made on such date, or if any of Company's covenants and
     agreements contained in this Agreement shall have been breached in any
     material respect, provided, however, that Parent may not terminate this
     Agreement under this Section 8.1(v) on account of an inaccuracy in
     Company's representations and warranties that is curable by Company unless
     Company fails to cure such inaccuracy or breach within ten (10) days after
     receiving written notice from Parent of such inaccuracy or breach;

       (vi) By Company if any of the Parent's representations and warranties
     contained in this Agreement shall have been materially inaccurate as of the
     date of this Agreement or shall have become materially inaccurate as of the
     Closing Date as if made on such date, or if any of the Parent's covenants
     and agreements contained in this Agreement shall have been breached in any
     material respect, provided, however, that Company may not terminate this
     Agreement under this Section 8.1(vi) on account of an inaccuracy in the
     Parent's representations and warranties that is curable by the Parent or on
     account of a

                                      40
<PAGE>

     breach of covenant or agreement by the Parent that is curable by the Parent
     unless the Parent fails to cure such inaccuracy or breach within ten (10)
     days after receiving written notice from Company of such inaccuracy or
     breach.

  Section 8.2 Effect of Termination.  In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1(a) hereof, this Agreement
(except for the provisions of Section 4.1(t), the last sentence of Section 6.2,
Section 6.4, this Section 8.2 and Article IX) shall forthwith become void and
cease to have any force or effect, without any liability on the part of any
party hereto or any of its affiliates; provided, however, that nothing in this
Section 8.2 shall relieve any party to this Agreement of liability for any
willful or intentional breach of this Agreement.

  Section 8.3 Amendment.  Subject to applicable provisions of the DGCL and the
CGCL, at any time prior to the Effective Time, the Parties hereto may modify or
amend this Agreement by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
adoption of this Agreement by the stockholders of Company, no amendment shall be
made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger. This
Agreement may not be modified or amended except by written agreement executed
and delivered by duly authorized officers of each of the respective parties.

  Section 8.4 Extension; Waiver.  At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement, or (c) subject to
Section 8.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in a written
instrument executed and delivered by a duly authorized officer on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.

  Section 8.5 Procedure for Termination, Amendment, Extension or Waiver.  A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Parent, Merger Sub
or Company, action by its Board of Directors or the duly authorized designee of
its Board of Directors.

                                   ARTICLE IX

                               GENERAL PROVISIONS

  Section 9.1  Nonsurvival of Representations and Warranties.  Except as
contemplated in Section 8.2, none of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time. This Section 9.1 shall not

                                      41
<PAGE>

limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.

  Section 9.2  Fees and Expenses.  Each party hereto shall pay its own fees and
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, except
for the reasonable fees and expenses of Company's financial advisor and legal
counsel and such other fees and expenses agreed upon between Parent and the
Company.

  Section 9.3  Definitions.  For purposes of this Agreement:

    (a) "Affiliate" of any person means another person that directly or
  indirectly, through one or more intermediaries, controls, is controlled by, or
  is under common control with, such first person;

    (b) "Aggregate Consideration" shall be equal to the sum of (A) the Aggregate
  Share Number multiplied by the Average Closing Price plus (B) the Aggregate
  Warrant Number multiplied by the Warrant Value.

    (c) "As-Converted Preferred Stock" shall mean the number of shares of each
  of the Company's Series A Preferred Stock, the Series B Preferred Stock, the
  number Series C Preferred Stock, the Series D Preferred Stock and the Series E
  Preferred Stock, on an as-converted into Common Stock basis taking into
  account the conversion rights contained in the Articles of Incorporation of
  the Company, as amended as of the date hereof.

    (d) "Average Closing Price" shall mean the average of the closing prices of
  the Parent Common Stock as reported on the Nasdaq National Market over the 30
  day period ending three days prior to the Closing Date.

    (e) "Business day" means any day other than Saturday, Sunday or any other
  day on which banks in the City of New York are required or permitted to close;

    (f) "Disclosure Schedule" means the disclosure schedule delivered by each
  party to the other simultaneously with the execution of this Agreement;

    (g) "Environmental Laws" means any federal, state or local law, rule,
  regulation or decision relating to: (i) releases or threatened releases of
  Hazardous Substances or materials containing Hazardous Substances; (ii) the
  manufacture, handling, transport, use, treatment, storage or disposal of
  Hazardous Substances or materials containing Hazardous Substances; or (iii)
  otherwise relating to pollution of the environment or the protection of human
  health;

    (h) "Hazardous Substances" means: (i) those substances defined as "hazardous
  substances," "pollutants" or "contaminants," "hazardous waste," "hazardous
  chemicals" and the like in or regulated under the following federal statutes
  and their state counterparts, as each may be amended from time to time, and
  all regulations thereunder: the Hazardous Materials Transportation Act, the
  Resource Conservation and Recovery Act, the Comprehensive

                                      42
<PAGE>

  Environmental Response, Compensation and Liability Act, the Clean Water Act,
  the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide,
  Fungicide and Rodenticide Act and the Clean Air Act; (ii) petroleum and
  petroleum products including crude oil and any fractions thereof; (iii)
  natural gas, synthetic gas and any mixtures thereof usable for fuel, (iv)
  radon; (v) asbestos; and (vi) any other substance, regardless of physical
  form, that is subject to any Environmental Laws;

    (i) "Knowledge" means the actual knowledge of any executive officer of
  Company or Parent, as the case may be;

    (j) "Liens" means, collectively, all pledges, claims, liens, charges,
  mortgages, conditional sale or title retention agreements, hypothecations,
  collateral assignments, security interests, easements and other encumbrances
  of any kind or nature whatsoever;

    (k) "Material Adverse Effect" or "Material Adverse Change" means any event,
  occurrence, failure of event or occurrence, change, effect, state of affairs,
  breach, default, violation, fine, penalty or failure to comply (each, a
  "circumstance"), individually or taken together with all other circumstances
  contemplated by or in connection with the applicable representations and
  warranties made in this Agreement which could reasonably be expected to: (i)
  materially adversely effect the business, properties, assets, condition
  (financial or otherwise), or results of operations of Parent or Company, in
  each case, including its respective Subsidiaries together with it taken as a
  whole, or (ii) impair Parent or Company, as the case may be, of its ability to
  perform its obligations under this Agreement and to consummate the
  transactions contemplated hereby. In no event shall any of the following
  constitute a Material Adverse Effect or a Material Adverse Change: (i) a
  change in the trading prices of Parent's equity securities between the date of
  this Agreement and the Effective Time, in and of itself; (ii) effects,
  changes, events, circumstances or conditions generally affecting the business
  application integration industry in which Parent and the Company operate or
  arising from changes in general business or economic conditions, and not
  specifically relating to Parent or Company, as the case may be; (iii) effects,
  changes, events, circumstances or conditions directly attributable to (A) out-
  of-pocket fees and expenses (including, without limitation, legal, accounting,
  investigatory, investment banking, and other fees and expenses) incurred in
  connection with the transactions contemplated by the Agreement or (B) the
  payment by Parent or Company of all amounts due to any officers or employees
  of Company under employment contracts, non-competition agreements, employee
  benefit plans or severance arrangements as specified in the Disclosure
  Schedule; (iv) any effects, changes, events, circumstances or conditions
  resulting from any change in law or generally accepted accounting principles,
  which affect generally entities such as Parent and Company; (v) any effects,
  changes, events, circumstances or conditions resulting from compliance by
  Parent or Company with the express terms of this Agreement or action taken
  with the prior informed written consent of the other party; and (vi) the
  default by Company of any payment obligations in favor of Parent under any
  promissory notes issued by Company to Parent.

    (l) "Person" means an individual, corporation, partnership, joint venture,
  association, trust, unincorporated organization or other entity;

                                      43
<PAGE>

    (m) "Secondary Aggregate Preference Amount" shall be equal to the sum of the
  Series B Aggregate Preference Amount, the Series C Aggregate Preference Amount
  and the Series D Aggregate Preference Amount.

    (n) "Series A Aggregate Preference Amount" shall be equal to Total Series A
  Shares multiplied by $3.00.

    (o) "Series B Aggregate Preference Amount" shall be equal to Total Series B
  Shares multiplied by $1.91.

    (p) "Series C Aggregate Preference Amount" shall be equal to Total Series C
  Shares multiplied by $5.00.

    (q) "Series D Aggregate Preference Amount" shall be equal to Total Series D
  Shares multiplied by $7.50.

    (r) "Series E Aggregate Preference Amount" shall be equal to Total Series E
  Shares multiplied by $3.00.

    (s) a "Subsidiary" of any person means any other person of which (i) the
  first mentioned person or any Subsidiary thereof is a general partner, (ii)
  voting power to elect a majority of the board of directors or others
  performing similar functions with respect to such other person is held by the
  first mentioned person and/or by any one or more of its Subsidiaries, or (iii)
  at least 50% of the equity interests of such other person is, directly or
  indirectly, owned or controlled by such first mentioned person and/or by any
  one or more of its Subsidiaries.

    (t) "Total As-Converted Common Shares" shall be equal to the sum of the
  number of Total Common Shares and the As-Converted Preferred Stock.

    (u) "Total Liquidation Preference Amount" shall be equal to the sum of
  Series A Aggregate Preference Amount, the Series B Aggregate Preference
  Amount, the Series C Aggregate Preference Amount, the Series D Aggregate
  Preference Amount and the Series E Aggregate Preference Amount.

    (v) "Total Common Shares" shall be equal to the number of shares of Company
  Common Stock outstanding immediately prior to the Effective Time (other than
  any shares of Company Common Stock to be canceled pursuant to Section 2.2(b).

    (w) "Total Series A Shares" shall be equal to the number of shares of Series
  A Preferred outstanding immediately prior to the Effective Time (other than
  any shares of Series A Preferred to be canceled pursuant to Section 2.2(b) and
  any Dissenting Shares).

    (x) "Total Series B Shares" shall be equal to the number of shares of Series
  B Preferred outstanding immediately prior to the Effective Time (other than
  any shares of Series B Preferred to be canceled pursuant to Section 2.2(b) and
  any Dissenting Shares).

                                      44
<PAGE>

    (y) "Total Series C Shares" shall be equal to the number of shares of Series
  C Preferred outstanding immediately prior to the Effective Time (other than
  any shares of Series C Preferred to be canceled pursuant to Section 2.2(b) and
  any Dissenting Shares).

    (z) "Total Series D Shares" shall be equal to the number of shares of Series
  D Preferred outstanding immediately prior to the Effective Time (other than
  any shares of Series D Preferred to be canceled pursuant to Section 2.2(b) and
  any Dissenting Shares).

    (aa) "Total Series E Shares" shall be equal to the number of shares of
  Series E Preferred outstanding immediately prior to the Effective Time (other
  than any shares of Series E Preferred to be canceled pursuant to Section
  2.2(b) and any Dissenting Shares).

    (bb) "Warrant Value" shall be determined by the Company's financial advisor,
  Merrill Lynch, Pierce, Fenner & Smith Incorporated.

  Section 9.4 Notices.  All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) or by telecopy (and confirmed by telecopy answerback) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):

     (i)     if to Parent or to Merger Sub, to

             Level 8 Systems, Inc.
             8000 Regency Parkway
             Cary, NC 27511
             Attention: W. Dennis McKinnie
             Telecopy: (919) 380-5121

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

             Powell, Goldstein, Frazer & Murphy LLP
             191 Peachtree Street, N.E.
             Suite 1600
             Atlanta, GA 30303
             Attention: Scott D. Smith, Esq.
             Telecopy: (404) 572-6999

     (ii)    if to Company, to

             StarQuest Software, Inc.
             1288 Ninth Street
             Berkeley, California
             Attention: President
             Telecopy:  (510) 528-2986

                                      45
<PAGE>

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

          Crosby, Heafey, Roach & May Professional Corporation
          Two Embarcadero Center
          Suite 2000
          San Francisco, California 94111
          Attention: Twila L. Foster, Esq.
          Telecopy: (415) 391-8269

  Section 9.5 Interpretation.  When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for convenience of reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".

  Section 9.6 Entire Agreement; Third-Party Beneficiaries.  This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (except for the letter agreement referenced in
the last sentence of Section 6.4.  Except for the provisions of Article II and
Section 6.8, this Agreement is not intended to confer upon any person (including
without limitation any employees or former employees of Company), other than the
parties hereto, any rights or remedies.

  Section 9.7 Governing Law.  This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof, except to the extent the internal laws of the State of California
expressly apply to the Merger as it relates to Company.

  Section 9.8 Assignment.  Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment without
such prior written consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.

  Section 9.9 Enforcement.  Irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in the
Court of Chancery in and for New Castle County in the State of Delaware (or, if
such court lacks subject matter jurisdiction, any appropriate state or federal
court in New Castle County in the State of Delaware), this being in addition to
any other remedy to which they are entitled at law or in equity. Each of the
parties hereto (a) shall submit itself to the personal jurisdiction of the Court
of Chancery in and for New Castle County in the State of Delaware (or, if such
court lacks subject matter jurisdiction, any appropriate state or federal court
in New

                                      46
<PAGE>

Castle County in the State of Delaware) in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (b) shall not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (c) shall not bring any action relating to
this Agreement or any of the transactions contemplated hereby in any court other
than the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware).

  Section 9.10 Severability.  Whenever possible, each provision or portion of
any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.

  Section 9.11 Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

                                      47
<PAGE>

  IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.

                                    LEVEL 8 SYSTEMS, INC.

                                    By: _______________________________________
                                    Name: _____________________________________
                                    Title: ____________________________________

                                    LEVEL 8 TECHNOLOGIES ACQUSITION CORP.

                                    By: _______________________________________
                                    Name: _____________________________________
                                    Title: ____________________________________

                                    STARQUEST SOFTWARE, INC.

                                    By: _______________________________________
                                    Name: _____________________________________
                                    Title: ____________________________________

                                      48

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