Document:

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                                                                     Exhibit 4.2

                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                  NETWORK ENGINES, INC., IPP ACQUISITION CO.,

                                      AND

                              IP PERFORMANCE, INC.

                                November 7, 2000
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                               TABLE OF CONTENTS

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                                                                                          PAGE
<C>           <S>                                                                         <C>
   ARTICLE I  THE MERGER.................................................................  1

         1.1  The Merger.................................................................  1
         1.2  The Closing................................................................  1
         1.3  Actions at the Closing.....................................................  1
         1.4  Additional Action..........................................................  2
         1.5  Conversion of Shares.......................................................  2
         1.6  Dissenting Shares..........................................................  3
         1.7  Fractional Shares..........................................................  3
         1.8  Warrants...................................................................  4
         1.9  Escrow.....................................................................  4
        1.10  Certificate of Incorporation and By-laws...................................  5
        1.11  No Further Rights..........................................................  5
        1.12  Closing of Transfer Books..................................................  5

  ARTICLE II  REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................  5

         2.1  Organization, Qualification and Corporate Power............................  5
         2.2  Capitalization.............................................................  6
         2.3  Authorization of Transaction...............................................  6
         2.4  Noncontravention...........................................................  7
         2.5  Subsidiaries...............................................................  7
         2.6  Financial Statements.......................................................  7
         2.7  Absence of Certain Changes.................................................  8
         2.8  Undisclosed Liabilities....................................................  8
         2.9  Tax Matters................................................................  8
        2.10  Assets.....................................................................  9
        2.11  Owned Real Property........................................................ 10
        2.12  Real Property Leases....................................................... 10
        2.13  Intellectual Property...................................................... 10
        2.14  Contracts.................................................................. 12
        2.15  Accounts Receivable........................................................ 13
        2.16  Powers of Attorney......................................................... 13
        2.17  Insurance.................................................................. 13
        2.18  Litigation................................................................. 13
        2.19  Warranties................................................................. 14
        2.20  Employees.................................................................. 14
        2.21  Employee Benefits.......................................................... 14
        2.22  Environmental Matters...................................................... 16
        2.23  Legal Compliance........................................................... 17
        2.24  Customers and Suppliers.................................................... 17
        2.25  Permits.................................................................... 17
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<C>           <S>                                                                         <C>
        2.26  Certain Business Relationships With Affiliates............................. 17
        2.27  Brokers' Fees.............................................................. 17
        2.28  Books and Records.......................................................... 17
        2.29  Disclosure................................................................. 18

 ARTICLE III  REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY.. 18

         3.1  Organization, Qualification and Corporate Power............................ 18
         3.2  Capitalization............................................................. 18
         3.3  Authorization of Transaction............................................... 18
         3.4  Noncontravention........................................................... 19
         3.5  Reports and Financial Statements........................................... 19
         3.6  Interim Operations of the Transitory Subsidiary............................ 20
         3.7  Brokers' Fees.............................................................. 20

  ARTICLE IV  COVENANTS.................................................................. 20

         4.1  Closing Efforts............................................................ 20
         4.2  Governmental and Third-Party Notices and Consents.......................... 20
         4.3  Stockholder Approval....................................................... 20
         4.4  Operation of Business...................................................... 21
         4.5  Access to Information...................................................... 23
         4.6  Notice of Breaches......................................................... 23
         4.7  Exclusivity................................................................ 24
         4.8  Expenses................................................................... 24
         4.9  Indemnification............................................................ 24
        4.10  Listing of Merger Shares................................................... 24

   ARTICLE V  CONDITIONS TO CONSUMMATION OF MERGER....................................... 25

         5.1  Conditions to Each Party's Obligations..................................... 25
         5.2  Conditions to Obligations of the Buyer and the Transitory Subsidiary....... 25
         5.3  Conditions to Obligations of the Company................................... 26

  ARTICLE VI  INDEMNIFICATION............................................................ 27

         6.1  Indemnification by the Company Stockholders................................ 27
         6.2  Indemnification by the Buyer............................................... 28
         6.3  Indemnification Claims..................................................... 28
         6.4  Survival of Representations and Warranties................................. 31
         6.5  Limitations................................................................ 32

 ARTICLE VII  REGISTRATION RIGHTS........................................................ 32

         7.1  Registration of Shares..................................................... 32
         7.2  Limitations on Registration Rights......................................... 33
         7.3  Incidental Registration.................................................... 34

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<C>           <S>                                                                         <C>
         7.4  Registration Procedures.................................................... 35
         7.5  Requirements of Company Stockholders....................................... 35
         7.6  Indemnification............................................................ 36
         7.7  Assignment of Rights....................................................... 36
         7.8  Availability of Information................................................ 36

ARTICLE VIII  TERMINATION................................................................ 37

         8.1  Termination of Agreement................................................... 37
         8.2  Effect of Termination...................................................... 38

  ARTICLE IX  DEFINITIONS................................................................ 38

   ARTICLE X  MISCELLANEOUS.............................................................. 40

        10.1  Press Releases and Announcements........................................... 40
        10.2  No Third Party Beneficiaries............................................... 40
        10.3  Entire Agreement........................................................... 40
        10.4  Succession and Assignment.................................................. 40
        10.5  Counterparts and Facsimile Signature....................................... 40
        10.6  Headings................................................................... 40
        10.7  Notices.................................................................... 41
        10.8  Governing Law.............................................................. 41
        10.9  Amendments and Waivers..................................................... 41
       10.10  Severability............................................................... 41
       10.11  Submission to Jurisdiction................................................. 42
       10.12  Construction............................................................... 42
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Exhibit A -  Escrow Agreement
Exhibit B -  Investment Representation Letter
Exhibit C -  Form of Stock Restriction Agreement
Exhibit D -  Form of Stockholders Agreement
Exhibit E -  Opinion of Counsel to the Company
Exhibit F -  Opinion of Counsel to the Buyer and the Transitory Subsidiary

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                          AGREEMENT AND PLAN OF MERGER

     Agreement entered into as of November 7, 2000 by and among Network Engines,
Inc., a Delaware corporation (the "Buyer"), IPP Acquisition Co., a Delaware
corporation and a wholly-owned subsidiary of the Buyer (the "Transitory
Subsidiary"), and IP Performance, Inc., a Delaware corporation (the "Company").
The Buyer, the Transitory Subsidiary and the Company are referred to
collectively herein as the "Parties."

     This Agreement contemplates a merger of the Transitory Subsidiary into the
Company.  In such merger, the stockholders of the Company will receive common
stock of the Buyer in exchange for their capital stock of the Company.

     The Parties intend the Merger (as defined below) to constitute a
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), for United States federal income tax purposes and that
this Agreement constitutes a plan of reorganization.

     Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.

                                   ARTICLE I
                                   THE MERGER

     1.1  The Merger.  Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below).  From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation").  The "Effective Time" shall be the time at which the Surviving
Corporation files a certificate of merger or other appropriate documents
prepared and executed in accordance with Section 251(c) of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of State of the
State of Delaware.  The Merger shall have the effects set forth in Section 259
of the Delaware General Corporation Law.

     1.2  The Closing.  The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hale and Dorr LLP
in Boston, Massachusetts, commencing at 9:00 a.m. local time on November 8,
2000, or, if all of the conditions to the obligations of the Parties to
consummate the transactions contemplated hereby have not been satisfied or
waived by such date, on such mutually agreeable later date as soon as
practicable (and in any event not later than three business days) after the
satisfaction or waiver of all conditions (excluding the delivery of any
documents to be delivered at the Closing by any of the Parties) set forth in
Article V hereof (the "Closing Date").

     1.3  Actions at the Closing.  At the Closing:

          (a) the Company shall deliver to the Buyer and the Transitory
     Subsidiary the various certificates, instruments and documents referred to
     in Section 5.2;

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          (b) the Buyer and the Transitory Subsidiary shall deliver to the
     Company the various certificates, instruments and documents referred to in
     Section 5.3;

          (c) the Surviving Corporation shall file with the Secretary of State
     of the State of Delaware the Certificate of Merger;

          (d) each of the stockholders of record of the Company immediately
     prior to the Effective Time (the "Company Stockholders") shall deliver to
     the Buyer the certificate(s) representing his, her or its Company Shares
     (as defined below);

          (e) the Buyer shall deliver certificates for the Initial Shares (as
     defined below) to each Company Stockholder in accordance with Section 1.5;
     and

          (f) the Buyer, each Company Stockholder and The Chase Manhattan Bank
     (the "Escrow Agent") shall execute and deliver the Escrow Agreement
     attached hereto as Exhibit A (the "Escrow Agreement") and the Buyer shall
     deliver to the Escrow Agent a certificate for the Escrow Shares (as defined
     below) being placed in escrow on the Closing Date pursuant to Section 1.9.

     1.4  Additional Action. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.

     1.5  Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:

          (a) Each share of common stock, $.001 par value per share, of the
     Company ("Common Shares" or "Company Shares") issued and outstanding
     immediately prior to the Effective Time (other than Company Shares owned
     beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares
     (as defined below) and Company Shares held in the Company's treasury) shall
     be converted into and represent the right to receive (subject to the
     provisions of Section 1.9) such number of shares of common stock, $.01 par
     value per share, of the Buyer ("Buyer Common Stock") as is equal to the
     Conversion Ratio (as defined below).

          (b) The "Conversion Ratio" shall be the result obtained by dividing
     (i) (A) $14,000,000 if the average reported closing price of the Buyer
     Common Stock on the Nasdaq National Market over the 15 consecutive trading
     days ending on the third trading day prior to the Closing (the "Average
     Closing Price") is between $33.46 and $40.90, (B) $15,000,000 if the
     Average Closing Price is equal to or greater than $40.90 or (C) $13,000,000
     if the Average Closing Price is equal to or less than $33.46 by (ii) the
     number of outstanding Company Shares immediately prior to the Effective
     Time, and dividing such amount by (iii) the Average Closing Price. The
     Conversion Ratio shall be subject to equitable adjustment in the event of
     any stock split, stock dividend, reverse stock split or similar event
     affecting the Buyer Common Stock between the beginning of such fifteen-day
     period and the Effective Time. The Company Stockholders shall be entitled
     to receive, promptly after the Effective Time, 90% of the shares of Buyer
     Common Stock into which their Company Shares were converted pursuant to
     this Section 1.5 (the "Initial Shares"); the remaining 10% of the shares of
     Buyer Common Stock into

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     which their Company Shares were converted pursuant to this Section 1.5,
     rounded to the nearest whole number (the "Escrow Shares"), shall be
     deposited in escrow pursuant to Section 1.9 and shall be held and disposed
     of in accordance with the terms of the Escrow Agreement. The Initial Shares
     and the Escrow Shares shall together be referred to herein as the "Merger
     Shares."

          (c) Each Company Share held in the Company's treasury immediately
     prior to the Effective Time and each Company Share owned beneficially by
     the Buyer or the Transitory Subsidiary shall be cancelled and retired
     without payment of any consideration therefor.

          (d) Each share of common stock, $.01 par value per share, of the
     Transitory Subsidiary issued and outstanding immediately prior to the
     Effective Time shall be converted into and thereafter evidence one share of
     common stock, $.01 par value per share, of the Surviving Corporation.

     1.6  Dissenting Shares.

          (a) For purposes of this Agreement, "Dissenting Shares" means Company
     Shares held as of the Effective Time by a Company Stockholder who has not
     voted such Company Shares in favor of the adoption of this Agreement and
     the Merger and with respect to which appraisal shall have been duly
     demanded and perfected in accordance with Section 262 of the Delaware
     General Corporation Law and not effectively withdrawn or forfeited prior to
     the Effective Time. Dissenting Shares shall not be converted into or
     represent the right to receive Merger Shares, unless such Company
     Stockholder shall have forfeited his, her or its right to appraisal under
     the Delaware General Corporation Law or properly withdrawn, his, her or its
     demand for appraisal. If such Company Stockholder has so forfeited or
     withdrawn his, her or its right to appraisal of Dissenting Shares, then (i)
     as of the occurrence of such event, such holder's Dissenting Shares shall
     cease to be Dissenting Shares and shall be converted into and represent the
     right to receive the Merger Shares issuable in respect of such Company
     Shares pursuant to Section 1.5, and (ii) promptly following the occurrence
     of such event, the Buyer shall deliver to such Company Stockholder a
     certificate representing 90% of the Merger Shares to which such holder is
     entitled pursuant to Section 1.5 (which shares shall be considered Initial
     Shares for all purposes of this Agreement) and shall deliver to the Escrow
     Agent a certificate representing the remaining 10% of the Merger Shares to
     which such holder is entitled pursuant to Section 1.5 (which shares shall
     be considered Escrow Shares for all purposes of this Agreement).

          (b) The Company shall give the Buyer (i) prompt notice of any written
     demands for appraisal of any Company Shares, withdrawals of such demands,
     and any other instruments that relate to such demands received by the
     Company and (ii) the opportunity to direct all negotiations and proceedings
     with respect to demands for appraisal under the Delaware General
     Corporation Law. The Company shall not, except with the prior written
     consent of the Buyer, make any payment with respect to any demands for
     appraisal of Company Shares or offer to settle or settle any such demands.

     1.7  Fractional Shares. No certificates representing fractional Initial
Shares shall be issued to former Company Stockholders upon the surrender for
exchange of certificates that, immediately prior to the Effective Time,
represented Company Shares converted into Merger Shares pursuant to Section 1.5
(including any Company Shares referred to in the last sentence of

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Section 1.6(a)) ("Certificates"), and such former Company Stockholders shall not
be entitled to any voting rights, rights to receive any dividends or
distributions or other rights as a stockholder of the Buyer with respect to any
fractional Initial Shares that would have otherwise been issued to such former
Company Stockholders. In lieu of any fractional Initial Shares that would have
otherwise been issued, each former Company Stockholder that would have been
entitled to receive a fractional Initial Share shall, upon proper surrender of
such person's Certificates, receive such whole number of Initial Shares as is
equal to the precise number of Initial Shares to which such person would be
entitled, rounded up or down to the nearest whole number (with a fractional
interest equal to .5 rounded to the nearest odd number); provided that each such
holder shall receive at least one Initial Share.

1.8  Warrants.

          (a) The Company shall cause the termination, as of the Effective Time,
     of (i) Common Stock Warrant No. CW-001 dated July 31, 2000 issued to VIEO,
     Inc. (formerly known as Power Micro Research, Inc.) (the "Warrant") if the
     Warrant is not elected to be exercised prior to the Closing Date, and
     thereafter the Warrant shall be of no further force or effect and (ii) the
     rights granted to Brobeck, Phleger & Harrison LLP to receive a warrant to
     purchase common stock of the Company under the engagement letter agreement
     dated as of July 14, 2000, between the Company and said firm, and
     thereafter such warrant rights shall be of no further force or effect.

          (b) The Company shall obtain, prior to the Closing and pursuant to
     Section 1.8(a), (i) the consent from the holder of the Warrant to the
     termination of the Warrant, and (ii) the consent from Brobeck, Phleger &
     Harrison LLP to the termination of its rights to receive a warrant under
     the engagement letter agreement dated as of July 14, 2000.

1.9  Escrow.

          (a) On the Closing Date, the Buyer shall deliver to the Escrow Agent a
     certificate or certificates (issued in the name of the Escrow Agent or its
     nominee) representing the Escrow Shares, as described in Section 1.5, for
     the purpose of securing the indemnification obligations of the Indemnifying
     Stockholders (as defined in Section 6.1) set forth in this Agreement. The
     Escrow Shares shall be held by the Escrow Agent under the Escrow Agreement
     pursuant to the terms thereof. The Escrow Shares shall be held as a trust
     fund and shall not be subject to any lien, attachment, trustee process or
     any other judicial process of any creditor of any party, and shall be held
     and disbursed solely for the purposes and in accordance with the terms of
     the Escrow Agreement.

          (b) The adoption of this Agreement and the approval of the Merger by
     the Company Stockholders shall constitute approval of the Escrow Agreement
     and of all of the arrangements relating thereto, including without
     limitation the placement of the Escrow Shares in escrow and the appointment
     of Tom Tucker, as the representative of the Company Stockholders (the
     "Indemnification Representative") (i) to take all action necessary in
     connection with the defense and/or settlement of any claims for which the
     Stockholders may be required to indemnify the Buyer or the Company pursuant
     to Article VI hereof, (ii) to give and receive all notices required to be
     given under this Agreement and the Escrow Agreement, and (iii) to take

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     any and all additional action as is contemplated to be taken by or on
     behalf of the Company Stockholders by the terms of this Agreement or the
     Escrow Agreement.

     1.10  Certificate of Incorporation and By-laws.

          (a) The Certificate of Incorporation of the Surviving Corporation
     immediately following the Effective Time shall be the same as the
     Certificate of Incorporation of the Transitory Subsidiary immediately prior
     to the Effective Time, except that (1) the name of the corporation set
     forth therein shall be changed to the name of the Company and (2) the
     identity of the incorporator shall be deleted.

          (b) The By-laws of the Surviving Corporation immediately following the
     Effective Time shall be the same as the By-laws of the Transitory
     Subsidiary immediately prior to the Effective Time, except that the name of
     the corporation set forth therein shall be changed to the name of the
     Company.

     1.11  No Further Rights. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.

     1.12  Closing of Transfer Books.  At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made.  If, after the Effective Time, Certificates are presented to
the Buyer or the Surviving Corporation, they shall be cancelled and exchanged
for Initial Shares in accordance with Section 1.5, subject to Section 1.9 and to
applicable law in the case of Dissenting Shares.

                                  ARTICLE II
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Company to the Buyer on the date hereof and
accepted in writing by the Buyer (the "Disclosure Schedule").  The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify only the corresponding
paragraph in this Article II.  For purposes of this Article II, the phrase "to
the knowledge of the Company" or any phrase of similar import shall be deemed to
refer to the actual knowledge of the executive officers of the Company, as well
as any other knowledge which such executive officers would have possessed had
they made reasonable inquiry of appropriate employees and agents of the Company
with respect to the matter in question.

     2.1  Organization, Qualification and Corporate Power.  The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware.  The Company is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have a Company Material Adverse
Effect (as defined below). The

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Company has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Company has furnished to the Buyer complete and accurate copies
of its Certificate of Incorporation and By-laws. The Company is not in default
under or in violation of any provision of its Certificate of Incorporation or
By-laws. For purposes of this Agreement, "Company Material Adverse Effect" means
a material adverse effect on the assets, business, condition (financial or
otherwise), or results of operations of the Company.

     2.2 Capitalization. The authorized capital stock of the Company consists of
(a) 2,000,000 Common Shares, of which, as of the date of this Agreement, 932,605
shares were issued and outstanding and no shares were held in the treasury of
the Company and (b) 1,000,000 Preferred Shares, of which, as of the date of this
Agreement, no shares are issued and outstanding. Section 2.2 of the Disclosure
Schedule sets forth a complete and accurate list of (i) all stockholders of the
Company, indicating the number and class or series of Company Shares held by
each stockholder and (for Company Shares other than Common Shares) the number of
Common Shares (if any) into which such Company Shares are convertible, (ii) all
outstanding warrants, indicating (A) the holder thereof, (B) the number and
class or series of Company Shares subject to each warrant and (for Company
Shares other than Common Shares) the number of Common Shares (if any) into which
such Company Shares are convertible, (C) the exercise price, date of grant,
vesting schedule and expiration date for each warrant, and (D) any terms
regarding the acceleration of vesting, and (iii) all stock option plans and
other stock or equity-related plans of the Company. All of the issued and
outstanding Company Shares are, and all Company Shares that may be issued upon
exercise of warrants will be (upon issuance in accordance with their terms),
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. Other than the warrants listed in Section 2.2 of the
Disclosure Schedule, there are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance or redemption of any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no
agreements to which the Company is a party or by which it is bound with respect
to the voting (including without limitation voting trusts or proxies),
registration under the Securities Act of 1933, as amended (the "Securities
Act"), or sale or transfer (including without limitation agreements relating to
pre-emptive rights, rights of first refusal, co-sale rights or "drag-along"
rights) of any securities of the Company. To the knowledge of the Company, there
are no agreements among other parties, to which the Company is not a party and
by which it is not bound, with respect to the voting (including without
limitation voting trusts or proxies) or sale or transfer (including without
limitation agreements relating to rights of first refusal, co-sale rights or
"drag-along" rights) of any securities of the Company. All of the issued and
outstanding Company Shares were issued in compliance with applicable federal and
state securities laws.

     2.3 Authorization of Transaction. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and,
subject to the adoption of this Agreement and the approval of the Merger by a
majority of the votes represented by the outstanding Company Shares entitled to
vote on this Agreement and the Merger (the "Requisite Stockholder Approval"),
the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of the Company.

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Without limiting the generality of the foregoing, the Board of Directors of the
Company, at a meeting duly called and held, by the unanimous vote of all
directors (i) determined that the Merger is fair and in the best interests of
the Company and its stockholders, (ii) adopted this Agreement in accordance with
the provisions of the Delaware General Corporation Law, and (iii) directed that
this Agreement and the Merger be submitted to the stockholders of the Company
for their adoption and approval and resolved to recommend that the stockholders
of Company vote in favor of the adoption of this Agreement and the approval of
the Merger. This Agreement has been duly and validly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.

     2.4  Noncontravention. Subject to the filing of the Certificate of Merger
as required by the Delaware General Corporation Law, neither the execution and
delivery by the Company of this Agreement, nor the consummation by the Company
of the transactions contemplated hereby, will (a) conflict with or violate any
provision of the Certificate of Incorporation or By-laws of the Company, (b)
require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (a "Governmental Entity"), (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any
party the right to terminate, modify or cancel, or require any notice, consent
or waiver under, any contract or instrument to which the Company is a party or
by which the Company is bound or to which any of its assets is subject, (d)
result in the imposition of any Security Interest (as defined below) upon any
assets of the Company or (e) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its properties
or assets. For purposes of this Agreement: "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge or other lien (whether
arising by contract or by operation of law), other than (i) mechanic's,
materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of the Company and not material to the Company; and
"Ordinary Course of Business" means the ordinary course of the Company's
business, consistent with past custom and practice (including with respect to
frequency and amount).

     2.5  Subsidiaries. The Company does not control directly or indirectly or
have any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association.

     2.6  Financial Statements. The Company has provided to the Buyer the
unaudited balance sheet as of September 30, 2000 (the "Most Recent Balance Sheet
Date") and statements of income, changes in stockholders' equity and cash flows
for the period from inception to September 30, 2000. Such financial statements
(collectively, the "Financial Statements") have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered thereby, fairly present the
financial condition, results of operations and cash flows of the Company as of
the respective dates thereof and for the periods referred to therein and are
consistent with the books and records

                                      -7-
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of the Company; provided, however, that the Financial Statements are subject to
normal recurring year-end adjustments (which will not be material) and do not
include footnotes.

     2.7  Absence of Certain Changes. Since the inception of the Company, (a)
there has occurred no event or development which has had, or could reasonably be
expected to have in the future, a Company Material Adverse Effect, and (b) the
Company has not taken any of the actions set forth in paragraphs (a) through (n)
of Section 4.4.

     2.8  Undisclosed Liabilities. The Company does not have any liability
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities shown
on the balance sheet referred to in Section 2.6 (the "Most Recent Balance
Sheet") and (b) liabilities which have arisen since the Most Recent Balance
Sheet Date in the Ordinary Course of Business and which are not material in
amount.

     2.9  Tax Matters.

          (a)  For purposes of this Agreement, the following terms shall have
     the following meanings:

               (i)  "Taxes" means all taxes, charges, fees, levies or other
     similar assessments or liabilities, including without limitation income,
     gross receipts, ad valorem, premium, value-added, excise, real property,
     personal property, sales, use, transfer, withholding, employment,
     unemployment insurance, social security, business license, business
     organization, environmental, workers compensation, payroll, profits,
     license, lease, service, service use, severance, stamp, occupation,
     windfall profits, customs, duties, franchise and other taxes imposed by the
     United States of America or any state, local or foreign government, or any
     agency thereof, or other political subdivision of the United States or any
     such government, and any interest, fines, penalties, assessments or
     additions to tax resulting from, attributable to or incurred in connection
     with any tax or any contest or dispute thereof.

               (ii) "Tax Returns" means all reports, returns, declarations,
     statements or other information required to be supplied to a taxing
     authority in connection with Taxes.

          (b)  The Company has filed on a timely basis all Tax Returns that it
     was required to file, and all such Tax Returns were complete and accurate
     in all material respects. The Company is not and has never been a member of
     a group of corporations with which it has filed (or been required to file)
     consolidated, combined or unitary Tax Returns. The Company has paid on a
     timely basis all Taxes that were due and payable. The unpaid Taxes of the
     Company for tax periods through the Most Recent Balance Sheet Date do not
     exceed the accruals and reserves for Taxes (excluding accruals and reserves
     for deferred Taxes established to reflect timing differences between book
     and Tax income) set forth on the Most Recent Balance Sheet. The Company has
     no actual or potential liability for any Tax obligation of any taxpayer
     (including without limitation any affiliated group of corporations or other
     entities that included the Company during a prior period) other than the
     Company. All Taxes that the Company is or was required by law to withhold
     or collect have been duly withheld or collected and, to the extent
     required, have been paid to the proper Governmental Entity.

                                      -8-
<PAGE>

          (c) The Company has delivered to the Buyer complete and accurate
     copies of all federal income Tax Returns, examination reports and
     statements of deficiencies assessed against or agreed to by the Company
     since the date of the Company's incorporation. The federal income Tax
     Returns of the Company have not been audited by the Internal Revenue
     Service or are closed by the applicable statute of limitations for all
     taxable years through the taxable year specified in Section 2.9(c) of the
     Disclosure Schedule. No examination or audit of any Tax Return of the
     Company by any Governmental Entity is currently in progress or, to the
     knowledge of the Company, threatened or contemplated. The Company has not
     been informed by any jurisdiction that the jurisdiction believes that the
     Company was required to file any Tax Return that was not filed. The Company
     has not waived any statute of limitations with respect to Taxes or agreed
     to an extension of time with respect to a Tax assessment or deficiency.

          (d) The Company: (i) is not a "consenting corporation" within the
     meaning of Section 341(f) of the Code and none of the assets of the Company
     is subject to an election under Section 341(f) of the Code; (ii) has not
     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)(l)(A)(ii) of the Code; (iii) has not made any payments, is
     not obligated to make any payments, or is not a party to any agreement that
     could obligate it to make any payments that may be treated as an "excess
     parachute payment" under Section 280G of the Code; (iv) does not have any
     actual or potential liability for any Taxes of any person (other than the
     Company) under Treasury Regulation Section 1.1502-6 (or any similar
     provision of federal, state, local, or foreign law), or is not as a
     transferee or successor, by contract, or otherwise; and (v) is or has not
     been required to make a basis reduction pursuant to Treasury Regulation
     Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).

          (e) None of the assets of the Company: (i) is property that is
     required to be treated as being owned by any other person pursuant to the
     provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt use
     property" within the meaning of Section 168(h) of the Code; or (iii)
     directly or indirectly secures any debt the interest on which is tax exempt
     under Section 103(a) of the Code.

          (f) The Company has not undergone a change in its method of accounting
     resulting in an adjustment to its taxable income pursuant to Section 481 of
     the Code.

          (g) No state or federal "net operating loss" of the Company determined
     as of the Closing Date is subject to limitation on its use pursuant to
     Section 382 of the Code or comparable provisions of state law as a result
     of any "ownership change" within the meaning of Section 382(g) of the Code
     or comparable provisions of any state law occurring prior to the Closing
     Date.

          (h) The Company has never participated in an international boycott as
     defined in Section 999 of the Code.

     2.10  Assets. The Company owns or leases all tangible assets necessary for
the conduct of its business as presently conducted and as presently proposed to
be conducted. Each such tangible asset is free from material defects, has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and

                                      -9-
<PAGE>

is suitable for the purposes for which it presently is used. No asset of the
Company (tangible or intangible) is subject to any Security Interest.

     2.11  Owned Real Property. The Company does not own, and has never owned,
any real property.

     2.12  Real Property Leases. Section 2.12 of the Disclosure Schedule lists
all real property leased or subleased to or by the Company and lists the term of
such lease, any extension and expansion options, and the rent payable
thereunder. The Company has delivered to the Buyer complete and accurate copies
of the leases and subleases (as amended to date) listed in Section 2.12 of the
Disclosure Schedule. With respect to each lease and sublease listed in Section
2.12 of the Disclosure Schedule:

          (a) the lease or sublease is legal, valid, binding, enforceable and in
     full force and effect;

          (b) the lease or sublease will continue to be legal, valid, binding,
     enforceable and in full force and effect immediately following the Closing
     in accordance with the terms thereof as in effect immediately prior to the
     Closing;

          (c) neither the Company nor, to the knowledge of the Company, any
     other party, is not in breach or violation of, or default under, any such
     lease or sublease, and no event has occurred, is pending or, to the
     knowledge of the Company, is threatened, which, after the giving of notice,
     with lapse of time, or otherwise, would constitute a breach or default by
     the Company or, to the knowledge of the Company, any other party under such
     lease or sublease;

          (d) the Company has not assigned, transferred, conveyed, mortgaged,
     deeded in trust or encumbered any interest in the leasehold or
     subleasehold; and

          (e) the Company is not aware of any Security Interest, easement,
     covenant or other restriction applicable to the real property subject to
     such lease, except for recorded easements, covenants and other restrictions
     which do not materially impair the current uses or the occupancy by the
     Company of the property subject thereto.

     2.13  Intellectual Property.

          (a) The Company owns or has the right to use all Intellectual Property
     (as defined below) necessary (i) to use, manufacture, market and distribute
     the products manufactured, marketed, sold or licensed (or as currently
     contemplated to use, manufacture, market or distribute such products), and
     to provide the services provided (or as currently contemplated to be
     provided), by the Company to other parties (together, the "Customer
     Deliverables") or (ii) to operate the Company's internal systems that are
     material to the business or operations of the Company, including, without
     limitation, computer hardware systems, software applications and embedded
     systems (the "Internal Systems"; the Intellectual Property owned by or
     licensed to the Company and incorporated in or underlying the Customer
     Deliverables or the Internal Systems is referred to herein as the "Company
     Intellectual Property"). Each item of Company Intellectual Property will be
     owned or available for use by the Surviving Corporation immediately
     following the Closing on substantially identical terms

                                      -10-
<PAGE>

     and conditions as it was immediately prior to the Closing. The Company has
     taken all reasonable measures to protect the proprietary nature of each
     item of Company Intellectual Property. To the knowledge of the Company, (a)
     no other person or entity has any rights to any of the Company Intellectual
     Property owned by the Company (except pursuant to agreements or licenses
     specified in Section 2.13(c) of the Disclosure Schedule), and (b) no other
     person or entity is infringing, violating or misappropriating any of the
     Company Intellectual Property. For purposes of this Agreement,
     "Intellectual Property" means all (i) patents and patent applications, (ii)
     copyrights and registrations thereof, (iii) mask works and registrations
     and applications for registration thereof, (iv) computer software, data and
     documentation, (v) trade secrets and confidential business information,
     whether patentable or unpatentable and whether or not reduced to practice,
     know-how, manufacturing and production processes and techniques, research
     and development information, copyrightable works, financial, marketing and
     business data, pricing and cost information, business and marketing plans
     and customer and supplier lists and information, (vi) trademarks, service
     marks, trade names, domain names and applications and registrations
     therefor and (vii) other proprietary rights relating to any of the
     foregoing. Section 2.13(a) of the Disclosure Schedule lists each patent,
     patent application, copyright registration or application therefor, mask
     work registration or application therefor, and trademark, service mark and
     domain name registration or application therefor of the Company.

          (b) None of the Customer Deliverables, or the marketing, distribution,
     provision or use thereof, infringes or violates, or constitutes a
     misappropriation of, any Intellectual Property rights of any person or
     entity. None of the Internal Systems, or the use thereof, infringes or
     violates, or constitutes a misappropriation of, any Intellectual Property
     rights of any person or entity. Section 2.13(b) of the Disclosure Schedule
     lists any complaint, claim or notice, or written threat thereof, received
     by the Company alleging any such infringement, violation or
     misappropriation; and the Company has provided to the Buyer complete and
     accurate copies of all written documentation in the possession of the
     Company relating to any such complaint, claim, notice or threat. The
     Company has provided to the Buyer complete and accurate copies of all
     written documentation in the Company's possession relating to claims or
     disputes known to the Company concerning any Company Intellectual Property.

          (c) Section 2.13(c) of the Disclosure Schedule identifies each license
     or other agreement (or type of license or other agreement) pursuant to
     which the Company has licensed, distributed or otherwise granted any rights
     to any third party with respect to, any Company Intellectual Property.

          (d) Section 2.13(d) of the Disclosure Schedule identifies each item of
     Company Intellectual Property that is owned by a party other than the
     Company, and the license or agreement pursuant to which the Company uses it
     (excluding off-the-shelf software programs licensed by the Company pursuant
     to "shrink wrap" licenses).

          (e) The Company has not disclosed the source code for any of the
     software owned by the Company (the "Software") or other confidential
     information constituting, embodied in or pertaining to the Software to any
     person or entity, except pursuant to the agreements listed in Section
     2.13(e) of the Disclosure Schedule, and the Company has taken reasonable
     measure to prevent disclosure of such source code.

                                      -11-
<PAGE>

          (f) All of the copyrightable materials (including Software)
     incorporated in or bundled with the Customer Deliverables have been created
     by employees of the Company within the scope of their employment by the
     Company or by independent contractors of the Company who have executed
     agreements expressly assigning all right, title and interest in such
     copyrightable materials to the Company. No portion of such copyrightable
     materials was jointly developed with any third party.

          (g) To the knowledge of the Company, the Customer Deliverables and the
     Internal Systems are free from significant defects or programming errors
     and conform in all material respects to the written documentation and
     specifications therefor.

     2.14  Contracts.

          (a) Section 2.14 of the Disclosure Schedule lists the following
     agreements (written or oral) to which the Company is a party as of the date
     of this Agreement:

               (i) any agreement (or group of related agreements) for the lease
     of personal property from or to third parties providing for lease payments
     in excess of $10,000 per annum or having a remaining term longer than three
     months;

               (ii) any agreement (or group of related agreements) for the
     purchase or sale of products or for the furnishing or receipt of services
     (A) which calls for performance over a period of more than one year, (B)
     which involves more than the sum of $10,000, or (C) in which the Company
     has granted manufacturing rights, "most favored nation" pricing provisions
     or marketing or distribution rights relating to any products or territory
     or has agreed to purchase a minimum quantity of goods or services or has
     agreed to purchase goods or services exclusively from a certain party;

                (iii) any agreement establishing a partnership or joint venture;

                (iv) any agreement (or group of related agreements) under which
     it has created, incurred, assumed or guaranteed (or may create, incur,
     assume or guarantee) indebtedness (including capitalized lease obligations)
     involving more than $10,000 or under which it has imposed (or may impose) a
     Security Interest on any of its assets, tangible or intangible;

                (v) any agreement concerning confidentiality or noncompetition;

                (vi) any employment or consulting agreement;

                (vii) any agreement involving any officer, director or
     stockholder of the Company or any affiliate (an "Affiliate"), as defined in
     Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
     "Exchange Act"), thereof;

                (viii) any agreement under which the consequences of a default
     or termination would reasonably be expected to have a Company Material
     Adverse Effect;

                                      -12-
<PAGE>

                (ix) any agreement which contains any provisions requiring the
     Company to indemnify any other party thereto (excluding indemnities
     contained in agreements for the purchase, sale or license of products
     entered into in the Ordinary Course of Business); and

                (x) any other agreement (or group of related agreements) either
     involving more than $10,000 or not entered into in the Ordinary Course of
     Business.

          (b) The Company has delivered to the Buyer a complete and accurate
     copy of each agreement listed in Section 2.13 or Section 2.14 of the
     Disclosure Schedule. With respect to each agreement so listed: (i) the
     agreement is legal, valid, binding and enforceable in all material respects
     and in full force and effect; (ii) the agreement is expected to continue to
     be legal, valid, binding and enforceable in all material respects and in
     full force and effect immediately following the Closing in accordance with
     the terms thereof as in effect immediately prior to the Closing; and (iii)
     neither the Company nor, to the knowledge of the Company, any other party,
     is not in breach or violation of, or default under, any such agreement, and
     no event has occurred, is pending or, to the knowledge of the Company, is
     threatened, which, after the giving of notice, with lapse of time, or
     otherwise, would constitute a breach or default by the Company, to the
     knowledge of the Company, any other party under such contract.

     2.15  Accounts Receivable. All accounts receivable of the Company reflected
on the Most Recent Balance Sheet are valid receivables subject to no setoffs or
counterclaims and are current and collectible (within 90 days after the date on
which it first became due and payable), net of the applicable reserve for bad
debts on the Most Recent Balance Sheet. All accounts receivable reflected in the
financial or accounting records of the Company that have arisen since the Most
Recent Balance Sheet Date are valid receivables subject to no setoffs or
counterclaims and are collectible (within 90 days after the date on which it
first became due and payable), net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Most Recent Balance Sheet.

     2.16  Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.

     2.17  Insurance. Section 2.17 of the Disclosure Schedule lists each
insurance policy to which the Company is a party. Such insurance policies are of
the type and in amounts customarily carried by organizations conducting
businesses or owning assets similar to those of the Company. There is no
material claim pending under any such policy as to which coverage has been
questioned, denied or disputed by the underwriter of such policy. All premiums
due and payable under all such policies have been paid, the Company will not be
liable for retroactive premiums or similar payments, and the Company is
otherwise in compliance in all material respects with the terms of such
policies. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any such policy. Each such policy
will continue to be enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.

     2.18  Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation before any Governmental Entity or before any arbitrator (a
"Legal Proceeding") which is

                                      -13-
<PAGE>

pending or has been threatened in writing against the Company which (a) seeks
either damages or equitable relief or (b) in any manner challenges or seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement.

     2.19  Warranties. No product or service manufactured, sold, leased,
licensed or delivered by the Company is subject to any guaranty, warranty, right
of return, right of credit or other indemnity other than (i) the applicable
standard terms and conditions of sale or lease of the Company, which are set
forth in Section 2.19 of the Disclosure Schedule and (ii) manufacturers'
warranties for which the Company has no liability.

     2.20  Employees.

          (a) Section 2.20 of the Disclosure Schedule contains a list of all
     employees of the Company, along with the position and the annual rate of
     compensation of each such person. Each such employee has entered into a
     confidentiality/assignment of inventions agreement with the Company, a copy
     of which has previously been delivered to the Buyer. Section 2.20 of the
     Disclosure Schedule contains a list of all employees of the Company who are
     a party to a non-competition agreement with the Company; copies of such
     agreements have previously been delivered to the Buyer. To the knowledge of
     the Company, no key employee or group of employees has any plans to
     terminate employment with the Company.

          (b) The Company is not a party to or bound by any collective
     bargaining agreement, and has not experienced any strikes, grievances,
     claims of unfair labor practices or other collective bargaining disputes.
     The Company has no knowledge of any organizational effort made or
     threatened, either currently or within the past two years, by or on behalf
     of any labor union with respect to employees of the Company.

     2.21  Employee Benefits.

          (a) For purposes of this Agreement, the following terms shall have the
     following meanings:

                (i) "Employee Benefit Plan" means any "employee pension benefit
     plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit
     plan" (as defined in Section 3(1) of ERISA), and any other written or oral
     plan, agreement or arrangement involving direct or indirect compensation,
     including without limitation insurance coverage, severance benefits,
     disability benefits, deferred compensation, bonuses, stock options, stock
     purchase, phantom stock, stock appreciation or other forms of incentive
     compensation or post-retirement compensation.

                (ii) "ERISA" means the Employee Retirement Income Security Act
     of 1974, as amended.

                (iii) "ERISA Affiliate" means any entity which is, or at any
     applicable time was, a member of (1) a controlled group of corporations (as
     defined in Section 414(b) of the Code), (2) a group of trades or businesses
     under common control (as defined in Section 414(c) of the Code), or (3) an
     affiliated service group (as defined under Section 414(m) of the Code or
     the regulations under Section 414(o) of the Code), any of which includes or
     included the Company.

                                      -14-
<PAGE>

          (b) Section 2.21(b) of the Disclosure Schedule contains a complete and
     accurate list of all Employee Benefit Plans maintained, or contributed to,
     by the Company or any ERISA Affiliate. Complete and accurate copies of (i)
     all Employee Benefit Plans which have been reduced to writing, (ii) written
     summaries of all unwritten Employee Benefit Plans, (iii) all related trust
     agreements, insurance contracts and summary plan descriptions, and (iv) all
     annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded
     plans) all plan financial statements for the last five plan years for each
     Employee Benefit Plan, have been delivered to the Buyer. Each Employee
     Benefit Plan has been administered in all material respects in accordance
     with its terms and each of the Company and the ERISA Affiliates has in all
     material respects met its obligations with respect to such Employee Benefit
     Plan and has made all required contributions thereto. The Company, each
     ERISA Affiliate and each Employee Benefit Plan are in compliance in all
     material respects with the currently applicable provisions of ERISA and the
     Code and the regulations thereunder.

          (c) There are no Legal Proceedings (except claims for benefits payable
     in the normal operation of the Employee Benefit Plans and proceedings with
     respect to qualified domestic relations orders) against or involving any
     Employee Benefit Plan or asserting any rights or claims to benefits under
     any Employee Benefit Plan that could give rise to any material liability.

          (d) Neither the Company nor any ERISA Affiliate has ever maintained an
     Employee Benefit Plan which is an "employee pension benefit plan."

          (e) No Employee Benefit Plan provides benefits after termination of
     employment to any employee of the Company (or to any beneficiary of any
     such employee), except for continuation of health coverage required to be
     continued under Section 4980B of the Code or other applicable law.

          (f) No act or omission has occurred and no condition exists with
     respect to any Employee Benefit Plan maintained by the Company or any ERISA
     Affiliate that would subject the Company or any ERISA Affiliate to (i) any
     material fine, penalty, tax or liability of any kind imposed under ERISA or
     the Code or (ii) any contractual indemnification or contribution obligation
     protecting any fiduciary, insurer or service provider with respect to any
     Employee Benefit Plan.

          (g) Each Employee Benefit Plan is amendable and terminable
     unilaterally by the Company at any time without liability to the Company as
     a result thereof and no Employee Benefit Plan, plan documentation or
     agreement, summary plan description or other written communication
     distributed generally to employees by its terms prohibits the Company from
     amending or terminating any such Employee Benefit Plan.

          (h) Section 2.21(h) of the Disclosure Schedule discloses each: (i)
     agreement with any stockholder, director, executive officer or other key
     employee of the Company (A) the benefits of which are contingent, or the
     terms of which are materially altered, upon the occurrence of a transaction
     involving the Company of the nature of any of the transactions contemplated
     by this Agreement, (B) providing any term of employment or compensation
     guarantee or (C) providing severance benefits or other benefits after the
     termination of

                                      -15-
<PAGE>

     employment of such director, executive officer or key employee; (ii)
     agreement, plan or arrangement under which any person may receive payments
     from the Company that may be subject to the tax imposed by Section 4999 of
     the Code or included in the determination of such person's "parachute
     payment" under Section 280G of the Code; and (iii) agreement or plan
     binding the Company, including without limitation any stock option plan,
     stock appreciation right plan, restricted stock plan, stock purchase plan,
     severance benefit plan or Employee Benefit Plan, any of the benefits of
     which will be increased, or the vesting of the benefits of which will be
     accelerated, by the occurrence of any of the transactions contemplated by
     this Agreement or the value of any of the benefits of which will be
     calculated on the basis of any of the transactions contemplated by this
     Agreement.

     2.22  Environmental Matters.

          (a) There is no pending or, to the knowledge of the Company,
     threatened civil or criminal litigation, written notice of violation,
     formal administrative proceeding, or investigation, inquiry or information
     request by any Governmental Entity, relating to any Environmental Law
     involving the Company. For purposes of this Agreement, "Environmental Law"
     means any federal, state or local law, statute, rule or regulation or the
     common law relating to the environment or occupational health and safety,
     including without limitation any statute, regulation, administrative
     decision or order pertaining to (i) treatment, storage, disposal,
     generation and transportation of industrial, toxic or hazardous materials
     or substances or solid or hazardous waste; (ii) air, water and noise
     pollution; (iii) groundwater and soil contamination; (iv) the release or
     threatened release into the environment of industrial, toxic or hazardous
     materials or substances, or solid or hazardous waste, including without
     limitation emissions, discharges, injections, spills, escapes or dumping of
     pollutants, contaminants or chemicals; (v) the protection of wild life,
     marine life and wetlands, including without limitation all endangered and
     threatened species; (vi) storage tanks, vessels, containers, abandoned or
     discarded barrels, and other closed receptacles; (vii) health and safety of
     employees and other persons; and (viii) manufacturing, processing, using,
     distributing, treating, storing, disposing, transporting or handling of
     materials regulated under any law as pollutants, contaminants, toxic or
     hazardous materials or substances or oil or petroleum products or solid or
     hazardous waste. As used above, the terms "release" and "environment" shall
     have the meaning set forth in the Comprehensive Environmental Response,
     Compensation and Liability Act of 1980, as amended ("CERCLA").

          (b) There have been no releases of any Materials of Environmental
     Concern (as defined below) into the environment at any parcel of real
     property or any facility formerly or currently owned, operated or
     controlled by the Company. For purposes of this Agreement, "Materials of
     Environmental Concern" means any chemicals, pollutants or contaminants,
     hazardous substances (as such term is defined under CERCLA), solid wastes
     and hazardous wastes (as such terms are defined under the Resource
     Conservation and Recovery Act), toxic materials, oil or petroleum and
     petroleum products or any other material subject to regulation under any
     Environmental Law.

          (c) Set forth in Section 2.22(c) of the Disclosure Schedule is a list
     of all documents (whether in hard copy or electronic form) that contain any
     environmental reports, investigations and audits relating to premises
     currently or previously operated by the Company

                                      -16-
<PAGE>

     (whether conducted by or on behalf of the Company or a third party, and
     whether done at the initiative of the Company or directed by a Governmental
     Entity or other third party) which the Company has possession of or access
     to. A complete and accurate copy of each such document has been provided to
     the Buyer.

     2.23  Legal Compliance.  The Company, and the conduct and operations of its
business, are in compliance with each applicable law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, except for any violations or defaults that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.

     2.24  Customers and Suppliers. Section 2.24 of the Disclosure Schedule sets
forth a list of (a) each customer of the Company and the amount of revenues
accounted for by such customer since the date of the Company's incorporation and
(b) each supplier to the Company. No such customer or supplier has indicated
within the past year that it will stop, or decrease the rate of, buying products
or supplying products, as applicable, to the Company.

     2.25  Permits. Section 2.25 of the Disclosure Schedule sets forth a list of
all permits, licenses, registrations, certificates, orders or approvals from any
Governmental Entity (including without limitation those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property) ("Permits") issued to or held by the Company. Such listed Permits
are the only Permits that are required for the Company to conduct its business
as presently conducted, except for those the absence of which, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. Each such Permit is in full force and effect
and, to the knowledge of the Company, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration. Each such Permit will continue in full force
and effect immediately following the Closing.

     2.26  Certain Business Relationships With Affiliates.  No Affiliate of the
Company (a) owns any property or right, tangible or intangible, which is used in
the business of the Company, (b) has any claim or cause of action against the
Company, or (c) owes any money to, or is owed any money by, the Company.
Section 2.26 of the Disclosure Schedule describes any transactions or
relationships between the Company and any Affiliate thereof which have occurred
or existed since the date of the Company's incorporation.

     2.27  Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.

     2.28  Books and Records.  The minute books and other similar records of the
Company contain complete and accurate records of all actions taken at any
meetings of the Company's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting.  The books and records of the Company accurately reflect in all
material respects the assets, liabilities, business, financial condition and
results of operations of the Company and have been maintained in accordance with
good business and bookkeeping practices.

                                      -17-
<PAGE>

     2.29  Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Company pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Company has disclosed to the Buyer all material information relating to the
business of the Company or the transactions contemplated by this Agreement.

                                  ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE BUYER
                         AND THE TRANSITORY SUBSIDIARY

     Each of the Buyer and the Transitory Subsidiary represents and warrants to
the Company as follows:

     3.1  Organization, Qualification and Corporate Power. Each of the Buyer and
the Transitory Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. The Buyer is
duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Buyer
Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Buyer has furnished
or made available to the Company complete and accurate copies of its Certificate
of Incorporation and By-laws. For purposes of this Agreement, "Buyer Material
Adverse Effect" means a material adverse effect on the assets, business,
condition (financial or otherwise), results of operations or future prospects of
the Buyer and its subsidiaries, taken as a whole.

     3.2  Capitalization. The authorized capital stock of the Buyer consists of
(a) 60,000,000 shares of Buyer Common Stock, of which 34,218,565 shares were
issued and outstanding as of September 30, 2000, and (b) 5,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. All of the Merger Shares will be, when issued in accordance
with this Agreement, duly authorized, validly issued, fully paid, nonassessable
and free of all preemptive rights.

     3.3  Authorization of Transaction.  Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder.  The execution and delivery by the Buyer
and the Transitory Subsidiary of this Agreement and (in the case of the Buyer)
the Escrow Agreement and the consummation by the Buyer and the Transitory
Subsidiary of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer and Transitory Subsidiary, respectively.  This Agreement has been duly and
validly executed and delivered by

                                      -18-
<PAGE>

the Buyer and the Transitory Subsidiary and constitutes a valid and binding
obligation of the Buyer and the Transitory Subsidiary, enforceable against them
in accordance with its terms.

     3.4  Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificate of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery by the
Buyer or the Transitory Subsidiary of this Agreement or (in the case of the
Buyer) the Escrow Agreement, nor the consummation by the Buyer or the Transitory
Subsidiary of the transactions contemplated hereby or thereby, will (a) conflict
with or violate any provision of the charter or By-laws of the Buyer or the
Transitory Subsidiary, (b) require on the part of the Buyer or the Transitory
Subsidiary any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (c) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party any right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which the Buyer or the Transitory Subsidiary is a
party or by which either is bound or to which any of their assets are subject,
except for (i) the consent required under the Underwriting Agreement, dated as
of July 13, 2000, among the Buyer, Donaldson, Lufkin & Jenrette Securities
Corporation, Dain Rauscher Incorporated, FleetBoston Robertson Stephens Inc. and
DLJdirect Inc., as representatives of the several Underwriters defined therein
and listed in Schedule I therein, (ii) any conflict, breach, default,
acceleration, termination, modification or cancellation which would not
adversely affect the consummation of the transactions contemplated hereby or
(iii) any notice, consent or waiver the absence of which would not adversely
affect the consummation of the transactions contemplated hereby, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or the Transitory Subsidiary or any of their properties or assets.

     3.5  Reports and Financial Statements. The Buyer has previously furnished
or made available to the Company complete and accurate copies, as amended or
supplemented, of its (a) Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2000, as filed with the Securities and Exchange Commission (the
"SEC"), and (b) all other reports filed by the Buyer under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the SEC since June
30, 2000 (such reports are collectively referred to herein as the "Buyer
Reports"). The Buyer Reports constitute all of the documents required to be
filed by the Buyer under Section 13 or subsections (a) or (c) of Section 14 of
the Exchange Act with the SEC from June 30, 2000 through the date of this
Agreement. The Buyer Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder when
filed. As of their respective dates, the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto when filed, (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and in the case of
quarterly financial statements, as permitted by Form 10-Q under the Exchange
Act), (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Buyer as

                                      -19-
<PAGE>

of the respective dates thereof and for the periods referred to therein, and
(iv) are consistent with the books and records of the Buyer.

     3.6  Interim Operations of the Transitory Subsidiary. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.

     3.7  Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.

                                  ARTICLE IV
                                   COVENANTS

     4.1  Closing Efforts. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including, without limitation,
using its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.

     4.2  Governmental and Third-Party Notices and Consents.

          (a) Each Party shall use its Reasonable Best Efforts to obtain, at its
     expense, all waivers, permits, consents, approvals or other authorizations
     from Governmental Entities, and to effect all registrations, filings and
     notices with or to Governmental Entities, as may be required for such Party
     to consummate the transactions contemplated by this Agreement and to
     otherwise comply with all applicable laws and regulations in connection
     with the consummation of the transactions contemplated by this Agreement.

          (b) The Company shall use its Reasonable Best Efforts to obtain, at
     its expense, all such waivers, consents or approvals from third parties,
     and to give all such notices to third parties, as are required to be listed
     in Section 2.4 of the Disclosure Schedule.

     4.3  Stockholder Approval.

          (a) The Company shall use its Reasonable Best Efforts to obtain, as
     promptly as practicable, the Requisite Stockholder Approval, either at a
     special meeting of stockholders or pursuant to a written stockholder
     consent, all in accordance with the applicable requirements of the Delaware
     General Corporation Law. In connection with such special meeting of
     stockholders or written stockholder consent, the Company shall provide to
     its stockholders a written proxy or information statement (the "Disclosure
     Statement") which includes (A) a summary of the Merger and this Agreement
     (which summary shall include a summary of the terms relating to the
     indemnification obligations of the Company Stockholders, the escrow
     arrangements and the authority of the Indemnification Representative, and a
     statement that the adoption of this Agreement by the stockholders of the
     Company shall constitute approval of such terms), (B) all of the
     information required by Rule 502(b)(2) of Regulation D under the

                                      -20-
<PAGE>

     Securities Act and (C) a statement that appraisal rights are available for
     the Company Shares pursuant to Section 262 of the Delaware General
     Corporation Law and a copy of such Section 262. The Buyer agrees to
     cooperate with the Company in the preparation of the Disclosure Statement.
     The Company agrees not to distr ibute the Disclosure Statement until the
     Buyer has had a reasonable opportunity to review and comment on the
     Disclosure Statement and the Disclosure Statement has been approved by the
     Buyer (which approval may not be unreasonably withheld or delayed). If the
     Requisite Stockholder Approval is obtained by means of a written consent,
     the Company shall send, pursuant to Sections 228 and 262(d) of the Delaware
     General Corporation Law, a written notice to all stockholders of the
     Company that did not execute such written consent informing them that this
     Agreement and the Merger were adopted and approved by the stockholders of
     the Company and that appraisal rights are available for their Company
     Shares pursuant to Section 262 of the Delaware General Corporation Law
     (which notice shall include a copy of such Section 262), and shall promptly
     inform the Buyer of the date on which such notice was sent.

          (b) The Company, acting through its Board of Directors, shall include
     in the Disclosure Statement the unanimous recommendation of its Board of
     Directors that the stockholders of the Company vote in favor of the
     adoption of this Agreement and the approval of the Merger.

          (c) The Company shall ensure that the Disclosure Statement does not
     contain any untrue statement of a material fact or omit to state a material
     fact necessary in order to make the statements made, in light of the
     circumstances under which they were made, not misleading (provided that the
     Company shall not be responsible for the accuracy or completeness of any
     information furnished by the Buyer in writing for inclusion in the
     Disclosure Statement).

          (d) The Buyer shall ensure that any information furnished by the Buyer
     to the Company in writing for inclusion in the Disclosure Statement does
     not contain any untrue statement of a material fact or omit to state a
     material fact necessary in order to make the statements made, in light of
     the circumstances under which they were made, not misleading.

          (e) Tom Tucker, Greg Joyce, John Thuotte, Steve Wise, Rob Netzer,
     Robert Gordon and Matt Finlay (collectively, the "Key Employees") each
     agree (i) to vote all Company Shares that are beneficially owned by him in
     favor of the adoption of this Agreement and the approval of the Merger,
     (ii) not to vote any Company Shares in favor of any other acquisition
     (whether by way of merger, consolidation, share exchange, stock purchase or
     asset purchase) of all or a majority of the outstanding capital stock or
     assets of the Company and (iii) otherwise to use his Reasonable Best
     Efforts to obtain the Requisite Stockholder Approval.

     4.4  Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall conduct its operations in the Ordinary Course of Business and in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use its Reasonable Best Efforts to preserve intact its
current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect. Without limiting the generality

                                      -21-
<PAGE>

of the foregoing, prior to the Effective Time, the Company shall not, without
the written consent of the Buyer:

          (a) issue or sell, or redeem or repurchase, any stock or other
     securities of the Company or any rights, warrants or options to acquire any
     such stock or other securities (except pursuant to the exercise of the
     Warrant) or amend any of the terms of (including without limitation the
     vesting of) the Warrant;

          (b) split, combine or reclassify any shares of its capital stock;
     declare, set aside or pay any dividend or other distribution (whether in
     cash, stock or property or any combination thereof) in respect of its
     capital stock;

          (c) create, incur or assume any indebtedness (including obligations in
     respect of capital leases); assume, guarantee, endorse or otherwise become
     liable or responsible (whether directly, contingently or otherwise) for the
     obligations of any other person or entity; or make any loans, advances or
     capital contributions to, or investments in, any other person or entity;

          (d) enter into, adopt or amend any Employee Benefit Plan or any
     employment or severance agreement or arrangement of the type described in
     Section 2.21(h) or (except for normal increases in the Ordinary Course of
     Business for employees who are not Affiliates) increase in any manner the
     compensation or fringe benefits of, or materially modify the employment
     terms of, its directors, officers or employees, generally or individually,
     or pay any bonus or other benefit to its directors, officers or employees
     (except for existing payment obligations listed in Section 2.19 of the
     Disclosure Schedule);

          (e) acquire, sell, lease, license or dispose of any assets or property
     (including without limitation any shares or other equity interests in or
     securities of any corporation, partnership, association or other business
     organization or division thereof), other than purchases and sales of assets
     in the Ordinary Course of Business;

          (f) mortgage or pledge any of its property or assets or subject any
     such property or assets to any Security Interest;

          (g) discharge or satisfy any Security Interest or pay any obligation
     or liability other than in the Ordinary Course of Business;

          (h) amend its charter, by-laws or other organizational documents; (i)
     change in any material respect its accounting methods, principles or
     practices, except insofar as may be required by a generally applicable
     change in GAAP;

          (j) enter into, amend, terminate, take or omit to take any action that
     would constitute a violation of or default under, or waive any rights
     under, any material contract or agreement;

          (k) make or commit to make any capital expenditure in excess of $5,000
     per item or $25,000 in the aggregate;

                                      -22-
<PAGE>

          (l) institute or settle any Legal Proceeding;

          (m) take any action or fail to take any action permitted by this
     Agreement with the knowledge that such action or failure to take action
     would result in (i) any of the representations and warranties of the
     Company set forth in this Agreement becoming untrue or (ii) any of the
     conditions to the Merger set forth in Article V not being satisfied; or

          (n) agree in writing or otherwise to take any of the foregoing
     actions.

     4.5  Access to Information.

          (a) The Company shall permit representatives of the Buyer to have full
     access (at all reasonable times, and in a manner so as not to interfere
     with the normal business operations of the Company) to all premises,
     properties, financial and accounting records, contracts, other records and
     documents, and personnel, of or pertaining to the Company.

          (b) Within 15 days after the end of each month ending prior to the
     Closing, the Company shall furnish to the Buyer an unaudited income
     statement for such month and a balance sheet as of the end of such month,
     prepared on a basis consistent with the Financial Statements. Such
     financial statements shall present fairly the financial condition and
     results of operations of the Company as of the dates thereof and for the
     periods covered thereby, and shall be consistent with the books and records
     of the Company.

          (c) Each of the Buyer and the Transitory Subsidiary (i) shall treat
     and hold as confidential any Confidential Information (as defined below),
     (ii) shall not use any of the Confidential Information except in connection
     with this Agreement, and (iii) if this Agreement is terminated for any
     reason whatsoever, shall return to the Company all tangible embodiments
     (and all copies) thereof which are in its possession. For purposes of this
     Agreement, "Confidential Information" means any confidential or proprietary
     information of the Company that is furnished in writing to the Buyer or the
     Transitory Subsidiary by the Company in connection with this Agreement and
     is labeled confidential or proprietary; provided, however, that it shall
     not include any information (A) which, at the time of disclosure, is
     available publicly, (B) which, after disclosure, becomes available publicly
     through no fault of the Buyer or the Transitory Subsidiary, (C) which the
     Buyer or the Transitory Subsidiary knew or to which the Buyer or the
     Transitory Subsidiary had access prior to disclosure or (D) which the Buyer
     or the Transitory Subsidiary rightfully obtains from a source other than
     the Company.

     4.6  Notice of Breaches.

          (a) From the date of this Agreement until the Effective Time, the
     Company shall promptly deliver to the Buyer supplemental information
     concerning events or circumstances occurring subsequent to the date hereof
     which would render any representation, warranty or statement in this
     Agreement or the Disclosure Schedule inaccurate or incomplete at any time
     after the date of this Agreement until the Closing Date. No such
     supplemental information shall be deemed to cure any misrepresentation or
     breach of warranty or constitute an amendment of any representation,
     warranty or statement in this Agreement or the Disclosure Schedule.

                                      -23-
<PAGE>

          (b) From the date of this Agreement until the Effective Time, the
     Buyer shall promptly deliver to the Company supplemental information
     concerning events or circumstances occurring subsequent to the date hereof
     which would render any representation or warranty in this Agreement
     inaccurate or incomplete at any time after the date of this Agreement until
     the Closing Date. No such supplemental information shall be deemed to cure
     any misrepresentation or breach of warranty or constitute an amendment of
     any representation or warranty in this Agreement.

     4.7  Exclusivity.

          (a) The Company shall not, and the Company shall require each of its
     officers, directors, employees, representatives and agents not to, directly
     or indirectly, (i) initiate, solicit, encourage or otherwise facilitate any
     inquiry, proposal, offer or discussion with any party (other than the
     Buyer) concerning any merger, reorganization, consolidation,
     recapitalization, business combination, liquidation, dissolution, share
     exchange, sale of stock, sale of material assets or similar business
     transaction involving the Company or any division of the Company, (ii)
     furnish any non-public information concerning the business, properties or
     assets of the Company or any division of the Company to any party (other
     than the Buyer) or (iii) engage in discussions or negotiations with any
     party (other than the Buyer) concerning any such transaction.

          (b) The Company shall immediately notify any party with which
     discussions or negotiations of the nature described in paragraph (a) above
     were pending that the Company is terminating such discussions or
     negotiations. If the Company receives any inquiry, proposal or offer of the
     nature described in paragraph (a) above, the Company shall, within one
     business day after such receipt, notify the Buyer of such inquiry, proposal
     or offer, including the identity of the other party and the terms of such
     inquiry, proposal or offer.

     4.8  Expenses. Except as set forth in Article VI and the Escrow Agreement,
each of the Parties shall bear its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided, however, that if the Merger is consummated, the
Company and the Subsidiaries shall not incur more than an aggregate of $25,000
in legal and accounting fees and expenses in connection with the Merger.

     4.9  Indemnification. The Buyer shall not, for a period of three years
after the Effective Time, take any action to alter or impair any exculpatory or
indemnification provisions now existing in the Certificate of Incorporation or
By-laws of the Company for the benefit of any individual who served as a
director or officer of the Company at any time prior to the Effective Time,
except for any changes which may be required to conform with changes in
applicable law and any change which do not affect the application of such
provisions to acts or omissions of such individuals prior to the Effective Time.

     4.10  Listing of Merger Shares. The Buyer shall use its best efforts to
list the Merger Shares on the Nasdaq National Market if required under the rules
of the Nasdaq National Market.

                                      -24-
<PAGE>

                                   ARTICLE V
                      CONDITIONS TO CONSUMMATION OF MERGER

     5.1  Conditions to Each Party's Obligations. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction of the
following condition: this Agreement and the Merger shall have received the
Requisite Stockholder Approval.

     5.2  Conditions to Obligations of the Buyer and the Transitory Subsidiary.
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the Merger is subject to the satisfaction (or waiver by the Buyer) of the
following additional conditions:

          (a) the number of Dissenting Shares shall not exceed 3% of the number
     of outstanding Common Shares as of the Effective Time;

          (b) the Company will have obtained (and will have provided copies
     thereof to the Buyer) all of the waivers, permits, consents, approvals or
     other authorizations, and effected all of the registrations, filings and
     notices, referred to in Section 4.2 which are required on the part of the
     Company;

          (c) the representations and warranties of the Company set forth in the
     first sentence of Section 2.1 and in Section 2.3 and any representations
     and warranties of the Company set forth in this Agreement that are
     qualified as to materiality shall be true and correct in all respects, and
     all other representations and warranties of the Company set forth in this
     Agreement shall be true and correct in all material respects, in each case
     as of the date of this Agreement and as of the Effective Time as though
     made as of the Effective Time, except to the extent such representations
     and warranties are specifically made as of a particular date or as of the
     date of this Agreement (in which case such representations and warranties
     shall be true and correct as of such date);

          (d) the Company shall have performed or complied with in all material
     respects its agreements and covenants required to be performed or complied
     with under this Agreement as of or prior to the Effective Time;

          (e) no Legal Proceeding shall be pending or threatened wherein an
     unfavorable judgment, order, decree, stipulation or injunction would (i)
     prevent consummation of any of the transactions contemplated by this
     Agreement, (ii) cause any of the transactions contemplated by this
     Agreement to be rescinded following consummation or (iii) have a Company
     Material Adverse Effect, and no such judgment, order, decree, stipulation
     or injunction shall be in effect;

          (f) the Company shall have delivered to the Buyer and the Transitory
     Subsidiary a certificate (the "Company Certificate") to the effect that
     each of the conditions specified in Section 5.1 and clauses (a) through (e)
     (insofar as clause (e) relates to Legal Proceedings involving the Company)
     of this Section 5.2 is satisfied in all respects;

          (g) each of the Company Stockholders shall have executed and delivered
     to the Buyer an Investment Representation Letter in the form attached
     hereto as Exhibit B and the Buyer shall have no reason to believe that the
     statements set forth therein are not true and shall

                                      -25-
<PAGE>

     be reasonably satisfied that the issuance and sale of the Merger Shares is
     exempt from the registration requirements of the Securities Act;

          (h) each of the Key Employees shall have executed and delivered to the
     Buyer an invention, non-disclosure, non-competition and non-solicitation
     agreement in form and substance reasonably satisfactory to the Buyer;

          (i) each of the Key Employees shall have executed and delivered a
     stock restriction agreement in substantially the form attached hereto as
     Exhibit C;

          (j) each of the Company Stockholders who is not a Key Employee shall
     have executed and delivered a stockholders agreement in substantially the
     form attached hereto as Exhibit D;

          (k) the Buyer shall have received from counsel to the Company an
     opinion with respect to the matters set forth in Exhibit E attached hereto,
     addressed to the Buyer and dated as of the Closing Date;

          (l) the Buyer shall have received copies of the resignations,
     effective as of the Effective Time, of each director and officer of the
     Company (other than any such resignations which the Buyer designates, by
     written notice to the Company, as unnecessary);

          (m) the Buyer shall have received evidence in form and substance
     satisfactory to it that the Warrant has been fully exercised or terminated,
     as the case may be, and that the holders of the Warrant shall have no
     further rights under such Warrant and that the Company shall have no
     further obligations with respect to such Warrant; and

          (n) the Buyer shall have received such other certificates and
     instruments (including without limitation certificates of good standing of
     the Company in their jurisdiction of organization and the various foreign
     jurisdictions in which they are qualified, certified charter documents,
     certificates as to the incumbency of officers and the adoption of
     authorizing resolutions) as it shall reasonably request in connection with
     the Closing.

     5.3  Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:

          (a) the Merger Shares shall have been authorized for listing on the
     Nasdaq National Market upon official notice of issuance;

          (b) the Buyer shall have effected all of the registrations, filings
     and notices referred to in Section 4.2 which are required on the part of
     the Buyer, except for any which if not obtained or effected would not have
     a Buyer Material Adverse Effect or a material adverse effect on the ability
     of the Parties to consummate the transactions contemplated by this
     Agreement;

          (c) the representations and warranties of the Buyer and the Transitory
     Subsidiary set forth in the first sentence of Section 3.1 and Section 3.3
     and any representations and warranties of the Buyer and the Transitory
     Subsidiary set forth in this Agreement that are qualified as to materiality
     shall be true and correct, and the representations and warranties of the

                                      -26-
<PAGE>

     Buyer and the Transitory Subsidiary set forth in this Agreement that are
     not so qualified (other than those set forth in Section 3.1 and Section
     3.3) shall be true and correct in all material respects, in each case as of
     the date of this Agreement and as of the Effective Time as though made as
     of the Effective Time, except to the extent such representations and
     warranties are specifically made as of a particular date or as of the date
     of this Agreement (in which case such representations and warranties shall
     be true and correct as of such date);

          (d) each of the Buyer and the Transitory Subsidiary shall have
     performed or complied with in all material respects its agreements and
     covenants required to be performed or complied with under this Agreement as
     of or prior to the Effective Time;

          (e) the Buyer shall have delivered to the Company a certificate (the
     "Buyer Certificate") to the effect that each of the conditions specified in
     clauses (a) through (d) of this Section 5.3 is satisfied in all respects;

          (f) the Company shall have received from counsel to the Buyer and the
     Transitory Subsidiary an opinion with respect to the matters set forth in
     Exhibit F attached hereto, addressed to the Company and dated as of the
     Closing Date; and

          (g) the Company shall have received such other certificates and
     instruments (including without limitation certificates of good standing of
     the Buyer and the Transitory Subsidiary in their jurisdiction of
     organization, certified charter documents, certificates as to the
     incumbency of officers and the adoption of authorizing resolutions) as it
     shall reasonably request in connection with the Closing.

                                  ARTICLE VI
                                INDEMNIFICATION

     6.1  Indemnification by the Company Stockholders.  The Company Stockholders
receiving the Merger Shares pursuant to Section 1.5 (the "Indemnifying
Stockholders") shall indemnify the Buyer in respect of, and hold it harmless
against, any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest, court costs, costs of investigators, fees
and expenses of attorneys, accountants, financial advisors and other experts,
and other expenses of litigation) ("Damages") incurred or suffered by the
Surviving Corporation or the Buyer or any Affiliate thereof resulting from,
relating to or constituting:

          (a) any misrepresentation, breach of warranty or failure to perform
     any covenant or agreement of the Company contained in this Agreement or the
     Company Certificate;

          (b) any failure of any Company Stockholder to have good, valid and
     marketable title to the issued and outstanding Company Shares issued in the
     name of such Company Stockholder, free and clear of all Security Interests;
     or

          (c) any claim by a stockholder or former stockholder of the Company,
     or any other person or entity, seeking to assert, or based upon: (i)
     ownership or rights to ownership of

                                      -27-
<PAGE>

     any shares of stock of the Company; (ii) any rights of a stockholder (other
     than the right to receive the Merger Shares pursuant to this Agreement or
     appraisal rights under the applicable provisions of the Delaware General
     Corporation Law), including any option, preemptive rights or rights to
     notice or to vote; (iii) any rights under the Certificate of Incorporation
     or By-laws of the Company as constituted prior to the Merger; or (iv) any
     claim that his, her or its shares were wrongfully repurchased by the
     Company.

     6.2  Indemnification by the Buyer. The Buyer shall indemnify the
Indemnifying Stockholders in respect of, and hold them harmless against, any and
all Damages incurred or suffered by the Indemnifying Stockholders resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of the Buyer or the Transitory
Subsidiary contained in this Agreement or the Buyer Certificate.

     6.3  Indemnification Claims.

          (a) A party entitled, or seeking to assert rights, to indemnification
     under this Article VI (an "Indemnified Party") shall give written
     notification to the party from whom indemnification is sought (an
     "Indemnifying Party") of the commencement of any suit or proceeding
     relating to a third-party claim for which indemnification pursuant to this
     Article VI may be sought. Such notification shall be given within 20
     business days after receipt by the Indemnified Party of notice of such suit
     or proceeding, and shall describe in reasonable detail (to the extent known
     by the Indemnified Party) the facts constituting the basis for such suit or
     proceeding and the amount of the claimed damages; provided, however, that
     no delay on the part of the Indemnified Party in notifying the Indemnifying
     Party shall relieve the Indemnifying Party of any liability or obligation
     hereunder except to the extent of any damage or liability caused by or
     arising out of such failure. Within 20 days after delivery of such
     notification, the Indemnifying Party may, upon written notice thereof to
     the Indemnified Party, assume control of the defense of such suit or
     proceeding with counsel reasonably satisfactory to the Indemnified Party;
     provided that (i) the Indemnifying Party may only assume control of such
     defense if (A) it acknowledges in writing to the Indemnified Party that any
     damages, fines, costs or other liabilities that may be assessed against the
     Indemnified Party in connection with such suit or proceeding constitute
     Damages for which the Indemnified Party shall be indemnified pursuant to
     this Article VI and (B) the ad damnum is less than or equal to the amount
     of Damages for which the Indemnifying Party is liable under this Article VI
     and (ii) the Indemnifying Party may not assume control of the defense of a
     suit or proceeding involving criminal liability or in which equitable
     relief is sought against the Indemnified Party. If the Indemnifying Party
     does not so assume control of such defense, the Indemnified Party shall
     control such defense. The party not controlling such defense (the "Non-
     controlling Party") may participate therein at its own expense; provided
     that if the Indemnifying Party assumes control of such defense and the
     Indemnified Party reasonably concludes that the Indemnifying Party and the
     Indemnified Party have conflicting interests or different defenses
     available with respect to such suit or proceeding, the reasonable fees and
     expenses of counsel to the Indemnified Party shall be considered "Damages"
     for purposes of this Agreement. The party controlling such defense (the
     "Controlling Party") shall keep the Non-controlling Party advised of the
     status of such suit or proceeding and the defense thereof and shall
     consider in good faith recommendations made by the Non-controlling Party
     with respect thereto. The Non-controlling Party shall furnish the
     Controlling Party with such information as it may have with respect to such
     suit or proceeding

                                      -28-
<PAGE>

     (including copies of any summons, complaint or other pleading which may
     have been served on such party and any written claim, demand, invoice,
     billing or other document evidencing or asserting the same) and shall
     otherwise cooperate with and assist the Controlling Party in the defense of
     such suit or proceeding. The Indemnifying Party shall not agree to any
     settlement of, or the entry of any judgment arising from, any such suit or
     proceeding without the prior written consent of the Indemnified Party,
     which shall not be unreasonably withheld or delayed; provided that the
     consent of the Indemnified Party shall not be required if the Indemnifying
     Party agrees in writing to pay any amounts payable pursuant to such
     settlement or judgment and such settlement or judgment includes a complete
     release of the Indemnified Party from further liability and has no other
     adverse effect on the Indemnified Party. The Indemnified Party shall not
     agree to any settlement of, or the entry of any judgment arising from, any
     such suit or proceeding without the prior written consent of the
     Indemnifying Party, which shall not be unreasonably withheld or delayed.

          (b) In order to seek indemnification under this Article VI, an
     Indemnified Party shall give written notification (a "Claim Notice") to the
     Indemnifying Party which contains (i) a description and the amount (the
     "Claimed Amount") of any Damages incurred by the Indemnified Party, (ii) a
     statement that the Indemnified Party is entitled to indemnification under
     this Article VI for such Damages and a reasonable explanation of the basis
     therefor, and (iii) a demand for payment (in the manner provided in
     paragraph (c) below) in the amount of such Damages. If the Indemnified
     Party is seeking to enforce such claim pursuant to the Escrow Agreement,
     the Indemnifying Party shall deliver a copy of the Claim Notice to the
     Escrow Agent.

          (c) Within 20 days after delivery of a Claim Notice, the Indemnifying
     Party shall deliver to the Indemnified Party a written response (the
     "Response") in which the Indemnifying Party shall: (i) agree that the
     Indemnified Party is entitled to receive all of the Claimed Amount (in
     which case the Response shall be accompanied by a payment by the
     Indemnifying Party to the Indemnified Party of the Claimed Amount, by check
     or by wire transfer; provided that if the Indemnified Party is seeking to
     enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party
     and the Indemnified Party shall deliver to the Escrow Agent, within three
     days following the delivery of the Response, a written notice executed by
     both parties instructing the Escrow Agent to distribute to the Buyer such
     number of Escrow Shares as have an aggregate Value (as defined below) equal
     to the Claimed Amount), (ii) agree that the Indemnified Party is entitled
     to receive part, but not all, of the Claimed Amount (the "Agreed Amount")
     (in which case the Response shall be accompanied by a payment by the
     Indemnifying Party to the Indemnified Party of the Agreed Amount, by check
     or by wire transfer; provided that if the Indemnified Party is seeking to
     enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party
     and the Indemnified Party shall deliver to the Escrow Agent, within three
     days following the delivery of the Response, a written notice executed by
     both parties instructing the Escrow Agent to distribute to the Buyer such
     number of Escrow Shares as have an aggregate Value equal to the Agreed
     Amount) or (iii) dispute that the Indemnified Party is entitled to receive
     any of the Claimed Amount. If the Indemnifying Party in the Response
     disputes its liability for all or part of the Claimed Amount, the
     Indemnifying Party and the Indemnified Party shall follow the procedures
     set forth in Section 6.3(d) for the resolution of such dispute (a
     "Dispute"). For purposes of this Article VI, the "Value" of any Escrow
     Shares on any given date delivered in satisfaction of an indemnity claim
     shall be the

                                      -29-
<PAGE>

     average reported closing price of the Buyer Common Stock on the Nasdaq
     National Market over the 15 consecutive trading days ending on the trading
     day immediately preceding such date (subject to equitable adjustment in the
     event of any stock split, stock dividend, reverse stock split or similar
     event affecting the Buyer Common Stock since the Closing Date), multiplied
     by the number of such Escrow Shares.

          (d) During the 60-day period following the delivery of a Response that
     reflects a Dispute, the Indemnifying Party and the Indemnified Party shall
     use good faith efforts to resolve the Dispute. If the Dispute is not
     resolved within such 60-day period, the Indemnifying Party and the
     Indemnified Party shall discuss in good faith the submission of the Dispute
     to a mutually acceptable alternative dispute resolution procedure (which
     may be non-binding or binding upon the parties, as they agree in advance)
     (the "ADR Procedure"). In the event the Indemnifying Party and the
     Indemnified Party agree upon an ADR Procedure, such parties shall, in
     consultation with the chosen dispute resolution service (the "ADR
     Service"), promptly agree upon a format and timetable for the ADR
     Procedure, agree upon the rules applicable to the ADR Procedure, and
     promptly undertake the ADR Procedure. The provisions of this Section 6.3(d)
     shall not obligate the Indemnifying Party and the Indemnified Party to
     pursue an ADR Procedure or prevent either such party from pursuing the
     Dispute in a court of competent jurisdiction; provided that, if the
     Indemnifying Party and the Indemnified Party agree to pursue an ADR
     Procedure, neither the Indemnifying Party nor the Indemnified Party may
     commence litigation or seek other remedies with respect to the Dispute
     prior to the completion of such ADR Procedure. Any ADR Procedure undertaken
     by the Indemnifying Party and the Indemnified Party shall be considered a
     compromise negotiation for purposes of federal and state rules of evidence,
     and all statements, offers, opinions and disclosures (whether written or
     oral) made in the course of the ADR Procedure by or on behalf of the
     Indemnifying Party, the Indemnified Party or the ADR Service shall be
     treated as confidential and, where appropriate, as privileged work product.
     Such statements, offers, opinions and disclosures shall not be discoverable
     or admissible for any purposes in any litigation or other proceeding
     relating to the Dispute (provided that this sentence shall not be construed
     to exclude from discovery or admission any matter that is otherwise
     discoverable or admissible). The fees and expenses of any ADR Service used
     by the Indemnifying Party and the Indemnified Party shall be shared equally
     by the Indemnifying Party and the Indemnified Party. If the Indemnified
     Party is seeking to enforce the claim that is the subject of the Dispute
     pursuant to the Escrow Agreement, the Indemnifying Party and the
     Indemnified Party shall deliver to the Escrow Agent, promptly following the
     resolution of the Dispute (whether by mutual agreement, pursuant to an ADR
     Procedure, as a result of a judicial decision or otherwise), a written
     notice executed by both parties instructing the Escrow Agent as to what (if
     any) portion of the Escrow Shares shall be distributed to the Buyer and/or
     the Indemnifying Stockholders (which notice shall be consistent with the
     terms of the resolution of the Dispute).

          (e) Notwithstanding the other provisions of this Section 6.3, if a
     third party asserts (other than by means of a lawsuit) that an Indemnified
     Party is liable to such third party for a monetary or other obligation
     which may constitute or result in Damages for which such Indemnified Party
     may be entitled to indemnification pursuant to this Article VI, and such
     Indemnified Party reasonably determines that it has a valid business reason
     to fulfill such obligation, then (i) such Indemnified Party shall be
     entitled to satisfy such obligation, without prior notice to or consent
     from the Indemnifying Party, (ii) such Indemnified Party may

                                      -30-
<PAGE>

     subsequently make a claim for indemnification in accordance with the
     provisions of this Article VI, and (iii) such Indemnified Party shall be
     reimbursed, in accordance with the provisions of this Article VI, for any
     such Damages for which it is entitled to indemnification pursuant to this
     Article VI (subject to the right of the Indemnifying Party to dispute the
     Indemnified Party's entitlement to indemnification, or the amount for which
     it is entitled to indemnification, under the terms of this Article VI).

          (f) For purposes of this Section 6.3 and the last two sentences of
     Section 6.4, (i) if the Indemnifying Stockholders comprise the Indemnifying
     Party, any references to the Indemnifying Party (except provisions relating
     to an obligation to make or a right to receive any payments provided for in
     Section 6.3 or Section 6.4) shall be deemed to refer to the Indemnification
     Representatives, and (ii) if the Indemnifying Stockholders comprise the
     Indemnified Party, any references to the Indemnified Party (except
     provisions relating to an obligation to make or a right to receive any
     payments provided for in Section 6.3 or Section 6.4) shall be deemed to
     refer to the Indemnification Representatives. The Indemnification
     Representatives shall have full power and authority on behalf of each
     Indemnifying Stockholder to take any and all actions on behalf of, execute
     any and all instruments on behalf of, and execute or waive any and all
     rights of, the Indemnifying Stockholders under this Article VI. The
     Indemnification Representatives shall have no liability to any Indemnifying
     Stockholder for any action taken or omitted on behalf of the Indemnifying
     Stockholders pursuant to this Article VI.

     6.4  Survival of Representations and Warranties.  All representations and
warranties contained in this Agreement, the Company Certificate or the Buyer
Certificate shall (a) survive the Closing and any investigation at any time made
by or on behalf of an Indemnified Party and (b) shall expire on the date one
year following the Closing Date, except that (i) the representations and
warranties set forth in Sections 2.1, 2.2, 2.3, 3.1, 3.2 and 3.3 (and the
portion of the Company Certificate or the Buyer Certificate relating thereto)
shall survive the Closing without limitation and (ii) the representations and
warranties set forth in Sections 2.9, 2.21 and 2.22 (and the portion of the
Company Certificate relating thereto) shall survive until 30 days following
expiration of all statutes of limitation applicable to the matters referred to
therein.  If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or warranty, either a Claim Notice based upon a
breach of such representation or warranty, or a notice that, as a result a legal
proceeding instituted by or written claim made by a third party, the Indemnified
Party reasonably expects to incur Damages as a result of a breach of such
representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice.  If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party; and if the
Indemnified Party has delivered a copy of the Expected Claim Notice to the
Escrow Agent and Escrow Shares have been retained in escrow after the
Termination Date (as defined in the Escrow Agreement) with respect to such
Expected Claim Notice, the Indemnifying Party and the Indemnified Party shall
promptly deliver to the Escrow Agent a written notice executed by both parties
instructing the Escrow Agent to distribute such retained Escrow Shares to the
Indemnifying Stockholders in accordance with the terms of the Escrow Agreement.

                                      -31-
<PAGE>

     6.5  Limitations.

          (a) Notwithstanding anything to the contrary herein, (i) the aggregate
     liability of the Indemnifying Stockholders for Damages under this Article
     VI shall not exceed the Value of the Escrow Shares held by the Escrow
     Agent, (ii) the aggregate liability of the Buyer for Damages under this
     Article VI shall not exceed $1,300,000, and (iii) the Indemnifying
     Stockholders and the Buyer shall be liable under this Article VI for only
     that portion of the aggregate Damages for which they or it would otherwise
     be liable which exceeds $50,000; provided that the limitation set forth in
     clause (iii) above shall not apply to (A) a claim pursuant to Section
     6.1(a) relating to a breach of the representations and warranties set forth
     in Sections 2.1, 2.2, or 2.3 (or the portion of the Company Certificate
     relating thereto) or to a breach of the covenants set forth in Sections 4.8
     or (B) a claim pursuant to Section 6.2 relating to a breach of the
     representations and warranties set forth in Sections 3.1, 3.2, or 3.3 (or
     the portion of the Buyer Certificate relating thereto). For purposes solely
     of this Article VI, all representations and warranties of the Company in
     Article II (other than Section 2.29) and all representations and warranties
     of the Buyer and the Transitory Subsidiary in Article III shall be
     construed as if the term "material" and any reference to "Company Material
     Adverse Effect" and "Buyer Material Adverse Effect" (and variations
     thereof) were omitted from such representations and warranties.

          (b) Except with respect to claims based on fraud, after the Closing,
     the rights of the Indemnified Parties under this Article VI and the Escrow
     Agreement shall be the exclusive remedy of the Indemnified Parties with
     respect to claims resulting from or relating to any misrepresentation,
     breach of warranty or failure to perform any covenant or agreement
     contained in this Agreement.

          (c) No Indemnifying Stockholder shall have any right of contribution
     against the Company or the Surviving Corporation with respect to any breach
     by the Company of any of its representations, warranties, covenants or
     agreements.

                                  ARTICLE VII
                              REGISTRATION RIGHTS

     7.1  Registration of Shares.

          (a) The Buyer shall file with the SEC, as soon as practicable
     following the Closing (but in no event prior to the Buyer's satisfaction of
     the eligibility requirements for use of Form S-3), a registration statement
     on Form S-3 covering the resale to the public by the Company Stockholders
     of 28.57% of the Merger Shares (the "Initial Stockholder Registration
     Statement"). As soon as practicable following each of the three anniversary
     dates of the Closing Date, the Buyer shall file with the SEC a registration
     statement on Form S-3 covering the resale to the public by the Company
     Stockholders of an addition 23.81% of the Merger Shares (each, a
     "Subsequent Stockholder Registration Statement" and together with the
     Initial Stockholder Registration Statement, the "Registration Statements").
     The Buyer shall use its best efforts to cause each Registration Statement
     to be declared effective by the SEC as soon as practicable. The Buyer shall
     cause each Registration Statement to remain effective until the date six
     months after the date such Registration Statement was declared effective or
     such earlier time as all of the

                                      -32-
<PAGE>

     Merger Shares covered by such Registration Statement have been sold
     pursuant thereto. Notwithstanding the foregoing, the Buyer shall not be
     obligated to file a Registration Statement (or maintain the effectiveness
     thereof) with respect to any Merger Shares eligible to be sold under Rule
     144(k) of the Securities Act.

          (b) If the Buyer desires that any officers or directors of the Buyer
     holding securities of the Buyer be included in any registration requested
     pursuant to Section 7.1(a) or if other holders of securities of the Buyer
     who are entitled, by contract with the Buyer, to have securities included
     in such a registration (the "Other Holders") request such inclusion, the
     Buyer may include the securities of such officers, directors and Other
     Holders in such registration on the terms set forth herein. If such
     registration involves an underwritten offering, the Buyer shall (together
     with all Company Stockholders, officers, directors and Other Holders
     proposing to distribute their securities through such underwriting) enter
     into an underwriting agreement in customary form (including, without
     limitation, customary indemnification and contribution provisions on the
     part of the Buyer) with the managing underwriter. Notwithstanding any other
     provision of this Section 7.1, if the managing underwriter determines that
     the inclusion of all shares requested to be registered would adversely
     affect the offering, the Buyer may limit the number of shares to be
     included in the registration and underwriting. The Buyer shall so advise
     all holders of shares requesting registration, and the number of shares
     that are entitled to be included in the registration and underwriting shall
     be allocated in the following manner. The securities of the Buyer held by
     holders other than Company Stockholders and Other Holders shall be excluded
     from such registration and underwriting to the extent deemed advisable by
     the managing underwriter, and, if a further limitation on the number of
     shares is required, the number of shares that may be included in such
     registration and underwriting shall be allocated among all Company
     Stockholders and Other Holders requesting registration in proportion, as
     nearly as practicable, to the respective number of shares of Buyer Common
     Stock which they held at the time the Buyer gives notice of the proposed
     registration to the Other Holders. If any Company Stockholder, officer,
     director or Other Holder who has requested inclusion in such registration
     as provided above disapproves of the terms of the underwriting, such person
     may elect to withdraw therefrom by written notice to the Buyer, and the
     securities so withdrawn shall also be withdrawn from registration. If the
     managing underwriter has not limited the number of shares or other
     securities to be underwritten, the Buyer may include securities for its own
     account in such registration if the managing underwriter so agrees and if
     the number of shares and other securities which would otherwise have been
     included in such registration and underwriting will not thereby be limited.

     7.2  Limitations on Registration Rights.

          (a) The Buyer may, by written notice to the Company Stockholders, (i)
     delay the filing or effectiveness of any Registration Statement or (ii)
     suspend any Registration Statement after effectiveness and require that the
     Company Stockholders immediately cease sales of shares pursuant to any
     Registration Statement, in the event that (A) the Buyer files a
     registration statement (other than a registration statement on Form S-8 or
     its successor form) with the SEC for a public offering of its securities;
     (B) the Buyer is engaged in any activity or transaction or preparations or
     negotiations for any activity or transaction that the Buyer desires to keep
     confidential for business reasons, if the Buyer determines in good faith
     that the public disclosure requirements imposed on the Buyer under the
     Securities Act in connection with the

                                      -33-
<PAGE>

     Registration Statement would require disclosure of such activity,
     transaction, preparations or negotiations or (C) the Buyer fails to satisfy
     the requirements for use of Form S-3, as set forth in the General
     Instructions to Form S-3.

          (b) If the Buyer delays or suspends any Registration Statement or
     requires the Company Stockholders to cease sales of shares pursuant to
     paragraph (a) above, the Buyer shall, as promptly as practicable following
     the termination of the circumstance which entitled the Buyer to do so, take
     such actions as may be necessary to file or reinstate the effectiveness of
     such Registration Statement and/or give written notice to all Company
     Stockholders authorizing them to resume sales pursuant to such Registration
     Statement. If as a result thereof the prospectus included in such
     Registration Statement has been amended to comply with the requirements of
     the Securities Act, the Buyer shall enclose such revised prospectus with
     the notice to Company Stockholders given pursuant to this paragraph (b),
     and the Company Stockholders shall make no offers or sales of shares
     pursuant to such Registration Statement other than by means of such revised
     prospectus.

     7.3  Incidental Registration.

          (a) If, on or before the third anniversary of the Effective Date, the
     Buyer proposes to file a registration statement with respect to any class
     of its equity securities, (other than a Registration Statement filed
     pursuant to Section 7.1 or a registration statement covering shares to be
     sold solely for the account of Other Holders), it will, prior to such
     filing, give written notice to all Company Stockholders of its intention to
     do so; provided, that no such notice need be given if no shares are to be
     included therein as a result of a determination of the managing underwriter
     pursuant to Section 7.3(b). Upon the written request of a Company
     Stockholder or Company Stockholders given within 20 days after the Buyer
     provides such notice (which request shall state the intended method of
     disposition of such shares), the Buyer shall use its best efforts to cause
     all Merger Shares which the Buyer has been requested by such Company
     Stockholder or Company Stockholders to register to be registered under the
     Securities Act to the extent necessary to permit their sale or other
     disposition in accordance with the intended methods of distribution
     specified in the request of such Company Stockholder or Company
     Stockholders; provided that the Buyer shall have the right to postpone or
     withdraw any registration effected pursuant to this Section 7.3 without
     obligation to any Company Stockholder.

          (b) If the registration for which the Buyer gives notice pursuant to
     Section 7.3(a) is a registered public offering involving an underwriting,
     the Buyer shall so advise the Company Stockholders as a part of the written
     notice given pursuant to Section 7.3(a). In such event, the right of any
     Company Stockholder to include its Merger Shares in such registration
     pursuant to Section 7.3 shall be conditioned upon such Company
     Stockholder's participation in such underwriting on the terms set forth
     herein. All Company Stockholders proposing to distribute their securities
     through such underwriting shall enter into an underwriting agreement in
     customary form with the underwriter or underwriters selected for the
     underwriting by the Buyer. Notwithstanding any other provision of this
     Section 7.3, if the managing underwriter determines that the inclusion of
     all shares requested to be registered would adversely affect the offering,
     the Buyer may limit the number of shares to be included in the registration
     and underwriting to not less than 50% of the total number of securities to
     be included in the offering. The Buyer shall so advise all holders of
     shares requesting registration, and the number of shares that are entitled

                                      -34-
<PAGE>

     to be included in the registration and underwriting shall be allocated in
     the following manner. The securities of the Buyer held by holders other
     than Company Stockholders and Other Holders shall be excluded from such
     registration and underwriting to the extent deemed advisable by the
     managing underwriter, and, if a further limitation on the number of shares
     is required, the number of shares that may be included in such registration
     and underwriting shall be allocated among all Company Stockholders and
     Other Holders requesting registration in proportion, as nearly as
     practicable, to the respective number of shares of Buyer Common Stock which
     they held at the time the Buyer gives the notice specified in Section
     7.3(a). If any Company Stockholder or Other Holder would thus be entitled
     to include more securities than such holder requested to be registered, the
     excess shall be allocated among other requesting Company Stockholders and
     Other Holders pro rata in the manner described in the preceding sentence.
     If any holder of shares or any officer, director or Other Holder
     disapproves of the terms of any such underwriting, such person may elect to
     withdraw therefrom by written notice to the Buyer, and any shares or other
     securities excluded or withdrawn from such underwriting shall be withdrawn
     from such registration.

     7.4  Registration Procedures.

          (a) In connection with the filing by the Buyer of each Registration
     Statement, the Buyer shall furnish to each Company Stockholder a copy of
     the prospectus, including a preliminary prospectus, in conformity with the
     requirements of the Securities Act.

          (b) The Buyer shall use its best efforts to register or qualify the
     Merger Shares covered by the Registration Statement under the securities
     laws of each state of the United States; provided, however, that the Buyer
     shall not be required in connection with this paragraph (b) to qualify as a
     foreign corporation or execute a general consent to service of process in
     any jurisdiction.

          (c) If the Buyer has delivered preliminary or final prospectuses to
     the Company Stockholders and after having done so the prospectus is amended
     or supplemented to comply with the requirements of the Securities Act, the
     Buyer shall promptly notify the Company Stockholders and, if requested by
     the Buyer, the Company Stockholders shall immediately cease making offers
     or sales of shares under the Registration Statement and return all
     prospectuses to the Buyer. The Buyer shall promptly provide the Company
     Stockholders with revised or supplemented prospectuses and, following
     receipt of the revised or supplemented prospectuses, the Company
     Stockholders shall be free to resume making offers and sales under such
     Registration Statement.

          (d) The Buyer shall pay the expenses incurred by it in complying with
     its obligations under this Article VII, including all registration and
     filing fees, exchange listing fees, fees and expenses of counsel for the
     Buyer, and fees and expenses of accountants for the Buyer, but excluding
     (i) any brokerage fees, selling commissions or underwriting discounts
     incurred by the Company Stockholders in connection with sales under any
     Registration Statement and (ii) the fees and expenses of any counsel
     retained by Company Stockholders.

                                      -35-
<PAGE>

     7.5  Requirements of Company Stockholders. The Buyer shall not be required
to include any Merger Shares in any Registration Statement unless:

          (a) the Company Stockholder owning such shares furnishes to the Buyer
     in writing such information regarding such Company Stockholder and the
     proposed sale of Merger Shares by such Company Stockholder as the Buyer may
     reasonably request in writing in connection with a Registration Statement
     or as shall be required in connection therewith by the SEC or any state
     securities law authorities;

          (b) such Company Stockholder shall have provided to the Buyer its
     written agreement:

                (i) to indemnify the Buyer and each of its directors and
     officers against, and hold the Buyer and each of its directors and officers
     harmless from, any losses, claims, damages, expenses or liabilities
     (including reasonable attorneys fees) to which the Buyer or such directors
     and officers may become subject by reason of any statement or omission in
     the Registration Statement made in reliance upon, or in conformity with, a
     written statement by such Company Stockholder furnished pursuant to this
     Section 7.5; and

                (ii) to report to the Buyer sales made pursuant to any
     Registration Statement.

     7.6  Indemnification.  The Buyer agrees to indemnify and hold harmless each
Company Stockholder whose shares are included in any Registration Statement
against any losses, claims, damages, expenses or liabilities to which such
Company Stockholder may become subject by reason of any untrue statement of a
material fact contained in such Registration Statement or any omission to state
therein a fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages, expenses
or liabilities arise out of or are based upon information furnished to the Buyer
by or on behalf of a Company Stockholder for use in such Registration Statement.
The Buyer shall have the right to assume the defense and settlement of any claim
or suit for which the Buyer may be responsible for indemnification under this
Section 7.6.

     7.7  Assignment of Rights.  A Company Stockholder may not assign any of its
rights under this Article VII except in connection with the transfer of some or
all of his, her or its Merger Shares to a child or spouse, or trust for their
benefit or, in the case of a partnership, to the partners of such partnership
pursuant to a pro rata distribution, provided each such transferee agrees in a
written instrument delivered to the Buyer to be bound by the provisions of this
Article VII.

     7.8  Availability of Information. With a view to making available to
Company Stockholders the benefits of Rule 144 promulgated under the Securities
Act and any other rule or regulation of the SEC that may at any time permit a
Company Stockholder to sell securities of the Buyer to the public without
registration or pursuant to a registration on Form S-3, the Buyer agrees to:

          (a) make and keep current public information about the Buyer
     available, as those terms are understood and defined in SEC Rule 144;

                                      -36-
<PAGE>

          (b) use its best efforts to file with the Commission in a timely
     manner all reports and other documents required of the Buyer under the
     Securities Act and the Exchange Act; and

          (c) furnish to any Company Stockholder upon request (i) a written
     statement by the Buyer as to its compliance with the reporting requirements
     of SEC Rule 144 and of the Securities Act and the Exchange Act, (ii) a copy
     of the most recent annual or quarterly report of the Buyer, and (iii) such
     other reports and documents of the Buyer as such holder may reasonably
     request to avail itself of any similar rule or regulation of the SEC
     allowing it to sell any such securities without registration.

                                 ARTICLE VIII
                                  TERMINATION

     8.1  Termination of Agreement. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval), as provided below:

          (a) the Parties may terminate this Agreement by mutual written
     consent;

          (b) the Buyer may terminate this Agreement by giving written notice to
     the Company in the event the Company is in breach of any representation,
     warranty or covenant contained in this Agreement, and such breach,
     individually or in combination with any other such breach, (i) would cause
     the conditions set forth in clauses (c) or (d) of Section 5.2 not to be
     satisfied and (ii) is not cured within 20 days following delivery by the
     Buyer to the Company of written notice of such breach;

          (c) the Company may terminate this Agreement by giving written notice
     to the Buyer in the event the Buyer or the Transitory Subsidiary is in
     breach of any representation, warranty or covenant contained in this
     Agreement, and such breach, individually or in combination with any other
     such breach, (i) would cause the conditions set forth in clauses (c) or (d)
     of Section 5.3 not to be satisfied and (ii) is not cured within 20 days
     following delivery by the Company to the Buyer of written notice of such
     breach;

          (d) any Party may terminate this Agreement by giving written notice to
     the other Parties at any time after the Company Stockholders have voted on
     whether to approve this Agreement and the Merger in the event this
     Agreement and the Merger failed to receive the Requisite Stockholder
     Approval;

          (e) the Buyer may terminate this Agreement by giving written notice to
     the Company if the Closing shall not have occurred on or before November 8,
     2000 by reason of the failure of any condition precedent under Section 5.1
     or 5.2 hereof (unless the failure results primarily from a breach by the
     Buyer or the Transitory Subsidiary of any representation, warranty or
     covenant contained in this Agreement); or

          (f) the Company may terminate this Agreement by giving written notice
     to the Buyer and the Transitory Subsidiary if the Closing shall not have
     occurred on or before November 8, 2000 by reason of the failure of any
     condition precedent under Section 5.1 or 5.3

                                      -37-
<PAGE>

     hereof (unless the failure results primarily from a breach by the Company
     of any representation, warranty or covenant contained in this Agreement).

     8.2  Effect of Termination. If any Party terminates this Agreement pursuant
to Section 8.1, all obligations of the Parties under this Agreement shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party for breaches of this Agreement) other than the
obligations of the parties under the Confidentiality Agreement dated as of
September 2, 2000 between the Buyer and the Company, the Consulting Agreement
dated as of October 10, 2000 between the Buyer and the Company, and Section
4.5(c).

                            ARTICLE IX  DEFINITIONS
     For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.

Defined Term                                    Section
------------                                    -------
ADR Procedure                                   6.3(d)
ADR Service                                     6.3(d)
Affiliate                                       2.14(a)(vii)
Agreed Amount                                   6.3(c)
Average Closing Price                           1.5(b)
Buyer                                           Introduction
Buyer Certificate                               5.3(e)
Buyer Common Stock                              1.5(a)
Buyer Material Adverse Effect                   3.1
Buyer Reports                                   3.5
CERCLA                                          2.22(a)
Certificates                                    1.7(a)
Certificate of Merger                           1.1
Claim Notice                                    6.3(b)
Claimed Amount                                  6.3(b)
Closing                                         1.2
Closing Date                                    1.2
Code                                            Introduction
Common Shares                                   1.5(a)
Company                                         Introduction
Company Certificate                             5.2(f)
Company Intellectual Property                   2.13(a)
Company Material Adverse Effect                 2.1
Company Shares                                  1.5(a)
Company Stockholder                             1.3(d)
Confidential Information                        4.5(c)
Controlling Party                               6.3(a)
Conversion Ratio                                1.5(b)
Customer Deliverables                           2.13(a)

                                      -38-
<PAGE>

Damages                                         6.1
Disclosure Schedule                             Article II
Disclosure Statement                            4.3(a)
Dispute                                         6.3(c)
Dissenting Shares                               1.6(a)
Effective Time                                  1.1
Employee Benefit Plan                           2.21(a)(i)
Environmental Law                               2.22(a)
ERISA                                           2.21(a)(ii)
ERISA Affiliate                                 2.21(a)(iii)
Escrow Agreement                                1.3(f)
Escrow Agent                                    1.3(f)
Escrow Shares                                   1.5(c)
Expected Claim Notice                           6.4
Exchange Act                                    2.14(a)(vii)
Financial Statements                            2.6
GAAP                                            2.6
Governmental Entity                             2.4
Indemnification Representatives                 1.9(b)
Indemnified Party                               6.3(a)
Indemnifying Party                              6.3(a)
Indemnifying Stockholders                       6.1
Initial Shares                                  1.5(b)
Initial Stockholder Registration Statement      7.1
Intellectual Property                           2.13(a)
Internal Systems                                2.13(a)
Key Employees                                   4.3(e)
Legal Proceeding                                2.18
Materials of Environmental Concern              2.22(b)
Merger                                          1.1
Merger Shares                                   1.5(c)
Most Recent Balance Sheet                       2.8
Most Recent Balance Sheet Date                  2.6
Non-controlling Party                           6.3(a)
Other Holders                                   7.1(b)
Ordinary Course of Business                     2.4
Parties                                         Introduction
Permits                                         2.25
Reasonable Best Efforts                         4.1
Registration Statements                         7.1
Response                                        6.3(c)
Requisite Stockholder Approval                  2.3
SEC                                             3.5
Securities Act                                  2.2
Security Interest                               2.4
Software                                        2.13(e)

                                      -39-
<PAGE>

Subsequent Stockholder Registration Statement   7.1
Surviving Corporation                           1.1
Taxes                                           2.9(a)(i)
Tax Returns                                     2.9(a)(ii)
Transitory Subsidiary                           Introduction
Value                                           6.3(c)
Warrant                                         1.8(a)

ARTICLE X
                                 MISCELLANEOUS

     10.1  Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which case the disclosing
Party shall use reasonable efforts to advise the other Parties and provide them
with a copy of the proposed disclosure prior to making the disclosure).

     10.2  No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares, Article VI concerning
indemnification and Article VII concerning registration rights are intended for
the benefit of the Company Stockholders and (b) the provisions in Section 4.9
concerning indemnification are intended for the benefit of the individuals
specified therein and their successors and assigns.

     10.3  Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
Confidentiality Agreement dated as of September 2, 2000 between the Buyer and
the Company shall remain in effect in accordance with its terms.

     10.4  Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.

     10.5  Counterparts and Facsimile Signature. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.

     10.6  Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

                                      -40-
<PAGE>

     10.7  Notices.  All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:

<TABLE>
<S>                   <C>                      <C>         <C>
If to the Company:    IP Performance, Inc.     Copy to:    Brobeck, Phleger & Harrison LLP
                      812 San Antonio Street               4801 Plaza on the Lake
                      Suite 200                            Austin, TX  78746
                      Austin, TX 78701                     Attention:  S. Michael Dunn, P.C.
                      Attention:  Tom Tucker

If to the Buyer or    Network Engines, Inc.    Copy to:    Hale and Dorr LLP
the Transitory        25 Dan Road                          60 State Street
Subsidiary:           Canton, MA 02021                     Boston, MA 02109
                      Attention:  President                Attention:  Philip P. Rossetti, Esq.

</TABLE>

     Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended.  Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.

     10.8  Governing Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.

     10.9  Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; provided, however,
that any amendment effected subsequent to the Requisite Stockholder Approval
shall be subject to any restrictions contained in the Delaware General
Corporation Law. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No waiver
of any right or remedy hereunder shall be valid unless the same shall be in
writing and signed by the Party giving such waiver. No waiver by any Party with
respect to any default, misrepresentation or breach of warranty or covenant
hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.

     10.10  Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the

                                      -41-
<PAGE>

Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified.

     10.11  Submission to Jurisdiction.  Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in Delaware in any action or
proceeding arising out of or relating to this Agreement, (b) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, and (c) agrees not to bring any action or proceeding arising out
of or relating to this Agreement in any other court.  Each of the Parties waives
any defense of inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety or other security that might be required
of any other Party with respect thereto.  Any Party may make service on another
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10.7.  Nothing in this Section 10.11, however, shall affect the right of any
Party to serve legal process in any other manner permitted by law.

     10.12  Construction.

          (a) The language used in this Agreement shall be deemed to be the
     language chosen by the Parties to express their mutual intent, and no rule
     of strict construction shall be applied against any Party.

          (b) Any reference to any federal, state, local or foreign statute or
     law shall be deemed also to refer to all rules and regulations promulgated
     thereunder, unless the context requires otherwise.

                                      -42-
<PAGE>

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.

                              NETWORK ENGINES, INC.

                              By: /s/ Lawrence A. Genovesi
                                  -----------------------------

                              Title: President and CEO
                                     --------------------------

                              IPP ACQUISITION CO.

                              By: /s/ Lawrence A. Genovesi
                                  -----------------------------

                              Title: President and CEO
                                     --------------------------

                              IP PERFORMANCE, INC.

                              By:/s/ Thomas Tucker
                                  -----------------------------

                              Title: President
                                     --------------------------

                                      -43-
<PAGE>

     The following stockholders of the Company hereby execute this Agreement for
the limited purpose of agreeing to and becoming bound by the provisions of
Section 4.3(e).

                              /s/ Tom Tucker
                              ---------------------------------------
                              TOM TUCKER

                              /s/ Greg Joyce
                              ---------------------------------------
                              GREG JOYCE

                              /s/ John Thuotte
                              ---------------------------------------
                              JOHN THUOTTE

                              /s/ Steve Wise
                              ---------------------------------------
                              STEVE WISE

                              /s/ Rob Netzer
                              ---------------------------------------
                              ROB NETZER

                              /s/ Robert Gordon
                              ---------------------------------------
                              ROBERT GORDON

                              /s/ Matt Finlay
                              ---------------------------------------
                              MATT FINLAY

                                      -44-<PAGE>
                                                                    Exhibit 10.8

  Confidential Materials omitted and filed separately with the Securities and
               Exchange Commission.  Asterisks denote omissions.

                     MANUFACTURING AND PURCHASE AGREEMENT

                                    between
                             SCI Technology, Inc.
                     doing business as SCI Systems ("SCI")
                                      and
             Network Engines Incorporated ("Network Engines Inc.")

SCI agrees to manufacture the products described on attached Schedule 1
("Products"), sell the finished Products to Network Engines, and ship them, at
Network Engines' expense, to the location specified on the Network Engines
purchase order. Network Engines Inc. agrees to purchase the finished Products
from SCI. The manufacture, sale and purchase of the finished Products will be
governed by the terms and conditions of this Agreement.

This Agreement consists of the attached General Terms and Conditions and the
                                        ----------------------------
following Schedules (as applicable):

          -- Schedule 1 - Product Specifications
          -- Schedule 2 - Product Pricing
          -- Schedule 3 - Non-Disclosure Agreement
          -- Schedule 4 - Pricing Schedule

Effective Date:  August 4, 2000

SCI SYSTEMS:                     NETWORK ENGINES INC.:

By:  /s/R. E. Patterson          By: /s/Lawrence A. Genovesi
     ---------------------          ------------------------
Signature                        Signature

   Ron Patterson                 Lawrence A. Genovesi
--------------------------       ---------------------------
Typed or Printed Name            Typed or Printed Name

  Plant Mgr. V. P.                   President
--------------------------       ---------------------------
Title                            Title

Address:                         Address:
300 Technology Drive              25 Dan Road
Hookett, NH 03106                  Canton, MA  02021
Attn:  Plant Mgr.                  Attn: President
Tel: 603-628-4800                  Tel: 781-332-1000
FAX: 603-628-4899                  FAX: 781-770-2000

<PAGE>

                     MANUFACTURING AND PURCHASE AGREEMENT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
NUMBER    SUBJECT                              PAGE
---------------------------------------------------
<S>       <C>                                  <C>

          Signature Page                          1
 1.       Purchase Price                          3
 2.       Purchase Orders                         3
 3.       Payment Terms                           5
 4.       Warranties, Remedies and Limitation     5
          of Liability
 5.       Inspection                              6
 6.       Rescheduling and Cancellation           7
 7.       Non-recurring Engineering Charges       7
 8.       Changes To The Products                 7
 9.       Inventory Indemnification               8
 10.      Term and Termination                    9
 11.      General                                 9
 </TABLE>

<PAGE>

  Confidential Materials omitted and filed separately with the Securities and
               Exchange Commission.  Asterisks denote omissions.

                                  SCI SYSTEMS
                          GENERAL TERMS AND CONDITIONS

 1.0      PRODUCT PURCHASE PRICES.

 1.1      Purchase prices ("Purchase Prices") for the Products are set forth on
 Schedule 2 and are effective for the period(s) and on the terms stated.
 Purchase Prices are FOB SCI's Plant of manufacture and are net of all taxes,
 duties, and all other charges.

 1.2      Purchase Prices will be reviewed by Network Engines and SCI as
 follows: Commodity prices will be reviewed monthly, items on allocation will be
 reviewed monthly, all other items will be reviewed quarterly. Commodities are
 defined as Processors, Memory Modules, Disk Drives, and CD Rom Drives. Prices
 will be increased or decreased as appropriate. In all cases, all cost
 components of the "Material Overhead" for commodity items shall not exceed
 [**]%. SCI will notify Network Engines Inc. of any industry-wide or sole source
 shortages of components affecting price or delivery schedules.  In such event,
 SCI and Network Engines Inc. will mutually agree on equitable adjustments to
 the Purchase Prices and delivery schedules.

1.3  If the Purchase Prices are based upon minimum quantities of Product
purchased by Network Engines, Inc., and through no fault of SCI, Network Engines
Inc. purchases significantly less than the minimum quantities, the Purchase
Prices will be equitably increased by an amount equal to SCI's verified
additional labor and material costs to manufacture the lesser number of Products
actually purchased by Network Engines Inc.

1.4  If the purchase prices are based on volumes of business as measured in
$U.S., and Network Engines Inc. purchases exceed the agreed upon business
volumes, then SCI shall equitably lower the purchase price in accordance with
the price structure (as defined in schedule 4) at the higher business volumes
for all products produced after the higher business volumes were achieved.

1.5  Network Engines Inc. business volumes shall include all product purchased
directly from SCI by Network Engines Inc. and by Network Engines Inc. licensees.

1.6  SCI agrees to attempt, as a goal, to reduce purchase prices of Network
Engines Inc. products by [**]% per quarter year.  Purchase price reductions can
employ any and all of the following (i) material cost reductions, (ii) labor
cost reductions, and (iii) cost reductions resulting from manufacturing process
improvements. However, design changes for improved manufacturability and
testability will be handled separately, in accordance with paragraph 1.8 below,
and shall not contribute to the [**]% per quarter year purchase price reduction
requirement.  Quarterly reviews will be held between both parties to view the
progress on this target.

<PAGE>

  Confidential Materials omitted and filed separately with the Securities and
               Exchange Commission.  Asterisks denote omissions.

1.7  Cost reductions that are a result of process change proposals brought to
the table by SCI will be shared [**]% by both parties for a period of six
months, with [**]% to NEI after that time.  Cost reductions brought to the table
by NEI will be incorporated as soon as mutually agreed to.  Cost reductions for
materials may be incorporated immediately if NEI bears the expense of the
inventory write down.

1.8  Cost reductions attributed to product design changes that are proposed by
SCI after completion of prototype and pre-production phases (i.e. changes that
are defined during steady state production) and implemented by Network Engines
Inc. shall be shared by Network Engines Inc. and SCI as follows: Network Engines
Inc. will receive [**]% of the cost reduction and SCI will receive [**]% of the
cost reduction.

2.0      NETWORK ENGINES INC. PURCHASE ORDERS.

2.1  Products will be manufactured and shipped according to a mutually agreed
schedule. Once agreed to, manufacture and shipment of Products will be in
accordance with Network Engines Inc. Purchase Orders ("Purchase Order(s)"). The
parties agree that TIME AND ACCURACY OF DELIVERY ARE OF THE ESSENCE UNDER THIS
AGREEMENT. Purchase Orders may be issued in hard copy or electronically ("EDI")
and will be issued at intervals as mutually agreed. Issued Purchase Orders are
firm and will cover a minimum of ninety (90) days. Purchase Orders will state
the number of Products to be manufactured and shipped during the period covered
by the Purchase Order, and other terms as mutually agreed. Network Engines shall
provide SCI with the exact configuration of Products to be shipped to NEI
customers with two to three days lead time.

2.2  Network Engines Inc. will provide a rolling 90 day forecast of product
purchases beyond ninety (90) days for planning purposes only. These are not
firm, and will be issued at thirty day intervals.

2.3  SCI will purchase material to manufacture Products according to the
quantity and delivery schedules set forth in Purchase Orders in effect from time
to time during the term of this Agreement. SCI will purchase material for the
Products according to Network Engines Inc.'s Approved Vendor List ("AVL"). With
Network Engines Inc.'s prior written consent, SCI may purchase material in
excess of Purchase Order requirements, such as long lead time components or
components which can be purchased in volume at a lower price.

3.0      PAYMENT TERMS.

Payment terms are net thirty (30) days from invoice date in United States
dollars. Invoices shall state the correct amount of Product and price, reference
Network Engine's P.O. number, and reference SCI's Packing Slip number. The
invoice date shall be no earlier than the ship date. Payments are not subject to
off-set or setoff. Acceptance of a partial payment

<PAGE>

   Confidential Materials omitted and filed separately with the Securities and
               Exchange Commission.  Asterisks denote omissions.

will not be a waiver of the right to be paid the remainder due. The parties
agree that TIME IS OF THE ESSENCE UNDER THIS AGREEMENT, AS IT RELATES TO
PAYMENTS TO SCI.

3.1  The parties acknowledge that in previous business done between Network
Engines and SCI, SCI has required Network Engines to post a standby Letter of
Credit to guarantee payment. Upon the closing of Network Engines' initial public
offering of stock, SCI shall no longer require such standby Letter of Credit
with regard to any payments hereunder.

4.0      WARRANTIES, REMEDIES, LIMITATION OF LIABILITY.

4.1  SCI warrants to Network Engines Inc. that each Product shall be free from
defects in workmanship and materials for [**] months from the Product ship date
(the "Product Warranty"). SCI shall also pass on to Network Engines, as
permitted, any component manufacturer's warranties. Additionally, SCI warrants
to Network Engines Inc. that each "Lot" of product produced will meet a quality
level of not more than "[**] defective parts per million" as measured by the
Product Acceptance tests in paragraph 4.1.2.

4.1.1 The materials portion of the Product Warranty shall not apply to  (ii)
Product that is abused, damaged, altered or misused other than by SCI, or (iii)
Product damaged by external causes not directly contributed to by SCI.

4.1.2 Products shall be considered free from defects in workmanship if they are
manufactured in accordance with SCI's manufacturing workmanship standards,
conform to the Product specifications, and successfully complete Network Engines
Inc. documented Product Acceptance Tests. These tests are system level tests
performed after successful completion of A.T.E and Functional tests. These tests
may be performed at SCI and/or Network Engines Inc. integration facility.
Network Engines Inc. may perform additional acceptance testing which measures a
different array of performance criteria, but the parties agree that the
documented Network Engines Inc. Product Acceptance Tests will be the measurement
standard to determine if the Product meets specifications at the time of
testing. Product acceptance tests will be reviewed quarterly and revised upon
mutual agreement.

4.2.1 ALL CLAIMS FOR BREACH OF WARRANTY MUST BE RECEIVED BY SCI NO LATER THAN
THIRTY (30) DAYS AFTER THE EXPIRATION OF THE WARRANTY PERIOD FOR THE PRODUCT.

4.2.2 THE PRODUCT WARRANTY IS THE ONLY WARRANTY GIVEN BY SCI. SCI MAKES, AND
NETWORK ENGINES INC. RECEIVES, NO OTHER WARRANTY EITHER EXPRESSED OR IMPLIED.
ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE,
AND ALL IMPLIED

<PAGE>

WARRANTIES OF TITLE FOR ANY CONSIGNED OR NETWORK ENGINES INC. SUPPLIED
MATERIALS, ARE EXPRESSLY DISCLAIMED AND EXCLUDED HEREFROM.

4.2.3 UNLESS EXPRESSLY AGREED TO BY SCI IN WRITING, SCI MAKES NO WARRANTY THAT
THE PRODUCTS WILL (i) MEET ANY SPECIFICATION NOT MADE KNOWN TO AND AGREED TO BY
SCI, OR (ii) RECEIVE THE APPROVAL OF OR BE CERTIFIED BY UNDERWRITERS LABORATORY,
ANY FEDERAL, STATE, LOCAL OR FOREIGN GOVERNMENT AGENCY (INCLUDING WITHOUT
LIMITATION THE FEDERAL COMMUNICATIONS COMMISSION) OR ANY OTHER PERSON OR ENTITY
("REGULATORY STANDARDS").  SCI ASSUMES NO RESPONSIBILITY FOR OBTAINING SUCH
APPROVALS OR CERTIFICATIONS, OR MEETING SUCH SPECIFICATIONS. NOTWITHSTANDING THE
FOREGOING, HOWEVER, SCI WARRANTS THAT IT'S MANUFACTURING PROCESS  WILL NOT ALTER
REGULATORY STANDARDS IF NETWORK ENGINES HAS QUALIFED THE PRODUCTS FOR SUCH
STANDARDS.

4.3   Network Engines Inc.'s exclusive remedy for any breach of the Product
Warranty shall be, at SCI's option, repair by SCI at The facility of original
manufacture, or return of the Purchase Price.

4.4   SCI's warranty obligations will cease only upon completion of the agreed
upon warranty period or upon such time that Network Engines has removed its test
equipment from SCI's premises such that SCI no longer has the test capability to
perform the warranty obligation.

4.5   Network Engines Inc. warrants to SCI that any documentation or other data
that it provides SCI to manufacture the Products is accurate and complete,
unless Network Engines Inc. informs SCI otherwise.

4.6   SCI will repair Products which are outside the warranty period  or
otherwise excluded from Warranty coverage, on mutually agreed prices and terms
and conditions.

4.7   SCI shall maintain the status of the manufacturing organization relevant
to this Agreement as ISO 9002 Certified for the duration of this Agreement.

<PAGE>

  Confidential Materials omitted and filed separately with the Securities and
               Exchange Commission.  Asterisks denote omissions.

5.0      INSPECTION.

5.1  Network Engines Inc. is required to inspect each shipment of Products and
give SCI written notice of any defects or count or other discrepancies within
forty five (45) days of receipt.  If Network Engines Inc. does not inspect
Products within forty five (45) days, the Products will be considered accepted
by Network Engines Inc.; any Product defects reported after forty five (45) days
will be covered by the warranty provisions of this Agreement.  Network Engines
Inc. will follow SCI's RMA procedure for return of Products. Discrepant product
returned to SCI via the SCI RMA process shall be dispositioned in accordance
with paragraph 4.3 within 30 days of SCI issuing the RMA. Network Engines shall
receive a  payment credit as part of an RMA, SCI shall re-invoice Network
Engines at the time that it ships repaired or replacement Products. SCI will
also issue a report with each dispositioned product that specifies the root
cause of the failure, the corrective action taken, and the process correction
taken at SCI to prevent recurrence of specific failure.

6.0      RESCHEDULING AND CANCELLATION.

6.1  Network Engines Inc. may increase, decrease or reschedule Products
previously released for production on agreed terms and any costs (if any)
mutually agreed to. Should Network Engines decrease or reschedule Products
previously released for production, Networks Engines' sole liability shall be to
pay for labor costs actually expended and for material cancellation or
rescheduling charges that SCI cannot avoid, despite it's use of commercially
reasonable efforts.

6.2  Network Engines Inc. may not cancel production of Products within [**] days
of their scheduled ship dates. SCI will; however, make commercially reasonable
efforts to accommodate any requests by Network Engines to reconfigure Products
at any time prior to ship date. No reconfigurations will take place until the
Parties have reached mutual agreement on schedule impacts and price adjustments.
Network Engines Inc. may reschedule production of Products within [**] days of
ship date by as much as [**] days. Network Engines Inc. may cancel Purchase
Orders outside the [**] day production period but will be responsible for the
Termination Inventory and handling charges provided for in Article 9 below.

7.0  NON-RECURRING ENGINEERING CHARGES.

7.1  Network Engines Inc. and SCI will mutually agree on SCI provided non-
recurring engineering charges and set-up fees ("NRE") required to manufacture
the Products. NRE charges will be billed to Network Engines Inc. as mutually
agreed upon.

<PAGE>

7.2  Network Engines will own all test equipment, fixtures, tools and other
materials and equipment ("Equipment") that it pays for under this Agreement. SCI
shall take due care of such Equipment while it is in SCI's possession. SCI shall
promptly return all Equipment to Network Engines or its designee upon request
from Network Engines. SCI acknowledges that it has and shall have no right to
retain any Equipment as security or set-off for any amounts or obligations owed
by Network Engines to SCI, and that Network Engines would be irreparably harmed
by any delay in the return of Equipment.

8.0      CHANGES TO THE PRODUCTS.

8.1 SCI will not make any changes to the Products without Network Engines Inc.'s
prior written authorization. SCI will make Network Engines Inc. requested
engineering changes ("EC") to the Products. An EC request will include
sufficient information for evaluation of its feasibility and cost impact. SCI
will respond to EC requests in writing and provide cost and other relevant data
within a time period that is reasonable considering the magnitude of the EC.

8.2  Network Engines Inc. may from time to time change the specifications for
the Products or the work required of SCI hereunder and SCI agrees to make
commercially reasonable efforts to comply. If changes result in a change in
SCI's costs or in the time for performance, an adjustment will be made. Any
adjustment must be in writing and SCI shall not be required to implement such
change until the Parties have mutually agreed upon the price.

9.0      INVENTORY INDEMNIFICATION.

9.1 Upon cancellation of a Purchase Order, or upon expiration of this Agreement
or termination of this Agreement for any reason, Network Engines Inc. shall be
responsible for:

          (i)   all finished Products scheduled for shipment within the thirty
(30) days immediately following SCI's receipt of the cancellation or termination
notice (the "Notice");

          (ii)  all work-in-process, scheduled in accordance with Network
Engines Inc. cancelled purchase order and SCI's agreed upon lead times for
production of Network Engines Inc. product, at receipt of the Notice. Network
Engines shall not pay finished Product fees under subparagraph (i) above, or
work-in-progress fees as specified in this subparagraph, for Products built in
advance of SCI's agreed-upon lead-times; and

          (iii) all components, subassemblies and other material purchased in
accordance with SCI's agreed upon lead times for production of Network Engines
Inc. product and to fill a Purchase Order or authorized to be purchased by
Network Engines Inc. which are on hand or on order at receipt of the Notice.
Without limitation this includes Piece Part Inventory made obsolete or excessive
due to changes to the specifications or Products, minimum buy quantities, and
reel quantities. Items (i)-(iii) are referred to as the "Termination Inventory".
In calculating the quantity of finished Products under (i) above, Products
rescheduled for

<PAGE>

manufacture and shipment during the sixty (60) days immediately prior to receipt
of the Notice may be counted by SCI.

9.2  SCI will make every reasonable effort to use the Termination Inventory on
other programs at the Plant where the Products are manufactured, and other SCI
plants world wide, will cancel all outstanding material orders with vendors, and
will attempt to return piece parts to vendors. Network Engines Inc. will be
responsible for agreed upon shipping costs, re-stocking fees, and cancellation
fees actually incurred by SCI to cancel or return any portion of the Termination
Inventory to vendors.

9.3  Within thirty (30) days from termination or cancellation, SCI will document
the Termination Inventory to Network Engines Inc. Network Engines Inc. and SCI
will review and agree on the contents of the Termination Inventory. SCI will
then ship the Termination Inventory and invoice Network Engines Inc., who will
purchase the Termination Inventory remaining after vendor cancellations and
returns and after other program use, as follows: (i) for Piece Part Inventory
and authorized long lead time components, at SCI's standard cost, (ii) for WIP,
at a reasonable pro rata percentage of the finished Product purchase price; and
(iii) for finished Product, at the purchase price in effect at termination or
cancellation. Network Engines Inc. will be responsible for any negative price
differentials between the price SCI paid for the Piece Part Inventory and
authorized long lead time components and the price at which SCI was able to
return and/or utilize the items on other programs. SCI will credit Network
Engines Inc. for any positive price differentials.

10.0     TERM AND TERMINATION.

10.1 The term of this Agreement shall be one (1) year from the Effective Date
and, unless terminated as provided for below, will be automatically renewed for
one (1) year periods thereafter. Either party must give the other six months
notice of its intent not to renew.

10.2 This Agreement may be terminated by either party upon the occurrence of any
one or more of the following events: (1) failure by either party to perform any
of its material performance obligations under this Agreement and to cure such
failure within sixty (60) days after receipt of written notice describing the
failure in sufficient detail, or if the failure cannot be completely cured
within sixty (60) days, failure to make substantial progress towards a cure
within the sixty (60) day period; or (2) entering into or filing of a petition,
arrangement of proceeding seeking: an order for relief under the bankruptcy laws
of the United States or similar laws of any other jurisdiction; a receivership
for any of its assets; a composition with or assignment for the benefit of its
creditors; a readjustment or debt; or its dissolution or liquidation. This
Agreement will apply to all Products purchased during the six (6) month period
immediately following termination. SCI agrees that it shall cooperate with any
new party that Network Engines has selected to manufacture the Products
(including Network Engines itself) in order to assure a smooth transition of
manufacturing responsibilities and capability, and shall promptly upon request
turn over to such party any and all Equipment (as defined above in Section 7.2),
information, documentation, and/or other materials belonging or pertaining to
Network Engines.

<PAGE>

11.0     GENERAL.

11.1  This Agreement and its attachments make up the entire agreement between
the parties regarding the Products.  This Agreement supersedes all prior oral
and written agreements and understandings between the parties relating to the
Products, and may only be amended or modified in writing signed by an
authorized representative of each party.  The terms and conditions of any
Purchase Order, Acknowledgment, Schedule, or other form or document of Network
Engines Inc. or SCI shall not apply.

11.2  Unless otherwise agreed, Network Engines Inc. shall be (i) the exporter
of record for any Products and/or Product documentation exported from the
United States, and shall comply with all applicable U.S. export control
statutes and regulations, and (ii) the importer of record for all Products
exported from the U.S. and later imported and returned to Network Engines Inc.
or to SCI.  SCI will cooperate with Network Engines Inc. in obtaining any
export or import licenses for the Products.

Network Engines Inc. hereby certifies that it will not knowingly export,
directly or indirectly, any U.S. origin technical data or software acquired
from SCI or any direct product of that technical data or software, to any
country listed below, for which the United States Government requires an export
license or other approval, without obtaining such approval from the United
States Government.  Those countries include Albania, Armenia, Azerbaijan,
Belarus, Bulgaria, Cambodia, Cuba, Estonia, Georgia, Iran, Iraq, Kazakhstan,
Kyrgyzstan, Laos, Latvia, Libya, Lithuania, Moldova, Mongolia, North Korea,
People's Republic of China, Romania, Russia, Tajikistan, Turkmenistan, Ukraine,
Uzbekistan and Vietnam.

11.3  Except for the Products or portions of the Products which are SCI's
design, Network Engines Inc. is responsible for the design of the Products.
Upon SCI's demand, Network Engines Inc. will promptly defend, indemnify and
hold SCI, its officers, directors, employees, agents, successors and assigns,
harmless from and against every kind of cost, expense or loss (including
attorneys' fees and legal costs) directly relating to any claim or threatened
claim ("Claims"):  (a) that any Product or portion of a Product violates the
intellectual property rights of a third party (foreign or domestic); (b) that
the Product has a design defect; or (c) arising from or related to the
distribution, sale or use of any Product or portion of a Product. Network
Engines shall defend any such Claim at its own expense, and shall pay all
expenses, cost and damages awarded pursuant to such Claim. SCI shall notify
Network Engines promptly upon learning of any Claim or threatened Claim and
shall grant to Network Engines full and complete authority to defend the Claim.
SCI shall cooperate with and provide all relevant information in its possession
to Network Engines to aid in the defense.  Network Engines shall reimburse SCI
for its expenses in providing such cooperation. Notwithstanding the foregoing,
Network Engines shall have no responsibility to defend, indemnify or hold SCI
harmless regarding any, Claims based on SCI's sole negligence, intentional
misconduct or breach of this Agreement.  The preceding obligations of each
party will apply whether the claim is based upon contract, tort or any other
legal theory.
<PAGE>

11.4  SCI's liability for any Product claim shall not exceed the purchase price
of the Products for which the claim is made.

IN NO EVENT SHALL EITHER PARTY  BE LIABLE TO THE OTHER PARTY  OR A THIRD PARTY
FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, WHETHER BASED
UPON CONTRACT, TORT, OR ANY OTHER LEGAL THEORY (INCLUDING WITHOUT LIMITATION
LOST PROFITS AND OPPORTUNITY).

11.5  This Agreement is intended solely for the benefit of the executing
parties and their permitted successors and assigns.  No other person or entity
shall have any rights under or in connection with this Agreement.

11.6  Neither party may sell, transfer or assign any right, duty or obligation
granted or imposed upon it under this Agreement without the prior written
consent of the other party.

11.7  The parties agree that transmission of data by EDI (electronic data
interchange) will not occur until a separate agreement governing such
transmissions is executed.  Upon  execution, such EDI agreement will become an
attachment to this Agreement.

11.8  Neither party shall be liable for damages and costs to the other party
arising out of delays or failures to perform under this Agreement if such
delays or failures result from causes beyond the reasonable control of a party,
and are not caused by an act or omission of such party.  Notice of any such
delays or failures and explanation of their causes must be given to the other
party within five (5) days of the occurrence.  As soon as it is reasonably
apparent that the occurrence will likely cause a delay of more than ninety (90)
days, the party against whom this section is invoked shall have the right to
terminate the affected installments under any Purchase Order.  If Network
Engines Inc. is the party claiming the force majeure event, Network Engines
Inc. shall be liable for any applicable cancellation charges and be responsible
for termination obligations, both as provided for in this Agreement.  This
force majeure provision may not be invoked for failure or inability to make a
payment under this Agreement.

11.9  The Network Engines Inc. is the only entity authorized to purchase
Product hereunder and the individual executing this Agreement certifies they
have the legal authority to bind the Network Engines Inc..  Any affiliates,
subsidiaries, and permitted assigns ("Assignees") of Network Engines Inc. which
Network Engines Inc. wishes to purchase Product hereunder must execute a copy
of this Agreement and Network Engines Inc. warrants that any and all
obligations and debts of the Assignees will be discharged in a timely fashion.
Network Engines Inc. shall be liable for performance of the Assignees hereunder
including, without limitation, payment of all monies.

11.10 This Agreement and performance by SCI and Network Engines Inc. under it
shall be governed by the laws of the state where the SCI Plant manufacturing the
Products is located. Both parties pledge their full cooperation and good faith
to settle any differences under this Agreement in a reasonable, business-like
and commercial manner. However, in the event any difference can not be so
settled, both parties submit to the personal jurisdiction and venue of
<PAGE>

the states and U.S. federal court districts within which the SCI Plant
manufacturing the Products is located, and within which Network Engines Inc.'s
facility issuing the Purchase Orders is located, for the limited purpose of
litigating such differences.

11.11  Prior to either party commencing any legal action under this Agreement,
the parties agree to try, in good faith, to settle the dispute amicably between
them.  If after 30 days, the dispute has not been settled to the satisfaction of
both parties, then the parties agree to engage a third party mediator, to help
settle the matter.  Either party may demand a meeting with a mediator to be held
within thirty days of the demand, and each party shall appoint a representative
of at least the Vice Presidential level who shall personally attend the meeting.
The mediation will be held at a location convenient to both parties and each
party will be responsible for their own costs and expenses, except that the
costs of the mediation will be shared equally between them.
<PAGE>

                                  Schedule 1
                                  ----------
                                   Products
                                   --------

McClaren
--------
  1.   McClaren Motherboard
  2.   McClaren Front Panel Board
  3.   McClaren PCI Riser Board
  4.   McClaren Console Adapter Board
  5.   McClaren Basic Box
  6.   VALinux Basic Box
  7.   McClaren Console Adapter Assembly
  8.   VALinux Console Adapter Assembly

Shelby
------
  1.   Shelby Motherboard (IDE only)
  2.   Shelby Motherboard (IDE and SCSI)
  3.   Shelby PCI Riser Board
  4.   Shelby Basic Box (IDE only)
  5.   Shelby Basic Box (IDE and SCSI)

Vortec
------
  1.   Vortec Motherboard
  2.   Vortec Basic Box

Miscellaneous Boards and Assemblies
-----------------------------------
  1.   SCSI Mezzanine Board
  2.   Giganet Mezzanine Board
  3.   Floppy Mezzanine Board
  4.   External Floppy Assembly
<PAGE>

  Confidential Materials omitted and filed separately with the Securities and
               Exchange Commission.  Asterisks denote omissions.

                                  Schedule 2
                                  ----------
                                    Pricing
                                    -------

                                   Plant 14            Plant 10
                                   --------            --------
McClaren
--------
  1.  McClaren Basic Box Rev. 0A               $[**]

 Shelby
  1.  Shelby Basic Box (IDE only)    $[**]
  2.  Shelby Basic Box (SCSI)        $[**]

<PAGE>

                                  Schedule 3
                                  ----------
           Reciprocal Non-Disclosure and Confidentiality Agreements
           --------------------------------------------------------

                               (To be Inserted)
<PAGE>

  Confidential Materials omitted and filed separately with the Securities and
               Exchange Commission.  Asterisks denote omissions.

                                  Schedule 4
                                  ----------
                               Pricing Structure
                               -----------------

Network Engines Inc. aggregate business volumes defined in section 1.5 shall
be subject to the following pricing structure:

Material Cost    equals    Purchased cost
Material markup (Non commodity items described in section 1.2)
  .  $[**]-$[**]m          [**]%
  .  $[**]-$[**]m          [**]%
  .  $[**]-$[**]m          [**]%
  .  >$[**]         [**]%
  .  The commodity items or [**]%
Note: Re-negotiations will take place on material margins as business levels
progress over $100m

Labor                    Plant 14         Plant 10

Labor Rate/hr             $[**]            $[**]

Overhead Rate              [**]             [**]

G&A Labor                  [**]%            [**]%

Labor Profit    Annual Revenue          Scale
                .   $[**]-$[**]m        [**]%            [**]%
                .   $[**]-$[**]m        [**]%            [**]%
                .   $[**]-$[**]m        [**]%            [**]%
                .   $[**]-$[**]m        [**]%            [**]%

                .   $[**]-$[**]m        [**]%            [**]%

                .   $[**]-$[**]m        [**]%            [**]%

                .   >$[**]m             [**]%            [**]%

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}]]