Document:

AGREEMENT AND PLAN OF REORGANIZATION

                                  by and among

                       PARADIGM MEDICAL INDUSTRIES, INC.,
                            PARADIGM SUBSIDIARY, INC.
                                       and
                            VISMED, INC., d/b/a DICON

                                  May 16, 2000

<PAGE>

                        TABLE OF CONTENTS

ARTICLE   1    DEFINITIONS.....................................................1
     1.1  Certain Terms Defined................................................1

ARTICLE   2    AGREEMENT TO MERGE, ETC.........................................5
     2.1  Agreement to Merge...................................................5
     2.2  Conversion of Dicon Common into Paradigm Common......................5
     2.3  Delivery of Certificates for Paradigm Common and Surrender
          of Certificates for Dicon Common.....................................7

     2.4 The Closing...........................................................7
     2.5 Dissenting Shareholders...............................................8
     2.7 Covenants, Agreements, Etc. as Conditions.............................9
     2.8 Effectiveness of Merger...............................................9

ARTICLE   3    REPRESENTATIONS AND WARRANTIES OF DICON.........................9
     3.1  Subsidiaries, Joint Ventures, Etc....................................9
     3.2  Organization and Qualification, Etc..................................9
     3.3  Articles of Incorporation and Bylaws................................10
     3.4  Capital Stock.......................................................10
     3.5  Officers and Directors; Financial Institution Accounts, Etc.........10
     3.6  Litigation..........................................................11
     3.7  Minute Books, Etc...................................................11
     3.8  Authorization of Agreement..........................................11
     3.9  No Conflict with Other Interests....................................12
     3.10 Tax Returns.........................................................12
     3.11 Software Programs, Patents, Trademarks, Service marks, and
          Copyrights..........................................................13
     3.12 Compliance with Law.................................................13
     3.13 Employee Benefit Plans..............................................14
     3.14 Labor...............................................................14
     3.15  State Admissions...................................................15
     3.16 Financial Statements................................................15
     3.17 Absence of Contracts, Agreements, and Plans.........................15
     3.18  No Adverse Change..................................................15
     3.19 Casualties..........................................................16
     3.20 Limitations on Dicon................................................16
     3.21 Accounts, Notes, and Advances Receivable............................18
     3.22 No Undisclosed Liabilities or Agreements............................18
     3.23 Disclosure..........................................................19
     3.24 Title to Properties; Liens; Conditions of Properties................19
     3.25 No Liability for Finders' or Financial Advisory Fees................20
     3.26 Environmental Matters...............................................20
     3.27 Information Set Forth in Any Schedule...............................21
<PAGE>
ARTICLE   4    REPRESENTATIONS AND WARRANTIES OF PARADIGM.....................21
     4.1  Organization and Qualification, Etc.................................21
     4.2  Authority...........................................................21
     4.3  Valid and Binding Obligations.......................................21
     4.4  No Violation of Charter, Etc........................................22
     4.5  Litigation..........................................................22
     4.6  Authorization of Agreement..........................................22
     4.7  No Conflict with Other Interests....................................22
     4.8  Software Programs, Patents, Trademarks, Servicemarks and Copyrights.23
     4.9  Financial Statements................................................23
     4.10 Title to Properties; Liens; Conditions of Properties................24
     4.11 Licenses and Permits................................................25
     4.12 Capital Stock.......................................................25
     4.13 Compliance with Law.................................................25
     4.14 No Adverse Change...................................................25
     4.15 No Undisclosed Liabilities or Agreements............................26
     4.16 Disclosure..........................................................26
     4.17 SEC Documents.......................................................26
     4.18 Subsidiary..........................................................26

ARTICLE 5 CONDUCT OF THE BUSINESS OF DICON PENDING THE MERGER.................27
     5.1  Conduct Business in Ordinary Course.................................27
     5.2  No Change in Articles or Bylaws.....................................27
     5.3  No Change in Capitalization.........................................27
     5.4  No Dividends........................................................27
     5.5  No Change in Compensation...........................................27
     5.6  No Contract Not in Ordinary Course..................................27
     5.7  No Changes in Personnel or Financial Institutions...................28
     5.8  Maintenance of Property.............................................28
     5.9  Insurance...........................................................28
     5.10 Business Intact.....................................................28
     5.11 No Capital Contributions............................................28
     5.12 Representations and Warranties......................................28
     5.13 Necessary Action....................................................28
     5.14 Best Efforts to Satisfy Conditions..................................29
     5.15 Inconsistent Activities.............................................29
     5.16 Approval by Dicon...................................................29
     5.17 Access to Properties, Files, Etc....................................29
     5.18 Correspondence with Regulators......................................30
     5.19 Hart-Scott-Rodino Filing............................................30

ARTICLE 6 CONDUCT OF THE BUSINESS OF PARADIGM PENDING THE MERGER..............30
     6.1   Conduct Business in Ordinary Course................................30
     6.2   No Change in Charter or Bylaws.....................................30
     6.3   Maintenance of Property............................................31
<PAGE>

     6.4   Insurance..........................................................31
     6.5   Business Intact....................................................31
     6.6   Necessary Action...................................................31
     6.7   Best Efforts to Satisfy Conditions.................................31
     6.8   Access to Properties, Files, Etc...................................31
     6.9   Correspondence with Regulators.....................................32
     6.10  Hart-Scott-Rodino Filing...........................................32
     6.11  Director and Officer Liability.....................................32

ARTICLE 7     APPROVALS NEEDED FOR MERGER.....................................33
     7.1   Hart-Scott-Rodino Antitrust Improvements Act of 1976...............33

ARTICLE 8     CONDITIONS......................................................33
     8.1   Conditions Precedent to Obligations of Paradigm....................33
     8.2   Conditions Precedent to Obligations of Dicon.......................37

ARTICLE 9     ACCESS TO INFORMATION...........................................40
     9.1   Pre-Closing Access by Dicon........................................40
     9.2   Access to Accountant's Records by Dicon............................40
     9.3   Post-Merger Access by Dicon........................................40
     9.4   Pre-Closing Access by Paradigm.....................................41
     9.5   Access to Accountant's Records by Paradigm.........................41

ARTICLE 10    INDEMNIFICATION.................................................41
    10.1  Indemnification by Dicon............................................41
    10.2  Indemnification by Paradigm.........................................41
    10.3  Survival of Obligation to Indemnify.................................42
    10.4  Notice and Procedure................................................42
    10.5  Third Party Claims..................................................43
    10.6  Limitation on Indemnification Obligations...........................43
    10.7  Indemnification as Exclusive Remedy.................................44
    10.8  No Consequential Damages............................................44

ARTICLE 11    MISCELLANEOUS...................................................44
    11.1  Termination; Expenses...............................................44
    11.2  Rights of Third Parties.............................................45
    11.3  Survival of Representations and Warranties; Indemnities.............45
    11.4  Prior Agreements; Modifications.....................................45
    11.5  Captions and Table of Contents......................................45
    11.6  Governing Law.......................................................45
    11.7  Counterparts........................................................46
    11.8  Severability........................................................46
    11.9  Notices.............................................................46
    11.10 Waiver..............................................................47
    11.11 Definition of Dicon's Knowledge.....................................47
<PAGE>

    11.12 Definition of Paradigm's Knowledge..................................47
    11.13 Attorney's Fees.....................................................47
    11.14 Consent to Jurisdiction.............................................47
    11.15 Cross References....................................................48
<PAGE>

                                    SCHEDULES
                                    ---------
                (with page number where first mentioned in text)

Schedule 3.5     Dicon Officers, Directors, Employees, Financial
                 Institution Accounts, Safety Deposit Boxes,
                 Powers of Attorney, and Shareholders.........................10

Schedule 3.6       Dicon Litigation...........................................11

Schedule 3.10A     Dicon Tax Returns..........................................12

Schedule 3.10B     Taxes Not Reflected on Dicon's Balance Sheet...............13

Schedule 3.11      Dicon Patents, Trademarks, Servicemarks, and Copyright.....13

Schedule 3.13      Dicon Employee Benefit Plans; Employment Contracts.........14

Schedule 3.15      States Where Dicon Admitted or Qualified...................15

Schedule 3.16      Dicon Financial Statements.................................15

Schedule 3.17      Dicon Contracts, Agreements, and Plans.....................15

Schedule 3.20      Certain Occurrences Since December 31, 1996................16

Schedule 3.24A     Dicon Real Estate Owned and Leased.........................19

Schedule 3.24B     Dicon Fixed Assets.........................................19

Schedule 4.5       Paradigm Litigation........................................22

Schedule 4.8       Paradigm Patents, Trademarks, Servicemarks, and Copyrights.23

Schedule 4.9       Paradigm Financial Statements..............................23

Schedule 4.10A     Paradigm Real Estate Owned and Leased......................24

Schedule 4. 10B    Paradigm Fixed Assets......................................24

Schedule 11.11     List of Dicon Individuals for "Knowledge" Purposes.........47

Schedule 11.12     List of Paradigm Individuals for "Knowledge" Purposes......47
<PAGE>

                                     ANNEXES
                                     -------

Annex I         Agreement of Merger

Annex 11        Escrow Agreement

Annex III       Indemnification Agreement

Annex IV        Registration Rights Agreement
<PAGE>

                      AGREEMENT AND PLAN OF REORGANIZATION

     This Agreement and Plan of Reorganization ("Agreement") dated as of May 16,
2000, is entered into by and among Paradigm Medical Industries, Inc., a Delaware
corporation  ("Paradigm"  or the  "Buyer"),  Paradigm  Subsidiary,  Inc., a Utah
corporation and wholly owned subsidiary of Paradigm  ("Subsidiary")  and Vismed,
Inc., d/b/a Dicon, a California corporation ("Dicon") (Paradigm, Subsidiary, and
Dicon collectively, the "Parties").

                                   WITNESSETH:

     WHEREAS,  the Parties  desire upon the terms and subject to the  conditions
herein set forth to enter into an agreement and plan of merger providing for the
merger of Subsidiary  with and into Dicon which merger,  if  consummated,  would
result in (i) Dicon becoming a wholly-owned  subsidiary of Paradigm and (ii) the
shareholders  of Dicon  becoming  entitled to receive  shares of common stock of
Paradigm; and

     WHEREAS,  the Parties  desire to enter into such an  agreement  and plan of
merger,  and  each of the  Parties  is  prepared  to make  the  representations,
warranties, and agreements set forth below.

     NOW, THEREFORE, in order to consummate the transactions set forth above and
in  consideration  of the mutual  covenants,  agreements,  representations,  and
warranties herein contained,  the Parties,  intending to be legally bound, agree
as follows:

                                     ARTICLE
                                        1
                                   DEFINITIONS

1.1 Certain Terms Defined.  The terms defined in this Section 1. 1 shall for all
purposes  of this  Agreement  have the  meanings  herein  specified,  unless the
context expressly or by necessary implication otherwise requires:

          (a) "Agreement" shall mean this Agreement by and among Paradigm, Dicon
     and  Subsidiary  as  originally  executed and  delivered  or, if amended or
     supplemented, as so amended or supplemented;

          (b) "Buyer" shall mean Paradigm.

          (c) "Closing" shall have the meaning specified in Section 2.4;

          (d) "Closing Date" shall have the meaning specified in Section 2.4;
<PAGE>

          (e) "Deposit Amount" shall mean the amount specified in Section2.2(b);

          (f) "Dicon" shall have the meaning specified in the first paragraph of
     this Agreement;

          (g) "Dicon Balance Sheet" shall have the meaning  specified in Section
     3.16;

          (h) "Dicon Capital Stock" shall mean all of the outstanding  shares of
     the Dicon Common and all of the outstanding Options;

          (i) "Dicon  Common" shall mean the shares of Common  Stock,  par value
     $.001 per share,  of Dicon,  and any  reference  to a share  thereof  shall
     include a fractional share thereof on a proportionate basis;

          (j) "Dicon  December 31, 1999,  Financial  Statements"  shall have the
     meaning specified in Section 3.16;

          (k) "Dicon Financial  Statements"  shall have the meaning specified in
     Section 3.16;

          (l) "Dicon Fixed  Assets"  shall have the meaning  specified in clause
     (a) of Section 3.24;

          (m)  "Disbursing  Agent"  shall  mean the law firm of  Mackey  Price &
     Williams;

          (n)  "Effective  Time of the  Merger"  shall  mean  the  date  for the
     effectiveness  of the Merger as  specified  in the Articles of Merger filed
     with the Secretary of State of the State of California  and the Articles of
     Merger filed with the Division of  Corporations  and Commercial Code of the
     State of Utah or if no date is specified therein, the later of the time (i)
     at which  Articles  of Merger are filed with the Office of the  Division of
     Corporations  and  Commercial  Code of the  State of Utah and (ii) at which
     Articles  of Merger are filed with the  Secretary  of State of the State of
     California;

          (o)  "Employee  Benefit  Plans"  shall have the meaning  specified  in
     Section 3.13;

          (p)  "Escrow  Account"  shall  mean  the  account  maintained  at  the
     Disbursing  Agent  pursuant to the Escrow,  Agreement  into which  Paradigm
     shall
<PAGE>

     deposit  the  Deposit  Amount  upon  the  execution  and  delivery  of this
     Agreement and the Merger Consideration as provided in Section 2.2(b);

          (q) "Escrow Agreement" shall mean the Agreement  referenced in Section
     2.2(b);

          (r) "GAAP" shall mean generally accepted accounting principles;

          (s)  "IRC"  means  the  Internal  Revenue  Code of  1986,  as  amended
     (including any subsequent statute);

          (t) "  Material  " when used in "  materially  adverse " or " material
     adverse change", shall be deemed to mean an effect or variance with respect
     to Dicon, or Paradigm, as appropriate,  the magnitude of which would result
     in an after tax net effect or  variance  of  Twenty-Five  Thousand  Dollars
     ($25,000) or more, whether individually or in the aggregate;

          (u)  "Merger"   shall  mean  the  merger  of  Subsidiary   into  Dicon
     contemplated by this Agreement and the Plan of Merger;

          (v) "Merger Consideration" shall have the meaning specified in Section
     2.2(a)(1);

          (w) "Optionholder" shall mean a holder of Options;

          (x)  "Options"  shall mean the  Options  granted  under the 1994 Stock
     Option Plan of Dicon, as described in Section 3.4;

          (y) "Paradigm" shall have the meaning specified in the first paragraph
     of this Agreement;

          (z)  "Paradigm  Balance  Sheet"  shall have the meaning  specified  in
     Section 4.9;

          (aa)  "Paradigm  Common"  shall mean the shares of Common  Stock,  par
     value $.O01 per share,  of Paradigm,  and any  reference to a share thereof
     shall include a fractional share thereof on a proportionate basis;

          (bb) "Paradigm December 31, 1999, Financial Statements" shall have the
     meaning specified in Section 4.9;
<PAGE>

          (cc) "Paradigm Financial  Statements" shall have the meaning specified
     in Section 4.9;

          (dd)  "Paradigm  Fixed  Assets"  shall have the meaning  specified  in
     clause (a) of Section 4. 1 0;

          (ee) "Parties" shall have the meaning specified in the first paragraph
     of this Agreement;

          (ff) "Per Share  Amount"  shall have the meaning  specified in Section
     2.2(a)(1);

          (gg) "Permitted Liens" shall mean as of any given time:

          (i) liens and charges for then current state,  county,  city,  school,
     water,  public utility,  district,  or other municipal  taxes,  levies,  or
     assessments  not then due and payable or which remain payable  without loss
     of  discount,  interest,  or penalty or which are being  contested  in good
     faith by appropriate  proceedings  diligently conducted and with respect to
     which adequate reserves have been set aside on the books of Dicon; and

          (ii)  easements,  rights  of way,  rights  of  lessees  under  leases,
     installations  of public  utilities,  title  exceptions  and  reservations,
     reservations  in  land  patents,  access  and  other  restrictions,  zoning
     ordinances,  and other  encumbrances,  none of which individually or in the
     aggregate materially  interferes with Dicon's use of the properties subject
     thereto in the ordinary course of its businesses;

          (hh)  "Plan of  Merger"  shall mean the  Agreement  of Merger  between
     Paradigm and Dicon pursuant to which  Subsidiary will be merged into Dicon,
     which  Agreement  of Merger  shall be  substantially  in the form  attached
     hereto as Annex 1;

          (ii) "Schedule"  shall mean any one of the schedules  delivered by the
     Parties  pursuant  to  this  Agreement  Articles  2,  3,  4,  5 or I I  and
     identified and initialed as such by an officer of the Party delivering such
     Schedule;

          (jj)  "Subsidiary"  shall  have the  meaning  specified  in the  first
     paragraph of this Agreement; and
<PAGE>

          (kk)  "Surviving  Corporation"  shall mean Dicon,  with and into which
     Subsidiary shall have been merged in accordance with the Plan of Merger and
     applicable law.

ARTICLE 2

AGREEMENT TO MERGE, ETC.

     2.1  Agreement  to Merge.  In  accordance  with the  provisions  of Section
     16-1Oa-1101  et seq.  of the  Utah  Revised  Business  Corporation  Act and
     Section 1100 et seq. of the California  Corporations Code, at the Effective
     Time of the Merger  Subsidiary shall be merged with and into Dicon upon the
     terms set forth in the Plan of Merger. Pursuant to such Merger:

          (a) The separate  existence of  Subsidiary  shall cease in  accordance
     with the  provisions of Section  16-10a-1106  of the Utah Revised  Business
     Corporation  Act and Section I I 00 et seq. of the California  Corporations
     Code.

          (b) Dicon  will be the  Surviving  Corporation  in the Merger and will
     continue  to be governed  by the laws of the State of  California,  and the
     separate  corporate  existence of Dicon and all of its rights,  privileges,
     immunities  and  franchises,  public or private,  and all of its duties and
     liabilities  as a  corporation  organized  under  the laws of the  State of
     California, will continue unaffected by the Merger.

          (c)  The  shares  of  Dicon  Common  owned  by  Dicon's   shareholders
     immediately  prior to the  Effective  Time of the Merger shall be converted
     into  Paradigm  Common in accordance  with the terms and  provisions of the
     Plan of Merger and Section 2.2(a)(1) hereof.

          (d) The Dicon Options owned by Optionholder  immediately  prior to the
     Effective  Time of the Merger shall be converted  into Paradigm  Options in
     accordance  with the terms and provisions of the Plan of Merger and Section
     2.2(a)(2) hereof.

          (e) The shares of  Subsidiary  Common  owned by  Paradigm  immediately
     prior to the Effective  Time of the Merger  shall,  by virtue of the Merger
     and without any action on the part of Paradigm,  automatically be converted
     into Dicon  Common so that,  following  such  conversion,  Dicon shall be a
     wholly owned subsidiary of Paradigm.

     2.2 Conversion of Dicon Common into Paradigm Common.

          (a)(1) The total amount of Paradigm Common to be delivered by Paradigm
     to the  holders  of  Dicon  Common,  pro  rata to  their  respective  share
     ownership shall be 921,500 shares, subject to adjustment as described below
     (such amount as adjusted, the "Merger
<PAGE>

     Consideration").  The Merger  Consideration  shall be  provided by Paradigm
     through  Subsidiary  and by virtue  of  Subsidiary's  merger  with and into
     Dicon. Each share of Dicon Common issued and outstanding  immediately prior
     to the  Effective  Time of the  Merger  shall,  by virtue of the Merger and
     without  any action on the part of the  holder  thereof,  automatically  be
     canceled and converted  into the right to receive an amount per share equal
     to the Merger Consideration  divided by the total number of shares of Dicon
     Common issued and outstanding at the Effective Time of the Merger,  rounded
     to the nearest  whole share (such  amount,  the "Per Share  Amount").  Each
     holder  of a share or  shares  of  Dicon  Common  immediately  prior to the
     Effective  Time of the Merger shall by virtue of the Merger and without any
     action on the part of such holder  cease being a  shareholder  of Dicon and
     automatically  be  converted  into a  shareholder  of Paradigm in an amount
     equal to the number of shares of Dicon Common held of record by such holder
     at such time  multiplied  by the Per  Share  Amount.  Rights of  dissenting
     shareholders are described in Section 2.5.

          (a)(2)  Each  Dicon  Option  outstanding   immediately  prior  to  the
     Effective Time of the Merger shall, by virtue of the Merger and without any
     action on the part of the Optionholder, automatically be converted into the
     option to purchase  Paradigm  Common (a "Paradigm  Option").  The terms and
     provisions  of the  Paradigm  Option  shall  be the same as the  terms  and
     provisions of the Dicon Option except that:

          (i) the number of shares of  Paradigm  Common  which may be  purchased
     pursuant to each Paradigm  Option shall be determined  by  multiplying  the
     number of shares of Dicon Common covered by the applicable  Dicon Option by
     the Per Share Amount, and

          (ii) the purchase  price for each share of Paradigm  Common covered by
     each Paradigm Option shall be determined by dividing the purchase price for
     each share of Dicon Common  covered by the  applicable  Dicon Option by the
     Per Share Amount.

          (b) Upon the execution and delivery of this  Agreement,  (i) Paradigm,
     Subsidiary,  Dicon,  and the Disbursing Agent shall execute and deliver the
     Escrow  Agreement in the form attached hereto as Annex II and (ii) Paradigm
     shall pay $ 1 00, 000 (the "Deposit Amount") to the Disbursing Agent, to be
     held as part of the Escrow  Account.  The Deposit  Amount  shall be paid to
     Dicon as  liquidated  damages  representing  reasonable  costs and expenses
     incurred by Dicon if (i) Paradigm  takes action to terminate this Agreement
     pursuant  to  Section  11.1 (a)  hereof,  or (ii)  Dicon  takes  action  to
     terminate this Agreement pursuant to Section 11.1(b)or(e)hereof.  Dicon and
     Paradigm agree that such sum is a fair and appropriate determination of the
     costs and  expenses  which  Dicon will incur if  Paradigm  takes  action to
     terminate this agreement pursuant to Section 11.1 (a) hereof, or (ii) Dicon
     takes  action to  terminate  this  Agreement  pursuant to Section  11.1 (e)
     hereof
<PAGE>

          (c) The Merger  Consideration  shall be  delivered  to the  Disbursing
     Agent as follows:

          (i) No later than 10:00 a.m.  (Mountain  Standard Time) on the Closing
     Date, Paradigm and Subsidiary shall deliver the Merger Consideration to the
     Disbursing Agent.

          (ii)  Promptly  after  the  Effective  Time  of  the  Merger,  and  in
     accordance with Section 2.3 hereof,  the Disbursing  Agent shall deliver to
     the holders of Dicon Common at the Effective Time of the Merger, the Merger
     Consideration in the proportion set forth in Section 2.2(a)(1) hereof.

     2.3  Delivery  of  Certificates   for  Paradigm  Common  and  Surrender  of
     Certificates for Dicon Common. All deliveries of Merger Consideration to be
     made to the  shareholders  of Dicon  Common  shall be made by delivery of a
     certificate of Paradigm  Common by the Disbursing  Agent to and in the name
     of each holder of Dicon Common or its designated agent or transferee. After
     the  Effective  Time of the Merger,  there shall be no further  registry of
     transfers in respect of Dicon Common.  Promptly after the Effective Time of
     the Merger, Paradigm will cause the Disbursing Agent to send a notice and a
     transmittal form to each holder of record of Dicon Common immediately prior
     to the Effective  Time of the Merger  advising such holders of the terms of
     the Merger  Consideration to be effected in connection with the Merger, the
     procedure for surrendering  certificates for Dicon Common to the Disbursing
     Agent,  and the procedure for delivery to such shareholder of the amount of
     Paradigm  Common to which such  holder is  entitled  pursuant  to the terms
     hereof  and the  Plan of  Merger.  If any  such  Paradigm  Common  is to be
     delivered  to a name  other  than that in which the  stock  certificate  is
     registered,  the certificate so surrendered  shall be properly endorsed and
     otherwise  in proper  form for  transfer,  and the person  requesting  such
     Paradigm  Common  shall pay to the  Disbursing  Agent any transfer or other
     fees  required by reason of the delivery to any name other than that of the
     registered  holder of the  certificate  surrendered,  or  establish  to the
     satisfaction of the Disbursing  Agent that such fee has been paid or is not
     applicable.

     2.4 The Closing.  The  execution  and delivery by Paradigm and Dicon of the
     various instruments and documents which this Agreement contemplates, all of
     which shall take place  prior to the  Effective  Time of the Merger,  shall
     constitute the "Closing".  The Closing shall take place,  at the offices of
     Paradigm,  2355 South 1070 West,  Salt Lake City,  Utah  84119,  or at such
     other  place as Paradigm  Subsidiary  and Dicon  shall  otherwise  agree in
     writing,  at 10:00 a.m.,  (Mountain  Standard Time), on a day (the "Closing
     Date")  within  five  business  days  after the last to occur of either (i)
     approval of the Merger by the Dicon shareholders or (ii) the receipt of the
     last of the  regulatory  approvals  referred to in Article 7, provided that
     all  other  conditions  to  closing  have  been met or  waived.  If  Dicon,
     Subsidiary  and Paradigm  cannot agree on the Closing  Date,  it shall take
     place on the fifth

AGR-516M.PMI 7
<PAGE>

     such business  day. In the event that any condition  precedent to a party's
     obligation to close hereunder and under the Plan of Merger is not satisfied
     or fulfilled at or as of the Closing, and the party with the right to do so
     has not waived compliance  therewith,  the Closing shall be postponed until
     such later time as such  condition  precedent  shall have been satisfied or
     such waiver shall have been given, or the parties shall otherwise  mutually
     agree,  but in no event shall the Closing be postponed to a date later than
     May 31, 2000.

     As  promptly  as possible  following  the  Closing,  a  fully-executed  and
     verified Articles of Merger meeting the requirements of Section 16-1Oa-1105
     of the Utah  Revised  Business  Corporation  Act and a  fully-executed  and
     verified  Certificate of Merger meeting the requirements of Section 1103 of
     the  California  Corporations  Code  shall be  delivered  for filing to the
     Office of the Division of Corporations  and Commercial Code of the State of
     Utah and the Secretary of State of the State of California, respectively.

     2.5  Dissenting  Shareholders.  The  duties  and  rights  of  a  dissenting
     shareholder  of Dicon  Common,  as well as the  duties  and  rights  of the
     Surviving  Corporation  shall be as provided in the Utah  Revised  Business
     Corporation  Act  and  the  California   Corporations  Code.  If  any  such
     shareholder shall not perfect his rights as a dissenting  shareholder under
     Section  1300  et  seq.  of  the  California  Corporations  Code,  or  such
     shareholder  shall  thereafter  withdraw such election or otherwise  become
     bound by the provisions of this  Agreement and the Plan of Merger  pursuant
     to  the  California  Corporations  Code,  the  amount  of  Paradigm  Common
     delivered to the Disbursing Agent with respect to such shareholder shall be
     delivered by the Disbursing  Agent to such  shareholder in exchange for the
     certificates representing such shareholder's shares of Dicon Common. If any
     such shareholder  thereafter receives payment for such shareholder's shares
     as provided in the California  Corporation  Code the Disbursing Agent shall
     return to the Surviving  Corporation  those shares of Paradigm Common which
     the Disbursing Agent had been holding as due to such  shareholder  pursuant
     to the Plan of Merger.

     2.6 Surviving Corporation. Except as provided otherwise in Schedule 2.6:

          (a) The Articles of  Incorporation  of Dicon as in effect  immediately
     prior  to the  Effective  Time  of the  Merger  shall  be the  Articles  of
     Incorporation of the Surviving Corporation after the Effective Time.

          (b) the  By-Laws  of  Dicon  as in  effect  immediately  prior  to the
     Effective Time shall be the By-Laws of the Surviving  Corporation after the
     Effective Time.

          (c) from and after the  Effective  Time,  the Board of  Directors  and
     officers of Paradigm  shall be the Board of  Directors  and officers of the
     Surviving Corporation.
<PAGE>

     2.7 Covenants,  Agreements, Etc. as Conditions. The material performance of
     all  covenants   and   agreements,   and  the  material   accuracy  of  all
     representations  and  warranties  made herein by the Buyer,  Subsidiary and
     Dicon are conditions to the obligations of the Buyer, Subsidiary and Dicon,
     respectively,  and it shall be the obligation of each party, prior to or at
     the time of Closing,  to show to the reasonable  satisfaction  of the other
     parties that all such covenants and agreements have been complied with, and
     that the  representations  and  warranties  contained  herein  comply  with
     Sections  8. 1 and  8.2,  and the  failure  of a party  to do so shall be a
     breach of and a failure to meet such conditions to the  performance  hereof
     by the other parties.

     2.8  Effectiveness  of Merger.  The Merger  shall  become  effective at the
     Effective Time of the Merger.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF DICON

Dicon represents and warrants to Paradigm and Subsidiary  that,  subject to such
exceptions as are disclosed in the Annexes and Schedules:

     3.1  Subsidiaries,  Joint Ventures,  Etc. Dicon has no subsidiaries.  Dicon
     does not own, directly or indirectly,  any of the outstanding capital stock
     of  any   corporation   or  an  interest  in  any  brokerage   arrangement,
     partnership,  joint venture, or other enterprise, other than any securities
     held for investment purposes in the ordinary course of business.

     3.2 Organization and Qualification, Etc. Dicon:

          (i) is a corporation  duly organized,  validly  existing,  and in good
     standing  under the laws of the State of  California,  with full  corporate
     power and corporate authority to own or hold under lease its properties and
     assets and to carry on its business as presently  conducted  under the laws
     of such state and under its articles of incorporation;

          (ii) is duly  qualified and in good standing as a foreign  corporation
     in each jurisdiction  where such qualification is necessary for the conduct
     of its business and failure to qualify would have a material adverse effect
     on its business or financial condition; and

          (iii)  has  all  licenses,  permits,  authorizations,   and  approvals
     necessary  to own or lease its  properties  and  assets and to carry on its
     business as presently  conducted where the failure to secure such licenses,
     permits,  authorizations and approvals would have a material adverse effect
     on its business or financial condition;
<PAGE>

     3.3 Articles of Incorporation and Bylaws. The copies of Dicon's articles of
     incorporation  (certified  by the  Secretary  of State of  California)  and
     bylaws  (certified  by the  secretary or an assistant  secretary of Dicon),
     both as amended to date,  which have been  furnished  to Paradigm are true,
     correct, and complete and are in full force and effect on the date hereof.

     3.4  Capital  Stock.  The  authorized  capital  stock of Dicon  consists of
     10,000,000 shares of Dicon Common, par value $. 001 per share, of which, as
     of the date hereof,  5,964,7 1 0 shares are validly issued and outstanding,
     fully paid and  non-assessable.  The current  shareholders of Dicon and the
     number of shares  held by each such  shareholder  are set forth in Schedule
     3.4.  Dicon has not entered  into or is bound by any  agreement to issue or
     sell additional shares of its capital stock or securities  convertible into
     or  exchangeable  for such  capital  stock,  nor has it granted or is there
     outstanding any other option,  warrant,  right,  call, or commitment of any
     character  relating to its authorized and unissued capital stock, and there
     are no  outstanding  securities or other  instruments  convertible  into or
     exchangeable  for  shares of such  capital  stock,  except  that  Dicon has
     granted Options and warrants (the  "Options"),  which are exercisable  into
     954,840  shares of Dicon  Common,  the  holders of which and the  principal
     amount thereof held by each holder are set forth in Schedule 3.4.

     3.5 Officers and Directors-,  Financial Institution Accounts, Etc. Schedule
     3.5 delivered to Paradigm contains true, correct, and complete lists of:

          (a) the names of all of Dicon's officers and directors;

          (b) the names and job descriptions of the three highest paid employees
     of Dicon for the fiscal  year ended  December  31,  1999,  together  with a
     statement of the full amount of  compensation  accrued for each such person
     in  respect  of such  year and a summary  of the  basis on which  each such
     person is compensated, if such basis is other than a fixed salary rate;

          (c) the  name of each  financial  institution  in which  Dicon  has an
     account or safety deposit box, the name in which the account or box is held
     and the names of all persons  authorized to draw checks  thereon or to have
     access thereto; and

          (d) the names of all persons holding powers of attorney from Dicon and
     a summary statement of the terms thereof.
<PAGE>

     3.6  Litigation.  Except as disclosed in Schedule 3.6,  there is no action,
     suit, proceeding,  or claim and no investigation by any governmental agency
     pending,  or to the knowledge of Dicon  threatened,  against Dicon,  or the
     assets or business of Dicon,  which if determined  adversely  would require
     payment  by Dicon of  damages  greater  than  $25,000  or which  has or may
     reasonably be expected in the future to have a material  adverse  effect on
     the assets,  liabilities,  financial condition, or results of operations of
     Dicon.  There is no  action,  suit,  proceeding,  claim,  or  investigation
     pending or, to the knowledge of Dicon,  threatened against or affecting the
     transactions  contemplated by this Agreement and the Plan of Merger.  There
     is no  outstanding,  and to  the  best  of  the  knowledge  of  Dicon,  any
     threatened, order, writ, injunction, or decree of any court, government, or
     governmental agency against Dicon, which has or may have a material adverse
     effect on the  assets,  liabilities,  financial  condition,  or  results of
     operations of Dicon.

     3.7 Minute Books,  Etc. The minute books of Dicon contain full and complete
     minutes of all annual, special, and other meetings (or- written consents in
     lieu thereof) of the directors and committees of directors and shareholders
     of  Dicon;  to  Dicon's  knowledge,  the  signatures  thereon  are the true
     signatures of the persons purporting to have signed them; the stock ledgers
     of Dicon are complete and all documentary  stamp taxes, if any, required in
     connection with the issuance or transfer of the outstanding shares of Dicon
     Common and Options have been paid.

     3.8  Authorization  of Agreement.  The Board of Directors of Dicon has duly
     approved  this  Agreement  and the  Plan  of  Merger  and the  transactions
     contemplated  hereby and thereby and has duly  authorized the execution and
     delivery  by Dicon of this  Agreement,  the Plan of Merger  and the  Escrow
     Agreement,  subject  to the  requisite  approval  by the  holders  of Dicon
     Common.  Subject to the requisite  approval of the holders of Dicon Common,
     and subject to any  requisite  approval of  regulatory  authorities  having
     jurisdiction  with  respect  to  the  transactions   contemplated  by  this
     Agreement,  Dicon has full power and authority to enter into this Agreement
     and perform its obligations  hereunder and to enter into the Plan of Merger
     and the Escrow Agreement and perform its obligations thereunder.

     This Agreement constitutes, and the Plan of Merger and the Escrow Agreement
     will  constitute,   valid,   and  legally  binding   obligations  of  Dicon
     enforceable against Dicon in accordance with their respective terms subject
     to laws of general application  relating to bankruptcy,  insolvency and the
     relief  of  debtors  and to rules of law  governing  specific  performance,
     injunctive relief or other equitable  remedies;  and this Agreement and the
     Plan of  Merger  and the  Escrow  Agreement  and  the  consummation  of the
     transactions  contemplated  hereby and thereby  have, or will have prior to
     the Closing Date,  been duly  authorized  and approved and adopted by or on
     behalf of Dicon by all requisite corporate action.
<PAGE>

     3.9 No Conflict with Other Interests. Neither the execution and delivery of
     this  Agreement  or  the  Plan  of  Merger  nor  the  consummation  of  the
     transactions contemplated hereby or thereby will conflict with, violate, or
     constitute  a  material   default   under  or   accelerate  or  permit  the
     acceleration of the performance  required by, any provision of the Articles
     of  Incorporation  or by-laws of Dicon or any  agreement or  instrument  to
     which Dicon is a party or by which Dicon or its  properties may be bound or
     affected  or any order,  judicial or  administrative  award,  judgment,  or
     decree, or to Dicon's  knowledge,  any law, to which Dicon is a party or by
     which Dicon's properties may be bound or affected or result in the creation
     or imposition of any lien,  charge,  pledge,  security  interest,  or other
     encumbrance upon any of its properties.  To Dicon's knowledge, no consents,
     waivers,  approvals,  authorizations,  or orders other than the approval of
     the shareholders of Dicon and the regulatory  authorities listed in Section
     7. 1 are necessary for the authorization,  execution,  and delivery of this
     Agreement  and the Plan of  Merger  by Dicon  and the  consummation  of the
     transactions  contemplated herein and therein except for (i) such consents,
     approvals or filings as may be required under  applicable  securities  laws
     and (ii) the filing of Articles of Merger and a Certificate  of Merger with
     the Division of Corporations  and Commercial Code of Utah and the Secretary
     of State of California.

     3.10 Tax Returns.  Except as disclosed on Schedule  3.1OA,  Dicon has filed
     all necessary Federal,  state, and local income, premium,  property,  sales
     and use,  capital  stock,  and  franchise  tax returns,  and all  necessary
     reports,  and returns for all other taxes due to the  Federal,  state,  and
     local  governments,  and  complete  and correct  copies  thereof  have been
     furnished  (with respect to the Federal  returns) or made  available  (with
     respect  to the  other  returns)  to  Paradigm  for the three  years  ended
     December  31,  1998.  Dicon has paid all taxes  (whether or not shown to be
     owing on said  returns),  and all  assessments of taxes received by each of
     them have been paid in full. All such tax returns were correct and complete
     in all respects. To the best of its knowledge after due inquiry,  Dicon has
     disclosed on its federal  income tax returns all  positions  taken  therein
     that could give rise to a substantial  understatement of federal income tax
     within  the  meaning  of IRC  section  6662.  Dicon  is not  currently  the
     beneficiary  of any extension of time within which to file any return.  The
     Federal  income tax returns of Dicon for the three years ended December 31,
     1998 have never been audited by the Internal Revenue Service.  There are no
     other  pending tax  examinations  or tax claims,  nor any basis for any tax
     claim  against  Dicon.  There are no waivers of statutes of  limitation  in
     effect in respect of any taxes for Dicon.  Except as  disclosed in Schedule
     3.10A, no claim has ever been made by an authority in a jurisdiction  where
     Dicon does not file  returns  that it is or may be subject to  taxation  by
     that jurisdiction.  There are no security interests on any of the assets of
     Dicon that arose in connection with any failure (or alleged failure) to pay
     any tax.  All taxes not yet due but which  are  accruable  have been  fully
     accrued  on the  books  of  Dicon  (in  accordance  with  sound  accounting
     practice) or full reserves have been  established  therefor (in  accordance
     with sound accounting practice) and are reflected in Dicon's balance sheets
     as of December  31, 1999,  delivered  to Paradigm  pursuant to Section 3.16
     (except as set forth
<PAGE>

     in Schedule  3.10B  delivered or to be delivered to Paradigm  hereto).  The
     unpaid  taxes of Dicon do not exceed  those  reserves as  adjusted  for the
     passage of time through the Effective Time of the Merger in accordance with
     the past custom and practice of Dicon in filing its tax returns.  Dicon has
     withheld  and paid all taxes  required  to have been  withheld  and paid in
     connection  with  amounts  paid  or  owing  to  any  employee,  independent
     contractor,  creditor,  stockholder,  or other third party. Dicon has never
     filed  a  consent  under  IRC  Section   341(f)(relating   to   collapsible
     corporations).  Dicon  is not a party  to any  tax  allocation  or  sharing
     agreement.  Dicon has not been a member  of an  affiliated  group  filing a
     consolidated  federal  income  tax  return  (other  than a group the common
     parent of which was Dicon) or does not have any  liability for the taxes of
     any person (other than any of Dicon) under Treas. Reg. section 1.1502-6 (or
     any similar provision of state,  local, or foreign law), as a transferee or
     successor, by contract or otherwise.

     3.11  Software  Programs.  Patents,  Trademarks,  Service  marks,  and Copy
     rights.  Except as indicated on Schedule  3.11  delivered to Paradigm,  all
     software programs,  patents,  trade names,  trademarks or servicemarks,  or
     service  names  (whether  registered  or  unregistered)  and  copyrights or
     applications  for any thereof  owned by,  licensed to, or used by Dicon are
     valid  and  subsisting  and are  listed  in  Schedule  3.11.  Dicon has not
     licensed any third party to use any software  program,  patent,  trademark,
     servicemark,  know-how, or copyright. Except as set forth in Schedule 3.11,
     to  Dicon's  knowledge,  there  are no  claims  or  demands  of any  person
     pertaining   to  any   software   programs,   patents,   know-how,   patent
     applications,  trademarks,  trademark applications,  servicemark or service
     name  applications,  or  copyrights  owned  by or  licensed  to  Dicon;  no
     proceedings  have been  instituted or are pending or to Dicon's  knowledge,
     threatened which challenge the rights of Dicon in respect  thereto;  and to
     Dicon's  knowledge,  the practice or use by Dicon of any software  program,
     patent, trademark, servicemark, or copyright, or any process utilized by or
     any product produced Dicon,  does not infringe (nor is it infringed by) any
     software program, patent, trademark,  servicemark,  or copyright owned by a
     third party (nor is it subject to any outstanding order, decree,  judgment,
     or  stipulation).   There  are  no  pending,   nor  Dicon's  knowledge  any
     threatened,   claims,   demands,   or   proceedings   charging  Dicon  with
     infringement  of or making  any other  claim with  respect to any  software
     program,  patent,  trademark,  trade  name,  servicemark  or service  name,
     copyright, or license. There is no (a) unexpired,  valid patent on products
     or  processes  of Dicon in  creating  such  products  and which  Dicon not-
     entitled to use or (b) patent or  application  therefor or invention  which
     would adversely affect any product,  apparatus,  method, process, or design
     of Dicon. No officer, director, or employee of Dicon has an interest in any
     software  program,   patent,  patent  application,   trademark,   trademark
     application, servicemark, servicemark application, trade name, or copyright
     of Dicon.

     3.12  Compliance  with Law.  Dicon in the  conduct  of its  business  is in
     compliance  with all laws,  regulations,  and  orders  of any  governmental
     entity affecting the business of Dicon presently  enacted and in force with
     respect to which the failure to comply would have a
<PAGE>

     material adverse effect on Dicon. To Dicon's knowledge, there is no pending
     or  threatened  change of any such law,  regulation,  or order  which might
     materially adversely affect the assets,  liabilities,  financial condition,
     or  results of  operations  of Dicon  taken as a whole.  Dicon has not been
     charged with violating, nor to Dicon's knowledge,  threatened with a charge
     of  violating,  nor to Dicon's  knowledge  is it under  investigation  with
     respect to a possible violation of, any provision of any Federal, state, or
     local law or administrative  ruling or regulation relating to any aspect of
     its business.

     3.13 Employee Benefit Plans.  Except as shown in Schedule 3.13 delivered to
     Paradigm, Dicon is not a party to any pension,  retirement, stock purchase,
     savings,  profit-sharing,  deferred compensation,  or collective bargaining
     agreement,  group insurance contracts, or any other incentive,  welfare, or
     employee benefit plans  (collectively  the "Employee  Benefit Plans") under
     which employees of Dicon participate or have the right to receive benefits.
     Dicon is not, nor will it from the date hereof  through the Effective  Time
     of the Merger be, in (a) violation of any  applicable  Federal,  state,  or
     local laws or  regulations  relating to the Employee  Benefit  Plans or (b)
     default of any of its  obligations  with  respect to the  Employee  Benefit
     Plans with respect to which such violation or default would have a material
     adverse  effect on Dicon.  Dicon  shall not amend or  terminate  any of the
     Employee  Benefit  Plans  without the prior  written  consent of  Paradigm.
     Furthermore,  Dicon  shall not make any  contributions  under the  Employee
     Benefit  Plans  other  than  those  required  by the terms of the  Employee
     Benefit Plans without the prior written consent of Paradigm.  Each Employee
     Benefit  Plan  has  been   consistently   maintained  and  administered  in
     accordance  with its terms and provisions and the  requirements,  including
     those  relating to reporting  and  disclosure,  of the Employee  Retirement
     Income  Security  Act  of  1974,  as  amended  ("ERISA").  All  information
     necessary  to make all  required or  necessary  filings  with the  Internal
     Revenue  Service,  the Department of Labor,  the Pension  Benefit  Guaranty
     Corporation, and any other governmental agencies with respect to any of the
     Employee  Benefit Plans after the Effective Time of the Merger will be made
     available  to Paradigm  in a manner that will permit  Paradigm to make such
     filings in a timely manner.  Except as set forth in Schedule 3.13 delivered
     to Paradigm,  Dicon is not a party to any employment contract or agreement.
     The employee  census for Dicon as of May 15, 2000, as disclosed in Schedule
     3.13 is true, correct,  and complete as of that date and has not materially
     changed.  Dicon is not nor ever been a member of a "multi employer plan" as
     defined in ERISA.

     3.14 Labor. Dicon is not in violation of any applicable Federal,  state, or
     local  law  relating  to  the  employment  of  labor  (including,   without
     limitation, the provisions thereof relating to wages and hours, the payment
     of Social Security taxes,  and equal  employment  opportunity) nor is Dicon
     liable  for any tax or  penalty  for  failure  to  comply  with  any of the
     foregoing,  with respect to which any  violation or liability  would have a
     material adverse effect on Dicon. There are no suits pending or, to Dicon's
     knowledge,  threatened between Dicon and any of its employees. Dicon is not
     currently,  nor to its knowledge since its formation has it been,  involved
     in any labor discussions with any unit or group

<PAGE>

     seeking to become the  bargaining  unit for any of its  employees.  Dicon's
     employees are not a member of any union or collective bargaining group.

     3.15 State  Admissions.  Dicon is duly  qualified  to do business and is in
     good standing in the states listed in Schedule 3.15. Except as set forth on
     Schedule  3.15,  there are no  proceedings  pending or, to the knowledge of
     Dicon threatened, which could materially adversely affect any such licenses
     or  qualifications,  nor are  there any facts  known to Dicon  which  could
     result in any such material adverse effect.

     3.16  Financial  Statements.  Dicon has  furnished  to  Paradigm  copies of
     Dicon's  financial   statements  for  the  years  1996  through  1998,  all
     accompanied by reports thereon containing  opinions without  qualification,
     except as therein noted,  by Deloitte & Touche  (collectively,  the " Dicon
     Financial  Statements"),  and  unaudited  balance  sheets  of  Dicon  as of
     December  31,  1999,  and the related  unaudited  statements  of income and
     shareholders'  equity for the fiscal year ended on  December  31, 1999 (the
     "Dicon  December  31, 1999,  Financial  Statements").  The Dicon  Financial
     Statements  (including  the notes  thereto)  fairly  present the  financial
     condition  of Dicon,  at December 31 in each of the years 1996 through 1998
     and the results of its operations and other data contained therein for each
     of the three  years then ended and have been  prepared in  accordance  with
     GAAP,  applied on a  consistent  basis  (except as  expressly  set forth or
     disclosed in the notes,  exhibits, or schedules thereto).  The exhibits and
     schedules  included in such Dicon Financial  Statements  fairly present the
     data purported to be shown thereby.  The Dicon December 31, 1999, Financial
     Statements  have been prepared in accordance  with GAAP and present  fairly
     the  financial  position  of Dicon as of such date and the  results  of its
     operations  for such period.  The balance sheet of Dicon as at December 31,
     1999,  included  in the  Dicon  December  31,  1999,  Financial  Statements
     hereinafter referred to as the "Dicon Balance Sheet".

     3.17 Absence of Contracts, Agreements, and Plans. Except for this Agreement
     and  the  Plan  of  Merger  and  the  contracts,   agreements,  plans,  and
     commitments  specifically  referred to herein,  or listed in Schedule  3.17
     delivered to Paradigm,  Dicon is not presently a party to or subject to any
     of the following, whether written or oral:

          (a) any management, consulting, or employment contract or contract for
     personal services which extends beyond December 31, 1999;

          (b)  any  plan,  contract,   or  arrangement  providing  for  bonuses,
     pensions,  deferred  compensation,  retirement  payments,  profit  sharing,
     incentive  pay,  stock  purchase,  hospitalization,  medical  expenses,  or
     similar employee benefits;

          (c) any collective  bargaining  contract,  agreement,  commitment,  or
     similar arrangement with any labor union or other similar organization;
<PAGE>

          (d) any contracts, commitments, or agreements for capital expenditures
     which will involve expenditure after the date hereof of more than $5,000 in
     the aggregate for items of like kind;

          (e) any  contract  or  agreement  not made in the  ordinary  course of
     business except as permitted by Section 3.20(j);

          (f) any  contract  extending  beyond  December  31,  1999,  except  as
     permitted by Section 3.20(j);

          (g) any contract or agreement  containing  covenants not to compete in
     any line of business;

          (h) any contract, agreement,  arrangement, or understanding upon which
     any  part of the  business  of  Dicon  is  materially  dependent  or  which
     materially affects the assets, liabilities, financial condition, or results
     of operations of Dicon; or

          (i) any license, franchise,  distributorship,  dealer,  manufacturer's
     representative, sales agency, or advertising agreement.

     3.18 No Adverse Change.  Since December 31, 1999,  there has been no change
     in the assets,  liabilities,  financial condition, or results of operations
     of Dicon except changes in the ordinary  course of business,  none of which
     individually  or in  the  aggregate  has  been  materially  adverse.  Since
     December 31, 1999,  Dicon has not  experienced  any labor trouble,  strike,
     stoppage,  or any other occurrence which would materially  adversely affect
     its assets, liabilities, financial condition, or results of operations.

     3.19  Casualties.   Since  December  31,  1999,  the  assets,  liabilities,
     financial  condition,  and  results  of  operations  of Dicon  has not been
     materially  adversely  affected  in any  way  (whether  or not  covered  by
     insurance) as the result of fire, explosion,  earthquake,  accident,  labor
     trouble, requisition, or taking of property by any government or any agency
     of any government,  flood,  windstorm,  embargo, riot, or act of God or the
     public enemy or any other casualty or similar event.

     3.20 Limitations on Dicon.  Except for the matters listed on Schedule 3.20,
     since December 31, 1999, there has not been:

          (a)  material  change in the  business or  operations  of Dicon or the
     manner of conduct of its business or  operations  other than changes in the
     ordinary  course  of  business,  none of which has had a  material  adverse
     effect on its businesses or operations considered as a whole;

<PAGE>

          (b) Any change in the articles of incorporation or bylaws of Dicon, or
     any  amendment to any  material  agreement,  contract,  or license to which
     Dicon is a party or by which it is bound;

          (c) Any  issuance by Dicon of any capital  stock,  bonds,  debentures,
     notes, or other corporate  securities or any option,  warrant,  or right to
     purchase any thereof;

          (d) Any declaration,  setting aside, or payment of any dividend or any
     other  distribution on or in respect of any shares of capital stock, or any
     direct or indirect redemption,  retirement,  purchase, or other acquisition
     by Dicon of any shares of capital stock or convertible securities of any of
     them;

          (e) Any  waiver by Dicon of any right or rights of  material  value or
     any payment,  direct or indirect, of any material debt, liability, or other
     obligation  of it before the same shall become due in  accordance  with its
     terms;

          (f) Any  material  change in the  accounting  methods,  practices,  or
     policies  followed  by Dicon,  including  but not  limited to any change in
     depreciation  or   amortization   policies  or  rates  of  depreciation  or
     amortization theretofore adopted by it;

          (g) Any increase in the  compensation  payable or to become payable by
     Dicon to any officer, director, employee,  consultant or any shareholder of
     Dicon or

     members of any of their  families or any  material  increase in the rate of
     commission or other variable  compensation to be paid to any person,  other
     than increases in accordance with past practice;

          (h) Any payment of any pension, retirement,  profit-sharing,  or bonus
     payment,  or other employee  welfare or benefit  payment,  other than those
     required by any contract listed in Schedule 3.13 or Schedule 3.17;

          (i)  Any  incurring  or  guaranteeing  of  any  debt,  obligation,  or
     liability for borrowed money (whether absolute or contingent and whether or
     not  currently  due and  payable),  except for  endorsement  of  negotiable
     instruments for collection or deposit;

          (j) Entering into of any contract, agreement,  arrangement,  lease (as
     lessor or lessee),  or license,  whether  written or oral,  entered into or
     assumed by or on behalf of Dicon,  for more than one year or involving more
     than $5,000 in any single case or $25,000 in the  aggregate for like items,
     except in accordance with past practice in the ordinary course of business;
<PAGE>

          (k)  Any  merger  or  consolidation  of or by  Dicon  with  any  other
     corporation or any  acquisition by Dicon of all or any part of the stock or
     the business or assets of any other person, firm, association, corporation,
     business, or organization;

          (l) Except in accordance  with past practice in the ordinary course of
     business, any change affecting the banking and safe deposit arrangements or
     powers of  attorney  in effect for  Dicon,  any new  financial  institution
     accounts or safe deposit  boxes opened for it or any new powers of attorney
     executed or made by it;

          (m) Any purchase or lease for a valuable consideration of any property
     from any  officer,  director,  or employee of Dicon or any member of his or
     her family or any entity affiliated with or controlled by any of the above;

          (n) Any sale, lease, disposition,  or mortgage,  pledge, or subjection
     to any lien or encumbrance  (other than Permitted  Liens) of, or any waiver
     of any  substantial  rights  relating to, any material  property or assets,
     tangible  or  intangible,  of Dicon  other  than the  purchase  and sale of
     investment securities;

          (o) Any  failure by Dicon to  perform  any of its  obligations  in any
     material  respect or suffering or permitting any default to exist under any
     material contract, lease, or other arrangement to which it is a party or by
     which it may be bound which may result in the  termination of such material
     contract,  lease,  or agreement or the  imposition  of material  damages or
     penalties; or

          (p) Any  occurrence  of any  material  transaction  or entry  into any
     material  agreement  other than in the  ordinary  course of  business or as
     specifically provided herein.

     3.21 Accounts,  Notes,  and Advances  Receivable.  All accounts,  notes and
     advances  receivable of Dicon  reflected on the Dicon Balance Sheet were at
     the date of the Dicon Balance Sheet valid  obligations  and  collectible in
     the ordinary  course of business  subject to the reserve  therefor shown on
     the Dicon  Balance  Sheet,  and Dicon has not,  since  December  31,  1999,
     changed its normal credit and collection practices.

     3.22 No Undisclosed  Liabilities or Agreements.  Except as disclosed in the
     Balance Sheet or in any of the Schedules, Dicon has not had, as of December
     31, 1999, any material debts, liabilities, or obligations, whether accrued,
     absolute,  or  contingent  and whether due or to become due,  except to the
     extent set forth in or provided for on the Dicon Balance Sheet.
<PAGE>

     3.23 Disclosure. Neither this Agreement nor any document furnished or to be
     furnished  in  connection  herewith,  contains  or will  contain any untrue
     statement  of a material  fact or omits or will omit to state any  material
     fact necessary to make the statements  contained therein, or herein, in the
     light of the circumstances under which they are made, not misleading.

     3.24 Title to Properties, Liens; Conditions of Properties.

          (a)  Schedule  3.24A sets forth (i) all of the land owned by, or under
     an  agreement  of sale or option to, Dicon at the date hereof and (ii) each
     of the leases as to which the annualized rental  obligation  exceeds $5,000
     per  year or as to which  the  unexpired  term  exceeds  one  year  (unless
     cancelable  without penalty on thirty days' notice) pursuant to which Dicon
     leases (as lessor or lessee) real or personal  property at the date hereof.
     Schedule  3.24A  delivered  to  Paradigm  sets  forth  all  the  buildings,
     machinery, vehicles and equipment having an initial unit value of $3,000 or
     more ("Dicon Fixed Assets ") of Dicon,  other than real  property  owned or
     leased.  Except for Permitted  Liens and except for mortgages  noted in the
     Dicon  Financial  Statements  or in  the  Schedules,  Dicon  has  good  and
     marketable  title in fee  simple  to all such  real  property  and all such
     leases are valid and  subsisting  and it is not in default  such as to give
     rise to  cancellation,  termination or a penalty  thereunder.  None of such
     Dicon Fixed Assets,  or real,  leased,  or other property is subject to any
     mortgage, pledge, lien, encumbrance,  conditional sale agreement,  security
     interest,  title retention agreement,  or other charge except for Permitted
     Liens  and  except  as noted in the Dicon  Financial  Statements  or in the
     Schedules.  There are no outstanding  options or rights in any third person
     to  acquire  any of such real  estate,  leasehold  interests,  Dicon  Fixed
     Assets, or other property or any interest therein.

          (b) Except as otherwise specified in Schedule 3.24B:

          (i) all Dicon Fixed Assets,  taken as a whole,  are in a good state of
     repair and operating condition  (reasonable wear, and tear and normal usage
     excepted);

          (ii) to Dicon's  knowledge,  Dicon's office  building  conforms in all
     material respects with all applicable zoning and land use laws, ordinances,
     and regulations and applicable deed  restrictions and other applicable laws
     relating to health and safety,  other than the Americans with  Disabilities
     Act of 1990, and does not encroach on property of others; and

          (iii) to the  knowledge  of Dicon,  there is no pending or  threatened
     change

     of any such  zoning  or land use law,  ordinance,  or  regulation,  nor any
     pending or threatened condemnation of any such property,

<PAGE>

     3.25 No Liability for Finders' or Financial  Advisory  Fees.  Dicon has not
     incurred  any  liability  for  brokerage  fees,   finders'  fees,   agents'
     commissions,   financial   advisory   fees,   or  other  similar  forms  of
     compensation   in  connection   with  this  Agreement  or  any  transaction
     contemplated hereby.

     3.26 Environmental Matters.

          (a) To the knowledge of Dicon, no Hazardous  Substance (as hereinafter
     defined)  has  been  released,  discharged,   deposited,  emitted,  leaked,
     spilled,  poured,  emptied,  injected,  dumped,  disposed  of, or otherwise
     placed  or  located  on,  in or under the real  property  and  improvements
     described in Schedule  3.24 (the "Real  Property") or any part thereof in a
     manner that would result in an  obligation on the part of the Companies for
     the clean-up or removal thereof. For purposes of this Agreement, "Hazardous
     Substance"  means any "hazardous  substance" as that term is now defined in
     42 U.S.C.  9601, any "extremely  hazardous  substance " as that term is now
     defined in 42 U. S. C.11049(3),  any "regulated  substance" as that term is
     now defined in 42 U.S.C. 6991(2), or any other material now regulated under
     any environmental law, statute, regulation, rule, ordinance, code, license,
     permit, or order of the United States, or any state, or any other governing
     body,  authority,  or  agency  (collectively,  "Environmental  Laws").  The
     foregoing representation specifically excludes and is not applicable to the
     use,  storage,   and  handling  within  the  Real  Property  of  substances
     customarily  used in  connection  with normal  office use provided (a) such
     substances  are used and  maintained in such  quantities as are  reasonably
     necessary for the permitted use of the Real Property in compliance with all
     Environmental  Laws;  and  (b)  such  substances  a-,re  not  disposed  of,
     released,  or discharged on the Real Property,  and shall be transported to
     and from the Real Property in compliance with all Environmental Laws.

          (b) The Real  Property  and its present and prior uses during  Dicon's
     ownership  and/or  occupancy comply with, and Dicon is are not in violation
     of, and have not violated in connection with the conduct of its businesses,
     any Environmental  Law. Any Hazardous  Substances that have been removed by
     Dicon  from  and  disposed  of off the Real  Property  have  been  handled,
     transported,  stored,  treated,  and  disposed  of in  compliance  with all
     Environmental Laws.

          (c) Neither Dicon nor the Real Property is subject to any obligations,
     liabilities,  claims, judgments,  orders,  settlements,  permits, licenses,
     authorizations,  resolutions  of disputes,  writs,  injunctions  or decrees
     relating   to  the   use,   generation,   treatment,   storage,   disposal,
     transportation,  presence,  release, discharge or emission of any Hazardous
     Substance  at or affecting  the Real  Property.  In addition,  there are no
     pending,  or,  to  the  knowledge  of  Dicon,  threatened   investigations,
     citations,  suits,  actions  or other  legal  proceedings,  or  notices  of
     violation  resulting  from or  connected  with the Real  Property  or Dicon
     relating   to  the   use,   generation,   treatment,   storage,   disposal,
     transportation,
<PAGE>

     presence,  release, discharge, or emission of any Hazardous Substance at or
     affecting the Real Property.

          (d) There are no facts or  circumstances  in existence  known to Dicon
     which may give rise to any litigation, proceedings, investigations, orders,
     citations,  violations,  notices,  or liability resulting from or connected
     with the Real Property or Dicon relating to the use, generation, treatment,
     storage,  disposal,   transportation,   presence,  release,  discharge,  or
     emission of any Hazardous Substance.

          (e) All permits,  licenses,  consents and authorizations necessary for
     full compliance with all Environmental Laws applicable to the Real Property
     have been  obtained  and are valid and in full  force and  effect.  No such
     application,  report,  or  other  document  or  information  filed  with or
     furnished to any federal,  state or local governmental  body,  authority or
     agency  contains  any  untrue  statement  of  material  fact or  omits  any
     statement  of material  fact  necessary to make the  statement  therein not
     misleading.

     3.27 Information Set Forth in A Schedule.  Any information set forth in any
     Schedule,  in any of the Dicon Financial  Statements or in any of the Dicon
     December 31, 1999  Financial  Statements  shall be deemed set forth in each
     such Schedule.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PARADIGM

Paradigm  represents and warrants to Dicon that,  subject to such  exceptions as
are disclosed in the Annexes and Schedules:

     4.1  Organization  and  Qualification,  Etc.  Paradigm  is duly  organized,
     validly  existing,  and in good  standing  as a Delaware  corporation  with
     corporate  power and authority  under the laws of the State of Delaware and
     under its  certificate  of  incorporation  to enter into this Agreement and
     perform  its  obligations  hereunder,  and  to  carry  on its  business  as
     presently conducted.

     4.2 Authority.  The Board of Directors of Paradigm has duly  authorized the
     execution and delivery by Paradigm of this  Agreement,  the Plan of Merger,
     the Escrow  Agreement  and the  Registration  Rights  Agreement (as defined
     below) and the transactions contemplated hereby and thereby.

     4.3 Valid and Binding  Obligations.  Each of this Agreement and the Plan of
     Merger has been duly  authorized  by  Paradigm by all  necessary  corporate
     action and constitutes a valid and legally  binding  obligation of Paradigm
     in accordance with its respective terms.
<PAGE>

     4.4 No  Violation  of Charter,  Etc.  The  execution  and  delivery of this
     Agreement,  the Plan of Merger,  the Escrow  Agreement and the Registration
     Rights Agreement (as defined below) by Paradigm and the consummation of the
     transactions contemplated hereby and thereby are not prohibited by and will
     not violate any provision of, or result in a default under, the certificate
     of incorporation or bylaws of Paradigm, any contract,  agreement,  or other
     instrument  to which  Paradigm is a party or by which its property is bound
     or any regulation,  order, decree, or judgment of any court or governmental
     agency or any law applicable to it.

     4.5  Litigation.  Except as disclosed in Schedule 4.5,  there is no action,
     suit, proceeding,  or claim and no investigation by any governmental agency
     pending, or to the knowledge of Paradigm threatened,  against Paradigm,  or
     the assets or business of Paradigm,  which if  determined  adversely  would
     require payment by Paradigm of damages greater than $25,000 or which has or
     may reasonably be expected in the future to have a material  adverse effect
     on the assets,  liabilities,  financial condition, or results of operations
     of Paradigm. There is no action, suit, proceeding,  claim, or investigation
     pending or, to the knowledge of Paradigm,  threatened  against or affecting
     the  transactions  contemplated  by this  Agreement and the Plan of Merger.
     There is no  outstanding,  and to the best of the knowledge of Paradigm any
     threatened, order, writ, injunction, or decree of any court, government, or
     governmental  agency  against  Paradigm,  which has or may have a  material
     adverse effect on the assets, liabilities,  financial condition, or results
     of operations of Paradigm.

     4.6 Authorization of Agreement. The Board of Directors of Paradigm has duly
     approved this Agreement,  the Plan of Merger,  the Escrow Agreement and the
     Registration Rights Agreement, and the transactions contemplated hereby and
     thereby and has duly  authorized  the execution and delivery by Paradigm of
     this  Agreement,   the  Plan  of  Merger,  the  Escrow  Agreement  and  the
     Registration Rights Agreement.  No approval of this Agreement,  the Plan of
     Merger,  the Escrow  Agreement  or the  Registration  Rights  Agreement  is
     required by holders of Paradigm Common.  Subject to any requisite  approval
     of  regulatory   authorities  having   jurisdiction  with  respect  to  the
     transactions  contemplated by this  Agreement,  Paradigm has full power and
     authority  to  enter  into  this  Agreement  and  perform  its  obligations
     hereunder and to enter into the Plan of Merger,  the Escrow Agreement,  and
     the Registration Rights Agreement and perform its obligations thereunder.

     4.7 No Conflict with Other Interests. Neither the execution and delivery of
     this  Agreement  or  the  Plan  of  Merger  nor  the  consummation  of  the
     transactions contemplated hereby or thereby will conflict with, violate, or
     constitute a default under or accelerate or permit the  acceleration of the
     performance  required by, any provision of the certificate of incorporation
     or by-laws of  Paradigm or any  agreement  or  instrument  to which it is a
     party or by  which it or its  properties  may be bound or  affected  or any
     order, judicial or
<PAGE>

     administrative award, judgment, or decree, or to Paradigm's knowledge,  any
     law, to which it is a party or by which any of its  properties may be bound
     or affected or result in the creation or  imposition  of any lien,  charge,
     pledge, security interest, or other encumbrance upon any of its properties.
     To Paradigm's knowledge, no consents, waivers,  approvals,  authorizations,
     or orders other than the approval of the regulatory  authorities  listed in
     Section 7.1 are necessary for the authorization, execution, and delivery of
     this Agreement and the Plan of Merger by Paradigm and the  consummation  of
     the transactions contemplated herein and therein.

     4.8 Software Programs,  Patents,  Trademarks,  Servicemarks and Copyrights.
     Except as  indicated  on Schedule  4.8  delivered  to Dicon,  all  software
     programs,  patents,  trade names,  trademarks or  servicemarks,  or service
     names (whether  registered or unregistered)  and copyrights or applications
     for any thereof  owned by,  licensed  to, or used by Paradigm are valid and
     subsisting  and are listed in Schedule  4.8.  Paradigm has not licensed any
     third party to use any software program,  patent,  trademark,  servicemark,
     know-how, or copyright.  Except as set forth in Schedule 4.8, to Paradigm's
     knowledge,  there are no claims or demands of any person  pertaining to any
     software programs,  patents,  know-how,  patent  applications,  trademarks,
     trademark  applications,  servicemark  or  service  name  applications,  or
     copyrights  owned by or  licensed to  Paradigm;  no  proceedings  have been
     instituted  or are  pending or  threatened  which  challenge  the rights of
     Paradigm in respect thereto; and to Paradigm's  knowledge,  the practice or
     use by Paradigm of any software program, patent, trademark, servicemark, or
     copyright,  or any process  utilized by or any product  produced  Paradigm,
     does not infringe  (nor is it infringed by) any software  program,  patent,
     trademark, servicemark, or copyright owned by another (nor is it subject to
     any outstanding  order,  decree,  judgment,  or stipulation).  There are no
     pending,  nor Paradigm's  knowledge any  threatened,  claims,  demands,  or
     proceedings  charging  Paradigm  with  infringement  of or making any other
     claim with respect to any software program, patent, trademark,  trade name,
     servicemark  or  servicename,  copyright,  or  license.  There  is  no  (a)
     unexpired,  valid patent,  on products or processes of Paradigm in creating
     such  products  and which  Paradigm  not  entitled  to use or (b) patent or
     application therefor or invention which would adversely affect any product,
     apparatus, method, process, or design of Paradigm. No officer, director, or
     employee of  Paradigm  has an interest  in any  software  program,  patent,
     patent  application,   trademark,   trademark   application,   servicemark,
     servicemark application, trade name, or copyright of Paradigm.

     4.9  Financial  Statements.  Paradigm  has  furnished  to Dicon  copies  of
     Paradigm's  Financial  Statements  for the years  1996  through  1998,  all
     accompanied by reports thereon containing  opinions without  qualification,
     except as therein noted, by either Price Waterhouse Coopers LLP or Tanner &
     Company (collectively,  the "Paradigm Financial Statements"), and unaudited
     balance  sheets of  Paradigm  as of  December  3 1, 1999,  and the  related
     unaudited statements of income and shareholders' equity for the fiscal year
     ended on December 31, 1999 (the "Paradigm December 31, 1999, Financial
<PAGE>

     Statements  "). The  Paradigm  Financial  Statements  (including  the notes
     thereto) fairly present the financial condition of Paradigm, it December 31
     in each of the years 1996  through  1998 and the results of its  operations
     and other data contained therein for each of the three years then ended and
     have been prepared in accordance with GAAP,  applied on a consistent  basis
     (except as  expressly  set forth or disclosed  in the notes,  exhibits,  or
     schedules  thereto).  The exhibits and schedules  included in such Paradigm
     Financial Statements fairly present the data purported to be shown thereby.
     The Paradigm December 31, 1999,  Financial Statements have been prepared in
     accordance with GAAP and present fairly the financial  position of Paradigm
     as of such date and the  results of its  operations  for such  period.  The
     balance sheet of Paradigm as at December 31, 1999, included in the Paradigm
     December  31,  1999,  Financial  Statements  are  collectively  hereinafter
     referred to as the "Paradigm Balance Sheet".

     4.10 Title to Properties; Liens: Conditions of Properties.

          (a)  Schedule  4.10A sets forth (i) all of the land owned by, or under
     an  agreement  of sale or option to,  Paradigm  at the date hereof and (ii)
     each of the leases as to which the  annualized  rental  obligation  exceeds
     $5,000 per year or as to which the unexpired  term exceeds one year (unless
     cancelable  without  penalty  on thirty  days'  notice)  pursuant  to which
     Paradigm leases (as lessor or lessee) real or personal property at the date
     hereof.  Schedule  4.1OA  delivered to Dicon sets forth all the  buildings,
     machinery, vehicles and equipment having an initial unit value of $3,000 or
     more ("Paradigm Fixed Assets") of Paradigm,  other than real property owned
     or leased. Except for Permitted Liens and except for mortgages noted in the
     Paradigm  Financial  Statements or in the Schedules,  Paradigm has good and
     marketable  title in fee  simple  to all such  real  property  and all such
     leases are valid and  subsisting  and it is not in default  such as to give
     rise to  cancellation,  termination or a penalty  thereunder.  None of such
     Paradigm Fixed Assets, or real, leased, or other property is subject to any
     mortgage, pledge, lien, encumbrance,  conditional sale agreement,  security
     interest,  title retention agreement,  or other charge except for Permitted
     Liens and except as noted in the Paradigm  Financial  Statements  or in the
     Schedules.  There are no outstanding  options or rights in any third person
     to acquire any of such real estate,  leasehold  interests,  Paradigm  Fixed
     Assets. or other property or any interest therein.

          (b) Except as otherwise specified in Schedule 4.1OB:

          (i) Paradigm  does not occupy and is not dependent on the right to use
     the property of others;

          (ii) all Paradigm Fixed Assets,  taken as a whole, are in a good state
     of repair  and  operating  condition  (reasonable  wear and tear and normal
     usage excepted);
<PAGE>

          (iii)  Paradigm's  office building  conforms in all material  respects
     with all applicable zoning and land use laws,  ordinances,  and regulations
     and applicable  deed  restrictions  and other  applicable  laws relating to
     health and safety,  other than the Americans with Disabilities Act of 1990,
     and does not encroach on property of others; and

          (iv) to the  knowledge of Paradigm,  there is no pending or threatened
     change of any such zoning or land use law,  ordinance,  or regulation,  nor
     any pending or threatened condemnation of any such property.

     4.11   Licenses  and  Permits.   Paradigm   has  all   licenses,   permits,
     authorizations,  and approvals necessary to own or lease its properties and
     assets  and to carry on its  business  as  presently  conducted,  where the
     failure to secure such  licenses,  permits,  authorizations  and  approvals
     would  have  a  material  adverse  effect  on  its  business  or  financial
     condition.

     4.12 Capital Stock.  The authorized  capital stock of Paradigm  consists of
     20,000,000  shares of  Paradigm  Common,  par value of $.001 per share,  of
     which,  as of the date  hereof,  10,083,990  shares are validly  issued and
     outstanding,   fully  paid  and  non-   assessable.   There  are  currently
     outstanding  options and  warrants  which are  exercisable  into  2,466,484
     shares of  Paradigm  Common.  The  shares of  Paradigm  Common to be issued
     pursuant to this Agreement will be duly authorized,  validly issued,  fully
     paid, non- assessable and free of preemptive  rights.  The Paradigm Options
     to be  granted  pursuant  to this  Agreement  will be duly  authorized  and
     validly  granted and Paradigm has  reserved  sufficient  shares of Paradigm
     Common to permit the exercise of all the Paradigm Options.

     4.13  Compliance  with Law.  Paradigm in the conduct of its  business is in
     compliance  with all laws,  regulations,  and  orders  of any  governmental
     entity  affecting the business of Paradigm  presently  enacted and in force
     with respect to which the failure to comply  would have a material  adverse
     effect  on  Paradigm.  To  Paradigm's  knowledge,  there is no  pending  or
     threatened  change  of any  such  law,  regulation  or  order  which  might
     materially adversely affect the assets,  liabilities,  financial condition,
     or results of  operations  of Paradigm  taken as a whole.  Paradigm has not
     been charged with violating, nor to Paradigm's knowledge, threatened with a
     charge of violating,  nor to Paradigm's knowledge is it under investigation
     with respect to a possible violation of any provision of any Federal, state
     or local law or administrative  ruling or regulation relating to any aspect
     of its business.

     4.14 No Adverse Change.  Since December 31, 1999,  there has been no change
     in the assets,  liabilities,  financial condition, or results of operations
     of Paradigm  except  changes in the ordinary  course of  business,  none of
     which individually or in the aggregate has been materially  adverse.  Since
     December 31, 1999, Paradigm has not experienced any labor trouble,  strike,
     stoppage,  or any other occurrence which would materially  adversely affect
     its assets, liabilities, financial condition or results of operations.
<PAGE>

     4.15 No Undisclosed  Liabilities or Agreements.  Except as disclosed in the
     quarterly report of Paradigm on Form 10-QSB for the quarter ended March 31,
     2000 or in any of the  Schedules,  Paradigm  has not had,  as of March  31,
     2000, any material debts,  liabilities,  or obligations,  whether  accrued,
     absolute,  or  contingent  and whether due or to become due,  except to the
     extent set forth in or provided for in said  quarterly  report or in any of
     the Schedules.

     4.16 Disclosure. Neither this Agreement nor any document furnished or to be
     furnished  in  connection  herewith  contains  or will  contain  any untrue
     statement of material fact or omits or will omit to state any material fact
     necessary to make the statements contained therein, or herein, in the light
     of the circumstances under which they are made, not misleading.

     4.17 SEC Documents.  Paradigm has furnished  Dicon with a true and complete
     copy of the  following  filings with the  Securities & Exchange  Commission
     (the  "SEC"):  (i) its  annual  report on Form  10-KSB  for the year  ended
     December 31, 1999; (ii) its quarterly report on Form 10-QSB for the quarter
     ended  March  31,  2000;  (iii)  its  registration  statement  on Form  S-3
     originally   filed  on  December  28,  1999,  as  amended;   and  (iv)  its
     registration  statement on Form SB-2 originally filed on April 28, 1999, as
     amended (collectively,  the "SEC Documents"). As of their respective filing
     dates,  the SEC  Documents  compiled  in all  material  respects  with  the
     requirements of the Securities Act of 1993, as amended,  and the Securities
     Exchange Act of 1934, as amended (the "Exchange  Act"), as applicable,  and
     none of the SEC Documents contained any untrue statement of a material fact
     or  omitted  to state a  material  fact  required  to be stated  therein or
     necessary  to  make  the   statements   made  therein,   in  light  of  the
     circumstances  in which they were made, not misleading.  Paradigm has filed
     in a timely  manner all reports  required to be filed during the  preceding
     twelve  calendar months pursuant to the Exchange Act. With the exception of
     the Form 8-K filed by Paradigm on February 17, 2000,  since  September  30,
     1999,  Paradigm  has not  filed nor has been  obligated  to file a Form 8-K
     under the  Exchange  Act,  which  Form 8-K  filing  reported  or would have
     reported an event,  action or other circumstance having or likely to have a
     material adverse effect on the business or financial condition of Paradigm.

     4.18  Subsidiary.  Subsidiary was recently  incorporated by Paradigm solely
     for the  purpose  of  entering  into this  Agreement  and the  transactions
     contemplated hereby,,  Subsidiary is a wholly owned subsidiary of Paradigm,
     and it has no assets other than the Merger Consideration provided to it for
     purposes of completing the Merger and has no liabilities.

<PAGE>

ARTICLE 5

CONDUCT OF THE BUSINESS OF DICON PENDING THE MERGER

Except as otherwise  first approved in writing by Paradigm,  or as otherwise set
forth in this  Agreement,  Dicon  covenants  that from the date hereof until the
Effective Time of the Merger or until this Agreement is terminated in accordance
with its terms:

     5.1 Conduct  Business in Ordinary  Course.  The  business of Dicon shall be
     conducted only in the ordinary course, and none of the properties or assets
     of it  shall be sold or  otherwise  disposed  of,  mortgaged,  pledged,  or
     otherwise  hypothecated,  except in the  ordinary  course of business or as
     otherwise contemplated by this Agreement.

     5.2 No  Change  in  Articles  or  Bylaws.  No  change  shall be made in the
     articles of incorporation or bylaws of Dicon.

     5.3  No  Change   in   Capitalization.   No   change   shall  be  made  (by
     reclassification,   subdivision,   reorganization,  or  otherwise)  in  the
     authorized or issued capital stock of Dicon, and no options,  warrants,  or
     rights to acquire, or securities  convertible into or exchangeable for, any
     shares of capital  stock of Dicon  shall be issued or granted  (except  for
     shares issued upon the exercise of Options by Optionholders of Dicon).

     5.4 No  Dividends.  No dividend or other  distribution  or payment shall be
     declared or made in respect of the  outstanding  shares of capital stock of
     Dicon.  Dicon shall not purchase or redeem or otherwise  acquire any of its
     shares in exchange for cash or other  property or prepay any notes or other
     debt.

     5.5 No Change in Compensation.  Except for regular and customary  increases
     in the  compensation  of  salaried  and hourly  employees  of Dicon made in
     accordance with past practice  (provided that notice of raises in excess of
     5 % per annum shall be given to Paradigm at least 5 business  days prior to
     their  effective  date),  no  increase  shall  be made in the  compensation
     payable or to become payable by Dicon to any of its officers, employees, or
     agents, nor shall any bonus, pension, retirement,  profit-sharing, or stock
     option payment, agency agreement, or other agreement or arrangement be made
     by any of them to or with any such person or persons,  nor shall any change
     be made in any  existing  Employee  Benefit  Plan  covering  such person or
     persons.

     5.6 No  Contract  Not in  Ordinary  Course.  No  contract,  obligation,  or
     commitment  (excepting therefrom insurance policies and annuities issued by
     Dicon in the ordinary  course of business) shall be entered into or assumed
     by or on  behalf  of  Dicon,  except  normal  commitments  incurred  in the
     ordinary course of business;  nor any  indebtedness  incurred  representing
     borrowed money or the deferred purchase price of goods or services;
<PAGE>

     nor shall any material contract,  obligation,  or commitment be modified or
     amended in any material  respect or  terminated.  The  foregoing  shall not
     prohibit  the  purchase or sale of  investment  securities  in the ordinary
     course of business in accordance with past practice.

     5.7 No Changes in Personnel or Financial  Institutions.  Except as provided
     in Section 5.5, no change (other than as required in the ordinary course of
     business)   shall   be   made   affecting   the   personnel,   agents,   or
     attorneys-iii-fact  of Dicon other than the resignations or terminations of
     any such persons in the ordinary course of business, and no change shall be
     made in the banking or safe deposit arrangements of Dicon.

     5.8 Maintenance of Property. Dicon shall maintain its properties,  taken as
     a whole, in good operating condition and repair.

     5.9  Insurance.  Dicon  shall  continue  in full force and  effect,  at its
     expense, (i) all present policies of casualty,  property,  fidelity, errors
     and  omissions,   directors'  and  officers',   and  workers'  compensation
     insurance  which have been issued to it and (ii) all bonds and/or  deposits
     in respect of any casualty,  fidelity,  property,  or workers' compensation
     risks which are self-insured.

     5.10  Business  Intact.  Dicon shall use its best  efforts to preserve  its
     business  organization  intact, to retain the services of its key officers,
     and of its employees, agents, and consultants, and to preserve for Paradigm
     the  good  will  of its  agents,  customers,  and  others  having  business
     relations with it.

     5.11 No Capital  Contributions.  No affiliate or non-affiliate person shall
     make any  contributions  to the capital of Dicon or repay any  indebtedness
     owed  to  it  other  than  in  cash,  and  Schedule  5.11  sets  forth  all
     indebtedness  owed to it by any of the  foregoing  persons  which  was paid
     since  December  31,  1999.  The term  "affiliate"  shall  mean any  person
     controlling, controlled by, or under common control with Dicon.

     5.12  Representations  and  Warranties.  Dicon hereby agrees that, from the
     date of this Agreement to the Closing Date,  except as otherwise  expressly
     permitted  by this  Agreement or as Paradigm  may  otherwise  consent to in
     writing from time to time,  Dicon shall not engage in any activity or enter
     into any transaction  which would be  inconsistent in any material  respect
     with any of the representations and warranties set forth in Article 3 as if
     such  representations and warranties were made at a time subsequent to such
     activity or  transaction  and all  references to the date of this Agreement
     were deemed to be as of such later date.

     5.13 Necessary  Action.  As soon as practicable after the execution of this
     Agreement,  Dicon shall take all  necessary  corporate and other action and
     shall use its best efforts to obtain, or where appropriate  assist Paradigm
     in obtaining, all material consents, orders,
<PAGE>

     and approvals required for consummation of the transactions contemplated by
     this Agreement.

     5.14 Best Efforts to Satisfy  Conditions.  Dicon shall use its best efforts
     to cause all  conditions  in this  Article 5 to be satisfied on or prior to
     the second business day prior to the Closing Date.

     5.15 Inconsistent Activities.  From the date of this Agreement,  unless and
     until this Agreement has been  terminated in accordance  with Section 11.1,
     Dicon shall not (i) solicit,  directly or indirectly,  any offer to acquire
     any of the Dicon Capital Stock, or all or  substantially  all of the assets
     of any of Dicon,  whether by merger,  purchase of assets,  tender offer, or
     otherwise;  or  (ii)  enter  into  any  negotiations  or  agreements  which
     contemplate  the  merger of Dicon or the sale of any of the  Dicon  Capital
     Stock,  or all or  substantially  all of the  assets of Dicon to any person
     other than Paradigm.  Nothing  contained in this Section shall prohibit the
     management of Dicon from advising its  shareholders  of any bona fide offer
     communicated to such management.

     5.16  Approval by Dicon  Shareholders.  Dicon shall use its best efforts to
     obtain the  signatures  of a majority  of the  outstanding  shares of Dicon
     Common approving this Agreement and the Plan of Merger and the transactions
     contemplated thereby, and, if applicable,  provide notice of such action to
     the  non-approving  shareholders  in  accordance  with  Section  603 of the
     California Corporations Code.

     5.17 Access to  Properties.  Files Etc. Dicon shall from time to time or at
     any time from the date hereof to the Effective Time of the Merger,  give or
     cause  to  be  given  to  Paradigm,   its  officers,   employees,   agents,
     representatives,  consultants, accountants, public accountants, and general
     or special counsel:

          (i)  full  access  during  normal   business   hours  to  all  Dicon's
     properties,  accounts,  books, minute books, deeds, title papers, insurance
     policies,  licenses,  agreements,   contracts,  commitments,  tax  returns,
     records  and  files of every  character,  equipment,  machinery,  fixtures,
     furniture,  vehicles,  notes and accounts payable and receivable,  and data
     processing programs;

          (ii)  the name of each  financial  institution  in which  Dicon or the
     trustee or agent of any retirement, pension, or similar plan to which Dicon
     is a party has an account or safe  deposit box and the names of all persons
     authorized  to draw thereon or to have access  thereto and the name of each
     person holding a power of attorney from Dicon;

          (iii)  promptly  upon  their  becoming  available,  one  copy  of each
     financial  statement,  report,  notice, or proxy statement sent by Dicon to
     its shareholders generally,  and of each regular or periodic report and any
     periodic statement or written communication, other than
<PAGE>

     transmittal  letters (all such material being  collectively  referred to as
     "Dicon  Reports"),  in respect of Dicon  Reports  filed by Dicon  with,  or
     received  by any of  them  in  connection  with,  Dicon  Reports  from  any
     securities commission or department; and

          (iv) all such other  information  concerning  the  affairs of Dicon as
     Paradigm may reasonably request.

     Dicon agrees that any investigation or inquiry made by Paradigm pursuant to
     this   Section   5.17  shall  not  in  any  way  affect  or  diminish   the
     representations  and warranties made by Dicon in this  Agreement.  Paradigm
     agrees  that any such  investigation  or inquiry  made by it after the date
     hereof shall be conducted at Paradigm's  sole expense and in such manner as
     not to interfere unreasonably in any material way with the operation of the
     business  of  Dicon.  Dicon  further  agrees  that  from  the  date of this
     Agreement until the Effective Time of the Merger or the termination of this
     Agreement,  Paradigm shall have the right,  at Paradigm's  expense,  at any
     time  during  normal   business  hours,   to  locate   employees,   agents,
     representatives and/or consultants at the premises of Dicon.

     5.18 Correspondence with Regulators.  Dicon shall promptly provide Paradigm
     with copies of all  correspondence  to and from all regulatory  authorities
     having jurisdiction with respect to Dicon.

     5.19  Hart-Scott-Rodino  Filing. As soon as practicable after the execution
     of this Agreement,  Dicon will effect all filings required,  if any, by the
     Hart-Scott-Rodino  Antitrust  Improvements  Act of  1976 by  reason  of the
     transactions contemplated by this Agreement.

ARTICLE 6

CONDUCT OF THE BUSINESS OF PARADIGM PENDING THE MERGER

Except as otherwise  first  approved in writing by Dicon,  or as  otherwise  set
forth in this Agreement,  Paradigm covenants that from the date hereof until the
Effective Time of the Merger or until this Agreement is terminated in accordance
with its terms:

     6.1 Conduct Business in Ordinary Course.  The business of Paradigm shall be
     conducted only in the ordinary course, and none of the properties or assets
     of it  shall be sold or  otherwise  disposed  of,  mortgaged,  pledged,  or
     otherwise  hypothecated,  except in the  ordinary  course of business or as
     otherwise contemplated by this Agreement.

     6.2 No  Change  in  Charter  or  Bylaws.  No  change  shall  be made in the
     certificate of incorporation or bylaws of Paradigm.
<PAGE>

     6.3 Maintenance of Property. Paradigm shall maintain its properties,  taken
     as a whole, in good operating condition and repair.

     6.4 Insurance.  Paradigm  shall  continue in full force and effect,  at its
     expense, (i) all present policies of casualty,  property,  fidelity, errors
     and  omissions,   directors'  and  officers',   and  workers'  compensation
     insurance  which have been issued to it and (ii) all bonds and/or  deposits
     in respect of any casualty,  fidelity,  property,  or workers' compensation
     risks which are self-insured.

     6.5 Business  Intact.  Paradigm  shall use its best efforts to preserve its
     business  organization  intact, to retain the services of its key officers,
     and of its employees,  agents,  and  consultants,  and to preserve the good
     will of its agents,  customers,  and others having business  relations with
     it.

     6.6 Necessary  Action.  As soon as practicable  after the execution of this
     Agreement, Paradigm shall take all necessary corporate and other action and
     shall use its best efforts to obtain, or where appropriate  assist Dicon in
     obtaining,  all  material  consents,  orders,  and  approvals  required for
     consummation of the transactions contemplated by this Agreement.

     6.7 Best Efforts to Satisfy Conditions. Paradigm shall use its best efforts
     to cause all  conditions  in this  Article 6 to be satisfied on or prior to
     the second business day prior to the Closing Date.

     6.8 Access to Properties,  Files.  Etc. Paradigm shall from time to time or
     at any time from the date hereof to the Effective Time of the Merger,  give
     or  cause  to  be  given  to  Dicon,  its  officers,   employees,   agents,
     representatives,  consultants, accountants, public accountants, and general
     or special counsel:

          (i)  full  access  during  normal  business  hours  to all  Paradigm's
     properties,  accounts,  books, minute books, deeds, title papers, insurance
     policies,  licenses,  agreements,   contracts,  commitments,  tax  returns,
     records  and  files of every  character,  equipment,  machinery,  fixtures,
     furniture,  vehicles,  notes and accounts payable and receivable,  and data
     processing programs;

          (ii) the name of each  financial  institution in which Paradigm or the
     trustee  or agent of any  retirement,  pension,  or  similar  plan to which
     Paradigm is a party has an account or safe deposit box and the names of all
     persons  authorized to draw thereon or to have access  thereto and the name
     of each person holding a power of attorney from Paradigm;

          (iii)  promptly  upon  their  becoming  available,  one  copy  of each
     financial statement, report, notice, or proxy statement sent by Paradigm to
     its shareholders generally, and of
<PAGE>

     each  regular or  periodic  report and any  periodic  statement  or written
     communication,  other than  transmittal  letters (all such  material  being
     collectively  referred to as  "Paradigm  Reports"),  in respect of Paradigm
     Reports  filed by Paradigm  with,  or received by any of them in connection
     with, Paradigm Reports from any securities commission or department; and

          (iv) all such other information  concerning the affairs of Paradigm as
     Dicon may reasonably request.

     Paradigm agrees that any investigation or inquiry made by Dicon pursuant to
     this   Section   6.8  shall  not  in  any  way  affect  or   diminish   the
     representations  and warranties made by Paradigm in this  Agreement.  Dicon
     agrees  that any such  investigation  or inquiry  made by it after the date
     hereof shall be  conducted in such manner as not to interfere  unreasonably
     in any  material  way with  the  operation  of the  business  of  Paradigm.
     Paradigm  further  agrees  that from the date of this  Agreement  until the
     Effective Time of the Merger or the  termination of this  Agreement,  Dicon
     shall  have the  right,  at  Dicon's  expense,  at any time  during  normal
     business  hours,  to  locate  employees,  agents,   representatives  and/or
     consultants at the premises of Paradigm.

     6.9 Correspondence  with Regulators.  Paradigm shall promptly provide Dicon
     with copies of all  correspondence  to and from all regulatory  authorities
     having jurisdiction with respect to Paradigm.

     6.10  Hart-Scott-Rodino  Filing. As soon as practicable after the execution
     of this Agreement,  Paradigm will effect all filings  required,  if any, by
     the Hart-Scott-Rodino  Antitrust  Improvements Act of 1976 by reason of the
     transactions contemplated by this Agreement.

     6.11  Director and Officer  Liability.  Paradigm  will cause the  Surviving
     Corporation to indemnify and hold harmless the present and former  officers
     and directors of Dicon in respect of acts of omissions  occurring  prior to
     the  Effective  Time of the Merger to the  extent  provided  under  Dicon's
     articles of incorporation and bylaws in effect on the date hereof, provided
     that such  indemnification  shall be subject to any limitation imposed from
     time to time  under  applicable  law,  including,  without  limitation,  as
     circumscribed by the applicable  provisions of the California  Corporations
     Code for (i) wilful failure to deal fairly in a case of a material conflict
     of interest;  (ii) violation of criminal law;  (iii) a transaction  wherein
     improper personal profit was derived;  or (iv) wilful misconduct.  Paradigm
     shall cause the Surviving  Corporation  to maintain  directors and officers
     liability insurance covering such  indemnification  obligation for a period
     of three (3) years after the Effective Time of the Merger.

<PAGE>

ARTICLE 7

APPROVALS NEEDED FOR MERGER

The  consummation  of the  Merger  shall be subject  to the  condition  that the
following approval, order and regulatory requirement shall have been obtained or
complied with prior to the Closing Date:

     7.1 Hart-Scott-Rodino Antitrust Improvements Act of 1976. In the event that
     the  Hart-  Scott-Rodino  Antitrust  Improvements  Act of  1976  is  deemed
     applicable  at any time prior to the Closing  Date,  said act and the rules
     and regulations  thereunder shall have been fully complied with by Paradigm
     and Dicon (including,  without limitation,  compliance with the information
     furnishing  and waiting period  requirements  thereof) prior to the Closing
     Date or such compliance shall have been waived by the governmental agencies
     having authority to give such waiver prior to the Closing Date.

ARTICLE 8

CONDITIONS

     8.1  Conditions  Precedent to  Obligations  of Paradigm.  The obligation of
     Paradigm to proceed with the transactions  contemplate hereby is subject to
     satisfaction  of the  following  conditions  unless  waived in  writing  by
     Paradigm:

          (a) Receipt of Approvals.  The approval and action required by Article
     7 shall, if necessary, have been obtained.

          (b) Dissenting Dicon Shares, Stockholder Approval. On the Closing Date
     the  dissenting  Dicon  shares  shall not exceed ten  percent  (10%) of the
     shares of Dicon  Common then  outstanding.  Dissenting  Dicon  shares shall
     mean,  for the purpose of this Section 8. l(b),  shares of Dicon Common the
     holders  of  which  shall  have   perfected   their  rights  as  dissenting
     shareholders  under  Section  1300 et seq. of the  California  Corporations
     Code.

          (c) Approval by Dicon  Shareholders.  This  Agreement  and the Plan of
     Merger and the transactions  contemplated thereby, shall have been approved
     and adopted by the affirmative  vote or written consent of the holders of a
     majority of the outstanding shares of Dicon Common.

          (d) Indemnification Agreement by Dicon Shareholders. Certain principal
     shareholders of Dicon shall have executed an  Indemnification  Agreement in
     the form attached as Annex III.

          (e) Employment and Non-Competition Agreements. Execution of employment
     and non-competition agreements in form and substance acceptable to Paradigm
<PAGE>

     with Mark M. Miehle,  President and Chief Executive  Officer of Dicon,  and
     with  other  executive  officers  and  key  employees  to be  specified  by
     Paradigm.

          (f) Opinion of Counsel for Dicon.  Paradigm  shall have  received from
     Luce, Forward, Hamilton & Scripps LLP, counsel for Dicon, an opinion, dated
     the Closing Date, in form and substance reasonably  satisfactory to counsel
     for Paradigm, to the effect that in such counsel's opinion:

          (i) Dicon has been duly incorporated,  is validly existing and in good
     standing  under the laws the state of  California,  and is duly licensed or
     admitted   to   transact    business   and   is   in   good   standing   in
     ___________________  and has the corporate  power to own its properties and
     carry on its business as presently conducted;

          (ii) the  authorized  capital  stock of  Dicon  is as  stated  in this
     Agreement,  and the  outstanding  stock as stated in this Agreement is duly
     authorized,   validly  issued,  and,  to  our  knowledge,  fully  paid  and
     nonassessable;

          (iii) the execution,  delivery, and performance of this Agreement will
     not (x)  conflict  with or result in any  violation of an), of the terms or
     provisions  of the  Articles or Bylaws of Dicon or, to our  knowledge,  any
     loan or credit agreement, indenture, mortgage, note, or other agreement due
     Dicon or to which it is a party or by which its  properties or assets is or
     may  be  bound  or  (y)  to  our   knowledge,   violate  any   judicial  or
     administrative  order,  award,  judgment,  or  decree  entered  against  or
     affecting Dicon;

          (iv) no  authorization,  consent,  or approval of, or  registration or
     filing  with,  any  governmental  or public body or authority of the United
     States, or of any jurisdiction  thereof or therein, is required on the part
     of Dicon for the performance of this Agreement and the  consummation of the
     transactions contemplated herein other than such as have been obtained;

          (v) there are no actions or  proceedings  seeking to prevent or enjoin
     the transactions  contemplated by this Agreement known,  after due inquiry,
     to such counsel to be pending or  threatened,  and,  except as set forth in
     this  Agreement  and any  document  furnished  to  Paradigm  in  connection
     herewith, there are no pending or threatened legal proceedings to which any
     of them is subject;
<PAGE>

          (vi) all  corporate  and  stockholder  action  required to be taken or
     instituted by and on the part of Dicon to authorize  this Agreement and the
     Plan of Merger has been duly and properly taken; and

          (vii) this Agreement, the Plan of Merger, the Escrow Agreement and the
     Registration Rights Agreement (the "Transaction  Documents") have been duly
     executed and delivered by Dicon, and the Transaction Documents constitute a
     valid and binding  obligation of Dicon in accordance with their  respective
     terms,  subject to or limited by  bankruptcy,  insolvency,  reorganization,
     moratorium,  or other  similar  laws, in each case relating to or affecting
     the enforcement of creditor's  rights  generally and general  principles of
     equity (regardless of whether enforcement of such obligations is considered
     in proceeding in equity or at law).

     In giving  such  opinion,  such  counsel  may rely upon  opinions  of other
     counsel  satisfactory  to it. As to matters of fact  asserted to be to such
     counsel's  knowledge or such counsel's  knowledge  after due inquiry,  such
     counsel may rely upon certificates of officers of Dicon, provided that such
     counsel shall deliver copies thereof to Paradigm contemporaneously with its
     opinion,  and upon  review by such  counsel  of its files  with  respect to
     matters on which it has represented.

          (g) Compliance. All of the covenants and obligations contained in this
     Agreement  to be  complied  with and  performed  by Dicon at or before  the
     Closing Date shall have been complied with and performed.

          (h)   Representations   and   Warranties   True   and   Correct.   The
     representations  and warranties  made by Dicon in this  Agreement  shall be
     true and correct in all material  aspects,  at and as of the Closing  Date,
     with  the  same  force  and  effect  as  though  such  representations  and
     warranties had been made at and as of the Closing Date,  except for changes
     contemplated  by this  Agreement;  provided,  however,  that the  foregoing
     condition  shall be deemed to be  satisfied  except  where any  failure  or
     failures to be true and correct shall reasonably be expected to result,  in
     the aggregate,  in an adverse  change,  after tax effect,  in the financial
     condition or results of  operations  of Dicon or,  following  the Effective
     Time of the Merger, of Paradigm, in excess of the amount of $25,000.  Dicon
     shall have  delivered to Paradigm a  certificate,  dated the Closing  Date,
     signed by an  executive  officer of Dicon  evidencing  compliance  with the
     provisions of paragraphs (g) and (h) of this Section 7. 1.

          (i)  Litigation.  There shall not have been  instituted  any action or
     proceeding  before any court or governmental  agency or other regulatory or
     administrative   agency  or  commission,   by  any  governmental  or  other
     regulatory or  administrative  agency or commission or any private  person,
     challenging the transactions contemplated hereby or
<PAGE>

     otherwise relating to the transactions  contemplated  hereby or pursuant to
     the terms of the Plan of Merger.

          (j) Governmental Action. There shall not have been any action taken by
     any  court,  government,  or  governmental  agency,  domestic  or  foreign,
     rendering  any  party to this  Agreement  or the Plan of  Merger  unable to
     consummate  the  transactions  contemplated  hereby or  thereby,  otherwise
     making such transactions illegal.

          (k) Material  Adverse Except for the $750,000 loan made by Paradigm to
     Dicon on or about  February 18, 2000,  Paradigm shall not have become aware
     after the date  hereof of any facts  which have a material  adverse  effect
     with respect to the assets, liabilities, financial condition, or results of
     operations of Dicon, subject to the provisions of Section 8.1(i) above.

          (l)  Resignation of Officers and Directors.  Each officer and director
     of Dicon as requested by Paradigm  shall have executed a letter  containing
     the resignation of such person as such officer and/or director effective as
     of the  Effective  Time of the  Merger  or at such date as  Paradigm  shall
     request.

          (m)  Legal  Matters.  All  actions,   proceedings,   instruments,  and
     documents  required to carry out this  Agreement and the Plan of Merger and
     to consummate the  transactions  contemplated  hereby and all other related
     legal  matters  shall  be  in  all  material  respects  to  the  reasonable
     satisfaction of counsel for Paradigm.

          (n) Receipt of Certain  Documents.  Dicon shall have made available to
     Paradigm on or before the Closing Date the following items:

          (i)  A  copy  of  the  resolutions  of  the  Board  of  Directors  and
     shareholders of Dicon adopting and approving this Agreement and the Plan of
     Merger and authorizing the  transactions  contemplated  hereby and thereby,
     certified by the secretary or an assistant secretary of Dicon;

          (ii) One or more  certificates of the  appropriate  secretary of state
     (or other  government  official)  as of a recent date  showing  Dicon to be
     validly existing and in good standing;

          (iii) One or more certificates of the Franchise Tax Board of the state
     of California  showing that all income tax and premium tax returns required
     to be filed as of such date by and all reports required to be filed by them
     through  seven (7)  business  days prior to the Closing Date have been duly
     filed and that the taxes  reflected  in such  returns and reports have been
     duly paid;
<PAGE>

          (iv) The resignations of all of the officers and directors of Dicon as
     shall have been requested by Paradigm;

          (v) The minute books of Dicon, and its stock register;

          (vi) All leases,  contracts,  insurance records,  policies,  and other
     documents affecting the assets and operations and systems of Dicon wherever
     performed,  including,  but not limited to, all electronic  data processing
     master files and programs in machine readable format and any  documentation
     and procedures needed for their maintenance not previously delivered; and

          (vii)  Such  other  documents  as shall  be  reasonably  requested  by
     Paradigm.

     8.2 Conditions  Precedent to Obligations of Dicon. The obligations of Dicon
     to  proceed  with the  transactions  contemplated  hereby  are  subject  to
     satisfaction of the following conditions unless waived by Dicon:

          (a) Receipt of Approvals.  The approval and action required by Article
     7 shall, if necessary, have been obtained.

          (b) Opinion of Counsel for  Paradigm.  Dicon shall have  received from
     Mackey,  Price & Williams,  counsel  for  Paradigm,  an opinion,  dated the
     Closing Date, in form and substance reasonably  satisfactory to counsel for
     Dicon, to the effect that in such counsel's opinion:

          (i) Paradigm  has been duly  incorporated  and is validly  existing in
     good standing under the laws of its state of incorporation;

          (ii) each of this Agreement,  the Plan of Merger, the Escrow Agreement
     and the Registration  Rights Agreement has been duly authorized,  executed,
     and delivered by Paradigm by all necessary corporate action and constitutes
     the valid  and  binding  obligation  of  Paradigm  in  accordance  with its
     respective  terms,  subject to the same  limitation  as provided in Section
     8.1(d)(vii);

          (iii) the execution,  delivery, and performance of this Agreement, the
     Plan of  Merger  and the  Escrow  Agreement  and  the  consummation  of the
     transactions  contemplated  thereby will not result in any violation of any
     of the terms or  provisions of the charter or bylaws of Paradigm or, to our
     knowledge,  any loan or credit  agreement,  indenture,  mortgage,  note, or
     other agreement due to Paradigm or to which
<PAGE>

     Paradigm is a party or by which it or any of its properties or assets is or
     may be bound;

          (iv) the shares of Paradigm  Common and options to purchase  shares of
     Paradigm  Common to be issued in the  Merger are duly  authorized,  validly
     issued, fully paid and nonassessable;

          (v) no  authorization,  consent,  or approval of, or  registration  or
     filing  with,  any  governmental  or public body or authority of the United
     States, or of any jurisdiction  thereof or therein, is required on the part
     of Paradigm for the performance of this  Agreement,  the Plan of Merger and
     the Escrow Agreement and the  consummation of the transaction  contemplated
     thereby, except such as have been obtained;

          (vi) to the  knowledge  of such  counsel,  there are no pending  legal
     proceedings material to Paradigm known to such counsel to which Paradigm is
     a party or of which the property of Paradigm is the subject; and

          (vii) there are no actions or proceedings seeking to prevent or enjoin
     the transactions contemplated by this Agreement, the Plan of Merger and the
     Escrow Agreement known to such counsel to be pending or threatened.

     In giving  such  opinion,  such  counsel  may rely upon  opinions  of other
     counsel satisfactory to it and, as to matters of fact, upon certificates of
     officers  of  Paradigm,  provided  that such  counsel  shall  state that it
     believes  it is  justified  in  relying  upon such  certificates  and shall
     deliver copies thereof to Dicon contemporaneously with its opinion.

          (c) Compliance and Representations  Correct.  All of the covenants and
     obligations  contained in this  Agreement to be complied with and performed
     by Paradigm at or before the Closing Date shall have been complied with and
     performed in all respects,  and the  representations and warranties made by
     Paradigm in this Agreement  shall be correct in all material  respects,  at
     and as of the Closing  Date,  with the same force and effect as though such
     representations and warranties had been made at and as of the Closing Date,
     except for changes  contemplated  by this  Agreement.  Paradigm  shall have
     delivered to Dicon a  certificate,  dated the Closing Date and signed by an
     officer of Paradigm,  evidencing  compliance  with the  provisions  of this
     Section 8.2.
<PAGE>

          (d)  Litigation.  There shall not have been  instituted  any action or
     proceeding  before any court or governmental  agency or other regulatory or
     administrative   agency  or  commission,   by  any  governmental  or  other
     regulatory or  administrative  agency or  commission or any private  person
     challenging  any of  the  transactions  contemplated  hereby  or  otherwise
     directly or indirectly relating to the transactions contemplated hereby.

          (e) Governmental Action. There shall not have been any action taken by
     any  court,  government,  or  governmental  agency,  domestic  or  foreign,
     rendering  any  party to this  Agreement  or the Plan of  Merger  unable to
     consummate  the  transactions  contemplated  hereby or thereby or otherwise
     making such transaction illegal.

          (f) Terms of Merger.  The terms and  provisions of the Merger  between
     Paradigm  and Dicon shall be  substantially  in  accordance  with those set
     forth in the Plan of  Merger,  which is  attached  hereto as Annex I and is
     hereby made a part of this Agreement.

          (g)  Legal  Matters.  All  actions,   proceedings,   instruments,  and
     documents  required to carry out this  Agreement and the Plan of Merger and
     to consummate the  transactions  contemplated  hereby and all other related
     legal  matters  shall  be  in  all  material  respects  to  the  reasonable
     satisfaction of counsel for Dicon.

          (h) Doctrine of  Equivalence.  Paradigm shall have achieved a doctrine
     of  equivalence  for its  Photon  technology  on the basis of an opinion or
     other documentation reasonably satisfactory to Dicon.

          (i) Material Adverse Changes.  Dicon shall not have become aware after
     the date  hereof of any facts  which have a material  adverse  effect  with
     respect to the  assets,  liabilities,  financial  condition,  or results of
     operations of Paradigm.

          (j) Receipt of Certain  Documents.  Paradigm shall have made available
     to Dicon on or before the Closing Date the following items:

          (i) A copy of the  resolutions  of the Board of  Directors of Paradigm
     adopting and approving  this  Agreement and  authorizing  the  transactions
     contemplated hereby and thereby, certified by the secretary or an assistant
     secretary of Paradigm;

          (ii) One or more  certificates of the  appropriate  secretary of state
     (or other  government  official) as of a recent date showing Paradigm to be
     validly existing and in good standing;
<PAGE>

          (iii) Such other documents as shall be reasonably requested by Dicon.

          (k) Registration  Rights  Agreement.  Paradigm and the shareholders of
     Dicon Common  shall have  executed a  Registration  Rights  Agreement  (the
     "Registration  Rights  Agreement"),  in the  form  attached  as  Annex  IV,
     granting such  shareholders  certain  registration  rights  beginning  five
     months after the  Effective  Time of the Merger,  with respect to shares of
     Paradigm Common received pursuant to this Agreement.

ARTICLE 9

ACCESS TO INFORMATION

     9.1   Pre-Closing   Access   by  Dicon.   Dicon   shall   give   Paradigm's
     representatives,  agents,  consultants,  accountants,  and  attorneys  full
     access as set forth in Section 5.17.  Paradigm  agrees that it will hold in
     strict  confidence  all  documents  and  information  concerning  Dicon  so
     furnished  (except that such documents and  information may be disclosed to
     Paradigm's  independent  accountants  and counsel in like confidence and to
     any governmental authority reviewing the transactions  contemplated by this
     Agreement),  and, if the transactions  contemplated by this Agreement shall
     not be  consummated,  such  confidence  shall be maintained  (except to the
     extent that such information was previously known to Paradigm or any of its
     affiliates,  in the public  domain or later  acquired by Paradigm or any of
     its affiliates from other legitimate sources or thereafter through no fault
     of Paradigm becomes information generally available to the public) and upon
     written request from Dicon all such documents shall immediately  thereafter
     be  returned  to the party  which  furnished  the  particular  document  to
     Paradigm.

     9.2  Access to  Accountant's  Records  by Dicon.  Dicon  shall  direct  its
     independent   accountants  to  grant  access  to  all  documents  in  their
     possession   concerning   Dicon,   including   its   working   papers,   to
     representatives of Paradigm,  at the expense (if any) of Paradigm,  and the
     confidentiality  provision set forth in Section 9. 1 shall apply equally to
     all such documents.

     9.3  Post-Merger  Access by Dicon.  After the Effective Time of the Merger,
     Paradigm  agrees that it shall  cause Dicon to give those  persons who were
     Dicon's officers,  directors,  attorneys, and accountants immediately prior
     to the Closing reasonable access to the records of Dicon in connection with
     any litigation  that may arise under this Agreement or any  requirements of
     law or government regulations which may be applicable.

<PAGE>

     9.4   Pre-Closing   Access  by  Paradigm.   Paradigm   shall  give  Dicon's
     representatives,  agents,  consultants,  accountants,  and  attorneys  full
     access as set  forth in  Section  6.9.  Dicon  agrees  that it will hold in
     strict  confidence  all documents and  information  concerning  Paradigm so
     furnished  (except that such documents and  information may be disclosed to
     Dicon's  independent  accountants and counsel in like confidence and to any
     governmental  authority  reviewing the  transactions  contemplated  by this
     Agreement),  and, if the transactions  contemplated by this Agreement shall
     not be  consummated,  such  confidence  shall be maintained  (except to the
     extent that such  information  was previously  known to Dicon or any of its
     affiliates,  in the public domain or later  acquired by Dicon or any of its
     affiliates from other legitimate  sources or thereafter through no fault of
     Dicon  becomes  information  generally  available  to the  public) and upon
     written  request  from  Paradigm  all  such  documents  shall   immediately
     thereafter be returned to the party which

     9.5 Access to Accountant's Records by Paradigm shall direct its independent
     accountants to grant access to all documents in their possession concerning
     Dicon,  including its working papers, to  representatives  of Dicon, at the
     expense (if any) of Dicon, and the  confidentiality  provision set forth in
     Section 9.4 shall apply equally to all such documents.

ARTICLE 10

INDEMNIFICATION

     10.1  Indemnification  by Dicon.  Dicon hereby agrees to indemnify and hold
     harmless Paradigm against and in respect of any direct  out-of-pocket loss,
     damage, or expense arising out of:

          (a) Any claim,  liability,  or  obligation  suffered  or  incurred  by
     Paradigm resulting from or arising out of any misrepresentation, breach, or
     non-fulfillment of any representation,  warranty, covenant, or agreement on
     the part of Dicon contained in this Agreement; and

          (b)  All  actions,  suits,   investigations,   proceedings,   demands,
     assessments,  judgments,  reasonable  attorney's fees, direct out-of-pocket
     costs and expenses  incident to the  foregoing,  including (but not limited
     to) any audit or investigation by any governmental entity.

     10.2  Indemnification by Paradigm.  Paradigm hereby agrees to indemnify and
     hold  harmless  Dicon  against  and in respect of any direct  out-of-pocket
     loss, damage, or expense

4 1
<PAGE>

          (a) Any claim,  liability, or obligation suffered or incurred by Dicon
     resulting  from  or  arising  out  of  any  misrepresentation,  breach,  or
     non-fulfillment or any representation,  warranty, covenant, or agreement on
     the part of Paradigm contained in this Agreement; and

          (b)  All  actions,  suits,   investigations,   proceedings,   demands,
     assessments,  judgments,  reasonable  attorney's fees, direct out-of-pocket
     costs, and expenses incident to the foregoing,  including (but not limited.
     to) any audit or investigation by any governmental entity.

     10.3  Survival  of  Obligation  to  Indemnify.  The mutual  indemnification
     obligations  of Paradigm and Dicon shall  survive  until twelve (12) months
     after the Effective Time of the Merger (the "Indemnification  Period"), and
     shall  continue  thereafter  only with  respect  to a claim,  liability  or
     obligation for which the party seeking indemnity hereunder shall have given
     the other party an  Indemnification  Notice as provided herein at least ten
     (10) days prior to the expiration of the Indemnification  Period. After the
     Effective  Time of the  Merger,  the holders of Dicon  Common,  pro rata in
     accordance with their ownership of Dicon Common as of the Effective Time of
     the Merger, shall succeed to Dicon's indemnification rights and obligations
     under this Article 10; provided, however, that the maximum aggregate amount
     for which any shareholder of Dicon Common is required to indemnify Paradigm
     pursuant to this  Article 10 shall not exceed such  shareholder's  Pro Rata
     Indemnification  Obligation (as defined below).  A  shareholder's  Pro Rata
     Indemnification  Obligation  shall  be  determined  by  multiplying  (x)the
     Indemnity  Amount (as defined in Section  10.6) by (y) the  quotient of (A)
     the number of shares of Paradigm Common paid to such shareholder hereunder,
     divided  by (B) the  total  number of shares  of  Paradigm  Common  paid to
     shareholders of Dicon Common hereunder as part of the Merger Consideration.

     10.4  Notice and  Procedure.  Either  party  claiming  indemnity  hereunder
     (hereinafter  referred to as the "Indemnified  Party") shall give the party
     against  whom  indemnity  is  sought   (hereinafter   referred  to  as  the
     "Indemnifying Party") prompt written notice (the "Indemnification  Notice")
     after  obtaining  knowledge  of any claim or the  existence  of facts as to
     which recovery may be sought against the Indemnifying  Party because of the
     indemnity  provisions  set forth in this  Article  10. The  Indemnification
     Notice  shall  specify  the basis  for such  indemnification  claim,  shall
     include  the  amount of such  claim if known,  and  shall be  supported  by
     relevant  information  and  documentation  with  respect  thereto.  If  the
     Indemnifying Party does not object in writing to such indemnification claim
     within thirty (30) business days of receiving such Indemnification  Notice,
     the  Indemnified  Party  shall be  entitled  to recover  promptly  from the
     Indemnifying  Party the amount of such claim and no later  objection by the
     Indemnifying  Party shall be permitted.  In the event that the Indemnifying
     Party shall have timely objected in writing in whole or in part to any
<PAGE>

     Indemnification  Notice,  the Indemnifying  Party and the Indemnified Party
     shall  privately  attempt  to  resolve  or  compromise  the  claim.  If the
     Indemnifying  Party and the Indemnified  Party shall have failed to resolve
     or compromise or agree to postpone  resolution of the claim within a period
     of  thirty  (30)  days  from the date the  Indemnifying  Party  shall  have
     objected in writing,  the  Indemnified  Party shall be free to seek a legal
     remedy.

     10.5 Third Party Claims. If a claim for indemnity arises in connection with
     a claim made by a third party (a "Third  Party  Claim"),  the  Indemnifying
     Party shall have the right, at any time after receipt of an Indemnification
     Notice, with respect to such Third Party Claim to assume the defense (which
     assumption  may be made under a  reservation  of rights) and to control the
     settlement and compromise of such action or claim at its sole expense.  The
     Indemnified  Party shall cooperate in such defense as reasonably  necessary
     to  enable  the  Indemnifying  Party  to  conduct  its  defense,  including
     providing the Indemnifying  Party with reasonable access to such records as
     may be relevant to its defense. The Indemnifying Party shall be entitled to
     settle any such Third Party Claim without the prior written  consent of the
     Indemnified  Party  provided  that  the  Indemnifying  Party  provides  the
     Indemnified  Party with reasonable  assurances  that the Indemnified  Party
     will be fully indemnified by the Indemnifying  Party in connection with any
     such Third Party Claim.  The Indemnified  Party shall be entitled to retain
     its own counsel at its own expense in connection with any Third Party Claim
     that the  Indemnifying  Party has  elected to defend.  If the  Indemnifying
     Party  elects  not to  conduct  the  defense of a Third  Party  Claim,  the
     Indemnified  Party  may  defend  and/or  settle  such  Third  Party  Claim;
     provided,  however, that the Indemnifying Party shall not be liable for any
     costs,  damages, or expenses arising out of any settlement effected without
     its  prior  written  consent,  which  consent  shall  not  be  unreasonably
     withheld.  The Indemnified  Party and the Indemnifying  Party agree to keep
     each other reasonably informed as to the progress of any matter that is the
     subject of a Third Party Claim . The  Indemnified  Party further  agrees to
     take any and all reasonable  steps,  including  (without  limitation) those
     steps  reasonably  requested  by the  Indemnifying  Party,  to mitigate any
     losses,  damages,  or expenses  with respect to any Third Party Claim under
     this Agreement and to cooperate with the defense  thereof.  In the event it
     is ultimately  determined  that the  Indemnified  Party was not entitled to
     indemnification  for a Third Party Claim,  and the  Indemnifying  Party has
     nonetheless  assumed  the  defense  of such  asserted  liability,  then the
     Indemnified  Party shall, at such time as it is ultimately  determined that
     the Indemnified  Party was not entitled to  indemnification,  reimburse the
     Indemnifying  Party  for  the  reasonable  costs  and  expenses,  including
     reasonable attorney's fees, incurred by the Indemnified Party in connection
     with such assumption.

     10.6 Limitation on Indemnification  Obligations.  Except as provided in the
     last clause of this sentence, an Indemnified Party shall not be entitled to
     recover any  indemnification  obligation pursuant to this Article 10 unless
     and until the total indemnification  obligations for which such Indemnified
     Party could seek recovery hereunder exceeds the sum of Twenty-Five Thousand
     Dollars ($25,000) in the aggregate (the "Threshold Amount"). In
<PAGE>

     the event such aggregate  indemnification  obligations exceed the Threshold
     Amount, such Indemnified Party shall be entitled to recover only the amount
     by which such aggregate  indemnification  obligations  exceed the Threshold
     Amount.  In no event may an  Indemnified  Party be  entitled  to recover an
     indemnification  obligation under this Article 10 in excess of Five Hundred
     Thousand  Dollars  ($500,000)  (the  "Indemnity  Amount").  Notwithstanding
     anything to the contrary  contained herein,  any  indemnification  payments
     made to Paradigm  pursuant  to this  Article 10 shall be net of related tax
     effects  and  net of  insurance  proceeds  received  or to be  received  by
     Paradigm on account of such indemnification claim.

     10.7 Indemnification as Exclusive Remedy.  Indemnification  pursuant to the
     provisions of this Article 11 shall be the sole and exclusive remedy of the
     parties  hereto  for  any  misrepresentation  or  breach  of any  warranty,
     covenant,  or  agreement  contained  in this  Agreement  or in any  closing
     document executed and delivered  pursuant to the provisions  hereof, or any
     other claim arising out of the transactions contemplated by this Agreement.

     10.8 No  Consequential  Damages.  With  respect to any claim for  indemnity
     under this  Agreement or any dispute among the Parties  arising out of this
     Agreement,  no party shall be entitled to recover  from any other party any
     consequential  damages,  except that such limitation shall not apply in the
     case of intentional misrepresentation or fraud on the part of a party.

ARTICLE 11

MISCELLANEOUS

     11.1 Termination,  Expenses.  This Agreement,  the Plan of Merger,  and the
     transactions  contemplated  by this Agreement and the Plan of Merger may be
     terminated at any time,  whether before or after action by the shareholders
     of Dicon as contemplated by Section 5.16:

          (a) by action of the Board of  Directors of Paradigm in the event of a
     failure of a condition set forth in Section 8. 1 ;

          (b) by  action of the  Board of  Directors  of Dicon in the event of a
     failure of a condition set forth in Section 8.2 ;

          (c) by action of the Board of  Directors  of  Paradigm or Dicon if the
     Closing  shall not  occur on or prior to May 31,  2000,  provided  that the
     terminating party is not then in default under the terms of this Agreement.

          (d) by mutual  agreement  of the Boards of  Directors  of Paradigm and
     Dicon; or
<PAGE>

          (e) by action of the Board of Directors of Dicon,  if Paradigm has not
     achieved a doctrine of equivalence for its Photon  technology on before May
     31, 2000.

     If termination shall occur as permitted herein, each party will pay its own
     expenses  incurred in  connection  with the proposed  merger at the time of
     termination.  If for any reason  Paradigm  takes action to  terminate  this
     Agreement  pursuant to Section  11.1(a)  hereof,  or Dicon takes  action to
     terminate this Agreement pursuant to Section 11.1(e) hereof,  then Paradigm
     shall  pay   liquidated   damages  in  the  amount  of  $100,000  to  Dicon
     representing  reasonable costs and expenses incurred by Dicon in connection
     with the proposed merger at the time of termination.

     11.2 Rights of Third  Parties.  This  Agreement has been  negotiated by and
     among the Parties, and no other person shall have any rights or obligations
     hereunder.  Neither  Dicon nor  Paradigm  may assign this  Agreement or any
     interest  hereunder,  and any such  attempted  assignment not in compliance
     herewith  shall be null and void,  except  that  Paradigm  may assign  this
     Agreement to a wholly- owned subsidiary,  provided that any such assignment
     shall  not  relieve  Paradigm  of  its  obligations  hereunder.  Except  as
     otherwise provided herein, this Agreement shall be binding and inure to the
     benefit of the parties hereto and their respective successors and assigns.

     11.3  Survival  of  Representations   and  Warranties,   Indemnities.   The
     representations,   warranties,  covenants,  and  agreements  of  Dicon  and
     Paradigm  contained  in  this  Agreement  and in any  instrument  delivered
     hereunder shall survive for the period of their obligation to indemnify, as
     set forth in Section 10.3.

     11.4 Prior  Agreements;  Modifications.  This Agreement the Plan of Merger,
     the Escrow Agreement and the Registration  Rights Agreement  constitute the
     entire  agreement  between the parties with  respect to the subject  matter
     hereof,  and shall  supersede  all prior  agreements,  documents,  or other
     instruments with respect to the matters covered hereby.  This Agreement may
     be amended by an instrument in writing signed by each of Dicon and Paradigm
     ;  provided,  however,  that no such  amendment  entered  into  without the
     written  consent  of the  shareholders  of Dicon may  decrease  the  Merger
     Consideration.

     11.5 Captions and Table of Contents.  The captions and table of contents in
     this Agreement are for convenience  only and shall not be considered a part
     of or affect the  construction or  interpretation  of any provision of this
     Agreement.

     11.6 Governing Law . The terms of this Agreement  shall be governed by, and
     interpreted and construed in accordance with the provisions of, the laws of
     the State of Delaware without regard to its conflicts of law principles.

<PAGE>

     11.7  Counterparts.  This  Agreement  may  be  executed  in any  number  of
     counterparts, each of which, when so executed, shall constitute an original
     copy hereof.

     11.8 Severability.  If any clause,  provision, or section of this Agreement
     is ruled  illegal,  invalid,  or  unenforceable  by any court of  competent
     jurisdiction, the invalidity or unenforceability of such clause, provision,
     or section shall not affect any of the remaining provisions hereof.

     11.9 Notices.  Any notice,  request,  instruction,  or other document to be
     given  hereunder  shall be in writing and shall be transmitted by certified
     or registered mail,  postage prepaid,  by reputable express courier,  or by
     facsimile  transmission.  The addresses or facsimile  telephone  numbers to
     which such communications shall be sent are as follows:

If to Dicon:

10373 Roselle Street
San Diego, California 92121
Attention: Mark R. Miehle, President and
Chief Executive Officer
Facsimile Number:

With a copy to:

Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, California 92101
Attention: Dennis J. Doucette, Esq.
Facsimile Number: (619) 232-8311

If to Paradigm:

2355 South 1070 West
Salt Lake City, Utah 84119
Attention: Thomas F. Motter, President and
 Chief Executive Officer
Facsimile Number: (801) 977-8973

With a copy to:

Mackey, Price & Williams
170 South Main Street, Suite 900
Salt Lake City, Utah 84101-1655
Attention: Randall A. Mackey, Esq.
Facsimile Number: (801) 575-5006
<PAGE>

If to the Disbursing Agent:

Mackey, Price & Williams
170 South Main Street, Suite 900
Salt Lake City, Utah 84101-1655
Attention: Randall A. Mackey, Esq.
Facsimile Number: (801) 575-5006

or to such other  address or  facsimile  telephone  number as any party may from
time to time designate to the others in writing.

     11.10  Waiver.  The  accuracy  of  any  representation  or  warranty,   the
     performance  of  any  covenant  or  agreement  or  the  fulfillment  of any
     condition  of this  Agreement  by  Dicon,  Subsidiary  or  Paradigm  may be
     expressly waived only in writing by the other parties. Any waiver hereunder
     shall be effective  only in the  specific  instance and for the purpose for
     which  given.  No  failure  or delay on the part of  Dicon,  Subsidiary  or
     Paradigm in exercising any right,  power, or privilege under this Agreement
     shall operate as a waiver thereof, nor shall any single or partial exercise
     of any right,  power, or privilege  hereunder preclude any other or further
     exercise  thereof or the exercise of any other right,  power, or privilege.
     The  rights  and  remedies  expressly   specified  in  this  Agreement  are
     cumulative  and are not  exclusive  of any rights or remedies  which either
     party would

     11.11  Definition o For the purposes of this  Agreement,  the  knowledge of
     Dicon  shall  be  deemed  to be  limited  to the  actual  knowledge  of the
     individuals identified on Schedule 11.11 delivered to Paradigm.

     11.12  Definition  of  Paradigm's  Knowledge.  For  the  purposes  of  this
     Agreement,  the knowledge of Paradigm  shall be deemed to be limited to the
     actual knowledge of the individuals  identified on Schedule 11.12 delivered
     to Paradigm.

     11.13 Attorney's Fees. In the event any party hereto institutes  litigation
     to  enforce  its  rights  or  remedies  under  this  Agreement,  the  party
     prevailing  in such  litigation  shall be entitled to receive an award from
     the non-prevailing  party of the prevailing  party's reasonable  attorney's
     fees and costs incurred in connection with such  litigation.  The foregoing
     shall include  reasonable  attorney's  fees and costs incurred at trial, on
     any appeal and in any proceeding in bankruptcy.

     11.14 Consent to Jurisdiction.  Each of the Parties irrevocably consents to
     the non- exclusive  jurisdiction of the courts of the State of Utah located
     in the County of Salt Lake, and of the United States District Court for the
     Central  District of Utah for purposes of any suit,  action,  or proceeding
     relating to this  Agreement or the Plan of Merger (a "Related  Proceeding")
     and irrevocably waives, to the fullest extent it may effectively do so, (i)
     any objection it may have to the laying of venue of any Related  Proceeding
     in any such court,
<PAGE>

     and (ii) the defense of an  inconvenient  forum to the  maintenance  of any
     Related Proceeding in any such court.

     11.15 Cross References.  Unless  additional  information is provided or the
     content clearly requires  otherwise,  references to a specified  Article or
     Section shall be construed to mean a reference to the specified  Article or
     Section of this Agreement.

     IN WITNESS  WHEREOF,  each of the parties  hereto,  intending to be legally
bound  hereby,  has duly  executed  this  Agreement as of the date first written
above.

VISMED, INC., d/b/a DICON

By:

Mark R. Miehle, President and
and Chief Executive Officer

PARADIGM MEDICAL INDUSTRIES, INC.

By:________________________________

Thomas F. Motter, President and
Chief Executive Officer

PARADIGM SUBSIDIARY, INC.

By:

Thomas F. Motter, President and
Chief Executive OfficerESCROW AGREEMENT
                           ----------------

       This Escrow Agreement (this "Escrow Agreement") dated as of May 16, 2000,
is entered  into by and among  Paradigm  Medical  Industries,  Inc.,  a Delaware
corporation  ("Paradigm"  or the  "Buyer"),  Paradigm  Subsidiary,  Inc., a Utah
corporation  and wholly owned  subsidiary  of Paradigm  ("Subsidiary"),  Vismed,
Inc.,  d/b/a  Dicon,  a  California  corporation  ("Dicon"),  and Mackey Price &
Williams,  a Utah  professional  corporation (the "Disbursing  Agent")(Paradigm,
Subsidiary, Dicon and Disbursing Agent, collectively, the "Parties").

                        W I T N E S S E T H :

       WHEREAS,  prior to the  execution  of this  Escrow  Agreement,  Paradigm,
Subsidiary  and Dicon have entered into an Agreement and Plan of  Reorganization
of even date herewith (the "Plan of Reorganization")  and a related Agreement of
Merger (the "Merger Agreement"), both of even date herewith; and

       WHEREAS,  the boards of directors of Paradigm,  Subsidiary and Dicon have
approved the acquisition of Dicon by Paradigm; and

       WHEREAS,  the boards of directors of Paradigm,  Subsidiary and Dicon have
approved the merger of Subsidiary  into Dicon (the  "Merger") upon the terms and
subject to the conditions set forth in the Plan of Reorganization and the Merger
Agreement  pursuant  to which  Dicon will become a wholly  owned  subsidiary  of
Paradigm; and

       WHEREAS, the Plan of Reorganization and the Merger Agreement  contemplate
the  execution  of this Escrow  Agreement  for the  purposes  stated  herein and
therein.

       NOW,  THEREFORE,  for good and  valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

                              ARTICLE 1

                             DEFINITIONS

1.1 Certain Terms Defined. The terms defined in the Plan of Reorganization shall
for all purposes of this Escrow  Agreement  have the  meanings  specified in the
Plan of Reorganization, unless the context expressly or by necessary implication
otherwise requires.

<PAGE>

                             ARTICLE 2

              ESTABLISHMENT AND DISTRIBUTION OF ESCROW

2.1 Escrow  Account.  Pursuant to the  provisions  of Section 2.2 of the Plan of
Reorganization

   (a) Upon the  execution and delivery of the Plan of  Reorganization  and this
Agreement,  Paradigm shall pay $100,000 (the "Deposit Amount") to the Disbursing
Agent, to be held as part of the Escrow Account.

   (b) Paradigm and  Subsidiary  shall deliver the Merger  Consideration  to the
Disbursing  Agent no later  than  10:00  a.m.  (Mountain  Standard  Time) on the
Closing Date.

2.2  Distribution of Escrow Account.  The Escrow Account shall be distributed as
follows:

   (a) The  Deposit  Amount  shall  be  paid  to  Dicon  as  liquidated  damages
representing  reasonable  costs and  expenses  incurred by Dicon if (i) Paradigm
takes action to terminate the Plan of Reorganization pursuant to Section 11.1(a)
of the Plan of Reorganization,  or (ii) Dicon takes action to terminate the Plan
of   Reorganization   pursuant  to  Section  11.1(b)  or  (e)  of  the  Plan  of
Reorganization.   If  there  is  no  such  action  to  Terminate   the  Plan  of
Reorganization, the Deposit Amount shall be returned to Paradigm.

   (b) Promptly after the Effective Time of the Merger,  and in accordance  with
Sections 2.3 and 2.5 of the Plan of  Reorganization,  the Disbursing Agent shall
deliver to the holders of Dicon Common at the Effective Time of the Merger,  the
Merger  Consideration  in the proportion  set forth in Section  2.2(a)(1) of the
Plan of Reorganization.

                            ARTICLE   3

                           MISCELLANEOUS

3.1 Termination.  This Escrow Agreement shall terminate in the event of and upon
termination of the Plan of Reorganization.

3.2 Prior Agreements; Modifications. This Escrow Agreement, the Merger Agreement
and the Plan of  Reorganization  constitute  the entire  agreement  between  the
parties with respect to the subject matter hereof, and shall supersede all prior
agreements,  documents, or other instruments with respect to the matters covered
hereby.  This Escrow Agreement may be amended by an instrument in writing signed
by each of the Parties.

                                      2
<PAGE>

3.3 Captions  and Table of Contents.  The captions and table of contents in this
Escrow  Agreement are for convenience only and shall not be considered a part of
or affect the  construction  or  interpretation  of any provision of this Escrow
Agreement.

3.4 Governing Law. The terms of this Escrow  Agreement shall be governed by, and
interpreted  and construed in accordance with the provisions of, the laws of the
State of Delaware without regard to its conflicts of law principles.

3.5  Counterparts.  This  Escrow  Agreement  may be  executed  in any  number of
counterparts, each of which, when so executed, shall constitute an original copy
hereof.

3.6 Severability.  If any clause, provision, or section of this Escrow Agreement
is  ruled  illegal,   invalid,  or  unenforceable  by  any  court  of  competent
jurisdiction,  the invalidity or unenforceability of such clause,  provision, or
section shall not affect any of the remaining provisions hereof.

3.7 Notices.  Any notice,  request,  instruction,  or other document to be given
hereunder  shall  be in  writing  and  shall  be  transmitted  by  certified  or
registered mail, postage prepaid,  by reputable express courier, or by facsimile
transmission.  The  addresses  or  facsimile  telephone  numbers  to which  such
communications shall be sent are as follows:

If to Dicon:

   10373 Roselle Street
   San Diego, California 92121
   Attention: Mark R. Miehle, President and
   Chief Executive Officer
   Facsimile Number:

   With a copy to:

   Luce, Forward, Hamilton & Scripps LLP
   600 West Broadway, Suite 2600
   San Diego, California 92101
   Attention: Dennis J. Doucette, Esq.
   Facsimile Number: (619) 232-8311

                                      3
<PAGE>

If to Paradigm:

   2355 South 1070 West
   Salt Lake City, Utah  84119
   Attention: Thomas F. Motter, President and
   Chief Executive Officer
   Facsimile Number: (801) 977-8973

   With a copy to:

   Mackey, Price & Williams
   170 South Main Street, Suite 900
   Salt Lake City, Utah  84101-1655
   Attention: Randall A. Mackey, Esq.
   Facsimile Number: (801) 575-5006

If to the Disbursing Agent:

   Mackey, Price & Williams
   170 South Main Street, Suite 900
   Salt Lake City, Utah  84101-1655
   Attention: Randall A. Mackey, Esq.
   Facsimile Number: (801) 575-5006

or to such other  address or  facsimile  telephone  number as any party may from
time to time designate to the others in writing.

3.8 Waiver.  The  performance of any covenant or agreement or the fulfillment of
any  condition of this Escrow  Agreement by the Parties may be expressly  waived
only in writing by the other parties.  Any waiver  hereunder  shall be effective
only in the specific instance and for the purpose for which given. No failure or
delay on the part of the Parties in exercising  any right,  power,  or privilege
under this Escrow  Agreement  shall operate as a waiver  thereof,  nor shall any
single or partial exercise of any right,  power, or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power,
or privilege.

                                      4
<PAGE>

   IN WITNESS WHEREOF, each of the parties hereto, intending to be legally bound
hereby,  has duly  executed  this Escrow  Agreement as of the date first written
above.

                                VISMED, INC., d/b/a DICON

                                By: /s/ Mark R. Miehle
                                    ---------------------
                                Mark R. Miehle, President and
                                and Chief Executive Officer
                                PARADIGM MEDICAL INDUSTRIES, INC.

                                By: /s/ Thomas F. Motter
                                    ---------------------
                                Thomas F. Motter, President and
                                Chief Executive Officer
                                PARADIGM SUBSIDIARY, INC.

                                By: /s/ Thomas F. Motter
                                    ---------------------
                                Thomas F. Motter, President and
                                Chief Executive Officer
                                MACKEY PRICE & WILLIAMS

                                By: /s/ Randall A. Mackey
                                    ----------------------
                                Randall A. Mackey, President

                                       5

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