Document:

Execution Copy

                     OPTION AND AGREEMENT AND PLAN OF MERGER

                                  by and among

                       NATIONAL SEMICONDUCTOR CORPORATION,

                          NINTAI ACQUISITION SUB, INC.,

                             DIGITALQUAKE, INC., AND

                       PAUL A. LESSARD AND MICHAEL G. FUNG

                          Dated as of February 8, 2002

<PAGE>

 NSD_DOCS\8088.9[W2000]
                     OPTION AND AGREEMENT AND PLAN OF MERGER

     This Option and Agreement and Plan of Merger (this  "Agreement") is entered
into as of February 8, 2002 by and among (i) National Semiconductor Corporation,
a Delaware  corporation  ("National"),  (ii) Nintai  Acquisition  Sub,  Inc.,  a
California corporation and a wholly-owned subsidiary of National ("Merger Sub"),
(iii) DigitalQuake,  Inc., a California corporation  ("DigitalQuake"),  and (iv)
Paul A. Lessard and Michael G. Fung (the "Founders").

                                    RECITALS

A.   National owns 100% of the issued and outstanding shares of capital stock of
     Merger Sub.

B.   Concurrently  with the execution and delivery of this  Agreement,  National
     and  DigitalQuake  have  entered into a Series B Preferred  Stock  Purchase
     Agreement (the "Series B Purchase Agreement") and a Technology  Development
     and Licensing  Agreement.  In consideration of National's entering into the
     Series B Purchase  Agreement  and the  Technology  Development  and License
     Agreement,  DigitalQuake  has  agreed to enter into this  Agreement  and to
     grant the Merger Option (as defined) contemplated hereby.

C.   Concurrently  with the execution of this  Agreement and as an inducement to
     National  to enter into this  Agreement,  the  holders  of all  outstanding
     shares of  DigitalQuake  capital stock (other than  National) have approved
     this  Agreement  and the Merger by written  consent and have entered into a
     Shareholder  Support  Agreement  with  National (the  "Shareholder  Support
     Agreement"),  pursuant to which such shareholders have agreed,  among other
     things,  to vote their shares to confirm their  approval of this  Agreement
     and the Merger (as  defined) if National  determines  that such  confirming
     vote is advisable at any time in the future.

D.   In the Merger, DigitalQuake will be the Surviving Corporation (as defined),
     the  shares of  DigitalQuake  will be  converted  into the right to receive
     consideration in accordance with the terms hereof, and the shares of Merger
     Sub will be converted into shares of Surviving Corporation.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration  of the mutual  covenants  and promises
contained herein, the parties hereto agree as follows:

                                   ARTICLE I.
                                   DEFINITIONS

1.1  Defined  Terms.  As used herein,  the terms below shall have the  following
     meanings:

     "Affiliate" of a Person means any other Person which directly or indirectly
controls,  is controlled by, or is under common control with,  such Person.  The
term "control"  (including,  with correlative meaning, the terms "controlled by"
and "under common control with"), as used with respect to any Person,  means the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction of the  management  and policies of such Person,  whether  through the
ownership of voting securities, by contract or otherwise.
<PAGE>

     "Agreement of Merger"  means the Agreement of Merger by and between  Merger
Sub and  DigitalQuake to be filed with the California  Secretary of State in the
form attached hereto as Exhibit A.

     "Ancillary  Agreements"  means  the  Employment   Agreements,   Non-Compete
Agreements and other agreements,  certificates and documents  required hereunder
to consummate the Closing or to be delivered at the Closing.

     "Assets" means all of  DigitalQuake's  right,  title and interest in and to
the properties,  assets and rights of any kind,  whether tangible or intangible,
real or personal.

     "Balance  Sheet" means the balance sheet of  DigitalQuake as of the Balance
Sheet Date.

     "Balance Sheet Date" means December 31, 2001.

     "Books and Records"  means (a) all product,  business and marketing  plans,
sales and  promotional  literature  and  artwork  relating  to the Assets or the
Business,  (b) all  books,  records,  lists,  ledgers,  financial  data,  files,
reports,  product and design manuals,  plans,  drawings,  technical  manuals and
operating  records  of  every  kind  relating  to the  Assets  or  the  Business
(including  records  and  lists  of  customers,   distributors,   suppliers  and
personnel)  and (c) all telephone and fax numbers used in the Business,  in each
case whether  maintained as hard copy or stored in electronic  media and whether
owned by DigitalQuake or its Affiliates.

     "Business" means the business of DigitalQuake.

     "California  GCL"  means  the  General  Corporation  Law  of the  State  of
California, as in effect from time to time.

     "Closing" means the consummation of the  transactions  contemplated by this
Agreement on the Closing Date.

     "Closing  Date"  means the fifth  business  day  following  delivery of the
Merger Option Notice  contemplated  by Section 2.2 below or, if later,  the date
specified  by National  in the Merger  Option  Notice,  subject to the terms and
conditions of this Agreement.

     "Closing  Place" means such location  agreed upon by the parties or, in the
absence  of  such  an  agreement,  the  offices  of  Latham  &  Watkins  at  135
Commonwealth Drive, Menlo Park, California 94025.

     "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>

     "Confidentiality  Agreement"  means that  certain  Confidential  Disclosure
Agreement dated November 9, 2001 between DigitalQuake and National.

     "Consents"  means any and all  licenses,  permits,  franchises,  approvals,
authorizations,  consents or waivers from third parties (including  governmental
authorities  and  parties  to the  Contracts)  that  are  (i)  required  for the
consummation  of  the  transactions  contemplated  by  this  Agreement  or  (ii)
necessary or desirable in order that DigitalQuake can conduct the Business after
the  Effective  Time in all  material  respects in the same manner as before the
Effective Time.

     "Contracts"  means all  agreements,  contracts,  leases,  purchase  orders,
undertakings,  covenants not to compete, employment agreements,  confidentiality
agreements,   licenses,  instruments,   obligations  and  commitments  to  which
DigitalQuake  is a party or by which  DigitalQuake  or any  Assets  are bound or
affected, whether written or oral.

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

     "Default"  means (a) a  breach of or default  under any  Contract,  (b) the
occurrence  of an event that with the passage of time or the giving of notice or
both would  constitute  a breach of or default  under any  Contract,  or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both  would  give  rise to a right of  termination,  renegotiation  or
acceleration under any Contract.

     "DigitalQuake Common Stock" means the common stock, no par value per share,
of DigitalQuake.

     "DigitalQuake  Options" means options to purchase DigitalQuake Common Stock
granted by  DigitalQuake  prior to the Closing Date pursuant to the Stock Option
Plan.

     "DigitalQuake  Preferred Stock" means the preferred stock, no par value per
share,  of  DigitalQuake,  designated  as Series A Preferred  Stock and Series B
Preferred Stock.

     "DigitalQuake  Subsidiaries" means the Subsidiaries of DigitalQuake,  which
shall include the  DigitalQuake  Subsidiaries  described on Schedule 4.6 and any
corporation or other  organization  acquired as a Subsidiary of  DigitalQuake in
the future and held as a Subsidiary by DigitalQuake at the Effective Time.

     "Effective  Time" means the time on the Closing  Date when the Merger shall
become  effective,  which shall be 5:00 p.m.,  California  time, on the date the
Agreement of Merger is filed with the  California  Secretary  of State,  or such
other date and time as the parties may agree in writing, or, if later, such time
as the  California  Secretary of State  certifies the filing of the Agreement of
Merger.
<PAGE>

     "Employment  Agreements" means the employment agreements to be entered into
on or prior to the Closing Date by National and  employees of  DigitalQuake,  as
specified on Schedule 1.1(b) hereto.

     "Encumbrance"  means any claim, lien,  pledge,  option,  charge,  easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction,  conditional  sales agreement,  encumbrance or other similar
right of any third parties, whether voluntarily incurred or arising by operation
of law, and includes any  agreement to give any of the  foregoing in the future,
and any  contingent  sale or other  title  retention  agreement  or lease in the
nature thereof.

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

     "Excess  Transaction  Costs"  means  (i) any  fees  and  expenses  of legal
counsel,  accountants  and any other advisors,  representatives,  consultants or
finders  incurred by  DigitalQuake  in excess of $100,000 in connection with the
negotiation,  preparation,  execution and  performance  of this  Agreement,  the
Series B Purchase Agreement,  the Technology Development and Licensing Agreement
and the  transactions  contemplated  hereby and thereby,  excluding  any fees or
expenses  payable to Toan  Tran,  and (ii) all  amounts  greater  than  $300,000
payable to Toan Tran in connection with the negotiation,  preparation, execution
and  performance  of this  Agreement,  the  Series  B  Purchase  Agreement,  the
Technology Development and Licensing Agreement and the transactions contemplated
hereby and thereby.

     "Financial  Statements"  means the  unaudited  balance  sheets and  related
statements of income,  cash flow and  shareholders'  equity for DigitalQuake for
the years ended December 31, 2001 and 2000, together with any notes thereon, all
of which are attached as Schedule 1.1(c).

     "Fixtures and Equipment" means all of the furniture, fixtures, furnishings,
office equipment,  development tools and equipment, lab equipment,  spare parts,
tooling,  molds,  mask sets,  database  tapes,  test tapes,  test  fixtures  and
equipment,  patterns,  dies,  computers  and software  (including  any source or
object codes  therefor or  documentation  relating  thereto and  computer  aided
design equipment and software),  and other tangible  personal  property owned by
DigitalQuake,  wherever located and including any such Fixtures and Equipment in
the  possession of any of its respective  suppliers or other vendors,  except to
the extent such items would constitute  Proprietary Rights,  which are addressed
separately herein.

     "GAAP" means  generally  accepted  accounting  principles  set forth in the
opinions and pronouncements of the Accounting  Principles Board and the American
Institute of Certified Public  Accountants and statements and  pronouncements of
the Financial  Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting  profession),  or in such
other statements by such entity as may be in general use by significant segments
of the U.S.  accounting  profession,  which  are  applicable  to the  facts  and
circumstances on the date of determination.
<PAGE>

     "Liabilities"  mean  any  direct  or  indirect   liability,   indebtedness,
obligation,  commitment,  expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued,  absolute,  contingent,  matured,
unmatured, liquidated, unliquidated, known or unknown.

     "Material  Adverse  Effect"  means in respect of any  entity,  any  change,
circumstance  or effect that,  individually  or in the aggregate  with all other
changes,  circumstances  and  effects,  is or would be  reasonably  likely to be
materially adverse to the assets,  properties  (whether tangible or intangible),
condition (financial or otherwise), results of operations, business or prospects
of such entity and its subsidiaries taken as a whole.

     "Merger"  means the merger of Merger Sub into  DigitalQuake  in  accordance
with this Agreement and the Agreement of Merger.

     "National Options" means options to acquire National Common Stock.

     "Non-Compete  Agreement" means the Non-Compete Agreement to be entered into
between National and each of the individuals listed on Schedule 1.1(d) hereto on
or prior to the Closing Date substantially in the form of Exhibit B hereof.

     "NYSE" means the New York Stock Exchange.

     "Optionee" means the holder of a DigitalQuake Option on the Closing Date.

     "Permits"   mean   all   licenses,    permits,    franchises,    approvals,
authorizations,  consents  or  orders  of, or  filings  with,  any  governmental
authority,  whether foreign,  federal, state or local, necessary for the conduct
or operation of the Business or ownership of the Assets.

     "Person"  means any  person or  entity,  whether  an  individual,  trustee,
corporation,   limited   liability   company,   general   partnership,   limited
partnership,  trust, unincorporated  organization,  business association,  firm,
joint venture, governmental agency or authority.

     "Principal  Employees" means Paul A. Lessard,  Michael G. Fung, Anil Kumar,
Duane Oto and Jackson Tung.

     "Proprietary  Rights"  means  all (a)  U.S.  and  foreign  patents,  patent
applications,  patent  disclosures  and  improvements  thereto,  including petty
patents and  utility  models and  applications  therefor,  (b) U.S.  and foreign
trademarks,  service marks, trade dress,  logos, trade names and corporate names
and the goodwill  associated  therewith and  registrations  and applications for
registration  thereof,  (c) U.S. and foreign  copyrights and  registrations  and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration  thereof,  (e) trade secrets and
confidential  business  information  (including ideas,  formulas,  compositions,
inventions  (whether  patentable or  unpatentable  and whether or not reduced to
practice),  know-how, research and development information,  software, drawings,
specifications,  designs, plans, proposals, technical data, copyrightable works,
financial,  marketing and business data, pricing and cost information,  business
and marketing plans and customer and supplier lists and information),  (f) other
proprietary  rights,  (g) copies and tangible  embodiments  thereof (in whatever
form or medium) and (h) licenses  granting any rights with respect to any of the
foregoing.
<PAGE>

     "Regulations" means any laws,  statutes,  ordinances,  regulations,  rules,
notice requirements,  court decisions, agency guidelines,  principles of law and
orders  of any  foreign,  federal,  state  or  local  government  and any  other
governmental department or agency, including Environmental Laws,  import/export,
energy, motor vehicle safety, public utility, zoning, building and health codes,
occupational  safety  and  health  and  laws  respecting  employment  practices,
employee documentation, terms and conditions of employment and wages and hours.

     "Related  Party"  means any  Principal  Employee,  any of the  officers and
directors of  DigitalQuake,  any  Affiliate of  DigitalQuake,  any holder of ten
percent  (10%) or more of the  outstanding  shares  of any  class or  series  of
capital stock of DigitalQuake (other than National),  any Affiliate or immediate
family member of a Principal  Employee or the respective  officers and directors
of any such Affiliate, or any Person in which any of DigitalQuake, any Principal
Employee or any Affiliate of any such Person or any immediate family member of a
Principal Employee has any direct or material indirect interest.

     "Representative" means any officer, director,  principal,  attorney, agent,
employee or other representative of any Person.

     "Restated  Articles"  means the Second  Amended  and  Restated  Articles of
Incorporation  of DigitalQuake as filed with the Secretary of State of the State
of California on February 6, 2002.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Shareholder  Representative"  shall  mean Paul A.  Lessard,  or any person
appointed  as a successor  Shareholder  Representative  pursuant to Section 13.1
hereof.

     "Shareholders" means the holders of shares of capital stock of DigitalQuake
on the Closing  Date and,  for  purposes of Article XII and Section  13.1,  also
means the holders of DigitalQuake Options on the Closing Date.

     "Stock Option Plan" means DigitalQuake's 2000 Stock Option Plan, as amended
to date.

     "Subsidiaries"  shall mean all those corporations,  associations,  or other
business  entities of which the entity in  question  either (i) owns or controls
50% or more of the outstanding  equity  securities either directly or through an
unbroken  chain of entities  as to each of which 50% or more of the  outstanding
equity securities is owned directly or indirectly by its parent (provided, there
shall not be included any such entity the equity  securities  of which are owned
or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves
as a general partner,  (iii) in the case of a limited liability company,  serves
as a managing  member,  or (iv) otherwise has the ability to elect a majority of
the directors, trustees or managing members thereof.
<PAGE>

     "Tax Return" means any report,  return,  document,  declaration,  claim for
refund or other  information  or filing  made with or required to be supplied to
any taxing  authority  or  jurisdiction  (foreign or  domestic)  with respect to
Taxes,  including  information  returns,  and any  documents  with respect to or
accompanying  requests  for the  extension  of time in  which  to file  any such
report, return, document, declaration or other information.

     "Taxes" mean any and all taxes, charges, fees, levies or other assessments,
including income,  gross receipts,  excise,  real or personal  property,  sales,
withholding,  social  security,  retirement,   unemployment,   occupation,  use,
service,  license,  net worth,  payroll,  franchise and transfer and  recording,
imposed  by the  Internal  Revenue  Service  or any  taxing  authority  (whether
domestic or foreign,  including  any federal,  state,  county,  local or foreign
government  or any  subdivision  or  taxing  agency  thereof  (including  a U.S.
possession)), whether computed on a separate, consolidated, unitary, combined or
any other  basis;  and such term shall  include  any  interest  whether  paid or
received,  fines,  penalties or additional  amounts  attributable to, or imposed
upon,  or with  respect  to,  any such  taxes,  charges,  fees,  levies or other
assessments, whether disputed or not.

     "To the knowledge" of a party (or similar  phrases) means matters (i) which
are actually known by such party or (ii) which, after reasonable  investigation,
would be known to a reasonable Person in similar circumstances.

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

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

     401(k) Plan                                          9.10
     Accelerated Optionees                                3.4(a)
     Actions                                              4.16
     Adjusted Consideration                               3.2(c)
     Adjusted Per Share Price                             3.2(c)
     Agreement                                            Preamble
     Analog Bits Agreement                                4.21(g)
     Benefit Arrangement                                  4.18(a)(i)
     Covenant End Date                                    7.1
     Damage Threshold                                     12.2(e)
     Damages                                              12.2(a)
     DigitalQuake                                         Preamble
     DigitalQuake's Closing Certificate                   9.1
     DigitalQuake's Secretary's Certificate               9.7
     Disclosure Schedule                                  Article IV
     Disqualified Individual                              3.9
     Dissenting Shares                                    3.8
     Employee Plans                                       4.18(a)(ii)
     Environmental Conditions                             4.27(a)(i)
     Environmental Laws                                   4.27(a)(ii)
<PAGE>

     ERISA Affiliate                                      4.18(a)(iii)
     Founders                                             Preamble
     Hazardous Substance                                  4.27(a)(iii)
     Indemnity Escrow Account                             3.3
     Instrument                                           13.2
     Majority                                             13.1
     Merger Option                                        2.1
     Merger Option Notice                                 2.2
     Merger Option Period                                 2.2
     Merger Sub                                           Preamble
     Multiemployer Plan                                   4.18(a)(iv)
     National                                             Preamble
     National's Closing Certificate                       8.1
     National Warrant                                     4.2(c)
     PBGC                                                 4.18(a)(v)
     Pension Plan                                         4.18(a)(vi)
     Proposed Acquisition Transaction                     7.4(a)
     Release                                              4.27(a)(v)
     Semi-Annual Increment                                3.4(b)
     Series B Purchase Agreement                          Recitals
     Shareholder Support Agreement                        Recitals
     Surviving Corporation                                2.6(a)
     Welfare Plan                                         4.18(a)(vii)

     1.3 Interpretation Provisions.

     (a)  The words  "hereof,"  "herein"  and  "hereunder"  and words of similar
          import when used in this Agreement  refer to this Agreement as a whole
          and not to any particular  provision of this  Agreement,  and article,
          section,  schedule and exhibit references are to this Agreement unless
          otherwise  specified.  The  meaning of defined  terms shall be equally
          applicable to the singular and plural forms of the defined terms.  The
          term  "or"  is  disjunctive  but,   depending  on  the  context,   not
          necessarily  exclusive.  The terms  "include" and  "including" are not
          limiting and mean "including without limitation."

     (b)  References  to  agreements  and  other  documents  shall be  deemed to
          include all subsequent amendments and other modifications thereto.

     (c)  References  to  statutes  shall  include all  regulations  promulgated
          thereunder  and  references  to  statutes  or  regulations   shall  be
          construed  as  including  all  statutory  and  regulatory   provisions
          consolidating, amending or replacing the statute or regulation.

     (d)  The captions and headings of this  Agreement  are for  convenience  of
          reference  only  and  shall  not  affect  the   construction  of  this
          Agreement.
<PAGE>

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

     (f)  The  schedules  and  exhibits to this  Agreement  are a material  part
          hereof and shall be treated as if fully  incorporated into the body of
          this Agreement.

                                  ARTICLE II.
                            THE OPTION AND THE MERGER

     2.1 Grant of Option.  In  consideration  of  National's  entering  into the
Series  B  Purchase  Agreement  and  the  Technology   Development  and  License
Agreement,  DigitalQuake hereby grants to National the exclusive and irrevocable
right (the  "Merger  Option") to require  DigitalQuake  to merge with Merger Sub
pursuant to the terms set forth in this Agreement,  with DigitalQuake continuing
as the surviving  corporation.  But for  DigitalQuake's  agreement to enter into
this  Agreement,  National  would not have  entered  into the  Series B Purchase
Agreement and the Technology Development and License Agreement.

     2.2 Exercise of the Merger Option.  National may exercise the Merger Option
at any time  during  the period  commencing  on the date of this  Agreement  and
ending at 5:00 p.m.  (PST) on  June 30,  2002 (the  "Merger  Option  Period") by
delivering a written  notice to  DigitalQuake  in  accordance  with Section 14.3
hereof  (the  "Merger  Option  Notice");  provided,  however,  that if  National
exercises the Series B Option (as defined in the Series B Purchase Agreement) on
or  prior  to  June 30,  2002,  the  Merger  Option  Period  shall  be  extended
automatically  by  three  months  such  that it will end at 5:00  p.m.  (PST) on
September 30,  2002.  The Merger  Option  Notice shall  specify the  anticipated
Closing  Date.  Upon receipt of the Merger  Option  Notice,  DigitalQuake  shall
prepare and deliver to National a schedule  showing  DigitalQuake's  outstanding
shares  of  DigitalQuake  Common  Stock  and  DigitalQuake  Preferred  Stock and
outstanding DigitalQuake Options, warrants and other rights as of a date that is
three days prior to the Closing Date.

     2.3 No Obligation to Exercise Option. National may elect to exercise or not
exercise the Merger  Option in its sole  discretion.  Nothing  contained in this
Agreement,  the Series B Purchase  Agreement or the Technology  Development  and
Licensing  Agreement and no action taken by National nor any failure by National
to take any action pursuant hereto or thereto shall create any obligation on the
part of National to exercise  the Merger  Option or create any  liability on the
part of National to DigitalQuake or the Shareholders for failure to exercise the
Merger Option.

     2.4  Actions  Following  Exercise  of  the  Option.  Immediately  following
National's  exercise of the Merger Option, each of the parties to this Agreement
shall take all actions  necessary or desirable to  consummate  the Merger within
five (5) business  days  following  delivery of the Merger  Option Notice or, if
later, by the date specified by National in the Merger Option Notice.
<PAGE>

     2.5 Effective Time. If following  National's  exercise of the Merger Option
all of the conditions to the Merger set forth in Articles VIII and IX shall have
been  satisfied or waived in accordance  herewith and this  Agreement  shall not
have been  terminated  pursuant to Section 14.1,  the parties hereto shall cause
the  Merger  to be  consummated  by filing  the  Agreement  of  Merger  with the
Secretary of State of the State of California in accordance  with the California
GCL.  The parties  hereto will  execute the  Agreement of Merger and deliver the
executed  copy to Latham & Watkins to hold in escrow  pending  receipt of notice
from  National that the Agreement of Merger should be dated and submitted to the
Secretary of State of the State of California for filing.

     2.6 Merger. At the Effective Time,  subject to the terms and conditions set
forth in this Agreement and in accordance with the California GCL:

     (a)  the  Merger  shall  become  effective,  Merger  Sub shall  merge  into
          DigitalQuake,  the separate  existence of Merger Sub shall cease,  and
          DigitalQuake shall continue as the surviving  corporation  ("Surviving
          Corporation");

     (b)  the Articles of Incorporation,  as amended, of Merger Sub as in effect
          immediately  prior to the  Effective  Time  shall be the  Articles  of
          Incorporation  of  Surviving   Corporation,   until  duly  amended  in
          accordance with applicable law;

     (c)  the  Bylaws  of  Merger  Sub as in  effect  immediately  prior  to the
          Effective  Time shall be the Bylaws of  Surviving  Corporation,  until
          altered, amended, or repealed; and

     (d)  each share of  DigitalQuake  Common Stock and  DigitalQuake  Preferred
          Stock  outstanding  immediately  prior to the Effective  Time shall be
          canceled and converted as provided in Article III hereof.

     2.7  Directors  and  Officers.  At the  Effective  Time,  the directors and
officers of Merger Sub immediately  prior to the Effective Time shall become the
directors  and  officers,  respectively,  of  Surviving  Corporation,  each such
director  and  officer  to hold  office  from the  Effective  Time  until  their
respective  successors are duly elected or appointed and qualified in the manner
provided in the Articles of  Incorporation  and Bylaws of Surviving  Corporation
and applicable  law.  DigitalQuake  shall use  reasonable  efforts to cause each
director of DigitalQuake to tender his resignation  prior to the Effective Time,
each such resignation to be effective as of the Effective Time.

     2.8 Further Assurances.  DigitalQuake agrees that if, at any time after the
Effective  Time,  Surviving  Corporation  shall  consider or be advised that any
further  deeds,  assignments,  or assurances are necessary or desirable to vest,
perfect, or confirm in Surviving  Corporation title to any property or rights of
DigitalQuake,  Surviving  Corporation  and its proper officers and directors may
execute and deliver all such proper deeds,  assignments,  and  assurances and do
all other things  necessary or  desirable to vest,  perfect or confirm  title to
such property or rights in Surviving  Corporation and otherwise to carry out the
purpose of this Agreement, in the name of DigitalQuake or otherwise.
<PAGE>

                                  ARTICLE III.
                              CONVERSION OF SHARES

     3.1 Conversion of Merger Sub Shares. At the Effective Time, each issued and
outstanding  share of capital stock of Merger Sub shall, by virtue of the Merger
and without any action on the part of the holder thereof,  be converted into and
become  one  fully  paid and  non-assessable  share of the  common  stock of the
Surviving Corporation.

     3.2  Conversion of  DigitalQuake  Common Stock and  DigitalQuake  Preferred
Stock.

     (a)  At the Effective Time,  each share of DigitalQuake  Series A Preferred
          Stock issued and outstanding  immediately  prior to the Effective Time
          shall,  by virtue of the Merger and  without any action on the part of
          the holder thereof,  be canceled and  extinguished  and converted into
          the right to receive in cash, without interest, $1.00.

     (b)  At the Effective Time,  each share of DigitalQuake  Series B Preferred
          Stock issued and outstanding  immediately  prior to the Effective Time
          shall,  by virtue of the Merger and  without any action on the part of
          the holder thereof,  be canceled and  extinguished  and converted into
          the right to receive in cash, without interest, $1.78.

     (c)  At the Effective Time, each share of DigitalQuake  Common Stock issued
          and  outstanding  immediately  prior to the Effective Time (other than
          shares of DigitalQuake  Common Stock and DigitalQuake  Preferred Stock
          held by National or its Subsidiaries (which shall be canceled pursuant
          to Section 3.7) and other than Dissenting  Shares (as defined herein))
          shall,  by virtue of the Merger and  without any action on the part of
          the holder thereof,  be canceled and  extinguished  and converted into
          the right to receive in cash, without interest, an amount equal to the
          quotient of (A) the Adjusted  Consideration (as defined below) divided
          by (B) the sum of (x) the  total  number  of  shares  of  DigitalQuake
          Common Stock outstanding three days before the Closing Date (including
          shares  held by  National  and its  Subsidiaries)  plus (y) the  total
          number of shares of DigitalQuake Common Stock issuable upon conversion
          of shares of DigitalQuake  Preferred Stock  (including  shares held by
          National  and its  Subsidiaries)  outstanding  three  days  before the
          Closing  Date  plus (z) the total  number  of  shares of  DigitalQuake
          Common  Stock  subject  to  DigitalQuake  Options,  warrants  or other
          convertible  securities  (including  those  held by  National  and its
          Subsidiaries)  outstanding  three days before the  Closing  Date (such
          amount, the "Adjusted Per Share Price");  provided,  however, that ten
          percent  of the  Adjusted  Per  Share  Price  shall  be  withheld  and
          deposited  into escrow  pursuant to Section 3.4 hereof.  The amount of
          the Adjusted Per Share Price  withheld and deposited  into escrow from
          all holders of DigitalQuake  Common Stock and  DigitalQuake  Preferred
          Stock (other than National) and deposited  into escrow,  together with
          the amounts  withheld from the Optionees  pursuant to clause (y)(I) of
          Section  3.4(a) and clause  (y)(I) of Section  3.4(b),  is referred to
          herein  as  the  "Indemnity  Escrow  Amount."  For  purposes  of  this
          Agreement,  the  "Adjusted  Consideration"  means an  amount  equal to
          Twenty-Seven Million Dollars  ($27,000,000)  reduced by (i) the Excess
          Transaction  Costs,  if any, and (ii) any amounts paid by DigitalQuake
          to  Syntek   Semiconductor   Co.,  Ltd.   pursuant  to  those  certain
          Convertible  Deposits dated as of  September 4,  2001 in the aggregate
          amount  of  $400,000   made  by   DigitalQuake   in  favor  of  Syntek
          Semiconductor Co., Ltd.
<PAGE>

     (d)  The amounts described in clauses (a) - (c) shall be paid in accordance
          with Section 3.6; provided, however, that the aggregate amount payable
          to each Principal  Employee  shall be further  subject to Section 3.5;
          and  provided  further  that  payments  with  respect to any shares of
          DigitalQuake  Common Stock that are subject to  forfeiture  or vesting
          restrictions as of the date hereof shall be subject to Section 3.9.

     3.3  Indemnity  Escrow  Arrangements.  On the Closing  Date,  the Indemnity
Escrow Amount shall be deposited into an escrow account (the  "Indemnity  Escrow
Account") pending  determination of certain  indemnification  obligations of the
Shareholders  (other  than  National)  and  Optionees,  if any,  as set forth in
Article XII. The Indemnity  Escrow  Account shall be subject to the terms of the
Indemnity   Escrow   Agreement   by  and   among   National,   the   Shareholder
Representative,  as  representative  of the Shareholders and the Optionees,  and
U.S.  Bank Trust N.A. (or such other bank that shall be mutually  acceptable  to
DigitalQuake  and  National),  as  escrow  agent,  substantially  in the form of
Exhibit C hereto.

     3.4 Treatment of DigitalQuake Options.

     (a)  Accelerated  Options.  Prior  to the  Effective  Time,  the  Board  of
          Directors of DigitalQuake,  as administrator of the Stock Option Plan,
          shall  pursuant to its  authority  under the Stock Option Plan provide
          that each  DigitalQuake  Option  issued under the Stock Option Plan to
          the individuals  (the  "Accelerated  Optionees") set forth on Schedule
          3.4(a)  shall  upon  shareholder  approval  pursuant  to Code  Section
          280G(b)(5)(A)(ii)  become  fully  vested and  exercisable  immediately
          prior to the Effective Time, and if such DigitalQuake  Options are not
          exercised prior to the Effective Time, such DigitalQuake Options shall
          terminate  and cease to be  outstanding  effective as of the Effective
          Time.  Prior  to the  Effective  Time,  National  shall  offer to pay,
          subject to consummation of the Merger, each Accelerated  Optionee that
          does not exercise its  DigitalQuake  Option(s)  prior to the Effective
          Time an amount  equal to (x) the  aggregate  Adjusted  Per Share Price
          into which the  shares of  DigitalQuake  Common  Stock  issuable  upon
          exercise  of the  DigitalQuake  Option(s)  held  by  such  Accelerated
          Optionee and not exercised prior to the Effective Time would have been
          converted  under Section 3.2 if such  DigitalQuake  Option(s) had been
          exercised  immediately prior to the Effective Time, reduced by (y) (I)
          ten percent of the Adjusted  Per Share Price,  which shall be withheld
          and  deposited  into escrow  pursuant to Section 3.3 hereof,  (II) the
          aggregate  exercise price for the shares of DigitalQuake  Common Stock
          then issuable upon exercise of such  DigitalQuake  Option(s) and (III)
          the amount of any  withholding  taxes  which may be  required  on such
          payment (which National shall cause  DigitalQuake to duly withhold for
          the  account  of  such  Accelerated  Optionee),   in  return  for  the
          cancellation of such DigitalQuake Option(s); provided that in the case
          of  Principal  Employees,  payment  of such  amount  shall  be made in
          accordance with Section 3.5.  DigitalQuake's  Board of Directors shall
          not  accelerate  the  vesting  of any  DigitalQuake  Option  except as
          provided in this Section 3.4(a).  National shall cause DigitalQuake to
          make or  otherwise  arrange for the payment  required by this  Section
          3.4(a) to each Accelerated Optionee as soon as reasonably  practicable
          after the Effective Time, upon delivery to DigitalQuake of the written
          agreement   representing  the  Accelerated   Optionee's   DigitalQuake
          Option(s) and such other  information or documents as  DigitalQuake or
          National may reasonably require.
<PAGE>

     (b)  Other  Employee   Options.   Each  DigitalQuake   Option   outstanding
          immediately prior to the Effective Time that is held by an employee of
          DigitalQuake  and that is not  accelerated  pursuant to Section 3.4(a)
          shall be canceled as of the  Effective  Time.  Prior to the  Effective
          Time,  National  shall offer to pay,  subject to  consummation  of the
          Merger,  each  Optionee  holding  a  DigitalQuake  Option  that is not
          exercised,  an amount  equal to (x) the  aggregate  Adjusted Per Share
          Price into which the shares of DigitalQuake Common Stock issuable upon
          exercise of the vested  portion of the  DigitalQuake  Option as of the
          Effective  Time  (taking  into  account  any  acceleration  of vesting
          triggered by the Merger under the terms of the applicable DigitalQuake
          Option)  would  have  been   converted   under  Section  3.2  if  such
          DigitalQuake  Option  had  been  exercised  immediately  prior  to the
          Effective  Time,  reduced by (y)(I) ten  percent of the  Adjusted  Per
          Share  Price,  which  shall be  withheld  and  deposited  into  escrow
          pursuant to Section 3.3 hereof,  (II) the aggregate exercise price for
          the shares of DigitalQuake Common Stock then issuable upon exercise of
          the vested portion of such DigitalQuake Option(s) and (III) the amount
          of any  withholding  taxes that may be required on such payment (which
          National shall cause  DigitalQuake  to duly withhold for the amount of
          such Optionee),  in return for the  cancellation of such  DigitalQuake
          Option. With respect to the unvested portion of each such DigitalQuake
          Option,  National shall make  semi-annual  cash payments to the former
          holder of such  DigitalQuake  Option  beginning  six months  after the
          Effective  Time.  Each such payment shall be in an amount equal to (x)
          the  aggregate  Adjusted  Per Share  Price  into  which the  shares of
          DigitalQuake  Common Stock  issuable upon  exercise of the  applicable
          Semi-Annual  Increment (as defined below), if any, of the DigitalQuake
          Option held by such Optionee would have been  converted  under Section
          3.2 if such DigitalQuake  Option had been exercised  immediately prior
          to the Effective  Time with respect to the number of shares covered by
          such Semi-Annual Increment,  reduced by (y) (I) the aggregate exercise
          price for the  shares  of  DigitalQuake  Common  Stock  issuable  upon
          exercise  of the  Semi-Annual  Increment  and (II) the  amount  of any
          withholding  taxes  which  may be  required  on  such  payment  (which
          National shall cause  DigitalQuake  to duly withhold for the amount of
          such  Optionee)   provided  that  the  holder   remains   employed  by
          DigitalQuake or National and otherwise  satisfies the requirements for
          continued  vesting of the DigitalQuake  Option in question through the
          date of such payment. "Semi-Annual Increment" shall mean the number of
          shares,  if any,  subject  to a  DigitalQuake  Option  that would have
          vested during the six-month  period ending on the date of such payment
          if such DigitalQuake Option had remained  outstanding and continued to
          vest in accordance  with its terms.  After  semi-annual  payments have
          been  made  with  respect  to  the  entire   unvested   portion  of  a
          DigitalQuake   Option,  no  further  semi-annual   payments  shall  be
          required.  In addition,  any  semi-annual  payments  with respect to a
          DigitalQuake  Option shall cease  immediately  upon the termination of
          the holder's employment.

     (c)  Non-Employee Options. Each DigitalQuake Option outstanding immediately
          prior  to the  Effective  Time  that  held by a  Person  who is not an
          employee of  DigitalQuake  shall be canceled as of the Effective Time.
          Prior to the Effective Time,  National shall offer to pay,  subject to
<PAGE>

          consummation of the Merger,  each such Optionee holding a DigitalQuake
          Option that is not  exercised,  an amount  equal to (x) the  aggregate
          Adjusted Per Share Price into which the shares of DigitalQuake  Common
          Stock issuable upon exercise of the vested portion of the DigitalQuake
          Option as of the Effective Time (taking into account any  acceleration
          of vesting  triggered by the Merger under the terms of the  applicable
          DigitalQuake  Option) would have been  converted  under Section 3.2 if
          such DigitalQuake  Option had been exercised  immediately prior to the
          Effective  Time,  reduced by (y)(I) ten  percent of the  Adjusted  Per
          Share  Price,  which  shall be  withheld  and  deposited  into  escrow
          pursuant to Section 3.3 hereof,  (II) the aggregate exercise price for
          the shares of DigitalQuake Common Stock then issuable upon exercise of
          the vested portion of such DigitalQuake Option(s) and (III) the amount
          of any  withholding  taxes that may be required on such payment (which
          National shall cause  DigitalQuake  to duly withhold for the amount of
          such Optionee),  in return for the  cancellation of such  DigitalQuake
          Option.

     3.5 Payments to Principal Employees.  Notwithstanding Section 3.4 above and
Section 3.6 below, the aggregate amount payable to each Principal  Employee with
respect to the DigitalQuake Common Stock and the DigitalQuake  Option(s) held by
him  pursuant  to  Section  3.2 or Section  3.4 shall be payable in three  equal
installments, as follows:

     (a)  The first installment  payable to each Principal Employee with respect
          to his DigitalQuake  Common Stock and DigitalQuake  Option(s) shall be
          due and payable immediately following the Effective Time.

     (b)  The second installment payable to each Principal Employee with respect
          to his DigitalQuake  Common Stock and DigitalQuake  Option(s) shall be
          due and payable upon the one-year  anniversary of the Effective  Time;
          and

     (c)  The third installment  payable to each Principal Employee with respect
          to his DigitalQuake  Common Stock and DigitalQuake  Option(s) shall be
          due and payable upon the two-year anniversary of the Effective Time.

     3.6 Surrender of Certificates.

     (a)  As soon as practicable after the Effective Time, each Person holding a
          certificate or certificates representing shares of DigitalQuake Common
          Stock  or   DigitalQuake   Preferred   Stock  issued  and  outstanding
          immediately   prior  to  the   Effective   Time  shall   deliver  such
          certificate(s), a letter of transmittal in the form attached hereto as
          Exhibit E and a Form W-9 or Form W-8 (or a suitable  substitute form),
          as applicable,  to the Surviving Corporation or its transfer agent. In
          the event that any such holder no longer has in his or her  possession
          any such  certificate(s),  such holder shall,  in lieu of surrendering
          such certificate(s),  deliver to Surviving Corporation an affidavit of
          that fact whereupon National may, in its sole discretion,  require the
          holder of such lost  certificate(s)  to  deliver a bond in such sum as
          National may reasonably direct as indemnity against any claim that may
          be made against  National or any of its Affiliates with respect to the
          certificate.  Thereupon, each such holder shall be entitled to receive
          in  exchange  therefor  cash  consideration  in the  amount and in the
          manner described in Section 3.2 and Section 3.5, without interest, and
          Surviving  Corporation  shall pay and National  shall cause  Surviving
          Corporation to pay such amount promptly to the holder.
<PAGE>

     (b)  Each  certificate  which  immediately  prior  to  the  Effective  Time
          evidenced   shares  of  DigitalQuake   Common  Stock  or  DigitalQuake
          Preferred  Stock  (other  than held by  National  and its  Affiliates)
          shall,  from and after the Effective  Time until such  certificate  is
          surrendered to Surviving Corporation or its transfer agent, be deemed,
          for all  corporate  purposes,  to  evidence  the right to receive  the
          consideration per share described in Section 3.2. No interest shall be
          payable upon any consideration.

     (c)  After the Effective Time, there shall be no transfers of any shares of
          DigitalQuake Common Stock or DigitalQuake Preferred Stock on the stock
          transfer books of Surviving Corporation. If, after the Effective Time,
          certificates formerly representing shares of DigitalQuake Common Stock
          or   DigitalQuake   Preferred   Stock  are   presented   to  Surviving
          Corporation,   they  shall  be   canceled   and   exchanged   for  the
          consideration per share provided for by Section 3.2.

     3.7 Shares  Held by  National  or its  Subsidiaries.  Each of the shares of
DigitalQuake  Preferred Stock or DigitalQuake  Common Stock held by DigitalQuake
or its  Subsidiaries  or National  or its  Subsidiaries  shall be  canceled  and
retired at the Effective Time and no  consideration  shall be issued in exchange
therefor.

     3.8 Dissenting  Shares.  Notwithstanding  anything in this Agreement to the
contrary,   shares  of   DigitalQuake   capital  stock  issued  and  outstanding
immediately  prior to the Effective  Time and held by a holder who has not voted
in favor of the Merger or  consented  thereto in  writing  and who has  demanded
appraisal for such shares in accordance with Section 1300 of the California GCL,
if such Section 1300 provides for appraisal rights for such shares in the Merger
("Dissenting  Shares"),  shall not be  converted  into the right to receive  the
consideration  as provided in Section 3.2, unless and until such holder fails to
perfect or withdraws or otherwise loses his right to appraisal and payment under
the California GCL. If, after the appraisal, any such holder fails to perfect or
withdraws or loses his right to  appraisal,  then such  Dissenting  Shares shall
thereupon be treated as if they had been converted as of the Effective Time into
the  right to  receive  the  consideration,  if any,  to which  such  holder  is
entitled. DigitalQuake shall give National prompt notice of any demands received
by  DigitalQuake  for  appraisal  of shares and,  prior to the  Effective  Time,
National shall have the right to participate in all negotiations and proceedings
with respect to such demands.  Prior to the Effective Time,  DigitalQuake  shall
not, except with the prior written  consent of National,  make any payments with
respect to or settle or offer to settle, any such demands.

     3.9 Disqualified Individual Payments.  Notwithstanding anything in Sections
3.2 or 3.4 to the contrary, no payment thereunder with respect to (i) any shares
of  DigitalQuake  Common  Stock  that  are  subject  to  forfeiture  or  vesting
restrictions  as of the date hereof or (ii) a DigitalQuake  Option shall be made
to any  individual  who is a  "disqualified  individual"  (as defined in Section
280G(c)  of  the  Code  and  the  proposed  Treasury   Regulations   promulgated
thereunder) with respect to DigitalQuake  unless the right of such individual to
receive such payment has been approved by the shareholders of DigitalQuake in an
approval  satisfying the  requirements of Section  280G(b)(5)(B) of the Code and
the proposed Treasury Regulations promulgated thereunder.
<PAGE>

                                  ARTICLE IV.
                        REPRESENTATIONS AND WARRANTIES OF
                          DIGITALQUAKE AND THE FOUNDERS

     DigitalQuake  and  each of the  Founders  jointly  and  severally  make the
following  representations  and  warranties  to National  and Merger Sub,  which
representations  and  warranties  are true and correct as of the date hereof and
will be true and  correct  as of the  Closing  Date,  except as set forth in the
disclosure  schedule delivered by DigitalQuake to National and Merger Sub on the
date hereof (the  "Disclosure  Schedule").  Nothing in the  Disclosure  Schedule
shall be deemed  adequate  to  disclose  an  exception  to a  representation  or
warranty made herein,  however,  unless the Disclosure  Schedule  identifies the
exception  with  reasonable  particularity  and describes the relevant  facts in
reasonable  detail.  An exception  in the  Disclosure  Schedule  relating to one
representation  and  warranty  shall not be deemed to  qualify or to serve as an
exception to another  representation  and warranty unless the same disclosure or
an appropriate cross-reference appears in the section of the Disclosure Schedule
relating to such other representation and warranty. The Disclosure Schedule will
be arranged in paragraphs  corresponding to the lettered and numbered paragraphs
contained in this Article IV.

     4.1  Organization  of  DigitalQuake.  DigitalQuake  is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
California.  DigitalQuake  has full corporate power and authority to conduct the
Business as it is presently  being conducted and to own or lease, as applicable,
the  Assets.  DigitalQuake  is  duly  qualified  to  do  business  as a  foreign
corporation  and  is in  good  standing  in  each  jurisdiction  in  which  such
qualification  is necessary  under  applicable law as a result of the conduct of
the Business or the ownership of its properties,  except where the failure to be
so qualified  would not have a Material  Adverse  Effect on  DigitalQuake.  Each
jurisdiction  in which  DigitalQuake  is  qualified  to do business as a foreign
corporation is set forth in Schedule 4.1.

     4.2 Capitalization of DigitalQuake.

     (a)  There  are  (i)  17,000,000   shares  of  DigitalQuake   Common  Stock
          authorized  under the Restated  Articles and (ii) 9,946,292  shares of
          DigitalQuake  Preferred Stock authorized under the Restated  Articles,
          6,000,000  of which are  designated  as Series A  Preferred  Stock and
          3,946,292 of which are designated as Series B Preferred  Stock.  As of
          the date hereof,  1,715,000  shares of  DigitalQuake  Common Stock are
          issued and  outstanding,  6,000,000 shares of Series A Preferred Stock
          are issued and  outstanding,  and up to  1,750,000  shares of Series B
          Preferred Stock will be issued and outstanding  upon the First Closing
          under  the  Series  B  Preferred   Stock   Purchase   Agreement.   The
          Shareholders  of  DigitalQuake  and the  number,  class and  series of
          shares  of  DigitalQuake  capital  stock  held of  record,  and to the
          knowledge of  DigitalQuake,  beneficially by each of them is set forth
          on Schedule 4.2.

     (b)  As of the date hereof,  (i) 2,510,000  shares of  DigitalQuake  Common
          Stock are  reserved for  issuance  upon the  exercise of  DigitalQuake
          Options  granted or  available  for grant under the Stock Option Plan,
          (ii)  DigitalQuake  Options  representing  the  right to  purchase  an
          aggregate  of  1,235,000  shares  of  DigitalQuake  Common  Stock  are
          outstanding under the Stock Option Plan, and (iii) 1,275,000 shares of
          DigitalQuake   Common  Stock  are   available  for  future  grants  of
          DigitalQuake  Options  under the Stock Option Plan.  DigitalQuake  has
          provided National a complete and accurate list of all such outstanding
          DigitalQuake Options and the vesting schedules and exercise prices for
          such options, a copy of which is attached hereto as Schedule 4.2.
<PAGE>

     (c)  Except for the DigitalQuake  Preferred Stock and DigitalQuake  Options
          listed  above and  except as  contemplated  by the  Series B  Purchase
          Agreement  and  this  Agreement,  there  are no  outstanding  options,
          warrants,  convertible securities or rights of any kind to purchase or
          otherwise  acquire any shares of capital stock or other  securities of
          DigitalQuake.   Except  for  the  aggregate  of  9,946,292  shares  of
          DigitalQuake Common Stock reserved for issuance upon the conversion of
          the DigitalQuake Preferred Stock, the aggregate of 2,510,000 shares of
          DigitalQuake  Common Stock  reserved for issuance upon the exercise of
          DigitalQuake  Options granted or available for grant,  and the 100,000
          shares of DigitalQuake Series B Preferred Stock issuable upon exercise
          of the  Warrant  dated  December 21,  2001  issued  to  National  (the
          "National Warrant"),  no other shares of capital stock of DigitalQuake
          are reserved for issuance.

     (d)  All outstanding  shares of DigitalQuake  Common Stock and DigitalQuake
          Preferred  Stock are,  and any  shares of  DigitalQuake  Common  Stock
          issuable upon exercise of any DigitalQuake  Option or on conversion of
          DigitalQuake   Preferred  Stock  (including   shares  of  DigitalQuake
          Preferred  Stock issuable upon exercise of the National  Warrant) will
          be, when issued in accordance with the terms thereof,  validly issued,
          fully paid and non-assessable and not subject to any preemptive rights
          created by statute,  DigitalQuake's Restated Articles or Bylaws or any
          Contract.  The shares of  DigitalQuake  Preferred  Stock issuable upon
          exercise of the National  Warrant  will be, when issued in  accordance
          with the terms thereof,  validly issued, fully paid and non-assessable
          and  not  subject  to  any  preemptive   rights  created  by  statute,
          DigitalQuake's Restated Articles or Bylaws or any Contract. The shares
          of  DigitalQuake  Common Stock and  DigitalQuake  Preferred  Stock and
          DigitalQuake  Options have been or will be issued in  compliance  with
          all federal and state corporate and securities laws.

     (e)  Except as contemplated by the Restated Articles,  there is outstanding
          no vote,  plan or pending  proposal for any redemption of DigitalQuake
          capital stock.

     (f)  DigitalQuake  has completed the repurchase of the 4,000,000  shares of
          DigitalQuake Common Stock that were issued to Paul A. Lessard pursuant
          to the Stock  Purchase  Agreement,  dated as of June 26, 2000,  by and
          between DigitalQuake and Paul A. Lessard.

     4.3  Authorization.  DigitalQuake  has all necessary power and authority to
enter into this Agreement,  the Agreement of Merger and the Ancillary Agreements
to  which  it is a  party  and has  taken  all  corporate  action  necessary  to
consummate the transactions  contemplated  hereby and thereby and to perform its
obligations  hereunder  and  thereunder.  The  execution  and  delivery  of this
Agreement, the Agreement of Merger and the Ancillary Agreements by DigitalQuake,
and the performance by DigitalQuake of its obligations  hereunder and thereunder
and the  consummation  of the  transactions  contemplated  hereby  and  thereby,
including the Merger,  have been unanimously  approved by the Board of Directors
and  unanimously  approved by the  Shareholders of  DigitalQuake.  Copies of the
resolutions of the Board of Directors and written  consents of the  Shareholders
have been provided to National,  there have been no changes to such  resolutions
or written  consents,  and such  resolutions and written consents remain in full
force and  effect.  This  Agreement  has been duly  executed  and  delivered  by
<PAGE>

DigitalQuake  and is a legal,  valid and  binding  obligation  of  DigitalQuake,
enforceable  against  DigitalQuake  in  accordance  with its terms,  except that
enforceability  may  be  limited  by  the  effect  of  bankruptcy,   insolvency,
reorganization,  moratorium  or other  similar laws relating to or affecting the
rights of creditors. The Agreement of Merger will have been, as of the Effective
Time, duly and validly executed by DigitalQuake,  and will be a legal, valid and
binding  obligation  of  DigitalQuake,   enforceable  against   DigitalQuake  in
accordance  with its terms,  except  that  enforceability  may be limited by the
effect of bankruptcy,  insolvency,  reorganization,  moratorium or other similar
laws relating to or affecting the rights of creditors.

     4.4  Officers  and  Directors.  Schedule  4.4 contains a list of all of the
officers and directors of DigitalQuake.

     4.5 Bank Accounts; Powers of Attorney.  Schedule 4.5 contains a list of all
DigitalQuake's  bank  accounts,  safe  deposit  boxes,  and  related  powers  of
attorney,  and  persons  authorized  to draw  thereon  or have  access  thereto.
DigitalQuake has no outstanding powers of attorney except as contemplated above.

     4.6 Subsidiaries.

     (a)  Schedule 4.6 contains a list of each of the DigitalQuake  Subsidiaries
          that is a corporation  (identifying its jurisdiction of incorporation)
          and each of the DigitalQuake Subsidiaries that is a general or limited
          partnership,  limited liability company, or other non-corporate entity
          (identifying  the  jurisdiction  under which such entity is organized,
          each jurisdiction in which it is qualified and/or licensed to transact
          business,  and  the  amount  and  nature  of  the  ownership  interest
          therein).  Each  DigitalQuake  Subsidiary is duly  organized,  validly
          existing,  and (as to corporations) in good standing under the laws of
          the jurisdiction in which it is incorporated or organized, and has the
          corporate  power and  authority  necessary for it to own,  lease,  and
          operate its assets and to carry on its business as now conducted. Each
          DigitalQuake  Subsidiary  is duly  qualified  or  licensed to transact
          business as a foreign  corporation  in good  standing in the States of
          the United States and foreign jurisdictions where the character of its
          assets or the nature or conduct of its  business  requires it to be so
          qualified  or  licensed,  except for such  jurisdictions  in which the
          failure to be so  qualified  or licensed is not  reasonably  likely to
          have, individually or in the aggregate, a Material Adverse Effect.

     (b)  DigitalQuake or one of its wholly owned  Subsidiaries  owns all of the
          issued  and  outstanding  shares of  capital  stock  (or other  equity
          interests) of each DigitalQuake Subsidiary. No capital stock (or other
          equity  interest)  of any  DigitalQuake  Subsidiary  is or may  become
          required  to be issued by reason  of any  options,  warrants  or other
          rights,  and there are no contracts,  agreements or  understandings by
          which any DigitalQuake  Subsidiary is bound to issue additional shares
          of its  capital  stock (or  other  equity  interests)  or by which any
          DigitalQuake  Subsidiary  is or may be bound to transfer any shares of
          the capital  stock (or other  equity  interests)  of any  DigitalQuake
          Subsidiary.  There  are no  contracts,  agreements  or  understandings
          relating to the rights of any  DigitalQuake  Subsidiary  to vote or to
          dispose  of  any  shares  of  its  capital   stock  (or  other  equity
          interests).  All of the  shares of  capital  stock  (or  other  equity
          interests) of each  DigitalQuake  Subsidiary  held by  DigitalQuake or
          another DigitalQuake Subsidiary are fully paid and nonassessable under
          the  applicable  corporation  law of the  jurisdiction  in which  such
          Subsidiary  is   incorporated  or  organized  and  are  owned  by  the
          DigitalQuake Subsidiary free and clear of any Encumbrance.
<PAGE>

     4.7 Absence of Certain  Changes or Events.  Except as set forth on Schedule
4.7, since the Balance Sheet Date there has not been any:

     (a)  failure by DigitalQuake to operate the Business in the ordinary course
          or failure to use  commercially  reasonable  efforts to  preserve  the
          Business intact and to preserve for National the continued services of
          the  employees  and  independent   contractors  and  the  goodwill  of
          suppliers,   customers  and  others  having  business  relations  with
          DigitalQuake;

     (b)  resignation or termination of any officer or employee;

     (c)  increase in the rate of  compensation  payable or to become payable to
          any officer, employee or Representative of DigitalQuake, including the
          making of any loan to, or the payment,  grant or accrual of any bonus,
          incentive compensation, service award or other similar benefit to, any
          such Person,  or the addition to,  modification of, or contribution to
          any Employee Plan other than the extension of coverage under such plan
          to others who became  eligible after the Balance Sheet Date other than
          in the ordinary course of business consistent with past practice;

     (d)  any payment, loan or advance of any amount to or in respect of, or the
          sale,  transfer or lease of any  properties  or Assets to, or entering
          into of any Contract with,  any Related  Party,  except (i) directors'
          fees, (ii)  compensation to employees at the rates disclosed  pursuant
          to Section  4.17(d) and (iii)  customary  travel and expense  advances
          made in the  ordinary  course of  business  and  consistent  with past
          practice;

     (e)  sale,  assignment,  license,  transfer  or  encumbrance  of any Assets
          tangible or intangible,  singly or in the aggregate,  other than sales
          of  products  and  services  and  licenses in the  ordinary  course of
          business and consistent with past practice;

     (f)  new Contracts, or extensions, modifications,  terminations or renewals
          thereof,  except for Contracts entered into, modified or terminated in
          the ordinary course of business and consistent with past practice;

     (g)  actual or threatened  termination of any material  customer account or
          group of accounts or actual or threatened  material reduction in fees,
          purchases  or  royalties  payable  by any  such  customer  or,  to the
          knowledge of DigitalQuake,  the occurrence of any event that is likely
          to result in any such termination or reduction;

     (h)  disposition or lapsing of any of DigitalQuake's Proprietary Rights, in
          whole or in part or, to the knowledge of DigitalQuake,  any disclosure
          of  any  trade  secret,  process  or  know-how  to any  Person  not an
          employee;

     (i)  change in accounting methods or practices by DigitalQuake;

     (j)  revaluation by  DigitalQuake of any of the Assets,  including  writing
          off notes or accounts  receivable  other than for which  reserves  had
          been established;

     (k)  material  damage,  destruction  or loss  (whether  or not  covered  by
          insurance)  affecting  DigitalQuake  or any of the Assets or any other
          material  adverse  change  in  the  financial  condition,  results  of
          operations, properties, business or prospects of DigitalQuake;
<PAGE>

     (l)  declaration, setting aside or payment of dividends or distributions in
          respect  of any  capital  stock  of  DigitalQuake  or any  redemption,
          purchase  or  other  acquisition  of  any  of  DigitalQuake's   equity
          securities  by  DigitalQuake  other than the  repurchase  of  unvested
          shares  at  their  original  purchase  price  and  the  repurchase  of
          4,000,000  shares of  DigitalQuake  Common  Stock from Paul A. Lessard
          pursuant to the Stock Purchase Agreement,  dated as of June 26,  2000,
          by and between DigitalQuake and Paul A. Lessard;

     (m)  issuance or reservation  for issuance by DigitalQuake of any shares of
          capital stock or other equity  securities or obligations or securities
          convertible  into or exchangeable for shares of capital stock or other
          equity  securities  (other than shares of  DigitalQuake  Common  Stock
          issued upon the  exercise of  DigitalQuake  Options or  conversion  of
          DigitalQuake Preferred Stock);

     (n)  commitment by DigitalQuake or by its executive  officers on its behalf
          to issue or reserve for issuance any shares of capital  stock or other
          equity  securities or  obligations or securities  convertible  into or
          exchangeable for shares of capital stock or other equity securities;

     (o)  increase,  decrease or reclassification  of DigitalQuake's  authorized
          capital stock;

     (p)  amendment of DigitalQuake's Restated Articles;

     (q)  capital  expenditure  or  execution  of any lease or any  incurring of
          liability  therefor by DigitalQuake,  involving  payments in excess of
          $25,000 in the aggregate;

     (r)  failure to pay any material obligation of DigitalQuake;

     (s)  cancellation   of  any   indebtedness  or  waiver  of  any  rights  of
          substantial  value to  DigitalQuake,  except in the ordinary course of
          business and consistent with past practice;

     (t)  indebtedness  incurred  by  DigitalQuake  for  borrowed  money  or any
          commitment to borrow money entered into by DigitalQuake,  or any loans
          made or agreed to be made by DigitalQuake;

     (u)  liability  incurred by  DigitalQuake  except in the ordinary course of
          business and consistent with past practice,  or any increase or change
          in any assumptions  underlying or methods of calculating any bad debt,
          contingency or other reserves;
<PAGE>

     (v)  payment,  discharge or satisfaction of any Liabilities of DigitalQuake
          other than the payment,  discharge or satisfaction (i) in the ordinary
          course of business and  consistent  with past practice of  Liabilities
          reflected or reserved against in the Financial  Statements or incurred
          in the ordinary  course of business and consistent  with past practice
          since the Balance Sheet Date and (ii) of Liabilities (other than those
          contemplated by clause (i)) of DigitalQuake  involving $25,000 or less
          in the aggregate;

     (w)  acquisition  by  DigitalQuake  of any  equity  interest  in any  other
          Person; or

     (x)  agreement by DigitalQuake to do any of the foregoing.

     4.8 Title to Assets.  DigitalQuake has sole, good and marketable fee simple
title to its Assets except as set forth on Schedule 4.8.  Except as set forth on
Schedule 4.8, none of DigitalQuake's Assets is subject to any Encumbrances.

     4.9 Sufficiency of Assets. The Assets constitute all of the assets,  rights
and properties, tangible or intangible, real or personal, which are required for
the operation of the Business as it is presently conducted and as it is proposed
to be conducted.

     4.10 Fixtures and  Equipment.   Schedule 4.10 contains  accurate  lists and
summary  descriptions  of all  Fixtures  and  Equipment  where  the  value of an
individual  item exceeds  $25,000 or where an aggregate of similar items exceeds
$100,000.  All of  DigitalQuake's  tangible  assets and  properties  are in good
operating condition and repair, normal wear and tear excepted, and are usable in
the ordinary course of DigitalQuake's business.

     4.11 Contracts.

     (a)  Disclosure. As of the date of this Agreement, Schedule 4.11 sets forth
          a complete and accurate list of all of DigitalQuake's Contracts of the
          following categories, as applicable:

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

          (ii) Manufacturing or joint development agreements;

          (iii)License agreements or royalty  agreements,  whether  DigitalQuake
               is the licensor or licensee  thereunder  (other than  shrink-wrap
               licenses);

          (iv) Confidentiality    and   non-disclosure    agreements    (whether
               DigitalQuake   is  the   beneficiary   or  the  obligated   party
               thereunder);

          (v)  Customer orders or sales contracts under which the customer is to
               make a payment after the date hereof of $10,000 or more;
<PAGE>

          (vi) Original   equipment   manufacturer   agreements  or  distributor
               agreements;

          (vii) Research agreements;

          (viii) Output or requirement agreements;

          (ix) Contracts involving future expenditures or Liabilities, actual or
               potential,  in  excess  of  $10,000  after  the  date  hereof  or
               otherwise material to the Business or the Assets;

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

          (xi) Employment   contracts,   consulting   contracts   and  severance
               agreements,  including those (A) to employ or terminate executive
               officers or other  personnel and other  contracts with present or
               former  officers or  directors of  DigitalQuake  or (B) that will
               result in the payment by, or the creation of any Liability to pay
               on behalf of National or DigitalQuake any severance, termination,
               "golden  parachute," or other similar  payments to any present or
               former personnel following termination of employment or otherwise
               as a result of the consummation of the transactions  contemplated
               by this Agreement;

          (xii)Agreements  providing  for  indemnification  by  DigitalQuake  of
               present or former directors or officers of DigitalQuake;

          (xiii) Promissory notes, loans, agreements,  indentures,  evidences of
               indebtedness, letters of credit, guarantees, or other instruments
               relating  to an  obligation  to pay money,  whether  DigitalQuake
               shall be the borrower,  lender or guarantor thereunder (excluding
               credit  provided  by  DigitalQuake  in  the  ordinary  course  of
               business to  purchasers  of its products and  obligations  to pay
               vendors in the ordinary  course of business and  consistent  with
               past practice);

          (xiv)Contracts   containing   covenants   limiting   the   freedom  of
               DigitalQuake   or  any   officer,   director   or   employee   of
               DigitalQuake,  to engage in any line of business or compete  with
               any Person that relates directly or indirectly to the Business;

          (xv) Any Contract with a foreign,  federal,  state or local government
               or any agency or department thereof;

          (xvi) Any Contract with a Related Party;

          (xvii) Leases of real or personal property;

          (xviii) Any Contract that relates to corporate governance,  the voting
               or  transfer  of  equity  securities,  the  registration  of  any
               securities under the Securities Act or that grants any redemption
               or preemptive rights; and
<PAGE>

          (xix) Any other material Contract.

True,  correct and complete  copies of all of the  Contracts  listed on Schedule
4.11, including all amendments and supplements  thereto,  have been delivered to
National.

     (b)  Absence of Defaults.  All of the Contracts listed on Schedule 4.11 are
          valid,  binding and enforceable in accordance with their terms with no
          existing (or to the knowledge of DigitalQuake,  threatened) dispute or
          material Default by DigitalQuake. DigitalQuake has fulfilled, or taken
          all  action  necessary  to enable it to fulfill  when due,  all of its
          material  obligations  under each of the Contracts  listed on Schedule
          4.11. To the knowledge of DigitalQuake,  all parties to such Contracts
          have complied in all material respects with the provisions thereof, no
          party is in Default  thereunder  and no notice of any claim of Default
          has been given to DigitalQuake.

     (c)  Warranties. DigitalQuake has not committed any act, and there has been
          no  omission,  which may result  in, and there has been no  occurrence
          which may give rise to,  product  liability or Liability for breach of
          warranty  (whether  covered  by  insurance  or  not)  on the  part  of
          DigitalQuake   with  respect  to  products   designed,   manufactured,
          assembled,  sold,  repaired,  maintained,  delivered  or  installed or
          services rendered.

     4.12 No Conflict or  Violation;  Consents.  Except as set forth on Schedule
4.12,  none of the  execution,  delivery or performance of this Agreement or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby,  nor compliance by  DigitalQuake  with any of the provisions  hereof or
thereof,  will (a)  violate or conflict  with any  provision  of  DigitalQuake's
Restated  Articles or Bylaws,  (b)  conflict  with,  or result in a breach of or
constitute  a default  (with or without  notice or passage  of time)  under,  or
result in the  termination  of, or accelerate  the  performance  required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice,  consent or approval under, or result in the creation of any Encumbrance
upon any of DigitalQuake's Assets under, any Contract to which DigitalQuake is a
party or by which  DigitalQuake  is bound  or to  which  any of its  Assets  are
subject or  (c) violate  any  applicable  Regulation  or Court Order  binding on
DigitalQuake. Except for (i) the approval of the Shareholders as required by the
California GCL and  DigitalQuake's  Restated Articles (which has been obtained),
(ii) the filing of the  Agreement  of Merger with the  Secretary of State of the
State of  California,  and (iii) as set forth on Schedule  4.12,  no notices to,
declaration,   filing  or  registration  with,  approvals  or  consents  of,  or
assignments  by, any Persons  (including  any foreign,  federal,  state or local
governmental or administrative authorities) are necessary to be made or obtained
by  DigitalQuake  in connection  with the execution,  delivery or performance of
this Agreement and the consummation of the Merger. As of the Balance Sheet Date,
the value of DigitalQuake's  Assets did not exceed $10 million, and DigitalQuake
does  not  have  an  "ultimate   parent   entity"  within  the  meaning  of  the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.

     4.13 Permits.  Schedule 4.13 sets forth a complete list of all Permits held
by  DigitalQuake.  DigitalQuake  has,  and at all  times has had,  all  material
Permits  required  under  any  applicable  Regulation  in its  operation  of the
Business or in its ownership of the Assets,  and owns or possesses  such Permits
free and clear of all  Encumbrances.  DigitalQuake  is not in  default,  nor has
DigitalQuake or any of its  Representatives  received any notice of any claim of
default,  with respect to any such Permit.  Except as otherwise governed by law,
all such  Permits  are  renewable  by their terms or in the  ordinary  course of
business without the need to comply with any special qualification procedures or
to pay any  amounts  other than  routine  filing fees and except as set forth on
Schedule 4.13,  will  not  be  adversely  affected  by  the  completion  of  the
transactions contemplated by this Agreement or the Ancillary Agreements.

     4.14 Financial Statements; Books and Records.

     (a)  The  Financial  Statements  are complete,  are in accordance  with the
          Books and  Records,  and fairly  present the Assets,  Liabilities  and
          financial  condition  and results of operations  indicated  thereby in
          accordance  with GAAP  consistently  applied  throughout  the  periods
          covered thereby.

     (b)  DigitalQuake  maintains  a  system  of  internal  accounting  controls
          sufficient to provide  reasonable  assurance that (i) transactions are
          executed  with  management's  authorizations,  (ii)  transactions  are
          recorded  as  necessary  to  permit   preparation   of  the  Financial
          Statements in accordance with GAAP and to maintain  accountability for
          assets,  (iii) access to assets is permitted  only in accordance  with
          management's  authorization and (iv) the recorded  accountability  for
          assets is compared  with existing  assets at reasonable  intervals and
          appropriate action is taken with respect to any differences.

     (c)  The Books and Records,  in reasonable  detail,  accurately  and fairly
          reflect  the  activities  of  DigitalQuake  and  the  Business  in all
          material   respects  and  have  been  provided  to  National  for  its
          inspection.

     (d)  DigitalQuake has not engaged in any  transaction,  maintained any bank
          account or used any  corporate  funds  except for  transactions,  bank
          accounts or funds which have been and are  reflected  in the  normally
          maintained Books and Records.

     (e)  The stock  records and minute books of  DigitalQuake  heretofore  made
          available to National,  in all material  respects,  fully  reflect all
          minutes  of  meetings,  resolutions  and other  material  actions  and
          proceedings  of its  shareholders  and  board  of  directors  and  all
          committees  thereof,  all  issuances,  transfers  and  redemptions  of
          DigitalQuake's  capital  stock of  which  DigitalQuake  is  aware  and
          contain true,  correct and complete copies of DigitalQuake's  Restated
          Articles and Bylaws and all amendments thereto.

     4.15 Liabilities. DigitalQuake has no Liabilities or obligations (absolute,
accrued,  contingent or otherwise),  except (i) liabilities  which are reflected
and properly  reserved  against in the Financial  Statements,  (ii)  liabilities
incurred in the ordinary  course of business and  consistent  with past practice
since the Balance  Sheet Date,  but in any event not  greater  than  $50,000 and
(iii) liabilities  arising under the Contracts (other than obligations which are
required to be reflected on a balance sheet  prepared in  accordance  with GAAP)
set  forth on  Schedule  4.11 and which  have  arisen  or been  incurred  in the
ordinary course of business.
<PAGE>

     4.16 Litigation.  Except as set forth on Schedule 4.16, there is no action,
order,  writ,  injunction,  judgment  or  decree  outstanding  or  claim,  suit,
litigation,  proceeding,  investigation  or  dispute  (collectively,  "Actions")
pending or, to the  knowledge of  DigitalQuake,  threatened or  anticipated  (i)
against, relating to or affecting DigitalQuake,  any of the Assets or any of its
officers and directors as such,  (ii) which seeks to enjoin or obtain damages in
respect of the transactions  contemplated hereby or by the Ancillary  Agreements
or  (iii)  with  respect  to  which  there  is  a  reasonable  likelihood  of  a
determination   which  would  prevent   DigitalQuake   from   consummating   the
transactions  contemplated hereby and by the Ancillary  Agreements.  None of the
Actions,  if  adversely  determined  against  DigitalQuake,   its  directors  or
officers,  or any other Person could  reasonably be expected to result in a loss
to DigitalQuake,  individually or in the aggregate, in excess of $25,000. To the
knowledge of DigitalQuake,  there is no basis for any Action, which if adversely
determined against DigitalQuake,  its directors or officers, or any other Person
could reasonably be expected to result in a loss to  DigitalQuake,  individually
or in the aggregate, in excess of $25,000. Except as specified in Schedule 4.16,
there are presently no outstanding judgments,  decrees or orders of any court or
any governmental or administrative agency against DigitalQuake,  its Business or
any of the Assets. Schedule 4.16 contains a complete and accurate description of
all Actions to which  DigitalQuake  has been a party or which  related to any of
the Assets or DigitalQuake's  officers or directors as such, or any such Actions
which were settled prior to the  institution of formal  proceedings,  other than
Actions  brought by  DigitalQuake  for collection of monies owed in the ordinary
course of business.

     4.17 Labor Matters.

     (a)  DigitalQuake is not a party to any labor agreement with respect to its
          employees (which term shall include any part-time workers for purposes
          of  this  Section  4.17)  with  any  labor   organization,   group  or
          association  and has not experienced any attempt by organized labor or
          its  representatives  to  make  DigitalQuake  conform  to  demands  of
          organized  labor  relating to its employees or to enter into a binding
          agreement  with  organized  labor that would  cover the  employees  of
          DigitalQuake.  There is no unfair labor  practice  charge or complaint
          against DigitalQuake pending before the National Labor Relations Board
          or  any  other  governmental  agency  arising  out  of  DigitalQuake's
          activities,  and  DigitalQuake  has  no  knowledge  of  any  facts  or
          information which would give rise thereto; there is no labor strike or
          labor disturbance  pending or threatened  against  DigitalQuake nor is
          any grievance  currently being asserted  against it; and  DigitalQuake
          has not experienced a work stoppage or other labor  difficulty.  There
          are  no  material  controversies  pending  or,  to  the  knowledge  of
          DigitalQuake,   threatened   between   DigitalQuake  and  any  of  its
          employees,  and  DigitalQuake  is not aware of any facts  which  could
          reasonably result in any such controversy.

     (b)  Except as set forth on  Schedule  4.17,  DigitalQuake  is in  material
          compliance  with  all  applicable  Regulations  respecting  employment
          practices, terms and conditions of employment,  wages and hours, equal
          employment opportunity, and the payment of social security and similar
          taxes, and is not engaged in any unfair labor practice.   DigitalQuake
          is not liable for any claims for past due wages or any  penalties  for
          failure to comply with any of the foregoing.
<PAGE>

     (c)  DigitalQuake has not entered into any severance or similar arrangement
          in respect of any present or former  employee  that will result in any
          obligation  (absolute or  contingent) of National or  DigitalQuake  to
          make  any  payment  to  any  present  or  former  employee   following
          termination of employment. Except as provided in Section 3.4 or as set
          forth on Schedule  4.17,  neither the  execution  and delivery of this
          Agreement or the  Ancillary  Agreements  nor the  consummation  of the
          transactions  contemplated  hereby  or  thereby  will  result  in  the
          acceleration  of the  vesting of  exercisability  of any  DigitalQuake
          Options or in the  acceleration  or vesting of any other rights of any
          Person to benefits under any Employee Plans.

     (d)  DigitalQuake  has  provided  National  with a list of the names of all
          present  employees and their current  salary or hourly wages and other
          compensation  payable by  DigitalQuake  and copies of all  outstanding
          offer letters.

     4.18 Employee Benefit Plans.

     (a)  Definitions.  The  following  terms,  when used in this Section  4.18,
          shall have the following meanings.  Any of these terms may, unless the
          context  otherwise  requires,  be used in the  singular  or the plural
          depending on the reference.

          (i)  "Benefit Arrangement" means any employment, consulting, severance
               or  other  similar  contract,  arrangement  or  policy  and  each
               material plan, arrangement (written or oral), program,  agreement
               or commitment  providing for insurance  coverage  (including  any
               self-insured  arrangements),  workers'  compensation,  disability
               benefits,  supplemental unemployment benefits, vacation benefits,
               retirement  benefits,   life,  health,   disability  or  accident
               benefits   (including  any  "voluntary   employees'   beneficiary
               association"  as  defined  in  Section   501(c)(9)  of  the  Code
               providing  for  the  same  or  other  benefits)  or for  deferred
               compensation,   profit-sharing   bonuses,  stock  options,  stock
               appreciation  rights, stock purchases or other forms of incentive
               compensation  or  post-retirement   insurance,   compensation  or
               benefits  which  (A) is  not a  Welfare  Plan,  Pension  Plan  or
               Multiemployer Plan, (B) is entered into, maintained,  contributed
               to or  required  to be  contributed  to,  as the case may be,  by
               DigitalQuake or an ERISA Affiliate or under which DigitalQuake or
               any ERISA  Affiliate may incur any liability,  and (C) covers any
               employee  or  former   employee  of  DigitalQuake  or  any  ERISA
               Affiliate   (with  respect  to  their   relationship   with  such
               entities).

          (ii) "Employee  Plans" means all Benefit  Arrangements,  Multiemployer
               Plans, Pension Plans and Welfare Plans.

          (iii)"ERISA  Affiliate"  means any entity which is (or at any relevant
               time was) a member of a "controlled  group of corporations"  with
               or under  "common  control"  with  DigitalQuake,  as  defined  in
               Section 414(b), (c), (m) or (o) of the Code.

          (iv) "Multiemployer  Plan" means any "multiemployer  plan," as defined
               in Section 4001(a)(3) of ERISA,  (A) which  DigitalQuake,  or any
               ERISA  Affiliate  maintains,  administers,  contributes  to or is
               required  to  contribute  to,  or,  after   September 25,   1980,
               maintained,  administered,  contributed  to or  was  required  to
               contribute to, or under which DigitalQuake or any ERISA Affiliate
               may incur any  liability  and  (B) which  covers any  employee or
               former employee DigitalQuake or any ERISA Affiliate (with respect
               to their relationship with such entities).
<PAGE>

          (v)  "PBGC" means the Pension Benefit Guaranty Corporation.

          (vi) "Pension  Plan"  means any  "employee  pension  benefit  plan" as
               defined  in Section  3(2) of ERISA  (other  than a  Multiemployer
               Plan) (A) which  DigitalQuake  or any ERISA Affiliate  maintains,
               administers,  contributes to or is required to contribute to, or,
               within  the five years  prior to the  Closing  Date,  maintained,
               administered, contributed to or was required to contribute to, or
               under which  DigitalQuake  or any ERISA  Affiliate  may incur any
               liability and (B) which covers any employee or former employee of
               DigitalQuake  or any  ERISA  Affiliate  (with  respect  to  their
               relationship with such entities).

          (vii)"Welfare  Plan"  means any  "employee  welfare  benefit  plan" as
               defined in Section 3(1) of ERISA,  (A) which  DigitalQuake or any
               ERISA  Affiliate  maintains,  administers,  contributes  to or is
               required to  contribute  to, or under which  DigitalQuake  or any
               ERISA Affiliate may incur any liability and (B) which  covers any
               employee  or  former   employee  of  DigitalQuake  or  any  ERISA
               Affiliate   (with  respect  to  their   relationship   with  such
               entities).

     (b)  Disclosure;  Delivery  of  Copies  of  Relevant  Documents  and  Other
          Information.  Schedule 4.18 contains a complete list of Employee Plans
          which cover or have covered  employees of  DigitalQuake  or any of its
          Subsidiaries  (with respect to their relationship with such entities).
          True and complete copies of each of the following  documents have been
          delivered  to  National by  DigitalQuake:  (i) each  Welfare  Plan and
          Pension Plan (and, if applicable,  related trust  agreements)  and all
          amendments  thereto,  all written  summary plan  descriptions or other
          interpretations  thereof and written  descriptions  thereof which have
          been  generally  distributed to the employees of  DigitalQuake  or its
          Subsidiaries and all annuity  contracts or other funding  instruments,
          (ii) each  Benefit  Arrangement   including  written   interpretations
          thereof and written  descriptions  thereof  which have been  generally
          distributed to DigitalQuake's  employees and a complete description of
          any such Benefit  Arrangement which is not in writing,  (iii) the most
          recent determination,  opinion, advisory or notification letter issued
          by the Internal  Revenue  Service  with respect to each Pension  Plan,
          (iv) for the three most recent plan years, Annual Reports on Form 5500
          Series  required  to be filed  with any  governmental  agency for each
          Pension Plan,  and (v) a  description  setting forth the amount of any
          Liability of  DigitalQuake  as of the Closing  Date for payments  more
          than 30 days past due with respect to each Welfare Plan.

     (c)  Representations.
<PAGE>

          (i)  Pension Plans.  No Pension Plan is subject to the minimum funding
               requirements  of ERISA  or the  Code.  Each  Pension  Plan,  each
               related  trust  agreement,  annuity  contract  or  other  funding
               instrument is intended to be qualified and  tax-exempt  under the
               provisions of Code Section 401(a) (or 403(a), as appropriate) and
               501(a) and has either obtained from the Internal  Revenue Service
               a favorable  determination,  opinion,  advisory  or  notification
               letter, as applicable, as to its qualified status under the Code,
               or  has  time  remaining  to  apply  under  applicable   Treasury
               Regulations or Internal Revenue Service pronouncements for such a
               determination  letter  and to make any  amendments  necessary  to
               obtain a favorable determination,  and nothing has occurred since
               the  issuance  of any such  determination,  opinion,  advisory or
               notification  letter which could  reasonably be expected to cause
               the loss of the qualified status of any Pension Plan.

          (ii) Multiemployer Plans. Neither DigitalQuake nor any ERISA Affiliate
               contributes  to, or within the past six years has been  obligated
               to, contribute to any Multiemployer Plan.

          (iii)Welfare Plans.  None of DigitalQuake,  any ERISA Affiliate or any
               Welfare  Plan has any  present or future  obligation  to make any
               payment to or with  respect to any present or former  employee of
               DigitalQuake  or any  ERISA  Affiliate  pursuant  to any  retiree
               medical  benefit  plan, or other  retiree  Welfare  Plan,  and no
               condition exists which would prevent  DigitalQuake  from amending
               or terminating any such benefit plan or Welfare Plan.

          (iv) Compliance  with Law.  Each Welfare  Plan,  Pension Plan and each
               related  trust  agreement,  annuity  contract  or  other  funding
               instrument is intended to be qualified and  tax-exempt  under the
               provisions of Code Sections  401(a) (or 403(a),  as  appropriate)
               and 501(a) and has been  intended to be so  qualified  during the
               period from its  adoption to date.  Each  Welfare Plan which is a
               "group health plan," as defined in Section  607(1) of ERISA,  has
               been operated in compliance  with provisions of Part 6 of Title I
               of ERISA and  Sections  162(k) and 4980B of the Code at all times
               in all material  respects.  Each Pension Plan, each related trust
               agreement, annuity contract or other funding instrument presently
               complies and has been  maintained  in  compliance  with its terms
               and,  both  as to  form  and  operation,  with  the  requirements
               prescribed by any and all statutes, orders, rules and regulations
               which are applicable to such plans,  including but not limited to
               ERISA and the Code. Neither  DigitalQuake nor any ERISA Affiliate
               has any  liability for unpaid  contributions  with respect to any
               Pension Plan.

          (v)  Benefit  Arrangements.  Each Benefit  Arrangement which covers or
               has covered  employees or former employees of DigitalQuake or any
               of its Subsidiaries (with respect to their relationship with such
               entities)  has been  maintained in material  compliance  with its
               terms  and  with  the  requirements  prescribed  by any  and  all
               Regulations  which are  applicable  to such Benefit  Arrangement,
               including  the Code.  Except as set forth in Schedule  4.18,  and
               except  as  provided  by  law,  the  employment  of  all  persons
               presently  employed  or retained  by  DigitalQuake  or any of its
               Subsidiaries  is  terminable  at will,  at any  time and  without
               advance notice.

          (vi) Unrelated  Business Taxable Income. No Employee Plan (or trust or
               other  funding  vehicle  pursuant  thereto) is subject to any Tax
               under Code Section 511.
<PAGE>

          (vii)Deductibility  of Payments.  There is no Employee Plan,  Contract
               or other plan or  arrangement,  covering  any  employee or former
               employee of DigitalQuake or any of its Subsidiaries (with respect
               to their  relationship with such entities) that,  individually or
               collectively,   provides  for  the  payment  by  DigitalQuake  or
               provision  of  benefits,   giving  effect  to  the   transactions
               contemplated  hereby,  of any amount  (i) that is not  deductible
               under  Section  162(a)(1)  or 404 of the Code or (ii)  that is an
               "excess parachute payment" pursuant to Section 280G of the Code.

          (viii)  Fiduciary   Duties  and   Prohibited   Transactions.   Neither
               DigitalQuake  nor  any  plan  fiduciary  of any  Welfare  Plan or
               Pension  Plan which  covers or has  covered  employees  or former
               employees of DigitalQuake or any ERISA Affiliate,  has engaged in
               any  transaction  in violation of Sections 404 or 406 of ERISA or
               any "prohibited transaction," as defined in Section 4975(c)(1) of
               the Code,  for which no  exemption  exists  under  Section 408 of
               ERISA or Section 4975(c)(2) or (d) of the Code.

          (ix) No Amendments.  Neither  DigitalQuake nor any ERISA Affiliate has
               any announced  plan or legally  binding  commitment to create any
               additional  Employee  Plans or to amend or  modify  any  existing
               Employee  Plan  except to the  extent  that any  amendment  to an
               Employee Plan may be required by law.

          (x)  Certain Contracts.  None of the Employee Plans holds any interest
               in any annuity contract,  guaranteed  investment  contract or any
               other investment contract which is issued by an insurance company
               which   is   the   subject   of   bankruptcy,   receivership   or
               conservatorship proceedings.

          (xi) No  Acceleration  of Rights or  Benefits.  Except as set forth on
               Schedule  4.18,  neither  the  execution  and  delivery  of  this
               Agreement or the Ancillary Agreements nor the consummation of the
               transactions  contemplated  hereby or thereby  will result in the
               acceleration  or creation of any rights of any person to benefits
               under any of the Employee Plans, including but not limited to the
               acceleration  of the  exercisability  of any stock  options,  the
               acceleration  of  the  vesting  of  any  restricted   stock,  the
               acceleration  of the accrual or vesting of any benefits under any
               Pension  Plan or the  creation  of rights  under  any  severance,
               parachute or change of control agreement.

          (xii)No Other Material Liability.  No event has occurred in connection
               with which  DigitalQuake  or any ERISA  Affiliate or any Employee
               Plan,  directly or  indirectly,  could be subject to any material
               liability (i) under any Regulation or governmental order relating
               to any  Employee  Plans or  (ii) pursuant  to any  obligation  of
               DigitalQuake  or any  Subsidiary to indemnify any Person  against
               liability  incurred  under,  any such Regulation or order as they
               relate to the Employee Plans.

     4.19   Transactions   with  Related   Parties.   Except  for   compensation
arrangements  (a) in the ordinary course of business,  (b) disclosed on Schedule
4.19 or (c) for amounts less than $10,000, to the knowledge of DigitalQuake,  no
Related Party has (a) borrowed or loaned money or other property to DigitalQuake
which has not been repaid or  returned,  (b) any  contractual  or other  claims,
express or implied,  of any kind whatsoever against  DigitalQuake or (c) had any
interest in any property used by DigitalQuake.
<PAGE>

     4.20  Compliance  with Law.   DigitalQuake  has  conducted  the Business in
material  compliance with all applicable Court Orders and Regulations.   Neither
DigitalQuake  nor any of its  Representatives  has  received  any  notice to the
effect  that,  or  has  otherwise  been  advised  that,  DigitalQuake  is not in
compliance with any Court Orders or Regulations,  and  DigitalQuake is not aware
of any  existing  circumstances  that  are  likely  to  result  in any  material
violation of any Court Order or Regulations.

     4.21 Intellectual Property.

     (a)  General.  Schedule 4.21  sets forth  with  respect  to  DigitalQuake's
          Proprietary  Rights:  (i) for  each  patent  and  patent  application,
          including petty patents and utility models and applications  therefor,
          as applicable,  the number, normal expiration date, title and priority
          information for each country in which such patent has been issued, or,
          the application number, date of filing, title and priority information
          for each country, (ii) for each trademark,  tradename or service mark,
          whether or not registered, the date first used, the application serial
          number or registration  number, the class of goods covered, the nature
          of the goods or services,  the countries in which the names or mark is
          used and the expiration date for each country in which a trademark has
          been registered,  (iii) for each copyright for which  registration has
          been sought, whether or not registered, the date of creation and first
          publication of the work, the number and date of registration  for each
          country in which a copyright application has been registered, (iv) for
          each  mask  work,  whether  or  not  registered,  the  date  of  first
          commercial exploitation and if registered, the registration number and
          date of registration and (v) all such  Proprietary  Rights in the form
          of  licenses.  True  and  correct  copies  of all  Proprietary  Rights
          (including all pending  applications and application related documents
          and materials) which have been documented and are owned, controlled or
          used by or on behalf of DigitalQuake or in which  DigitalQuake has any
          interest whatsoever have been provided or made available to National.

     (b)  Adequacy.  DigitalQuake's  Proprietary  Rights are all those necessary
          for the normal  conduct of the Business as presently  conducted and as
          presently contemplated,  including the design, manufacture and sale of
          all products currently under  development,  planned for development or
          in production.

     (c)  Royalties  and  Licenses.   DigitalQuake  has  no  obligation  to  pay
          royalties or other  compensation for the use of any of its Proprietary
          Rights nor has DigitalQuake granted to any Person any license,  option
          or other rights to use in any manner any of DigitalQuake's Proprietary
          Rights,  whether  requiring the payment of royalties or not, except as
          set forth in Schedule 4.21.

     (d)  Ownership.  DigitalQuake  owns  or  has  a  valid  right  to  use  its
          Proprietary  Rights,  and its Proprietary  Rights will not cease to be
          valid rights of DigitalQuake by reason of the execution,  delivery and
          performance  of this  Agreement  or the  Ancillary  Agreements  or the
          consummation  of the  transactions  contemplated  hereby  or  thereby,
          except as set forth on Schedule 4.21. DigitalQuake has not transferred
          any of its Proprietary  Rights to DigitalQuake  International  Holding
          Ltd.
<PAGE>

     (e)  Absence of Claims. Neither DigitalQuake nor any of its Representatives
          has received any notice of (A) alleged  invalidity with respect to any
          of DigitalQuake's  Proprietary  Rights or (B) alleged  infringement of
          any  rights of others  due to any  activity  by  DigitalQuake.  To the
          knowledge of  DigitalQuake  (but without  having  conducted any patent
          search),  DigitalQuake's  use of DigitalQuake's  Proprietary Rights in
          its past,  current and planned  products do not and would not infringe
          upon or otherwise violate the valid rights of any third party anywhere
          in the world.  Except as set forth on Schedule  4.21,  no other Person
          (i) has notified  DigitalQuake that it is claiming any ownership of or
          right to use any of DigitalQuake's  Proprietary  Rights or (ii) to the
          knowledge of  DigitalQuake,  is infringing upon any of  DigitalQuake's
          Proprietary Rights in any way.

     (f)  Protection  of  Proprietary  Rights.   Digital  Quake  has  taken  all
          reasonable  and prudent steps to protect its  Proprietary  Rights from
          infringement by any other Person.  DigitalQuake has taken  appropriate
          actions and made  appropriate  applications  and  filings  pursuant to
          applicable laws, to the extent  reasonable and prudent,  to perfect or
          protect  its  interest  in  its   Proprietary   Rights.   The  pending
          applications  for the Proprietary  Rights owned by  DigitalQuake  have
          been duly filed,  and all actions  necessary or appropriate to protect
          DigitalQuake's  Proprietary  Rights have been taken.  DigitalQuake has
          taken  all  reasonable  steps  necessary  or  appropriate  (including,
          entering   into   appropriate   confidentiality,   nondisclosure   and
          proprietary    rights    agreements    with    officers,    directors,
          subcontractors,   independent  contractors,  full-time  and  part-time
          employees,  licensees and  customers in connection  with the Assets or
          the   Business)   to   safeguard   and   maintain   the   secrecy  and
          confidentiality  of, and the  proprietary  rights  in,  DigitalQuake's
          Owned Proprietary  Rights material to the Business.  All documentation
          with  respect  to  DigitalQuake's   Owned   Proprietary   Rights  that
          constitute  trade  secrets  are located at  DigitalQuake's  offices in
          Campbell, California.

     (g)  Disclosure of Analog Bits  Proprietary  Information.  DigitalQuake has
          not  disclosed  to any third  party any  confidential  or  proprietary
          information of Analog Bits Inc.  provided to DigitalQuake  pursuant to
          that  certain  License  and  Hardware  Design  Agreement  dated  as of
          July 28,  2000 between  DigitalQuake and Analog Bits Inc. (the "Analog
          Bits Agreement") or otherwise.

     4.22 Tax Matters.

     (a)  Filing  of  Tax  Returns.  DigitalQuake  has  timely  filed  with  the
          appropriate  taxing  authorities  all Tax  Returns in respect of Taxes
          required to be filed.  The Tax Returns filed are complete and accurate
          in all respects.  Except as specified in Schedule  4.22,  DigitalQuake
          has not  requested  any  extension  of time  within  which to file Tax
          Returns in respect of any Taxes.

     (b)  Payment  of Taxes.  All Taxes owed by  DigitalQuake  in respect of Tax
          periods (or portions thereof) ending on or prior to before the Closing
          Date  have  been  paid,  or  an  adequate   reserve  shall  have  been
          established  therefor prior to the Closing Date.  DigitalQuake has, or
          will  have,  no  liability  for Taxes in respect  of Tax  periods  (or
          portions  thereof)  ending on or before the Closing  Date in excess of
<PAGE>

          the sum of (i) the amounts  paid in respect of Taxes prior to Closing,
          (ii) the amount of reserves  established  for Taxes  (rather  than any
          reserve for deferred Taxes  established to reflect timing  differences
          between  book and tax  income) as set forth on the face of the Balance
          Sheet  (rather than in any notes  thereto)  and (iii) such  additional
          reserve  amounts as may be added by  DigitalQuake  on its books (other
          than reserves  described in the  parenthetical  in clause (ii) hereof)
          prior to Closing  with  respect to  ordinary  business  operations  of
          DigitalQuake  in  accordance  with   DigitalQuake's  past  custom  and
          practice  between the Balance  Sheet Date and the  Closing  Date.  All
          Taxes that  DigitalQuake is required by law to withhold or collect for
          periods  ending on or before the Closing Date have been duly  withheld
          or  collected  and  have  been  timely  paid  over to the  appropriate
          governmental authorities to the extent due and payable.

     (c)  Audits,  Investigations  or  Claims.  No  deficiencies  for  Taxes  of
          DigitalQuake have been claimed,  proposed or assessed by any taxing or
          other  governmental  authority.  Except as set forth in Schedule 4.22,
          there are no pending or, to the knowledge of DigitalQuake,  threatened
          audits,  assessments or other Actions for or relating to any Liability
          in respect of Taxes of  DigitalQuake,  and there are no matters  under
          discussion  with any  governmental  authorities  with respect to Taxes
          that are likely to result in an additional Liability for Taxes. Except
          as set forth in Schedule  4.22,  neither  DigitalQuake  nor any of its
          Representatives has been notified that any taxing authority intends to
          audit a Tax Return for any other period. DigitalQuake has delivered to
          National complete and accurate copies of federal,  state and local Tax
          Returns of  DigitalQuake  for the year  ended  December 31,  2000.  No
          extension of a statute of  limitations  relating to Taxes is in effect
          with respect to DigitalQuake.

     (d)  Lien.  There are no  Encumbrances  for Taxes  (other  than for current
          Taxes not yet due and payable) on any of the Assets.

     (e)  Tax  Elections.   All  elections  with  respect  to  Taxes   affecting
          DigitalQuake  as of the date  hereof  are  reflected  or set  forth on
          DigitalQuake's Tax Returns for the 2000 Tax year. DigitalQuake (i) has
          not made nor will make a consent  dividend  election under Section 565
          of the  Code;  (ii) has  not  consented  at  any  time  under  Section
          341(f)(1) of the Code to have the  provisions of Section  341(f)(2) of
          the Code apply to any disposition of the Assets; (iii) has not agreed,
          nor is required,  to make any  adjustment  under Section 481(a) of the
          Code by reason of a change in accounting method or otherwise; (iv) has
          not made an election,  nor is required, to treat any Asset as owned by
          another  Person  pursuant to the  provisions of Section  168(f) of the
          Code  or as  tax-exempt  bond  financed  property  or  tax-exempt  use
          property  within the meaning of Section 168 of the Code;  (v)  has not
          elected  at any time to be  treated  as an S  corporation  within  the
          meaning of Sections  1361 or 1362 of the Code;  and  (vi) has not made
          any of the  foregoing  elections  or is  required  to apply any of the
          foregoing rules under any comparable state or local Tax provision.

     (f)  Prior  Affiliated  Groups.  DigitalQuake has never been a member of an
          affiliated group of corporations within the meaning of Section 1504 of
          the Code or of any group that has filed a  combined,  consolidated  or
          unitary state or local Tax Return.

     (g)  Tax Sharing Agreements. There are no Tax-sharing agreements or similar
          arrangements  (including  indemnity  arrangements)  with respect to or
          involving  DigitalQuake,  and,  after the Closing  Date,  DigitalQuake
          shall  not be bound  by any such  Tax-sharing  agreements  or  similar
          arrangements (entered into prior to the Closing) or have any Liability
          thereunder for amounts due in respect of periods prior to or after the
          Closing Date.

     (h)  Partnerships.  DigitalQuake  (i) is not subject to any joint  venture,
          partnership,  or other  arrangement  or contract which is treated as a
          partnership  for  federal  income  tax  purposes  and  (ii) is  not  a
          "personal  holding  company" as defined in Section 542 of the Code (or
          any similar provision of state, local or foreign law). DigitalQuake is
          not a successor to any other  Person by way of merger,  reorganization
          or similar transaction.
<PAGE>

     (i)  Foreign Person. Except as set forth in Schedule 4.22(i)),  none of the
          Shareholders is a "foreign person" as defined in Section 1445(f)(3) of
          the Code.

     (j)  Other Entity Liability. DigitalQuake has no Liability for the Taxes of
          any Person  (other  than  Taxes of  DigitalQuake)  (i) under  Treasury
          Regulation Section 1.1502-6 (or any similar provision of state, local,
          or foreign law), (ii) as a transferee or successor,  (iii) by contract
          or (iv) otherwise.

     (k)  No Withholding.  The transactions  contemplated herein are not subject
          to the tax  withholding  provisions of Section 3406 of the Code, or of
          Subchapter  A of  Chapter 3 of the Code or of any other  provision  of
          law.

     4.23 Insurance.  Schedule 4.23 contains a complete and accurate list of all
policies  or  binders  of  insurance  (showing  as to each  policy or binder the
carrier,  policy number,  coverage limits,  expiration dates, annual premiums, a
general  description  of the type of coverage  provided  and any pending  claims
thereunder) of which DigitalQuake is the owner,  insured or beneficiary.  All of
such policies are sufficient for (i)  compliance  with all material  Regulations
and all of the Contracts and (ii) covering such risks as are in accordance  with
normal industry practice for companies engaged in businesses  similar to that of
DigitalQuake  (taking into account the cost and availability of such insurance).
DigitalQuake is not in default under any of such policies or binders, and it has
not  prejudiced  coverage  by failing to give any notice or to present any claim
under any such policy or binder in a due and timely fashion.  There are no facts
known to  DigitalQuake  upon which an insurer  might be justified in reducing or
denying coverage or increasing  premiums on existing policies or binders.  There
are no  outstanding  unpaid  claims under any such  policies or  binders.   Such
policies  and  binders are in full force and effect on the date hereof and shall
be kept in full force and effect by DigitalQuake through the Effective Time.

     4.24 Purchase  Commitments  and  Outstanding  Bids.  Except as set forth on
Schedule 4.24, as of the date of this  Agreement,  the aggregate of all accepted
and  unfulfilled  orders  for  the  performance  of  services  entered  into  by
DigitalQuake does not exceed $5,000,  and the aggregate of all Contracts for the
purchase of  supplies  by  DigitalQuake  does not exceed  $10,000,  all of which
orders and Contracts were made in the ordinary course of business.  There are no
claims  against  DigitalQuake  for  inadequate,  incorrect  or  faulty  services
rendered by DigitalQuake prior to or on the date hereof. No outstanding purchase
or outstanding  lease  commitment of DigitalQuake  presently is in excess of the
normal, ordinary and usual requirements of the Business or was made at any price
in excess of the now current market price or contains terms and conditions  more
onerous than those usual and customary in DigitalQuake's business.
<PAGE>

     4.25 Payments.  Neither DigitalQuake nor any of its Representatives  acting
on its  behalf  have,  directly  or  indirectly,  paid  or  delivered  any  fee,
commission  or other sum of money or  property,  however  characterized,  to any
finder,  agent,  government  official or other  party,  in the U.S. or any other
country which  DigitalQuake  knows or has reason to believe to have been illegal
under any federal,  state or local laws of the U.S. or any other country  having
jurisdiction.   Neither   DigitalQuake  nor,  to  its  knowledge,   any  of  its
Representatives  acting on its behalf,  have  accepted or received  any unlawful
contributions,   payments,   gifts  or   expenditures.   DigitalQuake   has  not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers.

     4.26  Customers  and  Suppliers.   Schedule 4.26  sets forth a complete and
accurate list of the names and addresses of (i) the five customers who purchased
from DigitalQuake the greatest dollar volume of services and products during its
last fiscal year,  showing the  approximate  total sales in dollars to each such
customer  during  such  fiscal  year,  and  (ii)  all  suppliers  with  sales to
DigitalQuake  greater  than  $10,000  during the last fiscal  year,  showing the
approximate  total purchases in dollars by DigitalQuake  from each such supplier
during such fiscal year. Since the Balance Sheet Date, there has been no adverse
change in any material respect in the business relationship of DigitalQuake with
any customer or supplier named on  Schedule 4.26.  DigitalQuake has not received
any written  communication  from any customer or supplier named on Schedule 4.26
of any intention to return,  terminate or materially  reduce  purchases  from or
supplies to DigitalQuake.

     4.27 Environmental Matters.

     (a)  Definitions.  The  following  terms,  when used in this Section  4.27,
          shall have the following meanings:

          (i)  "Environmental   Conditions"  mean  the  introduction   into  the
               environment of any pollution, including any contaminant, irritant
               or pollutant or other  Hazardous  Substance  (whether or not such
               pollution  constituted  at the time  thereof a  violation  of any
               Environmental  Law  as a  result  of  any  Release  of  any  kind
               whatsoever  of any  Hazardous  Substance)  as a  result  of which
               DigitalQuake has or may become liable to any Person in a material
               respect or by reason of which any of the  Assets or the  Business
               may suffer or be subjected to any Encumbrance.

          (ii) "Environmental  Laws"  mean all  Regulations  which  regulate  or
               relate to the protection or clean-up of the environment, the use,
               treatment,  storage,  transportation,   generation,  manufacture,
               processing,  distribution,  handling or disposal of, or emission,
               discharge or other  release or threatened  release of,  Hazardous
               Substances or otherwise dangerous substances,  wastes,  pollution
               or materials  (whether gas, liquid or solid), the preservation or
               protection  of  waterways,   groundwater,  drinking  water,  air,
               wildlife,  plants or other natural  resources,  or the health and
               safety of persons or property, including protection of the health
               and safety of employees.  Environmental  Laws include the Federal
               Water  Pollution  Control Act,  Resource  Conservation & Recovery
               Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act,
               Occupational Safety and Health Act, Toxic Substances Control Act,
               Clean Air Act, Comprehensive Environmental Response, Compensation
               and Liability Act, Hazardous Materials Transportation Act and all
               analogous or related federal, state or local law.
<PAGE>

          (iii)"Hazardous   Substance"   means  any  pollutants,   contaminants,
               chemicals,   waste  and  any  toxic,  infectious,   carcinogenic,
               reactive, corrosive,  ignitable or flammable chemical or chemical
               compound  or  hazardous  substance,  material  or waste,  whether
               solid,  liquid or gas,  including any quantity of asbestos in any
               form,  urea  formaldehyde,  PCB's,  radon  gas,  crude oil or any
               fraction thereof, all forms of natural gas, petroleum products or
               by-products or derivatives,  radioactive substance, waste waters,
               sludges, slag and any other substance,  material or waste that is
               subject  to  regulation,   control  or   remediation   under  any
               Environmental Laws.

          (iv) "DigitalQuake"  for  purposes  of this  Section  4.27  means  (A)
               DigitalQuake,     (B)    all    Affiliates    of    DigitalQuake,
               (C) all partnerships,   joint   ventures   and   other   entities
               or organizations  in which  DigitalQuake  was at any time or is a
               partner,  joint  venturer,  member  or  participant  and  (D) all
               predecessor or former corporations, partnerships, joint ventures,
               organizations, businesses or other entities, whether in existence
               as of the date  hereof  or at any time prior to the date  hereof,
               the assets or  obligations of which have been acquired or assumed
               by DigitalQuake or to which DigitalQuake has succeeded.

          (v)  "Release"  means and includes  any  spilling,  leaking,  pumping,
               pouring, exhausting, emitting, emptying, discharging,  injecting,
               escaping,  leaching, dumping or disposing into the environment or
               the  workplace  of any  Hazardous  Substance,  and  otherwise  as
               defined in any Environmental Law.

     (b)  Notice   of   Violation.   Neither   DigitalQuake   nor   any  of  its
          Representatives  has  received  any  notice  of  alleged,   actual  or
          potential   responsibility   for,  or  any  inquiry  or  investigation
          regarding,  (i) any Release or threatened  Release by  DigitalQuake of
          any Hazardous  Substance at any location or (ii) an alleged  violation
          of or non-compliance by DigitalQuake with the conditions of any Permit
          required  under  any  Environmental  Law  or  the  provisions  of  any
          Environmental  Law.  DigitalQuake  has not  received any notice of any
          other  claim,  demand or Action by any Person  alleging  any actual or
          threatened injury or damage to any Person, property,  natural resource
          or  the  environment  arising  from  or  relating  to any  Release  or
          threatened Release by DigitalQuake of any Hazardous Substances.

     (c)  Environmental  Conditions.  There are no present or past Environmental
          Conditions.

     (d)  Notices, Warnings and Records.  DigitalQuake has given all notices and
          warnings,  made all reports,  and has kept and  maintained all records
          required by and in compliance with all Environmental Laws.

     4.28  Brokers;  Transaction  Costs.  Except as set forth on Schedule  4.28,
Neither  DigitalQuake nor any of its  Representatives  has entered into and will
not enter into any contract,  agreement,  arrangement or understanding  with any
Person that will result in the obligation of National or DigitalQuake to pay any
finder's fee,  brokerage  commission or similar  payment in connection  with the
transactions contemplated hereby.
<PAGE>

     4.29 No Other  Agreements  to Sell  DigitalQuake  or the  Assets.   Neither
DigitalQuake nor any of the Shareholders has any legal  obligation,  absolute or
contingent,  to any other Person to sell all or substantially  all of the Assets
or to sell any capital stock of  DigitalQuake  (other than pursuant to exercises
of the DigitalQuake  Options and the National  Warrant) or to effect any merger,
consolidation  or other  reorganization  of  DigitalQuake  or to enter  into any
agreement with respect thereto.

     4.30 Material  Misstatements or Omissions  No  representation,  warranty or
other statement of DigitalQuake  to National,  whether written or oral,  whether
included in any materials  provided to National  prior to the date hereof or the
Closing  Date and  whether  included  in this  Agreement  or in any  Exhibit  or
Schedule hereto or in any other documents delivered to National, is, or will be,
untrue with  respect to any  material  fact or omits,  or will omit,  to state a
material fact necessary in order to make the statements made not misleading.

                                   ARTICLE V.
                   REPRESENTATIONS AND WARRANTIES OF NATIONAL

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

     5.1  Organization of National.   National is a corporation  duly organized,
validly  existing and in good standing  under the laws of the State of Delaware.
National  has full  corporate  power and  authority  to conduct its  business as
presently  conducted  by it and to own and  lease  its  properties  and  assets.
National is duly  qualified  to do business as a foreign  corporation  and is in
good standing in each  jurisdiction  where the character of its properties owned
or leased or the nature of its  activities  make such  qualification  necessary,
except where the failure to be so qualified or in good standing would not have a
material adverse effect on National.

     5.2  Authorization.   National  has  all  requisite   corporate  power  and
authority,  and has taken all corporate  action necessary to execute and deliver
this  Agreement and the Ancillary  Agreements,  to consummate  the  transactions
contemplated  hereby and thereby and to perform its  obligations  hereunder  and
thereunder.  This Agreement has been duly executed and delivered by National and
is, and upon execution and delivery,  the Ancillary  Agreements  will be, legal,
valid and binding  obligations  of  National,  enforceable  against  National in
accordance with their terms,  except that  enforceability  may be limited by the
effect of bankruptcy,  insolvency,  reorganization,  moratorium or other similar
laws relating to or affecting the rights of creditors.

     5.3 No Conflict or Violation; Consents.  None of the execution, delivery or
performance of this Agreement or any Ancillary  Agreement,  the  consummation of
the transactions contemplated hereby or thereby, nor compliance by National with
any of the provisions  hereof or thereof,  will (a) violate or conflict with any
provision of the Second Restated  Certificate of Incorporation,  as amended,  or
Amended and Restated Bylaws of National,  (b) violate,  conflict with, or result
in a breach of or  constitute  a default  (with or without  notice or passage of
time) under,  or result in the  termination  of, or accelerate  the  performance
<PAGE>

required  by, or result in a right to  terminate,  accelerate,  modify or cancel
under, or require a notice, consent or approval under, or result in the creation
of any Encumbrance upon any of National's  assets under, any material  contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money,  instrument of indebtedness,  security  interest or
other  arrangement  to which  National  is a party or by which it is bound or to
which any of its  assets are  subject or  (c) violate  any  Regulation  or Court
Order. Except as set forth on Schedule 5.3, no notices to,  declaration,  filing
or registration  with,  approvals or consents of, or assignments by, any Persons
(including  any  federal,   state  of  local   governmental  or   administrative
authorities) are necessary to be made or obtained by National in connection with
the execution, delivery or performance of this Agreement.

     5.4 No  Brokers.  Neither  National  nor  any of its  officers,  directors,
employees,  stockholders  or Affiliates  has employed or made any agreement with
any  broker,  finder or  similar  agent or any Person  which will  result in the
obligation of DigitalQuake or any Shareholder to pay any finder's fee, brokerage
fees or  commission  or similar  payment  in  connection  with the  transactions
contemplated hereby.

     5.5 Litigation.  There are no Actions pending, or to National's  knowledge,
threatened or anticipated  against,  related to or affecting National seeking to
delay, limit or enjoin the transactions contemplated by this Agreement.

     5.6 National  Shares.  All of the shares of National  Common Stock issuable
pursuant  to  Section  3.5,  if any,  will be  validly  issued,  fully  paid and
nonassessable  and free of and not subject to any preemptive rights or rights of
first refusal created by statute or by National's Second Restated Certificate of
Incorporation,  as amended,  or Amended and Restated  Bylaws upon their issuance
pursuant to Section 3.5.

                                  ARTICLE VI.
                  REPRESENTATIONS AND WARRANTIES OF MERGER SUB

     Merger Sub  represents  and  warrants to  DigitalQuake  as  follows,  which
representations  and  warranties  are true and correct as of the date hereof and
will be, as of the Closing Date, true and correct:

     6.1 Organization of Merger Sub. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
Merger Sub has not conducted any business.  National owns all of the outstanding
capital stock of Merger Sub, free and clear of all Encumbrances.

     6.2  Authorization.  Merger  Sub  has all  requisite  corporate  power  and
authority,  and has taken all corporate action necessary, to execute and deliver
this  Agreement  and the  Agreement  of Merger to  consummate  the  transactions
contemplated  hereby and thereby and to perform its  obligations  hereunder  and
thereunder. This  Agreement  has been duly  executed and delivered by Merger Sub
and is, and upon execution and delivery,  the Agreement of Merger will be, as of
the  Effective  Time,  legal,  valid and  binding  obligations  of  Merger  Sub,
enforceable  against  Merger Sub in  accordance  with their  terms,  except that
enforceability  may  be  limited  by  the  effect  of  bankruptcy,   insolvency,
reorganization,  moratorium  or other  similar laws relating to or affecting the
rights of creditors.
<PAGE>

     6.3 Legal  Proceedings.  There are no Actions  pending,  or to Merger Sub's
knowledge, threatened or anticipated against, related to or affecting Merger Sub
seeking  to  delay,  limit  or  enjoin  the  transactions  contemplated  by this
Agreement.

                                  ARTICLE VII.
                          ACTIONS PRIOR TO THE CLOSING

     National, Merger Sub and DigitalQuake covenant as follows:

     7.1 Conduct of Business.  Except as  contemplated  by this  Agreement or as
consented to by National in writing, from the date hereof through the earlier of
(A) the  expiration of the Merger  Option Period or (B) the Effective  Time (the
"Covenant  End  Date"),  DigitalQuake  shall (i)  operate  the  Business  in the
ordinary  course of business and in  accordance  with past practice and (ii) not
take any action  inconsistent with this Agreement,  the Ancillary  Agreements or
the  consummation  of  the  Merger.  Without  limiting  the  generality  of  the
foregoing,  from the date hereof  through the  Covenant  End Date,  DigitalQuake
shall not, except as specifically contemplated by this Agreement or as consented
to by National in writing:

     (a)  incur any  indebtedness  (other  than  indebtedness  arising  from the
          purchase and sale of goods by  DigitalQuake  in the ordinary course of
          business), or assume, guarantee,  endorse (other than endorsements for
          deposit  or  collection  in  the  ordinary  course  of  business),  or
          otherwise become responsible for obligations of any other Person;

     (b)  issue,  commit to issue or  reserve  for  issuance  any  shares of its
          capital stock or any other  securities or any  securities  convertible
          into shares of its capital  stock or any other  securities,  including
          options and  warrants  therefor  (other  than  shares of  DigitalQuake
          Common  Stock  issued  upon the  exercise of  DigitalQuake  Options or
          warrants or conversion of DigitalQuake Preferred Stock), or accelerate
          the vesting of any DigitalQuake Options;

     (c)  declare, set aside or make or incur any obligation to pay any dividend
          or  distribution  on its capital stock or make or incur any obligation
          to redeem, purchase or otherwise acquire any of its capital stock;

     (d)  make any change to its Restated Articles or Bylaws;

     (e)  mortgage,  pledge or otherwise encumber any Assets or sell,  transfer,
          license or  otherwise  dispose of any Assets,  except for  licenses of
          product  technology in the ordinary  course of business and except for
          Encumbrances  arising  in  connection  with  leases  of  equipment  by
          DigitalQuake in the ordinary course of business;
<PAGE>

     (f)  cancel, release or assign any indebtedness owed to it or any claims or
          rights  held by it,  except in the  ordinary  course of  business  and
          consistent with past practice;

     (g)  make any investment of a capital nature either by purchase of stock or
          securities,  contributions to capital, property transfer or otherwise,
          or by the  purchase  of any  property  or assets of any other  Person,
          except  capital  expenditures  in  the  ordinary  course  of  business
          consistent with past practice;

     (h)  terminate  any material  Contract or make any  material  change in any
          material Contract;

     (i)  (A) enter into or modify any employment Contract,  (B) pay or agree to
          pay any  compensation  to or for any employee,  officer or director of
          DigitalQuake  other  than  in the  ordinary  course  of  business  and
          consistent  with  past  practice,  (C) pay or agree to pay any  bonus,
          incentive compensation, service award or other like benefit other than
          in the ordinary  course of business,  consistent with past practice or
          (D)  enter  into  or  modify  any  other  Employee  Plan,   except  as
          contemplated hereby;

     (j)  enter into or modify any Contract with a Related Party;

     (k)  enter into any  Contract,  which,  if entered  into on the date hereof
          would have been listed on Schedule 4.11, unless the same is terminable
          by  DigitalQuake  on no more  than 30  days'  written  notice  without
          penalty  or  payment  and is entered  into in the  ordinary  course of
          business consistent with past practice;

     (l)  adopt or make any change in any  method of  accounting  or  accounting
          practice in respect of Taxes or otherwise;

     (m)  make or change any  election  in respect of Taxes,  enter into any tax
          allocation agreement,  tax sharing agreement,  tax indemnity agreement
          or closing agreement,  settle or compromise any claim,  notice,  audit
          report or assessment in respect of Taxes,  or consent to any extension
          or  waiver  of  the  limitation  period  applicable  to any  claim  or
          assessment in respect of Taxes;

     (n)  fail to use its  commercially  reasonable  efforts to  (i) retain  its
          employees  and   independent   contractors,   (ii) maintain   existing
          relationships   with  customers  and  suppliers  of  DigitalQuake  and
          (iii) otherwise  preserve the goodwill of the Business;  provided that
          DigitalQuake  shall not make any  material  commitment  of any kind on
          behalf of National without National's prior written consent; or

     (o)  do any other act which would cause any  representation  or warranty of
          DigitalQuake  in this Agreement to be or become untrue in any material
          respect.

     7.2 Investigation by National.  Subject to the  Confidentiality  Agreement,
from the date hereof  through the Covenant End Date,  DigitalQuake  shall afford
the  Representatives  of  National  and its  Affiliates  complete  access at all
reasonable  times  upon  reasonable  notice to the  Business  and the Assets and
Liabilities  for the  purpose  of  inspecting  the same,  and to  DigitalQuake's
officers,  employees  and  Representatives,  properties,  Books and  Records and
Contracts,  and shall furnish  National and its  Representatives  all financial,
operating and other data and information (including  DigitalQuake's  Proprietary
Rights) as National or its Affiliates, through their respective Representatives,
may request.
<PAGE>

     7.3 Notification of Certain Matters. Each party shall give prompt notice to
the  other of (i) the  occurrence,  or  failure  to occur,  of any  event  which
occurrence or failure would be likely to cause any representation or warranty of
such  party  contained  in this  Agreement  to be  untrue or  inaccurate  in any
material  respect and (ii) any material  failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder;  provided,  however,  that such disclosure  shall not be deemed to
cure any breach of a  representation,  warranty,  covenant  or  agreement  or to
satisfy  any  condition.  DigitalQuake  shall  promptly  notify  National of any
Default,  the threat or  commencement  of any Action,  or any  development  that
occurs  before the  Closing  that could  reasonably  be  expected to result in a
failure of the  conditions  to Closing  enumerated in  Article IX,  and National
shall promptly notify  DigitalQuake of any threat or commencement of any Action,
or any  development  that occurs  before the Closing  that could  reasonably  be
expected to result in failure of the conditions to Closing enumerated in Article
VIII or delay, limit or enjoin the transactions contemplated by this Agreement.

     7.4 Restrictions on Certain Transactions

     (a)  No  Solicitation.  From the date hereof through the Covenant End Date,
          DigitalQuake shall not, directly or indirectly  (whether on its own or
          through  its  Representatives),   enter  into,  solicit,  initiate  or
          continue any discussions or negotiations with, or encourage or respond
          to any inquiries or proposals by, or participate  in any  negotiations
          with,  or provide any  information  to, or otherwise  cooperate in any
          other way with any Person or group (as defined  under Section 13(d) of
          the  Securities  Exchange Act of 1934,  as amended) of Persons,  other
          than  National,  Merger  Sub  and  their  respective  Representatives,
          concerning  any sale (by license or  otherwise) of all or a portion of
          the  Assets  (except  in  the  ordinary  course  of  business)  or the
          Business,  or of any shares of capital stock of  DigitalQuake,  or any
          merger, consolidation, liquidation, dissolution or similar transaction
          involving DigitalQuake (each such transaction being referred to herein
          as  a  "Proposed   Acquisition   Transaction").   DigitalQuake  hereby
          represents  that it is not now engaged in discussions or  negotiations
          with any party other than  National and Merger Sub with respect to any
          of the foregoing.  DigitalQuake  agrees not to release any third party
          from,  or waive any provision  of, any  confidentiality  or standstill
          agreement to which DigitalQuake is a party.

     (b)  Notification.  From the date  hereof  through the  Covenant  End Date,
          DigitalQuake will immediately  notify National (orally and in writing)
          if any  discussions or  negotiations  are sought to be initiated,  any
          inquiry or proposal is made,  or any  information  is  requested  with
          respect to any Proposed Acquisition Transaction and notify National of
          the terms of any proposal  which it may receive in respect of any such
          Proposed Acquisition Transaction,  including,  without limitation, the
          identity  of  the   prospective   purchaser   or   soliciting   party.
          DigitalQuake  shall  also  provide  National  with a copy of any offer
          received in respect of any Proposed Acquisition Transaction.
<PAGE>

     7.5 Approval of Shareholders; Conversion of DigitalQuake Preferred Stock.

     (a)  Shareholder Approval. If National determines for any reason and in its
          sole discretion  that a vote of  Shareholders  confirming or ratifying
          the  approval  of this  Agreement  and the  transactions  contemplated
          hereby,  including the Merger, is advisable,  DigitalQuake shall, upon
          National's  request,  solicit written consents  confirming approval of
          this  Agreement  and  the  Merger  from  all of the  Shareholders.  In
          addition,  upon such a request  by  National,  DigitalQuake  shall use
          diligent good faith  efforts to obtain the written  consent of (i) the
          holders  of  at  least  sixty   percent   (60%)  of  the   outstanding
          DigitalQuake   Series A  Preferred  Stock  and  DigitalQuake  Series B
          Preferred  Stock,  voting  together  as a single  class,  and (ii) the
          shareholders  of  DigitalQuake  representing  all of  the  outstanding
          shares  of   DigitalQuake   Common  Stock.   In  connection  with  the
          solicitation of consents  contemplated  hereby, the Board of Directors
          of DigitalQuake shall recommend such approval to its shareholders.

     (b)  Conversion of DigitalQuake  Preferred  Stock.  DigitalQuake  shall use
          diligent  good  faith  efforts to cause the  holders  of  DigitalQuake
          Preferred  Stock  to  elect  to  convert  all  outstanding  shares  of
          DigitalQuake   Preferred  Stock  into  DigitalQuake  Common  Stock  in
          accordance  with the Restated  Articles,  with such  conversions to be
          effective no later than immediately prior to the Effective Time.

     7.6 Employee Benefit Matters.

     (a)  National  Options.  Certain employees of DigitalQuake will be eligible
          to receive National Options to purchase the aggregate number of shares
          of National Common Stock set forth on Schedule 7.6(a) (as adjusted for
          stock splits, stock dividends, consolidations and the like) as soon as
          reasonably  practicable after the Closing, with the allocation of such
          National  Options  among  such  employees  to be  made  in the  manner
          contemplated by Schedule  7.6(a).  The terms of such National  Options
          will be generally consistent with National's current policies.

     (b)  Incentive Bonus Program. Prior to the Closing Date, DigitalQuake shall
          establish an incentive bonus program for those DigitalQuake  employees
          who have accepted  offers of employment made by National in connection
          with this  transaction  as of the  Closing  substantially  in the form
          attached  hereto as Exhibit F.  National  shall  assume the  incentive
          bonus program in connection with the Merger.

     (c)  Incentive  Pay  Programs.   National  agrees  that  all  employees  of
          DigitalQuake who accept  employment with National shall be eligible to
          participate in National's incentive pay programs to the same extent as
          other similarly situated National employees.

     7.7  Employment  Agreements,  Non-Compete  Agreements  and  Other  Employee
Matters. DigitalQuake shall use its reasonable best efforts to cause each person
listed or described on Schedule 1.1(b) to enter into an Employment Agreement and
each person listed or described on Schedule  1.1(d) to enter into an Non-Compete
Agreement.  In addition,  DigitalQuake  shall use its reasonable best efforts to
cause all employees who accept employment with National to enter into National's
standard assignment of inventions  agreement and the other agreements  routinely
entered into between National and its employees.
<PAGE>

     7.8  Further  Assurances.  Upon the terms  and  subject  to the  conditions
contained  herein,  the  parties  agree,  in each case both before and after the
Effective Time, (i) to use all reasonable efforts to take, or cause to be taken,
all  actions  and to do, or cause to be done,  all things  necessary,  proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement  and  the  Ancillary  Agreements,   (ii)  to  execute  any  documents,
instruments  or  conveyances  of any kind which may be  reasonably  necessary or
advisable  to  carry  out any of the  transactions  contemplated  hereunder  and
thereunder,  and (iii) to  cooperate  with  each  other in  connection  with the
foregoing.  Without limiting the foregoing,  the parties agree to use reasonable
efforts  (A) to  obtain  any  necessary  Consents  (provided,  however,  that no
amendment or  modification  shall be made to any Contract to obtain such Consent
without National's  consent),  (B) to obtain all necessary Permits,  (C) to give
all  notices to, and make all  registrations  and  filings  with third  parties,
including submissions of information requested by governmental authorities,  and
(D) to fulfill all conditions to this Agreement.

                                 ARTICLE VIII.
                    CONDITIONS TO OBLIGATIONS OF DIGITALQUAKE

     Following  delivery  of  the  Merger  Option  Notice,  the  obligations  of
DigitalQuake to consummate the Merger and the other transactions contemplated by
this Agreement are subject to the  satisfaction on or prior to the Closing Date,
of each  of the  following  conditions  unless  waived  by  DigitalQuake  in its
discretion:

     8.1  Representations,  Warranties and Covenants.  All  representations  and
warranties of National and Merger Sub contained in this Agreement  shall be true
and correct in all  material  respects at and as of the Closing  Date as if such
representations  and warranties were made at and as of the Closing Date (without
giving effect to any limitations  with respect to materiality set forth therein)
except as would not have a Material  Adverse  Effect on  National or Merger Sub.
National  and Merger Sub shall  have  performed  in all  material  respects  all
agreements and covenants  required hereby to be performed by them prior to or at
the Closing Date. There shall be delivered to DigitalQuake a certificate (signed
by a Senior Vice  President or more senior officer of National) to the foregoing
effect ("National's Closing Certificate").

     8.2  Consents.  All  consents,  approvals  and  waivers  from  governmental
authorities  necessary for the valid  consummation of the Merger shall have been
obtained. DigitalQuake shall be reasonably satisfied that all approvals required
under  any  Regulations  to  carry  out the  transactions  contemplated  by this
Agreement  and the  Ancillary  Agreements  shall  have  been  obtained  and that
National  shall have  complied in all  material  respects  with all  Regulations
applicable to the transactions contemplated hereby and thereby.

     8.3 No Court Orders.  There shall not be any Regulation or Court Order that
makes  the  transactions  contemplated  hereby  or by the  Ancillary  Agreements
illegal or otherwise prohibited, and no proceeding shall have been threatened or
instituted  seeking to restrain or enjoin or otherwise  prevent  consummation of
the transactions  contemplated hereby or which question the validity or legality
of the same.
<PAGE>

     8.4 Closing  Documents.  DigitalQuake shall have received from National and
Merger Sub the  documents and other items to be delivered by National and Merger
Sub pursuant to Section 10.2 of this Agreement.

                                  ARTICLE IX.
              CONDITIONS TO OBLIGATIONS OF NATIONAL AND MERGER SUB

     Following delivery of the Merger Option Notice, the obligations of National
and Merger Sub to consummate the Merger and the other transactions  contemplated
by this  Agreement  are subject to the  satisfaction  on or prior to the Closing
Date, of each of the following  conditions  unless waived by National and Merger
Sub in their discretion:

     9.1  Representations,  Warranties and Covenants.  All  representations  and
warranties of DigitalQuake contained in this Agreement shall be true and correct
in  all   material   respects  at  and  as  of  the  Closing  Date  as  if  such
representations  and warranties were made at and as of the Closing Date (without
giving effect to any limitations with respect to materiality set forth therein).
DigitalQuake  shall have  performed in all material  respects all agreements and
covenants required hereby to be performed prior to or at the Closing Date. There
shall be  delivered  to  National  a  certificate  (signed by the  President  of
DigitalQuake) to the foregoing effect ("DigitalQuake's Closing Certificate").

     9.2 Shareholder  Approval.  Shareholders  of  DigitalQuake  representing at
least (a) sixty percent (60%) of the outstanding shares of DigitalQuake Series A
Preferred Stock and DigitalQuake  Series B Preferred Stock, voting together as a
single  class,  on an  as-converted-to-common-stock  basis,  and  (b) all of the
outstanding  shares of  DigitalQuake  Common  Stock  shall  have  consented  to,
approved and adopted this  Agreement and the Merger and agreed to take all other
actions  necessary  or  required to  consummate  the  transactions  contemplated
hereby.

     9.3  Approvals.  Consents  from  governmental  authorities  and from  other
parties  necessary to the consummation of the transactions  contemplated  hereby
and by the Ancillary  Agreements and for the operation of the Business after the
Closing  (including  all  required  material  third  party  consents  under  the
Contracts, as listed on Schedule 4.12) shall have been obtained.  National shall
be satisfied that all approvals  required under any Regulations to carry out the
transactions  contemplated by this Agreement and the Ancillary  Agreements shall
have been  obtained and that  DigitalQuake  shall have  complied in all material
respects with all Regulations applicable to the transactions contemplated hereby
and thereby.

     9.4 No  Actions  or Court  Orders.  No  Action by any  court,  governmental
authority  or other  Person  shall  have been  instituted  or  threatened  which
questions the validity or legality of the transactions contemplated hereby or by
the Ancillary Agreements and which could reasonably be expected to damage in any
material respect  National,  DigitalQuake,  the Assets or National's  ability to
operate the  Business  if the  transactions  contemplated  hereby or thereby are
consummated.

     9.5 Opinion of Counsel.  DigitalQuake  shall have  delivered to National an
opinion of Ritchey Fisher Whitman & Klein, counsel to DigitalQuake,  dated as of
the  Closing  Date,  in form and  substance  reasonably  acceptable  to National
covering the matters set forth on Exhibit G hereto.
<PAGE>

     9.6 Employee Matters and Non-Compete Agreements.  The individuals listed or
described on Schedule 1.1(b) shall have delivered the Employment  Agreements and
the individuals  listed or described on Schedule 1.1(d) shall have delivered the
Non-Compete Agreements.

     9.7  Certificates.  DigitalQuake  shall furnish National with a certificate
from the Secretary of  DigitalQuake  certifying  that the requisite  shareholder
approval  specified in Section 9.2 has been obtained and attaching a copy of (a)
DigitalQuake's  board  resolutions  authorizing  the  transactions  contemplated
hereby,  (b) the Restated  Articles,  certified by the  California  Secretary of
State,  and  (c)  the  Bylaws  of  DigitalQuake   ("DigitalQuake's   Secretary's
Certificate").

     9.8 Closing  Documents.  National shall have received from DigitalQuake the
documents and other items described in Section 10.1 and such other documents and
items as National may reasonably require.

     9.9 No Material  Adverse Change.  There shall have been no Material Adverse
Effects on DigitalQuake.

     9.10 401(k) Plan. Unless National requests otherwise in writing,  the Board
of Directors of DigitalQuake shall adopt resolutions  terminating,  effective at
least  two (2) days  prior to the  Closing  Date,  any  Employee  Plan  which is
intended  to meet the  requirements  of  Section  401(k) of the Code  (each such
Employee  Plan, a "401(k)  Plan").  At the Closing,  DigitalQuake  shall provide
National with (i) executed resolutions of the Board of Directors of DigitalQuake
authorizing such termination and (ii) an executed  amendment to each such 401(k)
Plan  sufficient to assure  compliance  with all applicable  requirements of the
Code and regulations  thereunder so that the  tax-qualified  status of each such
401(k) Plan will be maintained at the time of termination.

     9.11  280G  Shareholder   Approval.   DigitalQuake,   the  shareholders  of
DigitalQuake  and any person who is a  "disqualified  individual" (as defined in
Section 280G(c) of the Code and the proposed  Treasury  Regulations  promulgated
thereunder)  with respect to  DigitalQuake  shall have taken any and all actions
necessary to provide that no payment or acceleration of any right to benefits or
payment  pursuant to this  Agreement,  any Employee Plan,  Contract or any other
plan or arrangement  shall constitute an "excess  parachute  payment" within the
meaning of Section  280G(b)(1).  National and DigitalQuake  each acknowledge and
agree that such actions may  include,  but are not  necessarily  limited to, the
approval  by the  shareholders  of  DigitalQuake  of the right of to  receive or
retain such payments or benefits,  which approval  satisfies the requirements of
Section  280G(b)(5)(B)  of  the  Code  and  the  proposed  Treasury  Regulations
promulgated thereunder.

     9.12  Payment  to Analog  Bits.  DigitalQuake  shall have made a payment to
Analog Bits Inc. in the amount of $50,000 in full satisfaction of DigitalQuake's
obligations under the Analog Bits Agreement.

                                   ARTICLE X.
                                     CLOSING

     On the Closing Date at the Closing Place:

     10.1  Deliveries  of Documents by  DigitalQuake  to National.  DigitalQuake
shall  deliver  (or  cause to be  delivered)  to  National  or  Merger  Sub,  as
applicable:

     (a)  the Ancillary Agreements to which it is a party;

     (b)  a certificate  of corporate  good standing  issued by the Secretary of
          State of the State of California for DigitalQuake, dated not more than
          five  business  days  prior  to  the  Closing  Date,  together  with a
          facsimile  bring-down from an attorney service dated not more than one
          business day prior to the Closing Date;

     (c)  DigitalQuake's  Closing  Certificate  referenced  in  Section  9.1 and
          DigitalQuake's Secretary's Certificate referenced in Section 9.7;

     (d)  the opinion of counsel to DigitalQuake described in Section 9.5;

     (e)  the  written   resignations   of  all   officers   and   directors  of
          DigitalQuake;

     (f)  a properly  completed  Form W-9 or Form W-8 (or a suitable  substitute
          form), as applicable, from each Shareholder; and

     (g)  the certificate described in Section 11.1(b).

     10.2  Deliveries of Documents by National to  DigitalQuake.  National shall
deliver to DigitalQuake, as applicable:

     (a)  National's Closing Certificate referenced in Section 8.1; and

     (b)  the Ancillary Agreements to which National is a party.

                                  ARTICLE XI.
                             ACTIONS BY DIGITALQUAKE
                         AND NATIONAL AFTER THE CLOSING

     11.1 Books and Records; Tax Matters.

     (a)  DigitalQuake,  National, Merger Sub and the Shareholders agree that so
          long as any Books and Records,  to the extent that they pertain to the
          operations  of  DigitalQuake  prior to the  Closing  Date,  remain  in
          existence and available, each party (at its expense) shall, upon prior
          notice,  have the right to inspect  and to make  copies of the same at
          any time during business hours for any proper purpose.
<PAGE>

     (b)  DigitalQuake   shall  have   delivered  to  National,   as  agent  for
          DigitalQuake,  a form of notice to the  Internal  Revenue  Service  in
          accordance  with  the  requirements  of  Treasury  Regulation  Section
          1.897-2(h)(2)  and in form  and  substance  reasonably  acceptable  to
          National along with written authorization for National to deliver such
          notice form to the Internal  Revenue Service on behalf of DigitalQuake
          upon the Closing of the Merger.

     (c)  National  covenants  and agrees  that in the event if or  DigitalQuake
          receives any notice or inquiry from the Internal  Revenue Service with
          respect  to the  characterization  of any  payments  made  under  this
          Agreement  or any  Ancillary  Agreement,  National  will  give  prompt
          written  notice  to the  Shareholder  Representative  concerning  such
          notice or inquiry.

                                  ARTICLE XII.
                                 INDEMNIFICATION

     12.1  Survival  of  Representations.   All  statements  contained  in  this
Agreement,  any  schedule or in any  certificate  or  instrument  of  conveyance
delivered  by or on behalf  of the  parties  pursuant  to this  Agreement  or in
connection  with the  transactions  contemplated  hereby  shall be  deemed to be
representations and warranties by the parties hereunder. The representations and
warranties of DigitalQuake contained herein shall survive the Closing Date for a
period of (and  claims  based upon or arising  out of such  representations  and
warranties  may be  asserted  at any time before the date which shall be) twelve
(12) months after the Closing Date;  provided,  however, the representations and
warranties  in Section 4.8 (Title to Assets),  Section  4.18  (Employee  Benefit
Plans) and Section 4.22 (Tax  Matters)  shall  survive for a period equal to the
relevant  statute of  limitations  (including  any  extensions  thereof) plus 30
calendar days. No  investigation  made by any of the parties hereto shall in any
way limit the representations and warranties of the parties. On the Closing Date
all  representations  and  warranties  contained in this  Agreement  and made by
DigitalQuake  shall expire as to  DigitalQuake  and thereafter will be deemed to
have  been  made  exclusively  by the  Shareholders  other  than  National.  The
termination  of the  representations  and warranties  provided  herein shall not
affect  the  rights of a party in  respect  of any claim made by such party in a
writing  received by the other party prior to the  expiration of the  applicable
survival period provided herein.

     12.2 Indemnification.

     (a)  General.  The  Shareholders  (other than  National)  shall jointly and
          severally   indemnify,   save  and  hold  harmless  National  and  its
          Affiliates  and its and  their  respective  Representatives  from  and
          against any and all costs,  losses  (including  diminution  in value),
          Taxes,  Liabilities,  obligations,  damages,  lawsuits,  deficiencies,
          claims,   demands,  and  expenses  (whether  or  not  arising  out  of
          third-party   claims),   including  interest,   penalties,   costs  of
          mitigation, losses in connection with any Environmental Law (including
          any  clean-up  or  remedial  action),   damages  to  the  environment,
          attorneys'  fees and all  amounts  paid in  investigation,  defense or
          settlement  of any of the  foregoing,  in each case after  taking into
          account any insurance  proceeds received by the indemnified Person and
          related tax benefits (herein, "Damages"), incurred in connection with,
          arising out of,  resulting  from or incident to: (i) any breach of any
          representation or warranty or the inaccuracy of any  representation or
          warranty,  made by  DigitalQuake  and  the  Shareholders  (other  than
          National)  in this  Agreement  and (ii) any breach of any  covenant or
          agreement made by DigitalQuake in this Agreement.
<PAGE>

     The term  "Damages"  is not limited to matters  asserted  by third  parties
against an indemnified Person, but includes Damages incurred or sustained by the
indemnified  Person  in the  absence  of  third  party  claims.  Payments  by an
indemnified Person of amounts for which it is indemnified hereunder shall not be
a condition precedent to recovery.

     (b)  Procedure for Claims between Parties.  If a claim for Damages is to be
          made by a party  entitled  to  indemnification  hereunder,  the  party
          claiming  such  indemnification  shall  give  written  notice  to  the
          Shareholder   Representative   as  soon  as   practicable   after  the
          indemnified Person becomes aware of any fact, condition or event which
          may give rise to Damages for which indemnification may be sought under
          this Section  12.2.  Any failure to submit any such notice of claim to
          the  Shareholder  Representative  shall not relieve any Shareholder of
          any  liability  hereunder,  except to the extent such  Shareholder  is
          actually  prejudiced by such  failure.  The  Shareholders  (other than
          National)  shall be deemed to have accepted the notice of claim and to
          have  agreed  to  pay  the   Damages  at  issue  if  the   Shareholder
          Representative   does  not  send  a  notice  of  disagreement  to  the
          indemnified  Person within 30 calendar days after receiving the notice
          of claim. In the case of a disputed claim,  the parties shall use best
          efforts to resolve the matter  internally on an expeditious  basis and
          in any event  within 45 calendar  days after the notice is received by
          the Shareholder Representative.

     (c)  Defense of Third-Party  Claims.  If any lawsuit or enforcement  action
          is filed against any indemnified Person,  written notice thereof shall
          be given to the Shareholder  Representative as promptly as practicable
          (and in any event  within 15  calendar  days after the  service of the
          citation or summons).  The failure of any  indemnified  Person to give
          timely notice  hereunder  shall not affect  rights to  indemnification
          hereunder,  except to the extent  that the  Shareholders  (other  than
          National)  demonstrate they were actually  prejudiced by such failure.
          After such notice, if the Shareholder Representative shall acknowledge
          in writing to the indemnified Person that the Shareholders (other than
          National)  shall  be  obligated  under  the  terms  of  its  indemnity
          hereunder  in  connection  with  such  lawsuit  or  action,  then  the
          Shareholders (other than National) shall be entitled, if they so elect
          at their  own  cost,  risk and  expense,  (i) to take  control  of the
          defense and  investigation  of such lawsuit or action,  (ii) to employ
          and engage attorneys of their own choice to handle and defend the same
          unless the named parties to such action or  proceeding  include both a
          Shareholder and the indemnified  Person and the indemnified Person has
          been advised in writing by counsel that there may be one or more legal
          defenses  available to such indemnified Person that are different from
          or additional to those available to the Shareholder(s), in which event
          the indemnified Person shall be entitled,  at the Shareholders'  cost,
          risk and expense,  to separate counsel of its own choosing,  and (iii)
          to  compromise  or settle such claim,  which  compromise or settlement
          shall be made only with the written consent of the indemnified Person,
          such consent not to be unreasonably  withheld.  The indemnified Person
          shall  cooperate  in all  reasonable  respects  with the  Shareholders
          (other than National) and their attorneys in the investigation,  trial
          and  defense  of  such  lawsuit  or  action  and  any  appeal  arising
          therefrom;  provided, however, that the indemnified Person may, at its
          own cost, participate in the investigation,  trial and defense of such
          lawsuit or action and any appeal arising therefrom.  The parties shall
          cooperate  with each other in any  notifications  to insurers.  If the
          Shareholders  (other than National) fail to assume the defense of such
          claim within 15 calendar  days after receipt of the notice of claim by
          the Shareholder  Representative,  the indemnified Person against which
          such  claim has been  asserted  will (upon  delivering  notice to such
          effect to the Shareholder Representative) have the right to undertake,
          at the  cost,  risk  and  expense  of  the  Shareholders  (other  than
          National),  the defense,  compromise  or  settlement  of such claim on
<PAGE>

          behalf of and for the account and risk of the Shareholders (other than
          National); provided, however, that such claim shall not be compromised
          or  settled   without   the   written   consent  of  the   Shareholder
          Representative,  which consent shall not be unreasonably  withheld. If
          the  indemnified   Person  assumes  the  defense  of  the  claim,  the
          indemnified Person will keep the Shareholder Representative reasonably
          informed  of  the  progress  of  any  such   defense,   compromise  or
          settlement. The Shareholders (other than National) shall be liable for
          any  settlement of any action  effected  pursuant to and in accordance
          with this  Section  12.2 and for any final  judgment  (subject  to any
          right of appeal),  and the  Shareholders  (other than National)  shall
          indemnify and hold harmless an indemnified Person from and against any
          Damages by reason of such settlement or judgment.

     (d)  Brokers and Finders.  Pursuant to the provisions of this Section 12.2,
          National, on the one hand, and Shareholders (other than National),  on
          the other,  shall  indemnify,  hold harmless and defend the other from
          the  payment  of  any  and  all  brokers'   and   finders'   expenses,
          commissions,  fees or other forms of compensation  which may be due or
          payable from or by the indemnifying Person, or may have been earned by
          any  third  party  acting  on  behalf  of the  indemnifying  Person in
          connection  with  the   negotiation  and  execution   hereof  and  the
          consummation of the transactions contemplated hereby.

     (e)  Limitations.  The obligation of the Shareholders (other than National)
          to indemnify  National and the other  indemnified  Persons  under this
          Section 12.2 in accordance with the procedures and subject to the time
          limitations  set  forth in the  Indemnity  Escrow  Agreement  shall be
          National's sole remedy under this Agreement  against the  Shareholders
          (other   than   National)   in  the   absence   of  fraud  or  willful
          misrepresentation.  National  shall not be entitled to recover for any
          Damages  until such time as the  Damages in the  aggregate  reasonably
          claimed by National exceed $100,000 (the "Damage Threshold"), at which
          time  National  shall  be  entitled  to  be  indemnified  against  and
          compensated  and  reimbursed for all such Damages,  including  Damages
          included  in the  Damage  Threshold.  In no  event  shall  the  actual
          aggregate   cumulative  liability  of  the  Shareholders  (other  than
          National) for Damages under this Agreement exceed the Indemnity Escrow
          Amount and each such  Shareholder's  liability shall be capped at such
          Shareholder's  percentage ownership in the consideration  deposited in
          the Indemnity Escrow Account pursuant to Section 3.3 hereof.

     12.3 No  Right of  Indemnification  or  Contribution.  After  the  Closing,
DigitalQuake  shall have no liability to indemnify  National or any  Shareholder
(other than National) on account of the breach of any representation or warranty
or the  nonfulfillment  of any covenant or agreement of any Shareholder;  and no
Shareholder  (other than National) shall have any right of contribution  against
DigitalQuake  (unless  such claim for  contribution  relates to a  Liability  of
DigitalQuake existing at or arising after the Closing Date).
<PAGE>

                                 ARTICLE XIII.
                           SHAREHOLDER REPRESENTATIVE

     13.1 Election and Replacement.  During the period ending upon the date when
all  obligations  under  this  Agreement  have been  discharged  (including  all
indemnification obligations under Section 12.2 hereof), Shareholders (other than
National) who immediately  prior to the Effective Time held an aggregate  number
of shares of DigitalQuake Common Stock,  including shares issuable upon exercise
of  DigitalQuake  Options,  which  exceeded  50%  of the  number  of  shares  of
DigitalQuake   Common  Stock,   including   shares  issuable  upon  exercise  of
DigitalQuake  Options,  held by Shareholders  (other than National)  immediately
prior to the Effective Time (a "Majority"),  may, from time to time upon written
notice to the Shareholder  Representative  and National,  remove the Shareholder
Representative   (including   any  appointed  by  National)  or  appoint  a  new
Shareholder   Representative   to  fill  any  vacancy   created  by  the  death,
incapacitation,  resignation  or  removal  of  the  Shareholder  Representative.
Furthermore,  if the Shareholder  Representative  dies,  becomes  incapacitated,
resigns or is removed by a  Majority,  the  Majority  shall  appoint a successor
Shareholder  Representative  to fill the vacancy so created.  If the Majority is
required to but has not appointed a successor Shareholder  Representative within
fifteen  (15)  business  days from a request by  National to appoint a successor
Shareholder  Representative,   National  shall  have  the  right  to  appoint  a
Shareholder  Representative to fill any vacancy so created from the directors of
DigitalQuake  prior to the Merger,  and shall  advise the  Shareholders  of such
appointment by written notice.  A copy of any appointment by the Majority of any
successor  Shareholder  Representative  shall be provided  to National  promptly
after it shall have been effected.

     13.2 Authority. The Shareholder  Representative shall be authorized to take
any  action  and to  make  and  deliver  any  certificate,  notice,  consent  or
instrument required or permitted to be made or delivered under this Agreement or
under the documents  referred to in this Agreement (an  "Instrument")  which the
Shareholder  Representative  determines  in  his  discretion  to  be  necessary,
appropriate or desirable,  and, in connection  therewith,  to hire or retain, at
the sole  expense of the  Shareholders  (other  than  National),  such  counsel,
investment bankers, accountants, representatives and other professional advisors
as he or she  determines  in  his or her  sole  and  absolute  discretion  to be
necessary, advisable or appropriate in order to carry out and perform his or her
rights and  obligations  hereunder.  Any party  receiving an Instrument from the
Shareholder  Representative shall have the right to rely in good faith upon such
Instrument,  and to act in accordance  with the Instrument  without  independent
investigation. The Shareholders (other than National) shall share, on a pro rata
basis based upon the number of shares of DigitalQuake  Common Stock held by each
such  Shareholder or subject to  DigitalQuake  Options held by such  Shareholder
immediately  prior  to the  Effective  Time,  the  expenses  of the  Shareholder
Representative.  Upon the  written  request  of the  Shareholder  Representative
delivered to National prior to the one-year  anniversary of the Effective  Time,
National  shall  withhold  from  the  Indemnity  Escrow  Amount  and  pay to the
Shareholder   Representative  an  amount  equal  to  expenses  incurred  by  the
Shareholder  Representative  through the date of his or her  written  request to
National.  The  Shareholder  Representative  shall  certify in any such  written
request  that the  amount  to be  withheld  from  the  Indemnity  Escrow  Amount
represents   actual,   reasonable   expenses   incurred   by   the   Shareholder
Representative pursuant to this Section 13.2.
<PAGE>

     13.3 No Liability of National.  National  (and the  Surviving  Corporation)
shall have no liability to any of the  Shareholders or otherwise  arising out of
the acts or omissions of the  Shareholder  Representative  or any disputes among
the  Shareholders  or with the  Shareholder  Representative.  National  may rely
entirely  on its  dealings  with,  and  notices  to and  from,  the  Shareholder
Representative  to satisfy any obligations it might have under this Agreement or
otherwise to the Shareholders  (other than National).  The  Shareholders  (other
than National) shall indemnify National and Merger Sub for any damages suffered,
including,  but not limited to,  attorneys' fees and other costs, as a result of
National or Merger  Sub's good faith  reliance on the acts or  omissions  of the
Shareholder Representative.

                                  ARTICLE XIV.
                                  MISCELLANEOUS

     14.1 Termination.

     (a)  This Agreement may be terminated and the Merger  abandoned at any time
          prior to the Effective Time (whether or not  shareholder  approval has
          been obtained):

          (i)  Prior to  exercise of the Merger  Option,  by National by written
               notice to DigitalQuake;

          (ii) After exercise of the Merger Option, by mutual written consent of
               National and DigitalQuake;

          (iii)By National if there is a material  breach of any  representation
               or warranty  set forth in Article IV or covenant or  agreement to
               be complied  with or  performed by  DigitalQuake  pursuant to the
               terms of this  Agreement  and such  breach,  if  capable of cure,
               shall not have been cured within ten days of notice thereof;

          (iv) By   DigitalQuake   if  there  is  a   material   breach  of  any
               representation  or warranty  set forth in Article V or Article VI
               or any covenant or agreement to be complied  with or performed by
               National or Merger Sub  pursuant  to the terms of this  Agreement
               and such  breach,  if capable of cure,  shall not have been cured
               within ten days of notice thereof; or

          (v)  By either  DigitalQuake  or National if the Merger shall not have
               been consummated by October 31,  2002 for any reason;  (b) In the
               event of termination of this Agreement:

          (i)  The provisions of the Confidentiality Agreement shall continue in
               full force and effect; and

          (ii) No party  hereto  shall have any  liability to any other party to
               this  Agreement,  except for any breach of, or  misrepresentation
               made in, this Agreement occurring prior to the proper termination
               of this Agreement.
<PAGE>

     14.2 Assignment; No Third-Party  Beneficiaries.  Neither this Agreement nor
any of the rights or  obligations  hereunder  may be  assigned  by  DigitalQuake
without  the prior  written  consent of  National,  or by National or Merger Sub
without the prior written  consent of  DigitalQuake.  Subject to the  foregoing,
this  Agreement  shall be binding  upon and inure to the  benefit of the parties
hereto and their  respective  successors and permitted  assigns.  Nothing herein
expressed or implied  shall give or be  construed  to give to any Person,  other
than the  parties  hereto  and  such  successors  and  assigns  and the  Persons
indemnified  pursuant to Section  12.2  hereof,  any legal or  equitable  rights
hereunder.

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

        If to National, Merger Sub, or, if after the Closing, to DigitalQuake:

        National Semiconductor Corporation
        2900 Semiconductor Drive
        Mail Stop G3-135
        Santa Clara, CA 95051
        Telecopy: (408) 733-0293
        Attention: General Counsel

        With copies to:

        National Semiconductor Corporation
        2900 Semiconductor Drive
        Mail Stop G2-365
        Santa Clara, CA 95051
        Telecopy: (408) 721-1666
        Attention: Russell W. Melton

        Latham & Watkins
        135 Commonwealth Drive
        Menlo Park, CA 94025
        Telecopy: (650) 463-2600
        Attention: Ora T. Fisher
<PAGE>

        If to DigitalQuake prior to Closing:

        DigitalQuake, Inc.
        550 Division Street
        Campbell, CA 95008
        Telecopy: (408) 374-0606
        Attention: Paul A. Lessard, CEO

        With a copy to:

        Ritchey Fisher Whitman & Klein
        1717 Embarcadero Road
        Palo Alto, CA 94303
        Telecopy: (650) 857-1288
        Attention: Lawrence A. Klein

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

     14.4 Choice of Law. This Agreement shall be construed,  interpreted and the
rights of the parties  determined  in  accordance  with the laws of the State of
California  except  with  respect  to  matters of law  concerning  the  internal
corporate  affairs of any corporate entity which is a party to or the subject of
this Agreement,  and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.

     14.5 Entire  Agreement;  Amendments and Waivers.  This Agreement,  together
with all exhibits and schedules hereto,  the Agreement of Merger,  the Ancillary
Agreements,  the Series B Purchase  Agreement,  the Technology  Development  and
Licensing Agreement and the  Confidentiality  Agreement (which the parties agree
shall terminate on the Closing Date),  constitute the entire agreement among the
parties  pertaining  to the  subject  matter  hereof  and  supersede  all  prior
agreements,  understandings,  negotiations  and  discussions,  whether  oral  or
written,  of  the  parties,  including  without  limitation  the  Memorandum  of
Understanding dated December 21, 2001. No supplement,  modification or waiver of
this Agreement  shall be binding  unless  executed in writing by the party to be
bound thereby.  No waiver of any of the  provisions of this  Agreement  shall be
deemed or shall  constitute a waiver of any other  provision  hereof (whether or
not  similar),  nor shall such waiver  constitute  a  continuing  waiver  unless
otherwise expressly provided.

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

     14.7  Invalidity.  In the  event  that  any one or  more of the  provisions
contained  in this  Agreement  or in any other  instrument  referred  to herein,
shall,  for any reason,  be held to be invalid,  illegal or unenforceable in any
respect,  such invalidity,  illegality or unenforceability  shall not affect any
other provision of this Agreement or any other such instrument.
<PAGE>

     14.8 Expenses.  National,  Merger Sub and DigitalQuake  will each be liable
for their own expenses incurred in connection with the negotiation, preparation,
execution and  performance of this Agreement and the  transactions  contemplated
hereby.  Notwithstanding anything in this Agreement to the contrary, in no event
shall National be responsible  for any Taxes owed by any holder of  DigitalQuake
Capital Stock (other than National) or DigitalQuake  Options as a result of this
Agreement and the transactions contemplated hereby.

     14.9 Publicity. Except as required by law or on advice of counsel, no party
hereto shall issue any press release or make any public statement  regarding the
transactions contemplated hereby without the prior written approval of the other
parties.  The parties hereto shall issue a mutually  acceptable press release as
soon as practicable after the date hereof.

     14.10 Specific  Performance.  Each of the parties hereto  acknowledges  and
agrees that the other parties would be damaged  irreparably  in the event any of
the  provisions of this  Agreement are not performed in accordance  with,  their
specific  terms or  otherwise  are  breached.  Accordingly,  each of the parties
agrees that the other parties shall be entitled to an injunction or  injunctions
to  prevent  breaches  of the  provisions  of  this  Agreement  and  to  enforce
specifically  this Agreement and the terms and  provisions  hereof in any action
instituted  in any  court of the  United  States  or any  state  thereof  having
jurisdiction  over the parties and the matter in addition to any other remedy to
which they may be entitled, at law or in equity.

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

     14.12 Service of Process, Consent to Jurisdiction.

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

     (b)  Consent  and   Jurisdiction.   Each  party  hereto   irrevocably   and
          unconditionally  (1)  agrees  that any  suit,  action  or other  legal
          proceeding  arising out of this Agreement may be brought in the United
          States  District Court for the Northern  District of  California,  San
          Jose Division or, if such court does not have jurisdiction or will not
          accept  jurisdiction,  in any  court of  general  jurisdiction  in the
          County of Santa Clara, California; (2) consents to the jurisdiction of
          any such court in any such suit, action or proceeding;  and (3) waives
          any objection  which such party may have to the laying of venue of any
          such suit, action or proceeding in any such court.
<PAGE>

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

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

                                NATIONAL SEMICONDUCTOR CORPORATION,
                                a Delaware corporation

                                By: //S// DONALD MACLEOD
                                Name: Donald Macleod
                                Its: Executive Vice President, Chief Operating
                                Officer and General Manager, Product Lines

                                NINTAI ACQUISITION SUB, INC.,
                                a California corporation

                                By: //S// DONALD MACLEOD
                                Name: Donald Macleod
                                Its: Vice President

                                DIGITALQUAKE, INC.,
                                a California corporation

                                By: //S// PAUL A. LESSARD
                                Name: Paul A. Lessard
                                Its: President

                                PAUL A. LESSARD

                                //S// PAUL A. LESSARD

                                MICHAEL G. FUNG

                                //S// MICHAEL G. FUNG

<PAGE>

                               TABLE OF SCHEDULES

Schedule 1.1(a)         Employee Shareholders
Schedule 1.1(b)         Employees to Sign Employment Agreements
Schedule 1.1(c)         Financial Statements
Schedule 1.1(d)         Individuals to Sign Non-Compete Agreements
Schedule 3.4(a)         Accelerated Optionees
Schedule 4.1            Foreign Qualifications
Schedule 4.2            Capitalization Spreadsheets
Schedule 4.4            Officers and Directors of DigitalQuake
Schedule 4.5            Bank Accounts, Safe Deposit Boxes and Authorized Persons
Schedule 4.6            Subsidiaries
Schedule 4.7            Certain Changes or Events
Schedule 4.8            Title to Assets and Encumbrances
Schedule 4.10           Fixtures and Equipment
Schedule 4.11           Contracts
Schedule 4.12           DigitalQuake Consents
Schedule 4.13           Permits
Schedule 4.16           Litigation
Schedule 4.17           Employment Practices
Schedule 4.18           Employee Plans
Schedule 4.19           Transactions with Related Parties
Schedule 4.21           Proprietary Rights
Schedule 4.22           Tax Matters
Schedule 4.23           Insurance Policies
Schedule 4.24           Purchase Commitments and Outstanding Bids
Schedule 4.26           Customers and Supplies
Schedule 4.28           Finder's Fee Arrangements
Schedule 5.3            National Consents
Schedule 7.6(a)         Employees Eligible to Receive National Options

<PAGE>

                                TABLE OF EXHIBITS

Exhibit A               Form of Agreement of Merger
Exhibit B               Form of Non-Compete Agreement
Exhibit C               Indemnity Escrow Agreement
Exhibit D               Investor Representations
Exhibit E               Form of Letter of Transmittal
Exhibit F               Summary of DigitalQuake, Inc. Incentive Bonus Plan
Exhibit G               Form of Opinion of Counsel to DigitalQuakeFIRST AMENDMENT TO OPTION AND
                          AGREEMENT AND PLAN OF MERGER

     This  First  Amendment  to Option  and  Agreement  and Plan of Merger  (the
"Amendment")  is entered  into as of August 29,  2002 by and among (i)  National
Semiconductor  Corporation,  a Delaware  corporation  ("National"),  (ii) Nintai
Acquisition Sub, Inc., a California corporation and a wholly-owned subsidiary of
National  ("Merger Sub"),  (iii)  DigitalQuake,  Inc., a California  corporation
("DigitalQuake"), and (iv) Paul A. Lessard and Michael G. Fung (the "Founders").
National,  Merger Sub,  DigitalQuake and the Founders are sometimes  hereinafter
referred to as the "Parties."

     WHEREAS,  the  Parties  entered  into an Option and  Agreement  and Plan of
Merger dated as of February 8, 2002 (the "Agreement"); and

     WHEREAS,  the  Parties  now  wish to  amend  the  Agreement  in the  manner
described in this Amendment; and

     WHEREAS, the board of directors of DigitalQuake has approved this Amendment
by resolutions adopted at a special meeting held on August __, 2002; and

     WHEREAS,  concurrently  with  the  execution  of this  Amendment  and as an
inducement  to  National  to enter  into  this  Amendment,  the  holders  of all
outstanding shares of DigitalQuake capital stock have approved the Agreement, as
amended  by this  Amendment,  and the Merger (as  defined in the  Agreement)  by
unanimous written consent; and

     WHEREAS,  concurrently  with  the  execution  of this  Amendment  and as an
inducement  to  DigitalQuake  and the  Founders  to enter  into this  Amendment,
National has  delivered a Merger  Option  Notice (as defined in the  Agreement),
which specifies an anticipated Closing Date of August 29, 2002; and

     WHEREAS, the Parties believe this Amendment will benefit each of them.

     NOW, THEREFORE,  for good and valuable  consideration,  receipt of which is
hereby acknowledged, the Parties hereto agree as follows:

          1.   The  definition of "Closing Date" in Section 1.1 of the Agreement
               shall be revised to state in its entirety as follows:

          ""Closing  Date"  means the date  specified  by National in the Merger
     Option Notice, subject to the terms and conditions of this Agreement."

          2.   The  definition of "Excess  Transaction  Costs" in Section 1.1 of
               the  Agreement  shall be  revised  to state  in its  entirety  as
               follows:
<PAGE>

          "Excess  Transaction  Costs"  means (i) any fees and expenses of legal
     counsel, accountants and any other advisors,  representatives,  consultants
     or finders  incurred by  DigitalQuake  in excess of $120,000 in  connection
     with  the  negotiation,  preparation,  execution  and  performance  of this
     Agreement,  the Series B Purchase Agreement, the Technology Development and
     Licensing  Agreement and the transactions  contemplated hereby and thereby,
     excluding any fees or expenses  payable to Toan Tran,  and (ii) all amounts
     greater  than  $300,000  payable  to  Toan  Tran  in  connection  with  the
     negotiation,  preparation, execution and performance of this Agreement, the
     Series B Purchase  Agreement,  the  Technology  Development  and  Licensing
     Agreement and the transactions contemplated hereby and thereby."

          3.   The  definition of "Financial  Statements"  in Section 1.1 of the
               Agreement shall be revised to state in its entirety as follows:

          ""Financial Statements" means the unaudited balance sheets and related
     statements of income,  cash flow and shareholders'  equity for DigitalQuake
     as of and for the years ended December 31, 2001 and 2000, and as of and for
     the six  months  ended  June 30,  2002 and  2001,  together  with any notes
     thereon, all of which are attached as Schedule 1.1(c)."

          4.   The  following  definition  shall be added to Section  1.1 of the
               Agreement:

          ""Restricted   DigitalQuake   Common   Stock"  shall  mean  shares  of
     DigitalQuake  Common Stock issued upon  exercise of a  DigitalQuake  Option
     that  are not  Vested  Shares  (within  the  meaning  of the  terms  of the
     applicable  DigitalQuake  Option) and that do not become  Vested  Shares by
     virtue of any  acceleration  of vesting  triggered  by the Merger under the
     terms of the applicable DigitalQuake Option."

          5.   Section  2.4 of the  Agreement  shall be  revised to state in its
               entirety as follows:

          "2.4 Actions Following Exercise of the Option.  Immediately  following
     National's  exercise  of the  Merger  Option,  each of the  parties to this
     Agreement  shall take all actions  necessary or desirable to consummate the
     Merger by the date specified by National in the Merger Option Notice."

          6.   Section 3.2  of the  Agreement  shall be  revised to state in its
               entirety as follows:

          "3.2  Conversion  of  DigitalQuake   Common  Stock  and   DigitalQuake
     Preferred  Stock.

               (a)  At the Effective Time,  each share of DigitalQuake  Series A
                    Preferred Stock issued and outstanding  immediately prior to
                    the  Effective  Time  shall,  by  virtue of the  Merger  and
                    without  any  action on the part of the holder  thereof,  be
                    canceled and  extinguished  and converted  into the right to
                    receive in cash, without interest, $1.00.

               (b)  At the Effective Time,  each share of DigitalQuake  Series B
                    Preferred Stock issued and outstanding  immediately prior to
                    the Effective Time (other than shares of DigitalQuake Series
                    B  Preferred  Stock  held by  National  or its  Subsidiaries
                    (which shall be canceled pursuant to Section 3.7)) shall, by
                    virtue of the Merger and  without  any action on the part of
                    the  holder  thereof,   be  canceled  and  extinguished  and
                    converted  into  the  right  to  receive  in  cash,  without
                    interest, $1.78.
<PAGE>

               (c)  At the Effective  Time,  each share of  DigitalQuake  Common
                    Stock,  including shares of Restricted  DigitalQuake  Common
                    Stock,  issued  and  outstanding  immediately  prior  to the
                    Effective  Time (other than  shares of  DigitalQuake  Common
                    Stock held by National or its  Subsidiaries  (which shall be
                    canceled  pursuant to Section 3.7) and other than Dissenting
                    Shares (as defined  herein))  shall, by virtue of the Merger
                    and without any action on the part of the holder thereof, be
                    canceled and  extinguished  and converted  into the right to
                    receive in cash, without interest:

                    (i)  immediately  following  the  Effective  Time, an amount
                         equal to the quotient of (A) the Adjusted Consideration
                         (as  defined  below)  divided by (B) the sum of (x) the
                         total  number of shares of  DigitalQuake  Common  Stock
                         outstanding   three  days  before  the   Closing   Date
                         (including    shares   held   by   National   and   its
                         Subsidiaries)  plus (y) the  total  number of shares of
                         DigitalQuake  Common Stock issuable upon  conversion of
                         shares  of  DigitalQuake   Preferred  Stock  (including
                         shares   held  by   National   and  its   Subsidiaries)
                         outstanding three days before the Closing Date plus (z)
                         the total number of shares of DigitalQuake Common Stock
                         subject  to  DigitalQuake  Options,  warrants  or other
                         convertible   securities   (including   those  held  by
                         National and its  Subsidiaries)  outstanding three days
                         before the Closing Date (such amount, the "Adjusted Per
                         Share Price");  provided,  however, that ten percent of
                         the  Adjusted  Per Share Price  shall be  withheld  and
                         deposited  into escrow  pursuant to Section 3.4 hereof.
                         The amount of the Adjusted Per Share Price withheld and
                         deposited into escrow from all holders of  DigitalQuake
                         Common Stock and  DigitalQuake  Preferred  Stock (other
                         than National) and deposited into escrow, together with
                         the amounts  withheld  from the  Optionees  pursuant to
                         clause  (y)(I) of Section  3.4(a) and clause  (y)(I) of
                         Section 3.4(b), is referred to herein as the "Indemnity
                         Escrow  Amount."  For purposes of this  Agreement,  the
                         "Adjusted  Consideration"  means  an  amount  equal  to
                         Twenty   Million   Six   Hundred    Thousand    Dollars
                         ($20,600,000)  reduced by the Excess Transaction Costs,
                         if any;

                    (ii) on the date that is thirty (30) days after the issuance
                         by National of a statement of operations as part of its
                         standard  quarterly  earnings  press  release  for  the
                         quarterly  period  ending  August 24,  2003,  an amount
                         equal to 94% of (A) the amount  specified  in the table
                         below under the  heading  "Aggregate  Earn-Out  Amount"
                         corresponding  to the  aggregate  amount of Revenue (as
                         defined   below)   recognized   by  National  from  the
                         Effective  Time  through  August 24, 2003 from sales of
                         products incorporating DQ Technology (as defined below)
                         set forth in the table below under the heading "Revenue
                         Amount"  divided by (B) the sum of (x) the total number
<PAGE>
                         of  shares of  DigitalQuake  Common  Stock  outstanding
                         three days before the  Closing  Date (other than shares
                         held by  National  and its  Subsidiaries)  plus (y) the
                         total  number of shares of  DigitalQuake  Common  Stock
                         issuable  upon  conversion  of shares  of  DigitalQuake
                         Preferred Stock (other than shares held by National and
                         its  Subsidiaries)  outstanding  three days  before the
                         Closing  Date  plus (z) the  total  number of shares of
                         DigitalQuake   Common  Stock  subject  to  DigitalQuake
                         Options,   warrants  or  other  convertible  securities
                         (other   than   those   held   by   National   and  its
                         Subsidiaries) outstanding three days before the Closing
                         Date; and

              Revenue Amount                    Aggregate Earn-Out Amount
              --------------                    -------------------------

        Greater than $14,000,000                     $   1,400,000

        $7,000,000 to $14,000,000                    $     500,000

          Less than $7,000,000                       $           0

                    (iii)on  the  date  that  is  thirty  (30)  days  after  the
                         issuance by National of a statement  of  operations  as
                         part of its standard  quarterly  earnings press release
                         for the  quarterly  period  ending  August 29, 2004, an
                         amount equal to 94% of (A) the amount  specified in the
                         table  below  under  the  heading  "Aggregate  Earn-Out
                         Amount"   corresponding  to  the  aggregate  amount  of
                         Revenue  recognized by National from the Effective Time
                         through   August  29,   2004  from  sales  of  products
                         incorporating  DQ  Technology  set  forth in the  table
                         below under the heading "Revenue Amount" divided by (B)
                         the  sum  of  (x)  the   total   number  of  shares  of
                         DigitalQuake Common Stock outstanding three days before
                         the  Closing  Date  (other than shares held by National
                         and its  Subsidiaries)  plus (y) the  total  number  of
                         shares  of  DigitalQuake  Common  Stock  issuable  upon
                         conversion of shares of  DigitalQuake  Preferred  Stock
                         (other   than   shares   held  by   National   and  its
                         Subsidiaries) outstanding three days before the Closing
                         Date   plus  (z)  the   total   number   of  shares  of
                         DigitalQuake   Common  Stock  subject  to  DigitalQuake
                         Options,   warrants  or  other  convertible  securities
                         (other   than   those   held   by   National   and  its
                         Subsidiaries) outstanding three days before the Closing
                         Date.

              Revenue Amount                    Aggregate Earn-Out Amount
              --------------                    -------------------------

        Greater than $66,000,000                     $   3,000,000

        $33,000,000 to $66,000,000                   $   1,000,000

        Less than $33,000,000                        $           0

                         For purposes of this Section  3.2(c),  "Revenue"  shall
                         mean those sales by National and its Subsidiaries that,
                         according to generally accepted  accounting  principles
                         and National's  revenue  recognition  policies,  may be
                         recognized  as revenue  and that have been  reported as
                         revenue  in  a  quarterly   statement   of   operations
                         published  by National as part of a quarterly  earnings
                         press   release,   and  "DQ   Technology"   shall  mean
                         DigitalQuake's   (i)  present  scaler  technology  with
                         third-  or  fourth-generation  scaler  algorithms,   or
                         future  generations  thereof;  (ii)  80 MHz  to  160MHz
                         triple analog-digital  converter and phase-locked loop,
                         or  future  generations  thereof;  (iii)  digital-video
                         interface receiver, or future generations thereof; (iv)
                         high-definition    content   protection,    or   future
                         generations  thereof;  or (v)  high-resolution  digital
                         phase-locked loop, or future generations  thereof.  For
                         the sake of clarity,  the Parties  understand and agree
                         that  DigitalQuake  will be credited the full amount of
                         Revenue   generated   by   the   sale   of  a   product
                         incorporating  DQ  Technology  even where DQ Technology
                         comprises only a portion of such product.
<PAGE>

               (d)  The amounts  described in clauses (a) - (c) shall be paid in
                    accordance  with Section 3.6;  provided,  however,  that the
                    aggregate amount payable to each Principal Employee pursuant
                    to  clause  (i) of  paragraph  (c)  above  shall be  further
                    subject to Section 3.5; and provided  further that  payments
                    with  respect to shares of  Restricted  DigitalQuake  Common
                    Stock shall be subject to Section  3.4(e) and payments  with
                    respect to such shares and any other shares of  DigitalQuake
                    Common  Stock  that are  subject  to  forfeiture,  rights of
                    repurchase   at  the   exercise   price  or  other   vesting
                    restrictions as of the date hereof or the Closing Date shall
                    be subject to Section 3.9.

               (e)  On behalf of the  Shareholders  and holders of  DigitalQuake
                    Options on the Closing  Date,  Paul Lessard (or in the event
                    that Paul  Lessard is no longer  employed by  National,  the
                    next-highest level manager of DigitalQuake immediately prior
                    to the  Effective  Time  who  continues  to be  employed  by
                    National)  shall  have  access  to  National's   proprietary
                    financial information system,  EXPERTs, for the sole purpose
                    of monitoring  Revenue (as defined in this Section 3.2), and
                    not  for  the  purpose  of  reviewing  or  monitoring  other
                    National sales data or revenues.

               (f)  Notwithstanding   the  earn-out  components  of  the  Merger
                    consideration,   the  parties   understand  and  agree  that
                    National  shall  be  entitled  to  operate  DigitalQuake  in
                    accordance with National's  business judgment  following the
                    Merger without  liability to  DigitalQuake,  the Founders or
                    the  Shareholders  for  failure  to  maximize  the  payments
                    contemplated  by  clauses  (ii) and  (iii)  of this  Section
                    3.2(c).

               (g)  Concurrently with the making of the payments contemplated by
                    clauses (ii) of Section 3.2(c),  if any,  National shall pay
                    to Toan Tran an amount equal to 6% of the product of clauses
                    (A) and (B) of clause  (ii) of  Section  3.2(c)  (the  "2003
                    Gross Earn-Out  Amount Per Share")  multiplied by the number
                    of shares of DigitalQuake Common Stock (other than shares of
                    Restricted    DigitalQuake    Common   Stock)    outstanding
                    immediately  prior  to  the  Effective  Time.  In  addition,
                    concurrently with the making of the payments contemplated by
                    clauses (iii) of Section 3.2(c),  if any, National shall pay
                    to Toan Tran an amount equal to 6% of the product of clauses
                    (A) and (B) of clause  (iii) of  Section  3.2(c)  (the "2004
                    Gross Earn-Out  Amount Per Share")  multiplied by the number
                    of shares of DigitalQuake Common Stock (other than shares of
                    Restricted    DigitalQuake    Common   Stock)    outstanding
                    immediately prior to the Effective Time."

          7. The following paragraphs shall be added to the end of Section 3.4:

          "(d) Earn-Out Payments on DigitalQuake Options. For each Digital Quake
     Option that is not exercised  prior to the Effective  Time,  National shall
     make  the  following  payments  on  the  following  dates,  subject  to the
     limitations set forth below:
<PAGE>
                    (i)  on the date that is thirty (30) days after the issuance
                         by National of a statement of operations as part of its
                         standard  quarterly  earnings  press  release  for  the
                         quarterly  period  ending  August 24,  2003,  an amount
                         equal to (A) the amount  payable  with  respect to each
                         share of DigitalQuake  Common Stock pursuant to Section
                         3.2(c)(ii) above multiplied by (B) the number of shares
                         of   DigitalQuake   Common   Stock   subject   to  such
                         DigitalQuake  Option immediately prior to the Effective
                         Time,  reduced by the amount of any  withholding  taxes
                         that may be required on such  payment  (which  National
                         shall  cause  DigitalQuake  to  duly  withhold  for the
                         amount of such Optionee); provided that with respect to
                         any DigitalQuake  Option that is not fully vested as of
                         the  Effective  Time  (after  taking  into  account any
                         acceleration  of vesting  triggered by the Merger under
                         the  terms  of  the  applicable  DigitalQuake  Option),
                         National  shall have no obligation to make a payment to
                         the former holder of such DigitalQuake  Option pursuant
                         to this clause (i) unless the holder  remains  employed
                         by DigitalQuake or National and otherwise satisfies the
                         requirements for continued  vesting of the DigitalQuake
                         Option in question  through  the date of such  payment;
                         and

                    (ii) on the date that is thirty (30) days after the issuance
                         by National of a statement of operations as part of its
                         standard  quarterly  earnings  press  release  for  the
                         quarterly  period  ending  August 29,  2004,  an amount
                         equal to (A) the amount  payable  with  respect to each
                         share of DigitalQuake  Common Stock pursuant to Section
                         3.2(c)(iii)  above  multiplied  by (B)  the  number  of
                         shares of  DigitalQuake  Common  Stock  subject to such
                         DigitalQuake  Option immediately prior to the Effective
                         Time,  reduced by the amount of any  withholding  taxes
                         that may be required on such  payment  (which  National
                         shall  cause  DigitalQuake  to  duly  withhold  for the
                         amount of such Optionee); provided that with respect to
                         any DigitalQuake  Option that is not fully vested as of
                         the  Effective  Time  (after  taking  into  account any
                         acceleration  of vesting  triggered by the Merger under
                         the  terms  of  the  applicable  DigitalQuake  Option),
                         National  shall have no obligation to make a payment to
                         the former holder of such DigitalQuake  Option pursuant
                         to this clause (ii) unless the holder remains  employed
                         by DigitalQuake or National and otherwise satisfies the
                         requirements for continued  vesting of the DigitalQuake
                         Option in question through the date of such payment.

               (e)  Restricted   DigitalQuake   Common  Stock.   Notwithstanding
                    Section 3.2(c)(i) above, in the case of shares of Restricted
                    Digital  Quake  Common  Stock,  in lieu of the payment  that
                    National  otherwise  would be required  to make  immediately
                    following  the  Effective  Time  pursuant  to  such  Section
                    3.2(c)(i),  National shall make semi-annual cash payments to
                    the former holders of such shares of Restricted DigitalQuake
                    Common Stock  beginning six months after the Effective Time.
                    Each  such  payment  shall  be in an  amount  equal  to  the
                    Adjusted Per Share Price  multiplied by the Restricted Stock
                    Semi-Annual  Increment  provided  that  the  holder  remains
                    employed by DigitalQuake or National and otherwise satisfies
                    the  requirements  for continued  vesting of the  Restricted
                    DigitalQuake  Common  Stock in question (as set forth in the
                    DigitalQuake  Option  pursuant  to which  such  shares  were
                    issued) through the date of such payment.  "Restricted Stock
                    Semi-Annual  Increment" shall mean the number of shares,  if
                    any, of Restricted DigitalQuake Common Stock that would have
                    vested  during the  six-month  period  ending on the date of
                    such  payment if such shares had  remained  outstanding  and
                    continued  to vest  in  accordance  with  the  terms  of the
                    DigitalQuake  Option  pursuant  to which  they were  issued.
                    After  semi-annual  payments  have been made with respect to
                    all shares of Restricted DigitalQuake Common Stock held by a
                    holder  immediately  prior to the Effective Time, no further
                    semi-annual  payments to such holder shall be  required.  In
                    addition, any semi-annual payments with respect to shares of
                    Restricted DigitalQuake Common Stock shall cease immediately
                    upon the  termination of the holder's  employment.  Further,
                    notwithstanding  clauses  (ii) and (iii) of Section  3.2(c),
                    National  shall have no  obligation to make a payment to the
                    former  holder of shares of Restricted  DigitalQuake  Common
                    Stock  pursuant  to clause  (ii) or (iii) of Section  3.2(c)
                    unless  the  holder  remains  employed  by  DigitalQuake  or
                    National  and  otherwise   satisfies  the  requirements  for
                    continued  vesting  of the  Restricted  DigitalQuake  Common
                    Stock under the terms of the DigitalQuake Option pursuant to
                    which such  shares  were  granted  through  the date of such
                    payment.
<PAGE>

               (f)  Finder's  Fee  on  Earn-Out  Amounts  Paid  on  DigitalQuake
                    Options   and   Restricted    DigitalQuake   Common   Stock.
                    Concurrently  with the making of the  payments to holders of
                    DigitalQuake  Common  Stock  contemplated  by clause (ii) of
                    Section  3.2(c),  National  shall pay to Toan Tran an amount
                    equal to 6% of the 2003  Gross  Earn-Out  Amount  Per  Share
                    multiplied  by the  sum of  (x)  the  number  of  shares  of
                    DigitalQuake  Common Stock subject to  DigitalQuake  Options
                    with  respect to which  National is required to make payment
                    pursuant to clause (i) of Section 3.4(d) plus (y) the number
                    of shares  of  Restricted  DigitalQuake  Common  Stock  with
                    respect  to  which  National  is  required  to make  payment
                    pursuant to Section 3.4(e).  In addition,  concurrently with
                    the making of the payments to holders of DigitalQuake Common
                    Stock  contemplated  by  clause  (iii)  of  Section  3.2(c),
                    National shall pay to Toan Tran an amount equal to 6% of (A)
                    the 2004 Gross Earn-Out  Amount Per Share  multiplied by (B)
                    the sum of (x) the number of shares of  DigitalQuake  Common
                    Stock subject to DigitalQuake  Options with respect to which
                    National is required to make payment pursuant to clause (ii)
                    of  Section   3.4(d)  plus  (y)  the  number  of  shares  of
                    Restricted  DigitalQuake  Common Stock with respect to which
                    National  is required  to make  payment  pursuant to Section
                    3.4(e)."

          8.   Clauses  (b) and (c) of  Section  3.5 of the  Agreement  shall be
               revised to state in their entirety as follows:

               "(b) The second  installment  payable to each Principal  Employee
                    with   respect  to  his   DigitalQuake   Common   Stock  and
                    DigitalQuake  Option(s)  shall be due and  payable on August
                    24, 2003; and

               (c)  The third  installment  payable to each  Principal  Employee
                    with   respect  to  his   DigitalQuake   Common   Stock  and
                    DigitalQuake  Option(s)  shall be due and  payable on August
                    29, 2004."

          9.   Section 3.6(a) of the Agreement  shall be revised to state in its
               entirety as follows:

               "(a) As soon as practicable after the Effective Time, each Person
                    holding a certificate or certificates representing shares of
                    DigitalQuake  Common Stock or  DigitalQuake  Preferred Stock
                    issued and  outstanding  immediately  prior to the Effective
                    Time  shall  deliver  such   certificate(s),   a  letter  of
                    transmittal in the form attached hereto as Exhibit E-1 and a
                    Form W-9 or Form W-8 (or a  suitable  substitute  form),  as
                    applicable,  to the  Surviving  Corporation  or its transfer
                    agent.  In the event  that any such  holder no longer has in
                    his or her  possession any such  certificate(s)  (other than
                    certificates  representing  shares  of  DigitalQuake  Common
                    Stock held in escrow by DigitalQuake), such holder shall, in
                    lieu  of  surrendering  such   certificate(s),   deliver  to
                    Surviving  Corporation  an affidavit of that fact  whereupon
                    National may, in its sole discretion,  require the holder of
                    such lost  certificate(s)  to  deliver a bond in such sum as
<PAGE>
                    National  may  reasonably  direct as  indemnity  against any
                    claim  that  may  be  made  against  National  or any of its
                    Affiliates  with  respect to the  certificate.  Each  Person
                    owning shares of DigitalQuake Common Stock held in escrow by
                    DigitalQuake   in   accordance   with   the   terms  of  the
                    DigitalQuake  Option  pursuant  to which  such  shares  were
                    issued  shall  deliver a letter of  transmittal  in the form
                    attached  hereto as  Exhibit  E-2 and a Form W-9 or Form W-8
                    (or a suitable substitute form), as applicable, to Surviving
                    Corporation or its transfer agent.  Thereupon, in each case,
                    each such  holder  shall be  entitled to receive in exchange
                    therefor cash  consideration in the amount and in the manner
                    described  in Section 3.2,  3.4(e) and Section 3.5,  without
                    interest,  and Surviving  Corporation shall pay and National
                    shall  cause  Surviving   Corporation  to  pay  such  amount
                    promptly to the holder."

          10.  The first sentence of the first  unnumbered  paragraph of Article
               IV of the Agreement  shall be revised to state in its entirety as
               follows:

          "DigitalQuake  and each of the Founders jointly and severally make the
     following  representations and warranties to National and Merger Sub, which
     representations  and  warranties are true and correct as of the date hereof
     and will be true and correct as of the Closing Date, except as set forth in
     the disclosure  schedule  delivered by  DigitalQuake to National and Merger
     Sub on the date hereof, as the same shall be updated on the August 29, 2002
     [the date of the Amendment] with respect to events or circumstances arising
     between the date hereof and August 29, 2002 (the "Disclosure Schedule")."

          11.  The first  sentence  of  Section  8.1 of the  Agreement  shall be
               revised to state in its entirety as follows:

          "All  representations  and  warranties  of  National  and  Merger  Sub
     contained  in this  Agreement  and in the First  Amendment  to  Option  and
     Agreement  and Plan of Merger  entered  into as of August  29,  2002 by and
     among   National,   Merger  Sub,   DigitalQuake,   and  the  Founders  (the
     "Amendment")  shall be true and correct in all material  respects at and as
     of the Closing Date as if such  representations and warranties were made at
     and as of the Closing Date (without giving effect to any  limitations  with
     respect  to  materiality  set  forth  therein)  except  as would not have a
     Material Adverse Effect on National or Merger Sub."

          12.  The first  sentence  of  Section  9.1 of the  Agreement  shall be
               revised to state in its entirety as follows:

          "All representations and warranties of DigitalQuake  contained in this
     Agreement  and in the  Amendment  shall be true and correct in all material
     respects  at and as of the  Closing  Date  as if such  representations  and
     warranties  were made at and as of the Closing Date (without  giving effect
     to any limitations with respect to materiality set forth therein)."

          13.  The following paragraph shall be added as a newly created Section
               9.13:
<PAGE>

          "9.13  Consents of Holders of  Restricted  DigitalQuake  Common Stock.
     DigitalQuake  shall have  delivered  to National  consents  from all of the
     holders of shares of Restricted  DigitalQuake  Common Stock issued prior to
     the Effective Time  approving of the treatment of such shares  contemplated
     by the Agreement, as amended by the Amendment,  and the termination of such
     holders'  rights under the  DigitalQuake  Option(s)  pursuant to which such
     shares were issued."

          14.  The following  sentence shall be added to the end of Section 14.5
               of the Agreement:

          "Upon the Effective  Time,  this Agreement and the Agreement of Merger
     shall supersede all DigitalQuake Options,  which DigitalQuake Options shall
     automatically be terminated as of the Closing, including without limitation
     any  provisions  thereof  relating to  DigitalQuake's  rights to repurchase
     shares of Restricted DigitalQuake Common Stock issued upon exercise of such
     DigitalQuake Options."

          15.  Each of Exhibit A,  Exhibit B, Exhibit C, Exhibit F and Exhibit G
               to the Agreement  shall be replaced in its entirety by Exhibit A,
               Exhibit  B,   Exhibit  C,   Exhibit  F  and   Exhibit  G  hereto,
               respectively. Exhibit E to the Agreement shall be replaced in its
               entirety by Exhibit E-1 and Exhibit E-2 hereto.  Schedule  1.1(c)
               to the  Agreement  shall be replaced in its  entirety by Schedule
               1.1(c) hereto.

          16.  DigitalQuake  and the Founders  represent and warrant as follows:
               DigitalQuake  has all necessary power and authority to enter into
               this  Amendment and has taken all corporate  action  necessary to
               consummate  the  transactions  contemplated  by the  Agreement as
               amended  hereby and to perform its  obligations  thereunder.  The
               execution and delivery of this  Amendment and the  performance by
               DigitalQuake  of its  obligations  under the Agreement as amended
               hereby  and the  consummation  of the  transactions  contemplated
               thereby,  including the Merger, have been unanimously approved by
               the  Board  of  Directors   and   unanimously   approved  by  the
               shareholders of DigitalQuake.  Certified resolutions of the Board
               of  Directors  and  written   consents  of  the  shareholders  of
               DigitalQuake  have been provided to National,  there have been no
               changes  to  such  resolutions  or  written  consents,  and  such
               resolutions and written consents remain in full force and effect.
               Each of the Founders  has all  necessary  power and  authority to
               enter into this  Amendment and has taken all action  necessary to
               consummate  the  transactions  contemplated  by the  Agreement as
               amended hereby and to perform its  obligations  thereunder.  This
               Amendment has been duly  executed and  delivered by  DigitalQuake
               and the Founders and is a legal,  valid and binding obligation of
               DigitalQuake,  and the Founders, enforceable against each of them
               in accordance with its terms,  except that  enforceability may be
               limited by the effect of bankruptcy, insolvency,  reorganization,
               moratorium  or other  similar laws  relating to or affecting  the
               rights of creditors.

          17.  National and Merger Sub represent and warrant as follows: Each of
               National  and Merger Sub has all  requisite  corporate  power and
               authority,  and has  taken  all  corporate  action  necessary  to
               execute  and  deliver   this   Amendment,   to   consummate   the
               transactions  contemplated by the Agreement as amended hereby and
               to perform its obligations  thereunder.   This Amendment has been
               duly  executed  and  delivered by each of National and Merger Sub
               and is a legal,  valid and binding  obligation  of  National  and
               Merger Sub,  enforceable  against each of them in accordance with
               its  terms,  except  that  enforceability  may be  limited by the
               effect of bankruptcy, insolvency,  reorganization,  moratorium or
               other  similar  laws  relating  to or  affecting  the  rights  of
               creditors.
<PAGE>

          18.  The  effectiveness  of  this  Amendment  is  subject  to (a)  the
               delivery  by  DigitalQuake  to  National  concurrently  with  the
               execution  and delivery  hereof of certified  resolutions  of the
               Board of Directors and written  consents of the  shareholders  of
               DigitalQuake  unanimously approving the execution and delivery of
               this  Amendment  and  the  performance  by  DigitalQuake  of  its
               obligations  under  the  Agreement  as  amended  hereby  and  the
               consummation of the transactions contemplated thereby,  including
               the  Merger,  (b) the  delivery  by  Merger  Sub to  DigitalQuake
               concurrently  with the execution and delivery hereof of copies of
               the  resolutions of the Board of Directors and written consent of
               the sole  shareholder  of Merger Sub  unanimously  approving  the
               execution and delivery of this  Amendment and the  performance by
               Merger  Sub of its  obligations  under the  Agreement  as amended
               hereby  and the  consummation  of the  transactions  contemplated
               thereby,  including  the Merger,  (c) the delivery by National to
               DigitalQuake  of  a  Merger  Option  Notice  which  specifies  an
               anticipated  Closing  Date of August 29,  2002,  (d)  delivery by
               DigitalQuake  to National of consents  from all of the holders of
               shares of Restricted  DigitalQuake  Common Stock to the treatment
               of such shares contemplated by the Agreement,  as amended hereby,
               (e) the  delivery  by the  parties  to  Latham &  Watkins  of the
               Agreement  of  Merger  attached  as  Exhibit  A to hold in escrow
               pending  receipt of notice from  National  that the  Agreement of
               Merger should be dated and submitted to the Secretary of State of
               the State of  California  for  filing,  and (f) the  delivery  by
               DigitalQuake to National of Non-Compete  Agreements signed by the
               individuals listed or described on Schedule 1.1(d) and Employment
               Agreements  signed  by the  individuals  listed or  described  on
               Schedule 1.1(b).  Prior to such deliveries,  this Amendment shall
               have no force or effect.

          19.  This Amendment may be executed in one or more  counterparts,  and
               by different  parties  hereto in separate  counterparts,  each of
               which when executed shall be deemed to be an original,  including
               counterparts  transmitted  by  facsimile,  but all of which taken
               together shall constitute one and the same agreement. Capitalized
               terms used  herein  without  definition  shall have the  meanings
               given to such terms in the Agreement.

          20.  On and after the date hereof, each reference in the Agreement and
               in any of the Ancillary  Agreements to the "Agreement" shall mean
               the Agreement as amended hereby.  Except as specifically  amended
               above, the Agreement shall remain in full force and effect and is
               hereby  ratified  and  confirmed.  The  execution,  delivery  and
               effectiveness  of this Amendment  shall not,  except as expressly
               provided  herein,  operate  as a waiver  of any  right,  power or
               remedy  of any  party  hereto,  nor  constitute  a waiver  of any
               provision of the Agreement.

                            [Signature page follows]

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have executed  this  Amendment or
caused this Amendment to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.

                                NATIONAL SEMICONDUCTOR CORPORATION,
                                a Delaware corporation

                                By: //S// DONALD MACLEOD
                                Name:
                                Its:

                                NINTAI ACQUISITION SUB, INC.,
                                a California corporation

                                By: //S// DONALD MACLEOD
                                Name:
                                Its:

                                DIGITALQUAKE, INC.,
                                a California corporation

                                By: //S// PAUL A. LESSARD
                                Name:
                                Its:

                                PAUL A. LESSARD

                                //S// PAUL A. LESSARD

                                MICHAEL G. FUNG

                                //S// MICHAEL G. FUNG

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