Agreement and Plan of Reorganization - VA Linux Systems Inc. and Andover.Net Inc.


                      AGREEMENT AND PLAN OF REORGANIZATION

                                  BY AND AMONG

                             VA LINUX SYSTEMS, INC.

                            ATLANTA ACQUISITION CORP.

                                       AND

                                ANDOVER.NET, INC.

                          Dated as of February 2, 2000






                                TABLE OF CONTENTS
                                                                          Page

ARTICLE I THE MERGER.........................................................1

         1.1      The Merger.................................................1
         1.2      Effective Time; Closing....................................2
         1.3      Effect of the Merger.......................................2
         1.4      Certificate of Incorporation; Bylaws.......................2
         1.5      Directors and Officers.....................................3
         1.6      Effect on Capital Stock....................................3
         1.7      Surrender of Certificates..................................4
         1.8      No Further Ownership Rights in Company Common Stock........5
         1.9      Lost, Stolen or Destroyed Certificates.....................6
         1.10     Tax Consequences...........................................6
         1.11     Taking of Necessary Action; Further Action.................6

ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................7

         2.1      Organization of the Company................................7
         2.2      Company Capital Structure..................................8
         2.3      Obligations With Respect to Capital Stock..................9
         2.4      Authority; Non-Contravention..............................10
         2.5      SEC Filings; Company Financial Statements; 
                   No Undisclosed Liabilities...............................12
         2.6      Absence of Certain Changes or Events......................13
         2.7      Taxes.....................................................13
         2.8      Title to Properties; Absence of Liens and Encumbrances....15
         2.9      Intellectual Property.....................................16
         2.10     Compliance; Permits; Restrictions.........................19
         2.11     Litigation................................................19
         2.12     Brokers' and Finders' Fees................................20
         2.13     Transactions with Affiliates..............................20
         2.14     Employee Benefit Plans....................................20
         2.15     Environmental Matters.....................................24
         2.16     Year 2000 Compliance......................................25
         2.17     Agreements, Contracts and Commitments.....................25
         2.18     [RESERVED]................................................27
         2.19     Disclosure................................................27
         2.20     Board Approval............................................27
         2.21     Fairness Opinion..........................................27
         2.22     Restrictions on Business Activities.......................27
         2.23     Insurance.................................................28
         2.24     State Takeover Statutes...................................28








ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........28

         3.1      Organization and Qualification; Subsidiaries..............28
         3.2      Certificate of Incorporation and Bylaws...................28
         3.3      Capitalization............................................29
         3.4      Authority; Non-Contravention..............................29
         3.5      SEC Filings; Parent Financial Statements..................30
         3.6      Absence of Certain Changes or Events......................31
         3.7      Tax.......................................................31
         3.8      Compliance; Permits; Restrictions.........................32
         3.9      Litigation................................................32
         3.10     Agreements, Contracts and Commitments.....................33
         3.11     Registration Statement; Proxy Statement...................33
         3.12     Board Approval............................................33
         3.13     Benefit Plans.............................................33

ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..............................33

         4.1      Conduct of Business by the Company........................33
         4.2      Conduct of Business by Parent.............................36

ARTICLE V ADDITIONAL AGREEMENTS.............................................36

         5.1      Prospectus/Proxy Statement; Registration Statement;
                    Other Filings...........................................36
         5.2      Meeting of Company Stockholders...........................37
         5.3      Registration Rights.......................................39
         5.4      Confidentiality; Access to Information....................39
         5.5      No Solicitation...........................................39
         5.6      Public Disclosure.........................................41
         5.7      Reasonable Efforts; Notification..........................41
         5.8      Third Party Consents......................................42
         5.9      Stock Options and Employee Benefits.......................42
         5.10     Form S-8..................................................44
         5.11     Indemnification...........................................44
         5.12     Invention Assignment Agreement............................44
         5.13     Nasdaq Listing............................................45
         5.14     Company Affiliate Agreement...............................45
         5.15     Option Assumption Agreement...............................45
         5.16     1999 Stock Option Plan....................................45

ARTICLE VI CONDITIONS TO THE MERGER.........................................45

         6.1      Conditions to Obligations of Each Party to 
                    Effect the Merger.......................................45
         6.2      Additional Conditions to Obligations of the Company.......46
         6.3      Additional Conditions to the Obligations of Parent 
                    and Merger Sub..........................................47

ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...............................48

         7.1      Termination...............................................48
         7.2      Notice of Termination; Effect of Termination..............49
         7.3      Fees and Expenses.........................................50
         7.4      Amendment.................................................51
         7.5      Extension; Waiver.........................................51

ARTICLE VIII GENERAL PROVISIONS.............................................51

         8.1      Non-Survival of Representations and Warranties............51
         8.2      Notices...................................................51
         8.3      Interpretation; Knowledge.................................52
         8.4      Counterparts..............................................53
         8.5      Entire Agreement; Third Party Beneficiaries...............53
         8.6      Severability..............................................53
         8.7      Other Remedies; Specific Performance......................53
         8.8      Governing Law.............................................54
         8.9      Rules of Construction.....................................54
         8.10     Assignment................................................54
         8.11     WAIVER OF JURY TRIAL......................................54








HWD2 755164v2

                                INDEX OF EXHIBITS

Exhibit A.........Company Voting Agreement

Exhibit B.........List of Company Affiliates

Exhibit C.........Affiliate Agreement

Exhibit D.........Form of Non-Competition/Non-Solicitation Agreement

Exhibit E.........List of Key Employees

Exhibit F.........Form of Employee Agreement

Exhibit G.........Form of Contractor Agreement







                                                   

HWD2 755164v2

HWD2 755164v2

                      AGREEMENT AND PLAN OF REORGANIZATION

     This  AGREEMENT AND PLAN OF  REORGANIZATION  is made and entered into as of
February  2,  2000,  among  VA  Linux  Systems,  Inc.,  a  Delaware  corporation
("Parent"), Atlanta Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary  of  Parent  ("Merger  Sub"),  and  Andover.Net,   Inc.,  a  Delaware
corporation (the "Company").

                                    RECITALS

         A........Upon the terms and subject to the conditions of this Agreement
and in accordance with the Delaware  General  Corporation Law ("Delaware  Law"),
Parent,  Merger Sub and the Company intend to enter into a business  combination
transaction.

         B........The  Board of Directors of the Company (i) has determined that
the Merger (as defined in Section 1.1) is consistent  with and in furtherance of
the  long-term  business  strategy  of the  Company and fair to, and in the best
interests  of,  the  Company  and  its  stockholders,  (ii)  has  approved  this
Agreement, the Merger and the other transactions  contemplated by this Agreement
and (iii) has determined to recommend that the stockholders of the Company adopt
and approve this Agreement and approve the Merger.

         C........Concurrently  with the execution of this  Agreement,  and as a
condition and  inducement to Parent's and Company's  respective  willingness  to
enter into this  Agreement,  certain  stockholders  of Company are entering into
Voting  Agreements in  substantially  the form attached hereto as Exhibit A (the
"Company Voting Agreements").

         D........The  parties intend,  by executing this Agreement,  to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").

         E........As an inducement for Parent to enter into this Agreement, each
of the  individuals  set forth on Exhibit E hereof (the "Key  Employees")  shall
execute the form of  Non-Competition/Non-Solicitation  Agreement attached hereto
as Exhibit F.

         NOW,  THEREFORE,  in  consideration  of  the  covenants,  promises  and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,  the parties agree
as follows:

                                    ARTICLE I

                                   THE MERGER

         1.1......The Merger.
                  ----------

                  (a)......At the Effective Time (as defined in Section 1.2) and
subject  to and  upon  the  terms  and  conditions  of  this  Agreement  and the
applicable  provisions of Delaware Law, Merger Sub shall be merged with and into
the Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving  corporation.  The Company
as the surviving  corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."

                  (b)......Parent,  may,  in its  sole  discretion,  at any time
prior to the  mailing of the Proxy  Statement/Prospectus  (as defined in Section
2.19 below),  change the structure of the Merger to a forward  triangular merger
with the Company  merging with and into Merger Sub and Merger Sub  surviving the
Merger.  In such  event,  Merger  Sub, as the  surviving  corporation  after the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."

         1.2......Effective  Time;  Closing.  Subject to the  provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate  of Merger with the Secretary of State of the State of Delaware in
accordance  with the relevant  provisions of Delaware Law (the  "Certificate  of
Merger")  (the time of such filing with the  Secretary  of State of the State of
Delaware  (or such later time as may be agreed in  writing  by the  Company  and
Parent and specified in the  Certificate of Merger) being the "Effective  Time")
as soon as practicable on or after the Closing Date (as herein defined).  Unless
the context  otherwise  requires,  the term  "Agreement"  as used herein  refers
collectively to this Agreement and Plan of Reorganization and the Certificate of
Merger.  The  closing  of the  Merger  (the  "Closing")  shall take place at the
offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, at a time
and date to be specified by the parties, which shall be no later than the second
business day after the  satisfaction  or waiver of the  conditions  set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "Closing Date").

         1.3......Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the  applicable  provisions of
Delaware Law.  Without  limiting the  generality of the  foregoing,  and subject
thereto, at the Effective Time all the property, rights, privileges,  powers and
franchises   of  the  Company  and  Merger  Sub  shall  vest  in  the  Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.

         1.4......Certificate of Incorporation; Bylaws.
                  ------------------------------------

                  (a)......At   the   Effective   Time,   the   Certificate   of
Incorporation  of Merger Sub, as in effect  immediately  prior to the  Effective
Time,  shall be the Certificate of  Incorporation  of the Surviving  Corporation
until   thereafter   amended  as  provided  by  law  and  such   Certificate  of
Incorporation  of the  Surviving  Corporation;  provided,  however,  that at the
Effective Time the  Certificate of  Incorporation  of the Surviving  Corporation
shall  be  amended  so that  the  name of the  Surviving  Corporation  shall  be
"[Company]."

                  (b)......The  Bylaws of Merger Sub,  as in effect  immediately
prior to the Effective Time,  shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended.

         1.5......Directors   and   Officers.   The   directors  of  Merger  Sub
immediately  prior to the Effective  Time shall be the initial  directors of the
Surviving  Corporation,  until their  respective  successors are duly elected or
appointed and  qualified.  The officers of Merger Sub  immediately  prior to the
Effective Time shall be the initial officers of the Surviving Corporation, until
their respective successors are duly appointed.

         1.6......Effect  on Capital Stock.  Subject to the terms and conditions
of this  Agreement,  at the Effective  Time, by virtue of the Merger and without
any action on the part of Merger  Sub,  the Company or the holders of any of the
following securities, the following shall occur:

                  (a)......Conversion  of Company  Common  Stock.  Each share of
common stock,  par value $0.01, of the Company  ("Company  Common Stock") issued
and outstanding  immediately  prior to the Effective Time, other than any shares
of the Company Common Stock to be canceled  pursuant to Section 1.6(b),  will be
canceled  and  extinguished  and  automatically  converted  (subject  to Section
1.6(e))  into the right to receive  (I) that  certain  amount of cash (the "Cash
Amount") as  determined  by the quotient of (A)  $60,000,000  divided by (B) the
number of issued and  outstanding  shares of Company  Common  Stock  immediately
prior to the Effective Time and (II) (A) 0.425 of a share of Parent Common Stock
minus (B) the quotient of (x) the Cash Amount divided by (y) the average trading
price of one share of Parent  Common  Stock as reported  on the Nasdaq  National
Market  System for the ten (10)  consecutive  trading  days  beginning  four (4)
trading days prior to the date of this Agreement.

                  (b)......Cancellation  of  Parent-Owned  Stock.  Each share of
Company  Common Stock held by the Company or owned by Merger Sub,  Parent or any
direct  or  indirect  wholly-owned  subsidiary  of  the  Company  or  of  Parent
immediately  prior to the  Effective  Time shall be  canceled  and  extinguished
without any conversion thereof.

                  (c)......Stock Options;  Employee Stock Purchase Plans. At the
Effective  Time, all options to purchase  Company Common Stock then  outstanding
under the 1995 Stock  Option Plan and the 1999 Stock  Option Plan (the  "Company
Stock Option  Plans") shall be assumed by Parent in accordance  with Section 5.9
hereof.

                  (d)......Capital  Stock of Merger  Sub.  Each  share of Common
Stock of Merger Sub (the  "Merger  Sub  Common  Stock")  issued and  outstanding
immediately  prior to the  Effective  Time shall be  converted  into one validly
issued,  fully paid and  nonassessable  share of Common  Stock of the  Surviving
Corporation.  Each  certificate  evidencing  ownership  of shares of Merger  Sub
Common Stock shall  evidence  ownership  of such shares of capital  stock of the
Surviving Corporation.

                  (e)......Fractional  Shares.  No fraction of a share of Parent
Common  Stock will be issued by virtue of the Merger,  but in lieu  thereof each
holder of shares of Company  Common  Stock who would  otherwise be entitled to a
fraction of a share of Parent  Common Stock (after  aggregating  all  fractional
shares of Parent Common Stock that  otherwise  would be received by such holder)
shall,  upon  surrender of such holder's  Certificate(s)  (as defined in Section
1.7(c)),  receive  from Parent an amount of cash  (rounded to the nearest  whole
cent), without interest,  equal to the product of (i) such fraction,  multiplied
by (ii) the closing  price of Parent  Common  Stock on the last full trading day
prior to Closing as reported on the Nasdaq National Market System.

                  (f)......Adjustments  to Exchange  Ratio.  The Exchange  Ratio
shall be  adjusted  to  reflect  appropriately  the  effect of any stock  split,
reverse stock split,  stock dividend  (including any dividend or distribution of
securities  convertible  into  Parent  Common  Stock or Company  Common  Stock),
reorganization,  recapitalization,  reclassification  or other like  change with
respect to Parent Common Stock or Company Common Stock occurring on or after the
date hereof and prior to the Effective Time.

         1.7......Surrender of Certificates.
                  -------------------------

                  (a)......Exchange  Agent.  Parent shall select an  institution
reasonably  satisfactory  to the  Company  to act as  the  exchange  agent  (the
"Exchange Agent") in the Merger.

                  (b)......Parent  to Provide Cash and Common Stock.  Within ten
(10) business days after the Effective Time,  Parent shall make available to the
Exchange Agent for exchange in accordance with this Article I, (i) the shares of
Parent Common Stock issuable pursuant to Section 1.6 in exchange for outstanding
shares of  Company  Common  Stock,  (ii)  $60,000,000,  (iii)  cash in an amount
sufficient for payment in lieu of fractional  shares  pursuant to Section 1.6(e)
and (iv) any  dividends  or  distributions  which  holders  of shares of Company
Common Stock may be entitled pursuant to Section 1.7(d).

                  (c)......Exchange  Procedures.  Promptly  after the  Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of record (as
of the Effective  Time) of a certificate or  certificates  (the  "Certificates")
which immediately prior to the Effective Time represented  outstanding shares of
Company  Common Stock whose shares were converted into the right to receive cash
and shares of Parent  Common Stock  pursuant to Section 1.6, cash in lieu of any
fractional  shares  pursuant  to  Section  1.6(e)  and any  dividends  or  other
distributions  pursuant to Section  1.7(d),  (i) a letter of transmittal  (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates  shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such  other  provisions  as Parent  may
reasonably  specify)  and  (ii)  Form  W-9  and  (iii)  instructions  for use in
effecting  the  surrender  of  the   Certificates   in  exchange  for  cash  and
certificates  representing  shares of Parent Common  Stock,  cash in lieu of any
fractional  shares  pursuant  to  Section  1.6(e)  and any  dividends  or  other
distributions  pursuant to Section 1.7(d).  Upon surrender of  Certificates  for
cancellation  to the  Exchange  Agent or to such other agent or agents as may be
appointed by Parent,  together with such letter of  transmittal,  duly completed
and validly executed in accordance with the instructions thereto, the holders of
such  Certificates  shall be entitled to receive in exchange  therefor  cash and
certificates  representing  the number of whole  shares of Parent  Common  Stock
which such holders have the right to receive pursuant to Section 1.6(e), payment
in lieu of  fractional  shares  which  such  holders  have the right to  receive
pursuant to Section 1.6(e) and any dividends or  distributions  payable pursuant
to Section  1.7(d),  and the  Certificates  so  surrendered  shall  forthwith be
canceled. Until so surrendered, outstanding Certificates will be deemed from and
after the Effective Time, for all corporate purposes,  subject to Section 1.7(d)
as to the payment of dividends,  to evidence the ownership of the number of full
shares of Parent Common Stock and cash into which such shares of Company  Common
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional  shares in accordance with Section 1.6(e)
and any  dividends  or  distributions  payable  pursuant to Section  1.7(d).  No
interest will be paid or will accrue on the cash consideration  payable upon the
surrender of any Certificate.

                  (d)......Distributions  With Respect to Unexchanged Shares. No
dividends  or  other  distributions  declared  or made  after  the  date of this
Agreement  with  respect to Parent  Common  Stock  with a record  date after the
Effective  Time will be paid to the  holders of any  unsurrendered  Certificates
with respect to the shares of Parent Common Stock represented  thereby until the
holders  of record  of such  Certificates  shall  surrender  such  Certificates.
Subject to applicable law,  following  surrender of any such  Certificates,  the
Exchange Agent shall deliver to the record holders  thereof,  without  interest,
cash and certificates representing whole shares of Parent Common Stock issued in
exchange  therefor along with payment in lieu of fractional  shares  pursuant to
Section   1.6(e)  hereof  and  the  amount  of  any  such   dividends  or  other
distributions  with a record date after the Effective  Time payable with respect
to such whole shares of Parent Common Stock.

                  (e)......Transfers of Ownership. If certificates for shares of
Parent  Common  Stock are to be issued  in a name  other  than that in which the
Certificates  surrendered  in exchange  therefor  are  registered,  it will be a
condition of the issuance  thereof that the  Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent  designated by it
any  transfer or other taxes  required by reason of the issuance of the cash and
certificates  for shares of Parent  Common  Stock in any name other than that of
the registered  holder of the  Certificates  surrendered,  or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.

                  (f)......Required  Withholding.  Each of the  Exchange  Agent,
Parent and the  Surviving  Corporation  shall be entitled to deduct and withhold
from  any  consideration  payable  or  otherwise  deliverable  pursuant  to this
Agreement to any holder or former holder of Company Common Stock such amounts as
may be required to be deducted or withheld therefrom under the Code or under any
provision of state, local or foreign tax law or under any other applicable Legal
Requirement  (as defined in Section  2.2(c)).  To the extent such amounts are so
deducted or withheld,  such amounts shall be treated for all purposes under this
Agreement as having been paid to the person to whom such amounts would otherwise
have been paid.

                  (g)......No   Liability.   Notwithstanding   anything  to  the
contrary in this Section 1.7, neither the Exchange Agent,  Parent, the Surviving
Corporation nor any party hereto shall be liable to a holder of shares of Parent
Common Stock or Company  Common Stock for any amount  properly  paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.

         1.8......No  Further Ownership Rights in Company Common Stock. All cash
and shares of Parent  Common  Stock  issued upon the  surrender  for exchange of
shares of Company  Common Stock in accordance  with the terms hereof  (including
any cash paid in respect thereof pursuant to Section 1.6(e) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock,  and there shall be no further  registration  of
transfers  on the  records  of the  Surviving  Corporation  of shares of Company
Common Stock which were outstanding  immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this Article
I.

         1.9......Lost,  Stolen  or  Destroyed  Certificates.  In the  event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange  for such lost,  stolen or  destroyed  Certificates,  upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(e) and any dividends or  distributions  payable  pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a condition
precedent to the  issuance  thereof,  require the owner of such lost,  stolen or
destroyed  Certificates  to  deliver  a bond in  such  sum as it may  direct  as
indemnity against any claim that may be made against Parent,  the Company or the
Exchange  Agent  with  respect  to the  Certificates  alleged to have been lost,
stolen or destroyed.

         1.10.....Tax  Consequences.  It is intended by the parties  hereto that
the Merger shall constitute a  reorganization  within the meaning of Section 368
of  the  Code.   The  parties   hereto  adopt  this  Agreement  as  a  "plan  of
reorganization"  within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations.  Accordingly,  both prior to and after the
Closing Date,  each party's  books and records shall be maintained  and federal,
state and local income tax and returns and schedules thereto shall be filed in a
manner  consistent  with the Merger being  qualified as a tax-free  merger under
Section 368(a) of the Code (unless a court of competent  jurisdiction  renders a
determination  (as  defined in Section  1313(a)(1)  of the Code) that the Merger
does not  qualify  as  such).  Each  party  shall  provide  to each  other  such
information,  reports,  returns or  schedules as may be  reasonably  required to
assist such party in accounting for reporting the Merger being so qualified.

         1.11.....Taking  of Necessary Action;  Further Action.  If, at any time
after the Effective  Time, any further action is necessary or desirable to carry
out the purposes of this  Agreement and to vest the Surviving  Corporation  with
full right, title and possession to all assets,  property,  rights,  privileges,
powers and  franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub will take all such lawful and necessary action, so
long as such action is consistent with this Agreement.







                                   ARTICLE II

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         As of  the  date  hereof  and  as of  the  Closing  Date,  the  Company
represents  and  warrants  to Parent and Merger Sub,  subject to the  exceptions
specifically  disclosed in writing in the  disclosure  letter and  referencing a
specific  representation  (except that  disclosure in one part of the disclosure
letter  shall  be  deemed  to be  disclosure  with  respect  to  all  reasonably
applicable  sections of the disclosure letter) supplied by the Company to Parent
dated as of the date hereof and  certified by a duly  authorized  officer of the
Company (the "Company Schedules"), as follows

         2.1......Organization of the Company.
                  ---------------------------

                  (a)......The  Company  has no  subsidiaries,  except  for  the
corporations identified in Part 2.1(a)(i) of the Company Schedules;  and neither
the Company nor any of the other  corporations  identified in Part  2.1(a)(i) of
the Company  Schedules owns any capital stock of, or any equity  interest of any
nature  in,  any  other  entity,  other  than the  entities  identified  in Part
2.1(a)(ii) of the Company  Schedules,  except for passive  investments in equity
interests  of public  companies  as part of the cash  management  program of the
Company.  Except as  identified  in Part  2.1(a)(ii)  of the Company  Schedules,
neither the Company nor any  subsidiary  thereof has agreed or is  obligated  to
make,  or  is  bound  by  any  written,  oral  or  other  agreement,   contract,
subcontract,  lease, binding understanding,  instrument, note, option, warranty,
purchase order, license,  sublicense,  insurance policy, benefit plan or legally
binding  commitment or  undertaking  of any nature,  as in effect as of the date
hereof or as may hereinafter be in effect  ("Contract")  under which Contract it
may become obligated to make, any future  investment in or capital  contribution
to any other entity. Neither the Company nor any subsidiary thereof is or at any
time, has been a general partner of any general partnership, limited partnership
or other entity.

                  (b)......The  Company  and  each  of  its  subsidiaries  is  a
corporation duly organized, validly existing and in good standing under the laws
of the  jurisdiction  of its  incorporation  and has  all  necessary  power  and
authority:  (i) to conduct its  business in the manner in which its  business is
currently being conducted; (ii) to own and use its assets in the manner in which
its assets are currently  owned and used;  and (iii) to perform its  obligations
under all Contracts by which it is bound.

                  (c)......The Company and each of its subsidiaries is qualified
to do business as a foreign corporation, and is in good standing, under the laws
of  all   jurisdictions   where  the  nature  of  its  business   requires  such
qualification  and where the failure to so qualify would have a Material Adverse
Effect (as defined in Section 8.3) on the Company.

                  (d)......The Company has delivered or made available to Parent
a true and correct copy of the  Certificate of  Incorporation  and Bylaws of the
Company and similar governing  instruments of each of its subsidiaries,  each as
amended to date (collectively,  the "Company Charter Documents"),  and each such
instrument  is in full force and effect.  The Company is not in violation of any
of the  provisions  of the  Company  Charter  Documents.  None of the  Company's
subsidiaries  is in violation of any provision of its Articles or Certificate of
Incorporation or Bylaws or other similar governing instruments,  except for such
violations  as are not material to the Company and its  subsidiaries  taken as a
whole.

                  (e)......The Company has delivered or made available to Parent
all proposed or considered amendments to the Company Charter Documents.

         2.2......Company Capital Structure.
                  -------------------------

                  (a)......The  authorized capital stock of the Company consists
of: (i)  100,000,000  shares of Company Common Stock,  $0.01 par value, of which
15,734,119  shares have been issued and are  outstanding  as of the date of this
Agreement;  and (ii) 1,000,000  shares of preferred  stock,  $0.01 par value, of
which no shares are  outstanding  as of the date of this  Agreement.  All of the
outstanding shares of capital stock of the Company have been duly authorized and
validly  issued,  and are fully paid and  nonassessable.  As of the date of this
Agreement,  there are no shares of Company  Common Stock held in treasury by the
Company.  Upon consummation of the Merger, (A) the shares of Parent Common Stock
and cash  issued in  exchange  for any shares of Company  Common  Stock that are
subject to a Contract pursuant to which the Company has the right to repurchase,
redeem or otherwise  reacquire any shares of Company Common Stock will,  without
any further act of Parent,  the Company or any other person,  become  subject to
the  restrictions,  conditions and other provisions  contained in such Contract,
and (B) Parent will automatically succeed to and become entitled to exercise the
Company's  rights and remedies under any such  Contract.  Except as set forth in
Part  2.2(a) of the  Company  Schedules,  there are no shares of Company  Common
Stock  immediately  prior to the  Effective  Time that are  unvested or that are
subject to a repurchase option,  risk of forfeiture or other condition under any
applicable  restricted  stock  purchase  agreement or other  agreement  with the
Company.

                  (b)......As  of the  date of  this  Agreement:  (i)  1,695,333
shares of Company  Common Stock are subject to issuance  pursuant to outstanding
options to purchase  Company  Common Stock under the Company  Stock Option Plans
(excluding options granted pursuant to Section 5.9(d));  and (ii) 960,155 shares
of Company  Common Stock are reserved for future grant under the Company's  1999
Stock Option Plan.  Stock options granted by the Company pursuant to the Company
Stock Option Plans are referred to in this Agreement as "Company  Options." Part
2.2(b) of the  Company  Schedules  sets  forth the  following  information  with
respect to each Company Option outstanding as of the date of this Agreement: (i)
the name and address of the optionee; (ii) the particular plan pursuant to which
such Company  Option was granted;  (iii) the number of shares of Company  Common
Stock subject to such Company  Option;  (iv) the exercise  price of such Company
Option;  (v) the  date on  which  such  Company  Option  was  granted;  (vi) the
applicable  vesting  schedule;  (vii)  the date on  which  such  Company  Option
expires; (viii) whether the exercisability of such option will be accelerated in
any way by the  transactions  contemplated by this Agreement,  and indicates the
extent of any such acceleration; and (ix) whether or not such option was granted
with the intention to qualify as an "incentive  stock option" within the meaning
of Section 422 of the Code (i) through (ix) collectively,  "Information Option."
The Company has made  available to Parent  accurate  and complete  copies of all
stock option plans  pursuant to which the Company has granted stock options that
are currently outstanding and the form of all stock option agreements evidencing
such  options.  All shares of  Company  Common  Stock  subject  to  issuance  as
aforesaid,   upon  issuance  on  the  terms  and  conditions  specified  in  the
instruments  pursuant  to which  they are  issuable,  would be duly  authorized,
validly  issued,  fully  paid and  nonassessable.  Except  as set  forth in Part
2.2(b)(i) of the Company  Schedules,  there are no  commitments or agreements of
any character to which the Company is bound obligating the Company to accelerate
the vesting of any Company Option as a result of the Merger. Each Company Option
shall be assumed as set forth in Section 5.9.

                  (c)......All  outstanding  shares of Company Common Stock, all
outstanding Company Options, and all outstanding shares of capital stock of each
subsidiary  of the Company have been issued and granted in  compliance  with (i)
all  applicable  securities  laws and, to the  knowledge of the  Company,  other
applicable  Legal  Requirements (as defined below) and (ii) all requirements set
forth in  applicable  Contracts.  For the  purposes  of this  Agreement,  "Legal
Requirements" means any federal, state, local, municipal,  foreign or other law,
statute,  constitution,  principle of common law, resolution,  ordinance,  code,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated,  implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined below).

         2.3......Obligations With Respect to Capital Stock. Except as set forth
in Part 2.3 of the Company  Schedules  and except for options  under the Company
Stock Option Plans, there are no securities  exchangeable or convertible into or
exercisable  for  any  equity  securities,   partnership  interests  or  similar
ownership  interests  of any  class  of any  Company  equity  security,  issued,
reserved for issuance or  outstanding.  Except for  securities  the Company owns
free and clear of all claims and  Encumbrances  (as defined below),  directly or
indirectly  through one or more  subsidiaries,  and except for shares of capital
stock or other  similar  ownership  interests  of  certain  subsidiaries  of the
Company  that are owned by certain  nominee  equity  holders as  required by the
applicable law of the jurisdiction of organization of such  subsidiaries  (which
shares or other interests do not materially affect the Company's control of such
subsidiaries),  as of the  date  of  this  Agreement,  there  are no  securities
exchangeable or convertible into or exercisable for any class of equity security
of any subsidiary of the Company,  issued, reserved for issuance or outstanding.
For the  purposes  of this  Agreement  "Encumbrances"  means any  lien,  pledge,
hypothecation,   charge,  mortgage,  security  interest,   encumbrance,   claim,
infringement,  interference,  option, right of first refusal,  preemptive right,
community property interest or, to the knowledge of the Company, any restriction
on the voting of any security,  any  restriction on the transfer of any security
or other asset,  any  restriction  on the receipt of any income derived from any
asset,  any  restriction  on the use of any  asset  and any  restriction  on the
possession,  exercise or transfer of any other  attribute  of  ownership  of any
asset.  Except as set forth in Part 2.3 of the Company Schedules or as set forth
in Section 2.2 hereof,  there are no subscriptions,  options,  warrants,  equity
securities,  partnership interests or similar ownership interests, calls, rights
(including  preemptive  rights),  commitments  or agreements of any character to
which the Company or any of its  subsidiaries is a party or by which it is bound
obligating  or  permitting  the  Company  or any of its  subsidiaries  to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
the Company or any of its  subsidiaries  or obligating or permitting the Company
or any of its subsidiaries to grant, extend,  accelerate the vesting of or enter
into any such  subscription,  option,  warrant,  equity security,  call,  right,
commitment  or  agreement.  As  of  the  date  of  this  Agreement,   except  as
contemplated  by this  Agreement  and pursuant to that certain Third Amended and
Restated  Registration  Rights  Agreement dated September 15, 1999 (the "Company
Registration Rights Agreement"),  there are no registration rights and there is,
except for the Company Voting Agreement,  no voting trust,  proxy,  rights plan,
antitakeover  plan or other agreement or understanding to which the Company is a
party  or by  which  it  or,  to  the  knowledge  of  the  Company,  any  of the
stockholders  of the Company is bound with respect to any equity security of any
class  of the  Company  or with  respect  to any  equity  security,  partnership
interest or similar ownership  interest of any class of any of its subsidiaries.
Stockholders  of the Company  will not be entitled to  dissenters'  rights under
applicable state law in connection with the Merger.

         2.4......Authority; Non-Contravention.
                  ----------------------------

                  (a)......The  Company has all  requisite  corporate  power and
authority  to enter  into this  Agreement  and to  consummate  the  transactions
contemplated  hereby and thereby.  The execution and delivery of this  Agreement
and the  consummation of the transactions  contemplated  hereby and thereby have
been  duly  authorized  by all  necessary  corporate  action  on the part of the
Company,  subject only to the approval  and adoption of this  Agreement  and the
approval  of the  Merger by the  Company's  stockholders  and the  filing of the
Certificate  of Merger  pursuant  to  Delaware  Law. A vote of the  holders of a
majority of the outstanding shares of the Company Common Stock is sufficient for
the Company's  stockholders  to approve and adopt this Agreement and approve the
Merger.  This Agreement has been duly executed and delivered by the Company and,
assuming  due  execution  and delivery by Parent and Merger Sub,  constitutes  a
valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other  similar laws and general  principles  of equity.  The  execution  and
delivery of this Agreement by the Company does not, and the  performance of this
Agreement  by the Company  will not,  (i)  conflict  with or violate the Company
Charter  Documents,  (ii) subject to obtaining the approval and adoption of this
Agreement  and the  approval  of the  Merger by the  Company's  stockholders  as
contemplated  in Section 5.2 and compliance with the  requirements  set forth in
Section 2.4(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree  applicable to the Company or any of its  subsidiaries  or by
which  the  Company  or any  of its  subsidiaries  or  any of  their  respective
properties is bound,  or (iii) result in any material  breach of or constitute a
material  default  (or an event that with  notice or lapse of time or both would
become a material  default) under,  or impair the Company's  rights or alter the
rights or obligations of any third party under,  or give to others any rights of
termination,  amendment,  acceleration  or  cancellation  of,  or  result in the
creation of a material lien or Encumbrance on any of the material  properties or
assets of the Company or any of its subsidiaries pursuant to, any material note,
bond,  mortgage,   indenture,   contract,  agreement,  lease,  license,  permit,
franchise, concession, or other instrument or obligation to which the Company or
any of its  subsidiaries  is a  party  or by  which  the  Company  or any of its
subsidiaries or its or any of their respective  assets are bound. Part 2.4(a) of
the Company Schedules lists all consents, waivers and approvals under any of the
Company's or any of its subsidiaries' agreements,  contracts, licenses or leases
required to be obtained in connection with the  consummation of the transactions
contemplated  hereby,  which,  if individually or in the aggregate not obtained,
would  result in a  material  loss of  benefits  to the  Company,  Parent or the
Surviving Corporation as a result of the Merger.

                  (b)......No consent,  approval,  order or authorization of, or
registration,  declaration  or filing with any court,  administrative  agency or
commission  or other  governmental  authority  or  instrumentality,  foreign  or
domestic  ("Governmental  Entity"),  is  required  to be obtained or made by the
Company in connection  with the execution and delivery of this  Agreement or the
consummation  of the  Merger,  except for (i) the filing of the  Certificate  of
Merger with the  Secretary of State of the State of Delaware,  (ii)  approval of
the Prospectus/Proxy Statement (as defined in Section 2.19) and the Registration
Statement (as defined in Section 2.19) by the Securities and Exchange Commission
("SEC") in accordance with the Securities  Exchange Act of 1934, as amended (the
"Exchange  Act"),  (iii)  such  consents,  approvals,  orders,   authorizations,
registrations,  declarations  and  filings as may be required  under  applicable
federal,   foreign   and   state   securities   (or   related)   laws   and  the
Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976,  as  amended  (the "HSR
Act"), and the securities or antitrust laws of any foreign country,  and (iv) to
the  knowledge of the Company,  such other  consents,  authorizations,  filings,
approvals and registrations  which if not obtained or made would not be material
to the Company or Parent or have a material adverse effect on the ability of the
parties hereto to consummate the Merger.

     2.5  SEC Filings; Company Financial Statements; No Undisclosed Liabilities.
          ---------------------------------------------------------------------

                  (a)......The   Company  has  filed  all  forms,   reports  and
documents  required  to be filed by the Company  with the SEC since  December 8,
1999 and has made  available to Parent such forms,  reports and documents in the
form  filed  with the SEC.  All  such  required  forms,  reports  and  documents
(including  those that the Company may file  subsequent  to the date hereof) are
referred to herein as the "Company SEC Reports." As of their  respective  dates,
the  Company  SEC  Reports  (including,   but  not  limited  to,  the  Company's
registration statement on form S-1 and the prospectus included therein) (i) were
prepared  in  accordance  and  complied  in  all  material   respects  with  the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and  regulations of the SEC thereunder  applicable to such Company SEC
Reports  and  (ii)  did not at the time  they  were  filed  contain  any  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein or necessary  in order to make the  statements  therein,  in the
light of the circumstances  under which they were made, not misleading.  None of
the  Company's  subsidiaries  is  required  to file any forms,  reports or other
documents with the SEC.

                  (b)......Each   of  the  consolidated   financial   statements
(including,  in each case, any related notes  thereto)  contained in the Company
SEC Reports (the "Company Financials"), including each Company SEC Reports filed
after the date hereof until the Closing, (i) complied as to form in all material
respects  with the  published  rules  and  regulations  of the SEC with  respect
thereto,  (ii) was prepared in accordance with United States generally  accepted
accounting  principles  ("GAAP")  applied on a consistent  basis  throughout the
periods  involved  (except as may be indicated  in the notes  thereto or, in the
case of unaudited interim financial  statements,  as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial  position  of the Company and its  subsidiaries  as at the  respective
dates thereof and the consolidated  results of the Company's operations and cash
flows for the periods  indicated,  except that the unaudited  interim  financial
statements  may not  contain  footnotes  and were or are  subject  to normal and
recurring year-end  adjustments.  The audited balance sheet of the Company as of
September 30, 1999  previously  delivered to Parent by the Company and contained
in the Company SEC Reports as of December 8, 1999 is hereinafter  referred to as
the "Company Balance Sheet."

                  (c)......The  Company  has  heretofore  furnished  to Parent a
complete and correct copy of any amendments or modifications, which have not yet
been  filed  with the SEC but which are  required  to be filed,  to  agreements,
documents or other  instruments  which  previously had been filed by the Company
with the SEC pursuant to the Securities Act or the Exchange Act.

                  (d)......The   Company  issued  stock  in  an  initial  public
offering  pursuant to a registration  statement on Form S-1 (the "Company S-1"),
which was declared  effective on December 8, 1999 (the  "Effective  Date") and a
prospectus  (the "Company  Prospectus"),  the final form of which was filed with
the SEC on December 8, 1999  pursuant to Rule 424(b) of the  Securities  Act. At
the  Effective  Date,  the Company S-1 did not contain an untrue  statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary to make the statements not misleading.

                  (e)......Neither  Company nor any of its  subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be  disclosed  on a balance  sheet or in the related  notes to the  consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate,  material to the business,  results of operations or financial
condition  of  Company  and  its  subsidiaries  taken  as a  whole,  except  (i)
liabilities  provided for in Company Balance Sheet or (ii) liabilities  incurred
since  September 30, 1999 in the ordinary  course of business,  none of which is
material to the  business,  results of  operations  or  financial  condition  of
Company and its subsidiaries, taken as a whole.

         2.6......Absence  of Certain  Changes or Events.  Since the date of the
Company Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company,  (ii) any declaration,  setting aside or payment of any dividend on, or
other  distribution  (whether in cash,  stock or property) in respect of, any of
the  Company's  or any of its  subsidiaries'  capital  stock,  or any  purchase,
redemption or other  acquisition by the Company of any of the Company's  capital
stock or any other securities of the Company or its subsidiaries or any options,
warrants,  calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their  pre-existing  stock  option or purchase  agreements,  (iii) any split,
combination  or  reclassification  of  any  of  the  Company's  or  any  of  its
subsidiaries' capital stock, (iv) except as set forth in Part 2.6 of the Company
Schedules,  any  granting  by the  Company  or any  of its  subsidiaries  of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary  course of business  consistent with past practice,
or any payment by the Company or any of its  subsidiaries  of any bonus,  except
for  bonuses  made in the  ordinary  course  of  business  consistent  with past
practice,  or (v) any granting by the Company or any of its  subsidiaries of any
increase in severance or termination pay or (vi) any entry by the Company or any
of  its  subsidiaries  into  any  currently  effective  employment,   severance,
termination or indemnification  agreement or any other agreement the benefits of
which  are  contingent  or the terms of which are  materially  altered  upon the
occurrence  of a transaction  involving  the Company of the nature  contemplated
hereby, (vii) entry by the Company or any of its subsidiaries into any licensing
or other agreement with regard to the acquisition or disposition of any material
Intellectual  Property  (as defined in Section  2.9) other than  licenses in the
ordinary course of business consistent with past practice,  (viii) any amendment
or consent with respect to any licensing agreement filed or required to be filed
by the  Company  with the SEC,  (ix) any  material  change by the Company in its
accounting  methods,  principles or practices,  except as required by concurrent
changes  in GAAP,  (x) any  revaluation  by the  Company  of any of its  assets,
including,  without limitation,  writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course of
business and consistent  with past practice;  or (xi) any changes in the vesting
schedules of outstanding Company Options.

         2.7......Taxes.
                  -----

                  (a)......Definition   of  Taxes.  For  the  purposes  of  this
Agreement,  "Tax" or "Taxes"  refers to any and all  federal,  state,  local and
foreign taxes, assessments and other governmental charges,  duties,  impositions
and  liabilities  relating to taxes,  including  taxes based upon or measured by
gross receipts,  income, profits, sales, use and occupation, and value added, ad
valorem,  transfer,  franchise,  withholding,  payroll,  recapture,  employment,
excise and property taxes,  together with all interest,  penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements  with any other person with  respect to such amounts and  including
any liability for taxes of a predecessor entity.

                  (b)......Tax Returns and Audits.
                           ----------------------

          (i) The Company  and each of its  subsidiaries  have timely  filed all
     federal,   state,  local  and  foreign  returns,   estimates,   information
     statements and reports  ("Returns")  relating to Taxes required to be filed
     by the Company and each of its  subsidiaries  with any Tax  authority.  The
     Company and each of its subsidiaries have paid all Taxes shown to be due on
     such Returns.

          (ii) The Company and each of its subsidiaries as of the Effective Time
     will have  withheld  with  respect to its  employees  all federal and state
     income taxes,  Taxes  pursuant to the Federal  Insurance  Contribution  Act
     ("FICA"),  Taxes pursuant to the Federal  Unemployment Tax Act ("FUTA") and
     other Taxes required to be withheld.

          (iii)  Neither  the  Company  nor  any of its  subsidiaries  has  been
     delinquent  in the  payment  of any Tax  nor is  there  any Tax  deficiency
     outstanding, proposed in writing (or otherwise, to the Company's knowledge,
     proposed) or assessed against the Company or any of its  subsidiaries,  nor
     has the Company or any of its subsidiaries executed any unexpired waiver of
     any statute of limitations on or extending the period for the assessment or
     collection of any Tax.

          (iv) No audit or other examination of any Return of the Company or any
     of its subsidiaries by any Tax authority is presently in progress,  nor has
     the  Company  or any of its  subsidiaries  been  notified  in  writing  (or
     otherwise, to the Company's knowledge, notified) of any request for such an
     audit or other examination.

          (v) No adjustment  relating to any Returns filed by the Company or any
     of its  subsidiaries has been proposed in writing formally or informally by
     any  Tax  authority  to the  Company  or any  of  its  subsidiaries  or any
     representative thereof.

          (vi) Neither the Company nor any of its subsidiaries has any liability
     for unpaid  Taxes which has not been accrued for or reserved on the Company
     Balance Sheet,  whether  asserted or  unasserted,  contingent or otherwise,
     which is material to the Company, other than any liability for unpaid Taxes
     that may  have  accrued  since  the date of the  Company  Balance  Sheet in
     connection  with the  operation  of the  business  of the  Company  and its
     subsidiaries in the ordinary course.

          (vii)  Except as set forth on Part  2.7(b) of the  Company  Schedules,
     there is no contract,  agreement,  plan or arrangement to which the Company
     is a party as of the date of this  Agreement,  including but not limited to
     the provisions of this Agreement,  covering any employee or former employee
     of  the  Company  or  any  of  its  subsidiaries   that,   individually  or
     collectively,  could give rise to the  payment of any amount that would not
     be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.

          (viii) Neither the Company nor any of its  subsidiaries  has filed any
     consent  agreement  under  Section  341(f)  of the Code or  agreed  to have
     Section  341(f)(2) of the Code apply to any disposition of a subsection (f)
     asset (as defined in Section 341(f)(4) of the Code) owned by the Company.

          (ix)  Neither the Company nor any of its  subsidiaries  is party to or
     has any obligation under any  tax-sharing,  tax indemnity or tax allocation
     agreement or arrangement.

          (x) Except as may be required  as a result of the Merger,  the Company
     and its subsidiaries  have not been and will not be required to include any
     adjustment  in  Taxable  income for any Tax  period  (or  portion  thereof)
     pursuant  to  Section  481 or  Section  263A of the Code or any  comparable
     provision  under  state or  foreign  Tax laws as a result of  transactions,
     events or accounting methods employed prior to the Closing.

          (xi)  Part 2.7 of the  Company  Schedules  lists (A) any  foreign  Tax
     holidays,  (B) any  intercompany  transfer  pricing  agreements,  or  other
     arrangements  that  have  been  established  by the  Company  or any of its
     subsidiaries  with any Tax  authority  and (C) any  expatriate  programs or
     policies affecting the Company or any of its subsidiaries.

          (xii) None of the Company or its subsidiaries (A) has been a member of
     an  "affiliated  group"  filing a  consolidated  federal  income tax return
     (other than a group the common  parent of which was the Company) or (B) has
     any  liability  for the Taxes of any person  (other than any of the Company
     and its subsidiaries) under Reg. Section 1.1502-6 (or any similar provision
     of state,  local,  or  foreign  law),  as a  transferee  or  successor,  by
     contract, or otherwise.

          (xiii) Neither the Company nor any of its subsidiaries has constituted
     either a  "distributing  corporation"  or a "controlled  corporation"  in a
     distribution of stock  qualifying for tax-free  treatment under Section 355
     of the Code (x) in the two years prior to the date of this Agreement or (y)
     in a  distribution  which could  otherwise  constitute  part of a "plan" or
     "series of related  transactions"  (within the meaning of Section 355(e) of
     the Code) in conjunction with the Merger.

         2.8......Title to Properties; Absence of Liens and Encumbrances.
                  ------------------------------------------------------

                  (a)......Part  2.8(a)(i)  of the Company  Schedules  lists the
real property  interests  owned by the Company as of the date of this Agreement.
Part 2.8(a)(ii) of the Company Schedules lists all real property leases to which
the  Company  is a party as of the  date of this  Agreement  and each  amendment
thereto  that is in effect as of the date of this  Agreement.  All such  current
leases are in full force and effect and are valid and  effective  in  accordance
with their  respective  terms,  and there is not, under any of such leases,  any
existing  default or event of default  (or event  which with  notice or lapse of
time,  or both,  would  constitute a default) that would give rise to a material
claim.  Other  than  the  leaseholds  created  under  the real  property  leases
identified  in Part  2.8(a)(ii)  of the Company  Schedules,  the Company owns no
interest in real property.

                  (b)......The  Company  has good and valid title to, or, in the
case of leased properties and assets,  valid leasehold  interests in, all of its
tangible  properties and assets,  real, personal and mixed, used or held for use
in its business, free and clear of any liens, pledges, charges, claims, security
interests or other  encumbrances of any sort  ("Liens"),  except as reflected in
the  Company  Financials  and except for liens for taxes not yet due and payable
and such Liens or other  imperfections of title and encumbrances,  if any, which
are not material in  character,  amount or extent,  and which do not  materially
detract from the value,  or  materially  interfere  with the present use, of the
property subject thereto or affected thereby.

         2.9......Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:

                  "Intellectual Property" shall mean any or all of the following
                  and all rights in,  arising out of, or  associated  therewith:
                  (i) all United States,  international  and foreign patents and
                  applications therefor and all reissues,  divisions,  renewals,
                  extensions,       provisionals,        continuations       and
                  continuations-in-part  thereof;  (ii) all inventions  (whether
                  patentable or not), invention disclosures, improvements, trade
                  secrets,   proprietary  information,   know  how,  technology,
                  technical  data  and  customer  lists,  and all  documentation
                  relating  to any  of  the  foregoing;  (iii)  all  copyrights,
                  copyrights  registrations and applications  therefor,  and all
                  other rights corresponding  thereto throughout the world; (iv)
                  all industrial  designs and any registrations and applications
                  therefor  throughout  the world;  (v) all trade names,  logos,
                  URLs,  domain names,  common law trademarks and service marks,
                  trademark  and service  mark  registrations  and  applications
                  therefor  throughout  the world;  (vi) all  databases and data
                  collections and all rights therein throughout the world; (vii)
                  all  moral  and  economic  rights of  authors  and  inventors,
                  however  denominated,  throughout  the  world;  and (viii) any
                  similar or equivalent rights to any of the foregoing  anywhere
                  in the world.

                  "Company  Intellectual  Property" shall mean any  Intellectual
                  Property  that is owned by, or  exclusively  licensed  to, the
                  Company and its subsidiaries.

                  "Registered  Intellectual  Property"  means all United States,
                  international and foreign: (i) patents and patent applications
                  (including   provisional   applications);    (ii)   registered
                  trademarks, applications to register trademarks, intent-to-use
                  applications,  or other registrations or applications  related
                  to  trademarks;  (iii)  registered  domain  names and reserved
                  domain names, (iv) registered  copyrights and applications for
                  copyright   registration;   and  (v)  any  other  Intellectual
                  Property that is the subject of an  application,  certificate,
                  filing,  registration or other document issued, filed with, or
                  recorded  by any  state,  government  or  other  public  legal
                  authority.

                  "Company  Registered  Intellectual  Property" means all of the
                  Registered  Intellectual  Property  owned  by, or filed in the
                  name of, the Company or its subsidiaries.

                  (a)......No  Company  Intellectual   Property  or  product  or
service  of the  Company is subject to any  proceeding  or  outstanding  decree,
order, judgment,  agreement,  or stipulation  restricting in any manner the use,
transfer, or licensing thereof by the Company, or which may affect the validity,
use or enforceability of such Company Intellectual Property.

                  (b)......Part  2.9(b) of the Company  Schedules  is a complete
and accurate list of all Company Registered Intellectual Property and specifies,
where  applicable,  the  jurisdictions  in  which  each  such  item  of  Company
Registered  Intellectual  Property has been issued or  registered or in which an
application  for such issuance and  registration  has been filed,  including the
respective  registration or application  numbers.  Each material item of Company
Registered  Intellectual  Property  is  valid  and  subsisting,   all  necessary
registration, maintenance and renewal fees currently due in connection with such
Registered  Intellectual  Property have been made and all  necessary  documents,
recordations  and  certificates in connection with such Registered  Intellectual
Property have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign  jurisdictions,  as the case may be,
for the purposes of maintaining such Registered Intellectual Property.

                  (c)......The Company owns and has good and exclusive title to,
or has license to or  otherwise  has a right to use or exploit in the way it has
been used as of the date  hereof,  each  material  item of Company  Intellectual
Property or other  Intellectual  Property  used by the Company free and clear of
any  Encumbrance  (excluding  licenses and related  restrictions  granted in the
ordinary course of business consistent with past practices);  and the Company is
the exclusive  owner of all trademarks  and trade names used in connection  with
the  operation or conduct of the business of the Company,  including the sale of
any products or the provision of any services by the Company.

                  (d)......The Company owns exclusively,  and has good title to,
all copyrighted  works that are Company products or which the Company  otherwise
expressly purports to own.

                  (e)......Neither   the  Company  nor  its  subsidiaries   have
transferred  ownership of, or granted any exclusive license with respect to, any
Intellectual  Property  that  is or was  material  to the  Company  Intellectual
Property, to any third party.

                  (f)......To the extent that any material technology,  software
or Intellectual  Property has been developed or created independently or jointly
by a third party for Company or any of its subsidiaries or is incorporated  into
any of the Company  Products,  Company has a written  agreement  with such third
party with respect thereto and Company thereby either (i) has obtained ownership
of,  and  is  the  exclusive  owner  of,  or  (ii)  has  obtained  a  perpetual,
non-terminable  license (sufficient for the conduct of its business as currently
conducted   and  as  proposed  to  be  conducted)  to  all  such  third  party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment,  to the fullest extent it is legally possible to do so. The
Company Schedules list all material contracts,  licenses and agreements to which
the  Company  is a party  (i) with  respect  to  Company  Intellectual  Property
licensed or transferred to any third party (other than end-user  licenses in the
ordinary  course);  or (ii)  pursuant  to which a third  party has  licensed  or
transferred any material Intellectual Property to the Company.

                  (g)......All  material  contracts,   licenses  and  agreements
relating  to either  (i)  Company  Intellectual  Property  or (ii)  Intellectual
Property of a third party licensed to Company or any of its subsidiaries, are in
full force and effect. The consummation of the transactions contemplated by this
Agreement  will  neither  violate  nor  result  in  the  breach,   modification,
cancellation,   termination  or  suspension  of  such  contracts,  licenses  and
agreements. Each of Company and its subsidiaries is in material compliance with,
and has not materially  breached,  any term of any such contracts,  licenses and
agreements  and,  to the  knowledge  of  Company,  all  other  parties  to  such
contracts,  licenses  and  agreements  are in  compliance  with,  and  have  not
materially  breached,  any term of, such  contracts,  licenses  and  agreements.
Following  the Closing  Date,  the  Surviving  Corporation  will be permitted to
exercise all of Company's  rights under such contracts,  licenses and agreements
to the same extent Company and its subsidiaries  would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments  which  Company  would  otherwise  be  required  to pay.  Neither  this
Agreement nor the  transactions  contemplated by this  Agreement,  including the
assignment  to Parent or Merger  Sub by  operation  of law or  otherwise  of any
contracts  or  agreements  to which the  Company is a party,  will result in (i)
either  Parent's or the Merger Sub's granting to any third party any right to or
with respect to any material  Intellectual  Property right owned by, or licensed
to, either of them, (ii) either the Parent's or the Merger Sub's being bound by,
or subject to, any non-compete or other material restriction on the operation or
scope of their respective businesses, or (iii) either the Parent's or the Merger
Sub's being  obligated  to pay any  royalties or other  material  amounts to any
third party in excess of those payable by Company prior to the Closing.

                  (h)......The  operation of the business of the Company and its
subsidiaries  as such business  currently is conducted,  including the Company's
design,  development,  marketing  and sale of the  products  or  services of the
Company  (including with respect to products  currently under  development)  has
not, does not and will not infringe or misappropriate the Intellectual  Property
of any third party or constitute unfair competition or trade practices under the
laws of any jurisdiction.

                  (i)......The  Company has received neither written, nor to the
Company's knowledge,  oral notice from any third party that the operation of the
business of the Company or any act, product or service of the Company, infringes
or misappropriates  the Intellectual  Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.

                  (j)......To  the  knowledge  of the  Company,  no  person  has
infringed or  misappropriated or is infringing or  misappropriating  any Company
Intellectual Property.

                  (k)......The Company has taken reasonable steps to protect the
Company's  rights in the Company's  confidential  information  and trade secrets
that it wishes to protect or any trade secrets or  confidential  information  of
third parties provided to the Company, and, without limiting the foregoing,  the
Company has and enforces a policy  requiring  each  employee and  contractor  to
execute a proprietary information/confidentiality agreement in the form attached
hereto as  Exhibit F and,  except  as set  forth on Part  2.9(l) of the  Company
Schedules,  all current and former employees and contractors of the Company have
executed such an agreement.

         2.10.....Compliance; Permits; Restrictions.
                  ---------------------------------

                  (a)......Neither  the Company nor any of its  subsidiaries is,
in any material respect,  in conflict with, or in default or in violation of (i)
any law, rule,  regulation,  order, judgment or decree applicable to the Company
or any of its subsidiaries or by which the Company or any of its subsidiaries or
any of their  respective  properties is bound, or (ii) any material note,  bond,
mortgage,  indenture,  contract, agreement, lease, license, permit, franchise or
other  instrument or obligation to which the Company or any of its  subsidiaries
is a party or by which the Company or any of its  subsidiaries  or its or any of
their  respective  businesses  or  properties  is bound,  except for  conflicts,
violations and defaults that  (individually or in the aggregate) would not cause
the Company to lose any  material  benefit or incur any material  liability.  No
investigation  or  review  by any  Governmental  Entity  is  pending  or, to the
Company's knowledge,  has been threatened in a writing delivered to the Company,
against the Company or any of its subsidiaries, nor, to the Company's knowledge,
has any  Governmental  Entity indicated an intention to conduct an investigation
of the  Company  or any of its  subsidiaries.  There is no  material  agreement,
judgment,  injunction,  order or decree  binding  upon the Company or any of its
subsidiaries  which has or could  reasonably  be  expected to have the effect of
prohibiting or materially  impairing any business practice of the Company or any
of its subsidiaries,  any acquisition of material property by the Company or any
of its  subsidiaries  or the conduct of  business  by the  Company as  currently
conducted.

                  (b)......The  Company and its subsidiaries hold, to the extent
legally  required,  all permits,  licenses,  variances,  exemptions,  orders and
approvals from  Governmental  Entities that are material to and required for the
operation of the business of the Company as currently  conducted  (collectively,
the "Company  Permits").  The Company and its  subsidiaries are in compliance in
all material  respects with the terms of the Company  Permits,  except where the
failure to be in compliance  with the terms of the Company  Permits would not be
material to the Company.

         2.11.....Litigation.  Except as  disclosed  in Part 2.11 of the Company
Schedules, there are no claims, suits, actions or proceedings pending or, to the
knowledge  of the Company,  threatened  against,  relating to or  affecting  the
Company or any of its subsidiaries,  before any court,  governmental department,
commission,  agency,  instrumentality or authority, or any arbitrator that seeks
to restrain or enjoin the consummation of the transactions  contemplated by this
Agreement or which could  reasonably  be expected,  either  singularly or in the
aggregate with all such claims,  actions or  proceedings,  to be material to the
Company.  No  Governmental  Entity has at any time challenged or questioned in a
writing  delivered  to the  Company  the legal  right of the  Company to design,
manufacture, offer or sell any of its products or services in the present manner
or style thereof.

         Except as disclosed in Part 2.11 of the Company Schedules,  the Company
has never been subject to an audit,  compliance  review,  investigation  or like
contract review by the GSA office of the Inspector General or other Governmental
Entity  or  agent  thereof  in  connection  with  any  government   contract  (a
"Government   Audit"),  to  the  Company's  knowledge  no  Government  Audit  is
threatened,  and in the event of such Government  Audit, to the knowledge of the
Company,  no basis  exists  for a finding  of  noncompliance  with any  material
provision of any government  contract or a refund of any amounts paid or owed by
any  Governmental  Entity  pursuant to such government  contract.  For each item
disclosed  in the  Company  Schedule  pursuant to this  Section  2.11 a true and
complete copy of all  correspondence  and documentation with respect thereto has
been made available to Parent.

         2.12.....Brokers'  and Finders'  Fees.  Except for fees payable to W.R.
Hambrecht  pursuant to an  engagement  letter  dated  January 20, 2000 a copy of
which has been  provided to Parent,  the Company has not  incurred,  nor will it
incur,  directly or indirectly,  any liability for brokerage or finders' fees or
agents'  commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.

         2.13.....Transactions  with  Affiliates.  Except  as set  forth  in the
Company SEC Reports,  since  September 30, 1999, no event has occurred as of the
date of this  Agreement  that would be  required  to be  reported by the Company
pursuant to Item 404 of Regulation S-K  promulgated by the SEC. Part 2.13 of the
Company Schedules  identifies each person who is an "affiliate" (as that term is
used in Rule 145 promulgated  under the Securities Act) of the Company as of the
date of this Agreement.

         2.14.....Employee Benefit Plans.
                  ----------------------

                  (a)......Definitions.  With the exception of the definition of
"Affiliate" set forth in Section  2.14(a)(i) below (which definition shall apply
only to this Section 2.14), for purposes of this Agreement,  the following terms
shall have the meanings set forth below:

          (i)  "Affiliate"  shall mean any other  person or entity  under common
     control with the Company within the meaning of Section 414(b),  (c), (m) or
     (o) of the Code and the regulations issued thereunder;

          (ii) "Company  Employee  Plan" shall mean any plan,  program,  policy,
     practice,   contract,   agreement  or  other   arrangement   providing  for
     compensation,  severance,  termination pay,  performance  awards,  stock or
     stock-related  awards,  fringe  benefits  or  other  employee  benefits  or
     remuneration of any kind, whether written or unwritten or otherwise, funded
     or unfunded,  including without  limitation,  each "employee benefit plan,"
     within  the  meaning  of  Section  3(3)  of  ERISA  which  is or  has  been
     maintained,  contributed  to,  or  required  to be  contributed  to, by the
     Company or any Affiliate for the benefit of any Employee

          (iii)   "COBRA"   shall   mean   the   Consolidated   Omnibus   Budget
     Reconciliation Act of 1985, as amended

          (iv) "DOL" shall mean the Department of Labor;

          (v) "Employee" shall mean any current,  former,  or retired  employee,
     officer, or
director of the Company or any Affiliate;

          (vi)  "Employee  Agreement"  shall mean each  management,  employment,
     severance, consulting, relocation, repatriation,  expatriation, visas, work
     permit  or  similar  agreement  or  contract  between  the  Company  or any
     Affiliate and any Employee or consultant;

          (vii) "ERISA" shall mean the Employee  Retirement  Income Security Act
     of 1974, as amended;

          (viii)  "FMLA"  shall mean the Family  Medical  Leave Act of 1993,  as
     amended;

          (ix)  "International  Employee Plan" shall mean each Company  Employee
     Plan that has been adopted or maintained by the Company, whether informally
     or formally, for the benefit of Employees outside the United States;

          (x) "IRS" shall mean the Internal Revenue Service;

          (xi)  "Multiemployer  Plan" shall mean any "Pension  Plan" (as defined
     below)  which is a  "multiemployer  plan," as defined  in Section  3(37) of
     ERISA;

          (xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and

          (xiii)  "Pension Plan" shall mean each Company  Employee Plan which is
     an "employee  pension  benefit plan," within the meaning of Section 3(2) of
     ERISA.

                  (b)......Schedule.  Part  2.14(b)  of  the  Company  Schedules
contain an accurate and complete  list of each  Company  Employee  Plan and each
material Employee Agreement.  The Company does not have any legally binding plan
or commitment to establish any new Company  Employee Plan, to modify any Company
Employee Plan or Employee  Agreement (except to the extent required by law or to
conform any such Company Employee Plan or Employee Agreement to the requirements
of any  applicable  law,  in each  case as  previously  disclosed  to  Parent in
writing,  or as  required  by this  Agreement),  or to enter  into  any  Company
Employee Plan or material Employee Agreement,  nor does it have any intention or
commitment to do any of the  foregoing.  Since December 31, 1999 the Company has
hired  five  employees  and has  indicated  in  written  offer  letters  that an
aggregate  of 37,000  options  would be  granted  to these  employees  (the "New
Options");  none of the vesting terms of the New Options  shall  accelerate as a
result of the actions contemplated by this Agreement.

                  (c)......Documents. The Company has provided or made available
to Parent:  (i) correct and  complete  copies of all  documents  embodying  each
Company  Employee Plan and each  Employee  Agreement  including  all  amendments
thereto  and  written  interpretations  thereof;  (ii)  the most  recent  annual
actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the
three (3) most recent  annual  reports  (Form Series 5500 and all  schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in  connection  with each Company  Employee Plan or related  trust;  (iv) if the
Company Employee Plan is funded, the most recent annual and periodic  accounting
of Company  Employee Plan assets;  (v) the most recent summary plan  description
together with the summary of material  modifications  thereto,  if any, required
under  ERISA  with  respect  to  each  Company   Employee  Plan;  (vi)  all  IRS
determination,  opinion, notification and advisory letters, and rulings relating
to Company Employee Plans and copies of all applications and  correspondence  to
or from the IRS or the DOL with respect to any Company  Employee Plan; (vii) all
material  written  agreements  and contracts  relating to each Company  Employee
Plan, including,  but not limited to, administrative  service agreements,  group
annuity  contracts  and group  insurance  contracts;  (viii) all  communications
material to any Employee or Employees  relating to any Company Employee Plan and
any proposed Company  Employee Plans, in each case,  relating to any amendments,
terminations,  establishments,  increases or decreases in benefits, acceleration
of payments  or vesting  schedules  or other  events  which would  result in any
material liability to the Company; (ix) all COBRA forms and related notices; and
(x) all  registration  statements and  prospectuses  prepared in connection with
each Company Employee Plan.

                  (d)......Employee Plan Compliance. Except as set forth in Part
2.14(d) of the Company Schedules,  (i) the Company has performed in all material
respects all obligations required to be performed by it under, is not in default
or  violation  of, and has no knowledge of any default or violation by any other
party to each Company  Employee  Plan,  and each Company  Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in  compliance  with  all  applicable  laws,  statutes,  orders,  rules  and
regulations,  including but not limited to ERISA or the Code;  (ii) each Company
Employee  Plan  intended to qualify  under  Section  401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received a
favorable determination letter from the IRS with respect to each such Plan as to
its  qualified  status  under the Code,  including  all  amendments  to the Code
effected  by the Tax  Reform  Act of 1986  and  subsequent  legislation,  or has
remaining  a  period  of  time  under  applicable  Treasury  regulations  or IRS
pronouncements  in which to apply for such a  determination  letter and make any
amendments necessary to obtain a favorable  determination;  (iii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA,  and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Company  Employee Plan; (iv) there are no actions,  suits or
claims  pending,  or, to the knowledge of the Company,  threatened or reasonably
anticipated  (other  than  routine  claims for  benefits)  against  any  Company
Employee  Plan or against  the assets of any  Company  Employee  Plan;  (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance  with its terms,  without  liability to Parent,
the  Company  or any of  its  Affiliates  (other  than  ordinary  administration
expenses typically incurred in a termination  event);  (vi) there are no audits,
inquiries  or  proceedings  pending or, to the  knowledge  of the Company or any
Affiliates,  threatened  by the IRS or DOL with respect to any Company  Employee
Plan;  and (vii) neither the Company nor any Affiliate is subject to any penalty
or tax with respect to any Company  Employee Plan under Section  402(i) of ERISA
or Sections 4975 through 4980 of the Code.

                  (e)......Pension  Plans.  The Company does not now, nor has it
ever, maintained,  established,  sponsored,  participated in, or contributed to,
any  Pension  Plan which is  subject to Title IV of ERISA or Section  412 of the
Code.

                  (f)......Multiemployer  Plans.  At no  time  has  the  Company
contributed to or been requested to contribute to any Multiemployer Plan.

                  (g)......No  Post-Employment  Obligations. No Company Employee
Plan provides, or has any liability to provide, retiree life insurance,  retiree
health or other retiree  employee welfare benefits to any person for any reason,
except as may be required by COBRA or other  applicable law, and the Company has
never represented,  promised or contracted  (whether in oral or written form) to
any  Employee  (either  individually  or to  Employees  as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance,  retiree health or other retiree employee welfare benefit,  except to
the extent required by statute.

                  (h)......Neither  the Company nor any Affiliate  has, prior to
the Effective Time, and in any material respect, violated any of the health care
continuation  requirements  of COBRA,  the  requirements  of FMLA or any similar
provisions of state law applicable to its Employees.

                  (i)......Effect  of  Transaction.  Except as set forth on Part
2.14(i) of the  Company  Schedules,  the  execution  of this  Agreement  and the
consummation of the transactions  contemplated  hereby will not (either alone or
upon the occurrence of any additional or subsequent  events) constitute an event
under any Company Employee Plan, Employee Agreement,  trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness  of  indebtedness,  vesting,  distribution,  increase in benefits or
obligation to fund  benefits  with respect to any former or current  Employee or
director.

                  (j)......Employment Matters. The Company: (i) is in compliance
in all material respects with all applicable foreign,  federal,  state and local
laws, rules and regulations respecting employment,  employment practices,  terms
and conditions of employment and wages and hours,  in each case, with respect to
Employees;  (ii) has withheld all amounts  required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees;  (iii) is not
liable  for any  arrears  of wages or any taxes or any  penalty  for  failure to
comply  with any of the  foregoing;  and  (iv) is not  liable  for any  material
payment  to any trust or other  fund or to any  governmental  or  administrative
authority,  with respect to unemployment  compensation benefits, social security
or other benefits or obligations for Employees  (other than routine  payments to
be made in the normal  course of business and  consistent  with past  practice).
There are no  pending,  or, to the  Company's  knowledge,  threatened  claims or
actions against the Company under any worker's  compensation policy or long-term
disability  policy. To the Company's  knowledge,  no employee of the Company has
violated any  employment  contract,  nondisclosure  agreement or  noncompetition
agreement by which such employee is bound due to such employee being employed by
the Company and  disclosing to the Company or using trade secrets or proprietary
information of any other person or entity.

                  (k)......Labor.  No work stoppage or labor strike  against the
Company is pending,  threatened or reasonably anticipated.  The Company does not
know of any  activities  or  proceedings  of any  labor  union to  organize  any
Employees.  There are no actions,  suits,  claims,  labor disputes or grievances
pending,  or,  to  the  knowledge  of  the  Company,  threatened  or  reasonably
anticipated  relating to any labor,  safety or discrimination  matters involving
any Employee,  including, without limitation,  charges of unfair labor practices
or   discrimination   complaints,   which,  if  adversely   determined,   would,
individually  or in the  aggregate,  result  in any  material  liability  to the
Company.  Neither  the Company  nor any of its  subsidiaries  has engaged in any
unfair labor  practices  within the meaning of the National Labor Relations Act.
The Company is not presently,  nor has it been in the past, a party to, or bound
by, any  collective  bargaining  agreement  or union  contract  with  respect to
Employees  and no  collective  bargaining  agreement is being  negotiated by the
Company.

                  (l)......International   Employee  Plan.  Each   International
Employee Plan has been  established,  maintained  and  administered  in material
compliance with its terms and conditions and with the requirements prescribed by
any  and  all  statutory  or  regulatory   laws  that  are  applicable  to  such
International  Employee Plan.  Furthermore,  no International  Employee Plan has
unfunded  liabilities,  that as of the  Effective  Time,  will not be  offset by
insurance or fully accrued.  Except as required by law, no condition exists that
would  prevent  the  Company  or  Parent  from   terminating   or  amending  any
International Employee Plan at any time for any reason.

                  (m)......Restricted  Stock.  No shares of outstanding  Company
Common  Stock are  unvested  or are  subject  to a  repurchase  option,  risk of
forfeiture or other  condition  under any applicable  restricted  stock purchase
agreement or other agreement with the Company.

         2.15.....Environmental Matters.
                  ---------------------

                  (a)......Hazardous  Material.  Except as would  not  result in
material liability to the Company, no underground storage tanks and no amount of
any  substance  that  has  been  designated  by any  Governmental  Entity  or by
applicable federal,  state or local law to be radioactive,  toxic,  hazardous or
otherwise a danger to health or the environment,  including, without limitation,
PCBs,  asbestos,  petroleum,  urea-formaldehyde  and all  substances  listed  as
hazardous  substances  pursuant  to the  Comprehensive  Environmental  Response,
Compensation,  and Liability Act of 1980, as amended,  or defined as a hazardous
waste pursuant to the United States  Resource  Conservation  and Recovery Act of
1976, as amended,  and the  regulations  promulgated  pursuant to said laws, but
excluding office and janitorial supplies,  (a "Hazardous Material") are present,
or as a result of the actions of the Company or any of its  subsidiaries  or any
affiliate of the Company,  or, to the  Company's  knowledge,  as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements,  ground water and surface water thereof, that the
Company or any of its subsidiaries has at any time owned, operated,  occupied or
leased.

                  (b)......Hazardous  Materials Activities.  Except as would not
result in a material  liability to the Company (in any individual case or in the
aggregate) (i) neither the Company nor any of its  subsidiaries has transported,
stored,  used,  manufactured,  disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing  Date,  and (ii)  neither the Company  nor any of its  subsidiaries  has
disposed of, transported,  sold, used, released, exposed its employees or others
to or manufactured  any product  containing a Hazardous  Material  (collectively
"Hazardous Materials Activities") in violation of any rule,  regulation,  treaty
or statute  promulgated by any  Governmental  Entity in effect prior to or as of
the date hereof to  prohibit,  regulate or control  Hazardous  Materials  or any
Hazardous Material Activity.

                  (c)......Permits.  The Company and its subsidiaries  currently
hold all environmental  approvals,  permits,  licenses,  clearances and consents
(the "Company Environmental Permits") necessary for the conduct of the Company's
and its subsidiaries'  Hazardous Material Activities and other businesses of the
Company and its  subsidiaries  as such  activities  and businesses are currently
being conducted.

                  (d)......Environmental  Liabilities.  No  action,  proceeding,
revocation proceeding,  amendment procedure,  writ or injunction is pending, and
to the  Company's  knowledge,  no  action,  proceeding,  revocation  proceeding,
amendment procedure,  writ or injunction has been threatened by any Governmental
Entity against the Company or any of its subsidiaries in a writing  delivered to
the Company concerning any Company Environmental  Permit,  Hazardous Material or
any Hazardous Materials Activity of the Company or any of its subsidiaries.  The
Company is not aware of any fact or circumstance which could involve the Company
or any of its  subsidiaries in any  environmental  litigation or impose upon the
Company any material environmental liability.

         2.16.....Year 2000 Compliance.  Except as disclosed in Part 2.16 of the
Company  Schedules,  the  Company's  products  and  internal  systems  have been
designed  to  ensure  date  and  time  entry   recognition,   calculations  that
accommodate same century and multi-century  formulas and date values,  leap year
recognition and  calculations,  and date data interface  values that reflect the
century.  The Company's products and internal systems manage and manipulate data
involving dates and times,  including single century formulas and  multi-century
formulas, and do not cause an abnormal ending scenario within the application or
generate incorrect values or invalid results involving such dates.

         2.17.....Agreements, Contracts and Commitments. Except as otherwise set
forth in Part 2.14 or 2.17 of the Company Schedules, neither the Company nor any
of its subsidiaries is a party to or is bound by:

                  (a)......any  employment or consulting agreement,  contract or
commitment  greater than  $100,000  with any officer,  employee or member of the
Company's  Board of  Directors,  other  than those  that are  terminable  by the
Company or any of its  subsidiaries  on no more than  thirty  (30) days'  notice
without  liability  or  financial  obligation,  except  to  the  extent  general
principles  of wrongful  termination  law may limit the  Company's or any of its
subsidiaries' ability to terminate employees at will;

                  (b)......any  agreement  of  indemnification  or any  guaranty
other than any agreement of indemnification  entered into in connection with the
sale or license of software products in the ordinary course of business;

                  (c)......any agreement,  contract or commitment containing any
covenant  limiting  in  any  respect  the  right  of the  Company  or any of its
subsidiaries  to engage in any line of business or to compete with any person or
granting any exclusive distribution rights;

                  (d)......any  agreement,  contract or commitment  currently in
force  relating to the  disposition  or acquisition by the Company or any of its
subsidiaries after the date of this Agreement of a material amount of assets not
in the  ordinary  course of  business  or  pursuant to which the Company has any
material  ownership interest in any corporation,  partnership,  joint venture or
other business enterprise other than the Company's subsidiaries;

                  (e)......any   joint   marketing  or   development   agreement
currently  in force  under  which the  Company or any of its  subsidiaries  have
continuing  material  obligations to jointly  market any product,  technology or
service and which may not be canceled  without penalty upon notice of 90 days or
less,  or any  material  agreement  pursuant  to which the Company or any of its
subsidiaries  have  continuing  material  obligations  to  jointly  develop  any
intellectual  property  that  will not be  owned,  in  whole or in part,  by the
Company or any of its subsidiaries and which may not be canceled without penalty
upon notice of 90 days or less;

                  (f)......any  agreement,  contract or commitment  currently in
force to provide  source code to any third  party for any product or  technology
that is material to the Company and its subsidiaries taken as a whole;

                  (g)......except as set forth on Part 2.2 of Company Schedules,
any agreement or plan,  including,  without  limitation,  any stock option plan,
stock  appreciation  right plan or stock  purchase  plan, any of the benefits of
which  will  be  increased,  or  the  vesting  of  benefits  of  which  will  be
accelerated,  by the occurrence of any of the transactions  contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;

                  (h)......any  agreement,  contract or commitment  currently in
force to sell or distribute any Company  products,  service or technology except
agreements with  distributors or sales  representatives  in the normal course of
business  cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided to Parent;

                  (i)......any  mortgages,  indentures,   guarantees,  loans  or
credit  agreements,  security  agreements  or other  agreements  or  instruments
relating to the borrowing of money or extension of credit;

                  (j)......any settlement agreement entered into within three 
(3) years prior to the date of this Agreement; or

                  (k)......any other agreement, contract or commitment that has 
a value of $100,000 or more individually.

         Neither the Company nor any of its  subsidiaries,  nor to the Company's
knowledge  any other  party to a Company  Contract  (as  defined  below),  is in
breach,  violation  or default  under,  and  neither  the Company nor any of its
subsidiaries  has  received  written  notice that it has  breached,  violated or
defaulted  under,  any  of  the  material  terms  or  conditions  of  any of the
agreements,  contracts  or  commitments  to  which  the  Company  or  any of its
subsidiaries  is a party  or by  which  it is  bound  that  are  required  to be
disclosed in the Company  Schedules or are required to be filed with any Company
SEC Report (any such agreement, contract or commitment, a "Company Contract") in
such a manner as would  permit any other party to cancel or  terminate  any such
Company  Contract,  or would permit any other party to seek material  damages or
other remedies (for any or all of such breaches,  violations or defaults, in the
aggregate).

         2.18.....[RESERVED].

         2.19.....Disclosure. None of the information supplied or to be supplied
by or on behalf of the Company for  inclusion or  incorporation  by reference in
the registration  statement on Form S-4 (or similar  successor form) to be filed
with the SEC by Parent in connection with the issuance of Parent Common Stock in
the Merger (the  "Registration  Statement")  will, at the time the  Registration
Statement  is filed with the SEC or at the time it becomes  effective  under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material  fact  required to be stated  therein or necessary in order to make
the statements  therein,  in the light of the circumstances under which they are
made, not misleading.  None of the information  supplied or to be supplied by or
on behalf of the Company for  inclusion  or  incorporation  by  reference in the
Prospectus/Proxy  Statement to be filed with the SEC as part of the Registration
Statement   (the   "Prospectus/Proxy   Statement"),   will,   at  the  time  the
Prospectus/Proxy  Statement is mailed to the stockholders of the Company, at the
time of the Company  Stockholders'  Meeting or as of the Effective Time, contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in the light of the  circumstances  under  which  they are  made,  not
misleading.  The  Prospectus/Proxy  Statement  will  comply  as to  form  in all
material  respects  with the  provisions  of the  Exchange Act and the rules and
regulations  promulgated by the SEC thereunder.  Notwithstanding  the foregoing,
the Company makes no  representation or warranty with respect to any information
supplied by the Parent which is contained in any of the foregoing documents.

         2.20.....Board  Approval. The Board of Directors of the Company has, as
of the date of this  Agreement,  unanimously  (i) determined  that the Merger is
fair to, and in the best  interests  of the Company and its  stockholders,  (ii)
approved and deemed advisable,  subject to stockholder approval,  this Agreement
and the transactions  contemplated hereby and (iii) determined to recommend that
the stockholders of the Company approve and adopt this Agreement and approve the
Merger.

         2.21.....Fairness   Opinion.  The  Company's  Board  of  Directors  has
received a verbal opinion from W.R.  Hambrecht,  dated as of the date hereof, to
the  effect  that as of the  date  hereof,  the  Exchange  Ratio  is fair to the
Company's  stockholders  from a  financial  point of view and has  delivered  to
Parent such verbal opinion. The Company has a legally enforceable agreement with
W.R.  Hambrecht to provide  this opinion in writing to the Company  within three
(3) days of the date of this  Agreement  and that such opinion shall be included
in the Prospectus/Proxy Statement.

         2.22.....Restrictions  on Business  Activities.  Except as set forth in
Part 2.22 of the Company Schedule, there is no agreement,  commitment, judgment,
injunction,  order or decree binding upon the Company or to which the Company is
a party  which  has or  could  reasonably  be  expected  to have the  effect  of
prohibiting or materially  impairing any business  practice of the Company,  any
acquisition of property by the Company or the conduct of business by the Company
as currently conducted.

         2.23.....Insurance.   The  Company  maintains  insurance  policies  and
fidelity bonds covering the assets, business, equipment, properties, operations,
employees,   officers  and  directors  of  the  Company  and  its   subsidiaries
(collectively,  the "Insurance  Policies")  which are of the type and in amounts
customarily  carried by persons  conducting  businesses  similar to those of the
Company and its  subsidiaries.  There is no material claim by the Company or any
of its subsidiaries  pending under any of the material  Insurance Policies as to
which coverage has been  questioned,  denied or disputed by the  underwriters of
such policies or bonds.

         2.24.....State  Takeover Statutes. No state takeover statute or similar
statute  or  regulation  applies to or  purports  to apply to the  Merger,  this
Agreement and the Company Voting Agreements or the transactions  contemplated by
this Agreement and the Company Voting Agreements.

                                   ARTICLE III

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

         As of the date hereof and as of the Closing Date, Parent and Merger Sub
represent and warrant to the Company, as follows:

         3.1......Organization and Qualification;  Subsidiaries.  Each of Parent
and its  subsidiaries is a corporation  duly organized,  validly existing and in
good standing under the laws of the  jurisdiction of its  incorporation  and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted, except
where the failure to do so would not,  individually or in the aggregate,  have a
Material  Adverse Effect on Parent.  Each of Parent and its  subsidiaries  is in
possession of all Approvals  necessary to own,  lease and operate the properties
it purports to own,  operate or lease and to carry on its  business as it is now
being  conducted,  except  where the failure to have such  Approvals  would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. Each
of Parent  and its  subsidiaries  is duly  qualified  or  licensed  as a foreign
corporation to do business,  and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary,  except for such
failures to be so duly  qualified  or licensed and in good  standing  that would
not, either individually or in the aggregate,  have a Material Adverse Effect on
Parent.

         3.2......Certificate of Incorporation and Bylaws. Parent has previously
furnished  to  Company  complete  and  correct  copies  of  its  Certificate  of
Incorporation and Bylaws,  (the "Parent Charter  Documents") as amended to date.
Such Parent Charter Documents and equivalent organizational documents of each of
its subsidiaries are in full force and effect. Parent is not in violation of any
of the provisions of the Parent Charter  Documents,  and no subsidiary of Parent
is in violation of any of its equivalent organizational documents.

         3.3......Capitalization.   The  authorized   capital  stock  of  Parent
consists of (i) 250,000,000  shares of Parent Common Stock, par value $0.001 per
share, and (ii) 10,000,000 shares of Preferred Stock, par value $0.001 per share
("Parent  Preferred  Stock").  At the close of  business on January 31, 2000 (i)
41,385,986  shares of Parent  Common Stock were issued and  outstanding,  (ii) 0
shares of Parent Common Stock were held in treasury by Parent or by subsidiaries
of Parent,  (iii)  1,000,000  shares of Parent  Common  Stock were  reserved for
future  issuance  pursuant to Parent's  employee  stock  purchase plan, and (iv)
8,144,826  shares of Parent  Common Stock were  reserved  for issuance  upon the
exercise of outstanding  options  ("Parent  Options") to purchase  Parent Common
Stock. As of the date hereof, no shares of Parent Preferred Stock were issued or
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of common  stock,  par value  $0.001  per  share,  all of which,  as of the date
hereof,  are issued and outstanding.  All of the outstanding  shares of Parent's
and Merger Sub's respective  capital stock have been duly authorized and validly
issued and are fully paid and  nonassessable.  All shares of Parent Common Stock
subject to  issuance as  aforesaid,  upon  issuance on the terms and  conditions
specified in the instruments pursuant to which they are issuable, shall, and the
shares of Parent Common Stock to be issued  pursuant to the Merger will be, duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital  stock (other than  directors'  qualifying  shares) of each of
Parent's  subsidiaries  is duly  authorized,  validly  issued,  fully  paid  and
nonassessable and all such shares (other than directors'  qualifying shares) are
owned by Parent or another subsidiary free and clear of all security  interests,
liens,  claims,  pledges,  agreements,  limitations  in Parent's  voting rights,
charges or other encumbrances of any nature whatsoever.

         3.4......Authority; Non-Contravention

                  (a)......Parent  and Merger Sub have all  requisite  corporate
power  and  authority  to  enter  into  this  Agreement  and to  consummate  the
transactions  contemplated  hereby. The execution and delivery of this Agreement
and the  consummation  of the  transactions  contemplated  hereby have been duly
authorized by all necessary corporate action on the part of Parent, subject only
to the filing of the  Certificate  of Merger  pursuant  to  Delaware  Law.  This
Agreement  has been duly  executed  and  delivered by Parent and Merger Sub, and
upon due execution and delivery by the Company,  constitutes a valid and binding
obligation of Parent and Merger Sub,  enforceable  against Parent and Merger Sub
in  accordance  with its  terms,  except as  enforceability  may be  limited  by
bankruptcy  and  other  similar  laws and  general  principles  of  equity.  The
execution  and  delivery of this  Agreement by Parent and Merger Sub do not, and
the  performance  of this  Agreement  by Parent  and  Merger  Sub will not,  (i)
conflict with Parent  Charter  Documents,  (ii) subject to  compliance  with the
requirements  set forth in Section  3.4(b)  below,  conflict with or violate any
law, rule, regulation,  order, judgment or decree applicable to Parent or any of
its  subsidiaries or by which Parent or any of its  subsidiaries or any of their
respective  properties  are bound or  affected,  or (iii) result in any material
breach of or  constitute  a material  default  (or an event that with  notice or
lapse of time or both would become a material default) under, or impair Parent's
rights or alter the rights or obligations  of any third party under,  or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result  in the  creation  of a  material  Encumbrance  on  any  of the  material
properties  or  assets of Parent or any of its  subsidiaries  pursuant  to,  any
material note, bond, mortgage,  indenture,  contract, agreement, lease, license,
permit, franchise, concession, or other instrument or obligation to which Parent
or  any  of  its  subsidiaries  is a  party  or by  which  Parent  or any of its
subsidiaries or its or any of their respective assets are bound or affected.

                  (b)......No consent,  approval,  order or authorization of, or
registration, declaration or filing with any Governmental Entity, is required to
be obtained or made by Parent in  connection  with the execution and delivery of
this Agreement or the  consummation of the Merger,  except for (i) the filing of
the  Certificate  of Merger with the Secretary of State of the State of Delaware
(ii)  the  approval  of the  Registration  Statement  and  the  Prospectus/Proxy
Statement  in  accordance   with  the  Securities  Act  and  the  Exchange  Act,
respectively,   (iii)  such   consents,   approvals,   orders,   authorizations,
registrations,  declarations  and  filings as may be required  under  applicable
federal, foreign and state securities (or related) laws and the HSR Act, and the
securities  or  antitrust  laws of any  foreign  country,  and (iv)  such  other
consents,  authorizations,  filings,  approvals and  registrations  which if not
obtained  or made would not be  material  to Parent or have a  material  adverse
effect on the ability of the parties hereto to consummate the Merger.

         3.5......SEC Filings; Parent Financial Statements.
                  ----------------------------------------

                  (a)......Parent  has filed all forms,  reports  and  documents
required to be filed by Parent with the SEC since  December 9, 1999 and has made
available  to the Company  such forms,  reports and  documents in the form filed
with the SEC. All such required forms,  reports and documents  (including  those
that Parent may file  subsequent  to the date  hereof) are referred to herein as
the "Parent SEC Reports").  As of their respective dates, Parent SEC Reports (i)
were  prepared in  accordance  and  complied in all material  respects  with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and  regulations of the SEC  thereunder  applicable to such Parent SEC
Reports  and  (ii)  did not at the time  they  were  filed  contain  any  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein or necessary  in order to make the  statements  therein,  in the
light of the circumstances  under which they were made, not misleading.  None of
Parent's  subsidiaries is required to file any forms, reports or other documents
with the SEC.

                  (b)......Each   of  the  consolidated   financial   statements
(including,  in each case,  any related notes  thereto)  contained in Parent SEC
Reports (the "Parent Financials"),  including each Parent SEC Report filed after
the date hereof  until the  Closing,  (i)  complied  as to form in all  material
respects  with the  published  rules  and  regulations  of the SEC with  respect
thereto,  (ii) was prepared in accordance with United States generally  accepted
accounting  principles  ("GAAP")  applied on a consistent  basis  throughout the
periods  involved  (except as may be indicated  in the notes  thereto or, in the
case of unaudited interim financial  statements,  as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial  position of Parent and its  subsidiaries  as at the respective  dates
thereof and the consolidated  results of Parent's  operations and cash flows for
the periods  indicated,  except that the unaudited interim financial  statements
may not  contain  footnotes  and were or are  subject  to normal  and  recurring
year-end  adjustments.  The  balance  sheet of Parent  dated  October  29,  1999
contained in Parent's registration  statement on Form S-1 dated December 9, 1999
is hereinafter referred to as (the "Parent Balance Sheet").

                  (c)......Parent  has  heretofore  furnished  to the  Company a
complete and correct copy of any amendments or modifications, which have not yet
been  filed  with the SEC but which are  required  to be filed,  to  agreements,
documents or other  instruments  which  previously had been filed by Parent with
the SEC pursuant to the Securities Act or the Exchange Act.

                  (d)......Neither  Parent nor any of its  subsidiaries  has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be  disclosed  on a balance  sheet or in the related  notes to the  consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate,  material to the business,  results of operations or financial
condition  of  Parent  and  its  subsidiaries  taken  as  a  whole,  except  (i)
liabilities  provided for in Parent's Balance Sheet or (ii) liabilities incurred
since  October 29, 1999 in the  ordinary  course of  business,  none of which is
material to the business, results of operations or financial condition of Parent
and its subsidiaries, taken as a whole.

         3.6......Absence of Certain Changes or Events. Since the date of Parent
Balance  Sheet there has not been:  (i) any Material  Adverse  Effect on Parent,
(ii) any  declaration,  setting  aside or payment of any  dividend  on, or other
distribution (whether in cash, stock or property) in respect of, any of Parent's
or any of its subsidiaries' capital stock, or any purchase,  redemption or other
acquisition by Parent of any of Parent's  capital stock or any other  securities
of Parent  or its  subsidiaries  or any  options,  warrants,  calls or rights to
acquire  any such  shares  or  other  securities  except  for  repurchases  from
employees   following  their   termination   pursuant  to  the  terms  of  their
pre-existing stock option or purchase agreements,  (iii) any split,  combination
or  reclassification  of any of  Parent's  or any of its  subsidiaries'  capital
stock, (iv) any granting by Parent or any of its subsidiaries of any increase in
compensation  or  fringe   benefits,   except  for  normal   increases  of  cash
compensation in the ordinary  course of business  consistent with past practice,
or any  payment by Parent or any of its  subsidiaries  of any bonus,  except for
bonuses made in the ordinary  course of business  consistent with past practice,
or  any  granting  by  Parent  or any of its  subsidiaries  of any  increase  in
severance or termination  pay or any entry by Parent or any of its  subsidiaries
into   any   currently   effective   employment,   severance,   termination   or
indemnification  agreement or any agreement the benefits of which are contingent
or  the  terms  of  which  are  materially  altered  upon  the  occurrence  of a
transaction  involving Parent of the nature  contemplated  hereby,  (v) entry by
Parent or any of its  subsidiaries  into any licensing or other  agreement  with
regard to the acquisition or disposition of any material  Intellectual  Property
(as  defined in  Section  2.9) other than  licenses  in the  ordinary  course of
business  consistent  with past  practice,  (vi) any  amendment  or consent with
respect to any licensing  agreement filed or required to be filed by Parent with
the SEC,  (vii)  any  material  change  by  Parent  in its  accounting  methods,
principles  or practices,  except as required by concurrent  changes in GAAP, or
(viii)  any  revaluation  by Parent  of any of its  assets,  including,  without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable other than in the ordinary course of business.

         3.7......Tax.  Parent has timely  filed all Tax Returns  required to be
filed by it,  has paid all  Taxes  shown  thereon  to be due,  and has  provided
adequate  accruals in accordance  with GAAP in its financial  statements for any
Taxes  that have not been  paid.  No audit of any Tax  Return of Parent is being
conducted by a Tax authority.  No extension of the statute of limitations on the
assessment of any Taxes has been granted by Parent and is currently in effect.

         3.8......Compliance; Permits; Restrictions.
                  ---------------------------------

                  (a)......Neither Parent nor any of its subsidiaries is, in any
material  respect,  in conflict  with,  or in default or in violation of (i) any
law, rule, regulation,  order, judgment or decree applicable to Parent or any of
its  subsidiaries or by which Parent or any of its  subsidiaries or any of their
respective  properties is bound or affected,  or (ii) any material  note,  bond,
mortgage,  indenture,  contract, agreement, lease, license, permit, franchise or
other  instrument or obligation to which Parent or any of its  subsidiaries is a
party  or by  which  Parent  or any of its  subsidiaries  or its or any of their
respective properties is bound or affected, except for conflicts, violations and
defaults that  (individually or in the aggregate) would not cause Parent to lose
any material benefit or incur any material liability. No investigation or review
by any  Governmental  Entity is  pending  or, to  Parent's  knowledge,  has been
threatened  in a  writing  delivered  to  Parent  against  Parent  or any of its
subsidiaries,  nor, to Parent's knowledge, has any Governmental Entity indicated
an intention to conduct an investigation  of Parent or any of its  subsidiaries.
There is no material agreement,  judgment,  injunction,  order or decree binding
upon Parent or any of its subsidiaries which has or could reasonably be expected
to have the effect of prohibiting or materially  impairing any business practice
of Parent or any of its  subsidiaries,  any acquisition of material  property by
Parent  or any of its  subsidiaries  or the  conduct  of  business  by Parent as
currently conducted.

                  (b)......Parent  and  its  subsidiaries  hold,  to the  extent
legally  required,  all permits,  licenses,  variances,  exemptions,  orders and
approvals from  Governmental  Entities that are material to and required for the
operation of the business of Parent as currently  conducted  (collectively,  the
"Parent Permits"). Parent and its subsidiaries are in compliance in all material
respects  with the terms of Parent  Permits,  except  where the failure to be in
compliance with the terms of Parent Permits would not be material to Parent.

         3.9......Litigation. There are no claims, suits, actions or proceedings
pending  or, to the  knowledge  of Parent,  threatened  against,  relating to or
affecting  Parent or any of its  subsidiaries,  before any  court,  governmental
department,  commission, agency, instrumentality or authority, or any arbitrator
that  seeks  to  restrain  or  enjoin  the   consummation  of  the  transactions
contemplated  by this  Agreement or which could  reasonably be expected,  either
singularly or in the aggregate with all such claims, actions or proceedings,  to
be material to Parent.  No  Governmental  Entity has at any time  challenged  or
questioned in a writing delivered to Parent the legal right of Parent to design,
manufacture, offer or sell any of its products or services in the present manner
or style thereof.  As of the date hereof,  to the knowledge of Parent,  no event
has occurred,  and no claim,  dispute or other condition or circumstance exists,
that will, or that would reasonably be expected to, cause or provide a bona fide
basis for a director or executive officer of Parent to seek indemnification from
Parent.

         3.10.....Agreements,  Contracts and Commitments. As of the date of this
Agreement, neither Parent nor any of its subsidiaries, nor to Parent's knowledge
any other party to a material  Contract of Parent,  is in breach,  violation  or
default under such Contract,  and neither Parent nor any of its subsidiaries has
received  written notice that it has breached,  violated or defaulted under, any
of the material terms or conditions of any material Contract of Parent in such a
manner as would permit any other party to cancel or terminate  any such material
Contract of Parent,  or would permit any other party to seek material damages or
other remedies (for any or all of such breaches,  violations or defaults, in the
aggregate).

         3.11.....Registration   Statement;   Proxy   Statement.   None  of  the
information  supplied or to be supplied by Parent for inclusion or incorporation
by  reference  in  (i)  the  Registration   Statement  will,  at  the  time  the
Registration  Statement  becomes effective under the Securities Act, contain any
untrue  statement of a material fact or omit to state any material fact required
to be stated  therein or necessary in order to make the statements  therein,  in
light of the circumstances  under which they are made, not misleading;  and (ii)
the Proxy  Statement/Prospectus will, at the dates mailed to the stockholders of
Company,  at  the  time  of  the  Company  Stockholders'  Meeting  and as of the
Effective Time, contain any untrue statement of a material fact or omit to state
any material  fact  required to be stated  therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not  misleading.  The  Registration  Statement  will  comply  as to  form in all
material  respects with the  provisions of the  Securities Act and the rules and
regulations  promulgated by the SEC thereunder.  Notwithstanding  the foregoing,
Parent  makes no  representation  or warranty  with  respect to any  information
supplied by the Company which is contained in any of the foregoing documents.

         3.12.....Board  Approval.  The Board of  Directors of Parent has, as of
the date of this  Agreement,  approved the  issuance of shares of Parent  Common
Stock and the payment of an aggregate of in connection with the Merger.

         3.13.....Benefit  Plans.  To  the  extent  eligible,  employees  of the
Company may participate and/or receive options and stock under the Parent's 1998
Stock Option Plan and 1998 Employee Stock Plan, pursuant to applicable laws.

                                   ARTICLE IV

                       CONDUCT PRIOR TO THE EFFECTIVE TIME

         4.1......Conduct of Business by the Company. During the period from the
date of this  Agreement and continuing  until the earlier of the  termination of
this Agreement pursuant to its terms or the Effective Time, the Company and each
of its  subsidiaries  shall,  except to the extent that Parent  shall  otherwise
consent in writing,  carry on its  business,  in all material  respects,  in the
usual,  regular  and  ordinary  course,  in  substantially  the same  manner  as
heretofore conducted and in compliance with all applicable laws and regulations,
pay its debts and taxes when due subject to good faith  disputes over such debts
or taxes,  pay or perform other  material  obligations  when due subject to good
faith  disputes  over  such  obligations,  and use its  commercially  reasonable
efforts  consistent  with past practices and policies to (i) preserve intact its
present business  organization,  (ii) keep available the services of its present
officers and  employees and (iii)  preserve its  relationships  with  customers,
suppliers,  distributors,  licensors,  licensees,  and others  with which it has
business dealings.

         In addition,  except as permitted by the terms of this  Agreement,  and
except as  provided  in Article 4 of the  Company  Schedules,  without the prior
written consent of Parent, during the period from the date of this Agreement and
continuing  until the earlier of the  termination of this Agreement  pursuant to
its terms or the Effective  Time,  the Company shall not do any of the following
and shall not permit its subsidiaries to do any of the following:

                  (a)......Except  for the  acceleration of the vesting of stock
options  pursuant to pre-existing  contractual  arrangement as set forth in Part
2.2(b) of the Company Schedules,  waive any stock repurchase rights, accelerate,
amend or change the period of  exercisability of options or restricted stock, or
reprice options granted under any employee, consultant,  director or other stock
plans or authorize  cash payments in exchange for any options  granted under any
of such plans;

                  (b)......Grant any severance or termination pay to any officer
or employee  except  pursuant  to written  agreements  outstanding,  or policies
existing,  on the date  hereof and as  previously  disclosed  in writing or made
available to Parent, or adopt any new severance plan;

                  (c)......Transfer  or  license  to any  person  or  entity  or
otherwise  extend,  amend or modify in any  material  respect  any rights to the
Company  Intellectual  Property,  or enter into grants to future patent  rights,
other  than  non-exclusive  licenses  in the  ordinary  course of  business  and
consistent with past practice;

                  (d)......Declare,  set aside or pay any  dividends  on or make
any other distributions  (whether in cash, stock, equity securities or property)
in respect of any  capital  stock or split,  combine or  reclassify  any capital
stock or issue or authorize the issuance of any other  securities in respect of,
in lieu of or in substitution for any capital stock;

                  (e)......Purchase,  redeem or otherwise  acquire,  directly or
indirectly,  any shares of  capital  stock of the  Company or its  subsidiaries,
except repurchases of unvested shares at cost in connection with the termination
of the  employment  relationship  with any employee  pursuant to stock option or
purchase agreements in effect on January 20, 2000;

                  (f)......Issue,  deliver, sell, authorize, pledge or otherwise
encumber,  any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions,  rights,  warrants or options to acquire any
shares of capital  stock or any  securities  convertible  into shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such  shares or  convertible  securities,  other  than (i) stock
options  pursuant to the Company  Stock Option Plans granted to employees of the
Company to purchase 1,200,000 shares (as appropriately adjusted for stock splits
and the like) of Company  Common  Stock  with  strike  prices  equal to the fair
market value of the Company Common Stock at the time of grant and otherwise with
vesting  schedules and other terms subject to Section 5; (ii) issuance of shares
of the Company  Common Stock in connection  with the prior  acquisitions  of the
Company,  as set forth in Part 4.1 of the Company Schedules;  and (iii) issuance
of shares by the Company  Common Stock pursuant to the exercise of stock options
therefor outstanding as of January 20, 2000 or granted pursuant to the preceding
clause (i);

                  (g)......Cause,  permit  or  propose  any  amendments  to  its
Certificate  of  Incorporation,  Bylaws or other  charter  documents (or similar
governing  instruments of any of its subsidiaries) except to the extent required
to comply with the Company's obligations hereunder,  required by law or required
by the rules and regulations of Nasdaq;

                  (h)......Except  as set  forth  on  Part  4.1  of the  Company
Schedules and except for the acquisition of Question Exchange,  Inc. pursuant to
the terms of a certain  Agreement  and Plan of Merger  dated  January 27,  2000,
acquire or agree to acquire by merging or  consolidating  with, or by purchasing
any equity  interest  in or a portion of the assets of, or by any other  manner,
any business or any  corporation,  partnership,  association  or other  business
organization or division  thereof,  or otherwise acquire or agree to acquire any
assets which are material,  individually or in the aggregate, to the business of
the Company or enter into any material joint ventures, strategic partnerships or
alliances;

                  (i)......Sell,  lease, license,  encumber or otherwise dispose
of  any  properties  or  assets  which  are  material,  individually  or in  the
aggregate,  to the business of the Company,  except sales of inventory  and used
equipment in the ordinary course of business consistent with past practice;

                  (j)......Incur   any   indebtedness   for  borrowed  money  or
guarantee  any  such  indebtedness  of  another  person,  issue or sell any debt
securities  or  options,  warrants,  calls or other  rights to acquire  any debt
securities  of the  Company,  enter into any "keep well" or other  agreement  to
maintain any financial  statement condition or enter into any arrangement having
the economic  effect of any of the foregoing  other than in connection  with the
financing of ordinary course trade payables consistent with past practice;

                  (k)......Adopt  or amend any employee benefit plan or employee
stock  purchase or employee  stock  option  plan,  or enter into any  employment
contract or collective bargaining agreement (other than offer letters and letter
agreements entered into in the ordinary course of business  consistent with past
practice with employees who are terminable "at will"),  pay any special bonus or
special  remuneration  to any director or employee,  or increase the salaries or
wage rates or fringe benefits (including rights to severance or indemnification)
of its directors,  officers, employees or consultants other than in the ordinary
course of business,  consistent  with past  practice,  or change in any material
respect any management policies or procedures;

                  (l)......Except  for  payments  made in  connection  with  the
acquisition  of  Question  Exchange,  Inc.,  make any  payments  outside  of the
ordinary course of business  consistent with past practices in excess of $50,000
individually or in the aggregate;

                  (m)......Modify,  amend or terminate  any Company  Contract or
other  material  contract or  agreement  to which the Company or any  subsidiary
thereof is a party or waive,  release or assign  any  material  rights or claims
thereunder;

                  (n)......Enter into any contracts,  agreements, or obligations
relating to the distribution, sale, license or marketing by third parties of the
Company's  products  or  products  licensed  by the  Company  other  than in the
ordinary course of business consistent with past practice;

                  (o)......Materially  revalue  any of its assets or,  except as
required  by  GAAP,  make  any  change  in  accounting  methods,  principles  or
practices;

                  (p)......Take  any action that could reasonably be expected to
cause the Merger to fail to qualify as a  "reorganization"  under Section 368(a)
of the Code; or

                  (q)......Agree in writing or otherwise to take any of the 
actions described in (a) through (p) above.

         4.2......Conduct of Business by Parent. During the period from the date
of this  Agreement and continuing  until the earlier of the  termination of this
Agreement  pursuant to its terms or the Effective  Time,  except as permitted by
the terms of this  Agreement and except as provided in Section 4.2 of the Parent
Schedule,  without the prior written consent of Company, Parent shall not engage
in any action that could  reasonably  be expected to cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code.

                                    ARTICLE V

                              ADDITIONAL AGREEMENTS

         5.1......Prospectus/Proxy   Statement;  Registration  Statement;  Other
Filings.  As promptly as practicable after the execution of this Agreement,  the
Company and Parent  will  prepare  and file with the SEC,  the  Prospectus/Proxy
Statement  and  Parent  will  prepare  and file  with  the SEC the  Registration
Statement  in  which  the  Prospectus/Proxy  Statement  will  be  included  as a
prospectus.  Each of Parent and Company shall provide promptly to the other such
information  concerning its business and financial statements and affairs as, in
the reasonable  judgment of the providing party or its counsel,  may be required
or  appropriate  for  inclusion  in  the  Proxy   Statement/Prospectus  and  the
Registration  Statement,  or in any  amendments or supplements  thereto,  and to
cause its  counsel  and  auditors  to  cooperate  with the  other's  counsel and
auditors  in  the  preparation  of  the  Proxy   Statement/Prospectus   and  the
Registration  Statement.  Each of the  Company  and Parent  will  respond to any
comments of the SEC, will use its respective  commercially reasonable efforts to
have the Registration  Statement  declared effective under the Securities Act as
promptly  as  practicable  after  such  filing  and the  Company  will cause the
Prospectus/Proxy  Statement  to be mailed to its  stockholders  at the  earliest
practicable time after the Registration  Statement is declared  effective by the
SEC. As promptly as practicable  after the date of this  Agreement,  each of the
Company and Parent  will  prepare  and file (i) with the United  States  Federal
Trade  Commission  (the "FTC") and the  Antitrust  Division of the United States
Department  of Justice  ("DOJ")  Notification  and Report Forms  relating to the
transactions  contemplated  herein  as  required  by the  HSR  Act,  as  well as
comparable pre-merger  notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties (the  "Antitrust  Filings")  and (ii) any other  filings  required to be
filed by it under the Exchange  Act, the  Securities  Act or any other  Federal,
state or foreign laws relating to the Merger and the  transactions  contemplated
by this  Agreement  (the  "Other  Filings").  The  Company and Parent each shall
promptly supply the other with any information which may be required in order to
effectuate  any filings  pursuant to this Section  5.1.  Each of the Company and
Parent will notify the other  promptly upon the receipt of any comments from the
SEC or its staff or any other government officials in connection with any filing
made  pursuant  hereto  and of any  request by the SEC or its staff or any other
government   officials  for  amendments  or  supplements  to  the   Registration
Statement,  the  Prospectus/Proxy  Statement or any  Antitrust  Filings or Other
Filing or for  additional  information  and will supply the other with copies of
all correspondence between such party or any of its representatives,  on the one
hand, and the SEC, or its staff or any other government officials,  on the other
hand,  with  respect  to  the  Registration   Statement,   the  Prospectus/Proxy
Statement,  the  Merger or any  Antitrust  Filing or Other  Filing.  Each of the
Company and Parent will cause all documents  that it is  responsible  for filing
with the SEC or other regulatory authorities under this Section 5.1 to comply in
all material respects with all applicable  requirements of law and the rules and
regulations promulgated thereunder.  Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Prospectus/Proxy Statement,
the Registration  Statement or any Antitrust Filing or Other Filing, the Company
or Parent, as the case may be, will promptly inform the other of such occurrence
and  cooperate  in  filing  with the SEC or its  staff or any  other  government
officials,  and/or mailing to  stockholders  of the Company and/or Parent,  such
amendment or supplement.

         5.2......Meeting of Company Stockholders.
                  -------------------------------

                  (a)......Promptly after the date hereof, the Company will take
all action  necessary in  accordance  with Delaware Law and its  Certificate  of
Incorporation  and Bylaws to convene a meeting of the Company's  stockholders to
consider adoption and approval of this Agreement and approval of the Merger (the
"Company Stockholders'  Meeting") to be held as promptly as practicable,  and in
any event (to the extent  permissible under applicable law) within 45 days after
the declaration of effectiveness of the Registration Statement. The Company will
use its commercially reasonable efforts to solicit from its stockholders proxies
in favor of the adoption and approval of this  Agreement and the approval of the
Merger and will take all other action  necessary or advisable to secure the vote
or consent of its  stockholders  required by the rules of Nasdaq or Delaware Law
to obtain such approvals.  Notwithstanding anything to the contrary contained in
this Agreement,  with Parent's prior written consent, the Company may adjourn or
postpone  the Company  Stockholders'  Meeting to the extent  necessary to ensure
that any necessary supplement or amendment to the Prospectus/Proxy  Statement is
provided to the  Company's  stockholders  in advance of a vote on the Merger and
this Agreement or, if as of the time for which the Company Stockholders' Meeting
is originally scheduled (as set forth in the  Prospectus/Proxy  Statement) there
are insufficient shares of Company Common Stock represented (either in person or
by proxy) to  constitute  a quorum  necessary  to conduct  the  business  of the
Company's  Stockholders'  Meeting.  The  Company  shall  ensure that the Company
Stockholders' Meeting is called, noticed, convened, held and conducted, and that
all  proxies   solicited  by  the  Company  in   connection   with  the  Company
Stockholders'  Meeting are solicited,  in compliance  with the Delaware Law, the
Company's  Certificate of Incorporation and Bylaws,  the rules of Nasdaq and all
other  applicable  legal  requirements.  The Company's  obligation to call, give
notice of, convene and hold the Company Stockholders' Meeting in accordance with
this  Section  5.2(a)  shall not be  limited  to or  otherwise  affected  by the
commencement,  disclosure,  announcement  or  submission  to the  Company of any
Acquisition  Proposal (as defined  below),  or by any  withdrawal,  amendment or
modification of the recommendation of the Board of Directors of the Company with
respect to the Merger and/or this Agreement.

                  (b)......Subject to Section 5.2(c): (i) the Board of Directors
of the Company shall unanimously recommend that the Company's  stockholders vote
in favor of and adopt and approve this  Agreement  and approve the Merger at the
Company Stockholders' Meeting; (ii) the Prospectus/Proxy Statement shall include
a  statement  to the  effect  that the Board of  Directors  of the  Company  has
unanimously  recommended  that the Company's  stockholders  vote in favor of and
adopt and approve  this  Agreement  and the Merger at the Company  Stockholders'
Meeting;  and  (iii)  neither  the Board of  Directors  of the  Company  nor any
committee  thereof  shall  withdraw,  amend or modify,  or propose or resolve to
withdraw,  amend  or  modify  in a  manner  adverse  to  Parent,  the  unanimous
recommendation  of the Board of  Directors  of the  Company  that the  Company's
stockholders  vote in favor of and  adopt and  approve  this  Agreement  and the
Merger.  For purposes of this  Agreement,  said  recommendation  of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.

                  (c)......Nothing  in this Agreement shall prevent the Board of
Directors of the Company from  withholding,  withdrawing,  amending or modifying
its unanimous  recommendation in favor of the Merger if (i) a Superior Offer (as
defined  below) is made to the  Company and is not  withdrawn,  (ii) the Company
shall have  provided  written  notice to Parent (a "Notice of  Superior  Offer")
advising Parent that the Company has received a Superior  Offer,  specifying the
material terms and conditions of such Superior Offer and  identifying the person
or entity making such Superior Offer,  (iii) Parent shall not have,  within five
(5) business days of Parent's receipt of the Notice of Superior  Proposal,  made
an offer that the Company Board by a majority vote  determines in its good faith
judgment (after  consultation with a financial adviser of nationally  recognized
reputation)  to be at least as favorable to the Company's  stockholders  as such
Superior  Proposal  (it being  agreed  that the Company  Board  shall  convene a
meeting to  consider  any such offer by Parent  promptly  following  the receipt
thereof),  (iv) the Board of Directors  of the Company  concludes in good faith,
after  consultation  with its outside  counsel,  that, in light of such Superior
Offer,   the  withholding,   withdrawal,   amendment  or  modification  of  such
recommendation is required in order for the Board of Directors of the Company to
comply  with its  fiduciary  obligations  to the  Company's  stockholders  under
applicable law and (v) neither the Company nor any of its representatives  shall
have violated any of the  restrictions  set forth in Section 5.5 or this Section
5.2. The Company  shall provide  Parent with at least three  business days prior
notice (or such lesser prior notice as provided to the members of the  Company's
Board of Directors but in no event less than  twenty-four  hours) of any meeting
of the Company's Board of Directors at which the Company's Board of Directors is
reasonably expected to consider any Acquisition  Transaction (as defined below).
Nothing contained in this Agreement shall limit the Company's obligation to hold
and  convene  the  Company  Stockholders'  Meeting  (regardless  of whether  the
unanimous  recommendation  of the Board of Directors  of the Company  shall have
been withdrawn,  amended or modified).  For purposes of this Agreement "Superior
Offer" shall mean an unsolicited,  bona fide written offer made by a third party
to consummate any of the following  transactions:  (i) a merger or consolidation
involving  the  Company  pursuant  to  which  the  stockholders  of the  Company
immediately  preceding such  transaction hold none of the equity interest in the
surviving or resulting entity of such transaction or (ii) the acquisition by any
person  or group  (including  by way of a tender  offer or an  exchange  offer),
directly or indirectly,  of ownership of 100% of the then outstanding  shares of
capital stock of the Company,  in each case on terms that the Board of Directors
of the Company  determines,  in its  reasonable  judgment  (based on the written
advice of a financial  adviser of nationally  recognized  reputation) to be more
favorable to the Company  stockholders  from a financial  point of view than the
terms of the Merger; provided,  however, that any such offer shall not be deemed
to be a "Superior Offer" if any financing required to consummate the transaction
contemplated by such offer is not committed.

                  (d)......Nothing  contained in this  Agreement  shall prohibit
the  Company  or its  Board of  Directors  from  taking  and  disclosing  to its
stockholders  a position  contemplated  by Rules 14d-9 and 14e-2(a)  promulgated
under the Exchange Act.

         5.3......Registration  Rights.  Parent  shall use its best  efforts  to
amend that certain  First  Amended and Restated  Registration  Rights  Agreement
dated June 16, 1999 so that each Company  Affiliate  shall receive  registration
rights for  Parent-initiated  secondary public offerings of Parent Common Stock,
such that in the aggregate,  the Company  Affiliates  shall receive the right to
sell no less than twenty percent (20%) of the selling  stockholder  component of
the first  Parent-initiated  secondary  offering of Parent Common Stock and pari
passu rights on subsequent Parent-initiated secondary offering.

         5.4......Confidentiality; Access to Information

                  (a)......The  parties  acknowledge that the Company and Parent
have previously  executed a Confidentiality  Agreement,  dated as of January __,
2000 (the "Confidentiality  Agreement"),  which  Confidentiality  Agreement will
continue in full force and effect in accordance with its terms.

                  (b)......Access to Information. Each of the Company and Parent
will  afford  the  other  and  the  other's   accountants,   counsel  and  other
representatives   reasonable   access  during  normal   business  hours  to  the
properties,  books,  records  and  personnel  during  the  period  prior  to the
Effective Time to obtain all information concerning its business,  including the
status of product  development  efforts,  properties,  results of operations and
personnel,  as such  other  party may  reasonably  request.  No  information  or
knowledge obtained in any investigation pursuant to this Section 5.4 will affect
or be deemed to modify any  representation  or warranty  contained herein or the
conditions to the obligations of the parties to consummate the Merger.

         5.5......No Solicitation.
                  ---------------

                  (a)......From  and after the date of this Agreement  until the
Effective Time or  termination  of this  Agreement  pursuant to Article VII, the
Company and its subsidiaries  will not, nor will they authorize or permit any of
their respective officers, directors,  affiliates or employees or any investment
banker,  attorney or other advisor or representative retained by any of them to,
directly or indirectly, (i) solicit, initiate, knowingly encourage or induce the
making,  submission or announcement of any Acquisition  Proposal (as hereinafter
defined),  (ii)  participate in any  discussions or negotiations  regarding,  or
furnish to any person other than Parent any non-public  information with respect
to, or take any other action to  facilitate  any  inquiries or the making of any
proposal  that  constitutes  or may  reasonably  be  expected  to lead  to,  any
Acquisition  Proposal,  (iii) engage in discussions with any person with respect
to any  Acquisition  Proposal,  except as to the existence of these  provisions,
(iv) subject to Section  5.2(c)  approve,  endorse or recommend any  Acquisition
Proposal  or (v) enter  into any  letter of intent or  similar  document  or any
contract  agreement or  commitment  contemplating  or otherwise  relating to any
Acquisition   Transaction;   provided,   however,   that  after  receipt  of  an
unsolicited, written, bona fide Acquisition Proposal that the Board of Directors
of the Company reasonably concludes may constitute a Superior Offer, the Company
may submit to the party  making  such  Acquisition  Proposal  a written  list of
questions,  the sole  purpose  of which is to  elicit  clarifications  as to the
material  terms  of the  Acquisition  Proposal  so as to  enable  the  Board  of
Directors  of the  Company  to make a  determination  whether  such  Acquisition
Proposal is in fact a Superior  Offer (it being  agreed that any  correspondence
with such party  shall be  limited  to  questions  and such  questions  shall be
limited to the purpose of  clarifying  the  material  terms of such  Acquisition
Proposal and shall not solicit or encourage any new Acquisition  Proposal or any
change to the Acquisition Proposal, and it being further agreed that the Company
shall provide Parent with a copy of any  correspondence to be delivered pursuant
to this Section 5.5(a) at least 24 hours prior to sending such correspondence to
any third party).  The Company and its subsidiaries  will immediately  cease any
and all  existing  activities,  discussions  or  negotiations  with any  parties
conducted heretofore with respect to any Acquisition Proposal.  Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in the  preceding  two  sentences  by any  officer,  director or employee of the
Company or any of its subsidiaries or any investment  banker,  attorney or other
advisor or  representative  of the Company or any of its  subsidiaries  shall be
deemed to be a breach of this Section 5.5 by the Company.

         For purposes of this Agreement,  "Acquisition  Proposal" shall mean any
offer or proposal  (other  than an offer or proposal by Parent)  relating to any
Acquisition   Transaction.   For  purposes  of  this   Agreement,   "Acquisition
Transaction"  shall  mean any  transaction  or  series of  related  transactions
involving:  (A) any purchase  from the Company or  acquisition  by any person or
"group" (as defined  under  Section  13(d) of the Exchange Act and the rules and
regulations  thereunder)  of more than a 5%  interest  in the total  outstanding
voting  securities of the Company or any of its subsidiaries or any tender offer
or exchange offer that if consummated  would result in any person or "group" (as
defined under  Section  13(d) of the Exchange Act and the rules and  regulations
thereunder)  beneficially  owning  5% or more of the  total  outstanding  voting
securities  of  the  Company  or  any  of  its   subsidiaries   or  any  merger,
consolidation,   business  combination  or  similar  transaction  involving  the
Company;  (B) any sale,  lease (other than in the ordinary  course of business),
exchange,  transfer,  license  (other than in the ordinary  course of business),
acquisition or disposition of more than 5% of the assets of the Company;  or (C)
any liquidation or dissolution of the Company.

                  (b)......In  addition  to the  obligations  of the Company set
forth  in  paragraph  (a) of this  Section  5.5,  the  Company  as  promptly  as
practicable  shall  advise  Parent  orally  and in  writing  of any  Acquisition
Proposal or any request for non-public  information which the Company reasonably
believes  would  lead  to  an  Acquisition   Proposal  or  to  any   Acquisition
Transaction,  or any inquiry  with  respect to or which the  Company  reasonably
should believe would lead to any  Acquisition  Proposal,  the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity of
the person or group making any such  request,  Acquisition  Proposal or inquiry.
The Company will keep Parent informed as promptly as practicable in all material
respects of the status and details  (including  material  amendments or proposed
material amendments) of any such Acquisition Proposal, request or inquiry.

         5.6......Public  Disclosure.  Parent and the Company  will consult with
each  other,  and to the extent  practicable,  agree,  before  issuing any press
release or  otherwise  making any public  statement  with respect to the Merger,
this  Agreement  or any  Acquisition  Proposal and will not issue any such press
release or make any such public statement prior to such consultation,  except as
may be  required  by law or any  listing  agreement  with a national  securities
exchange.  The  parties  have  agreed  to the text of the  joint  press  release
announcing the signing of this Agreement.

         5.7......Reasonable Efforts; Notification.
                  --------------------------------

                  (a)......Upon  the terms and  subject  to the  conditions  set
forth  in this  Agreement,  each of the  parties  agrees  to use all  reasonable
efforts to take,  or cause to be taken,  all actions,  and to do, or cause to be
done,  and to assist and cooperate  with the other parties in doing,  all things
necessary,  proper or advisable to consummate  and make  effective,  in the most
expeditious   manner   practicable,   the  Merger  and  the  other  transactions
contemplated by this Agreement, including using reasonable efforts to accomplish
the  following:  (i) the taking of all  reasonable  acts  necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining
of all necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations  from  Governmental  Entities  and the  making  of all  necessary
registrations,  declarations and filings (including registrations,  declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit,  claim,  action,  investigation  or
proceeding  by any  Governmental  Entity,  (iii) the  obtaining of all necessary
consents,  approvals or waivers from third  parties,  (iv) the  defending of any
suits,  claims,  actions,  investigations  or proceedings,  whether  judicial or
administrative,   challenging   this  Agreement  or  the   consummation  of  the
transactions  contemplated  hereby,  including  seeking  to  have  any  stay  or
temporary  restraining order entered by any court or other  Governmental  Entity
vacated  or  reversed  and (v)  the  execution  or  delivery  of any  additional
instruments  necessary to consummate the  transactions  contemplated  by, and to
fully carry out the purposes of, this Agreement.  In connection with and without
limiting the  foregoing,  the Company and its Board of Directors  shall,  if any
state takeover statute or similar statute or regulation is or becomes applicable
to the Merger,  this Agreement or any of the  transactions  contemplated by this
Agreement,  use all  reasonable  efforts to ensure that the Merger and the other
transactions  contemplated  by this  Agreement may be consummated as promptly as
practicable  on the  terms  contemplated  by this  Agreement  and  otherwise  to
minimize the effect of such statute or regulation on the Merger,  this Agreement
and the transactions contemplated hereby. Notwithstanding anything herein to the
contrary,  nothing in this  Agreement  shall be deemed to require  Parent or the
Company or any  subsidiary or affiliate  thereof to agree to any  divestiture by
itself or any of its  affiliates  of shares of capital stock or of any business,
assets or property,  or the imposition of any material limitation on the ability
of any of them to conduct their businesses or to own or exercise control of such
assets, properties and stock.

                  (b)......The Company shall give prompt notice to Parent of any
representation  or warranty  made by it  contained  in this  Agreement  becoming
untrue or inaccurate, or any failure of the Company to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section  6.3(a) or 6.3(b) would not be  satisfied,  provided,  however,
that  no  such  notification  shall  affect  the  representations,   warranties,
covenants or agreements of the parties or the  conditions to the  obligations of
the parties under this Agreement.

                  (c)......Parent shall give prompt notice to the Company of any
representation  or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate,  or any failure of Parent or Merger Sub to comply
with or satisfy in any material respect any covenant,  condition or agreement to
be complied  with or satisfied by it under this  Agreement,  in each case,  such
that  the  conditions  set  forth in  Section  6.2(a)  or  6.2(b)  would  not be
satisfied,  provided,  however,  that  no such  notification  shall  affect  the
representations,  warranties,  covenants  or  agreements  of the  parties or the
conditions to the obligations of the parties under this Agreement.

         5.8......Third  Party  Consents.  As soon as practicable  following the
date hereof,  Parent and the Company will each use its  commercially  reasonable
efforts to obtain any consents,  waivers and  approvals  under any of its or its
subsidiaries' respective agreements,  contracts,  licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby.

         5.9......Stock Options and Employee Benefits.
                  -----------------------------------

                  (a)......At the Effective Time, each then outstanding  Company
Option,  whether or not  exercisable at the Effective Time and regardless of the
respective  exercise  prices  thereof,  will be assumed by Parent.  Each Company
Option so assumed by Parent under this  Agreement  will continue to have, and be
subject to, the same terms and conditions  set forth in the  applicable  Company
Stock Option Plan (and any  applicable  stock option  agreement for such Company
Option) immediately prior to the Effective Time (including,  without limitation,
any  repurchase  rights or vesting  provisions),  except  that (i) each  Company
Option will be exercisable  (or will become  exercisable in accordance  with its
terms)  for that  number of whole  shares of Parent  Common  Stock  equal to the
product of the number of shares of Company  Common Stock that were issuable upon
exercise  of  such  Company  Option  immediately  prior  to the  Effective  Time
multiplied by 0.425 (the  "Exchange  Ratio"),  rounded down to the nearest whole
number of shares of Parent  Common Stock and (ii) the per share  exercise  price
for the shares of Parent  Common Stock  issuable  upon  exercise of such assumed
Company Option will be equal to the quotient determined by dividing the exercise
price per  share of  Company  Common  Stock at which  such  Company  Option  was
exercisable  immediately  prior to the  Effective  Time by the  Exchange  Ratio,
rounded down to the nearest  whole cent.  Each assumed  Company  Option shall be
vested immediately following the Effective Time as to the same percentage of the
total number of shares subject thereto as it was vested as of the Effective Time
(taking  into  consideration  the  effect of the  Merger on the  vesting of such
assumed Company Options); provided however, that the Company shall take all best
efforts so that no Company  Option  shall vest in excess of 50% of the  unvested
portion immediately prior to the Effective Time as a result of the Merger.

                  (b)......It is intended that Company Options assumed by Parent
shall qualify following the Effective Time as incentive stock options as defined
in Section 422 of the Code to the extent Company Options  qualified as incentive
stock options immediately prior to the Effective Time and the provisions of this
Section 5.9 shall be applied consistent with such intent.

                  (c)......It  is intended  that prior to  Closing,  the Company
shall  place  into  escrow  with an escrow  agent  and form of escrow  agreement
reasonably  acceptable  to Parent  shares of Company  Common  Stock (the "Escrow
Shares")  which  would have been issued by the  Company in  connection  with its
prior  acquisitions  as set  forth on Part 4.1 of the  Company  Schedules.  Upon
Closing,  such Escrow  Shares  shall be converted  into shares of Parent  Common
Stock in accordance with the terms of this Agreement and be released from escrow
in accordance with the terms of the respective acquisition agreements.

                  (d)......Prior  to the Effective Time, the Company shall grant
stock  options  pursuant  to the Company  1999 Stock  Option Plan to purchase an
aggregate of 1,200,000  shares (as  appropriately  adjusted for stock splits and
the like) of Company  Common  Stock to such  persons  and in such  amounts as to
which  Parent  shall have  agreed,  with strike  prices equal to the fair market
value of the Company Common Stock at the time of grant,  with no acceleration of
vesting  triggered by this Merger,  with 25% of the option vested 12 months from
the date of grant and 1/48th per month  thereafter.  These options shall only be
granted to employees of the Company and in such individual  amounts as set forth
on a written  schedule  approved in writing by Parent  prior to the  granting of
such options ("Option Schedule"); provided, however that no New Options shall be
included on the Option  Schedule.  The Company shall provide the Option Schedule
to Parent no later than ten (10) calendar days from the date hereof.

                  (e)......For   purposes   of   determining    eligibility   to
participate,  vesting,  and accrual or  entitlement  to benefits where length of
service is relevant  under any employee  benefit plan or  arrangement of Parent,
the  Surviving  Corporation,   or  any  of  their  respective   subsidiaries  or
affiliates, the employees,  officers,  directors, and consultants of the Company
as of the Effective Time ("Affected Employees") shall receive service credit for
service with the Company (and any predecessors  thereto) to the same extent that
such service credit was granted under the Company Employee Plans,  subject to no
duplication of benefits;  provided, however, that this paragraph shall not apply
to any of Parent's equity benefit plans.

                  (f)......Parent  shall  assume and honor,  or shall  cause the
Surviving  Corporation to assume and honor, in accordance with their terms,  all
written  employment,  retention,  consulting,  bonus,  severance and termination
plans and  agreements  (including  change in  control  provisions)  of  Affected
Employees  provided  or made  available  to Parent on or prior to the  Effective
Time.

         5.10.....Form  S-8. If available  for use by Parent,  Parent  agrees to
file a registration  statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed  Company Stock Options as soon as is reasonably
practicable  after the Effective  Time, and in no event later than 45 days after
the Effective  Time and shall use its  commercially  reasonable  efforts to have
such  registration  statement become effective and to maintain the effectiveness
of such registration statement for so long as such options remain outstanding.

         5.11.....Indemnification.
                  ---------------

                  (a)......From  and after the Effective Time,  Parent will, and
will cause the  Surviving  Corporation  to fulfill and honor in all respects the
obligations of the Company pursuant to any  indemnification  agreements  between
the  Company  and its  directors  and  officers  as of the  Effective  Time (the
"Indemnified  Parties").  The  Certificate  of  Incorporation  and Bylaws of the
Surviving  Corporation  will contain  provisions with respect to exculpation and
indemnification  that are at least as  favorable to the  Indemnified  Parties as
those contained in the Certificate of Incorporation and Bylaws of the Company as
in effect on the date hereof, which provisions will not be amended,  repealed or
otherwise  modified  for a period of six years  from the  Effective  Time in any
manner that would  adversely  affect the rights  thereunder of individuals  who,
immediately prior to the Effective Time, were directors,  officers, employees or
agents of the Company, unless such modification is required by law.

                  (b)......For a period of three years after the Effective Time,
Parent will cause the Surviving  Corporation to use its commercially  reasonable
efforts to maintain in effect, if available,  directors' and officers' liability
insurance  covering  those  persons who are  currently  covered by the Company's
directors' and officers' liability insurance policy on terms comparable to those
applicable  to the current  directors  and  officers of the  Company;  provided,
however,  that in no event will Parent or the Surviving  Corporation be required
to expend in excess of 150% of the annual premium  currently paid by the Company
for such coverage (or such coverage as is available for such 150% of such annual
premium).

         5.12.....Invention Assignment Agreement. The Company shall use its best
efforts to have all employees and independent contractors execute, respectively,
that certain  Employee  Agreement  attached hereto as Exhibit F and that certain
Contractor  Agreement  attached  hereto as Exhibit G. The Company shall pay each
such   employee  and   independent   contractor   one  hundred   (100)   dollars
contemporaneously with such execution.

         5.13.....Nasdaq  Listing.  Parent  agrees to  authorize  for listing on
Nasdaq the shares of Parent  Common  Stock  issuable,  and those  required to be
reserved for issuance,  in connection  with the Merger,  upon official notice of
issuance.

         5.14.....Company  Affiliate Agreement. Set forth on Exhibit B is a list
of those persons who may be deemed to be, in the Company's  reasonable judgment,
affiliates of the Company within the meaning of Rule 145  promulgated  under the
Securities  Act (each a "Company  Affiliate").  The Company will provide  Parent
with such information and documents as Parent  reasonably  requests for purposes
of reviewing such list. Contemporaneously herewith, the Company shall deliver or
cause to be  delivered  to  Parent,  from each  Company  Affiliate  an  executed
affiliate  agreement in substantially the form attached hereto as Exhibit C (the
"Company Affiliate  Agreement"),  each of which will be in full force and effect
as of the Effective Time. Parent will be entitled to place  appropriate  legends
on the  certificates  evidencing  any Parent  Common  Stock to be  received by a
Company  Affiliate  pursuant  to the  terms  of  this  Agreement,  and to  issue
appropriate  stop  transfer  instructions  to the transfer  agent for the Parent
Common Stock, consistent with the terms of the Company Affiliate Agreement.

         5.15.....Option  Assumption  Agreement.  The Company shall use its best
efforts  to cause each  holder of a Company  Option to  execute  and  deliver to
Parent an option assumption agreement in form delivered to the Company by Parent
(the "Option Assumption Agreement").

         5.16.....1999  Stock  Option  Plan.  The Company  shall  include in the
Proxy/Prospectus  a proposal  for its  stockholders  to  increase  the number of
shares  authorized  under the  Company's  1999 Stock Option Plan so that no less
than  1,200,000  shares of Company  Common Stock are  available for grant to the
individual  employees on the Option Schedule,  prior to the Closing (the "Option
Increase").

         5.17.....Option  Information. The Company shall provide Parent with the
Option Information no later than 5:00 p.m., California time on February 4, 2000.

                                   ARTICLE VI

                            CONDITIONS TO THE MERGER

         6.1......Conditions  to Obligations of Each Party to Effect the Merger.
The respective  obligations of each party to this Agreement to effect the Merger
shall be  subject to the  satisfaction  at or prior to the  Closing  Date of the
following conditions:

                  (a)......Company  Stockholder  Approval.  This Agreement shall
have been approved and adopted, and the Merger shall have been duly approved, by
the requisite vote under applicable law, by the stockholders of the Company.

                  (b)......Registration  Statement  Effective;  Proxy Statement.
The SEC shall have declared the Registration Statement effective.  No stop order
suspending the  effectiveness of the Registration  Statement or any part thereof
shall  have been  issued  and no  proceeding  for that  purpose,  and no similar
proceeding  in  respect  of the  Prospectus/Proxy  Statement,  shall  have  been
initiated or threatened in writing by the SEC.

                  (c)......No Order; HSR Act. No Governmental  Entity shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive  order,   decree,   injunction  or  other  order  (whether  temporary,
preliminary or permanent)  which is in effect and which has the effect of making
the Merger  illegal or otherwise  prohibiting  consummation  of the Merger.  All
waiting  periods,  if  any,  under  the  HSR Act  relating  to the  transactions
contemplated  hereby  will have  expired or  terminated  early and all  material
foreign  antitrust  approvals  required  to be  obtained  prior to the Merger in
connection with the transactions contemplated hereby shall have been obtained.

                  (d)......Tax Opinions.  Parent and the Company shall each have
received  written  opinions from their  respective tax counsel  (Wilson  Sonsini
Goodrich & Rosati, Professional Corporation,  and Hutchins, Wheeler and Dittmar,
a  Professional  Corporation,  respectively),  in form and substance  reasonably
satisfactory  to them, to the effect that the Merger will  constitute a tax-free
reorganization  within  the  meaning  of  Section  368(a)  of the  Code and such
opinions shall not have been withdrawn;  provided,  however, that if the counsel
to either  Parent or the Company does not render such  opinion,  this  condition
shall  nonetheless  be deemed to be  satisfied  with  respect  to such  party if
counsel to the other party  renders such  opinion to such party.  The parties to
this Agreement  agree to make such  reasonable  representations  as requested by
such counsel for the purpose of rendering such opinions.

                  (e)......Nasdaq  Listing. The shares of Parent Common Stock to
be issued in the  Merger  shall  have been  authorized  for  listing  on Nasdaq,
subject to notice of issuance.

         6.2......Additional  Conditions  to  Obligations  of the  Company.  The
obligation of the Company to  consummate  and effect the Merger shall be subject
to the  satisfaction  at or prior to the Closing  Date of each of the  following
conditions, any of which may be waived, in writing, exclusively by the Company:

                  (a)......Representations  and Warranties.  Each representation
and warranty of Parent and Merger Sub contained in this Agreement (i) shall have
been true and  correct as of the date of this  Agreement  and (ii) shall be true
and correct on and as of the  Closing  Date with the same force and effect as if
made on the Closing Date except, (A) in each case, or in the aggregate,  as does
not  constitute a Material  Adverse  Effect on Parent or Merger Sub; and (B) for
those  representations  and  warranties  which  address  matters  only  as  of a
particular date (which representations shall have been true and correct (subject
to the  qualifications  set  forth  in the  preceding  clause  (A))  as of  such
particular  date) (it being  understood  that, for purposes of  determining  the
accuracy of such  representations  and  warranties,  (i) all  "Material  Adverse
Effect" qualifications and other qualifications based on the word, "material" or
other similar phrases contained in such  representations and warranties shall be
disregarded and (ii) any update of or modification to the Parent  Schedules made
or purported to have been made after the  execution of this  Agreement  shall be
disregarded).  The Company shall have received a certificate with respect to the
foregoing signed on behalf of Parent by an authorized officer of Parent.

                  (b)......Agreements and Covenants. Parent and Merger Sub shall
have  performed or complied in all material  respects  with all  agreements  and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Closing Date,  and the Company shall have received a certificate
to such effect signed on behalf of Parent by an authorized officer of Parent.

                  (c)......Material  Adverse Effect.  No Material Adverse Effect
with respect to Parent shall have occurred since the date of this Agreement.

         6.3......Additional  Conditions to the Obligations of Parent and Merger
Sub.  The  obligations  of Parent and Merger  Sub to  consummate  and effect the
Merger shall be subject to the  satisfaction  at or prior to the Closing Date of
each of the  following  conditions,  any of which  may be  waived,  in  writing,
exclusively by Parent:

                  (a)......Representations  and Warranties.  Each representation
and warranty of the Company contained in this Agreement (i) shall have been true
and correct as of the date of this  Agreement and (ii) shall be true and correct
on and as of the  Closing  Date with the same force and effect as if made on and
as of the Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material  Adverse Effect on the Company;  provided,  however,  such
Material Adverse Effect  qualification shall be inapplicable with respect to the
representations and warranties  contained in Sections 2.2(a) and (b), 2.3, 2.20,
2.21 and 2.22, and (B) for those  representations  and warranties  which address
matters only as of a particular date (which representations shall have been true
and correct  (subject to the  qualifications  set forth in the preceding  clause
(A)) as of such  particular  date) (it being  understood  that,  for purposes of
determining  the  accuracy  of  such  representations  and  warranties,  (i) all
"Material Adverse Effect"  qualifications and other  qualifications based on the
word,  "material" or other similar phrases contained in such representations and
warranties  shall be disregarded  and (ii) any update of or  modification to the
Company  Schedules  made or purported  to have been made after the  execution of
this Agreement shall be  disregarded).  Parent shall have received a certificate
with respect to the  foregoing  signed on behalf of the Company by an authorized
officer of the Company.

                  (b)......Agreements  and  Covenants.  The  Company  shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date,  and Parent shall have  received a certificate  to such effect
signed on behalf of the  Company by the Chief  Executive  Officer  and the Chief
Financial Officer of the Company.

                  (c)......Material  Adverse Effect.  No Material Adverse Effect
with  respect to the  Company and its  subsidiaries  shall have  occurred  since
December 31, 1999.

                  (d)......Consents.   The  Company   shall  have  obtained  all
consents,  waivers and approvals required in connection with the consummation of
the  transactions   contemplated  hereby  in  connection  with  the  agreements,
contracts, licenses or leases set forth on Schedule 6.3(e).

                  (e)......Registration    Rights    Agreement.    The   Company
Registration  Rights Agreement shall have been terminated and none of the shares
of Company  Common  Stock shall have  registration  rights,  except  pursuant to
contractual arrangements with Parent.

                  (f)......1999 Stock Option Plan.  The Option Increase shall 
have been duly approved by the requisite vote under applicable law by the 
stockholders of the Company.

                                   ARTICLE VII

                        TERMINATION, AMENDMENT AND WAIVER

         7.1......Termination.  This  Agreement  may be  terminated  at any time
prior to the Effective Time, whether before or after the requisite  approvals of
the stockholders of the Company:

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

                  (b)......by  either the Company or Parent if the Merger  shall
not have been  consummated  by June 30,  2000 (the "End  Date") for any  reason;
provided, however, that the right to terminate this Agreement under this Section
7.1(b)  shall not be  available  to any party whose action or failure to act has
been a  principal  cause of or resulted in the failure of the Merger to occur on
or before  such date and such  action or failure to act  constitutes  a material
breach of this Agreement;

                  (c)......by  either the  Company  or Parent if a  Governmental
Entity shall have issued an order,  decree or ruling or taken any other  action,
in any case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is final and
nonappealable;

                  (d)......by  either  the  Company  or Parent  if the  required
approval of the stockholders of the Company contemplated by this Agreement shall
not have been obtained by reason of the failure to obtain the required vote at a
meeting  of  the  Company   stockholders  duly  convened  therefore  or  at  any
adjournment  thereof;  provided,  however,  that  the  right to  terminate  this
Agreement  under this Section 7.1(d) shall not be available to the Company where
the failure to obtain the Company stockholder approval shall have been caused by
(i) the action or failure to act of the  Company  and such  action or failure to
act  constitutes  a breach by the Company of this  Agreement or (ii) a breach of
the Company Voting Agreement by any party thereto other than Parent.

                  (e)......by  Parent  (at any time  prior to the  adoption  and
approval  of  this  Agreement  and  the  Merger  by  the  required  vote  of the
stockholders  of the Company) if a Company  Triggering  Event (as defined below)
shall have occurred;

                  (f)......by the Company,  upon a breach of any representation,
warranty,  covenant  or  agreement  on the  part of  Parent  set  forth  in this
Agreement,  or if any  representation  or warranty  of Parent  shall have become
untrue,  in either case such that the  conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue,  provided that if
such inaccuracy in Parent's  representations  and warranties or breach by Parent
is  curable  by Parent  through  the  exercise  of its  commercially  reasonable
efforts,  then the Company may not terminate this  Agreement  under this Section
7.1(f) prior to End Date,  provided  Parent  continues to exercise  commercially
reasonable efforts to cure such breach (it being understood that the Company may
not terminate  this  Agreement  pursuant to this  paragraph (f) if it shall have
materially breached this Agreement or if such breach by Parent is cured prior to
the End Date);

                  (g)......by  Parent,  upon a  breach  of  any  representation,
warranty,  covenant  or  agreement  on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue,  in either case such that the  conditions set forth in Section 6.3(a) or
Section 6.3(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided, that if
such inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the  Company  through  the  exercise  of its  commercially
reasonable  efforts,  then Parent may not terminate  this  Agreement  under this
Section 7.1(g) prior to the End Date, provided the Company continues to exercise
commercially  reasonable  efforts to cure such breach (it being  understood that
Parent may not terminate  this  Agreement  pursuant to this  paragraph (g) if it
shall have  materially  breached this Agreement or if such breach by the Company
is cured prior to the End Date);

                  (h)......by Parent, upon a breach of the provisions in Section
         5.5 of this Agreement.  For the purposes of this Agreement,  a "Company
         Triggering Event" shall be deemed to have occurred if:

(i) the Board of Directors of the Company or any committee thereof shall for any
reason have  withdrawn or shall have amended or modified in a manner  adverse to
Parent its  unanimous  recommendation  in favor of, the adoption and approval of
the Agreement or the approval of the Merger;  (ii) the Company shall have failed
to include in the Prospectus/Proxy Statement the unanimous recommendation of the
Board of  Directors  of the Company in favor of the adoption and approval of the
Agreement  and the  approval of the Merger;  (iii) the Board of Directors of the
Company fails to reaffirm its unanimous  recommendation in favor of the adoption
and approval of the  Agreement  and the  approval of the Merger  within ten (10)
days after Parent  requests in writing that such  recommendation  be reaffirmed;
(iv) the Board of Directors of the Company or any  committee  thereof shall have
approved or recommended  any Acquisition  Proposal;  or (v) a tender or exchange
offer  relating to  securities  of the Company  shall have been  commenced  by a
Person  unaffiliated  with  Parent  and the  Company  shall not have sent to its
securityholders  pursuant to Rule 14e-2  promulgated  under the Securities  Act,
within  ten (10)  business  days after such  tender or  exchange  offer is first
published  sent or given,  a statement  disclosing  that the Company  recommends
rejection of such tender or exchange offer.

         7.2......Notice of Termination;  Effect of Termination. Any termination
of this Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this  Agreement  shall be of no further force or effect,  except (i) as set
forth in Section  5.4(a),  this Section 7.2,  Section 7.3 and Article 8 (general
provisions),  each of which shall survive the termination of this Agreement, and
(ii)  nothing  herein  shall  relieve any party from  liability  for any willful
breach of this  Agreement.  No termination  of this  Agreement  shall affect the
obligations of the parties contained in the  Confidentiality  Agreement,  all of
which obligations shall survive termination of this Agreement in accordance with
their terms.

         7.3......Fees and Expenses.
                  -----------------

                  (a)......General. Except as set forth in this Section 7.3, all
fees  and  expenses   incurred  in  connection   with  this  Agreement  and  the
transactions  contemplated  hereby  shall be paid by the  party  incurring  such
expenses  whether  or not the Merger is  consummated;  provided,  however,  that
Parent and the Company  shall share  equally all fees and  expenses,  other than
attorneys'  and  accountants  fees and  expenses,  incurred  in  relation to the
printing and filing (with the SEC) of the Prospectus/Proxy  Statement (including
any  preliminary  materials  related  thereto)  and the  Registration  Statement
(including  financial statements and exhibits) and any amendments or supplements
thereto.

                  (b)......Company Payments. In the event that this Agreement is
terminated by Parent or the Company, as applicable, pursuant to Sections 7.1(b),
(d) or (g),  the  Company  shall  promptly,  but in no event later than two days
after the date of such  termination,  pay Parent a fee equal to  $30,000,000  in
immediately available funds (the "Termination Fee"); provided,  that in the case
of termination  under Section 7.1(b) or 7.1(d),  such payment shall be made only
if following the date hereof and prior to the termination of this  Agreement,  a
third party has publicly announced an Acquisition  Proposal and within 15 months
following the  termination of this Agreement a Company  Acquisition  (as defined
below) is consummated  or the Company  enters into an agreement  providing for a
Company  Acquisition.  The Company acknowledges that the agreements contained in
this Section  7.3(b) are an integral part of the  transactions  contemplated  by
this Agreement, and that, without these agreements,  Parent would not enter into
this Agreement;  accordingly, if the Company fails to pay in a timely manner the
amounts  due  pursuant  to this  Section  7.3(b) , and,  in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company for
the amounts set forth in this Section  7.3(b),  the Company  shall pay to Parent
its reasonable  costs and expenses  (including  attorneys' fees and expenses) in
connection  with such suit,  together  with interest on the amounts set forth in
this Section  7.3(b) at the prime rate of The Chase  Manhattan Bank in effect on
the date such payment was required to be made.  Payment of the fees described in
this  Section  7.3(b)  shall not be in lieu of damages  incurred in the event of
breach  of  this  Agreement.   For  the  purposes  of  this  Agreement  "Company
Acquisition"  shall  mean  any of the  following  transactions  (other  than the
transactions  contemplated  by this  Agreement);  (i) a  merger,  consolidation,
business  combination,  recapitalization,  liquidation,  dissolution  or similar
transaction  involving  the Company  pursuant to which the  stockholders  of the
Company  immediately  preceding  such  transaction  hold  less  than  50% of the
aggregate  equity  interests  in the  surviving  or  resulting  entity  of  such
transaction,  (ii)  a  sale  or  other  disposition  by the  Company  of  assets
representing  in  excess  of 50% of  the  aggregate  fair  market  value  of the
Company's  business  immediately  prior to such sale or (iii) the acquisition by
any person or group  (including by way of a tender offer or an exchange offer or
issuance by the Company),  directly or indirectly,  of beneficial ownership or a
right to acquire beneficial ownership of shares representing in excess of 50% of
the voting power of the then outstanding shares of capital stock of the Company.

         7.4......Amendment.  Subject to applicable  law, this  Agreement may be
amended by the  parties  hereto at any time by  execution  of an  instrument  in
writing signed on behalf of each of Parent and the Company.

         7.5......Extension; Waiver. At any time prior to the Effective Time any
party  hereto may, to the extent  legally  allowed,  (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the  representations  and warranties made to such
party contained  herein or in any document  delivered  pursuant hereto and (iii)
waive  compliance  with any of the  agreements or conditions  for the benefit of
such party contained herein.  Any agreement on the part of a party hereto to any
such  extension or waiver shall be valid only if set forth in an  instrument  in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.

                                  ARTICLE VIII

                               GENERAL PROVISIONS

         8.1......Non-Survival   of   Representations   and   Warranties.    The
representations  and warranties of the Company,  Parent and Merger Sub contained
in this Agreement  shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.

         8.2......Notices.  All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following  addresses or telecopy  numbers (or at such other  address or telecopy
numbers for a party as shall be specified by like notice):

                  (a)......if to Parent or Merger Sub, to:
                           VA Linux Systems, Inc.
                           1382 Bordeaux Drive
                           Sunnyvale, California 94089
                           Attention:  Chief Financial Officer
                           Telephone No.:  (408) 542-8600
                           Telecopy No.:  (408) 745-9152

                           with a copy to:

                           Wilson Sonsini Goodrich & Rosati
                           Professional Corporation
                           650 Page Mill Road
                           Palo Alto, California 94304-1050
                           Attention:   Judith M. O'Brien, Esq.
                                        Bruce M. McNamara, Esq.
                                        Bret M. DiMarco, Esq.
                           Telephone No.:  (650) 493-9300
                           Telecopy No.:  (650) 493-6811

                  (b)......if to the Company, to:
                           Andover.Net, Inc.
                           50 Nagog Park
                           Acton, Massachusetts 01720
                           Attention:  Bruce A. Twickler
                           Telephone No.:  (978) 635-5300
                           Telecopy No.:  (978) 635-5326

                           with a copy to:

                           Hutchins, Wheeler & Dittmar
                           A Professional Corporation
                           101 Federal Street
                           Boston, Massachusetts  02110
                           Attention:  David P. Kreisler, Esq.
                           Telephone No.:  (617) 951-6600
                           Telecopy No.:  (617) 951-1295


         8.3......Interpretation; Knowledge.
                  -------------------------

                  (a)......When  a  reference  is  made  in  this  Agreement  to
Exhibits,  such  reference  shall  be to an  Exhibit  to this  Agreement  unless
otherwise  indicated.  When a reference  is made in this  Agreement to Sections,
such  reference  shall  be to a  Section  of  this  Agreement  unless  otherwise
indicated the words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed  by the words  "without  limitation."  The
table of contents and headings  contained in this  Agreement  are for  reference
purposes only and shall not affect in any way the meaning or  interpretation  of
this  Agreement.  When  reference is made herein to "the business of" an entity,
such  reference  shall be deemed to  include  the  business  of all  direct  and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.

                  (b)......For  purposes of this Agreement the term  "knowledge"
means with  respect to a party  hereto,  with respect to any matter in question,
that any of the  Chief  Executive  Officer,  Chief  Financial  Officer,  General
Counsel or Controller of such party, has actual knowledge of such matter.

                  (c)......For  purposes of this  Agreement,  the term "Material
Adverse Effect" when used in connection with an entity means any change,  event,
violation, inaccuracy,  circumstance or effect that is materially adverse to the
business,  assets  (including  intangible  assets),  capitalization,   financial
condition  or results of  operations  of such  entity  taken as a whole with its
subsidiaries  provided  however,  that none of the following,  in and of itself,
shall be deemed to have a  Material  Adverse  Effect:  (i) an event,  violation,
inaccuracy,  circumstance or other matter that results from conditions affecting
the U.S. economy in general; (ii) an event, violation, inaccuracy,  circumstance
or other matter that results from the taking of any action expressly required by
the Agreement; (iii) a decline in Parent's Common Stock.

                  (d)......For  purposes of this  Agreement,  the term  "person"
shall mean any individual,  corporation (including any non-profit  corporation),
general partnership,  limited partnership,  limited liability partnership, joint
venture,  estate,  trust,  company  (including any limited  liability company or
joint  stock  company),  firm or other  enterprise,  association,  organization,
entity or Governmental Entity.

                  (e)......Counterparts.  This  Agreement may be executed in one
or more  counterparts,  all of  which  shall  be  considered  one  and the  same
agreement and shall become  effective  when one or more  counterparts  have been
signed  by each of the  parties  and  delivered  to the  other  party,  it being
understood that all parties need not sign the same counterpart.

         8.5......Entire  Agreement;  Third Party Beneficiaries.  This Agreement
and the documents and instruments and other  agreements among the parties hereto
as  contemplated by or referred to herein,  including the Company  Schedules and
the Parent  Schedules (a) constitute the entire agreement among the parties with
respect to the subject  matter  hereof and supersede  all prior  agreements  and
understandings,  both  written and oral,  among the parties  with respect to the
subject matter hereof,  it being understood that the  Confidentiality  Agreement
shall  continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or  remedies  hereunder,  except as  specifically  provided in
Section 5.11.

         8.6......Severability.   In  the  event  that  any  provision  of  this
Agreement  or the  application  thereof,  becomes or is  declared  by a court of
competent  jurisdiction to be illegal,  void or unenforceable,  the remainder of
this  Agreement  will continue in full force and effect and the  application  of
such  provision to other  persons or  circumstances  will be  interpreted  so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or  unenforceable  provision of this Agreement with a valid
and  enforceable  provision  that will  achieve,  to the  extent  possible,  the
economic, business and other purposes of such void or unenforceable provision.

         8.7......Other  Remedies;  Specific  Performance.  Except as  otherwise
provided herein,  any and all remedies herein  expressly  conferred upon a party
will be deemed  cumulative with and not exclusive of any other remedy  conferred
hereby,  or by law or equity upon such party, and the exercise by a party of any
one remedy  will not  preclude  the  exercise of any other  remedy.  The parties
hereto  agree that  irreparable  damage would occur in the event that any of the
provisions  of this  Agreement  were not  performed  in  accordance  with  their
specific terms or were  otherwise  breached.  It is accordingly  agreed that the
parties  shall be  entitled  to seek an  injunction  or  injunctions  to prevent
breaches of this Agreement and to enforce  specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction,  this
being in  addition to any other  remedy to which they are  entitled at law or in
equity.

         8.8......Governing  Law.  This  Agreement  shall  be  governed  by  and
construed in  accordance  with the laws of the State of Delaware,  regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.

         8.9......Rules of Construction. The parties hereto agree that they have
been  represented  by  counsel  during the  negotiation  and  execution  of this
Agreement and, therefore, waive the application of any law, regulation,  holding
or rule of  construction  providing  that  ambiguities  in an agreement or other
document  will be  construed  against  the  party  drafting  such  agreement  or
document.

         8.10.....Assignment.  No party may assign either this  Agreement or any
of its rights,  interests,  or obligations  hereunder  without the prior written
approval of the other parties. Subject to the preceding sentence, this Agreement
shall be binding  upon and shall inure to the benefit of the parties  hereto and
their respective successors and permitted assigns.

         8.11.....WAIVER  OF JURY TRIAL. EACH OF PARENT,  THE COMPANY AND MERGER
SUB  HEREBY  IRREVOCABLY  WAIVES  ALL  RIGHT  TO  TRIAL  BY JURY IN ANY  ACTION,
PROCEEDING  OR  COUNTERCLAIM  (WHETHER  BASED ON  CONTRACT,  TORT OR  OTHERWISE)
ARISING  OUT OF OR  RELATING TO THIS  AGREEMENT  OR THE  ACTIONS OF PARENT,  THE
COMPANY  OR  MERGER  SUB IN THE  NEGOTIATION,  ADMINISTRATION,  PERFORMANCE  AND
ENFORCEMENT HEREOF.

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 hereafter]







         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed  by their  duly  authorized  respective  officers  as of the date first
written above.

                                  VA LINUX SYSTEMS, INC.

                                  By:

                                  Name:

                                  Title:


                                  ATLANTA ACQUISITION CORP.

                                  By:

                                  Name:

                                  Title:


                                  ANDOVER.NET, INC.

                                  By:

                                  Name:

                                  Title: