MTS Systems Corp – ‘S-4’ on 4/28/99

As of:  Wednesday, 4/28/99   ·   Accession #:  1047469-99-16838   ·   File #:  333-77277

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Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4         Registration of Securities Issued in a               143    745K 
                          Business-Combination Transaction                       
 2: EX-3.1      Articles of Incorporation/Organization or By-Laws      1      6K 
 3: EX-5.1      Opinion re: Legality                                   1      8K 
 4: EX-8.1      Opinion re: Tax Matters                                2     11K 
 5: EX-8.2      Opinion re: Tax Matters                                3     15K 
 6: EX-23.1     Consent of Experts or Counsel                          1      6K 
 7: EX-23.2     Consent of Experts or Counsel                          1      6K 
 8: EX-99.1     Miscellaneous Exhibit                                  2     10K 

S-4   —   Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1999
                                                   REGISTRATION NO. 333-
--------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------------------------- 
FORM S-4

REGISTRATION STATEMENT

UNDER 

THE SECURITIES ACT OF 1933
--------------------------------------------------------------- 
MTS SYSTEMS CORPORATION 

(Exact name of Registrant as specified in its charter)

                                                                [Download Table]
                                                                                
          MINNESOTA                          3826                  41-0908057   
 (STATE OR OTHER JURISDICTION    (PRIMARY STANDARD INDUSTRIAL   (I.R.S. EMPLOYER
              OF                 CLASSIFICATION CODE NUMBER)     IDENTIFICATION 
INCORPORATION OR ORGANIZATION)                                        NO.)      

14000 TECHNOLOGY DRIVE
EDEN PRAIRIE, MINNESOTA 55344-9763
TELEPHONE: (612) 937-4000 
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF 
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) 
--------------------------------------------------------------- 

DR. SIDNEY W. EMERY, JR.
CHIEF EXECUTIVE OFFICER 
MTS SYSTEMS CORPORATION 
14000 TECHNOLOGY DRIVE
EDEN PRAIRIE, MINNESOTA 55344-9763
TELEPHONE: (612) 937-4000 
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE) 
--------------------------------------------------------------- 

COPIES TO:

JEFFREY N. SAUNDERS                        DIANE HOLT FRANKLE 
LINDQUIST & VENNUM P.L.L.P.                    DIANNE B. SALESIN      
        4200 IDS CENTER                   GRAY CARY WARE & FREIDENRICH LLP
80 SOUTH 8TH STREET                       400 HAMILTON AVENUE 
MINNEAPOLIS, MINNESOTA 55402-2205          PALO ALTO, CALIFORNIA 94301-1825 
(612) 371-3211                            (650) 328-6561

--------------------------------------------------------------- 

   APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effectiveness of this Registration Statement and the  
effective time of the proposed merger of Badger Merger Corp. with and into DSP  
Technology Inc., as described in the Agreement and Plan of Merger, dated as of  
March 23, 1999, attached as Appendix A to the Proxy Statement/Prospectus forming
a part of this Registration Statement.                                          

If the securities being registered on this Form are being offered in    
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box. / /                             

If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(a) under the Securities Act of 1933, as amended (the       
"Securities Act"), check the following box and list the Securities Act          
Registration Statement number of the earlier effective Registration Statement   
for the same offering. / /                                                      

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act   
Registration Statement number of the earlier effective Registration Statement   
for the same offering. / /                                                      

CALCULATION OF REGISTRATION FEE 

                                                        [Enlarge/Download Table]

                 TITLE OF                       AMOUNT     PROPOSED MAXIMUM   PROPOSED MAXIMUM        AMOUNT    
               EACH CLASS OF                    TO BE       OFFERING PRICE   AGGREGATE OFFERING  OF REGISTRATION
        SECURITIES TO BE REGISTERED         REGISTERED(1)    PER SHARE(2)         PRICE(2)          FEE(2)(3)   
                                                                                                                
Common Stock, Par Value $0.25 per share....   2,077,000     Not applicable     Not applicable       $5,437.68   

(1) Represents the number of shares of common stock of the Registrant which may 
be issued to the stockholders and optionholders of DSP Technology Inc.  
("DSPT") pursuant to the merger described herein.                       

(2) Each share of common stock of DSPT (and each net option share of DSPT) will 
    be converted into the right to receive a fraction of a share of common stock
   of the Registrant pursuant to the merger described herein. Pursuant to Rule
    457(f)(1) under the Securities Act, the registration fee has been calculated
    based on the average of the high and low prices per share of the DSPT common
 stock as reported on the Nasdaq National Market on April 22, 1999 and the
   estimated number of shares of DSPT common stock and net option shares to be
acquired by the Registrant pursuant to the merger.                      

(3) Pursuant to Rule 457(b) under the Securities Act, $3,957 of the registration
  fee is offset by the filing fee previously paid by DSPT in connection with
    the filing of preliminary proxy materials on Schedule 14A on April 16, 1999.
Accordingly, a registration fee of $1,480.68 is being paid herewith.    

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF  
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME     
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), 
MAY DETERMINE.                                                                  

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DSP TECHNOLOGY INC. 
48500 KATO ROAD 
FREMONT, CALIFORNIA 94538 

Dear DSPT Stockholder:                                                          

    You are cordially invited to attend a special meeting of the stockholders of
DSP Technology Inc. on Friday, May 28, 1999 at the offices of DSPT located at   
48500 Kato Road, Fremont, California, at 2:00 p.m., local time. At the special  
meeting, you will be asked to vote on a proposal to approve the merger agreement
among DSPT, MTS Systems Corporation and Badger Merger Corp., a wholly-owned     
subsidiary of MTS. As a result of the merger, DSPT will become a wholly-owned   
subsidiary of MTS and you will become a shareholder of MTS.                     

 The merger will combine MTS' global presence in computer-based mechanical
design and system integration skills with DSPT's expertise in state-of-the-art  
software, data acquisition and control systems.                                 

Upon the closing of the merger, the holders of the outstanding shares of
DSPT common stock and outstanding options to purchase DSPT common stock will    
receive a total of 2,077,000 shares of MTS common stock. As a result, each      
outstanding DSPT share and each net option share represented by outstanding DSPT
options will be exchanged for a fraction, the exchange ratio, of a share of MTS 
common stock. The exchange ratio will be determined at closing by dividing the  
2,077,000 MTS common shares to be issued in the merger by the sum of the total  
number of DSPT shares outstanding plus the net option shares, calculated as     
follows:                                                                        

    - DSPT's net option shares will represent DSPT shares issuable upon exercise
   of outstanding options less a number of DSPT shares with a value, based
upon the implied DSPT share value at closing, equal to the aggregate
exercise price of such options.                                     

    - The implied DSPT share value at closing will be determined by dividing the
  market value of the MTS shares issued in the merger plus the aggregate
 exercise price of the DSPT options by the total number of DSPT shares
outstanding and subject to outstanding options.                     

    For example, based on an assumed price of $13.00 for MTS common stock at the
closing of the merger and assuming all currently outstanding stock options      
remain unexercised at the time of closing, each of DSPT's common shares and each
of its net option shares would receive approximately 0.8037 of a share of MTS   
common stock. The actual exchange ratio will be determined at closing.          

The exact exchange ratio will depend upon the market price of MTS common
stock, the number of outstanding shares of DSPT common stock, the number of DSPT
shares subject to outstanding options and the exercise prices of such options.  
Therefore, the actual exchange ratio for the merger, the aggregate value of the 
2,077,000 MTS shares of common stock issued in the merger, and the allocation of
the aggregate merger consideration between DSPT stockholders and optionholders  
could be affected by:                                                           

- increases or decreases in the market price of MTS common stock;       

- exercises of DSPT options and their related exercise prices; and      

- grants of additional DSPT options.                                    

 MTS common stock is traded on the Nasdaq National Market under the symbol
"MTSC." DSPT common stock is traded on the Nasdaq National Market under the     
symbol "DSPT." DSPT stockholders                                                

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should obtain recent market quotations for MTS common stock and DSPT common     
stock and understand the exchange ratio being offered in the merger.            

   If you would like information regarding the exchange ratio and, if you hold
options, the implied DSPT share value used to determine the number of net option
shares represented by your options, you may call DSPT's proxy solicitor,        
MacKenzie Partners, Inc., at (800) 322-2885. MacKenzie Partners will provide to 
you an estimate of the exchange ratio and the implied DSPT share value as of any
date prior to and including the date on which the exchange ratio is finally     
determined. MacKenzie Partners will also provide instructions on how to submit  
proxies in a timely manner, including instructions if you wish to wait until the
exchange ratio is finally determined before voting. If you wish to change your  
vote, you may do so by transmitting the request by facsimile to MacKenzie       
Partners at (212) 929-0308 or by attending the special meeting.                 

DSPT'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO YOU AND IN
YOUR BEST INTERESTS. THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER AND RECOMMENDS THAT YOU VOTE TO APPROVE THE MERGER AGREEMENT AND THE 
MERGER.                                                                         

    Because of the significance of the merger, your participation in the special
meeting, either in person or by proxy, is especially important. We hope you will
be able to attend the special meeting. However, even if you anticipate attending
in person, we urge you to mark, sign and return the enclosed proxy card promptly
in the enclosed postage-paid envelope to ensure that your shares of common stock
will be represented at the special meeting. If you do attend, you will, of      
course, be able to vote your shares in person.                                  

Thank you, and we look forward to seeing you at the special meeting.    

                                                                [Download Table]

                                                                
/s/ Howard O. Painter, Jr. /s/ F. Gil Troutman, Jr.             

Howard O. Painter, Jr.     F. Gil Troutman, Jr.                 
Chairman of the Board      President and Chief Executive Officer

THE MERGER INVOLVES CERTAIN RISKS TO DSPT STOCKHOLDERS. SEE "RISK FACTORS"      
BEGINNING ON PAGE 9.                                                            

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES         
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE   
CONTRARY IS A CRIMINAL OFFENSE.                                                 

THIS PROXY STATEMENT/PROSPECTUS IS DATED APRIL 30, 1999 AND IS FIRST BEING
MAILED TO 
STOCKHOLDERS ON OR ABOUT APRIL 30, 1999.

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DSP TECHNOLOGY INC. 
48500 KATO ROAD 
FREMONT, CALIFORNIA 94538 
(510) 657-7555

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 
TO BE HELD ON MAY 28, 1999

TO THE STOCKHOLDERS OF DSP TECHNOLOGY INC.:                                     

A special meeting of the stockholders of DSP Technology Inc., a Delaware
corporation, will be held on May 28, 1999, at 2:00 p.m., local time, at the     
offices of DSPT located at 48500 Kato Road, Fremont, California for the         
following purposes:                                                             

 1.  To consider and vote upon a proposal to adopt and approve the
Agreement and Plan of Merger dated as of March 23, 1999, among DSPT, MTS
Systems Corporation, a Minnesota corporation, and Badger Merger Corp., a
   Delaware corporation and wholly-owned subsidiary of MTS, and to approve the
merger of Badger with and into DSPT pursuant to which DSPT will become a
wholly-owned subsidiary of MTS; and                                     

   2.  To transact such other business as may properly come before the
special meeting or any adjournment or postponement of that meeting.     

    THE BOARD OF DIRECTORS OF DSPT UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.          

The close of business on April 15, 1999 has been fixed by the board of  
directors of DSPT as the record date for determination of the stockholders of   
DSPT entitled to notice of, and to vote at, the special meeting or any          
postponement or adjournment thereof. A list of DSPT stockholders entitled to    
vote at the special meeting will be available for examination during ordinary   
business hours at DSPT's offices at 48500 Kato Road, Fremont, California for 10 
days prior to the special meeting.                                              

Whether or not you plan to attend the special meeting, we urge you to   
complete, sign and return the enclosed proxy card in the enclosed postage-paid  
envelope. You may revoke your proxy at any time before it is voted by delivering
a written notice of such revocation or a duly executed, later-dated proxy to    
DSPT at 48500 Kato Road, Fremont, California 94538, Attention: Secretary, or by 
attending the special meeting and voting in person.                             

                                       By order of the Board of Directors,

                             /s/ Jose M. Millares, Jr.
                                    Jose M. Millares, Jr., Secretary

Fremont, California                                                             
April 30, 1999                                                                  
YOUR VOTE IS IMPORTANT. 
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
HOLDERS OF DSPT COMMON STOCK SHOULD NOT 
SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS. 

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TABLE OF CONTENTS 

                                                        [Enlarge/Download Table]

                                                                                                              PAGE   
                                                                                                            ---------
                                                                                                                     
WHERE YOU CAN FIND MORE INFORMATION........................................................................         1

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................         1

WHO CAN HELP ANSWER YOUR QUESTIONS.........................................................................         2

SUMMARY....................................................................................................         3
  The Companies............................................................................................         3
  Exchange Ratio...........................................................................................         4
  Ownership of MTS following the Merger....................................................................         4
  Reasons for the Merger...................................................................................         5
  DSPT's Recommendation to You.............................................................................         5
  The Special Meeting......................................................................................         5
  Record Date and Voting Power.............................................................................         5
  Required Vote............................................................................................         6
  Share Ownership of Management and Certain Stockholders...................................................         6
  Exchange of Stock Certificates...........................................................................         6
  Interests of DSPT's Officers and Directors in the Merger.................................................         6
  Comparative Per Common Share Market Price Information....................................................         6
  Tax Matters..............................................................................................         6
  Treatment of Options.....................................................................................         6
  Anticipated Accounting Treatment.........................................................................         7
  Fairness Opinion of Financial Advisor....................................................................         7
  Regulatory Requirements..................................................................................         7
  No Appraisal Rights......................................................................................         7
  Conditions to the Merger.................................................................................         7
  Limitation on Discussing or Negotiating Other Transaction Proposals......................................         8
  Termination of the Merger Agreement......................................................................         8
  Termination Fee..........................................................................................         8

RISK FACTORS...............................................................................................         9
  Risks Relating to the Merger.............................................................................         9
  Risks Relating to MTS' and the Combined Company's Business...............................................        10

MTS SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION.................................................        13

DSPT SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION................................................        14

MARKET PRICE DATA AND DIVIDEND POLICY......................................................................        15

COMPARATIVE PER SHARE DATA.................................................................................        17

THE DSPT SPECIAL MEETING...................................................................................        19
  Date Time and Place of Meeting...........................................................................        19
  Purpose of the DSPT Special Meeting......................................................................        19
  Record Date and Outstanding Shares.......................................................................        19
  Voting of Proxies........................................................................................        19
  Vote Required............................................................................................        19
  Quorum; Abstentions; Broker Non-Votes....................................................................        20
  Solicitation of Proxies; Expenses........................................................................        20
  Exchange of Stock Certificates...........................................................................        20
  Other Matters............................................................................................        20

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                                                                                                              PAGE   
                                                                                                            ---------
                                                                                                                     
APPROVAL OF THE MERGER AND RELATED TRANSACTIONS............................................................        21
  Background of the Merger.................................................................................        21
  Reasons for the Merger...................................................................................        27
  Recommendation of the DSPT Board.........................................................................        30
  Opinion of DSPT Financial Advisor........................................................................        31
  Interests of Certain Persons in the Merger...............................................................        35
  Affiliate Agreements.....................................................................................        36
  Treatment of Options.....................................................................................        36
  Material Federal Income Tax Consequences.................................................................        37
  Anticipated Accounting Treatment.........................................................................        39
  Governmental Approvals...................................................................................        39
  Absence of Appraisal Rights..............................................................................        39
  Resale of MTS Common Stock...............................................................................        39

MATERIAL TERMS OF THE MERGER AGREEMENT.....................................................................        40
  Effective Time of the Merger.............................................................................        40
  Merger Consideration.....................................................................................        40
  Conditions to the Merger.................................................................................        41
  Representations and Warranties...........................................................................        43
  Covenants; Conduct of Business Prior to the Merger.......................................................        43
  Limitation on Discussing or Negotiating Other Transaction Proposals......................................        46
  Termination of the Merger Agreement......................................................................        47
  Expenses and Termination Fee.............................................................................        48

INFORMATION WITH RESPECT TO DSPT...........................................................................        49
  Business of DSPT.........................................................................................        49
  Market for DSPT's Common Equity and Related Stockholder Matters..........................................        55
  Management's Discussion and Analysis of Financial Condition and Results of Operations....................        56
  Principal Stockholders...................................................................................        61
  Executive Compensation and Other Matters.................................................................        63

INFORMATION WITH RESPECT TO MTS............................................................................        65
  Agreement with FEV.......................................................................................        65
  Backlog..................................................................................................        65

COMPARISON OF RIGHTS OF HOLDERS OF MTS COMMON STOCK AND HOLDERS OF DSPT COMMON STOCK.......................        66
  Description of MTS Capital Stock.........................................................................        66
  Comparative Rights of MTS and DSPT Stockholders..........................................................        66

EXPERTS....................................................................................................        69

LEGAL MATTERS..............................................................................................        69

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................................................................       F-1
  Report of Independent Certified Public Accountants.......................................................       F-2
  DSP Technology Inc. and Subsidiaries Consolidated Balance Sheets.........................................       F-3
  DSP Technology Inc. and Subsidiaries Consolidated Statements of Income...................................       F-4
  DSP Technology Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity.....................       F-5
  DSP Technology Inc. and Subsidiaries Consolidated Statements of Cash Flows...............................       F-6
  DSP Technology Inc. and Subsidiaries Notes to Consolidated Financial Statements..........................       F-7

APPENDICES:                                                                                                          
  Appendix A: Agreement and Plan of Merger Among MTS Systems Corporation, Badger Merger Corp., and DSP               
    Technology Inc. dated as of March 23, 1999.............................................................       A-1
  Appendix B: Opinion of Hambrecht & Quist LLC dated March 23, 1999........................................       B-1

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WHERE YOU CAN FIND MORE INFORMATION 

MTS and DSPT each file annual, quarterly and special reports, proxy     
statements and other information with the United States Securities and Exchange 
Commission. MTS common stock is traded on the Nasdaq National Market under the  
symbol "MTSC." DSPT common stock is traded on the Nasdaq National Market under  
the symbol "DSPT." You may read and copy any document filed by MTS or DSPT at   
the SEC's public reference facilities. Please call the SEC at 1-800-SEC-0330 for
further information about its public reference facilities. The SEC filings are  
also available to the public at the SEC's website at http://www.sec.gov.        
Reports, proxy statements and other information concerning MTS and DSPT can also
be inspected at the Nasdaq National Market, Operations, 1735 K Street, N.W.,    
Washington, D.C.                                                                

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

    The SEC allows MTS and DSPT to "incorporate by reference" the information we
file with the SEC, which means that we can disclose important information to you
by referring you to documents we have previously filed with the SEC. The        
information incorporated by reference is considered a part of this proxy        
statement/prospectus, and any later information that we file with the SEC will  
automatically update and supersede this information. This proxy                 
statement/prospectus is part of a registration statement on Form S-4 filed by   
MTS with the SEC (Registration No. 333-     ).                                  

    MTS incorporates by reference the documents listed below, and any additional
documents filed by MTS with the SEC between the date of this proxy              
statement/prospectus and the date of the special meeting. The documents MTS     
incorporates by reference are:                                                  

 - MTS' annual report on Form 10-K for the fiscal year ended September 30,
1998;                                                               

- MTS' amendment number one to its annual report on Form 10-K/A for the 
fiscal year ended September 30, 1998; and                           

- MTS' quarterly report on Form 10-Q for the quarter ended December 31, 
1998.                                                               

  DSPT incorporates by reference the document listed below and any documents
that DSPT may file with the SEC between the date of this proxy                  
statement/prospectus and the date of the special meeting. The document DSPT     
incorporates by reference is:                                                   

- DSPT's current report on Form 8-K filed on March 26, 1999.            

   Documents incorporated by reference are available without charge, excluding
all exhibits unless such exhibits have been specifically incorporated by        
reference in this proxy statement/prospectus. You may obtain documents          
incorporated by reference by requesting them in writing or by telephone from the
appropriate company as follows:                                                 

MTS Systems Corporation 
14000 Technology Drive
Eden Prairie, Minnesota 55344-9763
Attention: Investor Relations 
Phone Number: (612) 937-4000

DSP Technology Inc. 
48500 Kato Road 
Fremont, California 94538 
Attention: Joe Millares 
Phone Number: (510) 657-7555

In order to ensure timely delivery of the documents, any requests should be made
by May 21, 1999.                                                                

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WHO CAN HELP ANSWER YOUR QUESTIONS

If you have additional questions about the merger, you should contact:
DSP TECHNOLOGY INC. 
48500 Kato Road 
Fremont, California 94538 
Attention: Joe Millares 
Phone Number: (510) 657-7555

MTS SYSTEMS CORPORATION 
14000 Technology Drive
Eden Prairie, Minnesota 55344-9763
Attention: Investor Relations 
Phone Number: (612) 937-4000

If you have additional questions about DSPT's solicitation of your proxy, you 
should contact: 

MACKENZIE PARTNERS, INC.
156 5th Avenue
New York, New York 10010
Phone Number: (800) 322-2885 or call collect at 
(212) 929-5500

    DSP Technology Inc., SDPT, RedLine and ACAP are registered trademarks of DSP
Technology Inc. ADAPT-CAS, ADAPT-DAC, CONNECT and DYNO are trademarks of DSP    
Technology Inc. Other product and brand names are trademarks or registered      
trademarks of their respective holders.                                         

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SUMMARY 

   THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE      
MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE      
MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE OTHER AVAILABLE  
INFORMATION REFERRED TO IN "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 1. THE 
MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT/PROSPECTUS.  
WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT. IT IS THE LEGAL DOCUMENT THAT    
GOVERNS THE MERGER.                                                             

WE HAVE INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE
COMPLETE DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY.                   

 MTS HAS PROVIDED THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS ABOUT
MTS AND DSPT HAS PROVIDED THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS    
ABOUT DSPT.                                                                     

  THE FACTORS BEGINNING ON PAGE 9 SHOULD BE CONSIDERED CAREFULLY BY THE DSPT
STOCKHOLDERS IN EVALUATING WHETHER TO ADOPT THE MERGER AGREEMENT AND APPROVE THE
MERGER. THESE FACTORS SHOULD BE CONSIDERED ALONG WITH ANY ADDITIONAL RISK       
FACTORS IN DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROXY                    
STATEMENT/PROSPECTUS AND ANY OTHER INFORMATION INCLUDED OR INCORPORATED BY      
REFERENCE HEREIN, INCLUDING IN CONJUNCTION WITH FORWARD-LOOKING STATEMENTS MADE 
HEREIN. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 1.                    

THE COMPANIES                                                                   

MTS Systems Corporation (SEE PAGE 1)                                            
14000 Technology Drive                                                          
Eden Prairie, MN 55344-2290                                                     
(612) 937-4000                                                                  

  Organized in 1966, MTS is a technology-based company providing engineering
services, equipment and software for applications in materials and product      
research, product development, quality control and factory automation.          

   MTS bases its business on a set of building-block technologies and business
processes. Technologies include sensors for measuring machine and process       
parameters, control technologies for test and process automation, hydraulic and 
electric servodrives for precise actuation, and application software to tailor  
the test or automation system to the customer's needs and to analyze results.   
Business processes include project and product styles of operations on a        
worldwide basis. In combination, they offer solutions to customers in a variety 
of markets.                                                                     

MTS' operations are organized into two business sectors: (1) mechanical 
testing and simulation, and (2) factory automation. In the mechanical testing   
and simulation sector, customers use MTS' products and services in research,    
product development and quality control to determine the mechanical properties  
and performance of materials, products and structures. Many of MTS' products and
services support customers' mechanical design automation processes. In the      
factory automation sector, customers use MTS' measurement and control           
instrumentation to measure process variables and to automate production         
processes. The operational alignment of the mechanical testing and simulation   
and factory automation sectors allows MTS to maintain a strategic focus on      
markets with different applications of its technologies and with different      
competitors.                                                                    

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DSP Technology Inc. (SEE PAGE 49)                                               
48500 Kato Road                                                                 
Fremont, CA 94538                                                               
(510) 657-7555                                                                  

DSPT designs, develops, manufactures, markets and integrates high-speed 
computer-automated instrumentation for measurement and control applications.    
DSPT has two divisions, the transportation group, which focuses on powertrain   
testing, and the lab group, which focuses on vehicle safety and component       
testing, general data acquisition and signal analysis. Powertrain testing is    
currently DSPT's largest market and major focus.                                

EXCHANGE RATIO (SEE PAGE 40)                                                    

  The exchange ratio will be determined at closing by dividing the 2,077,000
MTS common shares to be issued in the merger by the sum of the total number of  
shares of DSPT common stock outstanding plus the net option shares represented  
by outstanding DSPT stock options, calculated as follows:                       

    - DSPT's net option shares will represent DSPT shares issuable upon exercise
   of outstanding options less a number of DSPT shares with a value, based
upon the implied DSPT share value at closing, equal to the aggregate
exercise price of such options.                                     

    - The implied DSPT share value at closing will be determined by dividing the
market value of the MTS common shares issued in the merger plus the 
    aggregate exercise price of the DSPT options by the total number of DSPT
shares outstanding and subject to outstanding options.              

    For example, based on an assumed price of $13.00 for MTS common stock at the
closing of the merger and assuming all currently outstanding stock options      
remain unexercised at the time of closing, each of DSPT's common shares and each
of its net option shares would receive approximately 0.8037 of a share of MTS   
common stock.                                                                   

   The exact exchange ratio will be determined at closing and will depend upon
the market price of MTS common stock, the number of outstanding shares of DSPT  
stock, the number of DSPT shares subject to outstanding options and the exercise
prices of such options. Therefore, the actual exchange ratio for the merger, the
aggregate value of the 2,077,000 MTS shares issued in the merger, and the       
allocation of the aggregate merger consideration between DSPT stockholders and  
optionholders could be affected by:                                             

- increases or decreases in the market price of MTS common stock;       

- exercises of DSPT options and their related exercise prices; and      

- grants of additional DSPT options.                                    

  DSPT has agreed in the merger agreement that it will not grant options for
more than 28,000 shares prior to the closing of the merger.                     

OWNERSHIP OF MTS FOLLOWING THE MERGER                                           

    DSPT stockholders and optionholders will receive a total of 2,077,000 shares
of MTS common stock in the merger. Based on the number of shares of MTS common  
stock outstanding on April 1, 1999, existing DSPT stockholders and optionholders
will own approximately 10% of MTS common stock after the merger.                

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REASONS FOR THE MERGER (SEE PAGE 27)                                            

    MTS.  The board of directors of MTS approved the merger based on a number of
factors including, among other things, the following:                           

   - the merger will further MTS' commitment to customers to provide a broader
  and more integrated analysis, simulation and testing process that will
   enable customers to lower development costs and move products to market
faster;                                                             

 - DSPT has unique expertise, technologies and customer recognition in the
market for test, analysis and validation of engine designs; and     

- the combined firms would be a stronger force in the global powertrain 
     testing market because they complement each other in technology, customer
base and geographic presence.                                       

    DSPT.  The board of directors of DSPT believes that the merger should result
in a number of benefits to DSPT and its stockholders including, among other     
benefits, the following:                                                        

  - the potential to obtain contracts for larger system integration projects
  due to the lower perceived risk to customers as a result of the larger
relative size of the combined company compared to DSPT;             

- the potential for increased sales to MTS' powertrain unit customers,  
  primarily as a result of combining the product lines of the powertrain
 unit and DSPT to offer diesel customers broader test capabilities and
complementary product lines;                                        

- the potential for increased sales of DSPT products to MTS powertrain  
component test product customers;                                   

 - the opportunity for increased DSPT international sales, leveraging MTS'
international business;                                             

 - the potential for increased sales in the powertrain testing market as a
result of integrating MTS' noise and vibration capability into DSPT 
products; and                                                       

- the greater liquidity and diversification of risk offered to DSPT     
stockholders by an investment in MTS instead of DSPT.               

DSPT'S RECOMMENDATION TO YOU (SEE PAGE 30)                                      

  The DSPT board of directors believes that the merger is fair to you and in
your best interests. The DSPT board of directors unanimously recommends that you
vote "FOR" adoption of the merger agreement and approval of the merger.         

THE SPECIAL MEETING (SEE PAGE 19)                                               

   A special meeting of the stockholders of DSPT will be held on May 28, 1999,
at the offices of DSPT located at 48500 Kato Road, Fremont, California at 2:00  
p.m. local time to consider and vote upon a proposal to adopt the merger        
agreement and to approve the merger.                                            

RECORD DATE AND VOTING POWER (SEE PAGE 19)                                      

   You are entitled to vote at the special meeting if you owned shares of DSPT
common stock on the close of business on April 15, 1999, the record date for the
special meeting. You will have one vote at the special meeting for each share of
DSPT common stock you owned on the record date. DSPT optionholders will not be  
entitled to vote at the special meeting. There are 2,351,076 shares of DSPT     
common stock entitled to be voted at the special meeting.                       

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REQUIRED VOTE (SEE PAGE 19)                                                     

    The adoption of the merger agreement and approval of the merger requires the
affirmative vote of a majority of the shares of DSPT common stock outstanding on
the record date.                                                                

SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS (SEE PAGE 66)            

  The directors and executive officers of DSPT own approximately 8.1% of the
shares entitled to vote at the special meeting. All of them have agreed to vote 
their shares for the adoption of the merger agreement and approval of the       
merger.                                                                         

EXCHANGE OF STOCK CERTIFICATES (SEE PAGE 20)                                    

If you are a DSPT stockholder, you should not send in your stock        
certificates now. After the merger is completed, MTS will send DSPT stockholders
and optionholders written instructions for receiving shares of MTS common stock 
in exchange for their stock certificates and options. MTS shareholders will keep
their current certificates, and will continue to hold the same number of shares 
of MTS common stock after the merger.                                           

INTERESTS OF DSPT'S OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 35)          

You should be aware that a number of DSPT's officers and directors have 
employment contracts, stock options and severance packages that give them       
interests in the merger that are different from other DSPT stockholders. In     
addition, MTS will cause indemnification and insurance arrangements to be       
maintained for the DSPT officers and directors.                                 

COMPARATIVE PER COMMON SHARE MARKET PRICE INFORMATION (SEE PAGE 17)             

 MTS common stock is traded on the Nasdaq National Market under the symbol
"MTSC." On March 23, 1999, the last trading day before the announcement that MTS
and DSPT entered into the merger agreement, the closing sale price of MTS common
stock was reported at $10.313 per share. Following the merger, MTS common stock 
will continue to be traded on the Nasdaq National Market under the symbol       
"MTSC." On April 27, 1999, the closing sale price of MTS common stock was       
reported at $11.50.                                                             

  DSPT common stock is traded on the Nasdaq National Market under the symbol
"DSPT." On March 23, 1999, the last trading day before the announcement that MTS
and DSPT entered into the merger agreement, the closing sale price of DSPT      
common stock was reported at $5.75 per share. On April 27, 1999, the closing    
sale price of DSPT common stock was reported at $7.625. Following the merger,   
DSPT common stock will cease to be traded on the Nasdaq National Market because 
all of the outstanding shares of DSPT common stock will be converted into MTS   
common stock.                                                                   

TAX MATTERS (SEE PAGE 37)                                                       

  The exchange of shares of DSPT common stock for shares of MTS common stock
in the merger will be tax-free to you for federal income tax purposes. You will,
however, have to pay taxes with respect to any cash received for any fractional 
share. Your tax basis in the shares of MTS common stock that you will receive in
the merger will equal your current tax basis in your DSPT common stock. However,
your tax basis will be reduced by the basis allocated to any fractional share   
interest for which you receive cash.                                            

TREATMENT OF OPTIONS (SEE PAGE 36)                                              

   In the merger, unexercised options representing "net option shares" will be
exchanged for MTS common stock. DSPT intends to treat the conversion of         
incentive stock options into MTS common stock as a deemed exercise of the       
incentive stock options, resulting in income recognition for U.S. federal       
alternative minimum tax purposes, but not for federal regular income tax        
purposes. Withholding                                                           

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taxes will not be withheld with respect to the conversion of incentive stock    
options into MTS common stock.                                                  

   Holders of nonqualified stock options to acquire DSPT common stock who have
their unexercised options converted into MTS common stock will recognize        
ordinary income for income tax purposes which will be reported on their 1999    
Form W-2 (for employees) or Form 1099 (for former employees and independent     
contractors), in an amount equal to the value of the MTS common stock on the    
merger closing date. Withholding taxes will apply with respect to wage income   
recognized by employees and former employees.                                   

 TAX MATTERS CAN BE COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN 
TAX ADVISORS TO FULLY UNDERSTAND THE TAX CONSEQUENCES OF THE MERGER TO YOU.     

ANTICIPATED ACCOUNTING TREATMENT (SEE PAGE 39)                                  

  The merger is expected to be accounted for as a "pooling of interests" for
financial accounting purposes.                                                  

FAIRNESS OPINION OF FINANCIAL ADVISOR (SEE PAGE 31)                             

   In deciding to approve the merger, DSPT's board of directors considered the
opinion of its financial advisor as to the fairness of the merger to you from a 
financial point of view. This opinion is attached as Appendix B to this proxy   
statement/prospectus. We encourage you to read this opinion carefully.          

DSPT's financial advisor performed several analyses in connection with  
delivering its opinion. These analyses included comparing DSPT's and MTS'       
historical stock prices, comparing DSPT and MTS to other publicly-traded        
companies, and estimating the relative values and contributions of DSPT and MTS 
based on past performance.                                                      

REGULATORY REQUIREMENTS (SEE PAGE 39)                                           

 We are prohibited by U.S. antitrust laws from completing the merger until
after we have furnished revenue and market information and materials to the     
Antitrust Division of the Department of Justice and the Federal Trade Commission
and a required waiting period has ended. MTS and DSPT have each filed the       
required notification and report forms with the Department of Justice and the   
Federal Trade Commission, and the waiting period for those filings has not yet  
expired. In letters dated April 20, 1999, the U.S. Department of Justice        
requested that MTS and DSPT voluntarily supply information concerning the       
merger. Both parties have supplied some of the requested information and expect 
to supply further information on a voluntary basis. Assuming the Department of  
Justice does not extend the waiting period, it will expire on May 6, 1999. After
the waiting period expires, the Department of Justice and the Federal Trade     
Commission continue to have the authority to challenge the merger on antitrust  
grounds before or after the merger is completed.                                

NO APPRAISAL RIGHTS (SEE PAGE 39)                                               

 DSPT is organized under Delaware law. Under Delaware law, stockholders of
DSPT have no rights to an appraisal of the value of their shares in connection  
with the merger.                                                                

CONDITIONS TO THE MERGER (SEE PAGE 41)                                          

MTS and DSPT will not complete the merger unless several conditions are 
satisfied or waived, including the following:                                   

- the adoption of the merger agreement and approval of the merger by the
DSPT stockholders;                                                  

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  - the absence of any legal action making the merger illegal or prohibiting
   the merger or that would materially limit the ability of MTS to own and
operate the assets and business of DSPT;                            

- the receipt of all material approvals and consents of third parties   
necessary to consummate the merger;                                 

   - the receipt of all permits or other authorizations required by applicable
     state securities laws for the MTS common stock to be issued in connection
with the merger;                                                    

- the expiration or termination of the applicable waiting period under  
antitrust laws;                                                     

- the compliance by MTS and DSPT with their obligations under the merger
  agreement and the representations and warranties made by MTS and DSPT,
      respectively, in the merger agreement being true in all material respects;

   - the delivery by counsel for each company of its tax and legal opinions to
the other company; and                                              

  - the delivery by the accounting firm for MTS of a letter stating that the
firm concurs with MTS management's conclusion that the merger may be
  accounted for as a pooling of interests and delivery by the accounting
    firm for DSPT of a letter stating that the firm is not aware of any fact
  concerning DSPT that would preclude the merger from being treated as a
pooling of interests for financial accounting purposes.             

LIMITATION ON DISCUSSING OR NEGOTIATING OTHER TRANSACTION PROPOSALS (SEE PAGE   
46)                                                                         

   Subject to certain exceptions, DSPT has agreed not to pursue an alternative
transaction with another party while the merger is pending unless such party has
made a proposal to the DSPT board of directors for a superior transaction with  
DSPT.                                                                           

TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 47)                               

MTS and DSPT can agree by mutual written consent to terminate the merger
agreement at any time, whether before or after the receipt of stockholder       
approval. In addition, either company can terminate the merger agreement under  
various circumstances, including if:                                            

- the merger is not completed on or before July 31, 1999;               

- the merger is prohibited by a final court order;                      

  - the stockholders of DSPT do not vote to approve the merger and adopt the
merger agreement;                                                   

- DSPT breaches its obligation not to pursue a business combination, the
board of directors recommends an alternative transaction, materially
   modifies in a manner adverse to MTS, or withdraws its recommendation or
     fails to recommend against acceptance of or takes no position regarding a
third party's tender offer or exchange offer;                       

- the DSPT board of directors authorizes DSPT to enter into a letter of 
      intent or a binding written agreement that constitutes a superior proposal
to the merger agreement with MTS and MTS does not make at least as  
favorable as the proposal within ten days after notice an offer; or 

   - either party breaches its representations or obligations under the merger
agreement, subject to certain exceptions.                           

TERMINATION FEE (SEE PAGE 48)                                                   

In connection with the termination of the merger agreement under certain
circumstances, DSPT would be required to pay MTS a termination fee of $400,000. 

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RISK FACTORS

  THIS PROXY STATEMENT/PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS RELATE TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF MTS   
AND DSPT. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY         
TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECTS," "PLANS," "ANTICIPATES," 
"BELIEVES," "FUTURE," "INTENDS," "ESTIMATES," "PREDICTS," "POTENTIAL," OR       
"CONTINUE" OR THE NEGATIVE OF SUCH TERMS AND OTHER COMPARABLE TERMINOLOGY. THESE
STATEMENTS ONLY REFLECT MANAGEMENT'S EXPECTATIONS AND ESTIMATES. ACTUAL EVENTS  
OR RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING    
STATEMENTS AS A RESULT OF COMPETITION, TECHNOLOGICAL CHANGE AND THE RISKS       
OUTLINED BELOW. THESE FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
ANY FORWARD-LOOKING STATEMENTS. WE ARE NOT UNDERTAKING ANY OBLIGATIONS TO UPDATE
ANY FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS TO  
REFLECT ANY FUTURE EVENTS OR DEVELOPMENTS.                                      

    THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY BY DSPT STOCKHOLDERS IN
EVALUATING WHETHER TO ADOPT THE MERGER AGREEMENT AND APPROVE THE MERGER. THESE  
FACTORS SHOULD BE CONSIDERED ALONG WITH ANY ADDITIONAL RISK FACTORS IN DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND ANY OTHER      
INFORMATION INCLUDED OR INCORPORATED BY REFERENCE, INCLUDING IN CONJUNCTION WITH
FORWARD-LOOKING STATEMENTS. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 1.

RISKS RELATING TO THE MERGER                                                    

INTEGRATING THE TWO BUSINESSES MAY BE DIFFICULT TO ACHIEVE AND THIS MAY         
ADVERSELY AFFECT OPERATIONS                                                 

  After the merger, MTS and DSPT will have to integrate their operations. In
particular, DSPT's transportation group and MTS' Detroit-based powertrain unit  
will be combined in DSPT's Ann Arbor, Michigan facility. The integration will   
require significant efforts from each company, including the coordination of    
their research and development and sales and marketing efforts. DSPT may find it
difficult to integrate the operations of the powertrain unit. DSPT personnel may
leave DSPT because of the merger. DSPT customers, distributors or suppliers may 
terminate their arrangements with DSPT, or demand amended terms to those        
arrangements. MTS management, including DSPT management who will become part of 
the MTS management team, may have their attention diverted while trying to      
integrate the two companies. Such diversion of management's attention or        
difficulties in the transition process could have an adverse impact on the      
combined operations. If MTS is not able to successfully integrate the operations
of DSPT, MTS' expectations for its future results of operations may not be met. 

THE COMBINATION MAY FAIL TO ACHIEVE BENEFICIAL SYNERGIES                        

 Achieving anticipated synergies and the potential benefits underlying the
two companies' reasons for the merger will depend on a number of factors, some  
of which include:                                                               

- the risk that MTS' and DSPT's customers may defer purchasing decisions
following the announcement of the merger;                           

 - the risk that it may be more difficult to retain DSPT's key management,
marketing and technical personnel after the merger;                 

   - the ability of DSPT to timely develop and market new products and product
enhancements;                                                       

   - the ability of the combined company to increase sales of DSPT's products;

 - the ability of the combined company to increase sales of MTS' products;

    - the competitive conditions in the engine and powertrain design and testing
markets; and                                                        

  - DSPT's and MTS' completion of their Year 2000 efforts to ensure that the
 products offered to their customers, as well as software, systems and
products received from suppliers and used internally, are Year 2000 
compliant by December 31, 1999.                                     

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  There can be no assurance that the anticipated synergies will be achieved.
The failure to achieve such synergies could have a material adverse effect on   
the business, results of operations and financial condition of the combined     
company.                                                                        

THE EXCHANGE RATIO, THE VALUE OF THE MERGER CONSIDERATION AND THE ALLOCATION OF 
THE MERGER CONSIDERATION BETWEEN DSPT STOCKHOLDERS AND OPTIONHOLDERS WILL   
FLUCTUATE PRIOR TO CLOSING                                                  

In the merger, MTS will issue a total of 2,077,000 shares of its common 
stock in exchange for all outstanding shares of DSPT common stock and           
outstanding options to purchase DSPT common stock. The holders of DSPT common   
stock and the holders of options to purchase DSPT common stock will receive a   
fraction of a share of MTS common stock, the exchange ratio, which will be      
calculated based on the market price of MTS common stock, the number of         
outstanding shares of DSPT common stock, the number of DSPT shares subject to   
outstanding options and the exercise price of those options. The actual exchange
ratio will not be determined until the closing. Therefore, the actual exchange  
ratio for the merger, the aggregate value of the 2,077,000 MTS shares to be     
issued in the merger and the allocation of the aggregate merger consideration   
between DSPT stockholders and optionholders could also be affected by:          

- increases or decreases in the market price of MTS common stock;       

- exercises of DSPT options and their related exercise prices; and      

- grants of additional DSPT options.                                    

  See "Material Terms of the Merger Agreement--Merger Consideration" on page
40.                                                                             

THE COSTS OF COMPLETING THE MERGER ARE SUBSTANTIAL AND MAY ADVERSELY AFFECT OUR 
RESULTS OF OPERATIONS                                                       

MTS and DSPT estimate that they will incur aggregate, direct transaction
costs of approximately $1,300,000 associated with the merger, which will be     
charged to operations in the quarter in which the merger is consummated. This   
estimate primarily includes fees for investment bankers, attorneys, accountants,
financial printing and other related charges. In addition, it is expected that  
the combined company will incur additional significant charges to operations    
after the merger, estimated to be between $200,000 and $300,000 and which have  
already been reserved for, to reflect costs of integrating the two companies.   
These amounts are only preliminary estimates and are subject to change. Although
MTS expects that the elimination of duplicative expenses as well as other       
efficiencies related to the integration of the businesses may offset the direct 
transaction and integration expenses over time, it is possible that such a net  
benefit will not be achieved in the near term or at all.                        

HOLDERS OF DSPT COMMON STOCK AND OPTIONS WILL HAVE DIFFERENT RIGHTS AS HOLDERS  
OF MTS COMMON STOCK FOLLOWING THE MERGER                                    

  Following the merger, holders of DSPT common stock and options to purchase
DSPT common stock outstanding on the date of the merger will become holders of  
MTS common stock. Certain differences exist between the rights of DSPT          
stockholders under DSPT's certificate of incorporation, as amended, and DSPT's  
bylaws and the rights of MTS shareholders under MTS' articles of incorporation, 
as amended, and MTS' bylaws. See "Comparison of Rights of Holders of MTS Common 
Stock and Holders of DSPT Common Stock" on page 66.                             

RISKS RELATING TO MTS' AND THE COMBINED COMPANY'S BUSINESS                      

MTS' COMMON STOCK PRICE IS EXPECTED TO CONTINUE TO BE VOLATILE                  

    As with most technology stocks, MTS' stock price is based largely on current
expectations of sustained future revenue and earnings growth rates and has been 
volatile during the past year. Any failure to meet expected revenue and earnings
levels in any period, or any negative change in perceived                       

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growth prospects of MTS after the merger, would likely have a significant       
adverse effect on MTS' stock price.                                             

MTS' BACKLOG AND QUARTERLY OPERATING RESULTS MAY BE VOLATILE                    

Possible significant volatility in both backlog and quarterly operating 
results for the combined company after the merger may result with respect to    
larger, individual fixed price orders currently being pursued by MTS and DSPT.  
In addition, delays in realization of backlog orders may occur due to technical 
difficulties, inability to obtain export licensing approval or delays in        
customers' preparation of installations sites. Any downturn in backlog or timing
of orders would likely have a significant adverse effect on MTS' operating      
results and earnings.                                                           

FAILURE TO ADAPT TO TECHNOLOGICAL CHANGE COULD HAVE AN ADVERSE EFFECT ON MTS'   
REVENUES AND EARNINGS                                                       

   If MTS is not able to keep pace with technological change in the industries
in which it competes, its revenues and earnings would be adversely effected. MTS
operates in a highly competitive industry characterized by rapid technological  
change. MTS' ability to compete effectively and its growth prospects depend upon
many factors, including the success of its existing products and services and   
the timely introduction and commercial acceptance of future products and        
services, as well as its ability to introduce new products and to enhance its   
existing products with features that meet changing end user requirements.       

EXPORT AND IMPORT CONTROLS COULD HAVE AN ADVERSE EFFECT ON ORDERS FOR MTS       
PRODUCTS                                                                    

  Export controls imposed by the U.S. government and import controls imposed
by foreign governments may cause delays in shipments or rejection of orders by  
MTS. Delays or rejection could cause material fluctuations in operating results 
and earnings.                                                                   

WEAK ECONOMIC CONDITIONS ABROAD COULD HAVE AN ADVERSE EFFECT ON MTS' RESULTS    

MTS' operating and financial results could be significantly adversely   
impacted by changes in foreign currency exchange rates and sluggish regional    
economic conditions, particularly in Europe and the Pacific Rim.                

YEAR 2000 PROBLEMS COULD RESULT IN A LOSS OF CUSTOMERS                          

The impact of Year 2000 issues on future MTS revenues is difficult to   
assess, but is a risk that should be considered in evaluating MTS' future growth
potential. MTS believes the current versions of its products are Year 2000      
compliant. MTS has been informed by DSPT that current versions of DSPT's        
products are Year 2000 compliant. MTS does not intend to make all prior versions
of its products Year 2000 compliant and has notified its customers as to which  
versions will and will not be Year 2000 compliant. MTS believes that its        
internal information systems are Year 2000 compliant and does not expect        
material liabilities or operational difficulties with respect to such systems,  
although any material failure of such systems could have a material adverse     
effect on MTS' operating results and earnings. See "Information With Respect to 
DSPT--Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 56 and MTS' annual report on Form 10-K for the fiscal year  
ended September 30, 1998 incorporated by reference in this proxy                
statement/prospectus.                                                           

DSPT NEEDS TO DEVELOP AND MANAGE ITS SYSTEMS INTEGRATION SERVICES               

DSPT believes that the successful marketing and expansion of its        
transportation products will be increasingly dependent on its ability to offer  
systems integration services. Success depends on DSPT's ability to attract and  
retain qualified technical personnel, market acceptance of these services,      
timing of service revenues, and the ability to manage customer projects         
profitably. The successful management of these projects depends on the timely   
availability and quality of key products, the availability of key               

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personnel, the ability to integrate different products from a variety of vendors
effectively, and the management of difficult scheduling and delivery problems.  
Most of DSPT's systems integration projects use fixed price contracts. The      
pricing of fixed price contracts requires accurate cost estimates in order to be
profitable.                                                                     

DSPT'S QUARTERLY RESULTS HAVE FLUCTUATED SIGNIFICANTLY IN THE PAST AND MAY      
FLUCTUATE SIGNIFICANTLY IN THE FUTURE                                       

   DSPT's quarterly operating results have varied significantly depending on a
number of factors. These factors include:                                       

   - timing of receipt of system orders from and shipments to major customers;

- variations in product mix and component costs;                        

- economic conditions prevailing within geographic markets and in the   
worldwide transportation industry;                                  

- market acceptance of new products and services;                       

- timing and levels of operating expenditures;                          

- exchange rate fluctuations;                                           

- DSPT's sales being concentrated in only a few customers; and          

   - DSPT's net sales being sporadic and typically generated in the last month
of the quarter.                                                     

DSPT IS HIGHLY DEPENDENT ON ITS SALES OVERSEAS                                  

  A significant part of DSPT's revenue growth in the past few years has been
due to increases in DSPT's international sales, particularly in Western Europe  
and Asia. International sales accounted for approximately 20%, 35% and 32% of   
net sales in fiscals 1999, 1998 and 1997, respectively. DSPT's international    
sales are subject to the following risks:                                       

- political and economic changes and disruptions;                       

- foreign regulation;                                                   

- tariffs or other barriers; and                                        

- exchange rate fluctuations.                                           

DSPT PURCHASES SEVERAL KEY COMPONENTS FROM LIMITED SOURCES AND SALES COULD BE   
LOST OR DELAYED IF THESE COMPONENTS ARE UNAVAILABLE                         

  DSPT currently purchases several key components used in the manufacture of
its products from a single or limited sources and is dependent on supply from   
these sources to meet DSPT's needs. DSPT may encounter shortages and delays in  
obtaining such components in the future. Shortages and delays could have an     
adverse effect on DSPT's ability to meet customer orders and could result in    
lost or delayed sales and revenues.                                             

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MTS SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The following table presents selected historical consolidated financial 
information for MTS for each of the fiscal years ended September 30, 1994       
through 1998 and for the unaudited three months ended December 31, 1997 and     
1998. The information has been derived from MTS' consolidated financial         
statements, which have been audited by Arthur Andersen LLP, independent public  
accountants for each of the fiscal years ended September 30, 1994 through 1998. 
For additional information regarding plans and objectives of management for     
future operations and financial condition and results of operations, see        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" included in MTS' annual report on Form 10-K for the fiscal year     
ended September 30, 1998 and its quarterly report on Form 10-Q for the quarter  
ended December 31, 1998 incorporated by reference in this proxy                 
statement/prospectus. The information set forth below has been derived from and 
is qualified by reference to and should be read in conjunction with the         
consolidated financial statements and related notes included in MTS' annual     
report on Form 10-K for the fiscal year ended September 30, 1998 and its        
quarterly report on Form 10-Q for the quarter ended December 31, 1998           
incorporated by reference in this proxy statement/prospectus.                   

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                                                                                      THREE MONTHS     
                                                     YEARS ENDED SEPTEMBER 30,                     ENDED DECEMBER 31,  
                                     ----------------------------------------------------------  ----------------------
                                        1998        1997        1996        1995        1994        1998        1997   
                                     ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                                                                                                       
OPERATING RESULTS DATA (FOR THE                                                                                        
  PERIOD):                                                                                                             
  Net revenues...................... $  339,682  $  303,480  $  261,029  $  234,131  $  200,550  $   87,733  $   73,938
  Income from operations............ $   33,275  $   30,865  $   22,888  $   16,764  $   14,162  $    5,915  $    8,124
  Net income........................ $   20,766  $   20,863(1) $   14,109 $   10,461 $    8,659  $    2,827  $    4,312
  Net income per share, basic                                                                                          
    basis........................... $     1.13  $     1.15(1) $     0.76 $     0.58 $     0.47  $     0.15  $     0.24
  Shares used in computing net                                                                                         
    income per share, basic basis...     18,441      18,207      18,669      18,116      18,313      18,594      18,290
  Net income per share, diluted                                                                                        
    basis........................... $     1.08  $     1.10(1) $     0.74 $     0.58 $     0.46  $     0.15  $     0.22
  Shares used in computing net                                                                                         
    income per share, diluted                                                                                          
    basis...........................     19,252      18,956      19,106      18,180      18,672      19,095      19,260
  Dividends declared................ $    4,429  $    3,645  $    2,991  $    2,523  $    2,558  $    1,116  $    1,099
  Dividend declared per share....... $     0.24  $     0.20  $     0.16  $     0.14  $     0.14  $     0.06  $     0.06
BALANCE SHEET DATA (AT PERIOD END):                                                                                    
  Working capital................... $   88,379  $   73,326  $   69,548  $   64,575  $   56,845  $   90,051  $   73,329
  Total assets...................... $  298,448  $  216,132  $  187,396  $  189,500  $  175,708  $  303,836  $  224,220
  Interest bearing debt............. $   74,682  $   12,865  $   11,836  $   22,965  $   23,851  $   70,427  $   22,649
  Shareholders' investment.......... $  143,036  $  124,619  $  112,814  $  106,677  $  100,046  $  146,289  $  126,957

------------------------                                                        

(1) Includes an after-tax gain of $2,654,000 from sale of land in May 1997,     
which is equal to $.14 per share.                                       

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DSPT SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION 

The following table presents selected historical financial data for DSPT
derived from the audited financial statements of DSPT is qualified by reference 
to and should be read in conjunction with "Information With Respect to          
DSPT--Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the related notes,    
included elsewhere in this proxy statement/prospectus.                          

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                                                            YEARS ENDED JANUARY 31,               
                                                             -----------------------------------------------------
                                                               1999       1998       1997       1996       1995   
                                                             ---------  ---------  ---------  ---------  ---------
                                                                                                                  
OPERATING RESULTS DATA (FOR THE YEAR):                                                                            
  Net sales................................................  $  25,396  $  22,038  $  17,987  $  15,538  $  12,977
  Operating income.........................................      2,277      2,543      1,234      1,956      1,416
  Net income...............................................      1,582      1,646        914      1,277        874
  Net income per common share (basic)......................        .70        .74        .42        .60        .42
  Weighted average shares used                                                                                    
    in computing basic net income per share................      2,253      2,211      2,168      2,131      2,079
  Net income per common share (diluted)....................        .64        .68        .40        .55        .40
  Weighted average shares and equivalents used in computing                                                       
    diluted net income per share...........................      2,479      2,437      2,304      2,331      2,189

BALANCE SHEET DATA (AT YEAR END):                                                                                 
  Working capital..........................................  $   8,276  $   8,173  $   5,726  $   5,472  $   4,190
  Total assets.............................................     17,068     16,730     11,799     10,294      8,744
  Long-term obligations....................................         --         --         --         --         --
  Stockholders' equity.....................................     12,016     10,657      8,687      7,698      6,268

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MARKET PRICE DATA AND DIVIDEND POLICY 

MTS common stock and DSPT common stock are included in the National     
Association of Securities Dealers Automated Quotations System and designated on 
the Nasdaq National Market under the symbols "MTSC" and "DSPT" respectively.    
This table sets forth, for the calendar quarters indicated, the range of high   
and low per share sales prices for MTS common stock and DSPT common stock as    
reported by Nasdaq. The per share price of MTS reflects two stock splits and    
related retroactive restatements by quarter. For market price information for   
DSPT common stock on a fiscal quarter basis, see page 55.                       

                                                        [Enlarge/Download Table]

                                                                                MTSC                  DSPT        
                                                                        --------------------  --------------------
                                                                          HIGH        LOW       HIGH        LOW   
                                                                        ---------  ---------  ---------  ---------
                                                                                                                  
1996                                                                                                              
  First Quarter........................................................ $   9.688  $   7.000  $   7.250  $   4.250
  Second Quarter.......................................................    11.250      8.750      6.750      5.125
  Third Quarter........................................................    10.750      9.250      6.125      4.750
  Fourth Quarter.......................................................    10.750      9.625      5.376      4.250
1997                                                                                                              
  First Quarter........................................................    11.313      9.750      6.625      4.625
  Second Quarter.......................................................    15.250     10.250      6.125      5.375
  Third Quarter........................................................    19.625     14.375     11.875      4.875
  Fourth Quarter.......................................................    20.000     17.375     11.750      8.000
1998                                                                                                              
  First Quarter........................................................    19.000     13.500     10.750      7.375
  Second Quarter.......................................................    19.250     15.500     10.750      7.250
  Third Quarter........................................................    17.750     11.563     10.125      6.250
  Fourth Quarter.......................................................    15.438     10.875      8.250      5.250
1999                                                                                                              
  First Quarter........................................................    14.375      9.625      7.813      5.625
  Second Quarter (through April 27, 1999)..............................    13.188     10.875      8.000      7.438

The following table sets forth the closing per share sales price of MTS 
common stock and DSPT common stock, as reported on Nasdaq, and the estimated    
equivalent per share price, as explained below, of DSPT common stock on March   
23, 1999, the last trading day before the public announcement of the proposed   
merger, and on April 27, 1999:                                                  

                                                        [Enlarge/Download Table]

                                                                                       DSPT ESTIMATED EQUIVALENT    
DATE                                       MTS COMMON STOCK    DSPT COMMON STOCK            PER SHARE PRICE         
----------------------------------------  ------------------  -------------------  ---------------------------------
                                                                                                                    
March 23, 1999..........................      $   10.313           $    5.75                   $    8.62            
April 27, 1999..........................      $    11.50           $   7.625                   $    9.39            

The estimated equivalent per share price of a share of DSPT common stock
based on MTS share price of $10.313 equals an assumed exchange ratio of 0.8355  
multiplied by the price of a share of MTS common stock. If the merger had       
occurred on April 27, 1999, you would have received a fraction of a share of MTS
common stock worth approximately $9.39 per share for each share of DSPT common  
stock you owned. The actual equivalent per share price of a share of DSPT common
stock that you will receive if the merger closes may be different from this     
price because the actual exchange ratio will not be determined until closing and
because the per share price of MTS common stock on the Nasdaq National Market   
fluctuates continuously.                                                        

Following the merger, MTS common stock will continue to be quoted on the
Nasdaq National Market, and there will be no further market for the DSPT common 
stock.                                                                          

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    MTS' dividend policy is to maintain a payout ratio which allows dividends to
increase with the long-term growth of earnings per share, while sustaining      
dividends in down years. MTS' dividend payout ratio target is approximately 25% 
of earnings per share. The current quarterly dividend of $0.06 per share equates
to 26% of MTS' fiscal 1996 through fiscal 1998 average net earnings per share.  

DSPT has never declared or paid a dividend. DSPT's policy is to retain  
earnings for use in its business.                                               

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COMPARATIVE PER SHARE DATA

   Set forth below are the net income and book value per common share data for
MTS on a historical basis and on a combined pro forma basis, and certain        
equivalent pro forma per share data for DSPT. The MTS combined pro forma data   
was derived by combining historical consolidated financial information of MTS   
and DSPT using the pooling of interests method of accounting for business       
combinations. The equivalent combined pro forma per share data for DSPT was     
calculated by multiplying the MTS combined pro forma per common share data by an
assumed exchange ratio of .8037. The equivalent historical per common share data
for DSPT was calculated by dividing the DSPT historical per common share data by
.8037.                                                                        

 The information in the table below should be read in conjunction with the
respective audited and unaudited consolidated financial statements and related  
notes of MTS and DSPT either incorporated by reference in this proxy            
statement/prospectus or included elsewhere in this proxy statement/ prospectus. 

MTS 

                                                        [Enlarge/Download Table]

                                                                                                              THREE MONTHS  
                                                                              YEARS ENDED SEPTEMBER 30,      ENDED DECEMBER 
                                                                                                                   31,      
                                                                          ---------------------------------  ---------------
                                                                            1998       1997(1)      1996          1998      
                                                                          ---------  -----------  ---------  ---------------
                                                                                                                            
HISTORICAL PER COMMON SHARE DATA:                                                                                           
  Income from continuing operations                                                                                         
    Basic................................................................ $    1.13   $    1.15   $    0.76     $    0.15   
    Diluted.............................................................. $    1.08   $    1.10   $    0.74     $    0.15   
    Dividends Declared................................................... $    0.24   $    0.20   $    0.16     $    0.06   
  Book Value............................................................. $    7.70         N/A         N/A     $    7.86   
COMBINED PRO FORMA PER COMMON SHARE DATA:                                                                                   
  Income from continuing operations                                                                                         
    Basic................................................................ $    1.05   $    1.08   $    0.73     $    0.18   
    Diluted.............................................................. $    1.01   $    1.04   $    0.72     $    0.18   
  Book Value............................................................. $    7.39         N/A         N/A     $    7.60   

------------------------                                                        

(1) Includes an after-tax gain of $2,654,000 from sale of land in May 1997.     

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DSPT

                                                        [Enlarge/Download Table]

                                                                                    YEARS ENDED JANUARY 31,   ADJUSTED THREE 
                                                                    ADJUSTED YEAR                              MONTHS ENDED  
                                                                   ENDED SEPTEMBER  ------------------------   DECEMBER 31,  
                                                                      30, 1998         1997         1996           1998      
                                                                   ---------------  -----------  -----------  ---------------
                                                                                                                             
EQUIVALENT HISTORICAL PER COMMON SHARE DATA:                                                                                 
  Income from continuing operations                                                                                          
    Basic.........................................................    $    0.43      $    0.52    $    0.75      $    0.50   
    Diluted.......................................................    $    0.38      $    0.49    $    0.68      $    0.46   
  Book Value......................................................    $    5.34            N/A          N/A      $    6.07   

                                                        [Enlarge/Download Table]

                                                                                                             THREE MONTHS  
                                                                             YEARS ENDED SEPTEMBER 30,      ENDED DECEMBER 
                                                                                                                  31,      
                                                                         ---------------------------------  ---------------
                                                                           1998       1997(1)      1996          1998      
                                                                         ---------  -----------  ---------  ---------------
                                                                                                                           
EQUIVALENT COMBINED PRO FORMA COMMON SHARE DATA:                                                                           
  Income from continuing operations                                                                                        
    Basic............................................................... $    0.84   $    0.87   $    0.59     $    0.14   
    Diluted............................................................. $    0.81   $    0.84   $    0.58     $    0.14   
  Book Value............................................................ $    5.94         N/A         N/A     $    6.11   

------------------------                                                        

(1) Includes an after-tax gain of $2,654,000 from sale of land in May 1997.     

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THE DSPT SPECIAL MEETING

DATE, TIME AND PLACE OF MEETING                                                 

The DSP Technology Inc. special meeting will be held at DSPT's offices  
located at 48500 Kato Road, Fremont, California, on Friday, May 28, 1999 at 2:00
p.m. local time.                                                                

PURPOSE OF THE DSPT SPECIAL MEETING                                             

  The purpose of the DSPT special meeting is to approve and adopt the merger
agreement and the merger. DSPT stockholders may also consider and vote upon such
other matters as may properly come before the DSPT special meeting or any       
adjournments or postponements of the meeting.                                   

RECORD DATE AND OUTSTANDING SHARES                                              

   The DSPT board of directors has fixed April 15, 1999 as the record date for
the DSPT special meeting. Only stockholders of record of DSPT common stock on   
the record date are entitled to notice of, and to vote at, the DSPT special     
meeting. As of the record date, there were 90 stockholders of record holding an 
aggregate of 2,351,076 shares of DSPT common stock. Except for the stockholders 
identified under "Information with Respect to DSPT--Principal Stockholders" on  
page 61, to the knowledge of DSPT, no other person beneficially owned more than 
5% of the outstanding DSPT common stock as of the record date.                  

This proxy statement/prospectus was mailed to all DSPT stockholders of  
record as of the record date and constitutes notice of the DSPT special meeting 
in conformity with the requirements of the Delaware General Corporation Law.    

VOTING OF PROXIES                                                               

    All properly executed proxies that are not revoked will be voted at the DSPT
special meeting in accordance with the instructions contained in the proxy. If a
stockholder signs and returns a proxy without indicating any voting             
instructions, the shares of DSPT common stock that the proxy represents will be 
voted "FOR" the proposal to adopt and approve the merger agreement and approve  
the merger under the recommendation of the DSPT board of directors or "FOR"     
adjournment or postponement of the DSPT special meeting if an adjournment or    
postponement, in the discretion of the proxy holders, is determined to be       
necessary or desirable. A stockholder who has executed and returned a proxy may 
revoke it at any time before it is voted at the DSPT special meeting by:        

- executing and returning a proxy bearing a later date;                 

- filing written notice of such revocation with the secretary of DSPT   
stating that the proxy is being revoked; or                         

- attending the DSPT special meeting and voting in person.              

  All written notices of revocation and other communications with respect to
revocation of DSPT proxies should be sent to: DSP Technology Inc., 48500 Kato   
Road, Fremont, CA 94538, Attention: Secretary. Attendance at the DSPT special   
meeting, in and of itself, will not constitute a revocation of a proxy.         

VOTE REQUIRED                                                                   

Adoption and approval of the merger agreement and approval of the merger
require the affirmative vote of holders of a majority of the shares of DSPT     
common stock outstanding as of the record date. Each stockholder of record of   
DSPT common stock on the record date is entitled to cast                        

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one vote per share, exercisable in person or by properly executed proxy, on each
matter properly submitted for the vote of the stockholders of DSPT at the DSPT  
special meeting.                                                                

At the record date for the special meeting, the directors and executive 
officers of DSPT owned approximately 8.1% of the outstanding shares of DSPT     
common stock entitled to vote at such meeting. All of them have agreed to vote  
their shares for the adoption of the merger agreement and approval of the       
merger.                                                                         

QUORUM; ABSTENTIONS; BROKER NON-VOTES                                           

  The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of DSPT common stock entitled to vote at the 
DSPT special meeting is necessary to constitute a quorum. Abstentions will be   
counted for purposes of determining a quorum, but will have the effect of a vote
against approval of the matters being voted upon. If a broker holding shares in 
street name returns an executed proxy that indicates that the broker does not   
have discretionary authority as to those shares to vote on one or more matters, 
those shares will be considered represented at the DSPT special meeting for     
purposes of determining a quorum, but will have the effect of a vote against    
approval of the matters being voted upon.                                       

SOLICITATION OF PROXIES; EXPENSES                                               

DSPT will bear the cost of the solicitation of proxies and all related  
costs. In addition, DSPT may reimburse brokerage firms and other persons        
representing beneficial owners of shares for their expenses in forwarding       
solicitation materials to such beneficial owners. Certain directors, officers or
other employees of DSPT may supplement original solicitation of proxies by mail 
with telephone, facsimile or personal solicitation, without payment of          
additional compensation. DSPT has engaged the services of Mackenzie Partners,   
Inc. to distribute proxy solicitation materials to brokers, banks and other     
nominees and to assist in the solicitation of proxies from DSPT stockholders for
a fee of approximately $5,000 plus reasonable out-of-pocket expenses.           

EXCHANGE OF STOCK CERTIFICATES                                                  

If you are a DSPT stockholder, you should not send in your stock        
certificates now. After the merger is completed, MTS will send DSPT stockholders
and optionholders written instructions for receiving shares of MTS common stock 
in exchange for their stock certificates and options. MTS stockholders will keep
their current certificates, and will continue to hold the same number of shares 
of MTS common stock after the merger.                                           

OTHER MATTERS                                                                   

As of the date of this proxy statement/prospectus, the DSPT board of    
directors does not know of any business to be presented at the special meeting  
other than as set forth in the notice accompanying this proxy                   
statement/prospectus. If any other matters should properly come before the      
special meeting, it is intended that the shares represented by proxies will be  
voted with respect to such matters in accordance with the judgment of the       
persons voting such proxies.                                                    

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APPROVAL OF THE MERGER AND RELATED TRANSACTIONS 

BACKGROUND OF THE MERGER                                                        

The terms and conditions of the merger agreement and the merger are the 
result of arms' length negotiations between representatives of MTS and          
representatives of DSPT. A summary of those negotiations follows:               

During late 1997 and throughout 1998, the DSPT board considered various 
strategic relationships and other alternatives to increase stockholder value. On
August 17, 1998, the DSPT board of directors approved the engagement of Douglas 
Hajjar, an experienced financial advisor, to assist the board in evaluating     
DSPT's strategic alternatives.                                                  

  In August of 1998, MTS identified DSPT as a possible acquisition candidate
in connection with MTS' product line extension strategy. MTS concluded that     
DSPT's transportation group products would constitute a strategic extension of  
MTS' existing powertrain product line.                                          

   On October 22, 1998, Mr. Troutman, President and Chief Executive Officer of
DSPT, received a letter dated October 15, 1998 from Hal Galvin, MTS' Vice       
President, Corporate Business Development, proposing a strategic business       
combination between the two companies. On October 26, 1998, after conferring    
with Gray Cary Ware & Freidenrich LLP, DSPT's outside legal counsel, DSPT's     
financial advisor, Mr. Hajjar, and the individual DSPT directors, Mr. Troutman  
advised Mr. Galvin that DSPT could not respond to MTS without a specific        
proposal, that DSPT was executing on its strategic plan, and that its current   
stock price did not reflect DSPT's value. Mr. Galvin expressed MTS' interest in 
engaging in a dialogue with DSPT about a possible strategic business            
combination, but no specific proposal was advanced. Mr. Galvin invited Mr.      
Troutman to visit MTS headquarters to permit representatives of the two         
companies to learn more about each other's business and possible synergies from 
a strategic business combination.                                               

   In a regularly scheduled meeting of the DSPT board of directors on November
16, 1998 at Webers Inn, Ann Arbor, Michigan, at which all DSPT directors were   
present, Mr. Troutman reviewed with the DSPT board his conversation with Mr.    
Galvin and possible risks and benefits of a strategic business combination with 
MTS. The board of directors authorized Mr. Troutman to explore a possible       
relationship with MTS and to consider other possible strategic alternatives.    

    Mr. Troutman visited MTS headquarters on November 19, 1998, and met with Dr.
Sidney W. Emery, Jr., Chairman and Chief Executive Officer of MTS, Keith Zell,  
Executive Vice President of MTS, Steven Cohoon, MTS Vice President of Vehicle   
Dynamics Division, and Hal Galvin. The representatives of the two companies     
discussed their respective businesses and possible synergies which might be     
achieved in a strategic business combination.                                   

   At a regularly scheduled meeting of DSPT's board of directors at Clubsport,
Fremont, California, on December 4, 1998 at which all directors were present,   
Mr. Troutman updated the board on various strategic alternatives, including his 
meeting at MTS. The directors discussed publicly available information          
concerning MTS and other possible strategic alternatives.                       

   On December 7, 1998, in a telephone conversation between Mr. Galvin and Mr.
Troutman, Mr. Galvin expressed MTS' continuing interest in a possible business  
combination between the two companies, but no specific terms were discussed. On 
December 21, 1998, Mr. Galvin advised Mr. Troutman in a telephone conversation  
that MTS was interested in a business combination and the two had preliminary   
discussions regarding possible structures and valuation. On December 22, 1998,  
Mr. Troutman advised Mr. Galvin in a telephone conversation that the DSPT board 
would consider, in early January, the possibility of a business combination with
MTS, but that the preliminary sense of individual directors was that while the  
strategic fit between the companies appeared promising, MTS' proposed valuation 
range was too low.                                                              

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In a January 5, 1999 telephone meeting of the DSPT board of directors at
which all DSPT directors were present, Mr. Troutman updated the board regarding 
the late December 1998 contact by MTS. The directors reviewed DSPT's strategic  
direction, business and synergies, as well as its prospects and risks in        
achieving the operating plan. The directors also considered other strategic     
alternatives, and DSPT's obligations to notify FEV Motorentechnik GmbH, DSPT's  
strategic alliance partner, of certain offers constituting a transfer of        
control. The DSPT board instructed Mr. Troutman and Mr. Hajjar to continue      
discussions with MTS to determine if an acceptable offer would likely be        
forthcoming.                                                                    

 From January 6, 1999 through January 8, 1999, Messrs. Troutman and Galvin
exchanged information concerning capitalization and possible structures for a   
strategic business combination. From January 8, 1999 through January 18, 1999,  
the parties reviewed publicly available information concerning the respective   
companies.                                                                      

 On Monday, January 18, 1999, at a regularly scheduled meeting of the DSPT
board of directors at Clubsport, Fremont, California, at which all directors and
outside legal counsel were present, Mr. Troutman updated the directors on       
discussions with MTS. At that same meeting, the board of directors approved a   
transition plan for DSPT under which DSPT's principal executive offices and     
transportation group would be consolidated in Ann Arbor, Michigan. DSPT         
announced the planned consolidation and an estimate of an associated accounting 
charge in a press release on January 21, 1999. On the same date, following the  
announcement of the consolidation, Mr. Troutman advised Mr. Galvin of the       
announcement. Mr. Galvin reviewed with Mr. Troutman MTS' current proposal on    
valuation and structure.                                                        

  At a telephonic meeting of the DSPT board of directors on January 21, 1999
at which all DSPT directors and outside legal counsel were present, Mr. Troutman
reviewed his discussions with Mr. Galvin, including MTS' initial proposal on    
valuation, with the board. The board of directors considered advice from DSPT's 
financial advisor, Mr. Hajjar, and DSPT's outside counsel and discussed         
strategies for further discussions with MTS. The board of directors also        
instructed Mr. Troutman to advise DSPT's strategic alliance partner, FEV, that a
transaction by a third party to acquire DSPT might be proposed in the near term 
and determine FEV's possible interest in a strategic business combination with  
DSPT. The directors considered the tax effects of a cash transaction, which the 
directors believed would be the most likely proposal by FEV.                    

On January 22, 1999, Mr. Troutman advised Professor Franz Pischinger,   
President and Chief Executive Officer of FEV, that DSPT had been approached by a
possible acquiror and that an acquisition proposal might be forthcoming in the  
near term. Professor Pischinger advised Mr. Troutman that he would consider     
FEV's possible interest in acquiring DSPT.                                      

 In a telephone conversation on January 25, 1999, Mr. Troutman, Mr. Hajjar
and Mr. Galvin discussed possible valuations and structure. However, no         
agreement was reached.                                                          

  At a telephonic meeting of the DSPT board of directors on January 25, 1999
at which all DSPT directors were present, Mr. Troutman and Mr. Hajjar summarized
the parties' discussions regarding structure and valuation, the treatment of    
options, the possible accounting treatment for a proposed transaction, and      
business conditions expected for DSPT in 1999. The board of directors authorized
Mr. Troutman and Mr. Hajjar to pursue negotiations with MTS to determine if a   
transaction on acceptable terms to DSPT was possible. Later on January 25, 1999,
Messrs. Troutman, Hajjar and Galvin discussed possible synergies in a business  
combination between the two companies, as well as the parties' respective views 
on valuation and structure, but no agreement on valuation or structure was      
reached.                                                                        

    On January 26, 1999, the MTS board of directors considered a presentation by
MTS management regarding a possible acquisition of DSPT. The MTS board          
authorized management to continue discussions regarding a possible acquisition  
of DSPT.                                                                        

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On January 27, 1999, Mr. Galvin advised Mr. Troutman that the proposed  
business combination had been discussed at the MTS board of directors meeting,  
but that no valuation or terms had been approved.                               

  At a telephonic meeting of the DSPT board of directors on January 28, 1999
at which all DSPT directors were present, Mr. Troutman and Mr. Hajjar reviewed  
the parties' discussions regarding valuation and the DSPT board of directors    
discussed strategies for further discussions regarding valuation and deal       
structure. The board then authorized Messrs. Troutman and Hajjar to have further
discussions with MTS representatives.                                           

Later on January 28, 1999, Messrs. Troutman, Hajjar, Galvin, and Robert 
Clobes, Controller of MTS, had a telephone conversation regarding valuation and 
structure. The parties agreed that a transaction would be proposed as a tax-free
stock-for-stock exchange, accounted for as a pooling of interests. Messrs.      
Galvin and Clobes advised that no DSPT stock options would be assumed, and that 
MTS would provide a fixed number of shares of MTS common stock representing a   
valuation proposed by MTS. The parties discussed the possibility of a "collar," 
pursuant to which if the MTS stock price went above or below agreed upon prices 
the parties would have a right to renegotiate. Messrs. Troutman and Hajjar      
advised that DSPT intended to provide for the outstanding options by a cashless 
exercise if an agreement on valuation and structure could be reached. The       
parties discussed a possible due diligence process. Mr. Galvin advised that MTS 
would not proceed without a letter of intent that contained a binding "no shop" 
provision, under which DSPT would be restricted from seeking alternative        
transactions. He also indicated that the valuation proposed by MTS was MTS' best
and final offer.                                                                

  At a telephonic meeting of the DSPT board of directors on January 29, 1999
at which all DSPT directors and outside legal counsel were present, Messrs.     
Troutman and Hajjar reviewed MTS' oral proposal, including the proposed         
valuation and the fixed share amount, subject to a collar to be negotiated, and 
reviewed the parties' negotiation on valuation and structure. Messrs. Troutman  
and Hajjar advised that MTS' proposal on valuation was represented as MTS' best 
and final offer. Outside legal counsel reviewed with the directors their        
fiduciary duties in considering an acquisition proposal, including their duties 
in considering a "no shop" agreement. The board of directors discussed the      
cashless exercise of options and its effect on merger consideration per common  
share and net option share. The board of directors also considered the effect of
a "collar" on the value to DSPT stockholders and the risks of a collar. The     
directors also reviewed with counsel DSPT's obligations under the strategic     
alliance agreement with FEV and the notice required if DSPT were to receive a   
"serious, credible offer" for a transfer of control transaction. Counsel advised
on the possible adverse effects of a transfer of control involving a            
"competitor" of FEV as such term was used in the strategic alliance agreement.  
The board of directors concluded that MTS was not a "competitor" of FEV under   
that agreement. The board of directors then reviewed other strategic            
alternatives. After this review, the DSPT board of directors instructed Mr.     
Troutman to advise FEV that DSPT expected an offer which would result in a      
transfer of control in the next few days in the form of a nonbinding letter of  
intent, while not revealing the identity of the possible offeror.               

On February 1, 1999, Mr. Troutman advised Professor Pischinger and Dr.  
Schaffrath, Executive Vice President of FEV, that DSPT expected a nonbinding    
letter of intent with an offer in the next few days, and that the offeror was   
not a "competitor" of FEV as such term was defined in the strategic alliance    
agreement between DSPT and FEV. Mr. Troutman did not identify the possible      
acquiror. Professor Pischinger indicated that FEV was not in a position to make 
an offer to purchase DSPT.                                                      

  At a telephonic meeting of the DSPT board of directors on February 1, 1999
at which all DSPT directors were present, outside legal counsel reviewed a      
memorandum regarding the fiduciary duties of the board in considering an        
acquisition proposal. Messrs. Troutman and Millares, DSPT's Chief Financial     
Officer, reviewed the accounting treatment for the proposed acquisition and the 
consequences                                                                    

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of treatment of options with DSPT's independent accountants. Mr. Troutman       
reviewed his conversation with FEV representatives. The directors reviewed      
financial information concerning MTS and the trading prices for MTS common      
stock. The board of directors discussed with counsel the advisability of a      
fairness opinion in connection with any binding agreement on valuation and the  
board of directors requested that Mr. Hajjar identify investment bankers who    
might be willing to serve in such an engagement. The board of directors         
discussed the possible effect of a "collar" on the valuation to stockholders.   
The board of directors discussed business and legal due diligence with counsel, 
management and the board's financial advisor. The board also discussed the      
relative liquidity and volatility of MTS common stock and DSPT common stock,    
relative trading volumes and analyst coverage and DSPT's growth prospects. The  
board of directors authorized management to continue discussions with MTS.      

    Later on February 1, 1999, Mr. Galvin advised Messrs. Troutman and Hajjar in
a telephone conversation that a nonbinding letter of intent was being prepared. 
The representatives discussed a possible due diligence process.                 

On February 2, 1999, MTS released its quarterly results for the quarter 
ended December 31, 1998. On February 2 and February 3, 1999, representatives of 
DSPT and MTS discussed MTS' proposal for a collar around an agreed upon         
valuation, which would operate to adjust the number of MTS shares to be issued  
in the merger depending on the MTS stock price on closing. No agreement was     
reached on the proposal. Later on February 3, 1999, MTS faxed a nonbinding      
letter of intent to Mr. Troutman.                                               

  At a telephonic meeting of the DSPT board of directors on February 3, 1999
at which all DSPT directors and outside legal counsel were present, management, 
outside legal counsel and Mr. Hajjar provided a preliminary review of the terms 
of the nonbinding letter of intent to the directors. Messrs. Troutman and Hajjar
reviewed the representative's recent negotiations on valuation and the "collar,"
and the financial terms proposed in the letter, as well as the proposed         
treatment of stock options. The board of directors discussed the effect of the  
proposed collar, as well as the termination, "no shop" and breakup fee          
provisions. The board of directors directed management and outside legal counsel
to negotiate the terms of the letter of intent.                                 

 On February 3, 1999, DSPT and MTS entered into a mutual nondisclosure and
standstill agreement under which each company agreed not to disclose            
confidential information that it had learned about the other and not to take any
action to acquire capital stock of the other party for a period of one year     
without the prior consent of the other party.                                   

   On February 4, 1999, at a telephonic meeting of the DSPT board of directors
at which all directors and outside legal counsel were present, outside legal    
counsel and Mr. Hajjar reviewed with the board of directors in detail the terms 
of the proposed letter of intent. The board of directors discussed the possible 
engagement of Hambrecht & Quist LLC to provide a fairness opinion on the        
transaction. On February 6, 1999, DSPT provided comments to MTS regarding the   
proposed letter of intent.                                                      

   Also on February 6, 1999, DSPT notified FEV of the receipt of the letter of
intent, identifying MTS as the offeror, providing the proposed financial terms  
of the transaction, noting that DSPT intended to negotiate the terms and        
advising that MTS was not a "competitor" of FEV under the strategic alliance    
agreement. DSPT also notified MTS on that same date of certain provisions of the
strategic alliance agreement relating to transfers of control. Each notice was  
made as required by the strategic alliance agreement. On that same date in      
response to the notice, Professor Pischinger called to discuss the transaction  
with Mr. Troutman and advised Mr. Troutman that FEV considered MTS a            
"competitor" under the strategic alliance agreement.                            

 On February 8, 1999, representatives of MTS and DSPT, together with their
respective outside counsel, negotiated the terms of the proposed nonbinding     
letter of intent.                                                               

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   On February 8, 1999, at a telephonic meeting of the DSPT board of directors
at which all DSPT directors and outside legal counsel were present, outside     
legal counsel and Mr. Hajjar reviewed with the board of directors the results of
the representatives' negotiations on the nonbinding letter of intent. The DSPT  
board of directors authorized the officers to enter into the nonbinding letter  
of intent on substantially the terms presented. On February 9, 1999, MTS and    
DSPT entered into a nonbinding letter of intent.                                

 Also on February 9, 1999, Professor Pischinger and Dr. Schaffrath advised
Mr. Troutman that Professor Pischinger had discussed the strategic alliance     
agreement with Dr. Emery of MTS and believed that MTS was a "competitor" under  
the strategic alliance agreement. Following this conversation, representatives  
of DSPT and FEV continued to discuss the issue. On February 12, 1999, Professor 
Pischinger telecopied a formal written request that MTS be added to the         
"competitor list" under the strategic alliance agreement. After consultation    
with outside legal counsel, on February 12, 1999, Mr. Troutman responded in     
writing and by telephone to FEV indicating that DSPT did not agree that MTS was 
a competitor of FEV.                                                            

On February 10, 1999, MTS and DSPT made due diligence requests of each  
other. From February 11, 1999 through the date of signing the definitive        
acquisition agreement, representatives of MTS and DSPT conducted due diligence  
investigations of each other's businesses.                                      

 On February 11, 1999, DSPT engaged Hambrecht & Quist LLC to advise on the
fairness of the merger to DSPT stockholders from a financial point of view.     

On February 14, 1999, FEV again asserted in writing that MTS was a      
"competitor" of FEV under the agreement, but proposed that a business resolution
was possible. Representatives of DSPT and FEV discussed possible business       
resolutions to FEV's concerns through February 19, 1999.                        

On February 17, 1999, outside legal counsel for MTS delivered to outside
legal counsel for DSPT an initial draft of the definitive merger agreement. From
February 17, 1999 through March 23, 1999, MTS and DSPT and their respective     
outside legal counsel negotiated the terms of the merger agreement and related  
agreements.                                                                     

On February 23, 1999, Mr. Galvin and Mr. Troutman met with Professor    
Pischinger and Dr. Schaffrath in Aachen, Germany regarding a possible business  
relationship among the parties. Professor Pischinger and a representative of    
each of MTS and DSPT had additional meetings regarding a proposed business      
relationship on February 28, 1999, March 3 and March 5, 1999 in Ann Arbor and   
Detroit, Michigan and Eden Prairie, Minnesota. On March 9, 1999, counsel for MTS
delivered to counsel for FEV a draft agreement regarding the proposed business  
relationship between the parties if the merger were consummated and MTS and FEV 
and their respective legal counsel negotiated the terms of this agreement from  
March 12, 1999 through March 20, 1999.                                          

    On February 22, 1999, the MTS board of directors met to discuss the terms of
the merger agreement and the merger. On February 24, 1999, the MTS board of     
directors by written action ratified the letter of intent with DSPT and         
authorized MTS management to proceed with the negotiation and execution of the  
definitive merger agreement and consummation of the merger.                     

On March 1, 1999, at a regularly scheduled meeting of the DSPT board of 
directors at the Webers Inn, Ann Arbor, Michigan, all directors were present in 
person. Also in attendance were DSPT's outside legal counsel and members of     
management. The board of directors ratified the engagement of Hambrecht & Quist 
LLC to advise on the fairness of the merger consideration to the DSPT           
stockholders. Representatives of Hambrecht & Quist LLC then joined the meeting  
by telephone. Mr. Troutman reviewed the strategic rationale for the merger, and 
possible risks and benefits of the merger. Outside legal counsel reviewed the   
negotiations to date on the merger agreement and the proposed merger agreement, 
including the termination provisions and the timing of any payment of breakup   
fees, the no-shop provision, the conditions to the merger, the treatment of     
options and the                                                                 

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representations and covenants. The board of directors considered legal and      
business due diligence relating to MTS, and management reviewed possible        
synergies in connection with the proposed business combination. Mr. Troutman    
summarized the status of discussions among FEV, DSPT and MTS.                   

 On March 1, 1999, the directors of DSPT had a dinner meeting with Messrs.
Emery and Zell, to discuss the businesses of the respective companies, the      
strategic rationale for the merger and the possible synergies and risks of the  
transaction.                                                                    

   On March 15, 1999, Dr. Emery advised Mr. Troutman by telephone that MTS was
not willing to proceed with the proposed transaction unless the terms of the    
merger agreement were revised to remove the collar and eliminate any adjustment 
in the number of shares of MTS common stock to be issued to DSPT stockholders as
a result of the price of MTS common stock at the closing. Dr. Emery explained   
that the MTS board of directors was concerned about possible dilution to MTS    
stockholders.                                                                   

    On March 16, 1999, a special meeting of the DSPT board of directors was held
telephonically and all DSPT directors were present. Also in attendance were     
DSPT's financial advisor, Doug Hajjar, representatives of Hambrecht & Quist LLC 
and Gray Cary Ware & Freidenrich LLP. The directors discussed with their        
financial and legal advisors the effect of the removal of the collar on the     
merger consideration to be received by the DSPT stockholders and holders of net 
option shares, and possible implications of the request regarding MTS' future   
operating results. After discussion, the board of directors requested that Mr.  
Troutman and Mr. Hajjar engage in further discussions with MTS concerning this  
request and the directors' concerns.                                            

Later on March 16, 1999, Messrs. Troutman and Hajjar discussed with Dr. 
Emery DSPT's concerns. Dr. Emery advised that MTS would not proceed with the    
merger if more than 2,077,000 shares of MTS common stock would be issued in the 
transaction.                                                                    

    On March 17, 1999, a special meeting of the DSPT board of directors was held
telephonically, and all directors were present. Also present were Mr. Hajjar,   
and representatives of Hambrecht & Quist LLC and Gray Cary Ware & Freidenrich   
LLP. Mr. Troutman reviewed DSPT's operating plan and the risks of achieving the 
plan as well as business and growth prospects. Messrs. Troutman and Hajjar then 
summarized their discussions with Dr. Emery and advised that MTS was unwilling  
to issue more than 2,077,000 shares of MTS common stock, and therefore would not
proceed if the number of shares was adjusted as a result of a lower stock price.
The DSPT board of directors discussed with their financial and legal advisors   
the effect of the removal of the collar on the merger consideration for DSPT    
stockholders, the risks and benefits of the proposed merger, and other          
alternatives available to DSPT. After discussion, the DSPT board of directors   
unanimously authorized management and outside legal counsel to proceed with the 
finalization of the merger agreement and related documents.                     

    On March 19, 1999, the MTS board of directors ratified its prior approval of
the merger and the merger agreement.                                            

On March 20, 1999, MTS and FEV entered into an agreement establishing a 
reciprocal distributorship and licensing arrangement effective on the merger,   
subject to DSPT's execution of the agreement.                                   

    On March 23, 1999, a special meeting of the DSPT board of directors was held
at the Embassy Suites, Burlingame, California, at which all directors were      
present. Also present were representatives of Hambrecht & Quist LLC and Gray    
Cary Ware & Freidenrich LLP. Mr. Troutman reviewed the strategic rationale for  
the merger. Outside legal counsel reviewed the negotiations relating to the     
merger agreement and the final terms of the agreement. Representatives of       
Hambrecht & Quist LLC then reviewed their financial analyses with respect to the
final terms of the proposed merger agreement and delivered an oral opinion      
(subsequently confirmed in writing) that the merger consideration was fair to   
the DSPT stockholders from a financial point of view. There followed a general  
discussion of the risks and benefits of the merger. The DSPT board of directors 
concluded, by the unanimous vote of the                                         

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directors, that the merger was fair to and in the best interests of DSPT and its
stockholders and approved the merger agreement and related agreements, and      
authorized DSPT management to proceed with the merger.                          

On March 23, 1999, after the closing of trading on the Nasdaq National  
Market and following the approval of the merger agreement by the DSPT board of  
directors, representatives of both companies executed and delivered the merger  
agreement and related documents. Also on March 23, 1999, a representative of    
DSPT executed the agreement among FEV, MTS and DSPT, which among other matters, 
resolved that MTS was not a competitor of FEV for purposes of the merger.       

On March 23, 1999, after the closing of trading on the Nasdaq National  
Market, MTS issued a press release announcing the execution of the merger       
agreement and the agreement among FEV, MTS and DSPT, and DSPT issued a press    
release announcing the execution of the merger agreement.                       

REASONS FOR MERGER                                                              

JOINT REASONS FOR THE MERGER                                            

  MTS and DSPT have identified several potential benefits of the merger that
they believe will contribute to the success of the combined company. These      
potential benefits include:                                                     

- the ability to integrate MTS' powertrain unit operations with DSPT's  
      transportation group, providing the opportunity to leverage the respective
operations, engineering and sales and support organizations;        

 - the potential to leverage research and development capabilities of each
company, including mechanical engineering, electronic and software  
development skills and to share technology;                         

    - the ability to achieve economies of scale in corporate infrastructure; and

    - the potential to exploit further the strategic alliance relationship among
MTS, FEV and DSPT.                                                  

MTS' REASONS FOR THE MERGER                                             

  MTS' board of directors has determined the merger is in the best interests
of MTS and its shareholders. In reaching its determination, the MTS board of    
directors considered a number of factors, including the matters discussed above 
under "Joint Reasons for the Merger" and the following:                         

- the technical, engineering, management and sales expertise of DSPT;   

  - the judgment, advice and analysis of MTS' management with respect to the
  potential strategic, financial and operational benefits of the merger,
    including MTS management's favorable recommendation of the merger, based
  in part on the business, technical, financial accounting and legal due
diligence investigations performed with respect to DSPT;            

    - the results of operations and financial condition of MTS and DSPT, and the
   anticipated accretive effect, in MTS' operating results for fiscal year
2000, taken as a whole, of the merger on MTS' common stock;         

  - the complementary fit between MTS' and DSPT's products, cultures, market
segments and distribution channels, which are expected to facilitate
integration of the two companies;                                   

   - the terms of the merger agreement and related agreements, including price
    and structure, which were considered by both the board and management of
MTS to provide a fair and equitable basis for the merger;           

    - the ability of MTS to account for the merger as a pooling of interests for
financial accounting purposes;                                      

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- the fact that the merger will further MTS' commitment to customers to 
  provide a broader and more integrated analysis, simulation and testing
  process that will enable customers to lower development costs and move
products to market faster;                                          

- DSPT's unique expertise, technologies and customer recognition in the 
market for test, analysis and validation of engine designs; and     

    - the belief that the combined firms would be a stronger force in the global
  powertrain development and testing market because they complement each
other in technology, customer base and geographic presence.         

The MTS board of directors also considered certain potentially negative 
factors that may result from the merger, including:                             

 - the potential dilutive effect on MTS' common stock price if revenue and
earnings expectations of the combined company are not achieved;     

  - the dilutive effect on MTS' earnings per share in MTS' fiscal 1999 which
     will principally result from one time charges relating primarily to costs
of the transaction;                                                 

  - the potential loss of key DSPT employees critical to the ongoing success
of the DSPT products and product development and to the successful  
integration of MTS' and DSPT's powertrain product lines;            

- the general difficulties of integrating product lines, technologies,  
research and development efforts, and companies; and                

   - the other risks and uncertainties discussed above under "Risk Factors" on
page 9.                                                             

In analyzing the proposed merger, the MTS board did not view any single 
factor as determinative and did not quantify or assign weight to any of the     
factors. Rather, the MTS board made its determination based upon the total mix  
of information available to it.                                                 

DSPT'S REASONS FOR THE MERGER                                           

The DSPT board of directors believes that its ability to grow DSPT's    
business as a relatively small independent company, competing with larger       
companies with substantially greater resources and broader, integrated product  
offerings, is challenged. DSPT's management considered the alternatives of      
either acquiring smaller companies that could extend its product and service    
offerings or enhance the distribution of its products and services, or merging  
with a larger company. In this environment, the DSPT board of directors         
identified several potential benefits for the DSPT stockholders and customers   
that it believes would result from the merger. These potential benefits include 
the benefits discussed above under "Joint Reasons for the Merger" and the       
following:                                                                      

  - the potential to obtain contracts for larger system integration projects
  due to the lower perceived risk to customers as a result of the larger
relative size of the combined company compared to DSPT;             

- the potential for increased sales to MTS' powertrain unit customers,  
   primarily as a result of combining product lines of the powertrain unit
and DSPT to offer diesel customers broader test capabilities and    
complementary product lines;                                        

- the potential for increased sales of DSPT products to MTS powertrain  
component test product customers;                                   

- the opportunity for increased DSPT international sales as a result of 
leveraging MTS' international business;                             

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 - the potential for increased sales in the powertrain testing market as a
result of integrating MTS' noise and vibration capability into DSPT 
products; and                                                       

- the greater liquidity and diversification of risk offered to DSPT     
stockholders by an investment in MTS instead of DSPT.               

In the course of its deliberations, the DSPT board of directors reviewed
with DSPT's management a number of additional factors relevant to the merger,   
including, among others:                                                        

- the information concerning MTS' and DSPT's respective businesses,     
   prospects, financial performance and condition, operations, technology,
   product and service lines, management and competitive position, current
  market conditions and historical market prices, volatility and trading
information with respect to MTS common stock and DSPT common stock; 

 - the consideration that DSPT stockholders will receive in the merger and
  the fact that at the time the parties signed the merger agreement, the
      market value of the MTS common stock to be issued in exchange for the DSPT
      common stock represented a significant premium over the recent price range
of the DSPT common stock;                                           

- the fact that although MTS was not assuming DSPT stock options, DSPT  
    stockholders and holders of net option shares would receive the pro rata
    benefit of the aggregate exercise price for stock options outstanding on
the closing of the merger;                                          

    - the greater liquidity of the MTS common stock as compared with DSPT common
stock;                                                              

    - the larger size, relative stability and greater investor visibility of MTS
as compared with DSPT;                                              

- the current industry and economic conditions;                         

  - the implications for continued independent operation of DSPT in light of
    market and competitive conditions, including the potential for increased
  competition from companies having significantly greater resources than
DSPT;                                                               

 - the complementary products and services, channels, partners, technology
and critical skills of MTS and DSPT;                                

   - the alternatives available to DSPT compared to the consideration proposed
to be paid to stockholders pursuant to the merger agreement;        

- the belief that the terms of the merger agreement are reasonable,     
    including the provisions allowing DSPT to respond to certain unsolicited
      inquiries regarding an acquisition of DSPT, and the provisions that permit
    DSPT to terminate the merger agreement upon payment to MTS of a break-up
fee under certain circumstances;                                    

    - a comparison of selected recent acquisition and merger transactions in the
industry;                                                           

- the view of the DSPT board of directors, based in part on the         
    presentations of management and DSPT's financial advisors, regarding the
likelihood of a superior offer arising;                             

- the expected tax and accounting treatment of the merger;              

- the opinion of Hambrecht & Quist LLC rendered at the March 23, 1999   
      meeting of the DSPT board of directors that, based upon and subject to the
   various assumptions and conditions set forth in the opinion, the merger
consideration was fair to the holders of DSPT common stock from a   
financial point of view;                                            

- the impact of the merger on the customers and employees of DSPT; and  

  - the reports from management, financial advisors and legal advisors as to
the results of their due diligence investigation of MTS.            

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    The DSPT board of directors also considered a number of potentially negative
factors in its deliberations concerning the merger, including, but not limited  
to:                                                                             

    - the risk that the benefits sought to be achieved in the merger will not be
achieved;                                                           

- the fact that the number of shares of MTS common stock is fixed at    
2,077,000 and that there is no guarantee as to the market value of a
    fraction of a share of MTS common stock to be received for each share of
      DSPT common stock and each net option share or that such market value will
    represent at closing a premium over the price range of DSPT common stock
prior to the announcement of the merger agreement;                  

  - the fact that the fraction of a share of MTS common stock to be received
      by a holder of DSPT common stock or net option shares will fluctuate based
   on the number of options which remain unexercised at the closing of the
   merger and the exercise prices of such options, and that in general the
  more options which are exercised prior to the closing, the smaller the
    fraction of a share of MTS common stock each holder of DSPT common stock
and net option shares will receive;                                 

    - the fact that the higher the price of MTS common stock on the closing, the
    higher the percentage of total merger consideration that will be paid to
holders of net option shares compared to stockholders;              

  - the fact that the future growth of MTS revenues, earnings or stock price
 may not equal or exceed the growth experienced by a small independent
technology company;                                                 

- the loss of control over the future operations of DSPT following the  
merger;                                                             

- the effect of the public announcement of the merger on DSPT's sales,  
      customer relations and operating results and DSPT's ability to attract and
retain key management, marketing and technical personnel;           

 - the risk of market confusion and potential delay or reduction in orders
for products and services; and                                      

- the other risks described above in "Risk Factors" on page 9.          

The DSPT board of directors believed that certain of these risks were   
unlikely to occur or unlikely to have a material impact on the stockholders or  
the combined company, while others could be avoided or mitigated by DSPT or MTS,
and that overall the risks associated with the merger were outweighed by the    
potential benefits of the merger.                                               

  The foregoing discussion of information and factors considered by the DSPT
board of directors is not intended to be all inclusive, but is believed to      
include all material factors considered by the DSPT board of directors. In view 
of the wide variety of factors considered by the DSPT board of directors, the   
DSPT board of directors did not find it practicable to quantify or otherwise    
assign relative weight to the specific factors considered. However, after taking
into account all the factors set forth above, the DSPT board of directors       
unanimously agreed that the merger agreement and the consummation of the merger 
were fair to, and in the best interests of DSPT and its stockholders, and that  
DSPT should proceed with the merger.                                            

RECOMMENDATION OF THE DSPT BOARD                                                

   The DSPT board of directors has unanimously adopted and approved the merger
agreement and approved the merger, and recommends a vote "FOR" the adoption and 
approval of the merger agreement and approval of the merger by the DSPT         
stockholders.                                                                   

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OPINION OF DSPT FINANCIAL ADVISOR                                               

DSPT engaged Hambrecht & Quist LLC to act as its financial advisor in   
connection with the merger and, in such capacity, to render an opinion as to the
fairness from a financial point of view to the holders of the outstanding shares
of common stock of DSPT of the consideration to be received by such stockholders
in the merger. Hambrecht & Quist LLC was selected by the DSPT board of directors
based on its qualifications, expertise and reputation. Hambrecht & Quist LLC    
rendered its oral opinion, subsequently confirmed in writing, on March 23, 1999 
to the DSPT board of directors that, as of such date, the consideration to be   
received by the holders of the DSPT common stock in the merger was fair to the  
holders of the DSPT common stock from a financial point of view.                

  A COPY OF HAMBRECHT & QUIST LLC'S OPINION DATED MARCH 23, 1999, WHICH SETS
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, THE SCOPE AND LIMITATIONS OF THE
REVIEW UNDERTAKEN AND THE PROCEDURES FOLLOWED BY HAMBRECHT & QUIST LLC IS       
ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS. DSPT STOCKHOLDERS ARE
ADVISED TO READ THE OPINION IN ITS ENTIRETY.                                    

  The assumptions made, matters considered and limits of review contained in
Hambrecht & Quist LLC's written opinion delivered March 23, 1999 were           
substantially the same as those contained in the opinion attached to this proxy 
statement/prospectus. No limitations were placed on Hambrecht & Quist LLC by the
DSPT board with respect to the investigation made or the procedures followed in 
preparing and rendering its opinion.                                            

In its review of the merger, and in arriving at its opinion, Hambrecht &
Quist LLC, among other things:                                                  

   - reviewed the publicly available consolidated financial statements of MTS,
   for recent years and interim periods to date and certain other relevant
      financial and operating data of MTS, including its capital structure, made
available to Hambrecht & Quist LLC from published sources;          

- discussed the business, financial condition and prospects of MTS with 
certain members of its senior management;                           

 - reviewed the consolidated financial statements of DSPT for recent years
and interim periods to date and certain other relevant financial and
operating data of DSPT made available to Hambrecht & Quist LLC from 
published sources and from the internal records of DSPT;            

  - reviewed certain internal financial and operating information, including
     certain projections, relating to DSPT prepared by the management of DSPT;

- discussed the business, financial condition and prospects of DSPT with
certain members of its senior management;                           

 - reviewed the recent reported prices and trading activity for the common
      stocks of MTS and DSPT and compared such information and certain financial
   information for MTS and DSPT with similar information for certain other
companies engaged in businesses Hambrecht & Quist LLC considered    
comparable;                                                         

    - reviewed the financial terms, to the extent publicly available, of certain
comparable merger and acquisition transactions;                     

- reviewed the merger agreement; and                                    

  - performed such other analyses and examinations and considered such other
      information, financial studies, analyses and investigations and financial,
economic and market data as Hambrecht & Quist LLC deemed relevant.  

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 Hambrecht & Quist LLC did not independently verify any of the information
concerning DSPT or MTS considered in connection with its review of the merger   
and, for purposes of its opinion, Hambrecht & Quist LLC assumed and relied upon 
the accuracy and completeness of all information considered. In connection with 
its opinion, Hambrecht & Quist LLC did not prepare or obtain any independent    
evaluation or appraisal of any of the assets or liabilities of DSPT or MTS, nor 
did it conduct a physical inspection of the properties and facilities of DSPT or
MTS. With respect to the financial forecasts and projections used in its        
analysis, Hambrecht & Quist LLC assumed that they reflected the best currently  
available estimates and judgments of the expected future financial performance  
of MTS and DSPT. For the purposes of its opinion, Hambrecht & Quist LLC also    
assumed that neither DSPT nor MTS was a party to any pending transactions,      
including external financings, recapitalizations or other material merger       
discussions, other than the merger and those activities undertaken in the       
ordinary course of conducting their respective businesses. For purposes of its  
opinion, Hambrecht & Quist LLC assumed that the merger will qualify as a        
tax-free reorganization under the Internal Revenue Code of 1986, as amended, for
the stockholders of DSPT and that the merger will be accounted for as a pooling 
of interests. Hambrecht & Quist LLC's opinion was necessarily based upon market,
economic, financial and other conditions as they existed and could be evaluated 
as of the date of the opinion and any subsequent change in the conditions would 
require a reevaluation of the opinion.                                          

The preparation of a fairness opinion is a complex process and is not   
necessarily susceptible to partial analysis or summary description. The summary 
of the Hambrecht & Quist LLC analyses set forth below does not purport to be a  
complete description of the presentation by Hambrecht & Quist LLC to the DSPT   
board. In arriving at its opinion, Hambrecht & Quist LLC did not attribute any  
particular weight to any analysis or factor it had considered, but rather made  
qualitative judgments as to the significance and relevance of each analysis and 
factor. Accordingly, Hambrecht & Quist LLC believes that its analyses and the   
summary set forth below must be considered as a whole and that selecting        
portions of its analyses, without considering all analyses, or of the following 
summary, without considering all factors and analyses, could create an          
incomplete view of the processes underlying the analyses set forth in the       
Hambrecht & Quist LLC presentation to the DSPT board and its opinion. In        
performing its analyses, Hambrecht & Quist LLC made numerous assumptions with   
respect to industry performance, general business and economic conditions and   
other matters, many of which are beyond the control of DSPT and MTS. The        
analyses performed by Hambrecht & Quist LLC, and summarized below, are not      
necessarily indicative of actual values or actual future results, which may be  
significantly more or less favorable than suggested by such analyses.           
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be         
acquired.                                                                       

The following is a brief summary of financial analyses performed by     
Hambrecht & Quist LLC in connection with providing its written opinion to the   
DSPT board on March 23, 1999:                                                   

PRO FORMA MERGER ANALYSIS                                               

Hambrecht & Quist LLC analyzed the pro forma impact of the merger on the
projected results of MTS for the fiscal years ending September 30, 1999 and     
2000. Hambrecht & Quist LLC prepared financial projections for MTS based on Dain
Rauscher Wessels analyst estimates. Hambrecht & Quist LLC prepared financial    
projections for DSPT based on DSPT management estimates. Hambrecht & Quist LLC  
observed that based upon these forecasts, the merger resulted in greater        
earnings for the pro forma combined company in the fiscal year ending September 
30, 2000 than for MTS as a stand-alone company. The foregoing analysis did not  
assume any adjustments to projected revenues or costs resulting from potential  
operating synergies that may be realized from the merger. The actual results and
savings achieved by the combined company as a result of the merger may vary from
the projected results and such variations may be material.                      

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CONTRIBUTION ANALYSIS                                                   

  Hambrecht & Quist LLC analyzed the contribution of each of DSPT and MTS to
material financial statement categories of the pro forma combined company,      
assuming no revenue or expense adjustments. The financial statement categories  
compared included revenues, gross profit, operating income and pretax income.   
This contribution analysis was then compared to the respective pro forma        
ownership percentages of DSPT and MTS stockholders in the pro forma combined    
company. Hambrecht & Quist LLC observed that, calculated on a fully-diluted     
basis using the treasury stock method, DSPT shareholders are expected to own    
approximately 10% of the combined company equity at the close of the merger and 
MTS stockholders are expected to own approximately 90% of the combined company  
equity at the close of the merger. For the fiscal year ending September 30,     
1999, it was estimated that DSPT would contribute approximately 7% of revenues, 
9% of gross profit, 7% of operating income, and 8% of pretax income of the      
combined company. For the fiscal year ending September 30, 2000, it was         
estimated that DSPT would contribute approximately 8% of revenues, 10% of gross 
profit, 12% of operating income, and 13% of pretax income of the combined       
company.                                                                        

PREMIUM ANALYSIS                                                        

    Based on the closing price of MTS common stock of $10.813 on March 22, 1999,
the implied value per share of DSPT common stock was approximately $8.93. This  
represented a one day premium over the closing price for DSPT common stock on   
March 22, 1999 of approximately 46%. Hambrecht & Quist LLC also analyzed the    
implied premiums to average historical closing prices for the 1 week, 1 month, 3
months, 6 months and 1 year ending March 22, 1999 and determined that the       
implied premiums were approximately 51%, 52%, 39%, 35% and 18%, respectively. In
addition, the implied premiums to the 52-week high and low closing prices of    
DSPT common stock were approximately 66% and 16%, respectively.                 

ANALYSIS OF PUBLICLY-TRADED COMPARABLE COMPANIES                        

  Hambrecht & Quist LLC compared selected historical and projected financial
information of DSPT to publicly-traded companies that Hambrecht & Quist LLC     
deemed to be comparable to DSPT. This information included the ratios of market 
value to historical net income, market value to projected calendar year 1999 net
income, and market value to book value. Hambrecht & Quist LLC also examined the 
ratios of enterprise value, market value plus debt less cash, to historical     
revenue, historical EBITDA, earnings before interest, taxes, depreciation and   
amortization, and historical EBIT, earnings before interest and taxes. Companies
deemed comparable on the basis of their business activity and other factors such
as market capitalization and projected growth rates included Aero Systems       
Engineering, Faro Technologies, Instron, Larson Davis, Modern Controls, MTS, and
Transmation. Hambrecht & Quist LLC determined average trading multiples for the 
above companies of 0.9 times LTM, latest twelve months revenues, 6.4 times LTM  
EBITDA, 9.1 times LTM EBIT, 13.0 times LTM net income, 9.5 times projected      
calendar year 1999 net income, and 1.4 times book value.                        

    The foregoing multiples were applied to historical financial results of DSPT
for the twelve-month period ended January 31, 1999 and projected financial      
results for DSPT. Based on the analysis of publicly-traded comparable companies,
Hambrecht & Quist LLC calculated a range of implied equity values ranging from  
$7.41 per share to $11.56 per share. This compared with an implied value in the 
proposed merger of approximately $8.93, based on the closing price of MTS common
stock on March 22, 1999.                                                        

ANALYSIS OF SELECTED MERGER AND ACQUISITION TRANSACTIONS                

   Hambrecht & Quist LLC compared the proposed merger with selected comparable
merger and acquisition transactions. This analysis included 11 transactions     
involving companies that provide                                                

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instrumentation, measurement and control products. These transactions included  
Liberty Technologies/ Crane, Satec Systems/Instron, Impact Systems/Voith Sulzer 
Paper Technology, Waekon Industries/ Hickok, Computational Systems/Emerson      
Electric, Chatillon & Lloyd/AMETEK, Petrotech/Roper Industries,                 
Measurex/Honeywell, Data Measurement/Meaurex, Uson/Roper Industries, and        
Powertek/ MTS. In examining these transactions, Hambrecht & Quist LLC analyzed  
certain income statement and balance sheet parameters of the acquired company   
relative to the consideration offered. The multiples determined included        
consideration offered as a multiple of LTM revenues, LTM EBITDA, LTM EBIT, LTM  
net income, and book value. In addition, Hambrecht & Quist LLC determined the   
one trading-day and twenty trading-day premiums paid in the above transactions  
which involved the acquisitions of public companies. The consideration offered  
in the above transactions was an average multiple of 1.2 times LTM revenue, 8.1 
times LTM EBITDA, 9.0 times LTM EBIT, 13.9 times LTM net income, and 2.2 times  
book value. The average one- and twenty-day premiums paid were 38.3% and 41.1%, 
respectively.                                                                   

    These multiples were applied to the historical financial results of DSPT for
the twelve-month period ended January 31, 1999. The foregoing premiums were     
applied to the closing price of DSPT common stock for the one day and twenty    
trading-days prior to March 23, 1999. Based on the analysis of selected merger  
and acquisition transactions, Hambrecht & Quist LLC calculated a range of       
implied equity values ranging from $8.47 per share to $13.71 per share. This    
compared with an implied value in the proposed merger of approximately $8.93,   
based on the closing price of MTS common stock on March 22, 1999.               

    No company or transaction used in the above analyses is identical to DSPT or
the proposed merger. Accordingly, an analysis of the results of the foregoing is
not purely mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the        
companies and other factors that could affect the values of the companies or    
transactions to which they are compared.                                        

DISCOUNTED CASH FLOW ANALYSIS                                           

 Hambrecht & Quist LLC analyzed the theoretical valuation of DSPT based on
the discounted free cash flow projected for DSPT using management's assumptions 
regarding long-term growth and margins. To estimate the total present value of  
DSPT's business, before giving effect to its capital structure, Hambrecht &     
Quist LLC discounted to present value the projected stream of after-tax cash    
flows produced by DSPT through the fiscal year ending January 31, 2004 and the  
hypothetical value of selling the entire business at the end of this period (the
terminal value). The terminal value was based upon multiples of 5.0 to 7.0 times
projected EBITDA for the fiscal year ending January 31, 2004. In this analysis  
Hambrecht & Quist LLC used discount rates ranging from 17.5% to 22.5%. Hambrecht
& Quist LLC calculated a range of present equity values ranging from $7.74 per  
share to $12.95 per share. This compared with an implied value in the proposed  
merger of approximately $8.93, based on the closing price of MTS common stock on
March 22, 1999.                                                                 

This description of Hambrecht & Quist LLC's opinion is qualified in its 
entirety by reference to the full text of the opinion which is attached as      
Appendix B to this proxy statement/prospectus.                                  

Hambrecht & Quist LLC, as part of its investment banking services, is   
regularly engaged in the valuation of businesses and their securities in        
connection with mergers and acquisitions, corporate restructurings, strategic   
transactions, negotiated underwritings, secondary distributions of listed and   
unlisted securities, private placements and valuations for corporate and other  
purposes.                                                                       

    Pursuant to an engagement letter dated February 11, 1999, DSPT agreed to pay
Hambrecht & Quist LLC a fee of $150,000 in connection with the delivery of a    
fairness opinion. DSPT also has agreed to reimburse Hambrecht & Quist LLC for   
its reasonable out-of-pocket expenses and to indemnify Hambrecht & Quist LLC    
against certain liabilities, including liabilities under federal                

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securities laws or relating to or arising out of Hambrecht & Quist LLC's        
engagement as financial advisor.                                                

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

INDEMNIFICATION                                                         

  The merger agreement provides that after the effective time, all rights to
indemnification existing in favor of any person who is a current or prior       
officer or director of DSPT for acts and omissions occuring prior to the        
effective time shall survive the merger and shall be fulfilled and honored by   
MTS and its wholly-owned subsidiary DSPT. MTS has agreed to maintain DSPT's     
policy or policies of directors' and officers' liability insurance for not less 
than six years following the effective time of the merger. Further, MTS has     
agreed to provide capital to the extent DSPT lacks sufficient capital to pay the
premiums for this coverage.                                                     

EMPLOYMENT ARRANGEMENTS                                                 

    DSPT has entered into retention agreements dated as of January 18, 1999 with
F. Gil Troutman, Jr., DSPT's President and Chief Executive Officer, and Larry   
Moulton, DSPT's General Manager of the Transportation Group. If Mr. Troutman or 
Mr. Moulton resigns for "good reason" or is terminated without "cause" within 12
months after the date of a merger or acquisition of DSPT, each officer is       
entitled to all salary, accrued but unused vacation and his pro rata target     
bonus for the year each through the date of his termination or resignation and  
an additional 18 months (12 months for Mr. Moulton) of salary and bonus,        
reimbursement of any expenses incurred in connection with DSPT's business,      
reimbursement of his health insurance premiums for 18 months (12 months for Mr. 
Moulton) and any benefits under DSPT's 401(k) plan or other benefit plans.      

In connection with the merger agreement, MTS has entered into separate  
employment agreements with Mr. Troutman and Mr. Moulton which will become       
effective upon the closing of the merger. Under the employment agreements, MTS  
has agreed to employ Messrs. Troutman and Moulton after the merger becomes      
effective and the retention agreements described above will have no effect.     

Mr. Troutman's employment agreement provides for a 36 month term of     
employment after the merger becomes effective and yearly base compensation of   
$200,000, subject to review annually by MTS. In addition, under the agreement,  
Mr. Troutman is eligible for MTS' Management Variable Compensation Bonus Plan   
and will be guaranteed a bonus of $9,250 for MTS' fiscal year 1999.             

    Other benefits and compensation provided to Mr. Troutman under the agreement
are:                                                                            

- the use of an automobile;                                             

- participation in MTS' 401(k) and Profit Sharing Retirement plans;     

- the grant of an option to purchase 10,000 shares of MTS common stock  
     priced at fair market value as of the effective time of the merger and an
  option to purchase at least 5,500 shares of common stock in subsequent
years;                                                              

- consideration for option grants when options are granted to other     
executives at MTS; and                                              

- the benefits under any other benefit or compensation plans that are   
adopted by MTS.                                                     

    If Mr. Troutman's employment is terminated by MTS during the first 36 months
of the agreement other than for death, disability or for "cause," as defined in 
the employment agreement, he will be entitled to payment of his monthly base    
salary of $16,666 and 1/24th of the bonus he has earned during the two most     
recent fiscal years prior to the termination per month for the remainder of the 
36-month term of the agreement and for a minimum of nine months. However, if Mr.
Troutman's employment is terminated during MTS' fiscal year ended September 30, 
2000, the bonus payment will be 1/12th of the                                   

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bonus earned during the previous fiscal year. If his employment is terminated   
during MTS' fiscal year ending September 30, 1999, the bonus payment will be    
1/12th of the bonus that would have been earned that year based on actual       
achievement of the established targets.                                         

In addition, for nine months after termination, MTS will continue Mr.   
Troutman's health and life insurance benefits and pay the employer portion of   
the premiums and his options will continue to be exercisable.                   

Mr. Troutman has also agreed to non-compete, confidentiality and trade  
secret provisions in the employment agreement.                                  

  Mr. Moulton's employment agreement with MTS provides for substantially the
same terms as Mr. Troutman's, except that Mr. Moulton's yearly base salary shall
be $150,000. Mr. Moulton's compensation under the MTS Management Variable       
Compensation Plan is also calculated at a lower rate than Mr. Troutman's.       
Furthermore, Mr. Moulton will be granted an option to purchase 5,000 shares of  
MTS common stock priced at fair market value as of the effective time of the    
merger and an option to purchase at least 3,650 shares of MTS common stock in   
subsequent years.                                                               

 Michael Ford and MTS have orally agreed that if Mr. Ford is terminated by
MTS other than for death, disability or cause, Mr. Ford will receive a severance
payment equal to at least six months of his base salary.                        

STOCK OPTION ACCELERATION                                               

   All options under the DSPT 1991 Directors' Stock Option Plan and 1991 Stock
Option Plan, the "Plans", and certain options issued outside the Plans contain  
terms that provide that vesting of all such options will accelerate thirty days 
prior to a transfer of control if the options are not assumed by the acquiror,  
except that vesting with respect to options for 39,000 shares granted outside   
the Plans do not accelerate upon a transfer of control. Under the terms of the  
merger agreement, MTS has not assumed any outstanding options under the Plans or
otherwise. Accordingly, vesting with respect to all outstanding options other   
than the unvested portion of options for 39,000 shares will accelerate thirty   
days prior to the effective time of the merger.                                 

AFFILIATE AGREEMENTS                                                            

Each of the directors and executive officers of DSPT have entered into  
agreements restricting sales, transfers, pledges, dispositions or other         
transactions reducing their risk of investment relative to shares of DSPT common
stock and the shares of MTS common stock received by them in the merger, or     
options to purchase common stock, during the period commencing 30 days prior to 
the effective time of the merger and ending on the date on which financial      
results covering at least 30 days of post-merger combined operations of MTS and 
DSPT have been published by MTS. The agreements also restrict the sale, transfer
or other disposition of shares of MTS common stock received by them in the      
merger except pursuant to an effective registration statement or in compliance  
with Rule 145 or another exemption from the registration requirements of the    
Securities Act. These agreements are intended to help ensure compliance with the
requirements of applicable federal securities and tax laws and to help ensure   
that the merger will be treated as a pooling of interests for accounting        
purposes.                                                                       

TREATMENT OF OPTIONS                                                            

   In the merger, unexercised options representing "net option shares" will be
exchanged for MTS common stock. DSPT intends to treat the conversion of         
incentive stock options into MTS common stock as a deemed exercise of the       
incentive stock options, resulting in income recognition for U.S. federal       
alternative minimum tax purposes, but not for federal regular income tax        
purposes. Withholding                                                           

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taxes will not be withheld with respect to the conversion of incentive stock    
options into MTS common stock.                                                  

   Holders of nonqualified stock options to acquire DSPT common stock who have
their unexercised options converted into MTS common stock will recognize        
ordinary income for income tax purposes which will be reported on their 1999    
Form W-2, for employees, or Form 1099, for former employees and independent     
contractors, in an amount equal to the value of the MTS common stock on the     
merger closing date. Withholding taxes will apply with respect to wage income   
recognized by employees and former employees.                                   

MATERIAL FEDERAL INCOME TAX CONSEQUENCES                                        

The following contains a description of the material federal income tax 
consequences of the merger to the holders of common stock. This summary relies  
upon the opinions of Lindquist & Vennum P.L.L.P. and Gray Cary Ware &           
Freidenrich LLP, and is based upon current provisions of the Internal Revenue   
Code of 1986, existing regulations and current administrative rulings and court 
decisions, all of which are subject to change. Any change, which may or may not 
be retroactive, could alter the tax consequences to MTS, DSPT or the            
stockholders of DSPT. No attempt has been made to comment on all federal income 
tax consequences of the merger that may be relevant to particular holders,      
including holders who are subject to special tax rules such as dealers in       
securities, foreign persons, mutual funds, insurance companies, tax-exempt      
entities, holders who are subject to the alternative minimum tax provisions of  
the Internal Revenue Code, holders who acquired their shares in connection with 
stock option or stock purchase plans or in other compensatory transactions,     
holders who hold their shares as a hedge or as part of a hedging, straddle or   
other risk reduction strategy, and holders who do not hold their shares as      
capital assets. In addition, the following discussion does not address the tax  
consequences of the merger under state, local and foreign tax laws or the tax   
consequences of transactions effectuated prior to or after the merger, whether  
or not such transactions are in connection with the merger. Accordingly, holders
of DSPT common stock are advised and expected to consult their own tax advisers 
regarding the federal income tax consequences of the merger in light of their   
personal circumstances and the consequences under state, local and foreign tax  
laws.                                                                           

As a condition to the consummation of the merger, Lindquist & Vennum    
P.L.L.P. and Gray Cary Ware & Freidenrich LLP must render tax opinions that the 
merger will constitute a reorganization within the meaning of Section 368(a) of 
the Internal Revenue Code. The tax opinions discussed in this section are       
included as an exhibit to the registration statement of which this proxy        
statement/prospectus is a part. Those opinions assume and are conditioned upon  
the following:                                                                  

  - the truth and accuracy of the statements, covenants, representations and
    warranties contained in the merger agreement, in the tax representations
     received from MTS, Badger and DSPT to support the tax opinions and in all
      other instruments and documents related to the formation, organization and
    operation of MTS, Badger and DSPT, and that no actions have been or will
  be taken which are inconsistent with such statements, descriptions and
representations;                                                    

- that original documents submitted to counsel are authentic, documents 
      submitted to counsel as copies conform to the original documents, and that
    all of those documents have been, or will be by the effective time, duly
     and validly executed and delivered where due execution and delivery are a
prerequisite to the effectiveness of those documents;               

- that all covenants contained in the merger agreement and the tax      
     representations described above are performed without waiver or breach of
any material provision of those covenants;                          

 - that any representation or statement made "to the best of knowledge" or
similarly qualified is correct without those qualifications; and    

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- that the merger will be consummated in accordance with the merger     
agreement, and without any waiver, breach or amendment of any of the
    material provisions of the merger agreement, will be effective under the
applicable state law, and will be reported by MTS and DSPT on their 
respective federal income tax returns in a manner consistent with   
treatment of the merger as a reorganization.                        

    No ruling from the Internal Revenue Service has been or will be requested in
connection with the merger. In addition, stockholders of DSPT should be aware   
that the tax opinions discussed in this section are not binding on the IRS and  
no assurance can be given that the IRS will not adopt a contrary position or    
that a contrary position would not be sustained by a court.                     

    Subject to these assumptions and limitations, it is the opinion of Lindquist
& Vennum P.L.L.P., tax counsel to MTS, and Gray Cary Ware & Freidenrich LLP, tax
counsel to DSPT that:                                                           

(1) the merger will be treated for federal income tax purposes as a     
reorganization;                                                   

(2) MTS, Badger and DSPT will each be a party to the reorganization;    

(3) MTS, Badger and DSPT will not recognize any gain or loss solely as a
result of the merger;                                             

(4) stockholders of DSPT will not recognize any gain or loss upon the   
   receipt of solely MTS common stock for their common stock, other than
  with respect to cash received in lieu of fractional shares of common
stock;                                                            

(5) the aggregate basis of the shares of MTS common stock received by a 
stockholder in the merger, including any fractional share deemed  
     received, will be the same as the aggregate basis of the shares of DSPT
common stock surrendered in exchange;                             

   (6) the holding period of the shares of MTS common stock received by a DSPT
     stockholder in the merger will include the holding period of the shares
      of DSPT common stock surrendered in exchange, provided that those shares
      of DSPT common stock are held as capital assets at the effective time of
the merger; and                                                   

 (7) a stockholder of DSPT who receives cash in lieu of a fractional share
    will recognize gain or loss equal to the difference, if any, between a
stockholder's basis in the fractional share and the amount of cash
   received. The gain or loss will be a capital gain or loss if the DSPT
common stock is held by the stockholder as a capital asset at the 
effective time of the merger.                                     

   DSPT stockholders should attach to their federal income tax returns for the
year of the merger a statement of all facts pertinent to the nonrecognition of  
gain or loss upon the exchange of DSPT common stock for MTS common stock,       
including the stockholder's tax basis in the stockholder's DSPT common stock and
a description of the MTS common stock received.                                 

Regardless of whether or not the merger qualifies as a reorganization, a
DSPT stockholder receiving MTS common stock would recognize income or gain to   
the extent those shares are considered to be received in exchange for services  
or property other than solely DSPT common stock. Gain would also be recognized  
to the extent a DSPT stockholder is treated as receiving consideration other    
than MTS common stock in exchange for the stockholder's DSPT common stock.      

  A successful IRS challenge to the status of the merger as a reorganization
would result in a DSPT stockholder recognizing gain or loss with respect to each
share of DSPT common stock in an amount equal to the difference between the     
stockholder's basis in such share and the fair market value, as of the effective
time of the merger, of the MTS common stock received in exchange. A             
stockholder's aggregate basis in the MTS common stock received would equal its  
fair market value, and the stockholder's holding period for the MTS common stock
would begin the day after the merger.                                           

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ANTICIPATED ACCOUNTING TREATMENT                                                

   The merger is expected to be accounted for using the "pooling of interests"
method of accounting pursuant to Opinion No. 16 of the Accounting Principles    
Board. The pooling of interests method of accounting assumes that the combining 
companies have been merged from inception, and the historical consolidated      
financial statements for periods prior to consummation of the merger are        
restated as though the companies had been combined from inception. Either MTS or
DSPT may terminate the merger agreement if the merger cannot be accounted for as
a pooling of interests.                                                         

GOVERNMENTAL APPROVALS                                                          

    The merger is subject to review by the Department of Justice and the Federal
Trade Commission to determine whether it complies with applicable antitrust     
laws. Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act  
of 1976, the merger may not be consummated until the waiting period specified   
under the act has expired. MTS and DSPT filed notification reports, together    
with requests for early termination of the waiting period, with the Department  
of Justice and the Federal Trade Commission on April 6, 1999. These filings     
commenced the 30-day waiting period. In letters dated April 20, 1999, the U.S.  
Department of Justice, Antitrust Division requested that MTS and DSPT           
voluntarily supply supplemental information concerning the merger. This request 
is not a formal "second request" for additional information or documentary      
materials under the Hart-Scott-Rodino Antitrust Improvements Act, but there can 
be no assurance that a "second request" will not be issued. MTS and DSPT have   
supplied some of the requested information and expect to supply further         
information on a voluntary basis. If additional information or documents is     
requested by these agencies, consummation of the merger could be delayed.       

ABSENCE OF APPRAISAL RIGHTS                                                     

   Under Section 262 of the Delaware General Corporation Law, stockholders who
do not vote in favor of or consent to a merger are not entitled to appraisal    
rights if the stock subject to such merger is listed on a national exchange or  
designated as a national market system security on an interdealer quotation     
system by the National Association of Securities Dealers, Inc. and the          
consideration to be received in such merger consists of stock listed on a       
national securities exchange or designated as a national market system security 
on an interdealer quotation system by the National Association of Securities    
Dealers, Inc. Because the Nasdaq National Market is designated as such a system 
and the DSPT common stock and MTS common stock are quoted on the Nasdaq National
Market, holders of DSPT common stock are not entitled to appraisal rights with  
respect to the merger.                                                          

RESALE OF MTS COMMON STOCK                                                      

The MTS common stock to be issued in connection with the merger will be 
freely transferable, except that shares issued to any DSPT stockholder or       
optionholder who is an affiliate of DSPT or who becomes an affiliate of MTS are 
subject to restrictions on resale. An affiliate is defined generally as         
including, without limitation, directors, executive officers and other persons  
who control a company. Stockholders of DSPT who may be deemed to be affiliates  
have executed agreements that prohibit the sale, transfer or other disposition  
of their DSPT common stock or MTS common stock received by stockholders in the  
merger, except in compliance with the requirements of federal securities laws   
and pooling of interests requirements. See "Approval of the Merger and Related  
Transactions--Affiliate Agreements" on page 36.                                 

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MATERIAL TERMS OF THE MERGER AGREEMENT

The following description of the merger agreement describes the material
terms of the merger agreement. The full text of the merger agreement is attached
as Appendix A to this proxy statement/ prospectus and is incorporated by        
reference. We encourage you to read the entire merger agreement.                

EFFECTIVE TIME OF THE MERGER                                                    

   The merger will become effective when a certificate of merger is filed with
the Secretary of State of the State of Delaware. If all the conditions to the   
merger contained in the merger agreement are satisfied or waived, we anticipate 
the effective time will occur on the date of the special meeting or as soon as  
practicable following the special meeting.                                      

MERGER CONSIDERATION                                                            

At the effective time of the merger, MTS will issue a total of 2,077,000
shares of its common stock in exchange for all outstanding shares of DSPT common
stock and outstanding options to purchase DSPT common stock. As a result, each  
outstanding share of DSPT common stock and each "net option share" will be      
exchanged for a fraction, the exchange ratio, of a share of MTS common stock    
equal to 2,077,000 divided by the sum of outstanding DSPT shares and DSPT "net  
option shares."                                                                 

 - "Net option shares" will represent the number of DSPT shares subject to
    outstanding options less a number of shares with a value, based upon the
implied DSPT "share value" at the time of the merger, equal to the  
aggregate exercise price. Unvested shares will be discounted using a
      method mutually agreeable to the companies. As of April 14, 1999, DSPT had
   options for 663,468 shares outstanding with a weighted average exercise
price of $5.446.                                                    

- The implied "DSPT share value" at the time of the merger will be      
      determined by dividing (a) the market value of the 2,077,000 MTS shares of
      common stock issued in the merger plus the aggregate exercise price of the
     DSPT options by (b) the total number of DSPT shares outstanding plus DSPT
shares subject to outstanding options.                              

  - Example. For example, assuming at the time of the merger that the market
      value of MTS' common stock is $13.00 and all of DSPT's outstanding options
    as of April 14, 1999 remain unexercised, each DSPT share outstanding and
each "net option share" will receive 0.8037 of a share of MTS common
    stock. If the market value of MTS' common stock is $11.00 at the time of
     the merger, each "net option share" will receive 0.8209 of a share of MTS
common stock.                                                       

The exact exchange ratio will not be determined until closing and will  
depend upon the market price of MTS common stock, the number of outstanding     
shares of DSPT common stock, the number of DSPT shares subject to outstanding   
options and the exercise prices of such options. Therefore, the actual exchange 
ratio for the merger, the aggregate value of the 2,077,000 MTS shares of common 
stock issued in the merger, and the allocation of the aggregate merger          
consideration between DSPT stockholders and optionholders could be affected by: 

- increases or decreases in the market price of MTS common stock;       

- exercises of DSPT options and their related exercise prices; and      

- grants of additional DSPT options.                                    

  DSPT has agreed in the merger agreement that it will not grant options for
more than 28,000 shares prior to the closing of the merger.                     

The following table shows, for certain MTS stock prices at closing, the 
exchange ratio for the merger, the implied value of a share of DSPT common      
stock, the value of the aggregate merger consideration to be received by DSPT   
stockholders and optionholders and the allocation of such                       

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merger consideration between DSPT stockholders and optionholders. The amounts   
shown in the table below are calculated assuming that the number of outstanding 
shares of DSPT stock, the number of shares subject to outstanding options and   
the related exercise prices of such options remain constant at April 14, 1999   
levels prior to closing.                                                        

                                                        [Enlarge/Download Table]

                                                           % MERGER          % MERGER     
                                           AGGREGATE     CONSIDERATION   CONSIDERATION TO 
 MTS SHARE    EXCHANGE    IMPLIED DSPT      MERGER          TO DSPT            DSPT       
   PRICE        RATIO      SHARE VALUE   CONSIDERATION   STOCKHOLDERS      OPTIONHOLDERS  
-----------  -----------  -------------  -------------  ---------------  -----------------
                                                                                          
 $    7.00        .8850     $    6.20    $  14,539,000          96.6%              3.4%   
      8.00        .8360          6.90       16,616,000          94.2               5.8    
      9.00        .8458          7.61       18,693,000          92.3               7.7    
     10.00        .8321          8.32       20,770,000          90.8               9.2    
     11.00        .8209          9.03       22,847,000          89.6              10.4    
     12.00        .8116          9.74       24,924,000          88.6              11.4    
     13.00        .8037         10.45       27,001,000          87.7              12.3    
     14.00        .7969         11.16       29,078,000          86.7              13.0    
     15.00        .7910         11.86       31,155,000          86.3              13.7    
     16.00        .7859         12.57       33,232,000          85.8              14.2    
     17.00        .7814         13.28       35,309,000          85.3              14.7    
     18.00        .7773         13.99       37,386,000          84.8              15.2    

 The following table shows, at an MTS share price of $13.00, the effect on
the merger consideration if DSPT options for varying amounts of shares are      
exercised with a weighted average exercise price of $5.446, which is the        
weighted average exercise price of all options outstanding on April 14, 1999.   
The actual values will depend on the actual exercise prices of the options, if  
any, that are exercised. It is not possible to predict what the weighted average
exercise prices of such options will be. DSPT optionholders may exercise options
at any time until the effective time of the merger.                             

                                                        [Enlarge/Download Table]

NUMBER SHARES                                                   % MERGER         % MERGER    
  SUBJECT TO                                    AGGREGATE     CONSIDERATION    CONSIDERATION 
  EXERCISED      EXCHANGE     IMPLIED DSPT       MERGER          TO DSPT          TO DSPT    
   OPTIONS         RATIO       SHARE VALUE    CONSIDERATION   STOCKHOLDERS     OPTIONHOLDERS 
--------------  -----------  ---------------  -------------  ---------------  ---------------
                                                                                             
      50,000         .7966          10.36     $  27,001,000         88.9%            11.1%   
     100,000         .7896          10.30     $  27,001,000         90.0%            10.0%   
     200,000         .7756          10.08     $  27,001,000         92.1%             7.9%   

  The value of MTS common stock at the time of the special meeting, the date
of the completion of the merger, the date that stockholders eventually sell     
shares of MTS common stock, or at any other time, may be significantly different
than the price of MTS common stock today. See "Market Price Data and Dividend   
Policy" on page 15 and "Material Terms of the Merger Agreement--Merger          
Consideration" on page 40. On April 27, 1999, the closing sale price of MTS     
common stock was $11.50. DSPT stockholders should obtain recent market          
quotations for MTS common stock and DSPT common stock and understand the        
exchange ratio being offered in the merger.                                     

CONDITIONS TO THE MERGER                                                        

CONDITIONS TO THE OBLIGATIONS OF EACH PARTY                             

 The obligations of MTS and DSPT to complete the merger are subject to the
following conditions:                                                           

 - adoption of the merger agreement and approval of the merger by the DSPT
stockholders;                                                       

  - the absence of any legal action making the merger illegal or prohibiting
   the merger or that would materially limit the ability of MTS to own and
operate the assets and business of DSPT;                            

   - receipt of all material approvals and consents of third parties necessary
to consummate the merger;                                           

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   - authorization for listing by the Nasdaq National Market of the MTS common
stock to be issued in the merger to the DSPT stockholders;          

- receipt of all permits or other authorizations required by applicable 
     state securities laws for the MTS common stock to be issued in connection
with the merger;                                                    

    - expiration or termination of the applicable waiting period under antitrust
laws; and                                                           

  - the registration statement of which this proxy statement/prospectus is a
part being declared effective under the Securities Act.             

CONDITIONS TO THE OBLIGATION OF DSPT                                    

 The obligation of DSPT to complete the merger is subject to the following
additional conditions:                                                          

   - compliance by MTS with its obligations under the merger agreement and the
    representations and warranties made by MTS in the merger agreement being
    true as of the effective time of the merger as if made at that time. Any
     inaccuracies in the representations and warranties will be disregarded if
     the circumstances giving rise to all inaccuracies considered collectively
do not constitute a material adverse effect on MTS;                 

- Gray Cary Ware & Freidenrich LLP delivering to DSPT its tax opinion;  

- Grant Thornton LLP delivering to DSPT and Arthur Andersen LLP letters 
      stating that such accounting firm is not aware of any fact concerning DSPT
that would preclude the merger from being treated as a pooling of   
interests for financial accounting purposes;                        

- Arthur Andersen LLP delivering to MTS a letter stating that such      
      accounting firm concurs in MTS management's conclusion that the merger may
be accounted for as a pooling of interests; and                     

- Lindquist & Vennum P.L.L.P. delivering to DSPT its legal opinion.     

CONDITIONS TO THE OBLIGATION OF MTS                                     

The obligation of MTS to complete the merger is subject to the following
additional conditions:                                                          

    - compliance by DSPT with its obligations under the merger agreement and the
     representations and warranties made by DSPT in the merger agreement being
    true as of the effective time of the merger as if made at that time. Any
     inaccuracies in representations and warranties will be disregarded if the
    circumstances giving rise to all inaccuracies considered collectively do
not constitute a material adverse effect on DSPT;                   

- Lindquist & Vennum P.L.L.P. delivering to MTS its tax opinion;        

    - Grant Thornton LLP delivering to DSPT letters stating that such accounting
 firm is not aware of any fact concerning DSPT that would preclude the
merger from being treated as a pooling of interests for financial   
accounting purposes;                                                

- Gary Cary Ware & Freidenrich LLP delivering to MTS its legal opinion; 

- Arthur Andersen LLP delivering to MTS a letter stating that such      
      accounting firm concurs in MTS management's conclusion that the merger may
be accounted for as a pooling of interests; and                     

  - execution of employment agreements by F. Gil Troutman and Larry Moulton.

Messrs. Troutman and Moulton delivered signed employment agreements satisfying  
this condition on the date the merger agreement was signed.                     

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"Material Adverse Effect" means an effect that is, or at the time of the
effect it is probable that the effect will be, materially adverse (1) to the    
company's business, results of operation or financial condition, (2) to the     
ability of the company to conduct its business, as presently conducted,         
following the effective time or, with respect to DSPT, to the ability of MTS to 
derive the benefits of owning all of the stock of the surviving corporation, or 
(3) to the company's ability to perform any of its material obligations under   
the merger agreement or to consummate the merger. The following events are not  
material adverse effects:                                                       

   - changes in the market price or trading volume of the DSPT common stock or
the MTS common stock;                                               

   - DSPT or MTS failing to meet any published securities analyst estimates of
revenue or earnings for any period ending or for which earnings are 
  released on or after the date of the merger agreement and prior to the
merger;                                                             

    - an event, violation, inaccuracy, circumstance or other matter that results
from conditions affecting the U.S. or world economy;                

    - an event, violation, inaccuracy, circumstance or other matter that results
from conditions affecting the powertrain testing or instrumentation 
industry generally;                                                 

    - an event, violation, inaccuracy, circumstance or other matter that results
primarily from the announcement or the pendency of the merger or the
transactions contemplated by the merger agreement; or               

    - an event, violation, inaccuracy, circumstance or other matter that results
from the taking of any action required or permitted by the merger   
agreement.                                                          

  There can be no assurance that all of the conditions to the merger will be
satisfied.                                                                      

REPRESENTATIONS AND WARRANTIES                                                  

 The merger agreement contains customary representations and warranties of
DSPT and MTS relating to, among other things, aspects of the respective         
businesses of the companies and other matters. The representations and          
warranties expire at the effective time of the merger.                          

COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE MERGER                              

AFFIRMATIVE COVENANTS OF DSPT                                           

   DSPT has agreed that, prior to the effective time, except to the extent MTS
shall consent in writing, DSPT will:                                            

  - conduct its operations, to the extent commercially reasonable, according
 to its ordinary and usual course of business and consistent with past
practice; and                                                       

  - use commercially reasonable efforts to preserve substantially intact its
     business organization, to keep the services of its officers and employees
available and to maintain satisfactory relationships with licensors,
   licensees, suppliers, contractors, distributors, consultants, customers
and others having business dealings with it.                        

NEGATIVE COVENANTS OF DSPT                                              

   DSPT has agreed that, prior to the effective time, except to the extent MTS
shall consent in writing and subject to certain exceptions, DSPT will not:      

- amend its certificate of incorporation or bylaws;                     

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  - subject to the continuation of its normal stock option program, issue or
   sell, or issue options, warrants, commitments, subscriptions, rights to
purchase or otherwise any stock of any class;                       

  - split, combine or reclassify any shares of its capital stock or declare,
set aside or pay any dividend or other distribution;                

- incur or assume any debt except for borrowing incurred in the ordinary
course of business and consistent with past practice;               

- increase the compensation or pay, modify or accelerate the benefits,  
  including but not limited to pension, severance, retirement, change of
      control and stock option benefits, of any DSPT director, officer, employee
     or consultant other than in the ordinary course or business or consistent
     with past practice or consistent with existing contractual commitments or
as required by applicable law;                                      

 - sell, transfer, mortgage, dispose of or encumber any assets material to
DSPT taken as a whole, other than liens that would not materially   
adversely affect DSPT, except in the ordinary course of business and
consistent with past practice or pursuant to contractual obligations
existing on the date of the merger agreement;                       

  - acquire or agree to acquire any other business or any material assets or
   make new capital expenditures in excess of $50,000, except purchases of
 inventory in the ordinary course of business and consistent with past
practice;                                                           

- enter into, amend or terminate any material contracts;                

- make any material changes in credit policies or inventory consignment 
practices;                                                          

 - remove or permit the removal of any material assets of DSPT from any of
  its facilities except in the ordinary course or business or unless the
removed asset is replaced with a similar item of equal quality;     

   - alter or revise any accounting methods in any material respect, except as
required by law or by a change in generally accepted accounting     
principles;                                                         

  - institute, settle or compromise any legal or governmental action pending
 or threatened against DSPT involving amounts in excess of $50,000; or

   - knowingly take any action that would render any representation, warranty,
covenant or agreement of DSPT in the merger agreement inaccurate or 
   breached such that the conditions to the obligation of MTS to close the
merger will not be satisfied at closing.                            

AFFIRMATIVE COVENANTS OF MTS                                            

MTS has agreed that, prior to the effective time, it will:              

  - conduct its operations, to the extent commercially reasonable, according
 to its ordinary and usual course of business and consistent with past
practice; and                                                       

  - use commercially reasonable efforts to preserve substantially intact its
     business organization, to keep the services of its officers and employees
available and to maintain satisfactory relationships with licensors,
      licensees, suppliers, contractors, distributors and others having business
dealings with it.                                                   

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NEGATIVE COVENANTS OF MTS                                               

   MTS has agreed that, prior to the effective time, except to the extent DSPT
shall consent in writing and subject to certain exceptions, MTS will not:       

- amend its articles of incorporation or bylaws;                        

- subject to the continuance of normal stock option programs and other  
exceptions, issue or sell, or issue options, warrants, commitments, 
  subscriptions, rights to purchase or otherwise any stock of any class;

- combine or reclassify any shares of its capital stock or declare, set 
aside or pay any extraordinary dividend or other distribution;      

- acquire or agree to acquire or dispose of any business or assets which
could reasonably be expected to materially delay the consummation or
materially increase the risk of non-consummation of the transactions
contemplated by the merger agreement;                               

    - sell, transfer, mortgage or otherwise dispose of or encumber any assets or
    properties material to MTS taken as a whole, other than liens that would
 not materially adversely affect MTS, except in the ordinary course of
 business and consistent with past practice or pursuant to contractual
obligations existing on the date of the merger agreement;           

   - alter or revise any accounting methods in any material respect, except as
required by law or by a change in generally accepted accounting     
principles;                                                         

  - knowingly take any action that would result in a failure to maintain the
quotation of MTS common stock on the Nasdaq National Market; or     

   - knowingly take any action that would render any representation, warranty,
covenant or agreement of MTS in the merger agreement inaccurate or  
    breached such that the conditions to the obligation of DSPT to close the
merger will not be satisfied at closing.                            

MUTUAL COVENANTS OF MTS AND DSPT                                        

   MTS and DSPT have each agreed that, prior to the effective time, they will:

 - permit the other company to inspect its records and to consult with its
officers, employees, consultants, advisors, distributors, customers,
 suppliers and other companies having business with DSPT during normal
business hours;                                                     

    - notify the other company of the occurrence of any event that will or could
reasonably be expected to result in a failure to satisfy certain    
conditions of the merger;                                           

    - use commercially reasonable efforts to have declared effective or approved
all documents and notifications with any governmental or regulatory 
bodies;                                                             

    - use reasonable best efforts to cause the merger to be treated as a pooling
of interests for financial accounting purposes;                     

 - use commercially reasonable efforts to cause the merger to qualify, and
    not take any action which would prevent the merger from qualifying, as a
tax-free reorganization; and                                        

- use commercially reasonable efforts to take all action necessary to   
consummate the transactions in the merger agreement.                

In addition, DSPT will:                                                 

  - use commercially reasonable efforts to obtain all material approvals and
consents of third parties necessary to consummate the transactions  
contemplated by the merger agreement;                               

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    - call and hold a meeting of its stockholders for the purpose of considering
     and acting upon a proposal to consummate the transactions contemplated by
the merger agreement;                                               

- cooperate with MTS and use reasonable best efforts to cause to be     
delivered to MTS a letter from Grant Thornton LLP regarding pooling 
issues; and                                                         

    - use commercially reasonable efforts to cause all outstanding shares of any
    subsidiary to be transferred for no or nominal consideration to a person
designated by MTS.                                                  

In addition, MTS shall:                                                 

 - prepare and submit an application to the Nasdaq National Market to list
the MTS common stock to be issued in connection with the merger;    

 - take all action necessary to cause the merger subsidiary to perform its
obligations under the merger agreement;                             

- from and after the effective time, to the extent practicable and      
commercially reasonable and subject to certain exceptions, provide  
employee benefits and programs to the employees of DSPT that, in the
      aggregate, are substantially comparable to or more favorable than those in
    existence as of the date of the merger agreement and disclosed to MTS in
writing; and                                                        

- maintain DSPT's directors' and officers' liability insurance for the  
      directors and officers of DSPT for a minimum period of six years following
the effective time of the merger.                                   

LIMITATION ON DISCUSSING OR NEGOTIATING OTHER TRANSACTION PROPOSALS             

DSPT has agreed not to, directly or indirectly:                         

- solicit, knowingly encourage, initiate, or participate in any way in  
discussions or negotiations with, or knowingly provide any nonpublic
   information to, a third party concerning an alternative transaction. An
      alternative transaction includes any tender offer, exchange offer, merger,
consolidation, share exchange, business combination or similar      
      transaction, an acquisition of more than 50% of the DSPT common stock or a
      sale, lease, exchange, license, transfer or other disposition of more than
  50% of DSPT's assets in a single or series of related transactions; or

  - otherwise knowingly facilitate any effort or attempt to propose, make or
implement an alternative transaction.                               

These clauses and the other provisions of the merger agreement, however,
will not prohibit DSPT from, prior to the vote of the DSPT stockholders in the  
merger, furnishing nonpublic information to or entering into discussions or     
negotiations with any third party that makes an unsolicited superior proposal,  
defined below, if, and only to the extent that                                  

- DSPT's board of directors reasonably and in good faith determines that
failure to take that action would be inconsistent with its fiduciary
duties to DSPT's stockholders;                                      

   - prior to furnishing nonpublic information to or entering into discussions
     or negotiations with the third party, DSPT (1) provides written notice to
      MTS that it intends to furnish information to or enter into discussions or
  negotiations with a third party making a superior proposal, naming the
     person or entity making the superior proposal, and (2) receives from such
third party an executed confidentiality agreement with terms no less
favorable to DSPT than the confidentiality agreement with MTS; and  

- DSPT provides MTS with all nonpublic information to be provided to the
   third party and keeps MTS informed, on a daily or more regular basis of
    the status, terms and conditions and all other material information with
respect to any discussions or negotiations.                         

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  For purposes of the merger agreement, the term "superior proposal" means a
proposal for an alternative transaction that the DSPT board of directors        
determines, reasonably and in good faith to be more favorable to DSPT's         
stockholders than the merger. This determination must be made after consultation
with DSPT's financial advisors, taking into account the likelihood of           
consummation of the alternative transaction, including, but not limited to, the 
conditions to consummation and the consequences under the alternative           
transaction of any material adverse effects or changes in DSPT.                 

TERMINATION OF THE MERGER AGREEMENT                                             

 The merger agreement may be terminated at any time prior to the effective
time as follows:                                                                

   - by mutual written consent of MTS and DSPT duly authorized by the board of
directors of each MTS and DSPT;                                     

 - by MTS or DSPT if the merger has not been consummated by July 31, 1999;
  however, such right to terminate will not be available for any company
  that breached in any material respect its obligations under the merger
agreement in a manner that proximately contributed to the failure to
consummate the merger by such date, and if there is a request for   
      additional information from the Department of Justice or the Federal Trade
   Commission pursuant to the HSR Act the date for consummating the merger
shall be extended to October 31, 1999;                              

    - by MTS or DSPT if a court or an administrative, governmental or regulatory
  authority has issued a final nonappealable order, decree or ruling, or
taken any other action having the effect of permanently restraining,
enjoining or prohibiting the merger;                                

   - by MTS or DSPT if DSPT's stockholders do not approve and adopt the merger
  agreement and the merger; however, such right to terminate will not be
available to any company that breached in any material respect its  
obligations under the merger agreement in a manner that proximately 
contributed to the failure to obtain that stockholder approval;     

- by MTS if                                                             

-- DSPT has breached its obligations with respect to alternative  
transactions as discussed above;                            

    -- DSPT's board of directors recommends, approves or authorizes DSPT's
         acceptance or execution of a letter of intent or definitive agreement
providing for an alternative transaction;                   

      -- DSPT's board of directors has modified in a manner materially adverse
        to MTS, or withdrawn, its recommendation of the merger agreement; or

    -- a tender offer or exchange offer for any outstanding shares of DSPT
      common stock is commenced and the DSPT board of directors fails to
        recommend against acceptance or the tender offer by its stockholders
         or exchange offer or takes no position with respect to the acceptance
of the tender or exchange offer by DSPT's stockholders.     

- by MTS or DSPT prior to the approval by the stockholders of DSPT if   

     -- DSPT's board of directors has authorized DSPT to enter into a letter
         of intent or binding written agreement concerning a superior proposal
and has provided written notice to MTS of the proposal;     

   -- MTS does not make, within 10 business days after receipt of DSPT's
         written notice of its intention to enter into the letter of intent or
          binding agreement, an offer that the DSPT board determines is at least
     as favorable to DSPT's stockholders as the superior proposal; and

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   -- upon a termination under these circumstances, DSPT pays to MTS the
         termination fee described below, DSPT agrees not to enter into such a
       letter of intent until at least the eleventh business day after MTS
  has received written notice from DSPT and to notify MTS if its
        intention to enter into such a letter of intent or binding agreement
changes.                                                    

- by MTS if MTS is not in material breach of its obligations under the  
   merger agreement and there has been a material breach by DSPT of any of
DSPT's representations, warranties or obligations under the merger  
   agreement so that the conditions of the obligations of MTS to close the
     merger cannot be satisfied and the breach cannot be cured by DSPT through
the exercise of reasonable efforts; or                              

- by DSPT if DSPT is not in material breach of its obligations under the
  merger agreement and there has been a material breach by MTS of any of
      MTS' representations, warranties or obligations under the merger agreement
 so that the conditions to the obligations of DSPT to close the merger
 cannot be satisfied and the breach cannot be cured by MTS through the
exercise of reasonable efforts.                                     

EXPENSES AND TERMINATION FEE                                                    

  If the merger is abandoned because the merger agreement is terminated, all
expenses will be paid by the party incurring them.                              

DSPT will pay to MTS a termination fee equal to $400,000 if the merger  
agreement is terminated:                                                        

 - by MTS if DSPT has breached its obligations with respect to alternative
transactions as discussed above;                                    

- by MTS if                                                             

    -- DSPT's board of directors recommends, approves or authorizes DSPT's
         acceptance or execution of a letter of intent or definitive agreement
providing for an alternative transaction;                   

      -- DSPT's board of directors has modified in a manner materially adverse
        to MTS, or withdrawn, its recommendation of the merger agreement; or

    -- a tender offer or exchange offer for any outstanding shares of DSPT
      common stock is commenced and the DSPT board of directors fails to
         recommend against acceptance or takes no position with respect to the
         acceptance by DSPT's stockholders, and within twelve months after the
     date of such termination DSPT enters into a letter of intent or a
definitive agreement with a third party for an alternative  
transaction.                                                

- by MTS or DSPT if the DSPT board authorizes DSPT to accept a superior 
    proposal and MTS does not make an offer that is at least as favorable to
      DSPT's stockholders as the superior proposal within 10 business days after
DSPT's written notice.                                              

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INFORMATION WITH RESPECT TO DSPT

BUSINESS OF DSPT                                                                

INTRODUCTION                                                                    

DSPT designs, develops, manufactures, markets and integrates high-speed 
computer-automated instrumentation for measurement and control applications.    
DSPT has two divisions, the transportation group, which focuses on powertrain   
testing, and the lab group, which focuses on vehicle safety and component       
testing, general data acquisition and signal analysis. Powertrain testing is    
currently DSPT's largest market and major focus.                                

  On January 21, 1999, DSPT announced its strategic decision to relocate its
corporate headquarters to, and consolidate its transportation group operations  
in Ann Arbor, Michigan in order to allow efficient operation of the             
transportation group, its largest and most profitable business segment. DSPT    
recorded a one-time pre-tax restructuring charge of $496,000 in the fourth      
quarter of 1999 which consists of $306,000 in severance pay and $190,000 in     
estimated idle facility and winding down costs in connection with the           
restructuring.                                                                  

  DSPT's products are used to gather and measure analog signals generated by
transducers and/or detectors which measure physical properties such as          
temperature, pressure and acceleration. These products have been used primarily 
in the transportation industry, in powertrain testing such as dynamometer       
control and automotive combustion research, and vehicle impact and simulation   
testing. Aerospace companies, universities and government-funded agencies use   
DSPT's products in ultrasonics, chemical kinetics, plasma diagnostics,          
spectroscopy, fusion research, explosives testing and vibration analysis.       

    DSPT was incorporated in California in July 1982 and began operations in May
1984. DSPT reincorporated in Delaware in September 1997.                        

STRATEGY                                                                        

 DSPT's strategy is to focus its resources on the transportation market as
DSPT's largest market. DSPT defines the transportation market as including the  
following industries and segments:                                              

- major vehicle manufacturers and their suppliers;                      

- the diesel industry, e.g., manufacturers of heavy trucks, farm and    
construction equipment and large stationary engines;                

- the fuels and lubricants industry;                                    

- small engine manufacturers; and                                       

- racing engine technology.                                             

DSPT believes that the fundamental factors of government environmental  
regulation, global competition among vehicle manufacturers, and rapid           
technological progress are expanding the demand for advanced turnkey powertrain 
test solutions. Large domestic and international customers demand more custom   
turnkey solutions that require more complex services. DSPT believes that        
investments in this area are necessary and logical steps towards expanding its  
share of the transportation market.                                             

    To address its customers' needs in the transportation market, DSPT announced
its strategic decision in early fiscal 1997 to focus more heavily and expand its
capabilities on the services side of the business, continue development of new  
products with higher levels of capability and integration, and take a more      
aggressive approach to marketing with the goal of becoming a full-service       
company capable of manufacturing and providing turnkey integration of DSPT's    
products.                                                                       

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DSPT also continues to invest in the development of data acquisition    
products. In fiscal 1999, DSPT introduced ADAPT-CAS, its new combustion analysis
system, BaseLine ADAPT, its new, low-cost dynamometer control system, and       
software enhancements to ADAPT-DAC, DSPT's primary dynamometer control system.  

DSPT entered into a Strategic Alliance Agreement dated February 26, 1995
with FEV Motorentechnik GmbH & Co. KG. As of February 26, 1999, FEV beneficially
owned approximately 12.5% of DSPT outstanding common stock. DSPT entered into   
the strategic relationship with FEV in order to combine resources, technology   
and distribution for joint product development and distribution within certain  
territories. Under the terms of the agreement, DSPT and FEV have agreed to      
jointly develop and manufacture certain products as well as act as sole         
distributors of each other's pre-existing products within certain respective    
territories, and to act as strategic partners with respect to distribution for  
other parts of the world. DSPT, MTS and FEV have entered into an agreement which
will supersede this agreement effective upon the merger. See "Information with  
Respect to MTS" on page 65.                                                     

PRODUCTS AND CUSTOMERS                                                          

  DSPT manufactures and markets data acquisition and control products in the
form of integrated systems, modules and proprietary software developed by DSPT. 
The transportation group provides powertrain testing and the lab group provides 
vehicle safety and component testing and general data acquisition and signal    
analysis.                                                                       

POWERTRAIN TESTING PRODUCTS                                             

DSPT supplies a wide range of products and services for powertrain test 
cells. DSPT's RedLine and BaseLine products are accepted as standards by leading
automakers around the world. These systems help its customers develop more cost 
effective, fuel efficient engines. By integrating hardware, software, services  
and expertise into a cost-effective system, DSPT creates solutions that focus on
its customers' specific needs. These solutions, based on industry standards,    
provide long-term flexibility for changing test requirements. The following is a
list of DSPT's major customers in the transportation market:                    

                                                                [Download Table]
                                                                   
-  Engelhard Corporation               -  John Deere               

-  FEV                                 -  Lubrizol Corporation     

-  General Motors Corporation          -  Sverdrup Technology, Inc.

REDLINE ADAPT-DAC.  The data acquisition and control system is a crucial
component in a powertrain test cell. RedLine ADAPT-DAC offers real-time control 
over the engine being tested. Multi-processor architecture allows the system to 
acquire data on hundreds of pre-set parameters simultaneously as the engine     
responds to test conditions. It can interface with and control a wide variety of
other test instruments and systems, including emission benches, combustion      
analyzers and other devices. With its networking capabilities, ADAPT-DAC can    
provide centralized, remote control of an entire suite of test cells. It        
features innovative graphics and runs on a personal computer in the Windows     
environment. The systems sell from $60,000 for a base model up to $500,000 with 
accessory products, hardware spares, custom software, integration, installation 
and training.                                                                   

    REDLINE ADAPT-CAS.  DSPT introduced the RedLine ADAPT-CAS at the SAE show in
February 1998. It is the third generation combustion analysis product of RedLine
ACAP which was introduced in 1991. ADAPT-CAS incorporates years of feedback from
industry leaders around the world. Designed for seamless integration with       
ADAPT-DAC or with VME-bus or VMX-bus systems from other vendors, it enhances the
usefulness and quality of test data, raises the efficiency of test cell         

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operations and increases test safety. It is easy to use and features dynamic    
graphic displays. Integrated with ADAPT-DAC, the combined system offers a single
user interface for operation, display of data, and system configuration. The    
systems range in price from approximately $30,000 for a base system to over     
$150,000.                                                                       

    REDLINE DYNO.  DSPT offers a line of dynamometers called RedLine DYNO. These
dynamometers are low-inertia, high-response units designed for the quick        
transient conditions of sophisticated powertrain testing. They interface        
directly with RedLine ADAPT-DAC and provide another element in the complete     
solution for powertrain testing. The systems range in price from approximately  
$25,000 to $125,000.                                                            

REDLINE CONNECT.  As test cell electronics proliferate, test-cell wiring
becomes more complex, time-consuming and error-prone. The RedLine CONNECT system
provides a fast, simple, modular solution for interfacing test cell             
instrumentation and signals. It combines the flexibility of individual signal   
connections with the speed and convenience of single-point mass termination.    
These systems range in price from approximately $15,000 to $25,000.             

BASELINE ADAPT.  BaseLine ADAPT is a self-contained data acquisition and
control system needing only a PC workstation and test cell interfaces to        
implement an operational test system. It is the lower cost alternative to       
RedLine ADAPT and offers space savings of approximately 70%, a significant      
advantage in the equipment-crammed environment of today's test cell. Typical    
systems range in price from approximately $35,000 to $45,000.                   

TEST CELL INSTRUMENTATION AND ACCESSORY PRODUCTS.  DSPT provides a      
comprehensive array of test cell accessories (e.g., engine supports, coolant    
control systems, containerized powertrain test cells) as integral parts of      
RedLine installations.                                                          

 TEST CELL SERVICES.  DSPT provides test cell services to its customers as
part of a turnkey solution. These services are provided with sales of the       
powertrain testing products described above. DSPT provides services in the areas
of custom manufacturing, system integration, project engineering and management,
installation and commissioning. Test cell services personnel work in close      
partnership with customers to design, install and service a wide variety of     
powertrain test facilities. In the planning phase, project and applications     
engineers work closely with customers' selected contractors to design and       
integrate complex systems and facilities that will meet their needs. During     
installation, DSPT's installers and commissioning engineers work with the       
customer to ensure timely completion and thorough testing of all equipment.     

VEHICLE SAFETY AND COMPONENT TESTING PRODUCTS                           

   IMPAX data acquisition systems are systems typically used in collecting and
processing data from full-scale vehicle crash tests, sled simulators and        
component test stands. In addition, they have been used for investigating       
lift-off dynamics for space launch vehicles. Systems prices range from about    
$150,000 to $400,000 depending on the configuration. Major customers for this   
product are General Motors Corporation, Autoliv, Lockheed-Martin and Morton     
International.                                                                  

GENERAL DATA ACQUISITION AND SIGNAL ANALYSIS PRODUCTS                   

SIGNAL ACQUISITION PRODUCTS.  SigLab high-performance signal acquisition
products are subsystems for personal computers and workstations in the          
electronic and electro-mechanical device analysis market. SigLab products       
provide a cost-effective, portable technology for measurement applications like 
computer hard disk head positioning or acoustic noise suppression systems in    
automobiles. The products are controlled by and integrated with the MATLAB      
software from The MathWorks Inc. of Natick, Massachusetts. The products range in
price from $5,000 for a base 2-channel unit to $30,000 for a 6-channel system   
with optional software and additional memory. Major customers for these products

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are distributors such as Signaltech, Sigmatest and Accoutionies, and customers  
such as G-Tech Instrument, Inc. and Phase Metrics.                              

CUSTOM DATA ACQUISITION SYSTEMS.  DSPT also designs custom systems for  
customer-specific measurement or control applications. These systems are        
configured from DSPT's line of modules, such as signal conditioners, transient  
recorders, analog-to-digital converters and interface modules. These systems are
typically sold to universities, government-funded labs and research and         
development labs. The typical selling price of a system ranges from about       
$25,000 to about $300,000 for a complex installation. Major customers for these 
products are Boeing Commercial Airplane, Naval Air Warfare Center, Telogy,      
Stanford Linear Accelerator and Ethyl Corporation.                              

MANUFACTURING AND SUPPLIERS                                                     

   DSPT manufactures its products from components and prefabricated parts such
as integrated circuits, printed circuit boards, power supplies and enclosures   
manufactured by others. Manufacturing operations consist of assembly of printed 
circuit boards, power supplies and crates, system integration and final testing.
Materials and components used by DSPT in manufacturing are available primarily  
from domestic sources. Where possible, DSPT buys from multiple sources to avoid 
dependence on any single supplier. However, certain custom analog devices are   
only available from a limited number of suppliers.                              

MARKETING AND SALES                                                             

    In the United States, DSPT primarily sells and services its products through
its own sales and service organizations located in Michigan and California. In  
Canada, Western Europe, Korea and Japan, DSPT sells its products through        
independent distributors through whom DSPT provides technical and administrative
assistance. For its transportation market products, DSPT distributes its        
products through FEV in Europe except for the United Kingdom. In the United     
Kingdom, DSPT operates a sales and customer support subsidiary for its          
powertrain testing products. DSPT's standard terms of sale generally require    
payment within 30 days of shipment.                                             

The following customers accounted for over 10% of fiscal 1999 net sales:
General Motors accounted for 15%, Sverdrup for 14% and Engelhard for 12%. In    
fiscal 1998, General Motors accounted for 21% of net sales and Hyundai Motor    
accounted for 14% of net sales. General Motors accounted for 18% of net sales in
fiscal 1997. No other customer accounted for 10% or more of DSPT's net sales in 
fiscal years 1999, 1998 or 1997. Sales of DSPT products through DSPT's          
relationship with FEV during fiscal 1999 were approximately $1,248,000 or       
approximately 5% of DSPT's total net sales.                                     

  Export sales, primarily to the United Kingdom, Western Europe, and the Far
East, accounted for approximately 20%, 35% and 32% of sales in 1999, 1998 and   
1997, respectively.                                                             

  At January 31, 1999, DSPT had an order backlog of approximately $4,800,000
compared to a backlog of approximately $11,500,000 at January 31, 1998, and     
approximately $9,500,000 at January 31, 1997. Backlog consists of orders        
believed by management to be firm and scheduled for delivery within twelve      
months. However, most orders can be rescheduled or canceled by customers without
significant penalty. In addition, backlog is dependent on the timing of orders, 
particularly large orders, and on seasonal spending for capital requirements.   
Accordingly, backlog at January 31, 1999, or at any other date, may not be      
indicative of prospective sales.                                                

SERVICE AND WARRANTY                                                            

DSPT maintains a telephone hotline staffed with qualified technicians to
respond to service calls. Most servicing is performed at its facilities in      
Fremont, California and Ann Arbor, Michigan.                                    

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   DSPT generally extends a one-year warranty for its products. Warranty costs
have been nominal to date.                                                      

RESEARCH AND DEVELOPMENT                                                        

DSPT's ability to compete successfully in an industry subject to rapid  
technological change depends on, among other things, its ability to anticipate  
and respond to such change. Accordingly, DSPT is committed to a high level of   
research and development activity. In 1999, the principal products introduced   
were the transportation group's RedLine ADAPT-CAS, its new combustion analysis  
system, BaseLine ADAPT, a lower cost dynamometer controller and several software
enhancements and upgrades to ADAPT-DAC system, its primary dynamometer control  
system. In 1999, the lab group introduced several new software add-ons which    
have helped broaden the market for its signal acquisition products. DSPT expects
that in 2000 research and development activities will focus primarily on        
software development for new products and product enhancements.                 

DSPT incurred expenditures for research and development of $2,765,000 in
fiscal 1999, $2,352,000 in fiscal 1998 and $2,203,000 in fiscal 1997,           
representing 11%, 11%, and 12% of total sales in each such period. In accordance
with the Statement of Financial Accounting Standards No. 86 which requires the  
capitalization of software development costs incurred subsequent to establishing
the technological feasibility of producing the finished software product. DSPT  
capitalized $522,000, $517,000, and $630,000 in fiscal 1999, 1998 and 1997,     
respectively.                                                                   

COMPETITION                                                                     

  Competition, from both U.S. and foreign competitors, is strong and active.
Some of these competitors are substantially larger companies with greater       
resources. DSPT management believes that these companies include AVL located in 
Graz, Austria, and Sverdrup, a system integrator based in Tennessee.            

DSPT competes primarily on the basis of product diversity, features and 
functions, price/ performance, flexibility, and technical support. In addition, 
DSPT believes that an additional competitive factor in the automotive market is 
its installed base in the United States. DSPT believes that it competes         
favorably with respect to all these factors. Systems integration experience and 
ability is increasingly a factor in large system orders and DSPT believes that  
it has the personnel and the resources to compete in this area, although many of
its competitors are substantially larger with greater resources.                

PROPRIETARY RIGHTS                                                              

DSPT relies upon a combination of copyright, trade secret laws and      
non-disclosure and licensing agreements to establish and maintain its           
proprietary rights to its products. The laws of foreign countries may not       
protect DSPT's proprietary rights to the same extent as do the laws of the      
United States. Although DSPT continues to implement protective measures and     
intends to defend its proprietary rights, these measures may not be successful. 
DSPT believes, however, that, because of the rapid pace of technological change 
in the automated test, measurement and control industries, the legal protections
for its products are less significant factors in DSPT's success than the        
knowledge, ability, and experience of DSPT's employees, the frequency of product
enhancements and the timeliness and quality of support services provided by     
DSPT.                                                                           

DSPT is subject to the risk of adverse claims and litigation alleging   
infringement of intellectual property rights. Technology used in DSPT's products
is licensed from third parties on a non-exclusive basis. These license          
agreements generally require DSPT to pay royalties and to fulfill               
confidentiality obligations in order to maintain the licenses. The termination  
of any of these licenses may have a material adverse effect on DSPT's           
operations. While it may be necessary or desirable in the future to             

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obtain other licenses relating to one or more of its products or relating to    
current or future technologies, DSPT may not be able to do so on commercially   
reasonable terms.                                                               

EMPLOYEES                                                                       

  DSPT had 158 employees at January 31, 1999. Of these employees, 107 worked
in manufacturing and engineering, 29 in marketing and sales and 22 in           
administration. None of DSPT's employees is represented by a labor union and    
there has never been a disruption of operations due to labor dispute.           

PROPERTIES                                                                      

 DSPT's facilities consist of approximately 28,000 square feet of space in
Fremont, California and approximately 26,000 square feet of space in Ann Arbor, 
Michigan which are leased under operating leases. The Fremont facility lease    
provides for monthly rent payments of $15,146 through October 1998 and $35,388  
from November 1998 through lease expiration on July 1999. DSPT plans to move its
lab group to a smaller location when the lease expires.                         

The Ann Arbor facility leases consist of:                               

- A seven-year lease for one building which expires in January 2000,    
      providing for annually increasing monthly rental payments reaching $10,257
   during the seventh year. DSPT expects to move out of this facility when
the lease expires.                                                  

- A 31-month lease for another building which expires in June 1999, with
     monthly rental payments of $4,308 from December 1996 through May 1998 and
     increasing to $4,602 per month thereafter. DSPT plans to extend its lease
on this facility until it is able to move into its new facility.    

   - A facility sublease commencing October 1998, providing for monthly rental
    payments of $4,696, and renewable annually each June until June 2002. If
  DSPT does not renew the lease, DSPT is responsible to pay the lessor a
one-time payment to cover the unamortized costs of the tenant       
  improvements. DSPT expects to renew its lease for another year in June
1999.                                                               

DSPT is obligated to pay real estate taxes, insurance and maintenance   
expenses associated with the leased facilities.                                 

DSPT is in the process of constructing a new 57,200 square foot facility
located in Ann Arbor, Michigan, which will house its corporate headquarters and 
transportation group. Under the terms of the construction contract, DSPT is     
obligated to pay the contractor $3,750,000 for the construction of the new      
facility which is expected to be completed sometime during the fall of 1999.    
Management believes that the new facilities will be adequate for the company    
over the next two to three years.                                               

DSPT also owns a condominium located in Ann Arbor, Michigan.            

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MARKET FOR DSPT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                 

MARKET INFORMATION                                                      

   DSPT's common stock is currently traded on the Nasdaq National Market under
the symbol "DSPT." The following table sets forth, for the periods indicated,   
the high and low closing sales prices of the common stock as reported by the    
Nasdaq market.                                                                  

                                                        [Enlarge/Download Table]

                                                               YEAR ENDED            YEAR ENDED     
                                                            JANUARY 31, 1999      JANUARY 31, 1998  
                                                          --------------------  --------------------
                                                                                                    
                                                            HIGH        LOW       HIGH        LOW   
                                                          ---------  ---------  ---------  ---------
First Quarter............................................    10.625      8.000      6.375      5.375

Second Quarter...........................................    10.000      7.500      6.000      4.875

Third Quarter............................................     9.375      5.375     11.625      5.625

Fourth Quarter...........................................     7.938      6.50      11.938      8.000

HOLDERS                                                                 

   The approximate number of holders of record of DSPT's common stock at March
31, 1999 was 90. DSPT believes that these recordholders represent approximately 
1,050 beneficial owners.                                                        

DIVIDEND POLICY                                                         

   DSPT has never declared or paid dividends on its common stock. There are no
dividend restrictions in DSPT's bank line of credit.                            

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      
OPERATIONS                                                                  

RESULTS OF OPERATIONS                                                   

  The following table sets forth, for the indicated periods, the percentages
that certain items in the consolidated statements of income bear to net sales.  
The table and subsequent discussion should be read in conjunction with the      
consolidated financial statements and notes included elsewhere in this proxy    
statement/prospectus.                                                           

                                                        [Enlarge/Download Table]

                                                               YEAR ENDED JANUARY 31,        
                                                        -------------------------------------
                                                           1999         1998         1997    
                                                           -----        -----        -----   
                                                                                             
Net sales..............................................        100%         100%         100%
Gross profit...........................................         53           54           56 
Research and development expenses......................         11           11           12 
Marketing, general and administrative expenses.........         32           31           37 
Restructuring costs....................................          2           --           -- 
Operating income.......................................          9           12            7 
Net income.............................................          6            7            5 

 For accounting purposes, DSPT changed to a 52/53 week convention with the
fiscal year ending on the Sunday nearest the end of January effective on the    
fiscal year beginning February 1, 1997. However, for financial reporting        
purposes, each fiscal quarter or year is presented as if it ended on the last   
day of such period. The number of days covered in each year used in the         
period-to-period comparisons are essentially the same with 1999 and 1998 having 
364 days and 1997 having 366 days.                                              

    OVERVIEW.  One of the major trends occurring in the transportation industry,
DSPT's largest market, is that large customers are demanding custom turnkey     
solutions that require more complex integration services. DSPT believes that    
investments in this area are necessary to expand its share of the transportation
market. Starting in 1997, DSPT invested heavily in developing significant       
service capabilities in the areas of custom manufacturing, system integration,  
project engineering/management, installation and commissioning with the goal of 
becoming a full-service company capable of manufacturing and providing turnkey  
integration of its products. DSPT's turnkey solutions, which combine our        
products and integration services, have provided DSPT's growth in the last three
years.                                                                          

REVENUES AND SALES BACKLOG.  Revenues were $25,396,000, $22,038,000 and 
$17,987,000 in 1999, 1998 and 1997, respectively, with annual revenue growth of 
15% from 1998 to 1999 and 23% from 1997 to 1998. Revenue growth during 1999 and 
1998 was principally driven by several large orders, contracts greater than     
$1,000,000, for the transportation group turnkey RedLine data acquisition and   
control systems that increased sales backlogs to $9,500,000 at January 31, 1997 
and to $11,500,000 at January 31, 1998. In addition, the introduction of new    
products in the lab group slowed the decline in revenues for the lab group from 
1997 to 1998 and resulted in a slight increase from 1998 to 1999.               

Overall revenue growth slowed in 1999 and sales backlog decreased to    
$4,800,000 at January 31, 1999, as the total dollar amount of large orders for  
transportation group products dropped significantly in 1999 compared to 1998,   
primarily due to delays in budgetary approvals from several major customers, as 
well as the delay in the introduction of DSPT's new RedLine combustion product, 
Redline ADAPT-CAS. In addition, revenues and sales bookings from the Asian      
market for Transportation Group products fell dramatically, reflecting the      
economic conditions in that region.                                             

The revenue increase in 1997 compared to 1996 was principally due to    
continued increase in demand for the transportation group products and services 
associated with RedLine ADAPT-DAC.                                              

Product revenues amounted to $21,349,000, $19,114,000 and $16,154,000 in
1999, 1998 and 1997, respectively. Product revenues grew by 12% in 1999 from    
1998, and by 18% in 1998 and 1997. Product                                      

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revenue growth in 1999 and 1998 was primarily due to the large orders received  
for its turnkey solutions in 1998 and 1997. The decrease in the rate of product 
revenue growth experienced in 1999 is attributable to the factors described     
above.                                                                          

   Service revenues amounted to $4,047,000, $2,924,000 and $1,833,000 in 1999,
1998 and 1997, respectively. Service revenues grew by 38% in 1999 from 1998, and
by 59% in 1998 from 1997. Service revenues amounted to 16%, 13% and 10% of total
revenues in 1999, 1998 and 1997, respectively. The growth in service revenues in
all periods reflects an increase in integration services revenues as part of    
turnkey system solutions introduced in 1997 to fill the growing need from DSPT's
large transportation group customers. In addition, maintenance contracts and    
training services also increased as product revenues increased.                 

   GROSS PROFIT.  Gross profit percentage decreased to 53% in 1999 compared to
54% in 1998 and 56% in 1997. Gross profit percentage is subject to change due to
various factors, including variation in product mix, changes in component costs 
and revenue levels. As anticipated in 1999 and 1998, the decrease in gross      
profit percentages is a result of product mix shift towards lower margin        
transportation group turnkey RedLine systems. This shift in product mix         
decreased the gross profit percentage in the transportation group segment from a
high of 56% in 1997 to 52% in 1998 and 51% in 1999. These percentages were      
offset partially by the increasing gross profit margins for the lab group that  
went from 58% in 1997 to 62% in 1998 and 68% in 1999. The increase in margins in
the lab group was primarily due to a shift in product mix to higher margin new  
products.                                                                       

Information regarding gross margins related to product sales and service
sales are not provided separately as such information is not readily available  
from DSPT's management information system.                                      

RESEARCH AND DEVELOPMENT.  DSPT invests in new product and application  
developments in both the transportation group and lab group. The majority of the
research and development expenses in all the periods presented were for the     
transportation group which introduced several new products and enhancements     
during the last three years.                                                    

 Research and development expenses during the last three years remained at
11-12% of revenues. The increase in absolute dollars in 1999 compared to 1998   
was primarily due to the addition of engineering consultants in the short term  
to accelerate the completion of certain product development projects, including 
RedLine which was behind schedule. DSPT anticipates research and development    
expenses to continue to increase in absolute dollars as it continues to add     
personnel to staff its development projects. However, it is expected that       
research and development expenses will remain at approximately 11% of net sales.

MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES.  Marketing, general and 
administrative expenses increased in absolute dollar amounts by $1,095,000, or  
16% in 1999 from $6,916,000 in 1998. As a percentage of sales, these expenses   
increased slightly to 32% in 1999 compared to 31% in 1998. The increase in      
spending in 1999 compared to 1998 was due to increased sales and marketing      
expenses, including the hiring of additional marketing personnel and increased  
advertising and sales collateral budgets. These expenses were primarily incurred
to permit increased focus on industrial manufacturers and a broad range of      
transportation industry equipment suppliers. DSPT also increased trade show     
expenses to introduce new products and incurred higher administrative support   
costs in 1999.                                                                  

   Marketing, general and administrative expenses increased in absolute dollar
amounts by 3% in 1998 compared to 1997, and decreased as a percentage of sales  
to 31% in 1998 from 37% in 1997. The increase in absolute dollars was a result  
of DSPT hiring additional sales and applications personnel to address the       
increased level of sales opportunities primarily for turnkey systems. The       
decrease in the percentage of sales was a result of increased revenues.         

RESTRUCTURING COSTS.  On January 21, 1999, DSPT announced its strategic 
decision to relocate its corporate headquarters to, and consolidate its         
transportation group operations in, Ann Arbor, Michigan                         

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in order to allow efficient operation of the transportation group, its largest  
and most profitable business segment. DSPT recorded a one-time, pre-tax         
restructuring charge of $496,000 in the fourth quarter of 1999 which consists of
$306,000 in severance pay and $190,000 in estimated idle facility and winding   
down costs.                                                                     

  DSPT expects that after the move and consolidation is complete sometime in
fiscal 2000, earnings will benefit from a lower cost structure and improved     
operating efficiencies. Manufacturing, sales and service for the transportation 
group will be consolidated with corporate headquarters into a single,           
company-owned facility in Ann Arbor.                                            

    OTHER INCOME.  Other income, net of interest expense in 1999 was essentially
unchanged at $221,000 compared to $225,000 in 1998, and increased from $123,000 
in 1997. On average, DSPT had much higher available cash to invest or to take   
advantage of vendor early payment discounts in 1999 and 1998 than in 1997.      

   INCOME TAXES.  The effective tax rate computed for 1999 was 37% compared to
40% in 1998 and 33% in 1997. The lower tax rate in 1999 versus 1998 reflect     
primarily the higher research and development credits and lower state tax rates.

   The higher tax rate in 1998 compared to 1997 reflect 1998's higher domestic
income contribution, higher state income taxes and lower research and           
development tax credits compared to 1997. Domestic tax rates historically have  
been higher than DSPT's foreign subsidiary's tax rates.                         

  Factors that may affect the tax rates include research and development tax
credits, differences in state tax rates, software capitalization levels and     
foreign income contributions.                                                   

NET INCOME.  As a result of the factors discussed above, net income     
decreased in absolute dollars to $1,582,000, or $.64 per diluted share in 1999, 
from $1,646,000, or $.68 per diluted share in 1998. 1997 net income was         
$914,000, or $.40 per diluted share.                                            

LIQUIDITY AND CAPITAL RESOURCES                                         

CASH FLOWS.  During 1999, operating activities used $724,000 of cash,   
compared with cash generated of $3,915,000 and $929,000 in 1998 and 1997,       
respectively. The cash used in 1999 for operating activities was largely due to 
the application of customer prepayments against receivables and to increased    
accounts receivable brought about primarily by high shipments in the last month 
of the year end. The major uses of cash in investing and financing activities   
included additions to property and equipment, investment in software development
and the repurchase of DSPT's common stock on the open market.                   

    Capital expenditures for property and equipment additions totaled $1,743,000
in 1999, $407,000 in 1998, and $1,015,000 in 1997. Major capital expenditures in
1999 included the purchase of land for the Ann Arbor building site and          
construction-in-progress costs for the new 57,200 square foot facility. DSPT    
purchased the land late in the second quarter of 1999 in anticipation of growth 
over the next three to five years. Due to the rising building lease costs in the
Ann Arbor, Michigan area, DSPT found that it would cost less to own its own     
facility. Building construction costs along with furniture, fixtures and        
equipment is currently estimated at $4,600,000. DSPT anticipates that the       
construction and eventual mortgage of the building will be financed through the 
Michigan Strategic Fund industrial bond financing. In August 1998, the Michigan 
Strategic Fund adopted an inducement resolution for a loan not to exceed        
$5,900,000 for DSPT. The bond issuance is pending negotiations between DSPT,    
Michigan Strategic Fund and DSPT's bank. As part of the financing, DSPT's bank  
will be expected to issue a letter of credit and will require a guarantee from  
MTS. DSPT expects the financing to be completed in May 1999.                    

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DSPT has secured a building contractor to build the first phase on the  
property, and began construction of the first phase in February 1999. Based on  
DSPT's current growth plans, DSPT believes that the building site is sufficient 
to allow DSPT to grow over the next three to five years.                        

  SHARE REPURCHASE PLAN.  In May 1998, DSPT announced plans to repurchase up
to 225,000 shares of its outstanding common stock, which represents             
approximately 10% of its shares, at prevailing market prices because it deemed  
the repurchase a good investment. DSPT terminated the repurchase plan in March  
1999 in connection with the board of directors' approval of the proposed merger 
between DSPT and MTS. As of January 31, 1999, the DSPT had repurchased          
approximately 51,000 shares on the open market for an aggregate amount of       
$397,000, or $7.72 per share. As a result of the small number of shares of      
repurchased common stock through January 31, 1999, the repurchase had minimal   
effect on net income per share. DSPT made no further common stock repurchases   
after January 31, 1999.                                                         

   FOREIGN CURRENCIES.  DSPT denominates substantially all of its transactions
in U.S. currency other than transactions by its foreign subsidiary. The assets  
and liabilities of the Company's foreign subsidiary is denominated in the       
country's local currency and translated at the year-end rate of exchange. The   
related income statement items are translated at the average rate of exchange   
for the year. The resulting translation adjustments are excluded from income and
reflected as a separate component of shareholders' equity. Realized and         
unrealized exchange gains or losses arising from transaction adjustments are    
reflected in operations and are not material.                                   

WORKING CAPITAL.  Working capital at January 31, 1999 was $8,276,000    
compared to $8,173,000 at the beginning of the fiscal year, while the current   
ratios stood at 2.8 to 1.0 at January 31, 1999 and at 2.5 to 1.0 at January 31, 
1998. DSPT has a $4,000,000 secured bank line of credit with no balance         
outstanding at January 31, 1999. DSPT currently anticipates that internally     
generated funds, bank borrowings and anticipated revenue bonds will be          
sufficient to satisfy its anticipated operating needs over the foreseeable      
future.                                                                         

  Management believes that inflation has not had a material effect on DSPT's
operations or financial condition.                                              

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK              

   DSPT management believes that the market risk associated with DSPT's market
risk sensitive instruments as of January 31, 1999 is not material, and          
therefore, disclosure is not required.                                          

YEAR 2000 COMPLIANCE                                                    

DSPT has an informal initiative in place to address Year 2000 issues and
risks. The five elements of the initiative can be summarized as follows:        

- product readiness;                                                    

- internal infrastructure readiness;                                    

- facilities readiness;                                                 

- supplier and vendor readiness; and                                    

- DSPT's contingency plan.                                              

  PRODUCT READINESS.  DSPT's products perform functions related to acquiring
data from tests of other companies' products and do not perform date            
calculations and, therefore DSPT does not consider Year 2000 issues and risks   
related to its products to be significant. All products sold by DSPT since the  
beginning of calendar 1998 have been tested by DSPT and determined to be Year   
2000 compliant. DSPT has contacted all of its significant customers and informed
them that prior versions of                                                     

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DSPT products may not be Year 2000 compliant. Customers with earlier versions of
DSPT products, other than some former DSPT products which are obsolete, may     
upgrade at the cost of an annual maintenance contract to assure compliance.     

INTERNAL INFRASTRUCTURE READINESS.  DSPT has also reviewed its internal 
management information systems, billing, outside payroll and other information  
service functions critical to its operations and determined the nature and      
extent of any Year 2000 issues related to such functions. DSPT's management     
information systems, billing and outside payroll systems are run on software    
provided by third party vendors. DSPT has obtained certifications from each of  
such vendors that those systems have been tested and are Year 2000 compliant.   
DSPT has a small number of noncompliant personal computers which will be phased 
out of use during DSPT's consolidation of the transportation group to Ann Arbor.

FACILITIES READINESS.  DSPT has conducted a limited review of its       
facilities, including air conditioning, heating and other facilities related    
systems, and has determined that its facilities are not Year 2000 compliant.    
DSPT's California lease expires at the end of July 1999 and DSPT will relocate  
the remaining operations being conducted in Fremont, California to a new        
facility in the same area. DSPT expects to consolidate all of its operations in 
Michigan into a new company-owned facility before the end of calendar 1999. As a
term and condition to entering into any new lease or building construction, DSPT
is requiring its lessor/building contractor to certify that the premises are    
Year 2000 compliant.                                                            

SUPPLIER AND VENDOR READINESS.  DSPT does not have any formal plan for  
addressing Year 2000 compliance with its suppliers and vendors. DSPT has        
received voluntary certification of Year 2000 compliance from many of its       
existing suppliers and vendors who are critical to DSPT's operations. DSPT is in
the process of selecting new suppliers of most components and new assembly      
houses for transportation group products as a result of the consolidation of its
transportation group operations in Ann Arbor, Michigan. DSPT has made the       
receipt of Year 2000 compliance certification a term and condition of entering  
into any new relationship with suppliers and vendors. DSPT intends to seek      
certification of Year 2000 compliance from any remaining existing suppliers and 
vendors critical to its operations beginning in May or June, 1999. DSPT expects 
to concentrate on its suppliers of circuit boards, limited source vendors and   
outside assembly houses for such third party products. DSPT expects to have the 
supplier/vendor certification project complete by the fall of 1999.             

    CONTINGENCY PLANNING.  DSPT does not consider the risks associated with Year
2000 issues to be significant to DSPT. DSPT has begun outlining the measures    
that it can take in January 2000 to minimize any Year 2000 related problems.    
Such measures include the following:                                            

- developing alternate supplier relationships;                          

- stocking critical inventory items; and                                

- stocking critical alternate parts and components.                     

DSPT has also done the following with respect to Year 2000 issues and   
compliance: notified its significant customers regarding the need to update     
DSPT's older products for Year 2000 compliance; determined a course of action   
for phasing out noncompliant end user computers; and implemented policies       
regarding Year 2000 compliance with new suppliers and vendors and new landlords.
DSPT also expects to implement a more formal policy with respect to existing    
suppliers and vendors who are critical to its operations. DSPT's costs to date  
in addressing Year 2000 issues have not been significant, and DSPT expects that 
any future costs will be immaterial.                                            

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PRINCIPAL STOCKHOLDERS                                                          

   The following table sets forth certain information as of February 26, 1999,
with respect to the beneficial ownership of DSPT's common stock by (1) all      
persons known by DSPT to be the beneficial owners of more than 5% of the        
outstanding common stock of DSPT, (2) each director of DSPT, (3) the Chief      
Executive Officer and the three other executive officers of DSPT as of January  
31, 1999 whose salary and bonus for the year ended January 31, 1999 exceeded    
$100,000, and (4) all executive officers and directors of DSPT as a group:      

                                                        [Enlarge/Download Table]

                                                                                                SHARES OWNED(2)       
                                                                                            ------------------------  
                                                                                             NUMBER OF   PERCENTAGE   
NAME AND ADDRESS OF BENEFICIAL OWNERS(1)                                                      SHARES      OF CLASS    
------------------------------------------------------------------------------------------  -----------  -----------  
                                                                                                                      
FEV Motorentechnik GmbH & Co. KG..........................................................     285,000(3)      12.71% 
  Neuenhostrasse 181                                                                                                  
  52078 Aachen, Germany                                                                                               

FMR Corp..................................................................................     224,100(4)       9.99% 
  82 Devonshire Street                                                                                                
  Boston, MA 02109                                                                                                    

Kennedy Capital Management, Inc...........................................................     138,000(5)       6.15% 
  10829 Olive Blvd.                                                                                                   
  St. Louis, MO 63141                                                                                                 

F. Gil Troutman, Jr.......................................................................     116,666(6)       5.09% 

Alan S. Broad.............................................................................      96,868(7)       4.27% 

J. Scott Kamsler..........................................................................      61,200(8)       2.72% 

Howard O. Painter, Jr.....................................................................      79,000(9)       3.49% 

Jose M. Millares, Jr......................................................................      38,666(10)       1.70%

Michael Ford..............................................................................      21,000(11)      *     

Larry Moulton.............................................................................      19,032(12)      *     

Executive officers and directors as a group (seven persons)...............................     432,432(13)      17.88%

------------------------                                                        

*   Less than 1%                                                                

(1) Except as otherwise indicated, the address of each beneficial owner is c/o  
DSP Technology Inc., 48500 Kato Road, Fremont, California 94538-7338.   

(2) Except as indicated in the footnotes to this table, the persons named in the
 table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them, subject to community  
property laws, where applicable.                                        

(3) According to a Schedule 13D filed with the Securities and Exchange          
  Commission on June 8, 1998, FEV has sole voting power and sole dispositive
power with respect to the 285,000 shares of the DSPT's common stock.    

(4) According to a Schedule 13G/A filed with the Securities and Exchange        
   Commission on January 7, 1999, all 224,100 shares are beneficially owned by
FMR Corp. through its wholly-owned subsidiary, Fidelity Management &    
Research Company, "Fidelity", which is deemed to beneficially own such  
   shares as a result of acting as an investment advisor to various investment
   companies registered under Section 8 of the Investment Company Act of 1940,
 the "Funds". The ownership of one investment company, Fidelity Low-Priced
Stock Fund, amounts to 224,100 shares of DSPT's common stock. Edward C. 
Johnson 3d, Chairman of FMR Corp., FMR Corp., through its control       

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    of Fidelity, and the Funds each has the sole power to dispose of the 224,100
 shares owned by the Funds. Neither FMR Corp. nor Edward C. Johnson 3d has
   the sole power to vote or direct the voting of the shares owned directly by
  the Funds, which power resides with the Funds' board of trustees. Fidelity
    carries out the voting of the shares under written guidelines established by
 the Funds' board of trustees. Members of the Edward C. Johnson 3d family,
through their ownership of voting common stock of FMR Corp. and their   
execution of a stockholder's voting agreement, may be deemed, under the 
   Investment Company Act of 1940, to form a controlling group with respect to
FMR Corp., and may therefore be deemed to beneficially own the shares of
DSPT's stock beneficially owned by FMR Corp.                            

(5) According to a Schedule 13G filed with the Securities and Exchange          
    Commission on February 5, 1999, all 138,000 shares are beneficially owned by
 Kennedy Capital Management, Inc. which is deemed to beneficially own such
  shares as a result of acting as an investment advisor to various companies
    registered under Section 203 of the Investment Advisers Act of 1940. Kennedy
 Capital is deemed to have the sole power to vote or to direct the vote of
 126,100 of the 138,000 shares beneficially owned. Kennedy Capital has the
sole power to dispose or to direct the disposition of 138,000 shares.   

(6) Includes 51,666 shares subject to stock options exercisable within 60 days  
of February 26, 1999.                                                   

(7) Includes 24,832 shares subject to stock options exercisable within 60 days  
of February 26, 1999.                                                   

(8) Includes 9,000 shares subject to stock options exercisable within 60 days of
February 26, 1999.                                                      

(9) Includes 24,000 shares subject to stock options exercisable within 60 days  
of February 26, 1999.                                                   

(10) Includes 28,166 shares subject to stock options exercisable within 60 days 
of February 26, 1999.                                                   

(11) Includes 21,000 shares subject to stock options exercisable within 60 days 
of February 26, 1999.                                                   

(12) Includes 17,832 shares subject to stock options exercisable within 60 days 
of February 26, 1999.                                                   

(13) Includes 176,496 shares subject to stock options exercisable within 60 days
of February 26, 1999.                                                   

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EXECUTIVE COMPENSATION AND OTHER MATTERS                                        

 The following table sets forth information concerning the compensation of
Mr. F. Gil Troutman, Jr., the President and Chief Executive Officer of DSPT, for
services in all capacities to the company, during the fiscal years ended January
31, 1999, 1998 and 1997. Mr. Troutman will serve as a Vice President of MTS     
following the merger.                                                           

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                                                           LONG-TERM   
                                                                                                         COMPENSATION  
                                                                                                            AWARDS     
                                                                                  ANNUAL COMPENSATION   ---------------
                                                                                 ---------------------    SECURITIES   
                                                                                                          UNDERLYING   
NAME AND PRINCIPAL POSITION                                             YEAR       SALARY      BONUS        OPTIONS    
--------------------------------------------------------------------  ---------  ----------  ---------  ---------------
                                                                                                                       
F. Gil Troutman, Jr.................................................       1999  $  192,046  $       0         5,000   
Chief Executive Officer and President                                      1998  $  173,076  $  51,000                 
                                                                           1997  $  175,448  $       0                 

STOCK OPTION INFORMATION                                                

    The following table sets forth certain information with respect to grants of
options to purchase DSPT's common stock made during the fiscal year ended       
January 31, 1999 to Mr. Troutman:                                               

OPTION GRANTS IN LAST FISCAL YEAR 

                                                        [Enlarge/Download Table]

                                                                                                     POTENTIAL REALIZABLE
                                                                                                       VALUE AT ASSUMED  
                                                             % OF TOTAL                                ANNUAL RATES OF   
                                               NUMBER OF       OPTIONS                                   STOCK PRICE     
                                              SECURITIES     GRANTED TO     EXERCISE                   APPRECIATION FOR  
                                              UNDERLYING      EMPLOYEES      OR BASE                    OPTION TERM(3)   
                                                OPTIONS       IN FISCAL       PRICE     EXPIRATION   --------------------
NAME                                          GRANTED(1)        YEAR        ($/SH)(2)      DATE         5%         10%   
-------------------------------------------  -------------  -------------  -----------  -----------  ---------  ---------
                                                                                                                         
F. Gil Troutman............................        5,000            5.6%    $   8.125      2/22/08   $  25,548  $  64,746

------------------------                                                        

(1) Options granted during fiscal 1999 under DSPT's 1991 Stock Option Plan      
  generally vest in equal annual amounts over a three-year period; provided,
however, no option may be exercised in whole or in part until six months
after the date of grant.                                                

(2) The option was granted at fair market value on the date of grant.           

(3) Potential gains are net of exercise price, but before taxes associated with 
exercise. These amounts represent certain assumed rates of appreciation 
  only, based on the Securities and Exchange Commission rules. Actual gains,
    if any, on stock option exercises are dependent on the future performance of
    the common stock, overall market conditions and the optionholder's continued
    employment throughout the vesting period. The amounts reflected in the table
  may not necessarily be achieved. One share of stock purchased at $8.125 in
fiscal 1999 would yield profits of approximately $5.11 per share at 5%  
appreciation over ten years, or approximately $12.95 per share at 10%   
appreciation over the same period.                                      

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 The following table provides specified information concerning unexercised
options held as of January 31, 1999 by Mr. Troutman. Mr. Troutman did not       
exercise any options during the year ended January 31, 1999.                    

FISCAL YEAR-END OPTION VALUES 

                                                        [Enlarge/Download Table]

                                                  NUMBER OF SECURITIES          VALUE OF UNEXERCISED     
                                                 UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS     
                                               OPTIONS AT FISCAL YEAR END        AT FISCAL YEAR END      
                                              ----------------------------  ---------------------------- 
NAME                                          EXERCISABLE(1) UNEXERCISABLE  EXERCISABLE(2)  UNEXERCISABLE
--------------------------------------------  -------------  -------------  -----------  --------------- 
                                                                                                         
F. Gil Troutman, Jr.........................       51,666          3,334     $ 219,400      $       0    

------------------------                                                        

(1) Options granted during fiscal 1999 under DSPT's 1991 Stock Option Plan      
  generally vest in equal annual amounts over a three-year period; provided,
however, no option may be exercised in whole or in part until six months
after the date of grant.                                                

(2) Based on the closing price of $6.938, as reported on the Nasdaq National    
Market, on January 29, 1999, less the exercise price.                   

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INFORMATION WITH RESPECT TO MTS 

AGREEMENT WITH FEV                                                              

   On March 21, 1999, MTS entered into a reciprocal distribution and licensing
agreement with FEV Motorentechnik GmbH, DSPT's strategic alliance partner, and  
DSPT. This agreement will become effective only upon the closing of the merger  
and will supersede the current strategic alliance agreement between FEV and DSPT
if the merger is consummated. It provides for the reciprocal distribution by MTS
and DSPT, as a group, and FEV of engine testing instruments and systems         
developed and produced by the other party within certain designated geographical
territories. The agreement also provides for the licensing of specified products
by each party to the other for manufacture and distribution by the licensee     
within its territory. In addition, FEV agreed that, pending the consummation of 
the merger, it will not be deemed a "competitor" for purposes of the existing   
strategic alliance agreement.                                                   

   MTS considers this new agreement with FEV to be an important alliance which
will provide an opportunity to increase the speed of customers' engine design   
processes. It also believes that the agreement will link MTS' mechanical and    
systems skills, DSPT's data acquisition and analysis strengths and FEV's engine 
design capabilities.                                                            

BACKLOG                                                                         

   On January 25, 1999, MTS issued a press release announcing that, due to the
timing of customer deliveries in its backlog, MTS is projecting lower revenue   
than planned in the near term. MTS expects that this projection is likely to    
reduce net income in MTS' second fiscal quarter of 1999 to a level only slightly
better than the results of its first fiscal quarter for the same year. MTS      
expects, however, to recover this projected earnings shortfall in the second    
half of its current fiscal year.                                                

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COMPARISON OF RIGHTS OF HOLDERS OF MTS COMMON STOCK 
AND HOLDERS OF DSPT COMMON STOCK

DESCRIPTION OF MTS CAPITAL STOCK                                                

The following describes of the material provisions of the articles of   
incorporation and bylaws of MTS. MTS' articles of incorporation and bylaws are  
included as exhibits to the documents incorporated by reference registration    
statement of which this proxy statement/prospectus is a part.                   

MTS COMMON STOCK                                                        

    MTS is authorized to issue 64,000,000 shares of common stock, par value $.25
per share. As of December 31, 1998, there were 18,626,853 shares of MTS common  
stock issued and outstanding and approximately 1,760 holders of record of MTS   
common stock. The holders of MTS common stock are entitled to one vote for each 
share of common stock held on all matters submitted to a vote of shareholders   
and have cumulative voting rights in the election of directors. The holders of  
MTS common stock are entitled to receive ratably such dividends, if any, as may 
be declared by the MTS board of directors out of legally available funds. In the
event of liquidation, dissolution or winding up of MTS, the holders of MTS      
common stock are entitled to share ratably in all assets of MTS. The holders of 
MTS common stock have no preemptive, subscription, redemptive or conversion     
rights. The outstanding shares are fully paid and nonassessable.                

TRANSFER AGENT AND REGISTRAR                                            

 The transfer agent and registrar for the MTS common stock is Norwest Bank
Minnesota, N.A.                                                                 

COMPARATIVE RIGHTS OF MTS AND DSPT STOCKHOLDERS                                 

If the merger is consummated, the stockholders of DSPT will become      
shareholders of MTS. The rights of the shareholders of MTS are governed by MTS' 
amended and restated articles of incorporation, as amended, its bylaws and the  
Minnesota Business Corporation Act. The rights of the stockholders of DSPT are  
governed by DSPT's certificate of incorporation, its bylaws and the Delaware    
General Corporation Law. The following is a brief summary of the primary        
differences between the rights of MTS shareholders and the rights of DSPT       
stockholders.                                                                   

CLASSIFICATION, REMOVAL AND ELECTION OF DIRECTORS                       

The bylaws of MTS and DSPT provide that the number of directors of both 
companies is determined by resolution of their respective boards of directors.  
Newly created MTS directorships resulting from an increase in the authorized    
number of directors may be filled by a two-thirds vote of the directors then in 
office and any vacant directorships may be filled by a majority of the directors
then in office. Newly created and vacant DSPT directorships may be filled by a  
majority of the directors then in office. Any director of either company may be 
removed, with or without cause, by the holders of a majority of the shares      
entitled to vote at an election of directors. Neither MTS' articles of          
incorporation nor DSPT's certificate of incorporation provide for a classified  
board of directors.                                                             

VOTING RIGHTS                                                           

MTS' and DSPT's governing documents both provide for cumulative voting  
rights in the election of directors.                                            

    Cumulative voting permits the holder of each share of stock entitled to vote
in the election of directors to cast that number of votes which equal the number
of directors to be elected. The holder may allocate all votes represented by a  
share to a single candidate or may allocate those votes among                   

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as many candidates as he chooses. Thus, a shareholder with a significant        
minority percentage of the outstanding shares may be able to elect one or more  
directors if voting is cumulative.                                              

PREFERRED STOCK                                                         

   DSPT's certificate of incorporation provides that shares of preferred stock
may be issued with terms, preferences and rights determined by DSPT's board of  
directors without stockholder approval. MTS is not authorized to issue preferred
stock.                                                                          

STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS                      

Neither MTS' nor DSPT's governing documents contain any provisions that 
would require greater than a majority of its respective stockholders to approve 
mergers, consolidations, sales of a substantial amount of assets or other       
similar transactions.                                                           

RIGHT TO CALL SPECIAL MEETING OF STOCKHOLDERS                           

    Under MTS' and DSPT's bylaws, special meetings of stockholders may be called
by the board of directors, the chairman of the board, or holders of 10% or more 
of the outstanding voting power. MTS' bylaws also require the secretary of the  
company to call a special meeting upon the written request of two or more       
directors.                                                                      

ADVANCE NOTICE OF STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS        

Under MTS' and DSPT's bylaws, advance notice is required of stockholder 
proposals or director nominations to be considered at a meeting of the          
stockholders.                                                                   

ACTION BY WRITTEN CONSENT                                               

 Minnesota law provides that any action of the shareholders of a Minnesota
corporation may be taken without a meeting if a written consent is signed by all
of the holders of outstanding voting stock of the corporation. DSPT's bylaws    
provide that any action of its stockholders may be taken without a meeting,     
without prior notice and without a vote, if a written consent is signed by the  
holders of outstanding stock having the minimum number of votes that would be   
necessary to authorize or take the action at a stockholder meeting. Prompt      
notice of the taking of any corporate action without a meeting by less than     
unanimous consent shall be given to those DSPT stockholders who have not        
consented in writing.                                                           

AMENDMENT OF GOVERNING DOCUMENTS                                        

 Minnesota law provides that an amendment to the articles of incorporation
requires the affirmative vote of the holders of a majority of the shares present
and entitled to vote unless a larger affirmative vote is required by the        
corporation's articles. MTS' articles of incorporation do not contain any       
provisions that require a larger affirmative vote in order to amend its         
articles.                                                                       

   Delaware law provides that an amendment to the certificate of incorporation
requires the affirmative vote of the holders of a majority of the shares        
entitled to vote unless the corporation's certificate requires a greater or     
lesser number for approval. DSPT's certificate of incorporation does not contain
any provision requiring a different number for approval.                        

    The MTS bylaws provide that the MTS board of directors has the power to make
and alter the bylaws, subject to the power of the MTS shareholders to change or 
repeal the bylaws.                                                              

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  The DSPT bylaws provide that the DSPT board of directors have the power to
alter, amend or repeal the bylaws, subject to the power of the DSPT stockholders
to alter, amend repeal or replace the bylaws.                                   

BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITIONS                    

   MTS is governed by Sections 302A.671 and 302A.673 of the Minnesota Business
Corporation Act. In general, Section 302A.671 provides that the shares of a     
corporation acquired in a "control share acquisition" have no voting rights     
unless voting rights are approved in a prescribed manner. A control share       
acquisition is an acquisition, of beneficial ownership of shares that would,    
when added to all other shares beneficially owned by the acquiring person,      
entitle the acquiring person to have voting power of 20% or more in the election
of directors. In general, Section 302A.673 prohibits a public Minnesota         
corporation from engaging in a "business combination" with an "interested       
shareholder" for a period of four years after the date of the transaction in    
which the person became an interested shareholder, unless the business          
combinations in approved in a prescribed manner. A business combination includes
any merger, asset sale or other transaction resulting in a financial benefit to 
the interested shareholder. An interested shareholder is a person who is the    
beneficial owner of 10% or more of the corporation's voting stock or who is an  
affiliate or associate of the corporation and at any time within four years     
prior to the date in question was the beneficial owner of 10% or more of the    
corporation's voting stock. These provisions of the Minnesota law could delay,  
defer or prevent a change in control of MTS.                                    

Section 203 of the Delaware General Corporation Act provides that a     
corporation may not engage in any business combination with any interested      
stockholder for a period of three years following the date that such shareholder
became an interested stockholder unless                                         

- prior to the date the stockholder became an interested stockholder the
   board of directors approved the business combination or the transaction
 which resulted in the stockholder becoming an interested stockholder;

- upon consummation of the transaction which resulted in the stockholder
   becoming an interested stockholder, the interested stockholder owned at
    least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding, those shares owned by persons who are 
   directors and also officers and shares owned by employee stock plans in
which employee participants do not have the right to determine      
      confidentially whether shares held subject to the plan will be tendered in
a tender or exchange offer; or                                      

- the business combination is approved by the board of directors and    
    authorized by 66 2/3% of the outstanding voting stock which is not owned
     by the interested stockholder. An interested stockholder means any person
      that is the owner of 15% or more of the outstanding voting stock; however,
      the statute provides for certain exceptions to parties who otherwise would
be designated interested stockholders.                              

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EXPERTS 

  The audited consolidated financial statements and schedule incorporated by
reference in this proxy statement/prospectus and elsewhere in the registration  
statement have been audited by Arthur Andersen LLP, independent public          
accountants, as indicated in their reports dated November 20, 1998 with respect 
thereto and are included in this proxy statement/prospectus and registration    
statement in reliance upon the authority of said firm as experts in giving said 
reports.                                                                        

   The consolidated financial statements of DSPT included herein as of January
31, 1999 and 1998 and for each of the three years in the period ended January   
31, 1999 have been audited by Grant Thornton LLP, independent public            
accountants, as set forth in their report thereon included in this proxy        
statement/prospectus and registration statement.                                

LEGAL MATTERS 

The validity of the MTS common stock to be issued in the merger has been
passed upon for MTS by Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota. The 
tax consequences of the merger have been passed upon for MTS by Lindquist &     
Vennum P.L.L.P., Minneapolis, Minnesota and for DSPT by Gray Cary Ware &        
Freidenrich LLP, Palo Alto, California. Patrick Delaney, a partner in Lindquist 
& Vennum P.L.L.P., is the Secretary of MTS.                                     

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DSP TECHNOLOGY INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements

                                                        [Enlarge/Download Table]

                                                                                                              PAGE   
                                                                                                            ---------
                                                                                                                     
Report of Independent Certified Public Accountants.........................................................       F-2

Consolidated Balance Sheets................................................................................       F-3

Consolidated Statements of Income..........................................................................       F-4

Consolidated Statement of Stockholders' Equity.............................................................       F-5

Consolidated Statements of Cash Flows......................................................................       F-6

Notes to Consolidated Financial Statements.................................................................       F-7

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of DSP Technology Inc.:              

We have audited the accompanying consolidated balance sheets of DSP     
Technology Inc. and subsidiaries as of January 31, 1999 and 1998, and the       
related consolidated statements of income, stockholders' equity and cash flows  
for each of the three years in the period ended January 31, 1999. These         
financial statements are the responsibility of the Company's management. Our    
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of DSP Technology 
Inc. and subsidiaries as of January 31, 1999 and 1998, and the consolidated     
results of their operations and their consolidated cash flows for each of the   
three years in the period ended January 31, 1999, in conformity with generally  
accepted accounting principles.                                                 

/s/ GRANT THORNTON LLP                                                          
GRANT THORNTON LLP                                                              
San Jose, California                                                            
March 12, 1999, except for Note N as to                                         
which the date is March 23, 1999                                            

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DSP TECHNOLOGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                               JANUARY 31,     
                                                                           --------------------
                                                                             1999       1998   
                                                                           ---------  ---------
                                                                                               
ASSETS                                                                                         
Current assets:                                                                                
  Cash and cash equivalents............................................... $   1,432  $   4,701
  Accounts receivable, net of allowance for doubtful accounts of $185 in                       
    1999 and $150 in 1998.................................................     7,122      5,581
  Inventories.............................................................     3,052      2,682
  Deferred income taxes...................................................       808        577
  Prepaid expenses and other..............................................       334        216
                                                                           ---------  ---------
    Total current assets..................................................    12,748     13,757
Property and equipment, net...............................................     2,557      1,341
Other assets..............................................................     1,763      1,632
                                                                           ---------  ---------
                                                                           $  17,068  $  16,730
                                                                           ---------  ---------
                                                                           ---------  ---------

LIABILITIES AND STOCKHOLDERS' EQUITY                                                           
Current liabilities:                                                                           
  Accounts payable........................................................ $     906  $     687
  Accrued liabilities.....................................................     2,621      3,755
  Income taxes payable....................................................       945      1,142
                                                                           ---------  ---------
    Total current liabilities.............................................     4,472      5,584

Deferred income taxes.....................................................       580        489

Commitments...............................................................        --         --

Stockholders' equity:                                                                          
  Preferred stock; 2,500,000 shares authorized; none issued...............        --         --
  Common stock; 25,000,000 shares authorized, $.001 par value; shares                          
    issued and outstanding: 2,241,579 in 1999 and 2,264,860 in 1998.......     3,057      3,301
  Retained earnings.......................................................     8,920      7,338
  Accumulated other comprehensive income..................................        39         18
                                                                           ---------  ---------
    Total stockholders' equity............................................    12,016     10,657
                                                                           ---------  ---------
                                                                           $  17,068  $  16,730
                                                                           ---------  ---------
                                                                           ---------  ---------

The accompanying notes are an integral part of these financial statements 

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.                                                                             

DSP TECHNOLOGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME 

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                                                       YEAR ENDED JANUARY 31,     
                                                                   -------------------------------
                                                                     1999       1998       1997   
                                                                   ---------  ---------  ---------
                                                                                                  
Net sales                                                                                         
  Products.......................................................  $  21,349  $  19,114  $  16,154
  Services.......................................................      4,047      2,924      1,833
                                                                   ---------  ---------  ---------
                                                                      25,396     22,038     17,987

Cost of sales....................................................     11,847     10,227      7,842
                                                                   ---------  ---------  ---------
  Gross profit...................................................     13,549     11,811     10,145
Operating expenses:                                                                               
  Research and development.......................................      2,765      2,352      2,203
  Marketing, general and administrative..........................      8,011      6,916      6,708
  Restructuring costs............................................        496         --         --
                                                                   ---------  ---------  ---------
                                                                      11,272      9,268      8,911
                                                                   ---------  ---------  ---------
  Operating income...............................................      2,277      2,543      1,234
Other income, net................................................        221        225        123
                                                                   ---------  ---------  ---------
  Income before income taxes.....................................      2,498      2,768      1,357
Income taxes.....................................................        916      1,122        443
                                                                   ---------  ---------  ---------
  Net income.....................................................  $   1,582  $   1,646  $     914
                                                                   ---------  ---------  ---------
                                                                   ---------  ---------  ---------
Net income per share:                                                                             
  Basic..........................................................  $     .70  $     .74  $     .42
                                                                   ---------  ---------  ---------
                                                                   ---------  ---------  ---------
  Diluted........................................................  $     .64  $     .68  $     .40
                                                                   ---------  ---------  ---------
                                                                   ---------  ---------  ---------
Weighted average shares used in computing basic net income per                                    
  share..........................................................      2,253      2,211      2,168
                                                                   ---------  ---------  ---------
                                                                   ---------  ---------  ---------
Weighted average shares and equivalents used in computing diluted                                 
  net income per share...........................................      2,479      2,437      2,304
                                                                   ---------  ---------  ---------
                                                                   ---------  ---------  ---------

The accompanying notes are an integral part of these financial statements.

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DSP TECHNOLOGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                               ACCUMULATED                               
                                                          COMMON STOCK            OTHER                        TOTAL     
                                                      --------------------    COMPREHENSIVE     RETAINED    STOCKHOLDERS'
                                                       SHARES     AMOUNT         INCOME         EARNINGS       EQUITY    
                                                      ---------  ---------  -----------------  -----------  ------------ 
                                                                                                                         
Balance at January 31, 1996..........................     2,154  $   2,920                      $   4,778    $    7,698  
Comprehensive income:                                                                                                    
  Foreign currency translations......................                                   7                             7  
  Net income.........................................                                                 914           914  
                                                                                                            ------------ 
Comprehensive income.................................                                                               921  
Exercise of stock options............................        26         68                                           68  
                                                      ---------  ---------            ---      -----------  ------------ 
Balance at January 31, 1997..........................     2,180  $   2,988      $       7       $   5,692    $    8,687  
                                                      ---------                                                          
                                                      ---------                                                          
Comprehensive income:                                                                                                    
  Foreign currency translations......................                                  11                            11  
  Net income.........................................                                               1,646         1,646  
                                                                                                            ------------ 
Comprehensive income.................................                                                             1,657  
Exercise of stock options............................        85        313                                          313  
                                                      ---------  ---------            ---      -----------  ------------ 
Balance at January 31, 1998..........................     2,265  $   3,301      $      18       $   7,338    $   10,657  
                                                      ---------                                                          
                                                      ---------                                                          
Comprehensive income:                                                                                                    
  Foreign currency translations......................                                  21                            21  
  Net income.........................................                                               1,582         1,582  
                                                                                                            ------------ 
Comprehensive income.................................                                                             1,603  
Exercise of stock options............................        28         99                                           99  
Repurchase of common stock...........................       (51)      (397)                                        (397) 
Compensation charge from nonqualified stock                                                                              
  options............................................                   54                                           54  
                                                      ---------  ---------            ---      -----------  ------------ 
Balance at January 31, 1999..........................     2,242  $   3,057      $      39       $   8,920    $   12,016  
                                                      ---------  ---------            ---      -----------  ------------ 
                                                      ---------  ---------            ---      -----------  ------------ 

The accompanying notes are an integral part of this financial statement.

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DSP TECHNOLOGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                                        YEAR ENDED JANUARY 31,      
                                                                                    ------------------------------- 
                                                                                                                    
                                                                                      1999       1998       1997    
                                                                                    ---------  ---------  --------- 
Increase (Decrease) in Cash and Cash Equivalents                                                                    
Cash flows from operating activities:                                                                               
  Net income....................................................................... $   1,582  $   1,646  $     914 
  Adjustments to reconcile net income to net cash provided by (used in) operating                                   
    activities:                                                                                                     
    Depreciation and amortization..................................................       975      1,107        847 
    Deferred income taxes..........................................................      (140)       (80)       217 
    Changes in operating assets and liabilities:                                                                    
      Accounts receivable..........................................................    (1,541)      (797)    (1,482)
      Inventories..................................................................      (370)      (667)       180 
      Prepaid expenses and other...................................................      (118)       (24)      (149)
      Accounts payable.............................................................       219       (112)       340 
      Accrued liabilities..........................................................    (1,134)     1,906        478 
      Income taxes payable.........................................................      (197)       936       (416)
                                                                                    ---------  ---------  --------- 
        Net cash (used in) provided by operating activities........................      (724)     3,915        929 
                                                                                    ---------  ---------  --------- 
Cash flows from investing activities:                                                                               
  Purchases of property and equipment..............................................    (1,743)      (407)    (1,015)
  Redemptions of certificates of deposit, net of purchases.........................        --         --        199 
  Investment in software development...............................................      (522)      (517)      (630)
  Other............................................................................        18         74        (44)
                                                                                    ---------  ---------  --------- 
        Net cash used in investing activities......................................    (2,247)      (850)    (1,490)
                                                                                    ---------  ---------  --------- 
Cash flows from financing activities:                                                                               
  Repurchase of common stock.......................................................      (397)        --         -- 
  Proceeds from issuance of common stock...........................................        99        313         68 
                                                                                    ---------  ---------  --------- 
        Net cash (used in) provided by financing activities........................      (298)       313         68 
                                                                                    ---------  ---------  --------- 
Increase (decrease) in cash and cash equivalents...................................    (3,269)     3,378       (493)
Cash and cash equivalents at beginning of period...................................     4,701      1,323      1,816 
                                                                                    ---------  ---------  --------- 
Cash and cash equivalents at end of period......................................... $   1,432  $   4,701  $   1,323 
                                                                                    ---------  ---------  --------- 
                                                                                    ---------  ---------  --------- 
Supplemental disclosure of cash flow information:                                                                   
  Cash paid during year for income taxes........................................... $   1,086  $      23  $     639 
                                                                                    ---------  ---------  --------- 
                                                                                    ---------  ---------  --------- 
  Cash paid during year for interest............................................... $      18  $      22  $      22 
                                                                                    ---------  ---------  --------- 
                                                                                    ---------  ---------  --------- 

The accompanying notes are an integral part of these financial statements.

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DSP TECHNOLOGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                              

BUSINESS.  The Company designs, develops, manufactures, markets and     
integrates high-speed computer-automated instrumentation for measurement and    
control applications. The Company has two groups, the Transportation Products   
Group, which focuses on powertrain testing, and the Lab Products Group, which   
focuses on vehicle safety and component testing and general data acquisition and
signal analysis. The Company's principal markets are in the United States,      
United Kingdom, Western Europe, and the Far East. Powertrain testing is         
currently the Company's largest market and major focus.                         

    The Company's fiscal year ends on the Sunday nearest to January 31. However,
for financial statement purposes, each fiscal year is presented as if it ended  
on January 31.                                                                  

   PRINCIPLES OF CONSOLIDATION.  The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant intercompany  
accounts and transactions have been eliminated.                                 

INVENTORIES.  Inventories are stated at the lower of cost (first-in,    
first-out) or market. The Company periodically reviews its inventories for      
potential slow-moving or obsolete items and writes down specific items to net   
realizable value as appropriate.                                                

    REVENUE RECOGNITION.  The Company recognizes revenue primarily upon shipment
when the product need only be manufactured and delivered. Revenue on contracts  
requiring delivery, installation and integration and contracts requiring longer 
delivery periods (long-term contracts) is recognized based on completed         
milestones or deliverables. Long-term contracts typically run from 18 to 24     
months. The Company evaluates profitability on long-term contracts on an ongoing
basis and recognizes losses when identified. Historically, no losses have been  
incurred on long-term contracts and no losses are anticipated on contracts in   
progress at January 31, 1999.                                                   

    COST OF SALES.  Information regarding cost of sales related to product sales
and service sales are not disaggregated as such information is not readily      
available from the Company's management information system.                     

PROPERTY AND EQUIPMENT.  Property and equipment are stated at cost.     
Depreciation and amortization are computed using the straight-line method based 
on the estimated useful lives of the assets or the lease term if shorter.       
Building and improvements are depreciated over 40 years. Machinery, equipment,  
and furniture are depreciated over three to five years.                         

INTANGIBLE ASSETS.  Cost in excess of net assets of acquired business   
("goodwill") is amortized on a straight line basis over 25 years. The Company   
evaluates the realizability of goodwill periodically by comparing the carrying  
value to the undiscounted future cash flows of the related assets. Purchased    
technology, is included in other assets and amortized over five years. Effective
February 1, 1996, impairments, if any, are recognized in accordance with        
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for   
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of," if
applicable.                                                                     

RESEARCH AND DEVELOPMENT.  Expenditures for research and development are
expensed as incurred, except for certain costs incurred in developing computer  
software to be sold, which have been capitalized in accordance with the         
provisions of SFAS No. 86, "Accounting for the Costs of Computer Software to Be 
Sold, Leased or Otherwise Marketed." Such costs are capitalized once            
technological feasibility of the product has been established based upon        
completion of a detailed program design. Software costs capitalized amounted to 
$522,000, $517,000 and $630,000 for the years ended                             

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DSP TECHNOLOGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                  
January 31, 1999, 1998 and 1997, respectively. Capitalized software is included 
in other assets and is being amortized to Research and Development expenses on a
straight-line basis over the lesser of three years or the estimated economic    
lives of the respective products, beginning when the products are offered for   
sale. To date, the estimated useful lives of the products have always exceeded  
three years. The Company evaluates the realizability of capitalized software on 
an ongoing basis relying on a number of factors including operating results,    
business plans, market trends and product development cycles.                   

 TRANSLATION OF FOREIGN CURRENCIES.  The Company denominates substantially
all of its transactions in U.S. currency, except for transactions by its foreign
subsidiary. The assets and liabilities of the Company's foreign subsidiary are  
denominated in the country's local currency and translated at the year-end rate 
of exchange. The related income statement items are translated at the average   
rate of exchange for the year. The resulting translation adjustments are        
excluded from income and reflected as a separate component of stockholders'     
equity. Realized and unrealized exchange gains or losses arising from           
transaction adjustments are reflected in operations and are not material.       

INCOME TAXES.  The Company accounts for income taxes using an asset and 
liability approach for financial accounting and reporting purposes.             

NET INCOME PER SHARE.  The following table sets forth the computation of
basic and diluted earnings per shares ("EPS").                                  

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED JANUARY 31,     
                                                                  -------------------------------
                                                                                                 
                                                                    1999       1998       1997   
                                                                  ---------  ---------  ---------


                                                                  (IN THOUSANDS, EXCEPT PER SHARE
                                                                             AMOUNTS)            
                                                                                                 
Numerator                                                                                        
Net income....................................................... $   1,582  $   1,646  $     914
                                                                  ---------  ---------  ---------
                                                                  ---------  ---------  ---------
Denominator                                                                                      
Number of shares on which basic EPS is calculated:                                               
  Average outstanding during the year............................     2,253      2,211      2,168
  Add: Incremental shares under stock option plans...............       226        226        136
                                                                  ---------  ---------  ---------
Number of shares on which diluted EPS is calculated..............     2,479      2,437      2,304
                                                                  ---------  ---------  ---------
                                                                  ---------  ---------  ---------
Basic EPS........................................................ $     .70  $     .74  $     .42
Diluted EPS...................................................... $     .64  $     .68  $     .40

CASH AND CASH EQUIVALENTS.  The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be   
cash equivalents. These instruments are recorded at their carrying values which 
approximate fair values because of their short maturity.                        

USING ESTIMATES.  In preparing financial statements in conformity with  
generally accepted accounting principles, management is required to make        
estimates and assumptions that affect the reported amounts of assets and        
liabilities and the disclosure of contingent assets and liabilities at the date 
of the financial statements, as well as revenue and expenses during the         
reporting period. Actual results could differ from those estimates.             

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DSP TECHNOLOGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                  
 RECLASSIFICATIONS.  Certain reclassifications have been made in the prior
year financial statements to conform with the fiscal 1999 presentation.         

COMPREHENSIVE INCOME.  The Company adopted SFAS No. 130, "Reporting     
Comprehensive Income," effective February 1, 1998. SFAS No. 130 establishes new 
rules for presenting comprehensive income and its components. The adoption had  
no impact on the Company's net income or stockholder's equity. SFAS No. 130     
requires foreign currency translation adjustments to be included in other       
comprehensive income. Prior year financial statements have been reclassified to 
conform to the requirements of SFAS No. 130.                                    

SEGMENT REPORTING.  The Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," effective February 1, 1998, 
SFAS No. 131 establishes new rules for presenting reportable business segments. 
The adoption had no effect on the Company's net income or stockholders' equity. 

NOTE B--INVENTORIES                                                             

Inventories consist of:                                                 

                                                        [Enlarge/Download Table]

                                                                                JANUARY 31,     
                                                                            --------------------
                                                                                                
                                                                              1999       1998   
                                                                            ---------  ---------


                                                                                (THOUSANDS)     
                                                                                                
Raw materials.............................................................. $   1,607  $   1,695
Work-in-process............................................................     1,068        637
Finished goods.............................................................       377        350
                                                                            ---------  ---------
                                                                            $   3,052  $   2,682
                                                                            ---------  ---------
                                                                            ---------  ---------

NOTE C--PROPERTY AND EQUIPMENT                                                  

Property and equipment consist of:                                      

                                                        [Enlarge/Download Table]

                                                                              JANUARY 31,      
                                                                          -------------------- 
                                                                                               
                                                                            1999       1998    
                                                                          ---------  --------- 


                                                                              (THOUSANDS)      
                                                                                               
Building and improvements................................................ $     111  $      -- 
Machinery and equipment..................................................       805        734 
Office furniture.........................................................     2,152      1,914 
Computer equipment.......................................................     2,550      2,263 
                                                                          ---------  --------- 
                                                                              5,618      4,911 
Accumulated depreciation and amortization................................    (4,097)    (3,570)
Land and construction in progress........................................     1,036         -- 
                                                                          ---------  --------- 
                                                                          $   2,557  $   1,341 
                                                                          ---------  --------- 
                                                                          ---------  --------- 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE D--OTHER ASSETS                                                            

Other assets consist of:                                                

                                                        [Enlarge/Download Table]

                                                                                 JANUARY 31,     
                                                                             --------------------
                                                                               1999       1998   
                                                                             ---------  ---------
                                                                                 (THOUSANDS)     
                                                                                                 
Capitalized software, net of accumulated amortization of $1,106 in 1999 and                      
  $849 in 1998.............................................................  $   1,464  $   1,199
Cost in excess of net assets of acquired business, net of accumulated                            
  amortization of $759 in 1999 and $641 in 1998............................        126        244
Other......................................................................        173        189
                                                                             ---------  ---------
                                                                             $   1,763  $   1,632
                                                                             ---------  ---------
                                                                             ---------  ---------

NOTE E--BANK LINE OF CREDIT                                                     

    At January 31, 1999, the Company has a $4,000,000 line of credit with a bank
renewable annually in May. Under the provisions of the line of credit agreement,
interest on borrowings is charged at the bank's prime rate of interest (7.75% at
January 31, 1999). Borrowings are collaterized by all unencumbered assets of the
Company and the Company must maintain certain financial ratios and be profitable
on an annual basis. There was no outstanding balance at January 31, 1999 or     
1998. Funds were borrowed at a weighted average interest rate of 8.1% and 8.63% 
during 1999 and 1998, respectively.                                             

NOTE F--ACCRUED LIABILITIES                                                     

Accrued liabilities consist of:                                         

                                                        [Enlarge/Download Table]

                                                                                JANUARY 31,     
                                                                            --------------------
                                                                              1999       1998   
                                                                            ---------  ---------
                                                                                (THOUSANDS)     
                                                                                                
Employee compensation and benefits......................................... $     697  $     755
Commissions................................................................        47        112
Customer deposits..........................................................       711      1,969
Restructuring costs........................................................       496         --
Other......................................................................       670        919
                                                                            ---------  ---------
                                                                            $   2,621  $   3,755
                                                                            ---------  ---------
                                                                            ---------  ---------

NOTE G--INCOME TAXES                                                            

Earnings before taxes consists of:                                      

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED JANUARY 31,     
                                                                  -------------------------------
                                                                    1999       1998       1997   
                                                                  ---------  ---------  ---------
                                                                            (THOUSANDS)          
                                                                                                 
U.S. operations.................................................. $   1,927  $   2,269  $     962
Foreign operations...............................................       571        499        395
                                                                  ---------  ---------  ---------
                                                                  $   2,498  $   2,768  $   1,357
                                                                  ---------  ---------  ---------
                                                                  ---------  ---------  ---------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE G--INCOME TAXES (CONTINUED)                                                
Income tax expense consists of:                                         

                                                        [Enlarge/Download Table]

                                                                         YEAR ENDED JANUARY 31,     
                                                                     -------------------------------
                                                                       1999       1998       1997   
                                                                     ---------  ---------  ---------
                                                                               (THOUSANDS)          
                                                                                                    
Currently payable:                                                                                  
  Federal income taxes.............................................. $     720  $     800  $      67
  State income taxes................................................       176        227         43
  Foreign taxes.....................................................       160        175        116
                                                                     ---------  ---------  ---------
                                                                         1,056      1,202        226
Deferred:                                                                                           
  Federal income taxes..............................................      (110)       (71)       184
  State income taxes................................................       (30)        (9)        33
                                                                     ---------  ---------  ---------
                                                                          (140)       (80)       217
                                                                     ---------  ---------  ---------
                                                                     $     916  $   1,122  $     443
                                                                     ---------  ---------  ---------
                                                                     ---------  ---------  ---------

The difference between income tax rates computed by applying the Federal
statutory income tax rate to income before income taxes and the actual effective
tax rate is reconciled as follows:                                              

                                                        [Enlarge/Download Table]

                                                                          YEAR ENDED JANUARY 31,      
                                                                      ------------------------------- 
                                                                        1998       1998       1997    
                                                                      ---------  ---------  --------- 
                                                                                                      
Federal statutory rate...............................................      34.0%      34.0%      34.0%
Goodwill.............................................................       1.6         .5        1.1 
State income taxes, net of federal benefit...........................       4.6        5.4        2.7 
Research and development credits.....................................      (2.6)      (1.8)      (3.3)
Benefit of foreign sales corporation.................................       (.4)      (1.0)      (3.8)
Other................................................................       (.5)       2.4        2.0 
                                                                            ---        ---        --- 
  Effective tax rate.................................................      36.7%      40.5%      32.7%
                                                                            ---        ---        --- 
                                                                            ---        ---        --- 

    At January 31, 1999 and 1998, respectively, the major components of deferred
tax assets are: inventory reserves and cost capitalization--$289,000 and        
$284,000; receivable and warranty reserves-- $118,000 and $105,000;             
restructuring accrual--$198,000 and none; and accrued compensation--$147,000 and
$126,000. The major item in non-current deferred tax liabilities is research and
development expenses of $580,000 at January 31, 1999 and $481,000 at January 31,
1998.                                                                           

NOTE H--STOCK OPTION PLANS                                                      

  The Company has two stock option plans, the 1991 Option Plan ("1991 Option
Plan") and the 1991 Directors Option Plan ("1991 Directors Option Plan")        
accounted for under APB Opinion 25, "Accounting for Stock Issued to Employees," 
and related interpretations. The 1991 Option Plan provides for the granting of  
incentive and non-statutory options to employees. The 1991 Directors Option Plan
provides for the granting of nonqualifed stock options to directors of the      
Company who are not employees of the Company. The options, which have terms of  
five or ten years when issued, typically vest over three years. The exercise    
price of each option equals the market price of the Company's stock on the date 
of grant or, in the case of those holding more than 10% of the                  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE H--STOCK OPTION PLANS (CONTINUED)                                          
Company's outstanding common stock, 110% of the market price. Accordingly, no   
compensation cost has been recognized for grants from either plan. A total of   
1,129,327 shares of the Company's common stock have been reserved for issuance  
under the 1991 Option Plan, of which 255,182 shares are available for grant at  
January 31, 1999. The 1991 Directors Option Plan has 75,000 common shares       
reserved, of which 6,000 shares are available for grant at January 31, 1999.    

    Had compensation costs for the plans been determined based on the fair value
of the options at the grant dates consistent with the method of SFAS No. 123,   
"Accounting for Stock-Based Compensation," the Company's net income and income  
per share would have been reduced to the pro forma amounts indicated below. Pro 
forma results for 1999, 1998 and 1997 may not be indicative of pro forma results
in future periods because the pro forma amounts do not include pro forma        
compensation cost for options granted prior to February 1, 1995.                

                                                        [Enlarge/Download Table]

                                                                        YEAR ENDED JANUARY 31,     
                                                                    -------------------------------
                                                                      1999       1998       1997   
                                                                    ---------  ---------  ---------
                                                                                                   
Net income (In thousands):                                                                         
  As reported...................................................... $   1,582  $   1,646  $     914
  Pro forma........................................................ $   1,269  $   1,310  $     678
Net income per share:                                                                              
  As reported--Basic............................................... $     .70  $     .74  $     .42
  As reported--Diluted............................................. $     .64  $     .68  $     .40
  Pro forma--Basic................................................. $     .56  $     .59  $     .31
  Pro forma--Diluted............................................... $     .51  $     .55  $     .30

   A summary of the status of the various stock option plans as of January 31,
1999, 1998 and 1997, and changes during the years ending on those dates is      
presented below.                                                                

                                                        [Enlarge/Download Table]

                                                          YEAR ENDED JANUARY 31,                  
                                         ---------------------------------------------------------
                                               1999                1998                1997       
                                         -----------------   -----------------   -----------------
                                                  WEIGHTED            WEIGHTED            WEIGHTED
                                                  AVERAGE             AVERAGE             AVERAGE 
                                                  EXERCISE            EXERCISE            EXERCISE
                                         SHARES    PRICE     SHARES    PRICE     SHARES    PRICE  
                                         ------   --------   ------   --------   ------   --------
                                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)         
                                                                                                  
Outstanding at beginning of year........   600     $4.81       602     $4.47       555     $4.29  
Granted.................................   135      7.68       103      6.09        95      5.11  
Exercised...............................   (28)     3.53       (85)     3.69       (26)     2.67  
Forfeited...............................   (17)     6.07       (20)     5.83       (22)     4.81  
                                         ------              ------              ------           
Outstanding at end of year..............   690     $5.39       600     $4.81       602     $4.47  
                                         ------              ------              ------           
                                         ------              ------              ------           

   The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model using the following weighted average     
assumptions.                                                                    

                                                                [Download Table]
                                                              
Weighted-average fair value of options                        
  granted during the year............... $5.56   4.27   $3.18 
Expected term (years)...................     7      7       6 
Volatility..............................  77.0%  67.0%   60.0%
Risk free interest rate.................   5.2%   6.3%    6.8%
Dividend yield..........................    --     --      -- 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE H--STOCK OPTION PLANS (CONTINUED)                                          
The following information applies to options outstanding at January 31, 
1999:                                                                           

                                                        [Enlarge/Download Table]

                                     OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE     
                        ---------------------------------------------  ----------------------------
                                            WEIGHTED                                               
                                             AVERAGE       WEIGHTED        NUMBER        WEIGHTED  
                                            REMAINING       AVERAGE      EXERCISABLE      AVERAGE  
RANGE OF EXERCISE                          CONTRACTUAL     EXERCISE    ---------------   EXERCISE  
PRICES                                        LIFE           PRICE                         PRICE   
----------------------                   ---------------  -----------  (IN THOUSANDS)   -----------
                            NUMBER                                                                 
                          OUTSTANDING      (IN YEARS)                                              
                        ---------------                                                            
                        (IN THOUSANDS)                                                             
                                                                                                   
$0.875 - $ 1.250......            37                1      $    1.23             37      $    1.23 
 2.625 -   3.875......           135                5           3.25            135           3.25 
 4.000 -   6.000......           198                7           5.15            147           5.09 
 6.125 -   8.625......           307                8           6.80            160           6.37 
 9.313 -  10.625......            13               10           9.58              1           9.37 
                                 ---                                            ---                
                                 690                                            480                
                                 ---                                            ---                
                                 ---                                            ---                

During 1999, the Company awarded options for 39,000 shares to certain   
non-employees for services rendered or to be rendered. These stock options are  
included in the stock option plan information above. The Company recognized a   
charge to earnings of approximately $54,000 in connection with the option       
grants.                                                                         

NOTE I--COMMITMENTS                                                             

 LEASES.  The Company leases its facilities in Fremont, California and Ann
Arbor, Michigan under operating leases which expire at various times during     
2000. Rental expenses were $433,000 in 1999, $350,000 in 1998, and $303,000 in  
1997.                                                                           

    Future minimum rental commitments for all leases with initial non-cancelable
lease terms of more than one year are $382,000 in 2000.                         

The Company has entered into a construction contract to build a 57,200  
square foot facility on its eight acre land in Ann Arbor, Michigan, which will  
house all of its Ann Arbor, Michigan operations. The Company expects to vacate  
all of its leased facilities in Ann Arbor, Michigan once the new building is    
completed. Under the terms of the construction contract, DSPT is obligated to   
pay the contractor $3,750,000 for the construction of the new facility which is 
expected to be completed in the fall of 1999.                                   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE J--MAJOR CUSTOMERS AND FOREIGN SALES                                       

  Three separate customers accounted for 10% or more of net sales in 1999 as
follows: 15%, 14% and 12%. One customer accounted for 21% and 18% of net sales  
for 1998 and 1997, respectively. One other customer accounted for 14% of net    
sales in 1998.                                                                  

Foreign sales were as follows:                                          

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED JANUARY 31,     
                                                                  -------------------------------
                                                                    1999       1998       1997   
                                                                  ---------  ---------  ---------
                                                                          (IN THOUSANDS)         
                                                                                                 
United Kingdom ("UK")............................................ $   2,948  $   2,640  $   2,916
Asia/Pacific Rim.................................................       601      3,496      1,476
Western Europe, excluding UK.....................................     1,531      1,457      1,352
Other countries..................................................        41        148         16
                                                                  ---------  ---------  ---------
                                                                  $   5,121  $   7,741  $   5,760
                                                                  ---------  ---------  ---------
                                                                  ---------  ---------  ---------

NOTE K--BUSINESS SEGMENTS AND FOREIGN OPERATIONS                                

BUSINESS SEGMENTS.  The Company operates in two business segments:      
Transportation Products Group and Lab Products Group. The Company's reportable  
segments are strategic business units that offer different products and         
services. They are managed separately based on the fundamental differences in   
their operations.                                                               

   The Transportation Products Group designs, manufactures and sells primarily
integrated systems and services for powertrain testing.                         

  The Lab Products Group consists of the Company's SigLab Group and Advanced
Research Group. The SigLab Group provides high-performance signal acquisition   
products used as subsystems for personal computers and workstations in the      
electronic and electro-mechanical device analysis market. The Advanced Research 
Group designs, manufactures and sells standard and custom systems to advanced   
research laboratories conducting studies for defense and aerospace related data 
acquisition and testing.                                                        

Information by industry segment is set forth below (in thousands):      

                                                        [Enlarge/Download Table]

                                                                  YEAR ENDED JANUARY 31,     
                                                              -------------------------------
                                                                1999       1998       1997   
                                                              ---------  ---------  ---------
                                                                                             
Net sales:                                                                                   
  Transportation Products Group.............................. $  21,661  $  18,309  $  13,354
  Lab Products Group.........................................     3,735      3,729      4,633
                                                              ---------  ---------  ---------
                                                              $  25,396  $  22,038  $  17,987
                                                              ---------  ---------  ---------
                                                              ---------  ---------  ---------
Income from operations:                                                                      
  Transportation Products Group.............................. $   2,032  $   2,467  $     931
  Lab Products Group.........................................       245         76        303
                                                              ---------  ---------  ---------
                                                              $   2,277  $   2,543  $   1,234
                                                              ---------  ---------  ---------
                                                              ---------  ---------  ---------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE K--BUSINESS SEGMENTS AND FOREIGN OPERATIONS (CONTINUED)                    

                                                        [Enlarge/Download Table]

                                                                   TRANSPORTATION      LAB    
                                                                       GROUP          GROUP   
                                                                   --------------  -----------
                                                                                              
1999                                                                                          
Identifiable assets...............................................   $   14,856     $   2,212 
Depreciation and amortization.....................................          758           217 
Net capital expenditures..........................................        1,700            43 
1998                                                                                          
Identifiable assets...............................................   $   14,766     $   1,964 
Depreciation and amortization.....................................          878           229 
Net capital expenditures..........................................          385            22 
1997                                                                                          
Identifiable assets...............................................   $    9,016     $   2,783 
Depreciation and amortization.....................................          692           155 
Net capital expenditures..........................................          978            37 

    GEOGRAPHIC INFORMATION.  A summary of the Company's operations by geographic
area is presented below:                                                        

                                                        [Enlarge/Download Table]

                                                                  YEAR ENDED JANUARY 31,     
                                                              -------------------------------
                                                                1999       1998       1997   
                                                              ---------  ---------  ---------
                                                                        (THOUSANDS)          
                                                                                             
Net Sales                                                                                    
  United States.............................................. $  22,488  $  19,402  $  15,083
  United Kingdom.............................................     2,908      2,636      2,904

Operating Margin                                                                             
  United States.............................................. $   1,799  $   2,042  $     839
  United Kingdom.............................................       478        501        395

Identifiable Assets                                                                          
  United States.............................................. $  14,642  $  14,960  $  10,408
  United Kingdom.............................................     2,426      1,770      1,391

NOTE L--EMPLOYEE BENEFIT PLAN                                                   

 The Company has established the DSP Technology Inc. 401(k) Profit Sharing
Plan covering substantially all employees of the Company who have at least six  
months of service and are at least twenty-one years of age. The amount          
participants may voluntarily contribute in any year is established by law and   
subject to cost of living adjustments. The Company has the option to make       
matching contributions on a year to year basis. Contributions to the plan by the
Company in 1999, 1998, and 1997 aggregated $137,000, $85,000, and $69,000,      
respectively.                                                                   

NOTE M--RESTRUCTURING COSTS                                                     

On January 21, 1999, the Company announced its strategic decision to    
relocate its corporate headquarters to, and consolidate its Transportation Group
operations in, Ann Arbor, Michigan, in order to focus on its largest and most   
profitable business segment. The Company recorded a one-time                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE M--RESTRUCTURING COSTS (CONTINUED)                                         
pre-tax restructuring charge of $496,000 ($314,000 after tax) in the fourth     
quarter of 1999 which consist of: $306,000 in severance pay and $190,000 in     
estimated idle facility and winding down costs.                                 

 Had one-time after-tax restructuring costs of $314,000 been excluded from
the 1999 results as reported, the Company's net income and net income per share 
would have been increased to the pro forma amounts indicated below:             

                                                        [Enlarge/Download Table]

                                                                                  YEAR ENDED 
                                                                                  JANUARY 31,
                                                                                     1999    
                                                                                  -----------
                                                                                             
Net income (In thousands):                                                                   
  As reported....................................................................  $   1,582 
  Pro forma......................................................................      1,896 

Net income per share:                                                                        
  As reported--Basic.............................................................  $     .70 
  As reported--Diluted...........................................................  $     .64 
  Pro forma--Basic...............................................................  $     .84 
  Pro forma--Diluted.............................................................  $     .76 

NOTE N--SUBSEQUENT EVENT                                                        

On March 23, 1999, the Company entered into a merger agreement with MTS 
Systems Corporation ("MTS"). Pursuant to the agreement, the stockholders and    
option holders of the Company will receive an aggregate consideration of        
2,077,000 shares of MTS common stock in exchange for the outstanding shares and 
net option shares of the Company.                                               

NOTE O--RELATED PARTY                                                           

   The Company has a strategic alliance agreement with FEV Motorentechnik GmbH
& Co. KG ("FEV"). The purpose of the alliance is to develop and distribute test 
instrumentation and control products for the transportation industry. FEV is a  
privately-held company based in Aachen, Germany, and is a leader in complete    
engine and powertrain research and development and instrumentation for the      
transportation industry. FEV owns approximately 12.7% of the Company's common   
stock. During fiscal 1999, 1998, and 1997, the Company sales to FEV were        
$1,249,000, $1,040,000, and $1,102,000, respectively.                           

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                                                                      APPENDIX A

AGREEMENT AND PLAN OF MERGER
AMONG 
MTS SYSTEMS CORPORATION,
BADGER MERGER CORP.,
AND 
DSP TECHNOLOGY INC. 

Dated as of March 23, 1999

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                                                        [Enlarge/Download Table]

                                                                                                        PAGE   
                                                                                                      ---------
                                                                                                               
ARTICLE 1  THE MERGER; CONVERSION OF SHARES..........................................................       A-5
      1.1  THE MERGER................................................................................       A-5
      1.2  EFFECTIVE TIME............................................................................       A-5
      1.3  CONVERSION OF SHARES AND OPTIONS..........................................................       A-5
      1.4  NO APPRAISAL RIGHTS.......................................................................       A-6
      1.5  EXCHANGE OF COMPANY COMMON STOCK..........................................................       A-6
      1.6  EXCHANGE OF MERGER SUBSIDIARY COMMON STOCK................................................       A-8
      1.7  CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION.................................       A-8
      1.8  BYLAWS OF THE SURVIVING CORPORATION.......................................................       A-9
      1.9  DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.......................................       A-9

ARTICLE 2  CLOSING...................................................................................       A-9
      2.1  TIME AND PLACE............................................................................       A-9
      2.2  FILINGS AT THE CLOSING....................................................................       A-9

ARTICLE 3  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................       A-9
      3.1  ORGANIZATION..............................................................................       A-9
      3.2  AUTHORIZATION.............................................................................      A-10
      3.3  CAPITALIZATION............................................................................      A-10
      3.4  REPORTS AND FINANCIAL STATEMENTS..........................................................      A-11
      3.5  ABSENCE OF UNDISCLOSED LIABILITIES........................................................      A-12
      3.6  CONSENTS AND APPROVALS....................................................................      A-12
      3.7  COMPLIANCE WITH LAWS......................................................................      A-12
      3.8  LITIGATION................................................................................      A-13
      3.9  ABSENCE OF MATERIAL ADVERSE CHANGES.......................................................      A-13
     3.10  OFFICERS, DIRECTORS AND EMPLOYEES.........................................................      A-13
     3.11  TAXES.....................................................................................      A-13
     3.12  CONTRACTS.................................................................................      A-14
     3.13  INTELLECTUAL PROPERTY RIGHTS..............................................................      A-14
     3.14  BENEFIT PLANS.............................................................................      A-15
     3.15  MINUTE BOOKS..............................................................................      A-17
     3.16  NO FINDERS................................................................................      A-17
     3.17  PROXY STATEMENT...........................................................................      A-17
     3.18  FAIRNESS OPINION..........................................................................      A-17
     3.19  STATE TAKEOVER LAWS.......................................................................      A-17
     3.20  MERGER FILINGS............................................................................      A-17
     3.21  ENVIRONMENTAL LAWS........................................................................      A-17
     3.22  ACCOUNTING MATTERS........................................................................      A-18

ARTICLE 4  REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY............................      A-18
      4.1  ORGANIZATION..............................................................................      A-18
      4.2  AUTHORIZATION.............................................................................      A-19
      4.3  CAPITALIZATION............................................................................      A-19
      4.4  CONSENTS AND APPROVALS....................................................................      A-19
      4.5  REPORTS; FINANCIAL STATEMENTS; ABSENCE OF CHANGES.........................................      A-20
      4.6  REGISTRATION STATEMENT....................................................................      A-20
      4.7  NO FINDERS................................................................................      A-21

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                                                        [Enlarge/Download Table]

                                                                                                        PAGE   
                                                                                                      ---------
                                                                                                               
      4.8  ABSENCE OF UNDISCLOSED LIABILITIES........................................................      A-21
      4.9  COMPLIANCE WITH LAWS......................................................................      A-21
     4.10  LITIGATION................................................................................      A-21
     4.11  ABSENCE OF MATERIAL ADVERSE CHANGES.......................................................      A-21
     4.12  REORGANIZATION............................................................................      A-22
     4.13  MERGER FILINGS............................................................................      A-22
     4.14  ACCOUNTING MATTERS........................................................................      A-22
     4.15  TAXES.....................................................................................      A-22
     4.16  CONTRACTS.................................................................................      A-22
     4.17  BENEFIT PLANS.............................................................................      A-22

ARTICLE 5  COVENANTS.................................................................................      A-24
      5.1  CONDUCT OF BUSINESS OF THE COMPANY........................................................      A-24
      5.2  CONDUCT OF BUSINESS OF PARENT.............................................................      A-26
      5.3  NO SOLICITATION...........................................................................      A-27
      5.4  ACCESS AND INFORMATION....................................................................      A-28
      5.5  APPROVAL OF STOCKHOLDERS; PROXY STATEMENT; REGISTRATION STATEMENT.........................      A-29
      5.6  CONSENTS..................................................................................      A-30
      5.7  AFFILIATES' LETTERS.......................................................................      A-31
      5.8  EXPENSES..................................................................................      A-31
      5.9  FURTHER ACTIONS...........................................................................      A-31
     5.10  REGULATORY APPROVALS......................................................................      A-31
     5.11  CERTAIN NOTIFICATIONS.....................................................................      A-32
     5.12  [INTENTIONALLY OMITTED]...................................................................      A-33
     5.13  NASDAQ LISTING APPLICATION................................................................      A-33
     5.14  LETTERS OF THE COMPANY'S AND PARENT'S ACCOUNTANTS.........................................      A-33
     5.15  SUBSIDIARY SHARES.........................................................................      A-33
     5.16  BENEFIT PLANS AND EMPLOYEE MATTERS........................................................      A-33
     5.17  OBLIGATIONS OF MERGER SUBSIDIARY..........................................................      A-34
     5.18  PLAN OF REORGANIZATION....................................................................      A-34
     5.19  POOLING...................................................................................      A-34
     5.20  TAX MATTERS...............................................................................      A-34
     5.21  INDEMNIFICATION OF OFFICERS AND DIRECTORS.................................................      A-35

ARTICLE 6  CLOSING CONDITIONS........................................................................      A-35
      6.1  CONDITIONS TO OBLIGATIONS OF PARENT, MERGER SUBSIDIARY AND THE COMPANY....................      A-35
      6.2  CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY.................................      A-36
      6.3  CONDITIONS TO OBLIGATIONS OF THE COMPANY..................................................      A-36

ARTICLE 7  TERMINATION AND ABANDONMENT...............................................................      A-37
      7.1  TERMINATION...............................................................................      A-37
      7.2  EFFECT OF TERMINATION.....................................................................      A-38
ARTICLE 8  MISCELLANEOUS.............................................................................      A-39
      8.1  AMENDMENT AND MODIFICATION................................................................      A-39
      8.2  WAIVER OF COMPLIANCE; CONSENTS............................................................      A-39
      8.3  INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................................      A-40
      8.4  NOTICES...................................................................................      A-40

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                                                                                                             PAGE   
                                                                                                           ---------
                                                                                                                    
           8.5  ASSIGNMENT................................................................................      A-41
           8.6  GOVERNING LAW.............................................................................      A-41
           8.7  COUNTERPARTS..............................................................................      A-41
           8.8  KNOWLEDGE.................................................................................      A-41
           8.9  INTERPRETATION............................................................................      A-41
          8.10  PUBLICITY.................................................................................      A-41
          8.11  ENTIRE AGREEMENT..........................................................................      A-41
          8.12  SEVERABILITY..............................................................................      A-42
          8.13  SPECIFIC PERFORMANCE......................................................................      A-42

EXECUTION.................................................................................................      A-43

EXHIBITS:                                                                                                           

Exhibit A:      Amended and Restated Certificate of Incorporation [not provided]                                    
Exhibit B:      Form of Affiliate's Letter [not provided]                                                           
Exhibit C:      Key Executives [not provided]                                                                       
Exhibit D:      Employment Agreements [not provided]                                                                
Exhibit E:      Gray Cary Ware & Freidenrich Opinion Matters [not provided]                                         
Exhibit F:      Lindquist & Vennum Opinion Matters [not provided]                                                   

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AGREEMENT AND PLAN OF MERGER

    THIS AGREEMENT (the "Agreement") is dated as of March 23, 1999, by and among
MTS SYSTEMS CORPORATION, a Minnesota corporation ("Parent"), BADGER MERGER      
CORP., a Delaware corporation and wholly-owned subsidiary of Parent ("Merger    
Subsidiary"), and DSP TECHNOLOGY INC., a Delaware corporation (the "Company").  

 WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary,
and the Company have each approved the merger of Merger Subsidiary with and into
the Company (the "Merger") upon the terms and subject to the conditions set     
forth herein; and                                                               

WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the   
Internal Revenue Code of 1986, as amended (the "Code"); and                     

 WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests" transaction within the meaning of     
Accounting Principles Board Opinion No. 16 and the rules and regulations of the 
Securities and Exchange Commission (the "SEC"); and                             

WHEREAS, the parties hereto desire to make certain representations,     
warranties, and agreements in connection with the Merger and also to prescribe  
various conditions to the Merger;                                               

 NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants, and agreements contained herein, the    
parties hereto agree as follows:                                                

ARTICLE 1 THE MERGER; CONVERSION OF SHARES

   1.1  THE MERGER.  Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.2 hereof), Merger Subsidiary shall  
be merged with and into the Company in accordance with the provisions of the    
Delaware General Corporation Law (the "DGCL"), whereupon the separate corporate 
existence of Merger Subsidiary shall cease. The Company shall continue as the   
surviving corporation (the "Surviving Corporation") in the Merger. From and     
after the Effective Time, the Surviving Corporation shall possess all the       
rights, privileges, immunities, powers, and franchises and be subject to all the
restrictions, disabilities, and duties of the Company and Merger Subsidiary, all
as more fully described in the DGCL.                                            

 1.2  EFFECTIVE TIME.  As soon as practicable after each of the conditions
set forth in Article 6 has been satisfied or waived on the Closing Date (as     
defined in Section 2.1), the Company will file, or cause to be filed, with the  
Secretary of State of the State of Delaware a Certificate of Merger for the     
Merger, which Certificate shall be in the form required by and executed in      
accordance with the applicable provisions of the DGCL. The Merger shall become  
effective at the time such filing is made or, if agreed to by Parent and the    
Company, such later time or date set forth in the Certificate of Merger (the    
"Effective Time").                                                              

   1.3  CONVERSION OF SHARES AND OPTIONS.  At the Effective Time, by virtue of
the Merger and without any action on the part of the Company, Parent, Merger    
Subsidiary or any holder of any share of capital stock, or holder of options to 
purchase capital stock, of the Company or Merger Subsidiary:                    

   (a) The holders of shares of common stock of the Company, $.001 par
value per share ("Company Common Stock") and holders of option(s) to    
purchase Company Common Stock ("Company Option(s)") will receive an     
   aggregate of 2,077,000 shares of the common stock of Parent ("Parent Common
 Stock"), $.25 par value per share (the "Merger Consideration"), such that
each share of Company Common Stock outstanding immediately prior to the 
Effective Time and each Option Share (as defined in Section 1.3(b)) will
  represent only the right to receive a fraction of a share of Parent Common
Stock equal to the Merger Consideration divided by the                  

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 sum of (i) the total number of shares of Company Common Stock outstanding
   immediately prior to the Effective Time and (ii) the total number of Option
  Shares represented by the Company Options outstanding immediately prior to
the Effective Time (the "Per Share Merger Consideration").              

      (b) Each Company Option outstanding immediately prior to the Effective
Time shall represent the number of Option Shares ("Option Shares")      
  determined by (i) dividing the Option Value by the Final Company Value and
    (ii) multiplying that result by the number of shares subject to each option.
The "Option Value" shall mean the Final Company Value less the option   
exercise price, provided, that with respect to any portion of a Company 
Option which is not vested immediately prior to the Effective Time, the 
   "Option Value" shall mean (i) the fair value of the unvested portion of the
   Company Option (as determined pursuant to an appropriate discounting method
   mutually agreed to by the parties), less (ii) the option exercise price for
 such unvested portion of the option. The "Final Company Value" shall mean
   the value obtained by adding (x) the Merger Consideration multiplied by the
Final Parent Price and (y) the aggregate exercise price of the Company  
 Options outstanding immediately prior to the Effective Time, and dividing
the sum of (x) and (y) by the sum of the aggregate number of shares of  
    Company Common Stock outstanding immediately prior to the Effective Time and
 the aggregate number of shares of Company Common Stock subject to Company
Options outstanding immediately prior to the Effective Time. The "Final 
   Parent Price" shall mean the closing sale price of a share of Parent Common
Stock as reported by the Nasdaq National Market on the trading day      
immediately prior to the Effective Time.                                

(c) Each share of Company Common Stock issued and outstanding   
   immediately prior to the Effective Time that is held in the treasury of the
    Company shall be canceled in accordance with applicable laws without payment
of any consideration therefor and without any conversion thereof.       

        (d) Each share of any other class of capital stock of the Company (other
than Company Common Stock) shall be canceled without payment of any     
consideration therefor and without any conversion thereof.              

       (e) Each share of common stock of Merger Subsidiary, par value $.01 per
    share ("Merger Subsidiary Common Stock"), issued and outstanding immediately
   prior to the Effective Time shall be converted into one share of the common
 stock of the Surviving Corporation, par value $.001 per share ("Surviving
Corporation Common Stock").                                             

    1.4  NO APPRAISAL RIGHTS.  The parties acknowledge that, pursuant to Section
262(b)(1) of the DGCL, no holders of Company Common Stock shall have appraisal  
rights in connection with the Merger.                                           

1.5  EXCHANGE OF COMPANY COMMON STOCK.                                  

       (a) At or prior to the Effective Time, Parent shall cause the Company's
 stock transfer agent, or such other agent as is mutually agreed to by the
parties, to act as exchange agent (the "Exchange Agent") hereunder. As  
promptly as practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail (i) to each holder of record (other than Parent, 
   Merger Subsidiary, the Company, or any wholly owned subsidiary of Parent or
   the Company) of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock   
  ("Company Certificates") a form letter of transmittal (which shall specify
   that delivery shall be effective, and risk of loss and title to the Company
   Certificate(s) shall pass, only upon delivery of the Company Certificate(s)
  to the Exchange Agent) and instructions for such holder's use in effecting
the surrender of the Company Certificates in exchange for certificates  
representing shares of Parent Common Stock and cash in lieu of any      
fractional shares, and (ii) to each holder of Company Option(s) a form  
letter of transmittal and                                               

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   instructions for such holder's use in effecting the receipt of certificates
representing shares of Parent Common Stock and cash in lieu of any      
fractional shares in exchange for such Company Option(s).               

       (b) As soon as practicable after the Effective Time, the Exchange Agent
shall distribute to holders of shares of Company Common Stock, upon     
surrender to the Exchange Agent of one or more Company Certificates for 
  cancellation, together with a duly-executed letter of transmittal, (i) one
or more certificates representing the number of whole shares of Parent  
    Common Stock into which the shares represented by the Company Certificate(s)
  shall have been converted pursuant to Section 1.3(a), (ii) a bank check in
the amount of cash into which the shares represented by the Company     
Certificate(s) shall have been converted pursuant to Section 1.5(f)     
(relating to fractional shares), and (iii) any dividends or other       
  distributions to which such holder is entitled pursuant to Section 1.5(c),
and the Company Certificate(s) so surrendered shall be canceled. In the 
event of a transfer of ownership of Company Common Stock that is not    
  registered in the transfer records of the Company, it shall be a condition
to the issuance of shares of Parent Common Stock that the Company       
   Certificate(s) so surrendered shall be properly endorsed or be otherwise in
proper form for transfer and that such transferee shall (i) pay to the  
    Exchange Agent any transfer or other taxes required or (ii) establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
    payable. As soon as practicable after the Effective Time, the Exchange Agent
shall distribute to holders of Company Options, upon surrender to the   
Exchange Agent of a duly-executed letter of transmittal, (i) one or more
   certificates representing the number of whole shares of Parent Common Stock
  into which the Option Shares represented by the Company Options shall have
  been converted pursuant to Section 1.3(a), (ii) a bank check in the amount
of cash into which the Option Shares represented by the Company Options 
    shall have been converted pursuant to Section 1.5(f) (relating to fractional
    shares), and (iii) any dividends or other distributions to which such holder
is entitled pursuant to Section 1.5(c).                                 

       (c) Holders of Company Common Stock or Company Options will be entitled
to any dividends or other distributions pertaining to the Parent Common 
  Stock received in exchange therefor that become payable to persons who are
 holders of record of Parent Common Stock as of a record date that follows
   the Effective Time, but only (i) for holders of Company Common Stock, after
  they have surrendered their Company Certificates for exchange and (ii) for
    holders of Company Options, after they have submitted a duly-executed letter
of transmittal. Subject to the effect, if any, of applicable law, the   
 Exchange Agent shall receive, hold, and remit any such dividends or other
    distributions to each such record holder entitled thereto, without interest,
  at the time that such Company Certificates are surrendered to the Exchange
   Agent for exchange. Holders of Company Common Stock or Company Options will
 not be entitled, however, to dividends or other distributions that become
 payable before or after the Effective Time to persons who were holders of
record of Parent Common Stock as of a record date that is prior to the  
Effective Time.                                                         

      (d) All certificates evidencing shares of Parent Common Stock that are
  issued (i) upon the surrender for exchange of Company Certificates or (ii)
in exchange for Company Options in accordance with the terms hereof,    
    together with any cash paid for fractional shares pursuant to Section 1.5(f)
hereof, shall be deemed to have been issued in full satisfaction of all 
  rights pertaining to the shares of Company Common Stock represented by the
    surrendered Company Certificates or Option Shares represented by the Company
Options, respectively.                                                  

       (e) After the Effective Time, there shall be no further registration of
 transfers on the stock transfer books of the Surviving Corporation of the
 shares of Company Common Stock that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Company Certificates  
 representing such shares are presented to the Surviving Corporation, they
shall be canceled and exchanged as provided in this Article 1. As of the
  Effective Time, the holders of Company Certificates representing shares of
Company Common Stock shall cease to have any                            

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  rights as stockholders of the Company, except such rights, if any, as they
  may have pursuant to the DGCL or this Agreement. Except as provided above,
until such Company Certificates are surrendered for exchange, each such 
Company Certificate shall, after the Effective Time, represent for all  
   purposes only the right to receive a certificate or certificates evidencing
  the number of whole shares of Parent Common Stock into which the shares of
Company Common Stock shall have been converted pursuant to the Merger as
 provided in Section 1.3(a) hereof, the right to receive the cash value of
    any fraction of a share of Parent Common Stock as provided in Section 1.5(f)
  hereof and the right to receive any dividends or distributions as provided
   in Section 1.5(c). As of the Effective Time, the holders of Company Options
   shall cease to have any rights as optionholders of the Company, except such
rights, if any, as they may have pursuant to this Agreement.            

      (f) No fractional shares of Parent Common Stock and no certificates or
  scrip therefor, or other evidence of ownership thereof, shall be issued in
connection with the Merger, no dividend or other distribution of Parent 
 shall relate to any fractional share, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a       
    shareholder of Parent. All fractional shares of Parent Common Stock to which
  a holder of Company Common Stock or Company Option(s) immediately prior to
    the Effective Time would otherwise be entitled, at the Effective Time, shall
be aggregated if and to the extent multiple Company Certificates of such
   holder are submitted together to the Exchange Agent and/or multiple Company
Options are held by such holder. If a fractional share results from such
aggregation, then (in lieu of such fractional share) the Exchange Agent 
shall pay to each holder of shares of Company Common Stock or Company   
   Options who otherwise would be entitled to receive such fractional share of
Parent Common Stock an amount of cash (without interest) determined by  
   multiplying (i) the closing sale price of a share of Parent Common Stock as
reported by the Nasdaq National Market on the Closing Date by (ii) the  
    fractional share of Parent Common Stock to which such holder would otherwise
be entitled. Parent will make available to the Exchange Agent any cash  
necessary for this purpose.                                             

       (g) In the event any Company Certificates shall have been lost, stolen,
or destroyed, the Exchange Agent shall issue in respect of such lost,   
  stolen, or destroyed Company 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, and dividends or other distributions, if any,
as may be required pursuant to this Article 1; 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 Company   
    Certificate to deliver a bond in such sum as Parent may reasonably direct as
   indemnity against any claim that may be made against Parent or the Exchange
 Agent with respect to such Company Certificate alleged to have been lost,
stolen, or destroyed.                                                   

1.6  EXCHANGE OF MERGER SUBSIDIARY COMMON STOCK.  From and after the    
Effective Time, each outstanding certificate previously representing shares of  
Merger Subsidiary Common Stock shall be deemed for all purposes to evidence     
ownership of and to represent the number of shares of Surviving Corporation     
Common Stock into which such shares of Merger Subsidiary Common Stock shall have
been converted, such conversion to be on the basis of one share of Surviving    
Corporation Common Stock for each share of Merger Subsidiary Common Stock.      
Promptly after the Effective Time, the Surviving Corporation shall issue to     
Parent a stock certificate or certificates representing such shares of Surviving
Corporation Common Stock in exchange for the certificate or certificates that   
formerly represented shares of Merger Subsidiary Common Stock, which shall be   
canceled.                                                                       

1.7  CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION.  The    
Certificate of Incorporation of the Company, as in effect immediately prior to  
the Effective Time, shall be amended as set forth on EXHIBIT A attached hereto, 
and shall, as amended, subject to Section                                       

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5.21, be the Certificate of Incorporation of the Surviving Corporation until    
thereafter amended in accordance with applicable law.                           

   1.8  BYLAWS OF THE SURVIVING CORPORATION.  The Bylaws of the Company, as in
effect immediately prior to the Effective Time, shall, subject to Section 5.21, 
be the Bylaws of the Surviving Corporation until thereafter amended in          
accordance with applicable law.                                                 

    1.9  DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.  The directors and
officers of Merger Subsidiary immediately prior to the Effective Time shall be  
the directors and officers, respectively, of the Surviving Corporation until    
their respective successors shall be duly elected and qualified.                

ARTICLE 2 CLOSING 

2.1  TIME AND PLACE.  Subject to the satisfaction or waiver of the      
provisions of Article 6, the closing of the Merger (the "Closing") shall take   
place at 1:00 p.m., local time, on the date that the Required Company           
Stockholder Vote (as defined in Section 3.2) is obtained, or as soon thereafter 
as, and in any event no later than the second business day after, all conditions
to Closing have been satisfied or waived, or on such other date and/or at such  
other time as Parent and the Company may mutually agree. The date on which the  
Closing actually occurs is herein referred to as the "Closing Date." The Closing
shall take place at the corporate headquarters offices of Parent, or at such    
other place or in such other manner (e.g., by facsimile exchange of signature   
pages with originals to promptly follow by overnight delivery) as the parties   
hereto may agree.                                                               

  2.2  FILINGS AT THE CLOSING.  At the Closing, subject to the provisions of
Article 6, Parent, Merger Subsidiary, and the Company shall cause the           
Certificate of Merger to be filed in accordance with the provisions of Section  
252 of the DGCL, and take any and all other lawful actions and do any and all   
other lawful things necessary to cause the Merger to become effective.          

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

Except: (i) as set forth in a document of even date herewith and        
concurrently delivered herewith (the "Company Disclosure Schedule") or (ii) as  
specifically described through express disclosure of current, specific facts set
forth in the Company's Annual Report on Form 10-K for the fiscal year ended     
January 31, 1998 or in any other filing by the Company with the SEC (as defined 
in Section 3.4) filed after the date of filing such Form 10-K and prior to the  
date hereof (for purposes of clauses (i) and (ii) above, disclosures in the     
Company Disclosure Schedule and such Company SEC filings shall be deemed to     
qualify or limit only those particular representations and warranties set forth 
in this Article 3 to which the relevancy of such disclosures is readily         
apparent), the Company hereby makes the following representations and warranties
to Parent and Merger Subsidiary:                                                

    3.1  ORGANIZATION.  The Company and each subsidiary (referred to herein with
respect to the Company or Parent, as applicable, as a "Subsidiary") of the      
Company is an entity duly organized, validly existing, and in good standing     
(where such concept is recognized) under the laws of its respective jurisdiction
of organization and has all requisite corporate power and authority to own,     
lease, and operate its properties and to carry on its business as now being     
conducted, except where the failure to be so organized, existing or in good     
standing or to have such corporate power and authority would not, individually  
or in the aggregate, have a Company Material Adverse Effect (as defined below). 
The Company and each Subsidiary is duly qualified and in good standing to do    
business in each jurisdiction in which the property owned, leased, or operated  
by it or the nature of the business conducted by it makes such qualification    
necessary, except where the failure to be so qualified or in good standing would
not have a Company Material Adverse Effect. "Company Material Adverse Effect"   
means an effect that is, or at the time of such effect it is probable that the  
effect will be, materially adverse: (i) to the business, results of operation,  
or financial condition of the Company and its Subsidiaries,                     

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considered as a whole; (ii) to the ability of the Surviving Corporation to      
conduct such business, as presently conducted, following the Effective Time or  
the ability of Parent to derive the benefits of owning all of the stock of the  
Surviving Corporation; or (iii) to the Company's ability to perform any of its  
material obligations under this Agreement or to consummate the Merger; PROVIDED,
HOWEVER, that none of the following shall be deemed to have a Material Adverse  
Effect on the Company: (A) a change in the market price or trading volume of the
Company Common Stock, (B) a failure by the Company to meet any published        
securities analyst estimates of revenue or earnings for any period ending or for
which earnings are released on or after the date of this Agreement and prior to 
the Closing, (C) an event, violation, inaccuracy, circumstance or other matter  
that results from conditions affecting the U.S. or world economy, (D) an event, 
violation, inaccuracy, circumstance or other matter that results from conditions
affecting the powertrain testing or instrumentation industry generally, (E) an  
event, violation, inaccuracy, circumstance or other matter that results         
primarily from the announcement or the pendency of the Merger or the            
transactions contemplated by this Agreement or (F) an event violation,          
inaccuracy, circumstance or other matter that results from the taking of any    
action required or permitted by this Agreement. The jurisdictions in which the  
Company and each Subsidiary are incorporated are listed in the Company          
Disclosure Schedule. The Company has heretofore delivered or made available to  
Parent or its advisers complete and accurate copies of the Certificate of       
Incorporation and Bylaws of the Company, as currently in effect, and of the     
organizational documents and agreements defining the rights of the Company or   
any Subsidiary with respect to any material joint ventures, partnerships or     
other business in which the Company owns less than substantially all of the     
outstanding equity interest. As of the date hereof, neither the Company nor any 
Subsidiary, directly or indirectly, owns or controls or has any material equity,
partnership, or other similar ownership interest in any corporation,            
partnership, joint venture, or other business association or entity that is     
material to the Company and its Subsidiaries, considered as a whole.            

3.2  AUTHORIZATION.  The Company has all necessary corporate power and  
authority to execute and deliver this Agreement and, subject to obtaining the   
necessary approval of its stockholders, to consummate the transactions          
contemplated hereby. The execution and delivery by the Company of this Agreement
and the other agreements contemplated hereby to which the Company is a party,   
and the consummation by the Company of the transactions contemplated hereby and 
thereby, have been duly and validly authorized and approved by the Company's    
Board of Directors, no other corporate proceedings on the part of the Company,  
other than a meeting of the Company's stockholders (the "Company Stockholders'  
Meeting"), are necessary to authorize this Agreement, and, subject to obtaining 
the approval and adoption of this Agreement and approval of the Merger by a     
majority of the shares of the Company Common Stock outstanding as of the record 
date of the Company Stockholders' Meeting (the "Required Company Stockholder    
Vote"), no other corporate action on the part of the Company is necessary to    
consummate the transactions contemplated hereby. The Merger has been declared   
advisable by the Board of Directors of the Company. This Agreement has been duly
and validly executed and delivered by the Company and, assuming due execution   
and delivery by the other parties hereto, constitutes the valid and binding     
obligation of the Company, enforceable against the Company in accordance with   
its terms, subject to laws of general application relating to bankruptcy,       
insolvency, and the relief of debtors and rules of law governing specific       
performance, injunctive relief, or other equitable remedies.                    

   3.3  CAPITALIZATION.  As of the close of business on February 26, 1999, the
authorized capital stock of the Company consisted of (i) 25,000,000 shares of   
Company Common Stock, $.001 par value per share, of which 2,242,179 were issued 
and outstanding and 90,200 shares were held in the Company's treasury, and (ii) 
2,500,000 shares of Company Preferred Stock, none of which were issued or       
outstanding. All issued and outstanding shares of capital stock of each         
Subsidiary are owned, beneficially and of record, by the Company, free and clear
of any mortgage, pledge, security interest, encumbrance, lien or other charge of
any kind ("Lien") that would materially affect the Company's interest in such   
shares. All issued and outstanding shares of Company Common Stock have been     
validly                                                                         

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issued, are fully paid and nonassessable, and have not been issued in violation 
of and are not currently subject to any preemptive rights. As of the close of   
business on February 26, 1999, except for (i) Company Options to purchase an    
aggregate total of 51,000 shares of Company Common Stock not granted pursuant to
the 1991 Stock Option Plan or 1991 Outside Directors Stock Option Plan          
(collectively, the "Stock Option Plans") and that are listed, together with     
their respective exercise prices, in the Company Disclosure Schedule, and (ii)  
Company Options to purchase an aggregate total of 637,051 shares of Company     
Common Stock that were granted pursuant to the Stock Option Plans and that are  
listed, together with their respective exercise prices, in the Company          
Disclosure Schedule, there were not any outstanding or authorized subscriptions,
options, warrants, calls, rights, convertible securities, commitments,          
restrictions, arrangements, or any other agreements of any character to which   
the Company or any Subsidiary was a party that, directly or indirectly, (a)     
obligated the Company or any Subsidiary to issue any shares of capital stock or 
any securities convertible into, or exercisable or exchangeable for, or         
evidencing the right to subscribe for, any shares of capital stock, (b) called  
for or related to the sale, pledge, transfer, or other disposition or           
encumbrance by the Company or any Subsidiary of any shares of its capital stock,
or (c) related to the voting or control of such capital stock. The Company      
Disclosure Schedule sets forth a complete and accurate list of all stock        
options, warrants, and other rights to acquire Company Common Stock that were   
outstanding as of February 26, 1999, including the name of the holder, the date 
of grant, acquisition price, number of shares, exercisability schedule, and, in 
the case of options, the type of option under the Code. No consent of holders or
participants under the Stock Option Plans is required to carry out the          
provisions of Section 1.3. All actions, if any, required on the part of the     
Company under the Stock Option Plans to allow for the treatment of Company      
Options as is provided in Section 1.3, have been, or prior to the Closing will  
be, validly taken by the Company.                                               

3.4  REPORTS AND FINANCIAL STATEMENTS.  The Company has filed all forms,
reports, registration statements, and other documents required to be filed by it
with the SEC since February 1, 1995 (such forms, reports, registration          
statements, and documents, together with any amendments thereto, are referred to
as the "Company SEC Filings"). As of their respective dates, the Company SEC    
Filings (i) complied as to form in all material respects with the applicable    
requirements of the Securities Act of 1933, and the rules and regulations       
thereunder (the "1933 Act") and the Securities Exchange Act of 1934 (the "1934  
Act"), as the case may be, and (ii) did not contain any untrue statement of a   
material fact or omit to state a material fact required to be stated therein or 
necessary to make the statements made therein, in light of the circumstances    
under which they were made, not misleading. The audited financial statements    
included or incorporated by reference or to be included or incorporated by      
reference in the Company SEC Filings, including but not limited to the Company's
audited financial statements at and for the year ended January 31, 1999 (the    
"Company January 31, 1999 Financials"), and the unaudited interim financial     
statements at and for periods commencing on or after February 1, 1999, to be    
included or incorporated by reference in the forms, reports, registration       
statements and other documents filed by the Company with the SEC (i) were or    
will be prepared in accordance with generally accepted accounting principles    
(except, in the case of unaudited statements, as permitted by Form 10-Q filed   
with the SEC) applied on a consistent basis during the periods involved (except 
as may be indicated therein or in the notes thereto), subject, in the case of   
unaudited interim financial statements, to the absence of notes and to year-end 
adjustments, (ii) complied or will comply as of their respective dates in all   
material respects with applicable accounting requirements and the published     
rules and regulations of the SEC with respect thereto, and (iii) fairly present 
or will fairly present in all material respects the consolidated financial      
position of the Company and its consolidated subsidiaries as of the dates       
thereof and the consolidated income, cash flows, and changes in stockholders'   
equity of the Company and its consolidated subsidiaries for the periods         
involved, except as otherwise noted therein and subject, in the case of         
unaudited statements, to normal year-end audit adjustments. The statements of   
operations included in or to be included in the audited or unaudited interim    
financial statements in the Company SEC Filings do not contain and will not     
contain any items                                                               

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of special or nonrecurring income or any other income not earned in the ordinary
course of business required to be disclosed separately in accordance with       
generally accepted accounting principles, except as expressly specified in the  
applicable statement of operations or notes thereto.                            

3.5  ABSENCE OF UNDISCLOSED LIABILITIES.  Neither the Company nor any   
Subsidiary has any liabilities or obligations of any nature (whether absolute,  
accrued, contingent or otherwise) of the type required to be reflected on or    
reserved against in, or disclosed in the notes to, a balance sheet prepared in  
accordance with U.S. generally accepted accounting principles except: (a)       
liabilities or obligations that will be accrued or reserved against in the      
audited consolidated balance sheet of the Company and its consolidated          
subsidiaries as of January 31, 1999 contained in the Company January 31, 1999   
Financials (the "Company Audited Balance Sheet") or referred to in the notes    
thereto, (b) liabilities incurred in the ordinary course of business since      
January 31, 1999, and (c) liabilities or obligations that would not have a      
Company Material Adverse Effect.                                                

    3.6  CONSENTS AND APPROVALS.  Except for: (i) any applicable requirements of
the 1933 Act, the 1934 Act, state securities laws, the Hart-Scott-Rodino        
Antitrust Improvements Act of 1976 and the regulations thereunder (the "HSR     
Act"), and the antitrust, competition, foreign investment, or similar laws of   
any foreign countries or supranational commissions or boards that require       
pre-merger notifications or filings with respect to the Merger (collectively,   
"Foreign Merger Laws"), (ii) obtaining the Required Company Stockholder Vote,   
(iii) the filing and recordation of appropriate merger documents as required by 
the DGCL, the execution and delivery by the Company of this Agreement and the   
other agreements contemplated hereby to which the Company is a party and the    
consummation by the Company of the transactions contemplated hereby and thereby 
will not: (a) violate any provision of the Certificate or Articles of           
Incorporation or Bylaws of the Company or any Subsidiary; (b) violate in any    
material way any material statute, rule, regulation, order, or decree of any    
federal, state, local, or foreign governmental or regulatory body or authority  
(a "Governmental Body") or any nongovernmental self-regulatory agency by which  
the Company or any Subsidiary, or any of their respective properties or assets  
may be bound; (c) require any filing by the Company with or permit, consent, or 
approval to be obtained by the Company from any Governmental Body or any        
nongovernmental self-regulatory agency; or (d) result in any violation or breach
of, or constitute (with or without due notice or lapse of time or both) a       
default under, result in the loss of any material benefit under, or give rise to
any right of termination, cancellation, increased payments, or acceleration     
under, or result in the creation of any Lien (as defined in Section 3.3) on any 
of the properties or assets of the Company or any Subsidiary under, any of the  
terms, conditions, or provisions of any material note, bond, mortgage,          
indenture, license, franchise, permit, authorization, agreement, or other       
instrument or obligation to which the Company or any Subsidiary is a party, or  
by which it or any of its properties or assets may be bound, except, in the case
of clauses (b), (c) and (d), for any such filings, permits, consents or         
approvals or violations, breaches, defaults, or other occurrences that could not
reasonably be expected to prevent or delay consummation of any of the           
transactions contemplated hereby in any material respect, or otherwise prevent  
the Company from performing its obligations under this Agreement in any material
respect, and would not have a Company Material Adverse Effect.                  

3.7  COMPLIANCE WITH LAWS.  Neither the Company nor any Subsidiary is in
default or violation in any material respect of any applicable federal, state,  
local, or foreign laws, ordinances, regulations, published interpretations,     
judgments, decrees, injunctions, permits, licenses, certificates, governmental  
requirements, orders, or other similar items of any court or other Governmental 
Body (and including those of any nongovernmental self-regulatory agency and     
including environmental laws or regulations), except for such defaults or       
violations that would not have a Company Material Adverse Effect.               

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3.8  LITIGATION.                                                        

(a) As of the date of this Agreement, there is no Merger-Related
  Proceeding (as defined below) pending, or to the knowledge of the Company,
  threatened in writing against the Company. For purposes of this Agreement,
"Merger-Related Proceeding" shall mean any meritorious asserted claim,  
   action, suit, proceeding, governmental investigation or governmental review
of any kind: (i) challenging or seeking to prevent, enjoin or delay the 
  Merger or any of the other transactions contemplated by this Agreement, or
    (ii) seeking material damages from the Company or any of its Subsidiaries or
  from Parent or any of its subsidiaries in connection with the consummation
or anticipated consummation of the Merger.                              

        (b) There are no asserted claims, actions, suits, proceedings or, to the
knowledge of the Company, governmental investigations or governmental   
   reviews of any kind pending, or to the knowledge of the Company, threatened
against the Company or any Subsidiary or any asset or property of the   
   Company or any Subsidiary, other than Merger-Related Proceedings and except
    for such claims, actions, suits, proceedings, governmental investigations or
   governmental reviews that would not have a Company Material Adverse Effect.

   3.9  ABSENCE OF MATERIAL ADVERSE CHANGES.  Between January 31, 1999 and the
date hereof, there has not been any (a) Company Material Adverse Effect; (b)    
damage, destruction, or loss, not covered by insurance, that would have a       
Company Material Adverse Effect; (c) material change by the Company or any      
Subsidiary in accounting methods or principles used for financial reporting     
purposes, except as required by a change in applicable law or generally accepted
accounting principles and concurred with by the Company's independent public    
accountants; or (d) agreement, whether in writing or otherwise, to take any     
action described or referenced in this Section 3.9.                             

3.10  OFFICERS, DIRECTORS AND EMPLOYEES.  Prior to the date hereof, the 
Company has provided to Parent a list that completely and accurately sets forth,
as of the date hereof, the name and current annual salary rate of each current  
officer of the Company whose total remuneration for the last fiscal year was, or
for the current fiscal year has been set at, in excess of $100,000, together    
with a summary of the bonuses, commissions, additional compensation, and other  
like cash benefits, if any, paid or payable to such persons for the last fiscal 
year and proposed for the current fiscal year. The Company Disclosure Schedule  
completely and accurately sets forth (i) the names of all former officers of the
Company whose employment with the Company has terminated either voluntarily or  
involuntarily during the 12-month period preceding the date of this Agreement;  
and (ii) the names of the officers (with all positions and titles indicated) and
directors of the Company as of the date hereof. Except as would not have a      
Company Material Adverse Effect: (i) no unfair labor practice complaint against 
the Company or any Subsidiary is pending before the National Labor Relations    
Board, and there is no labor strike, slowdown or stoppage pending or, to the    
knowledge of the Company, threatened in writing against or involving the Company
or any Subsidiary; (ii) no unionizing efforts have, to the knowledge of the     
Company, been made by employees of the Company or any Subsidiary; (iii) neither 
the Company nor any Subsidiary is a party to or subject to any collective       
bargaining agreement, and no collective bargaining agreement is currently being 
negotiated by the Company or any Subsidiary; and (iv) there is no labor dispute 
pending or, to the knowledge of the Company, threatened, between the Company or 
any Subsidiary and its employees.                                               

    3.11  TAXES.  Except for such matters that would not have a Company Material
Adverse Effect, (i) the Company and each Subsidiary have filed, or have obtained
extensions to file (which extensions have not expired without filing), all      
state, local, United States, foreign, or other tax reports and returns required 
to be filed by any of them, (ii) the Company and each Subsidiary have duly paid,
or accrued on their books of account, all taxes (including estimated taxes)     
shown as due on such reports and returns (or such extension requests), or       
assessed against them, other than taxes being contested in good faith in proper 
proceedings, and (iii) the liabilities and reserves for taxes which will be     
reflected on the                                                                

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Company Audited Balance Sheet will be adequate to cover all taxes payable by the
Company and its Subsidiaries for all taxable periods and portions thereof ending
on or before the dates thereof. To the Company's knowledge, no tax audits are   
pending against and no claims for taxes have been received in writing by the    
Company or any of its Subsidiaries, other than audits and claims that would not 
have a Company Material Adverse Effect. Neither the Company nor any Subsidiary  
has, with regard to any assets or property held, acquired or to be acquired by  
any of them, filed a consent to the application of Section 341(f)(2) of the     
Code. Neither the Company nor any of its Subsidiaries has taken or agreed to    
take any action (other than actions contemplated by this Agreement) that would  
prevent the Merger from constituting a reorganization qualifying under Section  
368(a) of the Code. The Company is not aware of any agreement, plan or other    
circumstance that would prevent the Merger from so qualifying under Section     
368(a) of the Code.                                                             

For the purposes of this Agreement, "tax" shall mean and include taxes, duties, 
withholdings, assessments, and charges assessed or imposed by any governmental  
authority (together with any interest, penalties and additions to tax imposed   
with respect thereto), including but not limited to all federal, state, county, 
local, and foreign income, profits, gross receipts, import, ad valorem, real and
personal property, franchise, license, sales, use, value added, stamp, transfer,
withholding, payroll, employment, excise, custom, duty, and any other taxes,    
obligations and assessments of any kind whatsoever; "tax" shall also include any
liability for taxes arising as a result of being (or ceasing to be) a member of 
any affiliated, consolidated, combined, or unitary group as well as any         
liability for taxes under any tax allocation, tax sharing, tax indemnity, or    
similar agreement.                                                              

    3.12  CONTRACTS.  The Company Disclosure Schedule lists, and the Company has
heretofore furnished to Parent complete and accurate copies of (or, if oral, the
Company Disclosure Schedule states all material provisions of), every           
employment, consulting, severance or change of control agreement or arrangement 
for the benefit of any director, officer, employee, other person or stockholder 
of the Company or any Subsidiary or any affiliate thereof in effect as of the   
date of this Agreement to which the Company or any Subsidiary is a party or by  
which the Company or any Subsidiary or any of their properties or assets is     
bound. Neither the Company nor any Subsidiary is in material violation of or in 
default under any contract, plan, agreement, understanding, arrangement or      
obligation that is material to the Company and its Subsidiaries, considered as a
whole, except for such violations or defaults that would not have a Company     
Material Adverse Effect. As of the date of this Agreement, neither the Company  
nor any Subsidiary is a party to any contract, plan, agreement, understanding,  
arrangement or obligation (i) which materially restricts the Company's, or after
the Merger would materially restrict the Surviving Corporation's or Parent's,   
ability to conduct any material line of business currently conducted by the     
Company, (ii) which imposes on the Company or any Subsidiary material           
obligations, the non-performance of which would have a Company Material Adverse 
Effect, that are not reflected in the Company's financial statements included   
within the Company's SEC Filings, or (iii) that would be required to be filed   
with the SEC in a filing to which paragraph (b)(10) of Item 601 of Regulation   
S-K of the Rules and Regulations of the SEC is applicable, which has not been so
filed.                                                                          

3.13  INTELLECTUAL PROPERTY RIGHTS.  For purposes of this Section,      
"Intellectual Property" shall mean patents, mask works, trademarks, trade names,
service marks, copyrights, know-how, trade secrets and other proprietary        
information, the loss, impairment or misappropriation of which, either          
individually or in the aggregate, would have a Company Material Adverse Effect, 
and all applications for or registrations of any of the foregoing. Except as set
forth in the Company Disclosure Schedule, the Company and its Subsidiaries own  
or have a valid license to (or otherwise possess legally enforceable rights to  
use) the Intellectual Property used in or necessary for the conduct of the      
Company's business as conducted prior to the date of this Agreement ("Company   
Intellectual Property"), free and clear of any Lien (as defined in Section 3.3, 
but excluding licenses) that would have a Company Material Adverse Effect. As of
the date of this Agreement, the Company Disclosure                              

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Schedule contains a complete and accurate list of (i) all patents, mask works,  
trademarks (with a separate listing of registered and unregistered trademarks), 
trade names, service marks and registered copyrights in the Company Intellectual
Property, (ii) all applications and registrations therefor, and (iii) all       
licenses or other agreements pursuant to which the Company grants any rights    
relating to Company Intellectual Property to a third party (other than end-user 
licenses). As of the date of this Agreement, the Company Disclosure Schedule    
contains a list of all licenses or agreements from a third party to the Company 
or any Subsidiary relating to any Intellectual Property that the Company is     
licensed or otherwise authorized by such third parties to use, distribute or    
otherwise exploit (other than any item of Intellectual Property generally       
available on standard terms and conditions). To the knowledge of the Company, no
claim is being asserted and no person is threatening in a writing delivered to  
the Company or a Subsidiary to assert a claim, with respect to the use of the   
Company Intellectual Property owned by the Company or challenging or questioning
the validity or effectiveness of any license or agreement with respect to any   
Company Intellectual Property, except for such claims that would not have a     
Company Material Adverse Effect. To the knowledge of the Company, neither the   
use by the Company or any Subsidiary of the Company Intellectual Property in the
present conduct of its business nor any product or service of the Company or any
Subsidiary infringes on the valid intellectual property rights of any person in 
a manner that would have a Company Material Adverse Effect. Except as would not 
have a Company Material Adverse Effect, (i) unless provided otherwise in the    
Company Disclosure Schedule, all applications listed in the Company Disclosure  
Schedule are still pending in good standing and have not been abandoned, and    
(ii) to the knowledge of the Company, the Company Intellectual Property is not  
being challenged in any judicial or administrative (excluding any patent-office 
or registration) proceeding. To the knowledge of the Company, no person or      
entity, nor such person's or entity's business or products has infringed, or    
misappropriated any Company Intellectual Property, or currently is infringing,  
or misappropriating any Company Intellectual Property, except as would not have 
a Company Material Adverse Effect.                                              

3.14  BENEFIT PLANS.                                                    

       (a) Except as set forth on the Company Disclosure Schedule, neither the
Company nor any Subsidiary sponsors, maintains, contributes to, or has, 
    during the five year period ending on the date of this Agreement, sponsored,
maintained, or contributed to or been required to contribute to, any    
    "employee pension benefit plan" ("Pension Plan"), as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as 
  amended ("ERISA"), including, solely for the purpose of this subsection, a
  plan excluded from coverage by Section 4(b)(5) of ERISA. Each such Pension
Plan presently maintained by the Company or any Subsidiary is, in all   
 material respects, in compliance with applicable provisions of ERISA, the
Code, and other applicable law and the Company or such Subsidiary has   
performed all of its obligations under such Pension Plan except for such
obligations that would not have a Company Material Adverse Effect.      

(b) Neither the Company nor any Subsidiary sponsors, maintains, 
 contributes to, or has, during the five year period ending on the date of
    this Agreement, sponsored, maintained, or contributed to or been required to
contribute to, any Pension Plan that is subject to Title IV of ERISA.   

       (c) Except as set forth on the Company Disclosure Schedule, neither the
Company nor any Subsidiary sponsors, maintains, or contributes to any   
    "employee welfare benefit plan" ("Welfare Plan"), as such term is defined in
 Section 3(1) of ERISA, whether insured or otherwise, and any such Welfare
Plan presently maintained by the Company or any Subsidiary is, in all   
    material respects, in compliance with the provisions of ERISA, the Code, and
  all other applicable laws, including, but not limited to, Section 4980B of
the Code and the regulations thereunder, and Part 6 of Title I of ERISA.
    Neither the Company nor any Subsidiary has established or contributed to any
    "voluntary employees' beneficiary association" within the meaning of Section
501(c)(9) of the Code.                                                  

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       (d) Except as set forth on the Company Disclosure Schedule, neither the
Company nor any Subsidiary currently maintains or contributes to any    
  material oral or written bonus, profit-sharing, compensation (incentive or
otherwise), commission, stock option, or other stock-based compensation,
   retirement, severance, change of control, vacation, sick or parental leave,
dependent care, deferred compensation, cafeteria, disability,           
hospitalization, medical, death, retiree, insurance, or other benefit or
welfare or other similar plan, policy, agreement, trust, fund, or       
arrangement providing for the remuneration or benefit of all or any     
    employees, directors or any other person, that is neither a Pension Plan nor
a Welfare Plan (collectively, the "Compensation Plans").                

    (e) With respect to the Pension Plans, Welfare Plans or Compensation
Plans, no event has occurred and, to the knowledge of the Company, there
 exists no condition or set of circumstances, in connection with which the
  Company or any of its Subsidiaries could be subject to any liability under
the terms of such Plans (other than the payment of benefits thereunder),
ERISA, the Code or any other applicable law which would have a Company  
Material Adverse Effect.                                                

   (f) The Internal Revenue Service has issued favorable determination
letters with respect to all presently maintained Company and Subsidiary 
   Pension Plans that are intended to be qualified under Section 401(a) of the
Code, or has applied to the Internal Revenue Service for such a         
  determination letter prior to the expiration of the requisite period under
  applicable Treasury Regulations or Internal Revenue Service pronouncements
in which to apply for such a determination and to make any amendments   
    necessary to obtain a favorable determination, or has been established under
   a standardized prototype plan for which an Internal Revenue Service opinion
    letter has been obtained by the plan sponsor and is valid as to the adopting
employer. The Company has made available to Parent the written documents
 setting forth the terms of all Pension Plans, Welfare Plans, Compensation
    Plans, and related agreements, and complete and accurate copies of the three
most recent annual reports (Form 5500), the most recent favorable       
    determination opinion or letters, current summary plan descriptions, and all
    employee handbooks or manuals. The Company has provided to Parent (i) copies
  of all employment agreements with officers of any of the Company, its U.S.
   Subsidiaries or, to the extent reasonably available, the Company's non-U.S.
   Subsidiaries (or copies of forms of agreements setting forth representative
employment terms and conditions); (ii) copies of all material severance,
   bonus or incentive agreements, programs and policies of any of the Company,
 any U.S. Subsidiary or, to the extent reasonably available, the Company's
 non-U.S. Subsidiaries with or relating to any of its employees; and (iii)
  copies of all plans, programs, agreements and other arrangements of any of
    the Company, any U.S. Subsidiary or, to the extent reasonably available, the
Company's non-U.S. Subsidiaries with or relating to any of its employees
  which contain change in control provisions. With respect to any items that
 would be described in the immediately preceding sentence but for the fact
that such copies relate to non-U.S. Subsidiaries and are not reasonably 
 available to the Company, the Company (i) shall deliver copies thereof to
Parent prior to the Effective Time, and (ii) represents and warrants to 
Parent that such items will not, individually or in the aggregate, be   
material to the Company and its Subsidiaries.                           

      (g) The execution by the Company of, and performance by the Company of
  the transactions contemplated in, this Agreement will not (either alone or
 upon the occurrence of any additional or subsequent events) constitute an
event under any Pension Plan, Welfare Plan, Compensation Plan, or other 
arrangement that will result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,         
distribution, increase in benefits, or obligation to fund benefits. No  
    amount that could be received (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this   
    Agreement by any employee, officer, or director of the Company or any of its
 affiliates who is a "disqualified individual" (as such term is defined in
 Prop. Treas. Reg. Section 1.280G-1) under any Pension Plan, Welfare Plan,

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or Compensation Plan currently in effect would be an "excess parachute  
payment" (as such term is defined in Section 280G(b)(1) of the Code).   

   3.15  MINUTE BOOKS.  The Company has previously made available to Parent or
its representatives all of its minutes of meetings of and corporate actions or  
written consents by the stockholders, Board of Directors, and committees of the 
Board of Directors of the Company since January 1, 1996.                        

    3.16  NO FINDERS.  No act of the Company or any Subsidiary has given or will
give rise to any claim against any of the parties hereto for a brokerage        
commission, finder's fee, or other like payment in connection with the          
transactions contemplated herein, except payments in the amounts specified in   
the Company Disclosure Schedule to those parties identified thereon who have    
acted as a finder for the Company or have been retained by the Company as       
financial advisors pursuant to the agreements or other documents described in   
the Company Disclosure Schedule, copies of which have been provided or made     
available to Parent or its advisors prior to the date of this Agreement.        

3.17  PROXY STATEMENT.  The Proxy Statement/Prospectus (as defined in   
Section 5.5 hereof) and any amendments or supplements thereto will comply as to 
form in all material respects with all applicable laws, and none of the         
information supplied by the Company specifically for inclusion or incorporation 
therein or in any amendments or supplements thereto, or in any schedules        
required to be filed with the SEC in connection therewith, will, at the date the
Proxy Statement/Prospectus (or any amendment or supplement thereto) is first    
mailed to stockholders, or at the time of the Company Stockholders' Meeting,    
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 were made, not          
misleading; provided, however, that no representation or warranty is made by the
Company with respect to information supplied by Parent specifically for         
inclusion in the Proxy Statement/Prospectus.                                    

   3.18  FAIRNESS OPINION.  The Company has received an opinion from Hambrecht
& Quist to the effect that, as of the date of such opinion, the Per Share Merger
Consideration is fair, from a financial point of view, to the holders of Company
Common Stock or Company Options, and the Company will promptly deliver a copy of
such opinion to Parent.                                                         

3.19  STATE TAKEOVER LAWS.  The Board of Directors of the Company has   
approved the transactions contemplated by this Agreement, such that the         
provisions of Section 203 (entitled "Business Combinations with Interested      
Stockholders") of the DGCL will not apply to this Agreement or any of the       
transactions contemplated hereby or thereby.                                    

3.20  MERGER FILINGS.  The information as to the Company or any of its  
affiliates or stockholders included in the Company's filing, or submitted to    
Parent and Merger Subsidiary for inclusion in their filing, if any, required to 
be submitted under the HSR Act or under any Foreign Merger Laws shall be true,  
correct, and complete in all material respects and shall comply in all material 
respects with the applicable requirements of the HSR Act, the rules and         
regulations issued by the Federal Trade Commission pursuant thereto, and Foreign
Merger Laws.                                                                    

3.21  ENVIRONMENTAL LAWS.  Except as set forth on the Company Disclosure
Schedule, the Company and its U.S. Subsidiaries are each in compliance in all   
material respects with all Applicable Laws with respect to Hazardous Substances.
There is no pending or, to the knowledge of the Company, threatened             
investigation or proceeding with respect to the operations of the Company or any
of its U.S. Subsidiaries as they pertain to Hazardous Substances. Except as set 
forth on the Company Disclosure Schedule, to the knowledge of the Company, there
is and has been no current or past usage or practice of the Company or any of   
its U.S. Subsidiaries with respect to any Hazardous Substances which may support
a claim or cause of action against the Company or any of its U.S. Subsidiaries  
under Applicable Law. For purposes of this Section 3.21, "Applicable Law" means 
all applicable laws, statutes,                                                  

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treaties, rules, codes, ordinances, regulations, permits, certificates, orders  
and licenses of any governmental authority, interpretations of any of the       
foregoing by a governmental authority having jurisdiction with respect thereto, 
and judgments, decrees, injunctions, writs, orders or like action of any court, 
arbitrator or other judicial or quasi-judicial tribunal (including without      
limitation those pertaining to health, safety and the environment); and         
"Hazardous Substances" means any substance, material or waste which is as of the
Closing Date regulated or, on or before the Closing Date, is proposed to be     
regulated, by any governmental authority, as hazardous, polluting or toxic      
pursuant to any Applicable Law.                                                 

3.22  ACCOUNTING MATTERS.  To the knowledge of the Company, neither the 
Company nor any affiliate (as such term is used in Rule 145 under the Securities
Act) of the Company has taken or agreed to take or plans to take any action that
could prevent Parent from accounting for the Merger as a "pooling of interests" 
in accordance with generally accepted accounting principles, Accounting         
Principles Board Opinion No. 16 and all published rules, regulations and        
policies of the SEC.                                                            

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY

    Except (i) as set forth in a document of even date herewith and concurrently
delivered herewith (the "Parent Disclosure Schedule") or (ii) as specifically   
described through express disclosure of current, specific facts set forth in    
Parent's Annual Report on Form 10-K for the fiscal year ended September 30, 1998
or in any other filing by Parent with the SEC filed after the date of filing    
such Form 10-K and prior to the date hereof (for purposes of clauses (i) and    
(ii) above, disclosures in the Parent Disclosure Schedule and such Parent SEC   
filings shall be deemed to qualify or limit only those particular               
representations and warranties set forth in this Article 4 to which the         
relevancy of such disclosures is readily apparent), Parent and Merger Subsidiary
hereby jointly and severally make the following representations and warranties  
to the Company:                                                                 

4.1  ORGANIZATION.  Parent is a corporation duly organized, validly     
existing, and in good standing under the laws of the State of Minnesota. Merger 
Subsidiary is a corporation duly organized and validly existing under the laws  
of the State of Delaware. Each of Parent and Merger Subsidiary has all requisite
corporate power and authority to own, lease, and operate its properties and to  
carry on its business as now being conducted, except where the failure to be so 
organized, existing or in good standing or to have such corporate power and     
authority would not, individually or in the aggregate, have a Parent Material   
Adverse Effect (as defined below). Each of Parent and Merger Subsidiary is duly 
qualified and in good standing to do business in each jurisdiction in which the 
property owned, leased, or operated by it or the nature of the business         
conducted by it makes such qualification necessary, except where the failure to 
be so qualified or in good standing would not have a Parent Material Adverse    
Effect. "Parent Material Adverse Effect" means an effect that is, or at the time
of such effect it is probable that the effect will be, materially adverse (i) to
the business, results of operation, or financial condition of Parent and its    
Subsidiaries, considered as a whole, (ii) to Parent's ability to conduct such   
business, as presently conducted, following the Effective Time, or (iii) to     
Parent's ability to perform any of its material obligations under this Agreement
or to consummate the Merger; provided, however, that none of the following shall
be deemed to have a Material Adverse Effect on Parent: (A) a change in the      
market price or trading volume of the Parent Common Stock, (B) a failure by     
Parent to meet any published securities analyst estimates of revenue or earnings
for any period ending or for which earnings are released on or after the date of
this Agreement and prior to the Closing, (C) an event, violation, inaccuracy,   
circumstance or other matter that results from conditions affecting the U.S. or 
world economy, (D) an event, violation, inaccuracy, circumstance or other matter
that results from conditions affecting the powertrain testing or instrumentation
industry generally, (E) an event, violation, inaccuracy, circumstance or other  
matter that results primarily from the announcement or the pendency of the      
Merger or the transactions contemplated by this Agreement or (F) an event,      
violation, inaccuracy, circumstance or other matter that results from the taking
of any                                                                          

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action required or permitted by this Agreement. Parent has heretofore delivered 
or made available to Company or its advisers complete and accurate copies of the
Articles of Incorporation and Bylaws of Parent, as currently in effect, and of  
the organizational documents and agreements defining the rights of Parent or any
Subsidiary with respect to any material joint ventures, partnerships or other   
business in which Parent owns less than substantially all of the outstanding    
equity interest. As of the date hereof, neither Parent nor any Subsidiary,      
directly or indirectly, owns or controls or has any material equity,            
partnership, or other similar ownership interest in any corporation,            
partnership, joint venture, or other business association or entity that is     
material to Parent and its Subsidiaries, considered as a whole.                 

   4.2  AUTHORIZATION.  Each of Parent and Merger Subsidiary has all necessary
corporate power and authority to execute and deliver this Agreement and to      
consummate the transactions contemplated hereby. The execution and delivery by  
Parent and Merger Subsidiary of this Agreement and the other agreements         
contemplated hereby to which Parent or Merger Subsidiary is a party, and the    
consummation by Parent and Merger Subsidiary of the transactions contemplated   
hereby and thereby, have been duly and validly authorized and approved by the   
Boards of Directors of Parent and Merger Subsidiary and by Parent as the sole   
shareholder of Merger Subsidiary, and no other corporate proceedings on the part
of Parent and Merger Subsidiary, and no vote, consent or approval of Parent's   
shareholders, are necessary to authorize this Agreement or to consummate the    
transactions contemplated hereby. The Merger has been declared advisable by the 
Board of Directors of Merger Subsidiary. This Agreement has been duly and       
validly executed and delivered by each of Parent and Merger Subsidiary and,     
assuming due execution and delivery by the Company, constitutes the valid and   
binding obligation of Parent and Merger Subsidiary, enforceable against each of 
them in accordance with its terms, subject to laws of general application       
relating to bankruptcy, insolvency, and the relief of debtors and rules of law  
governing specific performance, injunctive relief, or other equitable remedies. 

   4.3  CAPITALIZATION.  As of February 26, 1999, the authorized capital stock
of Parent consisted of 64,000,000 shares of Common Stock with a par value of    
$.25 per share, of which there were 18,626,853 shares issued and outstanding.   
The authorized capital stock of Merger Subsidiary consists of 2,500 shares of   
Merger Subsidiary Common Stock, 1,000 of which are issued and outstanding and   
owned by Parent. All issued and outstanding shares of Parent Common Stock and   
Merger Subsidiary Common Stock are, and the shares of Parent Common Stock to be 
issued and delivered in the Merger pursuant to Article 1 hereof shall be, at the
time of issuance and delivery, validly issued, fully paid, nonassessable, and   
free of preemptive rights. The shares of Parent Common Stock to be issued and   
delivered in the Merger pursuant to Article 1 hereof shall be registered under  
the 1933 Act and duly listed for quotation on the Nasdaq National Market,       
subject to official notice of issuance. All issued and outstanding shares of    
capital stock of each Subsidiary of Parent are owned, beneficially and of       
record, by Parent, free and clear of any Lien that would materially affect      
Parent's interest in such shares. As of the close of business on February 25,   
1999, except for options to purchase an aggregate total of 2,845,299 shares of  
Parent Common Stock that were granted pursuant to Parent's 1990 Stock Option    
Plan, 1994 Stock Option Plan or its 1997 Stock Option Plan and that are listed, 
together with their respective exercise prices, in the Parent Disclosure        
Schedule, there were not any outstanding or authorized subscriptions, options,  
warrants, calls, rights, convertible securities, commitments, restrictions,     
arrangements, or any other agreements of any character to which Parent or any   
Subsidiary was a party that, directly or indirectly, (a) obligated Parent or any
Subsidiary to issue any shares of capital stock or any securities convertible   
into, or exercisable or exchangeable for, or evidencing the right to subscribe  
for, any shares of capital stock, (b) called for or related to the sale, pledge,
transfer, or other disposition or encumbrance by Parent or any Subsidiary of any
shares of its capital stock, or (c) related to the voting or control of such    
capital stock.                                                                  

   4.4  CONSENTS AND APPROVALS.  Except for (i) any applicable requirements of
the 1933 Act, the 1934 Act, state securities laws, the NASD, the HSR Act, and   
Foreign Merger Laws, and (ii) the                                               

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filing and recordation of appropriate merger documents as required by the DGCL, 
the execution and delivery by Parent and Merger Subsidiary of this Agreement and
the other agreements contemplated hereby to which Parent and Merger Subsidiary  
are parties, and the consummation of the transactions contemplated hereby and   
thereby will not: (a) violate any provision of the Certificate or Articles of   
Incorporation or Bylaws of Parent or Merger Subsidiary; (b) violate in any      
material way any material statute, rule, regulation, order, or decree of any    
Governmental Body or any nongovernmental self-regulatory agency by which Parent 
or any of its Subsidiaries or any of their respective properties or assets may  
be bound; (c) require any filing by Parent or Merger Subsidiary with or permit, 
consent, or approval to be obtained by Parent or Merger Subsidiary from any     
Governmental Body or any nongovernmental self-regulatory agency; or (d) result  
in any violation or breach of, or constitute (with or without due notice or     
lapse of time or both) a default under, result in the loss of any material      
benefit under, or give rise to any right of termination, cancellation, increased
payments, or acceleration under, or result in the creation of any Lien on any of
the properties or assets of Parent or its Subsidiaries under, any of the terms, 
conditions, or provisions of any material note, bond, mortgage, indenture,      
license, franchise, permit, agreement, or other instrument or obligation to     
which Parent or any of its Subsidiaries is a party, or by which any of them or  
any of their respective properties or assets may be bound, except, in the case  
of clauses (b), (c) and (d), for any such filings, permits, consents or         
approvals or violations, breaches, defaults, or other occurrences that could not
reasonably be expected to prevent or delay consummation of any of the           
transaction contemplated hereby in any material respect, or otherwise prevent   
Parent from performing its obligations under this Agreement in any material     
respect, and would not have a Parent Material Adverse Effect.                   

    4.5  REPORTS AND FINANCIAL STATEMENTS.  Parent has filed all forms, reports,
registration statements, and other documents required to be filed by it with the
SEC since October 1, 1994 (such forms, reports, registration statements and     
other documents, together with any amendments thereto, are referred to as the   
"Parent SEC Filings"). As of their respective dates, the Parent SEC Filings (i) 
complied as to form in all material respects with the applicable requirements of
the 1933 Act and the 1934 Act, as the case may be, and (ii) did not contain any 
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of 
the circumstances under which they were made, not misleading. The audited       
financial statements included or incorporated by reference in the Parent SEC    
Filings, including but not limited to Parent's audited financial statements at  
and for the year ended September 30, 1998 (the "Parent September 30, 1998       
Financials"), and the unaudited interim financial statements at and for periods 
commencing on or after October 1, 1998 included or incorporated by reference in 
the forms, reports, registration statements and other documents filed by Parent 
with the SEC (i) were prepared in accordance with generally accepted accounting 
principles (except, in the case of unaudited statements, as permitted by Form   
10-Q filed with the SEC) applied on a consistent basis during the periods       
involved (except as may be indicated therein or in the notes thereto) subject,  
in the case of unaudited interim financial statements, to the absence of notes  
and to year-end adjustments, (ii) complied as of their respective dates in all  
material respects with applicable accounting requirements and the published     
rules and regulations of the SEC with respect thereto, and (iii) fairly present 
in all material respects the consolidated financial position of Parent and its  
consolidated Subsidiaries as of the dates thereof and the consolidated income,  
cash flows, and changes in shareholders' equity of Parent and its consolidated  
Subsidiaries for the periods involved, except as otherwise noted therein and    
subject, in the case of unaudited statements, to normal year-end audit          
adjustments. The statements of operations included in the audited or unaudited  
interim financial statements in the Parent SEC Filings do not contain any items 
of special or nonrecurring income or any other income not earned in the ordinary
course of business required to be disclosed separately in accordance with       
generally accepted accounting principles, except as expressly specified in the  
applicable statement of operations or notes thereto.                            

4.6  REGISTRATION STATEMENT.  The Registration Statement (as defined in 
Section 5.5 hereof) and any amendments or supplements thereto will comply as to 
form in all material respects                                                   

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with the 1933 Act, and none of the information supplied by Parent specifically  
for inclusion or incorporation therein or in any amendments or supplements      
thereto, or in any schedules required to be filed with the SEC in connection    
therewith, will, at the time the Registration Statement becomes effective, at   
the date the Proxy Statement/Prospectus (or any amendment or supplement thereto)
is first mailed to the Company's stockholders or at the time of the Company     
Stockholders' Meeting, or at 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 were made, not misleading, provided, however,    
that no representation or warranty is made by Parent with respect to information
supplied by or on behalf of the Company or any affiliate of the Company         
specifically for inclusion in the Registration Statement.                       

 4.7  NO FINDERS.  No act of Parent or Merger Subsidiary has given or will
give rise to any claim against any of the parties hereto for a brokerage        
commission, finder's fee, or other like payment in connection with the          
transactions contemplated herein.                                               

    4.8  ABSENCE OF UNDISCLOSED LIABILITIES.  To the best of Parent's knowledge,
neither Parent nor any of its Subsidiaries has any liabilities or obligations of
any nature (whether absolute, accrued, contingent or otherwise) of the type     
required to be reflected on or reserved against in, or disclosed in the notes   
to, a balance sheet prepared in accordance with U.S. generally accepted         
accounting principles except: (a) liabilities or obligations that are accrued or
reserved against in the audited consolidated balance of Parent as of September  
30, 1998 contained in the Parent SEC Filings or in the unaudited consolidated   
balance sheet of Parent as of December 31, 1998 contained in Parent's Quarterly 
Report on Form 10-Q for the fiscal quarter ended December 31, 1998              
(collectively, the "Parent Balance Sheets") or referred to in the notes thereto,
(b) liabilities incurred in the ordinary course of business since December 31,  
1998 and (c) liabilities or obligations that would not have a Parent Material   
Adverse Effect.                                                                 

    4.9  COMPLIANCE WITH LAWS.  Neither Parent nor any of its Subsidiaries is in
default or violation in any material respect of any applicable federal, state,  
local or foreign laws, ordinances, regulations, published interpretations,      
judgments, decrees, injunctions, permits, licenses, certificates, governmental  
requirements, orders or other similar items of any court or other Governmental  
Body (and including those of any nongovernmental self-regulatory agency and     
including environmental laws or regulations), except for such defaults or       
violations that would not have a Parent Material Adverse Effect.                

4.10  LITIGATION.                                                       

(a) As of the date of this Agreement, there is no Merger-Related
Proceeding pending, or to the knowledge of Parent, threatened in writing
against Parent.                                                         

       (b) There are no asserted claims, actions, suits, proceedings or to the
    knowledge of Parent, governmental investigations governmental reviews of any
  kind pending, or to the knowledge of Parent, threatened in writing against
   Parent or any of its Subsidiaries or any asset or property of Parent or any
 of its subsidiaries, other than Merger-Related Proceedings and except for
such claims, actions, suits, proceedings, governmental investigations or
  governmental reviews that would not have a Parent Material Adverse Effect.

  4.11  ABSENCE OF MATERIAL ADVERSE CHANGES.  Between September 30, 1998 and
the date hereof, there has not been any (a) Parent Material Adverse Effect, (b) 
damage, destruction or loss, not covered by insurance, that would have a Parent 
Material Adverse Effect, (c) material change by Parent or any of its            
Subsidiaries in accounting methods or principles used for financial reporting   
purposes, except as required by a change in applicable law or generally accepted
accounting principles and concurred with by Parent's independent public         
accountants, or (d) agreement, whether in writing or otherwise, to take any     
action described or referenced in this Section 4.11.                            

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  4.12  REORGANIZATION.  Neither Parent nor, to the knowledge of Parent, any
of its Subsidiaries has taken or agreed to take any action (other than actions  
contemplated by this Agreement) that would prevent the Merger from constituting 
a reorganization qualifying under Section 368(a) of the Code. Parent is not     
aware of any agreement, plan or other circumstances that would prevent the      
Merger from so qualifying under Section 368(a) of the Code.                     

    4.13  MERGER FILINGS.  The information as to Parent and Merger Subsidiary or
any of their affiliates or shareholders included in Parent's filing, or         
submitted to the Company for inclusion in its filing, if any, required to be    
submitted under the HSR Act or under any Foreign Merger Laws shall be true,     
correct, and complete in all material respects and shall comply in all material 
respects with the applicable requirements of the HSR Act, the rules and         
regulations issued by the Federal Trade Commission pursuant thereto, and Foreign
Merger Laws.                                                                    

 4.14  ACCOUNTING MATTERS.  To the knowledge of Parent, neither Parent nor
any affiliate (as such term is used in Rule 145 under the Securities Act) of    
Parent has taken or agreed to take or plans to take any action that could       
prevent Parent from accounting for the Merger as a "pooling of interests" in    
accordance with generally accepted accounting principles, Accounting Principles 
Board Opinion No. 16 and all published rules, regulations and policies of the   
SEC.                                                                            

   4.15  TAXES.  Except for such matters that would not have a Parent Material
Adverse Effect, (i) Parent and each Subsidiary have filed, or have obtained     
extensions to file (which extensions have not expired without filing), all      
state, local, United States, foreign, or other tax reports and returns required 
to be filed by any of them, (ii) Parent and each Subsidiary have duly paid, or  
accrued on their books of account, all taxes (including estimated taxes) shown  
as due on such reports and returns (or such extension requests), or assessed    
against them, other than taxes being contested in good faith in proper          
proceedings, and (iii) the liabilities and reserves for taxes which are         
reflected on the Parent Balance Sheets are adequate to cover all taxes payable  
by Parent and its Subsidiaries for all taxable periods and portions thereof     
ending on or before the dates thereof. To Parent's knowledge, no tax audits are 
pending against and no claims for taxes have been received in writing by Parent 
or any of its Subsidiaries, other than audits and claims that would not have a  
Parent Material Adverse Effect. Neither Parent nor any Subsidiary has, with     
regard to any assets or property held, acquired or to be acquired by any of     
them, filed a consent to the application of Section 341(f)(2) of the Code.      
Neither Parent nor any of its Subsidiaries has taken or agreed to take any      
action (other than actions contemplated by this Agreement) that would prevent   
the Merger from constituting a reorganization qualifying under Section 368(a) of
the Code. Parent is not aware of any agreement, plan or other circumstance that 
would prevent the Merger from so qualifying under Section 368(a) of the Code.   

    4.16  CONTRACTS.  Neither Parent nor any Subsidiary is in material violation
of or in default under any contract, plan, agreement, understanding, arrangement
or obligation that is material to Parent and its Subsidiaries, considered as a  
whole, except for such violations or defaults that would not have a Parent      
Material Adverse Effect. As of the date of this Agreement, neither Parent nor   
any Subsidiary is a party to any contract, plan, agreement, understanding,      
arrangement or obligation (i) which materially restricts Parent's, or after the 
Merger would materially restrict the Surviving Corporation's or Parent's,       
ability to conduct any material line of business currently conducted by Parent, 
(ii) which imposes on Parent or any Subsidiary material obligations , the       
non-performance of which would have a Parent Material Adverse Effect, that are  
not reflected in Parent's financial statements included within the Parent SEC   
Filings, or (iii) that would be required to be filed with the SEC in a filing to
which paragraph (b)(10) of Item 601 of Regulation S-K of the Rules and          
Regulations of the SEC is applicable, which has not been so filed.              

4.17  BENEFIT PLANS.                                                    

  (a) Except as set forth on the Parent Disclosure Schedule, neither
Parent nor any subsidiary sponsors, maintains, contributes to, or has,  
during the five year period ending on the date of this                  

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Agreement, sponsored, maintained, or contributed to or been required to 
    contribute to, any "employee pension benefit plan" ("Pension Plan"), as such
  term is defined in Section 3(2) of the Employee Retirement Income Security
    Act of 1974, as amended ("ERISA"), including, solely for the purpose of this
   subsection, a plan excluded from coverage by Section 4(b)(5) of ERISA. Each
 such Pension Plan presently maintained by Parent or any Subsidiary is, in
 all material respects, in compliance with applicable provisions of ERISA,
the Code, and other applicable law and Parent or such Subsidiary has    
performed all of its obligations under such Pension Plan except for such
obligations that would not have a Parent Material Adverse Effect.       

      (b) Neither Parent nor any Subsidiary sponsors, maintains, contributes
to, or has, during the five year period ending on the date of this      
Agreement, sponsored, maintained, or contributed to or been required to 
contribute to, any Pension Plan that is subject to Title IV of ERISA.   

  (c) Except as set forth on the Parent Disclosure Schedule, neither
Parent nor any Subsidiary sponsors, maintains, or contributes to any    
    "employee welfare benefit plan" ("Welfare Plan"), as such term is defined in
 Section 3(1) of ERISA, whether insured or otherwise, and any such Welfare
 Plan presently maintained by Parent or any Subsidiary is, in all material
respects, in compliance with the provisions of ERISA, the Code, and all 
  other applicable laws, including, but not limited to, Section 4980B of the
    Code and the regulations thereunder, and Part 6 of Title I of ERISA. Neither
  Parent nor any Subsidiary has established or contributed to any "voluntary
   employees' beneficiary association" within the meaning of Section 501(c)(9)
of the Code.                                                            

  (d) Except as set forth on the Parent Disclosure Schedule, neither
    Parent nor any Subsidiary currently maintains or contributes to any material
oral or written bonus, profit-sharing, compensation (incentive or       
otherwise), commission, stock option, or other stock-based compensation,
   retirement, severance, change of control, vacation, sick or parental leave,
dependent care, deferred compensation, cafeteria, disability,           
hospitalization, medical, death, retiree, insurance, or other benefit or
welfare or other similar plan, policy, agreement, trust, fund, or       
arrangement providing for the remuneration or benefit of all or any     
    employees, directors or any other person, that is neither a Pension Plan nor
a Welfare Plan (collectively, the "Compensation Plans").                

    (e) With respect to the Pension Plans, Welfare Plans or Compensation
  Plans, no event has occurred and, to the knowledge of Parent, there exists
    no condition or set of circumstances, in connection with which Parent or any
of its Subsidiaries could be subject to any liability under the terms of
   such Plans (other than the payment of benefits thereunder), ERISA, the Code
or any other applicable law which would have a Parent Material Adverse  
Effect.                                                                 

   (f) The Internal Revenue Service has issued favorable determination
letters with respect to all presently maintained Parent and Subsidiary  
   Pension Plans that are intended to be qualified under Section 401(a) of the
Code, or has applied to the Internal Revenue Service for such a         
  determination letter prior to the expiration of the requisite period under
  applicable Treasury Regulations or Internal Revenue Service pronouncements
in which to apply for such a determination and to make any amendments   
    necessary to obtain a favorable determination, or has been established under
   a standardized prototype plan for which an Internal Revenue Service opinion
    letter has been obtained by the plan sponsor and is valid as to the adopting
employer. Parent has made available to the Company the written documents
   setting forth the terms, or with respect to those plans for which a written
  document does not exist, a summary of the material terms, of all presently
maintained Pension Plans, Welfare Plans, Compensation Plans, and related
    agreements, and complete and accurate copies of the three most recent annual
reports (Form 5500), the most recent favorable determination opinion or 
 letters, current summary plan descriptions, and all employee handbooks or
manuals.                                                                

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ARTICLE 5 COVENANTS 

5.1  CONDUCT OF BUSINESS OF THE COMPANY.  Except as contemplated by this
Agreement or as set forth in Section 5.1 of the Company Disclosure Schedule,    
unless Parent shall otherwise consent in writing (such consent not to be        
unreasonably withheld or delayed), during the period from the date of this      
Agreement to the Effective Time, the Company and each Subsidiary will (i)       
conduct its respective operations, to the extent commercially reasonable,       
according to its ordinary and usual course of business and consistent with past 
practice, and (ii) use commercially reasonable efforts to preserve substantially
intact its respective business organization, to keep available the services of  
its respective officers and employees and to maintain satisfactory relationships
with licensors, licensees, suppliers, contractors, distributors, consultants,   
customers, and others having material business relationships with it. The       
Company will promptly advise Parent of any material change in the management,   
present or planned business, properties, liabilities, results of operations, or 
financial condition of the Company or any Subsidiary. The Company will, prior to
distributing or otherwise circulating any notices, directives, or other         
communications directed to all or groups of customers, vendors, employees,      
distributors, or others associated with its business relating to the            
transactions contemplated hereby or to the operation of business after          
consummation of such transactions, consult with Parent and give Parent          
reasonable opportunity to comment thereon. Without limiting the generality of   
the foregoing, and except as otherwise expressly provided in or contemplated by 
this Agreement or as set forth in Section 5.1 of the Company Disclosure         
Schedule, from the date of this Agreement until the Effective Time, neither the 
Company nor any Subsidiary will, without the prior written consent of Parent    
(such consent not to be unreasonably withheld or delayed):                      

      (a) amend its Certificate or Articles of Incorporation or, pursuant to
action by the Company's Board of Directors, amend its Bylaws;           

    (b) authorize for issuance, issue, sell, pledge, or deliver (whether
through the issuance or granting of additional options, warrants,       
  commitments, subscriptions, rights to purchase, or otherwise) any stock of
 any class or any securities convertible into shares of stock of any class
    (other than, so long as treatment of the Merger as a pooling of interests is
    not reasonably expected by Parent's or the Company's independent accountants
to be jeopardized, the (i) issuance of shares of Company Common Stock   
 pursuant to the exercise of stock options outstanding on the date of this
Agreement or granted in accordance with this subsection (b) and (ii) the
issuance, in the ordinary course of business and consistent with past   
practice, of stock options to purchase, at not less than the fair market
   value on the date of grant, up to the number of shares specified in Section
5.1 of the Company Disclosure Schedule).                                

  (c) split, combine, or reclassify any shares of its capital stock,
 declare, set aside, or pay any dividend or other distribution (whether in
cash, stock, or property or any combination thereof) in respect of its  
capital stock; or redeem or otherwise acquire any shares of its capital 
stock or its other securities (other than, so long as treatment of the  
    Merger as a pooling of interests is not jeopardized, pursuant to contractual
   agreements with employees, directors or consultants existing as of the date
of this Agreement); or amend or alter any material term of any of its   
outstanding securities;                                                 

       (d) other than indebtedness incurred in the ordinary course of business
  and consistent with past practice and other than intercompany indebtedness
  or as described in Section 5.1 of the Company Disclosure Schedule, create,
  incur or assume any indebtedness for borrowed money, or assume, guarantee,
endorse, or otherwise agree to become liable or responsible for the     
obligations of any other person, or make any loans, advances or capital 
  contributions to, or investments in, any other person; or create, incur or
assume any Lien on any material asset other than any Lien that would not
 materially adversely affect the Company's or any Subsidiary's rights with
respect thereto;                                                        

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        (e) (i) increase in any manner the compensation of any of its directors,
  officers, employees, or consultants, or accelerate the payment of any such
compensation, except in each case in the ordinary course of business and
 consistent with past practice (including, without limitation, annual year
   end increases and accelerated payments customarily made upon termination of
employment) or consistent with existing contractual commitments or as   
 required by applicable law; (ii) pay or accelerate or otherwise modify in
   any material respect the payment, vesting, exercisability, or other feature
 or requirement of any pension, retirement allowance, severance, change of
 control, stock option, or other employee benefit to any of its directors,
   officers, employees or consultants except as required by any existing plan,
agreement, or arrangement, or as set forth in Section 5.1 of the Company
 Disclosure Schedule; or (iii) except for normal increases in the ordinary
course of business in accordance with its customary past practices or   
consistent with existing contractual commitments or as required by      
applicable laws, commit itself to any additional or increased pension,  
 profit-sharing, bonus, incentive, deferred compensation, group insurance,
   severance, change of control, retirement or other benefit, plan, agreement,
 or arrangement, or to any employment or consulting agreement, with or for
the benefit of any person, or amend any of such plans or any of such    
    agreements in existence on the date hereof (except any amendment required by
    law or that would not materially increase benefits under the relevant plan);

      (f) except in the ordinary course of business and consistent with past
   practice or pursuant to contractual obligations existing on the date hereof
or as described in Section 5.1 of the Company Disclosure Schedule, sell,
transfer, mortgage, or otherwise dispose of or encumber any assets or   
properties material to the Company and its Subsidiaries, considered as a
whole other than any Lien that would not materially adversely affect the
Company's and its Subsidiaries' rights with respect to such assets or   
properties;                                                             

        (g) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other   
manner, any business of any corporation, partnership, joint venture,    
   association, or other business organization or division thereof or (ii) any
  assets that are material, individually or in the aggregate, to the Company
   and its Subsidiaries, except as provided in subsection (h) below and except
 purchases of inventory in the ordinary course of business consistent with
past practice;                                                          

      (h) make or agree to make any new capital expenditure or expenditures,
  except for up to $50,000 of capital expenditures pursuant to the Company's
  budget previously provided to Parent or as described in Section 5.1 of the
Company Disclosure Schedule;                                            

     (i) enter into, amend in any material respect, or terminate any joint
ventures or any other agreements, commitments, or contracts that are    
   material to the Company and its Subsidiaries, considered as a whole (except
    agreements, commitments, or contracts expressly provided for or contemplated
    by this Agreement or for the purchase, sale, or lease of goods, services, or
properties in the ordinary course of business, consistent with past     
practice), except as set forth in Section 5.1 of the Company Disclosure 
Schedule;                                                               

  (j) enter into or terminate, or amend, extend, renew, or otherwise
    modify in any material respect (including, but not limited to, by default or
by failure to act) any material distribution, OEM, independent sales    
representative, noncompetition, licensing, franchise, research and      
development, supply, or similar contract, agreement, or understanding   
(except agreements, commitments, or contracts expressly provided for or 
    contemplated by this Agreement or for the purchase, sale, or lease of goods,
   services, or properties in the ordinary course of business, consistent with
   past practice), or enter into any contract, plan, agreement, understanding,
    arrangement or obligation which materially restricts the Company's, or after
  the Merger would restrict the Surviving Corporation's or Parent's, ability
    to conduct any material line of business, except as set forth in Section 5.1
of the Company Disclosure Schedule;                                     

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   (k) change in any material respect its credit policy as to sales of
inventories or collection of receivables or its inventory consignment   
practices;                                                              

       (l) remove or permit to be removed from any building, facility, or real
property any material machinery, equipment, fixture, vehicle, or other  
personal property or parts thereof, except in the ordinary course of    
    business or unless the same is replaced with similar items of equal quality;

      (m) alter or revise its accounting principles, procedures, methods, or
  practices in any material respect, except as required by applicable law or
  by a change in generally accepted accounting principles and concurred with
by the Company's independent public accountants;                        

(n) institute, settle, or compromise any claim, action, suit, or
proceeding pending or threatened by or against it involving amounts in  
    excess of $50,000 at law or in equity or before any Governmental Body or any
nongovernmental self-regulatory agency;                                 

   (o) knowingly take any action that would render any representation,
    warranty, covenant, or agreement of the Company in this Agreement inaccurate
    or breached such that the conditions in Section 6.2 will not be satisfied as
of the Closing Date; or                                                 

       (p) agree, whether in writing or otherwise, to do any of the foregoing.

5.2  CONDUCT OF BUSINESS OF PARENT.  Except as contemplated by this     
Agreement or as set forth in Section 5.2 of the Parent Disclosure Schedule,     
unless the Company shall otherwise consent in writing (such consent not to be   
unreasonably withheld or delayed), during the period from the date of this      
Agreement to the Effective Time, Parent and each Subsidiary will (i) conduct its
respective operations, to the extent commercially reasonable, according to its  
ordinary and usual course of business and consistent with past practice, and    
(ii) use commercially reasonable efforts to preserve substantially intact its   
respective business organization, to keep available the services of its         
respective officers and employees and to maintain satisfactory relationships    
with licensors, licensees, suppliers, contractors, distributors, consultants,   
customers, and others having material business relationships with it. Without   
limiting the generality of the foregoing, and except as contemplated by this    
Agreement, from the date of this Agreement until the Effective Time, Parent will
not do, and will not permit any of its Subsidiaries to do, any of the following 
without the prior written consent of the Company (such consent not to be        
unreasonably withheld or delayed):                                              

      (a) amend its Certificate or Articles of Incorporation or, pursuant to
action by Parent's Board of Directors, amend its Bylaws;                

    (b) authorize for issuance, issue, sell, pledge, or deliver (whether
through the issuance or granting of additional options, warrants,       
  commitments, subscriptions, rights to purchase, or otherwise) any stock of
 any class or any securities convertible into shares of stock of any class
    (other than, so long as treatment of the Merger as a pooling of interests is
    not reasonably expected by Parent's or the Company's independent accounts to
  be jeopardized, the (i) issuance of shares of Parent Common Stock pursuant
  to the exercise of stock options outstanding on the date of this Agreement
   or granted in accordance with this subsection (b) and (ii) the issuance, in
   the ordinary course of business and consistent with past practice, of stock
  options to purchase, at not less than the fair market value on the date of
grant, up to the number of shares specified in Section 5.2 of the Parent
Disclosure Schedule).                                                   

       (c) combine or reclassify any shares of its capital stock, declare, set
 aside or pay any extraordinary dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its   
capital stock, or redeem or otherwise acquire any shares of its capital 
stock or its other securities (other than, so long as treatment of the  
 Merger as a pooling of interests is not jeopardized, pursuant to Parent's
previously announced stock repurchase program,                          

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or contractual arrangements with employees, directors, or consultants   
 existing as of the date of this Agreement) or amend or alter any material
term of any of its outstanding securities;                              

        (d) acquire or agree to acquire, by merging or consolidating with, or by
  purchasing a substantial portion of the assets of, or by any other manner,
   any business of any corporation, partnership, joint venture, association or
other business organization or division thereof, or otherwise acquire or
 agree to acquire, or dispose of or agree to dispose of, any assets of any
person, which, in each case, could reasonably be expected to delay      
materially the consummation of, or increase materially the risk of      
non-consummation of, the transactions contemplated by this Agreement;   

      (e) except in the ordinary course of business and consistent with past
   practice or pursuant to contractual obligations existing on the date hereof
or as described in Section 5.2 of the Parent Disclosure Schedule, sell, 
transfer, mortgage, or otherwise dispose of or encumber any assets or   
properties material to the Parent and its Subsidiaries, considered as a 
whole other than any Lien that would not materially adversely affect the
Parent's and its Subsidiaries' rights with respect to such assets or    
properties;                                                             

     (f) alter or revise its accounting principles, procedures, methods or
  practices in any material respect, except as required by applicable law or
 regulation or by a change in generally accepted accounting principles and
concurred with by Parent's independent public accountants;              

        (g) knowingly take any action that would result in a failure to maintain
the quotation of Parent Common Stock on the Nasdaq National Market.     

    (h) knowingly take any action, or knowingly fail to take any action,
that would render any representation, warranty, covenant or agreement of
   Parent in this Agreement inaccurate or breached such that the conditions in
Section 6.3 will not be satisfied as of the Closing Date; or            

       (i) agree, whether in writing or otherwise, to do any of the foregoing.

    5.3  NO SOLICITATION.  The Company and its Subsidiaries shall not, and shall
cause their respective officers, directors, employees, representatives, agents, 
or affiliates (including, but not limited to any investment banker, attorney or 
accountant retained by the Company or any Subsidiary) not to, directly or       
indirectly, solicit, knowingly encourage, initiate, or participate in any way in
discussions or negotiations with, or knowingly provide any nonpublic information
to, any corporation, partnership, person, or other entity or group (other than  
Parent or any affiliate or agent of Parent) concerning any proposed Alternative 
Transaction (as defined below), or otherwise knowingly facilitate any effort or 
attempt to propose, make or implement an Alternative Transaction. For purposes  
of this Agreement, "Alternative Transaction" shall mean any of the following    
involving the Company or any Subsidiary: (i) any tender offer, exchange offer,  
merger, consolidation, share exchange, business combination or similar          
transaction; (ii) any transaction or series of related transactions pursuant to 
which any person or entity (or its shareholders), other than Parent, Merger     
Subsidiary or any of their affiliates (a "Third Party") acquires shares (or     
securities exercisable for or convertible into shares) representing more than   
50% of the outstanding shares of any class of capital stock of the Company or   
any Subsidiary; or (iii) any sale, lease, exchange, licensing, transfer or other
disposition pursuant to which a Third Party acquires control of more than 50% of
the assets (including, but not limited to, Intellectual Property assets) of the 
Company and its Subsidiaries taken as a whole (determined by reference to the   
fair market value of such assets), in a single transaction or series of related 
transactions. The Company will immediately terminate all discussions with Third 
Parties concerning any proposed Alternative Transaction, and will request that  
such Third Parties promptly return any confidential information furnished by the
Company in connection with any proposed Alternative Transaction. The Company    
will not waive any provision of any confidentiality, standstill or similar      
agreement entered into with any third party regarding any proposed Alternative  
Transaction, and prior to the Closing shall enforce all                         

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such agreements in accordance with their terms. The Company will promptly       
communicate to Parent the name of the person or entity submitting, and the terms
and conditions of, any proposal or inquiry that it receives after the date      
hereof in respect of any proposed Alternative Transaction or a reasonably       
detailed description of any such information requested from it after the date   
hereof or of any such negotiations or discussions being sought to be initiated  
or continued with the Company after the date hereof in respect of a proposed    
Alternative Transaction.                                                        

The foregoing notwithstanding, this Agreement shall not prohibit the Board of   
Directors of the Company from (i) prior to the Required Company Stockholder     
Vote, furnishing nonpublic information to or entering into discussions or       
negotiations with, any person or entity that makes an unsolicited Superior      
Proposal (as defined below), if, and only to the extent that:                   

       (a) the Board of Directors reasonably and in good faith determines that
   failure to take such action would be inconsistent with the fiduciary duties
of the Board of Directors to its stockholders under applicable law;     

(b) prior to first furnishing nonpublic information to, or first
    entering into any substantive discussions and negotiations with, such person
   or entity after the date hereof, the Company (i) provides written notice to
Parent to the effect that it intends to furnish information to, or enter
   into discussions or negotiations with, a person or entity making a Superior
Proposal, and naming and identifying the person or entity making the    
   Superior Proposal, and (ii) receives from such person or entity an executed
  confidentiality agreement with terms no less favorable to the Company than
  the Confidentiality Agreement (as defined below) entered into with Parent;
and                                                                     

     (c) the Company provides Parent with all non-public information to be
  provided to such person or entity which Parent has not previously received
   from the Company, and the Company keeps Parent informed, on a daily or more
   regular basis if the context requires or Parent so requests, of the status,
   terms and conditions and all other material information with respect to any
such discussions or negotiations; and                                   

(ii) to the extent applicable, complying with Rule 14e-2 or 14d-9 promulgated   
under the 1934 Act with regard to a proposed Alternative Transaction.           

Nothing in this Section shall (x) permit the Company to terminate this Agreement
(except as specifically provided in Article 7 hereof), or (y) permit the Company
to enter into any agreement providing for an Alternative Transaction (other than
as specifically provided in Article 7 hereof, or the confidentiality agreement  
as provided, and in the circumstances and under the conditions set forth, above)
for as long as this Agreement remains in effect.                                

For purposes of this Agreement, a "Superior Proposal" shall mean a proposal for 
an Alternative Transaction that the Board of Directors of the Company has       
reasonably and in good faith determined (with the advice of its financial       
advisors and taking into account all legal, financial and regulatory aspects of 
the likelihood of the consummation of such Alternative Transaction, including,  
but not limited to, the conditions to consummation and the consequences under   
such Alternative Transaction proposal of any material adverse effects or changes
in the Company) to be more favorable to the Company's stockholders than the     
transactions contemplated by this Agreement.                                    

5.4  ACCESS AND INFORMATION.                                            

(a) The Company and Parent shall afford each other, and to their
  respective accountants, officers, directors, employees, counsel, and other
representatives, reasonable access during normal business hours upon    
    reasonable prior notice, from the date hereof through the Effective Time, to
all of its properties, books, contracts, commitments, and records, and, 
 during such period, the Company and Parent shall furnish promptly to each
other all information concerning its and its Subsidiaries' businesses,  
prospects, properties, liabilities, results of operations, financial    
condition,                                                              

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research and development, intellectual property, officers, employees,   
    consultants, advisers, distributors, customers, suppliers, and others having
material dealings with it or any Subsidiary as the other may reasonably 
  request, and reasonable opportunity to contact and obtain information from
 such officers, employees, consultants, advisers, distributors, customers,
    suppliers, and others having dealings with it or any Subsidiary as the other
may reasonably request provided that each party may require the other to
  enter into a supplemental confidentiality agreement with regard to certain
technical proprietary or competitively sensitive information prior to   
 providing such information to the other party. During the period from the
   date hereof to the Effective Time, the parties shall in good faith meet and
    correspond on a regular basis for mutual consultation concerning the conduct
   of their respective businesses and, in connection therewith, Parent and the
Company shall be entitled, during normal business hours upon reasonable 
  prior notice and in a manner that does not unreasonably interfere with the
  other party's business, to have employees or other representatives present
at the offices of the other party to observe, and be kept informed      
concerning, the other party's operations and business planning.         

      (b) Parent and the Company shall hold in confidence all such nonpublic
information as required by and in accordance with the confidentiality   
agreement dated February 3, 1999, between Parent and the Company and any
supplemental confidentiality agreements entered into between the parties
    prior to the Effective Time (collectively, the "Confidentiality Agreement").

5.5  APPROVAL OF STOCKHOLDERS; PROXY STATEMENT; REGISTRATION STATEMENT. 

      (a) The Company shall use commercially reasonable efforts to promptly,
subject to applicable law or SEC or Nasdaq regulations, take all action 
necessary in accordance with the DGCL and the Company's Certificate of  
Incorporation and Bylaws to cause a special meeting of the Company's    
    stockholders (the "Company Stockholders Meeting") to be duly called and held
as soon as reasonably practicable following the date upon which the     
   Registration Statement (as defined below) becomes effective for the purpose
 of voting upon the Merger and the adoption and approval of this Agreement
    and at such Meeting to submit this Agreement and the Merger to a vote of the
stockholders. The stockholder vote or consent required for adoption and 
approval of this Agreement and the approval of the Merger shall be no   
greater than that set forth in the DGCL and the Company's Certificate of
Incorporation as previously provided to Parent. Accordingly, the Company
  represents and warrants that the affirmative vote of the holders of record
of a majority of the shares of Company Common Stock outstanding on the  
    record date for the Company Stockholders Meeting is all that is necessary to
  obtain stockholder adoption and approval of this Agreement and approval of
   the Merger. The Company shall use commercially reasonable efforts to obtain
 the adoption and approval by the Company's stockholders of this Agreement
 and the approval by the Company's stockholders of the Merger, unless such
  action is inconsistent with the fiduciary duties of the Board of Directors
   to its stockholders imposed by applicable law. In accordance therewith, the
   Company shall, with the cooperation of Parent, prepare and file, as soon as
    reasonably practicable, a proxy statement/ prospectus to be included as part
of the Registration Statement (such proxy statement/prospectus, together
   with notice of meeting, form of proxy, and any letter or other materials to
the Company's stockholders included therein are referred to in this     
   Agreement as the "Proxy Statement/Prospectus"). Parent shall furnish to the
 Company all information concerning Parent and its subsidiaries, officers,
  directors and shareholders, and shall take such other action and otherwise
    cooperate, as the Company may reasonably request in connection with any such
  action. The Company shall use commercially reasonable efforts to cause the
 definitive Proxy Statement/Prospectus to be mailed to the stockholders of
the Company as soon as reasonably practicable after the Registration    
   Statement shall have become effective, with the date of mailing as mutually
  determined by the Company and Parent. The Proxy Statement/Prospectus shall
  include the recommendation of the Company's Board of Directors in favor of
the Merger, unless such action is inconsistent with the fiduciary       

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  duties of the Board of Directors to its stockholders imposed by applicable
law. Unless and until this Agreement is validly terminated pursuant to  
   Article 7, nothing herein shall limit or eliminate in any way the Company's
obligation to call, give notice of, convene and hold the Company        
Stockholders Meeting and at such meeting submit this Agreement and the  
   Merger to a vote of the Company's stockholders (and not postpone or adjourn
  such meeting or the vote by the Company's stockholders upon this Agreement
and the Merger to another date without Parent's approval, not to be     
unreasonably withheld if and only to the extent such postponement or    
adjournment is required by law or by SEC or Nasdaq regulation).         

        (b) Parent shall, with the cooperation of the Company, prepare and file,
  as soon as reasonably practicable following completion of the SEC's review
and comment on the Proxy Statement/Prospectus, a registration statement 
under the 1933 Act registering the shares of Parent Common Stock to be  
issued in the Merger (the "Registration Statement"), which Registration 
Statement shall include the Proxy Statement/Prospectus. Parent will use 
   commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly thereafter as practicable. Parent shall
    also take any action required to be taken under state blue sky or securities
   laws in connection with the issuance of Parent Common Stock pursuant to the
  Merger. The Company shall furnish to Parent all information concerning the
    Company and its Subsidiaries and the holders of its capital stock, and shall
take such other action and otherwise cooperate, as Parent may reasonably
request in connection with any such action.                             

      (c) Parent shall notify the Company promptly (i) of the receipt of the
comments of the SEC, (ii) of any request by the SEC for amendments or   
supplements to the Registration Statement, (iii) of the time when the   
  Registration Statement has become effective or any supplement or amendment
    has been filed, or the issuance of any stop order and (iv) of the suspension
   of the qualification of the Parent Common Stock issuable in connection with
the Merger for offering or sale in any jurisdiction and shall supply the
  Company with copies of all correspondence with the SEC with respect to the
Registration Statement.                                                 

(d) If at any time prior to the Effective Time, any event or    
circumstance relating to the Company, any Subsidiary, or the Company's  
   officers or directors should occur and be discovered by the Company that is
required to be described in an amendment or supplement to the definitive
   Proxy Statement/Prospectus or the Registration Statement, the Company shall
promptly inform Parent. If at any time prior to the Effective Time, any 
    event or circumstance relating to Parent or any of its subsidiaries or their
 respective officers or directors should occur and be discovered by Parent
that is required to be described in an amendment or supplement to the   
   definitive Proxy Statement/Prospectus or the Registration Statement, Parent
   shall promptly inform the Company. Whenever any event occurs that should be
described in an amendment of, or supplement to, the definitive Proxy    
  Statement/Prospectus or the Registration Statement, the Company or Parent,
   as the case may be, shall, upon learning of such event, promptly notify the
other and consult and cooperate with the other in connection with the   
 preparation of a mutually acceptable amendment or supplement. The parties
   shall promptly file such amendment or supplement with the SEC and mail such
 amendment or supplement as soon as practicable after it is cleared by the
SEC. No amendment or supplement to the Proxy Statement/Prospectus or the
Registration Statement will be made by Parent or the Company without the
  approval of the other party (such approval not to be unreasonably withheld
or delayed).                                                            

   5.6  CONSENTS.  The Company will, at its cost and expense, use commercially
reasonable efforts to obtain all material approvals and consents of all third   
parties necessary on the part of the Company or its Subsidiaries to consummate  
the transactions contemplated hereby. Parent agrees to cooperate with the       
Company in connection with obtaining such approvals and consents. Parent will,  
at its cost and expense, use commercially reasonable efforts to obtain all      
material approvals and consents of all third parties necessary on the part of   
Parent to consummate the transactions contemplated hereby. The                  

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Company and Parent agree to cooperate with each other in connection with        
obtaining such approvals and consents.                                          

5.7  AFFILIATES' LETTERS.                                               

        (a) As soon as practicable after the date of this Agreement, the Company
  shall deliver to Parent a list of names and addresses of those persons, in
the Company's reasonable judgment after consultation with outside legal 
 counsel, who, as of the date hereof, are affiliates within the meaning of
Rule 145 of the rules and regulations promulgated under the 1933 Act or 
otherwise applicable SEC accounting releases with respect to            
    pooling-of-interests accounting treatment (each such person, an "Affiliate")
of the Company. The Company shall provide Parent such information and   
   documents as Parent shall reasonably request for purposes of reviewing such
   list and shall promptly update such list to reflect any changes thereto. As
soon as practicable after the date of this Agreement, the Company will  
deliver to Parent an affiliate's letter in the form attached hereto as  
  EXHIBIT B, executed by each of the Affiliates of the Company identified in
the foregoing list, and shall use best efforts to deliver or cause to be
delivered to Parent as soon as practicable after the date hereof such an
affiliate's letter executed by any persons who, to the knowledge of the 
  Company, become Affiliates after the date hereof. Parent shall be entitled
to place legends as specified in such affiliates' letters on the        
certificates evidencing any of the Parent Common Stock received by such 
    Affiliates 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 such letters.                       

  (b) For so long as resales of shares of Parent Common Stock issued
  pursuant to the Merger are subject to the resale restrictions set forth in
    Rule 145 under the 1933 Act, Parent will use commercially reasonable efforts
to comply with Rule 144(c)(1) under the 1933 Act.                       

5.8  EXPENSES.  Whether or not the Merger is consummated, all costs and 
expenses incurred in connection with this Agreement, the transactions           
contemplated hereby, the Proxy Statement/Prospectus, and the Registration       
Statement will be paid by the party incurring such costs and expenses, except   
that the Company and Parent will share equally the cost of printing and filing  
with the SEC the Proxy Statement/Prospectus and the Registration Statement and  
the filing fees required under the HSR Act or any Foreign Merger Laws.          

  5.9  FURTHER ACTIONS.  Subject to the terms and conditions herein provided
and without being required to waive any conditions herein (whether absolute,    
discretionary, or otherwise), each of the parties hereto agrees to use          
commercially reasonable efforts to take, or cause to be taken, all action, and  
to do, or cause to be done, all things necessary, proper, or advisable to       
consummate and make effective the transactions contemplated by this Agreement.  
In case at any time after the Effective Time any further action is necessary or 
desirable to carry out the purposes of this Agreement, the proper officers and  
directors of each party to this Agreement shall take all such necessary action. 

5.10  REGULATORY APPROVALS.                                             

 (a) The Company and Parent each shall use commercially reasonable
 efforts to take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things as may be necessary under federal or state 
securities laws or the HSR Act or Foreign Merger Laws (including without
    limitation, furnishing all information required under the HSR Act or Foreign
 Merger Laws and in connection with approvals of or filings with any other
  Governmental Entity) applicable to or necessary for, and will file as soon
  as reasonably practicable and, if appropriate, use commercially reasonable
efforts to have declared effective or approved all documents and        
notifications with the SEC and other governmental or regulatory bodies  
 (including, without limitation, foreign regulatory bodies that administer
Foreign Merger Laws, and any foreign labor councils or bodies as may be 
 required) that they deem necessary or appropriate for the consummation of
the Merger or any of                                                    

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 the other transactions contemplated hereby, and each party shall give the
   other information reasonably requested by such other party pertaining to it
   and its subsidiaries and affiliates to enable such other party to take such
actions.                                                                

(b) Although the parties do not anticipate any legislative,     
 administrative or judicial objection to the consummation of the Merger or
    any of the transactions contemplated by this Agreement, each of the Company,
Parent and Merger Subsidiary shall use commercially reasonable efforts  
vigorously to contest and resist any action, including legislative,     
   administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether     
    temporary, preliminary or permanent) (an "Order") that is in effect and that
 restricts, prevents or prohibits the consummation of the Merger or any of
 the other transactions contemplated by this Agreement, including, without
  limitation, by vigorously pursuing available avenues of administrative and
judicial appeal. Each of the Company, Parent and Merger Subsidiary shall
also use commercially reasonable efforts to take any and all actions    
necessary to avoid or eliminate each and every impediment under any     
  antitrust law that may be asserted by any governmental antitrust authority
or any other party so as to enable the parties to close by the date     
   specified in Section 7.1(b) the transactions contemplated hereby, including
without limitation, committing to and/or effecting, by consent decree,  
separate orders, or otherwise, the sale or disposition of such assets or
    businesses as are required to be divested in order to avoid the entry of, or
    to effect the dissolution of, any injunction, temporary restraining order or
    other order in any suit or proceeding, which would otherwise have the effect
 of preventing the consummation by the date specified in Section 7.1(b) of
all or any material part of the transactions contemplated hereby. The   
Company and Parent shall respond as promptly as practicable to (i) any  
inquiries or requests received from the Federal Trade Commission or the 
Department of Justice or any foreign regulatory bodies that administer  
    Foreign Merger Laws for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general or other 
    governmental entity in connection with antitrust or related matters. Each of
  the Company and Parent shall (1) give the other party prompt notice of the
 commencement of any Legal Proceeding by or before any Governmental Entity
   with respect to the Merger or any of the other transactions contemplated by
 this Agreement, (2) keep the other party informed as to the status of any
such Legal Proceeding, and (3) promptly inform the other party of any   
 communication to or from such Government Entity regarding the Merger. The
    Company and Parent will consult with and cooperate with one another and will
consider in good faith the views of one another, in connection with any 
   analysis, appearance, presentation, memorandum, brief, argument, opinion or
   proposal made or submitted in connection with any Legal Proceeding under or
 related to the HSR Act or the Foreign Merger Laws or any other federal or
   state antitrust or fair trade law. In addition, except as may be prohibited
    by any Governmental Entity, in connection with any Legal Proceeding under or
 related to the HSR Act or the Foreign Merger Laws or any other federal or
 state antitrust or fair trade law, or any other similar Legal Proceeding,
 each of the Company and Parent shall permit authorized representatives of
    the other party to be present at each meeting or conference relating to such
Legal Proceeding.                                                       

Notwithstanding the foregoing or anything herein to the contrary, in no 
event shall any party hereto be required under this Section 5.10 to make        
arrangements for or to effect the sale, cessation, or other disposition of      
product lines or businesses or take any action materially adverse to such party.

 5.11  CERTAIN NOTIFICATIONS.  The Company shall promptly notify Parent in
writing of the occurrence of any event that will or could reasonably be expected
to result in the failure by the Company or its affiliates to satisfy any of the 
conditions specified in Section 6.1 or 6.2. Parent shall promptly notify the    
Company in writing of the occurrence of any event that will or could reasonably 
be expected to result in the failure by Parent or its affiliates to satisfy any 
of the conditions specified in Section 6.1, 6.2(e) or 6.3.                      

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5.12  [INTENTIONALLY OMITTED.]                                          

   5.13  NASDAQ LISTING APPLICATION.  Parent shall promptly prepare and submit
to the Nasdaq National Market a listing application for the Parent Common Stock 
to be issued in the Merger pursuant to Article 1 of this Agreement, and shall   
use commercially reasonable efforts to obtain, prior to the Effective Time,     
approval for the listing of such Parent Common Stock, subject to official notice
to the Nasdaq National Market of issuance. The Company shall cooperate with     
Parent in such listing application.                                             

5.14  LETTERS OF THE COMPANY'S AND PARENT'S ACCOUNTANTS.                

   (a) The Company shall cooperate with Parent and use reasonable best
efforts to cause to be delivered to Parent and the Company, letters from
    Grant Thornton LLP addressed to the Company, as of the Closing Date, stating
 that based upon discussions with officials of the Company responsible for
financial and accounting matters, and information furnished to Grant    
  Thornton LLP to the date of its letter, Grant Thornton LLP is not aware of
   any fact concerning the Company or any of the stockholders or affiliates of
  the Company that could preclude the Company from being a "poolable entity"
in accordance with generally accepted accounting principles, Accounting 
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC.                                                    

(b) The Company shall cooperate with Parent and Parent shall use
   reasonable best efforts to cause to be delivered to the Company and Parent,
letters from Arthur Andersen LLP addressed to Parent, dated as of the   
Closing Date, to the effect that Arthur Andersen LLP concurs with       
    management's conclusion that the Merger may be accounted for as a pooling of
interests transaction in accordance with generally accepted accounting  
principles, Accounting Principles Board Opinion No. 16 and all published
rules, regulations and policies of the SEC.                             

   5.15  SUBSIDIARY SHARES.  At or prior to the Closing, the Company shall use
commercially reasonable efforts to cause all issued and outstanding Subsidiary  
shares (other than any interests in joint ventures or similar arrangements)     
owned by any person other than the Company or any of its Subsidiaries to be     
transferred for no or nominal consideration to such qualified person or persons 
designated by Parent.                                                           

5.16  BENEFIT PLANS AND EMPLOYEE MATTERS.                               

  (a) From and after the Effective Time, Parent shall, to the extent
   practicable and commercially reasonable, cause the Surviving Corporation to
provide employee benefits and programs to the Company's and its         
    Subsidiaries' employees that, in the aggregate, are substantially comparable
to or more favorable than those in existence as of the date hereof and  
disclosed in writing to Parent prior to the date hereof; provided that  
stock-based compensation shall be comparable, in the aggregate, to that 
offered by Parent and its subsidiaries generally. To the extent Parent  
   satisfies its obligations under this Section by maintaining Company benefit
  plans, Parent shall not be required to include employees of the Company in
Parent's benefit plans. From and after the Effective Time, Parent shall 
 honor, in accordance with their terms, all employment, change of control,
  consulting and severance agreements and all severance, incentive and bonus
    plans as in effect immediately prior to the Closing Date that are applicable
    to any current or former employees or directors of the Company or any of its
Subsidiaries and that are disclosed in the Company Disclosure Schedule, 
except to the extent that the coverage of any such agreement or plan is 
terminated by mutual agreement between the Company and any covered or   
applicable current or former employee or director.                      

       (b) To the extent that service is relevant for purposes of eligibility,
  level of participation or vesting under any employee benefit plan, program
 or arrangement established or maintained by Parent, the Company or any of
their respective subsidiaries, employees of the Company and its         

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  Subsidiaries shall be credited for service accrued or deemed accrued prior
  to the Effective Time with the Company or such Subsidiary, as the case may
be. Under no circumstances shall employees receive credit for service   
 accrued or deemed accrued prior to the Effective Time with the Company or
   such Subsidiary, as the case may be, for benefit accruals under any defined
 benefit plan (as defined by Section 3(23) of ERISA) or any retiree health
plan established or maintained by Parent.                               

     (c) Parent will use commercially reasonable efforts to, or will cause
 the Surviving Corporation or any of their respective Subsidiaries to: (i)
   waive all limitations as to pre-existing conditions, exclusions and waiting
  periods with respect to participation and coverage requirements applicable
to employees who remain employees of the Surviving Corporation or its   
 Subsidiaries, following the Effective Time ("Continuing Employees") under
   any welfare benefit plans that such Continuing Employees may be eligible to
  participate in after the Effective Time, other than limitations or waiting
    periods that are already in effect with respect to such Continuing Employees
   and that have not been satisfied as of the Effective Time, and (ii) provide
  each Continuing Employee with credit for the remaining short plan year for
any co-payments and deductibles paid under each comparable welfare plan 
    maintained by the Company or its Subsidiaries prior to the Effective Time in
 satisfying any applicable deductible or co-payment requirements under any
   welfare plans that such Continuing Employees are eligible to participate in
after the Effective Time.                                               

5.17  OBLIGATIONS OF MERGER SUBSIDIARY.  Parent shall take all action   
necessary to cause Merger Subsidiary to perform its obligations under this      
Agreement and to consummate the Merger on the terms and subject to the          
conditions set forth in this Agreement.                                         

 5.18  PLAN OF REORGANIZATION.  This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the income 
tax regulations promulgated under the Code. From and after the date of this     
Agreement and after the Effective Time, each party hereto shall use commercially
reasonable efforts to cause the Merger to qualify, and shall not, without the   
prior written consent of the other parties hereto, knowingly take any actions or
cause any actions to be taken which could prevent the Merger from qualifying as 
a reorganization under the provisions of Section 368(a) of the Code.            

5.19  POOLING.  From and after the date of this Agreement and until the 
Effective Time, neither Parent nor the Company, nor any of their respective     
subsidiaries or other affiliates, shall knowingly take any action, or knowingly 
fail to take any action, that is reasonably likely to jeopardize the treatment  
of the Merger as a "pooling of interests" transaction under Opinion 16 of the   
Accounting Principles Board and applicable SEC rules and regulations. Between   
the date of this Agreement and the Effective Time, Parent and the Company each  
shall use reasonable best efforts to cause the characterization of the Merger as
a pooling of interests for accounting purposes if such a characterization were  
jeopardized by action taken by Parent or the Company, respectively, prior to the
date of this Agreement. Following the Effective Time, Parent shall not knowingly
take any action, or fail to take any action, that would jeopardize the          
characterization of the Merger as a "pooling of interests" transaction for      
accounting purposes.                                                            

   5.20  TAX MATTERS.  At or prior to the filing of the Registration Statement
and at or prior to the Closing, the Company and Parent shall execute and deliver
to Lindquist & Vennum P.L.L.P. and to Gray Cary Ware & Freidenrich LLP tax      
representation letters reasonably satisfactory to such counsel setting forth    
customary representations which may be relied upon by such counsel in rendering 
any opinions contemplated by this Agreement. Parent shall use commercially      
reasonable efforts to cause Lindquist & Vennum P.L.L.P. to deliver to Parent a  
legal opinion, satisfying the requirements of Item 601 of Regulation S-K        
promulgated under the 1933 Act and dated as of a date that is no more than two  
business days prior to the date of filing of the Registration Statement and as  
of the Closing Date, to the effect that the Merger will constitute a            
reorganization within the meaning of Section 368(a) of                          

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the Code, based in part on the tax representation letters described in this     
Section 5.20. The Company shall use commercially reasonable efforts to cause    
Gray Cary Ware & Freidenrich LLP to deliver to the Company a legal opinion,     
satisfying the requirements of Item 601 of Regulation S-K promulgated under the 
1933 Act and dated as of a date that is no more than two business days prior to 
the date of filing of the Registration Statement and as of the Closing Date, to 
the effect that the Merger will constitute a reorganization within the meaning  
of Section 368(a) of the Code, based in part on the tax representation letters  
described in this Section 5.20.                                                 

5.21  INDEMNIFICATION OF OFFICERS AND DIRECTORS.                        

        (a) All rights to indemnification existing in favor of any person who is
    now, or has been prior to the date of this Agreement or who becomes prior to
   the Effective Time, an officer or director of the Company (the "Indemnified
  Persons") for acts and omissions occurring prior to the Effective Time, as
provided in the Company's Certificate of Incorporation or Bylaws or the 
Company's predecessor's Articles of Incorporation or Bylaws, or in      
 indemnification agreements between the Company or its predecessor and any
    such Indemnified Persons shall survive the Merger and shall be fulfilled and
honored in all respects by the Parent and the Surviving Corporation.    

     (b) Parent shall maintain or shall cause the Surviving Corporation to
   maintain in effect a policy or policies of directors and officers liability
   insurance with coverage substantially comparable to policies in force as of
   the date of this Agreement covering the Indemnified Parties for a period of
not less than six years following the Effective Time.                   

        (c) If the Surviving Corporation lacks sufficient capital to comply with
its obligations under this Section 5.21, Parent shall provide Surviving 
Corporation with such capital.                                          

       (d) The provisions of this Section 5.21 are intended for the benefit of
and shall be enforceable by each Indemnified Party, his or her heirs or 
representatives and may not be amended, altered or repealed without the 
written consent of the affected Indemnified Parties.                    

ARTICLE 6 CLOSING CONDITIONS

6.1  CONDITIONS TO OBLIGATIONS OF PARENT, MERGER SUBSIDIARY AND THE     
COMPANY.  The respective obligations of each party to consummate the Merger     
shall be subject to the fulfillment at or prior to the Closing of the following 
conditions, any or all of which may be waived, in whole or in part, to the      
extent permitted by applicable law:                                             

     (a)  NO INJUNCTION.  None of Parent, Merger Subsidiary or the Company
shall be subject to any final order, decree, or injunction of a court of
   competent jurisdiction within the United States that is then in effect that
    (i) has the effect of making the Merger illegal or otherwise prohibiting the
   consummation of the Merger, or (ii) would impose any material limitation on
 the ability of Parent to effectively exercise full rights of ownership of
 the stock of the Surviving Corporation or of the Surviving Corporation to
own and operate the assets and business of the Company.                 

       (b)  STOCKHOLDER APPROVAL.  The Required Company Stockholder Vote shall
have been obtained, in accordance with the DGCL and the Company's       
Certificate of Incorporation and Bylaws.                                

       (c)  REGISTRATION STATEMENT.  The Registration Statement (as amended or
  supplemented) shall have become effective under the 1933 Act and shall not
be subject to any "stop order," and no action, suit, proceeding, or     
investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing.                                       

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       (d)  NASDAQ LISTING.  The shares of Parent Common Stock to be delivered
   pursuant to the Merger shall have been duly authorized for quotation on the
Nasdaq National Market, subject to official notice of issuance.         

      (e)  WAITING PERIODS.  The waiting periods (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act and any  
Foreign Merger Laws shall have expired or been terminated.              

    (f)  BLUE SKY LAWS.  Parent shall have received all permits or other
authorizations required under applicable state blue sky laws for the    
issuance of shares of Parent Common Stock pursuant to the Merger.       

       (g)  THIRD PARTY CONSENTS.  All approvals and consents of third parties
referred to in Section 5.6 shall have been obtained.                    

6.2  CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY.  The    
respective obligations of Parent and Merger Subsidiary to consummate the Merger 
shall be subject to the fulfillment at or prior to the Closing of the following 
additional conditions, any or all of which may be waived by Parent, in whole or 
in part, to the extent permitted by applicable law:                             

  (a)  REPRESENTATIONS AND WARRANTIES TRUE.  Each representation and
warranty of the Company contained in this Agreement shall be true and   
 correct on the Closing Date as though such representations and warranties
were made on such date, except that those representations and warranties
  that address matters only as of the date hereof or another particular date
 shall remain true and correct as of such date, and except in any case for
    any inaccuracies that have not had a Company Material Adverse Effect. Parent
shall have received a certificate to the foregoing effect signed by the 
 Chief Executive Officer of the Company or other authorized officer of the
Company reasonably satisfactory to Parent.                              

       (b)  PERFORMANCE.  The Company shall have performed and complied in all
material respects with all covenants required by this Agreement to be   
performed or complied with by it at or prior to the Closing, and Parent 
shall have received a certificate to such effect signed by the Chief    
   Executive Officer of the Company or other authorized officer of the Company
reasonably satisfactory to Parent.                                      

       (c)  TAX OPINION.  Parent shall have received the opinions of Lindquist
& Vennum P.L.L.P. described in Section 5.20.                            

     (d)  POOLING OPINION.  Parent shall have received each of the letters
described in Section 5.14.                                              

   (e)  EMPLOYMENT OF KEY EXECUTIVES.  Those executive officers of the
Company identified on EXHIBIT C hereto shall have executed and delivered
   employment agreements with the Company in the forms set forth as EXHIBIT D.

       (f)  LEGAL OPINION.  Parent shall have received an opinion of Gray Cary
Ware & Freidenrich LLP as to the matters set forth on EXHIBIT E.        

6.3  CONDITIONS TO OBLIGATIONS OF THE COMPANY.  The obligation of the   
Company to consummate the Merger shall be subject to the fulfillment at or prior
to the Closing of the following additional conditions, any or all of which may  
be waived by the Company, in whole or in part, to the extent permitted by       
applicable law:                                                                 

  (a)  REPRESENTATIONS AND WARRANTIES TRUE.  Each representation and
   warranty of Parent contained in this Agreement shall be true and correct on
   the Closing Date as though such representations and warranties were made on
such date, except that those representations and warranties that address
  matters only as of the date hereof or another particular date shall remain

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true and correct as of such date, and except in any case for any        
   inaccuracies that have not had, or would not reasonably be expected to have
a Parent Material Adverse Effect. The Company shall have received a     
    certificate to the foregoing effect signed by the Chief Executive Officer or
  other authorized officer of Parent reasonably satisfactory to the Company.

        (b)  PERFORMANCE.  Parent and Merger Subsidiary shall have performed and
 complied in all material respects with all material covenants required by
  this Agreement to be performed or complied with by them at or prior to the
 Closing, and the Company shall have received a certificate to such effect
   signed by the Chief Executive Officer or other authorized officer of Parent
reasonably satisfactory to the Company.                                 

       (c)  TAX OPINION.  The Company shall have received the opinions of Gray
Cary Ware & Freidenrich LLP described in Section 5.20.                  

  (d)  POOLING OPINION.  The Company shall have received each of the
letters described in Section 5.14.                                      

  (e)  LEGAL OPINION.  The Company shall have received an opinion of
Lindquist & Vennum P.L.L.P. as to the matters set forth on EXHIBIT F.   

ARTICLE 7 TERMINATION AND ABANDONMENT 

    7.1  TERMINATION.  This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of the     
Company, only:                                                                  

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

     (b) by either Parent or the Company if the Merger shall not have been
consummated on or before July 31, 1999; provided, however, that the     
terminating party shall not have breached in any material respect its   
obligations under this Agreement in any manner that shall have been the 
   proximate cause of, or resulted in, the failure to consummate the Merger by
  such date and provided further, however, that, if a request for additional
 information is received from the U.S. Federal Trade Commission ("FTC") or
Department of Justice ("DOJ") pursuant to the HSR Act, or additional    
    information is requested by a governmental authority (a "Foreign Authority")
    pursuant to Foreign Merger Laws, such date shall be extended to the 90th day
following acknowledgment by the FTC, DOJ, or Foreign Authority, as      
    applicable, that Parent and the Company have complied with such request, but
in any event not later than October 31, 1999;                           

        (c) by either Parent or the Company if a court of competent jurisdiction
or an administrative, governmental, or regulatory authority has issued a
final nonappealable order, decree, or ruling, or taken any other action,
having the effect of permanently restraining, enjoining, or otherwise   
prohibiting the Merger;                                                 

    (d) by either Parent or the Company if, at the Company Stockholder's
   Meeting, the requisite vote of the stockholders of the Company for approval
  and adoption of this Agreement and the Merger is not obtained, except that
   the right to terminate this Agreement under this Section 7.1(d) will not be
available to any party whose failure to perform any material obligation 
 under this Agreement has been the proximate cause of, or resulted in, the
failure to obtain the requisite vote of the stockholders of the Company;

    (e) by Parent if either (i) the Company has breached its obligations
 under Section 5.3 in any material respect, (ii) the Board of Directors of
the Company has recommended, approved, or authorized the Company's      
acceptance or execution of a letter of intent or definitive agreement   
  providing for an Alternative Transaction, as defined in Section 5.3, (iii)
the Board of Directors of                                               

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the Company has modified in a manner materially adverse to Parent, or   
 withdrawn, its recommendation of this Agreement or (iv) a tender offer or
exchange offer for any outstanding shares of Company Common Stock is    
commenced, and the Board of Directors of the Company, within 10 business
    days after such tender offer or exchange offer is so commenced, either fails
 to recommend against acceptance of such tender offer or exchange offer by
    its stockholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by its stockholders;                     

      (f) by the Company or Parent prior to the Required Company Stockholder
Vote if (i) the Board of Directors of the Company has complied with, and
   continues to comply with, all requirements and procedures of Section 5.3 in
all material respects and has authorized, subject to complying with the 
terms of this Agreement, the Company to enter into a letter of intent or
binding written agreement concerning a transaction that constitutes a   
    Superior Proposal and the Company notifies Parent in writing that it intends
to enter into such agreement, attaching the most current version of such
agreement to such notice, (ii) Parent does not make, within ten business
    days after receipt of the Company's written notice of its intention to enter
 into a letter of intent or binding agreement for a Superior Proposal, any
offer that the Board of Directors of the Company reasonably and in good 
   faith determines, after consultation with its financial and legal advisors,
   is at least as favorable to the stockholders of the Company as the Superior
Proposal and during such ten business-day period the Company reasonably 
    considers and discusses in good faith all proposals submitted by Parent and,
without limiting the foregoing, meets with, and causes its financial    
   advisors and legal advisors to meet with, Parent and its advisors from time
 to time as requested by Parent to reasonably consider and discuss in good
faith Parent's proposals, and (iii) upon termination pursuant to this   
  Section 7.1(f), the Company pays to Parent the fee required by Section 7.2
   to be paid to Parent in the manner therein provided. The Company agrees (x)
    that it will not enter into a letter of intent or binding agreement referred
    to in clause (i) above until at least the 11th business day after Parent has
received the notice to Parent required by clause (i) above, and (y) to  
   notify Parent promptly if its intention to enter into a letter of intent or
 binding agreement referred to in its notice to Parent shall change at any
time after giving such notice;                                          

        (g) by Parent if (i) Parent is not in material breach of its obligations
under this Agreement and (ii) there has been a material breach by the   
    Company of any of its representations, warranties, or obligations under this
Agreement such that the conditions in Section 6.2 will not be satisfied 
    ("Terminating Company Breach"); provided, however, that, if such Terminating
   Company Breach is curable by the Company through the exercise of reasonable
efforts and such cure is reasonably likely to be completed prior to the 
    applicable date specified in Section 7.1(b), then for so long as the Company
continues to exercise reasonable efforts, Parent may not terminate this 
Agreement under this Section 7.1(g); or                                 

      (h) by the Company if (i) the Company is not in material breach of its
  obligations under this Agreement and (ii) there has been a material breach
 by Parent of any of its representations, warranties, or obligations under
    this Agreement such that the conditions in Section 6.3 will not be satisfied
   ("Terminating Parent Breach"); provided, however, that, if such Terminating
Parent Breach is curable by Parent through the exercise of commercially 
   reasonable efforts and such cure is reasonably likely to be completed prior
to the applicable date specified in Section 7.1(b), then for so long as 
 Parent continues to exercise commercially reasonable efforts, the Company
may not terminate this Agreement under this Section 7.1(h).             

7.2  EFFECT OF TERMINATION.                                             

  (a) In recognition of the time, efforts, and expenses expended and
   incurred by Parent with respect to the Company and the opportunity that the
acquisition of the Company presents to                                  

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  Parent, if this Agreement is validly terminated: (i) by Parent pursuant to
Section 7.1(e)(i), (ii) by Parent pursuant to any provision of Section  
7.1(e) other than 7.1(e)(i) and within 12 months after the date of such 
termination, the Company shall have entered into a letter of intent or a
definitive agreement with a Third Party providing for an Alternative    
 Transaction or (iii) by Parent or the Company pursuant to Section 7.1(f);
    then in any such event (but subject to Section 7.2(c)), the Company will pay
  to Parent, within five business days after demand by Parent in the case of
  termination pursuant to Section 7.1(e)(i), within five business days after
the Company entering into a letter of intent or a definitive agreement  
  covered by clause (ii) above, or upon the termination date in the event of
termination pursuant to Section 7.1(f) (by wire transfer of immediately 
   available funds to an account designated by Parent for such purpose), a fee
equal to $400,000.                                                      

  (b) The Company acknowledges that the agreements contained in this
 Section 7.2 are an integral part of the transactions contemplated by this
   Agreement and are not a penalty, and that, without these agreements, Parent
 would not enter into this Agreement. If the Company fails to pay promptly
the fee due pursuant to Section 7.2(a), the Company shall also pay to   
Parent's costs and expenses (including legal fees and expenses) in      
connection with any action, including the filing of any lawsuit or other
    legal action, taken to collect payment, together with interest on the amount
of the unpaid fee under this section, accruing from its due date, at an 
interest rate per annum equal to two percentage points in excess of the 
prime commercial lending or reference rate quoted by U.S. Bank National 
Association. Any change in the interest rate hereunder resulting from a 
  change in such prime or reference rate shall be effective at the beginning
of the day of such change in such rate.                                 

       (c) Parent agrees that the payment provided for in Section 7.2(a) shall
be the sole and exclusive remedy of Parent upon termination of this     
Agreement pursuant to Section 7.1(e) and 7.1(f), as the case may be, and
  such remedy shall be limited to the sum stipulated in such Section 7.2(a),
  regardless of the circumstances giving rise to such termination; provided,
   however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or  
agreements set forth in this Agreement. In no event shall the Company be
required to pay to Parent more than one fee pursuant to Section 7.2(a). 
Except as otherwise provided in this paragraph, in the event of the     
   termination of this Agreement pursuant to any paragraph of Section 7.1, the
    obligations of the parties to consummate the Merger will expire, and none of
 the parties will have any further obligations under this Agreement except
  pursuant to Sections 5.4(b), 5.8, 7.2(a), 7.2(b) and 7.2(c) and Article 8.

ARTICLE 8 MISCELLANEOUS 

   8.1  AMENDMENT AND MODIFICATION.  Subject to applicable law, this Agreement
may be amended, modified, or supplemented only by written agreement of Parent,  
Merger Subsidiary, and the Company at any time prior to the Effective Time with 
respect to any of the terms contained herein; provided, however, that, after the
approval of this Agreement by the stockholders of the Company, no amendment may 
be made which would reduce the amount or change the type of consideration into  
which each share of Company Common Stock shall be converted upon consummation of
the Merger or which would otherwise require stockholder approval under          
applicable law unless such stockholder approval shall have been obtained. This  
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.                                                  

8.2  WAIVER OF COMPLIANCE; CONSENTS.  Any failure of Parent or Merger   
Subsidiary on the one hand, or the Company on the other hand, to comply with any
obligation, covenant, agreement, or condition herein may be waived by the       
Company or Parent, respectively, only by a written instrument signed by an      
officer of the party granting such waiver, but such waiver or failure to insist 
upon strict compliance with such obligation, covenant, agreement, or condition  
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement                                          

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requires or permits consent by or on behalf of any party hereto, such consent   
shall be given in writing. Merger Subsidiary agrees that any consent or waiver  
of compliance given by Parent hereunder shall be conclusively binding upon      
Merger Subsidiary, whether or not given expressly on its behalf.                

8.3  INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  The    
respective representations and warranties of Parent and the Company contained   
herein or in any certificates or other documents delivered prior to or at the   
Closing shall not be deemed waived or otherwise affected by any investigation   
made by any party hereto. The representations, warranties and agreements in this
Agreement and in any certificate delivered pursuant hereto shall terminate at   
the Effective Time, except that the agreements set forth in Article I and       
Sections 5.7(b), 5.8, 5.9, 5.16, 5.17, 5.18, 5.19, 5.21 and this Article VIII   
shall survive the Effective Time.                                               

 8.4  NOTICES.  All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally by commercial       
courier service or otherwise, or by facsimile, or three days after such notice  
is mailed by registered or certified mail (return receipt requested) to the     
parties at the following addresses (or at such other address for a party as     
shall be specified by like notice):                                             

(a)  If to Parent or Merger Subsidiary, to it at:                 
MTS Systems Corporation                                   
14000 Technology Drive                                    
Eden Prairie, MN 55344-2290                               
Attention: Dr. Sidney W. Emery, Jr.                       
FAX: (612) 937-4101                                       

with a copy to:                                                   

Lindquist & Vennum P.L.L.P.                               
4200 IDS Center                                           
80 South 8th Street                                       
Minneapolis, MN 55402                                     
FAX: (612) 371-3207                                       
    Attention: Jeffrey N. Saunders, Esq. and John R. Houston, Esq.

(b)  If to the Company, to it at:                                 
DSP Technology Inc.                                       
795 Highland Drive                                        
Ann Arbor, MI 48108                                       
Attention: F. Gil Troutman                                
FAX: (734) 975-1674                                       

with a copy to:                                                   

Gray Cary Ware & Freidenrich LLP                          
400 Hamilton Avenue                                       
Palo Alto, CA 94301-1925                                  
FAX: (650) 327-3699                                       
  Attention: Diane Holt Frankle, Esq. and Dianne Salesin, Esq.

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  8.5  ASSIGNMENT.  This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the     
rights, interests, or obligations hereunder shall be assigned by any of the     
parties hereto without the prior written consent of the other parties. Except   
for the provisions of Article I and Section 5.21 (the "Third Party Provisions"),
this Agreement is not intended to confer upon any other person, except the      
parties hereto, any rights or remedies hereunder, and no third person shall be a
third party beneficiary of this Agreement. The Third Party Provisions may be    
enforced by the beneficiaries thereof.                                          

    8.6  GOVERNING LAW.  Except to the extent that Delaware law is applicable to
the duties of the Company's Board of Directors, this Agreement shall be governed
by the substantive laws of the State of Minnesota (regardless of the laws that  
might otherwise govern under applicable Minnesota principles of conflicts of    
law). The parties hereby (i) agree and consent to be subject to the jurisdiction
of any state or federal court in the state of Delaware or in Minneapolis or St. 
Paul, Minnesota or Ann Arbor, Michigan, with respect to all actions and         
proceedings arising out of or relating to this Agreement; (ii) agree that all   
claims with respect to any such action or proceeding may be heard and determined
in such court; (iii) irrevocably waive any defense of an inconvenient forum to  
the maintenance of any action or proceeding in such court; (iv) consent to      
service of process by mailing or delivering such service to the party at its    
respective principal business address; and (v) agree that a final judgment in   
any such action or proceeding from which there is no further appeal shall be    
conclusive and may be enforced in any other jurisdiction by suit on the judgment
or in any manner provided by law.                                               

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

   8.8  KNOWLEDGE.  As used in this Agreement or the instruments, certificates
or other documents required hereunder, the term "knowledge" of a party hereto   
shall mean actual knowledge of the directors or executive officers of such      
party.                                                                          

 8.9  INTERPRETATION.  The Table of Contents, article and Section headings
contained in this Agreement are inserted for reference purposes only and shall  
not affect the meaning or interpretation of this Agreement. This Agreement shall
be construed without regard to any presumption or other rule requiring the      
resolution of any ambiguity regarding the interpretation or construction hereof 
against the party causing this Agreement to be drafted.                         

8.10  PUBLICITY.  Upon execution of this Agreement by Parent, Merger    
Subsidiary, and the Company, the parties shall jointly issue a press release, as
agreed upon by them. The parties intend that all future statements or           
communications to the public or press regarding this Agreement or the Merger    
will be mutually agreed upon by them. Neither party shall, without such mutual  
agreement or the prior consent of the other, issue any statement or             
communication to the public or to the press regarding this Agreement, or any of 
the terms, conditions, or other matters with respect to this Agreement, except  
as required by law or the rules of the SEC, NASD or Nasdaq and then only (a)    
upon the advice of such party's legal counsel; (b) to the extent required by law
or the rules of the SEC, NASD or Nasdaq; and (c) following prior notice to, and 
consultation with, the other party (which notice shall include a copy of the    
proposed statement or communication to be issued to the press or public). The   
foregoing shall not restrict Parent's or the Company's communications with their
employees or customers in the ordinary course of business. Each party shall     
exercise in good faith all reasonable efforts to agree with the other party     
regarding the nature, form and extent of such disclosure.                       

8.11  ENTIRE AGREEMENT.  This Agreement, including the exhibits and     
schedules hereto and the Confidentiality Agreement referred to herein, embodies 
the entire agreement and understanding of                                       

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the parties hereto in respect of the subject matter contained herein. This      
Agreement and the Confidentiality Agreement supersede all prior agreements and  
the understandings between the parties with respect to such subject matter,     
whether written or oral.                                                        

8.12  SEVERABILITY.  If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public    
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of   
the transactions contemplated by this Agreement is not affected in any manner   
materially adverse to any party. Upon such determination that any term or other 
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the      
original intent of the parties as closely as possible in a mutually acceptable  
manner in order that the transactions contemplated by this Agreement be         
consummated as originally contemplated to the fullest extent possible.          

8.13  SPECIFIC PERFORMANCE.  The parties hereto agree that irreparable  
damage would occur in the event any provision of this Agreement was not         
performed in accordance with the terms hereof and that the parties shall be     
entitled to specific performance of the terms hereof, in addition to any other  
remedy at law or in equity.                                                     

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    IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan
of Merger as of the date first above written.                                   

                           MTS SYSTEMS CORPORATION

                                    By: /s/ DR. SIDNEY W. EMERY, JR.
                                            ------------------------------------
                                          Dr. Sidney W. Emery, Jr., Chairman
       and
                                   Chief Executive Officer

                       BADGER MERGER CORP.

                                    By: /s/ DR. SIDNEY W. EMERY, JR.
                                            ------------------------------------
                                           Dr. Sidney W. Emery, Jr., President

                       DSP TECHNOLOGY INC.

                           By: /s/ F. GIL TROUTMAN
                                            ------------------------------------
                                      F. Gil Troutman, President and
                                   Chief Executive Officer

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                                                                      APPENDIX B

[LETTERHEAD]        

March 23, 1999                                                                  

Confidential                                                                    

The Board of Directors                                                          
DSP Technology, Inc.                                                            
795 Highland Drive                                                              
Ann Arbor, MI 48108                                                             

Gentlemen:                                                                      

   You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock (the "Common      
Stock") of DSP Technology, Inc. ("DSP" or the "Company") of the consideration to
be received by such shareholders in connection with the proposed merger of      
Badger Merger Corp. ("Merger Sub"), a wholly-owned subsidiary of MTS Systems    
Corporation ("MTS"), with and into DSP (the "Proposed Transaction") pursuant to 
the Agreement and Plan of Merger to be dated as of March 23, 1999, among MTS,   
Merger Sub, and DSP (the "Agreement").                                          

  We understand that the terms of the Agreement provide, among other things,
that all of the issued and outstanding shares of Common Stock and options to    
purchase shares of Common Stock shall be converted into the right to receive an 
aggregate of 2,077,000 shares of common stock of MTS, as more fully set forth in
the Agreement. For purposes of this opinion, we have assumed that the Proposed  
Transaction will qualify as a tax-free reorganization under the United States   
Internal Revenue Code for the shareholders of the Company and that the Proposed 
Transaction will be accounted for as a pooling of interests.                    

Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment  
banking services, is regularly engaged in the valuation of businesses and their 
securities in connection with mergers and acquisitions, strategic transactions, 
corporate restructurings, negotiated underwritings, secondary distributions of  
listed and unlisted securities, private placements and valuations for corporate 
and other purposes. We have acted as a financial advisor to the Board of        
Directors of DSP in rendering our opinion as to the fairness from a financial   
point of view of the consideration to be received by the Company and its        
stockholders in the Proposed Transaction, and we will receive a fee for our     
services.                                                                       

  In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:                                    

    (i) reviewed the publicly available consolidated financial statements of MTS
       for recent years and interim periods to date and certain other relevant
     financial and operating data of MTS (including its capital structure)
made available to us from published sources;                    

  (ii) discussed the business, financial condition and prospects of MTS with
certain members of senior management;                         

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(iii) reviewed the publicly available consolidated financial statements of
    DSP for recent years and interim periods to date and certain other
        relevant financial and operating data of DSP made available to us from
published sources and from the internal records of DSP;       

(iv) reviewed certain internal financial and operating information,     
including certain projections, relating to DSP prepared by the
management of DSP;                                            

 (v) discussed the business, financial condition and prospects of DSP with
certain members of senior management;                           

    (vi) reviewed the recent reported prices and trading activity for the common
 stocks of MTS and DSP and compared such information and certain
    financial information for MTS and DSP with similar information for
       certain other companies engaged in businesses we consider comparable;

(vii) reviewed the financial terms, to the extent publicly available, of  
certain comparable merger and acquisition transactions;       

(viii) reviewed a draft of the Agreement dated March 23, 1999; and          

(ix) performed such other analyses and examinations and considered such 
       other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.    

  In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning MTS or DSP considered in      
connection with our review of the Proposed Transaction, and we have not assumed 
any responsibility for independent verification of such information. We have not
prepared any independent valuation or appraisal of any of the assets or         
liabilities of MTS or DSP, nor have we conducted a physical inspection of the   
properties and facilities of either company. With respect to the financial      
forecasts and projections made available to us and used in our analysis, we have
assumed that they reflect the best currently available estimates and judgments  
of the expected future financial performance of MTS and DSP. For purposes of    
this opinion, we have assumed that neither MTS nor DSP is a party to any pending
transactions, including external financings, recapitalizations or material      
merger discussions, other than the Proposed Transaction and those activities    
undertaken in the ordinary course of conducting their respective businesses. Our
opinion is necessarily based upon market, economic, financial and other         
conditions as they exist and can be evaluated as of the date of this letter and 
any change in such conditions would require a reevaluation of this opinion. We  
express no opinion as to the price at which MTS common stock will trade         
subsequent to the Effective Time (as defined in the Agreement). In rendering    
this opinion, we have assumed that the proposed merger will be consummated      
substantially on the terms discussed in the Agreement, without any waiver of any
material terms or conditions by any party thereto. We were not requested to, and
did not, solicit indications of interest from any other parties in connection   
with a possible acquisition of, or business combination with, DSP.              

It is understood that this letter is for the information of the Board of
Directors only and may not be used for any other purpose without our prior      
written consent; provided, however, that this letter may be reproduced in full  
in the Proxy Statement/Prospectus. This letter does not constitute a            
recommendation to any stockholder as to how such stockholder should vote on the 
Proposed Transaction.                                                           

Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof   
the consideration to be received by the holders of the Common Stock in the      
Proposed Transaction is fair to such holders from a financial point             

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of view. We express no opinion, however, as to the adequacy of any consideration
received in the Proposed Transaction by MTS or any of its affiliates.           

Very truly yours,                                                               

HAMBRECHT & QUIST LLC                                                           

/s/ Paul B. Cleveland                                                           

Paul B. Cleveland                                                               
Managing Director                                                               

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PART II 

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS                              

   Section 302A.521 of Minnesota Statutes requires the Registrant to indemnify
a person made or threatened to be made a party to a proceeding by reason of the 
former or present official capacity of the person with respect to the           
Registrant, against judgments, penalties, fines, including reasonable expenses, 
if such person (1) has not been indemnified by another organization or employee 
benefit plan for the same judgments, penalties, fines, including, without       
limitation, excise taxes assessed against the person with respect to an employee
benefit plan, settlements, and reasonable expenses, including attorneys' fees   
and disbursements, incurred by the person in connection with the proceeding with
respect to the same acts or omissions; (2) acted in good faith; (3) received no 
improper personal benefit, and statutory procedure has been followed in the case
of any conflict of interest by a director; (4) in the case of a criminal        
proceeding, had no reasonable cause to believe the conduct was unlawful; and (5)
in the case of acts or omissions occurring in the person's performance in the   
official capacity of director or, for a person not a director, in the official  
capacity of officer, committee member or employee, reasonably believed that the 
conduct was in the best interests of the Registrant, or, in the case of         
performance by a director, officer or employee of the Registrant as a director, 
officer, partner, trustee, employee or agent of another organization or employee
benefit plan, reasonably believed that the conduct was not opposed to the best  
interests of the Registrant. In addition, Section 302A.521, subd. 3, requires   
payment by the Registrant, upon written request, of reasonable expenses in      
advance of final disposition in certain instances. A decision as to required    
indemnification is made by a disinterested majority of the Board of Directors   
present at a meeting at which a disinterested quorum is present, or by a        
designated committee of the Board, by special legal counsel, by the shareholders
or by a court. The Registrant's Bylaws provide for indemnification of officers, 
directors and employees to the fullest extent provided by the Minnesota Business
Corporation Act, as it may be amended from time to time.                        

   As permitted by Section 302A.251 of the Minnesota Business Corporation Act,
the Articles of Incorporation of the Registrant eliminate the liability of the  
directors of the Registrant for monetary damages arising from any breach of     
fiduciary duties as a member of the Registrant's Board of Directors, except for 
liability (a) for any breach of the director's duty of loyalty to the Registrant
or its shareholders; (b) for acts or omissions not in good faith or which       
involve intentional misconduct or a knowing violation of law; (c) under Sections
302A.559 or 80A.23 of the Minnesota Statutes; (d) for any transaction from which
a director derived an improper personal benefit; or (e) for any act or omission 
that occurred prior to the adoption of these provisions in the Registrant's     
Articles of Incorporation.                                                      

  The Registrant currently has in effect policies of insurance which provide
insurance protection to its directors and officers against some liabilities     
which may be incurred by them on account of their services to the Registrant.   

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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                             

(1) Exhibits:                                                                   

                                                        [Enlarge/Download Table]

  EXHIBIT                                                                                                            
  NUMBER                                             DESCRIPTION OF EXHIBITS                                         
-----------  --------------------------------------------------------------------------------------------------------
                                                                                                                     
       2.1   Agreement and Plan of Reorganization dated March 23, 1999 by and among MTS Systems Corporation, Badger  
             Merger Corp. and DSP Technology Inc. (included as Appendix A to the Proxy Statement/Prospectus included 
             in this Registration Statement).                                                                        
      *3.1   Articles of Amendment of the Amended and Restated Articles of Incorporation of MTS Systems Corporation. 
       4.1   MTS Systems Corporation Amended and Restated Articles of Incorporation, adopted January 30, 1996        
             (incorporated by reference from Exhibit 3.a of the Registrant's Annual Report on Form 10-K for the      
             fiscal year ended September 30, 1996).                                                                  
       4.2   MTS Systems Corporation Restated Bylaws (incorporated by reference from Exhibit 3.b of the Registrant's 
             Annual Report on Form 10-K for the fiscal year ended September 30, 1998).                               
      *5.1   Opinion of Lindquist & Vennum P.L.L.P. regarding legality of securities.                                
      *8.1   Opinion of Lindquist & Vennum P.L.L.P. regarding certain tax matters.                                   
      *8.2   Opinion of Gray Cary Ware & Freidenrich, LLP regarding certain tax matters.                             
     *23.1   Consent of Arthur Andersen LLP.                                                                         
     *23.2   Consent of Grant Thornton LLP.                                                                          
      23.3   Consents of Lindquist & Vennum P.L.L.P. (set forth in Exhibit 5.1 and Exhibit 8.1).                     
      23.4   Consent of Gray Cary Ware & Friedenrich, LLP (set forth in Exhibit 8.2).                                
     *99.1   Form of Proxy for Special Meeting of Stockholders of DSP Technology Inc.                                

------------------------                                                        

*   Filed herewith.                                                             

All other exhibits have been previously filed.                          

(2) Financial Statement Schedules:                                              

All financial statement schedules have been omitted because they are not
applicable or the required information is included in the financial statements  
or notes thereto previously filed as part of the Registrant's Annual Report on  
Form 10-K for the year ended September 30, 1998.                                

ITEM 22. UNDERTAKINGS                                                           

The undersigned Registrant hereby undertakes:                           

       (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:              

  (i) To include any prospectus required in Section 10(a) (3) of the
Securities Act of 1933;                                 

       (ii) To reflect in the prospectus any facts or events arising after the
          effective date of the Registration Statement (or the most recent
         post-effective amendment thereof) which, individually or in the
          aggregate, represent a fundamental change in the information set
forth in the Registration Statement;                  

   (iii) To include any material information with respect to the plan of
             distribution not previously disclosed in the Registration Statement
        or any material change to such information in the Registration
Statement;                                            

provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if the     
information required to be included in a post-effective amendment by those      
paragraphs is contained in periodic reports filed by                            

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the Registrant pursuant to section 13 or section 15(d) of the Securities        
Exchange Act of 1934 that are incorporated by reference in the Registration     
Statement;                                                                      

(2) That, for the purpose of determining any liability under the
  Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered   
    therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;                              

      (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the       
termination of the offering;                                            

        (4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to  
  section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that
  is incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered   
    therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;                              

  (5) To respond to requests for information that is incorporated by
   reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
 Form, within one business day of receipt of such request, and to send the
 incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
   effective date of the Registration Statement through the date of responding
to the request;                                                         

     (6) That, prior to any public reoffering of the securities registered
  hereunder through use of a prospectus which is a part of this Registration
   Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering  
prospectus will contain the information called for by the applicable    
  registration form with respect to reofferings by persons who may be deemed
  underwriters, in addition to the information called for by the other Items
of the applicable form;                                                 

     (7) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of
 section 10(a) (3) of the Securities Act and is used in connection with an
 offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such 
   amendment is effective, and that, for purposes of determining any liability
    under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered   
    therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof; and                          

    (8) To supply by means of a post-effective amendment all information
  concerning a transaction, and the company being acquired involved therein,
   that was not the subject of and included in the Registration Statement when
it became effective.                                                    

   Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the  
Registrant pursuant to the provisions described under Item 20 above, or         
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as        
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the     
Registrant of expenses incurred or paid by a director, officer or controlling   
person of the Registrant in the successful defense of any action, suit or       
proceeding) is asserted by such director, officer or controlling person in      
connection with the securities being registered, the Registrant will, unless in 
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such         
indemnification by it is against public policy as expressed in the Act and will 
be governed by the final adjudication of such issue.                            

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SIGNATURES

    Pursuant to the requirements of the Securities and Exchange Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its      
behalf by the undersigned, thereunto duly authorized, in the City of Eden       
Prairie and the State of Minnesota on this 28(th) day of April, 1999.           

                                                                [Download Table]
                                              
MTS SYSTEMS CORPORATION                       

By:         /s/ DR. SIDNEY W. EMERY, JR.      
     -----------------------------------------
              Dr. Sidney W. Emery, Jr.        
       PRESIDENT, CHIEF EXECUTIVE OFFICER AND 
         CHAIRMAN OF THE BOARD OF DIRECTORS   

POWER OF ATTORNEY 

  KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
hereby constitutes and appoints Dr. Sidney W. Emery, Jr. and Marshall L.        
Carpenter, and each of them, his or her true and lawful attorneys-in-fact and   
agents, with full power and substitution and resubstitution for him or her and  
in his or her name, place and stead, in any and all capacities, to sign any and 
all amendments (including post-effective amendments) to this Registration       
Statement and to file the same, with all exhibits and schedules thereto, and    
other documents or instruments in connection with this Registration Statement or
any amendment thereto, with the Securities and Exchange Commission, granting    
upon said attorneys-in-fact and agents, and each of them, full power and        
authority to do and perform each and every act and thing requisite or necessary 
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that    
said attorneys-in-fact and agents or either of them, or their or his or her     
substitute or substitutes, may lawfully do or cause to be done by virtue        
thereof.                                                                        

Pursuant to the requirements of the Securities Act of 1933, this        
Registration Statement has been signed below on the 28(th) day of April, 1999,  
by the following persons in the capacities indicated.                           

                                                                [Download Table]

          SIGNATURE                       TITLE           
------------------------------  --------------------------

                                                          
                                President, Chief Executive
 /s/ DR. SIDNEY W. EMERY, JR.     Officer and Chairman of 
------------------------------    the Board of Directors  
   Dr. Sidney W. Emery, Jr.       and Director (principal 
                                  executive officer)      

                                Vice President and Chief  
  /s/ MARSHALL L. CARPENTER       Financial Officer       
------------------------------    (principal financial and
    Marshall L. Carpenter         accounting officer)     

   /s/ CHARLES A. BRICKMAN                                
------------------------------  Director                  
     Charles A. Brickman                                  

     /s/ JEAN-LOU CHAMEAU                                 
------------------------------  Director                  
       Jean-Lou Chameau                                   

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                                                                [Download Table]

          SIGNATURE                       TITLE           
------------------------------  --------------------------

                                                          
     /s/ BOBBY I. GRIFFIN                                 
------------------------------  Director                  
       Bobby I. Griffin                                   

   /s/ RUSSELL A. GULLOTTI                                
------------------------------  Director                  
     Russell A. Gullotti                                  

    /s/ BRENDAN C. HEGARTY                                
------------------------------  Director                  
      Brendan C. Hegarty                                  

    /s/ THOMAS E. HOLLORAN                                
------------------------------  Director                  
      Thomas E. Holloran                                  

    /s/ LINDA HALL WHITMAN                                
------------------------------  Director                  
      Linda Hall Whitman                                  

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INDEX TO EXHIBITS 

                                                        [Enlarge/Download Table]

  EXHIBIT                                                                                                            
  NUMBER                                              DESCRIPTION OF EXHIBIT                                         
-----------  --------------------------------------------------------------------------------------------------------
                                                                                                                     
       3.1   Articles of Amendment of the Amended and Restated Articles of Incorporation of MTS Systems Corporation. 

       5.1   Opinion of Lindquist & Vennum P.L.L.P. regarding legality of securities.                                

       8.1   Opinion of Lindquist & Vennum P.L.L.P. regarding certain tax matters.                                   

       8.2   Opinion of Gray Cary Ware & Freidenrich, LLP regarding certain tax matters.                             

      23.1   Consent of Arthur Andersen LLP.                                                                         

      23.2   Consent of Grant Thornton LLP.                                                                          

      99.1   Form of Proxy for Special Meeting of Stockholders of DSP Technology Inc.                                

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘S-4’ Filing		Date		First		Last			Other Filings
		1/31/04		40
		9/30/00		38		41			10-K
		12/31/99		15					10-Q
		10/31/99		53		128
		9/30/99		38		42			10-K,  8-K
		7/31/99		14		128
		5/28/99		2		25
		5/21/99		7
		5/6/99		13
		4/30/99		3		4
		4/29/99
Filed on:		4/28/99		1
		4/27/99		12		47
		4/22/99		1
		4/20/99		13		45
		4/16/99		1
		4/15/99		4		25
		4/14/99		46		47
		4/6/99		45
		4/1/99		10
		3/31/99		61					10-Q
		3/26/99		7
		3/23/99		1		139
		3/22/99		39		40
		3/21/99		71
		3/20/99		31		32
		3/19/99		32
		3/17/99		32
		3/16/99		32
		3/15/99		32
		3/12/99		31		77
		3/9/99		31
		3/5/99		31
		3/1/99		31		32
		2/28/99		31
		2/26/99		56		110
		2/25/99		110
		2/24/99		31
		2/23/99		31
		2/22/99		31
		2/19/99		31
		2/17/99		31
		2/14/99		31
		2/12/99		31
		2/11/99		31		40			SC 13G
		2/10/99		31
		2/9/99		31
		2/8/99		30		31
		2/6/99		30
		2/5/99		68
		2/4/99		30
		2/3/99		30		120
		2/2/99		30
		2/1/99		29		102
		1/31/99		39		104
		1/29/99		29		70
		1/28/99		29
		1/27/99		29
		1/26/99		28					DEF 14A,  PRE 14A
		1/25/99		28		71
		1/22/99		28
		1/21/99		28		90
		1/18/99		28		41
		1/8/99		28
		1/7/99		67
		1/6/99		28
		1/5/99		28
		12/31/98		7		112			10-Q
		12/22/98		27					10-K,  DEF 14A
		12/21/98		27
		12/7/98		27
		12/4/98		27
		11/20/98		75
		11/19/98		27
		11/16/98		27
		10/26/98		27
		10/22/98		27
		10/15/98		27
		10/1/98		111
		9/30/98		7		139			10-K,  10-K/A
		8/17/98		27
		6/8/98		67
		2/1/98		84
		1/31/98		58		100
		12/31/97		19					10-Q
		2/1/97		62
		1/31/97		58		87
		9/30/96		139					10-K
		2/1/96		82
		1/31/96		80
		1/30/96		139					DEF 14A,  PRE 14A
		1/1/96		108
		2/26/95		56
		2/1/95		87		102
		10/1/94		111
		9/30/94		19					10-K
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