Socket Mobile, Inc. – ‘8-K’ for 10/5/00 – EX-2.1

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         4     15K 
 2: EX-2.1      Exhibit 2.1 Agreement and Plan of Reorganization      55±   243K 
 3: EX-4.1      Exhibit 4.1 Form of Registration Rights Agreement     15±    68K 
 4: EX-99.1     Exhibit 99.1 Form of Employment Agreement              5±    21K 

EX-2.1   —   Exhibit 2.1 Agreement and Plan of Reorganization
Exhibit Table of Contents

EX-2.1
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AGREEMENT AND PLAN OF REORGANIZATION          

TABLE OF CONTENTS             

ARTICLE I THE MERGER                                                            
1.1   The Merger                                                      
1.2   Effective Time                                                  
1.3   Effect of the Merger                                            
1.4   Articles of Incorporation and Bylaws                            
1.5   Directors and Officers                                          
1.6   Maximum Shares to be Issued                                     
1.7   Conversion of Securities                                        
1.8   Dissenting Shares                                               
1.9   Surrender of Certificates                                       
1.10  No Further Ownership Rights in Company Common Stock             
1.11  Lost, Stolen or Destroyed Certificates                          
1.12  Tax and Accounting Consequences                                 
1.13  Taking of Necessary Action; Further Action                      

ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY                        
2.1   Organization of the Company                                     
2.2   Company Capital Structure                                       
2.3   Subsidiaries                                                    
2.4   Authority                                                       
2.5   No Conflict                                                     
2.6   Consents                                                        
2.7   Company Financial Statements                                    
2.8   No Undisclosed Liabilities                                      
2.9   No Changes                                                      
2.10  Tax and Other Returns and Reports                               
2.11  Restrictions on Business Activities                             
2.12  Title of Properties; Absence of Liens and Encumbrances          
2.13  Intellectual Property                                           
2.14  Agreements, Contracts and Commitments                           
2.15  Interested Party Transactions                                   
2.16  Compliance with Laws                                            
2.17  Governmental Authorization                                      
2.18  Litigation                                                      
2.19  Accounts Receivable                                             
2.20  Insurance                                                       
2.21  Minute Books                                                    
2.22  Environmental Matters                                           
2.23  Brokers' and Finders' Fees                                      
2.24  Employee Matters and Benefit Plans                              
2.25  Warranties; Indemnities                                         
2.26  Complete Copies of Materials                                    
2.27  Representations Complete                                        

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT                            
AND MERGER SUB                                          
3.1   Organization, Standing and Power                                
3.2   Authority                                                       
3.3   Capital Structure                                               
3.4   SEC Documents                                                   
3.5   Financial Statements                                            
3.6   Absence Of Undisclosed Liabilities                              
3.7   Litigation                                                      
3.8   Compliance with Laws and Other Instruments                      
3.9   Brokers' and Finders' Fees                                      
3.10  Consents                                                        

ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME                                  
4.1   Conduct of Business of the Company                              

ARTICLE V ADDITIONAL AGREEMENTS                                                 
5.1   Access to Information                                           
5.2   Confidentiality                                                 
5.3   Expenses                                                        
5.4   Public Disclosure                                               
5.5   Consents                                                        
5.6   FIRPTA Compliance                                               
5.7   Reasonable Efforts                                              
5.8   Notification of Certain Matters                                 
5.9   Certain Benefit Plans                                           
5.10  Additional Documents and Further Assurances                     
5.11  Registration Statement                                          
5.12  Restrictions on Sales and Other Transfers                       

ARTICLE VI CONDITIONS TO THE MERGER                                             
6.1   Conditions to Obligations of Each Party to                      
Effect the Merger                                         
6.2   Additional Conditions to Obligations of the Company             
6.3   Additional Conditions to the Obligations of Parent              
and Merger Sub                                            

ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW                  
7.1   Survival of Representations and Warranties                      
7.2   Escrow Arrangements                                             

ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER                                  
8.1   Termination                                                     
8.2   Effect of Termination                                           

ARTICLE IX GENERAL PROVISIONS                                                   
9.1   Notices                                                         
9.2   Interpretation                                                  
9.3   Amendment                                                       
9.4   Extension; Waiver                                               
9.5   Counterparts                                                    
9.6   Entire Agreement; Assignment                                    
9.7   Severability                                                    
9.8   Other Remedies                                                  
9.9   Governing Law                                                   
9.10  Rules of Construction                                           
9.11  Specific Performance                                            

EX-2.1
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AGREEMENT   AND PLAN OF REORGANIZATION                

This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is       
made and entered into as of October 3, 2000 among Socket                        
Communications, Inc., a Delaware corporation ("Parent"); 3rd Rail               
Acquisition Corp., a California corporation and a wholly owned                  
subsidiary of Parent ("Merger Sub") and 3rd Rail Engineering, Inc., a           
California corporation (the "Company"); Paul Hughes, Robert Miller              
and Thomas Newman (collectively, the "Principal Shareholders"); Paul            
Hughes as Securityholder Agent (the "Securityholder Agent") and David           
W. Dunlap, in his capacity as Chief Financial Office of Parent, as              
Escrow Agent (the "Escrow Agent").                                              

RECITALS                

A.  The Boards of Directors of each of the Company, Parent and        
Merger Sub believe it is in the best interests of each company and              
their respective stockholders that Parent acquire the Company through           
the statutory merger of Merger Sub with and into the Company (the               
"Merger") and, in furtherance thereof, have approved the Merger.                

B.  Pursuant to the Merger, among other things, and subject to        
the terms and conditions of this Agreement, all of the issued and               
outstanding shares of capital stock of the Company ("Company Capital            
Stock") shall be converted into the right to receive shares of Common           
Stock of Parent ("Parent Common Stock").                                        

C.  A portion of the shares of Parent Common Stock otherwise          
issuable by Parent in connection with the Merger shall be placed in             
escrow by Parent, the release of which amount shall be contingent               
upon certain events and conditions, all as set forth in Article VII             
hereof.                                                                         

D.  The parties intend that the Merger constitute a                   
"reorganization" within the meaning of Section 368(a) of the Internal           
Revenue Code of 1986, as amended (the "Code").                                  

E.  The Company, Parent, and Merger Sub desire to make certain        
representations and warranties and other agreements in connection               
with the Merger.                                                                

NOW, THEREFORE, in consideration of the covenants, promises and       
representations set forth herein, and for other good and valuable               
consideration, intending to be legally bound hereby the parties agree           
as follows:                                                                     

ARTICLE I                 

THE MERGER                  

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

1.2 Effective Time.  Unless this                                      
Agreement is earlier terminated pursuant to Section 8.1 hereof, the             
closing of the Merger (the "Closing") will take place as promptly as            
practicable after the execution and delivery hereof by the parties              
hereto, but no later than five (5) business days following                      
satisfaction or waiver of the conditions set forth in Article VI                
hereof, at the offices of Wilson Sonsini Goodrich & Rosati,                     
Professional Corporation, 650 Page Mill Road, Palo Alto, California,            
unless another time and/or place is mutually agreed upon in writing             
by Parent and the Company.  The date upon which the Closing actually            
occurs shall be referred to herein as the "Closing Date."  On the               
Closing Date, the parties hereto shall cause the Merger to be                   
consummated by filing a Certificate of Merger (or like instrument)              
and the accompanying officers' certificates, each in the form                   
reasonably satisfactory to Parent and Company, with the Secretary of            
State of the State of California (the "Certificate of Merger"), in              
accordance with the applicable provisions of California Law (the time           
of acceptance by the Secretary of State of the State of California of           
such filing shall be referred to herein as the "Effective Time").               

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

1.4 Articles of Incorporation and Bylaws                              

(a) Unless otherwise determined by Parent prior to the                
Effective Time, the articles of incorporation of Merger Sub, as in              
effect immediately prior to the Effective Time, shall be the articles           
of incorporation of the Surviving Corporation at the Effective Time             
until thereafter amended in accordance with California Law and as               
provided in such articles of incorporation; provided, however, that             
at the Effective Time, Article I of the Articles of Incorporation of            
the Surviving Corporation shall be amended and restated in its                  
entirety to read as follows:  "The name of the corporation is 3rd Rail          
Engineering, Inc."                                                              

(b) Unless otherwise determined by Parent prior to the                
Effective Time, the bylaws of Merger Sub, as in effect immediately              
prior to the Effective Time, shall be the bylaws of the Surviving               
Corporation at the Effective Time until thereafter amended in                   
accordance with California Law and as provided in the articles of               
incorporation of the Surviving Corporation and such bylaws.                     

1.5 Directors and Officers                                            

(a) Unless otherwise determined by Parent prior to the                
Effective Time, the directors of Merger Sub immediately prior to the            
Effective Time shall be the directors of the Surviving Corporation              
immediately after the Effective Time, each to hold the office of                
director of the Surviving Corporation in accordance with the                    
provisions of California Law and the articles of incorporation and              
bylaws of the Surviving Corporation until his successor is duly                 
elected and qualified.                                                          

(b) Unless otherwise determined by Parent prior to the                
Effective Time, the officers of Merger Sub immediately prior to the             
Effective Time shall be the officers of the Surviving Corporation               
immediately after the Effective Time, each to hold office in                    
accordance with the provisions of the bylaws of the Surviving                   
Corporation.                                                                    

1.6 Maximum Shares to be Issued.  The maximum                         
number  of shares of Parent Common Stock to be                                  
issued in exchange for the acquisition by Parent of all outstanding             
Company Capital Stock (assuming no Dissenting Shares (as defined in             
Section 1.8 below) shall be the Aggregate Share Number (as defined in           
Section 1.7(g) below). No adjustment shall be made in the number of             
shares of Parent Common Stock issued in the Merger as a result of any           
cash proceeds received by the Company from the date hereof to the               
Closing Date pursuant to the exercise of options or warrants to                 
acquire Company Capital Stock.                                                  

1.7 Conversion of Securities.  Subject to the                         
terms and conditions of this Agreement, as of                                   
the Effective Time, by virtue of the Merger and without any action on           
the part of Merger Sub, the Company or the holder of any shares of              
the Company's capital stock, the following shall occur:                         

(a) Conversion of Company Common Stock.  Each share of                
Common Stock of the Company ("Company Common Stock") issued and                 
outstanding immediately prior to the Effective Time (other than any             
shares of Company Common Stock to be canceled pursuant to                       
Section 1.7(b) and any Dissenting Shares (as defined and to the                 
extent provided in Section 1.8(a)) will be canceled and extinguished            
and be converted automatically into the right to receive that number            
of shares of Parent Common Stock equal to the Exchange Ratio (as                
defined in paragraph (g) below), upon surrender of the certificate              
representing such share of Company Common Stock in the manner                   
provided in Section 1.9; provided, however that up to 10% (rounding             
down to the nearest whole share) of the Stockholder Amount (as                  
defined in paragraph (g) below) payable to each holder of Company               
Common Stock (a "Company Shareholder") may be paid in cash at a price           
per share equal the Average Closing Price (as defined in paragraph              
(g) below).  Such amount that each Company Shareholder elects to be             
paid in cash shall for each Company Shareholder be referred to herein           
as the "Cash Election".                                                         

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

(c) Company Stock Options.  Prior to the Effective Time,              
the Company shall send a notice (the "Option Notice") to all holders            
of options to purchase Company Capital Stock (the "Company Options"):           
(i) specifying that such options shall not be assumed in connection             
with the Merger, (ii) specifying that the vesting restrictions                  
applicable to all options to purchase Company Common Stock                      
outstanding at the time of such notice shall be eliminated such that            
no vesting restrictions remain thereon effective as of the date such            
notice is given, (iii) specifying that any Company Options                      
outstanding as of the Effective Time shall terminate and be cancelled           
at such time, and (iv) setting forth instructions as to how to                  
exercise  such Company Options.                                                 

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

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

(f) Fractional Shares.  No fraction of a share of Parent              
Common Stock will be issued, but in lieu thereof, each holder of                
shares of Company Capital Stock who would otherwise be entitled to a            
fraction of a share of Parent Common Stock (after aggregating all               
fractional shares of Parent Common Stock to be received by such                 
holder) shall be entitled to receive from Parent an amount of cash              
(rounded to the nearest whole cent) equal to the product of (i) such            
fraction, multiplied by (ii) Average Closing Price.                             

(g) Definitions.                                                      

(i) Aggregate Common Number.  The "Aggregate Common         
Number" shall mean the aggregate number of shares of Company Common             
Stock outstanding immediately prior to the Effective Time (assuming             
the prior exercise or termination of all options to purchase Company            
Capital Stock).                                                                 

(ii) Aggregate Share Number.  The "Aggregate Share          
Number" shall be a number of shares of Parent Common Stock equal to             
the quotient derived by dividing (A) $12,000,000 by (B) the Average             
Closing Price, rounded to the nearest whole number (as appropriately            
adjusted to reflect the effect of any stock split, stock dividend,              
reorganization, recapitalization or the like with respect to the                
Parent Common Stock occurring after the date hereof and prior to the            
Effective Time).                                                                

(iii)  Average Closing Price.  The "Average Closing         
Price" shall mean the average of the closing prices of one share of             
Parent Common Stock as reported on the Nasdaq National Market over              
the twenty trading days ending one day prior to the Closing Date;               
provided that if such average during the period is: (A) greater than            
$15.00, then the Average Closing Price shall be $15.00 or (B) less              
than $12.00, then the Average Closing Price shall be $12.00.                    

(iv) Escrow Amount.  The "Escrow Amount" shall be a         
number of shares of Parent Common Stock obtained by multiplying (x)             
the aggregate Shareholder Amount for each Principal Shareholder by              
(y) 0.30.                                                                       

(v) Exchange Ratio.  The "Exchange Ratio" shall mean        
the quotient obtained by dividing (x) the Aggregate Share Number by             
(y) the Aggregate Common Number.                                                

(vi) Shareholder Amount.  The "Shareholder Amount"          
shall mean, for each individual Company Shareholder, that portion of            
the Aggregate Share Number to which such shareholder is entitled                
based upon the number of shares of Company Common Stock such Company            
Shareholder owns immediately prior to the Effective Time multiplied             
by the Exchange Ratio (rounded down to the nearest whole share)                 
(assuming the prior exercise or termination of all options to                   
purchase Company Capital Stock).                                                

1.8 Dissenting Shares                                                 

(a) Company shall be solely responsible for giving notice   
of appraisal or dissenters' rights to its shareholders in a manner              
consistent with California Law.  Notwithstanding any other provisions           
of this Agreement to the contrary, any shares of Company Capital                
Stock held by a holder who has exercised and perfected appraisal                
rights for such shares in accordance with California Law and who, as            
of the Effective Time, has not effectively withdrawn or lost such               
appraisal rights ("Dissenting Shares") shall not be converted into or           
represent a right to receive Parent Common Stock pursuant to                    
Section 1.7 hereof, but the holder thereof shall only be entitled to            
such rights as are provided by California Law.                                  

(b) Notwithstanding the provisions of Section 1.8(a)        
hereof, if any holder of Dissenting Shares shall effectively withdraw           
or lose (through failure to perfect or otherwise) such holder's                 
appraisal rights under California Law, then, as of the later of the             
Effective Time and the occurrence of such event, such holder's shares           
shall automatically be converted into and represent only the right to           
receive Parent Common Stock pursuant to Section 1.7 hereof, without             
interest thereon, upon surrender of the certificate representing such           
shares.                                                                         

(c) The Company shall give Parent (i) prompt notice of any  
written demand for appraisal received by the Company pursuant to the            
applicable provisions of California Law, and (ii) the opportunity to            
participate in all negotiations and proceedings with respect to such            
demands.  The Company shall not, except with the prior written                  
consent of Parent, make any payment with respect to any such demands            
or offer to settle or settle any such demands.                                  

1.9 Surrender of Certificates.                                        

(a) Exchange Agent.  Prior to the Effective Time, Parent    
shall designate a bank or trust company with assets of not less than            
$100,000,000 to act as exchange agent (the "Exchange Agent") in the             
Merger.                                                                         

(b) Parent to Provide Common Stock.  Promptly after the     
Effective Time, Parent shall make available to the Exchange Agent,              
for exchange in accordance with this Article I, the aggregate number            
of shares of Parent Common Stock issuable pursuant to Section 1.7 in            
exchange for outstanding shares of Company Capital Stock; provided              
that, on behalf of the Principal Shareholders, Parent shall deposit             
into an escrow account a number of shares of Parent Common Stock                
equal to the Escrow Amount out of the aggregate number of shares of             
Parent Common Stock otherwise issuable pursuant to Section 1.7.  The            
portion of the Escrow Amount contributed on behalf of each Principal            
Shareholder shall be in proportion to the Shareholder Amount for each           
Principal Shareholder.                                                          

(c)  Exchange Procedures.  Promptly after the Effective     
Time, the Surviving Corporation shall cause to be mailed to each                
holder of record of a certificate or certificates (the                          
"Certificates") that immediately prior to the Effective Time                    
represented outstanding shares of Company Capital Stock whose shares            
were converted into the right to receive shares of Parent Common                
Stock pursuant to Section 1.7 (i) a letter of transmittal (which                
shall specify that delivery shall be effected, and risk of loss and             
title to the Certificates shall pass, only upon actual delivery of              
the Certificates to the Exchange Agent and shall be in such form and            
have such other provisions as Parent may reasonably specify) and                
(ii) instructions for use in effecting the surrender of the                     
Certificates in exchange for certificates representing shares of                
Parent Common Stock and the Cash Election, if applicable.  Upon                 
surrender of a Certificate for cancellation to the Exchange Agent or            
to such other agent or agents as may be appointed by Parent, together           
with such letter of transmittal, duly completed and validly executed            
in accordance with the instructions thereto, the holder of such                 
Certificate shall be entitled to receive in exchange therefor a                 
certificate representing the number of whole shares of Parent Common            
Stock (less the number of shares of Parent Common Stock to be                   
deposited in the Escrow Fund on each Principal Shareholder's behalf             
pursuant to Article VII hereof) and the Cash Election, if applicable,           
plus cash in lieu of fractional shares in accordance with                       
Section 1.7(f), to which such holder is entitled pursuant to                    
Section 1.6, and the Certificate so surrendered shall forthwith be              
canceled. As soon as practicable after the Effective Time, and                  
subject to and in accordance with the provisions of Article VII                 
hereof, Parent shall cause to be distributed to the Escrow Agent (as            
defined in Article VII) a certificate or certificates representing              
that number of shares of Parent Common Stock equal to the Escrow                
Amount which shall be registered in the name of the Escrow Agent.               
Such shares shall be beneficially owned by the Company Shareholders             
on whose behalf such shares were deposited in the Escrow Fund and               
shall be available to compensate Parent as provided in Article VII.             
Until so surrendered, each outstanding Certificate that, prior to the           
Effective Time, represented shares of Company Capital Stock will be             
deemed from and after the Effective Time, for all corporate purposes,           
other than the payment of dividends, to evidence the ownership of the           
number of full shares of Parent Common Stock into which such shares             
of Company Capital Stock shall have been so converted and the right             
to receive an amount in cash in lieu of the issuance of any                     
fractional shares in accordance with Section 1.7.                               

(d) Distributions With Respect to Unexchanged Shares.  No   
dividends or other distributions declared or made with respect to               
Parent Common Stock with a record date after the Effective Time will            
be paid to the holder of any unsurrendered Certificate with respect             
to the shares of Parent Common Stock represented thereby until the              
holder of record of such Certificate shall surrender such                       
Certificate.  Subject to applicable law, following surrender of any             
such Certificate, there shall be paid to the record holder of the               
certificates representing whole shares of Parent Common Stock issued            
in exchange therefor, without interest, at the time of such                     
surrender, the amount of dividends or other distributions with a                
record date after the Effective Time theretofore paid with respect to           
such shares of Parent Common Stock.                                             

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

(f) No Liability.  Notwithstanding anything to the          
contrary in this Section 1.9, none of the Exchange Agent, the                   
Surviving Corporation or any party hereto shall be liable to a holder           
of shares of Parent Common Stock or Company Capital Stock for any               
amount properly paid to a public official pursuant to any applicable            
abandoned property, escheat or similar law.                                     

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

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

1.12 Tax and Accounting Consequences.  It is intended                 
by the parties hereto that the Merger shall                                     
(i) constitute a "reorganization" within the meaning of Section 368             
of the Code and (ii) be accounted for under purchase accounting.                

1.13 Taking of Necessary Action; Further Action.  If, at              
any time after the Effective Time, any such further                             
action is necessary or desirable to carry out the purposes of this              
Agreement and to vest the Surviving Corporation with full right,                
title and possession to all assets, property, rights, privileges,               
powers and franchises of the Company and Merger Sub, the officers and           
directors of the Company and Merger Sub are fully authorized in the             
name of their respective corporations or otherwise to take, and shall           
take, all such lawful and necessary action.                                     

ARTICLE II                    

REPRESENTATIONS AND WARRANTIES OF THE COMPANY                 

The Company hereby represents and warrants to Parent and Merger       
Sub, subject to such exceptions as are specifically disclosed in the            
disclosure schedule (referencing the appropriate section and                    
paragraph numbers) supplied by the Company to Parent (the "Company              
Disclosure Schedule") and dated as of the date hereof, on the date              
hereof and as of the Effective Time as though made at the Effective             
Time as follows (provided that the representations and warranties               
made as of a specified date shall be true and correct as of such                
date):                                                                          

2.1 Organization of the Company.  The Company                         
is a corporation duly organized, validly existing                               
and in good standing under the laws of the State of California.  The            
Company has the corporate power to own its properties and to carry on           
its business as now being conducted.  The Company is duly qualified             
to do business and in good standing as a foreign corporation in each            
jurisdiction in which the failure to be so qualified would have a               
material adverse effect on the business, assets (including intangible           
assets), condition (financial or otherwise), prospects or results of            
operations (hereinafter referred to as a "Material Adverse Effect")             
of the Company.  The Company has delivered a true and correct copy of           
its Articles of Incorporation and Bylaws, each as amended to date, to           
Parent.  Section 2.1 of the Company Disclosure Schedule lists the               
directors and officers of the Company.  The operations now being                
conducted by the Company are not now and have never been conducted by           
the Company under any other name.                                               

2.2 Company Capital Structure.                                        
(a) The authorized capital stock of the Company consists    
of 25,000,000 shares of authorized Common Stock, of which 13,863,700            
shares are issued and outstanding.  The Company Capital Stock is held           
by the persons, with the domicile addresses and taxpayer                        
identification numbers, and in the amounts set forth on Section                 
2.2(a) of the Company Disclosure Schedule.  All outstanding shares of           
Company Capital Common Stock are duly authorized, validly issued,               
fully paid and non-assessable and not subject to preemptive rights              
created by statute, the Articles of Incorporation or Bylaws of the              
Company or any agreement to which the Company is a party or by which            
it is bound.  There are no declared or accrued but unpaid dividends             
with respect to any shares of Company Capital Stock.                            

(b) The Company has reserved 5,000,000 shares of Common     
Stock for issuance to employees and consultants pursuant to the 2000            
Stock Plan (the "Option Plan"), of which no shares are subject to               
outstanding, unexercised options and 2,576,300 shares remain                    
available for future grant.  Section 2.2(b) of the Company Disclosure           
Schedule sets forth for each outstanding Company Option the name of             
the holder of such option, the domicile address and the taxpayer                
identification number of such holder, the number of shares of Common            
Stock subject to such option, the exercise price of such option and             
the vesting schedule for such option, including the extent vested to            
date and whether the exercisability of such option will be                      
accelerated and become exercisable by the transactions contemplated             
by this Agreement, and whether such option is intended to qualify as            
an incentive stock option as defined in Section 422 of the Code.                
Section 2.2(b) of the Company Disclosure Schedule also sets forth the           
name of the holder of any Company Capital Stock subject to a right of           
repurchase by the Company ("Company Restricted Stock"), the number of           
shares of Company Restricted Stock and the vesting schedule for such            
Company Restricted Stock, including the extent vested to date and               
whether the vesting of such shares of Company Restricted Stock will             
be accelerated by the transactions contemplated by this Agreement.              
Except for the Company Options described in Section 2.2(b) of the               
Company Disclosure Schedule, there are no options, warrants, calls,             
rights, commitments or agreements of any character, written or oral,            
to which the Company is a party or by which it is bound obligating              
the Company to issue, deliver, sell, repurchase or redeem, or cause             
to be issued, delivered, sold, repurchased or redeemed, any shares of           
the capital stock of the Company or obligating the Company to grant,            
extend, accelerate the vesting of, change the price of, otherwise               
amend or enter into any such option, warrant, call, right, commitment           
or agreement.  The holders of Company Options have been or will be              
given, or shall have properly waived, any required notice prior to              
the Merger and all such rights will be terminated at or prior to the            
Effective Time.  Except as contemplated hereby, and with respect to             
the Principal Stockholders to their knowledge, there are no voting              
trusts, proxies, or other agreements or understandings with respect             
to the voting stock of the Company.  As a result of the Merger,                 
Parent will be the record and sole beneficial owner of all                      
outstanding capital stock of the Company and rights to acquire or               
receive Company Capital Stock.                                                  

2.3 Subsidiaries.  The Company does not                               
have and has never had any subsidiaries                                         
or affiliated companies and does not otherwise own and has never                
otherwise owned any shares of capital stock or any interest in, or              
control, directly or indirectly, any other corporation, partnership,            
association, joint venture or other business entity.                            

2.4 Authority.  The Company has                                       
all requisite power and authority to enter into this Agreement and              
any Related Agreements (as hereinafter defined) to which it is a                
party and to consummate the transactions contemplated hereby and                
thereby.  The execution and delivery of this Agreement and any                  
Related Agreements to which it is a party and the consummation of the           
transactions contemplated hereby and thereby have been duly                     
authorized by all necessary corporate action on the part of the                 
Company, and no further action is required on the part of the Company           
to authorize the Agreement, any Related Agreements to which it is or            
they are a party and the transactions contemplated hereby and                   
thereby, subject only to the approval of this Agreement by the                  
Company Shareholders.  This Agreement and the Merger have been                  
unanimously approved by the Board of Directors of the Company.  This            
Agreement and any Related Agreements to which the Company is a party            
have been duly executed and delivered by the Company, and assuming              
the due authorization, execution and delivery by the other parties              
hereto and thereto, constitute the valid and binding obligation of              
the Company and such Principal Stockholder, as the case may be,                 
enforceable in accordance with their respective terms, subject to the           
laws of general application relating to bankruptcy, insolvency and              
the relief of debtors and to rules of law governing specific                    
performance, injunctive relief or other equitable remedies.  The                
"Related Agreements" shall mean all such ancillary agreements                   
required in this Agreement to be executed and delivered in connection           
with the transactions contemplated hereby, including the Employment             
Agreements.                                                                     

2.5 No Conflict.  The execution and                                   
delivery of this Agreement and any Related Agreements to which                  
the Company is a party by the Company do not, and the consummation of           
the transactions contemplated hereby and thereby will not, conflict             
with, or result in any violation of or default under (with or without           
notice or lapse of time, or both), or give rise to a right of                   
termination, cancellation, modification or acceleration of any                  
obligation or loss of any benefit under (any such event, a                      
"Conflict") (i) any provision of the Articles of Incorporation and              
Bylaws of the Company, (ii) any mortgage, indenture, lease, contract            
or other agreement or instrument, permit, concession, franchise or              
license to which the Company or any of its properties or assets are             
subject, or (iii) any judgment, order, decree, statute, law,                    
ordinance, rule or regulation applicable to the Company or their                
respective properties or assets.                                                

2.6 Consents.  No consent,                                            
waiver, approval, order or authorization of, or registration,                   
declaration or filing with, any court, administrative agency or                 
commission or other federal, state, county, local or other foreign              
governmental authority, instrumentality, agency or commission                   
("Governmental Entity") or any third party, including a party to any            
agreement with the Company (so as not to trigger any Conflict), is              
required by or with respect to the Company in connection with the               
execution and delivery of this Agreement and any Related Agreements             
to which the Company is a party or the consummation of the                      
transactions contemplated hereby and thereby, except for (i) such               
consents, waivers, approvals, orders, authorizations, registrations,            
declarations and filings as may be required under applicable                    
securities laws thereby, and (ii) the filing of the Merger Agreement            
with the Secretary of State of the State of California.                         

2.7 Company Financial Statements.  Section 2.7 of                     
the Company Disclosure Schedule sets forth (i)                                  
the Company's unaudited balance sheet as of December 31, 1999 and the           
related unaudited statements of income and cash flow for the twelve-            
month period then ended and (ii) the Company's unaudited balance                
sheet as of August 31, 2000 (the "Current Balance Sheet") and the               
related unaudited statements of income and cash flow for the eight-             
month period then ended (collectively, the "Company Financials").               
The Company Financials are correct in all material respects and have            
been prepared using cash basis accounting applied on a basis                    
consistent throughout the periods indicated and consistent with each            
other.  The Company Financials present fairly the financial condition           
and operating results of the Company as of the dates and during the             
periods indicated therein, subject to normal year-end adjustments,              
which will not be material in amount or significance.                           

2.8 No Undisclosed Liabilities.  The Company                          
does not have any liability, indebtedness,                                      
obligation, expense, claim, deficiency, guaranty or endorsement of              
any type, whether accrued, absolute, contingent, matured, unmatured             
or other (whether or not required to be reflected in financial                  
statements), which individually or in the aggregate (i) has not been            
reflected in the Current Balance Sheet, or (ii) has not arisen in the           
ordinary course of the Company's business since August 31, 2000,                
consistent with past practices.                                                 

2.9 No Changes.  Except as set forth in Section 2.9 of the Company    
Disclosure Schedule, since August 31, 2000, there has not been, occurred        
or arisen any:                                                                  

(a) transaction by the Company except in the ordinary       
course of business as conducted on that date and consistent with past           
practices;                                                                      

(b) amendments or changes to the Articles of Incorporation  
or Bylaws of the Company;                                                       

(c) capital expenditure or commitment by the Company,       
either individually or in the aggregate, exceeding $10,000                      
individually or $50,000 in the aggregate;                                       

(d) destruction of, damage to or loss of any material       
assets, business or customer of the Company (whether or not covered             
by insurance);                                                                  

(e) labor trouble or claim of wrongful discharge or other   
unlawful labor practice or action;                                              

(f) change in accounting methods or practices (including    
any change in depreciation or amortization policies or rates) by the            
Company;                                                                        

(g) revaluation by the Company of any of its assets;        

(h) declaration, setting aside or payment of a dividend or  
other distribution with respect to the capital stock of the Company,            
or any direct or indirect redemption, repurchase or other acquisition           
by the Company of any of its capital stock;                                     

(i) increase in the salary or other compensation payable    
or to become payable by the Company to any of its officers,                     
directors, employees or advisors, or the declaration, payment or                
commitment or obligation of any kind for the payment, by the Company,           
of a bonus or other additional salary or compensation to any such               
person except as otherwise contemplated by this Agreement;                      

(j) sale, lease, license or other disposition of any of     
the assets or properties of the Company or any creation of any                  
security interest in such assets or properties, except in the                   
ordinary course of business as conducted on that date and consistent            
with past practices;                                                            

(k) any material agreement, contract, covenant,             
instrument, lease, license or commitment to which the Company is a              
party or by which they or any of its assets are bound or any                    
termination, extension, amendment or modification the terms of any              
material agreement, contract, covenant, instrument, lease, license or           
commitment to which the Company is a party or by which it or any of             
its assets are bound;                                                           

(l) loan by the Company to any person or entity, incurring  
by the Company of any indebtedness, guaranteeing by the Company of              
any indebtedness, issuance or sale of any debt securities of the                
Company or guaranteeing of any debt securities of others;                       

(m) waiver or release of any right or claim of the          
Company, including any write-off or other compromise of any account             
receivable of the Company;                                                      

(n) the commencement or notice or threat of commencement    
of any lawsuit or proceeding against or investigation of the Company            
or its affairs;                                                                 

(o) notice of any claim of ownership by a third party of    
the Company Intellectual Property (as defined in Section 2.13 below)            
or of infringement by the Company of any third party's Intellectual             
Property rights;                                                                

(p) issuance or sale, or contract to issue or sell, by the  
Company of any shares of its capital stock or securities                        
exchangeable, convertible or exercisable therefor, or any securities,           
warrants, options or rights to purchase any of the foregoing, except            
for options to purchase capital stock of the Company granted to                 
employees of the Company in the ordinary course of business                     
consistent with past practice;                                                  

(q) (i) selling or entering into any license agreement      
with respect to the Company Intellectual Property with any third                
party or (ii) buying or entering into any license agreement with                
respect to the Intellectual Property of any third party;                        

(r) change in pricing or royalties set or charged by the    
Company to its customers or licensees or in pricing or royalties set            
or charged by persons who have licensed Intellectual Property to the            
Company;                                                                        

(s) any event or condition of any character that has or     
could be reasonably expected to have a Material Adverse Effect on the           
Company; or                                                                     

(t) negotiation or agreement by the Company or any officer  
or employees thereof or by any Principal Shareholder to do any of the           
things described in the preceding clauses (a) through (s) (other than           
negotiations with Parent and its representatives regarding the                  
transactions contemplated by this Agreement).                                   

2.10 Tax and Other Returns and Reports.                               

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

(b) Tax Returns and Audits.                                 

(i) The Company as of the Effective Time will have
prepared and filed all required federal, state, local and foreign               
returns, estimates, information statements and reports ("Returns")              
relating to any and all Taxes concerning or attributable to the                 
Company or its operations and such Returns are true and correct and             
have been completed in accordance with applicable law.                          

  (ii) The Company as of the Effective Time:  (A) will
have paid or accrued all Taxes it is required to pay or accrue and              
(B) will have withheld with respect to its employees all federal and            
state income taxes, FICA, FUTA and other Taxes required to be                   
withheld.                                                                       

(iii) The Company has not been delinquent in the  
payment of any Tax nor is there any Tax deficiency outstanding,                 
proposed or assessed against the Company, nor has the Company                   
executed any waiver of any statute of limitations on or extending the           
period for the assessment or collection of any Tax.                             
 (iv) No audit or other examination of any Return of
the Company is presently in progress, nor has the Company been                  
notified of any request for such an audit or other examination.                 

(v) The Company does not have any liabilities for 
unpaid federal, state, local and foreign Taxes which have not been              
accrued or reserved against in accordance with GAAP on the Current              
Balance Sheet, whether asserted or unasserted, contingent or                    
otherwise, and the Company has no knowledge of any basis for the                
assertion of any such liability attributable to the Company, its                
assets or operations.                                                           

   (vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Tax Returns for            
all periods since the date of Company's incorporation.                          

  (vii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, security             
interests or other encumbrances of any sort ("Liens") on the assets             
of the Company relating to or attributable to Taxes.                            

      (viii) The Company has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if              
adversely determined, would result in any Lien on the assets of the             
Company.                                                                        

    (ix) None of the Company's assets are treated as "tax-
exempt use property" within the meaning of Section 168(h) of the                
Code.                                                                           

 (x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited             
to the provisions of this Agreement, covering any employee or former            
employee of the Company that, individually or collectively, could               
give rise to the payment of any amount that would not be deductible             
pursuant to Section 280G, 404 or 162 of the Code.                               

  (xi) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2)            
of the Code apply to any disposition of a subsection (f) asset (as              
defined in Section 341(f)(4) of the Code) owned by the Company.                 
  (xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any              
such agreement.                                                                 

      (xiii) The Company is not, and has not been at any time,
a "United States real property holding corporation" within the                  
meaning of Section 897(c)(2) of the Code.                                       

(xiv) The Company's tax basis in its assets for   
purposes of determining its future amortization, depreciation and               
other federal income tax deductions is accurately reflected on the              
Company's tax books and records.                                                

(xv) The Company (A) has not been a member of any 
affiliated group within the meaning of Code Section 1504 or any                 
similar group defined under a similar provision of state, local, or             
foreign law filing a consolidated federal Income Tax Return (other              
than a group the common parent of which was the Company) and (B) has            
no liability for the taxes of any Person (other than any of the                 
Company) under Treasury Regulation Section 1.1502-6 (or any similar             
provision of state, local, or foreign law), as a transferee or                  
successor, by contract, or otherwise.                                           

(xvi) The Company has not constituted either a    
"distributing corporation" or a "controlled corporation" in a                   
distribution of stock qualifying for tax-free treatment under Section           
355 of the Code (i) in the two years prior to the date of this                  
Agreement or (ii) in a distribution which could otherwise constitute            
part of a "plan" or "series of related transaction" (within the                 
meaning of Section 355(e) of the Code) that includes the Merger.                

2.11 Restrictions on Business Activities.  There                      
is no agreement (noncompete or otherwise),                                      
commitment, judgment, injunction, order or decree to which the                  
Company is a party or otherwise binding upon the Company which has or           
may have the effect of prohibiting or impairing any business practice           
of the Company, any acquisition of property (tangible or intangible)            
by the Company or the conduct of business by the Company.  Without              
limiting the foregoing, the Company has not entered into any                    
agreement under which the Company is restricted from selling,                   
licensing or otherwise distributing any of its technology or products           
to or providing services to, customers or potential customers or any            
class of customers, in any geographic area, during any period of time           
or in any segment of the market.                                                

2.12 Title of Properties; Absence of Liens and Encumbrances.          

(a) The Company owns no real property, nor has it ever      
owned any real property. Section 2.12(a) of the Company Disclosure              
Schedule sets forth a list of all real property currently, or at any            
time in the past, leased by the Company, the name of the lessor, the            
date of the lease and each amendment thereto and, with respect to any           
current lease, the aggregate annual rental and/or other fees payable            
under any such lease.  All such current leases are in full force and            
effect, are valid and effective in accordance with their respective             
terms, and there is not, under any of such leases, any existing                 
default or event of default (or event which with notice or lapse of             
time, or both, would constitute a default).                                     

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

(c) Section 2.12(c) of the Company Disclosure Schedule      
lists all material items of equipment (the "Equipment") owned or                
leased by the Company, and such Equipment is (i) sufficient for the             
conduct of the business of the Company as currently conducted and               
(ii) in good operating condition, regularly and properly maintained,            
subject to normal wear and tear.                                                

(d) The Company has sole and exclusive ownership, free and  
clear of any Liens, of all customer files and other customer                    
information relating to customers of the Company's current and former           
customers (the "Customer Information").  No person other than the               
Company possesses any claims or rights with respect to use of the               
Customer Information.                                                           

2.13 Intellectual Property.                                           

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

  "Intellectual Property" shall mean any or all of the
following and all rights in, arising out of, or associated therewith:           
(i) all United States and foreign patents and applications therefor             
and all reissues, divisions, renewals, extensions, provisionals,                
continuations and continuations-in-part thereof; (ii) all inventions            
(whether patentable or not), invention disclosures, improvements,               
trade secrets, proprietary information, know how, technology,                   
technical data and customer lists, and all documentation relating to            
any of the foregoing; (iii) all copyrights, copyrights registrations            
and applications therefor and all other rights corresponding thereto            
throughout the world; (iv) all mask works, mask work registrations              
and applications therefor; (v) all industrial designs and any                   
registrations and applications therefor throughout the world;                   
(vi) all trade names, logos, common law trademarks and service marks;           
trademark and service mark registrations and applications therefor              
and all goodwill associated therewith throughout the world; (vii) all           
databases and data collections and all rights therein throughout the            
world; (viii) all computer software including all source code, object           
code, firmware, development tools, files, records and data, all media           
on which any of the foregoing is recorded, all Web addresses, sites             
and domain names; (ix) any similar, corresponding or equivalent                 
rights to any of the foregoing; and (x) all documentation related to            
any of the foregoing.                                                           

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

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

(b) Section 2.13(b) of the Company Disclosure Schedule      
lists all Registered Intellectual Property owned by, or filed in the            
name of, the Company (the "Company Registered Intellectual Property")           
and lists any proceedings or actions before any court, tribunal                 
(including the United States Patent and Trademark Office (the "PTO")            
or equivalent authority anywhere in the world) related to any of the            
Company Registered Intellectual Property.                                       

(c) Except as set forth in Section 2.13(b) of the Company   
Disclosure Schedule, each item of Company Intellectual Property,                
including all Company Registered Intellectual Property listed in                
Section 2.13(b) of the Company Disclosure Schedule and all                      
Intellectual Property licensed to the Company, is free and clear of             
any Liens. The Company (i) is the exclusive owner of all trademarks             
and trade names used in connection with the operation or conduct of             
the business of the Company, including the sale of any products or              
technology or the provision of any services by the Company and                  
(ii) owns exclusively, and has good title to, all copyrighted works             
that are Company products or other works of authorship that the                 
Company otherwise purports to own.                                              

(d) To the extent that any Intellectual Property has been   
developed or created by any person other than the Company for which             
the Company has, directly or indirectly, paid, the Company has a                
written agreement with such person with respect thereto, and the                
Company thereby has obtained ownership of, and is the exclusive owner           
of, all such Intellectual Property by operation of law or by valid              
assignment.                                                                     

(e) Except as set forth in Section 2.13(e) of the Company   
Disclosure Schedule, the Company has not transferred ownership of or            
granted any license of or right to use or authorized the retention of           
any rights to use any Intellectual Property that is or was Company              
Intellectual Property to any other person.                                      

(f) The Company Intellectual Property constitutes all the   
Intellectual Property used in and/or necessary to the conduct of its            
business as it currently is conducted or is reasonably contemplated             
to be conducted, including, without limitation, the design,                     
development, manufacture, use, import and sale of the products,                 
technology and services of the Company (including products,                     
technology or services currently under development).                            

(g) Other than "shrink-wrap" and similar widely available   
commercial end-user licenses, the contracts, licenses and agreements            
listed in Section 2.13(g) of the Company Disclosure Schedule include            
all contracts, licenses and agreements to which the Company is a                
party with respect to any Intellectual Property.  No person who has             
licensed Intellectual Property to the Company has ownership rights or           
license rights to improvements made by the Company in such                      
Intellectual Property.                                                          

(h) Section 2.13(h) of the Company Disclosure Schedule      
lists all contracts, licenses and agreements between the Company and            
any other person wherein or whereby the Company has agreed to, or               
assumed, any obligation or duty to warrant, indemnify, reimburse,               
hold harmless, guaranty or otherwise assume or incur any obligation             
or liability or provide a right of rescission with respect to the               
infringement or misappropriation by the Company or such other person            
of the Intellectual Property of any person other than the Company.              

(i) The operation of the business of the Company as it      
currently is conducted or is reasonably contemplated to be conducted,           
including but not limited to the Company's design, development, use,            
import, manufacture and sale of the products, technology or services            
(including products, technology or services currently under                     
development) of the Company does not infringe or misappropriate the             
Intellectual Property of any person, violate the rights of any person           
(including rights to privacy or publicity), or constitute unfair                
competition or trade practices under the laws of any jurisdiction,              
and the Company has not received notice from any person claiming that           
such operation or any act, product, technology or service (including            
products, technology or services currently under development) of the            
Company infringes or misappropriates the Intellectual Property of any           
person or constitutes unfair competition or trade practices under the           
laws of any jurisdiction (nor is the Company aware of any basis                 
therefor).                                                                      

(j) Each item of Company Registered Intellectual Property   
is valid and subsisting, all necessary registration, maintenance and            
renewal fees in connection with such Registered Intellectual Property           
have been paid, and all necessary documents and certificates in                 
connection with such Company Registered Intellectual Property have              
been filed with the relevant patent, copyright, trademark or other              
authorities in the United States or foreign jurisdictions, as the               
case may be, for the purposes of maintaining such Registered                    
Intellectual Property.  There are no actions that must be taken by              
the Company within sixty (60) days of the Closing Date, including the           
payment of any registration, maintenance or renewal fees or the                 
filing of any documents, applications or certificates for the                   
purposes of maintaining, perfecting or preserving or renewing any               
Company Intellectual Property.  In each case in which the Company has           
acquired any Intellectual Property rights from any person, the                  
Company has obtained a valid and enforceable assignment sufficient to           
irrevocably transfer all rights in such Intellectual Property                   
(including the right to seek past and future damages with respect to            
such Intellectual Property) to the Company and, to the maximum extent           
provided for by, and in accordance with, applicable laws and                    
regulations, the Company has recorded each such assignment with the             
relevant governmental authorities, including the PTO, the U.S.                  
Copyright Office, or their respective equivalents in any relevant               
foreign jurisdiction, as the case may be.                                       

(k) There are no contracts, licenses or agreements between  
the Company and any other person with respect to Company Intellectual           
Property under which there is any dispute known to the Company                  
regarding the scope of such agreement, or performance under such                
agreement including with respect to any payments to be made or                  
received by the Company thereunder.                                             

(l) To the knowledge of the Company, no person is           
infringing or misappropriating any Company Intellectual Property.               

(m) The Company has taken all reasonable steps that are     
required to protect the Company's rights in confidential information            
and trade secrets of the Company or provided by any other person to             
the Company.  Without limiting the foregoing, the Company has, and              
enforces, a policy requiring each employee, consultant and contractor           
to execute proprietary information, confidentiality and assignment              
agreements substantially in the Company's standard forms, and all               
current and former employees, consultants and contractors of the                
Company have executed such an agreement.                                        

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

(o) No (i) product, technology, service or publication of   
the Company (ii) material published or distributed by the Company or            
(iii) conduct or statement of Company constitutes obscene material, a           
defamatory statement or material, false advertising or otherwise                
violates any law or regulation.                                                 

2.14 Agreements, Contracts and Commitments.                           

(a) Except as set forth on Section 2.14(a) of the Company   
Disclosure Schedule, the Company does not have, is not a party to nor           
is it bound by:                                                                 
(i) any collective bargaining agreements,         

  (ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,                    

     (iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or             
arrangements,                                                                   

   (iv) any employment or consulting agreement, contract
or commitment with an employee or individual consultant or                      
salesperson or consulting or sales agreement, contract or commitment            
with a firm or other organization,                                              

(v) any agreement or plan, including, without     
limitation, any stock option plan, stock appreciation rights plan or            
stock purchase plan, any of the benefits of which will be increased,            
or the vesting of benefits of which will be accelerated, by the                 
occurrence of any of the transactions contemplated by this Agreement            
or the value of any of the benefits of which will be calculated on              
the basis of any of the transactions contemplated by this Agreement,            

  (vi) any fidelity or surety bond or completion bond,

 (vii) any lease of personal property having a value
individually in excess of $10,000,                                              

  (viii) any agreement of indemnification or guaranty,

   (ix) any agreement, contract or commitment containing
any covenant limiting the freedom of the Company to engage in any               
line of business or to compete with any person,                                 

   (x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of                 
$10,000,                                                                        

    (xi) any agreement, contract or commitment relating to
the disposition or acquisition of assets or any interest in any                 
business enterprise outside the ordinary course of the Company's                
business,                                                                       
(xii) any mortgages, indentures, loans or credit  
agreements, security agreements or other agreements or instruments              
relating to the borrowing of money or extension of credit, including            
guaranties referred to in clause (viii) hereof,                                 

    (xiii) any purchase order or contract for the purchase
of raw materials involving $10,000 or more,                                     

(xiv) any construction contracts,                 

   (xv) any distribution, joint marketing or development
agreement, or                                                                   

    (xvi) any other agreement, contract or commitment that
involves $10,000 or more or is not cancelable without penalty within            
thirty (30) days.                                                               

(b) The Company is in compliance with and has not           
breached, violated or defaulted under, or received notice that it has           
breached, violated or defaulted under, any of the terms or conditions           
of any agreement, contract, covenant, instrument, lease, license or             
commitment to which the Company is a party or by which it is bound              
(collectively a "Contract"), nor is the Company or any Principal                
Stockholder aware of any event that would constitute such a breach,             
violation or default with the lapse of time, giving of notice or                
both.  Each Contract is in full force and effect and is not subject             
to any default thereunder by any party obligated to the Company                 
pursuant thereto.  The Company has obtained, or will obtain prior to            
the Closing Date, all necessary consents, waivers and approvals of              
parties to any Contract as are required thereunder in connection with           
the Merger or for such Contracts to remain in effect without                    
modification after the Closing.  Following the Effective Time, the              
Company will be permitted to exercise all of the Company's rights               
under the Contracts without the payment of any additional amounts or            
consideration other than ongoing fees, royalties or payments which              
the Company would otherwise be required to pay had the transactions             
contemplated by this Agreement not occurred.                                    

2.15 Interested Party Transactions.  Except as                        
set forth on Section 2.15 of the Company                                        
Disclosure Schedule, no officer, director or Stockholder of the                 
Company (nor any ancestor, sibling, descendant or spouse of any of              
such persons, or any trust, partnership or corporation in which any             
of such persons has or has had an interest), has or has had, directly           
or indirectly, (i) an interest in any entity which furnished or sold,           
or furnishes or sells, services, products or technology that the                
Company furnishes or sells, or proposes to furnish or sell, or                  
(ii) any interest in any entity that purchases from or sells or                 
furnishes to the Company any goods or services or (iii) a beneficial            
interest in any Contract; provided, that ownership of no more than              
one percent (1%) of the outstanding voting stock of a publicly traded           
corporation shall not be deemed an "interest in any entity" for                 
purposes of this Section 2.15.                                                  

2.16 Compliance with Laws.  The Company                               
has complied in all material respects with, is                                  
not in material violation of, and has not received any notices of               
violation with respect to, any foreign, federal, state or local                 
statute, law or regulation.                                                     

2.17 Governmental Authorization.                                      
Section 2.17 of the Company Disclosure Schedule accurately lists each           
consent, license, permit, grant or other authorization issued to the            
Company by a Governmental Entity (i) pursuant to which the Company              
currently operates or holds any interest in any of their properties             
or (ii) which is required for the operation of its business or the              
holding of any such interest (herein collectively called "Company               
Authorizations").  The Company Authorizations are in full force and             
effect and constitute all Company Authorizations required to permit             
the Company to operate or conduct its business or hold any interest             
in its properties or assets.                                                    

2.18 Litigation.  There is no                                         
action, suit or proceeding of any nature pending                                
or to the Company's knowledge threatened against the Company, its               
properties or any of its officers or directors, in their respective             
capacities as such.  To the Company's knowledge, there is no                    
investigation pending or threatened against the Company, its                    
properties or any of its officers or directors by or before any                 
governmental entity. Section 2.18 of the Company Disclosure Schedule            
sets forth, with respect to any pending or threatened action, suit,             
proceeding or investigation, the forum, the parties thereto, the                
subject matter thereof and the amount of damages claimed or other               
remedy requested.  No Governmental Entity has at any time challenged            
or questioned the legal right of the Company to manufacture, offer or           
sell any of its products in the present manner or style thereof.                

2.19 Accounts Receivable.                                             

(a) The Company has made available to Parent a list of all  
accounts receivable of the Company ("Accounts Receivable") as of                
August 31, 2000 along with a range of days elapsed since invoice.               

(b) All Accounts Receivable of the Company arose in the     
ordinary course of business and are collectible except to the extent            
of reserves therefor set forth in the Current Balance Sheet.  No                
person has any Lien on any of such Accounts Receivable and no request           
or agreement for deduction or discount has been made with respect to            
any of such Accounts Receivable.                                                

2.20 Insurance.  Section 2.20 of                                      
the Company Disclosure Schedule contains an                                     
accurate summary of the insurance policies currently maintained by              
the Company.  The Company has obtained and maintained in full force             
and effect insurance with responsible and reputable insurance                   
companies or associations in such amounts, on such terms and covering           
such risks, including fire and other risks insured against by                   
extended coverage, as is reasonably prudent.  With respect to the               
insurance policies and fidelity bonds covering the assets, business,            
equipment, properties, operations, employees, officers and directors            
of the Company, there is no claim by the Company pending under any of           
such policies or bonds as to which coverage has been questioned,                
denied or disputed by the underwriters of such policies or bonds.               
All premiums due and payable under all such policies and bonds have             
been paid and the Company is otherwise in material compliance with              
the terms of such policies and bonds (or other policies and bonds               
providing substantially similar insurance coverage).  The Company has           
no knowledge of any threatened termination of, or material premium              
increase with respect to, any of such policies.                                 

2.21 Minute Books.  The minute books of the                           
Company made available to counsel for                                           
Parent are the only minute books of the Company and contain a                   
reasonably accurate summary of all meetings of directors (or                    
committees thereof) and stockholders or actions by written consent              
since the time of incorporation of the Company.                                 

2.22 Environmental Matters.                                           

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

   (ii) Hazardous Materials Activities.  The Company has
not transported, stored, used, manufactured, disposed of, released or           
exposed its employees or others to Hazardous Materials in violation             
of any law in effect on or before the Closing Date, nor has the                 
Company disposed of, transported, sold, or manufactured any product             
containing a Hazardous Material (any or all of the foregoing being              
collectively referred to as "Hazardous Materials Activities") in                
violation of any rule, regulation, treaty or statute promulgated by             
any Governmental Entity in effect prior to or as of the date hereof             
to prohibit, regulate or control Hazardous Materials or any Hazardous           
Material Activity.                                                              

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

(iv) Environmental Liabilities.  No action,       
proceeding, revocation proceeding, amendment procedure, writ,                   
injunction or claim is pending, or to the Company's knowledge,                  
threatened concerning any Environmental Permit, Hazardous Material or           
any Hazardous Materials Activity of the Company.  The Company is not            
aware of any fact or circumstance which could involve the Company in            
any environmental litigation or impose upon the Company any                     
environmental liability.                                                        

2.23 Brokers' and Finders' Fees.  The Company                         
has not incurred, nor will it incur, directly or                                
indirectly, any liability for brokerage or finders' fees or agents'             
commissions or any similar charges in connection with this Agreement            
or any transaction contemplated hereby.  Section 2.23 of the Company            
Disclosure Schedule sets forth the Company's current reasonable                 
estimate of all Third Party Expenses (as defined in Section 5.3)                
expected to be incurred by the Company in connection with the                   
negotiation and effectuation of the terms and conditions of this                
Agreement and the transactions contemplated hereby.                             

2.24 Employee Matters and Benefit Plans.                              

(a) Definitions.  With the exception of the definition of   
"Affiliate" set forth in Section 2.24(a)(i) below (which definition             
shall apply only to this Section 2.24), for purposes of this                    
Agreement, the following terms shall have the meanings set forth                
below:                                                                          

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

 (ii) "Code" shall mean the Internal Revenue Code of
1986, as amended;                                                               

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

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

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

(vi) "Employee" shall mean any current or former  
employee, consultant or director of the Company or any Affiliate;               

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

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

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

(x) "International Employee Plan"  shall mean each
Company Employee Plan that has been adopted or maintained by the                
Company or any Affiliate, whether informally or formally, or with               
respect to which the Company or any Affiliate will or may have any              
liability, for the benefit of Employees who perform services outside            
the United States;                                                              

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

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

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

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

(b) Schedule.  Section 2.24(b) of the Company Disclosure    
Schedule contains an accurate and complete list of each Company                 
Employee Plan and each Employee Agreement under each Company Employee           
Plan or Employee Agreement.  The Company does not have any plan or              
commitment to establish any new Company Employee Plan or Employee               
Agreement, to modify any Company Employee Plan or Employee Agreement            
(except to the extent required by law or to conform any such Company            
Employee Plan or Employee Agreement to the requirements of any                  
applicable law, in each case as previously disclosed to Parent in               
writing, or as required by this Agreement), or to enter into any                
Company Employee Plan or Employee Agreement.                                    

(c) Documents.  The Company has provided to Parent          
(i) correct and complete copies of all documents embodying each                 
Company Employee Plan and each Employee Agreement including (without            
limitation) all amendments thereto and all related trust documents;             
(ii) the most recent annual actuarial valuations, if any, prepared              
for each Company Employee Plan; (iii) the three (3) most recent                 
annual reports (Form Series 5500 and all schedules and financial                
statements attached thereto), if any, required under ERISA or the               
Code in connection with each Company Employee Plan; (iv) if the                 
Company Employee Plan is funded, the most recent annual and periodic            
accounting of Company Employee Plan assets; (v) the most recent                 
summary plan description together with the summary(ies) of material             
modifications thereto, if any, required under ERISA with respect to             
each Company Employee Plan; (vi) all IRS determination, opinion,                
notification and advisory letters, and all applications and                     
correspondence to or from the IRS or the DOL with respect to any such           
application or letter; (vii) all material written agreements and                
contracts relating to each Company Employee Plan, including, but not            
limited to, administrative service agreements, group annuity                    
contracts and group insurance contracts; (viii) all communications              
material to any Employee or Employees relating to any Company                   
Employee Plan and any proposed Company Employee Plans, in each case,            
relating to any amendments, terminations, establishments, increases             
or decreases in benefits, acceleration of payments or vesting                   
schedules or other events which would result in any material                    
liability to the Company; (ix) all correspondence to or from any                
governmental agency relating to any Company Employee Plan; (x) all              
COBRA forms and related notices; (xi) all policies pertaining to                
fiduciary liability insurance covering the fiduciaries for each                 
Company Employee Plan; (xii) all discrimination tests for each                  
Company Employee Plan for the most recent plan year; and (xiii) all             
registration statements, annual reports (Form 11-K and all                      
attachments thereto) and prospectuses prepared in connection with               
each Company Employee Plan.                                                     

(d) Employee Plan Compliance. (i) The Company has           
performed in all material respects all obligations required to be               
performed by it under, is not in default or violation of, and has no            
knowledge of any default or violation by any other party to each                
Company Employee Plan, and each Company Employee Plan has been                  
established and maintained in all material respects in accordance               
with its terms and in compliance with all applicable laws, statutes,            
orders, rules and regulations, including but not limited to ERISA or            
the Code; (ii) each Company Employee Plan intended to qualify under             
Section 401(a) of the Code and each trust intended to qualify under             
Section 501(a) of the Code has either received a favorable                      
determination, opinion, notification or advisory letter from the IRS            
with respect to each such Plan as to its qualified status under the             
Code, including all amendments to the Code effected by the Tax Reform           
Act of 1986 and subsequent legislation, or has remaining a period of            
time under applicable Treasury regulations or IRS pronouncements in             
which to apply for such a letter and make any amendments necessary to           
obtain a favorable determination as to the qualified status of each             
such Company Employee Plan; (iii) no "prohibited transaction," within           
the meaning of Section 4975 of the Code or Sections 406 and 407 of              
ERISA, and not otherwise exempt under Section 408 of ERISA, has                 
occurred with respect to any Company Employee Plan; (iv) there are no           
actions, suits or claims pending, or, to the knowledge of the                   
Company, threatened or reasonably anticipated (other than routine               
claims for benefits) against any Company Employee Plan or against the           
assets of any Company Employee Plan; (v) each Company Employee Plan             
can be amended, terminated or otherwise discontinued after the                  
Effective Time in accordance with its terms, without liability to the           
Parent or Surviving Corporation or any of its Affiliates (other than            
ordinary administration expenses); (vi) there are no audits,                    
inquiries or proceedings pending or, to the knowledge of the Company            
or any Affiliates, threatened by the IRS or DOL with respect to any             
Company Employee Plan; and (vii) neither the Company nor any                    
Affiliate is subject to any penalty or tax with respect to any                  
Company Employee Plan under Section 502(i) of ERISA or Sections 4975            
through 4980 of the Code.                                                       

(e) Pension Plan.  Neither the Company nor any Affiliate    
has ever maintained, established, sponsored, participated in, or                
contributed to, any Pension Plan which is subject to Title IV of                
ERISA or Section 412 of the Code.                                               

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

(g) No Post-Employment Obligations.  Except as set forth    
in Section 2.24(g) of the Company Disclosure Schedule, no Company               
Employee Plan provides, or reflects or represents any liability to              
provide, retiree life insurance, retiree health or other retiree                
employee welfare benefits to any person for any reason, except as may           
be required by COBRA or other applicable statute, and the Company has           
never represented, promised or contracted (whether in oral or written           
form) to any Employee (either individually or to Employees as a                 
group) or any other person that such Employee(s) or other person                
would be provided with retiree life insurance, retiree health or                
other retiree employee welfare benefit, except to the extent required           
by statute.                                                                     

(h) COBRA etc.  Neither the Company nor any Affiliate has,  
prior to the Effective Time and in any material respect, violated any           
of the health care continuation requirements of COBRA, the                      
requirements of FMLA, the requirements of the Women's Heath and                 
Cancer Rights Act, the requirements of the Newborns' and Mothers'               
Health Protection Act of 1996, or any similar provisions of state law           
applicable to its Employees.                                                    

(i) Effect of Transaction.                                  
(i) Except as set forth on Section 2.24(i) of the 
Company Disclosure Schedule, the execution of this Agreement and the            
consummation of the transactions contemplated hereby will not (either           
alone or upon the occurrence of any additional or subsequent events)            
constitute an event under any Company Employee Plan, Employee                   
Agreement, trust or loan that will or may result in any payment                 
(whether of severance pay or otherwise), acceleration, forgiveness of           
indebtedness, vesting, distribution, increase in benefits or                    
obligation to fund benefits with respect to any Employee.                       

  (ii) No payment or benefit which will or may be made
by the Company or its Affiliates with respect to any Employee as a              
result of the transactions contemplated by this Agreement or                    
otherwise will be characterized as a "parachute payment," within the            
meaning of Section 280G(b)(2) of the Code (but without regard to                
clause (ii) thereof).                                                           

(j) Employment Matters.  The Company: (i) is in compliance  
in all respects with all applicable foreign, federal, state and local           
laws, rules and regulations respecting employment, employment                   
practices, terms and conditions of employment and wages and hours, in           
each case, with respect to Employees; (ii) has withheld and reported            
all amounts required by law or by agreement to be withheld and                  
reported with respect to wages, salaries and other payments to                  
Employees; (iii) is not liable for any arrears of wages or any taxes            
or any penalty for failure to comply with any of the foregoing; and             
(iv) is not liable for any payment to any trust or other fund                   
governed by or maintained by or on behalf of any governmental                   
authority, with respect to unemployment compensation benefits, social           
security or other benefits or obligations for Employees (other than             
routine payments to be made in the normal course of business and                
consistent with past practice).  There are no pending, threatened or            
reasonably anticipated claims or actions against the Company under              
any worker's compensation policy or long-term disability policy.                

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

(l) International Employee Plan.  The Company does not      
now, nor has it ever had the obligation to, maintain, establish,                
sponsor, participate in, or contribute to any International Employee            
Plan.                                                                           

2.25 Warranties; Indemnities.  Except for                             
the warranties and indemnities contained in (i) those                           
contracts and agreements set forth in Section 2.13(g) of the Company            
Disclosure Schedule and (ii) the Company's shrink wrap license                  
agreements substantially in the form set forth in Section 2.13(d) of            
the Company Disclosure Schedule, the Company has not given any                  
warranties or indemnities relating to products or technology sold or            
licensed or services rendered by the Company.                                   

2.26 Complete Copies of Materials.  The Company                       
has delivered or made available true and                                        
complete copies of each document (or summaries of same) that has been           
requested by Parent or its counsel.                                             

2.27 Representations Complete.  None of the                           
representations or warranties made by the Company                               
(as modified by the Company Disclosure Schedule), nor any statement             
made in any Schedule or certificate furnished by the Company pursuant           
to this Agreement, or furnished in or in connection with documents              
mailed or delivered to the Company Shareholders in connection with              
soliciting their consent to this Agreement and the Merger, contains             
or will contain at the Effective Time, any untrue statement of a                
material fact, or omits or will omit at the Effective Time to state             
any material fact necessary in order to make the statements contained           
herein or therein, in the light of the circumstances under which                
made, not misleading.                                                           

ARTICLE III                   

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB                 

Parent and Merger Sub represent and warrant, subject to such          
exception as are disclosed in any of the Parent SEC Documents (as               
defined below) filed prior to the date hereof, on the date hereof               
(provided that the representations and warranties made as of a                  
specified date will be true and correct as of such date) as follows:            

3.1 Organization, Standing and Power.  Parent is                      
a corporation duly organized, validly existing and                              
in good standing under the laws of the State of Delaware.  Merger Sub           
is a corporation duly organized, validly existing and in good                   
standing under the laws of the State of California.  Each of Parent             
and Merger Sub has the corporate power to own its properties and to             
carry on its business as now being conducted and is duly qualified to           
do business and is in good standing in each jurisdiction in which the           
failure to be so qualified would have a material adverse effect on              
the ability of Parent and Merger Sub to consummate the transactions             
contemplated hereby.                                                            

3.2 Authority.  Parent and Merger Sub have all requisite corporate    
power and authority to enter into this Agreement and to consummate the          
transactions contemplated hereby.  The execution and delivery of this           
Agreement and the consummation of the transactions contemplated                 
hereby have been duly authorized by all necessary corporate action on           
the part of Parent and Merger Sub.  This Agreement has been duly                
executed and delivered by Parent and Merger Sub and constitutes the             
valid and binding obligations of Parent and Merger Sub, enforceable             
in accordance with its terms, except as such enforceability may be              
limited by principles of public policy and subject to the 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 Capital Structure.  The authorized                                
capital stock of Parent as of the date hereof                                   
is 100,000,000 shares of Common Stock and 3,000,000 shares of                   
Preferred Stock.  As of October 2, 2000, there are 21,942,282 issued            
and outstanding shares of Parent's Common Stock and no issued and               
outstanding shares of Parent's Preferred Stock.  All such issued and            
outstanding shares have been duly authorized and validly issued, are            
fully paid and nonassessable, and were issued in compliance with all            
applicable state and federal laws concerning the issuance of                    
securities.  Parent has: (i) reserved 118,048 shares of its Common              
Stock for issuance under Parent's 1993 Stock Plan, 3,411,788 shares             
of its Common Stock for issuance under Parent's 1995 Stock Plan and             
912,918 shares of its Common Stock for issuance under Parent's 1999             
Stock Plan, each to its employees, consultants, directors or officers           
of which options for an aggregate of 3,219,529 shares are outstanding           
as of October 2, 2000 and (ii) reserved 1,068,272 shares of its                 
Common Stock for issuance upon exercise of outstanding warrants as of           
October 2, 2000.                                                                

3.4 SEC Documents.  Parent has                                        
filed timely all required reports, proxy                                        
statements, registration statements, forms and other documents with             
the SEC on or after January 1, 1998 (the "Parent SEC Documents"). As            
of their respective dates, and giving effect to any amendments                  
thereto, (a) the Parent SEC Documents complied in all material                  
respects with the requirements of the Securities Act or the Exchange            
Act, as the case may be, and the applicable rules and regulations of            
the SEC promulgated thereunder and (b) none of the Parent SEC                   
Documents at the time filed (or if amended or superceded by a filing            
prior to the date of this Agreement, then on the date of such filing)           
contained any untrue statement of a material fact or omitted 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.                                           

3.5 Financial Statements.                                             

(a) The financial statements of Parent (including, in each  
case, any notes and schedules thereto) included in the Parent SEC               
Documents (a) were prepared from the books and records of the Parent,           

        (b) complied as to form in all material respects with all applicable
accounting requirements and the rules and regulations of the SEC with           
respect thereto, (c) are in conformity with United States generally             
accepted accounting principles ("GAAP"), applied on a consistent                
basis (except in the case of unaudited statements, as otherwise                 
permitted by the rules and regulations of the SEC and described in              
the Notes included therewith) during the periods involved and (d)               
fairly present, in all material respects, the consolidated financial            
position of Parent as of the dates thereof and the results of their             
operations and cash flows for the periods then ended (subject, in the           
case of unaudited statements, to normal year-end audit adjustments              
which are not expected to be, individually or in the aggregate,                 
material in amount).                                                            

(b) The unaudited consolidating income statement of the     
Company for the six-month period ended June 30, 2000 and balance                
sheet as of such date that are filed with the Parent SEC Documents              
(including any notes and schedules thereto): (i) were prepared from             
the books and records of the Company and its Subsidiaries, (ii) are             
in conformity with GAAP, applied on a consistent basis (except for              
the absence of explanatory footnotes) during the period involved, and           
(iii) fairly present, in all material respects, the financial                   
position of the Company and its Subsidiaries as of the date thereof             
and the results of their operations for the periods then ended                  
(subject to normal year-end audit adjustments which are not expected            
to be, individually or in the aggregate, material in amount).                   

3.6 Absence Of Undisclosed Liabilities.  Except as                    
set forth in the Parent SEC Documents filed prior                               
to the date of this Agreement, and except for liabilities and                   
obligations incurred in the ordinary course of business since June              
30, 2000, Parent has no liabilities or obligations of any nature                
(whether accrued, absolute, contingent or otherwise) except for those           
that would not, in the aggregate, reasonably be expected to have a              
Material Adverse Effect on Parent.                                              

3.7 Litigation.  Other than that which is disclosed in the Parent     
SEC documents, there is no litigation, action, suit, proceeding or              
governmental investigation pending or, to the knowledge of Parent,              
threatened against Parent or its predecessor or affecting any of                
Parent's properties or assets, which in any manner challenges or                
seeks to prevent, enjoin, alter or materially delay the consummation            
of the transactions contemplated by this Agreement.                             

3.8 Compliance with Laws and Other Instruments.  Neither              
the execution, delivery or performance of this                                  
Agreement, nor the transactions contemplated herein, with or without            
the giving of notice or passage of time, or both, will violate, or              
result in any breach of, or constitute a default under, or result in            
the imposition of any encumbrance in any material respect upon any              
asset of Parent pursuant to any provision of Parent's Certificate of            
Incorporation, or any other material agreement or instrument by which           
Parent is bound or to which Parent or any of its properties are                 
subject.                                                                        

3.9 Brokers' and Finders' Fees.  Neither Parent                       
nor Merger Sub has incurred, nor will it incur,                                 
directly or indirectly, any liability for brokerage or finders' fees            
or agents' commissions or any similar charges in connection with this           
Agreement or any transaction contemplated hereby.                               

3.10 Consents.  No consent, waiver, approval, order or authorization  
of, or registration, declaration or filing with, any court, administrative      
agency or commission or other federal, state, county, local or other            
foreign governmental authority, instrumentality, agency or commission           
("Governmental Entity") or any third party, including a party to any            
agreement with the Parent, is required by or with respect to the                
Parent or Merger Sub in connection with the execution and delivery of           
this Agreement and any Related Agreements to which the Parent or the            
Merger Sub is a party or the consummation of the transactions                   
contemplated hereby and thereby, except for (i) such consents,                  
waivers, approvals, orders, authorizations, registrations,                      
declarations and filings as may be required under applicable                    
securities laws hereby, and (ii) the filing of the Merger Agreement             
with the Secretary of Sate of the State of California.                          

ARTICLE IV                  

CONDUCT PRIOR TO THE EFFECTIVE TIME                 

4.1 Conduct of Business of the Company.  During the                   
period from the date of this Agreement and                                      
continuing until the earlier of the termination of this Agreement and           
the Effective Time, the Company and the Principal Stockholders agree            
(except to the extent that the other shall otherwise consent in                 
writing), to carry on its business in the usual, regular and ordinary           
course in substantially the same manner as heretofore conducted, to             
pay its debts and Taxes when due, to pay or perform other obligations           
when due, and, to the extent consistent with such business, use all             
reasonable efforts consistent with past practice and policies to                
preserve intact its present business organization, keep available the           
services of its present officers and key employees and preserve their           
relationships with customers, suppliers, distributors, licensors,               
licensees, and others having business dealings with it, all with the            
goal of preserving unimpaired its goodwill and ongoing businesses at            
the Effective Time. The Company shall promptly notify Parent of any             
event or occurrence or emergency not in the ordinary course of its              
business, and any material event involving it.  Except as expressly             
contemplated by this Agreement, the Company shall not, without the              
prior written consent of Parent:                                                

(a) Enter into any commitment or transaction not in the     
ordinary course of business.                                                    

(b) (i) Sell or enter into any license agreement with       
respect to the Company Intellectual Property with any person or                 
entity or (ii) buy or enter into any license agreement with respect             
to the Intellectual Property of any person or entity;                           

(c) Transfer to any person or entity any rights to the      
Company's Intellectual Property (other than pursuant to end user                
licenses in the ordinary course of business);                                   

(d) Enter into or amend any agreements pursuant to which    
any other party is granted marketing, distribution or similar rights            
of any type or scope with respect to any products or technology of              
the Company;                                                                    

(e) Enter into or amend any Contract pursuant to which any  
other party is granted marketing, distribution or similar rights of             
any type or scope with respect to any products or technology of the             
Company;                                                                        

(f) Amend or otherwise modify (or agree to do so), except   
in the ordinary course of business, or violate the terms of, any of             
the Contracts set forth or described in the Company Disclosure                  
Schedule;                                                                       

(g) Commence any litigation;                                

(h) Declare, set aside or pay any dividends on or make any  
other distributions (whether in cash, stock or property) in respect             
of any of its capital stock, or split, combine or reclassify any of             
its capital stock or issue or authorize the issuance of any other               
securities in respect of, in lieu of or in substitution for shares of           
capital stock of the Company, or repurchase, redeem or otherwise                
acquire, directly or indirectly, any shares of its capital stock (or            
options, warrants or other rights exercisable therefor);                        

(i) Except for the issuance of shares of Company Capital    
Stock upon exercise or conversion of currently outstanding Company              
Options or warrants, issue, grant, deliver or sell or authorize or              
propose the issuance, grant, delivery or sale of, or purchase or                
propose the purchase of, any shares of its capital stock or                     
securities convertible into, or subscriptions, rights, warrants or              
options to acquire, or other agreements or commitments of any                   
character obligating it to issue any such shares or other convertible           
securities;                                                                     

(j) Cause or permit any amendments to its Articles of       
Incorporation or Bylaws;                                                        

(k) Acquire or agree to acquire by merging or               
consolidating with, or by purchasing any assets or equity securities            
of, or by any other manner, any business or any corporation,                    
partnership, association or other business organization or division             
thereof, or otherwise acquire or agree to acquire any assets which              
are material, individually or in the aggregate, to the business of              
the Company;                                                                    

(l) Sell, lease, license or otherwise dispose of any of     
its properties or assets, except in the ordinary course of business;            

(m) Incur any indebtedness for borrowed money or guarantee  
any such indebtedness or issue or sell any debt securities of the               
Company or guarantee any debt securities of others;                             

(n) Grant any loans to others or purchase debt securities   
of others or amend the terms of any outstanding loan agreement;                 

(o) Grant any severance or termination pay (i) to any       
director or officer or (ii) to any other employee except payments               
made pursuant to standard written agreements outstanding on the date            
hereof and disclosed in the Company Disclosure Schedule;                        

(p) Adopt or amend any employee benefit plan, or enter      
into any employment contract, pay or agree to pay any special bonus             
or special remuneration to any director or employee, or increase the            
salaries or wage rates of its employees;                                        

(q) Revalue any of its assets, including without            
limitation writing down the value of inventory or writing off notes             
or accounts receivable other than in the ordinary course of business;           

(r) Accelerate the vesting of any options, warrants,        
restricted stock or other rights to acquire shares of the capital               
stock of the Company;                                                           

(s) Pay, discharge or satisfy, in an amount in excess of    
$10,000 (in any one case) or $25,000 (in the aggregate), any claim,             
liability or obligation (absolute, accrued, asserted or unasserted,             
contingent or otherwise), other than the payment, discharge or                  
satisfaction in the ordinary course of business of liabilities                  
reflected or reserved against in the Company Financial Statements (or           
the notes thereto);                                                             

(t) Make or change any material election in respect of      
Taxes, adopt or change any accounting method in respect of Taxes,               
enter into any closing agreement, settle any claim or assessment in             
respect of Taxes, or consent to any extension or waiver of the                  
limitation period applicable to any claim or assessment in respect of           
Taxes;                                                                          

(u) Enter into any strategic alliance or joint marketing    
arrangement or agreement;                                                       

(v) Hire or terminate employees or encourage employees to   
resign other than in the ordinary course of business;                           

(w) Take, or agree in writing or otherwise to take, any of  
the actions described in Sections 4.1(a) through (v) above, or any              
other action that would prevent the Company from performing or cause            
the Company not to perform its covenants hereunder.                             

ARTICLE V               

ADDITIONAL AGREEMENTS               

5.1 Access to Information.  The Company                               
shall afford Parent and its accountants, counsel and other                      
representatives, reasonable access during normal business hours                 
during the period prior to the Effective Time to (a) all of the                 
Company's properties, books, contracts, commitments and records,                
(b) all other information concerning the business, properties and               
personnel (subject to restrictions imposed by applicable law) of the            
Company as Parent may reasonably request and (c) all key employees of           
the Company as identified by Parent.  The Company agrees to provide             
to Parent and its accountants, counsel and other representatives                
copies of internal financial statements (including by returns and               
supporting documentation) promptly upon request.  Parent shall                  
provide the Company with copies of such publicly available                      
information about Parent as the Company may request.  No information            
or knowledge obtained in any investigation pursuant to this                     
Section 5.2 shall affect or be deemed to modify any representation or           
warranty contained herein or the conditions to the obligations of the           
parties to consummate the Merger.                                               

5.2 Confidentiality.  Each of the                                     
parties hereto hereby agrees to keep such                                       
information or knowledge obtained in any investigation pursuant to              
Section 5.1, or pursuant to the negotiation and execution of this               
Agreement or the effectuation of the transactions contemplated                  
hereby, confidential; provided, however, that the foregoing shall not           
apply to information or knowledge which (a) a party can demonstrate             
was already lawfully in its possession prior to the disclosure                  
thereof by the other party, (b) is generally known to the public and            
did not become so known through any violation of law, (c) became                
known to the public through no fault of such party, (d) is later                
lawfully acquired by such party from other sources, (e) is required             
to be disclosed by order of court or government agency with subpoena            
powers or (f) which is disclosed in the course of any litigation                
between any of the parties hereto.                                              

5.3 Expenses.  Whether or not the Merger is consummated, all fees     
and expenses incurred in connection with the Merger including, without          
limitation, all legal, accounting, financial advisory, consulting and           
all other fees and expenses of third parties ("Third Party Expenses")           
incurred by a party in connection with the negotiation and                      
effectuation of the terms and conditions of this Agreement and the              
transactions contemplated hereby, shall be the obligation of the                
respective party incurring such fees and expenses.  The Principal               
Shareholders shall be jointly and severally liable, and neither                 
Parent nor the Surviving Corporation shall have any liability for any           
Third Party Expenses attributable to the Company or the Principal               
Shareholders except for the Third Party Expenses incurred by the                
Company.                                                                        

5.4 Public Disclosure.  Unless otherwise                              
required by law, prior to the Effective                                         
Time, no disclosure (whether or not in response to an inquiry) of the           
subject matter of this Agreement shall be made by any party hereto              
unless approved by Parent and the Company prior to release.                     

5.5 Consents.  The Company shall use its best efforts to obtain the   
consents, waivers and approvals under any of the Contracts as may be            
required in connection with the Merger (all of such consents, waivers           
and approvals are set forth in Company Disclosures) so as to preserve           
all rights of, and benefits to the Company thereunder.                          

5.6 FIRPTA Compliance.  On the Closing Date,                          
the Company shall deliver to Parent a                                           
properly executed statement in a form reasonably acceptable to Parent           
for purposes of satisfying Parent's obligations under Treasury                  
Regulation Section 1.1445-2(c)(3).                                              

5.7 Reasonable Efforts.  Subject to the                               
terms and conditions provided in this                                           
Agreement, each of the parties hereto shall use its reasonable                  
efforts to take promptly, or cause to be taken, all actions, and to             
do promptly, or cause to be done, all things necessary, proper or               
advisable under applicable laws and regulations to consummate and               
make effective the transactions contemplated hereby to obtain all               
necessary waivers, consents and approvals and to effect all necessary           
registrations and filings and to remove any injunctions or other                
impediments or delays, legal or otherwise, in order to consummate and           
make effective the transactions contemplated by this Agreement for              
the purpose of securing to the parties hereto the benefits                      
contemplated by this Agreement; provided that Parent shall not be               
required to agree to any divestiture by Parent or the Company or any            
of Parent's subsidiaries or affiliates of shares of capital stock or            
of any business, assets or property of Parent or its subsidiaries or            
affiliates or the Company or its affiliates, or the imposition of any           
material limitation on the ability of any of them to conduct their              
businesses or to own or exercise control of such assets, properties             
and stock.                                                                      

5.8 Notification of Certain Matters.  Each party                      
shall give prompt notice to the other parties                                   
of (i) the occurrence or non-occurrence of any event, the occurrence            
or non-occurrence of which is likely to cause any representation or             
warranty contained in this Agreement to be untrue or inaccurate at or           
prior to the Effective Time and (ii) any failure to comply with or              
satisfy any covenant, condition or agreement to be complied with or             
satisfied by it hereunder; provided, however, that the delivery of              
any notice pursuant to this Section 5.8 shall not limit or otherwise            
affect any remedies available to the party receiving such notice.  No           
disclosure, however, shall be deemed to amend or supplement the                 
Company Disclosure Schedule or prevent or cure any                              
misrepresentations, breach of warranty or breach of covenant.                   

5.9 Certain Benefit Plans.  Parent shall                              
keep the existing benefit programs of the                                       
Company available to eligible employees of the Company after the                
Effective Time until such time Parent elects to terminate such plans            
provided that Parent shall thereafter, take such reasonable actions             
as are necessary to allow eligible employees of the Company to                  
participate in the benefit programs of Parent, or alternative                   
benefits programs substantially comparable to those applicable to               
employees of Parent on similar terms.                                           

5.10 Additional Documents and Further Assurances.  Each party         
hereto, at the request of another party hereto,                                 
shall execute and deliver such other instruments and do and perform             
such other acts and things as may be necessary or desirable for                 
effecting completely the consummation of this Agreement and the                 
transactions contemplated hereby.                                               

5.11 Registration Statement.  Subject to                              
certain limitations set forth in the Registration                               
Rights Agreement attached hereto as Exhibit A, (i)  Parent shall, at            
Parent's own expense, use  reasonable commercial efforts to file, no            
later than 90 days after the Closing Date and in any event as soon as           
reasonably practicable, a registration statement (the "Registration             
Statement") under the Securities Act to provide for resale by the               
Company Shareholders of the shares of Parent Common Stock                       
constituting the merger consideration and shall use commercially                
reasonable efforts to cause such Registration Statement to become               
effective as promptly as practicable thereafter.  The rights and                
obligations of the Company Shareholders and Parent in respect of the            
Registration Statement shall be as set forth in the Registration                
Rights Agreement.  Notwithstanding anything herein or in the                    
Registration Rights Agreement, in the event that all of the shares of           
Parent Common Stock issued to a Company Shareholder can be sold by              
such person in a single three month period in accordance with Rule              
144 under the Securities Act, Parent shall have no obligation to                
cause such shares to continue to be registered.                                 

5.12 Restrictions on Sales and Other Transfers.                       

(a) General Restrictions. Except as otherwise provided in   
Section 5.12(b) or as otherwise consented to in writing by Parent in            
its absolute discretion, until the two year anniversary after the               
Closing Date, the Company Shareholders shall not (x) effect an offer,           
pledge, sale, contract of sale, short sale, sale of any option or               
contract to purchase, purchase of any option or contract to sell,               
grant of any option, right or warrant to purchase, gift or other                
transfer or disposition of, directly or indirectly, any of the shares           
of Parent Common Stock issued to them upon consummation of the Merger           
as part of the Shareholder Amount or (y) enter into any swap or other           
arrangement that transfers all or a portion of the economic                     
consequences associated with the ownership of the applicable                    
Shareholder Amount (regardless of whether any of the transactions               
described in clause (x) or (y) (each, a "Disposition") are to be                
settled by the delivery of the shares consisting of the Shareholder             
Amount, or such other securities, in cash or otherwise). Parent shall           
be authorized to cause its transfer agent to decline to transfer                
and/or to note stop transfer restrictions on the transfer books and             
records of Parent with respect to any of the shares constituting the            
Shareholder Amount.                                                             

(b) Sequential Lapse of Restrictions. Initially, each       
Company Shareholder shall have the right to make a Disposition of up            
to 20% of the applicable Shareholder Amount less the amount of any              
Company Shareholder's Cash Election.  Upon the one year anniversary             
of the Closing Date, each Company Shareholder shall have the right to           
make a Disposition of an additional 25% of the applicable Shareholder           
Amount and upon the 18 month anniversary of the Closing Date each               
Company Shareholder shall have the right to make a Disposition of an            
additional 25% of the applicable Shareholder Amount. The restrictions           
set forth in this Section 5.12 shall cease to apply on the two-year             
anniversary of the Closing Date.  Notwithstanding the foregoing: (i)            
if at any time, a Company Shareholder voluntarily terminates his/her            
employment with Parent (other than for death or disability), any                
unsold Shareholder Amount held by such Company Shareholder shall not            
be eligible for Disposition until the three-year anniversary of the             
Closing Date and (ii) if Parent  terminates the employment of any               
Company Shareholder other than for Cause (as such term is defined in            
the form of Employment Agreement attached hereto as Exhibit B) or if            
Employee terminates due to death or disability, all restrictions on             
Disposition of such Company Shareholder's Shareholder Amount shall              
lapse; provided, however, in no event shall the provisions of this              
Section 5.12 disturb the creation, operation and distribution of the            
Escrow Fund as contemplated in Article VII hereof.                              

(c) Certificates. The certificates representing the         
Shareholder Amounts shall bear a legend, in addition to any other               
legend required hereunder, referring to the restrictions set forth in           
this Section 5.12; provided, however, at Parent's discretion, Parent            
may issue without legend certificates representing the portion of the           
Shareholder Amounts that may be subject to a Disposition during the             
initial period. At a Company Shareholder's written request, Parent              
will remove the legends required by this Section 5.12 at any time               
after the applicable restrictive period has lapsed.                             

ARTICLE VI                  

CONDITIONS TO THE MERGER                  

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

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

(b) No Injunctions or Restraints; Illegality.  No           
temporary restraining order, preliminary or permanent injunction or             
other order issued by any court of competent jurisdiction or other              
legal or regulatory restraint or prohibition preventing the                     
consummation of the Merger shall be in effect.                                  

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

(a) Representations and Warranties.  The representations    
and warranties of Parent and Merger Sub contained in this Agreement             
shall be true and correct in all material respects on and as of the             
Effective Time, except for changes contemplated by this Agreement and           
except for those representations and warranties which address matters           
only as of a particular date (which shall remain true and correct as            
of such date), with the same force and effect as if made on and as of           
the Effective Time, except, in all such cases, for such breaches,               
inaccuracies or omissions of such representations and warranties                
which have neither had nor reasonably would be expected to have a               
Material Adverse Effect on Parent; and the Company shall have                   
received a certificate to such effect signed on behalf of Parent by a           
duly authorized officer of Parent;                                              

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

(c) Material Adverse Change.  There shall not have          
occurred any material adverse change in the business, assets                    
(including intangible assets), condition (financial or otherwise) or            
results of operations of Parent since August 31, 2000.                          

(d) Registration Rights Agreement.  Concurrent with the     
execution of this Agreement, Parent shall enter into a Registration             
Rights Agreement attached hereto as Exhibit A for the benefit of the            
Company Shareholders.                                                           

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

(a) Representations and Warranties.  The representations    
and warranties of the Company contained in this Agreement shall be              
true and correct in all material respects on and as of the Effective            
Time, except for changes contemplated by this Agreement and except              
for those representations and warranties which address matters only             
as of a particular date (which shall remain true and correct as of              
such date), with the same force and effect as if made on and as of              
the Effective Time, except, in all such cases, for such breaches,               
inaccuracies or omissions of such representations and warranties                
which have neither had nor reasonably would be expected to have a               
Material Adverse Effect on the Company or Parent; and Parent and                
Merger Sub shall have received a certificate to such effect signed on           
behalf of the Company by a duly authorized officer of the Company;              

(b) Agreements and Covenants.  The Company shall have       
performed or complied in all material respects with all agreements              
and covenants required by this Agreement to be performed or complied            
with by it on or prior to the Effective Time, and Parent and Merger             
Sub shall have received a certificate to such effect signed by a duly           
authorized officer of the Company;                                              

(c) Third Party Consents.  Parent shall have been           
furnished with evidence satisfactory to it that the Company has                 
obtained the consents, approvals and waivers set forth in Section               
6.3(c) of the Company Disclosure Schedule.                                      

(d) Material Adverse Change.  There shall not have          
occurred any material adverse change in the business, assets                    
(including intangible assets) condition (financial or otherwise) or             
results of operations of the Company since August 31, 2000.                     

(e) New Employment Arrangements.  Each of the Principal     
Shareholders shall have executed employment agreements substantially            
in the form attached hereto as Exhibit B.  A minimum of six (6)                 
additional employees from the list of Company employees in Exhibit C            
hereto shall have entered into "at-will" employment arrangements with           
Parent and/or the Surviving Corporation pursuant to the form of offer           
letter attached hereto as Exhibit D, shall have agreed to be                    
employees of Parent after the Closing and shall be employees of the             
Company immediately prior to the Effective Time.                                

(f) No Dissenters.  Holders of more than 2% of the          
outstanding shares of Company Capital Stock shall not have exercised,           
nor shall they have any continued right to exercise, appraisal,                 
dissenters' or similar rights under applicable law with respect to              
their shares by virtue of the Merger.                                           

(g) Termination of Options.  Parent shall have received     
evidence that as of the Effective Time each unexercised Company                 
Option and warrant shall have been terminated to the satisfaction of            
Parent.                                                                         

(h) Opinion of Company Counsel.  Parent shall have          
received an opinion of Landrum & Company, counsel to the Company, in            
the form attached hereto as Exhibit E and dated as of the Closing               
Date.                                                                           

(i) Shareholder Certificate.  Each of the Company           
Shareholders shall have executed and delivered a Shareholder                    
Certificate in the form attached hereto as Exhibit F.                           

ARTICLE VII                 

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW                  

7.1 Survival of Representations and Warranties.  All of               
the Company's representations and warranties in this                            
Agreement or in any instrument delivered pursuant to this Agreement             
(each as modified by the Company Disclosure Schedule) and all of                
Parent's representations and warranties in this Agreement or in any             
instrument delivered pursuant to this Agreement (each as modified by            
the Parent SEC Documents) shall survive the Merger and continue until           
the 11:59 p.m. California time on the date which is two years                   
following the date of this Agreement (the "Expiration Date").                   

7.2 Escrow Arrangements.                                              

(a) Escrow Fund.  At the Effective Time, the Principal      
Shareholders shall be deemed to have received and deposited with the            
Escrow Agent (as defined below) the Escrow Amount (plus any                     
additional shares as may be issued upon any stock split, stock                  
dividend or recapitalization effected by Parent after the Effective             
Time) without any act of any shareholder.  As soon as practicable               
after the Effective Time, the Escrow Amount, without any act of any             
shareholder, will be deposited with David W. Dunlap, in his capacity            
as Chief Financial Officer of Parent, (or other institution or                  
individual acceptable to Parent and the Securityholder Agent (as                
defined in Section 7.2(h) below)) as Escrow Agent (the "Escrow                  
Agent"), such deposit to constitute an escrow fund (the "Escrow                 
Fund") to be governed by the terms set forth herein and at Parent's             
cost and expense.  The portion of the Escrow Amount contributed on              
behalf of each Principal Shareholder shall be in proportion to each             
Principal Shareholder's Shareholder Amount.                                     

(b) Indemnification.  The Principal Shareholders hereby,    
severally and not jointly, indemnify Parent, its officers, directors            
and affiliates for any claims, losses, liabilities, damages,                    
deficiencies, costs and expenses, including reasonable attorneys'               
fees and expenses, and expenses of investigation and defense                    
(hereinafter individually a "Loss" and collectively "Losses")                   
incurred by Parent, its officers, directors, or affiliates (including           
the Surviving Corporation) directly or indirectly as a result of (i)            
any inaccuracy or breach of a representation or warranty of the                 
Company contained in this Agreement, or (ii) any failure by the                 
Company to perform or comply with any covenant contained herein,                
which shall be satisfied exclusively through the Escrow Fund, except            
that no portion of the Escrow Fund shall be available to satisfy any            
claim arising from death of a Shareholder, failure of a Shareholder             
to continue employment with Parent or breach of Section 6.3(f)                  
hereof.  Parent and the Company each acknowledge that such Losses, if           
any, would relate to unresolved contingencies existing at the                   
Effective Time, which if resolved at the Effective Time would have              
led to a reduction in the Aggregate Share Number.  Nothing herein               
shall limit the liability of the Company for any breach of any                  
representation, warranty or covenant if the Merger does not close.              

(c) Escrow Period; Distribution upon Termination of Escrow  
Periods.  Subject to the following requirements, the Escrow Fund                
shall be in existence immediately following the Effective Time and              
shall terminate at 11:59 p.m., California time, on the Expiration               
Date (the "Escrow Period"); provided that the Escrow Period shall not           
terminate with respect to such amount (or some portion thereof) if in           
a reasonable judgment of Parent, subject to the objection of the                
Securityholder Agent and the subsequent arbitration of the matter in            
the manner provided in Section 7.2(f) hereof, such amount (or some              
portion thereof) together with the aggregate amount remaining in the            
Escrow Fund is necessary to satisfy any unsatisfied claims specified            
in any Officer's Certificate delivered to the Escrow Agent prior to             
termination of such Escrow Period with respect to facts and                     
circumstances existing prior to the termination of such Escrow                  
Period.  As soon as all such claims have been resolved, the Escrow              
Agent shall deliver to the Principal Shareholders the remaining                 
portion of the Escrow Fund and not required to satisfy such claims.             
Deliveries of Escrow Amounts to the Principal Shareholders pursuant             
to this Section 7.2(b) shall be made in proportion to their                     
respective original contributions to the Escrow Fund.                           

(d) Protection of Escrow Fund.                              

(i) The Escrow Agent shall hold and safeguard the 
Escrow Fund during the Escrow Period, shall treat such fund as a                
trust fund in accordance with the terms of this Agreement and not as            
the property of Parent and shall hold and dispose of the Escrow Fund            
only in accordance with the terms hereof.                                       

    (ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued             
upon a stock split) ("New Shares") in respect of Parent Common Stock            
in the Escrow Fund which have not been released from the Escrow Fund            
shall be added to the Escrow Fund and become a part thereof.  New               
Shares issued in respect of shares of Parent Common Stock which have            
been released from the Escrow Fund shall not be added to the Escrow             
Fund but shall be distributed to the recordholders thereof.  Cash               
dividends on Parent Common Stock shall not be added to the Escrow               
Fund but shall be distributed currently to the recordholders thereof.           

(iii) Each Principal Shareholder shall have voting
rights with respect to the shares of Parent Common Stock contributed            
to the Escrow Fund by such Principal Shareholder (and on any voting             
securities added to the Escrow Fund in respect of such shares of                
Parent Common Stock).                                                           

(e) Claims Upon Escrow Fund.                                

 (i) Upon receipt by the Escrow Agent at any time on
or before the last day of the Escrow Period of a certificate signed             
by any officer of Parent (an "Officer's Certificate"): (A) stating              
that Parent has paid or properly accrued or reasonably anticipates              
that it will have to pay or accrue Losses, and (B) specifying in                
reasonable detail the individual items of Losses included in the                
amount so stated, the date each such item was paid or properly                  
accrued, or the basis for such anticipated liability, and the nature            
of the misrepresentation, breach of warranty or covenant to which               
such item is related, the Escrow Agent shall, subject to the                    
provisions of Section 7.2(e) hereof, deliver to Parent out of the               
Escrow Fund, as promptly as practicable, shares of Parent Common                
Stock held in the Escrow Fund in an amount equal to such Losses.                

(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the              
Escrow Fund pursuant to Section 7.2(d)(i) hereof, the shares of                 
Parent Common Stock shall be valued at the Average Closing Price.               
Parent and the Securityholder Agent shall certify such fair market              
value in a certificate signed by both Parent and the Securityholder             
Agent, and shall deliver such certificate to the Escrow Agent.                  

(f) Objections to Claims.  At the time of delivery of any   
Officer's Certificate to the Escrow Agent, a duplicate copy of such             
certificate shall be delivered to the Securityholder Agent and for a            
period of thirty (30) days after such delivery, the Escrow Agent                
shall make no delivery to Parent of any Escrow Amounts pursuant to              
Section 7.2(d) hereof unless the Escrow Agent shall have received               
written authorization from the Agent to make such delivery.  After              
the expiration of such thirty (30) day period, the Escrow Agent shall           
make delivery of shares of Parent Common Stock from the Escrow Fund             
in accordance with Section 7.2(d) hereof, provided that no such                 
payment or delivery may be made if the Securityholder Agent shall               
object in a written statement to the claim made in the Officer's                
Certificate, and such statement shall have been delivered to the                
Escrow Agent prior to the expiration of such thirty (30) day period.            

(g) Resolution of Conflicts; Arbitration.                   

  (i) In case the Securityholder Agent shall so object
in writing to any claim or claims made in any Officer's Certificate,            
the Securityholder Agent and Parent shall attempt in good faith to              
agree upon the rights of the respective parties with respect to each            
of such claims.  If the Securityholder Agent and Parent should so               
agree, a memorandum setting forth such agreement shall be prepared              
and signed by both parties and shall be furnished to the Escrow                 
Agent.  The Escrow Agent shall be entitled to rely on any such                  
memorandum and distribute shares of Parent Common Stock from the                
Escrow Fund in accordance with the terms thereof.                               

 (ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Securityholder Agent may                
demand arbitration of the matter unless the amount of the damage or             
loss is at issue in pending litigation with a third party, in which             
event arbitration shall not be commenced until such amount is                   
ascertained or both parties agree to arbitration; and in either such            
event the matter shall be settled by arbitration conducted by three             
arbitrators.  Parent and the Securityholder Agent shall each select             
one arbitrator, and the two arbitrators so selected shall select a              
third arbitrator.  The arbitrators shall set a limited time period              
and establish procedures designed to reduce the cost and time for               
discovery while allowing the parties an opportunity, adequate in the            
sole judgment of the arbitrators, to discover relevant information              
from the opposing parties about the subject matter of the dispute.              
The arbitrators shall rule upon motions to compel or limit discovery            
and shall have the authority to impose sanctions, including attorneys           
fees and costs, to the extent as a court of competent law or equity,            
should the arbitrators determine that discovery was sought without              
substantial justification or that discovery was refused or objected             
to without substantial justification.  The decision of a majority of            
the three arbitrators as to the validity and amount of any claim in             
such Officer's Certificate shall be binding and conclusive upon the             
parties to this Agreement, and notwithstanding anything in                      
Section 7.2(e) hereof, the Escrow Agent shall be entitled to act in             
accordance with such decision and make or withhold payments out of              
the Escrow Fund in accordance therewith.  Such decision shall be                
written and shall be supported by written findings of fact and                  
conclusions which shall set forth the award, judgment, decree or                
order awarded by the arbitrators.                                               

(iii) Judgment upon any award rendered by the     
arbitrators may be entered in any court having jurisdiction.  Any               
such arbitration shall be held in Santa Clara County, California                
under the rules then in effect of the American Arbitration                      
Association.  The arbitrators shall have the power, in their                    
discretion, to determine that the party is the prevailing party in              
the arbitration. The non-prevailing party to an arbitration shall pay           
its own expenses, the fees of each arbitrator, the administrative fee           
of the American Arbitration Association, and the expenses, including            
without limitation, reasonable attorneys' fees and costs, incurred by           
the other party to the arbitration.  In the event the arbitrators               
choose not to determine a prevailing party, then each party shall pay           
its own expenses, and the parties shall each pay one-half of the fees           
of each arbitrator and such administrative fees.                                

(h) Securityholder Agent of the Company Shareholders;       
Power of Attorney.                                                              

(i) In the event that the Merger is approved,     
effective upon such vote, and without further act of any shareholder,           
Paul Hughes shall be appointed as agent and attorney-in-fact (the               
"Securityholder Agent") for each of the Company Shareholders (except            
such shareholders, if any, as shall have perfected their appraisal              
rights under California Law), for and on behalf of Company                      
Shareholders, to give and receive notices and communications, to                
authorize delivery to Parent of shares of Parent Common Stock from              
the Escrow Fund in satisfaction of claims by Parent, to object to               
such deliveries, to agree to, negotiate, enter into settlements and             
compromises of, and demand arbitration and comply with orders of                
courts and awards of arbitrators with respect to such claims, and to            
take all actions necessary or appropriate in the judgment of                    
Securityholder Agent for the accomplishment of the foregoing.  Such             
agency may be changed by the Company Shareholders from time to time             
upon not less than thirty (30) days prior written notice to Parent;             
provided that the Securityholder Agent may not be removed unless                
holders of a two-thirds interest of the Escrow Fund agree to such               
removal and to the identity of the substituted agent.  No bond shall            
be required of the Securityholder Agent, and the Securityholder Agent           
shall not receive compensation for his or her services.  Notices or             
communications to or from the Securityholder Agent shall constitute             
notice to or from each of the Company Shareholders.                             

   (ii) The Securityholder Agent shall not be liable for
any act done or omitted hereunder as Securityholder Agent while                 
acting in good faith and in the exercise of reasonable judgment.  The           
Principal Shareholders on whose behalf the Escrow Amount was                    
contributed to the Escrow Fund shall severally indemnify the                    
Securityholder Agent and hold the Securityholder Agent harmless                 
against any loss, liability or expense incurred without negligence or           
bad faith on the part of the Securityholder Agent and arising out of            
or in connection with the acceptance or administration of the                   
Securityholder Agent's duties hereunder, including the reasonable               
fees and expenses of any legal counsel retained by the Securityholder           
Agent.                                                                          

(i) Actions of the Securityholder Agent.  A decision, act,  
consent or instruction of the Securityholder Agent shall constitute a           
decision of all the shareholders for whom a portion of the Escrow               
Amount otherwise issuable to them are deposited in the Escrow Fund              
and shall be final, binding and conclusive upon each of such                    
shareholders, and the Escrow Agent and Parent may rely upon any such            
decision, act, consent or instruction of the Securityholder Agent as            
being the decision, act, consent or instruction of each every such              
shareholder of the Company.  The Escrow Agent and Parent are hereby             
relieved from any liability to any person for any acts done by them             
in accordance with such decision, act, consent or instruction of the            
Securityholder Agent.                                                           

(j) Third-Party Claims.  In the event Parent becomes aware  
of a third-party claim which Parent believes may result in a demand             
against the Escrow Fund, Parent shall notify the Securityholder Agent           
of such claim, and the Securityholder Agent, as representative for              
the Principal Shareholders, shall be entitled, at their expense, to             
participate in any defense of such claim.  Parent shall have the                
right in its sole discretion to settle any such claim; provided,                
however, that except with the consent of the Securityholder Agent, no           
settlement of any such claim with third-party claimants shall alone             
be determinative of the amount of any claim against the Escrow Fund.            
In the event that the Securityholder Agent has consented to any such            
settlement, the Securityholder Agent shall have no power or authority           
to object under any provision of this Article VII to the amount of              
any claim by Parent against the Escrow Fund with respect to such                
settlement.                                                                     

(k) Escrow Agent's Duties.                                  

  (i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and            
as set forth in any additional written escrow instructions which the            
Escrow Agent may receive after the date of this Agreement which are             
signed by an officer of Parent and the Securityholder Agent, and may            
rely and shall be protected in relying or refraining from acting on             
any instrument reasonably believed to be genuine and to have been               
signed or presented by the proper party or parties.  The Escrow Agent           
shall not be liable for any act done or omitted hereunder as Escrow             
Agent while acting in good faith and in the exercise of reasonable              
judgment, and any act done or omitted pursuant to the advice of                 
counsel shall be conclusive evidence of such good faith.                        

  (ii) The Escrow Agent is hereby expressly authorized
to disregard any and all warnings given by any of the parties hereto            
or by any other person, excepting only orders or process of courts of           
law, and is hereby expressly authorized to comply with and obey                 
orders, judgments or decrees of any court.  In case the Escrow Agent            
obeys or complies with any such order, judgment or decree of any                
court, the Escrow Agent shall not be liable to any of the parties               
hereto or to any other person by reason of such compliance,                     
notwithstanding any such order, judgment or decree being subsequently           
reversed, modified, annulled, set aside, vacated or found to have               
been entered without jurisdiction.                                              

(iii) The Escrow Agent shall not be liable in any 
respect on account of the identity, authority or rights of the                  
parties executing or delivering or purporting to execute or deliver             
this Agreement or any documents or papers deposited or called for               
hereunder.                                                                      

(iv) The Escrow Agent shall not be liable for the 
expiration of any rights under any statute of limitations with                  
respect to this Agreement or any documents deposited with the Escrow            
Agent.                                                                          
   (v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or           
expenses, except for gross negligence or willful misconduct on the              
part of the Escrow Agent.  The Escrow Agent shall not incur any such            
liability for (A) any act or failure to act made or omitted in good             
faith, or (B) any action taken or omitted in reliance upon any                  
instrument, including any written statement of affidavit provided for           
in this Agreement that the Escrow Agent shall in good faith believe             
to be genuine, nor will the Escrow Agent be liable or responsible for           
forgeries, fraud, impersonations, or determining the scope of any               
representative authority.  In addition, the Escrow Agent may consult            
with the legal counsel in connection with Escrow Agent's duties under           
this Agreement and shall be fully protected in any act taken,                   
suffered, or permitted by him/her in good faith in accordance with              
the advice of counsel.  The Escrow Agent is not responsible for                 
determining and verifying the authority of any person acting or                 
purporting to act on behalf of any party to this Agreement.                     

   (vi) If any controversy arises between the parties to
this Agreement, or with any other party, concerning the subject                 
matter of this Agreement, its terms or conditions, the Escrow Agent             
will not be required to determine the controversy or to take any                
action regarding it.  The Escrow Agent may hold all documents and               
shares of Parent Common Stock and may wait for settlement of any such           
controversy by final appropriate legal proceedings or other means as,           
in the Escrow Agent's discretion, the Escrow Agent may require,                 
despite what may be set forth elsewhere in this Agreement.  In such             
event, the Escrow Agent will not be liable for damage.                          
Furthermore, the Escrow Agent may at its option, file an action                 
of interpleader requiring the parties to answer and litigate any                
claims and rights among themselves.  The Escrow Agent is authorized             
to deposit with the clerk of the court all documents and shares of              
Parent Common Stock held in escrow, except all cost, expenses,                  
charges and reasonable attorney fees incurred by the Escrow Agent due           
to the interpleader action and which the parties jointly and                    
severally agree to pay.  Upon initiating such action, the Escrow                
Agent shall be fully released and discharged of and from all                    
obligations and liability imposed by the terms of this Agreement.               

   (vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow                
Agent harmless against any and all losses, claims, damages,                     
liabilities, and expenses, including reasonable costs of                        
investigation, counsel fees, and disbursements that may be imposed on           
Escrow Agent or incurred by Escrow Agent in connection with the                 
performance of his/her duties under this Agreement, including but not           
limited to any litigation arising from this Agreement or involving              
its subject matter.                                                             

 (viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the parties;                 
provided, however, that no such resignation shall become effective              
until the appointment of a successor escrow agent which shall be                
accomplished as follows:  the parties shall use their best efforts to           
mutually agree on a successor escrow agent within thirty (30) days              
after receiving such notice.  If the parties fail to agree upon a               
successor escrow agent within such time, the Escrow Agent shall have            
the right to appoint a successor escrow agent authorized to do                  
business in the state of California.  The successor escrow agent                
shall execute and deliver an instrument accepting such appointment              
and it shall, without further acts, be vested with all the estates,             
properties, rights, powers, and duties of the predecessor escrow                
agent as if originally named as escrow agent.  The Escrow Agent shall           
be discharged from any further duties and liability under this                  
Agreement.                                                                      

(l) Fees.  All fees of the Escrow Agent for performance of  
its duties hereunder shall be paid by Parent.  It is understood that            
the fees and usual charges agreed upon for services of the Escrow               
Agent shall be considered compensation for ordinary services as                 
contemplated by this Agreement.  In the event that the conditions of            
this Agreement are not promptly fulfilled, or if the Escrow Agent               
renders any service not provided for in this Agreement, or if the               
parties request a substantial modification of its terms, or if any              
controversy arises, or if the Escrow Agent is made a party to, or               
intervenes in, any litigation pertaining to this escrow or its                  
subject matter, the Escrow Agent shall be reasonably compensated for            
such extraordinary services and reimbursed for all costs, attorney's            
fees, and expenses occasioned by such default, delay, controversy or            
litigation.  Parent promises to pay these sums upon demand.                     

ARTICLE VIII              

TERMINATION, AMENDMENT AND WAIVER               

8.1 Termination.  Except as provided in Section 8.2 below,            
this Agreement may be terminated and the Merger abandoned at any                
time prior to the Effective Time:                                               

(a) by mutual consent of the Company and Parent;            

(b) by Parent if there shall be any action taken, or any    
statute, rule, regulation or order enacted, promulgated or issued or            
deemed applicable to the Merger by any Governmental Entity, which               
would:  (i) prohibit Parent's or the Company's ownership or operation           
of all or a portion of the business of the Company or (ii) compel               
Parent or the Company to dispose of or hold separate all or a portion           
of the business or assets of the Company or Parent as a result of the           
Merger;                                                                         

(c) by Parent if it is not in material breach of its        
obligations under this Agreement and there has been a breach of any             
representation, warranty, covenant or agreement contained in this               
Agreement on the part of the Company and (i) such breach has not been           
cured within five (5) business days after written notice to the                 
Company (provided that, no cure period shall be required for a breach           
which by its nature cannot be cured), and (ii) as a result of such              
breach the conditions set forth in Section 6.3(a) or 6.3(b), as the             
case may be, would not then be satisfied;                                       

(d) by the Company if it is not in material breach of its   
obligations under this Agreement and there has been a breach of any             
representation, warranty, covenant or agreement contained in this               
Agreement on the part of Parent or Merger Sub and (i) such breach has           
not been cured within five (5) business days after written notice to            
Parent (provided that, no cure period shall be required for a breach            
which by its nature cannot be cured), and (ii) as a result of such              
breach the conditions set forth in Section 6.2(a) or 6.2(b), as the             
case may be, would not then be satisfied.                                       
Where action is taken to terminate this Agreement pursuant to this              
Section 8.1, it shall be sufficient for such action to be authorized            
by the Board of Directors (as applicable) of the party taking such              
action.                                                                         

8.2 Effect of Termination.  In the event of                           
termination of this Agreement as provided in                                    
Section 8.1, this Agreement shall forthwith become void and there               
shall be no liability or obligation on the part of Parent, Merger Sub           
or the Company, or their respective officers, directors or                      
stockholders, provided that each party shall remain liable for any              
breaches of this Agreement prior to its termination; and provided               
further that the provisions of Sections 5.2, 5.3 and 5.4 and Articles           
VIII and IX of this Agreement and paragraph 5 of the letter of                  
understanding between the parties dated September 11, 2000 shall                
remain in full force and effect and survive any termination of this             
Agreement.                                                                      

ARTICLE IX                    

GENERAL PROVISIONS                    

9.1 Notices.  All notices and other communications hereunder          
shall be in writing and shall be deemed given if delivered personally           
or by commercial delivery service, or mailed by registered or certified         
mail (return receipt requested) or sent via facsimile (with                     
acknowledgment of complete transmission) 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 Sub, to:                                   

Socket Communications, Inc.                                                     
37400 Central Court                                                             
Newark, CA 94560                                                                
Attention:  David W. Dunlap                                                     
Telephone No.: (510) 744-2700                                                   
Facsimile No.:  (510) 744-2727                                                  

with a copy to:                                                                 

Wilson Sonsini Goodrich & Rosati, P.C.                                          
650 Page Mill Road                                                              
Palo Alto, California 94304                                                     
Attention:  Herbert P. Fockler, Esq.                                            
Telephone No.: (650) 493-9300                                                   
Facsimile No.:  (650) 493-6811                                                  

(b) if to the Company, to:                                            

3rd Rail Engineering, Inc.                                                      
39889 Balentine Drive                                                           
Suite 160                                                                       
Newark, California 94560                                                        
Attention:  Paul Hughes                                                         
Telephone No.:  (510) 623-8808                                                  
Facsimile No.:    (510) 623-7223                                                

with a copy to:                                                                 

Landrum & Company                                                               
333 W. Santa Clara St., Suite 606                                               
San Jose, CA  95113                                                             
Attention:  Jay Landrum                                                         
Telephone No.:  (408) 278-1600                                                  
Facsimile No.:    (408) 278-8608                                                

(c) if to the Securityholder Agent:                                   

3rd Rail Engineering, Inc.                                                      
39889 Balentine Drive                                                           
Suite 160                                                                       
Newark, California 94560                                                        
Attention:  Paul Hughes                                                         
Telephone No.:  (510) 623-8808                                                  
Facsimile No.:    (510) 623-7223                                                

(d) if to the Escrow Agent:                                           

Socket Communications, Inc.                                                     
37400 Central Court                                                             
Newark, CA 94560                                                                
Attention:  Chief Financial Officer                                             
Telephone No.: (510) 744-2700                                                   
Facsimile No.:  (510) 744-2727                                                  

9.2 Interpretation.  The words "include," "includes" and              
"including" when used herein shall be deemed in each case to be                 
followed by the words "without limitation."  The table of contents              
and headings contained in this Agreement are for reference purposes             
only and shall not affect in any way the meaning or interpretation              
of this Agreement.                                                              

9.3 Amendment.  This Agreement                                        
may be amended by the parties hereto at any time by execution of an             
instrument in writing signed on behalf of each of the parties hereto.           

9.4 Extension; Waiver .  At any                                       
time prior to the Closing, Parent, on the one hand, and the Company,            
on the other hand, may, to the extent legally allowed, (i) extend the           
time for the performance of any of the obligations of the other party           
hereto, (ii) waive any inaccuracies in the representations and                  
warranties made to such party contained herein or in any document               
delivered pursuant hereto, and (iii) waive compliance with any of the           
agreements or conditions for the benefit of such party contained                
herein.                                                                         

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

9.6 Entire Agreement; Assignment.  This Agreement,                    
the schedules and Exhibits hereto, and the                                      
documents and instruments and other agreements among the parties                
hereto referenced herein:  (a) constitute the entire agreement among            
the parties with respect to the subject matter hereof and supersede             
all prior agreements and understandings, both written and oral, among           
the parties with respect to the subject matter hereof; (b) are not              
intended to confer upon any other person any rights or remedies                 
hereunder; and (c) shall not be assigned by operation of law or                 
otherwise except as otherwise specifically provided, except that                
Parent and Merger Sub may assign their respective rights and delegate           
their respective obligations hereunder to their respective                      
affiliates.                                                                     

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

9.8 Other Remedies.  Except as otherwise                              
provided herein, any and all remedies                                           
herein expressly conferred upon a party will be deemed cumulative               
with and not exclusive of any other remedy conferred hereby, or by              
law or equity upon such party, and the exercise by a party of any one           
remedy will not preclude the exercise of any other remedy.                      

9.9 Governing Law.  This Agreement shall                              
be governed by and construed in accordance with the                             
laws of the State of California, regardless of the laws that might              
otherwise govern under applicable principles of conflicts of laws               
thereof.  Each of the parties hereto irrevocably consents to the                
exclusive jurisdiction and venue of any court within Santa Clara,               
State of California, in connection with any matter based upon or                
arising out of this Agreement or the matters contemplated herein,               
agrees that process may be served upon them in any manner authorized            
by the laws of the State of California for such persons and waives              
and covenants not to assert or plead any objection which they might             
otherwise have to such jurisdiction, venue and such process.                    

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

9.11 Specific Performance.  The parties hereto                        
agree that irreparable damage would occur                                       
in the event that any of the provisions of this Agreement were not              
performed in accordance with their specific terms or were otherwise             
breached.  It is accordingly agreed that the parties shall be                   
entitled to an injunction or injunctions to prevent breaches of this            
Agreement and to enforce specifically the terms and provisions hereof           
in any court of the United States or any state having jurisdiction,             
this being in addition to any other remedy to which they are entitled           
at law or in equity.                                                            

EX-2.1
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the              
Principal Shareholder, the Securityholder Agent and the Escrow Agent            
(as to matters set forth in Article VII only) have caused this                  
Agreement to be signed by their duly authorized respective officers,            
all as of the date first written above.                                         

SOCKET COMMUNICATIONS, INC.              3RD RAIL ENGINEERING, INC.             

By:  /s/ David W. Dunlap               By: /s/ Paul T. Hughes                   
Name:                                  Name:                                    
Title: Chief Financial Officer         Title: President                         

3RD RAIL ACQUISITION CORP.             PRINCIPAL SHAREHOLDERS                   

By: /s/ David W. Dunlap                By: /s/ Paul T. Hughes                   
Name:                                  Name:                                    
Title:  President                      By: /s/ Robert J. Miller                 

   Name:
                      By: /s/ Thomas J. Newman
   Name:

SECURITYHOLDER AGENT                   ESCROW AGENT                             

By:  /s/ Pual T. Hughes                By:  /s/ David W. Dunlap                 
Name:                                  Name:                                    
Title:  Agent                          Title:  Escrow Agent                     

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AGREEMENT AND PLAN OF REORGANIZATION            

BY AND AMONG            

SOCKET COMMUNICATIONS, INC.           

3RD RAIL ACQUISITION CORP.          

AND             

3RD RAIL ENGINEERING, INC.          

Dated as of October 3, 2000           

EX-2.1
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INDEX OF EXHIBITS               

Exhibit     Description                           
---------    -------------------------------------  

Exhibit A    Form of Registration Rights Agreement  

Exhibit B    Form of Employment Agreement           

Exhibit C    List of Company Employees              

Exhibit D    Form of Offer Letter                   

Exhibit E    Form of Opinion of Landrum & Company   

Exhibit F    Form of Shareholder Certificate        

</PAGE>                                                                         

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-K’ Filing		Date		First		Last			Other Filings
Filed on:		10/20/00
For Period End:		10/5/00							8-K/A
		10/3/00		2		4
		10/2/00		2
		9/11/00		2
		8/31/00		2
		6/30/00		2					10QSB,  10QSB/A
		12/31/99		2					10KSB,  10KSB/A
		1/1/98		2
									List all Filings