AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                         GT INTERACTIVE SOFTWARE CORP.,

                             SWAN ACQUISITION CORP.

                                       and

                                MICROPROSE, INC.


                           Dated as of October 5, 1997

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                                TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE I

                                   THE MERGER

 SECTION 1.1.   The Merger...................................................  2
 SECTION 1.2.   Effective Time...............................................  2
 SECTION 1.3.   Effect of the Merger.........................................  2
 SECTION 1.4.   Certificate of Incorporation; By-Laws........................  3
 SECTION 1.5.   Directors and Officers.......................................  3
 SECTION 1.6.   Effect on Capital Stock......................................  3
 SECTION 1.7.   Exchange of Certificates.....................................  6
 SECTION 1.8.   No Further Ownership Rights in Shares........................  8
 SECTION 1.9.   Lost, Stolen or Destroyed Certificates.......................  8
 SECTION 1.10.  Tax and Accounting Consequences..............................  8
 SECTION 1.11.  Taking of Necessary Action; Further Action...................  9
 SECTION 1.12.  Material Adverse Effect......................................  9

                                   ARTICLE II

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 SECTION 2.1.    Organization and Qualification; Subsidiaries................  9
 SECTION 2.2.    Certificate of Incorporation and By-Laws.................... 10
 SECTION 2.3.    Capitalization.............................................. 10
 SECTION 2.4.    Authority Relative to this Agreement........................ 11
 SECTION 2.5.    No Conflict; Required Filings and Consents.................. 12
 SECTION 2.6.    Compliance; Permits......................................... 13
 SECTION 2.7.    SEC Filings; Financial Statements........................... 14
 SECTION 2.8.    Absence of Certain Changes or Events........................ 14
 SECTION 2.9.    No Undisclosed Liabilities.................................. 15
 SECTION 2.10.   Absence of Litigation....................................... 15
 SECTION 2.11.   Employee Benefit Plans; Employment Agreements............... 15
 SECTION 2.12.   Labor Matters............................................... 18
 SECTION 2.13.   Registration Statement; Joint Proxy Statement/Prospectus.... 19
 SECTION 2.14.   Restrictions on Business Activities......................... 19
 SECTION 2.15.   Title to Property........................................... 20
 SECTION 2.16.   Taxes....................................................... 20
 SECTION 2.17.   Environmental Matters....................................... 22
 SECTION 2.18.   Brokers..................................................... 23
 SECTION 2.19.   Intellectual Property....................................... 23
 SECTION 2.20.   Interested Party Transactions............................... 25
 SECTION 2.21.   Insurance................................................... 25


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                                                                            Page

SECTION 2.22.    Product Liability and Recalls............................... 25
SECTION 2.23.    Opinion of Financial Advisor................................ 26
SECTION 2.24.    Pooling Matters............................................. 26
SECTION 2.25.    Section 203 of the DGCL Not Applicable...................... 26
SECTION 2.26.    Section 2115 of the CCL Not Applicable...................... 26

                                  ARTICLE III

               REPRESENTATIONS AND WARRANTIES OF GT AND MERGER SUB

SECTION 3.1.     Organization and Qualification; Subsidiaries................ 26
SECTION 3.2.     Certificate of Incorporation and By-Laws.................... 27
SECTION 3.3.     Capitalization.............................................. 27
SECTION 3.4.     Authority Relative to this Agreement........................ 28
SECTION 3.5.     No Conflict; Required Filings and Consents.................. 28
SECTION 3.6.     Compliance; Permits......................................... 29
SECTION 3.7.     SEC Filings; Financial Statements........................... 30
SECTION 3.8.     Absence of Certain Changes or Events........................ 30
SECTION 3.9.     No Undisclosed Liabilities.................................. 31
SECTION 3.10.    Absence of Litigation....................................... 31
SECTION 3.11.    Employee Benefit Plans; Employment Agreements............... 31
SECTION 3.12.    Labor Matters............................................... 33
SECTION 3.13.    Registration Statement; Joint Proxy Statement/Prospectus.... 33
SECTION 3.14.    Restrictions on Business Activities......................... 34
SECTION 3.15.    Title to Property........................................... 34
SECTION 3.16.    Taxes....................................................... 34
SECTION 3.17.    Environmental Matters....................................... 36
SECTION 3.18.    Brokers..................................................... 36
SECTION 3.19.    Intellectual Property....................................... 36
SECTION 3.20.    Interested Party Transactions............................... 37
SECTION 3.21.    Insurance................................................... 37
SECTION 3.22.    Product Liability and Recalls............................... 37
SECTION 3.23.    Ownership of Merger Sub; No Prior Activities................ 38

                                   ARTICLE IV

                     CONDUCT OF BUSINESS PENDING THE MERGER

SECTION 4.1.     Conduct of Business by the Company Pending the Merger....... 38
SECTION 4.2.     No Solicitation............................................. 42
SECTION 4.3.     Conduct of Business by GT Pending the Merger................ 44

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                                                                            Page


                                    ARTICLE V

                              ADDITIONAL AGREEMENTS

SECTION 5.1.    Joint Proxy Statement/Prospectus; Registration Statement..... 45
SECTION 5.2.    Company Shareholders' Meeting................................ 46
SECTION 5.3.    GT Shareholders' Meeting..................................... 46
SECTION 5.4.     Access to Information; Confidentiality...................... 46
SECTION 5.5.    Consents; Approvals.......................................... 47
SECTION 5.6.    Agreements with Respect to Affiliates........................ 47
SECTION 5.7.    Indemnification and Insurance................................ 48
SECTION 5.8.    Notification of Certain Matters.............................. 49
SECTION 5.9.    Further Action/Tax Treatment; Tax Returns.................... 49
SECTION 5.10.   Public Announcements......................................... 50
SECTION 5.11.   Listing of GT Shares......................................... 50
SECTION 5.12.   Conveyance Taxes............................................. 50
SECTION 5.13.   Accountant's Letters......................................... 51
SECTION 5.14.   Pooling Accounting Treatment................................. 51
SECTION 5.15.   Rights Agreement............................................. 51
SECTION 5.16.   Election to GT Board. ....................................... 51
SECTION 5.17.   Stock Option Repurchase Rights............................... 52
SECTION 5.18.   Regulatory Filings; Reasonable Efforts....................... 52

                                   ARTICLE VI

                            CONDITIONS TO THE MERGER

SECTION 6.1.     Conditions to Obligation of Each Party to Effect the Merger. 52
SECTION 6.2.     Additional Conditions to Obligations of GT and Merger Sub... 53
SECTION 6.3.     Additional Conditions to Obligation of the Company.......... 54

                                   ARTICLE VII

                                   TERMINATION

SECTION 7.1.     Termination................................................. 56
SECTION 7.2      Effect of Termination....................................... 58
SECTION 7.3      Fees and Expenses........................................... 58


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                                                                            Page

                                  ARTICLE VIII

                               GENERAL PROVISIONS

SECTION 8.1.     Effectiveness of Representations, Warranties and
                   Agreements; Knowledge, Etc............................... 60
SECTION 8.2.     Notices.................................................... 60
SECTION 8.3.     Certain Definitions........................................ 62
SECTION 8.4.     Amendment.................................................. 63
SECTION 8.5.     Waiver..................................................... 63
SECTION 8.6.     Headings................................................... 63
SECTION 8.7.     Severability............................................... 63
SECTION 8.8.     Entire Agreement........................................... 63
SECTION 8.9.     Assignment; Merger Sub..................................... 63
SECTION 8.10.    Parties in Interest........................................ 64
SECTION 8.11.    Failure or Indulgence Not Waiver; Remedies Cumulative...... 64
SECTION 8.12.    Governing Law; Jurisdiction................................ 64
SECTION 8.13.    Counterparts............................................... 64
SECTION 8.14.    WAIVER OF JURY TRIAL....................................... 64


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<PAGE>

                          AGREEMENT AND PLAN OF MERGER


         AGREEMENT  AND  PLAN OF  MERGER,  dated as of  October  5,  1997  (this
"Agreement"),  among GT  INTERACTIVE  SOFTWARE  CORP.,  a  Delaware  corporation
("GT"),   SWAN  ACQUISITION   CORP.,  a  Delaware   corporation  and  a  direct,
wholly-owned  subsidiary of GT ("Merger Sub"), and MICROPROSE,  INC., a Delaware
corporation (the "Company").

                              W I T N E S S E T H:

         WHEREAS, the Boards of Directors of GT, Merger Sub and the Company have
each  determined  that a  business  combination  between  GT and the  Company is
advisable  and in the  best  interests  of  their  respective  shareholders  and
presents an  opportunity  for their  respective  companies and  shareholders  to
achieve long-term strategic and financial benefits,  and accordingly have agreed
to cause  Merger  Sub to merge  with and into the  Company  upon the  terms  and
subject to the conditions set forth herein;

         WHEREAS, in furtherance of such combination, the Boards of Directors of
GT, Merger Sub and the Company have each  approved the merger (the  "Merger") of
Merger  Sub with  and  into  the  Company  in  accordance  with  the  applicable
provisions of the Delaware  General  Corporation Law (the "DGCL"),  and upon the
terms and subject to the conditions set forth herein;

         WHEREAS,   GT,  Merger  Sub  and  the  Company  intend,   by  approving
resolutions  authorizing  this  Agreement,  to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations promulgated thereunder;

         WHEREAS,  GT,  Merger  Sub and the  Company  intend  that the Merger be
accounted for as a pooling-of-interests for financial reporting purposes; and

         WHEREAS,  pursuant to the Merger, each outstanding share (a "Share") of
(i) common stock of the Company,  par value $.001 per share (the "Company Common
Stock"),  and (ii) any series of preferred stock of the Company, par value $.001
per share (the "Company  Preferred  Stock") shall be converted into the right to
receive the applicable Merger Consideration (as defined in Section 1.7(b)), upon
the terms and subject to the conditions set forth herein;

         WHEREAS,  concurrently  with the execution of this Agreement,  and as a
condition and  inducement to GT's and the  Company's  willingness  to enter into
this Agreement,  all executive  officers and directors of GT and the Company are
entering  into  a  Voting  Agreement  (collectively,  the  "Voting  Agreements")
substantially  in  the  forms  attached  hereto  as  Exhibit  A and  Exhibit  B,
respectively.


<PAGE>


         NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  mutual
covenants and  agreements  herein  contained,  and intending to be legally bound
hereby, GT, Merger Sub and the Company hereby agree as follows:


                                   ARTICLE I1

                                   THE MERGER

         SECTION 1.1. The Merger.  (a) Effective Time. 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 DGCL,  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.  The  Company  as the
surviving  corporation after the Merger is hereinafter  sometimes referred to as
the "Surviving Corporation."

         (b) Closing.  Unless this Agreement  shall have been terminated and the
transactions  herein  contemplated shall have been abandoned pursuant to Section
7.1 and subject to the  satisfaction  or waiver of the  conditions  set forth in
Article VI, the  consummation  of the Merger (the  "Closing") will take place as
promptly  as  practicable  (and in any event  within two  business  days)  after
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Kramer,  Levin,  Naftalis & Frankel,  919 Third Avenue,  New York,  New York,
unless another date, time or place is agreed to in writing by the parties hereto
(the date of the Closing, the "Closing Date").

         SECTION  1.2.  Effective  Time.  As promptly as  practicable  after the
satisfaction  or waiver of the  conditions  set forth in Article VI, the parties
hereto  shall  cause the Merger to be  consummated  by filing a  certificate  of
merger as contemplated by the DGCL (the "Certificate of Merger"),  together with
any required related  certificates,  with the Secretary of State of the State of
Delaware,  in such form as  required  by, and  executed in  accordance  with the
relevant  provisions  of, the DGCL (the time of such filing being the "Effective
Time").

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

         SECTION 1.4. Certificate of Incorporation;  By-Laws. (a) Certificate of
Incorporation. Unless otherwise determined by GT prior to the Effective Time, at
the Effective Time the Certificate of Incorporation of the Company, as in effect
immediately   prior  to  the  Effective  Time,   shall  be  the  Certificate  of
Incorporation of the Surviving


                                       -2-

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Corporation  until  thereafter   amended  as  provided  by  the  DGCL  and  such
Certificate  of  Incorporation;  provided,  however,  that  Article  IV shall be
amended and restated in its  entirety to provide  that the capital  stock of the
Surviving  Corporation  shall consist of 100 shares of common  stock,  par value
$.01 per share.

         (b) By-Laws. The By-Laws of the Company, as in effect immediately prior
to the Effective Time, shall be the By-Laws of the Surviving  Corporation  until
thereafter  amended as provided by the DGCL, the Certificate of Incorporation of
the Surviving Corporation and such By-Laws.

         SECTION  1.5.  Directors  and  Officers.  The  directors  of Merger Sub
immediately  prior to the Effective  Time shall be the initial  directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and ByLaws of the Surviving  Corporation,  and the officers of the
Company at the  Effective  Time shall be the initial  officers of the  Surviving
Corporation,  in each case until their respective successors are duly elected or
appointed and qualified.

         SECTION 1.6.  Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of GT,  Merger Sub, the Company
or the holders of any of the following securities:

         (a) Conversion of Securities.

               (i) Each share of Company  Common  Stock  issued and  outstanding
immediately  prior  to the  Effective  Time  (excluding  any such  shares  to be
canceled  pursuant to Section  1.6(b))  shall be  converted,  subject to Section
1.6(f),  into the right to receive validly issued,  fully paid and nonassessable
shares of GT common stock, par value $0.01 per share ("GT Common Stock"), in the
ratio (the  "Exchange  Ratio") of 0.700 a share of GT Common Stock for each such
issued and outstanding share of Company Common Stock.

               (ii) Each share of the Company's  Series A Convertible  Preferred
Stock (the "Redeemable  Preferred  Stock"),  issued and outstanding  immediately
prior to the Effective Time  (excluding any such shares to be canceled  pursuant
to Section 1.6(b) and Preferred  Dissenting  Shares (as defined below)) shall be
converted  into  the  right  to  receive  one  validly  issued,  fully  paid and
non-assessable  share of Series A  Preferred  Stock,  par value  $0.01  (the "GT
Preferred  Stock"),  of GT.  Prior  to  the  Effective  Time,  GT  shall  file a
certificate of designation  which provides the holders of the GT Preferred Stock
substantially  the same rights,  preferences  and privileges as were provided to
the  holders  of the  Redeemable  Preferred  Stock  pursuant  to  the  Company's
Certificate of Incorporation. Shares of Redeemable Preferred Stock that are held
by stockholders who have not voted such shares in favor of approval and adoption
of this  Agreement  and who shall have  properly  demanded  appraisal  rights in
accordance  with  applicable law  ("Preferred  Dissenting  Shares") shall not be
converted into GT Preferred Stock unless and until such stockholders  shall have
effectively  lost or  withdrawn  such  right  to  appraisal  and  payment  under
applicable  law. The Company  agrees to give GT (i) prompt notice of any written
demands  for   appraisal,   withdrawals  of  demands  for  appraisal  and  other
instruments served pursuant to Section 262


                                       -3-

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of the DGCL or Chapter 13 of the CCL (as  hereinafter  defined)  received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for  appraisal.  The Company  will not  voluntarily  make any
payment  with  respect to demands for  appraisal  and will not,  except with the
prior written consent of GT, settle, compromise or offer to settle or compromise
any such demands.  The Company shall provide GT with all  information  as GT may
request with respect to claims for appraisal.

         (b)  Cancellation.  Each Share held in the  treasury of the Company and
each such share owned by any direct or indirect  wholly owned  subsidiary of the
Company  immediately  prior to the Effective Time shall, by virtue of the Merger
and  without  any  action  on  the  part  of the  holder  thereof,  cease  to be
outstanding,  be  canceled  and  retired  without  payment of any  consideration
therefor and cease to exist.

         (c) Stock Options;  Warrants;  Notes; and Employee Stock Purchase Plan.
(i) At the Effective Time each outstanding  option to purchase shares of Company
Common Stock (a "Stock  Option")  granted  under (i) the 1991 Stock Option Plan,
the 1992 Stock Option Plan, as amended,  1994 Stock Option Plan, as amended, and
1996  Supplemental  Stock Option Plan  (collectively  the "Company  Stock Option
Plans"), or (ii) any other stock plan or agreement of the Company,  which by its
terms is not  extinguished  in the  Merger,  shall be deemed  assumed  by GT and
deemed to  constitute  an option to  acquire,  on the same terms and  conditions
mutatis  mutandis  as were  applicable  under  such  Stock  Option  prior to the
Effective  Time,  such number of shares of GT Common Stock as the holder of such
Stock Option would have been entitled to receive pursuant to the Merger had such
holder  exercised  such option in full  immediately  prior to the Effective Time
(not taking into account whether or not such option was in fact exercisable), at
a price per share equal to (x) the aggregate  exercise  price for Company Common
Stock  otherwise  purchasable  pursuant to such Stock Option  divided by (y) the
number of shares of GT Common  Stock deemed  purchasable  pursuant to such Stock
Option; provided, however, that the number of shares of GT Common Stock that may
be  purchased  upon  exercise  of any such Stock  Option  shall not  include any
fractional share and, upon exercise of the Stock Option, a cash payment shall be
made for any  fractional  share  based upon the  Closing  Price (as  hereinafter
defined) of a share of GT Common Stock on the trading day immediately  preceding
the date of exercise.  "Closing Price" shall mean, on any day, the last reported
sale price of one share of GT Common Stock on the Nasdaq  National Market System
("Nasdaq").

               As soon as practicable  after the Effective  Time, GT shall cause
to be delivered  to each holder of an  outstanding  Stock Option an  appropriate
notice  setting  forth such holder's  rights  pursuant  thereto,  and such Stock
Option shall continue in effect on the same terms and conditions.

               (ii) At the Effective Time, the warrant expiring July 13, 1999 to
purchase  20,400 shares of Company Common Stock at a price of $13.875 per share,
subject to adjustment,  held by Paragon  Software  Corporation  (the  "Warrant")
shall be assumed by GT and such Warrant  shall be deemed to constitute a warrant
to  acquire,  on the same terms and  conditions  as were  applicable  under such
Warrant prior to the Effective  Time,  the number  (rounded to the nearest whole
number) of shares of GT Common Stock as the holder of such


                                       -4-

<PAGE>

Warrant  would have been  entitled  to receive  pursuant  to the Merger had such
holder exercised such Warrant in full  immediately  prior to the Effective Time,
at a price per  share  equal to (x) the  aggregate  exercise  price for  Company
Common Stock otherwise  purchasable  pursuant to such Warrant divided by (y) the
number of shares of GT Common Stock deemed purchasable pursuant to such Warrant.

         (iii)  At  the  Effective   Time,   the  Company's   6.5%   Convertible
Subordinated  Notes due 2002 (the  "Notes")  shall be assumed  by the  Surviving
Corporation  and such Notes shall be deemed  convertible,  on the same terms and
conditions  as were  applicable  to the  conversion  of the  Notes  prior to the
Effective  Time,  into the number of shares of GT Common Stock and the amount of
cash for  fractional  shares  under  Section  1.6(f) (if any) as the  respective
holders of such Notes would have been entitled to receive pursuant to the Merger
had such holders  converted the Notes in full immediately prior to the Effective
Time.

         (iv) GT shall reserve for issuance a sufficient  number of shares of GT
Common Stock for delivery  upon  exercise of Stock Options and Warrants and upon
conversion  of the Notes in  accordance  with this  Section  1.6(c).  As soon as
practicable  after the Effective Time, GT (i) shall cause to be registered under
the  Securities  Act of 1933,  as amended  and the SEC's rules  thereunder  (the
"Securities Act") pursuant to registration  statements on Form S-8 and Form S-3,
as  appropriate  (or any successor or other  appropriate  forms),  the GT Common
Stock  subject to (x) the Stock  Options and, (y) to the extent  required by the
terms of the Warrant and the  registration  rights agreement dated September 26,
1995, by and among the Company and the Initial  Purchasers (as defined  therein)
(the "Registration Rights Agreement"),  the Warrant and the Notes, respectively,
and  (ii)  shall  use its  best  efforts  to  cause  the  effectiveness  of such
registration  statements  (and the current  status of the  prospectus  contained
therein)  to be  maintained  for so long as the  holders  of the  Stock  Options
continue  to hold such  Stock  Options  or the GT  Common  Stock  issuable  upon
exercise  thereof are held by such holders (or until such time as all of such GT
Common Stock becomes salable under Rule 144(k)  promulgated under the Securities
Act),  or as  required by the terms of the  Warrant or the  Registration  Rights
Agreement, as the case may be.

         (v) The Company  shall take all such actions as are  necessary to cause
the  purchase  date  applicable  to the then current  purchase  period under the
Company's  Employee  Stock Purchase Plan to be the last trading day on which the
Company Common Stock is traded on Nasdaq immediately prior to the Effective Time
(the "Final Company Purchase Date");  provided, that such change in the purchase
date shall be  conditioned  upon the  consummation  of the Merger.  On the Final
Company  Purchase  Date,  the Company shall apply the funds  credited as of such
date under the Company's  Employee Stock Purchase Plan within each participant's
payroll  deductions  account to the purchase of whole  shares of Company  Common
Stock, and refund to such participant any amount remaining in such account after
such application,  in accordance with the terms of the Company's  Employee Stock
Purchase Plan. The cost to each participant in the Company's Stock Purchase Plan
shall be the lower of 85% of the closing sale price of the Company  Common Stock
as reported on Nasdaq on (i) the first day of the then current  purchase  period
or (ii) the Final Company  Purchase  Date. The Board of Directors of the Company
shall take such actions as


                                       -5-

<PAGE>

are necessary to terminate the Company's  Employee Stock Purchase Plan effective
as of the Effective Time in accordance with the terms of the Company's  Employee
Stock Purchase Plan. At the Effective  Time, the Company Common Stock  purchased
in accordance  with this Section  1.6(c)(v) shall be converted into the right to
receive GT Common Stock, cash in lieu of fractional shares, and any dividends or
distributions pursuant to Section 1.6(c) and (f) and Section 1.7(c).

         (d) Capital Stock of Merger Sub. Each share of common stock,  $0.01 par
value, 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,  $0.01 par value,  of the  Surviving
Corporation.

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

         (f) Fractional  Shares. No certificates or scrip representing less than
one share shall be issued upon the surrender  for exchange of a  certificate  or
certificates   which   immediately  prior  to  the  Effective  Time  represented
outstanding  shares of Company  Common Stock  (together  with a  certificate  or
certificates   which   immediately  prior  to  the  Effective  Time  represented
outstanding shares of the Redeemable  Preferred Stock, the  "Certificates").  In
lieu of any  such  fractional  share,  each  holder  of such  shares  who  would
otherwise  have been entitled to a fraction of a share of GT Common Stock,  upon
surrender  of  Certificates  representing  shares of  Company  Common  Stock for
exchange, shall be paid upon such surrender cash (without interest) in an amount
equal to such fraction multiplied by the Closing Price of GT Common Stock on the
date of the Effective Time.

         (g) No Appraisal Rights.  Holders of shares of Company Common Stock who
dissent from the Merger are not entitled to rights of  appraisal  under  Section
262 of the DGCL by virtue of Section 262 (1) and (2) of the DGCL or by virtue of
the applicability of Section 2115 of the California General Corporation Law (the
"CCL") to the Company.

         SECTION 1.7.  Exchange of  Certificates.  (a) Transfer  Agent. GT shall
cause to be supplied,  to or for the American  Stock Transfer & Trust Company or
such other bank or trust company mutually  designated by the Company and GT (the
"Transfer  Agent"),  in trust for the benefit of the  holders of Company  Common
Stock and the Redeemable  Preferred  Stock, for exchange in accordance with this
Section 1.7, through the Transfer Agent,  certificates  evidencing the shares of
GT Common  Stock and GT  Preferred  Stock  issuable  pursuant  to Section 1.6 in
exchange  for  outstanding  shares of Company  Common  Stock and the  Redeemable
Preferred Stock.

         (b) Exchange  Procedures.  As soon as reasonably  practicable after the
Effective  Time, GT will  instruct the Transfer  Agent to mail to each holder of
record of shares of Company  Common  Stock and the  Redeemable  Preferred  Stock
which were


                                       -6-

<PAGE>

converted into GT Common Stock and GT Preferred Stock, respectively, pursuant to
Section  1.6  hereof  (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 proper  delivery of the  Certificates to the Transfer Agent and
shall be in such  form and  have  such  other  provisions  as GT may  reasonably
specify),  and (ii)  instructions to effect the surrender of the Certificates in
exchange  for the  certificates  evidencing  shares  of GT  Common  Stock  or GT
Preferred  Stock,  as the  case may be,  cash in lieu of  fractional  shares  in
accordance with Section 1.6(f) and any dividends or  distributions in accordance
with Section  1.7(c).  Upon surrender of a Certificate  for  cancellation to the
Transfer Agent together with such letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions,  the
holder of such Certificate shall be entitled to receive in exchange therefor (A)
certificates  evidencing  that number of whole  shares of GT Common  Stock which
such holder has the right to receive in  accordance  with the Exchange  Ratio in
respect of the Company Common Stock formerly  evidenced by such Certificate,  or
certificates  evidencing  that number of shares of GT Preferred Stock which such
holder has the right to receive in accordance with Section 1.6(a)(ii) in respect
of the Redeemable  Preferred Stock formerly  evidenced by such  Certificate,  as
appropriate,  (B) any dividends or other  distributions  to which such holder is
entitled  pursuant  to Section  1.7(c),  and (C) cash in  respect of  fractional
shares as  provided  in Section  1.6(f)  (the  shares of GT Common  Stock and GT
Preferred  Stock and cash issued and paid  pursuant  to Sections  1.6 and 1.7(c)
being,  collectively,  the  "Merger  Consideration"),  and  the  Certificate  so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Shares which is not  registered in the transfer  records of the Company as of
the Effective Time, shares of GT Common Stock or GT Preferred Stock,  dividends,
distributions,  and cash in respect of fractional shares, may be issued and paid
in accordance with this Article I to a transferee if the Certificate  evidencing
such Shares is presented to the Transfer  Agent,  accompanied  by all  documents
required to evidence and effect such  transfer  pursuant to this Section  1.7(b)
and by evidence that any applicable  stock transfer taxes have been paid.  Until
so surrendered,  each outstanding  Certificate that, prior to the Effective Time
represented  shares of the  Company  Common  Stock or the  Redeemable  Preferred
Stock,  will be deemed  from and after the  Effective  Time,  for all  corporate
purposes,  other than the payment of dividends and subject to Section 1.6(f) and
other than Preferred  Dissenting Shares, to evidence the ownership of the number
of full shares of GT Common Stock or GT Preferred Stock, as the case may be, and
cash in respect of fractional shares,  into which such shares shall have been so
converted.

         (c) Distributions  With Respect to Unexchanged  Shares. No dividends or
other  distributions  declared or made after the Effective  Time with respect to
shares of GT Common  Stock or GT  Preferred  Stock with a record  date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of GT Common Stock or GT Preferred Stock they are entitled
to  receive  until  the  holder  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 GT Common  Stock or GT  Preferred  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 whole  shares of GT Common  Stock or GT
Preferred Stock.


                                       -7-

<PAGE>


         (d) Transfers of Ownership.  If any certificate for shares of GT Common
Stock or GT  Preferred  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 GT or any agent  designated by it any
transfer or other taxes required by reason of the issuance of a certificate  for
shares of GT Common Stock or GT  Preferred  Stock in any name other than that of
the  registered  holder of the  Certificate  surrendered,  or established to the
satisfaction of GT or any agent  designated by it that such tax has been paid or
is not payable.

         (e) No  Liability.  Neither  GT,  Merger Sub nor the  Company  shall be
liable to any  holder of Shares  for any  Merger  Consideration  delivered  to a
public  official  pursuant  to any  applicable  abandoned  property,  escheat or
similar law.

         SECTION  1.8.  No  Further  Ownership  Rights  in  Shares.  The  Merger
Consideration  delivered upon the surrender for exchange of Shares in accordance
with the terms hereof  shall be deemed to have been issued in full  satisfaction
of all  rights  pertaining  to  such  Shares,  and  there  shall  be no  further
registration of transfers on the records of the Surviving  Corporation of Shares
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.

         SECTION 1.9. Lost, Stolen or Destroyed  Certificates.  In the event any
Certificates shall have been lost, stolen or destroyed, the Transfer Agent shall
issue in exchange  for such lost,  stolen or  destroyed  Certificates,  upon the
making of an  affidavit  of that fact by the holder  thereof,  such shares of GT
Common Stock or GT Preferred  Stock as may be required  pursuant to Section 1.6,
cash for  fractional  shares,  as may be  required  by  Section  1.6(f)  and any
dividends  or  distributions  payable  pursuant  to  Section  1.7(c);  provided,
however,  that GT 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 GT or the  Transfer  Agent
with respect to the Certificates alleged to have been lost, stolen or destroyed.

         SECTION 1.10.  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(a) of the Code and (ii) qualify for accounting  treatment
as a pooling of interests under  applicable  accounting  standards.  The parties
hereto  hereby  adopt this  Agreement as a "plan of  reorganization"  within the
meaning of Sections  1.368-2(g)  and  1.368-3(a) of the United  States  Treasury
Regulations.

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


                                       -8-

<PAGE>

prior to the Effective Time are fully authorized in the name of their respective
corporations  or otherwise to take, and will take, all such lawful and necessary
action. GT shall cause Merger Sub to perform all of its obligations  pursuant to
this Agreement and the transactions contemplated thereby.

         SECTION 1.12. Material Adverse Effect. When used in connection with the
Company or GT, as the case may be, the term "Material  Adverse Effect" means any
change,  effect or circumstance  that,  individually or when taken together with
all other such changes, effects or circumstances that have occurred prior to the
date of determination of the occurrence of the Material Adverse Effect, is or is
reasonably  likely to be materially  adverse to the business,  assets (including
intangible assets),  financial condition or results of operations of the Company
and its  subsidiaries  or GT and its  subsidiaries,  as the case may be, in each
case  taken as a  whole;  provided,  however,  that (i) any  change,  effect  or
circumstance   relating  to  conditions  affecting  the  United  States  economy
generally  or the economy of any nation or region in which such entity or any of
its  subsidiaries  conducts  business  that is material to the  business of such
entity and its subsidiaries,  taken as a whole,  shall not be taken into account
in determining whether there has been or would be a "Material Adverse Effect" on
or with respect to such entity; (ii) any change, effect or circumstance relating
to conditions generally affecting the entertainment  software industry shall not
be taken  into  account  in  determining  whether  there  has been or would be a
"Material  Adverse  Effect"  on or with  respect to such  entity;  and (iii) any
change,  circumstance  or effect caused by the  announcement or pendency of this
Agreement or the Merger shall not be taken into account in  determining  whether
there has been or would be a  "Material  Adverse  Effect" on or with  respect to
such  entity  unless  such  change,  circumstance  or effect  has  resulted,  or
reasonably  would be expected to result,  in a  substantial  impairment  to such
entity's  ability to  continue  to  develop,  produce,  sell or  distribute  the
products that are material to such entity's  business in substantially  the same
manner as it has prior to the date of this Agreement.


                                   ARTICLE II2

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company  hereby  represents and warrants to GT and Merger Sub that,
except as set forth in the written disclosure letter previously delivered by the
Company to GT (the "Company Disclosure Schedule"):

         SECTION 2.1. Organization and Qualification;  Subsidiaries. Each of the
Company and its subsidiaries is a corporation  duly organized,  validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite  corporate or similar  power and  authority  necessary to own,
lease and operate  the  properties  it purports to own,  operate or lease and to
carry on its business as it is now being conducted,  except where the failure to
be so  organized,  existing  and in good  standing  or to have  such  power  and
authority  could not reasonably be expected to have a Material  Adverse  Effect.
Each of the  Company and its  subsidiaries  is duly  qualified  or licensed as a
foreign corporation to do


                                       -9-

<PAGE>

business,  and is in good standing,  in each jurisdiction where the character of
its properties  owned,  leased or operated by it or the nature of its activities
makes such qualification or licensing necessary,  except for such failures to be
so duly  qualified or licensed and in good standing that could not reasonably be
expected to have a Material  Adverse Effect.  A true and complete list of all of
the Company's  subsidiaries,  together with the jurisdiction of incorporation of
each  subsidiary and the  percentage of each  subsidiary's  outstanding  capital
stock owned by the Company or another subsidiary, is set forth in Section 2.1 of
the  Company  Disclosure  Schedule.  Except as set forth in  Section  2.1 of the
Company  Disclosure  Schedule or the Company SEC Reports (as defined below), the
Company does not directly or indirectly  own any equity or similar  interest in,
or any interest  convertible into or exchangeable or exercisable for, any equity
or similar  interest in, any  corporation,  partnership,  joint venture or other
business association or entity.

         SECTION 2.2.  Certificate of Incorporation and By-Laws. The Company has
heretofore  furnished to GT a complete and correct  copy of its  Certificate  of
Incorporation and By-Laws as most recently restated and subsequently  amended to
date, and has made available to GT the Certificate of Incorporation  and By-Laws
(or  equivalent  organizational  documents)  of  each of its  subsidiaries  (the
"Subsidiary  Documents").   Such  Certificate  of  Incorporation,   By-Laws  and
Subsidiary  Documents are in full force and effect.  Neither the Company nor any
of its  subsidiaries is in violation of any of the provisions of its Certificate
of  Incorporation  or By-Laws or  Subsidiary  Documents,  except for  immaterial
violations of the Subsidiary Documents which may exist.

         SECTION  2.3.  Capitalization.  The  authorized  capital  stock  of the
Company  consists of  40,000,000  shares of Company  Common Stock and  9,000,000
shares of Company Preferred Stock. As of July 31, 1997:

         (a)  28,328,927   shares  of  Company  Common  Stock  were  issued  and
outstanding  (none of which were issued  pursuant to a  restricted  stock grant,
except where the applicable  restrictions on transfer or disposition had expired
prior to July 31,  1997),  all of  which  are  validly  issued,  fully  paid and
nonassessable, and an additional 1,818,367 shares were held in treasury;

         (b)  4,016,045  shares of Company  Preferred  Stock  were  outstanding,
comprised of 4,000,000 shares of Redeemable Preferred Stock and 16,045 shares of
Series B-1 Preferred Stock,  and no shares of Company  Preferred Stock were held
in treasury;

         (c) no shares of Company Common Stock or Company  Preferred  Stock were
held by subsidiaries of the Company;

         (d) 3,944,475 shares of Company Common Stock were reserved for existing
and future grants pursuant to the Company Stock Option Plans,  pursuant to which
2,997,098  Options for the purchase of 2,997,098  shares of Company Common Stock
were  outstanding  (of which  1,255,711  Options for the  purchase of  1,255,711
shares of Company Common Stock are currently exercisable);


                                      -10-

<PAGE>

         (e) 20,400 shares of Company Common Stock were reserved pursuant to the
Warrant (which is currently exercisable with respect to all such shares); and

         (f) 1,963,400 shares of Company Common Stock were reserved  pursuant to
the Notes.

Except as set forth in Section 2.3 of the Company Disclosure Schedule, no change
in such  capitalization  has occurred between July 31, 1997 and the date hereof.
Except as set forth in Section  2.1,  this  Section  2.3 or  Section  2.11 or in
Section 2.3 or Section  2.11 of the Company  Disclosure  Schedule or the Company
SEC Reports (as defined in Section 2.7 hereof),  there are no options,  warrants
or other rights,  agreements,  arrangements  or  commitments of any character to
which the Company or any of its  subsidiaries is a party or by which it is bound
relating  to the issued or unissued  capital  stock of the Company or any of its
subsidiaries  or obligating the Company or any of its  subsidiaries  to issue or
sell any shares of capital  stock of, or other equity  interests in, the Company
or any of its  subsidiaries.  All  shares of  Company  Common  Stock  subject to
issuance as aforesaid,  upon issuance on the terms and  conditions  specified in
the instruments  pursuant to which they are issuable,  shall be duly authorized,
validly issued, fully paid and nonassessable. Except as disclosed in Section 2.3
of the Company  Disclosure  Schedule or the  Company SEC  Reports,  there are no
obligations,  contingent or otherwise, of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any shares of Company Common Stock or
Company   Preferred  Stock  or  the  capital  stock  of  any  of  the  Company's
subsidiaries  or to provide  funds to or make any  investment  (in the form of a
loan,  capital  contribution  or otherwise) in any such  subsidiary or any other
entity other than guarantees of bank obligations of subsidiaries entered into in
the ordinary course of business.  Except as set forth in Sections 2.1 and 2.3 of
the Company Disclosure Schedule,  all of the outstanding shares of capital stock
of each of the Company's subsidiaries are duly authorized, validly issued, fully
paid and nonassessable,  and all such shares are owned by the Company or another
subsidiary free and clear of all security  interests,  liens,  claims,  pledges,
agreements,  limitations  in the  Company's  voting  rights,  charges  or  other
encumbrances  of any nature  whatsoever.  Section 2.3 of the Company  Disclosure
Schedule sets forth a list of all currently  outstanding  loans  associated with
the exercise of Stock Options  granted under the Company Stock Option Plans.  As
of June 30,  1997,  no shares of Company  Common  Stock  issued  pursuant to the
exercise of Stock  Options  granted  under the Company  Stock  Option Plans were
subject to repurchase by the Company.

         SECTION 2.4. Authority Relative to this Agreement.  The Company has all
necessary  corporate  power and authority to execute and deliver this  Agreement
and to perform its  obligations  hereunder  and to consummate  the  transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate  the  transactions  so  contemplated  (other than the
approval of the Merger and this  Agreement by the holders of at least a majority
of the  outstanding  shares of Company Common Stock and Company  Preferred Stock
(voting on an as-converted basis) entitled to vote in accordance with the


                                      -11-

<PAGE>

DGCL and the Company's  Certificate of Incorporation and By-Laws, and the filing
of the  Certificate of Merger  pursuant to DGCL).  The Board of Directors of the
Company has  determined  that it is  advisable  and in the best  interest of the
Company's  shareholders  for the Company to enter into,  and to  consummate  the
transactions  contemplated  by, this Agreement upon the terms and subject to the
conditions of this Agreement.  This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due authorization,  execution and
delivery by GT and Merger Sub, as  applicable,  constitutes  a legal,  valid and
binding obligation of the Company, enforceable against the Company in accordance
with  its  terms,  except  that  such  enforceability  may  be  subject  to  (i)
bankruptcy,  insolvency,  reorganization  or other  similar  laws  affecting  or
relating  to  enforcement  of  creditors'  rights  generally  and  (ii)  general
equitable principles.

         SECTION 2.5. No Conflict;  Required Filings and Consents. (a) Except as
disclosed in Section  2.5(a) of the Company  Disclosure  Schedule or the Company
SEC Reports, there are (i) no loan agreements,  indentures,  mortgages, pledges,
conditional sale or title retention agreements,  security agreements,  equipment
obligations,  guaranties,  standby letters of credit,  equipment leases or lease
purchase agreements,  each in an amount equal to or exceeding $250,000, to which
the  Company  or any of its  subsidiaries  is a party or by which any of them is
bound;  (ii) no contracts,  agreements,  commitments or other  understandings or
arrangements currently in effect to which the Company or any of its subsidiaries
is a party or by  which  any of them or any of their  respective  properties  or
assets are bound or affected, other than contracts,  agreements,  commitments or
other  understandings  or  arrangements  involving,  in each case,  payments  or
receipts by the Company or any of its  subsidiaries of less than $250,000 in any
single  instance but not more than  $1,000,000  in the  aggregate;  and (iii) no
agreements  which, as of the date hereof,  are required to be filed as "material
contracts" with the Securities and Exchange  Commission  ("SEC") pursuant to the
requirements of the Securities  Exchange Act of 1934, as amended,  and the SEC's
rules thereunder (the "Exchange Act") but have not been so filed with the SEC as
of the date hereof.

         (b) Except as set forth in  Section  2.5(b) of the  Company  Disclosure
Schedule,  the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the  Certificate  of  Incorporation  or By-Laws of the Company,  (ii)
subject to obtaining approval and adoption of this Agreement and approval of the
Merger by the Company's  shareholders,  conflict with or violate any law,  rule,
regulation,  order,  judgment or decree  applicable to the Company or any of its
subsidiaries or by which its or any of their  respective  properties is bound or
affected,  or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default), or impair the
Company's or any of its subsidiaries'  rights or alter the rights or obligations
of any  third  party  under,  or give  to  others  any  rights  of  termination,
amendment,  acceleration or cancellation of, or result in the creation of a lien
or  encumbrance  on any of the properties or assets of the Company or any of its
subsidiaries  pursuant  to,  any  note,  bond,  mortgage,  indenture,  contract,
agreement,  lease, license,  permit, franchise or other instrument or obligation
to which  the  Company  or any of its  subsidiaries  is a party or by which  the
Company or any of its subsidiaries or its or any of their respective  properties
is bound or affected, except for such conflicts, violations,


                                      -12-

<PAGE>

breaches or defaults as shall have been waived by GT prior to the Effective Time
and  except  in any  such  case for any such  conflicts,  violations,  breaches,
defaults or other  occurrences  that would not  reasonably be expected to have a
Material  Adverse  Effect.  Without  limiting the  foregoing,  the execution and
delivery of this  Agreement by the Company does not, and the  performance by the
Company  of its  obligations  under  this  Agreement  by the  Company  will not,
constitute a "Designated Event" as such term is defined in the Indenture,  dated
as of September  15, 1995,  between the Company and  Chemical  Trust  Company of
California, as Trustee.

         (c) The  execution  and delivery of this  Agreement by the Company does
not, and the performance of this Agreement by the Company will not,  require any
consent,  approval,  authorization  or permit of, or filing with or notification
to, any governmental or regulatory  authority,  domestic or foreign,  except (i)
for applicable  requirements,  if any, of the Securities  Act, the Exchange Act,
state   securities   laws  ("Blue  Sky  Laws"),   the  pre-merger   notification
requirements of the  Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976, as
amended,  and the rules and regulations  thereunder (the "HSR Act"), filings and
consents under any applicable  foreign antitrust laws ("Foreign Monopoly Laws"),
filings  and  consents  as may be required  under any  environmental,  health or
safety law or regulation pertaining to any notification,  disclosure or required
approval  triggered  by the  Merger  or the  transactions  contemplated  by this
Agreement,  and the  filing  and  recordation  of  appropriate  merger  or other
documents  as  required  by the DGCL,  (ii)  where the  failure  to obtain  such
consents,  approvals,  authorizations  or  permits,  or to make such  filings or
notifications,  would not prevent or  materially  delay  (subject to Section 7.1
hereof)  consummation of the Merger,  or otherwise  prevent or materially  delay
(subject to Section 7.1 hereof) the  Company  from  performing  its  obligations
under this  Agreement and would not  otherwise  reasonably be expected to have a
Material Adverse Effect, or (iii) as to which any necessary consents, approvals,
authorizations,  permits, filings or notifications have heretofore been obtained
or filed, as the case may be, by the Company.

         SECTION 2.6.  Compliance;  Permits.  (a) Except as disclosed in Section
2.6 of the  Company  Disclosure  Schedule,  neither  the  Company nor any of its
subsidiaries  is in conflict  with,  or in default or violation of, (i) any law,
rule, regulation,  order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective  properties is bound
or affected or (ii) any note, bond, mortgage,  indenture,  contract,  agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its  subsidiaries is a party or by which the Company or any of
its  subsidiaries  or its or any of  their  respective  properties  is  bound or
affected, except for any such conflicts,  defaults or violations which would not
reasonably be expected to have a Material Adverse Effect.

         (b)  Except as  disclosed  in  Section  2.6 of the  Company  Disclosure
Schedule,  the  Company  and  its  subsidiaries  hold  all  franchises,  grants,
authorizations,  permits, licenses, easements, variances,  exemptions, consents,
certificates,  orders and  approvals  from  governmental  authorities  which are
material to the  operation of the  business of the Company and its  subsidiaries
taken  as a whole  as it is now  being  conducted  (collectively,  the  "Company
Permits"). The Company and its subsidiaries are in compliance


                                      -13-

<PAGE>

with the terms of the  Company  Permits,  except  where the failure to so comply
would not reasonably be expected to have a Material Adverse Effect.

         SECTION  2.7. SEC Filings;  Financial  Statements.  (a) The Company has
filed all forms,  reports and documents  required to be filed with the SEC since
March 31, 1995 and has made  available to GT (i) its Annual Reports on Form 10-K
for the fiscal years ended March 31,  1995,  1996 and 1997,  (ii) its  Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1997, and, (iii) all
proxy  statements  relating to the Company's  meetings of shareholders  (whether
annual or  special)  held  since  March 31,  1995,  (iv) all  other  reports  or
registration  statements  (other  than  Reports on Form 10-Q not  referred to in
clause (ii) above or on Form 8-K filed  before  December  31, 1996) filed by the
Company  with  the  SEC  since  March  31,  1995,  and (v)  all  amendments  and
supplements to all such reports and registration statements filed by the Company
with the SEC (collectively,  the "Company SEC Reports").  Except as disclosed in
Section 2.7 of the Company Disclosure Schedule, the Company SEC Reports (i) were
prepared in all material  respects in accordance  with the  requirements  of the
Securities  Act or the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or  superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a  material  fact or omit to state a  material  fact  required  to be  stated
therein or necessary in order to make the  statements  therein,  in the light of
the  circumstances  under  which they were  made,  not  misleading.  None of the
Company's subsidiaries is required to file any forms, reports or other documents
with the SEC.

         (b) Each of the consolidated financial statements  (including,  in each
case,  any  related  notes  thereto)  contained  in the  Company SEC Reports was
prepared in accordance with generally accepted  accounting  principles  ("GAAP")
applied on a consistent  basis throughout the periods involved (except as may be
indicated  in the  notes  thereto),  and each  fairly in all  material  respects
presents the consolidated financial position of the Company and its subsidiaries
as at  the  respective  dates  thereof  and  the  consolidated  results  of  its
operations and cash flows for the periods  indicated,  except that the unaudited
interim  financial  statements  were or are  subject  to  normal  and  recurring
year-end  adjustments  which  were not or are not  expected  to be  material  in
amount,  and may not contain  certain  related  notes as may be permitted by the
applicable rules promulgated by the SEC.

         SECTION 2.8. Absence of Certain Changes or Events.  Except as set forth
in Section 2.8 of the Company  Disclosure  Schedule or the Company SEC  Reports,
since March 31,  1997,  the Company has  conducted  its business in the ordinary
course and there has not occurred:  (i) any Material  Adverse  Effect;  (ii) any
amendments  or changes in the  Certificate  of  Incorporation  or By-laws of the
Company;  (iii) any damage to,  destruction  or loss of any asset of the Company
(whether or not covered by insurance) that could  reasonably be expected to have
a  Material  Adverse  Effect;  (iv) any  material  change by the  Company in its
accounting methods, principles or practices; (v) any material revaluation by the
Company of 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;  (vi) any sale of a material amount of property of
the  Company,  except in the  ordinary  course of  business,  or (vii) any other
action or event that would have required the


                                      -14-

<PAGE>

consent of GT pursuant to Section  4.1 had such action or event  occurred  after
the date of this Agreement.

         SECTION 2.9. No Undisclosed Liabilities. Except as set forth in Section
2.9 of the Company Disclosure  Schedule or the Company SEC Reports,  neither the
Company nor any of its  subsidiaries  has any  liabilities  (absolute,  accrued,
contingent or otherwise),  except  liabilities  (a) in the aggregate  adequately
provided for in the Company's audited balance sheet (including any related notes
thereto) for the fiscal year ended March 31, 1997 included in the Company's 1996
Annual Report to Shareholders  (the "1997 Balance  Sheet"),  (b) incurred in the
ordinary  course of business and not required  under GAAP to be reflected on the
1997 Balance Sheet,  (c) incurred since March 31, 1997 in the ordinary course of
business  consistent  with past practice,  (d) incurred in connection  with this
Agreement,  or (e) which  would not  reasonably  be  expected to have a Material
Adverse Effect.

         SECTION  2.10.  Absence of  Litigation.  Except as set forth in Section
2.10 of the Company Disclosure Schedule or the Company SEC Reports, there are no
claims, actions, suits,  proceedings or investigations pending or, to the actual
knowledge of the Company and its subsidiaries and their respective  officers and
directors  (collectively,  the "Knowledge of the Company"),  overtly  threatened
against the Company or any of its  subsidiaries,  or any properties or rights of
the  Company  or  any of its  subsidiaries,  before  any  court,  arbitrator  or
administrative,  governmental  or  regulatory  authority  or body,  domestic  or
foreign, that would reasonably be expected to have a Material Adverse Effect.

         SECTION  2.11.  Employee  Benefit  Plans;  Employment  Agreements.  (a)
Section 2.11(a) of the Company  Disclosure  Schedule lists all employee  pension
benefit  plans (as defined in Section  3(2) of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA")),  all employee welfare benefit plans
(as defined in Section 3(1) of ERISA), and all other bonus, stock option,  stock
purchase, incentive, deferred compensation,  supplemental retirement,  severance
and other similar fringe or employee  benefit plans,  programs or  arrangements,
and any employment,  executive compensation or severance agreements,  written or
otherwise, as amended, modified or supplemented, for the benefit of, or relating
to, any  former or current  employee,  officer  or  consultant  (or any of their
beneficiaries)  of the Company or any other entity (whether or not incorporated)
which is a member of a controlled  group including the Company or which is under
common control with the Company (a "Company ERISA Affiliate") within the meaning
of Sections  414(b),  (c), (m) or (o) of the Code or Section 4001(a) (14) or (b)
of ERISA, or any subsidiary of the Company, as well as each plan with respect to
which the Company or any Company ERISA  Affiliate  could incur  liability  under
Title IV of ERISA or Section 412 of the Code  (together for the purposes of this
Section  2.11,  the  "Company  Employee  Plans").  Prior  to the  date  of  this
Agreement,  the  Company  has  provided  to GT copies  of (i) each such  written
Company  Employee Plan (or a written  description  of any Company  Employee Plan
which is not  written) and all related  trust  agreements,  insurance  and other
contracts (including policies), the most recent summary plan descriptions, along
with a summary of  material  modifications  thereto,  (ii) the three most recent
annual reports on Form 5500 series, with accompanying schedules and attachments,
filed with respect to each Company Employee Plan required to make such a filing,
(iii) the most recent actuarial valuation for each Company Employee Plan


                                      -15-

<PAGE>

subject to Title IV of ERISA,  (iv) all  correspondence  with the  Department of
Labor with respect to each Company  Employee Plan filing and (v) the most recent
favorable  determination  letters  issued  for each  Company  Employee  Plan and
related  trust  which is subject to Parts 1, 2 and 4 of Subtitle B of Title I of
ERISA (and, if an application for such  determination is pending,  a copy of the
application for such determination).

         (b) Except as set forth in Section  2.11(b) of the  Company  Disclosure
Schedule,  (i) none of the Company  Employee Plans promises or provides  retiree
medical  or other  retiree  welfare  benefits  to any  person,  except as may be
required by the  Consolidated  Omnibus  Budget  Reconciliation  Act of 1985,  as
amended  ("COBRA"),  and none of the Company  Employee Plans is a "multiemployer
plan" as such term is defined in Section  3(37) of ERISA,  a "multiple  employer
welfare benefit  arrangement" as such term is defined in Section 3(40) of ERISA,
or a  "multiple  employer  plan" as such term is defined  in Section  413 of the
Code;  (ii) no party in interest or  disqualified  person (as defined in Section
3(14) of ERISA  and  Section  4975 of the  Code)  has at any time  engaged  in a
transaction  with respect to any Company  Employee  Plan which could subject the
Company or any  Company  ERISA  Affiliate,  directly  or  indirectly,  to a tax,
penalty or other material  liability for prohibited  transactions under ERISA or
Section 4975 of the Code;  (iii) the Company,  in its role as a fiduciary of any
Company  Employee  Plan,  has  not  breached  any  of  the  responsibilities  or
obligations  imposed upon fiduciaries under Title I of ERISA, which breach could
result in any material  liability to the Company or any Company ERISA Affiliate;
(iv)  all  Company   Employee  Plans  have  been   established   and  maintained
substantially  in accordance with their terms and have operated in compliance in
all material  respects with the requirements  prescribed by any and all statutes
(including ERISA and the Code),  orders,  or governmental  rules and regulations
currently in effect with respect thereto (including all applicable  requirements
for  notification to participants or the Department of Labor,  Internal  Revenue
Service  (the "IRS") or Secretary  of the  Treasury),  and may by their terms be
amended  and/or  terminated at any time subject to  applicable  law, and, to the
Knowledge  of the  Company,  the  Company  and  each  of its  subsidiaries  have
performed all material  obligations  required to be performed by them under, are
not in any  material  respect  in  default  under or  violation  of, and have no
knowledge  of any default or violation by any other party to, any of the Company
Employee  Plans;  (v) each Company  Employee Plan which is subject to Parts 1, 2
and 4 of Subtitle B of ERISA is the subject of a favorable  determination letter
from the IRS,  and  nothing has  occurred  which may  reasonably  be expected to
impair  such  determination;  (vi) all  contributions  required  to be made with
respect to any Company Employee Plan pursuant to Section 412 of the Code, or the
terms of the Company Employee Plan or any collective bargaining agreement,  have
been made on or before  their due  dates;  (vii) with  respect  to each  Company
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding  any such  event  for which the 30 day  notice  requirement  has been
waived under the regulations to Section 4043 of ERISA) or any event described in
Section 4062, 4063 or 4041 of ERISA has occurred for which there is any material
outstanding  liability to the Company or any Company  ERISA  Affiliate nor would
the consummation of the transaction contemplated hereby (including the execution
of  this  Agreement)   constitute  a  reportable  event  for  which  the  30-day
requirement has not been waived;  and (viii) neither the Company nor any Company
ERISA Affiliate has incurred or reasonably  expects to incur any liability under
Title IV of ERISA (other than liability for


                                      -16-

<PAGE>

premium  payments to the  Pension  Benefit  Guaranty  Corporation  (the  "PBGC")
arising in the ordinary course).

         (c) Section  2.11(c) of the Company  Disclosure  Schedule  sets forth a
true and complete list of each current or former employee,  consultant,  officer
or director of the Company or any of its  subsidiaries  who holds (i) any option
to purchase Company Common Stock as of the date hereof, together with the number
of shares of Company  Common Stock  subject to such option,  the option price of
such  option (to the extent  determined  as of the date  hereof),  whether  such
option is intended to qualify as an incentive stock option within the meaning of
Section  422(b) of the Code (an "ISO"),  whether the Company may be denied a tax
deduction  with  respect to the exercise of such option if it is not an ISO, and
the expiration date of such option; (ii) any shares of Company Common Stock that
are restricted;  and (iii) any other right,  directly or indirectly,  to receive
Company Common Stock, together with the number of shares of Company Common Stock
subject to such right.  Section 2.11(c) of the Company Disclosure  Schedule also
sets forth the total number of any such ISOs and any such  nonqualified  options
and other such rights.

         (d) Section  2.11(d) of the Company  Disclosure  Schedule  sets forth a
true and complete  list of (i) all  employment  agreements  with officers of the
Company or any of its subsidiaries; (ii) all agreements with consultants who are
individuals  obligating  the Company or any of its  subsidiaries  to make annual
cash payments in an amount exceeding $100,000; (iii) all current agreements with
respect to the services of independent contractors who are individuals or leased
employees,  whether or not they participate in any of the Company Employee Plans
obligating the Company or any of its  subsidiaries  to make annual cash payments
in an amount exceeding $100,000;  (iv) all officers of the Company or any of its
subsidiaries who have executed a  non-competition  agreement with the Company or
any of its subsidiaries; (v) all severance agreements,  programs and policies of
the Company or any of its  subsidiaries  with or relating to its  employees,  in
each case with outstanding commitments exceeding $50,000, excluding programs and
policies  required  to be  maintained  by law;  and  (vi) all  plans,  programs,
agreements   and  other   arrangements   of  Company   relating  to  employment,
compensation or employee benefits which contain change in control provisions.

         (e) Except as set forth in Section  2.11(e) of the  Company  Disclosure
Schedule, no employee of the Company or any of its subsidiaries has participated
in any  employee  pension  benefit  plans (as defined in Section  3(2) of ERISA)
maintained  by or on  behalf  of  the  Company.  The  PBGC  has  not  instituted
proceedings  to terminate any Company  Employee Plan that is subject to Title IV
of ERISA (each, a "Defined  Benefit  Plan").  The Defined  Benefit Plans have no
accumulated or waived funding  deficiencies within the meaning of Section 412 of
the Code nor have any extensions of any  amortization  period within the meaning
of  Section  412 of the  Code or 302 of ERISA  been  applied  for  with  respect
thereto.  The present  value of the benefit  liabilities  (within the meaning of
Section 4041 of ERISA) of the Defined Benefit Plans, determined on a termination
basis using actuarial assumptions that would be used by the PBGC does not exceed
by more than $1,000,000 the value of the Plans' assets. All applicable  premiums
required to be paid to the PBGC with respect to the Defined  Benefit  Plans have
been paid. No facts or circumstances


                                      -17-

<PAGE>

exist with  respect to any Defined  Benefit Plan which would give rise to a lien
on the  assets of the  Company  under  Section  4068 of ERISA or  otherwise.  No
Defined Benefit Plan has been a party to a merger, spinoff or transfer of assets
or  liabilities  subject  to Section  414(l) of the Code.  All the assets of the
Company Employee Plans are readily marketable  securities,  securities issued by
an investment  company  registered under the Investment  Company Act of 1940, or
insurance contracts.

         (f) Except as  provided in Section  2.11(f) of the  Company  Disclosure
Schedule,  (i) the Company has never maintained an employee stock ownership plan
(within  the  meaning of Section  4975(e)(7)  of the Code) or any other  Company
Employee Plan that invests in Company  stock;  (ii) the Company has not proposed
nor agreed to any increase in benefits  under any Company  Employee Plan (or the
creation of new benefits) or change in employee  coverage  which would  increase
the expense of maintaining any Company  Employee Plan; (iii) the consummation of
the  transactions  contemplated by this Agreement will not result in an increase
in the amount of compensation or benefits or accelerate the vesting or timing of
payment of any  benefits or  compensation  payable in respect of any employee of
the Company or any of its  subsidiaries,  or accelerate the vesting of any Stock
Options  granted under the Company Stock Option Plans; or (iv) no person will be
entitled to any severance  benefits under the terms of any Company Employee Plan
solely by reason of the  consummation of the  transactions  contemplated by this
Agreement.

         (g) Each Company Employee Plan covering non-U.S.  employees (a "Company
International  Plan") has been  maintained in  substantial  compliance  with its
terms  and with  the  requirements  prescribed  by any and all  applicable  Laws
(including  any special  provisions  relating to registered  or qualified  plans
where such Company  International  Plan was intended to so qualify) and has been
maintained in good standing with  applicable  regulatory  authorities.  The fair
market  value of the assets of each funded  Company  International  Plan (or the
liability of each funded Company International Plan funded through insurance) is
sufficient to procure or provide for the benefits accrued thereunder through the
Closing Date according to the actuarial assumptions and valuations most recently
used to determine employer contributions to the Company International Plan.

         (h)  The  Company  has  fiduciary   liability  insurance  of  at  least
$1,000,000 in effect covering the fiduciaries of certain Company  Employee Plans
(including the Company) with respect to whom the Company may have liability.

         SECTION 2.12. Labor Matters. Except as set forth in Section 2.12 of the
Company  Disclosure  Schedule  or the  Company  SEC  Reports,  (i)  there are no
controversies pending or, to the Knowledge of the Company,  threatened,  between
the Company or any of its subsidiaries  and any of their  respective  employees,
which  controversies  have had,  or would  reasonably  be  expected  to have,  a
Material Adverse Effect; (ii) neither the Company nor any of its subsidiaries is
a party to any  material  collective  bargaining  agreement or other labor union
contract applicable to persons employed by the Company or its subsidiaries,  nor
does  the  Company  or  any of  its  subsidiaries  know  of  any  activities  or
proceedings of any labor union to organize any such employees; and (iii) neither
the Company nor any of its subsidiaries has any knowledge, after due inquiry, of
any strikes, slowdowns, work


                                      -18-

<PAGE>

stoppages,  lockouts, or threats thereof, by or with respect to any employees of
the Company or any of its  subsidiaries  which would  reasonably  be expected to
have a Material Adverse Effect.

         SECTION 2.13. Registration Statement; Joint Proxy Statement/Prospectus.
Subject  to the  accuracy  of the  representations  of GT in Section  3.13,  the
information supplied by the Company in writing specifically for inclusion in the
Registration  Statement  (as defined in Section  3.13) shall not at the time the
Registration  Statement  is  declared  effective  by the SEC  contain any untrue
statement of a material  fact or omit to state any material  fact required to be
stated  therein or necessary  in order to make the  statements  therein,  in the
light of the  circumstances  under  which they were made,  not  misleading.  The
information   supplied  by  the  Company  for   inclusion  in  the  joint  proxy
statement/prospectus to be sent to the shareholders of the Company in connection
with the meeting of the  shareholders of the Company to consider the Merger (the
"Company  Shareholders'  Meeting") and to the  shareholders  of GT in connection
with the meeting of the shareholders of GT (the "GT Shareholders'  Meeting" and,
together with the Company's  Shareholders Meeting, the "Shareholders  Meetings")
to consider  the Merger  (such joint  proxy  statement/prospectus  as amended or
supplemented  is referred to herein as the "Joint  Proxy  Statement/Prospectus")
will not, on the date the Joint  Proxy  Statement/Prospectus  (or any  amendment
thereof or supplement  thereto) is first mailed to shareholders,  at the time of
the  Shareholders  Meetings,  or at the  Effective  Time,  contain any statement
which,  at such time and in light of the  circumstances  under which it shall be
made, is false or misleading with respect to any material fact, or shall omit to
state any material fact necessary in order to make the  statements  made therein
not false or misleading; or omit to state any material fact necessary to correct
any statement in any earlier  communication  with respect to the solicitation of
proxies for the Shareholders  Meetings which has become false or misleading.  If
at any time prior to the Effective Time any event relating to the Company or any
of its respective affiliates,  officers or directors should be discovered by the
Company which should be set forth in an amendment to the Registration  Statement
or a  supplement  to the Joint Proxy  Statement/Prospectus,  the  Company  shall
promptly  inform GT and Merger Sub. The Joint Proxy  Statement/Prospectus  shall
comply in all material respects with the requirements of the Securities Act, the
Exchange  Act and the  rules and  regulations  thereunder.  Notwithstanding  the
foregoing,  the Company makes no  representation or warranty with respect to any
information  supplied by GT or Merger Sub which is contained or  incorporated by
reference  in,  or  furnished  in  connection   with  the  preparation  of,  the
Registration Statement or the Joint Proxy Statement/Prospectus.

         SECTION  2.14.  Restrictions  on Business  Activities.  Except for this
Agreement or as set forth in Section 2.14 of the Company Disclosure  Schedule or
the Company SEC Reports, to the Knowledge of the Company, there is no agreement,
judgment,  injunction,  order or decree  binding  upon the Company or any of its
subsidiaries  which has or would  reasonably  be  expected to have the effect of
prohibiting  or  impairing  any  business  practice of the Company or any of its
subsidiaries  as  currently  conducted  or as proposed to be  conducted by them,
acquisition of property by the Company or any of its subsidiaries or the conduct
of business by the Company or any of its subsidiaries as currently conducted or


                                      -19-

<PAGE>

as proposed to be conducted by them, except for any prohibition or impairment as
would not reasonably be expected to have a Material Adverse Effect.

         SECTION 2.15. Title to Property. Except as set forth in Section 2.15 of
the Company Disclosure  Schedule,  the Company and each of its subsidiaries have
good and valid title to, or in the case of leased  properties,  valid  leasehold
interests in, all of their tangible properties and assets, free and clear of all
liens, charges and encumbrances,  except liens for taxes not yet due and payable
and such liens or other  imperfections  of title,  if any, as do not  materially
detract  from the value of or  interfere  with the present  use of the  property
affected  thereby or which could not  reasonably  be expected to have a Material
Adverse Effect, and except for liens which secure indebtedness  reflected in the
1997  Balance  Sheet;  and there is not under  any lease  pursuant  to which the
Company or any of its  subsidiaries  leases from others material amounts of real
or personal  property,  any  existing  material  default or event of default (or
event which with notice or lapse of time, or both,  would  constitute a material
default) by the Company or any of its  subsidiaries,  or to the Knowledge of the
Company,  any existing material default or event of default (or event which with
notice or lapse of time, or both,  would  constitute a material  default) by the
other  party  under such lease,  except  where the lack of such  validity or the
existence of such default or event of default  could not  reasonably be expected
to have a Material Adverse Effect.

         SECTION  2.16.  Taxes.  (a) For  purposes of this  Agreement,  "Tax" or
"Taxes"  shall  mean  taxes,  fees,  levies,  duties,   tariffs,   imposts,  and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes,  payable  to any  Federal,  state,  local or  foreign  taxing  authority,
including (without limitation) (i) income,  franchise,  profits, gross receipts,
ad valorem,  net worth,  value  added,  sales,  use,  service,  real or personal
property,  special assessments,  capital stock, license,  payroll,  withholding,
employment,  social security, workers' compensation,  unemployment compensation,
utility, severance,  production,  excise, stamp, occupation,  premiums, windfall
profits,  transfer and gains taxes,  and (ii)  interest,  penalties,  additional
taxes and additions to tax imposed with respect thereto; and "Tax Returns" shall
mean returns, reports, and information statements with respect to Taxes required
to be filed with the IRS or any other  taxing  authority,  domestic  or foreign,
including,  without limitation,  consolidated,  combined and unitary tax returns
(including returns required in connection with any Employee Plan).

         (b)  Other  than  as  disclosed  in  Section  2.16(b)  of  the  Company
Disclosure Schedule or the Company SEC Reports: The Company and its subsidiaries
have timely and accurately completed and filed all United States Federal,  state
and local income Tax Returns and all other  material Tax Returns  required to be
filed by them, the Company and its subsidiaries  have timely paid and discharged
all  material  Taxes due in  connection  with or with  respect to the periods or
transactions  covered by such Tax Returns and have paid all other material Taxes
as are due,  except  such as are being  contested  in good faith by  appropriate
proceedings  and such  Taxes as have been  accrued or  reserved  for in the 1997
Balance  Sheet,  there are no other  Taxes  that would be due if  asserted  by a
taxing  authority,  except  with  respect to which the  Company  is  maintaining
reserves  unless the failure to do so would not reasonably be expected to have a
Material  Adverse  Effect,  and the Company and its  subsidiaries  have complied
(and, until the Effective Time, will comply) in all material


                                      -20-

<PAGE>

respects  with all  applicable  laws,  rules  and  regulations  relating  to the
withholding of Taxes and the payment  thereof  (including,  without  limitation,
withholding  of Taxes  under  Sections  1441 and 1442 of the  Code,  or  similar
provisions  under any foreign  laws),  and timely and  properly  withheld in all
material  respects from  individual  employee  wages and paid over to the proper
governmental  authorities  all amounts  required to be so withheld and paid over
under all  applicable  laws.  Except as does not  involve or would not result in
liability to the Company or any of its  subsidiaries  that would  reasonably  be
expected to have a Material  Adverse  Effect,  (i) there are no tax liens on any
assets of the Company or any subsidiary thereof,  except liens for Taxes not yet
due; (ii) neither the Company nor any of its subsidiaries has granted any waiver
of (or comparable  consent) any statute of  limitations  with respect to, or any
extension  of a period  for the  assessment  of,  any Tax;  (iii) no unpaid  (or
unreserved)  deficiencies  for Taxes have been claimed,  proposed or assessed by
any taxing or other governmental authority with respect to the Company or any of
its  subsidiaries  except  for such  deficiencies  which  have been  accrued  or
reserved  for in the 1997  Balance  Sheet;  (iv)  there are no  pending  audits,
investigations or claims for or relating to any liability in respect of Taxes of
the Company or any of its  subsidiaries;  (v) neither the Company nor any of its
subsidiaries  has  requested  any  extension  of time  within  which to file any
currently unfiled returns in respect of any Taxes; and (vi) no power of attorney
has been granted by the Company or its  subsidiaries  with respect to any matter
relating to Taxes which is  currently  in force.  The  accruals and reserves for
Taxes (including  deferred taxes) reflected in the 1997 Balance Sheet are in all
material respects adequate to cover all Taxes accruable through the date thereof
(including Taxes being contested) in accordance with GAAP.

         (c)  Other  than  as  disclosed  in  Section  2.16(c)  of  the  Company
Disclosure  Schedule or the Company SEC Reports,  and other than with respect to
items  the  inaccuracy  of which  would not  reasonably  be  expected  to have a
Material Adverse Effect:  (i) neither the Company nor any of its subsidiaries is
obligated  under any agreement with respect to industrial  development  bonds or
other obligations with respect to which the  excludability  from gross income of
the holder for  Federal or state  income tax  purposes  could be affected by the
transactions  contemplated  hereunder;  (ii)  neither the Company nor any of its
subsidiaries is, or has been, a United States real property holding  corporation
(as  defined in Section  897(c)(2)  of the Code)  during the  applicable  period
specified in Section 897(c)(1)(A)(ii) of the Code; (iii) to the Knowledge of the
Company,  neither the Company nor any of its subsidiaries owns any property of a
character the indirect transfer of which pursuant to this Agreement,  would give
rise to any material documentary,  stamp or other transfer tax; (iv) neither the
Company nor any of its  subsidiaries  has filed or been  included in a combined,
consolidated or unitary return (or substantial equivalent thereof) of any Person
other than the Company and its subsidiaries;  (v) neither the Company nor any of
its  subsidiaries  is liable for Taxes of any Person  other than the Company and
its subsidiaries, or currently under any contractual obligation to indemnify any
Person with  respect to Taxes,  or a party to any tax sharing  agreement  or any
other agreement providing for payments by the Company or any of its subsidiaries
with respect to Taxes; (vi) neither the Company nor any of its subsidiaries is a
party to any joint venture,  partnership or other  arrangement or contract which
could be treated as a partnership for United States Federal income tax purposes;
(vii)  neither  the  Company  nor  any of its  subsidiaries  is a  party  to any
agreement,  contract, arrangement or plan that would result (taking into account
the transactions contemplated by


                                      -21-

<PAGE>

this Agreement),  separately or in the aggregate,  in the payment of any "excess
parachute  payments"  within the  meaning  of  Section  280G of the Code (or any
corresponding  provisions of state, local or foreign law); (viii) the prices for
any property or services (or for the use of property) provided by the Company or
any of its  subsidiaries  to any other  subsidiary  or to the Company  have been
arm's  length  prices  determined  using  a  method  permitted  by the  Treasury
Regulations  under Section 482 of the Code;  (ix) neither the Company nor any of
its subsidiaries is a "consenting corporation" under Section 341 (f) of the Code
or any corresponding  provision of state,  local or foreign law; (x) neither the
Company nor any of its subsidiaries has made an election or is required to treat
any of its assets as owned by another  Person for Federal income tax purposes or
as tax-exempt  bond  financed  property or  tax-exempt  use property  within the
meaning of Section  168 of the Code (or any  corresponding  provision  of state,
local or foreign law); (xi) neither the Company nor its subsidiaries is required
to include in income any  adjustment  under  Section  481(a) of the Code (or any
corresponding provision of state, local or foreign law) by reason of a voluntary
change in accounting  method,  and the Internal Revenue Service has not provided
written  notice of such a proposed  adjustment or change in  accounting  method;
(xii)  neither  the Company nor its  subsidiaries  has  received a Tax ruling or
entered into a closing  agreement  with any taxing  authority  that would have a
continuing effect on the net income of the Surviving  Corporation for any period
after the  Effective  Time;  and (xiii)  Company has made  available to GT true,
correct  and  complete  copies of all Tax  Returns  filed by the  Company or its
subsidiaries  for each Tax period open to audit,  review or  examination  by the
relevant taxing  authority and all Federal income Tax Returns for years in which
a loss was claimed and with respect to which a net operating  loss  carryforward
is available.

         SECTION  2.17.  Environmental  Matters.  Except as set forth in Section
2.17 of the Company Disclosure  Schedule or the Company SEC Reports,  and except
in all cases  as, in the  aggregate,  have not had and would not  reasonably  be
expected to have a Material Adverse Effect, to the Knowledge of the Company, the
Company and each of its subsidiaries  (i) have obtained all applicable  permits,
licenses and other  authorization  which are  required to be obtained  under all
applicable  Federal,  state or local laws or any regulation,  code, plan, order,
decree,  judgment,  notice or demand  letter  issued,  entered,  promulgated  or
approved  thereunder  relating to pollution or  protection  of the  environment,
including  laws  relating  to  emissions,  discharges,  releases  or  threatened
releases of pollutants, contaminants, or hazardous or toxic substances or wastes
into ambient air, surface water,  ground water, or land or otherwise relating to
the manufacture,  processing,  distribution,  use, treatment, storage, disposal,
transport,  or  handling  of  pollutants,  contaminants  or  hazardous  or toxic
substances or wastes (collectively,  "Environmental Laws") by the Company or its
subsidiaries (or their respective agents); (ii) are in compliance with all terms
and conditions of such required permits,  licenses and  authorization,  and also
are  in  compliance  with  all  other  limitations,   restrictions,  conditions,
standards,  prohibitions,  requirements,  obligations,  schedules and timetables
contained in applicable Environmental Laws; (iii) as of the date hereof, are not
aware of nor have received  written  notice from any  governmental  authority or
third party of any past or present  violations  of  Environmental  Laws,  or any
event, condition,  circumstance,  activity,  practice,  incident, action or plan
which is reasonably  likely to interfere  with or prevent  continued  compliance
with or which  would  give rise to any  common law or  statutory  liability,  or
otherwise form the basis of any claim, action, suit or


                                      -22-

<PAGE>

proceeding, against the Company or any of its subsidiaries based on or resulting
from  the  manufacture,   processing,  distribution,  use,  treatment,  storage,
disposal,  transport or handling, or the emission, discharge or release into the
environment,  of any pollutant,  contaminant or hazardous or toxic  substance or
waste; and (iv) have taken all actions necessary under applicable  Environmental
Laws to register  any  products or materials  required to be  registered  by the
Company or its subsidiaries (or any of their respective agents) thereunder.

         SECTION 2.18.  Brokers.  No broker,  finder or investment banker (other
than Piper Jaffray Inc. ("Piper Jaffray"), the fees and expenses of whom will be
paid by the  Company)  is entitled  to any  brokerage,  finder's or other fee or
commission in connection  with the  transactions  contemplated by this Agreement
based upon  arrangements  made by or on behalf of the  Company.  The Company has
heretofore furnished to GT a complete and correct copy of all agreements between
the Company and Piper  Jaffray  pursuant to which such firm would be entitled to
any  payment  relating  to the  transactions  contemplated  hereunder,  and such
agreements  set forth the amount of such payment and/or the formula or method by
which such amount is to be determined.

         SECTION 2.19.  Intellectual Property.  Except in each case as disclosed
in Section 2.19 of the Company Disclosure Schedule:

         (a) The  Company  and each  subsidiary  thereof  has the  right to use,
market,  distribute,  sell or license all Intellectual  Property Rights (as such
term is hereinafter  defined) used in its business as presently conducted and as
it is expected to be conducted as of the Effective Time (which includes, without
limitation,  the products  defined in Section 2.19(a) of the Company  Disclosure
Schedule  as  the  "Specified  Products"),  including  without  limitation,  all
Intellectual  Property  Rights  used or to be used in the Company  Products  (as
defined below) (such Intellectual Property Rights being hereinafter collectively
referred to as the "Company IP Rights"),  except to the extent that such Company
IP Rights are collectively  owned by the Company and its subsidiaries,  and such
rights to use,  market,  distribute,  sell or license  are  sufficient  for such
conduct of their respective businesses;

         (b) the execution,  delivery and  performance of this Agreement and the
consummation  of the  transactions  contemplated  hereby will not  constitute  a
breach of any  instrument  or  agreement  governing  any  Company  IP Right (the
"Company IP Rights Agreements"), will not cause the forfeiture or termination or
give rise to a right of  forfeiture  or  termination  of any Company IP Right or
impair  the  right  of  the  Company  and  its  subsidiaries  or  the  Surviving
Corporation to use, market, distribute,  sell or license any Company IP Right or
portion thereof;

         (c)  neither  the  manufacture,  development,  publication,  marketing,
license,  sale,  distribution  or  use  intended  by the  Company  or any of its
subsidiaries of any product currently  licensed or sold by the Company or any of
its  subsidiaries  or currently  under  development by the Company or any of its
subsidiaries  (which  includes,  without  limitation,  the  products  defined in
Section 2.19(a) of the Company Disclosure Schedule as the "Specified  Products")
violates any license or agreement between the Company or any of its


                                      -23-

<PAGE>

subsidiaries and any third party or infringes any  Intellectual  Property Right,
moral right or right of publicity or privacy of any other party, and there is no
pending or, to the  Knowledge of the  Company,  threatened  claim or  litigation
contesting the validity,  ownership or right to use, market,  distribute,  sell,
license or dispose of any Company IP Right nor, to the Knowledge of the Company,
is there any basis for any such claim under  applicable law, nor has the Company
or any of its  subsidiaries  received any notice  asserting  that any Company IP
Right or the proposed use, marketing, distribution, sale, license or disposition
thereof  conflicts or will conflict with the rights of any other party,  nor, to
the Knowledge of the Company,  is there any basis for any such  assertion  under
applicable law;

         (d)  The  Company  and  its  subsidiaries  have  taken  reasonable  and
practicable   steps   designed  to  safeguard   and  maintain  the  secrecy  and
confidentiality  of, and their respective  proprietary rights in, all Company IP
Rights and the Intellectual  Property Rights of third parties entrusted to them;
and

         (e)  Section  2.19(e) of the  Company  Disclosure  Schedule  contains a
complete  list of all  material  software  development  tools used or  currently
intended to be used by the Company and its  subsidiaries  in the  development of
any software  products  published and/or  distributed,  or under  development or
consideration,  by  the  Company  or  any  of  its  subsidiaries  (the  "Company
Products"),  except for any such tools that are generally available and are used
in their  generally  available  form (such as standard  compilers)  and any such
tools (the  "Internally  Developed  Tools")  entirely  developed  internally  by
employees of the Company or its subsidiaries (the "Company  Development Tools").
Section 2.19(e) of the Company Disclosure  Schedule also sets forth, for each of
the Company Development Tools: (a) for any of the Company Development Tools, the
identity  of the  independent  contractors  and  consultants  involved  in  such
development and a list of the agreements with such  independent  contractors and
consultants;  (b) a list  of any  third  parties  with  any  rights  to  receive
royalties or other payments with respect to the Company Development Tools, and a
schedule of all such royalties  payable;  (c) a list of any  restrictions on the
Company's  or its  subsidiary's  unrestricted  right to use and  distribute  the
Company  Development  Tools; and (d) a list of all agreements with third parties
for the use by such third party of the Company  Development  Tools.  The Company
and its  subsidiaries  have sufficient  right,  title and interest in and to the
Company  Development Tools and the Internally  Developed Tools necessary for the
conduct of its business as currently  conducted and as to any products currently
in development  or proposed to be developed and,  except as indicated on Section
2.19(e) of the Company Disclosure Schedule, all of the Company Development Tools
and the Internally  Developed Tools are either works made for hire (as such term
is  used in the  Copyright  Act of  1976,  as  amended)  or the  Company  or its
subsidiaries  have been  granted a perpetual  worldwide  license with respect to
such development tools.

         (f) The Company  and its  subsidiaries  have timely and  satisfactorily
complied  with  their  respective  milestone  delivery  requirements  under  all
agreements pursuant to which the Company or any of its subsidiaries, as the case
may be, has  agreed to  program,  design or develop on behalf of a third  party,
whether for  original use or for porting or  conversion  (for use on a different
hardware platform or in a different language), any


                                      -24-

<PAGE>

software  products or any part  thereof,  except  where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect.

         As used in this  Agreement,  the term  "Intellectual  Property  Rights"
shall mean all U.S. and foreign intellectual property rights, including, without
limitation, patents, patent applications,  patent rights, trademarks,  trademark
applications, trade names, service marks, service mark applications,  copyright,
copyright  applications,  franchises,  licenses,  inventories,  know-how,  trade
secrets,  customer  lists,  proprietary  processes and formulae,  all source and
object code, algorithms,  architectures,  structures,  display screens, layouts,
inventions,  development  tools and all  documentation  and media  constituting,
describing or relating to the above,  including,  without  limitation,  manuals,
memoranda and records.

         SECTION 2.20.  Interested  Party  Transactions.  Except as set forth in
Section  2.20 of the Company  Disclosure  Schedule  or the Company SEC  Reports,
since the date of the Company's  proxy statement dated August 1, 1997 (the "1997
Company  Proxy  Statement"),  no event has occurred that would be required to be
reported as a Certain Relationship or Related Transaction,  pursuant to Item 404
of Regulation S-K promulgated by the SEC.

         SECTION  2.21.  Insurance.  Except as  disclosed in Section 2.21 of the
Company Disclosure Schedule, all material fire and casualty,  general liability,
business  interruption,   product  liability  and  sprinkler  and  water  damage
insurance policies maintained by the Company or any of its subsidiaries are with
reputable insurance carriers,  provide full and adequate coverage for all normal
risks  incident to the  business of the Company and its  subsidiaries  and their
respective properties and assets and are in character and amount appropriate for
the  businesses  engaged  by the  Company,  except  as could not  reasonably  be
expected  to  have a  Material  Adverse  Effect.  Section  2.21  of the  Company
Disclosure  Schedule sets forth a complete list of such insurance  policies and,
with respect to each such policy, the following terms thereof: type of coverage,
term of such policy,  annual premium,  limits of insurance (if applicable,  both
each-occurrence and aggregate limits) and deductible or self-retained  insurance
amount, if any.

         SECTION 2.22. Product Liability and Recalls. (a) Except as disclosed in
Section 2.22(a) of the Company  Disclosure  Schedule or the Company SEC Reports,
the  Company is not aware of any claim,  or the basis of any claim,  against the
Company or any of its subsidiaries for injury to person or property of employees
or any  third  parties  suffered  as a  result  of the  sale of any  product  or
performance of any service by the Company or any of its subsidiaries,  including
claims  arising  out of the  defective  or  unsafe  nature  of its  products  or
services, which would reasonably be expected to have a Material Adverse Effect.

         (b) Except as  disclosed in Section  2.22(b) of the Company  Disclosure
Schedule or the Company SEC Reports, there is no pending or, to the Knowledge of
the Company,  overtly  threatened recall or investigation of any product sold by
the Company,  which recall or investigation would reasonably be expected to have
a Material Adverse Effect.


                                      -25-

<PAGE>

         SECTION  2.23.  Opinion of  Financial  Advisor.  The  Company  has been
advised by its financial advisor,  Piper Jaffray Inc., to the effect that in its
opinion,  as of the date  hereof,  the  Exchange  Ratio is fair from a financial
point of view to the holders of Shares.

         SECTION 2.24.  Pooling  Matters.  To the Company's  knowledge and based
upon consultation with its independent accountants,  the Company has provided to
GT and its independent  accountants all information  concerning actions taken or
agreed to be taken by the Company or any of its affiliates on or before the date
of this  Agreement  that could  reasonably  be expected to adversely  affect the
ability of GT to account  for the  business  combination  to be  effected by the
Merger as a pooling of  interests.  For purposes of this Section  2.24,  "to the
Company's  knowledge" means to the actual  knowledge of the Company's  Chairman,
Chief Executive Officer or Chief Financial Officer.

         SECTION  2.25.  Section  203 of the DGCL Not  Applicable.  The Board of
Directors  of the  Company  has  taken  all  actions  so that  the  restrictions
contained in Section 203 of the DGCL applicable to a "business  combination" (as
defined  therein) will not apply to the execution or delivery of this  Agreement
or to the consummation of the Merger or the other  transactions  contemplated by
this Agreement.

         SECTION 2.26.  Section 2115 of the CCL Not Applicable.  Section 2115 of
the CCL is not applicable to the Company.


                                  ARTICLE III3

               REPRESENTATIONS AND WARRANTIES OF GT AND MERGER SUB

         GT and Merger Sub hereby  represent  and warrant to the  Company  that,
except as set forth in the written disclosure letter previously  delivered by GT
to the Company (the "GT Disclosure Schedule"):

         SECTION 3.1. Organization and Qualification;  Subsidiaries.  Each of GT
and its  subsidiaries is a corporation  duly organized,  validly existing and in
good standing under the laws of the  jurisdiction of its  incorporation  and has
the requisite  corporate or similar power and authority  necessary to own, lease
and operate the properties it purports to own,  operate or lease and to carry on
its  business as it is now being  conducted,  except  where the failure to be so
organized,  existing  and in good  standing or to have such power and  authority
could not reasonably be expected to have a Material  Adverse Effect.  Each of GT
and its  subsidiaries is duly qualified or licensed as a foreign  corporation to
do business,  and is in good standing,  in each jurisdiction where the character
of  its  properties  owned,  leased  or  operated  by it or  the  nature  of its
activities  makes such  qualification  or licensing  necessary,  except for such
failures to be so duly qualified or licensed and in good standing that could not
reasonably be expected to have a Material  Adverse  Effect.  A true and complete
list  of  all  of  GT's   subsidiaries,   together  with  the   jurisdiction  of
incorporation of each subsidiary and


                                      -26-

<PAGE>

the  percentage of each  subsidiary's  outstanding  capital stock owned by GT or
another  subsidiary,  is set forth in  Section  3.1 of GT  Disclosure  Schedule.
Except as set forth in Section 3.1 of the GT  Disclosure  Schedule or the GT SEC
Reports (as defined below), GT does not directly or indirectly own any equity or
similar  interest  in,  or any  interest  convertible  into or  exchangeable  or
exercisable   for,  any  equity  or  similar   interest  in,  any   corporation,
partnership, joint venture or other business association or entity.

         SECTION  3.2.   Certificate  of  Incorporation  and  By-Laws.   GT  has
heretofore  furnished  to  the  Company  a  complete  and  correct  copy  of its
Certificate of Incorporation  and By-Laws,  as amended to date. Such Certificate
of Incorporation and By-Laws are in full force and effect. Neither GT nor Merger
Sub is in violation of any of the provisions of its Certificate of Incorporation
or By-Laws.

         SECTION 3.3.  Capitalization.  (a) The  authorized  capital stock of GT
consists of  150,000,000  shares of GT Common Stock and  5,000,000  shares of GT
Preferred Stock. As of August 1, 1997, (i) 67,005,218  shares of GT Common Stock
were issued and  outstanding,  all of which are validly  issued,  fully paid and
non-assessable,  and no shares of GT Common Stock were held in treasury, (ii) no
shares of GT Preferred  Stock were  outstanding  or held in  treasury,  (iii) no
shares of GT Common Stock or GT Preferred Stock were held by subsidiaries of GT,
(iv) 7,205,880  shares and no shares of GT Common Stock were reserved for future
issuance  pursuant  to the  outstanding  stock  options  under  GT's 1995  Stock
Incentive Plan and 1997 Stock Incentive Plan, respectively, (v) 1,255,911 shares
of GT Common Stock were reserved for issuance  upon exercise of warrants  issued
to various  parties.  No material  change in such  capitalization  has  occurred
between  August 1, 1997 and the date of this  Agreement.  Except as set forth in
the immediately preceding sentence, in Section 3.3 of the GT Disclosure Schedule
or the GT SEC Reports (as defined in Section 3.7 hereof),  there are no options,
warrants  or  other  rights,  agreements,  arrangements  or  commitments  of any
character  to which GT or any of its  subsidiaries  is a party or by which it is
bound  relating  to the  issued or  unissued  capital  stock of GT or any of its
subsidiaries  or obligating GT or any of its  subsidiaries  to issue or sell any
shares  of  capital  stock of, or other  equity  interests  in, GT or any of its
subsidiaries.  All  outstanding  shares of GT Common Stock are duly  authorized,
fully paid,  validly issued and  nonassessable and are not subject to preemptive
rights of any nature.  Except as set forth in Section  3.3 of the GT  Disclosure
Schedule  or  the GT SEC  Reports,  there  are  no  obligations,  contingent  or
otherwise,  of GT or any of its subsidiaries to repurchase,  redeem or otherwise
acquire any shares of the capital stock of GT or of any subsidiary or to provide
funds to or make any investment (in the form of a loan, capital  contribution or
otherwise) in any such subsidiary  other than guarantees of bank  obligations of
subsidiaries  entered  into in the ordinary  course of  business.  Except as set
forth  in  Section  3.1  or  3.3  of  the  GT  Disclosure  Schedule,  all of the
outstanding  shares  of  capital  stock  of each of GT's  subsidiaries  are duly
authorized, validly issued, fully paid and nonassessable and all such shares are
owned by GT or  another  subsidiary  free and clear of all  security  interests,
liens, claims, pledges,  agreements,  limitations in GT's voting rights, charges
or other encumbrances of any nature whatsoever.

         (b) The shares of GT Common  Stock to be issued  pursuant to the Merger
will be duly authorized,  validly issued,  fully paid and nonassessable and free
of preemptive


                                      -27-

<PAGE>

rights of any nature and shall be approved for listing,  upon official notice of
issuance, prior to the Effective Time for trading on Nasdaq.

         SECTION  3.4.  Authority  Relative  to this  Agreement.  Each of GT and
Merger Sub has all  necessary  corporate  power and  authority  to  execute  and
deliver  this  Agreement  and  to  perform  its  obligations  hereunder  and  to
consummate the transactions  contemplated  hereby. The execution and delivery of
this Agreement by GT and Merger Sub and the consummation by GT and Merger Sub of
the transactions  contemplated  hereby have been duly and validly  authorized by
all  necessary  corporate  action on the part of GT and Merger Sub, and no other
corporate proceedings on the part of GT or Merger Sub are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby (other than
the  approval  of the Merger  and this  Agreement  by the  holders of at least a
majority  of the votes  cast on the  proposal  to  approve  the  Merger and this
Agreement). The Board of Directors of GT has determined that it is advisable and
in the best interest of GT's  shareholders  for GT to enter into this  Agreement
and to  consummate  the Merger upon the terms and subject to the  conditions  of
this Agreement.  This Agreement has been duly and validly executed and delivered
by GT and Merger Sub and, assuming the due authorization, execution and delivery
by the Company,  constitutes  a legal,  valid and binding  obligation  of GT and
Merger Sub,  enforceable  against each in accordance with its terms, except that
such enforceability may be subject to (i) bankruptcy, insolvency, reorganization
or other similar laws affecting or relating to enforcement of creditors'  rights
generally and (ii) general equitable principles.

         SECTION 3.5. No Conflict;  Required Filings and Consents. (a) Except as
disclosed in Section 3.5(a) of the GT Disclosure Schedule or the GT SEC Reports,
there are (i) no loan agreements,  indentures,  mortgages,  pledges, conditional
sale or title retention agreements, security agreements,  equipment obligations,
guaranties,  standby  letters  of  credit,  equipment  leases or lease  purchase
agreements to which GT or any of its  subsidiaries is a party or by which any of
them is  bound,  each in an amount  exceeding  $1,000,000,  other  than any such
agreement  between GT and its  wholly-owned  subsidiaries or between two or more
wholly-owned subsidiaries of GT; (ii) no contracts,  agreements,  commitments or
other understandings or arrangements to which GT or any of its subsidiaries is a
party or by which any of them or any of their  respective  properties  or assets
are bound or affected,  other than contracts,  agreements,  commitments or other
understandings or arrangements  involving, in each case, payments or receipts by
GT or any of its subsidiaries of less than $1,000,000 in any single instance but
not more than $2,000,000 in the aggregate;  and (iii) no agreements which, as of
the  date  hereof,  are  required  to be  filed  with  the SEC  pursuant  to the
requirements  of the Exchange Act as "material  contracts"  but have not been so
filed with the SEC as of the date hereof.

         (b)  Except  as set  forth  in  Section  3.5(b)  of  the GT  Disclosure
Schedule,  the execution and delivery of this  Agreement by GT and Merger Sub do
not, and the  performance  of this  Agreement by GT and Merger Sub will not, (i)
conflict with or violate the  Certificate of  Incorporation  or By-Laws of GT or
Merger Sub, (ii) subject to obtaining  approval and adoption of this  Agreement,
and  approval  of the Merger and  issuance of GT Common  Stock and GT  Preferred
Stock in connection therewith, by GT's shareholders,


                                      -28-

<PAGE>

conflict with or violate any law, rule,  regulation,  order,  judgment or decree
applicable to GT or any of its  subsidiaries or by which its or their respective
properties are bound or affected, or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or impair GT's or any of its  subsidiaries'  rights or alter the
rights or obligations of any third party under,  or give to others any rights of
termination,  amendment,  acceleration  or  cancellation  of,  or  result in the
creation of a lien or  encumbrance  on any of the  properties or assets of GT or
any of its  subsidiaries  pursuant  to,  any note,  bond,  mortgage,  indenture,
contract,  agreement,  lease, license,  permit, franchise or other instrument or
obligation to which GT or any of its  subsidiaries  is a party or by which GT or
any of its subsidiaries or its or any of their  respective  properties are bound
or  affected,  except for such  conflicts,  violations,  breaches or defaults as
shall have been waived by the Company prior to the Effective  Time and except in
any such case for any such conflicts,  violations,  breaches,  defaults or other
occurrences  that would not  reasonably  be expected to have a Material  Adverse
Effect or as to which any necessary  consents have  heretofore  been obtained by
GT.

                  (c) The  execution  and  delivery of this  Agreement by GT and
Merger Sub does not, and the  performance of this Agreement by GT and Merger Sub
will not, require any consent,  approval,  authorization or permit of, or filing
with or notification to, any governmental or regulatory  authority,  domestic or
foreign, except (i) for applicable requirements,  if any, of the Securities Act,
the Exchange Act, the Blue Sky Laws, the pre-merger notification requirements of
the  HSR  Act,  Foreign  Monopoly  Laws,  and  the  filing  and  recordation  of
appropriate  merger or other  documents as required by the DGCL,  (ii) where the
failure to obtain such consents,  approvals,  authorizations  or permits,  or to
make such  filings  or  notifications,  would not  prevent or  materially  delay
(subject to Section 7.1 hereof) consummation of the Merger, or otherwise prevent
GT or  Merger  Sub from  performing  their  respective  obligations  under  this
Agreement,  and would not  otherwise be  reasonably  expected to have a Material
Adverse  Effect  or  (iii)  as  to  which  any  necessary  consents,  approvals,
authorizations,  permits, filings or notifications have heretofore been obtained
or filed, as the case may be, by GT.

         SECTION 3.6.  Compliance;  Permits.  (a) Except as disclosed in Section
3.6(a) of the GT Disclosure Schedule,  neither GT nor any of its subsidiaries is
in conflict with, or in default or violation of, (i) any law, rule,  regulation,
order,  judgment or decree  applicable  to GT or any of its  subsidiaries  or by
which its or any of their respective properties is bound or affected or (ii) any
note, bond, mortgage,  indenture,  contract,  agreement, lease, license, permit,
franchise  or  other  instrument  or  obligation  to  which  GT or  any  of  its
subsidiaries is a party or by which GT or any of its  subsidiaries or its or any
of  their  respective  properties  is  bound or  affected,  except  for any such
conflicts, defaults or violations which would not reasonably be expected to have
a Material Adverse Effect.

         (b)  Except  as  disclosed  in  Section  3.6(b)  of the  GT  Disclosure
Schedule, GT and its subsidiaries hold all franchises,  grants,  authorizations,
permits, licenses, easements,  variances,  exemptions,  consents,  certificates,
orders and approvals  from  governmental  authorities  which are material to the
operation of the business of GT and its  subsidiaries  taken as a whole as it is
now being conducted (collectively, the "GT Permits").


                                      -29-

<PAGE>

GT and its subsidiaries  are in compliance with the terms of GT Permits,  except
where the  failure  to so comply  would not  reasonably  be  expected  to have a
Material Adverse Effect.

         SECTION 3.7. SEC Filings;  Financial  Statements.  (a) GT has filed all
forms,  reports and documents  required to be filed with the SEC since  December
31, 1995,  and has heretofore  delivered to the Company,  in the form filed with
the SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended December
31, 1995 and 1996,  (ii) its  Quarterly  Reports on Form 10-Q for the  quarterly
periods  ending  March 31, 1997 and June 30,  1997,  (iii) all proxy  statements
relating to GT's meetings of shareholders (whether annual or special) held since
December 31, 1995, (iv) all other reports or registration statements (other than
Reports on Form 10-Q not  referred to in clause (ii) above) filed by GT with the
SEC since December 31, 1995 and (v) all  amendments and  supplements to all such
reports and registration statements filed by GT with the SEC (collectively,  the
"GT SEC Reports"). The GT SEC Reports (i) were prepared in all material respects
in accordance  with the  requirements of the Securities Act or the Exchange Act,
as the case may be,  and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement,  then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated  therein or necessary in order to make the
statements  therein,  in the light of the  circumstances  under  which they were
made, not misleading.  None of GT's  subsidiaries is required to file any forms,
reports or other documents with the SEC.

         (b) Each of the consolidated financial statements  (including,  in each
case,  any  related  notes  thereto)  contained  in the GT SEC  Reports has been
prepared in accordance  with GAAP applied on a consistent  basis  throughout the
periods  involved  (except as may be  indicated  in the notes  thereto) and each
fairly in all material respects presents the consolidated  financial position of
GT and its  subsidiaries as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated,  except that
the unaudited  interim  financial  statements  were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount,  and may not contain certain related notes as may be permitted by the
applicable rules promulgated by the SEC.

         SECTION 3.8. Absence of Certain Changes or Events.  Except as set forth
in  Section  3.8 of the GT  Disclosure  Schedule  or the GT SEC  Reports,  since
December  31, 1996,  GT has  conducted  its business in the ordinary  course and
there has not occurred:  (i) any Material Adverse Effect; (ii) any amendments or
changes in the Certificate of  Incorporation  or By-Laws of GT; (iii) any damage
to,  destruction  or  loss  of any  assets  of GT  (whether  or not  covered  by
insurance) that could  reasonably be expected to have a Material Adverse Effect;
(iv) any  material  change by GT in its  accounting  methods;  (v) any  material
revaluation by GT of 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;  (vi) any sale of a material amount of
assets of GT,  except in the  ordinary  course of  business,  or (vii) any other
action or event that would have required the consent of the Company  pursuant to
Section 4.3 had such action or event occurred after the date of this Agreement.


                                      -30-

<PAGE>

         SECTION  3.9. No  Undisclosed  Liabilities.  Except as is  disclosed in
Section 3.9 of the GT Disclosure Schedule and GT SEC Reports, neither GT nor any
of its  subsidiaries  has any  liabilities  (absolute,  accrued,  contingent  or
otherwise), except liabilities (a) adequately provided for in GT's balance sheet
(including  any related notes  thereto) as of December 31, 1996 included in GT's
Annual  Report on Form 10-K for the fiscal  year ended  December  31,  1996 (the
"December 1996 Balance Sheet"),  (b) incurred in the ordinary course of business
and not required  under GAAP to be reflected on the December 1996 Balance Sheet,
(c) incurred  since  December  31, 1996 in the  ordinary  course of business and
consistent  with past practice,  (d) incurred in connection with this Agreement,
or (e) which would not reasonably be expected to have a Material Adverse Effect.

         SECTION  3.10.  Absence of  Litigation.  Except as set forth in Section
3.10  of the GT  Disclosure  Schedule,  there  are no  claims,  actions,  suits,
proceedings  or  investigations  pending  or, to the  knowledge  of GT,  overtly
threatened against GT or any of its subsidiaries, or any properties or rights of
GT or any of its subsidiaries,  before any court,  arbitrator or administrative,
governmental or regulatory  authority or body,  domestic or foreign,  that would
reasonably be expected to have a Material Adverse Effect.

         SECTION 3.11. Employee Benefit Plans; Employment Agreements.

                  (a) (i)  Except  as set  forth in  Section  3.11(a)  of the GT
Disclosure  Schedule,  none of the GT Employee Plans (as defined below) promises
or provides  retiree  medical or other retiree  welfare  benefits to any person,
except as may be  required  by  COBRA,  and none of the GT  Employee  Plans is a
"multiemployer  plan" as such term is defined in Section 3(37) of ERISA; (ii) no
party in interest or  disqualified  person (as defined in Section 3(14) of ERISA
and  Section  4975 of the Code) has at any time  engaged in a  transaction  with
respect to any GT Employee Plan which could subject GT or any GT ERISA Affiliate
(as defined below), directly or indirectly,  to a tax, penalty or other material
liability for prohibited  transactions  under ERISA or Section 4975 of the Code;
(iii) GT, in its role as a fiduciary of any GT Employee  Plan,  has not breached
any of the  responsibilities or obligations imposed upon fiduciaries under Title
I of ERISA,  which breach could result in any material liability to GT or any GT
ERISA Affiliate; (iv) all GT Employee Plans have been established and maintained
substantially  in accordance with their terms and have operated in compliance in
all material  respects with the requirements  prescribed by any and all statutes
(including ERISA and the Code),  orders,  or governmental  rules and regulations
currently in effect with respect thereto (including all applicable  requirements
for notification to participants or the Department of Labor, IRS or Secretary of
the Treasury),  and may by their terms be amended and/or  terminated at any time
subject to  applicable  law,  and,  to the  knowledge  of GT, GT and each of its
subsidiaries have performed all material obligations required to be performed by
them under,  are not in any material  respect in default  under or violation of,
and have no  knowledge of any default or violation by any other party to, any of
the GT Employee Plans;  (v) each GT Employee Plan which is subject to Parts 1, 2
and 4 of Subtitle B of ERISA is the subject of a favorable  determination letter
from the IRS,  and  nothing has  occurred  which may  reasonably  be expected to
impair  such  determination;  (vi) all  contributions  required  to be made with
respect to any GT Employee  Plan  pursuant  to Section  412 of the Code,  or the
terms of the GT Employee Plan or any collective bargaining agreement,  have been
made on

                                                      -31-



<PAGE>



or before  their due dates;  (vii) with  respect to each GT  Employee  Plan,  no
"reportable  event" within the meaning of Section 4043 of ERISA  (excluding  any
such event for which the 30 day notice  requirement  has been  waived  under the
regulations  to Section 4043 of ERISA) or any event  described in Section  4062,
4063 or 4041 of ERISA has occurred  for which there is any material  outstanding
liability to GT or any GT ERISA  Affiliates;  nor would the  consummation of the
transaction  contemplated  hereby  (including  the execution of this  agreement)
constitute  a  reportable  event for which the 30-day  requirement  has not been
waived;  and  (viii)  neither GT nor any GT ERISA  Affiliate  has  incurred,  or
reasonably  expects to incur,  any liability under Title IV of ERISA (other than
liability for premium payments to the PBGC arising in the ordinary course).

                  As used in this Agreement, the term "GT Employee Plans" means,
collectively,  all employee pension benefit plans (as defined in Section 3(2) of
ERISA),  all  employee  welfare  benefit  plans (as  defined in Section  3(1) of
ERISA), and all other bonus, stock option, stock purchase,  incentive,  deferred
compensation,  supplemental  retirement,  severance and other similar  fringe or
employee benefit plans, programs or arrangements, and any employment,  executive
compensation or severance agreements, written or otherwise, as amended, modified
or  supplemented,  for the  benefit  of, or  relating  to, any former or current
employee,  officer or consultant  (or any of their  beneficiaries)  of GT or any
other  entity  (whether or not  incorporated)  which is a member of a controlled
group  including  GT or which  is  under  common  control  with GT (a "GT  ERISA
Affiliate")  within the meaning of Sections 414(b),  (c), (m) or (o) of the Code
or Section  4001(a) (14) or (b) of ERISA,  or any  subsidiary  of GT, as well as
each  plan  with  respect  to  which GT or any GT ERISA  Affiliate  could  incur
liability under Title IV of ERISA or Section 412 of the Code.

                  (b)  Except  as  set  forth  in  Section  3.11(b)  of  the  GT
Disclosure  Schedule,  no  employee  of  GT  or  any  of  its  subsidiaries  has
participated  in any employee  pension benefit plans (as defined in Section 3(2)
of  ERISA)  maintained  by or on  behalf  of GT.  Neither  GT nor  any GT  ERISA
Affiliate  has  maintained  any GT Employee  Plan that is subject to Title IV of
ERISA.

                  (c) Each GT Employee Plan covering  non-U.S.  employees (a "GT
International  Plan") has been  maintained in  substantial  compliance  with its
terms  and with  the  requirements  prescribed  by any and all  applicable  Laws
(including  any special  provisions  relating to registered  or qualified  plans
where  such GT  International  Plan was  intended  to so  qualify)  and has been
maintained in good standing with applicable regulatory authorities.  The benefit
liabilities of the GT  International  Plans are  adequately  provided for on the
consolidated financial statements of GT.

                  (d) The consummation of the transactions  contemplated by this
Agreement  will not  result in an  increase  in the  amount of  compensation  or
benefits  or  accelerate  the  vesting or timing of payment of any  benefits  or
compensation   payable  in  respect  of  any  employee  of  GT  or  any  of  its
subsidiaries, and no person will be entitled to any severance benefits under the
terms of any GT  Employee  Plan  solely  by reason  of the  consummation  of the
transactions  contemplated by this  Agreement,  except where the amounts of such
increase,

                                                      -32-



<PAGE>



such  accelerated  payment or  compensation  and such severance  benefits do not
exceed in the aggregate $5,000,000.

                  SECTION 3.12.  Labor  Matters.  Except as set forth in Section
3.12 of the GT  Disclosure  Schedule  or the GT SEC  Reports,  (i)  there are no
controversies pending or, to the knowledge of GT, threatened,  between GT or any
of its subsidiaries and any of their respective  employees,  which controversies
have or would  reasonably be expected to have a Material  Adverse  Effect;  (ii)
neither GT nor any of its  subsidiaries  is a party to any  material  collective
bargaining  agreement  or other  labor  union  contract  applicable  to  persons
employed by GT or its subsidiaries,  nor does GT or any of its subsidiaries know
of any  activities  or  proceedings  of any  labor  union to  organize  any such
employees; and (iii) neither GT nor any of its subsidiaries has any knowledge of
any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of GT or any of its subsidiaries which would reasonably
be expected to have a Material Adverse Effect.

                  SECTION   3.13.    Registration    Statement;    Joint   Proxy
Statement/Prospectus.  Subject to the  accuracy  of the  representations  of the
Company  in  Section  2.13,  the  registration   statement  (the   "Registration
Statement")  pursuant  to which the GT Common  Stock to be issued in the  Merger
will be  registered  with  the SEC  shall  not,  at the  time  the  Registration
Statement   (including  any  amendments  or  supplements  thereto)  is  declared
effective by the SEC, contain any untrue statement of a material fact or omit to
state any  material  fact  necessary  in order to make the  statements  included
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading. The information supplied by GT specifically in writing for inclusion
in the Joint  Proxy  Statement/Prospectus  will not, on the date the Joint Proxy
Statement/Prospectus  is  first  mailed  to  shareholders,  at the  time  of the
Shareholders Meetings and at the Effective Time, contain any statement which, at
such time and in light of the  circumstances  under  which it shall be made,  is
false or misleading with respect to any material fact, or will omit to state any
material  fact  necessary in order to make the  statements  therein not false or
misleading;  or omit to  state  any  material  fact  necessary  to  correct  any
statement  in any earlier  communication  with  respect to the  solicitation  of
proxies for the Shareholders  Meetings which has become false or misleading.  If
at any time prior to the Effective  Time any event relating to GT, Merger Sub or
any of their respective  affiliates,  officers or directors should be discovered
by  GT or  Merger  Sub  which  should  be  set  forth  in an  amendment  to  the
Registration Statement or a supplement to the Joint Proxy  Statement/Prospectus,
GT or Merger Sub will promptly inform the Company.  The  Registration  Statement
and Joint Proxy  Statement/Prospectus shall comply in all material respects with
the  requirements  of the  Securities  Act,  the  Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, GT and Merger Sub make no
representation  or  warranty  with  respect to any  information  supplied by the
Company  which is contained  or  incorporated  by reference  in, or furnished in
connection  with the  preparation  of, the  Registration  Statement or the Joint
Proxy Statement/Prospectus.

                  SECTION 3.14. Restrictions on Business Activities.  Except for
this  Agreement,  GT has no knowledge of any  agreement,  judgment,  injunction,
order or decree  binding upon GT or any of its  subsidiaries  which has or would
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of GT or any of

                                                      -33-



<PAGE>



its subsidiaries as currently  conducted or as proposed to be conducted by them,
any  acquisition of property by GT or any of its  subsidiaries or the conduct of
business by GT or any of its subsidiaries as currently  conducted or as proposed
to be conducted by them,  except for any  prohibition or impairment as would not
reasonably be expected to have a Material Adverse Effect.

                  SECTION  3.15.   Title  to  Property.   GT  and  each  of  its
subsidiaries have good and valid title to, or in the case of leased  properties,
valid leasehold  interests in, all of their tangible properties and assets, free
and clear of all liens, charges and encumbrances, except liens for taxes not yet
due and payable and such liens or other  imperfections  of title,  if any, as do
not  materially  detract from the value of or interfere  with the present use of
the property  affected thereby or which could not reasonably be expected to have
a  Material  Adverse  Effect,  and except for liens  which  secure  indebtedness
reflected in the December 1996 Balance Sheet; and there is not, to the knowledge
of GT,  under  any of  leases  pursuant  to which GT or any of its  subsidiaries
leases from other material  amounts of real or personal  property,  any existing
material  default or event of default  (or event  which with  notice or lapse of
time, or both,  would  constitute a material  default)  except where the lack of
such  validity or the  existence of such  default or event of default  would not
reasonably be expected to have a Material Adverse Effect.

                  SECTION  3.16.  Taxes.  (a) Other than as disclosed in Section
3.16(a) of GT Disclosure Schedule or the GT SEC Reports: GT and its subsidiaries
have timely and accurately completed and filed all United States federal,  state
and local income Tax Returns and all other  material Tax Returns  required to be
filed by them,  GT and its  subsidiaries  have  timely paid and  discharged  all
material  Taxes  due in  connection  with  or with  respect  to the  periods  or
transactions  covered by such Tax Returns and have paid all other material Taxes
as are due,  except  such as are being  contested  in good faith by  appropriate
proceedings  and such Taxes as have been accrued or reserved for in the December
1996 Balance Sheet,  there are no other Taxes that would be due if asserted by a
taxing authority, except with respect to which GT is maintaining reserves unless
the failure to do so would not reasonably be expected to have a Material Adverse
Effect,  and GT has complied (and, until the Effective Time, will comply) in all
material  respects with all applicable laws,  rules and regulations  relating to
the withholding of Taxes and the payment thereof (including, without limitation,
withholding  of Taxes  under  Sections  1441 and 1442 of the  Code,  or  similar
provisions  under any foreign  laws),  and timely and  properly  withheld in all
material  respects from  individual  employee  wages and paid over to the proper
governmental  authorities  all amounts  required to be so withheld and paid over
under all  applicable  laws.  Except as does not  involve or would not result in
liability  to GT that would  reasonably  be expected to have a Material  Adverse
Effect,  (i)  there  are no tax  liens  on any  assets  of GT or any  subsidiary
thereof,  except  liens for Taxes not yet due;  (ii)  neither  GT nor any of its
subsidiaries  has granted any waiver of (or  comparable  consent) any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax;  (iii) no unpaid  (or  unreserved)  deficiencies  for  Taxes  have been
claimed, proposed or assessed by any taxing or other governmental authority with
respect to GT or any of its subsidiaries except for such deficiencies which have
been accrued or reserved for in the December 1996 Balance Sheet;  (iv) there are
no pending audits,  investigations or claims for or relating to any liability in
respect of Taxes of GT or any of its


                                      -34-



<PAGE>

subsidiaries;  (v)  neither GT nor any of its  subsidiaries  has  requested  any
extension of time within which to file any currently  unfiled returns in respect
of any  Taxes,  and (vi) no  power of  attorney  has been  granted  by GT or its
subsidiaries  with respect to any matter relating to Taxes which is currently in
force. The accruals and reserves for taxes (including  deferred taxes) reflected
in the December  1996 Balance  Sheet are in all  material  respects  adequate to
cover all Taxes  accruable  through  the date  thereof  (including  Taxes  being
contested) in accordance with GAAP.

                  (b) Other  than as  disclosed  on  Section  3.16(b)  of the GT
Disclosure Schedule or the GT SEC Reports,  and other than with respect to items
the  inaccuracy  of which  could not  reasonably  be expected to have a Material
Adverse  Effect:  (i) neither GT nor any of its  subsidiaries is obligated under
any agreement with respect to industrial  development bonds or other obligations
with  respect to which the  excludability  from  gross  income of the holder for
federal or state  income tax  purposes  could be  affected  by the  transactions
contemplated hereunder; (ii) neither GT nor any of its subsidiaries has filed or
been  included in a combined,  consolidated  or unitary  return (or  substantial
equivalent  thereof)  of any Person  other than GT and its  subsidiaries;  (iii)
neither GT nor any of its  subsidiaries  is liable for Taxes of any Person other
than GT and its subsidiaries,  or currently under any contractual  obligation to
indemnify  any  Person  with  respect  to Taxes,  or a party to any tax  sharing
agreement  or any other  agreement  providing  for  payments by GT or any of its
subsidiaries  with respect to Taxes; (iv) neither GT nor any of its subsidiaries
is a party to any joint venture,  partnership  or other  arrangement or contract
which could be treated as a  partnership  for United States  Federal  income tax
purposes;  (v)  neither  GT nor  any  of  its  subsidiaries  is a  party  to any
agreement,  contract,  arrangement  or plan that would  (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate, in
the payment of any  "excess  parachute  payments"  within the meaning of Section
280G of the Code (or any  corresponding  provision  of state,  local or  foreign
law);  (vi) the prices for any property or services (or for the use of property)
provided by GT or any of its  subsidiaries to any other subsidiary or to GT have
been arm's length  prices  determined  using a method  permitted by the Treasury
Regulations  under  Section  482 of the Code;  (vii)  neither  GT nor any of its
subsidiaries is a "consenting  corporation"  under Section 341(f) of the Code or
any  corresponding  provision of state,  local or foreign law; (viii) neither GT
nor any of its  subsidiaries has made an election or is required to treat any of
its assets as owned by another  Person for  Federal  income tax  purposes  or as
tax-exempt bond financed  property or tax-exempt use property within the meaning
of Section 168 of the Code (or any  corresponding  provision of state,  local or
foreign  law);  (ix) neither GT nor its  subsidiaries  is required to include in
income any  adjustment  under Section  481(a) of the Code (or any  corresponding
provision  of state,  local or foreign  law) by reason of a voluntary  change in
accounting  method,  and the Internal  Revenue Service has not provided  written
notice of such a proposed any such  adjustment or change in  accounting  method;
(x) neither GT nor its  subsidiaries has received a Tax ruling or entered into a
closing  agreement with any taxing authority that would have a continuing effect
on the net income of GT for any period after the Effective Time; and (xi) GT has
made  available  to the Company  true,  correct and  complete  copies of all Tax
Returns  filed by GT or its  subsidiaries  for each Tax  period  open to  audit,
review or  examination by the relevant  taxing  authority and all Federal income
Tax Returns for years in


                                      -35-



<PAGE>

which a loss  was  claimed  and  with  respect  to  which a net  operating  loss
carryforward is available.

                  SECTION 3.17.  Environmental  Matters.  Except as set forth in
Section  3.17 of GT  Disclosure  Schedule,  and  except  in all cases as, in the
aggregate,  have not had and would not reasonably be expected to have a Material
Adverse  Effect,  GT and each of its  subsidiaries to the best of GT's knowledge
(i) have obtained all applicable permits, licenses and other authorization which
are required to be obtained under all applicable Environmental Laws by GT or its
subsidiaries (or their respective agents); (ii) are in compliance with all terms
and conditions of such required permits,  licenses and  authorization,  and also
are  in  compliance  with  all  other  limitations,   restrictions,  conditions,
standards,  prohibitions,  requirements,  obligations,  schedules and timetables
contained in applicable Environmental Laws; (iii) as of the date hereof, are not
aware of nor have received  written  notice from any  governmental  authority or
third party of any past or present  violations  of  Environmental  Laws,  or any
event, condition,  circumstance,  activity,  practice,  incident, action or plan
which is reasonably  likely to interfere  with or prevent  continued  compliance
with or which  would  give rise to any  common law or  statutory  liability,  or
otherwise form the basis of any claim, action, suit or proceeding, against GT or
any of its subsidiaries based on or resulting from the manufacture,  processing,
distribution,  use, treatment, storage, disposal, transport, or handling, or the
emission,   discharge  or  release  into  the  environment,  of  any  pollutant,
contaminant  or hazardous or toxic  substance or waste;  and (iv) have taken all
actions necessary under applicable  Environmental  Laws to register any products
or materials  required to be  registered  by GT or its  subsidiaries  (or any of
their respective agents) thereunder.

                  SECTION 3.18. Brokers. No broker,  finder or investment banker
(other than Robertson Stephens & Company  ("Robertson  Stephens"),  the fees and
expenses of whom will be paid by GT) is entitled to any  brokerage,  finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of GT or Merger Sub.

                  SECTION 3.19.  Intellectual  Property.  Except in each case as
disclosed in Section 3.19 of the GT Disclosure Schedule:

                  (a) GT and each subsidiary  thereof has the right to use, sell
or license all  Intellectual  Property  Rights used in its business as presently
conducted and as it is expected to be conducted as of the  Effective  Time (such
Intellectual  Property Rights being hereinafter  collectively referred to as the
"GT IP Rights"),  except to the extent such GT IP Rights are collectively  owned
by GT and its  subsidiaries,  and  such  rights  to use,  sell  or  license  are
sufficient for such conduct of their respective businesses;

                  (b) the execution,  delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not constitute
a breach of any  instrument  or agreement  governing any GT IP Right (the "GT IP
Rights  Agreements"),  will not cause the forfeiture or termination or give rise
to a right of forfeiture or termination of


                                      -36-



<PAGE>

any GT IP Right or impair the right of GT and its  subsidiaries or the Surviving
Corporation to use, sell or license any GT IP Right or portion thereof;

                  (c) neither the manufacture,  marketing,  license, sale or use
intended by GT or any of its subsidiaries of any product  currently  licensed or
sold by GT or any of its  subsidiaries or currently  under  development by GT or
any of its subsidiaries  violates any license or agreement  between GT or any of
its  subsidiaries  and any third party or infringes  any  Intellectual  Property
Right,  moral right or right of  publicity  or privacy of any other  party,  and
there is no  pending  or,  to the best of GT's  knowledge,  threatened  claim or
litigation contesting the validity,  ownership or right to use, sell, license or
dispose  of any GT IP Right  nor,  to the best of GT's  knowledge,  is there any
basis  for  any  such  claim  under  applicable  law,  nor  has GT or any of its
subsidiaries  received any notice asserting that any GT IP Right or the proposed
use, sale,  license or disposition  thereof  conflicts or will conflict with the
rights of any other  party,  nor,  to the best of GT's  knowledge,  is there any
basis for any such assertion under applicable law; and

                  (d)  GT  and  its  subsidiaries   have  taken  reasonable  and
practicable   steps   designed  to  safeguard   and  maintain  the  secrecy  and
confidentiality of, and their respective proprietary rights in, all GT IP Rights
and the  Intellectual  Property  Rights of third  parties  entrusted to them. No
current or prior  officers,  employees or consultants of GT or its  subsidiaries
claim or have a right to claim an  ownership  interest  in any GT IP Rights as a
result of having been involved in the  development or licensing of such property
while employed by or consulting to GT or its subsidiary, or otherwise.

                  SECTION 3.20.  Interested  Party  Transactions.  Except as set
forth in Section 3.20 of the GT Disclosure Schedule or the GT SEC Reports, since
the date of GT's proxy  statement dated May 10, 1997, no event has occurred that
would  be  required  to  be  reported  as  a  Certain  Relationship  or  Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.

                  SECTION 3.21.  Insurance.  Except as disclosed in Section 3.21
of  the  GT  Disclosure  Schedule,  all  material  fire  and  casualty,  general
liability,  business  interruption,  product  liability  and sprinkler and water
damage insurance  policies  maintained by GT or any of its subsidiaries are with
reputable insurance carriers,  provide full and adequate coverage for all normal
risks incident to the business of GT and its  subsidiaries  and their respective
properties  and  assets and are in  character  and  amount  appropriate  for the
businesses conducted by GT, except as could not reasonably be expected to have a
Material Adverse Effect.

                  SECTION 3.22.  Product  Liability  and Recalls.  (a) Except as
disclosed  in  Section  3.22(a)  of the  GT  Disclosure  Schedule  or the GT SEC
Reports, GT is not aware of any claim, or the basis of any claim,  against GT or
any of its  subsidiaries  for injury to person or property of  employees  or any
third parties  suffered as a result of the sale of any product or performance of
any service by GT or any of its  subsidiaries,  including  claims arising out of
the  defective  or unsafe  nature  of its  products  or  services,  which  would
reasonably be expected to have a Material Adverse Effect.


                                      -37-



<PAGE>

                  (b)  Except  as  disclosed  in  Section   3.22(b)  of  the  GT
Disclosure  Schedule  or the GT SEC  Reports,  there is no  pending  or,  to the
knowledge of GT, overtly threatened, recall or investigation of any product sold
by GT,  which recall or  investigation  would  reasonably  be expected to have a
Material Adverse Effect.

                  SECTION  3.23.  Ownership of Merger Sub; No Prior  Activities.
(a) Merger Sub is a direct,  wholly-owned subsidiary of GT and was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement.

                  (b) As of the date hereof and the Effective  Time,  except for
obligations  or liabilities  incurred in connection  with its  incorporation  or
organization and the transactions  contemplated by this Agreement and except for
this Agreement and any other  agreements or  arrangements  contemplated  by this
Agreement,  Merger  Sub  has  not  and  will  not  have  incurred,  directly  or
indirectly,  through any subsidiary or affiliate, any obligations or liabilities
or engaged in any business  activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person.

                  SECTION 3.24.  Pooling  Matters.  To GT's  knowledge and based
upon  consultation  with its  independent  accountants,  GT has  provided to the
Company and its independent accountants all information concerning actions taken
or agreed to be taken by GT or any of its  affiliates  on or before  the date of
this Agreement that could reasonably be expected to adversely affect the ability
of GT to account for the business  combination to be effected by the Merger as a
pooling of  interests.  For purposes of this Section 3.24,  "to GT's  knowledge"
means to the actual knowledge of GT's Chief Executive Officer or Chief Financial
Officer.


                                  ARTICLE IV 4

                     CONDUCT OF BUSINESS PENDING THE MERGER


                  SECTION  4.1.  Conduct of Business by the Company  Pending the
Merger.  During the period from the date of this Agreement and continuing  until
the earlier of the  termination  of this  Agreement or the Effective  Time,  the
Company covenants and agrees that, unless GT shall otherwise consent in writing,
and except as set forth in Section 4.1 of the Company Disclosure  Schedule,  the
Company  shall  conduct  its  business  and shall  cause the  businesses  of its
subsidiaries to be conducted only in, and the Company and its subsidiaries shall
not take any action  except in, the ordinary  course of business and in a manner
consistent with past practice;  and the Company shall use reasonable  commercial
efforts to  preserve  substantially  intact  the  business  organization  of the
Company and its  subsidiaries,  to keep  available  the  services of the present
officers,  employees and consultants of the Company and its  subsidiaries and to
preserve  the present  relationships  of the Company and its  subsidiaries  with
customers,  suppliers  and other  persons  with which the  Company or any of its
subsidiaries has significant business relations. By way of amplification and not
limitation,  except as contemplated  by this Agreement,  neither the Company nor
any of its


                                      -38-



<PAGE>

subsidiaries  shall,  during  the  period  from the date of this  Agreement  and
continuing  until  the  earlier  of the  termination  of this  Agreement  or the
Effective Time, and except as set forth in Section 4.1 of the Company Disclosure
Schedule,  directly or indirectly  do, or propose to a third party to do, any of
the following without the prior written consent of GT:

                  (a) amend or otherwise  change the  Company's  Certificate  of
         Incorporation or By-Laws;

                  (b) issue, sell, pledge,  dispose of or encumber, or authorize
         the issuance,  sale, pledge,  disposition or encumbrance of, any shares
         of capital stock of any class,  or any options,  warrants,  convertible
         securities or other rights of any kind to acquire any shares of capital
         stock, or any other ownership interest (including,  without limitation,
         any  phantom  interest)  in the  Company,  any of its  subsidiaries  or
         affiliates  (except for (i) the  issuance  of shares of Company  Common
         Stock issuable pursuant to Stock Options under the Company Stock Option
         Plans,  which  options  are  outstanding  on the date  hereof,  or upon
         conversion of the Notes,  Company  Preferred  Stock, the Warrant or the
         warrant  expiring October 17, 1997 to purchase 90,278 shares of Company
         Common Stock at a price of $9.00 per share, subject to adjustment, held
         by  Grotech  Partners  II,  L.P.  and (ii) the  issuance  of options to
         purchase up to 400,000 shares of Company  Common Stock,  at fair market
         value at the time of grant,  to employees  (excluding  officers) of the
         Company engaged in product  development  activities,  provided that the
         grant to any individual does not exceed 25,000 shares of Company Common
         Stock,  and the issuance of shares of Company  Common Stock pursuant to
         the exercise of such options);

                  (c) sell,  pledge,  dispose of or  encumber  any assets of the
         Company or any of its  subsidiaries  (except for (i) sales of assets in
         the ordinary  course of business and in a manner  consistent  with past
         practice,  (ii) dispositions of obsolete or worthless assets, and (iii)
         sales of immaterial assets not in excess of $100,000);

                  (d) (i) declare,  set aside, make or pay any dividend or other
         distribution  (whether in cash,  stock or  property or any  combination
         thereof) in respect of any of its capital stock, (ii) split, combine or
         reclassify  any of its capital  stock or issue or  authorize or propose
         the  issuance of any other  securities  in respect of, in lieu of or in
         substitution  for shares of its capital stock, or (iii) amend the terms
         or change the period of exercisability of, purchase, repurchase, redeem
         or otherwise acquire, or permit any subsidiary to purchase, repurchase,
         redeem or otherwise acquire, any of its securities or any securities of
         its  subsidiaries,  including,  without  limitation,  shares of Company
         Common Stock or any option,  warrant or right,  directly or indirectly,
         to acquire shares of Company Common Stock,  or propose to do any of the
         foregoing;

                  (e)  (i)   acquire  or  agree  to  acquire   (by   merging  or
         consolidating  with,  or by  purchasing  any  equity  interest  in or a
         material portion of the assets of, or by any other manner) any business
         or any corporation, partnership interest, association or other business
         organization  or  division  thereof;  acquire or agree to  acquire  any
         assets other than in the ordinary course of business; or enter into any
         joint ventures,


                                      -39-



<PAGE>

         strategic  partnerships or alliances;  (ii) incur any  indebtedness for
         borrowed  money or issue any debt  securities  or assume,  guarantee or
         endorse or otherwise as an  accommodation  become  responsible for, the
         obligations  of any  person,  or make  any  loans  or  advances;  (iii)
         authorize or make any capital expenditures or purchases of fixed assets
         or lease (whether by capital or operating lease) any personal  property
         if such capital  expenditures  and  purchases,  together  with the fair
         market value of such leased  assets,  exceed,  in the aggregate for the
         Company and its subsidiaries  taken as a whole,  $1,000,000;  (iv) take
         any action to install or otherwise implement any material accounting or
         inventory  software  system  (other  than the  payment of not more than
         $150,000 if required to be paid pursuant to the contract  dated May 27,
         1997 for such system), provided that the Company shall not be obligated
         to take,  or refrain  from  taking,  any action  which  would cause the
         Company  to  breach a  contract  in effect  on the date  hereof,  or be
         obligated  to pay a  termination  penalty,  in respect of any  software
         license or installation  contract  relating to such system in effect on
         the date hereof;  or (v) enter into or amend any  contract,  agreement,
         commitment or  arrangement  to effect any of the matters  prohibited by
         this Section 4.1(e);

                  (f)  except as set forth in Section  4.1(f) of the  Disclosure
         Schedule increase the compensation  payable or to become payable to its
         officers or employees,  or grant or modify any severance or termination
         pay to, or enter into any employment or severance  agreement  with, any
         director,  officer  or  other  employee  of the  Company  or any of its
         subsidiaries,  or establish,  adopt, enter into or amend any collective
         bargaining,  agreement,  Company  Employee  Plan (within the meaning of
         Section 2.11 of this Agreement), trust, fund, policy or arrangement for
         the benefit of any current or former  directors,  officers or employees
         or any of their beneficiaries, except, in each case, as may be required
         by law;

                  (g)  take  any  action  to  change   accounting   policies  or
         procedures (including,  without limitation,  procedures with respect to
         revenue  recognition,  payments of accounts  payable and  collection of
         accounts receivable);

                  (h) make any  material  tax  election  inconsistent  with past
         practice or settle or compromise any material federal,  state, local or
         foreign  tax  liability  or  agree  to an  extension  of a  statute  of
         limitations, except to the extent the amount of any such settlement has
         been reserved for in the financial  statements contained in the Company
         SEC Reports filed prior to the date of this Agreement;

                  (i) pay, discharge or satisfy (including,  without limitation,
         any settlement of a litigation or arbitration) any claims,  liabilities
         or obligations (absolute,  accrued, asserted or unasserted,  contingent
         or  otherwise) in excess of $500,000 in the  aggregate,  other than the
         payment,  discharge or  satisfaction in the ordinary course of business
         and consistent with past practice of liabilities  reflected or reserved
         against  in the  financial  statements  contained  in the  Company  SEC
         Reports  filed prior to the date of this  Agreement  or incurred in the
         ordinary course of business and consistent with past practice,  or make
         payment on any claim,  liability or obligation prior to such time as it
         becomes due and payable under applicable payment terms;


                                      -40-



<PAGE>

                  (j)  except as set  forth in  Section  4.1(j)  of the  Company
         Disclosure  Schedule,   enter  into,  amend  or  modify  any  contract,
         agreement, arrangement or understanding (including, without limitation,
         any  letter of intent or  understanding),  whether  legally  binding or
         non-binding,  transfer  or  license  to or from any person or entity or
         otherwise  enter into or extend the term of any agreement  with respect
         to,  or amend or  modify  in any  material  respect,  any  Intellectual
         Property Rights (including without limitation  distribution rights), or
         enter  into  assignments  of  any  Intellectual   Property  Rights,  or
         commence,  originate  or  undertake  any new  internal  or  third-party
         development  project with respect to any software  title,  except where
         the failure to so commence,  originate or  undertake  such  third-party
         project  would  result  in a  breach  by  the  Company  or  any  of its
         subsidiaries  of its  legal  obligations  existing  on the date of this
         Agreement;

                  (k) enter into,  extend,  modify or amend any forward purchase
         or other hedging  agreements except hedging of foreign  receivables and
         payables  in the  ordinary  course  of  business  consistent  with past
         practice;

                  (l) without consulting with GT prior thereto,  (i) commence or
         institute   any   litigation   (including   without   limitation,   any
         counterclaim)  or  arbitration  or (ii)  settle or agree to settle  any
         claim,  dispute,  litigation or  arbitration on terms which include any
         obligation on the part of the Company or any of its subsidiaries  other
         than the payment of money to the plaintiff;

                  (m)  authorize  or make any  expenditures  with respect to the
         marketing  of  products  (including  without  limitation,  expenditures
         relating to consumer,  trade or in-store  marketing)  other than in the
         ordinary course of business and consistent with past practice;

                  (n)  make  any  sale  of  products  other  than on  terms  and
         conditions  which are in the ordinary course of business and consistent
         with  past  practice  (including  without  limitation,  payment  terms,
         dating, discounts, and return and market development funds policies);

                  (o) extend,  amend, modify, renew or enter into any agreement,
         arrangement  or  understanding  with  respect  to any lease of any real
         property;

                  (p)  except as set  forth in  Section  4.1(p)  of the  Company
         Disclosure   Schedule,   hire,   retain  or  engage  any  employees  or
         consultants, or enter into, amend or modify any agreement,  arrangement
         or  understanding  with  respect  to  employment  of any  employees  or
         consultants;

                  (q) take, or agree in writing or otherwise to take, any of the
         actions  described in Sections  4.1(a) through (p) above, or any action
         which  would  make  any of the  representations  or  warranties  of the
         Company  contained in this Agreement untrue or incorrect or prevent the
         Company  from  performing  or cause  the  Company  not to  perform  its
         covenants hereunder;


                                      -41-



<PAGE>

                  The Company  further  agrees and covenants  that, in the event
that its  subsidiary  referenced  in Section  4.1(t) of the  Company  Disclosure
Schedule (the "Party  Subsidiary")  is entitled to terminate the Agreement  (the
"Sales  Agreement") with the company referenced in Section 4.1(t) of the Company
Disclosure  Schedule  (the  "Contract  Party")  pursuant  to the  terms  of such
agreement  as  furnished  to GT  prior  to the  date  of this  Agreement  and in
accordance with applicable law, it shall immediately notify GT thereof and shall
cause the Party Subsidiary to terminate the Sales Agreement within five business
days after such termination right accrues if GT furnishes an indemnity agreement
reasonably  acceptable to the Company  indemnifying  the Party  Subsidiary,  the
Company and their respective officers, employees and against any losses incurred
by such  persons as a result of claims with  respect to the  termination  of the
Sales Agreement and offers to provide the Company with distribution  services on
substantially  the same terms as the Sales  Agreement.  Upon  request by GT, the
Company  shall  consult with GT in good faith with  respect to the  existence of
such  termination  right.  Following  such  consultation,  in the event  that GT
delivers to the Company a written request for the Company's basis or explanation
for its  determination  that such  termination  right has not then accrued,  the
Company shall provide to GT in writing such basis or explanation,  in reasonable
detail, within five business days of such written request.

                  SECTION 4.2. No  Solicitation.  (a) Subject to Section 4.2(b),
from and after the date of this  Agreement  until the  earlier of the  Effective
Time or termination of this Agreement pursuant to its terms, the Company and its
subsidiaries shall not, and will instruct their respective directors,  officers,
employees,  representatives,  investment bankers,  agents and affiliates not to,
directly  or  indirectly,   (i)  solicit,  initiate  or  encourage  the  making,
submission or announcement of, any Acquisition  Proposal (as defined below) with
respect to the Company or any of its  subsidiaries  by any person (other than GT
and its  affiliates,  agents and  representatives),  or (ii)  participate in any
discussions  or  negotiations  with,  or  disclose  any  non-public  information
concerning  the Company or any of its  subsidiaries  to, or afford any access to
the properties,  books or records of the Company or any of its  subsidiaries to,
or otherwise assist or facilitate,  or enter into any agreement or understanding
with, any person (other than GT and its affiliates, agents and representatives),
in connection with any  Acquisition  Proposal with respect to the Company or any
of its  subsidiaries.  Without  limiting the  generality of the  foregoing,  the
Company  acknowledges  and agrees that any violation of any of the  restrictions
set  forth  in the  preceding  sentence  by  any  director,  officer,  employee,
representative,  investment  banker,  agent or affiliate of the Company shall be
deemed to constitute a breach of this Section 4.2 by the Company.

                  For the purposes of this Agreement,  an "Acquisition Proposal"
with  respect  to an entity  means any  proposal  or offer  relating  to (i) any
merger,  consolidation,  sale of  substantial  assets  or  similar  transactions
involving  the entity or any  subsidiaries  of the entity  (other  than sales or
licenses  of  assets or  inventory  in the  ordinary  course  of  business,  and
transactions  which  are  specifically  exempted  from the  requirement  of a GT
consent or consultation  right pursuant to Section  4.1(c),  (e) or (j) hereof),
(ii) sale of 15% or more of the outstanding shares of any class of capital stock
of the  entity  (including  without  limitation  by way of a tender  offer or an
exchange offer),  (iii) the acquisition by any person of beneficial ownership or
a right to acquire beneficial ownership of, or the formation of any


                                      -42-



<PAGE>

"group" (as defined  under  Section  13(d) of the Exchange Act and the rules and
regulations  thereunder)  which  beneficially  owns, or has the right to acquire
beneficial ownership of, 15% or more of the then outstanding shares of any class
of capital stock of the entity (except for acquisitions  for passive  investment
purposes only in circumstances where the person or group qualifies for and files
a Schedule 13G with respect thereto and is not and does not become  obligated to
file a Schedule  13D); or (iv) any public  announcement  of a proposal,  plan or
intention to do any of the  foregoing  or any  agreement to engage in any of the
foregoing.  The Company will immediately cease any and all existing  activities,
discussions or negotiations with any person conducted heretofore with respect to
any  Acquisition  Proposal.  The  Company  will (i)  notify  GT as  promptly  as
practicable if it receives any proposal,  written  inquiry or written request in
connection with an Acquisition Proposal or potential Acquisition Proposal,  (ii)
as promptly as  practicable  notify GT of the terms and  conditions  of any such
Acquisition Proposal, as well as the identity of the third party submitting such
Acquisition  Proposal,   and  (iii)  keep  GT  apprised  of  any  discussion  or
negotiation with respect to any Acquisition  Proposal.  In addition,  subject to
the other  provisions  of this Section  4.2(a),  from and after the date of this
Agreement  until the  earlier  of the  Effective  Time and  termination  of this
Agreement  pursuant to its terms, the Company and its subsidiaries will not, and
will instruct their respective directors, officers, employees,  representatives,
investment bankers,  agents and affiliates not to, directly or indirectly,  make
or authorize any public statement,  recommendation or solicitation in support of
any Acquisition Proposal made by any person (other than GT); provided,  however,
that nothing herein shall prohibit the Company's  Board of Directors from taking
and disclosing to the Company's shareholders a position with respect to a tender
or  exchange  offer  pursuant  to Rules  14d-9 and 14e-2  promulgated  under the
Exchange Act.

                  (b)  Notwithstanding  anything to the  contrary  contained  in
Section 4.2(a) or elsewhere in this Agreement,  prior to the Effective Time, the
Company may, to the extent the Board of Directors of the Company determines,  in
good faith,  after  consultation with and based upon the advice of outside legal
counsel,  that the Board's fiduciary duties require it to do so,  participate in
discussions or negotiations  with, and,  subject to the  requirements of Section
4.2(c),  furnish  non-public  information,  and afford access to the properties,
books or records of the Company to any person after such person has delivered to
the Company in writing,  an  unsolicited  bona fide  Acquisition  Proposal  with
respect to the Company or any of its subsidiaries (which has not been withdrawn)
which  the  Board  of  Directors  of the  Company  in its  good  faith  judgment
determines,  after  reasonable  inquiry  and  consultation  with an  independent
investment banking firm of national reputation,  including,  without limitation,
Piper Jaffray,  (i) would be reasonably  likely to result in a transaction  more
favorable than the Merger to the  shareholders  of the Company  (which  judgment
must be reasonable) and (ii) that the person making such Acquisition Proposal is
financially  capable  of  consummating  such  Acquisition  Proposal  or that the
financing  necessary to  consummate  such  Acquisition  Proposal,  to the extent
required,  is then  committed or is capable of being  obtained by such person (a
"Superior  Proposal").  In addition,  notwithstanding  the provisions of Section
4.2(a) above or any other  provision of this  Agreement,  in  connection  with a
submitted,  written  bona fide  Acquisition  Proposal or  potential  Acquisition
Proposal (in each case, with respect to the Company or any of its subsidiaries),
the Company may refer any third party to this Section 4.2 or make a copy of this
Section 4.2 available to such third


                                      -43-



<PAGE>

party. In the event the Company receives a Superior Proposal,  nothing contained
in this Agreement (but subject to the terms of this Section 4.2(b)) will prevent
the Board of Directors of the Company from  recommending  such Superior Proposal
to the Company'  shareholders,  if the Board  determines,  in good faith,  after
consultation with and based upon the advice of outside legal counsel,  that such
action is required by its fiduciary duties; in such case, the Board of Directors
of the Company may withdraw,  modify or refrain from making its  recommendations
set forth in Section 5.1, and, to the extent it does so, the Company may refrain
from soliciting  proxies to secure the affirmative  vote of its  shareholders as
contemplated  by Section  5.2;  provided,  however,  that the Company  shall (i)
provide GT at least 48 hours prior notice of any meeting of the Company's  Board
of Directors at which such Board of Directors is reasonably expected to consider
a Superior  Proposal,  and (ii) not  recommend  to its  shareholders  a Superior
Proposal for a period of not less than the greater of two full business days and
48 hours after GT's receipt of a copy of such Superior Proposal and the identity
of the third  party;  and  provided,  further,  that  unless this  Agreement  is
terminated  pursuant to Section 7.1,  nothing  contained in this Section  4.2(b)
shall  limit  the   Company's   obligation  to  hold  and  convene  the  Company
Shareholders'  Meeting (regardless of whether the recommendation of the Board of
Directors of the Company shall have been withdrawn, modified or not yet made) or
to provide the shareholders of the Company with material information relating to
such meeting.

                  (c)  Notwithstanding  anything  to the  contrary  herein,  the
Company will not provide any non-public information to a third party unless: (x)
the Company  provides such  non-public  information  pursuant to a nondisclosure
agreement with terms  regarding the  protection of oral or written  confidential
information  at  least  as  restrictive  as such  terms  in the  confidentiality
agreement heretofore entered into by the Company and GT, dated February 6, 1996,
and the letter from GT to Gilman G. Louie and Stephen M. Race,  dated August 25,
1997  (collectively,  the  "Confidentiality  Letter");  and (y) such  non-public
information has been previously delivered or made available to GT.

                  SECTION  4.3.  Conduct of  Business  by GT Pending the Merger.
During the  period  from the date of this  Agreement  and  continuing  until the
earlier of the termination of this Agreement or the Effective Time, GT covenants
and  agrees  that,  except  as set  forth in  Section  4.3 of the GT  Disclosure
Schedule  or unless the  Company  shall  otherwise  agree in  writing,  GT shall
conduct  its  business,  and  cause the  businesses  of its  subsidiaries  to be
conducted, in the ordinary course of business and consistent with past practice,
other than  actions  taken by GT or its  subsidiaries  in  contemplation  of the
Merger,  and shall not directly or  indirectly  do, or propose to do, any of the
following without the prior written consent of the Company:

                  (a)   amend  or   otherwise   change   GT's   Certificate   of
         Incorporation or By- Laws;

                  (b) acquire or agree to acquire,  by merging or  consolidating
         with, by  purchasing  an equity  interest in or a portion of the assets
         of,  or  by  any  other  manner,   any  business  or  any  corporation,
         partnership,  association  or other business  organization  or division
         thereof, or otherwise acquire or agree to acquire any assets of any


                                      -44-



<PAGE>

         other  person,  which,  in any such  case,  would  materially  delay or
         prevent  the  consummation  of the  transactions  contemplated  by this
         Agreement,  or issue shares of GT Common  Stock  unless such  issuance,
         taken  together  with any sale of GT Common  Stock  subject to a Voting
         Agreement,  would not  result in less  than 50% of the  outstanding  GT
         Common Stock being subject to the voting  obligations  contemplated  by
         the Voting Agreements;

                  (c)  declare,  set aside,  make or pay any  dividend  or other
         distribution  (whether in cash,  stock or  property or any  combination
         thereof) in respect of any of its capital stock; or

                  (d) take or agree in writing or  otherwise  to take any action
         which  would  make  any  of the  representations  or  warranties  of GT
         contained  in this  Agreement  untrue or  incorrect  or prevent GT from
         performing or cause GT not to perform its covenants hereunder.


                                   ARTICLE V 5

                              ADDITIONAL AGREEMENTS


                  SECTION 5.1.  Joint Proxy  Statement/Prospectus;  Registration
Statement.  As promptly as practicable after the execution of this Agreement, GT
will prepare,  with cooperation of the Company, and file with the SEC, the Proxy
Statement and GT will prepare and file with the SEC the  Registration  Statement
in which the Proxy  Statement  will be  included  as a  prospectus.  Each of the
Company and GT will respond to any comments of the SEC, will use its  respective
reasonable best efforts to have the Registration  Statement  declared  effective
under the Securities  Act as promptly as practicable  after such filing and will
cause the Proxy  Statement to be mailed to its  respective  shareholders  at the
earliest  practicable  time. As promptly as  practicable  after the date of this
Agreement,  the Company and GT will prepare and file any other filings  required
under the Exchange Act, the Securities Act or any other Federal, foreign or Blue
Sky laws  relating  to the  Merger  and the  transactions  contemplated  by this
Agreement  (the  "Other  Filings").  Each of the  Company and GT will notify the
other promptly upon the receipt of any comments from the SEC or its staff and of
any  request  by the SEC or its  staff or any  other  government  officials  for
amendments or supplements to the Registration Statement,  the Proxy Statement or
any Other Filing or for  additional  information  and will supply the other with
copies of all correspondence  between such party or any of its  representatives,
on the one hand, and the SEC, or its staff or any other government officials, on
the other hand, with respect to the Registration Statement, the Proxy Statement,
the Merger or any Other Filing. The Proxy Statement,  the Registration Statement
and the Other Filings will comply in all material  respects with all  applicable
requirements  of law and  the  rules  and  regulations  promulgated  thereunder.
Whenever  any event  occurs which is required to be set forth in an amendment or
supplement  to the Proxy  Statement,  the  Registration  Statement  or any Other
Filing, the Company or GT, as the case may be, will promptly inform the other of
such occurrence and


                                      -45-



<PAGE>

cooperate in filing with the SEC or its staff or any other government officials,
and/or  mailing  to  shareholders  of the  Company  and GT,  such  amendment  or
supplement.  The Joint Proxy  Statement/Prospectus  shall  include the unanimous
recommendation  of the Boards of Directors of the Company and GT in favor of the
approval and adoption of this Agreement and the approval of the Merger,  subject
to Section 4.2(b) and the last sentence of Section 5.2 and Section 5.3.

                  SECTION 5.2. Company Shareholders'  Meeting. The Company shall
call and give  notice  of the  Company  Shareholders'  Meeting  as  promptly  as
practicable after the combined proxy and Registration  Statement contemplated by
Section 5.1 is declared effective by the SEC, but in no event later than 10 days
after  the  date of such  effectiveness,  for the  purpose  of  voting  upon the
approval of the Merger, and the Company shall use its reasonable good faith best
efforts to hold the Company  Shareholders'  Meeting as soon as practicable after
the date on which the Registration Statement becomes effective. Unless otherwise
required by the applicable  fiduciary duties of the directors of the Company, as
determined by such directors in good faith,  after  consultation  with and based
upon the advice of outside legal counsel, as contemplated by Section 4.2 hereof,
the Company shall solicit from its shareholders  proxies in favor of approval of
the Merger and approval and adoption of this Agreement, and shall take all other
reasonable  action  necessary  or  advisable  to secure  the vote or  consent of
shareholders in favor of such approval.

                  SECTION 5.3. GT  Shareholders'  Meeting.  GT shall call the GT
Share-holders' Meeting as promptly as practicable for the purpose of voting upon
the approval of the Merger, and GT shall use its reasonable best efforts to hold
the GT Shareholders'  Meeting as soon as practicable after the date on which the
Registration  Statement  becomes  effective.  Unless  otherwise  required by the
applicable  fiduciary  duties  of the  directors  of GT, as  determined  by such
directors in good faith,  after  consultation  with and based upon the advice of
outside legal counsel,  GT shall solicit from its shareholders  proxies in favor
of approval of the Merger and the  issuance of GT Common  Stock and GT Preferred
Stock pursuant thereto,  and approval and adoption of this Agreement,  and shall
take all other  action  necessary  or advisable to secure the vote or consent of
shareholders to obtain such approval.

                  SECTION  5.4.  Access to  Information;  Confidentiality.  Upon
reasonable  notice and  subject to  restrictions  contained  in  confidentiality
agreements  to which  such  party is subject  (from  which such party  shall use
reasonable  efforts to be  released),  the  Company and GT shall each (and shall
cause  each  of  their  subsidiaries  to)  afford  to the  officers,  employees,
accountants,  counsel and other representatives of the other, reasonable access,
during the period prior to the  Effective  Time, to all its  properties,  books,
contracts,  commitments and records and, during such period,  the Company and GT
each shall (and shall cause each of their  subsidiaries  to) furnish promptly to
the other all information  concerning its business,  properties and personnel as
such other party may  reasonably  request,  and each shall make available to the
other the appropriate  individuals  (including attorneys,  accountants and other
professionals) for discussion of the other's business,  properties and personnel
as either GT or the Company may reasonably  request.  Each party shall keep such
information  confidential  in accordance  with the terms of the  Confidentiality
Letter.


                                      -46-



<PAGE>

                  SECTION  5.5.  Consents;  Approvals.  The Company and GT shall
each use  their  reasonable  best  efforts  to  obtain  all  consents,  waivers,
approvals,  authorizations or orders (including,  without limitation, all United
States and foreign  governmental and regulatory rulings and approvals),  and the
Company  and GT shall  make all  filings  (including,  without  limitation,  all
filings with United States and foreign  governmental  or  regulatory  agencies),
required  under  the terms of any  agreement  or by law in  connection  with the
authorization,  execution  and delivery of this  Agreement by the Company and GT
and the  consummation  by  them of the  transactions  contemplated  hereby.  The
Company  and GT shall  furnish  all  information  required to be included in the
Joint Proxy  Statement/Prospectus  and the  Registration  Statement,  or for any
application or other filing to be made pursuant to the rules and  regulations of
any  United  States  or  foreign   governmental  body  in  connection  with  the
transactions contemplated by this Agreement.

                  SECTION 5.6.  Agreements  with Respect to Affiliates.  (a) The
Company  shall  deliver to GT, as promptly  as  practicable  following  the date
hereof,  a letter (the "Affiliate  Letter")  identifying all persons who are, at
the time of the Company Shareholders' Meeting, anticipated to be "affiliates" of
the Company for purposes of Rule 145 under the Securities  Act ("Rule 145"),  or
the rules and regulations of the SEC relating to pooling of interests accounting
treatment for merger  transactions (the "Pooling Rules") . The Company shall use
its  reasonable  best  efforts to cause  each  person  who is  identified  as an
"affiliate" in the Affiliate Letter to deliver to GT, as promptly as practicable
following the date hereof,  a written  agreement (an  "Affiliate  Agreement") in
connection  with  restrictions  on  affiliates  under  Rule 145 and  pooling  of
interests accounting treatment, in the form attached hereto as Exhibit C.

                  (b)  GT  shall   deliver  to  the  Company,   as  promptly  as
practicable  following  the date hereof,  a letter (the "GT  Affiliate  Letter")
identifying  all  persons  who  are  anticipated  to be,  at the  time of the GT
Shareholders' Meeting,  "affiliates" of GT for purposes of the Pooling Rules. GT
shall  use its best  efforts  to  cause  each  person  who is  identified  as an
"affiliate" in the GT Affiliate Letter to deliver to the Company, as promptly as
practicable  following  the date hereof,  a written  agreement (a "GT  Affiliate
Agreement")  in connection  with  restrictions  on  affiliates  under pooling of
interests accounting treatment, in the form attached hereto as Exhibit D.

                  (c) The Company and GT shall use all  commercially  reasonable
efforts to cause the  Voting  Agreements  to be  amended as soon as  practicable
after the date  hereof to  provide  that,  in the case of GT Common  Stock,  the
signatory will not transfer,  sell, exchange,  pledge or otherwise dispose of or
encumber such shares unless (i) the transferee assumes the obligation to vote in
favor of the Merger or (ii) such  transfer,  when taken  together with all other
transfers of GT Common Stock  subject to a Voting  Agreement and issuances of GT
Common  Stock by GT,  would not  result in less than 50% of the  outstanding  GT
Common Stock being subject to the voting obligations  contemplated by the Voting
Agreements,  and, in the case of Company  Common Stock,  that the signatory will
not transfer,  sell,  exchange,  pledge or otherwise  dispose of or encumber any
such shares of Company Common Stock.


                                      -47-



<PAGE>

                  SECTION 5.7.  Indemnification  and Insurance.  (a) The By-Laws
and Certificate of Incorporation of the Surviving  Corporation shall contain the
provisions  with  respect  to  indemnification  set  forth  in the  By-Laws  and
Certificate  of  Incorporation  of the Company,  which  provisions  shall not be
amended,  repealed  or  otherwise  modified  for a period of six years  from the
Effective Time in any manner that would adversely  affect the rights  thereunder
as of  the  Effective  Time  of  individuals  who  at the  Effective  Time  were
directors,   officers,   employees  or  agents  of  the  Company,   unless  such
modification is required after the Effective Time by law.

                  (b) The Surviving  Corporation  shall,  to the fullest  extent
permitted under applicable law or under the Surviving Corporation's  Certificate
of  Incorporation  or By-Laws,  indemnify  and hold  harmless,  each present and
former  director,  officer or employee of the Company or any of its subsidiaries
(collectively,   the  "Indemnified  Parties")  against  any  costs  or  expenses
(including  attorneys'  fees),   judgments,   fines,  losses,  claims,  damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation,  whether civil,  criminal,  administrative or
investigative, (x) arising out of or pertaining to the transactions contemplated
by this  Agreement  or (y)  otherwise  with  respect  to any  acts or  omissions
occurring at or prior to the  Effective  Time, to the same extent as provided in
the Company's Certificate of Incorporation or By-Laws or any applicable contract
or agreement  as in effect on the date hereof,  in each case for a period of six
years  after the date  hereof.  In the event of any such  claim,  action,  suit,
proceeding  or  investigation  (whether  arising  before or after the  Effective
Time), (i) any counsel retained by the Indemnified  Parties for any period after
the  Effective   Time  shall  be  reasonably   satisfactory   to  the  Surviving
Corporation,  (ii) after the Effective Time, the Surviving Corporation shall pay
the  reasonable  fees and expenses of such counsel,  promptly  after  statements
therefor are received, and (iii) the Surviving Corporation will cooperate in the
defense of any such matter;  provided,  however,  that the Surviving Corporation
shall not be liable for any  settlement  effected  without its  written  consent
(which consent shall not be unreasonably withheld); and provided, further, that,
in the event that any claim or claims for  indemnification  are asserted or made
within such six-year  period,  all rights to  indemnification  in respect of any
such claim or claims shall  continue  until the  disposition of any and all such
claims.  The  Indemnified  Parties  as a group may  retain  only one law firm to
represent them in each applicable jurisdiction with respect to any single action
unless there is, under applicable standards of professional  conduct, a conflict
on any  significant  issue between the positions of any two or more  Indemnified
Parties,  in which  case each  Indemnified  Person  with  respect to whom such a
conflict  exists (or group of such  Indemnified  Persons  who among them have no
such conflict) may retain one separate law firm in each applicable jurisdiction.

                  (c) GT and the Surviving  Corporation  shall honor and fulfill
to  the  fullest  extent   permitted  by  applicable  law  the   indemnification
obligations of the Company pursuant to indemnification agreements and employment
agreements (the employee  parties under such agreements being referred to as the
"Officer  Employees") with the Company's  directors and officers  existing at or
before the Effective Time which were provided to GT prior to the date hereof.


                                      -48-



<PAGE>

                  (d) For a period of six years  after the  Effective  Time,  GT
shall cause the  Surviving  Corporation  to maintain  in effect,  if  available,
directors'  and officers'  liability  insurance  covering  those persons who are
currently covered by the Company's  directors' and officers' liability insurance
policy (a copy of which has been made  available to GT) on terms  comparable  to
those now  applicable  to  directors  and  officers  of the  Company;  provided,
however,  that in no event shall GT or the Surviving  Corporation be required to
expend in excess of 150% of the annual premium currently paid by the Company for
such  coverage;  and  provided  further,  that if the premium for such  coverage
exceeds such amount,  GT or the Surviving  Corporation  shall  purchase a policy
with the greatest coverage available for such 150% of the annual premium.

                  (e)   From   and   after   the   Effective   Time,   GT  shall
unconditionally  guarantee  the timely  payment  of all funds  owing by, and the
timely performance of all other obligations of, the Surviving  Corporation under
this Section.

                  (f) This Section shall survive the  consummation of the Merger
at the  Effective  Time,  is  intended  to benefit the  Company,  the  Surviving
Corporation and the Indemnified Parties,  shall be binding on all successors and
assigns of the  Surviving  Corporation  and GT and shall be  enforceable  by the
Indemnified Parties.

                  SECTION  5.8.  Notification  of Certain  Matters.  The Company
shall give prompt  notice to GT, and GT shall give prompt notice to the Company,
after obtaining  knowledge of (i) the occurrence or  nonoccurrence  of any event
the  occurrence  or  nonoccurrence  of  which  would  be  likely  to  cause  any
representation  or warranty  contained in this Agreement to be materially untrue
or inaccurate, or (ii) any failure of the Company, GT or Merger Sub, as the case
may be,  materially  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  shall not limit or
otherwise  affect the remedies  available  hereunder to the party receiving such
notice;  and  provided  further  that  failure to give such notice  shall not be
treated as a breach of covenant  for the  purposes of Sections  6.2(b) or 6.3(b)
unless the failure to give such  notice  results in  material  prejudice  to the
other party.

                  SECTION 5.9. Further Action/Tax  Treatment;  Tax Returns. Upon
the terms and subject to the conditions hereof, each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all actions and to do,
or cause to be  done,  all  other  things  necessary,  proper  or  advisable  to
consummate  and make  effective  as promptly  as  practicable  the  transactions
contemplated  by this  Agreement,  to obtain in a timely  manner  all  necessary
waivers,  consents and approvals and to effect all necessary  registrations  and
filings,  and  otherwise  to satisfy  or cause to be  satisfied  all  conditions
precedent to its obligations under this Agreement.  The foregoing covenant shall
not include  any  obligation  by GT or the Company to agree to divest,  abandon,
license  or  take  similar  action  with  respect  to any  assets  (tangible  or
intangible)  of GT or the Company.  Each of GT, Merger Sub and the Company shall
use its  reasonable  best  efforts to cause the Merger to qualify,  and will not
(both before and after consummation of the Merger) take any actions which to its
knowledge could


                                      -49-



<PAGE>

reasonably   be  expected  to  prevent   the  Merger  from   qualifying,   as  a
reorganization under the provisions of Section 368(a) of the Code.

                  In the event of the  issuance of final or  temporary  Treasury
regulations  relating  to  the  continuity  of  shareholder  interest  (proposed
regulations  on the topic were  issued in the Federal  Register on December  23,
1996  (Reg-252231-96);  these regulations  would,  among other things, add a new
section  1.368-1(e)  to existing  regulations),  the parties  agree to use their
reasonable  best efforts to take  advantage of, and comply with,  any provisions
therein  (such as an  election  and/or  reporting  requirements)  to the  extent
necessary to cause such regulations to apply to the Merger.

                  The Company will be responsible for the preparation and filing
of all Tax Returns for the  Company and its  subsidiaries  which are due (taking
into account proper extensions) on or before the Effective Time. With respect to
any material Tax Returns of Company or its  subsidiaries  that are due after the
date of this  Agreement  that Company is  responsible  for preparing  under this
section,  the Company shall provide GT with a reasonable  opportunity  to review
and comment on such Tax Returns prior to their filing.  The Company and GT agree
to consult and  attempt to resolve in good faith any issues  arising as a result
of GT's review of such Tax Returns.  In the event that the Company and GT cannot
resolve such issues,  they shall mutually select an independent  accounting firm
to resolve such  dispute.  The Company  shall not amend any material Tax Returns
without the consent of GT (which consent shall not be unreasonably withheld).

                  SECTION 5.10. Public  Announcements.  GT and the Company shall
consult  with each other  before  issuing any press  release with respect to the
Merger or this  Agreement and shall not issue any such press release or make any
such public statement without the prior consent of the other party,  which shall
not be unreasonably withheld;  provided,  however, that a party may, without the
prior  consent of the other party,  issue such press release or make such public
statement  as may upon the advice of counsel be required by law or the rules and
regulations of Nasdaq, if it has used all reasonable efforts to consult with the
other party.

                  SECTION  5.11.  Listing  of GT  Shares.  GT shall use its best
efforts to cause the shares of GT Common  Stock to be issued in the Merger to be
listed, upon official notice of issuance, on Nasdaq prior to the Effective Time.

                  SECTION  5.12.  Conveyance  Taxes.  GT and the  Company  shall
cooperate   in  the   preparation,   execution   and  filing  of  all   returns,
questionnaires,  applications,  or other  documents  regarding any real property
transfer or gains,  sales, use, transfer,  value added, stock transfer and stamp
taxes,  any transfer,  recording,  registration  and other fees, and any similar
taxes which become  payable in  connection  with the  transactions  contemplated
hereby that are  required or  permitted  to be filed on or before the  Effective
Time and the Surviving  Corporation  shall be responsible for the payment of all
such taxes and fees.

                  SECTION 5.13.  Accountant's  Letters.  Upon reasonable  notice
from the  other,  the  Company  shall use its best  efforts  to cause  Coopers &
Lybrand LLP to deliver to


                                                      -50-



<PAGE>

GT, and GT shall use its best efforts to cause Arthur Andersen LLP to deliver to
the  Company,  a letter  covering  such  matters as are  requested  by GT or the
Company,  as the case may be, and as are  customarily  addressed in accountant's
"comfort" letters.

                  SECTION 5.14. Pooling Accounting Treatment. GT and the Company
each agrees not to take any action,  and will not permit any of their respective
subsidiaries to take any action,  that would reasonably be expected to adversely
affect the ability of GT to account for the business  combination to be effected
by the Merger as a pooling of interests.  GT and the Company each agrees to take
such  action as may be  reasonably  required  to negate  the  impact of any past
actions by GT, the Company or their respective affiliates which would reasonably
be  expected  to  adversely  impact  the  ability of GT to treat the Merger as a
pooling  of  interests  provided,  that in no event  shall GT or the  Company be
required  by this  Section  5.14 to take  any  action  which  would  necessitate
material  expenditure  by, or cause a material  detriment  to, such  party.  The
taking by GT or the Company of any action  prohibited  by the first  sentence of
this  Section  5.14,  or the  failure  of GT or the  Company  to take any action
required by the previous sentence, if the Merger is not able to be accounted for
as a pooling  of  interests  because of such  action or failure to take  action,
shall  constitute  a breach of this  Agreement by such party for the purposes of
Section 7.1(j).

                  SECTION 5.15. Rights  Agreement.  Prior to the Effective Time,
the Company shall take all  necessary  action to (i) render rights (the "Company
Rights") issued pursuant to the Rights  Agreement by and between the Company and
Chemical  Mellon  Shareholder  Services,  L.L.C.,  as Rights Agent (the "Company
Rights Agreement"), inapplicable to the Merger, and (ii) ensure that (x) neither
GT nor any of its Affiliates (as defined in the Company Rights  Agreement) is an
Acquiring Person (as defined in the Company Rights  Agreement)  solely by reason
of the approval,  execution or delivery of this Agreement or the announcement or
consummation  of the  Merger,  (y)  no  Distribution  Date,  Section  13  Event,
Triggering  Event or Shares  Acquisition  Date (each as  defined in the  Company
Rights  Agreement)  shall occur solely by reason of the  approval,  execution or
delivery of this Agreement,  or the  announcement or consummation of the Merger,
and (z) the right to buy Company Common Stock  pursuant to Section  11(a)(ii) of
the Company Rights  Agreement  shall not arise solely by reason of the approval,
execution or delivery of this Agreement,  or the announcement or consummation of
the Merger.

                  SECTION  5.16.  Election  to GT  Board.  Effective  as of  the
Effective  Time,  GT shall  increase  the size of its Board of  Directors by two
directors and shall cause Gilman G. Louie and a director mutually  acceptable to
GT and the  Company  to be  appointed  to fill  the  vacancies  created  by such
increase for an initial term consisting of the remainder of the full term of the
class of directors in which each new directorship was created.

                  SECTION 5.17. Stock Option Repurchase Rights. At the Effective
Time,  any rights of the Company to  repurchase  shares of Company  Common Stock
issued pursuant to the exercise of Stock Options granted under the Company Stock
Option Plans shall be assigned to GT and shall  thereafter be  exercisable by GT
on the terms and conditions specified in the instruments evidencing such rights.


                                      -51-



<PAGE>

                  SECTION 5.18. Regulatory Filings;  Reasonable Efforts. As soon
as may be  reasonably  practicable,  GT and the Company each shall file with the
United States Federal Trade Commission (the "FTC") and the Antitrust Division of
the United States  Department of Justice ("DOJ")  Notification  and Report Forms
relating to the transactions  contemplated herein as required by the HSR Act, as
well  as  comparable  pre-merger  notification  forms  required  by  the  merger
notification or control laws and regulations of any applicable jurisdiction,  as
agreed to by the parties.  GT and the Company each shall promptly (a) supply the
other with any  information  which may be required in order to  effectuate  such
filings  and (b) supply  any  additional  information  which  reasonably  may be
required by the FTC, the DOJ or the competition or merger control authorities of
any other jurisdiction and which the parties may reasonably deem appropriate.


                                  ARTICLE VI 6

                            CONDITIONS TO THE MERGER

                  SECTION 6.1.  Conditions to Obligation of Each Party to Effect
the Merger. The respective  obligations of each party to effect the Merger shall
be  subject  to the  satisfaction  at or  prior  to the  Effective  Time  of the
following conditions:

                  (a)   Effectiveness   of  the  Registration   Statement.   The
         Registration  Statement  shall have been declared  effective by the SEC
         under the Securities Act. No stop order suspending the effectiveness of
         the  Registration  Statement  shall have been  issued by the SEC and no
         proceedings  for that purpose and no similar  proceeding  in respect of
         the Joint  Proxy  Statement/Prospectus  shall  have been  initiated  or
         threatened by the SEC;

                  (b) Shareholder Approval.  This Agreement and the Merger shall
         have  been  approved  and  adopted  by  the   requisite   vote  of  the
         shareholders  of the Company,  and this  Agreement,  the Merger and the
         issuance  of GT  Common  Stock  and GT  Preferred  Stock in  connection
         therewith,  shall  have  been  approved  by the  requisite  vote of the
         shareholders of GT;

                  (c)  Listing.  The shares of GT Common  Stock  issuable in the
         Merger shall have been  authorized  for listing on Nasdaq upon official
         notice of issuance;

                  (d)  HSR  Act.   All  waiting   periods   applicable   to  the
         consummation of the Merger under the HSR Act shall have expired or been
         terminated;

                  (e)   Governmental   Actions.   There   shall  not  have  been
         instituted,  pending or  threatened in writing any action or proceeding
         by any  governmental  authority  or  administrative  agency  before any
         governmental  authority,  administrative  agency or court of  competent
         jurisdiction,  domestic  or  foreign,  nor shall there be in effect any
         judgment, decree or order of any governmental authority, administrative
         agency or court of competent jurisdiction, or any other legal restraint
         (i) preventing or seeking


                                      -52-



<PAGE>

         to prevent  consummation of the Merger,  (ii) prohibiting or seeking to
         prohibit  or  limiting  or seeking  to limit,  GT from  exercising  all
         material  rights and  privileges  pertaining  to its  ownership  of the
         Surviving Corporation or the ownership or operation by GT or any of its
         subsidiaries of all or a material  portion of the business or assets of
         GT or any of its subsidiaries, or (iii) compelling or seeking to compel
         GT or any of its subsidiaries to dispose of or hold separate all or any
         material  portion  of  the  business  or  assets  of GT or  any  of its
         subsidiaries    (including   the   Surviving    Corporation   and   its
         subsidiaries),   as  a  result  of  the  Merger  or  the   transactions
         contemplated by this Agreement;

                  (f) Illegality. No statute, rule, regulation or order shall be
         enacted,  entered,  enforced or deemed  applicable  to the Merger which
         makes the consummation of the Merger illegal;

                  (g) Tax  Opinions.  The Company  shall have received a written
         opinion of its counsel,  Wilson Sonsini Goodrich & Rosati, P.C., and GT
         shall have received a written  opinion of its counsel,  Kramer,  Levin,
         Naftalis & Frankel,  in form and substance  reasonably  satisfactory to
         each  of  them  to  the  effect  that  the  Merger  will  constitute  a
         reorganization  within  the  meaning  of  Section  368(a)  of the Code;
         provided, however, that if the counsel to either the Company or GT does
         not render such opinion,  this  condition  shall  nonetheless be deemed
         satisfied  with respect to such party if counsel to the other party set
         forth in this Section 6.1(g)  renders such opinion to such party.  Each
         party agrees to make all  reasonable  representations  and covenants in
         connection with the rendering of such opinions.

                  SECTION 6.2.  Additional  Conditions to  Obligations of GT and
Merger Sub. The  obligations  of GT and Merger Sub to effect the Merger are also
subject to the following conditions:

                  (a)  Representations  and Warranties.  The representations and
         warranties of the Company contained in this Agreement shall be true and
         correct in all respects on and as of the Effective Time, except for (i)
         changes contemplated by this Agreement,  (ii) those representations and
         warranties  which address  matters only as of a particular  date (which
         shall have been true and  correct  as of such  date,  subject to clause
         (iii)) (it being  understood  that,  for the  purposes  of  determining
         whether such  representations  and  warranties  made as of a particular
         date have been true and  correct,  any  inaccuracies  therein that have
         been cured shall be  disregarded),  or (iii) in such cases,  other than
         the  representations  and  warranties  in  Sections  2.3,  2.4 and 2.26
         hereof,  where the failure to be true and correct could not  reasonably
         be expected to have a Material Adverse Effect,  with the same force and
         effect as if made on and as of the  Effective  Time,  and GT and Merger
         Sub shall have  received a  certificate  to such  effect  signed by the
         Chief Executive 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,


                                      -53-



<PAGE>

         and GT and Merger Sub shall have received a certificate  to such effect
         signed by the Chief Executive Officer of the Company;

                  (c)  Consents  Obtained.   All  material  consents,   waivers,
         approvals,  authorizations  or orders required to be obtained,  and all
         filings  required to be made,  by the  Company  for the  authorization,
         execution and delivery of this Agreement, the consummation by it of the
         transactions  contemplated  hereby  or  necessary  to  provide  for the
         continuation  in full force and effect of any and all of the  Company's
         material rights, contracts,  instruments and agreements shall have been
         obtained and made by the  Company,  except where the failure to receive
         such consents, etc. could not reasonably be expected to have a Material
         Adverse Effect on the Company or GT;

                  (d)  Opinion  of  Accountants.  GT shall  have  received  from
         Coopers & Lybrand LLP,  independent auditors for the Company, a copy of
         a letter  addressed to the Company dated the Closing Date, in substance
         reasonably   satisfactory  to  GT  (and  which  may  contain  customary
         qualifications  and assumptions),  to the effect that Coopers & Lybrand
         LLP concurs with the Company management's conclusion that no conditions
         exist related to the Company that would preclude GT from accounting for
         the Merger as a pooling of  interests;  and GT shall have received from
         Arthur  Andersen LLP, the  independent  auditors for GT, a letter dated
         the Closing Date, in substance reasonably satisfactory to GT (which may
         contain customary qualifications and assumptions and which may be based
         in part on the letter  referred to above from Coopers & Lybrand LLP) to
         the effect  that  Arthur  Andersen  LLP  concurs  with GT  management's
         conclusion  that,  as of that  date,  no  conditions  exist  that would
         preclude GT from  accounting  for the Merger as a pooling of interests;
         and

                  (e)  Affiliate  Agreements.  GT shall have  received from each
         person who is identified in the Affiliate  Letter as an  "affiliate" of
         the Company, an Affiliate Agreement, and such Affiliate Agreement shall
         be in full force and effect.

                  SECTION  6.3.  Additional  Conditions  to  Obligation  of  the
Company.  The  obligation of the Company to effect the Merger is also subject to
the following conditions:

                  (a)  Representations  and Warranties.  The representations and
         warranties  of GT and Merger Sub contained in this  Agreement  shall be
         true and  correct  in all  respects  on and as of the  Effective  Time,
         except  for (i)  changes  contemplated  by this  Agreement,  (ii) those
         representations  and  warranties  which  address  matters  only as of a
         particular  date  (which  shall  have been true and  correct as of such
         date,  subject to clause  (iii))  (it being  understood  that,  for the
         purposes of  determining  whether such  representations  and warranties
         made  as  of  a  particular  date  have  been  true  and  correct,  any
         inaccuracies  therein  that have been cured shall be  disregarded);  or
         (iii) in such  cases,  other than the  representations  and  warranties
         contained in Sections 3.3 and 3.4 hereof,  where the failure to be true
         and correct could not reasonably be expected to have a Material Adverse
         Effect,  with the same  force  and  effect  as if made on and as of the
         Effective  Time,  and the Company shall have received a certificate  to
         such effect signed by the Chief Operating Officer of GT;


                                      -54-



<PAGE>

                  (b)  Agreements  and  Covenants.  GT 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 the Chief  Operating
         Officer of GT;


                  (c) Opinion of  Accountants.  The Company  shall have received
         from Coopers & Lybrand  LLP,  independent  auditors for the Company,  a
         letter   dated  the  Closing   Date   (which  may   contain   customary
         qualifications  and assumptions),  to the effect that Coopers & Lybrand
         LLP concurs with the Company management's conclusion that no conditions
         exist related to the Company that would preclude GT from accounting for
         the  Merger as a pooling  of  interests;  and the  Company  shall  have
         received from Arthur Andersen LLP, the  independent  auditors for GT, a
         copy of a letter  addressed to GT dated the Closing  Date, in substance
         reasonably satisfactory to the Company (and which may contain customary
         qualifications  and  assumptions  and which may be based in part on the
         letter  referred to above from  Coopers & Lybrand  LLP),  to the effect
         that Arthur Andersen LLP concurs with GT  management's  conclusion that
         as of that  date,  no  conditions  exist that  would  preclude  GT from
         accounting for the Merger as a pooling of interests;

                  (d)  Consents  Obtained.   All  material  consents,   waivers,
         approvals,  authorizations  or orders required to be obtained,  and all
         filings required to be made, by GT or Merger Sub for the authorization,
         execution and delivery of this Agreement,  the  consummation by them of
         the  transactions  contemplated  hereby or necessary to provide for the
         continuation  in full force and effect of any and all of GT's  material
         rights, contracts,  instruments and agreements shall have been obtained
         and made by GT or Merger Sub,  except where the failure to receive such
         consents,  etc.  could not  reasonably  be  expected to have a Material
         Adverse Effect on the Company or GT; and

                  (e) Affiliate Agreements. The Company shall have received from
         each person who is identified in the Affiliate Letter as an "affiliate"
         of GT, an Affiliate Agreement, and such Affiliate Agreement shall be in
         full force and effect.


                                  ARTICLE VII 7

                                   TERMINATION


                  SECTION 7.1. Termination.  This Agreement may be terminated at
any time prior to the Effective Time,  notwithstanding  approval  thereof by the
shareholders of the Company or GT:


                                      -55-



<PAGE>

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

                  (b) by either GT or the  Company if the Merger  shall not have
         been  consummated  by March 31, 1998 (the "Final Date")  (provided that
         the right to terminate this  Agreement  under this Section 7.1(b) shall
         not be available to any party whose  failure to fulfill any  obligation
         under this Agreement has been the principal cause of or resulted in the
         failure of the Merger to occur on or before such date); or

                  (c) by  either  GT or the  Company  if a  court  of  competent
         jurisdiction or governmental,  regulatory or  administrative  agency or
         commission  shall have issued a  nonappealable  final order,  decree or
         ruling or taken any  other  action  having  the  effect of  permanently
         restraining, enjoining or otherwise prohibiting the Merger; or

                  (d) by GT if the  requisite  vote of the  shareholders  of the
         Company  shall not have been  obtained  by March  31,  1998,  or if the
         shareholders of the Company shall not have approved the Merger and this
         Agreement at the Company Shareholders' Meeting or at any adjournment or
         postponement thereof; or

                  (e) by either GT or the Company,  if the requisite vote of the
         shareholders  of GT shall not have been  obtained by March 31, 1998, or
         if the  shareholders  of GT shall not have  approved  the Merger,  this
         Agreement and the issuance of GT Common Stock and GT Preferred Stock in
         connection  therewith,  at  the  GT  Shareholders'  Meeting  or at  any
         adjournment or postponement thereof; or

                  (f) by GT, if (i) the Board of Directors of the Company  shall
         withdraw,  modify or change its unanimous approval or recommendation of
         this  Agreement or the Merger in a manner  adverse to GT or Merger Sub,
         or the  Company  shall  have  failed  to  include  in the  Joint  Proxy
         Statement/Prospectus  the  unanimous  recommendation  of the  Board  of
         Directors  of the  Company in favor of the  approval  of the Merger and
         this  Agreement;  (ii) the Board of Directors of the Company  shall not
         have called and given  notice of the Company  Shareholders'  Meeting by
         the  later  of (a)  November  15,  1997  and  (b)  10  days  after  the
         Registration  Statement has been declared  effective by the SEC;  (iii)
         the Board of Directors  of the Company  shall have  recommended  to the
         shareholders of the Company a Superior  Proposal,  or the Company shall
         have executed a letter of intent or similar  document with respect to a
         Superior  Proposal;  (iv) a tender  offer or exchange  offer for 15% or
         more of the  outstanding  shares of Company  Common  Stock is commenced
         (other than by GT or an affiliate of GT) and the Company shall not have
         sent  to  its   shareholders,   within  ten  business  days  after  the
         commencement  of such tender or exchange  offer,  a statement  that the
         Board of Directors of the Company  recommends  rejection of such tender
         or exchange offer; (v) an Acquisition  Proposal (other than a tender or
         exchange  offer  covered by clause (iv) of this  Section  7.1(f))  with
         respect to the Company or any of its subsidiaries is publicly announced
         and,  upon GT's  request,  the Company  fails to issue a press  release
         announcing  its  opposition  to such  Acquisition  Proposal  within ten
         business days after such request; or (vi) the Board of Directors of the
         Company shall


                                      -56-



<PAGE>

         have resolved to take any action  described in clauses (i) and (iii) of
         this Section 7.1(f); or

                  (g) by the  Company,  if (i) the  Board  of  Directors  of the
         Company shall withdraw, modify or change its approval of this Agreement
         or the  Merger in a manner  adverse  to GT or Merger  Sub or shall have
         resolved to do so, in each case in  compliance  with the  provisions of
         Section 4.2, and (ii) the Company  shall have paid the Fee and Expenses
         (as each such term is  defined  in  Section  7.3)  pursuant  to Section
         7.3(b)(iv); or

                  (h) by GT, if any  representation  or  warranty of the Company
         set forth in this  Agreement  shall be untrue when made,  such that the
         condition  set  forth in  Section  6.2(a)  would  not be  satisfied  (a
         "Company  Terminating  Misrepresentation"),  or by the Company,  if any
         representation  or  warranty  of GT or  Merger  Sub set  forth  in this
         Agreement  shall be untrue when made such that the  condition set forth
         in  Section   6.3(a)  would  not  be   satisfied  (a  "GT   Terminating
         Misrepresentation,"   and   together   with   a   Company   Terminating
         Misrepresentation, a "Terminating Misrepresentation");  provided, that,
         if such  Terminating  Misrepresentation  is curable  prior to March 31,
         1998 by the Company or GT, as the case may be,  through the exercise of
         its  reasonable  best  efforts and for so long as the Company or GT, as
         the case may be,  continues to exercise such  reasonable  best efforts,
         neither GT nor the Company,  respectively, may terminate this Agreement
         under this Section 7.1(h); or

                  (i) by GT, if any  representation  or  warranty of the Company
         shall have become  untrue such that the  condition set forth in Section
         6.2(a) would not be satisfied (a "Company Terminating  Change"),  or by
         the Company,  if any representation or warranty of GT shall have become
         untrue such that the condition set forth in Section 6.3(a) would not be
         satisfied  (a "GT  Terminating  Change"  and  together  with a  Company
         Terminating Change, a "Terminating  Change"), in either case other than
         by reason of a Terminating Breach (as hereinafter defined) by the party
         seeking  termination;  provided that if any such Terminating  Change is
         curable  prior to March 31,  1998 by the Company or GT, as the case may
         be,  through the exercise of its  reasonable  best efforts,  and for so
         long as the  Company or GT, as the case may be,  continues  to exercise
         such reasonable best efforts, neither GT nor the Company, respectively,
         may terminate this Agreement under this Section 7.1(i); or

                  (j) by GT or the  Company,  upon a breach of any  covenant  or
         agreement on the part of the Company or GT, respectively,  set forth in
         this  Agreement,  such that the conditions set forth in Sections 6.2(b)
         or 6.3(b),  as the case may be, would not be satisfied (a  "Terminating
         Breach");  provided,  that, if such Terminating Breach is curable prior
         to March 31, 1998 by the Company or GT, as the case may be, through the
         exercise of its reasonable  best efforts and for so long as the Company
         or GT, as the case may be,  continues to exercise such  reasonable best
         efforts, neither GT nor the Company,  respectively,  may terminate this
         Agreement under this Section 7.1(j).


                                      -57-



<PAGE>

                  (k) by GT or the  Company,  if the  Average  Stock  Price  (as
         defined  below) is less than  $8.225  (as  adjusted  for stock  splits,
         recapitalizations,  stock dividends and the like). For purposes of this
         Agreement:

                           "Average  Stock Price" means the average of the Daily
         Per Share  Prices (as defined  below) for the thirty  (30)  consecutive
         trading  days  ending on the  third  trading  day prior to the  Company
         Shareholders' Meeting; and

                           "Daily Per Share Price" for any trading day means the
         per share  closing sale price of GT Common  Stock,  as quoted on Nasdaq
         and reported in the Wall Street Journal, for that day.

                  (l) by GT, if Section  2115 of the CCL  applies to the Company
         and one or  more  of the  shareholders  of the  Company  who own in the
         aggregate at least five percent (5%) of the outstanding  Company Common
         Stock  as of the  date of this  Agreement  exercise  or  perfect  their
         dissenters' rights.

                  SECTION  7.2  Effect  of  Termination.  In  the  event  of the
termination  of this  Agreement  pursuant to Section 7.1, this  Agreement  shall
forthwith  become void and there shall be no  liability on the part of any party
hereto or any of its affiliates,  directors, officers or shareholders except (i)
as set forth in this Section 7.2,  Section 7.3 and Section 8.1 hereof,  and (ii)
nothing  herein shall  relieve any party from  liability for willful or material
breach of this Agreement.

                  SECTION 7.3 Fees and Expenses. (a) Except as set forth in this
Section 7.3, all fees and expenses  incurred in connection  with this  Agreement
and the  transactions  contemplated  hereby shall be paid by the party incurring
such expenses, whether or not the Merger is consummated; provided, however, that
GT and the Company shall share equally all SEC filing fees and printing expenses
incurred  in  connection  with  the  printing  and  filing  of the  Joint  Proxy
Statement/Prospectus   and  the  Registration   Statement  (including  financial
statements and exhibits) and any amendments or supplements thereto.

                  (b) The Company shall pay GT a fee of $8,000,000  (the "Fee"),
plus GT's actual,  documented and reasonable  out-of-pocket expenses relating to
the transactions  contemplated by this Agreement  (including but not limited to,
fees and expenses of counsel,  accountants and financial advisors) ("Expenses"),
but in no event shall such Expenses exceed  $1,500,000,  if any of the following
events  occurs;  provided that no Fee or Expenses  shall be payable  pursuant to
this Section  7.3(b) if this Agreement has been  previously  terminated and such
previous  termination  did not  entitle  GT to  receive a Fee  pursuant  to this
Section 7.3(b):

                           (i) the  termination of this Agreement by the Company
                  pursuant  to  7.1(b),  if  prior  to the  Final  Date  (x) the
                  necessary  HSR  approvals  shall have been  obtained and (y) a
                  third  party  shall  have  proposed,  or it  shall  have  been
                  publicly  disclosed that a third party intends to propose,  an
                  Acquisition Proposal with respect to the Company or any of its
                  subsidiaries  and within 12 months  following such Final Date,
                  the Company shall enter into an agreement


                                      -58-



<PAGE>

                  with a third party with respect to a Company  Acquisition  (as
                  defined below); or

                           (ii) the termination of this Agreement by GT pursuant
                  to Section 7.1(d) as a result (x) of the failure to obtain the
                  requisite vote of the shareholders of the Company by the Final
                  Date if the  Company  is in breach  of any of its  obligations
                  under  Section  5.2 or (y) if there  shall  have  occurred  an
                  Acquisition Proposal with respect to the Company or any of its
                  subsidiaries  which shall have been publicly disclosed and not
                  withdrawn,  the failure of the  shareholders of the Company to
                  approve  the  Merger  and  this   Agreement   at  the  Company
                  Shareholders' Meeting; or

                           (iii)  the   termination  of  this  Agreement  by  GT
                  pursuant to Section 7.1(f); or

                           (iv) the termination of this Agreement by the Company
                  pursuant to Section 7.1(g).

                  For  purposes  of  this  Section  7.3(b),  the  term  "Company
Acquisition"  shall mean any of the following  transactions or series of related
transactions:  (i) a merger, consolidation or business combination involving the
Company   pursuant  to  which  the   shareholders  of  the  Company   (excluding
shareholders  participating  or involved in any such  transactions  or series of
related  transactions  or  any  affiliates  of  such  shareholders)  immediately
preceding such transaction or series of related  transactions hold less than 70%
of the equity interests in the surviving or resulting entity of such transaction
or transactions; (ii) a sale by the Company or any of its subsidiaries of assets
(excluding  assets sold in the ordinary course of business) having a fair market
value in excess of 30% of the fair market value of all the assets of the Company
and its subsidiaries  immediately  prior to such sale; (iii) a sale and issuance
by the  Company of shares of capital  stock of the  Company  which  would,  upon
issuance, represent 30% or more of the outstanding capital stock of the Company,
other than in an underwritten public offering or underwritten private placement;
or (iv) the  acquisition  by any person or group  (including  by way of a tender
offer or an  exchange  offer)  of  beneficial  ownership  or a right to  acquire
beneficial  ownership of 30% of more of the then  outstanding  shares of capital
stock of the Company.

                  (c)  The  Fees  and  Expenses   payable  pursuant  to  Section
7.3(b)(i)  shall be paid within one business  day  following  consummation  of a
Company  Acquisition.  The Fees  and  Expenses  payable  pursuant  to any  other
subsection  of Section  7.3(b)  shall be paid  within one  business  day after a
demand for payment  following the first to occur of any of the events  described
in  Section  7.3(b)(ii),  (iii) and (iv);  provided,  that  notwithstanding  the
foregoing, the Fees and Expenses payable pursuant to Section 7.3(b)(iv) shall be
paid  prior to or  simultaneously  with the  termination  of this  Agreement  as
provided  in  Section  7.1(g);  provided,  further,  that in no event  shall the
Company be required to pay such Fees and Expenses to GT, if,  immediately  prior
to  the  termination  of  this  Agreement,  GT  was in  material  breach  of its
obligations under this Agreement. The payment of such Fees and


                                      -59-



<PAGE>

Expenses  (or Expenses  under  Section  7.3(d))  shall not be in lieu of damages
incurred in the event of a breach of this Agreement.

                  (d) Upon  termination  of this  Agreement  pursuant to Section
7.1(j) by the Company or GT ("Terminating  Party"), then within one business day
after a demand for payment by the Terminating  Party, GT or the Company,  as the
case may be,  shall pay the  Expenses  of the  Terminating  Party (not to exceed
$1,500,000).


                                 ARTICLE VIII 8

                               GENERAL PROVISIONS


                  SECTION 8.1. Effectiveness of Representations,  Warranties and
Agreements;  Knowledge,  Etc. (a) Except as  otherwise  provided in this Section
8.1, the  representations,  warranties and agreements of each party hereto shall
remain  operative and in full force and effect  regardless of any  investigation
made by or on behalf of any other party hereto,  any person controlling any such
party or any of their  officers  or  directors,  whether  prior to or after  the
execution of this Agreement.  The representations,  warranties and agreements in
this Agreement  shall terminate at the Effective Time or upon the termination of
this  Agreement  pursuant to Section  7.1,  as the case may be,  except that the
agreements set forth in Section 7.3 shall survive  termination  indefinitely and
nothing  herein shall  relieve any party from  liability for willful or material
breach of this Agreement.  The Confidentiality  Letter shall survive termination
of this Agreement as provided therein.

                  (b) Any disclosure made with reference to one or more Sections
of the Company  Disclosure  Schedule or GT Disclosure  Schedule  shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably  apparent.  Disclosure of
any matter in the  Company  Disclosure  Schedule or the GT  Disclosure  Schedule
shall not be deemed an admission that such matter is material.

                  SECTION  8.2.  Notices.  All notices and other  communications
given or made  pursuant  hereto  shall be in writing and shall be deemed to have
been duly given or made if and when delivered personally or by overnight courier
to the parties at the following  addresses or sent by  electronic  transmission,
with confirmation  received, to the telecopy numbers specified below (or at such
other  address  or  telecopy  number for a party as shall be  specified  by like
notice):


                                      -60-



<PAGE>

                  (a)      If to GT or Merger Sub:

                           GT Interactive Software Corp.
                           16 East 40th Street
                           New York, NY  10016
                           Telecopier No.:  (212) 679-3064
                           Telephone No.:  (212) 726-6508
                           Attention:  President

                  With a copy to:

                      Kramer, Levin, Naftalis & Frankel
                      919 Third Avenue
                      New York, NY  10022
                      Telecopier No.:  (212) 715-8000
                      Telephone No.:  (212) 715-9100
                      Attention:  David P. Levin, Esq.
                                  Monica C. Lord, Esq.

                  (b) If to the Company:

                      MicroProse, Inc.
                      2490 Mariner Square Loop
                      Alameda, CA  94501
                      Telecopier No.:  (510) 522-9305
                      Telephone No.:  (510) 814-6408
                      Attention:  Chief Executive Officer

                  With a copy to:

                     Wilson Sonsini Goodrich & Rosati, Professional Corporation
                     650 Page Mill Road
                     Palo Alto, CA  94304
                     Telecopier No.:   (650) 493-6811
                     Telephone No.:  (650) 493-9300
                     Attention: Larry Sonsini, Esq.
                                        David C. Drummond, Esq.

                  SECTION  8.3.  Certain  Definitions.   For  purposes  of  this
Agreement, the term:

                  (a)  "affiliates"  means a person that directly or indirectly,
         through one or more intermediaries,  controls,  is controlled by, or is
         under common  control  with,  the first  mentioned  person;  including,
         without  limitation,  any  partnership  or joint  venture  in which the
         Company   (either  alone,   or  through  or  together  with  any  other
         subsidiary) has, directly or indirectly, an interest of 5% or more;


                                      -61-



<PAGE>

                  (b)  "beneficial  owner" with respect to any shares of Company
         Common  Stock  means a person who shall be deemed to be the  beneficial
         owner of such shares (i) which such person or any of its  affiliates or
         associates  (as such term is defined in Rule 12b-2 of the Exchange Act)
         has,  directly or  indirectly,  (A) the right to acquire  (whether such
         right is  exercisable  immediately  or subject  only to the  passage of
         time), pursuant to any agreement,  arrangement or understanding or upon
         the exercise of  consideration  rights,  exchange  rights,  warrants or
         options,  or  otherwise,  or (B)  the  right  to vote  pursuant  to any
         agreement, arrangement or understanding, or (ii) which are beneficially
         owned,  directly or  indirectly,  by any other  persons  with whom such
         person  or any of its  affiliates  or  associates  has  any  agreement,
         arrangement  or  understanding  for the purpose of acquiring,  holding,
         voting or disposing of any shares;

                  (c)  "business  day"  means any day other  than a day on which
         banks in New York are required or authorized to be closed;

                  (d) "control"  (including the terms "controlled by" and "under
         common control with") means the  possession,  directly or indirectly or
         as trustee or executor,  of the power to direct or cause the  direction
         of  the  management  or  policies  of a  person,  whether  through  the
         ownership  of stock,  as trustee or  executor,  by  contract  or credit
         arrangement or otherwise;

                  (e) "person"  means an individual,  corporation,  partnership,
         association, trust, unincorporated organization,  other entity or group
         (as defined in Section 13(d)(3) of the Exchange Act); and

                  (f)  "subsidiary"  or  "subsidiaries"  of  the  Company,   the
         Surviving  Corporation,  GT or any other person means any  corporation,
         partnership,  joint venture or other legal entity of which the Company,
         the Surviving Corporation,  GT or such other person, as the case may be
         (either alone or through or together with any other subsidiary),  owns,
         directly  or  indirectly,  more than 50% of the  stock or other  equity
         interests the holders of which are  generally  entitled to vote for the
         election  of the board of  directors  or other  governing  body of such
         corporation or other legal entity.

                  SECTION 8.4.  Amendment.  This Agreement may be amended by the
parties  hereto by action  taken by or on behalf of their  respective  Boards of
Directors at any time prior to the  Effective  Time;  provided,  however,  that,
after  approval  of the Merger and this  Agreement  by the  shareholders  of the
Company, no amendment may be made which by law requires further approval by such
shareholders  without such further  approval.  This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.

                  SECTION 8.5. Waiver.  At any time prior to the Effective Time,
any party  hereto may with respect to any other party hereto (a) extend the time
for the  performance  of any of the  obligations  or other  acts,  (b) waive any
inaccuracies in the representations and


                                      -62-



<PAGE>

warranties contained herein or in any document delivered pursuant hereto, or (c)
waive compliance with any of the agreements or conditions  contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.

                  SECTION  8.6.   Headings.   The  headings  contained  in  this
Agreement  are for  reference  purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

                  SECTION 8.7. Severability.  (a) If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
of law, or public policy,  all other conditions and provisions of this Agreement
shall  nevertheless  remain in full force and effect so long as the  economic or
legal substance of the transactions  contemplated  hereby is not affected in any
manner  adverse to any  party.  Upon such  determination  that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall  negotiate  in good  faith to modify  this  Agreement  so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that  transactions  contemplated  hereby  are  fulfilled  to the  extent
possible.

                  (b) The Company and GT agree that the Fee  provided in Section
7.3(b) is fair and  reasonable in the  circumstances,  considering  not only the
Merger  Consideration but also the outstanding  funded  indebtedness  (including
capital  leases) of the Company and its  subsidiaries.  If a court of  competent
jurisdiction shall nonetheless, by a final,  non-appealable judgment,  determine
that the amount of the Fee exceeds the maximum amount permitted by law, then the
amount of the Fee shall be reduced to the maximum amount permitted by law in the
circumstances, as determined by such court of competent jurisdiction.

                  SECTION 8.8. Entire Agreement.  This Agreement constitutes the
entire  agreement and supersedes all prior  agreements and  undertakings  (other
than the Confidentiality  Letter),  both written and oral, among the parties, or
any of them,  with respect to the subject matter hereof and, except as otherwise
expressly provided herein.

                  SECTION 8.9. Assignment;  Merger Sub. This Agreement shall not
be  assigned by  operation  of law or  otherwise,  except that all or any of the
rights of Merger Sub  hereunder may be assigned with the consent of the Company,
which consent shall not be unreasonably  withheld,  to any direct,  wholly-owned
subsidiary of GT, provided that no such  assignment  shall relieve the assigning
party  of its  obligations  hereunder.  GT  guarantees  the  full  and  punctual
performance by Merger Sub of all the obligations  hereunder of Merger Sub or any
such assignees.

                  SECTION 8.10.  Parties in Interest.  This  Agreement  shall be
binding upon and inure solely to the benefit of each party  hereto,  and nothing
in this Agreement,  express or implied,  is intended to or shall confer upon any
other person any right,  benefit or remedy of any nature  whatsoever under or by
reason of this Agreement,  including, without limitation, by way of subrogation,
other than Section 5.7 (which is intended to be for the


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benefit of the Indemnified  Parties and Officer Employees and may be enforced by
such Indemnified Parties and Officer Employees).

                  SECTION  8.11.  Failure or  Indulgence  Not  Waiver;  Remedies
Cumulative.  No failure or delay on the part of any party hereto in the exercise
of any right  hereunder  shall  impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation,  warranty or agreement
herein,  nor shall any single or  partial  exercise  of any such right  preclude
other or further exercise thereof or of any other right. All rights and remedies
existing  under this  Agreement  are  cumulative  to, and not  exclusive of, any
rights or remedies otherwise available.

                  SECTION 8.12.  Governing  Law;  Jurisdiction.  This  Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of New York applicable to contracts  executed and fully  performed  within
the State of New York.  Each of the parties hereto submits to the  non-exclusive
jurisdiction  of the Federal  courts of the United  States and the courts of the
State of New York  located in the City of New York,  Borough of  Manhattan  with
respect to any claim or cause of action  arising  out of this  Agreement  or the
transactions contemplated hereby.

                  SECTION 8.13. Counterparts.  This Agreement may be executed in
one or more  counterparts,  and by the  different  parties  hereto  in  separate
counterparts,  each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.

                  SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF GT, MERGER SUB AND
THE COMPANY HEREBY  IRREVOCABLY  WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,  PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON  CONTRACT,  TORT OR  OTHERWISE)  ARISING  OUT OF OR  RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.


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                  IN WITNESS WHEREOF, GT, Merger Sub and the Company have caused
this  Agreement  to be  executed  as of the date  first  written  above by their
respective officers thereunto duly authorized.


                                  GT INTERACTIVE SOFTWARE CORP.


                                  By    /s/ Ronald Chaimowitz
                                        -------------------------------------
                                         Name:   Ronald Chaimowitz
                                         Title:  President and Chief Executive
                                                        Officer


                                  SWAN ACQUISITION CORP.


                                  By    /s/ Ronald Chaimowitz
                                        -------------------------------------
                                         Name:  Ronald Chaimowitz
                                         Title: President


                                  MICROPROSE, INC.


                                  By    /s/ Stephen M. Race
                                        -------------------------------------
                                         Name:  Stephen M. Race
                                         Title: Chief Executive Officer

Source: OneCLE Business Contracts.