ASSET PURCHASE AGREEMENT

                                  By and Among

                                   PALM, INC.,

                     ECA SUBSIDIARY ACQUISITION CORPORATION

                                       and

                                 BE INCORPORATED

                                 August 16, 2001

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                                TABLE OF CONTENTS

                                                                            Page

ARTICLE 1 DEFINITIONS.........................................................2


         1.1      Capitalized Terms...........................................2

         1.2      Construction................................................8


ARTICLE 2 PURCHASE AND SALE...................................................8


         2.1      Purchase and Sale of Assets.................................8

         2.2      Excluded Assets.............................................9

         2.3      Delivery of Acquired Assets.................................9

         2.4      Assignments.................................................9

         2.5      Transfer of Product Software Copyrights....................10

         2.6      Transfer of Patent Rights..................................10

         2.7      Transfer of Trademarks.....................................10

         2.8      Transferred Contracts......................................10

         2.9      Assumed Liabilities........................................10

         2.10     Excluded Liabilities.......................................10


ARTICLE 3 CLOSING AND CONSIDERATION..........................................11


         3.1      Closing....................................................11

         3.2      Stock Consideration........................................11

         3.3      Allocation of Consideration................................11

         3.4      Transfer Taxes.............................................12


ARTICLE 4 LICENSE TO BUYER...................................................12


         4.1      License of Licensed Intellectual Property..................12

         4.2      Bankruptcy.................................................13


ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER...........................13


         5.1      Organization of Seller.....................................13

         5.2      Authority..................................................13

         5.3      No Conflict................................................14

         5.4      SEC Filings; Seller Financial Statements...................14

         5.5      Transferred Contracts......................................15

         5.6      Consents...................................................15

         5.7      Support and Service Contracts..............................15

         5.8      No Liquidation, Insolvency, WindingUp......................15

         5.9      Restrictions on Business Activities........................16

         5.10     Title to Properties; Absence of Liens and Encumbrances.....17

         5.11     Intellectual Property......................................17

         5.12     Litigation.................................................19

         5.13     Brokers' or Finders' Fees..................................19

         5.14     Tax Matters................................................19
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         5.15     Power of Attorney..........................................20

         5.16     Compliance with Laws.......................................20

         5.17     Product Warranties.........................................20

         5.18     Employee Matters...........................................21

         5.19     International Employee Plan................................22

         5.20     Business Changes...........................................22


ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.................23


         6.1      Organization, Good Standing and Qualification..............23

         6.2      Authority..................................................23

         6.3      No Conflict................................................23

         6.4      SEC Filings................................................24

         6.5      Consents...................................................24

         6.6      Brokers' and Finders' Fees.................................24


ARTICLE 7 COVENANTS AND AGREEMENTS...........................................24


         7.1      Access.....................................................24

         7.2      PreClosing Activities of Seller............................24

         7.3      Conduct Prior to Closing...................................25

         7.4      Confidentiality............................................26

         7.5      Use of Confidential Information............................26

         7.6      Seller Intellectual Property Covenants.....................27

         7.7      Covenant Not to Compete or Solicit.........................27

         7.8      No Solicitation............................................28

         7.9      Notification of Certain Matters............................30

         7.10     New Employment Arrangements................................31

         7.11     Public Disclosure..........................................31

         7.12     Consents...................................................31

         7.13     COBRA Continuation Coverage................................31

         7.14     Prepaid Service Payment Update.............................32

         7.15     Exemption from Registration or Registration Statement......32

         7.16     Proxy Statement............................................34

         7.17     Meeting of Seller's Stockholders...........................36

         7.18     Reasonable Efforts.........................................37

         7.19     Change of Control Agreements...............................38

         7.20     Post Closing Tax Covenants.................................38

         7.21     Employee Withholding.......................................39

         7.22     Termination of Compaq Agreement............................39

         7.23     Additional Documents and Further Assurances................39

         7.24     Disclosure by Seller.......................................40

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         7.25     Disclosure by Buyer or Parent..............................40

         7.26     Sublicensing Requirements..................................40

         7.27     Supplemental Transferred Contracts.........................41


ARTICLE 8 CONDITIONS TO THE CLOSING..........................................41


         8.1      Conditions to Obligations of Each Party....................41

         8.2      Additional Conditions to the Obligations

                   of Parent and Buyer.......................................42

         8.3      Additional Conditions to Obligations of Seller.............43


ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION........44


         9.1      Survival of Representations, Warranties and Covenants......44

         9.2      Indemnification............................................45

         9.3      Indemnification Procedure..................................45

         9.4      Resolution of Conflicts; Arbitration.......................45

         9.5      ThirdParty Claims..........................................46

         9.6      Maximum Payments; Remedy...................................46

         9.7      Liability of Parent and Buyer..............................47


ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER.................................48


         10.1     Termination................................................48

         10.2     Notice of Termination......................................50

         10.3     Effect of Termination......................................50

         10.4     Amendment..................................................50

         10.5     Extension; Waiver..........................................50


ARTICLE 11 GENERAL...........................................................50


         11.1     Notices....................................................50

         11.2     Entire Agreement; Assignment...............................52

         11.3     Severability...............................................52

         11.4     Other Remedies.............................................52

         11.5     GOVERNING LAW..............................................52

         11.6     Jurisdiction and Venue.....................................52

         11.7     Rules of Construction......................................52

         11.8     WAIVER OF JURY TRIAL.......................................52

         11.9     Fees and Expenses..........................................53

         11.10    Counterparts...............................................53

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                                    EXHIBITS

         Exhibit A..............................Form of NonCompetition Agreement

         Exhibit B.........................Form of Stockholder Support Agreement

         Exhibit C....................................Form of General Assignment

         Exhibit D......................................Form of Solvency Opinion




         SCHEDULES

         Schedule 1.1(o)  Designated Employees

         Schedule 1.1(x)  Excluded Contracts

         Schedule 1.1(hh)  Key Employees

         Schedule 1.1(tt)  Products

         Schedule 1.1(bbb)  Tangible Assets

         Schedule 1.1(eee)  Transferred Contracts

         Schedule 1.1(ggg)  Transferred Technology

         Schedule 1.1(hhh)  Transferred Trademarks

         Schedule 2.2  Excluded Assets

         Schedule 8.2(d)  Required Key Employees under Section 8.2(d)

         Schedule 8.2(e) Key Employees Signing NonCompetition Agreement

<PAGE>



                            ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (the  "Agreement"),  is made and entered into
as of  August  16,  2001,  by and  among  Palm,  Inc.,  a  Delaware  corporation
("Parent"),  ECA Subsidiary Acquisition Corporation,  a Delaware corporation and
an indirect wholly owned Subsidiary of Parent ( "Buyer"), and Be Incorporated, a
Delaware corporation ("Seller").

                                    RECITALS

     A.  Parent and Buyer  desire to cause Buyer to purchase  from  Seller,  and
Seller desires to sell to Buyer,  substantially  all of the assets  relating to,
required  for,  used in or  otherwise  constituting  the  Products  (as  defined
herein),  in exchange for shares of common stock of Parent,  the  assumption  of
certain  liabilities  relating to the Products and the other  consideration  set
forth below.

     B.  Concurrently  with the execution and delivery of this  Agreement,  as a
material  inducement to Parent and Buyer to enter this  Agreement,  selected Key
Employees  (as  defined  below)  of  Seller  are  entering  into  noncompetition
agreements,  substantially  in  the  form  attached  hereto  as  Exhibit  A (the
"NonCompetition Agreements"),  with Parent, each of which shall become effective
as of the Closing Date (as defined below).

     C.  Concurrently  with the execution and delivery of this  Agreement,  as a
material  inducement to Parent and Buyer to enter into this  Agreement,  certain
stockholders  of  Seller  are  executing  and  delivering   stockholder  support
agreements, substantially in the form attached hereto as Exhibit B (the "Support
Agreements"), to Buyer.

     D. It is contemplated that,  subject to approval by Seller's  stockholders,
as soon as  reasonably  practicable  following  the Closing  (as defined  below)
Seller shall wind up its business operations in accordance with applicable law.

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

<PAGE>

                                    ARTICLE 1

                                   DEFINITIONS

     1.1  Capitalized  Terms.  The  following  capitalized  terms shall have the
meanings set forth below:

     (a)  "Acquired Assets" shall have the meaning set forth in Section 2.1.

     (b) "Adjustment  Amount" means the aggregate  amount of all Prepaid Service
Payments (as defined in Section 5.7)  reflected on the Prepaid  Service  Payment
Update as of the Closing Date.

     (c)  "Agreement"  means this Asset  Purchase  Agreement  together  with all
exhibits and schedules hereto.

     (d) "Allocation" shall have the meaning set forth in Section 3.3.

     (e) "Assumed Liabilities" shall have the meaning set forth in Section 2.9.

     (f) "Benefits  Liabilities" means any and all claims,  debts,  liabilities,
commitments and obligations,  whether fixed, contingent or absolute,  matured or
unmatured,  liquidated or unliquidated,  accrued or unaccrued, known or unknown,
whenever or however arising,  including all costs and expenses  relating thereto
arising under law, rule,  regulation,  permits,  action or proceeding before any
Governmental  Entity,  order or consent decree or any award of any arbitrator of
any kind  relating to any Employee  Plan,  Employment  Agreement,  International
Employee Plan or otherwise to an Employee.

     (g)  "Books  and  Records"  means  all  papers  and  records  (in  paper or
electronic  format)  in the care,  custody,  or  control of Seller or any of its
Subsidiaries relating to the Acquired Assets including,  without limitation, all
purchasing  and  sales  records,  customer  and  vendor  lists,  accounting  and
financial records,  product  documentation,  product  specifications,  marketing
requirement documents and software release orders.

     (h) "Closing" shall have the meaning set forth in Section 3.1.


     (i) "Closing Date" shall have the meaning set forth in Section 3.1.


     (j)  "Collateral  Agreements"  shall have the  meaning set forth in Section
2.4.


     (k) "Code" means the Internal Revenue Code of 1986, as amended.


     (l)  "Continuing  Employees"  shall have the  meaning  set forth in Section
7.10.

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<PAGE>

     (m) "Contract" means any mortgage,  indenture, lease, contract, covenant or
other  agreement,  instrument or commitment,  permit,  concession,  franchise or
license.

     (n)  "Derivative  Work" has the  meaning  ascribed  to it under the  United
States  Copyright  Law,  Title 17 U.S.C.  Sec. 101 et. seq.,  as the same may be
amended from time to time.

     (o)  "Designated  Employees"  means  those  employees  of Seller  listed on
Schedule 1.1(o) hereto.

     (p) "DOL" shall mean the Department of Labor.

     (q) "Effectively  Transferred  Contract" means a Transferred Contract as to
which  no  consent  to  assignment  is  required  or as to  which a  consent  to
assignment is required and has been obtained prior to the Closing.

     (r) "Eligible  Contracts" means (i) the Internet  Appliance OEM License and
Distribution  Agreement  between Be Incorporated and Sony Electronics Inc. dated
March 13, 2001 (the "Sony Agreement"), (ii) all Contracts of Seller that contain
license grants to Seller that are not Transferred  Contracts on the date of this
Agreement and (iii) all nondisclosure agreements,  confidentiality agreements or
similar Contracts of Seller.

     (s)  "Employee"  shall  mean any  current  or former or  retired  employee,
consultant  or  director  of  Seller or any  Subsidiary  of Seller in his or her
capacity as such.

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

     (u) "Employment  Agreement" means each management,  employment,  severance,
consulting, relocation, repatriation,  expatriation, visas, work permit or other
agreement,  contract or understanding between Seller or any Subsidiary of Seller
and any Designated Employee.

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

     (w) "Excluded Assets" shall have the meaning set forth in Section 2.2.

     (x)  "Excluded  Contracts"  shall  mean the  Contracts  listed on  Schedule
1.1(x).

     (y)  "Excluded  Liabilities"  shall have the  meaning  set forth in Section
2.10.

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<PAGE>

     (z) "GAAP" means United States generally accepted accounting principles, as
of the date hereof.

     (aa) "General Assignment" shall have the meaning set forth in Section 2.4.

     (bb)  "Governmental  Entity"  means  any  court,  administrative  agency or
commission  or other  federal,  state,  county,  local or  foreign  governmental
authority, instrumentality, agency or commission.

     (cc) "Indemnified Parties" shall have the meaning set forth in Section 9.2.

     (dd)  "Intellectual  Property Rights" means any or all of the following and
all statutory or common law rights  throughout  the world in, arising out of, or
associated  with:  (i)  all  patents  and  applications  (including  provisional
applications)  therefor  and  all  reissues,  divisions,  renewals,  extensions,
continuations and continuationsinpart  thereof (collectively,  "Patents");  (ii)
all  trade  secrets  that (A)  derive  independent  economic  value,  actual  or
potential,   from  not  being   generally   known  to,  and  not  being  readily
ascertainable  by proper means by, other persons who can obtain  economic  value
from  its  disclosure  or use,  and (B) are the  subject  of  efforts  that  are
reasonable  under the  circumstances  to  maintain  its  secrecy,  and all other
inventions  (whether  patentable or not, but which are not the subject of issued
or published  Patents),  proprietary  information,  and know how  (collectively,
"Trade  Secrets");  (iii)  all  works of  authorship,  copyrights,  mask  works,
copyright  and  mask  work   registrations   and   applications   (collectively,
"Copyrights");  (iv) all  trade  names,  trademarks  and  service  marks and all
trademark  and  service  mark  registrations  and  applications   (collectively,
"Trademarks");  (v)  all  rights  in  and  to  databases  and  data  collections
(including knowledge databases, customer lists and customer databases); and (vi)
any similar, corresponding or equivalent rights to any of the foregoing types of
intellectual  property.

     (ee)  "International  Employee Plan" means each Employee Plan that has been
adopted or maintained by Seller or any ERISA  Affiliate,  whether  informally or
formally,  or with  respect to which Seller or any ERISA  Affiliate  will or may
have any liability,  for the benefit of Employees who perform  services  outside
the United States.

     (ff) "IRS" shall mean the Internal Revenue Service.

     (gg) "Kernel" means the level of an operating  system that contains  system
level  services,  including  thread and team  management,  virtual and protected
memory management,  thread  scheduling,  interprocess  communication  (including
semaphores,  ports  and  thread  messages),  input/output  management  and  node
abstraction  layer,  kernel module  management,  ELF  executable  binary loader,
device driver  management,  power  management and  CPUdependent  layer.  It also
includes   builtin   components  that  could  otherwise  be  loaded,   including
platformdependent  modules,  generic  virtual  drivers (null and zero  drivers),
generic virtual  filesystems (root, pipe and device file systems) and the kernel
debugger module.

     (hh) "Key Employee" shall have the meaning set forth in Schedule 1.1(hh).


                                       4
<PAGE>

     (ii)  "Licensed  Intellectual  Property"  means all  Intellectual  Property
Rights  that,  immediately  after  the sale and  assignment  of the  Transferred
Intellectual  Property  Rights and other  Acquired  Assets  from Seller to Buyer
occurs, Seller or any of its Subsidiaries has the right to license to the extent
provided in Section 4.1, without breaching any Contract,  without infringing any
other Person's Intellectual Property Rights, and without payment of any royalty,
fee or other amount as a result of such license to Buyer  (unless  Buyer assumes
the obligation to pay such royalty, fee or other amount).

     (jj) "Lien" means, with respect to any asset or right, any mortgage,  lien,
pledge,  charge,  security interest,  claim, equity encumbrance,  restriction on
transfer,  conditional  sale or other  title  retention  device  or  arrangement
(including,  without limitation,  a capital lease),  transfer for the purpose of
subjection to the payment of any  indebtedness,  restriction  on the creation of
any of the foregoing, or encumbrance of any kind whatsoever;  provided, however,
that the term "Lien" shall not include:  (i) statutory  liens for Taxes that are
not yet due and  payable or are being  contested  in good  faith by  appropriate
proceedings  and are  disclosed  in the Seller  Disclosure  Schedule or that are
otherwise not material; (ii) statutory or common law liens to secure obligations
to landlords,  lessors or renters under leases or rental agreements  confined to
the premises  rented;  (iii) deposits or pledges made in connection  with, or to
secure  payment  of,  workers'  compensation,  unemployment  insurance,  old age
pension or other social  security  programs  mandated by  applicable  law;  (iv)
statutory or common law liens in favor of carriers, warehousemen,  mechanics and
materialmen,  to secure  claims for labor,  materials or supplies and other like
liens;  (v)  restrictions on transfer of securities  imposed by applicable state
and federal  securities laws; and (vi)  contractual  restrictions on transfer of
contractual rights.

     (kk) "Loss" and "Losses" shall have the meanings set forth in Section 9.2.

     (ll)  "Material  Adverse  Effect"  means any (i) change in or effect on the
Acquired Assets,  taken as a whole,  that is materially  adverse to the Acquired
Assets, taken as a whole, or (ii) circumstance,  change or event that materially
impairs Buyer's ability to make, use, sell, license, distribute,  market, build,
modify,  debug and  operate the  current  version or release of the  Products in
substantially  the same  manner  as Seller  prior to the date of this  Agreement
(excluding  any effect on  Buyer's  ability  to do the  foregoing  caused by the
absence of the items  licensed  under the Excluded  Contracts or  NonTransferred
Licenses or any facts and circumstances  unique to Buyer).

     (mm)  "NonTransferred  Licenses"  shall mean  license  agreements  granting
licenses  to Seller  that are  Transferred  Contracts  but  which do not  become
Effectively Transferred Contracts.

     (nn) "Offer Letter" shall have the meaning set forth in Section 7.10.

     (oo) "Object Code" means computer  software,  substantially  or entirely in
binary form,  which is intended to be directly  executable  by a computer  after
suitable processing and linking but without the intervening steps of compilation
or assembly.

     (pp) "Pension  Plan" means each Seller  Employee Plan which is an "employee
pension  benefit  plan,"  within  the  meaning of  Section  3(2) of ERISA.  (qq)
"Person" means any  individual,  partnership,  firm,  corporation,  association,
trust,  unincorporated organization or other entity, as well as any syndicate or
group of any of the foregoing.  (rr) "Prepaid Service Payment Update" shall have
the  meaning  set forth in Section  7.14.  (ss)  "Platform  Business"  means the
business of developing,  marketing,  licensing or distributing operating systems
software and associated software  components and software  development tools for
portable,  handheld and wireless solutions,  and personal information management
(PIM) applications designed to run on such operating systems.

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<PAGE>

     (tt)  "Products"  means any  products of Seller or any of its  Subsidiaries
(including products under development) listed on Schedule 1.1(tt).

     (uu) "PTO" means the United States Patent and Trademark Office.

     (vv)   "Registered   Intellectual   Property"   means  all  United  States,
international  and  foreign:  (i)  Patents;   (ii)  registered   Trademarks  and
applications  for  Trademarks,   including   intenttouse   applications;   (iii)
registered  Copyrights  and  applications  for  Copyrights;  and (iv) any  other
Intellectual   Property   Rights  that  are  the  subject  of  an   application,
certificate,  filing,  registration  or other  document  issued,  filed  with or
recorded by any Governmental Entity.

     (ww) "Software"  means computer  software and code,  including  assemblers,
applets,  compilers,  Source Code,  Object Code, data (including image and sound
data),  development  tools,  design  tools and user  interfaces,  in any form or
format, however fixed, including Source Code listings and related documentation.

     (xx) "Source Code" means computer software code which may be printed out or
displayed in human  readable form,  including  related  programmer  comments and
annotations, help text, data and data structures,  instructions, and procedural,
objectoriented  and other code which may be printed  out or  displayed  in human
readable  form.  (yy)  "Stock  Consideration"  means  that  number  of shares of
Parent's  common stock,  rounded to the nearest number of whole shares (with 0.5
being rounded up), equal to the quotient  determined by dividing (A) $11,000,000
minus the Adjustment Amount by (B) the opening price of Parent's common stock as
quoted on the Nasdaq  National  Market on the Closing Date;  provided,  however,
that the  number  of  shares  of  Parent's  common  stock  comprising  the Stock
Consideration  shall be  increased  above such  number or  decreased  below such
number to the extent provided in Section 7.15.

     (zz) "Subsidiary"  means,  with respect to any Person,  any entity of which
securities or other ownership  interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such Person.

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<PAGE>

     (aaa) "Supplemental  Transferred  Contracts" means any Eligible Contract of
Seller which becomes a Transferred  Contract in accordance with Section 7.27, in
addition  to the  Transferred  Contracts  listed  on  Schedule  1.1(eee).  (bbb)
"Tangible  Assets"  means  the  tangible  assets  listed on  Schedule  1.1(bbb);
provided,   however,  that  Tangible  Assets  shall  not  include  any  tangible
manifestation of Software that is delivered  pursuant to a written  agreement or
protocol  agreed to by Buyer and  Seller  providing  for the  remote  electronic
transmission of such Software, except for documentation and manuals.

     (ccc) "Tax" and "Taxes"  shall mean any and all federal,  state,  local and
foreign taxes, assessments and other governmental charges,  duties,  impositions
and  liabilities,  including  taxes based upon or  measured  by gross  receipts,
income,  profits,  sales,  use and  occupation,  and value  added,  ad  valorem,
transfer,  franchise,  withholding,  payroll, recapture,  employment, excise and
property  taxes as well as public  imposts,  fees and  social  security  charges
(including  but not  limited to health,  unemployment  and  pension  insurance),
together with all interest, penalties and additions imposed with respect to such
amounts and any  obligation  under any agreement or  arrangement  with any other
person with respect to such amounts and  including  any liability for taxes of a
predecessor  entity.  (ddd) "Third Party Software" means any Software owned by a
third party or in the public  domain,  including  open source  Software,  public
source  Software,  or freeware,  or any modification or Derivative Work thereof,
and also  including  any version of any  Software  licensed  pursuant to any GNU
general public license or limited general public  license,  in each case that is
used in,  incorporated  into, or integrated or bundled with the current released
version of the Products  and any more recent  versions  thereof  (whether or not
released or completed) or Transferred Technology.  (eee) "Transferred Contracts"
means  those  Contracts  listed  on  Schedule  1.1(eee)  as of the  date of this
Agreement,  and shall also include,  from and after the date Eligible  Contracts
become Supplemental  Transferred  Contracts in accordance with Section 7.27, any
such Supplemental Transferred Contracts.

     (fff) "Transferred Intellectual Property Rights" means (i) all Intellectual
Property  Rights  (other  than  Trademarks)  owned  by  Seller  or  any  of  its
Subsidiaries;   and  (ii)  the  Transferred   Trademarks.

     (ggg) "Transferred Technology" means

          (i) the items listed on Schedule 1.1(ggg); and

          (ii)  any  other  Source  Code  and  other  Software,   materials  and
     information  (including  development software,  development  documentation,
     compilers, interpreters, system build software, build scripts, test suites,
     testing tools and  documentation,  test  scripts,  bug  databases,  support
     tools,  revision control systems and environments)  that are used by Seller
     or any of its  Subsidiaries  to, or that Seller or any of its  Subsidiaries
     has and are reasonably  necessary to, build,  modify, debug and operate the
     current  release or version of the Products,  and any more recent  versions
     thereof (whether or not released or completed),  which Seller has the right
     to  deliver  and  disclose  to Buyer  without  breaching  any  Contract  or
     infringing  any other  Person's  Intellectual  Property  Rights;  provided,
     however,  that  Transferred  Technology  shall  not  include  any  tangible
     manifestation of Software that is delivered pursuant to a written agreement
     or  protocol  agreed  to by  Buyer  and  Seller  providing  for the  remote
     electronic  transmission  of such Software,  except for  documentation  and
     manuals.

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<PAGE>

     (hhh)   "Transferred   Trademarks"   means  the  Product  names  and  other
Trademarks, if any, listed on Schedule 1.1(hhh).

1.2      Construction.

     (a) For  purposes of this  Agreement,  whenever the context  requires:  the
singular number will include the plural,  and vice versa;  the masculine  gender
will include the feminine and neuter  genders;  the feminine gender will include
the  masculine  and neuter  genders;  and the neuter  gender  will  include  the
masculine and feminine genders.

     (b) Any rule of  construction  to the  effect  that  ambiguities  are to be
resolved  against the drafting party will not be applied in the  construction or
interpretation of this Agreement.

     (c) As used in this  Agreement,  the words  "include" and  "including"  and
variations thereof will not be deemed to be terms of limitation, but rather will
be deemed  to be  followed  by the words  "without  limitation."

     (d) Except as otherwise  indicated,  all  references  in this  Agreement to
"Articles,"  "Schedules,"  "Sections"  and  "Exhibits"  are intended to refer to
Articles, Schedules, Sections and Exhibits to this Agreement.

     (e) The headings in this Agreement are for  convenience of reference  only,
will not be deemed to be a part of this  Agreement,  and will not be referred to
in connection with the construction or interpretation of this Agreement.


                                   ARTICLE 2

                                PURCHASE AND SALE

     2.1 Purchase and Sale of Assets.  On the Closing  Date,  and subject to the
terms and  conditions set forth in this  Agreement,  but subject to Section 2.2,
Seller will sell, convey,  transfer and assign to Buyer, and Buyer will purchase
from  Seller,  all of Seller's  right,  title and  interest in and to all of the
following  assets,  free  and  clear  of any and all  Liens  (collectively,  the
"Acquired Assets"):

                                       8
<PAGE>

(a)      the Tangible Assets;

(b)      the Transferred Intellectual Property Rights;

(c)  all  goodwill  of  Seller  or any of its  Subsidiaries  appurtenant  to the
Transferred Trademarks;

     (d) the  Transferred  Technology  (for avoidance of doubt,  with respect to
portions  of the  Transferred  Technology  that are owned by Persons  other than
Seller or its  Subsidiaries,  the  rights in such  portions  of the  Transferred
Technology to be transferred  and assigned to Buyer are the rights of Seller and
its  Subsidiaries  under the Effectively  Transferred  Contracts as described in
clause (e) below);

     (e) all rights of Seller or any of its  Subsidiaries  under the Effectively
Transferred  Contracts,  other than payment  obligations  under such Transferred
Contracts  (including  accounts  receivable)  earned  by  Seller  or  any of its
Subsidiaries  as a result of  performance  by Seller or any of its  Subsidiaries
prior to the Closing Date; and

     (f) all rights to recover past,  present and future damages for the breach,
infringement or misappropriation,  as the case may be, of any of the Transferred
Intellectual  Property Rights and Effectively  Transferred Contracts (other than
payment obligations under such Transferred Contracts).

     2.2  Excluded  Assets.  The parties  expressly  acknowledge  and agree that
notwithstanding  anything to the contrary in this Agreement, the Acquired Assets
and Transferred  Contracts do not include, and Seller does not have and shall be
under no  obligation  to sell,  assign  or  otherwise  transfer  to Buyer any of
Seller's fixed assets (other than Tangible Assets), cash and cash equivalents or
receivables,  the Sony Agreement,  the Excluded Contracts,  or any other assets,
claims,  causes  of  action,  contracts,  licenses  or  agreements  set forth on
Schedule 2.2 hereto, or any other assets,  claims, causes of action,  contracts,
licenses or agreements not included  within the Acquired  Assets and Transferred
Contracts  as  defined  herein  (collectively,  the  "Excluded  Assets"),  which
Excluded  Assets  shall remain for all  purposes  the  properties  and assets of
Seller.

     2.3 Delivery of Acquired  Assets.  At the Closing,  Seller shall deliver to
Buyer all of the Tangible Assets and Transferred  Technology.  Without  limiting
the foregoing,  all Software  included in the Transferred  Technology  shall, at
Buyer's request, be delivered to Buyer by electronic means.

     2.4  Assignments.  At the  Closing,  Seller  shall  deliver to Buyer,  duly
executed by Seller,  and Seller shall deliver to Buyer,  duly executed by Buyer:
(i) an Assignment and Assumption Agreement and Bill of Sale substantially in the
form of  Exhibit  C  hereto  (the  "General  Assignment");  (ii)  the  copyright
registrations  and  assignments  required  pursuant to Section  2.5,  the patent
assignments  required  pursuant  to Section  2.6 and the  trademark  assignments
required   pursuant  to  Section  2.7;  and  (iii)  such  other  instruments  of
conveyance,  assignment and transfer as Buyer may reasonably request in order to
vest in Buyer good and valid title in and to the  Acquired  Assets (the  General
Assignment and the other instruments  referred to in clauses (i), (ii) and (iii)
being collectively referred to herein as the "Collateral Agreements").

                                       9
<PAGE>

     2.5 Transfer of Product Software Copyrights. For each Copyright included in
the  Transferred  Intellectual  Property  Rights  for which  Seller  has filed a
copyright  registration  with the United States Copyright  Office,  Seller shall
deliver to Buyer at Closing an assignment,  on a form  reasonably  acceptable to
Buyer,  to record the transfer of such  copyright to Buyer in the United  States
Copyright  Office. If Seller has not registered the copyright in a Product prior
to  the  Closing  Date,  Seller  shall  deliver  to  Buyer  at  the  Closing  an
application,  on the applicable form, to register such copyright in each Product
with the United States Copyright Office.

     2.6 Transfer of Patent Rights. For each of Seller's Patents included in the
Transferred  Intellectual  Property  Rights,  Seller  shall  deliver to Buyer at
Closing an  assignment  in form  reasonably  acceptable to Buyer to evidence the
transfer of such Patents to Buyer.  Such  assignment  shall specify Buyer as the
owner by assignment of such Patents.

     2.7 Transfer of Trademarks. For each of the Transferred Trademarks,  Seller
shall deliver to Buyer at Closing an assignment in form reasonably acceptable to
Buyer to evidence  the transfer of such  Trademarks  to Buyer.  Such  assignment
shall specify Buyer as the owner by assignment of such Trademarks.

     2.8 Transferred  Contracts.  At the Closing,  Seller shall deliver to Buyer
all of the  Transferred  Contracts  to the extent not  previously  delivered  to
Buyer.

     2.9 Assumed Liabilities.  As of the Closing,  Buyer hereby agrees to assume
the following, and only the following (collectively, the "Assumed Liabilities"):
the  obligations  of Seller  or any of its  Subsidiaries  under the  Transferred
Contracts,  in each case  solely to the extent such  obligations  arise from and
after the Closing Date; provided,  however,  that notwithstanding the foregoing,
Buyer  shall  be  responsible  for  liabilities  that  arise  solely  out of its
ownership  or  operation  of  the  Acquired  Assets  or its  performance  of the
Transferred  Contracts on or  subsequent to the Closing Date. As of the Closing,
Parent shall be deemed to guarantee the  obligations  of Buyer under the Assumed
Liabilities.

     2.10 Excluded Liabilities. Except for the Assumed Liabilities, Buyer is not
assuming  any  other  debt,  liability,  duty or  obligation,  whether  known or
unknown,  fixed  or  contingent,  of  Seller  or any of  its  Subsidiaries  (the
"Excluded  Liabilities").  Without  limiting the foregoing,  all  liabilities of
Seller and its Subsidiaries,  including any liabilities for Taxes,  arising from
or  related  to:  (i)  Seller's  operations  or  the  operation  of  any  of its
Subsidiaries,  whenever  arising or incurred,  including  Seller's or any of its
Subsidiaries'  sale or ownership of the Products and Acquired Assets through the
Closing  Date;  (ii)  Seller's or any of its  Subsidiaries'  termination  of any
Contracts that are not Transferred Contracts; (iii) the Sony Agreement, (iv) the
employment  or  engagement  by  Seller  of  employees,  agents,  consultants  or
independent   contractors   through  the  Closing   Date;  or  (v)  any  Benefit
Liabilities,  shall be Excluded  Liabilities and shall remain the responsibility
of Seller,  unless any such liabilities described in this sentence are otherwise
included within the Assumed Liabilities.


                                       10
<PAGE>

                                   ARTICLE 3

                            CLOSING AND CONSIDERATION

     3.1 Closing. The closing of the transactions contemplated by this Agreement
(the  "Closing")  will take place at the  offices of Wilson  Sonsini  Goodrich &
Rosati,  Professional Corporation,  in Palo Alto, California at 6:30 a.m., local
time, two (2) business days following the  satisfaction or written waiver of the
last of the  conditions of Closing as set forth in ARTICLE 8 hereof,  or on such
other date as the parties may mutually determine (the "Closing Date").

     3.2 Stock Consideration. At the Closing, Parent and Buyer shall cause to be
issued to Seller a duly authorized and issued stock certificate representing the
Stock  Consideration,  and following the Closing,  to the extent that the Resale
Registration  Statement is filed with the SEC and the provisions of Section 7.15
apply,   (i)  in  the  case  where  the  number  of  shares  issuable  upon  the
effectiveness  of the Resale  Registration  Statement is  increased  pursuant to
Section 7.15(b), Parent and Buyer shall cause to be issued to Seller immediately
upon the effectiveness of the Resale Registration  Statement an additional stock
certificate  representing the number of any such whole shares of Parent's common
stock required to be issued to Seller in accordance with such Section,  and (ii)
in the case where the number of shares  issuable upon the  effectiveness  of the
Resale Registration  Statement is decreased pursuant to Section 7.15(b),  Parent
and Buyer  shall,  upon  delivery  by Seller  for  cancellation  to Buyer of the
original  stock  certificate  issued  to  Seller,  cause to be  issued to Seller
immediately  upon the  effectiveness  of the  Resale  Registration  Statement  a
replacement  stock  certificate  representing  the  total  number  of  shares of
Parent's  common  stock  representing  the Stock  Consideration,  as adjusted in
accordance with such Section. In addition,  whether at the Closing (in the event
the Permit is issued  prior to the  Closing)  or upon the  effectiveness  of the
Resale  Registration  Statement  (in the event the Permit is not issued prior to
the  Closing),  Parent and Buyer shall,  at the request of Seller,  deliver such
other instruments, coordinate with Parent's transfer agent, and use commercially
reasonable  efforts  to do and  perform  such  other  acts and  things as may be
reasonably necessary to enable Seller to immediately sell, transfer or otherwise
liquidate  the  shares  of  Parent's   common  stock   constituting   the  Stock
Consideration in the public markets.

     3.3  Allocation  of  Consideration.  The  parties  hereto  intend  that the
purchase be treated as a taxable  transaction  for federal and state  income tax
purposes.  Prior to the Closing Date,  Buyer and Seller shall  negotiate in good
faith and determine the allocation of the Stock Consideration among the Acquired
Assets (the  "Allocation").  The Allocation shall be conclusive and binding upon
Buyer and Seller for all  purposes,  and the parties  agree that all returns and
reports (including IRS Form 8594) and all financial statements shall be prepared
in a manner  consistent  with (and the parties  shall not  otherwise  file a Tax
return position  inconsistent with) the Allocation unless required by the IRS or
any other applicable taxing authority.

                                       11
<PAGE>

     3.4 Transfer  Taxes.  Buyer and Seller shall each be responsible  for fifty
percent (50%) of the aggregate amount of any sales, use, excise or similar Taxes
that may be payable in  connection  with the sale or  purchase  of the  Acquired
Assets and the granting of the licenses  hereunder,  including  any sales,  use,
excise or similar  transfer Taxes.  The parties hereto shall cooperate with each
other and use their  reasonable  best  efforts to minimize  the  transfer  Taxes
attributable  to the sale of the Acquired  Assets,  including but not limited to
the transfer of all Software by remote electronic transmission.

                                    ARTICLE 4

                                LICENSE TO BUYER

     4.1 License of Licensed Intellectual Property.  Effective as of the Closing
(and subject to the conditions thereto set forth herein), Seller shall be deemed
to have  granted to Buyer under all of the  Licensed  Intellectual  Property,  a
royaltyfree,   fullypaid,  worldwide,  perpetual,  irrevocable,   nonterminable,
transferable  right  and  license,   with  the  right  to  grant  and  authorize
sublicenses,   to  fully  exercise,  use  and  otherwise  exploit  the  Licensed
Intellectual Property in any manner and without limitation,  including the right
and license under Copyrights to copy, create Derivative Works from,  distribute,
publicly  perform  and  display  and  transmit   Software   products  and  other
copyrightable  works,  and under Patent rights to make,  have made,  use,  sell,
offer for sale and import products.  To the extent that the foregoing license is
broader  in  any  respect  (including,  without  limitation,  the  rights  being
licensed,  the duration and revocability of the license, the geographic scope of
the license, and the transferability of the license) than the license Seller has
the right to grant without breaching any Contract,  without infringing any other
Person's  Intellectual  Property  Rights,  and without being required to pay any
additional royalty,  fee or other amount to any other Person as a result of such
license to Buyer, then the foregoing license will be deemed to be limited in all
such respects to the license Seller has the right to grant without breaching any
Contract,  without infringing any other Person's  Intellectual  Property Rights,
and without being required to pay any royalty,  fee or other amount to any other
Person. If, in order to grant the foregoing license to Buyer with respect to any
Licensed  Intellectual  Property  owned by any Person  other than  Seller or its
Subsidiaries, Seller is required to notify any such other Person of the license,
obtain the approval or consent of any such other  Person,  provide a copy of the
license agreement to any such other Person,  obtain Buyer's written agreement to
any particular term or condition  (each, a "PassThrough  Term"),  or comply with
any  obligation,   condition,   or  requirement   (collectively,   "Sublicensing
Requirements"),  the  foregoing  license will be effective  with respect to such
Licensed  Intellectual  Property only if and when (a) Buyer authorizes Seller in
writing to comply with such Sublicensing Requirements,  (b) Seller complies with
all  applicable  Sublicensing  Requirements,  (c) Buyer  agrees in writing to be
bound by and to comply with all applicable  PassThrough  Terms,  if any, and (d)
Buyer pays any royalty,  fee or other amount which is authorized by Buyer and is
required to be paid by Seller as the result of such license to Buyer.

                                       12
<PAGE>

     4.2  Bankruptcy.  The license  granted to Buyer  under  Section 4.1 is, and
shall  otherwise be deemed to be, for  purposes of Section  365(n) of the United
States Bankruptcy Code, a license to rights of "Intellectual Property Rights" as
defined thereunder.

                                   ARTICLE 5

                    REPRESENTATIONS AND WARRANTIES OF SELLER

         Except as disclosed in the disclosure  schedule delivered to Parent and
Buyer on the date hereof  (the  "Seller  Disclosure  Schedule"),  Seller  hereby
represents  and  warrants to Parent and Buyer as follows:

     5.1 Organization of Seller.

          (a)  Except as set forth in Section  5.1(a) of the  Seller  Disclosure
     Schedule, Seller has no Subsidiaries.

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

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

          (d) Seller has delivered or made available to Buyer a true and correct
     copy of the  certificate of  incorporation  (including  any  certificate of
     designations) and bylaws of Seller and similar governing instruments,  each
     as amended to date (collectively, the "Seller Charter Documents"), and each
     such instrument is in full force and effect.  Seller is not in violation of
     any of the provisions of Seller Charter Documents.

     5.2 Authority.  Seller has all requisite  corporate  power and authority to
enter into this  Agreement and the  Collateral  Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Collateral Agreements and the consummation of the transactions
contemplated  hereby and  thereby  have been duly  authorized  by all  necessary
corporate  action  on the  part of  Seller,  and,  except  for  approval  by the
stockholders of Seller, no further action is required on the part of Seller, any
of its  Subsidiaries or any of Seller's  stockholders to authorize the Agreement
and the Collateral  Agreements and the transactions  contemplated hereby. A vote
of the holders of a majority of the outstanding  shares of Seller's common stock
is sufficient for Seller's  stockholders to approve and adopt this Agreement and
approve the transactions  contemplated hereby and the Dissolution (as defined in
Section 7.17). This Agreement and the transactions contemplated hereby have been
approved  by the Board of  Directors  of Seller.  This  Agreement  has been duly
executed and delivered by Seller and, assuming the due authorization,  execution
and delivery by Parent and Buyer,  constitutes a valid and binding obligation of
Seller,  enforceable against Seller in accordance with its terms, subject to any
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
now or hereafter in effect relating to creditors'  rights  generally or to other
equitable remedies.

                                       13
<PAGE>

     5.3 No Conflict.  The execution and delivery of this Agreement by Seller do
not, and the execution and delivery of the  Collateral  Agreements by Seller and
the  performance of this Agreement and the Collateral  Agreements by Seller will
not, (i) conflict with or violate the Seller Charter Documents,  (ii) subject to
obtaining the approval and adoption of this  Agreement by Seller's  stockholders
as  contemplated  in  Section  7.17,  conflict  with or violate  any law,  rule,
regulation,  order,  judgment  or  decree  applicable  to  Seller  or any of its
Subsidiaries or by which any of their 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)  under,  or impair the rights of
Seller or any of its  Subsidiaries  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 on any of
the properties or assets of Seller or any of its  Subsidiaries  pursuant to, any
note, bond, mortgage,  indenture,  contract,  agreement, lease, license, permit,
franchise,  concession, or other instrument or obligation to which Seller or any
of its  Subsidiaries is a party or by which Seller,  any of its  Subsidiaries or
the Acquired  Assets are bound or affected,  except with respect to clauses (ii)
and (iii),  for the matters  set forth on Section  5.3 of the Seller  Disclosure
Schedule  and for  matters  the  existence  of which  would  not  reasonably  be
expected, individually or in the aggregate, to have a Material Adverse Effect.

     5.4 SEC Filings; Seller Financial Statements.

     (a) Seller has delivered or made available to Parent (through  reference to
documents  filed by EDGAR or  otherwise)  accurate  and  complete  copies of all
forms,  reports and documents  filed by Seller with the  Securities and Exchange
Commission  ("SEC") since January 1, 2000 (the "Seller SEC Reports"),  which are
all the forms, reports and documents required to be filed by Seller with the SEC
since such date. As of their  respective  dates, the Seller SEC Reports (i) were
prepared  in  accordance  and  complied  in  all  material   respects  with  the
requirements of the Securities Act of 1933, as amended (the  "Securities  Act"),
or the Securities  Exchange Act of 1934, as amended (the "Exchange Act"), as the
case may be, and the rules and  regulations of the SEC thereunder  applicable to
such Seller SEC Reports and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements  therein,  in the
light of the circumstances under which they were made, not misleading.

     (b) Each of the consolidated financial statements (including, in each case,
any  related  notes  thereto)  contained  in Seller  SEC  Reports  (the  "Seller
Financials") (i) complied as to form in all material respects with the published
rules and  regulations  of the SEC with respect  thereto,  (ii) were prepared in
accordance  with GAAP  applied on a  consistent  basis  throughout  the  periods
involved  (except as may be  indicated  in the notes  thereto or, in the case of
unaudited interim financial  statements,  as may be permitted by the SEC on Form
10Q under the Exchange Act) and (iii) fairly presented the financial position of
Seller as at the respective dates thereof and the results of Seller's operations
and cash flows for the  periods  indicated,  except that the  unaudited  interim
financial statements may not contain footnotes and were or are subject to normal
and recurring yearend adjustments.  The balance sheet of Seller contained in the
Form 10Q of Seller  filed on August 14, 2001 is  hereinafter  referred to as the
"Seller Balance Sheet."

                                       14
<PAGE>

     (c) Except as disclosed in the Seller Financials,  since the date of Seller
Balance Sheet Seller has incurred no  liabilities  required under GAAP to be set
forth  on  a  consolidated  balance  sheet  (absolute,  accrued,  contingent  or
otherwise),  except for  liabilities  incurred  (i) since the date of the Seller
Balance Sheet in the ordinary course of business  consistent with past practices
or (ii) pursuant to this Agreement,  which  liabilities  would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.

     5.5  Transferred  Contracts.  True  and  complete  copies  of  all  of  the
Transferred  Contracts as of the date of this  Agreement  have been delivered to
Buyer.  Each such  Transferred  Contract  is in full force and  effect.  None of
Seller,  any of its  Subsidiaries  or, to  Seller's  knowledge,  any other party
thereto is in default or breach under the terms of any such Transferred Contract
and, to the Seller's knowledge, no event or circumstance has occurred that, with
notice or lapse of time or both,  would reasonably be expected to constitute any
event of default thereunder.

     5.6 Consents. No consent,  waiver,  approval, order or authorization of, or
registration,  declaration or filing with any  Governmental  Entity or any third
party,   including  a  party  to  any  agreement  with  Seller  or  any  of  its
Subsidiaries,  is  required  by  or  with  respect  to  Seller  or  any  of  its
Subsidiaries in connection with the execution and delivery of this Agreement and
the Collateral  Agreements or the consummation of the transactions  contemplated
hereby,  except for the  filing of the Proxy  Statement  (as  defined in Section
7.17) with the SEC in accordance  with the Exchange Act, the Consents  listed on
Section 5.6 of the Seller Disclosure Schedule.

     5.7  Support and Service  Contracts.  Section 5.7 of the Seller  Disclosure
Schedule  sets  forth a true  and  complete  list of all  Transferred  Contracts
pursuant to which  Seller or any of its  Subsidiaries  is  obligated  to provide
support,  maintenance or other  services to third parties  following the date of
this  Agreement,  together with the amounts of prepaid fees that are  associated
with the executory support, maintenance and other service obligations under such
Transferred  Contracts and the portion of such fees  attributable to obligations
to be  performed  subsequent  to the  date  hereof  (each,  a  "Prepaid  Service
Payment").  Each  Prepaid  Service  Payment  is as  reflected  in the  Books and
Records.

     5.8 No Liquidation, Insolvency, WindingUp.

     (a) Except as  contemplated  by this  Agreement,  no order has been made or
petition  presented,   or  resolution  passed  by  the  board  of  directors  or
stockholders  of Seller for the  dissolution or windingup of Seller and there is
not outstanding:

          (i) any petition or order for the windingup of Seller;

                                       15
<PAGE>

          (ii) any  appointment  of a  receiver  over  the  whole or part of the
     undertaking of assets of Seller;

          (iii) any petition or order for administration of Seller;

          (iv)  any  voluntary   arrangement  between  Seller  and  any  of  its
     creditors;

          (v) any  assignment  for the benefit of Seller's  creditors or similar
     creditor arrangement or remedy;

          (vi) any voluntary petition,  involuntary petition or order for relief
     with respect to the Seller under the  Bankruptcy  Code,  11 U.S.C.  section
     101, et. seq.;

          (vii) any distress or execution or other process  levied in respect of
     Seller  which  remains   undischarged;   and

          (viii) any unfulfilled or unsatisfied  judgment or court order against
     Seller.

     (b) Seller is not now insolvent,  and will not be rendered insolvent by any
of the  transactions  contemplated by this  Agreement.  As used in this section,
"insolvent"  means either of the following:

          (i)  at  fair  valuations,   the  sum  of  Seller's  debts  and  other
     liabilities,  including,  without limitation,  contingent  liabilities,  is
     greater than all of Seller's assets,  provided that (A) such assets are not
     to  include  any  rights  of Seller or any  successor  to Seller  under any
     fraudulent  transfer,  preference or similar  theories to recover  Seller's
     property that was transferred,  concealed or removed, and (B) the valuation
     of such assets is to assume that the Closing occurs, but otherwise is to be
     based on  liquidation  values of any assets  not being sold to Buyer  under
     this  Agreement  (assuming  a  liquidation  within 120 days  following  the
     Closing), and

          (ii) Seller is not generally paying its debts as they come due (within
     the meaning of Section 3439 of the California Civil Code).

     (c) Upon occurrence of the transfers of property from Seller to Buyer under
this  Agreement,   Seller  will  have  adequate  capital  for  any  business  or
transaction in which Seller is or will be engaged.

     (d)  Seller  has not  incurred,  does not  intend  to  incur,  and does not
reasonably  believe it will incur debts  beyond its ability to pay as such debts
mature or become due.

     (e) Seller intends to and will windup its business operations in accordance
with  applicable  law as  soon  as  reasonably  practicable  after  the  Closing
consistent with this Agreement and in a manner  providing for full payment to or
adequate  provision for all  creditors.  The parties agree that  notwithstanding
anything to the contrary  herein,  the Dissolution (as defined herein) shall not
mandate that Seller effect the dissolution of its corporate entity in accordance
with  Delaware  law except to the extent  that the failure to do so would have a
Material Adverse Effect or would materially adversely impact Parent or Buyer.

                                       16
<PAGE>

     5.9  Restrictions  on Business  Activities.  There is no agreement  (not to
compete or  otherwise),  commitment,  judgment,  injunction,  order or decree to
which Seller or any of its Subsidiaries is a party which has or could reasonably
have the effect of prohibiting the transactions  contemplated by this Agreement,
or which could reasonably have a Material Adverse Effect.

     5.10 Title to Properties; Absence of Liens and Encumbrances.

     (a) Seller does not own any real property.

     (b) Seller has good and valid title to or, in the case of leased properties
and assets,  valid leasehold  interests in, all of the Acquired Assets, free and
clear of any Liens.  (c) None of the  Subsidiaries  of Seller has, or will as of
the  Closing  Date  have,  any  right,  title or  interest  in, or to any of the
Acquired Assets or any of the Transferred Contracts.

     5.11 Intellectual Property.

     (a) Section 5.11(a) of the Seller Disclosure  Schedule lists all Registered
Intellectual  Property  Rights  included  among  the  Transferred   Intellectual
Property Rights. All such Registered  Intellectual Property Rights are currently
in  compliance  with formal  legal  requirements  (including  payment of filing,
examination  and  maintenance  fees and proofs of use),  are valid  (except with
respect to pending applications for any patents,  trademarks,  or other forms of
intellectual  property,  as to which no  representation  or warranty  concerning
validity is made) and subsisting,  and are not subject to any unpaid maintenance
fees or taxes or actions. All such Registered  Intellectual Property Rights have
been assigned to Seller and such assignments  have been properly  recorded prior
to the Closing.  There are no pending proceedings or actions before any court or
tribunal  (including  the PTO or  equivalent  authority  anywhere  in the world)
related to any such Registered Intellectual Property Rights.

     (b) Each item of Transferred  Intellectual  Property  Rights embodied in or
relating to the  Transferred  Technology is free and clear of any Liens.

     (c) To  the  extent  that  any  Transferred  Intellectual  Property  Rights
embodied in or relating to the Transferred  Technology were originally  owned or
created by or for any third  party,  including  any  contractor  or  employee of
Seller and any  predecessor of Seller:  (i) Seller has a written  agreement with
such third party or parties with respect  thereto,  pursuant to which Seller has
obtained complete,  unencumbered and unrestricted ownership and is the exclusive
owner of, all such Transferred  Intellectual Property Rights by valid assignment
or  otherwise;  and (ii) the  assignment  by Seller to Buyer  hereunder  of such
Transferred  Intellectual  Property  Rights  will not  violate  such third party
agreements.

                                       17
<PAGE>

     (d) Seller has not  transferred  ownership of, or granted any license of or
right  to use  that is in  effect  as of the  date  hereof,  or  authorized  the
retention  of any rights to use, any  Transferred  Intellectual  Property  Right
embodied in or  relating  to the  Transferred  Technology  to any other  Person,
except for nonexclusive Object Code enduser licenses,  and nonexclusive  enduser
licenses to immaterial  portions of the Source Code, granted to customers in the
ordinary course of business.

     (e) The  Transferred  Technology  delivered  to Buyer under this  Agreement
includes  all  Source  Code,  tools,  and other  Software  used by Seller to, or
necessary to, build,  modify, debug and operate the current versions or releases
of the Products in  substantially  the same manner as Seller did so prior to the
date of this  Agreement,  except for those items  licensed  to Seller  under the
Excluded  Contracts and the  NonTransferred  Licenses which Seller is prohibited
from  providing  to Buyer under the  Excluded  Contracts  or the  NonTransferred
Licenses. The Acquired Assets and the Licensed Intellectual Property, along with
the  Intellectual  Property Rights licensed under the Excluded  Contracts or the
NonTransferred Licenses, are sufficient to make, use, sell, license,  distribute
and market the current version or release of the Products in  substantially  the
same  manner  as  Seller  did so  prior to the  date of this  Agreement  without
infringing or misappropriating any other Person's  Intellectual Property Rights.
Seller has the right to deliver all Software and other materials and information
delivered to Buyer under this Agreement without  infringing or  misappropriating
any other Person's Intellectual Property Rights.

     (f) Seller hereby  represents and warrants to Parent and Buyer,  only as of
the Closing Date, that Section 5.11(f) of the Seller  Disclosure  Schedule to be
delivered  pursuant to Section  7.2(h) will list all Third Party Software in the
Transferred Technology.

     (g) No  government  funding,  facilities of a  university,  college,  other
educational  institution  or research  center or funding from third  parties was
used in the development of the Transferred  Technology.

     (h) To the knowledge of Seller, the making, using,  selling,  licensing and
distribution  of the current  version or release of the  Products by Seller does
not (i)  infringe or  misappropriate  the  Intellectual  Property  Rights of any
Person, or (ii) constitute unfair  competition or trade practices under the laws
of any  jurisdiction.  Seller has not  received  written  notice from any Person
claiming  that the making,  using,  selling,  licensing or  distribution  of the
current versions or releases of the Products  infringes or  misappropriates  the
Intellectual  Property Rights of any Person or constitutes unfair competition or
trade practices under the laws of any jurisdiction.

     (i) There are no Contracts between Seller and any other Person with respect
to the Acquired Assets,  including the Transferred Intellectual Property Rights,
under which there is any pending dispute or (to Seller's  knowledge)  threatened
dispute regarding the scope of such Contract or performance under such Contract.

     (j) To the knowledge of Seller, no Person is infringing or misappropriating
the  Transferred  Intellectual  Property  Rights  embodied in or relating to the
Transferred Technology.

                                       18
<PAGE>

     (k) Seller has taken all reasonable  steps that are required to protect its
rights  in the Trade  Secrets  associated  with or  related  to the  Transferred
Technology, and Seller has taken reasonable steps to prevent misappropriation of
any Trade Secrets of any third party.

     (l) Except as set forth in Section 5.11(l) of the Disclosure  Schedule,  no
third  party  possesses  any  copy of any  Source  Code for the  Kernel  for any
Product. In addition, no third party possesses any copy of any other Source Code
for any Product,  other than portions of the Source Code the use of which by any
other Person would not have a Material Adverse Effect.

     (m) There is no Third  Party  Software  incorporated  in the Kernel for the
current version of any Product.

     (n) Seller has and enforces a policy requiring each employee and consultant
of  Seller  to  execute  a  proprietary  rights  and  confidentiality  agreement
substantially  in a form that Seller has delivered to Buyer, and all current and
former  employees and consultants of Seller or any of its  Subsidiaries who have
created or modified in any material  respect any of the  Transferred  Technology
have executed such an agreement,  except where the failure to have obtained such
an agreement would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect.

     (o) No Transferred  Intellectual Property Rights embodied in or relating to
the Transferred  Technology are subject to any proceeding or outstanding decree,
order,  judgment,  or stipulation that restricts the use,  transfer or licensing
thereof or may affect the validity, use, or enforceability thereof.

     (p) To the extent that Seller has distributed or licensed any Product to an
end user pursuant to any form of  encryption  key, no third party has had access
to any  such  keys  enabling  disclosure  of such  keys to a third  party.

     5.12  Litigation.   There  is  no  action,   suit,  claim,   proceeding  or
investigation  of any nature pending or (to the knowledge of Seller)  threatened
relating to the Products,  the Acquired Assets or the Designated Employees as of
the  date  of  this  Agreement.   To  the  knowledge  of  Seller,  there  is  no
investigation or other proceeding pending or threatened relating to the Acquired
Assets or the Designated  Employees by or before any  Governmental  Entity as of
the date of this Agreement. There are no judgments,  orders, decrees, citations,
fines or penalties heretofore assessed against Seller or any of its Subsidiaries
under any  foreign,  federal,  state or local law that would  reasonably  have a
Material Adverse Effect.


                                       19
<PAGE>

     5.13 Brokers' or Finders' Fees.  Except as set forth in Section 5.13 of the
Seller Disclosure Schedule, Seller has not incurred, nor will it incur, directly
or  indirectly,  any  liability  for  brokerage  or  finders'  fees  or  agents'
commissions  or any similar  charges in  connection  with this  Agreement or any
transaction contemplated hereby.

     5.14 Tax Matters.

     (a) Tax Returns and Audits.

          (i) To the extent  failure to do so could  reasonably  have a Material
     Adverse Effect or would materially adversely impact Parent or Buyer, Seller
     and each of its  Subsidiaries  has  prepared  and timely filed all required
     federal,   state,  local  and  foreign  returns,   estimates,   information
     statements and reports ("Returns") relating to any and all Taxes concerning
     or attributable to Seller, its Subsidiaries or the operations of Seller and
     its  Subsidiaries  and such  Returns  are true and  correct  and have  been
     completed, in all material respects, in accordance with applicable law.

          (ii) To the extent failure to do so could  reasonably  have a Material
     Adverse Effect or would materially adversely impact Parent or Buyer, Seller
     and each of its Subsidiaries (A) has paid all Taxes shown to be due on such
     returns and (B) has  withheld  with respect to its  employees  all federal,
     state and  foreign  income  taxes and social  security  charges and similar
     fees, Federal Insurance  Contribution Act, Federal Unemployment Tax Act and
     other Taxes required to be withheld.

          (iii) To the extent failure to do so could  reasonably have a Material
     Adverse  Effect  or would  materially  adversely  impact  Parent  or Buyer,
     neither  Seller  nor any of its  Subsidiaries  has been  delinquent  in the
     payment of any Tax, nor is there any Tax deficiency  outstanding,  assessed
     or  proposed  against  Seller,  nor has Seller  executed  any waiver of any
     statute of  limitations  on or extending  the period for the  assessment or
     collection of any Tax.

          (iv) No audit or other  examination  of any Return of Seller or any of
     its  Subsidiaries  is presently  in progress,  nor has Seller or any of its
     Subsidiaries  been  notified in writing of any request for such an audit or
     other  examination  pursuant to which an assessment could reasonably have a
     Material  Adverse  Effect or would  materially  adversely  impact Parent or
     Buyer.

          (v)  Seller  is not  aware  of,  and  knows no  factual  basis for the
     assertion  of any  material  claim for Taxes for which Buyer  would  become
     liable as a result of the  transactions  contemplated by this Agreement and
     the Collateral Agreements.

     5.15  Power of  Attorney.  There  are no  outstanding  powers  of  attorney
executed on behalf of Seller in respect of the Acquired Assets except as granted
to Buyer hereunder.

     5.16  Compliance  with  Laws.  Seller  and  each of its  Subsidiaries  have
complied  with,  are not in  violation  of, and have not received any notices of
violation with respect to, any foreign,  federal, state or local statute, law or
regulation  with  respect  to the  sale and  distribution  of the  Products,  or
otherwise with respect to the Acquired Assets,  except for any  noncompliance or
violations the existence of which would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect.

                                       20
<PAGE>

     5.17 Product  Warranties.  Except for any of the following the existence of
which would not reasonably be expected,  individually  or in the  aggregate,  to
have a Material Adverse Effect,  (i) each Product  manufactured,  sold,  leased,
licensed  or  delivered  by  Seller  has  been  done so in  conformity  with all
applicable contractual  commitments and all express and implied warranties,  and
(ii) Seller has no liability for  replacement or repair thereof or other damages
in connection therewith.

     5.18 Employee Matters.

     (a) Pension  Plan.  Seller has never  maintained,  established,  sponsored,
participated  in, or contributed  to, any Pension Plan which is subject to Title
IV of ERISA or Section 412 of the Code.

     (b) Scheduled  Employees.  Concurrent with the execution of this Agreement,
Seller has  delivered to Buyer a written  statement  that  contains the names of
individuals  (including  dependents) (i) currently  receiving COBRA continuation
coverage under any heath plan of Seller,  (ii) terminated  within 115 days prior
to the execution date of this Agreement, (iii) employed by Seller as of the date
immediately  preceding  the  execution  date of this  Agreement  and who will be
terminated  in  connection  with the  acquisition,  and (iv) who are  Designated
Employees.

     (c)  Multiemployer  and  Multiple  Employer  Plans.  At no time has  Seller
contributed to or been obligated to contribute to any Multiemployer Plan. Seller
has never maintained, established, sponsored, participated in, or contributed to
any multiple employer plan, or to any plan described in Section 413 of the Code.

     (d) No PostEmployment  Obligations.  Except as set forth in Section 5.18(d)
of the Seller  Disclosure  Schedule,  no Employee Plan provides,  or reflects or
represents any liability to provide retiree health to any person for any reason,
except as may be required by COBRA or other applicable statute.

     (e) Effect of Transaction.

          (i)  Except as set forth on Section  5.18(e) of the Seller  Disclosure
     Schedule,  the  execution of this  Agreement  and the  consummation  of the
     transactions  contemplated  hereby  will  not  (either  alone  or upon  the
     occurrence  of any  additional or  subsequent  events)  constitute an event
     under  any  Employee  Plan or  Employment  Agreement  that  will  or  would
     reasonably  result in any payment  (whether of severance pay or otherwise),
     acceleration,  forgiveness of indebtedness, vesting, distribution, increase
     in benefits or obligation to fund benefits with respect to any Employee.

          (f) Health Care Compliance.  Neither Seller nor any ERISA Affiliate is
     in  violation,  in any material  respect,  of the health care  continuation
     requirements of COBRA,  the requirements of the Family Medical Leave Act of
     1993, as amended, the requirements of the Health Insurance  Portability and
     Accountability  Act of 1996,  the  requirements  of the Women's  Health and
     Cancer Rights Act of 1998, the  requirements  of the Newborns' and Mothers'
     Health  Protection  Act of 1996,  or any amendment to each such act, or any
     similar provisions of state law applicable to its Employees.

                                       21
<PAGE>

          (g) Employment  Matters.  Seller: (i) is in compliance in all respects
     with all  applicable  foreign,  federal,  state and local  laws,  rules and
     regulations   respecting  employment,   employment  practices,   terms  and
     conditions of employment and wages and hours, in each case, with respect to
     Employees; (ii) has withheld and reported all amounts required by law or by
     agreement to be withheld and reported  with respect to wages,  salaries and
     other  payments to Employees;  (iii) is not liable for any arrears of wages
     or any  taxes  or  any  penalty  for  failure  to  comply  with  any of the
     foregoing;  and (iv) is not  liable  for any  payment to any trust or other
     fund  governed  by or  maintained  by  or on  behalf  of  any  governmental
     authority,  with  respect to  unemployment  compensation  benefits,  social
     security or other benefits or obligations for Employees (other than routine
     payments to be made in the normal  course of business and  consistent  with
     past practice).

          (h) Labor.  No work stoppage or labor strike against Seller is pending
     or, to the knowledge of Seller,  threatened involving any of the Designated
     Employees.  Seller does not know of any  activities or  proceedings  of any
     labor  union to organize  any of the  Designated  Employees.  Except as set
     forth in Section 5.18(h) of the Seller  Disclosure  Schedule,  there are no
     actions,  suits,  claims,  labor disputes or grievances pending, or, to the
     knowledge  of  Seller,   threatened   relating  to  any  labor,  safety  or
     discrimination  matters  involving  any  Designated  Employee,   including,
     without  limitation,  charges of unfair labor  practices or  discrimination
     complaints,  which, if adversely determined,  would, individually or in the
     aggregate,  result in any material liability to Seller. Except as set forth
     in Section 5.18(h) of the Seller Disclosure Schedule, Seller is not a party
     to, or bound by, any collective bargaining agreement or union contract with
     respect to any of the  Designated  Employees and no  collective  bargaining
     agreement is currently being negotiated by Seller.

          5.19  International  Employee Plan. Seller does not now, nor has it in
     the last two years had the obligation  to,  maintain,  establish,  sponsor,
     participate  in, or contribute to any  International  Employee  Plan.

          5.20  Business  Changes.  From June 30, 2001  through the date of this
     Agreement,  except as otherwise  contemplated by this Agreement,  or as set
     forth in Section  5.20 of the Seller  Disclosure  Schedule:

          (a)  There  have  been  no  changes  in the  condition  (financial  or
     otherwise),  business,  net  worth,  assets,  operations,   obligations  or
     liabilities  of  Seller  which,  in  the  aggregate,  have  had  or  may be
     reasonably expected to have a Material Adverse Effect.

          (b) Seller has not mortgaged,  pledged, or otherwise encumbered any of
     the Acquired Assets.

          (c) Seller has not sold, assigned,  licensed,  leased,  transferred or
     conveyed, or committed itself to sell, assign,  license, lease, transfer or
     convey, any of the Acquired Assets except for nonexclusive licenses entered
     into in the ordinary course of business.

                                       22
<PAGE>

          (d) There has been no destruction  of, damage to or loss of any of the
     Acquired  Assets.

          (e)  There  has been no  notice  of any  claim or  potential  claim of
     ownership  by any  Person  other  than  Seller or its  Subsidiaries  of the
     Transferred Technology,  the Transferred  Intellectual Property Rights, the
     Licensed  Intellectual  Property Rights,  or the Licensed  Technology or of
     infringement   by  Buyer  or  its   Subsidiaries   of  any  other  Person's
     Intellectual Property Rights.

          (f) There has been no dispute, proceeding,  litigation, arbitration or
     mediation pending or (to the knowledge of Seller) threatened against Seller
     or any of its Subsidiaries  related to the Acquired  Assets.

          (g) There has been no event or condition of any character that has had
     or is reasonably likely to have a Material Adverse Effect.

          (h) There has been no agreement  by Seller or any of its  Subsidiaries
     or any employees,  agents or affiliates of Seller or its Subsidiaries to do
     any of the things described in the preceding clauses (a) through (g) (other
     than negotiations with Parent and Buyer and their representatives regarding
     the transactions contemplated by this Agreement).


                                   ARTICLE 6

               REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

     Except as disclosed in the Disclosure  Schedule  delivered to Seller on the
date hereof (the "Parent Disclosure Schedule"),  Parent and Buyer hereby jointly
and severally represent and warrant to Seller as follows:

     6.1 Organization, Good Standing and Qualification. Each of Parent and Buyer
is a corporation duly organized,  validly  existing,  and in good standing under
the  laws  of  Delaware.  Buyer  is a  wholly  owned  Subsidiary  of  El  Camino
Acquisition Corporation, which is in turn a wholly owned Subsidiary of Parent.

     6.2 Authority.  Each of Parent and Buyer has all requisite  corporate power
and authority to enter into this Agreement and the Collateral  Agreements and to
consummate the transactions  contemplated hereby and thereby.  The execution and
delivery of this Agreement and the Collateral Agreements and the consummation of
the  transactions  contemplated  hereby and thereby have been duly authorized by
all necessary  corporate action on the part of Parent and Buyer.  This Agreement
and the  Collateral  Agreements  have been duly executed and delivered by Parent
and Buyer and constitute the valid and binding  obligations of Parent and Buyer,
enforceable in accordance with their terms, except as such enforceability may be
limited by principles of public policy and subject to the rules of law governing
specific performance, injunctive relief or other equitable remedies.

                                       23
<PAGE>

     6.3 No Conflict.  Neither the execution and delivery of this  Agreement and
the Collateral Agreements, nor the consummation of the transactions contemplated
hereby and  thereby,  will  conflict  with,  or result in any  violation  of, or
default  under  (with or  without  notice  or lapse  of time,  or both)  (i) any
provision  of the  certificate  of  incorporation,  as amended,  and bylaws,  as
amended,  of Parent or Buyer,  (ii) any Contract to which Parent or Buyer or any
of their respective properties or assets are subject and which has been filed as
an exhibit to Parent's  filings under the Securities Act or the Exchange Act, or
(iii) any judgment,  order, decree, statute, law, ordinance,  rule or regulation
applicable to Parent or Buyer or their respective  properties or assets,  except
in each case where such conflict,  violation or default will not have a material
adverse  effect on Parent or Buyer or will not affect the legality,  validity or
enforceability of this Agreement or the Collateral Agreements.

     6.4 SEC Filings.  Parent has delivered or made available to Seller (through
reference to documents filed by EDGAR or otherwise) accurate and complete copies
of all forms,  reports and documents filed by Parent with the SEC since March 2,
2000 (the "Parent SEC Reports"),  which are all the forms, reports and documents
required  to be filed  by  Parent  with the SEC  since  such  date.  As of their
respective  dates,  the Parent SEC Reports (i) were prepared in  accordance  and
complied in all material  respects with the  requirements of the Securities Act,
or the Exchange  Act, as the case may be, and the rules and  regulations  of the
SEC  thereunder  applicable  to such  Parent SEC Reports and (ii) did not at the
time they were filed contain any untrue  statement of a material fact or omit to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements  therein, in the light of the circumstances under which they
were made, not misleading. None of Parent's Subsidiaries is required to file any
forms, reports or other documents with the SEC.

     6.5 Consents. No consent,  waiver,  approval, order or authorization of, or
registration,  declaration or filing with, any Governmental Entity, or any third
party is required by or with respect to Parent or Buyer in  connection  with the
execution and delivery of this  Agreement and the  Collateral  Agreements or the
consummation of the transactions  contemplated hereby, except for such consents,
waivers,  approvals,  orders,  authorizations,  registrations,  declarations and
filings which, if not obtained or made, would not have a material adverse effect
on Parent or Buyer.

     6.6 Brokers' and Finders' Fees. Neither Parent nor Buyer has incurred,  nor
will they incur, directly or indirectly, any liability for brokerage or finders'
fees or agents'  commissions  or any  similar  charges in  connection  with this
Agreement or the transactions contemplated hereby.


                                   ARTICLE 7

                            COVENANTS AND AGREEMENTS

     7.1 Access.  During the period commencing on the date of this Agreement and
continuing  through the earlier of the Closing Date or the  termination  of this
Agreement,  Seller, upon reasonable prior notice from Parent or Buyer to Seller,
and subject to the Confidentiality  Agreement,  will (a) afford to Buyer and its
representatives,  at reasonable  times during normal business hours,  reasonable
access to the appropriate members of Seller's personnel,  Seller's  professional
advisors, and Seller's properties, and (b) furnish Buyer and its representatives
with reasonable access to or copies of Transferred Contracts, relevant Books and
Records, and other existing documents and data related to the Acquired Assets as
Buyer may  reasonably  request  (including  to enable  Buyer to assess  Seller's
compliance  with its  obligations  under this  Agreement).  Except as  otherwise
provided  herein,  no  information  or knowledge  obtained in any  investigation
pursuant  to  this  Section  7.1  shall  affect  or  be  deemed  to  modify  any
representation or warranty contained herein or the conditions to the obligations
of the parties hereto to consummate the transactions contemplated hereby.

                                       24
<PAGE>

     7.2  PreClosing  Activities of Seller.  Between the date of this Agreement
and the earlier of the Closing Date or the termination of this Agreement, unless
otherwise  agreed in writing by Parent or Buyer,  Seller  will:

 (a) conduct its
business (as it relates to the  Acquired  Assets) in a  commercially  reasonable
manner;

     (b) pay its debts and Taxes when due,  where  failure to pay when due would
be reasonably likely to have a Material Adverse Effect;

     (c) pay or perform other obligations related to the Acquired Assets,  where
failure to pay or perform would be reasonably  likely to have a Material Adverse
Effect;

     (d) use  commercially  reasonable,  good  faith  efforts  to  maintain  its
relations  and goodwill  with  suppliers,  customers,  distributors,  licensors,
licensees,  landlords,  trade  creditors,  employees,  agents and others  having
business relationships with Seller relating to the Acquired Assets to the extent
Seller  knows or has reason to  believe  that  Buyer  intends  to have  business
relations  with such parties with respect to the Acquired  Assets  following the
Closing;

     (e)  keep  Buyer  reasonably   informed  concerning  material  business  or
operational matters relating to the Acquired Assets;

     (f) use  commercially  reasonable,  good  faith  efforts  to  maintain  the
Acquired Assets in their current condition, ordinary wear and tear excepted;

     (g) use  commercially  reasonable  efforts to identify  and notify Buyer of
material  Sublicensing   Requirements  and,  upon  receipt  of  Buyer's  written
authorization  to do so,  comply  with  the  Sublicensing  Requirements  for the
Licensed  Intellectual Property specified in Buyer's authorization to the extent
provided  in  Section  4.1;  provided,  however,  that,  with  respect  to those
Sublicensing  Restrictions that require the consent, approval or other action of
any third party,  Seller shall only be required to use  commercially  reasonable
efforts to comply with such  Sublicensing  Restrictions;  and

     (h) complete and deliver to Buyer and Parent Section  5.11(f) of the Seller
Disclosure Schedule on or before the Closing Date.

     7.3 Conduct Prior to Closing.  Except as otherwise  expressly  permitted by
this  Agreement,  between the date of this  Agreement and the earlier of (i) the
Closing Date and (ii) the  termination of this  Agreement,  Seller will not take
any  action as a result  of which any of the  changes  or  events  described  in
Section 5.20 of this Agreement  would likely or foreseeably  occur. In addition,
between the date of this  Agreement  and the earlier of (i) the Closing Date and
(ii) the  termination  of this  Agreement,  Seller  will not,  without the prior
written  consent of Parent or Buyer,  which  consent  shall not be  unreasonably
withheld:

                                       25
<PAGE>

     (a) take any  action  to  materially  impair,  encumber,  or  create a Lien
against the Acquired Assets;

     (b) except to comply with existing  contractual  obligations or commitments
or with respect to nonexclusive licenses entered into in the ordinary course of
business  consistent with past practice,  buy, or enter into any inbound license
agreement with respect to, Third Party Technology or the  Intellectual  Property
Rights of any third party to be  incorporated  in or used in connection with the
Products or sell,  lease or otherwise  transfer or dispose of, or enter into any
outbound license  agreement with respect to, any of the Acquired Assets with any
third party;

     (c) except to comply with existing  contractual  obligations or commitments
or with respect to nonexclusive licenses entered into in the ordinary course of
business consistent with past practice,  enter into any Contract relating to (i)
the sale or distribution  of any Product,  (ii) any of the Acquired  Assets,  or
(iii) any Licensed Intellectual Property (subject to Section 7.2(g) above);

     (d) change  pricing or  royalties  charged to customers or licensees of the
Acquired Assets;

     (e) enter into any strategic  arrangement or  relationship,  development or
joint marketing arrangement or agreement relating to the Acquired Assets;

     (f) fire, or give notice of termination to, any Designated Employee, except
as permitted under the terms of that certain Funding Agreement between Buyer and
Seller of even date herewith (the "Funding Agreement");

     (g) amend or modify, except to the extent required by the terms thereof, or
violate the terms of, any of the Transferred Contracts;

     (h) adopt or change any accounting  method in respect of Taxes,  enter into
any closing  agreement,  settle any claim or assessment in respect of Taxes,  or
consent to any extension or waiver of the  limitation  period  applicable to any
claim or  assessment  in respect of Taxes,  in each case where such action would
reasonably have a Material Adverse Effect; and

     (i) agree in writing or otherwise  to take any of the actions  described in
Sections 7.3(a) through (h) above.

     7.4  Confidentiality.  Each of the parties  hereto  hereby  agrees that the
information  obtained in any investigation  pursuant to Section 7.1, or pursuant
to the  negotiation  and execution of this Agreement or the  effectuation of the
transactions  contemplated  hereby, shall be governed by the terms of the Mutual
Nondisclosure  Agreement  between  Parent and Seller  dated  June 22,  2000,  as
amended by Amendment Number 1 to such agreement dated June 21, 2001.

                                       26
<PAGE>

     7.5  Use  of  Confidential  Information.  Notwithstanding  anything  to the
contrary  contained  herein or in any other  agreement of Seller,  including any
agreement  between Seller and any employee of Seller,  after the Closing,  Buyer
shall have the unrestricted,  sublicensable  and transferable  right, and Seller
hereby  consents to such rights of Buyer,  to use,  disclose  and exploit in any
manner and without restriction any and all confidential  information embodied in
any of the Acquired  Assets.  To the extent that any Designated  Employee may be
bound by any agreement or policy of Seller or any of its Subsidiaries that would
in any  way  limit  or  restrict  the  rights  of  Buyer  to  such  confidential
information  hereunder,  Seller shall not assert,  enforce or otherwise exercise
its rights under such  agreement or policy  against any  Designated  Employee or
Buyer.

     7.6 Seller Intellectual Property  Covenants.After the Closing, Seller shall
not:  (i)  transfer or license  any  Intellectual  Property  Rights to any third
party; (ii) use, exercise or otherwise  exploit any Transferred  Technology;  or
(iii)  disclose  any  Trade  Secrets  related  to the  Transferred  Intellectual
Property Rights to any third party.  Prior to the Closing,  at Seller's  request
Seller and Parent shall enter into an escrow agreement with a third party escrow
agent (the  "Escrow  Agreement")  which shall  provide  that:  (1) Seller  shall
deposit, with such escrow agent, prior to the Closing, a copy of the Source Code
for the Products  (including  prior versions  thereof) and related  materials or
information (the "Escrowed  Materials") which Seller reasonably expects could be
necessary  for the  prosecution  or  defense of claims or causes of action by or
against Seller for  violations of (or that otherwise  arise under) the antitrust
laws of any  jurisdiction,  and (2) Seller  shall have the right to obtain  from
such escrow agent a copy of the Escrowed Materials that are reasonably necessary
for the prosecution or defense of any such antitrust claim or cause of action by
or against Seller,  provided that Seller first obtains certain protective orders
or other  reasonable  confidentiality  protections  as set  forth in the  Escrow
Agreement,  and  provided  further  that Seller shall have the right to use such
materials only in connection  with such specific  claim or cause of action,  and
shall  return to the  escrow  agent or  destroy  such  materials  upon the final
resolution  (including  through  any  appeals) of such claim or cause of action.
Except with respect to Escrowed Materials released to Seller as described above,
after the Closing,  upon  written  notice from Buyer,  Seller shall  destroy all
copies of Source Code in Seller's  possession or control relating to the current
version  and all prior  versions  of the  Product  and all  copies  in  Seller's
possession or control of specifications,  documentation, and other materials and
information relating thereto.

     7.7  Covenant Not to Compete or Solicit.

     (a)  Subject to the  Closing,  and  without  limiting  Seller's  ability to
prosecute antitrust claims against third parties,  beginning on the Closing Date
and  ending  on  the  second  (2nd)   anniversary   of  the  Closing  Date  (the
"NonCompetition  Period"),  Seller shall not directly or indirectly (other than
on behalf of  Buyer),  without  the prior  written  consent  of Parent or Buyer,
engage in a Competitive  Business  Activity (as defined  below)  anywhere in the
Restricted  Territory  (as defined  below).  For all purposes  hereof,  the term
"Competitive  Business  Activity"  shall  mean:  (i)  engaging  in,  managing or
directing  persons engaged in any business in competition with Parent's Platform
Business;  (ii)  acquiring or having an  ownership  interest in any entity which
derives  revenues  from any  business  in  competition  with  Parent's  Platform
Business  (except for  ownership of one percent (1%) or less of any entity whose
securities have been  registered  under the Securities Act, or Section 12 of the
Exchange Act); or (iii) participating in the operation, management or control of
any firm, partnership,  corporation, entity or business described in clause (ii)
of this sentence. For all purposes hereof, the term "Restricted Territory" shall
mean  each  and  every  country,   province,  state,  city  or  other  political
subdivision of the world including those in which Parent is currently engaged in
business or otherwise distributes, licenses or sells products.

                                       27
<PAGE>

     (b) Subject to the Closing, and beginning on the Closing Date and ending on
the second  (2nd)  anniversary  of the Closing  Date,  Seller shall not solicit,
encourage  or take any other  action which is intended to induce or encourage or
could reasonably be expected to have the effect of inducing or encouraging,  any
employee of Parent or any  Subsidiary  of Parent or any  Continuing  Employee to
terminate  his or her  employment  with  Parent  or any  Subsidiary  of  Parent;
provided,  however,  that any general solicitation of employees not specifically
targeted to employees of Parent or any  Subsidiary  of Parent or any  Continuing
Employee  shall  not be  deemed a  violation  of this  Section  7.7(b).

     (c) The  covenants  contained  in Section  7.7(a)  shall be  construed as a
series of separate  covenants,  one for each country,  province,  state, city or
other political subdivision of the Restricted  Territory.  Except for geographic
coverage,  each such separate covenant shall be deemed identical in terms to the
covenant  contained in Section 7.7(a). If, in any judicial  proceeding,  a court
refuses to enforce any of such separate  covenants (or any part  thereof),  then
such  unenforceable  covenant  (or such  part)  shall be  eliminated  from  this
Agreement to the extent necessary to permit the remaining separate covenants (or
portions  thereof)  to be  enforced.  In the event that the  provisions  of this
Section  7.7(a) are deemed to exceed the time,  geographic or scope  limitations
permitted  by  applicable  law,  then such  provisions  shall be reformed to the
maximum time, geographic or scope limitations,  as the case may be, permitted by
applicable  laws.

     (d) Seller acknowledges (without in any way representing to Parent or Buyer
any of the following)  that (i) the value of the Acquired  Assets is an integral
component  of the  value  to  Buyer  of the  transactions  contemplated  by this
Agreement  and is  reflected  in the  value  of the  Stock  Consideration  to be
received by Seller,  and (ii) Seller's agreement as set forth in Sections 7.7(a)
and 7.7(b) is necessary  to preserve the value of the Acquired  Assets for Buyer
following the Closing.  Seller also  acknowledges  that the limitations of time,
geography  and scope of  activity  agreed to in Section  7.7(a)  are  reasonable
because,  among  other  things,  (A) Seller  has had unique  access to the Trade
Secrets  and  knowhow  relating  to the  Acquired  Assets,  including,  without
limitation,  the  plans  and  strategy  (and,  in  particular,  the  competitive
strategy)  relating  to  the  Acquired  Assets,  and  (B)  Seller  is  receiving
significant   consideration   in  connection   with  the   consummation  of  the
transactions contemplated by this Agreement.

     (e) The parties agree that in the event of a breach or threatened breach by
Seller of any of the covenants set forth in Sections 7.7(a) and 7.7(b), monetary
damages alone would be inadequate  to fully protect Buyer from,  and  compensate
Buyer for,  the harm caused by such breach or  threatened  breach.  Accordingly,
Seller  agrees that if it  breaches  or  threatens  breach of any  provision  of
Sections 7.7(a) and 7.7(b), Buyer shall be entitled to, in addition to any other
right  or  remedy  otherwise  available,  the  right to seek  injunctive  relief
restraining such breach or threatened breach and to specific  performance of any
such provision of Sections 7.7(a) and 7.7(b), and Buyer shall not be required to
post a bond in  connection  with, or as a condition  to,  obtaining  such relief
before a court of competent jurisdiction.

                                       28
<PAGE>

     7.8 No  Solicitation.

     (a) From and after the date of this Agreement  until the earlier of (i) the
Closing  Date and (ii)  termination  of this  Agreement  pursuant to ARTICLE 10,
neither  Seller nor any of its  Subsidiaries  will,  nor will they  authorize or
permit  any of their  officers,  directors  or  affiliates  to,  nor  will  they
authorize or knowingly  permit any of their employees or any investment  banker,
attorney or other  advisor or  representative  retained by them to,  directly or
indirectly,  (i) solicit,  initiate,  knowingly  encourage or induce the making,
submission or announcement of any Acquisition Proposal (as hereinafter defined),
(ii) engage or participate  in any  discussions or  negotiations  regarding,  or
furnish to any person any nonpublic  information  with respect to, or knowingly
take any other action to facilitate or that could reasonably be expected to lead
to,  any  Acquisition  Proposal,   (iii)  approve,   endorse  or  recommend  any
Acquisition  Proposal  other than in compliance  with Section  7.17(c),  or (iv)
enter into any letter of intent or similar document or any contract agreement or
commitment  contemplating or otherwise relating to any Acquisition  Transaction;
provided, however, that nothing contained in this Section 7.8 shall prohibit the
Board of  Directors  of  Seller  from (i) in  response  to a bona  fide  written
Acquisition Proposal for a Qualifying  Acquisition  Transaction not solicited by
Seller in violation of this Section 7.8(a) that the Board of Directors of Seller
has in good faith  concluded  (based on,  among  other  things,  the advice of a
financial advisor of nationally recognized reputation),  is reasonably likely to
lead to a Superior Offer,  furnishing nonpublic  information to the party making
such Acquisition  Proposal,  and submitting to the party making such Acquisition
Proposal   written   questions,   the  sole   purpose  of  which  is  to  elicit
clarifications  as to the material terms of such  Acquisition  Proposal so as to
enable  the Board of  Directors  of Seller to make a  determination  whether  to
construe such  Acquisition  Proposal as a Superior Offer, to the extent that (A)
the Board of Directors of Seller  concludes  in good faith,  after  consultation
with its outside counsel,  that its fiduciary  obligations  under applicable law
require it to do so, (B) (x)  concurrently  with  furnishing  any such nonpublic
information to, or written  questions to such party,  Seller gives Buyer written
notice of  Seller's  intention  to  furnish  nonpublic  information,  or written
questions  to such party and (y)  Seller  receives  from such party an  executed
confidentiality  agreement  containing  customary  limitations  on the  use  and
disclosure of all nonpublic written and oral information furnished to such party
on behalf of Seller, the terms of which are at least as restrictive as the terms
contained  in the  Confidentiality  Agreement,  and (C)  contemporaneously  with
furnishing any such nonpublic  information to such party,  Seller furnishes such
nonpublic information to Buyer (to the extent such nonpublic information has not
been  previously  furnished  by Seller to Buyer) and (ii) in  response to a bona
fide written  Acquisition  Proposal not solicited by Seller in violation of this
Section 7.8(a) that constitutes a Superior Offer,  engaging in negotiations with
the party making such  Acquisition  Proposal to the extent that (A) the Board of
Directors of Seller concludes in good faith, after consultation with its outside
counsel,  that its fiduciary  obligations  under applicable law require it to do
so, (B) (x) concurrently with entering into negotiations with such party, Seller
gives Buyer written notice of Seller's intention to enter into negotiations with
such party and (y) Seller  receives from such party an executed  confidentiality
agreement  containing  customary  limitations  on the use and  disclosure of all
nonpublic  written  and oral  information  furnished  to such party on behalf of
Seller, the terms of which are at least as restrictive as the terms contained in
the  Confidentiality  Agreement.  Seller  will  immediately  cease  any  and all
existing  activities,  discussions or  negotiations  with any parties  conducted
heretofore  with  respect to any  Acquisition  Proposal.  Without  limiting  the
foregoing,  it is understood that any violation of the restrictions set forth in
the preceding two sentences by any officer or director of Seller shall be deemed
to be a  breach  of  this  Section  7.8 by  Seller.

                                       29
<PAGE>

     (b) For purposes of this Agreement,  "Acquisition  Proposal" shall mean any
offer or proposal  (other than an offer or proposal by Parent or Buyer) relating
to any Acquisition  Transaction.  For purposes of this  Agreement,  "Acquisition
Transaction"  shall  mean any  transaction  or  series of  related  transactions
involving:  (i) any purchase from Seller or acquisition by any person or "group"
(as  defined  under  Section  13(d)  of the  Exchange  Act  and  the  rules  and
regulations  thereunder)  of more than a 15%  interest in the total  outstanding
voting  securities  of Seller or any  tender  offer or  exchange  offer  that if
consummated  would  result in any person or "group"  (as defined  under  Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning 15% or more of the total  outstanding  voting securities of Seller or any
merger,  consolidation,  business  combination or similar transaction  involving
Seller; or (ii) any sale, lease (other than in the ordinary course of business),
exchange,  transfer,  license (other than nonexclusive licenses in the ordinary
course of business),  acquisition  or disposition of more than 15% of the assets
of  Seller  or  of  any  of  the  Acquired  Assets,  except  for  an  immaterial
(individually or in the aggregate) portion of such Acquired Assets. In addition,
for the purposes of this Agreement  "Qualifying  Acquisition  Transaction" shall
mean any  Acquisition  Transaction  pursuant  to which (i) the  stockholders  of
Seller  immediately  preceding such Acquisition  Transaction  would  immediately
following such Acquisition Transaction hold less than fifty percent (50%) of the
aggregate equity interests in the Seller (or if the Seller does not survive such
Acquisition  Transaction,  in the surviving or resulting entity); or (ii) Seller
would sell all or substantially all of its assets.

     (c) In addition to the  obligations of Seller set forth in paragraph (a) of
this Section 7.8, Seller as promptly as practicable after learning of any of the
following  matters shall advise Buyer in writing of any Acquisition  Proposal or
any  request for  nonpublic  information  or inquiry  which  Seller  reasonably
believes would lead to an Acquisition Proposal or to any Acquisition Transaction
the material  terms and  conditions of such,  Acquisition  Proposal,  or request
inquiry,  and the  identity  of the  person or group  making  any such  request,
Acquisition Proposal or inquiry.  Seller will keep Buyer informed as promptly as
practicable  after  learning  of any of the  following  matters in all  material
respects of the status and details  (including  material  amendments or proposed
material  amendments) of any such request,  Acquisition Proposal or inquiry.

     7.9 Notification of Certain Matters.

     (a)  Seller  shall give  prompt  notice to Buyer of (i) the  occurrence  or
nonoccurrence of any event, the occurrence or nonoccurrence of which is likely
to cause any representation or warranty of Seller contained in this Agreement to
be untrue or  inaccurate  in any material  respect at the Closing,  and (ii) any
failure of Seller to comply with or satisfy in any material respect any covenant
or  agreement  required to be complied  with or satisfied  by it  hereunder,  in
either  case  such  that the  conditions  set  forth  in  Section  8.2(a)  might
reasonably  not be  satisfied  by the End  Date;  provided,  however,  that  the
delivery of any notice  pursuant to this  Section  7.9(a) shall not (a) limit or
otherwise  affect any remedies  available to the party  receiving such notice or
(b) constitute an acknowledgment or admission of a breach of this Agreement.  No
disclosure by Seller pursuant to this Section 7.9(a),  however,  shall be deemed
to amend or  supplement  the Seller  Disclosure  Schedule or prevent or cure any
misrepresentations,   breach  of  warranty  or  breach  of  covenant  by  Seller
hereunder.

                                       30
<PAGE>

     (b)  Parent  or  Buyer  shall  give  prompt  notice  to  Seller  of (i) the
occurrence or  nonoccurrence  of any event, the occurrence or nonoccurrence of
which is likely  to cause  any  representation  or  warranty  of Parent or Buyer
contained in this  Agreement to be untrue or inaccurate in any material  respect
at the  Closing,  and (ii) any  failure  of Parent  or Buyer to  comply  with or
satisfy in any material respect any covenant, condition or agreement required to
be complied  with or  satisfied  by it  hereunder,  in either case such that the
conditions set forth in Section 8.3(a) might  reasonably not be satisfied by the
End Date;  provided,  however,  that the delivery of any notice pursuant to this
Section 7.9(b) shall not (a) limit or otherwise affect any remedies available to
Seller, or (b) constitute an acknowledgment or admission by Parent or Buyer of a
breach of this  Agreement.  No  disclosure  by Parent or Buyer  pursuant to this
Section  7.9(b),  however,  shall be  deemed  to amend or  supplement  the Buyer
Disclosure  Schedule  or  prevent  or cure  any  misrepresentations,  breach  of
warranty or breach of covenant by Parent or Buyer hereunder.

     7.10 New Employment  Arrangements.  Parent has offered each person who is a
Designated Employee "atwill"  employment with Parent, to be effective as of the
Closing  Date,  subject to proof  evidencing a legal right to work in his or her
country of current employment.  Such "atwill" employment arrangements have been
set forth in offer  letters  based on Parent's  standard  form  delivered to the
Designated Employees prior to the date hereof (each, an "Offer Letter"),  copies
of which have been  provided to Seller.  At least seven of the Key Employees are
executing  an Offer  Letter prior to or  concurrent  with the  execution of this
Agreement,  which Offer Letters shall be effective as of the Closing Date.  Each
employee  of Seller who becomes an  employee  of Parent  after the Closing  Date
shall be referred to hereafter as a "Continuing  Employee." Continuing Employees
shall be eligible to receive  benefits  consistent with Parent's  standard human
resources policies. In furtherance of the foregoing, at the Closing Seller shall
terminate all employment  agreements and other  arrangements with any Continuing
Employees   who  have   accepted   employment   with   Parent,   and  waive  any
noncompetition agreements and any duty of confidentiality owed to Seller by any
such Continuing Employee, effective as of the Closing Date.

     7.11  Public  Disclosure.  Except as may be  required by law or any listing
agreement  with a  national  securities  exchange,  no  party  shall  issue  any
statement  or  communication  to any third party  (other  than their  respective
agents)  regarding  the subject  matter of this  Agreement  or the  transactions
contemplated hereby, including, if applicable, the termination of this Agreement
and the reasons therefor,  without the consent of the other party, which consent
shall not be unreasonably withheld.  Immediately following the execution of this
Agreement,  each of Parent and Seller shall issue a press release announcing the
execution of this Agreement and the transactions  contemplated  hereby, and each
of Parent and Seller shall be  entitled,  in its  discretion,  to file a current
report with the SEC disclosing the foregoing matters.

                                       31
<PAGE>

     7.12 Consents.  Seller shall use commercially  reasonable efforts to obtain
the consents,  waivers and approvals under any of the  Transferred  Contracts or
under any  contractual  restrictions  relating to the  Tangible  Assets that are
necessary  to permit the  transfer  of such  Transferred  Contracts  or Tangible
Assets to Buyer as may be required in connection with this Agreement, as well as
any  consents  that may be  necessary  to permit  the  transfer  to Buyer of any
Supplemental Transferred Contracts. Buyer shall reasonably cooperate in Seller's
efforts to obtain such consents,  waivers and approvals.

     7.13 COBRA Continuation  Coverage.  Seller agrees and acknowledges that the
selling group (as defined in Treasury Regulation Section  54.4980B9,  Q&A3(a))
of which it is a part  (the  "Selling  Group")  will  continue  to offer a group
health plan to employees of Seller after the Closing Date and, accordingly, that
Seller  and  the  Selling  Group  shall  be  solely  responsible  for  providing
continuation  coverage  under COBRA to those  individuals  who are M&A qualified
beneficiaries (as defined in Treasury Regulation Section  54.4980B9,  Q&A4(a))
with respect to the transactions  contemplated by this Agreement  (collectively,
the "M&A Qualified Beneficiaries").  Seller further agrees and acknowledges that
in the event that the Selling  Group  ceases to provide any group health plan to
any employee prior to the expiration of the continuation coverage period for all
M&A Qualified Beneficiaries (pursuant to Treasury Regulation Section 54.4980B9,
Q&A8(c)),  then Seller  shall  provide  Buyer with (i)  written  notice of such
cessation as far in advance of such cessation as is reasonably practicable (and,
in any event, at least thirty (30) days prior to such  cessation),  and (ii) all
information  necessary  or  appropriate  for  Purchaser  to  offer  continuation
coverage to such M&A Qualified Beneficiaries.

     7.14 Prepaid Service Payment Update.  Seller shall prepare and deliver,  at
least three (3) business days prior to the Closing Date, an updated  Section 5.7
of the Seller Disclosure Schedule estimated as of the Closing Date (the "Prepaid
Service  Payment  Update"),  including an update to each Prepaid Service Payment
contained thereon, that has been prepared on a basis consistent with Section 5.7
of the Seller Disclosure Schedule delivered on the date of this Agreement.

     7.15 Exemption from Registration or Registration Statement.

     (a) As promptly  as  practicable  after the  execution  of this  Agreement,
Parent shall apply to the California  Commissioner of Corporations  for a permit
(the  "Permit"),  which may be issued after a public  hearing on the fairness of
the terms and conditions of the transactions contemplated by this Agreement (the
"Fairness Hearing") in order to issue the Stock Consideration to Seller pursuant
to an  exemption  from  the  registration  requirements  of the  Securities  Act
provided  by Section  3(a)(10)  thereof  (the  "3(a)(10)  Exemption").  With the
cooperation  and  assistance of Seller where  necessary or  appropriate,  Parent
shall  prepare and file with the  California  Commissioner  of  Corporations  an
Application for Qualification of Securities by Permit under Section 25121 of the
California  Corporate  Securities Law of 1968, as amended, and related materials
required to be filed in  connection  with such  Application  (collectively,  the
"Hearing  Documents").  Parent and Seller will thereafter endeavor in good faith
to obtain a finding of fairness  and the  issuance of a Permit to such effect by
the California Commissioner of Corporations as a result of such hearing, and all
parties  hereto  shall  proceed  expeditiously  and  cooperate  fully in  making

                                       32
<PAGE>

available all  information  necessary to complete the Permit  application and to
participate as may be necessary or appropriate at the Fairness  Hearing.  In the
event that, within five (5) business days following the Fairness Hearing, Parent
shall not have received a favorable determination in such Fairness Hearing and a
Permit  covering  the  Stock  Consideration  to be  issued  in the  transactions
contemplated  by this Agreement  such that the issuance  qualifies for exemption
under the 3(a)(10)  Exemption,  (i) Parent  shall issue the Stock  Consideration
hereunder pursuant to the Resale  Registration  Statement as provided in Section
7.15(b),  (ii) the parties  shall comply with  Section  7.15(b) and (iii) Parent
shall use commercially reasonable efforts to seek a waiver from Foothill Capital
Corporation  to enable Parent to make the Cash Loan in  accordance  with Section
7.15(c)(the  "Waiver").

     (b) In the event that, within five (5) business days following the Fairness
Hearing,  Parent  shall not have  received  a  favorable  determination  in such
Fairness  Hearing and a Permit  covering  all of the Stock  Consideration  to be
issued in the transactions contemplated by this Agreement such that the issuance
qualifies for exemption under the 3(a)(10) Exemption,  Parent shall, at Parent's
own  expense,  file  with the SEC  promptly  (and in any event not more than two
business days) following the Closing,  a resale  registration  statement on Form
S3 (the "Resale  Registration  Statement")  under the Securities Act to provide
for the resale by Seller of such  number of shares of Parent's  common  stock as
may be required to be issued to Seller in  accordance  with the last sentence of
this  clause (b),  and will use  commercially  reasonable  efforts to cause such
Resale  Registration  Statement to become  effective  as promptly as  reasonably
practicable thereafter;  provided,  however, that Parent will not be required to
cause such Resale Registration  Statement to become effective until at least one
(1) Business Day after Parent publicly discloses operating results from its most
recently ended fiscal  quarter.  Parent will use its reasonable  best efforts to
keep such Resale  Registration  Statement  effective for a period of thirty (30)
days after such  Resale  Registration  Statement  becomes  effective;  provided,
however,  that at any time  after  fifteen  (15) days  after the SEC shall  have
declared the Resale Registration Statement effective, Parent may suspend the use
of the Resale  Registration  Statement  beginning on the fifteenth (15th) day of
the last month prior to the end of each fiscal  quarter of Parent and ending one
(1) business day after Parent  publicly  discloses  operating  results from such
fiscal quarter, in keeping with the blackout periods in Parent's standard stock
trading policy, and during any other blackout period designated by Parent under
Parent's  standard stock trading  policy;  provided,  however,  that in no event
shall Parent suspend the effectiveness of the Resale Registration  Statement for
more than 60 consecutive  days.  Seller shall,  on or prior to the Closing Date,
complete a selling stockholder  questionnaire  containing  customary  investment
representations  in such form as may be reasonably  provided by Parent not later
than the tenth  (10th) day prior to the Closing  Date.  In the event that Seller
shall have failed to furnish such completed  questionnaire to Parent on or prior
to the Closing Date, Parent will be entitled, in its reasonable  discretion,  to
(i) defer the filing of the Resale  Registration  Statement until the earlier to
occur of the tenth (10th) day after Seller will have furnished such  information
or the  thirtieth  (30th)  day  after  such  Resale  Registration  Statement  is
otherwise required to filed pursuant to this Section 7.15(b).  In the event that
Parent shall file the Resale Registration  Statement,  and Seller shall not have
otherwise disposed of the Stock  Consideration prior to the effectiveness of the
Resale  Registration  Statement,  the Stock  Consideration shall be increased or
decreased so that Seller shall receive that number of shares of Parent's  common


                                       33
<PAGE>

stock,  rounded up or down to the nearest number of whole shares (with 0.5 being
rounded up) equal to the quotient  determined by dividing (A) $11,000,000  minus
the  Adjustment  Amount,  by (B) the opening  price of Parent's  common stock as
quoted on the Nasdaq  National  Market on the first  trading day  following  the
declaration of effectiveness of the Resale Registration Statement.

     (c) Provided that Parent obtains the Waiver, (i) if the Resale Registration
Statement is not declared effective by the SEC on or prior to the 15th day after
the Closing Date,  Parent shall  immediately make a loan to Seller of $5,500,000
in cash, and (ii) if the Resale Registration Statement is not declared effective
by the SEC on or prior to the 30th day  after the  Closing  Date,  Parent  shall
immediately  make a second loan to Seller of $5,500,000  in cash  (collectively,
the "Cash Loans"). The Cash Loans shall not bear any interest. Repayment of each
Cash Loan shall be secured  by a pledge of the Stock  Consideration,  and Seller
and  Parent  agree to  enter  into a  promissory  note  and  security  agreement
containing  customary and reasonable terms and conditions  relating to such Cash
Loan.  The Cash  Advances  shall be  repayable  at any time by  Seller,  without
interest or penalty.  In the event that Buyer makes the Cash Loan,  Seller shall
be obligated to sell the Stock Consideration promptly (but, in any event, within
two  business  days)  following  the  effectiveness  of the Resale  Registration
Statement and simultaneously repay the Cash Loan with the proceeds of such sale.

     (d)  In  the  event  that  Parent  shall  not  have  received  a  favorable
determination  in such Fairness  Hearing and a Permit  covering all of the Stock
Consideration  to be issued in the  transactions  contemplated by this Agreement
such that the issuance qualifies for exemption under the 3(a)(10) Exemption, the
Stock  Consideration  issued to Seller at Closing shall  constitute  "restricted
securities"  within the  meaning of Rule 144 of the  Securities  Act and will be
issued in a private  placement  transaction  in reliance upon the exemption from
the  registration  and  prospectus  delivery  requirements  of  Section 5 of the
Securities  Act afforded by Section 4(2) of the  Securities Act and Regulation D
promulgated  thereunder  and  pending  the  effectiveness  of  the  Registration
Statement,  will be subject to the following  legend to identify such  privately
placed shares as being  "restricted  securities"  under the  Securities  Act, to
comply with foreign, provincial, state and federal securities laws and to notice
the restrictions on transfer of such shares:

         "THE SHARES  REPRESENTED  BY THIS  CERTIFICATE  HAVE BEEN  ACQUIRED FOR
         INVESTMENT  AND HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES ACT OF
         1933, AS AMENDED (THE  "SECURITIES  ACT").  THESE SECURITIES MAY NOT BE
         SOLD,  TRANSFERRED,  ASSIGNED OR  HYPOTHECATED  UNLESS  THERE IS (A) AN
         EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING SUCH
         SECURITIES,  OR (B) A VALID  EXEMPTION  THEREFROM  AND THE  CORPORATION
         RECEIVES  AN  OPINION OF  COUNSEL  FOR THE  HOLDER OF THESE  SECURITIES
         REASONABLY  SATISFACTORY  TO THE  CORPORATION,  STATING THAT SUCH SALE,
         TRANSFER,  ASSIGNMENT OR  HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
         AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT."

                                       34
<PAGE>

     (e)  The  information  supplied  by  Parent  and  Buyer  for  inclusion  or
incorporation  by  reference in Hearing  Documents  will not, at the time of the
Fairness  Hearing,  contain any untrue  statement of a material  fact or omit to
state any material fact  required to be stated  therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made,  not  misleading.  In the event that Parent is required to issue the Stock
Consideration  hereunder  pursuant  to the Resale  Registration  Statement,  the
information  supplied by Seller and Parent for  inclusion  or  incorporation  by
reference in the Resale Registration  Statement will not, at the time the Resale
Registration  Statement  becomes  effective under the Securities Act contain any
untrue  statement of a material fact or omit to state any material fact required
to be stated  therein or necessary in order to make the statements  therein,  in
light of the circumstances under which they are made, not misleading.

     7.16 Proxy  Statement.  As promptly as  practicable  after the execution of
this  Agreement,  Seller  will  prepare and file a proxy  statement  (the "Proxy
Statement")  with the SEC.  Seller will  respond to any  comments of the SEC and
will cause the Proxy Statement to be mailed to its  stockholders at the earliest
practicable  time  after the  Permit is  received  (or the date of the  Fairness
Hearing if no Permit is issued at such  Fairness  Hearing).  Seller  will notify
Buyer promptly upon the receipt of any comments from the SEC or its staff or any
other  government  officials in connection  with any filing made pursuant hereto
and of any request by the SEC or its staff or any other government officials for
amendments or supplements to the Proxy  Statement or for additional  information
and will supply Buyer with copies of all correspondence between Seller 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 Proxy  Statement.
Seller will cause all documents that it is  responsible  for filing with the SEC
or other  regulatory  authorities  under  this  Section  7.16 to  comply  in all
material  respects  with all  applicable  requirements  of law and the rules and
regulations promulgated thereunder.  Whenever any event occurs which is required
to be set forth in an amendment or  supplement  to the Proxy  Statement,  Seller
will promptly  inform Buyer of such  occurrence and cooperate in filing with the
SEC or its staff or any other government  officials,  or mailing to stockholders
of Seller, such amendment or supplement.

                                       35
<PAGE>

     7.17  Meeting of  Seller's  Stockholders.

     (a) Seller will take all action  necessary in accordance  with Delaware Law
and its  certificate  of  incorporation  and  bylaws to  convene a meeting  (the
"Seller  Stockholders'  Meeting") of Seller's  stockholders to consider adoption
and approval of this  Agreement  and the  dissolution  or windingup of Seller's
business after the Closing in a manner providing for full payment to or adequate
provision for creditors in advance of any distribution to Seller's  stockholders
(the "Dissolution") to be held as promptly as practicable,  and in any event (to
the extent permissible under applicable law) within 45 days after the receipt of
the Permit (or the date of the  Fairness  Hearing in the event that no Permit is
issued at such Fairness  Hearing).  Subject to Section 7.17(c),  Seller will use
its commercially  reasonable efforts to solicit from its stockholders proxies in
favor of the adoption and approval of this Agreement and the  Dissolution and to
take all other  action  necessary  or advisable to secure the vote or consent of
its   stockholders   required  by  Delaware  Law  in  favor  of  such   matters.
Notwithstanding anything to the contrary contained in this Agreement, Seller may
adjourn or postpone the Seller Stockholders'  Meeting to the extent necessary to
ensure that any  necessary  supplement  or amendment  to the Proxy  Statement is
provided to Seller's stockholders in advance of a vote on this Agreement and the
Dissolution  or, if as of the time for which  Seller  Stockholders'  Meeting  is
originally   scheduled  (as  set  forth  in  the  Proxy   Statement)  there  are
insufficient shares of Seller's common stock represented (either in person or by
proxy) to  constitute  a quorum  necessary to conduct the business of the Seller
Stockholders' Meeting.  Seller shall ensure that Seller Stockholders' Meeting is
called, noticed, convened, held and conducted, and that all proxies solicited by
Seller in  connection  with  Seller  Stockholders'  Meeting  are  solicited,  in
compliance  with the Delaware Law,  Seller's  certificate of  incorporation  and
bylaws,  the  rules of  Nasdaq  and all  other  applicable  legal  requirements.
Seller's  obligation  to call,  give  notice  of,  convene  and hold the  Seller
Stockholders'  Meeting in  accordance  with this  Section  7.17(a)  shall not be
limited to or otherwise affected by the commencement,  disclosure,  announcement
or submission to Seller of any Acquisition Proposal (as defined in Section 7.8),
or by any withdrawal,  amendment or modification  of the  recommendation  of the
Board of Directors of Seller with respect to this Agreement and the Dissolution.

     (b) Subject to Section 7.17(c):  (i) the Board of Directors of Seller shall
recommend that Seller's  stockholders vote in favor of the adoption and approval
of  this   Agreement  and  the  approval  of  the   Dissolution  at  the  Seller
Stockholders' Meeting; (ii) the Proxy Statement shall include a statement to the
effect  that the Board of  Directors  of Seller has  recommended  that  Seller's
stockholders  vote in favor of the adoption and approval of this  Agreement  and
the Dissolution at Seller Stockholders'  Meeting; and (iii) neither the Board of
Directors of Seller nor any committee  thereof shall withdraw,  amend or modify,
or propose or resolve to withdraw, amend or modify in a manner adverse to Buyer,
the   recommendation   of  the  Board  of  Directors  of  Seller  that  Seller's
stockholders  vote in favor of the adoption and approval of this  Agreement  and
the approval of the Dissolution.

     (c)  Nothing in this  Agreement  shall  prevent the Board of  Directors  of
Seller from withholding,  withdrawing,  amending or modifying its recommendation
in favor of the adoption and approval of this  Agreement and the approval of the


                                       36
<PAGE>

     Dissolution  if (i) a Superior  Offer (as defined  below) is made to Seller
and is not withdrawn, (ii) Seller shall have provided written notice to Buyer (a
"Notice of Superior  Offer")  advising Buyer that Seller has received a Superior
Offer,  specifying  the material terms and conditions of such Superior Offer and
identifying the person or entity making such Superior  Offer,  (iii) Buyer shall
not have,  within  five (5)  business  days of Buyer's  receipt of the Notice of
Superior  Offer,  made an offer  that the  Board of  Directors  of  Seller  by a
majority  vote  determines  in its good faith  judgment  (based on,  among other
things, the advice of a financial adviser of nationally  recognized  reputation)
to be at least as favorable to Seller's  stockholders as such Superior Offer (it
being  agreed  that  Board of  Directors  of Seller  shall  convene a meeting to
consider any such offer by Buyer promptly  following the receipt thereof),  (iv)
the Board of Directors of Seller  concludes  in good faith,  after  consultation
with  its  outside  counsel,   that,  in  light  of  such  Superior  Offer,  the
withholding,  withdrawal,  amendment or modification of such  recommendation  is
required  in order for the  Board of  Directors  of  Seller  to comply  with its
fiduciary  obligations  to Seller's  stockholders  under  applicable law and (v)
neither  Seller nor any of its  representatives  shall have  violated any of the
restrictions  set forth in Section 7.8 or this Section 7.17 in  connection  with
such Superior  Offer.  Seller shall  provide Buyer with at least three  business
days' prior  notice (or such lesser  prior  notice as provided to the members of
Seller's  Board of Directors)  of any meeting of Seller's  Board of Directors at
which  Seller's  Board of  Directors  is  reasonably  expected to  consider  any
Acquisition  Transaction (as defined below).  Nothing  contained in this Section
shall limit  Seller's  obligation  to hold and convene the Seller  Stockholders'
Meeting  (regardless of whether the  recommendation of the Board of Directors of
Seller shall have been  withdrawn,  amended or  modified).  For purposes of this
Agreement "Superior Offer" shall mean a bona fide written offer not solicited by
Seller in  violation  of Section  7.8(a) to  acquire,  directly  or  indirectly,
including  pursuant to a tender offer,  exchange offer,  merger,  consolidation,
business  combination,  recapitalization,  liquidation,  dissolution  or similar
transaction,  for consideration  consisting of cash or securities,  either (x) a
majorityininterest of the total outstanding voting securities of Seller, if as
a result of such transaction,  the stockholders of Seller immediately  preceding
such transaction would hold less than fifty percent (50%) of the equity interest
in the surviving  corporation or resulting entity of such transaction or (y) all
or substantially  all the assets of Seller, on terms that the Board of Directors
of Seller determines,  in its good faith judgment (based on, among other things,
the advice of a financial  adviser of nationally  recognized  reputation)  to be
more  favorable  to  Seller's  stockholders  than the  terms of the  transaction
contemplated by this Agreement and is reasonably  capable of being  consummated;
provided,  however,  that any such offer  shall not be deemed to be a  "Superior
Offer" if any financing  required to consummate the transaction  contemplated by
such offer is not committed and is not likely in the judgment of Seller's  Board
of Directors to be obtained by the entity making such Acquisition  Proposal on a
timely basis.

     (d) Nothing  contained in this Agreement shall prohibit Seller or its Board
of  Directors  from  taking  and  disclosing  to  its  stockholders  a  position
contemplated by Rules 14d9 and 14e2(a) promulgated under the Exchange Act with
respect to a Superior  Offer;  provided,  however,  that the content of any such
disclosure shall not be inconsistent with the terms of this Agreement.

     7.18 Reasonable  Efforts.  Subject to the terms and conditions  provided in
this  Agreement,  each of the parties hereto shall use  commercially  reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,


                                       37
<PAGE>

or cause to be done, all things necessary,  proper or advisable  underapplicable
laws  and  regulations  to  consummate  and  make  effective  the   transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary  registrations and filings and to remove any injunctions
or other impediments or delays,  legal or otherwise,  in order to consummate and
make effective the  transactions  contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits  contemplated  by this Agreement;
provided  that no party to this  Agreement  shall  be  required  to agree to any
divestiture of shares of capital stock or of any business, assets or property of
Buyer or its Subsidiaries or affiliates or of Seller, as the case may be, or the
imposition  of any material  limitation on the ability of any of them to conduct
their  businesses or to own or exercise  control of such assets,  properties and
stock.

     7.19  Change of  Control  Agreements.  Upon the  written  request of Buyer,
Seller  shall  take  commercially  reasonable  actions  to have  any  Continuing
Employee waive any right under any change of control agreement with Seller that,
if not waived, would reasonably be expected to have the effect of providing such
Continuing  Employee in the future with similar  rights in  connection  with any
future change of control of Parent or Buyer.

     7.20 Post Closing Tax Covenants.

     (a) Subject to Section 7.20(c) below,  Seller and its Subsidiaries  will be
responsible  for the preparation and filing of all Tax Returns of Seller and its
Subsidiaries (including Tax Returns required to be filed after the Closing Date)
to the extent such Tax Returns  include or relate to the use or ownership of the
Acquired  Assets  by  Seller or any of its  Subsidiaries,  or to sales,  use and
employment  taxes.  The Tax Returns of Seller and its Subsidiaries to the extent
they relate to the Acquired Assets or to sales,  use and employment  taxes shall
be true,  complete and correct and prepared in accordance with applicable law in
all material  respects.  Seller and its Subsidiaries will be responsible for and
make all  payments  of Taxes  shown to be due on such Tax  Returns to the extent
they relate to the Acquired Assets or to sales, use and employment taxes.

     (b) Buyer will be  responsible  for the  preparation  and filing of all Tax
Returns it is required to file with  respect to Buyer's  ownership or use of the
Acquired Assets attributable to taxable periods (or portions thereof) commencing
on or after the Closing Date. Buyer's Tax Returns, to the extent they related to
the  Acquired  Assets,  shall be true,  complete  and  correct  and  prepared in
accordance  with  applicable law in all material  respects.  Buyer will make all
payments  of Taxes shown to be due on such Tax Returns to the extent they relate
to the Acquired Assets.

     (c) In the case of any real or personal  property  taxes (or other  similar
Taxes)  attributable to the Acquired Assets which returns cover a taxable period
commencing  before the Closing Date and ending  thereafter,  Buyer shall prepare
such  returns and make all  payments  required  with respect to any such return;
provided,  however,  Seller will promptly reimburse Buyer upon receipt of a copy
of the filed Tax return to the extent any payment made by Buyer  relates to that
portion of the taxable  period ending on or before the Closing Date which amount
shall be determined and prorated on a per diem basis.

                                       38
<PAGE>

     (d) To the extent  relevant to the  Acquired  Assets,  each party shall (i)
provide  the  other  with such  assistance  as may  reasonably  be  required  in
connection  with the  preparation of any Tax Return and the conduct of any audit
or other  examination by any taxing  authority or in connection with judicial or
administrative  proceedings  relating to any liability for Taxes and (ii) retain
and provide the other with all records or other information that may be relevant
to  the  preparation  of any  Tax  Returns,  or the  conduct  of  any  audit  or
examination,  or other proceeding relating to Taxes. Seller and its Subsidiaries
shall retain all documents,  including prior years' Tax Returns, supporting work
schedules and other records or  information  with respect to all sales,  use and
employment  tax  returns  and,  absent  the  receipt  by  Seller  or  any of its
Subsidiaries  of the  relevant  Sales Tax  Certificates,  shall not  destroy  or
otherwise  dispose of any such records for six (6) years after  closing  without
the prior written consent of Buyer or Parent.

     (e) Within  twenty (20) days of the date of this  Agreement,  Seller  shall
file or cause to be filed properly  completed  applications or other appropriate
forms of request with (i) California's Employment Development Department (or any
other appropriate or analogous  governmental  agency) to obtain a certificate of
release as authorized in, and pursuant to, California's  Unemployment  Insurance
Code  sections  1731 through and including  1734,  and, to the extent  available
under analogous law, a certificate of release or payment  pursuant to the law of
Washington state (the "Employment Tax Certificates") and (ii) California's State
Board of Equalization to obtain a certificate of receipt of payment of all sales
and use taxes as authorized  in and pursuant to California  Revenue and Taxation
Code sections 6811 through and including 6814 and, to the extent available under
analogous law, a certificate of payment  pursuant to the law of Washington state
(the "Sales and Use Tax Certificates").  The Employment Tax Certificates and the
Sales and Use Tax Certificates  are  collectively  referred to as the "State Tax
Certificates".

     7.21 Employee  Withholding.  Seller shall prepare and furnish to Continuing
Employees a Form W2 which  shall  reflect  all wages and  compensation  paid to
Continuing  Employees for that portion of the calendar year in which the Closing
Date occurs  during  which the  Continuing  Employees  were  employed by Seller.
Seller  shall  furnish  to  Parent  the  Forms  W4 and  W5 of each  Continuing
Employee.  Parent shall send to the appropriate  Social Security  Administration
office a duly completed Form W3 and  accompanying  copies of the duly completed
Forms W2. It is the intent of the parties  hereunder  that the  obligations  of
Parent and Seller  under this  Section  7.21 shall be carried out in  accordance
with Section 5 of Revenue Procedure 9660.

     7.22 Termination of Compaq  Agreement.  Prior to September 19, 2001, Seller
shall  deliver  a notice  of  termination  to  Compaq  Computer  Corporation  in
accordance  with Section 14.1 of the Web Appliance OEM License and  Distribution
Agreement  between Seller and Compaq.  Seller shall use commercially  reasonable
efforts to obtain the consent of Compaq to terminate all  maintenance  and other
obligations  that continue  beyond the end of the term.  Buyer shall  reasonably
cooperate in Seller's efforts to obtain such consent.

     7.23 Additional Documents and Further Assurances. Each party hereto, at the
request  of  another  party  hereto,   shall  execute  and  deliver  such  other
instruments  and do and perform such other acts and things as may be  reasonably
necessary or desirable for effecting the  consummation of this Agreement and the
transactions contemplated hereby. Without limiting the foregoing, at any time or
from time to time after the  Closing,  at Buyer's  request and  expense,  Seller


                                       39
<PAGE>

shall at the  expense  of Buyer:  (i)  execute  and  deliver to Buyer such other
instruments of sale,  transfer,  conveyance,  assignment and confirmation;  (ii)
provide such materials and information;  (iii) take such other actions, as Buyer
may  reasonably  deem  necessary or desirable in order  effectively to transfer,
convey and assign to Buyer,  to confirm  Buyer's  title to, all of the  Acquired
Assets,  and,  to the full  extent  permitted  by law,  to put  Buyer in  actual
possession  and  operating  control of the  Acquired  Assets;  and (iv)  provide
reasonable assistance and information in connection with the filing, prosecution
and enforcement of the Transferred  Intellectual  Property Rights.  In the event
Seller is unable or unwilling  to execute any  document  described in clause (i)
above,  Seller hereby  appoints  Buyer as its  attorneyinfact  to execute such
documents on its behalf.  Such appointment  shall be deemed a power coupled with
an interest and is therefore  irrevocable.  Buyer shall only exercise such power
if Seller fails to execute the  necessary  document  within thirty (30) business
days of Buyer's written request to do so.

     7.24  Disclosure  by  Seller.  None of the  information  supplied  or to be
supplied by or on behalf of Seller for inclusion or  incorporation  by reference
in the Hearing Documents or the Resale  Registration  Statement (each as defined
in Section  7.15)  will,  at the time the Hearing  Documents  are filed with the
California  Commissioner of Corporations or at the time of the Fairness  Hearing
(or at the time the Resale  Registration  Statement  is filed with the SEC or at
the time it becomes effective under the Securities Act, if applicable),  contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in the light of the  circumstances  under  which  they are  made,  not
misleading.  None of the information  supplied or to be supplied by or on behalf
of Seller for inclusion or  incorporation by reference in the Proxy Statement to
be filed with the SEC,  will,  at the time the Proxy  Statement is mailed to the
stockholders of Seller, at the time of the Seller Stockholders' Meeting or as of
the Closing  Date,  contain any untrue  statement of a material  fact or omit to
state any material fact  required to be stated  therein or necessary in order to
make the statements  therein, in the light of the circumstances under which they
are made,  not  misleading.  The Proxy  Statement  will comply as to form in all
material  respects  with the  provisions  of the  Exchange Act and the rules and
regulations promulgated by the SEC thereunder,  except that no representation or
warranty is made by Seller with respect to statements  made or  incorporated  by
reference therein based on information supplied by Parent or Buyer for inclusion
or incorporation by reference in the Proxy Statement.

     7.25 Disclosure by Buyer or Parent. None of the information  supplied or to
be supplied by or on behalf of Parent or Buyer for inclusion or incorporation by
reference in the Hearing Documents or the Resale Registration Statement will, at
the time the Hearing  Documents are filed with the  California  Commissioner  of
Corporations  or at the time of the Fairness  Hearing (or at the time the Resale
Registration   Statement   becomes   effective  under  the  Securities  Act,  as
applicable),  contain any untrue  statement of a material  fact or omit to state
any material  fact  required to be stated  therein or necessary in order to make
the statements  therein,  in the light of the circumstances under which they are
made, not misleading.  None of the information  supplied or to be supplied by or
on behalf of Parent or Buyer for inclusion or  incorporation by reference in the
Proxy  Statement to be filed with the SEC, will, at the time the Proxy Statement
is  mailed  to the  stockholders  of  Seller,  or at  the  time  of  the  Seller
Stockholders'  Meeting,  contain any untrue statement of a material fact or omit


                                       40
<PAGE>

to state any material fact  required to be stated  therein or necessary in order
to make the statements  therein,  in the light of the circumstances  under which
they are made, not misleading. The Hearing Documents and the Resale Registration
Statement,  as applicable,  will comply as to form in all material respects with
the  provisions of the California  Corporations  Code and the Securities Act and
the  rules  and  regulations  promulgated  by  the  California  Commissioner  of
Corporations and the SEC thereunder,  except that no  representation or warranty
is made by Parent or Buyer with respect to statements  made or  incorporated  by
reference  therein  based on  information  supplied by Seller for  inclusion  or
incorporation by reference in the Proxy Statement.

     7.26  Sublicensing  Requirements.  To the extent  that  Seller was not able
prior to the Closing Date to identify all material Sublicensing Requirements or,
upon  receipt  of Buyer's  written  authorization  to do so, to comply  with the
Sublicensing  Requirements for the Licensed  Intellectual  Property specified in
Buyer's  authorization,  Seller  shall do so until  the  earlier  of (a) six (6)
months  after  the  Closing  Date or (b) the  date on  which  Seller  files  its
certificate of dissolution with the Secretary of State of the State of Delaware;
provided,  however,  that, with respect to those Sublicensing  Restrictions that
require the consent,  approval or other action of any third party,  Seller shall
only be  required  to use  commercially  reasonable  efforts to comply with such
Sublicensing Restrictions.

     7.27 Supplemental  Transferred Contracts. At any time prior to the Closing,
if Buyer  elects,  in its sole  discretion,  to  assume  one or more  additional
Eligible  Contracts of Seller by delivering a written notice of such election to
Seller,  Seller  agrees  that such an  Eligible  Contract  shall  thereafter  be
considered a Transferred Contract hereunder, unless Seller reasonably determines
in good faith that Seller cannot transfer such Eligible Contract to Buyer due to
a change in  circumstances  between the date of this  Agreement  and the date of
Buyer's  written  notice.  Seller shall deliver true and complete  copies of all
Supplemental Transferred Contracts to Buyer.


                                   ARTICLE 8

                            CONDITIONS TO THE CLOSING

     8.1 Conditions to Obligations of Each Party. The respective  obligations of
Parent, Buyer and Seller to effect the transactions contemplated hereby shall be
subject  to the  satisfaction,  at or prior  to the  Closing,  of the  following
conditions,  any of which may be waived, in writing, by Parent and Buyer (on the
one hand) and Seller (on the other hand):

     (a)  No  Order.  No  Governmental   Entity  shall  have  enacted,   issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary,  preliminary or permanent)
which  is in  effect  and  which  has the  effect  of  making  the  transactions
contemplated  hereby illegal or otherwise  prohibiting  the  consummation of the
transactions contemplated hereby.

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<PAGE>

     (b) No  Injunctions  or Restraints;  Illegality.  No temporary  restraining
order, preliminary or permanent injunction or other order issued by any court of
competent  jurisdiction or other legal  restraint or prohibition  preventing the
consummation of the  transactions  contemplated  hereby shall be in effect,  nor
shall  any  proceeding  brought  by a  Governmental  Entity  seeking  any of the
foregoing be pending.

     (c)  Stockholder  Approval.  This  Agreement  shall have been  approved and
adopted,  and the  Dissolution  shall have been duly approved,  by the requisite
vote under  applicable law and the certificate of incorporation of Seller by the
stockholders of Seller.

     (d)  Governmental   Approval.   Any  governmental  or  regulatory  notices,
approvals  or  other  requirements  necessary  to  consummate  the  transactions
contemplated  hereby and shall have been given,  obtained or complied  with,  as
applicable.

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

     (a) Representations,  Warranties and Covenants. (i) The representations and
warranties of Seller in this  Agreement  shall have been true and correct on the
date they were made and shall be true and correct on and as of the Closing  Date
as though such  representations and warranties were made on and as of such date,
except in either case to the extent that the  aggregate of all breaches  thereof
has not had and would not  reasonably  be  expected  to have a Material  Adverse
Effect (without giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein) and except to the extent such representations
and warranties  address matters as of a particular date or period, in which case
such representations and warranties shall be true and correct as of such date or
period  (and in any event,  subject to the  foregoing  Material  Adverse  Effect
qualification),  and (ii)  Seller  shall  have  performed  and  complied  in all
material  respects  with all  covenants  and  obligations  under this  Agreement
required to be performed and complied with by Seller as of the Closing.

     (b)  Litigation.  There  shall be no action  or  proceeding  of any  nature
pending or threatened  with respect to the Acquired Assets against Seller or any
of its  Subsidiaries  where such action is reasonably  likely to have a Material
Adverse Effect.

     (c) Opinion of Financial Advisor. Buyer shall have received an opinion of a
financial advisor or appraiser,  in form and substance reasonably  acceptable to
Buyer,  that (i) Seller is not  insolvent as of the Closing  Date,  and (ii) the
sale of the Acquired  Assets will not cause  Seller to be insolvent  immediately
following  the  Closing.  Notwithstanding  anything  to  the  contrary  in  this
Agreement,  Buyer shall bear and incur all costs related to the issuance of such
opinion,  and Buyer agrees that any opinion in substantially the form of Exhibit
D hereto shall presumptively be deemed to be acceptable to Buyer.

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<PAGE>

     (d) New  Employment  Arrangements.  At  least  seven  of the Key  Employees
(provided that such seven Key Employees  include both Key Employees set forth on
Schedule 8.2(d)) and at least 33 of the Designated  Employees other than the Key
Employees shall have entered into "atwill" employment  arrangements with Parent
pursuant to their  execution of an Offer Letter and shall be employees of Seller
immediately prior to the Closing. In addition, effective as of the Closing Date,
Seller shall have  terminated all employment  agreements and other  arrangements
with the  Continuing  Employees and waived all of its rights with respect to any
duty of  confidentiality  owed to Seller by any such  Continuing  Employee  with
respect to the Acquired Assets or any other intellectual  property or technology
of Seller.

     (e)  NonCompetition  Agreements.  Each of the Key  Employees  set forth on
Schedule 8.2(e) shall have executed  NonCompetition  Agreements concurrent with
the execution and delivery of this Agreement and such NonCompetition Agreements
shall be in full force and effect as of the Closing Date.

     (f) Certificate of Seller. Buyer shall have received a certificate, validly
executed  by a duly  authorized  officer of Seller  for and on its  behalf  (the
"Certificate  of Seller"),  to the effect that,  as of the Closing,  each of the
conditions  specified in Section 8.2(a) and Section 8.2(b) have been  satisfied.

     (g)  Certificate  of  Secretary  of Seller.  Buyer  shall  have  received a
certificate,  validly executed by the Secretary of Seller,  certifying as to (i)
the terms and  effectiveness of the certificate of incorporation  and the bylaws
of Seller,  (ii) the valid  adoption of resolutions of the Board of Directors of
Seller  approving this  Agreement,  and (iii) the valid adoption and approval of
this Agreement and approval of the Dissolution by the stockholders of Seller.

     (h) Prepaid Service  Payment Update.  Buyer shall have received from Seller
the Prepaid  Service  Payment Update  pursuant to Section 7.14.

     (i) Deliveries. Seller shall have delivered to Buyer executed copies of the
Collateral Agreements.

     (j) State Tax Certificates. Buyer shall have received from Seller certified
copies  of the  completed  and date  stamped  applications  or  filings  made in
satisfaction  of the  covenant  in Section  7.20 (e) or, if  received,  true and
complete copies of the State Tax Certificates

     8.3  Additional  Conditions to Obligations  of Seller.  The  obligations of
Seller to consummate and effect the  transactions  contemplated  hereby shall be
subject to the  satisfaction at or prior to the Closing of each of the following
conditions,  any of which may be waived, in writing,  exclusively by Seller:

     (a) Representations,  Warranties and Covenants. (i) The representations and
warranties  of  Parent  and  Buyer in this  Agreement  shall  have been true and
correct  on the date they were made and shall be true and  correct  on and as of
the Closing Date as though such  representations and warranties were made on and


                                       43
<PAGE>

as of such date,  except in either case to the extent that the  aggregate of all
breaches  thereof  has not had and would not  reasonably  be  expected to have a
material  adverse  effect  on  Parent  or Buyer  (without  giving  effect to any
limitation as to "materiality"  or "material  adverse effect" set forth therein)
and except to the extent such  representations and warranties address matters as
of a  particular  date  or  period,  in  which  case  such  representations  and
warranties  shall be true and  correct  as of such  date or  period  (and in any
event, subject to the foregoing material adverse effect qualification), and (ii)
Parent and Buyer shall have performed and complied in all material respects with
all covenants and obligations under this Agreement  required to be performed and
complied with by Parent or Buyer as of the Closing.

     (b)  Certificate  of  Parent  and  Buyer.  Seller  shall  have  received  a
certificate,  validly executed by an executive  officer of both Parent and Buyer
for and on behalf of each of them (the  "Certificate  of Buyer"),  to the effect
that, as of the Closing, each of the conditions specified in Section 8.3(a) have
been satisfied.

     (c)  Certificate  of  Secretaries  of Parent and Buyer.  Seller  shall have
received certificates,  validly executed by the Secretaries of Parent and Buyer,
certifying  as to  (i)  the  terms  and  effectiveness  of the  certificates  of
incorporation and the bylaws of Parent and Buyer, and (ii) the valid adoption of
resolutions  of the Board of  Directors  of  Parent  and  Buyer  approving  this
Agreement.

     (d) Deliveries. Buyer shall have delivered to Seller executed copies of the
Collateral Agreements.

     (e) Securities  Approvals.  Parent shall have received all state securities
laws or "blue  sky"  permits  and  authorizations  necessary  to issue the Stock
Consideration.

     (f)  Fairness  Hearing.  The Fairness  Hearing  shall have been held by the
Commissioner  of  Corporations  of the State of California and the Permit sought
therein shall have been issued by the State of California, and Parent shall have
duly  authorized  and issued and made  available  for  delivery to Seller at the
Closing a stock  certificate  that in form and substance is sufficient to enable
Seller to  immediately  sell on the open  market the shares of  Parent's  common
stock comprising the Stock Consideration;  provided,  however, that in the event
that, within five (5) business days following the Fairness Hearing, Parent shall
not have  received a  favorable  determination  in such  Fairness  Hearing and a
Permit covering all of the Stock  Consideration to be issued in the transactions
contemplated  by this Agreement  such that the issuance  qualifies for exemption
under  the  3(a)(10)  Exemption,  this  condition  shall be  deemed to have been
satisfied if Parent duly and validly issues the Stock Consideration to Seller in
a transaction  exempt from the registration  requirements of the Securities Act,
and provides Seller with evidence reasonably  satisfactory to Seller that Parent
is prepared to file the Resale Registration  Statement immediately following the
Closing.


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<PAGE>

                                   ARTICLE 9

           SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

     9.1   Survival  of   Representations,   Warranties   and   Covenants.   The
representations and warranties of Seller contained in this Agreement,  or in the
Certificate  of  Seller,  shall  terminate  on the  earliest  of (i)  the  first
anniversary  of the  Closing  Date,  (ii)  the date on which  Seller  files  its
certificate  of dissolution  with the Delaware  Secretary of State and (iii) the
date 15 days following the delivery of a Dissolution Notice; provided,  however,
that a termination  pursuant to clause (iii) shall be rescinded if a certificate
of dissolution is not filed with the Delaware  Secretary of State within 30 days
following the delivery of such Dissolution Notice. A "Dissolution  Notice" shall
mean a notice  delivered  by  Seller to Buyer  indicating  Seller's  good  faith
intention to file a certificate  of dissolution  with the Delaware  Secretary of
State within 30 days. The  representations  and warranties of Buyer contained in
this Agreement,  or in any certificate or other instrument delivered pursuant to
this Agreement, shall terminate at the Closing.

     9.2  Indemnification.  Seller agrees to indemnify and hold Parent and Buyer
and their  respective  officers,  directors and  affiliates  (collectively,  the
"Indemnified  Parties"),  harmless  against  all  claims,  losses,  liabilities,
damages, deficiencies,  costs and expenses, including reasonable attorneys' fees
and expenses of investigation and defense (hereinafter individually a "Loss" and
collectively  "Losses") incurred or sustained by the Indemnified Parties, or any
of them,  arising out of (i) any breach or  inaccuracy  of a  representation  or
warranty of Seller  contained in this  Agreement as of the date hereof and as of
the Closing Date or in the Certificate of Seller,  (ii) any failure by Seller to
perform  or  comply  with any  covenant  given or made by it  contained  in this
Agreement,  or (iii) any failure on the part of Seller to perform and  discharge
in full the Excluded Liabilities.

     9.3 Indemnification Procedure. An Indemnified Party seeking indemnification
pursuant to Section 9.2 shall deliver an Officer's Certificate to Seller. Seller
may object to such claim by written notice to such Indemnified  Party specifying
the basis for Seller's  objection,  within thirty (30) days following receipt by
Seller of  notice  from such  Indemnified  Party  regarding  such  claim.  If no
objection is made, Seller shall promptly pay the claim. For the purposes hereof,
"Officer's  Certificate"  shall mean a  certificate  signed in good faith by any
executive  officer  of Buyer:  (1)  stating  that  Buyer  has  paid,  sustained,
incurred,  or properly accrued,  or reasonably  anticipates that it will have to
pay, sustain,  incur, or accrue Losses,  and (2) specifying in reasonable detail
the individual  items of Losses included in the amount so stated,  the date each
such item was paid,  sustained,  incurred, or properly accrued, or the basis for
such anticipated liability,  and the nature of the misrepresentation,  breach of
warranty or covenant or Excluded Liability to which such item is related.

     9.4 Resolution of Conflicts; Arbitration.

     (a) In case Seller  shall  object in writing to any claim or claims made in
any  Officer's  Certificate  to recover  Losses  within  thirty  (30) days after
delivery of such Officer's  Certificate,  Seller and Buyer shall attempt in good


                                       45
<PAGE>

faith to agree upon the rights of the respective parties with respect to each of
such claims.  If Seller and Buyer should so agree,  a memorandum  setting  forth
such  agreement  shall be prepared  and signed by both  parties and Seller shall
promptly pay to the  Indemnified  Party the amount of the claim agreed upon,  if
any.

     (b) If no such  agreement can be reached after good faith  negotiation  and
prior to sixty (60) days after  delivery of an Officer's  Certificate,  Buyer or
Seller may demand  arbitration of the matter unless the amount of the Loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be  commenced  until such amount is  ascertained  or both  parties  agree to
arbitration, and in either such event the matter shall be settled by arbitration
conducted by one arbitrator mutually agreeable to Buyer and Seller. In the event
that,  within thirty (30) days after  submission of any dispute to  arbitration,
Buyer and Seller cannot mutually agree on one arbitrator,  then,  within fifteen
(15) days after the end of such thirty (30) day period,  Buyer and Seller  shall
each select one arbitrator. The two arbitrators so selected shall select a third
arbitrator. If Seller does not select an arbitrator during this fifteen (15) day
period,  then the parties  agree that the  arbitration  will be conducted by one
arbitrator selected by Buyer.

     (c) Any such arbitration  shall be held in Santa Clara County,  California,
under the rules  then in effect of the  American  Arbitration  Association.  The
arbitrator(s) shall determine how all expenses relating to the arbitration shall
be paid,  including without  limitation,  the respective expenses of each party,
the  fees  of  each  arbitrator  and  the  administrative  fee of  the  American
Arbitration  Association.  The  arbitrator or  arbitrators,  as the case may be,
shall set a limited time period and establish  procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity,  adequate
in the sole judgment of the arbitrator or majority of the three arbitrators,  as
the case may be, to discover  relevant  information  from the  opposing  parties
about the subject  matter of the dispute.  The  arbitrator  or a majority of the
three  arbitrators,  as the case may be,  shall  rule upon  motions to compel or
limit  discovery  and shall have the  authority to impose  sanctions,  including
attorneys'  fees and costs,  to the same extent as a  competent  court of law or
equity,  should the arbitrators or a majority of the three  arbitrators,  as the
case  may  be,   determine  that   discovery  was  sought  without   substantial
justification  or that discovery was refused or objected to without  substantial
justification.  The  decision  of the  arbitrator  or a  majority  of the  three
arbitrators,  as the case may be, as to the  validity and amount of any claim in
such Officer's  Certificate  shall be final,  binding,  and conclusive  upon the
parties to this Agreement. Such decision shall be written and shall be supported
by written  findings  of fact and  conclusions  which shall set forth the award,
judgment, decree or order awarded by the arbitrator(s).  Within thirty (30) days
of a decision of the  arbitrator(s)  requiring  payment by one party to another,
such party shall make the payment to such other  party.

     (d) Judgment upon any award rendered by the arbitrator(s) may be entered in
any court having jurisdiction.

     9.5  ThirdParty  Claims.  In the event Buyer  becomes aware of a thirdparty
claim which Buyer reasonably believes is reasonably likely to result in a demand


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<PAGE>

for  indemnification  pursuant to this ARTICLE 9, Buyer shall  notify  Seller in
writing  of such  claim,  and  Seller  shall be  entitled,  at its  expense,  to
participate  in, but not to  determine  or  conduct,  the defense of such claim.
Buyer shall have the right in its sole  discretion to conduct the defense of and
settle any such claim;  provided,  however, that except with the written consent
of Seller,  no settlement of any such claim with  thirdparty  claimants shall be
determinative of the amount of Losses relating to such matter. In the event that
Seller  has  consented  to any such  settlement,  Seller  shall have no power or
authority to object  under any  provision of this ARTICLE 9 to the amount of any
claim by Buyer against Seller with respect to such settlement.

     9.6 Maximum Payments;  Remedy.

     (a) Except  with  respect to (A) any  Excluded  Liabilities,  and (B) Taxes
referred  to in Section 3.4 and 5.14 that are owed by Seller and which Buyer may
become  obligated to pay, the aggregate  maximum amount the Indemnified  Parties
may recover from Seller  pursuant to the  indemnity  set forth in Section 9.2 or
otherwise  for Losses,  or  otherwise  in respect of any  breaches of any of the
representations,   warranties  or  covenants  of  Seller  hereunder  or  in  the
Certificate of Seller, shall be limited to $3,300,000.

     (b) The maximum  amount an  Indemnified  Party may  recover  from Seller in
respect of Losses arising out of any Excluded  Liabilities shall not be limited.

     (c) Without  limiting the effect of any of the other  limitations set forth
herein,  Seller  shall  not be  required  to make  any  indemnification  payment
hereunder  until  such time as the total  amount  of all  Losses  that have been
suffered or incurred by any one or more of the Indemnified  Parties and to which
any Indemnified Party is entitled to indemnification  hereunder, or to which any
one or more of the Indemnified Parties has or have otherwise become subject with
respect to which any Indemnified Party is entitled to indemnification hereunder,
exceeds  $100,000 in the  aggregate,  at which point Seller shall  indemnify the
full  amount of such  claims  and all  claims  thereafter,  subject to any other
applicable limitations under this ARTICLE 9.

     (d) The right of Parent  and Buyer  hereto  and their  related  Indemnified
Parties to assert  indemnification claims and receive  indemnification  payments
pursuant  to this  ARTICLE 9 shall be the sole and  exclusive  right and  remedy
exercisable  by Parent  and Buyer  with  respect  to any breach by Seller of any
representation,  warranty or covenant  hereunder or other matter with respect to
which such indemnification is provided;  provided,  however,  that the foregoing
clause of this sentence shall not be deemed a waiver by any Indemnified Party of
any right to specific  performance or injunctive  relief, or any right or remedy
they may otherwise have against any Person that has committed fraud with respect
to this Agreement.

     (e) Nothing herein shall limit the liability of Seller, Buyer or Parent for
any breach or inaccuracy of any  representation,  warranty or covenant contained
in this  Agreement  if the Closing does not occur.

     9.7 Liability of Parent and Buyer.  The fact that neither  Parent nor Buyer
is obligated to indemnify Seller hereunder shall not be construed so as to limit
the rights or remedies that Seller may otherwise  have against  Parent or Buyer,
whether under this  Agreement or applicable  law, in the event of (a) any breach


                                       47
<PAGE>

or inaccuracy of a  representation  or warranty of Parent or Buyer  contained in
this  Agreement or in the  Certificate  of Buyer,  (ii) any failure by Parent or
Buyer to perform  or comply  with any  covenant  given or made by either of them
contained  in this  Agreement,  or  (iii)  any  failure  on the part of Buyer to
perform and discharge in full the Assumed Liabilities.


                                   ARTICLE 10

                        TERMINATION, AMENDMENT AND WAIVER

     10.1 Termination. Except as provided in Section 10.3, this Agreement may be
terminated and the transactions  contemplated hereby abandoned at any time prior
to  the  Closing  whether  before  or  after  the  requisite   approval  of  the
stockholders of Seller:

     (a) by mutual written consent duly authorized by the Boards of Directors of
Parent,  Buyer and Seller;

(b) by any party if the Closing  Date shall not have
occurred  by  November  30,  2001 (the "End  Date")  for any  reason;  provided,
however,  that the right to terminate this Agreement  under this Section 10.1(b)
shall not be  available  to any party  whose  (or whose  affiliate's)  action or
failure to act has been a  principal  cause of or resulted in the failure of the
Closing  Date to occur on or before  such date and such action or failure to act
constitutes  a  material  breach  of  this  Agreement;

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

 (d) by any
party if (i) the Seller  Stockholders'  Meeting  (including any adjournments and
postponements  thereof) shall not have been held and completed  prior to the End
Date or shall have been held and completed and the  stockholders of Seller shall
have taken a final vote on a proposal to adopt and approve  this  Agreement  and
the transactions contemplated by this Agreement; and (ii) this Agreement and the
transactions  contemplated  by this  Agreement  shall not have been  adopted and
approved at the Seller  Stockholders'  Meeting  (and shall not have been adopted
and  approved  at any  adjournment  or  postponement  thereof)  by the  required
approval of the  stockholders of Seller;  provided,  however,  that the right to
terminate  this Agreement  under this Section  10.1(d) shall not be available to
Seller where the failure to hold the Seller Stockholders'  Meeting and to obtain
Seller stockholder  approval shall have been caused by (A) the action or failure
to act of Seller  and such  action or  failure  to act  constitutes  a breach by
Seller of this  Agreement or (B) a material  breach of any Support  Agreement by
any party thereto other than Buyer; provided further, however, that the right to
terminate  this Agreement  under this Section  10.1(d) shall not be available to
Parent or Buyer where the failure to hold the Seller  Stockholders'  Meeting and
to obtain Seller  stockholder  approval  shall have been caused by the action or
failure to act of Parent or Buyer and such action or failure to act  constitutes
a breach by Parent or Buyer of this  Agreement;

                                       48
<PAGE>

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

     (f) by Seller  (at any time  prior to the  adoption  and  approval  of this
Agreement  and the  approval  of the  Dissolution  by the  required  vote of the
stockholders of Seller) if Parent shall have breached (and failed to cure within
10 days after notice of such breach is delivered by Seller to Parent) any of its
obligations under the Funding Agreement;

     (g) by Seller  (at any time  prior to the  adoption  and  approval  of this
Agreement  and the  approval  of the  Dissolution  by the  required  vote of the
stockholders  of Seller) in the event that (i)  within  five (5)  business  days
following  the  Fairness  Hearing,  Parent  shall not have  received a favorable
determination  in such Fairness  Hearing and a Permit  covering all of the Stock
Consideration  to be issued in the  transactions  contemplated by this Agreement
such that the issuance  qualifies for exemption under the 3(a)(10) Exemption and
(ii) Parent shall not have  obtained the Waiver  within ten (10)  business  days
following the Fairness Hearing;

     (h) by Buyer, upon a breach of any  representation,  warranty,  covenant or
agreement  on the  part  of  Seller  set  forth  in  this  Agreement,  or if any
representation  or warranty of Seller shall have become  untrue,  in either case
such that the  conditions  set forth in Section 8.2(a) would not be satisfied by
the End Date, provided, that if such inaccuracy in Seller's  representations and
warranties or breach by Seller is curable by Seller  through the exercise of its
commercially  reasonable  efforts,  then Buyer may not terminate  this Agreement
under this Section 10.1(h) prior to the End Date,  provided Seller  continues to
exercise  commercially   reasonable  efforts  to  cure  such  breach  (it  being
understood  that  Buyer  may  not  terminate  this  Agreement  pursuant  to this
paragraph (h) if it shall have  materially  breached  this  Agreement or if such
breach by Seller is cured  prior to the End  Date);  and

     (i) by Seller, upon a breach of any representation,  warranty,  covenant or
agreement on the part of Parent or Buyer set forth in this Agreement,  or if any
representation  or  warranty of Parent or Buyer  shall have  become  untrue,  in
either case such that the  conditions  set forth in Section  8.3(a) would not be
satisfied  by the End Date,  provided,  that if such  inaccuracy  in Parent's or
Buyer's  representations  and warranties or breach by Parent or Buyer is curable
by Parent or Buyer through the exercise of its commercially  reasonable efforts,
then Seller may not terminate this Agreement under this Section 10.1(i) prior to
the End  Date,  provided  Parent  or Buyer  (as the case  may be)  continues  to
exercise  commercially   reasonable  efforts  to  cure  such  breach  (it  being
understood  that  Seller  may not  terminate  this  Agreement  pursuant  to this
paragraph (i) if it shall have  materially  breached  this  Agreement or if such
breach by Parent or Buyer is cured prior to the End Date).

     For the purposes of this Agreement,  a "Seller  Triggering  Event" shall be
deemed  to have  occurred  if:  (i) the  Board of  Directors  of  Seller  or any
committee  thereof shall for any reason have  withdrawn or shall have amended or
modified  in a  manner  adverse  to  Buyer  its  recommendation  in favor of the
adoption and approval of this Agreement or the approval of the Dissolution; (ii)
Seller shall have failed to include in the Proxy Statement the recommendation of


                                       49
<PAGE>

the Board of  Directors  of Seller in favor of the  adoption and approval of the
Agreement and the approval of the  Dissolution;  (iii) the Board of Directors of
Seller  fails to  reaffirm  its  recommendation  in favor  of the  adoption  and
approval of the  Agreement and the approval of the  Dissolution  within ten (10)
days after Buyer  requests in writing  that such  recommendation  be  reaffirmed
following the public announcement of an Acquisition Proposal;  (iv) the Board of
Directors of Seller or any committee  thereof shall have approved or recommended
any  Acquisition  Proposal;  or (v) a  tender  or  exchange  offer  relating  to
securities  of Seller shall have been  commenced by a Person  unaffiliated  with
Buyer and Seller  shall not have sent to its  securityholders  pursuant  to Rule
14e2  promulgated  under the Securities Act, within ten (10) business days after
such  tender or exchange  offer is first  published  sent or given,  a statement
disclosing  that Seller  recommends  rejection of such tender or exchange offer.

     10.2 Notice of Termination. Any termination of this Agreement under Section
10.1 will be effective  immediately  upon the delivery of written notice thereof
by the  terminating  party  to the  other  parties  hereto  (or,  in the case of
termination  pursuant  to  Section  10.1(h)  or  Section  10.1(i),  on the  date
specified therein).

     10.3 Effect of  Termination.  In the event of termination of this Agreement
as provided in Section 10.1,  this  Agreement  shall  forthwith  become void and
there shall be no liability or obligation  on the part of any party  hereto,  or
its affiliates,  officers,  directors or stockholders,  provided that each party
shall remain liable for any breaches of this Agreement prior to its termination;
and provided further that, the provisions of Section 7.4, Section 7.10,  ARTICLE
11 and this Section 10.3 of this Agreement shall remain in full force and effect
and survive any termination of this Agreement. Notwithstanding the foregoing, no
termination  of this  Agreement  shall relieve any party from  liability for any
breach hereof prior to such termination.


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

     10.5 Extension; Waiver. At any time prior to the Closing, Buyer, on the one
hand, and Seller,  on the other hand,  may, to the extent legally  allowed,  (i)
extend the time for the performance of any of the obligations of the other party
hereto,  (ii) waive any inaccuracies in the  representations and warranties made
to such party contained herein or in any document delivered pursuant hereto, and
(iii) waive  compliance with any of the agreements or conditions for the benefit
of such party contained  herein.  Any agreement on the part of a party hereto to
any such  extension or waiver shall be valid only if set forth in an  instrument
in writing signed on behalf of such party.


                                   ARTICLE 11

                                     GENERAL

11.1 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered  personally or by commercial messenger or
courier  service,  or mailed by  registered  or certified  mail (return  receipt


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requested) or sent via facsimile (with acknowledgment of complete  transmission)
to the parties at the following  addresses (or at such other address for a party
as shall be specified by like notice);  provided,  however, that notices sent by
mail will not be deemed given until received:

     (a) if to Buyer, to:

                           Palm, Inc.
                           5470 Great America Parkway
                           Santa Clara, California  95052
                           Attention: General Counsel
                           Telephone No.: (408) 8789000
                           Facsimile No.:  (408) 8782750

                           with a copy to:

                           Wilson Sonsini Goodrich & Rosati
                           Professional Corporation
                           650 Page Mill Road
                           Palo Alto, California 94304
                           Attention:  Katharine A. Martin, Esq.
                                          Robert Sanchez, Esq.
                           Telephone No.: (650) 4939300
                           Facsimile No.: (650) 4936811

     (b) if to Seller, to:


                           Be Incorporated
                           800 El Camino Real
                           Menlo Park, California 94025
                           Attention: General Counsel
                           Telephone No.: (650) 4624100
                           Facsimile No.:  (650) 4624129

                           with a copy to:

                           Cooley Godward LLP
                           5 Palo Alto Square
                           3000 El Camino Real
                           Palo Alto, California 94306
                           Attention:  David Lipkin, Esq.
                           Telephone No.:  (650) 8435000
                           Facsimile No.:   (650) 8497400

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     11.2 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
Seller Disclosure Schedule,  the Parent Disclosure  Schedule,  the NonDisclosure
Agreement, the Collateral Agreements and the documents and instruments and other
agreements among the parties hereto referenced herein: (i) constitute the entire
agreement  among the  parties  with  respect to the  subject  matter  hereof and
supersede all prior agreements and  understandings  both written and oral, among
the parties with respect to the subject matter hereof;  (ii) are not intended to
confer upon any other person any rights or remedies  hereunder;  and (iii) shall
not be assigned by operation of law or  otherwise,  except that Buyer may assign
its rights and delegate its obligations hereunder to Parent.

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

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

     11.5 GOVERNING  LAW. THIS  AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

     11.6  Jurisdiction  and  Venue.  Each  of the  parties  hereto  irrevocably
consents to the exclusive jurisdiction and venue of any court within Santa Clara
County, State of California, in connection with any matter based upon or arising
out of this Agreement or the matters  contemplated  herein,  agrees that process
may be served  upon them in any  manner  authorized  by the laws of the State of
California  for such persons and waives and covenants not to assert or plead any
objection which they might otherwise have to such  jurisdiction,  venue and such
process.

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

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

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     11.9 Fees and Expenses. Except as otherwise provided herein, whether or not
the transactions  contemplated herein are consummated,  all expenses,  including
without limitation all legal,  accounting,  financial  advisory,  consulting and
other fees,  incurred in connection with the negotiation or effectuation of this
Agreement or consummation of such  transactions,  shall be the obligation of the
respective party incurring such expenses.

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

                  [Remainder of Page Intentionally Left Blank]


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     IN WITNESS WHEREOF,  this Agreement has been executed by the parties hereto
as of the date first above written.

                           Palm, Inc.
                           By:/s/ CARL YANKOWSKI
                           Name: Carl Yankowski
                           Title: Chief Executive Officer

                           Be Incorporated
                           By:/s/ JEAN-LOUIS F. GASSEE
                           Name:Jean-Louis F. Gassee
                           Title:President and Chief Executive Officer

                           ECA Subsidiary Acquisition Corporation
                           By:/s/ STEPHEN YU
                           Name:Stephen Yu
                           Title:President and Secretary


Source: OneCLE Business Contracts.