Exhibit 2.1

                          AGREEMENT AND PLAN OF MERGER

                                      Among

                              MCKESSON CORPORATION,

                               MOORE MEDICAL CORP.

                                       and

                            MADISON ACQUISITIONS INC.

                          Dated as of January 19, 2004






                                TABLE OF CONTENTS


ARTICLE I The Merger; Closing; Effective Time
    1.1     The Merger
    1.2     Closing
    1.3     Effective Time

ARTICLE II Certificate of Incorporation and Bylaws of the Surviving Corporation
    2.1     The Certificate of Incorporation
    2.2     The Bylaws

ARTICLE III Certain Governance Matters
    3.1     Directors of the Surviving Corporation
    3.2     Officers of the Surviving Corporation

ARTICLE IV Effect of the Merger on Capital Stock; Exchange of Certificates
    4.1     Effect on Capital Stock
    4.2     Exchange of Certificates

ARTICLE V Representations and Warranties
    5.1     Representations and Warranties of the Company
    5.2     Representations and Warranties of Parent and Merger Sub

ARTICLE VI Covenants
    6.1     Conduct of the Company
    6.2     Proxy Statement; Stockholders' Meeting
    6.3     Acquisition Proposals
    6.4     Filings; Other Actions; Notification
    6.5     Stockholder Litigation
    6.6     Access
    6.7     Publicity
    6.8     Equity Awards
    6.9     Expenses
    6.10    Indemnification; Directors' and Officers' Insurance
    6.11    Takeover Statute
    6.12    Transfer Taxes
    6.13    Employee Benefits.

ARTICLE VII Conditions
    7.1     Conditions to Each Party's Obligation to Effect the Merger
    7.2     Conditions to Obligations of Parent and Merger Sub
    7.3     Conditions to Obligation of the Company

ARTICLE VIII Termination
    8.1     Termination by Mutual Consent
    8.2     Termination by Either Parent or the Company
    8.3     Termination by the Company
    8.4     Termination by Parent
    8.5     Effect of Termination and Abandonment


                                      -i-





ARTICLE IX Miscellaneous and General
    9.1     Survival
    9.2     Modification or Amendment
    9.3     Waiver of Conditions
    9.4     Counterparts
    9.5     Governing Law and Venue; Waiver of Jury Trial
    9.6     Notices
    9.7     Definitions
    9.8     Entire Agreement
    9.9     No Third Party Beneficiaries
    9.10    Obligations of Parent and of the Company
    9.11    Severability
    9.12    Interpretation
    9.13    Assignment
    9.14    Captions


EXHIBIT A   Restated Certificate of Incorporation of the Surviving Corporation


                                      -ii-





                          AGREEMENT AND PLAN OF MERGER

      This AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of January 19, 2004, is made and entered into by and among MCKESSON
CORPORATION, a Delaware corporation ("Parent"), MOORE MEDICAL CORP., a Delaware
corporation (the "Company"), and MADISON ACQUISITIONS INC., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub").

                                    RECITALS

      WHEREAS, the respective boards of directors of each of Parent, Merger Sub
and the Company have approved and declared advisable this Agreement and the
merger of Merger Sub with and into the Company on the terms and subject to the
conditions set forth in this Agreement (the "Merger") and have determined that
the Merger and the other transactions contemplated by this Agreement are fair
to, and in the best interest of, their respective stockholders:

      NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto agree as follows:

                                   ARTICLE I
                       The Merger; Closing; Effective Time

      1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.3) Merger Sub
shall be merged with and into the Company pursuant to a statutory merger
effected pursuant to Section 251 of the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), and the separate corporate existence of
Merger Sub shall thereupon cease. The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Delaware, and the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in Articles II and III. The Merger shall have the effects
specified in the DGCL.

      1.2 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place (i) at the offices of
Pillsbury Winthrop LLP, 50 Fremont Street, San Francisco, California at 10:00
A.M. on the second business day after the fulfillment or waiver of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions) in accordance with this Agreement or (ii) at such
other place and time and/or on such other date as the Company and Parent may
agree in writing (the "Closing Date").

      1.3 Effective Time. Subject to the provisions of this Agreement and as
soon as practicable following the Closing, the Company will cause a Certificate
of Merger (the "Certificate of Merger") to be executed, acknowledged and filed
with the Secretary of State of the State of Delaware as provided in Section 251
of the DGCL. The Merger shall become effective at the time when the Certificate
of Merger has been duly filed with the Secretary of


                                       1



State of Delaware or, if agreed to by Parent and the Company, such later time or
date as may be set forth in the Certificate of Merger in accordance with the
DGCL (the "Effective Time").

                                   ARTICLE II
                    Certificate of Incorporation and Bylaws
                          of the Surviving Corporation

      2.1 The Certificate of Incorporation. The certificate of incorporation of
the Company as in effect immediately prior to the Effective Time shall be
amended and restated in the Merger to read in its entirety as set forth in
Exhibit A, and as so amended shall be the restated certificate of incorporation
of the Surviving Corporation (the "Charter").

      2.2 The Bylaws. The bylaws of Merger Sub as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation (the
"Bylaws"), until thereafter amended as provided therein or by applicable law.

                                  ARTICLE III
                           Certain Governance Matters

      3.1 Directors of the Surviving Corporation. The directors of Merger Sub
immediately prior to the Effective Time shall, from and after the Effective
Time, be the directors of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Charter and Bylaws.

      3.2 Officers of the Surviving Corporation. The officers of the Merger Sub
immediately prior to the Effective Time shall, from and after the Effective
Time, be the officers of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Charter and Bylaws.

                                   ARTICLE IV
       Effect of the Merger on Capital Stock; Exchange of Certificates

      4.1 Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company or any capital stock of Merger Sub, the following shall occur:

      (a) Merger Consideration.

            (i) Each share of common stock, par value $0.01 per share, of the
Company (each a "Share" or, collectively, the "Shares") that is issued and
outstanding immediately prior to the Effective Time (other than Excluded Shares
and the Appraisal Shares, as defined below),


                                       2



together with the associated Rights (as defined in Section 5.1(c)), shall be
converted into the right to receive $12.00 in cash, without interest (the
"Merger Consideration").

            (ii) At the Effective Time, all Shares that are issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and each
certificate (a "Certificate") formerly representing any of such Shares and the
associated Rights (other than Excluded Shares and Appraisal Shares) shall
thereafter represent only the right to receive the Merger Consideration. The
right of any holder of a Certificate to receive the Merger Consideration shall
be subject to and reduced by the amount of any withholding that is required
under applicable tax law.

      (b) Cancellation of Excluded Shares. At the Effective Time, each Excluded
Share that is issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, shall be canceled and retired without payment
of any consideration therefor and shall cease to exist.

      (c) Merger Sub. At the Effective Time, each share of common stock, par
value $0.01 per share, of Merger Sub that is issued and outstanding immediately
prior to the Effective Time shall be converted into one fully-paid and
non-assessable share of common stock of the Surviving Corporation.

      (d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, Shares issued and outstanding immediately prior to the Effective Time
that are held by any holder who is entitled to demand and properly demands
appraisal of such Shares (the "Appraisal Shares") pursuant to, and who complies
in all respects with, the provisions of Section 262 of the DGCL ("Section 262")
shall not be converted into the right to receive the Merger Consideration as
provided in Section 4.1(a), but instead such holder shall be entitled to payment
of the fair value of such Appraisal Shares in accordance with the provisions of
Section 262. At the Effective Time, all Appraisal Shares shall no longer be
outstanding, shall automatically be canceled and shall cease to exist, and each
holder of Appraisal Shares shall cease to have any rights with respect thereto,
except the right to receive the fair value of such Appraisal Shares in
accordance with the provisions of Section 262. Notwithstanding the foregoing, if
any such holder shall fail to perfect or otherwise shall waive, withdraw or lose
the right to appraisal under Section 262, or a court of competent jurisdiction
shall determine that such holder is not entitled to the relief provided by
Section 262, then the right of such holder to be paid the fair value of such
holder's Appraisal Shares under Section 262 shall cease and such Appraisal
Shares shall be deemed to have been converted at the Effective Time into, and
shall have become, the right to receive the Merger Consideration as provided in
Section 4.1(a), without interest. The Company shall serve prompt notice to
Parent of any demands for appraisal of any Shares, and Parent shall have the
right to participate in and direct all negotiations and proceedings with respect
to such demands. Prior to the Effective Time, the Company shall not, without the
prior written consent of Parent, voluntarily make any payment with respect to,
or settle or offer to settle, any such demands, or agree to do any of the
foregoing.


                                       3



      4.2 Exchange of Certificates.

      (a) Paying Agent. Prior to the Effective Time, Parent shall appoint a bank
or trust company reasonably acceptable to the Company to act as paying agent
(the "Paying Agent") for the payment of the Merger Consideration. At the
Effective Time, Parent shall deposit, or cause the Surviving Corporation to
deposit, with the Paying Agent, for the benefit of the holders of Certificates,
cash in an amount sufficient to pay the aggregate Merger Consideration required
to be paid pursuant to Section 4.1(a) (such cash being hereinafter referred to
as the "Exchange Fund"). The Exchange Fund shall not be used for any other
purpose.

      (b) Exchange Procedures. As soon as practicable after the Effective Time,
Parent shall cause the Paying Agent to mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificate shall
pass, only upon proper delivery of the Certificate to the Paying Agent and which
shall be in customary form) and (ii) instructions for use in effecting the
surrender of the Certificate in exchange for the Merger Consideration. Each
holder of record of a Certificate shall, upon surrender to the Paying Agent of
such Certificate, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Paying Agent, be
entitled to receive in exchange therefor the Merger Consideration which the
number of Shares (and the associated Rights) previously represented by such
Certificate shall have been converted into the right to receive pursuant to
Section 4.1(a), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Shares which is not registered in the
transfer records of the Company, payment of the Merger Consideration may be made
to a person other than the person in whose name the Certificate so surrendered
is registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of such Certificate
or establish to the reasonable satisfaction of Parent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
4.2(b), each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Consideration
which the holder thereof has the right to receive in respect of such Certificate
pursuant to this Article IV. No interest shall be paid or will accrue on any
cash payable to holders of Certificates pursuant to the provisions of this
Article IV.

      (c) No Further Ownership Rights in Shares. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article IV shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
Shares (and associated Rights) formerly represented by such Certificates. At the
close of business on the day on which the Effective Time occurs, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, any Certificate is presented to
the Surviving Corporation for transfer, it shall be canceled against delivery of
cash to the holder thereof as provided in this Article IV.

      (d) Termination of the Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not


                                       4



theretofore complied with this Article IV shall thereafter look only to Parent
for, and Parent shall remain liable for, payment of their claim for the Merger
Consideration.

      (e) No Liability. None of Parent, Merger Sub, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any Person in respect of any
cash from the Exchange Fund properly delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered immediately prior to the date on which any
Merger Consideration would otherwise escheat to or become the property of any
Governmental Entity, any such Merger Consideration shall, to the extent
permitted by applicable law, become the property of Parent, free and clear of
all claims or interest of any Person previously entitled thereto.

      (f) Investment of Exchange Fund. The Paying Agent shall invest the cash in
the Exchange Fund as directed by Parent. Any interest and other income resulting
from such investments shall be paid to and be income of Parent.

      (g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such reasonable amount as Parent may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Consideration with respect thereto.

      (h) Withholding Rights. Parent, the Surviving Corporation or the Paying
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares (and associated
Rights) such amounts as Parent, the Surviving Corporation or the Paying Agent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld and
paid over to the appropriate taxing authority by Parent, the Surviving
Corporation or the Paying Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares (and
associated Rights) in respect of which such deduction and withholding was made
by Parent, the Surviving Corporation or the Paying Agent.

                                   ARTICLE V
                         Representations and Warranties

      5.1 Representations and Warranties of the Company. Except as set forth in
the corresponding sections or subsections of the disclosure letter, dated the
date hereof, delivered by the Company to Parent (the "Company Disclosure
Letter"), the Company hereby represents and warrants to Parent and Merger Sub
that:

      (a) Organization, Good Standing and Qualification. Each of the Company and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently


                                       5



conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where,
in any case, the failure to be so qualified or in good standing, when taken
together with all other such failures, is not reasonably likely to have a
Material Adverse Effect. The Company has made available to Parent a complete and
accurate copy of its and its Subsidiaries' certificates of incorporation and
bylaws, or other governing documents as applicable, each as amended to date.
Such certificates of incorporation and bylaws, or other governing documents, so
delivered are in full force and effect. Section 5.1(a) of the Company Disclosure
Letter contains a complete and accurate list of each jurisdiction where the
Company is qualified or licensed to do business. The Company has made available
to Parent complete and accurate copies of the minutes of all meetings of the
stockholders of the Company and each of its Subsidiaries, the Board of Directors
of the Company and each of its Subsidiaries and the committees of each of such
Board of Directors, in each case held since January 1, 2000.

      (b) Subsidiaries. Section 5.1(b) of the Company Disclosure Letter lists
each of the Subsidiaries of the Company and, for each such Subsidiary, the state
of incorporation or formation and, as of the date hereof, each jurisdiction in
which such Subsidiary is qualified or licensed to do business. Except for the
capital stock of, or voting securities or equity interests in, its Subsidiaries,
the Company does not own, directly or indirectly, any capital stock of, or other
voting securities or equity interests in, any corporation, partnership, joint
venture, association or other entity.

      (c) Capital Structure. The authorized capital stock of the Company
consists of 10,000,000 Shares, of which 3,200,009 Shares are issued and
outstanding as of the date of this Agreement, and 1,000,000 shares of preferred
stock, par value $1.00 per share (the "Preferred Shares"), of which none are
outstanding. All of the outstanding Shares have been duly authorized and are
validly issued, fully paid and nonassessable. The Company has no Shares or
Preferred Shares reserved for or subject to issuance, except (A) 70,000
Preferred Shares, designated Series I Junior Preferred Stock, subject to
issuance upon exercise of the rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of November 18, 1998 (the "Company Rights
Agreement"), between the Company and American Stock Transfer & Trust Co., as
Rights Agent, and (B) 755,000 Shares reserved for issuance under the Company's
stock option or other equity-based compensation plans identified in Section
5.1(c) of the Company Disclosure Letter (collectively, the "Company Stock Option
Plans"), of which options to acquire not more than 176,800 Shares are
outstanding as of the date of this Agreement. Section 5.1(c) of the Company
Disclosure Letter sets forth a correct and complete list of each outstanding
option to purchase Shares under the Company Stock Option Plans, as hereinafter
defined (each a "Company Option"), as of the date hereof, including the holder,
date of grant, exercise price, vesting status and number of Shares subject
thereto. All issued and outstanding shares of capital stock or other securities
of each of the Company's Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable and owned by the Company or a direct or indirect wholly
owned Subsidiary of the Company, free and clear of any lien, pledge, security
interest, claim or other encumbrance. Except as set forth above or as disclosed
in Section 5.1(c) of the Company Disclosure Letter, there are no shares of
capital stock of the Company authorized, issued or outstanding, and except as
set forth above, there are no preemptive rights nor any outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character (including any restriction on the
right to vote, sell or otherwise


                                       6



transfer) to which the Company or any of its Subsidiaries is a party or may be
bound relating to the issued or unissued capital stock or other securities of
the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has outstanding any bonds, debentures, notes or other obligations
the holders of which have the right to vote (or convertible into or exercisable
for securities having the right to vote) with the stockholders of the Company or
any of its Subsidiaries on any matter ("Company Voting Debt"). Except for Shares
(or options to purchase Shares) issued pursuant to the Company Stock Option
Plans, neither the Surviving Corporation nor Parent nor their respective
affiliates has or will, at or after the Effective Time, have any current or
future obligation to issue, transfer or sell any shares or securities of the
Surviving Corporation, Parent or any of their respective affiliates pursuant to
any Compensation and Benefit Plan (as defined in Section 5.1(o)(i)).

      (d) Corporate Authority; Approval and Fairness. The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate the Merger, subject only to approval and adoption of
this Agreement by the holders of a majority of the outstanding Shares (the
"Stockholder Approval") and the filing of the Certificate of Merger pursuant to
the DGCL. This Agreement has been duly executed and delivered by the Company and
is a legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except (A) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (B) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. The Board of Directors of the Company, at a
meeting duly called and held, duly adopted resolutions (i) approving and
declaring advisable this Agreement, the Merger and the other transactions
contemplated by this Agreement, (ii) declaring that it is in the best interests
of the stockholders of the Company that the Company enter into this Agreement
and consummate the Merger and the other transactions contemplated by this
Agreement on the terms and subject to the conditions set forth herein, (iii)
directing that the adoption and approval of this Agreement be submitted as
promptly as practicable to a vote at a meeting of the stockholders of the
Company and (iv) recommending that the stockholders of the Company adopt and
approve this Agreement, which resolutions, as of the date of this Agreement,
have not been subsequently rescinded, modified or withdrawn in any way.

      (e) Governmental Filings; No Violations.

            (i) Other than the filings and/or notices (A) contemplated by
Section 1.3, (B) with the Securities and Exchange Commission (the "SEC") of (1)
a proxy statement relating to the adoption and approval by the stockholders of
the Company of this Agreement (as amended or supplemented from time to time, the
"Proxy Statement") and (2) such reports under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement and (C) required to be made by the Company or any of its
Subsidiaries under applicable state securities or blue sky laws or the rules and
regulations of the American Stock Exchange in connection with the Merger or any
of the transactions contemplated by this Agreement, no notices, reports or other
filings are required to be made with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the Company or
any of its Subsidiaries from, any national, state, municipal, local or foreign
government, any instrumentality, subdivision, court, administrative agency,
board or


                                       7



commission or other governmental authority or instrumentality, or any
quasi-governmental or private body exercising any regulatory or governmental or
quasi-governmental authority (a "Governmental Entity"), in connection with the
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Merger and the other transactions contemplated hereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or prevent
or materially delay the Company's ability to consummate the transactions
contemplated by this Agreement.

            (ii) The execution, delivery and performance of this Agreement does
not, and the consummation of the Merger and the other transactions contemplated
hereby will not, constitute or result in (A) a breach or violation of, or a
default (with or without notice, lapse of time or both) under, the Company's
certificate of incorporation or bylaws or other governing documents or the
comparable governing instruments of any of its Subsidiaries, (B) except as set
forth in Section 5.1(e) of the Company Disclosure Letter, (with or without
notice, lapse of time or both) a breach or violation of, or a default under, the
acceleration of any obligations under, or the creation of a lien, pledge,
security interest or other encumbrance on any assets of the Company or any of
its Subsidiaries pursuant to, any Contract that is binding upon the Company or
any of its Subsidiaries or any Law or governmental or non-governmental permit or
license to which the Company or its Subsidiaries is subject or (C) any change in
the material rights or obligations of any party under any of the Company's or
any of its Subsidiaries' Contracts, except, in the case of clause (B) or (C)
above, for any breach, violation, default, acceleration, creation or change
that, individually or in the aggregate, is not reasonably likely to (1) have a
Material Adverse Effect on the Company, or (2) prevent or materially delay the
Company's ability to consummate the Merger or any of the other transactions
contemplated by this Agreement.

(f) SEC Filings; Financial Statements. The Company has on a timely basis filed
all forms, reports and documents (including reports filed on SEC Form 8-K)
required to be filed by it with the SEC since December 31, 2000, has on a timely
basis filed all applicable Form 11-K reports and Form S-8 registration
statements required to be filed by it with the SEC for all Company Compensation
and Benefit Plans including Company Stock Option Plans, and has delivered or
made available to Parent, in the form filed with the SEC, (i) its annual reports
on Form 10-K (and all amendments thereto) for the fiscal years ended December
31, 2000, 2001 and 2002, respectively, (ii) its quarterly reports on Form 10-Q
for each of the first three quarters in each of the fiscal years of the Company
referred to in clause (i) above, (iii) all proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
December 31, 2000, (iv) all certificates and statements required by (x) Rule
13a-14 under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002) with respect to any report referred to in clause (i)
or (ii) above, and (v) all other forms, reports and other registration
statements filed by the Company with the SEC since December 31, 2000 (the forms,
reports and other documents referred to in clauses (i), (ii), (iii), (iv) and
(v) above being, collectively, the "Company SEC Reports"). The Company SEC
Reports were, and any Company SEC Reports filed with the SEC subsequent to the
date hereof will be, prepared in all material respects in accordance with either
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations promulgated thereunder. As of their respective
dates, the Company SEC Reports did not, and any Company SEC Report filed with
the SEC subsequent to the date hereof will not, contain any untrue statement of
a


                                       8



material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. No Subsidiary of the
Company is required to file any form, report or other document with the SEC. As
used in this Section 5.1(f), the term "file" shall be broadly construed to
include any manner in which a document or information is furnished, supplied or
otherwise made available to the SEC.

      Each of the consolidated financial statements (including, in each case,
any notes thereto) included in or incorporated by reference into the Company SEC
Reports was, and any Company SEC Report filed with the SEC subsequent to the
date hereof will be, (i) prepared from and in accordance with the books and
records of the Company and its Subsidiaries, (ii) in compliance in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC, and (iii) prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments that will not be
material in amount or effect).

      (g) Certain Liabilities. Except as disclosed in Section 5.1(g) of the
Company Disclosure Letter or disclosed in the Company SEC Reports filed prior to
the date hereof, including the consolidated balance sheet of the Company and its
consolidated Subsidiaries as at December 31, 2002 (the "Company Audit Date"),
and the notes thereto (the "December 2002 Balance Sheet"), neither the Company
nor any Subsidiary has any material liabilities or obligations of any nature
(whether known or unknown, accrued, absolute, contingent or otherwise).

      (h) SEC Correspondence. The Company has made available to Parent all
comment letters, if any, received by the Company from the SEC or the staff
thereof since December 31, 2000 and all responses to such comment letters filed
by or on behalf of the Company. The Company has furnished or made available to
Parent complete and accurate copies of all material amendments and modifications
that have not been filed by the Company with the SEC to all agreements,
documents and other instruments that previously had been filed by the Company
with the SEC as exhibits to the Company SEC Reports and are currently in effect.

      (i) Financial and Disclosure Controls. The Company and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences The Company
maintains disclosure controls and procedures as defined by Rule 13a-15 under the
Exchange Act that are reasonably effective to ensure that all material
information concerning the Company and its Subsidiaries is made known on a
timely basis to the individuals responsible for the preparation of the Company's
filings with the SEC and other


                                       9



public disclosure documents. Section 5.1(i) of the Company Disclosure Letter
lists, and the Company has made available to Parent complete and accurate copies
of, all written descriptions of, and all policies, manuals and other documents
promulgating, such internal accounting controls and such disclosure controls and
procedures.

      (j) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the date it is first mailed to the stockholders of the
Company and at the time of the Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading, except
that no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation
by reference in the Proxy Statement. The Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder.

      (k) Accounting or Audit Irregularities. From the Company Audit Date to the
date hereof, neither the Company nor any Subsidiary nor, to the Company's
knowledge, any director, executive officer or auditor of the Company or any
Subsidiary, has actual knowledge of any material complaint, allegation,
assertion or claim, whether made in writing or made orally, regarding the
accounting or auditing practices, procedures, methodologies or methods of the
Company or any of its Subsidiaries or their respective internal accounting
controls, including any complaint, allegation, assertion or claim that the
Company or any of its Subsidiaries has engaged in questionable accounting or
auditing practices. No attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of its Subsidiaries,
has reported evidence of a material violation of securities laws, breach of
fiduciary duty or similar violation by the Company or any of its officers,
directors, employees or agents to the Company's Board of Directors or any
committee thereof or to any director or executive officer of the Company. From
the Company Audit Date to the date hereof, there have been no internal
investigations regarding accounting or revenue recognition discussed with,
reviewed by or initiated at the direction of the chief executive officer, chief
financial officer, general counsel or similar legal officer, the Company's Board
of Directors or any committee thereof.

      (l) Accounts Receivable. All accounts receivable of the Company and its
Subsidiaries reflected on the December 2002 Balance Sheet or arising thereafter
have arisen from bona fide transactions in the ordinary course of business
consistent with past practices and in accordance with SEC regulations and GAAP
applied on a consistent basis. The Company's reserve for contractual allowances
and doubtful accounts has been prepared in accordance with GAAP applied on a
consistent basis. Since the Company Audit Date, neither the Company nor any of
its Subsidiaries has modified or changed in any material respect its sales
practices or methods including, without limitation, such practices or methods in
accordance with which the Company or any of its Subsidiaries sell goods, fill
orders or record sales.

      (m) Absence of Certain Changes. Except as disclosed in the Company SEC
Reports filed prior to the date hereof or in Section 5.1(m) of the Company
Disclosure Letter, as of the


                                       10



date hereof there has not been any material adverse change in the condition
(financial or otherwise), assets, business or results of operations of the
Company or any of its Subsidiaries, taken as a whole, since the Company Audit
Date. Except as disclosed in the Company SEC Reports filed prior to the date
hereof or in Section 5.1(m) of the Company Disclosure Letter, since the Company
Audit Date the Company and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any transaction other than according
to, the ordinary and usual course of such businesses and there has not been (i)
as of the date hereof, any material damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or otherwise used
by the Company or any of its Subsidiaries, whether or not covered by insurance;
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) in respect of the Company's
capital stock or repurchase, redemption or other reacquisition of any shares of
capital stock or other securities of the Company; (iii) any change in its
accounting principles, practices or methods; (iv) any change in any material tax
election or any settlement or compromise of any tax liability or (v) any
agreement or commitment to take any of the actions referred to in clauses (ii)
through (iv) above. Since the Company Audit Date, except as disclosed in Section
5.1(m)(vi) of the Company Disclosure Letter there has not been any increase in
the compensation payable or that could become payable by the Company or any of
its Subsidiaries to (x) any officers of the Company or any of its Subsidiaries
or (y) any key employees of the Company or any of its Subsidiaries in each case
whose annual cash compensation is $100,000 or more, or any amendment of any of
its Compensation and Benefit Plans.

      (n) Litigation. There is no civil, criminal or administrative suit,
action, proceeding, investigation, review or inquiry pending or, to the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries or any of their properties or rights, except for those that would
not be reasonably likely, either individually or in the aggregate, to have a
Material Adverse Effect on the Company or prevent or materially delay the
ability of the Company to consummate the transactions contemplated by this
Agreement. Except as set forth in Section 5.1(n) of the Company Disclosure
Letter, there is no judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against, or, to the knowledge of
the Company, investigation by any Governmental Entity involving, the Company or
any of its Subsidiaries.

      (o) Employee Benefits.

            (i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, change of control, compensation, medical, health or other welfare
plan, agreement, policy or arrangement that covers employees, directors, former
employees or former directors of the Company and its Subsidiaries (the
"Compensation and Benefit Plans") has been made available to Parent prior to the
date hereof. For each Compensation and Benefit Plan, copies of the following
documents (to the extent applicable) have also been made available to Parent
prior to the date hereof: (A) any amendments since the last restatement of the
plan; (B) any trust agreement or other funding agreement; (C) the most recent
Form 5500 annual report, including all attachments; (D) the most recent annual
actuarial valuation report; and (E) the most recent IRS determination letter,
and any outstanding request for such a letter. The Compensation and Benefit
Plans existing as of the date hereof are listed in


                                       11



Section 5.1(o)(i) of the Company Disclosure Letter and any "change of control"
or similar provisions therein which will be affected by the Merger are
specifically identified in Section 5.1(o)(i) of the Company Disclosure Letter.

            (ii) All of the Company's Compensation and Benefit Plans are in
substantial compliance with all applicable state, local and federal laws
including but not limited to the Code, the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Health Insurance Portability and
Accountability Act and the Family and Medical Leave Act. Each Compensation and
Benefit Plan that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan"), that is intended to be qualified under
Section 401(a) of the Code and is not a standardized prototype plan has received
a favorable determination letter from the Internal Revenue Service (the "IRS"),
has applied for such letter in a timely fashion, or has a remaining period of
time within which to apply for such a letter, and it is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter or any material costs under the Internal Revenue Service's Employee Plans
Compliance Resolution System. There is no pending or, to the Company's
knowledge, threatened claims or litigation relating to the Compensation and
Benefit Plans. Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any Compensation and Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
it or any of its Subsidiaries to fiduciary liability payment of additional
benefits or a material tax or penalty imposed pursuant to either Section 4975 of
the Code or Section 502 of ERISA.

            (iii) As of the date hereof, except as set forth in Section
5.1(o)(iii) of the Company Disclosure Letter, the Company does not maintain or
contribute to an employee pension benefit plan subject to Title IV of ERISA or
Section 412 of the Code.

            (iv) Except as set forth in Section 5.1(o)(iv) of the Company
Disclosure Letter, neither the Company nor its Subsidiaries have any obligations
for retiree health and life benefits under any Compensation and Benefit Plan.
Except as set forth in Section 5.1(o)(iv) of the Company Disclosure Letter, the
Company or its Subsidiaries may amend or terminate any such plan under the terms
of such plan at any time without incurring any material liability thereunder.
Except as set forth in Section 5.1(o)(iv), the Company and its Subsidiaries do
not have any obligation to provide group continuation coverage to former
employees or their dependents as required by Section 600 et seq. of ERISA and
Section 4980B of the Code.

            (v) Except as set forth in Section 5.1(o)(v) of the Company
Disclosure Letter, neither the execution of this Agreement by the Company,
stockholders approval of this Agreement or the Merger nor the consummation of
the Merger and the other transactions contemplated by this Agreement will (x)
entitle any employees of the Company or any of its Subsidiaries to severance
pay, (y) except as contemplated by Section 6.8 hereof, accelerate the time of
payment or vesting or trigger any payment of compensation or benefits or
forgiveness of indebtedness under, increase the amount payable or trigger any
other material obligation pursuant to, any of the Compensation and Benefit Plans
or (z) result in any breach or violation of, or a default under, any of the
Compensation and Benefit Plans.

            (vi) Except as set forth in Section 5.1(o)(vi) of the Company
Disclosure Letter, all annual reports required to be filed under any Laws
applicable to the Compensation and


                                       12



Benefits Plans have been timely filed with the respective governmental agency
with which such reports are required to be filed, including, without limitation
Form 5500 and Form 11-K.

            (vii) To the Company's knowledge, all Compensation and Benefit Plans
covering current or former non-U.S. employees or former employees of the Company
or any of its Subsidiaries comply in all material respects with applicable Laws.
Except as set forth in Section 5.1(o)(vii) of the Company Disclosure Letter, the
Company and its Subsidiaries have no material unfunded liabilities with respect
to any Pension Plan that covers such non-U.S. employees.

            (viii) Each field sales representative and telesales representative
employed by the Company has entered into a Non-Competition/Non-Disclosure
agreement containing terms substantially similar to the terms set forth in
Section 5.01(o)(viii)(a) of the Company Disclosure Letter. Each customer support
representative employed by the Company has entered into a
Non-Disclosure/Non-Solicitation agreement containing terms substantially similar
to the terms set forth in Section 5.1(o)(viii)(b) of the Company Disclosure
Letter.

            (ix) Except as provided in Section 5.1(o)(ix) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries nor its
Consolidated Group is a party to any agreement, plan, contract or arrangement
that would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.

      (p) Compliance with Laws; Permits.

            (i) The businesses of each of the Company and its Subsidiaries are
and have been conducted in substantial compliance with all laws, ordinances,
regulations, codes, rules, judgments, orders (whether temporary, preliminary or
permanent), decrees, arbitration awards, licenses and permits of any
Governmental Entity (collectively, "Laws") applicable thereto, except for
violations that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on the Company or to prevent or materially delay
the Company's ability to consummate the transactions contemplated by this
Agreement.

            (ii) To the Company's knowledge, no action, demand, requirement,
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries or affecting any of their properties or assets is
pending or threatened, nor has any Governmental Entity indicated an intention to
conduct the same. To the Company's knowledge, no Governmental Entity has made
any allegation, and the Company has not received notice that a Governmental
Entity is investigating any allegation, with respect to any violation of any Law
by the Company or any Subsidiary which, assuming such allegation were true,
would be reasonably likely to have a Material Adverse Effect on the Company.

            (iii) Each of the Company and its Subsidiaries has in effect all
material approvals, authorizations, certificates, filings, franchises, licenses,
notices and permits of or with all Governmental Entities (collectively,
"Permits"), including all Permits necessary for the receipt, storage, marketing,
sale or supply of medical devices and other healthcare products, cosmetics,
nutritionals, over-the-counter products, and drugs and related services provided
by the


                                       13



Company under the Laws of any Governmental Entity, including, but not limited
to, the Federal Food, Drug and Cosmetic Act of 1938, as amended (the "FDCA") and
the Other Regulatory Laws, and the regulations of the Federal Food and Drug
Administration (the "FDA"), the Drug Enforcement Agency (the "DEA") and any
other Governmental Entity promulgating or enforcing rules or regulations under
such Laws, necessary for it to own, lease or operate its properties and other
assets and to carry on its business and operations as presently conducted. All
material Permits are set forth in Section 5.1(p)(iii) of the Company Disclosure
Letter. There has occurred no default under, or violation of, any such Permit,
and each such Permit is in full force and effect. To the knowledge of the
Company, the Company is in good standing under the Permits. Since January 1,
2000, neither the Company nor any Subsidiary has received any notice from any
Governmental Entity that it is or has been in violation of or in default under
any Laws. The Company has kept all required records and has filed with the FDA,
the DEA and all other Governmental Entities, as applicable, all required
notices, supplemental applications and annual or other reports, including
adverse reaction reports, with respect to the Company and its Subsidiaries and
each Company Product.

            (iv) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any of its directors, employees or agents have engaged in or is
being investigated for any activities which are prohibited under any of (a)
Section 3729 of Title 31 of the United States Code, (b) Section 1320a-7a or
1320a-7b of Title 42 of the United States Code, or (c) Section 1395nn of Title
42 of the United States Code, or the regulations promulgated thereunder, or any
similar or related state or local statutes or regulations, or which are
prohibited by rules of professional conduct, in any case which has had or is
reasonably likely to have a Material Adverse Effect on the Company, including,
but not limited to, the following: (i) knowingly presenting or causing to be
presented a false claim for payment, (ii) knowingly making or using a false
record in order to receive payment for a claim, (iii) knowingly and willfully
making or causing to be made a false statement or representation of a material
fact in any application for any benefit or payment, (iv) knowingly and willfully
making or causing to be made any false statement or representation of a material
fact for use in determining rights to any benefit or payment, (v) any failure by
a claimant to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment, (vi) knowingly and willfully soliciting or receiving any remuneration
directly or indirectly, overtly or covertly, in cash or in kind, or offering to
pay or receive such remuneration (A) in return for referring an individual to a
person for the furnishing or arranging for the furnishing of any item or service
for which payment may be made in whole or in part by a Federal health care
program or (B) in return for purchasing, leasing or ordering or arranging for,
or recommending, purchasing, leasing or ordering any good, facility, service or
item for which payment may be made in whole or in part by a Federal health care
program, or (vii) referring an individual for "designated health services" to a
person or entity with which the referring physician has a financial
relationship, as defined in Section 1395nn of Title 42 of the United States Code
and the regulations promulgated thereunder.

            (v) To the Company's knowledge, neither the Company, nor any
physician employee of the Company, has a financial relationship, ownership
interest in or compensation arrangement with any entity (other than the Company)
to which the Company or the physician employee makes any referral of or relating
to health care and none of the executive officers of


                                       14



the Company has any reason to believe that any such financial relationship,
ownership interest or compensation arrangement exists. For purposes of this
representation, the phrase "financial relationship", "ownership interest",
"compensation arrangement", and "referral" shall have the meaning stated in
Section 1395nn of Title 42 of the United States Code and the regulations
promulgated thereunder.

            (vi) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any person, including but not limited to persons who (a) have a
direct or indirect ownership interest in the Company, (b) are an owner of a
whole or part interest in any mortgage, deed of trust, note or other obligation
secured by the Company, (c) are an officer or director of the Company, (d) are
an agent of the Company, or (e) are a managing employee of the Company, have
ever been and are not currently excluded from participating in any Federal
health care program. To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any of its directors, employees or agents have ever
executed or negotiated a corporate integrity agreement with any Governmental
Entity.

      (q) Company Products. Except as set forth in Section 5.1(q) of the Company
Disclosure Letter, to the knowledge of the Company, there are no statements,
citations or decisions by any Governmental Entity (including, without
limitation, the FDA) stating that any of the Company Products is defective or
unsafe or fails to meet any standards promulgated by any such Governmental
Entity. Except as set forth in Section 5.1(q) of the Company Disclosure Letter,
the Company has not received any written complaints of any significant injury or
significant harm to any person as a result of the Company Products and, to the
knowledge of the Company, there is no (i) fact relating to any of the Company
Products that may impose upon the Company or any of its Subsidiaries a duty to
recall any of such products or a duty to warn customers of a defect in any of
such products, (ii) latent or overt design, manufacturing or other defect in any
of such products or (iii) material liability for warranty claims or returns with
respect to any of such products not fully reflected on the December 2002 Balance
Sheet. Section 5.1(q) of the Company Disclosure Letter sets forth a description
of all product warranty claims with respect to the Company Products during the
three years immediately preceding the date hereof. Except as set forth in
Section 5.1(q) of the Company Disclosure Letter, to the knowledge of the
Company, the Company Products conform in all material respects with all
applicable Laws and all requests of all Governmental Entities.

      Since December 31, 2000, there have been no recalls, field notifications,
or seizures ordered with respect to any of the Company Products, and neither the
Company nor any Subsidiary has independently engaged in such recalls or field
notifications. No Governmental Entity (including the FDA) has commenced or, to
the Company's knowledge, threatened to commence, (i) any action to withdraw any
Permits or (ii) any requests to recall any of the products of the Company or any
Subsidiary, or commenced or to the Company's knowledge, threatened to initiate,
any action to enjoin production or sale of any Company Product or any
Subsidiary, nor has the Company or any Subsidiary received any written notice to
such effect.

      (r) Takeover Statutes. The Company's Board of Directors has taken all
necessary action to approve the transactions contemplated by this Agreement such
that the restrictions under Section 203 of the DGCL shall not apply to such
transactions. No "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation


                                       15



(each, a "Takeover Statute") is applicable to the Company, the Shares, the
Merger Consideration, the Merger, this Agreement or the other transactions
contemplated by this Agreement.

      (s) Environmental Matters. Except as disclosed in Section 5.1(s) of the
Company Disclosure Letter: (i) the Company and its Subsidiaries have complied in
all material respects with all applicable Environmental Laws; (ii) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries have
any material liability under any Environmental Law for any Hazardous Substance
disposal or contamination on the properties currently owned or operated by the
Company or any of its Subsidiaries; (iii) to the knowledge of the Company,
neither the Company nor any of its Subsidiaries have any material liability
under any Environmental Law for any Hazardous Substance disposal or
contamination on the properties formerly owned or operated by the Company or any
of its Subsidiaries; (iv) to the knowledge of the Company, neither the Company
nor any of its Subsidiaries have any material liability under any Environmental
Law for any Hazardous Substance disposal or contamination on any third party
property; (v) to the knowledge of the Company, neither the Company nor any of
its Subsidiaries is in violation of or has any material liability under any
Environmental Law for any release or threat of release of any Hazardous
Substance; (vi) since December 31, 2000, neither the Company nor any of its
Subsidiaries has received any written notice, demand, letter, claim or request
for information alleging that it or any of its Subsidiaries may be in violation
of or liable under any Environmental Law in any material respect; (vii) neither
the Company nor any of its Subsidiaries is subject to any orders, decrees,
injunctions or other arrangements with any Governmental Entity or is an
indemnitor of any third party indemnitee for any liability under any
Environmental Law or relating to Hazardous Substances; (viii) to the Company's
knowledge, there are no circumstances or conditions involving the Company or any
of its Subsidiaries that would reasonably be expected to result in any material
claims, liability, investigations, costs or restrictions on the ownership, use,
or transfer of any of the property pursuant to any Environmental Law; (ix) to
the knowledge of the Company, none of the properties the Company or any of its
Subsidiaries owns, leases or otherwise occupies contain any underground storage
tanks, asbestos-containing material, lead-based paint, or polychlorinated
biphenyls in violation of any Environmental Law caused by the Company or its
Subsidiaries or that would reasonably be expected to result in liability to the
Company or its Subsidiaries under any Environmental Law; and (x) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
engaged in any activities involving the generation, use, handling or disposal of
any Hazardous Substances in violation of any Environmental Law or that would
reasonably be expected to result in any material liability under any
Environmental Law.

      As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, regulation, treaty, order, decree, permit, authorization,
policy, opinion, common law or agency requirement applicable to the Company or
any of its Subsidiaries relating to: (A) the protection, investigation or
restoration of the environment, health and safety, or natural resources or
exposure to any harmful or hazardous material, (B) the handling, use, presence,
disposal, release or threatened release of any chemical substance or waste water
or (C) noise, odor, wetlands, pollution, contamination or any injury or threat
of injury to persons or property.

      As used herein, the term "Hazardous Substance" means any substance that
is: (A) listed, classified or regulated in any concentration pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or


                                       16



plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any
other substance which may be the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.

      (t) Intellectual Property.

            (i) As used in this Section 5.1(t):

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

            "Commercial Software Licenses" means commercially available end-user
computer software licenses for software that is used in the ordinary course of
the Company's or any of its Subsidiaries' business, where either (i) the total
fees for such software license typically do not exceed $5,000 per license per
calendar year or (ii) the software is licensed under shrinkwrap, clickwrap or
other non-negotiated standard license terms, provided that such software
described in the foregoing clauses (i) and (ii) is not a material component of
any product or service marketed or commercially exploited by the Company or any
of its Subsidiaries that generated 1% or more of the Company's consolidated
gross revenues (as determined in accordance with GAAP) during its last completed
fiscal year.

            "Third Party IP License" means a license or other similar agreement
under which the Company or any of its Subsidiaries is granted rights in or under
Intellectual Property Rights, or in software; provided that the term "Third
Party IP License" shall not include any Commercial Software Licenses.

            "Material Third Party IP License" means a Third Party IP License of
the Company or any of its Subsidiaries, but only if either (A) the total fees,
royalties or other payments that the Company or any of its Subsidiaries is
required to pay for such Third Party IP License exceeds $25,000 per year or
$100,000 in total, or (B) the licensed subject matter of such Third Party IP
License is a material component of any product or service marketed or
commercially exploited by the Company or any of its Subsidiaries that generated
1% or more of the Company's consolidated gross revenues (as determined in
accordance with GAAP) during its last completed fiscal year.


                                       17



            (ii) Section 5.1(t)(ii) of the Company Disclosure Letter lists all
patents, registered trademarks, service marks, trade names, logos, copyrights
and mask works, and all pending applications for patents or for the registration
of trademarks, service marks, trade names, logos, copyrights and mask works that
are owned or registered in the name of the Company or in the name of any of its
Subsidiaries and used in the business of the Company or any of its Subsidiaries
as currently conducted (collectively "Registered IP Rights"). All of such
Registered IP Rights, if any, have been duly registered in, filed in, applied
for or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights, or the appropriate corresponding offices of other
jurisdictions, and have been properly maintained and renewed in all material
respects in accordance with all applicable provisions of law and administrative
regulations in the United States and each such other applicable jurisdiction,
except for those Registered IP Rights the failure of which to have so duly
registered, filed, applied for or issued would not have a Material Adverse
Effect on the Company.

            (iii) Excluding Commercial Software Licenses, the Company or one or
more of its Subsidiaries owns and/or has all license or other rights necessary
to use, all patents, trademarks, service marks, trade names, logos, copyrights,
mask works (whether or not registered), trade secrets and software used in and
necessary to conduct the Company's business and the businesses of its
Subsidiaries as such businesses are currently conducted (collectively, the
Company's "Required IP Rights"). None of the Company's Required IP Rights that
is owned by the Company is co-owned with any other Person.

            (iv) Neither the Company nor any of its Subsidiaries is bound by any
agreements, including without limitation any license agreements, that have
granted to any third party any purchase option, right of first refusal, a
consensual security interest, or exclusive rights in any material Required IP
Rights that are owned by the Company or any of its Subsidiaries.

            (v) Section 5.1(t)(v) of the Company Disclosure Letter includes a
complete and accurate list of all Material Third Party IP Licenses. The Company
and its Subsidiaries are in compliance in all material respects with all Third
Party Licenses, and are not in default of any Third Party IP Licenses, all of
which are in full force and effect.

            (vi) Neither the Company nor any of its Subsidiaries is and will not
be as a result of the execution, delivery or performance of this Agreement or
the consummation of the Merger or the other transactions contemplated hereby, in
material breach, violation or default of any Material Third Party IP License.
The Company's rights to its Required IP Rights will not be materially adversely
affected by the execution, delivery or performance of this Agreement or the
consummation of the Merger or the other transactions contemplated hereby.

            (vii) To the Company's knowledge, there are no claims, suits or
demands pending against the Company or any of its Subsidiaries by any other
Person pertaining to any of the Company's rights in or with respect to the
Required IP Rights, and no proceedings have been instituted, are pending or, to
its knowledge, threatened against the Company or any of its Subsidiaries which
challenge its rights or the rights of any of its Subsidiaries in or with respect
to any of its Required IP Rights. Neither the Company nor its any of its
Subsidiaries have received any requests or demands by third parties for the
licensing of such third party's Intellectual Property Rights. Section
5.1(t)(vii) of the Company Disclosure Letter contains a complete and


                                       18



accurate list of any pending challenges or adversarial proceedings before any
patent or trademark authority to which the Company or any Subsidiary is a party
(including any pending applications for reexamination of a patent), a
description of the subject matter of each proceeding, and the current status of
each proceeding, including, without limitation, interferences, priority
contests, opposition, and protests.

            (viii) The marketing, distribution or sale of any product currently
marketed, distributed or sold by the Company or any of its Subsidiaries in the
countries where the Company or its Subsidiaries have conducted such activities,
does not, to the Company's knowledge, infringe or misappropriate the
Intellectual Property Rights, software (including source code and object code),
or proprietary non-public technology of any third party.

            (ix) The Company and each of its Subsidiaries has taken all
reasonable steps required and customary in accordance with sound business
practice to establish, preserve and protect its ownership of all material
copyright, trade secret and other proprietary rights with respect to its
products and technology. The Company and each of its Subsidiaries has required
all employees and independent contractors having knowledge of non-public
information of the Company and each of its Subsidiaries to execute agreements
under which such persons are required to maintain the confidentiality of such
information and appropriately restricting the use thereof. The Company does not
have knowledge of any infringement by others (including any of its employees or
former employees) of any Intellectual Property Rights of the Company or any of
its Subsidiaries.

            (x) Each person who, in any capacity (including, without limitation,
current and former consultants, independent contractors, officers, directors and
employees) has had access to the software, propriety technology or trade secrets
related to any of its currently offered products or services that the Company
purports to own and to embodiments of such software, propriety technology or
trade secrets from which such person could potentially misappropriate
information or technology of any material value has entered into a written
agreement suitable to vest sole and exclusive right, title and interest in and
to all inventions, creations, developments, and works in the Company (including,
without limitation, intellectual property rights contained therein) to the
Company.

      (u) Contracts. Except as set forth in Section 5.1(u) of the Company
Disclosure Letter and other than those Contracts identified on the Exhibit index
of the Company's Annual Report on Form 10-K for the year ended December 31, 2002
(the "Filed Contracts"), there are no Contracts that are material contracts with
respect to the Company and its Subsidiaries (together with the Contracts set
forth in Section 5.1(u) of the Company Disclosure Letter and the Filed
Contracts, the "Material Contracts"). Except as set forth in the corresponding
subsection of Section 5.1(u) of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries is a party to, and none of their respective
properties or other assets is subject to any:

            (i) covenant not to compete or other covenant (i) limiting or
restricting the development, manufacture, marketing, distribution or sale of any
of the Company Products or any future line extension of such products into other
forms or (ii) limiting or restricting the ability of the Company or any of its
Subsidiaries to enter into any market or line of business or to compete with any
other Person, or any other covenant restricting or prohibiting the Company or


                                       19



any of its Subsidiaries or Affiliates from transacting business or dealing in
any manner with any other Person;

            (ii) Contract with any Affiliate of the Company or any of its
Subsidiaries or any director, officer, stockholder or employee of the Company or
any of its Subsidiaries;

            (iii) advertising Contracts requiring aggregate expenditures or fees
in excess of $100,000 in any twelve-month period;

            (iv) continuing Contract for the future purchase or price of raw
materials, supplies or equipment which involves or would reasonably be expected
to involve the payment by the Company or any of its Subsidiaries of more than
$100,000 in any twelve month period or which contain minimum purchase conditions
or requirements or other terms that restrict or limit the purchasing
relationships of the Company and its Subsidiaries;

            (v) management, employment, service, consulting, bonus, incentive
compensation, severance or other similar type of Contract;

            (vi) Contract relating in whole or in part to the Intellectual
Property Rights of the Company or any of its Subsidiaries (including any
Contract under which the Company or any of its Subsidiaries is licensee or
licensor of any such Intellectual Property Rights);

            (vii) mortgage, pledge, security agreement, deed of trust, loan
agreement, credit agreement, indenture, conditional sale or title retention
agreement, equipment financing obligation or other instrument, in any case,
involving amounts in excess of $100,000 or granting a lien, pledge, security
interest, claim or other encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries;

            (viii) collective bargaining agreement or other Contract with any
labor union or association representing employees;

            (ix) Contract regarding the release, transportation or disposal of
Hazardous Substances, or the clean-up, abatement or other action relating to
Hazardous Substances or Environmental Laws;

            (x) Contract establishing or creating any partnership, joint
venture, limited liability company, limited liability partnership or similar
entity;

            (xi) Contracts to make any capital expenditures or capital additions
or improvements with aggregate commitments in excess of $100,000 in any
twelve-month period or in excess of $100,000 in the aggregate over the term of
any such Contract;

            (xii) Contract relating to the storage or warehousing of any
inventory or products of the Company or any of its Subsidiaries, or the charter
or purchase of transportation or shipping services;

            (xiii) guarantees or other Contracts in respect of any indebtedness
of any Person;


                                       20



            (xiv) Contract providing for the indemnification of any current or
former director, officer or employee of the Company or any of its Subsidiaries;

            (xv) any other material Contract (other than Filed Contracts) to
which the Company or any of its Subsidiaries is a party or by which any of them
or any of their properties or other assets are bound.

      Each Material Contract that requires or may require the consent or waiver
of a third party prior to consummation of the transactions contemplated by this
Agreement in order to avoid a material breach or violation of, or default under,
such Material Contract is identified and marked by an asterisk on Section 5.1(u)
of the Company Disclosure Letter. Each Material Contract is a valid and binding
obligation of the Company or its Subsidiary, in full force and effect and
enforceable in accordance with its terms. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any other party to any Material
Contract, is in material violation of or in material default under any Material
Contract, nor, to the Company's knowledge, except as set forth on Section 5.1(u)
of the Company Disclosure Letter, has any event occurred or circumstance or
condition exists, that (with or without notice or lapse of time) would
reasonably be expected to (i) result in a material violation of or material
default under any Material Contract, (ii) give any party the right to cancel or
terminate or modify any Material Contract or (iii) give any party the right to
seek material damages or other material remedies. Except as set forth in Section
5.1(u) of the Company Disclosure Letter, there have been no oral or written
modifications, amendments or waivers with respect to of any of the terms of any
of the Material Contracts.

      (v) Distributors, Suppliers and Customers. No (i) supplier of Company
Products that supplied more than $1,000,000 of products to the Company or its
Subsidiaries during the year ended December 31, 2003, or (ii) distributor or
customer (who has a contract with the Company) who accounted for more than
$100,000 of the Company's sales of Company Products or services during the year
ended December 31, 2003, has cancelled or otherwise terminated, or, to the
knowledge of the Company, threatened to cancel or otherwise terminate, its
relationship with the Company or any of its Subsidiaries. Section 5.1(v) of the
Company Disclosure Letter identifies each supplier that meets the criteria in
clause (i) above and the Company has previously delivered to Parent a complete
and accurate schedule listing each of the ten largest distributors or customers
that meet the criteria in clause (ii) above. As of the date hereof, to the
knowledge of the Company, the relationships of the Company with the
distributors, suppliers and customers identified in Section 5.1(v) of the
Company Disclosure Letter are reasonably good relationships.

      (w) Taxes.

      Except as set forth in Section 5.1(w) of the Company Disclosure Letter:

            (i) The Company and each of its Subsidiaries, and any consolidated,
combined, affiliated or unitary group for tax purposes of which the Company or
any of its Subsidiaries is or has been a member during any taxable year for
which the applicable statute of limitations has not closed (collectively, its
"Consolidated Group"), have timely filed all material Tax Returns required to be
filed by the Company in the manner provided by law. All such Tax Returns are
true, correct and complete in all material respects. The Company and each of its


                                       21



Subsidiaries and its Consolidated Group have timely paid all material Taxes due
or required to be withheld from amounts owing to any employee, creditor or third
party or have provided adequate reserves in their financial statements for any
material Taxes that have not been paid, whether or not shown as being due on any
Tax Returns. For purposes of this Section 5.1(w) only, the term "material" shall
mean any Taxes (including any penalties and interest) which, in the aggregate,
exceed $60,000.

            (ii) (1) No claim for material unpaid Taxes has become a lien or
encumbrance of any kind against the property of the Company or any of its
Subsidiaries or its Consolidated Group or is being asserted against the Company
or any of its Subsidiaries or its Consolidated Group, except for liens for
current Taxes not yet due; (2) no audit, examination, investigation, deficiency
or refund litigation or other proceeding in respect of Taxes of the Company, its
Subsidiaries or its Consolidated Group has been proposed, assessed or asserted
in writing by a Tax authority; (3) neither the Company nor any of its
Subsidiaries nor its Consolidated Group is a party to, is bound by, or has any
obligation under, or potential liability with regards to, any Tax sharing
agreement or has any potential liability or obligation for any Taxes of any
Person other than itself whether as a transferee or successor or otherwise; (4)
no extension or waiver of the statute of limitations on the assessment of any
Taxes has been granted by the Company or any of its Subsidiaries or its
Consolidated Group and is currently in effect; (5) neither the Company nor any
of its Subsidiaries nor its Consolidated Group has any material deferred
intercompany gain or loss arising as a result of a deferred intercompany
transaction within the meaning of Treasury Regulation Section 1.1502-13 (or
similar provision under state, local or foreign law) or any excess loss accounts
within the meaning of Treasury Regulation Section 1.1502-19; (6) neither the
Company nor any of its Subsidiaries nor its Consolidated Group is nor has been a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(ii) of
the Code; (7) neither the Company nor any of its Subsidiaries nor its
Consolidated Group has agreed to include, or is required to include, in income
for any year beginning after the Effective Time, any material adjustment under
either Section 481(a) or 482 of the Code (or an analogous provision of state,
local or foreign law) by reason of a change in accounting method or otherwise;
and (8) neither the Company nor any of its Subsidiaries has distributed stock of
another entity, or has had its stock distributed by another entity, within the
past three (3) years, in a transaction that purported or was intended to be
governed in whole or in part by Section 355 of the Code.

            (iii) "Tax" or "Taxes" means any taxes of any kind, including but
not limited to those on or measured by or referred to as income, gross receipts,
capital, sales, use, ad valorem, franchise, profits, license, withholding,
employment, payroll, premium, value added, property or windfall profits taxes,
environmental transfer taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Entity,
domestic or foreign.

            (iv) "Tax Return" means any return, declaration, report, statement
or information return required to be filed with any Governmental Entity with
respect to Taxes.

      (x) Labor Matters. The Company has previously delivered to Parent a
complete and accurate schedule showing, with respect to salaried employees, the
name, current annual compensation rate (including bonus and commissions), title,
current base salary rate, accrued


                                       22



bonus, accrued sick leave, accrued vacation benefits and accrued severance pay
of each present employee of the Company and each of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization, nor is the Company or any of its
Subsidiaries the subject of any proceeding asserting that the Company or any of
its Subsidiaries has committed an unfair labor practice or is seeking to compel
the Company or any Subsidiary to bargain with any labor union or labor
organization nor is there pending or, to the Company's knowledge, threatened,
any labor strike, dispute, walkout, work stoppage, slowdown or lockout involving
the Company or any of its Subsidiaries. Each of the Company and its Subsidiaries
is in compliance in all material respects with all applicable Laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and occupational safety and health. Except as disclosed in
Section 5.1(x) of the Company Disclosure Letter, there is no action, suit or
legal, administrative, arbitration, grievance or other proceeding pending or, to
the Company's knowledge, threatened, or, to the Company's knowledge, any
investigation pending or threatened against the Company or any Subsidiary
relating to the Company's employment practices or any of the applicable Laws
described in this Section 5.1(x).

      (y) Rights Agreements. The Board of Directors of the Company has taken all
action necessary to render the Rights and the Company Rights Agreement
inapplicable to the Merger, the execution and delivery of this Agreement and the
consummation of the consummation of the other transactions contemplated hereby
and a copy of the amendment to the Company Rights Agreement effecting such
change has been provided to Permit.

      (z) Real Property. Neither the Company nor any of its Subsidiaries owns
or, to the knowledge of the Company, has ever owned any real property. Section
5.1(z) of the Company Disclosure Letter sets forth a complete and accurate list
of all real property leased, subleased, licensed, operated or occupied by the
Company or any of its Subsidiaries (collectively the "Company Leases") and the
location of the premises. The premises subject to the Company Leases are
hereinafter referred to as "Company Leased Property." Except as set forth in
Section 5.1(z) of the Company Disclosure Letter, neither the Company, nor any of
its Subsidiaries nor, to the Company's knowledge, any other party is in default
under any of the Company Leases (nor, to the knowledge of the Company, does
there exist any condition which, upon the passage of time or the giving of
notice or both, would cause a default). Except as set forth in Section 5.1(z) of
the Company Disclosure Letter, no Company Leased Property is occupied by a third
party other than the Company or one of its Subsidiaries, and, to the Company's
knowledge, no third party has a right to occupy such property other than the
Company. The Company has provided to Parent complete and accurate copies of all
the Company Leases, including all amendments thereto; no term or condition of
any of the Company Leases has been modified, amended or waived except as shown
in such copies; and there are no other material agreements or arrangements
relating to the Company's or its Subsidiaries' use or occupancy of any of the
Company Leased Property. The Company has not transferred, mortgaged or assigned
any interest in any of the Company Leases. To the Company's knowledge, there is
no pending or threatened condemnation or similar proceeding affecting any
Company Leased Property or any portion thereof. The Company Leased Property is
in good operating condition and repair and is suitable for the conduct of
business as presently conducted therein.


                                       23



      (aa) Insurance. Section 5.1(aa) of the Company Disclosure Letter contains
a complete and accurate list of all policies of fire, liability, workers'
compensation, title and other forms of insurance owned, held by or applicable to
the Company or any of its Subsidiaries (or their assets or business) as of the
date hereof, and the Company has heretofore made available to Parent a complete
and accurate copy of all such policies. All such policies are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies are
sufficient for compliance by the Company and its Subsidiaries with all Contracts
to which the Company or any of its Subsidiaries is a party, and each of the
Company and its Subsidiaries has complied in all material respects with the
provisions of each such policy under which it is an insured party. The Company
has not been refused any insurance with respect to its assets or operations by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance, during the last three (3) years. There are no
pending or, to the knowledge of the Company, threatened material claims under
any insurance policy.

      (bb) Title to Assets. The Company and its Subsidiaries own, and have good
and valid title to, all assets purported to be owned by them, including: (a) all
assets reflected on the December 2002 Balance Sheet (except for assets sold or
otherwise disposed of in the ordinary course of business consistent with past
practice since December 31, 2002); and (b) all other assets reflected in the
books and records of the Company and its Subsidiaries as being owned by the
Company and its Subsidiaries. Except for the liens, pledges, security interests,
claims or other encumbrances set forth in Section 5.1(bb) of the Company
Disclosure Letter, all of said assets are owned by the Company and its
Subsidiaries free and clear of any liens, pledges, security interests, claims or
other encumbrances, except for (i) any lien, pledge, security interest, claim or
other encumbrance for current taxes not yet due and payable and (ii) minor
liens, pledges, security interests, claims or other encumbrances that have
arisen in the ordinary course of business consistent with past practice and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of the Company or
any of its Subsidiaries ("Permitted Liens").

      (cc) [Reserved]

      (dd) Opinion of Financial Advisor. The Company has received the oral
opinion of Lehman Brothers Inc. to the effect that, as of the date hereof, the
Merger Consideration is fair from a financial point of view to the holders of
the Shares (other than Parent and its Affiliates). An executed copy of the
written opinion confirming such oral opinion will be delivered to Parent
promptly after delivery thereof to the Company.

      (ee) Brokers and Finders. Neither the Company nor any of the Company's
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the Merger or the other transactions contemplated by this Agreement, except
that the Company has engaged Lehman Brothers Inc. as its financial advisor, the
arrangements with which have been disclosed to Parent prior to the date hereof.


                                       24



      (ff) Transactions with Affiliates. Except as set forth in Section 5.1(ff)
of the Company Disclosure Letter, since December 31, 2000, neither the Company
nor any of its Subsidiaries has purchased goods or services from, or sold goods
or services to, or otherwise engaged in any transaction with, any Person (i)
that is an Affiliate of the Company or (ii) with respect to which any Affiliate
of the Company, or any member of the immediate family of any such Affiliate,
owns more than 10% of the voting equity of such Person. All such transactions
have been conducted on terms at least as favorable to the Company or its
applicable Subsidiary as could have been obtained from third parties.

      5.2 Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub hereby represent and warrant to the Company that:

      (a) Organization, Good Standing and Qualification. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate power and authority to own and operate its properties
and assets and to carry on its business as presently conducted. Parent has made
available to the Company a complete and correct copy of its and Merger Sub's
certificate of incorporation and bylaws, each as amended to date. Such
certificates of incorporation and bylaws are in full force and effect.

      (b) Corporate Authority; Approval and Fairness. Each of Parent and Merger
Sub has all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the Merger. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and is a legal, valid
and binding agreement of each enforceable against each in accordance with its
terms, except (A) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (B) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.

      (c) Governmental Filings; No Violations. Other than the filings and/or
notices (A) contemplated by Section 1.3, (B) such reports under the Exchange Act
as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, and (C) otherwise required to be made by Parent,
or Merger Sub under applicable state securities or blue sky laws or the rules
and regulations of the American Stock Exchange in connection with the Merger or
any of the transactions contemplated by this Agreement, no notices, reports or
other filings are required to be made with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by Parent or Merger
Sub from, any Governmental Entity, in connection with the execution and delivery
of this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the Merger and the other transactions contemplated hereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to prevent or materially delay Parent's or Merger
Sub's ability to consummate the transactions contemplated by this Agreement.

      The execution, delivery and performance of this Agreement does not, and
the consummation of the Merger and the other transactions contemplated hereby
will not, constitute or result in (A) a breach or violation of, or a default
(with or without notice, lapse of time or


                                       25



both) under, either Parent's or Merger Sub's certificate of incorporation or
bylaws, (B) (with or without notice, lapse of time or both) a breach or
violation of, or a default under, the acceleration of any obligations under, or
the creation of a lien, pledge, security interest or other encumbrance on any
assets of Parent or Merger Sub pursuant to, any Contract that is binding upon
Parent or Merger Sub or any Law or governmental or non-governmental permit or
license to which Parent or Merger Sub is subject or (C) any change in the rights
or obligations of any party under any of Parent's or Merger Sub's Contracts,
except, in the case of clause (B) or (C) above, for any breach, violation,
default, acceleration, creation or change that, individually or in the
aggregate, is not reasonably likely to prevent or materially delay its ability
to consummate the Merger or any of the other transactions contemplated by this
Agreement.

      (d) Information Supplied. None of the information supplied or to be
supplied by or on behalf of Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date it is first
mailed to the stockholders of the Company and at the time of the Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.

      (e) Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.

      (f) Funds. Parent has or will have funds sufficient cash to pay the
aggregate Merger Consideration.

      (g) Brokers. None of Parent, Merger Sub or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any broker or finder in connection with the transactions
contemplated herein.

                                   ARTICLE VI
                                    Covenants

      6.1 Conduct of the Company. From the date of this Agreement until the
Effective Time, the Company shall, and shall cause its Subsidiaries to, conduct
their respective businesses in the ordinary and usual course consistent with
past practice and in a manner not representing a new strategic direction for the
Company and its Subsidiaries and shall, and shall cause its Subsidiaries to, use
all commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties. Without limiting the
generality of the foregoing, except with the prior written consent of Parent,
which shall not be unreasonably withheld, or as set forth in the corresponding
subsections of Section 6.1 of the Company Disclosure Letter, except as
specifically required by this Agreement or applicable Law, from the date hereof
until the Effective Time the Company will not, and will not permit any of its
Subsidiaries to:

      (a) adopt or propose any change in its certificate of incorporation or
by-laws, or amend, modify or terminate the Company Rights Agreement, except that
the Company shall


                                       26



be permitted to make any amendments to the Company Rights Agreement that may be
necessary in order to ensure that its representations in Section 5.1(y) are true
and correct and to provide that the Rights issued under such Company Rights
Agreement terminate immediately prior to the Effective Time;

      (b) adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization of the Company or any of its Subsidiaries;

      (c) issue, sell, transfer, pledge, dispose of or encumber any shares of,
or securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of the Company or its Subsidiaries or any Company Voting Debt
other than issuances pursuant to the exercise of convertible securities or
warrants outstanding on the date hereof or issuances pursuant to stock based
awards or options that are outstanding on the date hereof and are reflected in
clause (B) of Section 5.1(c);

      (d) (i) split, combine, subdivide or reclassify its outstanding shares of
capital stock, or (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock other than dividends paid by any wholly-owned Subsidiary of the Company to
the Company or any wholly-owned Subsidiary of the Company;

      (e) redeem, purchase or otherwise acquire directly or indirectly any of
the Company's or any Subsidiary's capital stock except purchases or redemptions
of capital stock of any wholly-owned Subsidiary of the Company;

      (f) except as provided by Section 6.8 of this Agreement, amend the terms
of any Company Options, including, but not limited to, amendments to accelerate
or otherwise change the vesting or period of exercisability of Company Options
or restricted stock, or reprice Company Options or authorize cash payments in
exchange for any Company Options granted under any Company Stock Option Plans;

      (g) make or commit to make any capital expenditure in excess of $500,000
through April 30, 2004, or make or commit to make any capital expenditure in
excess of $500,000 after April 30, 2004;

      (h) (i) increase the compensation or benefits of any director, officer or
employee, except as required under any existing agreement or commitment and
provided that such required increase (including identity of employee) is
specifically disclosed on Section 6.1(h) of the Company Disclosure Letter; (ii)
enter into (or adopt) any new, or amend any existing, Compensation and Benefit
Plan; or (iii) hire any new employee at the level of director or above or with
an annual base salary in excess of $100,000 or promote any level to director or
manager or above;

      (i) acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any equity interest in or any material portion of the assets of, or
by any other manner acquire any business or any Person or division thereof
except (x) purchases of inventory in the ordinary


                                       27



course of business or (y) pursuant to purchase orders entered into in the
ordinary course of business which do not require payments in excess of $500,000
per annum;

      (j) sell, lease, encumber (including by the grant of any option thereon)
or otherwise dispose of any material assets or property except pursuant to
existing contracts or commitments or with respect to the sale of Company
Products in the ordinary course of business consistent with past practice;

      (k) (i) incur or assume any indebtedness, except indebtedness under the
Company's current line of credit in an amount that, when aggregated with all
then existing indebtedness of the Company, does not exceed $3,500,000; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
other than its Subsidiaries in the ordinary course of business; or (iii) make or
cancel, or waive any rights with respect to, any loans, advances or capital
contributions to, or investments in, any other person;

      (l) pay, discharge or satisfy any claims, suits, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice of liabilities reflected or
reserved against in the December 2002 Balance Sheet, or incurred subsequent to
such date in the ordinary course of business consistent with past practice (and,
in any case, only if the amount involved is less than $500,000);

      (m) (i) enter into any license or other Contract with respect to the
Intellectual Property Rights owned by the Company other than in the ordinary
course of business or (ii) enter into any consulting or independent contracting
arrangement under which the Company may be obligated to make payments in excess
of $100,000 in the aggregate or that extend for a period longer than one year
and may not be terminated by the Company without penalty upon thirty (or less)
days notice;

      (n) directly or indirectly, engage in any transaction with, or enter into
any Contract with, any director, officer, holder of 5% or more the outstanding
Shares or Affiliate of the Company or any individual known to the Company to be
a family member of any such Person except for transactions solely between the
Company and any wholly-owned Subsidiary of the Company or solely between
wholly-owned Subsidiaries of the Company;

      (o) change any method of accounting or accounting practice used by it
except any change required by reason of a concurrent change in GAAP;

      (p) amend, modify or otherwise change the terms of any existing Contract
to accelerate the payments due to the Company or its Subsidiaries thereunder;

      (q) enter into any joint venture, partnership or other similar
arrangement;

      (r) (i) make or change any Tax election, (ii) settle any Tax audit or
(iii) file any amended Tax Return or (iv) consent to any extension or waiver of
the limitation period applicable to any Tax claim or assessment relating to the
Company or any of its Subsidiaries,


                                       28



in each case, that is reasonably likely to result in a Tax liability that is
material to the Company and its Subsidiaries, taken as a whole;

      (s) enter into any Contract that limits the ability of the Company or any
Subsidiary of the Company, or would limit the ability of Parent or any
Subsidiary of Parent after the Effective Time, to compete in or conduct any line
of business or compete with any Person in any geographic area or during any
period;

      (t) except in the ordinary course of business, enter into any material
Contract, modify, amend or terminate any material term of any material Contract
or waive, release or assign any material rights or claims thereunder;

      (u) enter into any Contract to the extent consummation of the transactions
contemplated by this Agreement or compliance by the Company with the provisions
of this Agreement would reasonably be expected to conflict with, or result in a
violation or breach of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of, or result in, termination, cancellation
or acceleration of any material obligation or to the loss of a material benefit
under, or result in the creation of any lien, pledge, security interest, claim
or other encumbrance in or upon any of the material properties or other assets
of the Company or any of its Subsidiaries under, or give rise to any increased,
additional, accelerated, or guaranteed right or entitlements of any third party
under, or result in any material alteration of, any provision of such Contract;

      (v) take any action that would reasonably be expected to cause any of the
representations and warranties of the Company contained in this Agreement or the
Company Disclosure Letter not to be true and correct as of the date of such
action or as of the Closing or otherwise prevent, materially delay or materially
impede the consummation of the Merger; and

      (w) agree or commit to do any of the foregoing.

      6.2 Proxy Statement; Stockholders' Meeting.

      (a) As promptly as practicable following the date of this Agreement, the
Company shall prepare and file with the SEC the Proxy Statement, and the Company
shall use all reasonable efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto and to cause the Proxy Statement to be
mailed to the stockholders of the Company as promptly as practicable following
the date of this Agreement. The Company shall promptly notify Parent upon the
receipt of any comments from the SEC or the staff of the SEC or any request from
the SEC or the staff of the SEC for amendments or supplements to the Proxy
Statement and shall provide Parent with copies of all correspondence between the
Company and its Representatives, on the one hand, and the SEC and the staff of
the SEC, on the other hand, relating to the Proxy Statement. Notwithstanding the
foregoing, prior to filing or mailing the Proxy Statement (or any amendment or
supplement thereto) or responding to any comments of the SEC or the staff of the
SEC with respect thereto, the Company (i) shall provide Parent an opportunity to
review and comment on such document or response and (ii) shall include in such
document or response all comments reasonably proposed by Parent


                                       29



Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, the Company or Parent, as the case may be,
will promptly inform the other of such occurrence and cooperate in filing with
the SEC and/or mailing to stockholders of the Company such amendment or
supplement.

      (b) The Company shall, as soon as practicable following the date of this
Agreement, establish a record date for, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Stockholders' Meeting") solely for the
purpose of obtaining the Stockholder Approval. Subject to Section 6.3 below, the
Company shall, through its Board of Directors, recommend that the Company's
stockholders vote in favor of the adoption and approval of this Agreement and
approval of the Merger and shall include such recommendation in the Proxy
Statement. Subject to Section 6.3(d), the Company will use all reasonable
efforts to solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement and approval of the Merger, and will take all other
action necessary or advisable under applicable Law to secure Stockholder
Approval. Notwithstanding anything to the contrary contained in this Agreement,
the Company may adjourn or postpone the Stockholders' Meeting to the extent
necessary to ensure that any necessary supplement or amendment to the Proxy
Statement is provided to its stockholders in advance of a vote on the Merger and
this Agreement or, if as of the time for which the Stockholders' Meeting is
originally scheduled (as set forth in the Proxy Statement) there are
insufficient Shares represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of such Stockholders' Meeting.

      6.3 Acquisition Proposals.

      (a) No Solicitation. The Company agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of the Company or its
Subsidiaries shall, and that it shall use its best efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not to
(and shall not authorize any of them to) directly or indirectly: (i) solicit,
initiate, encourage, knowingly facilitate or induce any inquiry with respect to,
or the making, submission or announcement of, any Acquisition Proposal (as
defined in Section 6.3(f)), (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any nonpublic information in connection
with, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any Person with respect
to any Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal, or (v) enter into
any letter of intent or similar document or any contract, agreement or
commitment contemplating or otherwise relating to any Acquisition Proposal or
transaction contemplated thereby. The Company and its Subsidiaries will
immediately cease any and all existing activities, discussions or negotiations
with any third parties conducted heretofore with respect to any Acquisition
Proposal.

      (b) Notification of Unsolicited Acquisition Proposals. As promptly as
practicable after receipt of any Acquisition Proposal (and in any event within
forty-eight (48) hours of such receipt) or any request for nonpublic information
or inquiry which it reasonably believes would lead to an Acquisition Proposal,
the Company shall provide Parent with oral and written notice


                                       30



of the material terms and conditions of such Acquisition Proposal, request or
inquiry, and the identity of the Person or group making any such Acquisition
Proposal, request or inquiry. The Company shall provide Parent as promptly as
practicable, oral and written notice of any changes in the proposed material
terms and conditions or the status of any such Acquisition Proposal, request or
inquiry.

      (c) Superior Offers. Notwithstanding anything to the contrary contained in
Section 6.3(a), in the event that the Company receives an unsolicited, written
Acquisition Proposal from a third party that its Board of Directors has
concluded (following consultation with its outside legal counsel and its
financial advisor), is, or is reasonably likely to result in, a Superior Offer
(as defined in Section 6.3(f)), the Company may then take the following actions:

            (i) Furnish nonpublic information to the third party making such
Acquisition Proposal, provided that (A) the Company receives from the third
party an executed confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral information furnished
to such third party on its behalf, the terms of which are substantially similar
to the terms contained in the Confidentiality Agreement (as defined in Section
6.6) and (B) substantially contemporaneously with furnishing any such nonpublic
information to such third party, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously so furnished); and

            (ii) Participate in negotiations and discussions with the third
party with respect to the Acquisition Proposal.

      (d) Changes of Recommendation. In response to the receipt of a Superior
Offer, the Board of Directors of the Company may withhold, withdraw, amend or
modify its recommendation in favor of this Agreement and the Merger and may
indicate that it is doing so because it has received a Superior Offer and, in
the case of the Company's receipt of a Superior Offer that is a tender or
exchange offer made directly to its stockholders, recommend that its
stockholders accept the tender or exchange offer (any of the foregoing actions,
whether by the Board of Directors of the Company or a committee thereof, a
"Change of Recommendation"), if all of the following conditions in clauses (i)
through (iii) are met:

            (i) The Stockholders' Meeting has not occurred;

            (ii) The Company shall have (A) provided Parent with written notice
which shall state expressly (1) that it has received a Superior Offer, (2) the
material terms and conditions of the Superior Offer and the identity of the
Person or group making the Superior Offer, and (3) that it intends to effect a
Change of Recommendation and the manner in which it intends to do so, and (B)
considered any counterproposal to the Superior Offer that Parent may make during
the three-day period after Parent's receipt of the written notice referred to in
clause (A) (no Change of Recommendation being permissible hereunder prior to the
end of such three-day period) and (C) determined in the sole judgment of its
Board of Directors (following consultation with its outside legal counsel and
its financial advisor), that such Superior Offer is more favorable, from a
financial point of view, to the Company's stockholders (in their capacities as
stockholders) than such counterproposal; and


                                       31



            (iii) The Company shall not have breached in any material respect
any of the provisions set forth in Section 6.2 or this Section 6.3.

      (e) Compliance with Tender Offer Rules. Nothing contained in this
Agreement shall prohibit the Company or its Board of Directors from taking and
disclosing to its stockholders a position contemplated by Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act; provided that the Company shall not
effect a Change of Recommendation unless specifically permitted pursuant to the
terms of Section 6.3(d).

      (f) Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:

            (i) "Acquisition Proposal" shall mean any offer or proposal relating
to any transaction (other than the transaction contemplated by this Agreement)
or series of related transactions involving: (A) any purchase from the Company
or acquisition by any Person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a fifteen
percent (15%) interest in the total outstanding voting securities of the Company
or any tender offer or exchange offer that if consummated would result in any
Person or group beneficially owning fifteen percent (15%) or more of the total
outstanding voting securities of the Company or any merger, consolidation,
business combination or similar transaction involving the Company, (B) any sale
of all or substantially all of the assets of the Company (including its
Subsidiaries taken as a whole), or (C) any liquidation or dissolution of the
Company; and

            (ii) "Superior Offer" shall mean an unsolicited, written offer made
by a third party to acquire, directly or indirectly, pursuant to a tender offer,
exchange offer, merger, consolidation or other business combination, or asset
purchase, all or substantially all of the assets of the Company or a majority of
the total outstanding voting securities of the Company and as a result of which
the stockholders of the Company immediately preceding such transaction would
hold less than fifty percent (50%) of the equity interests in the surviving or
resulting entity of such transaction or any direct or indirect parent or
subsidiary thereof, on terms that the Board of Directors of the Company has
concluded (following consultation with its outside legal counsel and its
financial adviser) (A) to be more favorable, from a financial point of view, to
the Company's stockholders (in their capacities as stockholders) than the terms
of the Merger (or any counterproposal referred to in Section 6.3(d)(ii)(B)) and
(B) the conditions to the consummation of which are reasonably capable of being
satisfied.

      6.4 Filings; Other Actions; Notification.

      (a) Each of the Company and Parent shall cooperate with the other and use
(and shall cause their respective Subsidiaries to use) all commercially
reasonable efforts to take or cause to be taken all actions, and do or cause to
be done all things, necessary, proper or advisable under this Agreement and
applicable Laws to consummate and make effective the Merger and the other
transactions contemplated by this Agreement as soon as practicable, including
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings and other documents and to
obtain as promptly as practicable all permits, consents, approvals and
authorizations necessary or advisable to be


                                       32



obtained from any third party and/or any Governmental Entity in order to
consummate the Merger or any of the other transactions contemplated by this
Agreement; provided, however, that neither the foregoing nor anything else in
this Agreement shall require Parent to take or to permit the Company to take any
action or agree to take any action that would involve the disposition of any
assets that are material to Parent and its Subsidiaries, taken as a whole.
Subject to applicable Laws relating to the exchange of information, Parent and
the Company shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to
Parent or the Company, as the case may be, and any of their respective
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Agreement. In
exercising the foregoing right, each of the Company and Parent shall act
reasonably and as promptly as practicable.

      (b) The Company and Parent each shall, upon request by the other, furnish
the other with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, or any other statement,
filing, notice or application made by or on behalf of Parent, the Company or any
of their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Merger and the transactions contemplated by this
Agreement.

      (c) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or by any
of their respective Subsidiaries, from any third party and/or any Governmental
Entity with respect to the Merger and the other transactions contemplated by
this Agreement. The Company and Parent each shall give prompt notice to the
other upon becoming aware of, including a reasonably detailed statement of the
relevant facts relating to: (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would reasonably be likely to cause any
representation or warranty of such party contained in this Agreement or the
Company Disclosure Letter to be untrue or inaccurate such that the condition set
forth in Section 7.2(a) or Section 7.3(a), as applicable, would not be satisfied
as of the date of such event or as of the Closing Date; (ii) the occurrence of
any event that, were it to have occurred prior to the date hereof, would have
caused the representation of the Company set forth in Section 5.1(k) to be
untrue, (iii) any material failure of the Company or Parent, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; or (iv) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would reasonably be likely to
cause any condition to the obligations of any party to effect the transactions
contemplated hereby not to be satisfied. The Company shall give prompt notice to
Parent upon becoming aware of any change since the date hereof that has had, or
is reasonably likely to have, a Material Adverse Effect on the Company. The
parties hereto agree that the delivery of any notice pursuant to this Section
6.4(c) shall not cure such breach or noncompliance or limit or otherwise affect
the remedies available hereunder to the party receiving such notice.


                                       33



      6.5 Stockholder Litigation. The Company shall give Parent the opportunity
to participate in the defense or settlement of any stockholder litigation
against the Company and/or its directors relating to the transactions
contemplated by this Agreement, and no such settlement shall be agreed to
without Parent's prior written consent, such consent not to be unreasonably
withheld or delayed.

      6.6 Access. Upon reasonable notice, the Company shall (and shall cause its
Subsidiaries to) afford Parent's officers, employees, counsel, accountants and
other authorized representatives ("Representatives") reasonable access, during
normal business hours throughout the period prior to the Effective Time, to the
Company's executive officers, accountants, properties, books, contracts and
records and, during such period, shall (and shall cause its Subsidiaries to)
furnish promptly to the Representatives all information concerning its business,
properties, results of operations and personnel as may reasonably be requested,
provided that no investigation pursuant to this Section shall affect or be
deemed to modify any representation or warranty made by the Company, and
provided further, however, that the Company may restrict the foregoing access to
the extent that (A) in the reasonable judgment of the Company, any law, treaty,
rule or regulation of any Governmental Entity applicable to the Company requires
the Company or its subsidiaries to restrict or prohibit access to any such
properties or information, (B) in the reasonable judgment of the Company, the
information is subject to confidentiality obligations to a third party, (C) such
disclosure would result in disclosure of any trade secrets of third parties, or
(D) disclosure of any such information or document could result in the loss of
attorney client privilege; provided, however, that with respect to this clause
(D), the Company and/or its counsel shall use their reasonable efforts to enter
into such joint defense agreements or other arrangements, as appropriate, so as
to avoid the loss of attorney client privilege. All requests for information and
access made pursuant to this Section shall be directed to an executive officer
of the Company or such Person as may be designated by its officers. The parties
will hold any such information which is nonpublic in confidence pursuant to the
terms of the confidentiality agreement, dated October 3, 2003, between the
Company and Parent (the "Confidentiality Agreement"). Nothing in this Section
6.6 will modify or alter the provisions of the Confidentiality Agreement;
provided, however, that, notwithstanding anything to the contrary contained
herein or in the Confidentiality Agreement, any confidentiality obligations set
forth herein or in any other agreement to which the parties hereto are parties
or by which they are bound, including the Confidentiality Agreement, as they
relate to the transactions contemplated by this Agreement shall not apply to the
purported or claimed Federal, state, or local income tax treatment of the
transactions (the "Tax Treatment") or to any fact that may be relevant to
understanding the purported or claimed Federal, state, or local income tax
treatment of the transactions (the "Tax Structure"), and each party hereto (and
any employee, representative, or agent of any party hereto) may disclose to any
and all persons, without limitation of any kind, the Tax Treatment and Tax
Structure of the transactions contemplated by this Agreement and any materials
of any kind (including any tax opinions or other tax analyses) that relate to
the Tax Treatment or Tax Structure. In addition, each party hereto acknowledges
that it has no proprietary or exclusive rights to any tax matter or tax idea
related to the transactions contemplated by this Agreement. The preceding
sentence is intended to ensure that the transactions contemplated by this
Agreement shall not be treated as having been offered under conditions of
confidentiality for purposes of Treasury Regulation Section 1.6011-4(b)(3) or
any successor provision of the Treasury Regulations promulgated under Section
6011 of the Code, or


                                       34



any similar state or local provisions, and shall be construed in a manner
consistent with such purpose.

      6.7 Publicity. The initial press release concerning the Merger shall be a
joint press release and thereafter (except with respect to any press release or
public announcement relating to a Change of Recommendation) the Company and
Parent shall consult with each other prior to issuing any press releases or
otherwise making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any filings with
any third party and/or any Governmental Entity (including any national
securities exchange) with respect thereto, except as may be required by
applicable Law or by obligations pursuant to any listing agreement with or rules
of any national securities exchange. Nothing contained in this Agreement shall
prohibit the Company or Parent from publicly disclosing this Agreement to the
extent such disclosure is required under applicable Law or by obligations
pursuant to any listing agreement with, or any rules of, any national securities
exchange, provided, that the Company may not disclose a Change of Recommendation
except as permitted by Section 6.3.

      6.8 Equity Awards.

      (a) The Company shall amend, or cause to be amended, each Company Stock
Option Plan to provide that, or take such other reasonable actions so that, at
the Effective Time, each holder of a Company Option that is vested or unvested
and unexercised shall receive a "Cash Amount" (less any applicable withholding
taxes) equal to the product of (x) the amount (if any) by which the Merger
Consideration exceeds the exercise price per Share of the Company Option and (y)
the number of underlying Shares with respect to which the Company Option had not
been exercised prior to the Effective Time. The Company shall use all
commercially reasonable efforts to amend the Company Stock Option Plans to
provide that each Company Option shall terminate as of the Effective Time upon
the making of such payments.

      (b) The Company shall provide notice to participants in the Company Stock
Option Plans that the Company proposes to merge into another corporation; that
the participant under the plans or program may exercise his vested and
unexercised Company Options in full with respect to Shares not theretofore
purchased by him prior to the Effective Time; and that the Company Stock Option
Plans have been amended to provide that to the extent such a participant does
not exercise such Company Options prior to the Effective Time, such Options
shall terminate at the Effective Time and to the extent that such participant
holds vested and unexercised Company Options at the Effective Time, such
participant shall receive, in settlement of each Company Option held by the
participant, the "Cash Amount" described in the preceding paragraph.

      (c) Except as may be otherwise agreed to by Parent and the Company, the
Company Stock Option Plans shall terminate as of the Effective Time.

      (d) Prior to the Effective Time, the Company shall take all such steps as
may be required and permitted to cause the transactions contemplated by this
Agreement, including dispositions of Shares, Company Options and any other
derivative securities with respect to the Shares, by each individual who is or
will be subject to the reporting requirements of


                                       35



Section 16(a) of the Exchange Act with respect to the Company, to be exempt
under Rule 16b-3 promulgated under the Exchange Act.

      (e) Notwithstanding anything to the contrary herein, if it is determined
that compliance with any of the foregoing would cause any individual subject to
Section 16 of the Exchange Act to become subject to the profit recovery
provisions thereof, any Company Options held by such individual will be canceled
or purchased, as the case may be, at the Effective Time or at such later time as
may be necessary to avoid application of such profit recovery provisions and
such individual will be entitled to receive from the Company or the Surviving
Corporation an amount in cash or other consideration satisfactory to the
Surviving Corporation and such individual equal to the excess, if any, of the
Merger Consideration over the per share exercise price of such Company Option,
multiplied by the number of underlying shares subject thereto (less any
applicable withholding taxes), and the parties hereto will cooperate and take
any and all necessary actions so as to achieve the intent of the foregoing
without giving rise to such profit recovery.

      6.9 Expenses. Except as otherwise provided in Section 8.5(b), whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the Merger and the other transactions contemplated by
this Agreement shall be paid by the party incurring such expense, except that
expenses incurred in connection with printing and mailing the Proxy Statement
and expenses of the Paying Agent shall be shared equally by the Company and
Parent.

      6.10 Indemnification; Directors' and Officers' Insurance.

      (a) From and after the Effective Time, Parent and the Surviving
Corporation, jointly and severally, shall indemnify, defend and hold harmless
each present and former director and officer of the Company and its Subsidiaries
and each present or former employee, officer or director of the Company who
serve or have served at the Company's request as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise (in
any such case when acting in such capacity) determined as of the Effective Time
(the "Indemnified Parties" and each an "Indemnified Party"), against any costs
or expenses (including but not limited to reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any threatened or pending claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time (including, without limitation, for acts or omissions occurring
in connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby), whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company is permitted
under applicable law and the Company's certificate of incorporation to indemnify
such Indemnified Party (and Parent shall also advance expenses to each
Indemnified Party as incurred (promptly following Parent's receipt of a written
request from the Indemnified Party, together with a statement containing
reasonable detail of such expenses) to the fullest extent permitted under
applicable law, provided the Indemnified Party to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately determined
that such expenses can not be reimbursed or indemnified under applicable law to
the extent such undertaking is required by applicable law). For a period of


                                       36



six years after the Effective Time, Parent and the Surviving Corporation (or any
successor to the Surviving Corporation), jointly and severally, shall indemnify
each person who is a beneficiary of the provisions of Article NINTH of the
Company's certificate of incorporation as in effect on the date hereof for acts
or omissions occurring at or prior to the Effective Time to the same extent that
such person is so entitled under said Article NINTH as in effect on the date
hereof.

      (b) Any Indemnified Party wishing to claim indemnification under the first
sentence of paragraph (a) of this Section 6.10, upon receiving written
notification of any such claim, action, suit, proceeding or investigation, shall
promptly notify Parent thereof, but the failure to so notify shall not relieve
Parent of any liability it may have to such Indemnified Party except if, and
only to the extent that, such failure materially and irreversibly prejudices
Parent. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
shall pay the fees and expenses of counsel selected by the Indemnified Party and
reasonably acceptable to Parent, promptly after statements therefor are
received, and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred, (ii) Parent will
cooperate in the defense of any such matter, and (iii) any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under applicable Law shall be made by the
written opinion of independent counsel selected by the Parent and reasonably
approved by the Indemnified Party, which counsel shall not have, at the time of
such determination, otherwise performed services for the Surviving Corporation,
Parent or their respective affiliates during the preceding three years;
provided, however, that (A) Parent shall be obligated pursuant to this Section
6.10(b) to pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of such Indemnified
Party and any other Indemnified Party or Indemnified Parties, in which case each
Indemnified Party with a conflicting position on a significant issue shall be
entitled to retain separate counsel mutually satisfactory to Parent and such
Indemnified Party, (B) the Indemnified Parties shall cooperate in the defense of
any such matter and (C) Parent shall not be liable for any settlement effected
without its prior written consent (which consent may not be unreasonably
withheld or delayed).

      (c) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to maintain with one or more reputable third party
insurers directors' and officers' liability insurance in respect of claims
arising from acts or omissions occurring at or prior to the Effective Time
covering those persons who are covered by the Company's directors' and officers'
liability insurance policy as of the date hereof on terms no less favorable than
those applicable to the current directors and officers of the Company as of the
date hereof; provided, however, that in no event will the Surviving Corporation
be required to expend in any one year in excess of two hundred percent (200%) of
the annual premium currently paid by the Company for such coverage (and to the
extent the annual premium would exceed two hundred percent (200%) of the annual
premium currently paid by the Company for such coverage, the Surviving
Corporation shall cause to be maintained the maximum amount of coverage as is
available for such two hundred percent (200%) of such annual premium).


                                       37



      (d) The provisions of this Section 6.10 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties and their heirs
and estates and such provisions may not be terminated or amended in any manner
adverse to the interests of such Indemnified Parties without their prior
consent. Nothing in this Section 6.10 shall limit in any way any other rights to
indemnification or advancement or expenses that any current or former director,
officer, employee or agent of the Company may have by virtue of the certificate
of incorporation of the Company or under applicable law. Parent agrees that all
rights to indemnification for acts or omissions occurring prior to the Effective
Time now existing in favor of the Indemnified Parties, including, without
limitation, as provided in its certificate of incorporation, shall survive the
Merger, shall become the obligation of Parent and shall continue in full force
and effect in accordance with their terms.

      (e) In the event the Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties to any Person, then, and in each case, proper provision shall be made
so that the successors and assigns of the Company and the Surviving Corporation,
as the case may be, shall assume the obligations set forth in this Section 6.10.

      (f) After the Effective Time, Parent shall indemnify any Indemnified Party
against all reasonable costs and expenses (including reasonable attorneys' fees
and expenses) and Parent shall also advance expenses to such Indemnified Party
as incurred (subject to the conditions set forth in Section 6.10(a) with respect
to the advancement of expenses), relating to the enforcement of such Indemnified
Party's rights under this Section 6.10 or under the certificate of
incorporation, but Parent shall be obligated to so indemnify only to the extent
that such Indemnified Party is ultimately determined to be entitled to
indemnification hereunder or thereunder.

      6.11 Takeover Statute.

      If any Takeover Statute is or may become applicable to the Merger or the
other transactions contemplated by this Agreement, each of Parent and the
Company and their respective Board of Directors shall grant such approvals and
take such lawful actions as are necessary so that such transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement or by the Merger and otherwise act to eliminate or minimize the
effects of such statute or regulation on such transactions.

      6.12 Transfer Taxes

      All stock transfer, real estate transfer, documentary, stamp, recording
and other similar Taxes (including interest, penalties and additions to any such
Taxes) ("Transfer Taxes") incurred in connection with the transactions
contemplated hereby shall be paid by either Merger Sub or the Surviving
Corporation, and the Company shall cooperate with Merger Sub and Parent in
preparing, executing and timely filing any Tax Returns with respect to such
Transfer Taxes.

      6.13 Employee Benefits.


                                       38



      (a) Parent agrees that the employees of the Company and its Subsidiaries
("Company Employees") will be provided with benefits under employee benefit
plans (other than equity incentive plans) that are comparable in the aggregate
to those provided by Parent and its Subsidiaries to similarly situated employees
of Parent and its Subsidiaries.

      (b) Following the Effective Time, Parent shall cause service performed by
Company Employees for the Company and its Subsidiaries (and any predecessor
entities) to be taken into account for purposes of eligibility and vesting, and
for purposes of determining severance, vacation and other paid time off
entitlements, under the benefit plans of Parent and its Subsidiaries in which
Company Employees participate to the extent such service was credited by the
Company and its Subsidiaries under similar Benefit Plans. Notwithstanding the
foregoing, nothing in this Section 6.13(b) shall be construed to require
crediting of service that would result in (i) duplication of benefits, (ii)
service credit for benefit accruals under a defined benefit pension plan or for
employer contributions under a defined contribution pension plan, or (iii)
service credit under a newly established plan for which prior service is not
taken into account.

      (c) From and after the Effective Time, Parent shall (i) cause to be waived
any pre-existing condition limitations under welfare benefit plans, policies or
practices of Parent or its Subsidiaries in which Company Employees participate
and (ii) cause to be credited any deductibles and out-of-pocket expenses
incurred by such employees and their beneficiaries and dependents during the
portion of the calendar year prior to participation in the benefit plans
provided by Parent and its Subsidiaries.

                                  ARTICLE VII
                                   Conditions

      7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:

      (a) Stockholder Approval. The Stockholder Approval shall have been
obtained.

      (b) Regulatory Consents. All Required Governmental Consents and Filings
shall have been made or obtained (as the case may be).

      (c) No Order. No Governmental Entity of competent jurisdiction 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 (i) is in effect and (ii) has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.

      (d) No Governmental Restriction. There shall not be any pending or overtly
threatened suit, action or proceeding asserted by any Governmental Entity
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions


                                       39



contemplated by this Agreement, the effect of which restraint or prohibition if
obtained would cause the condition set forth in Section 7.1(c) to not be
satisfied.

      7.2 Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are also subject to the satisfaction
or waiver by Parent prior to the Effective Time of the following conditions:

      (a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement and the Company Disclosure Letter, when
read without any exception or qualification as to materiality or Material
Adverse Effect, shall be true and correct as of the date hereof and as of the
Closing Date, as if such representations and warranties were made as of the date
hereof and as of the Closing Date (except as to any such representation or
warranty which speaks as of a specific date, which must be true and correct as
of such specific date) except where the failure to be so true and correct would
not, individually or in the aggregate with all such failures, be reasonably
likely to have a Material Adverse Effect, and Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer and
chief financial officer of the Company to such effect.

      (b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the chief
executive officer and chief financial officer of the Company to such effect.

      (c) Absence of Certain Changes. Since the date of this Agreement, there
shall not have occurred any change or event (whether alone or together with
other changes or events occurring since the date of this Agreement) that has
had, or is reasonably likely to have, a Material Adverse Effect on the Company.

      (d) Litigation Matters. There shall not be any suit, action or proceeding
pending or threatened (in writing or otherwise directly communicated to the
Company) by a Governmental Entity seeking to require Parent or any of its
Subsidiaries to take any action that Parent is not required to take pursuant to
the proviso in Section 6.4(a).

      7.3 Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger is also subject to the satisfaction or waiver by the
Company prior to the Effective Time of the following conditions:

      (a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth in this Agreement, when read without any
exception or qualification as to materiality or Material Adverse Effect, shall
be true and correct as of the date hereof and as of the Closing Date, as if such
representations and warranties were made as of the date hereof and as of the
Closing Date (except as to any such representation or warranty which speaks as
of a specific date, which must be true and correct as of such specific date)
except where the failure to be so true and correct would not, individually or in
the aggregate with all such failures, be reasonably likely to materially
adversely affect the ability of Parent to effect the Merger in accordance with
this Agreement, and the Company shall have received a certificate signed on


                                       40



behalf of Parent and Merger Sub by the chief executive officer and chief
financial officer of Parent to such effect.

      (b) Performance of Obligations of Parent and Merger Sub. Each of Parent
and Merger Sub shall have performed in all material respects all material
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent and Merger Sub by the chief executive officer and chief
financial officer of Parent to such effect.

                                  ARTICLE VIII
                                   TERMINATION

      8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and Parent referred
to in Section 7.1(a) is obtained, by mutual written consent of the Company,
Parent and Merger Sub, by action of their respective boards of directors.

      8.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if (a)
the Merger shall not have been consummated by June 30, 2004 (the "Termination
Date"), (b) the Stockholder Approval shall not have been obtained at a meeting
duly convened therefor or at any adjournment or postponement thereof, or (c) any
Law permanently restraining, enjoining or otherwise prohibiting the Merger shall
become final and non-appealable (whether before or after the approval by the
stockholders of the Company); provided, that the right to terminate this
Agreement pursuant to this Section 8.2 shall not be available to any party that
has breached in any material respect its obligations under this Agreement in any
manner that shall have been a principal cause of the failure referred to in said
clause.

      8.3 Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned by the Company, by action of the Board of Directors of
the Company:

      (a) at any time prior to the time when Stockholder Approval has been
obtained if at the time of such termination all of the conditions set forth in
clauses (ii) and (iii) of Section 6.3(d) are met; or

      (b) at any time prior to the Effective Time, whether before or after the
time when Stockholder Approval has been obtained, if there has been a material
breach by Parent or Merger Sub of any representation, warranty or covenant of
Parent or Merger Sub set forth in this Agreement or if any representation or
warranty of Parent or Merger Sub would be untrue if made on any date prior to
the Effective Time, in either case such that the conditions set forth in Section
7.3(a) or Section 7.3(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty would be untrue; provided that if
such breach by Parent or Merger Sub or inaccuracy in its respective
representation or warranty is curable


                                       41



through the exercise of all commercially reasonable efforts, then the Company
may not terminate this Agreement under this Section 8.3(b) prior to the date
which is twenty (20) calendar days after written notice of such breach or
inaccuracy is given by the Company to Parent.

      8.4 Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned by the Parent, by action of the Board of Directors of Parent:

      (a) at any time prior to the time when Stockholder Approval has been
obtained if (i) the Board of Directors of the Company shall have withdrawn or
shall have amended or modified in a manner adverse to Parent its approval or
recommendation of this Agreement, (ii) the Company shall have failed to include
in the Proxy Statement the recommendation of the Company's Board of Directors in
favor of the adoption and approval of this Agreement and the approval of the
Merger, (iii) the Company's Board of Directors or any committee thereof shall
have approved or recommended any Acquisition Proposal not made by Parent or any
of its Affiliates or (iv) there has been a material breach by the Company of any
of its obligations under Section 6.2 or Section 6.3;

      (b) at any time prior to the time when Stockholder Approval has been
obtained if (i) it has been made known to the stockholders of the Company that
any Person (other than Parent or any of its Affiliates) has made or is
considering an Acquisition Proposal and thereafter the Company's Board of
Directors fails to reaffirm (publicly, if so requested) its recommendation in
favor of the adoption and approval of this Agreement and the approval of the
Merger within ten (10) business days after Parent requests in writing that such
recommendation be reaffirmed (it being understood that such reaffirmation shall
not affect the Company's right to thereafter effect a Change of Recommendation
in accordance with the provisions of Section 6.3(d)), or (ii) a tender or
exchange offer relating to the Company's securities shall have been commenced by
a Person unaffiliated with Parent and the Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Securities Act,
within ten (10) business days after such tender or exchange offer is first
published, sent or given, a statement disclosing that the Company's Board of
Directors recommends rejection of such tender or exchange offer; provided,
however, that prior to any termination pursuant to this Section 8.4(b), Parent
shall have given the Company 24 hours prior written notice; or

      (c) at any time prior to the Effective Time, whether before or after the
time when Stockholder Approval has been obtained, if there has been a material
breach by the Company of any representation, warranty or covenant of the Company
set forth in this Agreement (other than Section 6.2 or Section 6.3) or the
Company Disclosure Letter or if any such representation or warranty of the
Company would be untrue if made on any date prior to the Effective Time, in
either case such that the conditions set forth in Section 7.2(a) or Section
7.2(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue; provided that if such
breach by the Company or inaccuracy in its representation or warranty is curable
through the exercise of all commercially reasonable efforts, then Parent may not
terminate this Agreement under this Section 8.4(b) prior to the date which is
twenty (20) calendar days after written notice of such breach or inaccuracy is
given by Parent to the Company.


                                       42



      8.5 Effect of Termination and Abandonment.

      (a) Any proper termination of this Agreement under Section 8.2, 8.3 or 8.4
above will be effective immediately upon the delivery of written notice of
termination by the terminating party to the other parties hereto. In the event
of termination of this Agreement pursuant to this Article VIII, this Agreement
(other than as set forth in Section 9.1) shall become void and of no effect with
no liability of any party hereto (or any of its directors, officers, employees,
agents, legal and financial advisors or other representatives); provided,
however, no such termination shall relieve any party hereto of any liability or
damages resulting from any breach of this Agreement.

      (b) In the event that (i) a bona fide Acquisition Proposal shall have been
made to the Company and made known to stockholders of the Company generally or
has been made directly to stockholders of the Company generally or any Person
shall have publicly announced an intention (whether or not conditional) to make
a bona fide Acquisition Proposal regarding the Company and such Acquisition
Proposal or announced intention shall not have been withdrawn prior to the
Stockholders' Meeting of the Company and thereafter this Agreement is terminated
by either Parent or the Company, as applicable, pursuant to Section 8.2(b) or,
following a willful and material breach by the Company of any covenant set forth
in this Agreement, Section 8.4(c), and (ii) within twelve months following any
such termination any Person (other than Parent or any of its Affiliates) shall
consummate an Acquisition of the Company, then the Company shall pay to Parent
by wire transfer of same-day funds, prior to or upon the date of consummation of
such Acquisition of the Company, a termination fee of $1,200,000. In the event
that this Agreement is terminated by Parent pursuant to Section 8.4(a) or
Section 8.4(b), or by the Company pursuant to Section 8.3(a), then the Company
shall promptly, but in no event later than two (2) business days after the date
of such termination, pay to Parent by wire transfer of same-day funds an amount
equal to the lesser of (x) Parent's and its Affiliates' aggregate costs and
expenses (other than wages and salaries and employee benefits paid to employees
of Parent or its Subsidiaries) incurred in connection with their evaluation of
the transactions contemplated hereby, the negotiation and execution of this
Agreement and Parent's and its Affiliates' performance hereunder and (y) Five
Hundred Thousand Dollars ($500,000); provided that if within twelve months
following any termination of this Agreement pursuant to Section 8.4(a) or
Section 8.3(a) (but not Section 8.4(b)) any Person (other than Parent or any of
its Affiliates) shall consummate an Acquisition of the Company, then the Company
shall pay to Parent by wire transfer of same-day funds, prior to or upon the
date of consummation of such Acquisition of the Company, a termination fee equal
to $1,200,000 less any amount theretofore paid to Parent pursuant to this
sentence. The term "Acquisition of the Company" for purposes of this Section
8.5(b) means any of the following transactions involving the Company: (i) a
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company pursuant to which the
stockholders of the Company immediately preceding such transaction hold less
than fifty percent (50%) of the aggregate equity interests in the surviving or
resulting entity of such transaction or any direct or indirect parent thereof,
(ii) a sale or other disposition by the Company of assets representing in excess
of fifty percent (50%) of the aggregate fair market value of the Company's
business immediately prior to such sale, or (iii) the acquisition by any Person
or group (including by way of a tender offer or an exchange offer or issuance by
the party or such Person or group), directly or indirectly, of beneficial


                                       43



ownership or a right to acquire beneficial ownership of shares representing in
excess of fifty percent (50%) of the voting power of the then-outstanding shares
of capital stock of the Company. The Company acknowledges that the agreements
contained in this Section 8.5(b) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, Parent and
Merger Sub would not enter into this Agreement; accordingly, if the Company
fails to pay promptly the amount due pursuant to this Section 8.5(b), and, in
order to obtain such payment, Parent or Merger Sub commences a suit which
results in a judgment against the Company for the amounts set forth in this
Section 8.5(b), the Company shall pay to Parent or Merger Sub its reasonable
costs and expenses (including reasonable attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime lending
rate of Citibank, N.A. in effect on the date such payment was required to be
made.

                                   ARTICLE IX
                            Miscellaneous and General

      9.1 Survival. This Article IX, Article IV and the agreements of the
Company, Parent and Merger Sub contained in Sections 6.8 (Equity Awards), 6.9
(Expenses) and 6.10 (Indemnification; Directors' and Officers' Insurance) shall
survive the consummation of the Merger. This Article IX, the agreements of the
Company, Parent and Merger Sub contained in Section 6.9 (Expenses) and Section
8.5 (Effect of Termination and Abandonment) shall survive the termination of
this Agreement. All other representations, warranties, agreements and covenants
in this Agreement shall not survive the consummation of the Merger or the
termination of this Agreement.

      9.2 Modification or Amendment. Subject to the provisions of the applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.

      9.3 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.

      9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.

      9.5 Governing Law and Venue; Waiver of Jury Trial.

      (a) This Agreement shall be deemed to be made in and in all respects shall
be interpreted, construed and governed by and in accordance with the law of the
state of Delaware without regard to the conflict of law principles thereof. The
parties hereby irrevocably submit to the exclusive jurisdiction of the courts of
the State of Delaware and the Federal courts of the United States of America
located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or


                                       44



proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Delaware State or Federal court. The parties hereby consent to and
grant any such court jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 9.6 or in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.

      (b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.

      9.6 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:

            if to Parent or Merger Sub, to:
            -------------------------------

            McKesson Corporation
            One Post Street
            San Francisco, CA 943104

            Attention:  General Counsel
            Fax:  (415) 983- 8826


                                       45



            with a copy to:

            Pillsbury Winthrop LLP
            50 Fremont Street
            San Francisco, CA 94105

            Attention:  Blair W. White, Esq.
            Fax:  (415) 983-1200

            if to the Company, to:
            ----------------------

            Moore Medical Corp.
            389 John Downey Drive
            New Britain, CT 06050

            Attention:  Chief Executive Officer
            Fax:   (860) 225-4440

            with a copy to:

            Cadwalader, Wickersham & Taft LLP
            100 Maiden Lane
            New York, NY  10038

            Attention:  Dennis J. Block, Esq.
            Fax:  (212) 504-6666

or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.

      9.7 Definitions. For purposes of this Agreement:

      (a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person;

      (b) "Company Products" means any product or drug produced, manufactured,
marketed or distributed by the Company or any of its Subsidiaries.

      (c) "Contract" means and includes any agreement, lease, contract, note,
mortgage, indenture or other legally binding obligation or commitment, written
or oral;

      (d) "Exchange Act" means the Securities Exchange Act of 1934, as amended;

      (e) "Excluded Shares" means, collectively, (i) Shares owned by Parent or
any direct or indirect Subsidiary of Parent, and (ii) Shares that are owned by
the Company or any direct or indirect Subsidiary of the Company (and in each
case not held on behalf of third parties);


                                       46



      (f) "knowledge of the Company," "Company's knowledge," and like phrases
mean the actual knowledge of those persons who are as of the date hereof or
become after the date hereof and prior to the Effective Time executive officers
of the Company as such term is defined in Rule 16a-1(f) under the Exchange Act,
which include Linda M. Autore, Jon Garrity and John M. Zinzarella as of the date
hereof.

      (g) "Material Adverse Effect" means any change, event, circumstance, set
of facts or effect (whether alone or together with other changes, events,
circumstances, sets of facts or effects) that, with respect to any Person, is
materially adverse to the condition (financial or otherwise), assets, business
or results of operations of such Person and its Subsidiaries, taken as a whole;
provided, however, that (i) none of the following shall be considered when
determining whether there has been a Material Adverse Effect: any effect that
results from (A) changes affecting generally the industry or industries in which
such Person or any of its Subsidiaries participates or the U.S. economy as a
whole, unless such change shall disproportionately adversely affect such Person
or any of its Subsidiaries (B) changes in GAAP or (C) legislative or regulatory
changes, and (ii) neither of the following, in and of itself, shall constitute a
Material Adverse Effect: (A) any failure on the part of the Company to meet
analysts published revenues or earnings predictions for the Company for any
period ending (or which revenues or earnings are released) on or after the date
of this Agreement or (B) any change in the price of shares of Company Common
Stock on or after the date of this Agreement;

      (h) "Other Regulatory Laws" means the FDA Modernization Act of 1997, the
Federal Food and Drug Act of 1906, the Public Health Service Act, the Federal
Trade Commission Act, the Trademark Act of 1946, the Fair Packaging and Labeling
Act, the Drug Price Competition and Patent Term Restoration Act of 1984, the
Controlled Substances Act, the Controlled Substances Import and Export Act, the
1962 Drug Amendments, the Child Protection Act, the Animal Drug Amendments of
1968, the Radiation Control for Health Safety Act, the Drug Listing Act, the
Orphan Drug Act, the Drug Price Competition and Patent Term Restoration Act, the
Generic Animal Drug and Patent Term Restoration Act, the Prescription Drug
Marketing Act of 1987, the Safe Medical Devices Act of 1990, the Generic Drug
Enforcement Act of 1992, the Prescription Drug User Fee Act of 1992, the
Nutrition Labeling and Education Act of 1990, the Dietary Supplement Health and
Education Act of 1994, the Fiscal Year 2001 Agriculture Appropriations - Drug
Import Provisions, Best Pharmaceuticals for Children Act, the Bioterrorism Act
and any state Laws similar or related to any of the foregoing.

      (i) "Person" or "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity;

      (j) "Required Governmental Consents and Filings" means, to the extent
required to have been obtained or made prior to the Effective Time, the filings
contemplated by Section 5.1(e)(i)(A), Section 5.1(e)(i)(B), Section
5.1(e)(i)(C), Section 5.2(c)(i)(A), Section 5.2(c)(i)(B) and Section
5.2(c)(i)(C).

      (k) "Securities Act" means the Securities Act of 1933, as amended; and


                                       47



      (l) "Subsidiary" of any person means another person, an amount of the
voting securities, other voting rights or voting partnership interests of which
is sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.

      (m) Each of the following terms is defined in the Section set forth
opposite such term:

       Term                                                    Section
       ----                                                    -------
       Acquisition of the Company                              8.5(b)
       Acquisition Proposal............................      6.3(f)(i).
       Affiliate.......................................          9.7
       Agreement.......................................       Preamble
       Appraisal Shares................................        4.1(d)
       Bylaws..........................................          2.2
       Cash Amount.....................................        6.8(a)
       Certificate.....................................      4.1(a)(ii)
       Certificate of Merger...........................          1.3
       Change of Recommendation........................        6.3(d)
       Charter.........................................          2.1
       Closing.........................................          1.2
       Closing Date....................................          1.2
       Code............................................        4.2(h)
       Comfort Letter..................................        7.2(e)
       Commercial Software Licenses....................       5.1(t)(i)
       Company.........................................       Preamble
       Company Audit Date..............................        5.1(g)
       Company Disclosure Letter.......................          5.1
       Company Employees...............................        6.13(a)
       Company Leased Property.........................        5.1(z)
       Company Leases..................................        5.1(z)
       Company Option..................................        5.1(c)
       Company Products................................          9.7
       Company Rights Agreement........................        5.1(c)
       Company SEC Reports.............................        5.1(f)
       Company Stock Option Plans......................        5.1(c)
       Company Voting Debt.............................        5.1(c)
       Compensation and Benefit Plans..................       5.1(o)(i)
       Confidentiality Agreement.......................          6.6
       Consolidated Group..............................       5.1(w)(i)
       Contract........................................          9.7
       Costs...........................................        6.10(a)
       December 2002 Balance Sheet.....................        5.1(g)
       DGCL............................................          1.1
       Effective Time..................................          1.3
       Environmental Law...............................        5.1(s)


                                       48



       Term                                                    Section
       ----                                                    -------
       ERISA...........................................      5.1(o)(ii)
       Exchange Act....................................          9.7
       Exchange Fund...................................        4.2(a)
       Excluded Shares                                           9.7
       FDA.............................................      5.1(p)(ii)
       FDCA............................................      5.1(p)(ii)
       Filed Contracts.................................        5.1(u)
       GAAP............................................        5.1(f)
       Governmental Consents...........................        7.1(b)
       Governmental Entity.............................       5.1(e)(i)
       Hazardous Substance.............................        5.1(s)
       Indemnified Party...............................        6.10(a)
       Intellectual Property Rights....................       5.1(t)(i)
       knowledge of the Company........................          9.7
       IRS.............................................      5.1(o)(ii)
       Laws............................................       5.1(p)(i)
       Material Adverse Effect.........................          9.7
       Material Contracts..............................        5.1(u)
       Material Third Party IP License.................       5.1(t)(i)
       Merger Consideration............................       4.1(a)(i)
       Merger                                                 Preamble
       Merger Sub......................................       Preamble
       Nine-Month Financials...........................        7.2(e)
       Other Regulatory Laws ..........................          9.7
       Parent..........................................       Preamble
       Paying Agent....................................        4.2(a)
       Pension Plan....................................      5.1(o)(ii)
       Permits.........................................      5.1(p)(ii)
       Permitted Liens.................................        5.1(bb)
       Person                                                    9.7
       Preferred Shares................................        5.1(c)
       Proxy Statement.................................       5.1(e)(i)
       Registered IP Rights............................      5.1(t)(ii)
       Representatives.................................          6.6
       Required IP Rights..............................      5.1(t)(iii)
       Rights..........................................        5.1(c)
       Securities Act                                            9.7
       SEC.............................................       5.1(e)(i)
       Section 262.....................................        4.1(d)
       Shares..........................................       4.1(a)(i)
       Stockholder Approval                                    5.1(d)
       Stockholders' Meeting...........................        6.2(b)
       Subsidiary                                                9.7
       Superior Offer..................................      6.3(f)(ii)
       Surviving Corporation...........................          1.1


                                       49



       Term                                                    Section
       ----                                                    -------
       Takeover Statute................................        5.1(r)
       Tax.............................................      5.1(w)(iii)
       Tax Return......................................      5.1(w)(iv)
       Tax Structure...................................          6.6
       Tax Treatment...................................          6.6
       Termination Date................................          8.2
       Termination Fee.................................        8.5(b)
       Third Party IP License..........................       5.1(t)(i)
       Transfer Taxes..................................         6.12


      9.8. Entire Agreement. This Agreement (including any exhibits hereto),
the Disclosure Letters hereto and the Confidentiality Agreement constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.

      9.9. No Third Party Beneficiaries. Except as provided in Section 6.10
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.

      9.10. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.

      9.11. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.

      9.12. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section, Schedule or Exhibit,
such reference shall be to a Section of or Schedule or Exhibit to this Agreement
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."


                                       50



      9.13. Assignment. This Agreement shall not be assignable by operation of
law or otherwise; provided, however, that Parent may designate, by written
notice to the Company, another wholly-owned direct Subsidiary of Parent to be a
constituent corporation in lieu of Merger Sub, in the event of which, all
references herein to Merger Sub shall be deemed references to such other
Subsidiary of Parent and provided that all representations and warranties made
herein with respect to Merger Sub as of the date of this Agreement shall be
deemed representations and warranties made with respect to such other Subsidiary
of Parent as of the date of such designation. Any purported assignment made in
contravention of this Agreement shall be null and void.

      9.14. Captions. The Article, Section and paragraph captions herein are for
convenience of reference only and do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.



                  [Remainder of Page Intentionally Left Blank]


                                       51



      IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
duly authorized officers of the parties hereto as of the date hereof.

                                    PARENT

                                    By:  /s/ Marc E. Owen
                                         ------------------
                                        Name:  Marc E. Owen
                                        Title:  Senior Vice President,
                                        Corporate Strategy and Business
                                        Development

                                    MOORE MEDICAL CORP.

                                    By:  /s/ Linda M. Autore
                                         -------------------
                                        Name:  Linda M. Autore
                                        Title:  President and Chief Executive
                                        Officer

                                    MADISON ACQUISITIONS INC.

                                    By:  /s/ Marc E. Owen
                                         ----------------
                                        Name:  Marc E. Owen
                                        Title:  Senior Vice President


                                       1



                                    EXHIBIT A

                      RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                               MOORE MEDICAL CORP.

                                    ARTICLE I

      The name of the corporation is MOORE MEDICAL CORP.

                                   ARTICLE II

      The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801. The name of its registered agent at such address is The Corporation Trust
Company.

                                   ARTICLE III

      The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.

                                   ARTICLE IV

      The number of shares of stock that the corporation shall have authority to
issue is 1,000 shares of Common Stock, par value $.01 per share.

                                    ARTICLE V

      The Board of Directors is expressly authorized to make and alter the
Bylaws of the corporation, without any action on the part of the stockholders;
but the Bylaws made by the directors and the powers so conferred may be altered
or repealed by the directors or the stockholders.

                                   ARTICLE VI

      Elections of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.

                                   ARTICLE VII

      A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to the corporation or its stockholders; (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) under Section 174 of the General Corporation Law of the
State of Delaware; or (4) for any transaction from which the director derived an
improper personal benefit.


                                       A-1



      If the General Corporation Law of the State of Delaware hereafter is
amended to further eliminate or limit the liability of directors, then the
liability of a director of the corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware.


                                      A-2