Raj,

If you plan to use RS-485, you will not be able to use the MAX488 chip, it is intended for RS-422 applications, RS-422 is a two way link, RS-485 is a one way link. In other words, with RS-485, you can have only one unit transmitting at one time. The circuit that you drew will have multiple transmitters trying to talk at one time. A RS-485 chip such as the MAX1487 would work. The /RE and DE pins control whether the chip is in recieve mode or transmit mode.
The 120 ohm resistors are needed only at the beginning and end of a daisy chained link. For short links the termination resistors can be omitted and replaced by 100k pull-up on the A line and 100k pull-down on the B line.


Regards,

Jacob