Exhibit 10.1


 


Execution Copy


 


 


AGREEMENT AND PLAN OF MERGER


 


by and among


 


Bookham Technology plc,


 


Budapest Acquisition Corp.


 


and


 


New Focus, Inc.


 


Dated as of September 21, 2003


 

















 


TABLE OF CONTENTS


 


 


	
  ARTICLE I

  	
  THE MERGER

  
	
   

  	
  1.1

  	
  Effective Time of the Merger

  
	
   

  	
  1.2

  	
  Closing

  
	
   

  	
  1.3

  	
  Effects of the Merger

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  CONVERSION OF SECURITIES AND DISTRIBUTION
  OF THE CASH AMOUNT

  
	
   

  	
  2.1

  	
  Conversion of Capital Stock

  
	
   

  	
  2.2

  	
  Exchange of Certificates and Distribution
  of Cash Amount

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  
	
   

  	
  3.1

  	
  Organization, Standing and Power;
  Subsidiaries.

  
	
   

  	
  3.2

  	
  Capitalization.

  
	
   

  	
  3.3

  	
  Authority; No Conflict; Required Filings
  and Consents.

  
	
   

  	
  3.4

  	
  SEC Filings; Financial Statements;
  Information Provided.

  
	
   

  	
  3.5

  	
  No Undisclosed Liabilities; Indebtedness.

  
	
   

  	
  3.6

  	
  Absence of Certain Changes or Events

  
	
   

  	
  3.7

  	
  Taxes.

  
	
   

  	
  3.8

  	
  Owned and Leased Real Properties.

  
	
   

  	
  3.9

  	
  Intellectual Property.

  
	
   

  	
  3.10

  	
  Agreements, Contracts and Commitments;
  Government Contracts.

  
	
   

  	
  3.11

  	
  Litigation; Product Liability

  
	
   

  	
  3.12

  	
  Environmental Matters.

  
	
   

  	
  3.13

  	
  Employee Benefit Plans.

  
	
   

  	
  3.14

  	
  Compliance With Laws

  
	
   

  	
  3.15

  	
  Permits

  
	
   

  	
  3.16

  	
  Labor Matters.

  
	
   

  	
  3.17

  	
  Insurance

  
	
   

  	
  3.18

  	
  [Intentionally Omitted]

  
	
   

  	
  3.19

  	
  Assets

  
	
   

  	
  3.20

  	
  Warranty

  
	
   

  	
  3.21

  	
  Customers and Suppliers

  
	
   

  	
  3.22

  	
  Opinion of Financial Advisor

  
	
   

  	
  3.23

  	
  Section 203 of the DGCL Not Applicable

  
	
   

  	
  3.24

  	
  Rights Agreement

  
	
   

  	
  3.25

  	
  Brokers; Schedule of Fees and
  Expenses.

  
	
   

  	
  3.26

  	
  No Existing Discussions

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES OF THE
  PARENT AND THE TRANSITORY SUBSIDIARY

  
	
   

  	
  4.1

  	
  Organization, Standing and Power.

  
	
   

  	
  4.2

  	
  Capitalization.

  
	
   

  	
  4.3

  	
  Authority; No Conflict; Required Filings
  and Consents.

  



 


i

















 


	
   

  	
  4.4

  	
  SEC Filings; Financial Statements;
  Information Provided; LSE.

  
	
   

  	
  4.5

  	
  No Undisclosed Liabilities

  
	
   

  	
  4.6

  	
  Agreements, Contracts and Commitments;
  Government Contracts.

  
	
   

  	
  4.7

  	
  Absence of Certain Changes or Events

  
	
   

  	
  4.8

  	
  Litigation; Product Liability

  
	
   

  	
  4.9

  	
  Intellectual Property.

  
	
   

  	
  4.10

  	
  Taxes.

  
	
   

  	
  4.11

  	
  Environmental Matters.

  
	
   

  	
  4.12

  	
  Compliance With Laws

  
	
   

  	
  4.13

  	
  Assets

  
	
   

  	
  4.14

  	
  Broker

  
	
   

  	
  4.15

  	
  Operations of the Transitory Subsidiary

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  CONDUCT OF BUSINESS

  
	
   

  	
  5.1

  	
  Covenants of the Company

  
	
   

  	
  5.2

  	
  Covenants of the Parent

  
	
   

  	
  5.3

  	
  Confidentiality

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  ADDITIONAL AGREEMENTS

  
	
   

  	
  6.1

  	
  Company No Solicitation.

  
	
   

  	
  6.2

  	
  Parent Notices; Additional Negotiations

  
	
   

  	
  6.3

  	
  Joint Proxy Statement/Prospectus;
  Registration Statement; Shareholder Circular; Listing Particulars.

  
	
   

  	
  6.4

  	
  NASDAQ and LSE Quotation

  
	
   

  	
  6.5

  	
  Access to Information

  
	
   

  	
  6.6

  	
  Stockholders Meetings.

  
	
   

  	
  6.7

  	
  [Intentionally Omitted]

  
	
   

  	
  6.8

  	
  Legal Conditions to the Merger.

  
	
   

  	
  6.9

  	
  Public Disclosure

  
	
   

  	
  6.10

  	
  Section 368(a) Reorganization

  
	
   

  	
  6.11

  	
  Affiliate Legends

  
	
   

  	
  6.12

  	
  Listing Applications

  
	
   

  	
  6.13

  	
  Company Stock Plans.

  
	
   

  	
  6.14

  	
  Stockholder Litigation

  
	
   

  	
  6.15

  	
  Indemnification.

  
	
   

  	
  6.16

  	
  Notification of Certain Matters

  
	
   

  	
  6.17

  	
  Exemption from Liability Under
  Section 16(b).

  
	
   

  	
  6.18

  	
  Board of Directors of Parent

  
	
   

  	
  6.19

  	
  Service Credit

  
	
   

  	
  6.20

  	
  Employee Communications

  
	
   

  	
  6.21

  	
  401(k) Plan

  
	
   

  	
  6.22

  	
  Distribution

  
	
   

  	
  6.23

  	
  Transfer Taxes

  



 


ii

















 


	
  ARTICLE VII

  	
  CONDITIONS
  TO MERGER

  
	
   

  	
  7.1

  	
  Conditions to Each Party’s Obligation To
  Effect the Merger

  
	
   

  	
  7.2

  	
  Additional Conditions to Obligations of the
  Parent and the Transitory Subsidiary

  
	
   

  	
  7.3

  	
  Additional Conditions to Obligations of the
  Company

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  TERMINATION
  AND AMENDMENT

  
	
   

  	
  8.1

  	
  Termination

  
	
   

  	
  8.2

  	
  Effect of Termination

  
	
   

  	
  8.3

  	
  Fees and Expenses.

  
	
   

  	
  8.4

  	
  Amendment

  
	
   

  	
  8.5

  	
  Extension; Waiver

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  MISCELLANEOUS

  
	
   

  	
  9.1

  	
  Nonsurvival of Representations and
  Warranties

  
	
   

  	
  9.2

  	
  Notices

  
	
   

  	
  9.3

  	
  Entire Agreement

  
	
   

  	
  9.4

  	
  No Third Party Beneficiaries

  
	
   

  	
  9.5

  	
  Assignment

  
	
   

  	
  9.6

  	
  Severability

  
	
   

  	
  9.7

  	
  Counterparts and Signature

  
	
   

  	
  9.8

  	
  Interpretation

  
	
   

  	
  9.9

  	
  Governing Law

  
	
   

  	
  9.10

  	
  Remedies

  
	
   

  	
  9.11

  	
  Submission to Jurisdiction

  
	
   

  	
  9.12

  	
  Waiver of Jury Trial

  
	
   

  	
   

  	
   

  
	
  Schedule A

  	
  Parties to Company Stockholder
  Agreements

  
	
   

  	
   

  
	
  Schedule B

  	
  Parties to Parent Shareholder
  Agreements

  
	
   

  	
   

  
	
  Schedule 6.18

  	
  Board of Directors of Parent

  
	
   

  	
   

  
	
  Exhibit A

  	
  Form of Company Stockholder Agreement

  
	
   

  	
   

  
	
  Exhibit B

  	
  Form of Parent Shareholder Agreement

  
				



 


iii

















 


TABLE OF DEFINED TERMS


 


	
  Terms

  	
   

  	
  Reference
  in

  Agreement

  
	
   

  	
   

  	
   

  
	
  Affiliate

  	
   

  	
  Section 3.2(d)

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Alternative Acquisition
  Agreement

  	
   

  	
  Section 6.1(b)

  
	
  Antitrust Laws

  	
   

  	
  Section 6.8(b)

  
	
  Antitrust Order

  	
   

  	
  Section 6.8(b)

  
	
  Bankruptcy and Equity
  Exception

  	
   

  	
  Section 3.3(a)

  
	
  Cash Amount

  	
   

  	
  Section 2.2(j)

  
	
  Cash Amount Per Share

  	
   

  	
  Section 2.2(j)

  
	
  CERCLA

  	
   

  	
  Section 3.12(g)

  
	
  Certificate of Merger

  	
   

  	
  Section 1.1

  
	
  Certificates

  	
   

  	
  Section 2.2(a)

  
	
  Closing

  	
   

  	
  Section 1.2

  
	
  Closing Date

  	
   

  	
  Section 1.2

  
	
  Code

  	
   

  	
  Preamble

  
	
  Company

  	
   

  	
  Preamble

  
	
  Company Acquisition
  Proposal

  	
   

  	
  Section 6.1(f)

  
	
  Company Balance Sheet

  	
   

  	
  Section 3.4(b)

  
	
  Company Board

  	
   

  	
  Section 3.3(a)

  
	
  Company Common Stock

  	
   

  	
  Section 2.1(b)

  
	
  Company Disclosure
  Schedule

  	
   

  	
  Article III

  
	
  Company Designees

  	
   

  	
  Section 6.18

  
	
  Company Employee Plan

  	
   

  	
  Section 3.13(a)

  
	
  Company ESPP

  	
   

  	
  Section 5.1(q)

  
	
  Company Insiders

  	
   

  	
  Section 6.17(c)

  
	
  Company Intellectual
  Property

  	
   

  	
  Section 3.9(b)

  
	
  Company Leases

  	
   

  	
  Section 3.8(d)

  
	
  Company Material
  Adverse Effect

  	
   

  	
  Section 3.1(a)

  
	
  Company Material
  Contracts

  	
   

  	
  Section 3.10(a)

  
	
  Company Permits

  	
   

  	
  Section 3.15

  
	
  Company Preferred Stock

  	
   

  	
  Section 3.2(a)

  
	
  Company Products

  	
   

  	
  Section 3.9(e)

  
	
  Company Rights

  	
   

  	
  Section 3.2(d)

  
	
  Company Rights Plan

  	
   

  	
  Section 3.2(d)

  
	
  Company SEC Reports

  	
   

  	
  Section 3.4(a)

  
	
  Company Stock Options

  	
   

  	
  Section 3.2(c)

  
	
  Company Stock Plans

  	
   

  	
  Section 3.2(c)

  
	
  Company Stockholder
  Agreements

  	
   

  	
  Preamble

  
	
  Company Stockholder
  Approval

  	
   

  	
  Section 3.3(a)

  
	
  Company Stockholders
  Meeting

  	
   

  	
  Section 3.4(c)

  
	
  Company Third Party
  Intellectual Property

  	
   

  	
  Section 3.9(b)

  
	
  Company Voting Proposal

  	
   

  	
  Section 3.3(a)

  
	
  Confidentiality
  Agreement

  	
   

  	
  Section 5.3

  



 


iv

















 


	
  Terms

  	
   

  	
  Reference
  in

  Agreement

  
	
   

  	
   

  	
   

  
	
  Continuing Employees

  	
   

  	
  Section 6.19

  
	
  Deposit Agreement

  	
   

  	
  Section 2.1(c)

  
	
  Depository

  	
   

  	
  Section 2.1(c)

  
	
  DGCL

  	
   

  	
  Preamble

  
	
  Distribution

  	
   

  	
  Preamble

  
	
  Distribution Record
  Date

  	
   

  	
  Section 2.2(j)

  
	
  Effective Time

  	
   

  	
  Section 1.1

  
	
  Employee Benefit Plan

  	
   

  	
  Section 3.13(a)

  
	
  Environmental Law

  	
   

  	
  Section 3.12(g)

  
	
  ERISA

  	
   

  	
  Section 3.13(a)

  
	
  ERISA Affiliate

  	
   

  	
  Section 3.13(a)

  
	
  Exchange Agent

  	
   

  	
  Section 2.2(a)

  
	
  Exchange Fund

  	
   

  	
  Section 2.2(a)

  
	
  Exchange Act

  	
   

  	
  Section 3.3(c)

  
	
  Exchange Ratio

  	
   

  	
  Section 2.1(c)

  
	
  FSMA

  	
   

  	
  Section 4.4(d)

  
	
  GAAP

  	
   

  	
  Section 3.4(b)

  
	
  Governmental Entity

  	
   

  	
  Section 3.3(c)

  
	
  Governmental
  Regulations

  	
   

  	
  Section 3.8(b)

  
	
  HSR Act

  	
   

  	
  Section 3.3(c)

  
	
  Indemnified Parties

  	
   

  	
  Section 6.15(a)

  
	
  Insurance Policies

  	
   

  	
  Section 3.17

  
	
  Intellectual Property

  	
   

  	
  Section 3.9(a)

  
	
  Joint Proxy
  Statement/Prospectus

  	
   

  	
  Section 3.4(c)

  
	
  Liens

  	
   

  	
  Section 3.2(f)

  
	
  Listing Rules

  	
   

  	
  Section 4.4(d)

  
	
  LSE

  	
   

  	
  Section 4.3(a)

  
	
  Materials of
  Environmental Concern

  	
   

  	
  Section 3.12(h)

  
	
  Merger

  	
   

  	
  Preamble

  
	
  Non-U.S. Plan

  	
   

  	
  Section 3.13(j)

  
	
  Ordinary Course of
  Business

  	
   

  	
  Section 3.2(d)

  
	
  Outside Date

  	
   

  	
  Section 8.1(b)

  
	
  Parent

  	
   

  	
  Preamble

  
	
  Parent Acquisition
  Proposal

  	
   

  	
  Section 6.2

  
	
  Parent ADRs

  	
   

  	
  Section 2.1(c)

  
	
  Parent ADSs

  	
   

  	
  Section 2.1(c)

  
	
  Parent Balance Sheet

  	
   

  	
  Section 4.4(b)

  
	
  Parent Board

  	
   

  	
  Section 4.3(a)

  
	
  Parent Circular

  	
   

  	
  Section 6.3(b)

  
	
  Parent Disclosure
  Schedule

  	
   

  	
  Article IV

  
	
  Parent Employee Benefit
  Plan

  	
   

  	
  Section 6.19

  
	
  Parent Intellectual
  Property

  	
   

  	
  Section 3.10(d)

  
	
  Parent Listing Document

  	
   

  	
  Section 6.3(b)

  



 


v

















 


	
  Terms

  	
   

  	
  Reference
  in

  Agreement

  
	
   

  	
   

  	
   

  
	
  Parent Material Adverse
  Effect

  	
   

  	
  Section 4.1(a)

  
	
  Parent Material
  Contracts

  	
   

  	
  Section 4.6(a)

  
	
  Parent Ordinary Shares

  	
   

  	
  Section 2.1(c)

  
	
  Parent Products

  	
   

  	
  Section 4.9(e)

  
	
  Parent SEC Reports

  	
   

  	
  Section 4.4(a)

  
	
  Parent Share Plans

  	
   

  	
  Section 4.2(b)

  
	
  Parent Shareholder
  Agreements

  	
   

  	
  Preamble

  
	
  Parent Shareholder
  Approval

  	
   

  	
  Section 4.3(a)

  
	
  Parent Shareholders
  Meeting

  	
   

  	
  Section 3.4(c)

  
	
  Parent Third Party
  Intellectual Property

  	
   

  	
  Section 4.9(b)

  
	
  Parent UK Documents

  	
   

  	
  Section 6.3(b)

  
	
  Parent Voting Proposal

  	
   

  	
  Section 3.4(c)

  
	
  Patents

  	
   

  	
  Section 3.9(a)

  
	
  PRC

  	
   

  	
  Section 3.1(c)

  
	
  Qualifying Proposal

  	
   

  	
  Section 6.1(f)

  
	
  Real Estate

  	
   

  	
  Section 3.8(a)

  
	
  Registration Statement

  	
   

  	
  Section 3.4(c)

  
	
  Regulation M-A Filing

  	
   

  	
  Section 3.4(c)

  
	
  Representatives

  	
   

  	
  Section 6.1(a)

  
	
  Rights Agreement
  Amendment

  	
   

  	
  Section 3.24

  
	
  Rule 145 Affiliates

  	
   

  	
  Section 6.11

  
	
  SEC

  	
   

  	
  Section 3.3(c)

  
	
  Section 16
  Information

  	
   

  	
  Section 6.17(b)

  
	
  Securities Act

  	
   

  	
  Section 3.2(d)

  
	
  Specified Time

  	
   

  	
  Section 6.1(a)

  
	
  Subsidiary

  	
   

  	
  Section 3.1(b)

  
	
  Superior Proposal

  	
   

  	
  Section 6.1(f)

  
	
  Surviving Corporation

  	
   

  	
  Section 1.3

  
	
  Tax Returns

  	
   

  	
  Section 3.7(a)

  
	
  Taxes

  	
   

  	
  Section 3.7(a)

  
	
  Transitory Subsidiary

  	
   

  	
  Preamble

  
	
  UK GAAP

  	
   

  	
  Section 4.4(b)

  
	
  UKLA

  	
   

  	
  Section 4.4(d)

  



 


vi

















 


AGREEMENT AND PLAN OF MERGER


 


THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”),
dated as of September 21, 2003, is entered into by and among Bookham
Technology plc, a public limited company incorporated under the laws of England
and Wales (the “Parent”), Budapest Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of the Parent (the “Transitory Subsidiary”), and
New Focus, Inc., a Delaware corporation (the “Company”).


 


WHEREAS, the Boards of Directors of the Parent and the
Company deem it advisable and in the best interests of each corporation and
their respective stockholders that the Parent combine with the Company in order
to advance the long-term business interests of the Parent and the Company;


 


WHEREAS, the business combination of the Company shall
be effected through a merger (the “Merger”) of the Transitory Subsidiary into the
Company in accordance with the terms of this Agreement and the General
Corporation Law of the State of Delaware (the “DGCL”), as a result of which the
Company shall become a wholly owned subsidiary of the Parent;


 


WHEREAS, concurrently with the execution and delivery
of this Agreement and as a condition and inducement to the Parent’s willingness
to enter into this Agreement, the stockholders of the Company listed on Schedule A
have entered into Stockholder Agreements, dated as of the date of this Agreement,
in the form attached hereto as Exhibit A (the “Company Stockholder
Agreements”), pursuant to which such stockholders have, among other things,
agreed to give the Parent a proxy to vote all of the shares of capital stock of
the Company that such stockholders own;


 


WHEREAS, concurrently with the execution and delivery
of this Agreement and as a condition and inducement to the Company’s
willingness to enter into this Agreement, the shareholders of the Parent listed
on Schedule B have entered into Shareholder Agreements, dated as of
the date of this Agreement, in the form attached hereto as Exhibit B
(the “Parent Shareholder Agreements”), pursuant to which such shareholders
have, among other things, agreed to give the Company a proxy to vote all of the
shares of capital stock of the Parent that such shareholders own;


 


WHEREAS, for United States federal income tax
purposes, it is intended that the Merger shall qualify as a reorganization
within the meaning of Section 368(a) of the United States Internal Revenue
Code of 1986, as amended (the “Code”); and


 


WHEREAS, immediately prior to the Effective Time, the
Company intends to distribute the Cash Amount (as defined herein) to the
holders of Company Common Stock outstanding on the Distribution Record Date, as
defined below (the “Distribution”).


 


NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and agreements set forth
below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parent, the Transitory
Subsidiary and the Company agree as follows:


 

















 


ARTICLE I



THE MERGER


 


1.1                                 Effective Time of the Merger.  Subject to the provisions of this Agreement,
prior to the Closing, the Parent shall prepare, and on the Closing Date or as
soon as practicable thereafter the Parent shall cause to be filed with the
Secretary of State of the State of Delaware, a certificate of merger (the
“Certificate of Merger”) in such form as is required by, and executed by the Surviving
Corporation in accordance with, the relevant provisions of the DGCL and shall
make all other filings or recordings required under the DGCL.  The Merger shall become effective upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware or at such later time as is established by the Parent and the Company
and set forth in the Certificate of Merger (the “Effective Time”).


 


1.2                                 Closing.  The
closing of the Merger (the “Closing”) shall take place at 10:00 a.m., Eastern
time, on a date to be specified by the Parent and the Company (the “Closing
Date”), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VII (other than delivery
of items to be delivered at the Closing and other than satisfaction of those
conditions that by their nature are to be satisfied at the Closing, it being
understood that the occurrence of the Closing shall remain subject to the
delivery of such items and the satisfaction or waiver of such conditions at the
Closing), at the offices of Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto, California, unless
another date, place or time is agreed to in writing by the Parent and the Company.


 


1.3                                 Effects of the Merger.  At the Effective Time (i) the separate
existence of the Transitory Subsidiary shall cease and the Transitory
Subsidiary shall be merged with and into the Company (the Company following the
Merger is sometimes referred to herein as the “Surviving Corporation”),
(ii) the Certificate of Incorporation of the Company as in effect on the
date of this Agreement shall be amended so that Article FOURTH of such
Certificate of Incorporation reads in its entirety as follows:  “The total number of shares of all classes
of stock which the Corporation shall have authority to issue is 1,000, all of
which shall consist of common stock, $.01 par value per share,” and, as so
amended, such Certificate of Incorporation shall be the Certificate of Incorporation
of the Surviving Corporation, until further amended in accordance with the
DGCL, and (iii) the directors and officers of the Transitory Subsidiary
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-laws of the Surviving Corporation.  In addition, the Parent shall cause the
By-laws of the Company to be amended and restated in their entirety immediately
following the Effective Time so that they are identical to the By-laws of the
Transitory Subsidiary as in effect immediately prior to the Effective Time,
except that all references to the name of the Transitory Subsidiary therein
shall be changed to refer to the name of the Company, and, as so amended and
restated, such By-laws shall be the By-laws of the Surviving Corporation, until
further amended in accordance with the DGCL and such By-laws.  The Merger shall have the effects set forth
in Section 259 of the DGCL.


 


2

















 


ARTICLE II



CONVERSION OF SECURITIES AND

DISTRIBUTION OF THE CASH AMOUNT


 


2.1                                 Conversion of Capital Stock.  As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:


 


(a)                                  Capital
Stock of the Transitory Subsidiary. 
Each share of the common stock of the Transitory Subsidiary issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock, US $.01 par
value per share, of the Surviving Corporation.


 


(b)                                 Cancellation
of Treasury Stock and Parent-Owned Stock. 
All shares of common stock, US $0.001 par value per share, of the
Company (“Company Common Stock”) that are owned by the Company as treasury
stock or by any wholly owned Subsidiary of the Company and any shares of
Company Common Stock owned by the Parent, the Transitory Subsidiary or any
other wholly owned Subsidiary of the Parent immediately prior to the Effective
Time shall be cancelled and shall cease to exist and no stock of the Parent or
other consideration shall be delivered in exchange therefor.


 


(c)                                  Exchange
Ratio for Company Common Stock. 
Subject to Section 2.2, each share of Company Common Stock (other
than shares to be cancelled in accordance with Section 2.1(b)) issued and
outstanding immediately prior to the Effective Time shall be automatically
converted into and represent the right to receive 1.2015 shares (the “Exchange
Ratio”) of Parent American Depositary Shares (“Parent ADSs”), each Parent ADS
representing one ordinary share, par value 1/3 p per share, of the Parent
(“Parent Ordinary Shares”) or, at the election of the holder of Company Common
Stock, the equivalent number of Parent Ordinary Shares in registered
certificated or uncertificated form, upon surrender of the certificate
representing such share of Company Common Stock in the manner provided in Section 2.2;
provided that if a holder of Company Common Stock does not make such
election on the letter of transmittal forwarded to such holder pursuant to
Section 2.2(b), such holder shall be deemed to have elected to receive
Parent ADSs.  The Parent ADSs shall be
evidenced by one or more American Depository Receipts (“Parent ADRs”) issued in
accordance with the Deposit Agreement dated as of April 11, 2000 by and
among the Parent, The Bank of New York (the “Depository”) and the holders from
time to time of Parent ADRs (the “Deposit Agreement”).  As of the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Parent ADSs
pursuant to this Section 2.1(c), any cash in lieu of fractional Parent
ADSs to be issued or paid in consideration therefor and any dividends or
distributions payable pursuant to Section 2.2(c) upon the surrender of
such certificate in accordance with Section 2.2, without interest.  For purposes of this Agreement, references
to Parent ADSs shall also mean Parent Ordinary Shares that holders of Company
Common Stock may elect to receive in lieu of Parent ADSs pursuant to the
Merger.


 


3

















 


(d)                                 Adjustments
to Exchange Ratio.  The Exchange
Ratio shall be adjusted to reflect fully the effect of any reclassification,
stock split, consolidation, reverse split, stock dividend (including any
dividend or distribution of securities convertible into Parent Ordinary Shares,
Parent ADSs or Company Common Stock), reorganization, capital redemption or
repayment, bonus issue, recapitalization or other like change with respect to
Parent Ordinary Shares, Parent ADSs or Company Common Stock occurring (or for
which a record date is established) after the date hereof and prior to the
Effective Time, other than the Distribution.


 


(e)                                  Unvested
Stock.  At the Effective Time, any
Parent ADSs issued in accordance with Section 2.1(c) with respect to any
unvested shares of Company Common Stock awarded to employees, directors or
consultants pursuant to any of the Company’s plans or arrangements and
outstanding immediately prior to the Effective Time shall remain subject to the
same terms, restrictions and vesting schedule as in effect immediately
prior to the Effective Time, except to the extent by their terms as in effect
as of the date hereof such unvested shares of Company Common Stock vest at the
Effective Time.  The Company shall not
take or permit any action, which would accelerate vesting of any unvested
shares, except to the extent required by their terms as in effect on the date
hereof.  Copies of the relevant
agreements governing such shares and the vesting thereof have been provided to
the Parent.  All outstanding rights
which the Company may hold immediately prior to the Effective Time to
repurchase unvested shares of Company Common Stock shall be assigned to the
Parent in the Merger and shall thereafter be exercisable by the Surviving
Corporation upon the same terms and conditions in effect immediately prior to
the Effective Time, except that the shares purchasable and the purchase price
payable per share pursuant to such rights shall be appropriately adjusted to
reflect the Exchange Ratio.  The Company
shall take all steps necessary to cause the foregoing provisions of this Section 2.1(e)
to occur.


 


(f)                                    Treatment
of Company Stock Options.  Following
the Effective Time, Company Stock Options shall be treated in the manner set
forth in Section 6.13.


 


2.2                                 Exchange of Certificates and
Distribution of Cash Amount. 
The procedures for exchanging outstanding shares of Company Common Stock
for Parent ADSs pursuant to the Merger and the Distribution of the Cash Amount
are as follows:


 


(a)                                  Exchange
Agent.  As of the Effective Time,
the Parent shall deposit with the Depository, for the benefit of the holders of
shares of Company Common Stock, the number of Parent Ordinary Shares as are
represented by the Parent ADSs to be issued in connection with
Section 2.1.  In addition, as of
the Effective Time, the Depository shall deposit with Capita plc or another
bank or trust company designated by the Parent and reasonably acceptable to the
Company (the “Exchange Agent”), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Section 2.2,
through the Exchange Agent, Parent ADSs (such Parent ADSs, together with any
dividends or distributions with respect to the Parent Ordinary Shares
underlying such Parent ADSs with a record date after the Effective Time, being
hereinafter referred to as the “Exchange Fund”) issuable pursuant to
Section 2.1 in exchange for certificates evidencing shares of Company
Common Stock outstanding as of the Effective Time (“Certificates”).  At the Effective Time, the Parent shall also
deposit with the Exchange Agent for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance


 


4

















 


with
this Section 2.2, through the Exchange Agent cash in an amount sufficient
to make payments for fractional shares required pursuant to
Section 2.2(e).


 


(b)                                 Exchange
Procedures.  As soon as reasonably
practicable and in any event within ten (10) business days after the Effective
Time, the Parent shall cause the Exchange Agent to mail to each holder of
record of a Certificate (i) a letter of transmittal (which shall (A)
include a form of election by which each such holder may elect to receive the
merger consideration to which such holder is entitled in the form of Parent
ADSs or Parent Ordinary Shares in registered form and (B) specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as the Parent may reasonably specify)
and (ii) instructions for effecting the surrender of the Certificates in
exchange for Parent ADRs (plus cash in lieu of fractional shares, if any, of
Parent ADSs and any dividends or distributions as provided below) or
certificates representing Parent Ordinary Shares.  Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by the Parent,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor a Parent ADR
representing that number of whole Parent ADSs or a certificate representing
that number of Parent Ordinary Shares which such holder has the right to
receive pursuant to the provisions of this Article II plus cash in lieu of
fractional shares pursuant to Section 2.2(e) and any dividends or
distributions then payable pursuant to Section 2.2(c), and the Certificate
so surrendered shall immediately be cancelled. 
In the event of a transfer of ownership of Company Common Stock which is
not registered in the transfer records of the Company, a Parent ADR
representing the proper number of Parent ADSs or a certificate representing the
proper number of Parent Ordinary Shares issuable in exchange therefor pursuant
to this Article II plus cash in lieu of fractional shares pursuant to
Section 2.2(e) and any dividends or distributions then payable pursuant to
Section 2.2(c) may be issued or paid to a person other than the person in
whose name the Certificate so surrendered is registered, if such Certificate is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.  Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Parent ADR representing Parent ADSs or
certificates representing Parent Ordinary Shares plus cash in lieu of
fractional shares pursuant to Section 2.2(e) and any dividends or
distributions then payable pursuant to Section 2.2(c) as contemplated by
this Section 2.2.


 


(c)                                  Distributions
with Respect to Unexchanged Shares. 
No dividends or other distributions declared or made after the Effective
Time with respect to Parent ADSs with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate until the holder
of record of such Certificate shall surrender such Certificate.  Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be issued and paid to
the record holder of the Certificate, at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective Time
previously paid with respect to such whole Parent ADSs, without interest, and,
at the appropriate payment date, the amount of dividends or other distributions
having a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender that are payable with respect to such
whole Parent ADSs.


 


5

















 


(d)                                 No
Further Ownership Rights in Company Common Stock.  All Parent ADSs issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash or
dividends or other distributions paid pursuant to Sections 2.2(c) or
2.2(e)) shall be deemed to have been issued (and paid) in full satisfaction of
all rights pertaining to such shares of Company Common Stock, and from and
after the Effective Time there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective
Time.  If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be cancelled and exchanged as provided in this
Article II.


 


(e)                                  No
Fractional Shares.  No Parent ADRs
or scrip representing fractional shares of Parent ADSs, or if applicable
certificates representing Parent Ordinary Shares,  shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests shall not entitle the owner thereof to vote
or to any other rights of a shareholder of the Parent.  Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock converted pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
Parent ADS (after taking into account all Certificates delivered by such holder
and the aggregate number of shares of Company Common Stock represented thereby)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a Parent ADS multiplied by the average of the last
reported sales prices of Parent ADSs at the 4:00 p.m., Eastern time, end of
regular trading hours on The NASDAQ Stock Market during the ten consecutive
trading days ending on the last trading day prior to the Effective Time.


 


(f)                                    Termination
of Exchange Fund.  Any portion of
the Exchange Fund which remains undistributed to the holders of Company Common
Stock for 12 months after the Effective Time shall be delivered to the Parent,
upon demand, and any holder of Company Common Stock who has not previously
complied with this Section 2.2 shall thereafter look only to the Parent,
as a general unsecured creditor, for payment of its claim for Parent ADSs, any
cash in lieu of fractional shares of Parent ADSs and any dividends or
distributions with respect to Parent ADSs.


 


(g)                                 No
Liability.  To the extent permitted
by applicable law, none of the Parent, the Transitory Subsidiary, the Company,
the Surviving Corporation or the Exchange Agent shall be liable to any holder
of shares of Company Common Stock, Parent Ordinary Shares or Parent ADSs, as
the case may be, for such shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.  If
any Certificate shall not have been surrendered prior to the date that is 18
months after the Effective Time (or immediately prior to such earlier date on
which any Parent ADSs and any cash payable to the holder of such Certificate or
any dividends or distributions payable to the holder of such Certificate
pursuant to this Article II would otherwise escheat to or become the
property of any Governmental Entity), any such Parent ADSs and the underlying
Parent Ordinary Shares, or cash, dividends or distributions in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of the Parent, free and clear of all claims or interest of any person previously
entitled thereto.


 


6

















 


(h)                                 Withholding
Rights.  Notwithstanding any other
provision in this Agreement, each of the Parent, the Surviving Corporation and
the Company shall be entitled to deduct and withhold from the payments to be
made pursuant to this Agreement such amounts as it reasonably determines that
it is required to deduct and withhold with respect to the making of such
payments under the Code or any other applicable provision of law and to collect
Forms W-8 or W-9, as applicable, or similar information from the holders of
Company Common Stock and any other recipients of payments hereunder.  To the extent that amounts are so withheld
by the Company, the Surviving Corporation or the Parent, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by the Company, the Surviving
Corporation or the Parent, as the case may be.


 


(i)                                     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 the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Parent ADSs and any cash in lieu of
fractional shares, and unpaid dividends and distributions on Parent Ordinary
Shares deliverable in respect thereof pursuant to this Agreement.


 


(j)                                     Distribution
of the Cash Amount.  Subject to the
provisions of Section 6.22, (A) prior to the Effective Time, the Company
shall deliver the Cash Amount to EquiServe and (B) immediately prior to the
Effective Time, the Company shall effect the Distribution and EquiServe shall
deliver to each holder of Company Common Stock on the Distribution Record Date,
a check in the amount of the Cash Amount Per Share.  For the purposes of this Agreement, the following terms shall have
the following meanings:


 


(i)                                     “Cash
Amount” shall equal the product of (A) the Cash Amount Per Share and (B) the
number of shares of Company Common Stock issued and outstanding as of the
Distribution Record Date.


 


(ii)                                  “Cash
Amount Per Share” shall equal US $2.19.


 


(iii)                               “Distribution
Record Date” means the close of business on the date to be determined by the
Board of Directors of the Company as the record date for determining
stockholders of the Company entitled to receive a share of the Distribution.


 


ARTICLE III



REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


The Company represents and warrants to the Parent and
the Transitory Subsidiary that the statements contained in this
Article III are true and correct, except as expressly set forth herein or
in the disclosure schedule delivered by the Company to the Parent and the
Transitory Subsidiary on or before the date of this Agreement (the “Company
Disclosure Schedule”).  The Company
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered


 


7

















 


and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify (1) the corresponding paragraph in
this Article III and (2) the other paragraphs in this Article III
only to the extent such disclosure reasonably appears on its face to be
applicable to such other paragraphs.


 


3.1                                 Organization, Standing and Power;
Subsidiaries.


 


(a)                                  Each
of the Company and its Subsidiaries is a corporation duly organized, validly
existing and, where applicable as a legal concept, in good standing under the
laws of the jurisdiction of its incorporation, has all requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted and as proposed to be conducted,
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction listed in Section 3.1 of the Company
Disclosure Schedule, which jurisdictions constitute the only jurisdictions in
which the character of the properties it owns, operates or leases or the nature
of its activities makes such qualification necessary, except for such failures
to be so organized, qualified or in good standing, individually or in the
aggregate, that have not had a Company Material Adverse Effect.  For purposes of this Agreement, the term
“Company Material Adverse Effect” means any material adverse change, event,
circumstance or development with respect to, or material adverse effect on (i)
the business, assets, liabilities, capitalization, financial condition, or
results of operations of the Company and its Subsidiaries, taken as a whole, or
(ii) the ability of the Company to consummate the transactions contemplated by
this Agreement; provided, however, that in the case of clause
(i), in no event shall any of the following, alone or in combination, be deemed
to constitute, nor shall any of the following be taken into account in
determining whether there has occurred, a Company Material Adverse Effect:  any adverse change, event, circumstance or
development with respect to, or effect resulting from (A) general economic
conditions or conditions generally affecting the semiconductor capital
equipment and the test and measurement industries, except to the extent the
Company is materially disproportionately affected thereby, (B) the announcement
or pendency of the Merger or any other transactions expressly contemplated
hereby, (C) compliance with the express terms and conditions of this Agreement,
(D) a change in the stock price or trading volume of the Company (or any
failure of the Company to meet published revenue or earnings projections), provided
that clause (D) shall not exclude any underlying effect which may have caused
such change in stock price or trading volume or failure to meet published
revenue or earnings projections, (E) any change in accounting requirements or
principles or any change in applicable laws, rules or regulations or the
interpretation thereof or (F) the continued incurrence of losses by the
Company.  For the avoidance of doubt,
the parties agree that the terms “material”, “materially” or “materiality” as
used in this Agreement with an initial lower case “m” shall have their
respective customary and ordinary meanings, without regard to the meanings
ascribed to Company Material Adverse Effect in the prior sentence of this
paragraph or Parent Material Adverse Effect in Section 4.1.


 


(b)                                 Section 3.1(b)
of the Company Disclosure Schedule sets forth a complete and accurate list
of all of the Company’s Subsidiaries and the Company’s direct or indirect
equity interest therein.  Except as set
forth in Section 3.1(b) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries directly or indirectly owns any equity,
membership, partnership or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity, membership, partnership or
similar interest in, any corporation,


 


8

















 


partnership,
joint venture, limited liability company or other business association or
entity, whether incorporated or unincorporated, and neither the Company, nor
any of its Subsidiaries, has, at any time, been a general partner or managing
member of any general partnership, limited partnership, limited liability
company or other entity.  As used in
this Agreement, the term “Subsidiary” means, with respect to a party, any
corporation, partnership, joint venture, limited liability company or other
business association or entity, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general
partner or a managing member (excluding partnerships, the general partnership
interests of which held by such party and/or one or more of its Subsidiaries do
not have a majority of the voting interest in such partnership), (ii) such
party and/or one or more of its Subsidiaries holds voting power to elect a
majority of the board of directors or other governing body performing similar
functions, or (iii) such party and/or one or more of its Subsidiaries, directly
or indirectly, owns or controls more than 50% of the equity, membership,
partnership or similar interests.


 


(c)                                  The
Company has timely paid in its capital contribution to the registered capital
of the Company’s subsidiaries in The People’s Republic of China (the “PRC”) as
such capital contributions have become due.


 


(d)                                 The
Company has delivered to the Parent complete and accurate copies of the
Certificate of Incorporation and By-laws of the Company and of the charter,
by-laws or other organizational documents of each Subsidiary of the Company.


 


3.2                                 Capitalization.


 


(a)                                  The
authorized capital stock of the Company consists of 250,000,000 shares of
Company Common Stock and 10,000,000 shares of preferred stock, $.001 par value
per share (the “Company Preferred
Stock”), of which 250,000 shares are designated Series A Participating
Preferred Stock.  The rights and
privileges of each class of the Company’s capital stock are as set forth in the
Company’s Certificate of Incorporation. 
As of the close of business on September 18, 2003: (i) 64,140,847
shares of Company Common Stock were issued and outstanding, (ii) no shares of
Company Common Stock were held in the treasury of the Company or by
Subsidiaries of the Company, and (iii) no shares of Company Preferred Stock
were issued or outstanding.  No material
change in such capitalization has occurred between September 18, 2003 and
the date of this Agreement.


 


(b)                                 Section 3.2(b)
of the Company Disclosure Schedule lists all issued and outstanding shares
of Company Common Stock that constitute restricted stock or that are otherwise
subject to a repurchase or redemption right or right of first refusal in favor
of the Company, indicating the name of the applicable stockholder, the lapsing
schedule for any such shares, including the extent to which any such
repurchase or redemption right or right of first refusal has lapsed as of the
date of this Agreement, whether (and to what extent) the lapsing will be
accelerated in any way by the transactions contemplated by this Agreement or by
termination of employment or change in position following consummation of the
Merger, and whether such holder has the sole power to vote and dispose of such
shares.


 


(c)                                  Section 3.2(c)
of the Company Disclosure Schedule lists the number of shares of Company
Common Stock reserved for future issuance pursuant to stock options


 


9

















 


granted
and outstanding as of the date of this Agreement and the plans or other
arrangements under which such options were granted (collectively, the “Company
Stock Plans”) and sets forth a complete and accurate list, as of the date
hereof, of all holders of outstanding options to purchase shares of Company
Common Stock (such outstanding options, the “Company Stock Options”),
indicating with respect to each Company Stock Option, the number of shares of
Company Common Stock subject to such Company Stock Option, the relationship of
the holder to the Company, and the exercise price, the date of grant, vesting
schedule and the expiration date thereof, including the extent to which
any vesting has occurred as of the date of this Agreement, and whether (and to
what extent) the vesting of such Company Stock Options will be accelerated in
any way by the transactions contemplated by this Agreement or by the
termination of employment or engagement or change in position of any holder
thereof following consummation of the Merger. 
There are no warrants or other outstanding rights (other than Company
Stock Options) to purchase shares of Company Common Stock outstanding as of the
date of this Agreement.  The Company has
provided to the Parent accurate and complete copies of all Company Stock Plans
and the forms of all stock option agreements evidencing Company Stock Options.


 


(d)                                 Except
(x) as set forth in this Section 3.2, (y) as reserved for future grants
under Company Stock Plans, and (z) the rights (the “Company Rights”) issued and
issuable under the Rights Agreement dated as of July 26, 2001 between the
Company and Equiserve Trust Company, N.A. (the “Company Rights Plan”), (i)
there are no equity securities of any class of the Company or any of its
Subsidiaries (other than equity securities of any such Subsidiary that are
directly or indirectly owned by the Company), or any security exchangeable into
or exercisable for such equity securities, issued, reserved for issuance or
outstanding and (ii) there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound obligating the Company or any of its Subsidiaries to
issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged,
transferred, delivered or sold, additional shares of capital stock or other
equity interests of the Company or any of its Subsidiaries or any security or
rights convertible into or exchangeable or exercisable for any such shares or
other equity interests, or obligating the Company or any of its Subsidiaries to
grant, extend, accelerate the vesting of, otherwise modify or amend or enter
into any such option, warrant, equity security, call, right, commitment or
agreement.  Neither the Company nor any
of its Subsidiaries has outstanding any stock appreciation rights, phantom
stock, performance based rights or similar rights or obligations.  There are no obligations, contingent or
otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of Company Common Stock or the capital stock of the Company
or any of its Subsidiaries or to provide funds to or make any material
investment (in the form of a loan, capital contribution or otherwise) in the
Company or any Subsidiary of the Company or any other entity, other than
guarantees of bank obligations of Subsidiaries of the Company entered into in
the ordinary course of business consistent with past practice (the “Ordinary
Course of Business”) and listed in Section 3.2(d) of the Company
Disclosure Schedule.  Other than the
Company Stockholder Agreements, neither the Company nor any of its Affiliates
is a party to or is bound by any, and to the knowledge of the Company, there
are no, agreements or understandings with respect to the voting (including
voting trusts and proxies) or sale or transfer (including agreements imposing
transfer restrictions) of any shares of capital stock or other equity interests
of the Company or any of its Subsidiaries. 
For purposes of this Agreement, the term “Affiliate” when used with


 


10

















 


respect
to any party shall mean any person who is an “affiliate” of that party within
the meaning of Rule 405 promulgated under the Securities Act of 1933, as amended
(the “Securities Act”).  Except as
contemplated by this Agreement, there are no registration rights, and there is
no rights agreement, “poison pill” anti-takeover plan or other agreement or
understanding to which the Company or any of its Subsidiaries is a party or by
which it or they are bound with respect to any equity security of any class of
the Company or any of its Subsidiaries or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
Subsidiaries.


 


(e)                                  All
outstanding shares of Company Common Stock are, and all shares of Company
Common Stock subject to issuance as specified in Section 3.2(c) above,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be, duly authorized, validly issued, fully
paid and nonassessable and not subject to or issued in violation of any
purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the DGCL, the
Company’s Certificate of Incorporation or By-laws or any agreement to which the
Company is a party or is otherwise bound.


 


(f)                                    All
of the outstanding shares of capital stock and other equity securities or
interests of each of the Company’s Subsidiaries are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights and all such
shares (other than directors’ qualifying shares in the case of non-U.S.
Subsidiaries, all of which the Company has the power to cause to be transferred
for no or nominal consideration to the Parent or the Parent’s designee) are
owned, of record and beneficially, by the Company or another Subsidiary of the
Company free and clear of all mortgages, security interests, claims, pledges,
liens, charges or encumbrances of any nature (“Liens”) and agreements in
respect of, or limitations on, the Company’s voting rights.


 


(g)                                 No
consent of the holders of Company Stock Options is required in connection with
the actions contemplated by Section 6.13.


 


3.3                                 Authority; No Conflict; Required
Filings and Consents.


 


(a)                                  The
Company has all requisite corporate power and authority to enter into this
Agreement and, subject only to the adoption of this Agreement and the approval
of the Merger (the “Company Voting Proposal”) by the Company’s stockholders
under the DGCL (the “Company Stockholder Approval”), to consummate the
transactions contemplated by this Agreement. 
Without limiting the generality of the foregoing, the Board of Directors
of the Company (the “Company Board”), at a meeting duly called and held on or
prior to the date hereof, by the unanimous vote of all directors (i) determined
that the Merger is fair to and in the best interests of the Company and its
stockholders, (ii) approved this Agreement and declared its advisability in
accordance with the provisions of the DGCL, (iii) directed that this Agreement
and the Merger be submitted to the stockholders of the Company for their
adoption and approval and resolved to recommend that the stockholders of the
Company vote in favor of the adoption of this Agreement and the approval of the
Merger, and (iv) to the extent necessary, adopted a resolution having the
effect of causing the Company not to be subject to any state takeover law or
similar law that might otherwise apply to the Merger and any other transactions
contemplated by this Agreement.  The
execution and delivery of this Agreement and the consummation of the


 


11

















 


transactions
contemplated by this Agreement by the Company have been duly authorized by all
necessary corporate action on the part of the Company, subject only to the
required receipt of the Company Stockholder Approval.  This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles (the “Bankruptcy and Equity Exception”).


 


(b)                                 The
execution and delivery of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated by this Agreement,
including, subject to Section 6.22 of this Agreement, the Distribution,
shall not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or By-laws of the Company or of
the charter, by-laws, or other organizational document of any Subsidiary of the
Company, (ii) conflict with, or result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, require a consent or waiver
under, constitute a change in control under, require the payment of a penalty
under or result in the imposition of any Lien on the Company’s or any of its
Subsidiary’s assets under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract or other agreement,
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be
bound, or (iii) subject to obtaining the Company Stockholder Approval and
compliance with the requirements specified in clauses (i) through (vi) of
Section 3.3(c), conflict with or violate any permit, concession,
franchise, license, judgment, injunction, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of its or their properties or assets, except in the case of
clauses (ii) and (iii) of this Section 3.3(b) for any such conflicts,
violations, breaches, defaults, terminations, cancellations, accelerations or
losses that, individually or in the aggregate, would not have a Company
Material Adverse Effect. 
Section 3.3(b) of the Company Disclosure Schedule lists all
material consents, waivers and approvals under any of the Company’s or any of
its Subsidiaries’ agreements, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.


 


(c)                                  No
consent, approval, license, permit, order or authorization of, or registration,
declaration, notice or filing with, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority, agency or instrumentality (a “Governmental Entity”) or any stock
market or stock exchange on which shares of Company Common Stock are listed for
trading is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
by this Agreement, except for (i) the pre-merger notification requirements
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR Act”), (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate corresponding documents with the
appropriate authorities of other states in which the Company is qualified as a
foreign corporation to transact business, (iii) the filing of the Joint Proxy
Statement/Prospectus with the Securities and Exchange Commission (the “SEC”) in
accordance with the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), (iv) the filing of such reports,


 


12

















 


schedules
or materials under Section 13 of or Rule 14a-12 under the Exchange Act and
materials under Rule 165 and Rule 425 under the Securities Act as may be
required in connection with this Agreement and the transactions contemplated
hereby, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country and (vi)
in connection with any applicable Antitrust Law.


 


(d)                                 The
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock on the record date for the Company Stockholders Meeting is
the only vote of the holders of any class or series of the Company’s capital
stock or other securities necessary for the adoption and approval of this
Agreement and for the consummation by the Company of the other transactions
contemplated by this Agreement.  There
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company may vote.


 


3.4                                 SEC Filings; Financial Statements;
Information Provided.


 


(a)                                  The
Company has filed all registration statements, forms, reports and other
documents required to be filed by the Company with the SEC since
January 1, 2000, and has made available to the Parent copies of all
registration statements, forms, reports and other documents filed by the
Company with the SEC since such date, all of which are publicly available on
the SEC’s EDGAR system.  All such
registration statements, forms, reports and other documents (including those
that the Company may file after the date hereof until the Closing) are referred
to herein as the “Company SEC Reports.” 
The Company SEC Reports (i) were or will be filed on a timely basis,
(ii) at the time filed, were or will be prepared in compliance in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports, including the provision of
all statements and certifications required by (x) the SEC’s order dated
June 27, 2002 pursuant to Section 21(a)(1) of the Exchange Act, (y)
Rule 13a-14 or 15d-14 under the Exchange Act or (z) 18 U.S.C. §1350
(Section 906 of the Sarbanes-Oxley Act of 2002), and (iii) did not or will
not at the time they were or are filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Company SEC Reports or necessary in order to make the statements in such
Company SEC Reports, in the light of the circumstances under which they were
made, not misleading.  No Subsidiary of
the Company is subject to the reporting requirements of Section 13(a) or
Section 15(d) of the Exchange Act.


 


(b)                                 Each
of the consolidated financial statements (including, in each case, any related
notes and schedules) contained or to be contained in the Company SEC Reports at
the time filed (i) complied or will comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, (ii) were or will be prepared in accordance
with United States generally accepted accounting principles (“GAAP”) applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited interim
financial statements, as permitted by the SEC on Form 10-Q under the
Exchange Act) and (iii) fairly presented or will fairly present in all material
respects the consolidated financial position


 


13

















 


of the
Company and its Subsidiaries as of the dates indicated and the consolidated
results of its operations and cash flows for the periods indicated, consistent
with the books and records of the Company and its Subsidiaries, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.  The consolidated,
unaudited balance sheet of the Company as of June 30, 2003 is referred to
herein as the “Company Balance Sheet.”


 


(c)                                  The
information to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in the registration statement on Form F-4 to be
filed by the Parent pursuant to which the Parent Ordinary Shares issued in
connection with the Merger shall be registered under the Securities Act (the
“Registration Statement”), or to be included or supplied by or on behalf of the
Company for inclusion in any filing pursuant to Rule 165 and Rule 425 under the
Securities Act or Rule 14a-12 under the Exchange Act (each a “Regulation M-A
Filing”), shall not at the time the Registration Statement or any such
Regulation M-A Filing is filed with the SEC, at any time it is amended or
supplemented, or at the time the Registration Statement is declared effective
by the SEC, as applicable, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading.  The information to be supplied by or on behalf of the Company for
inclusion in (i) the joint proxy statement/prospectus to be sent to the
stockholders of the Company (the “Joint Proxy Statement/Prospectus”) in
connection with the meeting of the Company’s stockholders to consider the
Company Voting Proposal (the “Company Stockholders Meeting”) (which shall be
deemed to include all information about or relating to the Company, the Company
Voting Proposal and the Company Stockholders Meeting), and (ii) the Parent UK
Documents, to be sent to shareholders of the Parent in connection with the
extraordinary general meeting of the Parent’s shareholders (the “Parent
Shareholders Meeting”) to consider the issue of shares of Parent Ordinary
Shares pursuant to the Merger (the “Parent Voting Proposal”) shall not, on the
date the Joint Proxy Statement/Prospectus is first mailed to stockholders of
the Company or the Parent UK Documents are first mailed to the shareholders of
the Parent, or at the time of the Company Stockholders Meeting or the Parent
Shareholders Meeting or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Joint Proxy
Statement/Prospectus or the Parent UK Documents, as the case may be, not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting or the Parent Shareholders Meeting
which has become false or misleading. 
If at any time prior to the Effective Time any fact or event relating to
the Company or any of its Affiliates which should be set forth in an amendment
to the Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus or the Parent UK Documents should be discovered by the
Company or should occur, the Company shall promptly inform the Parent of such
fact or event.


 


3.5                                 No Undisclosed Liabilities;
Indebtedness.


 


(a)                                  Except
as disclosed in the Company SEC Reports filed prior to the date of this
Agreement, and except for normal and recurring liabilities incurred since the
date of the Company Balance Sheet in the Ordinary Course of Business, the
Company and its Subsidiaries


 


14

















 


do not
have any material liabilities, either accrued, contingent or otherwise (whether
or not required to be reflected in financial statements in accordance with
GAAP), and whether due or to become due.


 


(b)                                 Section 3.5(b)
of the Company Disclosure Schedule sets forth a complete and accurate
list, as of the date of this Agreement, of all loan or credit agreements,
notes, bonds, mortgages, indentures and other agreements and instruments (i)
pursuant to which any indebtedness of the Company or any of its Subsidiaries in
an aggregate principal amount in excess of US $250,000 is outstanding or may be
incurred and the respective principal amounts outstanding thereunder as of the
date of this Agreement or (ii) which creates or governs all securitization and
“off-balance sheet arrangements” (as defined in Item 303(c) of Regulation S-K
of the Securities Act).  For purposes of
this Section, “indebtedness” means, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (B) all obligations
of such person evidenced by bonds, debentures, notes or similar instruments,
(C) all obligations of such person upon which interest charges are customarily
paid, (D) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (E) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such person or creditors for raw
materials, inventory, services and supplies incurred in the Ordinary Course of
Business), (F) all capitalized lease obligations of such person, (G) all
obligations of others secured by any lien on property or assets owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed, (H) all obligations of such person under interest rate or
currency hedging transactions (valued at the termination value thereof), (I)
all letters of credit issued for the account of such person, and (J) all
guarantees and arrangements having the economic effect of a guarantee by such
person of any indebtedness of any other person.  Except as set forth in Section 5.1, all of the outstanding
indebtedness of the type described in this Section 3.5(b) of the Company
and each of its Subsidiaries may be prepaid by the Company or its Subsidiary at
any time without the consent or approval of, or prior notice to, any other
person, and without payment of any premium or penalty.


 


3.6                                 Absence of Certain Changes or Events.  Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, since the date of the
Company Balance Sheet, the Company and its Subsidiaries have conducted their
respective businesses only in the Ordinary Course of Business and, since such
date, there has not been (i) any change, event, circumstance, development or
effect that, individually or in the aggregate, has had, or is reasonably likely
to have, a Company Material Adverse Effect; or (ii) any other action or event
that would have required the consent of the Parent pursuant to Section 5.1
of this Agreement had such action or event occurred after the date of this
Agreement.


 


3.7                                 Taxes.


 


(a)                                  The
Company and each of its Subsidiaries has filed all material Tax Returns that it
was required to file, and all such Tax Returns were correct and complete except
for any errors or omissions that, individually or in the aggregate, would not
have a Company Material Adverse Effect. 
Except as would not have a Company Material Adverse Effect, the Company
and each of its Subsidiaries have paid on a timely basis all Taxes that are
shown to be


 


15

















 


due on
any such Tax Returns.  The unpaid Taxes
of the Company and its Subsidiaries for Tax periods through the date of the Company
Balance Sheet do not exceed the accruals and reserves for Taxes set forth on
the Company Balance Sheet exclusive of any accruals and reserves for “deferred
taxes” or similar items that reflect timing differences between Tax and
financial accounting principles.  All
Taxes attributable to the period from and after the date of the Company Balance
Sheet and continuing through the Closing Date are attributable to the conduct
by the Company of its operations in the Ordinary Course of Business and are
consistent both as to type and amount with Taxes attributable to such
comparable period in the immediately preceding year.  All Taxes that the Company or any of its Subsidiaries is or was
required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental
Entity.  For purposes of this Agreement,
(i) “Taxes” means all taxes, charges, fees, imposts, levies or other similar
assessments or liabilities, including income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
services, transfer, withholding, employment, payroll and franchise taxes
imposed by the United States or the United Kingdom, as the case may be, or any
state, local or other foreign government, or any agency thereof, or other
political subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or
dispute thereof and (ii) “Tax Returns” means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.


 


(b)                                 The
income Tax Returns of the Company and each of its Subsidiaries have been
audited by the applicable Governmental Entity or are closed by the applicable
statute of limitations for all taxable years through the taxable year specified
in Section 3.7(b) of the Company Disclosure Schedule.  No examination, audit or other dispute with
respect to any material Tax Return of the Company or any of its Subsidiaries by
any Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. 
Neither the Company nor any of its Subsidiaries has been informed by any
Governmental Entity that the Governmental Entity believes that the Company or
any of its Subsidiaries was required to file any material Tax Return that was
not filed.  Neither the Company nor any
of its Subsidiaries has waived any statute of limitations with respect to Taxes
or agreed to an extension of time with respect to a Tax assessment or
deficiency.


 


(c)                                  Neither
the Company nor any of its Subsidiaries: 
(i) has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(l)(A)(ii) of the Code; (ii) has made any
payments, is obligated to make any payments, or is a party to any agreement
that could obligate it to make any payments that may be treated as an “excess
parachute payment” under Section 280G of the Code (without regard to
Section 280G(b)(4)); (iii) has any actual or potential liability for any
Taxes of any person (other than the Company and its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any similar provision of law in
any jurisdiction), or as a transferee or successor, by contract, or otherwise;
or (iv) is or has been required to make a basis reduction pursuant to Treasury
Regulation Section 1.1502-20(b) or Treasury Regulation
Section 1.337(d)-2(b).  The Company
has provided to the Parent the information necessary to accurately calculate
any excise tax due under Section 4999 of the Code as a result of the
transactions contemplated by this Agreement for which the Company or the Parent
may directly or indirectly


 


16

















 


become
liable and the amount of deductions that may be disallowed under
Section 280G of the Code as a result of the transactions contemplated by
this Agreement.


 


(d)                                 None
of the assets of the Company or any of its Subsidiaries: (i) is property that
is required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is “tax-exempt
use property” within the meaning of Section 168(h) of the Code; (iii)
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code; or (iv) is subject to a lease under
Section 7701(h) of the Code or any predecessor section.


 


(e)                                  Neither
the Company nor any of its Subsidiaries (i) is or has ever been a member of a
group of corporations with which it has filed (or been required to file) group,
consolidated, combined or unitary Tax Returns, other than a group of which only
the Company and its Subsidiaries are or were members or (ii) is a party to or
bound by any Tax indemnity, Tax sharing or Tax allocation agreement.


 


(f)                                    There
are no material adjustments under Section 481 of the Code (or any similar
adjustments under any provision of the Code or any corresponding foreign, state
or local Tax laws) that are required (or will be required as a result of the
transactions contemplated by this Agreement) to be taken into account by the
Company or any Subsidiary in any period ending after the Closing Date by reason
of a change in method of accounting in any taxable period ending on or before
the Closing Date.


 


(g)                                 Neither
the Company nor any Subsidiary has distributed to its stockholders or security
holders stock or securities of a controlled corporation, nor has stock or
securities of the Company or any Subsidiary been distributed, in a transaction
to which Section 355 of the Code applies (i) in the two years prior to the
date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a “plan” or “series of related transactions” (within the
meaning of Section 355(e) of the Code) that includes the transactions
contemplated by this Agreement.


 


(h)                                 Neither
the Company nor any Subsidiary owns any interest in an entity that is
characterized as a partnership for United States federal income Tax purposes.


 


(i)                                     Neither
the Company nor any Subsidiary has incurred (or been allocated) an “overall
foreign loss” as defined in Section 904(f)(2) of the Code which has not
been previously recaptured in full as provided in Sections 904(f)(1) and/or
904(f)(3) of the Code.


 


(j)                                     Neither
the Company nor any Subsidiary is a party to a gain recognition agreement under
Section 367 of the Code.


 


(k)                                  Section 3.7(k)
of the Company Disclosure Schedule sets forth a complete and accurate
list, as of the date hereof, of any Subsidiaries for which a “check-the-box”
election under Section 7701 of the Code has been made.


 


(l)                                     Section 3.7(l)
of the Company Disclosure Schedule sets forth a complete and accurate
list, as of the date hereof, of all material agreements, rulings, settlements
or other


 


17

















 


Tax documents relating to Tax incentives between the
Company or any Subsidiary and a Governmental Entity.


 


3.8                                 Owned and Leased Real Properties.


 


(a)                                  Section 3.8(a)
of the Company Disclosure Schedule sets forth a complete and accurate list
of (i) the addresses and legal descriptions of all real property owned by
the Company or any of its Subsidiaries (the “Real Estate”) and (ii) all
material liabilities, Liens, easements, restrictions, reservations, tenancies,
agreements or other obligations affecting the Real Estate.  There is no pending or, to the Company’s
knowledge, threatened condemnation or eminent domain proceeding with respect to
the Real Estate.  There are no material
Taxes or material betterment assessments other than ordinary real estate taxes
pending or payable against the Real Estate and there are no contingencies
existing under which any assessment for real estate taxes may be retroactively
filed against the Real Estate.


 


(b)                                 The
Real Estate complies in all material respects with the requirements of all
applicable building, zoning, subdivision, health, safety, environmental,
pollution control, waste products, sewage control and all other applicable
statutes, laws, codes, ordinances, rules, orders and regulations (collectively,
“Governmental Regulations”).  There is
no material action pending or threatened by any Governmental Entity claiming
that the Real Estate violates any Governmental Regulations or threatening to
shut down the business of the Company or any of its Subsidiaries.  There are no suits, petitions, notices or proceedings
pending, given or, to the Company’s knowledge, threatened against the Company
by any persons or Governmental Entities before any court, Governmental Entity
or instrumentalities, administrative or otherwise, which if given, commenced or
concluded would have a material adverse effect on the Company’s title to the
Real Estate or the operation of the business of the Company or any of its
Subsidiaries, as a whole, as presently operated.


 


(c)                                  All
of the buildings, fixtures and other improvements located on the Real Estate
are in good operating condition and repair, and, to the Company’s knowledge,
the operation thereof as presently conducted is not in material violation of
any applicable building code, zoning ordinance or other law or regulation.


 


(d)                                 Section 3.8(d)
of the Company Disclosure Schedule sets forth a complete and accurate list
of all real property leased, subleased or licensed by the Company or any of its
Subsidiaries (collectively, “Company Leases”) and the location of the
premises.  Neither the Company nor any
of its Subsidiaries nor, to the Company’s knowledge, any other party to any
Company Lease, is in default under any of the Company Leases, except where the
existence of such defaults, individually or in the aggregate, has not had a
Company Material Adverse Effect.  Each
of the Company Leases is in full force and effect and is enforceable in
accordance with its terms and shall not cease to be in full force and effect as
a result of the transactions contemplated by this Agreement.  Neither the Company nor any of its
Subsidiaries leases, subleases or licenses any real property to any person
other than the Company and its Subsidiaries. 
The Company has provided the Parent with complete and accurate copies of
all Company Leases.  All of the plants,
structures, facilities, properties, leased premises and equipment of the
Company and its Subsidiaries, are in good operating condition and repair, in
all material respects, and suitable for their intended uses.


 


18

















 


3.9                                 Intellectual Property.


 


(a)                                  The
Company and its Subsidiaries exclusively own, or license or otherwise possess
legally enforceable rights to use, without any obligation to make any fixed or
contingent payments, including any royalty payments, all Intellectual Property
used or necessary to conduct the business of the Company and its Subsidiaries
as currently conducted, or that would be used or necessary as such business is
planned to be conducted (in each case excluding generally commercially
available, off-the-shelf software programs licensed pursuant to shrinkwrap or
“click-and-accept” licenses), the absence of which, individually or in the
aggregate, would have a Company Material Adverse Effect.  For purposes of this Agreement, the term “Intellectual
Property” shall mean any or all of the following and all rights in, arising out
of, or associated therewith: (A) all United States and foreign patents and
utility models and applications therefor and all reissues, divisions,
re-examinations, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries including without limitation invention
disclosures (“Patents”); (B) all trade secrets and other rights in
know-how and confidential or proprietary information; (C) all copyrights,
copyrights registrations and applications therefor and all other rights
corresponding thereto throughout the world; (D) all industrial designs and
any registrations and applications therefor throughout the world; (E) mask
works, mask work registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (F) all rights in World Wide
Web addresses and domain names and applications and registrations therefor, all
trade names, logos, trademarks and service marks, trademark and service mark
registrations and applications therefor and all goodwill associated therewith
throughout the world; and (G) any similar, corresponding or equivalent
rights to any of the foregoing anywhere in the world.


 


(b)                                 The
execution and delivery of this Agreement and consummation of the Merger will
not result in the breach of, or create on behalf of any third party the right
to terminate or modify, (i) any license, sublicense or other agreement relating
to any Intellectual Property owned by the Company that is material to the
business of the Company and its Subsidiaries, taken as a whole, including
software that is used in the manufacture of, incorporated in, or forms a part
of any product or service sold by or expected to be sold by the Company or any
of its Subsidiaries (the “Company Intellectual Property”) or (ii) any license,
sublicense and other agreement as to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is authorized to use any third party Intellectual Property that is
material to the business of the Company and its Subsidiaries, taken as a whole,
including software that is used in the manufacture of, incorporated in, or forms
a part of any product or service sold by or expected to be sold by the Company
or any of its Subsidiaries (the “Company Third Party Intellectual
Property”).  Section 3.9(b)(i) of
the Company Disclosure Schedule sets forth a complete and accurate list,
as of the date hereof, of the Company Intellectual Property (other than
unregistered copyrights, trade secrets and confidential information) and
Section 3.9(b)(ii) sets forth a complete and accurate list, as of the date
hereof, of all Company Third Party Intellectual Property.  Neither the Company nor any of its
Subsidiaries has transferred ownership of, or granted any exclusive license of
or right to use any Intellectual Property that is or was Company Intellectual
Property, to any other person.


 


19

















 


(c)                                  All
patents and registrations and applications for trademarks, service marks and
copyrights which are held by the Company or any of its Subsidiaries and which
are material to the business of the Company and its Subsidiaries, taken as a
whole, are, to the Company’s knowledge, valid and subsisting.  The Company and its Subsidiaries have taken
reasonable measures to protect the proprietary nature of the Company Intellectual
Property.  To the knowledge of the Company,
no other person or entity is infringing, violating or misappropriating any of
the Company Intellectual Property, except for infringements, violations or
misappropriations that, individually or in the aggregate, would not have a
Company Material Adverse Effect.


 


(d)                                 None
of the (i) Company Products or (ii) business as currently conducted by the
Company or any of its Subsidiaries infringes, violates or constitutes a
misappropriation of, any Intellectual Property (other than Patents) of any
third party, except for such infringements, violations and misappropriation
that, individually or in the aggregate, would not have a Company Material
Adverse Effect.  With respect to
Patents, to its knowledge none of the (i) Company Products or (ii) business as
currently conducted by the Company or any of its Subsidiaries infringes,
violates or constitutes a misappropriation of, any Patents of any third party,
except for such infringements, violations and misappropriation that,
individually or in the aggregate, would not have a Company Material Adverse
Effect.  Neither the Company nor any of
its Subsidiaries has received any complaint, claim or notice alleging any such
infringement, violation or misappropriation of Intellectual Property of a third
party.


 


(e)                                  For
purposes of this Section, “Company Products” means the products and or services
sold, leased, licensed or provided by the Company or its Subsidiaries currently
or at any time during the immediately preceding seven years.


 


3.10                           Agreements, Contracts and
Commitments; Government Contracts.


 


(a)                                  Section 3.10(a)
of the Company Disclosure Schedules sets forth a complete and accurate list, as
of the date hereof, of all contracts and agreements (collectively, the “Company
Material Contracts”), that are material to the business, assets, liabilities,
capitalization, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole, including without
limitation (i) any agreement, contract or commitment in connection with which or
pursuant to which the Company and its Subsidiaries will spend or receive (or
are expected to spend or receive pursuant to the terms of such contract or
agreement), in the aggregate, more than US $250,000 during the current fiscal
year or during the next fiscal year and (ii) any non-competition or other
agreement, contract or commitment that prohibits or otherwise restricts, in any
material respect, the Company or any of its Subsidiaries from freely engaging
in business anywhere in the world.  The
Company has provided the Parent with a complete and accurate copy of each
Company Material Contract.  Each Company
Material Contract is in full force and effect and is enforceable in accordance
with its terms against the Company or the applicable Subsidiary, as the case
may be, subject to the Bankruptcy and Equity Exception.  To the Company’s knowledge, each Company
Material Contract is enforceable against each other party thereto, subject to
the Bankruptcy and Equity Exception. 
Neither the Company nor any of its Subsidiaries nor, to the Company’s
knowledge, any other party to any Company Material Contract is in violation of
or in default under (nor does there exist any condition which, upon the passage
of time or the giving of notice or both, would cause


 


20

















 


such a
violation of or default under) (x) any loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or
other contract, arrangement or understanding to which it is a party or by which
it or any of its properties or assets is bound, except for violations or
defaults that, individually or in the aggregate, have not had, and are not
reasonably likely to have, a Company Material Adverse Effect or (y) any
Company Material Contract.


 


(b)                                 Section 3.10(b)
of the Company Disclosure Schedule sets forth a complete and accurate list
of each contract or agreement to which the Company or any of its Subsidiaries
is a party or bound with any Affiliate of the Company (other than any
Subsidiary which is a direct or indirect wholly owned Subsidiary of the
Company).  Complete and accurate copies
of all the agreements, contracts and arrangements set forth in
Section 3.10(b) of the Company Disclosure Schedule have heretofore
been furnished to the Parent. Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement, neither the Company nor any of its
Subsidiaries has entered into any transaction with any Affiliate of the Company
or any of its Subsidiaries or any transaction that would be subject to proxy
statement disclosure pursuant to Item 404 of Regulation S-K.


 


(c)                                  There
is no non-competition or other similar agreement, commitment, judgment,
injunction or order to which the Company or any of its Subsidiaries is a party
or is subject that has or could reasonably be expected to have the effect of
prohibiting or impairing in any material respect the conduct of the business of
the Company or any of its Subsidiaries as currently conducted and as proposed
to be conducted.  Neither the Company
nor any of its Subsidiaries has entered into (or is otherwise bound by) any
agreement under which it is restricted in any material respect from selling,
licensing or otherwise distributing any of its technology or products, or providing
services to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or any segment of the market or line
of business.


 


(d)                                 Neither
the Company nor any of its Subsidiaries is a party to any agreement under which
a third party would be entitled to receive, as a result of this Agreement or
the transactions provided for hereunder, any license, sublicense or other
agreement relating to any Intellectual Property owned by the Parent that is
material to the business of the Parent and its Subsidiaries, taken as a whole,
including software that is used in the manufacture of, incorporated in, or
forms a part of any product or service sold by or expected to be sold by the
Parent or any of its Subsidiaries (the “Parent Intellectual Property”)
following the Closing, other than any Company Intellectual Property that such
third party was entitled to use prior to Closing.


 


(e)                                  Neither
the Company nor any of its Subsidiaries is or has been suspended or debarred from
bidding on contracts or subcontracts with any Governmental Entity; no such
suspension or debarment has been initiated or, to the Company’s knowledge,
threatened; and the consummation of the transactions contemplated by this
Agreement will not result in any such suspension or debarment that,
individually or in the aggregate, would have a Company Material Adverse
Effect.  Neither the Company nor any of
its Subsidiaries has any agreements, contracts or commitments, which require it
to obtain or maintain a security clearance with any Governmental Entity.


 


21

















 


3.11                           Litigation; Product Liability.  Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, there is no action, suit, proceeding,
claim, arbitration or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that, individually or in the aggregate, has had, or is reasonably likely to
have, a Company Material Adverse Effect. 
There are no material judgments, orders or decrees outstanding against
the Company or any of its Subsidiaries. 
No material product liability claims have been asserted or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries with respect to any Company Products.


 


3.12                           Environmental Matters.


 


(a)                                  Except
as disclosed in the Company SEC Reports filed prior to the date of this
Agreement, each of the Company and its Subsidiaries has complied with all
applicable Environmental Laws, except for violations of Environmental Laws
that, individually or in the aggregate, would not have a Company Material
Adverse Effect.  There is no pending or,
to the knowledge of the Company, threatened civil or criminal litigation,
written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity,
relating to any Environmental Law involving the Company or any of its
Subsidiaries.


 


(b)                                 Neither
the Company nor any of its Subsidiaries has released, emitted, injected,
spilled or discharged any amount of Materials of Environmental Concern into the
environment in a manner that has resulted in or is reasonably likely to result
in a material liability to or corrective action or remedial obligation of the
Company or its Subsidiaries.


 


(c)                                  Neither
the Company nor any of its Subsidiaries is a party to or bound by any court
order, administrative order, consent order or other agreement between the
Company and any Governmental Entity entered into in connection with any legal
obligation or liability arising under any Environmental Law.


 


(d)                                 Set
forth in Section 3.12(d) of the Company Disclosure Schedule is a list
of all documents within the Company’s possession or control (whether in hard
copy or electronic form) that contain any environmental reports, investigations
and audits relating to premises currently or previously owned or operated by
the Company or any of its Subsidiaries (whether conducted by or on behalf of the
Company or any of its Subsidiaries or a third party, and whether done at the
initiative of the Company or any of its Subsidiaries or directed by a
Governmental Entity or other third party) which were issued or conducted during
the past five years and which the Company has possession of or access to.  A complete and accurate copy of each such
document has been provided to the Parent.


 


(e)                                  The
Company is not aware of any material environmental liability of any solid or
hazardous waste transporter or treatment, storage or disposal facility that has
been used by the Company or any of its Subsidiaries.


 


(f)                                    For
purposes of this Agreement, “Environmental Law” means any national, federal,
state or local law, statute, rule or regulation or the common law or applicable


 


22

















 


laws of
PRC relating to the environment or occupational health and safety, including
any statute, regulation, administrative decision or order pertaining to
(i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous materials or substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and
soil contamination; (iv) the release or threatened release into the environment
of industrial, toxic or hazardous materials or substances, or solid or
hazardous waste, including emissions, discharges, injections, spills, escapes
or dumping of pollutants, contaminants or chemicals; (v) the protection of
wild life, marine life and wetlands, including all endangered and threatened
species; (vi) storage tanks, vessels, containers, abandoned or discarded
barrels and other closed receptacles; (vii) health and safety of employees
and other persons; and (viii) manufacturing, processing, using, distributing,
treating, storing, disposing, transporting or handling of materials regulated
under any law as pollutants, contaminants, toxic or hazardous materials or
substances or oil or petroleum products or solid or hazardous waste.  As used above, the terms “release” and
“environment” shall have the meaning set forth in the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(“CERCLA”).


 


(g)                                 For
purposes of this Agreement, “Materials of Environmental Concern” means any
chemicals, pollutants or contaminants, hazardous substances (as such term is
defined under CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the Resource Conservation and Recovery Act), toxic materials, oil
or petroleum and petroleum products or any other material subject to regulation
under any Environmental Law.


 


3.13                           Employee Benefit Plans.


 


(a)                                  Section 3.13(a)
of the Company Disclosure Schedule sets forth a complete and accurate list
of all Company Employee Plans currently maintained, or contributed to, by the
Company, any of the Company’s Subsidiaries or any of their ERISA
Affiliates.  For purposes of this
Agreement, the following terms shall have the following meanings:  (i) “Company Employee Plan” means any
Employee Benefit Plan maintained, or contributed to, by the Company, any of the
Company’s Subsidiaries or any of their ERISA Affiliates; (ii) “Employee Benefit
Plan” means any “employee pension benefit plan” (as defined in
Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in
Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation, bonuses,
stock options, stock purchase, phantom stock, stock appreciation or other forms
of incentive compensation or post-retirement compensation and all unexpired
severance agreements, written or otherwise, for the benefit of, or relating to,
any current or former employee of the Company or any of its Subsidiaries or an
ERISA Affiliate; (iii) “ERISA” means the Employee Retirement Income Security
Act of 1974, as amended; and (iv) “ERISA Affiliate” means any entity which is,
or at any applicable time was, a member of (1) a controlled group of
corporations (as defined in Section 414(b) of the Code), (2) a group of
trades or businesses under common control (as defined in Section 414(c) of
the Code), or (3) an affiliated service group (as defined under Section 414(m)
of the Code or the regulations under Section 414(o) of the Code), any of
which includes or included the Company or a Subsidiary.


 


(b)                                 With
respect to each Company Employee Plan, the Company has furnished to the Parent
a complete and accurate copy of (i) such Company Employee Plan (or a


 


23

















 


written
summary of any unwritten plan), (ii) the three (3) most recent annual reports,
if any, (Form 5500 and all required schedules and financial statements) filed
with the United States Internal Revenue Service, (iii) each trust agreement,
group annuity contract and summary plan description, if any, relating to such
Company Employee Plan, (iv) the most recent financial statements for each
Company Employee Plan that is funded, (v) all personnel, payroll and employment
manuals and policies, (vi) all employee handbooks, (vii) all reports
regarding the satisfaction of the nondiscrimination requirements of Sections
410(b), 401(k) and 401(m) of the Code, if applicable, (viii) all Internal
Revenue Service determination, opinion, notification and advisory letters with
respect to any Company Employee Plan and (ix) all material correspondence to or
from any governmental agency relating to any Company Employee Plan.


 


(c)                                  Each
Company Employee Plan has been administered in all material respects in
accordance with ERISA, the Code and all other applicable laws and the
regulations thereunder and in accordance with its terms and each of the
Company, the Company’s Subsidiaries and their ERISA Affiliates has in all
material respects met its obligations with respect to such Company Employee
Plan and has made all required contributions thereto (or reserved such
contributions on the Company Balance Sheet) on time.  The Company, each Subsidiary of the Company, each ERISA Affiliate
and each Company Employee Plan are in compliance in all material respects with
the currently applicable provisions of ERISA and the Code and the regulations
thereunder (including Section 4980B of the Code, Subtitle K; Chapter 100
of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA).  All filings and reports as to each Company
Employee Plan required to have been submitted to the Internal Revenue Service
or to the United States Department of Labor have been timely submitted.  With respect to the Company Employee Plans,
no event has occurred, and there exists no condition or set of circumstances in
connection with which the Company, any of its Subsidiaries or any ERISA
Affiliate could be subject to any material liability under ERISA, the Code or
any other applicable law.  There are no
audits, inquiries or proceedings pending or, to the knowledge of the Company,
threatened by the Internal Revenue Service, the Department of Labor or any
other person.


 


(d)                                 With
respect to the Company Employee Plans, there are no benefit obligations for
which contributions have not been made or properly accrued and there are no
benefit obligations, which have not been accounted for by reserves, or
otherwise properly footnoted in accordance with GAAP, on the financial
statements of the Company.  The assets
of each Company Employee Plan, which is funded, are reported at their fair
market value on the books and records of such Company Employee Plan.


 


(e)                                  All
the Company Employee Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Company Employee Plans are
qualified and the plans and trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and, to the Company’s knowledge,
revocation has not been threatened, and no such Employee Benefit Plan has been
amended or operated since the date of its most recent determination letter or
application therefor in any respect, and no act or omission has occurred, that
would adversely affect its qualification or materially increase its cost.  Each Company Employee Plan which is required
to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has
been tested (if required to be tested) for


 


24

















 


compliance
with, and satisfies the requirements of Section 401(k)(3) and
Section 401(m)(2) of the Code, as the case may be, for each plan year
ending prior to the Closing Date.


 


(f)                                    Neither
the Company, any of the Company’s Subsidiaries nor any of their ERISA
Affiliates has (i) ever maintained a Company Employee Plan which was ever subject
to Section 412 of the Code or Title IV of ERISA or (ii) ever been
obligated to contribute to a “multiemployer plan” (as defined in
Section 4001(a)(3) of ERISA).  No
Company Employee Plan is funded by, associated with or related to a “voluntary
employee’s beneficiary association” within the meaning of
Section 501(c)(9) of the Code.  Any
Company Employee Plan that holds securities issued by the Company, any of the
Company’s Subsidiaries or any of their ERISA Affiliates is identified as such
on Schedule 3.13(f).  No Company
Employee Plan provides health benefits that are not fully insured through an
insurance contract.


 


(g)                                 Each
Company Employee Plan is amendable and terminable unilaterally by the Company
and any of the Company’s Subsidiaries which are a party thereto or covered
thereby at any time without liability to the Company or any of its Subsidiaries
as a result thereof (other than for benefits accrued through the date of
termination or amendment and reasonable administrative expenses related thereto)
and no Company Employee Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to employees
by its terms prohibits the Company or any of its Subsidiaries from amending or
terminating any such Company Employee Plan. 
The investment vehicles used to fund the Company Employee Plans may be
changed at any time without incurring a material sales charge, surrender fee or
other similar expense.


 


(h)                                 Except
as disclosed in the Company SEC Reports filed prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries is a party to any
oral or written (i) agreement with any stockholders, director, executive
officer or other key employee of the Company or any of its Subsidiaries (A) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company or any of its
Subsidiaries of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee or
(C) providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee or (ii)
agreement or plan binding the Company or any of its Subsidiaries, including any
stock option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan or severance benefit plan, any of the benefits of which shall be
increased, or the vesting of the benefits of which shall be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which shall be calculated on the basis of any
of the transactions contemplated by this Agreement.


 


(i)                                     None
of the Company Employee Plans promises or provides retiree medical or other
retiree welfare benefits to any person, except as required by applicable law.


 


(j)                                     Schedule 3.13(j)
sets forth a complete and accurate list of all Company Employee Plans
maintained outside the United States (each, a “Non-U.S. Plan”).  Each Non-U.S. Plan is in material compliance
and the books and records thereof are maintained in material compliance with
all applicable laws, rules and regulations of each jurisdiction in which such Non-U.S.
Plan is maintained.  The Company, each
of its Subsidiaries and each ERISA Affiliate


 


25

















 


have
satisfied in all material respects their respective obligations with respect to
each Non-U.S. Plan.


 


3.14                           Compliance With Laws.  The Company and each of its Subsidiaries has
complied with, is not in violation of, and has not received any written notice
alleging any violation with respect to, any applicable provisions of any
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its properties or assets, except for failures to
comply or violations that, individually or in the aggregate, have not had a
Company Material Adverse Effect.


 


3.15                           Permits.  The
Company and each of its Subsidiaries have all permits, licenses and franchises
from Governmental Entities required to conduct their businesses as now being
conducted or as presently contemplated to be conducted (the “Company Permits”),
except for such permits, licenses and franchises the absence of which,
individually or in the aggregate, have not had a Company Material Adverse
Effect.  The Company and each of its
Subsidiaries are in compliance with the terms of the Company Permits, except
for such failures to comply that, individually or in the aggregate, have not
had a Company Material Adverse Effect. 
No material Company Permit shall cease to be effective as a result of
the consummation of the transactions contemplated by this Agreement.


 


3.16                           Labor Matters.


 


(a)                                  Section 3.16(a)
of the Company Disclosure Schedule contains a list, as of the date hereof,
of all employees of the Company and each of its Subsidiaries whose annual rate
of compensation exceeds U.S. $150,000 per year, along with the position and the
annual rate of cash compensation of each such person.  Each current or past employee of the Company or any of its
Subsidiaries has entered into a confidentiality and assignment of inventions
agreement with the Company, a copy or form of which has previously been
delivered to the Parent.  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.  Neither
the Company nor any of its Subsidiaries is 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 it to bargain with any labor union or
labor organization that, individually or in the aggregate, have had a Company Material
Adverse Effect, nor is there pending or, to the knowledge of the Company,
threatened, any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving the Company or any of its Subsidiaries.  The Company is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions
of employment and wages and hours, in each case, with respect to its current or
former employees.


 


(b)                                 Except
as disclosed in the Company SEC Reports filed prior to the date of this
Agreement, no employee of the Company or any of its Subsidiaries (i) has an
employment agreement, (ii) to the Company’s knowledge is in violation of any
term of any patent disclosure agreement, non-competition agreement, or any
restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company or any of its Subsidiaries because of
the nature of the business conducted or presently proposed to be conducted by
the Company or any of its Subsidiaries or to the use of trade secrets or
proprietary information of


 


26

















 


others, or (iii) in the case of any key employee or
group of key employees, has given notice to the Company or any of its
Subsidiaries that such employee or any employee in a group of key employees
intends to terminate his or her employment with the Company.


 


3.17                           Insurance. 
Section 3.17 of the Company Disclosure Schedule sets forth the
insurance coverage maintained by the Company and its Subsidiaries and a history
of any claims made and claims paid since January 1, 2000.  Each of the insurance policies that the
Company and its Subsidiaries maintain (the “Insurance Policies”) is in full
force and effect and is valid, outstanding and enforceable, and all premiums
due thereon have been paid in full. 
None of the Insurance Policies shall terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement.  The
Company and each of its Subsidiaries have complied in all material respects
with the provisions of each Insurance Policy under which it is the insured
party.  No insurer under any Insurance
Policy has canceled or generally disclaimed liability under any such policy or
indicated any intent to do so or not to renew any such policy.


 


3.18                           [Intentionally Omitted]


 


3.19                           Assets.  The
Company or one of its Subsidiaries owns or leases all tangible assets necessary
for the conduct of their businesses as presently conducted.  All of such tangible assets which are owned,
are owned free and clear of all Liens except for (i) Liens which are disclosed
in the Financial Statements contained in the Company SEC Reports filed prior to
the date of this Agreement, (ii) Liens for Taxes not yet due and payable and
(iii) other Liens that, individually and in the aggregate, do not materially
interfere with the ability of the Company or its Subsidiaries to conduct their
business as currently conducted, and have not had a Company Material Adverse
Effect.  The tangible assets of the
Company and its Subsidiaries, taken as a whole, are free from material defects,
have been maintained in accordance with normal industry practice, are in good
operating condition and repair (subject to normal wear and tear) and are
suitable for the purpose for which they are presently used.


 


3.20                           Warranty. 
Except as set forth in Section 3.20 of the Company Disclosure
Schedule, no product or service manufactured, sold, leased, licensed, delivered
or otherwise provided by the Company or any of its Subsidiaries is subject to
any guaranty, warranty, right of return or other indemnity.


 


3.21                           Customers and Suppliers.  Section 3.21 of the Company Disclosure
Schedule accurately identifies, and provides an accurate and complete
breakdown of the revenues received from, each customer of the Company or any of
its Subsidiaries that represented 5% or more of the Company’s consolidated
revenues in the fiscal year ended December 29, 2002 or in the six-month
period ended June 29, 2003.  No
such customer has affirmatively indicated in writing to the Company or any of
its Subsidiaries that it will stop, or materially decrease the rate of, buying
materials, products or services from the Company or any of its
Subsidiaries.  No material supplier or
exclusive supplier of the Company or any of its Subsidiaries has affirmatively
indicated in writing to the Company or any of its Subsidiaries that it will
stop, or materially decrease the rate of, supplying materials, products or
services to them.


 


27

















 


3.22                           Opinion of Financial Advisor.  The financial advisor of the Company, Thomas
Weisel Partners LLC, has delivered to the Company an opinion dated the date of
this Agreement to the effect that, as of such date, the Parent ADSs or Parent
Ordinary Shares, as the case may be, and the cash to be received by the holders
of Company Common Stock pursuant to the Merger and the Distribution are fair to
such holders from a financial point of view, a signed copy of which opinion has
been, or will be within three days following the date of this Agreement,
delivered to the Parent.


 


3.23                           Section 203 of the DGCL Not
Applicable.  The Company Board
has taken all actions necessary so that the restrictions contained in
Section 203 of the DGCL applicable to a “business combination” (as defined
in Section 203) shall not apply to the execution, delivery or performance
of this Agreement, the Company Stockholder Agreements or the consummation of
the Merger or the other transactions contemplated by this Agreement or the
Company Stockholder Agreements.  No
other “fair practice,” “moratorium,” “control share acquisition,” “business combination,”
or other state takeover statute or similar statute or regulation applies to the
Company, the Parent, the Transitory Subsidiary, the Merger, this Agreement or
the Company Stockholder Agreements.


 


3.24                           Rights Agreement.  The Company has duly entered into an amendment to the Company Rights
Plan, a signed copy of which has been delivered to the Parent (the “Rights
Agreement Amendment”), and taken all other action necessary or appropriate so
that:  (a) the entering into of this
Agreement or the Company Stockholder Agreements and the consummation of the
transactions contemplated hereby and thereby do not and will not result in the
ability of any person to exercise any of the Company Rights under the Company
Rights Plan or enable or require the Company Rights issued thereunder to
separate from the shares of Company Common Stock to which they are attached or
to be triggered or become exercisable or cease to be redeemable and (b) the
Company Rights will expire immediately prior to the Effective Time.


 


3.25                           Brokers; Schedule of Fees and
Expenses.


 


(a)                                  No
agent, broker, investment banker, financial advisor or other firm or person is
or shall be entitled, as a result of any action, agreement or commitment of the
Company or any of its Affiliates, to any broker’s, finder’s, financial
advisor’s or other similar fee or commission in connection with any of the
transactions contemplated by this Agreement, except Thomas Weisel Partners,
whose fees and expense shall be paid by the Company.  The Company has delivered to the Parent a complete and accurate
copy of all agreements pursuant to which Thomas Weisel Partners is entitled to
any fees and expenses in connection with any of the transactions contemplated
by this Agreement.


 


(b)                                 Section 3.25(b)
of the Company Disclosure Schedule sets forth, as of the date hereof, a
good faith estimate by the Company of the estimated fees and expenses incurred
and to be incurred by the Company and any of its Subsidiaries in connection
with this Agreement and the transactions contemplated by this Agreement
(including the fees and expenses of Thomas Weisel Partners and of the Company’s
legal counsel and accountants).


 


28

















 


3.26                           No Existing Discussions.  As of the time of execution of this
Agreement, neither the Company nor any of its Subsidiaries is engaged, directly
or indirectly, in any discussions or negotiations with any other party with
respect to a Company Acquisition Proposal.


 


ARTICLE IV



REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE

TRANSITORY SUBSIDIARY


 


The Parent and the Transitory Subsidiary represent and
warrant to the Company that the statements contained in this Article IV
are true and correct, except as expressly set forth herein or in the disclosure
schedule delivered by the Parent and the Transitory Subsidiary to the
Company on or before the date of this Agreement (the “Parent Disclosure
Schedule”).  The Parent Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV and the disclosure in any
paragraph shall qualify (1) the corresponding paragraph in this Article IV
and (2) the other paragraphs in this Article IV only to the extent such
disclosure reasonably appears on its face to be applicable to such other
paragraphs.


 


4.1                                 Organization, Standing and Power.


 


(a)                                  Each
of the Parent and the Transitory Subsidiary is a corporation duly organized,
validly existing and, where applicable as a legal concept, in good standing
under the laws of the jurisdiction of its incorporation, has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted and as proposed to
be conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the character of the
properties it owns, operates or leases or the nature of its activities makes
such qualification necessary, except for such failures to be so organized,
qualified or in good standing, individually or in the aggregate, that have not
had a Parent Material Adverse Effect. 
For purposes of this Agreement, the term “Parent Material Adverse
Effect” means any material adverse change, event, circumstance or development with
respect to, or material adverse effect on (i) the business, assets,
liabilities, capitalization, financial condition, or results of operations of
the Parent and its Subsidiaries, taken as a whole or (ii) the ability of the
Parent or the Transitory Subsidiary to consummate the transactions contemplated
by this Agreement; provided, however, that in the case of clause
(i), in no event shall any of the following, alone or in combination, be deemed
to constitute, nor shall any of the following be taken into account in
determining whether there has occurred, a Parent Material Adverse Effect:  any adverse change, event, circumstance or
development with respect to, or effect resulting from (A) general economic
conditions or conditions generally affecting the optical networking industry,
except in either case to the extent the Parent is materially disproportionately
affected thereby, (B) the announcement or pendency of the Merger or any other
transactions expressly contemplated hereby, (C) compliance with the terms and
conditions of this Agreement, (D) a change in the stock price or trading volume
of the Parent Ordinary Shares or Parent ADSs (or any failure of the Parent to
meet published revenue or earnings projections), provided that clause
(D) shall not exclude any underlying effect which may have caused such change
in stock price or trading volume or failure to meet published revenue or
earnings projections, (E) any change in accounting requirements or principles
or any


 


29

















 


change in applicable laws, rules or regulations or the
interpretation thereof or (F) the continued incurrence of losses by the
Parent.  For the avoidance of doubt, the
parties agree that the terms “material”, “materially” or “materiality” as used
in this Agreement with an initial lower case “m” shall have their respective
customary and ordinary meanings, without regard to the meanings ascribed to
Parent Material Adverse Effect in the prior sentence of this paragraph or
Company Material Adverse Effect in Section 3.1(a).  The Parent has delivered to the Company
complete and accurate copies of the Memorandum and Articles of Association of
the Parent together with copies of all shareholder resolutions required by law
to be embodied in or annexed thereto.


 


(b)                                 Section 4.1(b)
of the Parent Disclosure Schedule sets forth a complete and accurate list
of all of the Parent’s Subsidiaries and the Parent’s direct or indirect equity
interest therein.  Except as set forth
in Section 4.1(b) of the Parent Disclosure Schedule, neither the Parent
nor any of its Subsidiaries directly or indirectly owns any equity, membership,
partnership or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity, membership, partnership or similar
interest in, any corporation, partnership, joint venture, limited liability
company or other business association or entity, whether incorporated or
unincorporated, and neither the Parent, nor any of its Subsidiaries, has, at
any time, been a general partner or managing member of any general partnership,
limited partnership, limited liability company or other entity.


 


4.2                                 Capitalization.


 


(a)                                  The
authorized share capital of the Parent consists of an aggregate nominal value
of £1,000,000 divided into 300,000,000 Parent Ordinary Shares.  The rights and privileges of the Parent
Ordinary Shares are set forth in the Parent’s Memorandum and Articles of
Association.  As of the close of
business on September 19, 2003, 208,032,813 Parent Ordinary Shares were
issued and outstanding.  No material change
in such capitalization has occurred between September 19, 2003 and the
date of this Agreement.


 


(b)                                 Section 4.2(b)
of the Parent Disclosure Schedule sets forth a complete and accurate list,
as of the date of this Agreement, of: (i) all share option plans or other share
or equity-related plans of the Parent (the “Parent Share Plans”), indicating
for each Parent Share Plan the number of Parent Ordinary Shares and/or Parent
ADSs issued to date under such Plan, the number of Parent Ordinary Shares
and/or Parent ADSs subject to outstanding options under such Plan and the
number of Parent Ordinary Shares and/or Parent ADSs reserved for future
issuance under such Plan; and (ii) the number of Parent Ordinary Shares and/or
Parent ADSs, and the class or series of such shares, subject to any outstanding
warrants or other contractual rights to purchase or acquire share capital of
the Parent.  The Parent has provided to
the Company complete and accurate copies of all Parent Share Plans and standard
forms of option agreements used thereunder. 
Except as set forth in this Section 4.2, (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to subscribe, purchase or acquire or require the allotment or issue of any
share capital of the Parent is authorized or outstanding, (ii) the Parent has
no obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right, or to issue or distribute to
holders of any share capital any evidences of indebtedness or assets of the
Parent, (iii) the Parent has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any share capital or any interest therein
or to pay any dividend or to make any other distribution in respect thereof,


 


30

















 


and (iv)
there are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Parent.


 


(c)                                  All
outstanding Parent Ordinary Shares are, and all Parent Ordinary Shares issuable
pursuant to Section 2.1(c) in connection with the Merger, when issued on
the terms and conditions of this Agreement, will be, duly authorized, validly
issued and fully paid, and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under the Parent’s Memorandum and Articles of
Association or any agreement to which the Parent is a party or is otherwise
bound.


 


4.3                                 Authority; No Conflict; Required
Filings and Consents.


 


(a)                                  Each
of the Parent and the Transitory Subsidiary has all requisite corporate power
and authority to enter into this Agreement and, subject to obtaining the
necessary approval of the shareholders of the Parent as referred to in
Section 6.3(b) (the “Parent Shareholder Approval”), the UKLA agreeing to
admit all of the Parent Ordinary Shares (including those underlying the Parent
ADSs) to the Official List of the UKLA and the London Stock Exchange plc (the
“LSE”) agreeing to admit such Parent Ordinary Shares to trading on the LSE’s
market for listed securities, to consummate the transactions contemplated by
this Agreement.  The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement by the Parent and the Transitory Subsidiary have been duly
authorized by all necessary corporate action on the part of each of the Parent
and the Transitory Subsidiary and the approval of the Board of Directors of the
Parent (the “Parent Board”)), subject only to the required receipt of the
Parent Shareholder Approval and adoption of this Agreement by the Parent in its
capacity as the sole stockholder of the Transitory Subsidiary.  This Agreement has been duly executed and
delivered by each of the Parent and the Transitory Subsidiary and constitutes
the valid and binding obligation of each of the Parent and the Transitory
Subsidiary, enforceable in accordance with its terms, subject to the Bankruptcy
and Equity Exception.


 


(b)                                 The
execution and delivery of this Agreement by each of the Parent and the
Transitory Subsidiary do not, and the consummation by the Parent and the
Transitory Subsidiary of the transactions contemplated by this Agreement shall
not, (i) conflict with, or result in any violation or breach of, any
provision of the Memorandum and Articles of Association of the Parent or
Certificate of Incorporation or By-laws of the Transitory Subsidiary,
(ii) conflict with, or result in any violation or breach of, or constitute
(with or without notice or lapse of time, or both) a default (or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
any material benefit) under, require a consent or waiver under, constitute a
change in control under, require the payment of a penalty under or result in
the imposition of any Lien on the Parent’s or the Transitory Subsidiary’s
assets under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract or other agreement, instrument or
obligation to which the Parent or the Transitory Subsidiary is a party or by
which any of them or any of their properties or assets may be bound, or
(iii) subject to obtaining the Parent Shareholder Approval and compliance
with the requirements specified in clauses (i) through (viii) of
Section 4.3(c), conflict with or violate any permit, concession,
franchise, license, judgment, injunction, order, decree, statute, law,
ordinance, rule or regulation applicable to the Parent or the Transitory
Subsidiary or any of its or their properties or assets,


 


31

















 


except
in the case of clauses (ii) and (iii) of this Section 4.3(b) for any such
conflicts, violations, breaches, defaults, terminations, cancellations,
accelerations or losses that, individually or in the aggregate, would not have
a Parent Material Adverse Effect.


 


(c)                                  No
consent, approval, license, permit, order or authorization of, or registration,
declaration, notice or filing with, any Governmental Entity, including the
UKLA, the UK Panel on Takeovers and Mergers, or any stock market or stock
exchange on which the Parent Ordinary Shares or Parent ADSs are listed for
trading is required by or with respect to the Parent or the Transitory Subsidiary
in connection with the execution and delivery of this Agreement by the Parent
or the Transitory Subsidiary or the consummation by the Parent or the
Transitory Subsidiary of the transactions contemplated by this Agreement,
except for (i) the pre-merger notification requirements under the HSR Act, (ii)
the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate corresponding documents with the appropriate
authorities of other states in which the Company is qualified as a foreign
corporation to transact business, (iii) the filing of the Registration
Statement with the SEC in accordance with the Securities Act, (iv) the filing
of the Joint Proxy Statement/Prospectus with the SEC in accordance with the Exchange
Act, (v) the filing of such reports, schedules or materials under
Section 13 of or Rule 14a-12 under the Exchange Act and materials under
Rule 165 and Rule 425 under the Securities Act as may be required in connection
with this Agreement and the transactions contemplated hereby, (vi) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country, (vii) the filing with The NASDAQ Stock
Market of a Notification Form for Listing of Additional Shares with respect to
the Parent ADSs issuable in connection with the Merger and a listing
application with the LSE with respect to the Parent Ordinary Shares issuable in
connection with the Merger, the UKLA agreeing to admit all of the Parent
Ordinary Shares underlying the Parent ADSs to the Official List of the UKLA and
the LSE agreeing to admit such Parent Ordinary Shares to trading on the LSE’s
market for listed securities, and (viii) in connection with any applicable
Antitrust Law.


 


(d)                                 The
affirmative vote of the holders of a majority of the Parent Ordinary Shares
present or represented by proxy and voting at the Parent Shareholders Meeting
is the only vote of the holders of any class or series of the Parent’s share
capital necessary for approval of the Parent Voting Proposal and for the
consummation by the Parent of the other transactions contemplated by this
Agreement.  There are no bonds,
debentures, notes or other indebtedness of the Parent having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Parent may vote.


 


4.4                                 SEC Filings; Financial Statements;
Information Provided; LSE.


 


(a)                                  The
Parent has filed all registration statements, forms, reports and other
documents required to be filed by the Parent with the SEC since January 1,
2000 and has made available to the Company copies of all registration
statements, forms, reports and other documents filed by the Parent with the SEC
since such date.  All such registration
statements, forms, reports and other documents (including those that the Parent
may file after the date hereof until the Closing) are referred to herein as the
“Parent SEC Reports.”  The Parent SEC
Reports (i) were or will be filed on a timely basis, (ii) at the time filed,
were or will be prepared in


 


32

















 


compliance
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such Parent SEC Reports, including the provision
of all statements and certifications required by (x) the SEC’s order dated June 27,
2002 pursuant to Section 21(a)(1) of the Exchange Act, (y) Rule 13a-14 or
15d-14 under the Exchange Act or (z) 18 U.S.C. §1350 (Section 906 of the
Sarbanes-Oxley Act of 2002), and (iii) did not or will not at the time they
were or are filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Parent SEC Reports or
necessary in order to make the statements in such Parent SEC Reports, in the
light of the circumstances under which they were made, not misleading.  No Subsidiary of the Parent is subject to
the reporting requirements of Section 13(a) or Section 15(d) of the
Exchange Act.


 


(b)                                 Each
of the consolidated financial statements (including, in each case, any related
notes and schedules) contained or to be contained in the Parent SEC Reports at
the time filed (i) complied or will comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, (ii) were or will be prepared in accordance
with generally accepted accounting principles in the United Kingdom (“UK GAAP”)
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by the SEC) and, to the extent applicable
and required by the Securities Act or Exchange Act, reconciled to GAAP and
(iii) fairly presented or will fairly present in all material respects the
consolidated financial position of the Parent and its Subsidiaries as of the
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, consistent with the books and records of the Parent and
its Subsidiaries, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount. 
The consolidated, unaudited balance sheet of the Parent as of
June 30, 2003 is referred to herein as the “Parent Balance Sheet.”


 


(c)                                  The
information in the Registration Statement to be supplied by or on behalf of the
Parent for inclusion or incorporation by reference in the Registration
Statement or to be included or supplied by or on behalf of the Parent for
inclusion in any Regulation M-A Filing shall not at the time the Registration
Statement or any such Regulation M-A Filing is filed with the SEC, at any time
it is amended or supplemented, or at the time the Registration Statement is
declared effective by the SEC, as applicable, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading.  The information to be supplied by or on
behalf of the Parent for inclusion in (i) the Joint Proxy Statement/Prospectus
(which shall be deemed to include all information about or relating to the
Parent, the Parent Voting Proposal and the Parent Shareholders Meeting) and
(ii) the Parent UK Documents, to be sent to the shareholders of the Parent in
connection with the Parent Shareholders Meeting to consider the Parent Voting
Proposal, shall not, on the date the Joint Proxy Statement/Prospectus is first
mailed to stockholders of the Company or the Parent UK Documents are first
mailed to the shareholders of the Parent, or at the time of the Company
Stockholders Meeting or the Parent Shareholders Meeting or at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the


 


33

















 


Joint
Proxy Statement/Prospectus or the Parent UK Documents, as the case may be, not
false or misleading; or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting or the Parent Shareholders Meeting
which has become false or misleading. 
If at any time prior to the Effective Time any fact or event relating to
the Parent or any of its Affiliates which should be set forth in an amendment
to the Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus or the Parent UK Documents, should be discovered by the
Parent or should occur, the Parent shall promptly inform the Company of such
fact or event.


 


(d)                                 The
Parent has in all material respects complied with its obligations to notify a
Regulatory Information Service of information pursuant to the Listing Rules
(the “Listing Rules”) of the Financial Services Authority acting in its
capacity as the competent authority for listing in the United Kingdom (the
“UKLA”) under Part VI of the Financial Services and Markets Act 2000 (“FSMA”)
since January 1, 2000, and such notifications are publicly available.  The Parent has not received notice from the
UKLA that there are any circumstances and, as of the date of this Agreement,
the Parent is not aware of any circumstances that would justify or warrant the
UKLA commencing proceedings to withdraw or cancel of the listing of the Parent
Ordinary Shares by the UKLA.


 


4.5                                 No Undisclosed Liabilities.  Except as disclosed in the Parent SEC
Reports filed prior to the date of this Agreement, and except for normal and
recurring liabilities incurred since the date of the Parent Balance Sheet in
the Ordinary Course of Business, the Parent and its Subsidiaries do not have
any material liabilities, either accrued, contingent or otherwise (whether or
not required to be reflected in financial statements in accordance with UK
GAAP), and whether due or to become due.


 


4.6                                 Agreements, Contracts and
Commitments; Government Contracts.


 


(a)                                  The
Parent has made available to the Company a complete and accurate copy of each
contract and agreement that is material to the business, assets, liabilities,
capitalization, condition (financial or otherwise) or results of operations of
the Parent and its Subsidiaries, taken as a whole (the “Parent Material
Contracts”).  Each Parent Material
Contract is in full force and effect and is enforceable in accordance with its
terms against the Company or the applicable Subsidiary, as the case may be,
subject to the Bankruptcy and Equity Exception.  To the Parent’s knowledge, each Parent Material Contract is
enforceable against each other party thereto, subject to the Bankruptcy and
Equity Exception.  Neither the Parent
nor any of its Subsidiaries nor, to the Parent’s knowledge, any other party to
any Parent Material Contract is in violation of or in default under (nor does
there exist any condition which, upon the passage of time or the giving of
notice or both, would cause such a violation of or default under) (x) any loan
or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or other contract, arrangement or understanding
to which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that, individually or in the
aggregate, have not had, and are not reasonably likely to have, a Parent
Material Adverse Effect or (y) any Parent Material Contract.


 


(b)                                 Neither
the Parent nor any of its Subsidiaries is or has been suspended or debarred
from bidding on contracts or subcontracts with any Governmental Entity; no such


 


34

















 


suspension or debarment has been initiated or, to the
Parent’s knowledge, threatened; and the consummation of the transactions
contemplated by this Agreement will not result in any such suspension or
debarment that, individually or in the aggregate, would have a Parent Material
Adverse Effect.  Neither the Parent nor
any of its Subsidiaries has any agreements, contracts or commitments, which
require it to obtain or maintain a security clearance with any Governmental
Entity.


 


4.7                                 Absence of Certain Changes or Events.  Except as disclosed in the Parent SEC
Reports filed prior to the date of this Agreement, since the date of the Parent
Balance Sheet, there has not been (i) any event, change, circumstance,
development or effect that, individually or in the aggregate, has had, or is
reasonably likely to have, a Parent Material Adverse Effect or (ii) any other action
or event that would have required the consent of the Company pursuant to
Section 5.2 of this Agreement had such action or event occurred after the
date of this Agreement.


 


4.8                                 Litigation; Product Liability.  Except as disclosed in the Parent SEC Reports
filed prior to the date of this Agreement, there is no action, suit,
proceeding, claim, arbitration or investigation pending or, to the knowledge of
the Parent, threatened against or affecting the Parent or any of its
Subsidiaries that, individually or in the aggregate, has had, or is reasonably
likely to have, a Parent Material Adverse Effect.  There are no material judgments, orders or decrees outstanding
against the Parent or any of its Subsidiaries. 
No material product liability claims have been asserted or, to the
knowledge of the Parent, threatened against the Parent or any of its
Subsidiaries with respect to any Parent Products.


 


4.9                                 Intellectual Property.


 


(a)                                  The
Parent and its Subsidiaries exclusively own, or license or otherwise possess
legally enforceable rights to use, without any obligation to make any fixed or
contingent payments, including any royalty payments, all Intellectual Property
used or necessary to conduct the business of the Parent and its Subsidiaries as
currently conducted, or that would be used or necessary as such business is
planned to be conducted (in each case excluding generally commercially
available, off-the-shelf software programs licensed pursuant to shrinkwrap or
“click-and-accept” licenses), the absence of which, individually or in the
aggregate would have a Parent Material Adverse Effect.


 


(b)                                 The
execution and delivery of this Agreement and consummation of the Merger will
not result in the breach of, or create on behalf of any third party the right
to terminate or modify, (i) Parent Intellectual Property or (ii) any
license, sublicense and other agreement as to which the Parent or any of its
Subsidiaries is a party and pursuant to which the Parent or any of its
Subsidiaries is authorized to use any third party Intellectual Property that is
material to the business of the Parent and its Subsidiaries, taken as a whole,
including software that is used in the manufacture of, incorporated in, or
forms a part of any product or service sold by or expected to be sold by the Parent
or any of its Subsidiaries (the “Parent Third Party Intellectual
Property”).  Section 4.9(b)(i) of
the Parent Disclosure Schedule sets forth a complete and accurate list, as
of the date hereof, of the Parent Intellectual Property (other than unregistered
copyrights, trade secrets and confidential information) and
Section 4.9(b)(ii) sets forth a complete and accurate list of all Third
Party Intellectual Property.  Neither
the Parent nor any of its Subsidiaries has transferred ownership of, or granted
any exclusive license of or right to use,


 


35

















 


or authorized the retention of any exclusive rights to
use or joint ownership of, any Intellectual Property this is or was Parent
Intellectual Property, to any other person.


 


(c)                                  All
patents and registrations and applications for trademarks, service marks and
copyrights which are held by the Parent or any of its Subsidiaries and which
are material to the business of the Parent and its Subsidiaries, taken as a
whole, are, to Parent’s knowledge, valid and subsisting.  The Parent and its Subsidiaries have taken
reasonable measures to protect the proprietary nature of the Parent
Intellectual Property.  To the knowledge
of the Parent, no other person or entity is infringing, violating or
misappropriating any of the Parent Intellectual Property or Third Party
Intellectual Property, except for infringements, violations or
misappropriations that, individually or in the aggregate, would not have a
Parent Material Adverse Effect.


 


(d)                                 None
of the (i) Parent Products or (ii) business or activities previously
or currently conducted by the Parent or any of its Subsidiaries infringes,
violates or constitutes a misappropriation of, any Intellectual Property (other
than Patents) of any third party, except for such infringements, violations and
misappropriation that, individually or in the aggregate, would not have a
Parent Material Adverse Effect.  With
respect to Patents, to the knowledge of Parent and its Subsidiaries, none of
the (i) Parent Products or (ii) business as currently conducted by the Parent
or any of its Subsidiaries infringes, violates or constitutes a
misappropriation of, any Patents of any third party, except for such
infringements, violations and misappropriation that, individually or in the
aggregate, would not have a Parent Material Adverse Effect.  Neither the Parent nor any of its
Subsidiaries has received any complaint, claim or notice alleging any such
infringement, violation or misappropriation of Intellectual Property of a third
party.


 


(e)                                  For
purposes of this Section, “Parent Products” means the product and or services
sold, leased, licensed or provided by Parent or its Subsidiaries currently or
at any time during the immediately preceding seven years.


 


4.10                           Taxes.


 


(a)                                  The
Parent and each of its Subsidiaries has filed all material Tax Returns that it
was required to file, and all such Tax Returns were correct and complete except
for any errors or omissions that, individually or in the aggregate, would not
have a Parent Material Adverse Effect. 
Except as would not have a Parent Material Adverse Effect, the Parent
and each of its Subsidiaries have paid on a timely basis all Taxes that are
due.  The unpaid Taxes of the Parent and
its Subsidiaries for Tax periods through the date of the Parent Balance Sheet
do not exceed the accruals and reserves for Taxes set forth on the Parent
Balance Sheet exclusive of any accruals and reserves for “deferred taxes” or
similar items that reflect timing differences between Tax and financial
accounting principles.  All Taxes
attributable to the period from and after the date of the Parent Balance Sheet
and continuing through the Closing Date are attributable to the conduct by the
Parent and its Subsidiaries of operations in the Ordinary Course of Business
and are consistent both as to type and amount with Taxes attributable to such
comparable periods in the immediately preceding year.  All Taxes that the Parent or any of its Subsidiaries is or was
required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Entity.


 


36

















 


(b)                                 The
income Tax Returns of the Parent and each of its Subsidiaries have been audited
by the applicable Governmental Entity or are closed by the applicable statute
of limitations for all taxable years through the taxable year specified in
Section 4.10(b) of the Parent Disclosure Schedule.  No examination, audit or other dispute with respect
to any material Tax Return of the Parent or any of its Subsidiaries by any
Governmental Entity is currently in progress or, to the knowledge of the
Parent, threatened or contemplated. 
Neither the Parent nor any of its Subsidiaries has been informed by any
Governmental Entity that the Governmental Entity believes that the Parent or
any of its Subsidiaries was required to file any Tax Return that was not
filed.  Neither the Parent nor any of
its Subsidiaries has waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a Tax assessment or deficiency.


 


(c)                                  Neither
the Parent nor any of its Subsidiaries: 
(i) has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(l)(A)(ii) of the Code; (ii) has made any
payments, is obligated to make any payments, or is a party to any agreement
that could obligate it to make any payments that may be treated as an “excess
parachute payment” under Section 280G of the Code (without regard to
Section 280G(b)(4)); (iii) has any actual or potential liability for any
Taxes of any person (other than the Parent and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of law in any
jurisdiction), or as a transferee or successor, by contract, or otherwise; or
(iv) is or has been required to make a basis reduction pursuant to Treasury
Regulation Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).


 


(d)                                 None
of the assets of the Parent or any of its Subsidiaries: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is “tax-exempt use
property” within the meaning of Section 168(h) of the Code; (iii) directly
or indirectly secures any debt the interest on which is tax exempt under
Section 103(a) of the Code; or (iv) is subject to a lease under
Section 7701(h) of the Code or any predecessor section.


 


(e)                                  Neither
the Parent nor any of its Subsidiaries (i) is or has ever been a member of a
group of corporations with which it has filed (or been required to file) group,
consolidated, combined or unitary Tax Returns, other than a group of which only
the Parent and its Subsidiaries are or were members or (ii) is a party to or
bound by any Tax indemnity, Tax sharing or Tax allocation agreement.


 


(f)                                    There
are no material adjustments under Section 481 of the Code (or any similar
adjustments under any provision of the Code or any corresponding foreign, state
or local Tax laws) that are required (or will be required as a result of the
transactions contemplated by this Agreement) to be taken into account by the
Parent or any Subsidiary in any period ending after the Closing Date by reason
of a change in method of accounting in any taxable period ending on or before
the Closing Date.


 


(g)                                 Neither
the Parent nor any Subsidiary has distributed to its stockholders or security
holders stock or securities of a controlled corporation, nor has stock or
securities of the Parent or any Subsidiary been distributed, in a transaction
to which Section 355 of the Code


 


37

















 


applies (i) in the two years prior to the date of this
Agreement or (ii) in a distribution that could otherwise constitute part of a
“plan” or “series of related transactions” (within the meaning of
Section 355(e) of the Code) that includes the transactions contemplated by
this Agreement.


 


(h)                                 Neither
the Parent nor any Subsidiary owns any interest in an entity that is
characterized as a partnership for United States federal income Tax purposes.


 


(i)                                     Neither
the Parent nor any Subsidiary has incurred (or been allocated) an “overall
foreign loss” as defined in Section 904(f)(2) of the Code which has not
been previously recaptured in full as provided in Sections 904(f)(1) and/or
904(f)(3) of the Code.


 


(j)                                     Neither
the Parent nor any Subsidiary is a party to a gain recognition agreement under
Section 367 of the Code.


 


(k)                                  Section 4.10(k)
of the Parent Disclosure Schedule sets forth a complete and accurate list,
as of the date hereof, of any Subsidiaries for which a “check-the-box” election
under Section 7701 of the Code has been made.


 


(l)                                     Section 4.10(l)
of the Parent Disclosure Schedule sets forth a complete and accurate list,
as of the date hereof, of all material agreements, rulings, settlements or
other Tax documents relating to Tax incentives between the Parent or any
Subsidiary and a Governmental Entity.


 


4.11                           Environmental Matters.


 


(a)                                  Except
as disclosed in the Parent SEC Reports filed prior to the date of this
Agreement, each of the Parent and its Subsidiaries has complied with all
applicable Environmental Laws, except for violations of Environmental Laws
that, individually or in the aggregate, would not have a Parent Material
Adverse Effect.  There is no pending or,
to the knowledge of the Parent, threatened civil or criminal litigation,
written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity,
relating to any Environmental Law involving the Parent or any of its
Subsidiaries.


 


(b)                                 Neither
the Parent nor any of its Subsidiaries has released, emitted, injected, spilled
or discharged any amount of Materials of Environmental Concern into the
environment in a manner that has resulted in or is reasonably likely to result
in a material liability to or corrective action or remedial obligation of the
Parent or its Subsidiaries.


 


(c)                                  Neither
the Parent nor any of its Subsidiaries is a party to or bound by any court
order, administrative order, consent order or other agreement between the
Parent and any Governmental Entity entered into in connection with any legal
obligation or liability arising under any Environmental Law.


 


(d)                                 The
Parent is not aware of any material environmental liability of any solid or
hazardous waste transporter or treatment, storage or disposal facility that has
been used by the Parent or any of its Subsidiaries.


 


38

















 


4.12                           Compliance With Laws.  The Parent and each of its Subsidiaries has
complied with, is not in violation of, and, has not received any written notice
alleging any violation with respect to, any applicable provisions of any
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its properties or assets, except for failures to
comply or violations that, individually or in the aggregate, have not had a
Parent Material Adverse Effect.


 


4.13                           Assets.  The
Parent or one of its Subsidiaries owns or leases all tangible assets necessary
for the conduct of their businesses as presently conducted.  The tangible assets of the Parent and its
Subsidiaries, taken as a whole, are free from material defects, have been
maintained in accordance with normal industry practice, are in good operating
condition and repair (subject to normal wear and tear) and are suitable for the
purpose for which they are presently used.


 


4.14                           Broker.  No
agent, broker, investment banker, financial advisor or other firm or person is
or shall be entitled, as a result of any action, agreement or commitment of the
Parent or any of its Affiliates, to any broker’s, finder’s, financial advisor’s
or other similar fee or commission in connection with any of the transactions
contemplated by this Agreement, except Perseus Group, LLC, whose fees and
expense shall be paid by the Parent.


 


4.15                           Operations of the Transitory
Subsidiary.  The Transitory Subsidiary
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement, has engaged in no other business activities and has
conducted its operations only as contemplated by this Agreement.


 


ARTICLE V



CONDUCT OF BUSINESS


 


5.1                                 Covenants of the Company.  Except as expressly provided herein or set
forth in Section 5.1 of the Company Disclosure Schedule or as
consented to in writing by the Parent, from and after the date of this
Agreement until the earlier of the termination of this Agreement in accordance
with its terms or the Effective Time, the Company shall, and shall cause each
of its Subsidiaries to, act and carry on its business in the ordinary course in
substantially the same manner as previously conducted, pay its debts and Taxes
and perform its other obligations when due (subject to good faith disputes over
such debts, Taxes or obligations), comply with all applicable laws, rules and
regulations, and use commercially reasonable efforts, consistent with past
practices, to maintain and preserve its and each Subsidiary’s present business
organization, assets and properties, maintain inventory levels in the Ordinary
Course of Business, keep available the services of its present officers and
employees and preserve its advantageous business relationships with customers,
strategic partners, suppliers, distributors and others having business dealings
with it.  Without limiting the
generality of the foregoing, and except as set forth in Section 5.1 of the
Company Disclosure Schedule, from and after the date of this Agreement until
the earlier of the termination of this Agreement in accordance with its terms
or the Effective Time, the Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, do any of the following without the
prior written consent of the Parent:


 


39

















 


(a)                                  (A)
declare, set aside or pay any dividends on, or make any other distributions
(whether in cash, securities or other property) in respect of, any of its
capital stock (other than (i) the Distribution and (ii) dividends and
distributions by a direct or indirect wholly owned Subsidiary of the Company to
its parent); (B) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or any of its other
securities; or (C) purchase, redeem or otherwise acquire any shares of its
capital stock or any other of its securities or any rights, warrants or options
to acquire any such shares or other securities; provided, however, that nothing
in this Section 5.1(a) shall prohibit the Company from exercising
contractual rights of repurchase of any shares of Company Common Stock under
any employee, consultant or director plan or agreement as in effect on the date
hereof and disclosed on Section 3.2(b) of the Company Disclosure Schedule,
copies of which have been provided to the Parent;


 


(b)                                 except
as permitted by Section 5.1(o), issue, deliver, sell, grant, pledge or
otherwise dispose of or encumber any shares of its capital stock, any other
voting securities or any securities convertible into or exchangeable for, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible or exchangeable securities (other than (i) the issuance of
shares of Company Common Stock (and corresponding Company Rights) upon the
exercise of Company Stock Options outstanding on the date of this Agreement in
accordance with their present terms and (ii) the grant of options to purchase
Company Common Stock, which grants (A) shall not exceed 100,000 shares of
Company Common Stock in the aggregate, net of any shares of Company Common
Stock returned, after the date hereof, to the Company Stock Plans in accordance
with the terms of such Company Stock Plans, (B) shall have an exercise price
equal to the fair market value of Company Common Stock on the date of grant
(determined in a manner consistent with the Company’s existing practice for
establishing fair market value for option grants) and (C) shall otherwise be
upon the Company’s customary terms));


 


(c)                                  amend
its certificate of incorporation, by-laws or other comparable charter or
organizational documents, except as expressly provided by this Agreement;


 


(d)                                 acquire
(A) by merging or consolidating with, or by purchasing all or a substantial
portion of the assets or any stock of, or by any other manner, any business or
any corporation, partnership, joint venture, limited liability company,
association or other business organization or division thereof or (B) any
assets that are material, in the aggregate, to the Company and its
Subsidiaries, taken as a whole, except purchases of inventory and components in
the Ordinary Course of Business;


 


(e)                                  except
for sales of inventory in the Ordinary Course of Business, sell, lease,
license, pledge, or otherwise dispose of or encumber any properties or assets
of the Company or of any of its Subsidiaries;


 


(f)                                    whether
or not in the Ordinary Course of Business, sell, dispose of or otherwise
transfer any assets material to the Company and its Subsidiaries, taken as a
whole (including any accounts, leases, contracts or intellectual property or
any assets or the stock of any of its Subsidiaries, but excluding the sale or
non-exclusive license of products in the Ordinary Course of Business);


 


40

















 


(g)                                 adopt
or implement any stockholder rights plan or, except as provided in
Section 3.24, alter or further amend the Company Rights Plan or the
Company Rights; provided, however, that, subject to the provisions of
Section 6.1 of this Agreement, but notwithstanding anything else to the
contrary set forth herein, the Company Board may (i) in the event of an unsolicited
exchange or tender offer by a third party not resulting from a breach of the
provisions of Section 6.1, amend the Company Rights Plan solely for the
purpose of extending the Distribution Date thereunder to that time immediately
prior to the consummation of such exchange or tender offer and (ii) take any
action in connection with the Company Rights Plan that is required by order of
a court of competent jurisdiction;


 


(h)                                 except
for a confidentiality agreement as permitted by Section 6.1, enter into an
agreement with respect to any merger, consolidation, liquidation or business
combination, or any acquisition or disposition of all or substantially all of
the assets or securities of the Company or any of its Subsidiaries;


 


(i)                                     (A)
incur or suffer to exist any indebtedness (as such term is defined in
Section 3.5(b) of this Agreement) other than such indebtedness which
existed as of June 29, 2003, as reflected on the Company Balance Sheet or
guarantee any such indebtedness of another person, including entering into any
agreements, notes, bonds, mortgages, indentures or other agreements or
instruments which create or govern securitization or “off-balance sheet”
arrangements (as defined in Item 303(a) of Regulation S-K, (B) issue, sell or
amend any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any “keep well” or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, (C) make any
loans, advances (other than routine advances to employees of the Company and
its Subsidiaries in the Ordinary Course of Business) or capital contributions
to, or investment in, any other person, other than the Company or any of its
direct or indirect wholly owned Subsidiaries or (D) enter into any hedging
agreement or other financial agreement or arrangement designed to protect the
Company or its Subsidiaries against fluctuations in commodities prices or
exchange rates;


 


(j)                                     make
any capital expenditures or other expenditures with respect to property, plant
or equipment in excess of US $300,000 in the aggregate for the Company and its
Subsidiaries, taken as a whole, other than the specific capital expenditures
disclosed and set forth in Section 3.6 of the Company Disclosure Schedule;


 


(k)                                  make
any changes in accounting methods, principles or practices, except insofar as
may have been required by a change in GAAP or, except as so required, change
any assumption underlying, or method of calculating, any bad debt, contingency
or other reserve;


 


(l)                                     (A)
pay, discharge, settle or satisfy any claims, liabilities or obligations
(whether absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction, in the Ordinary Course of
Business or in accordance with their terms as in effect on the date of this
Agreement, of claims, liabilities or obligations reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) of the Company included in the Company SEC Reports filed
prior to the date of this Agreement (to the extent so reflected or reserved
against) or incurred since the date of


 


41

















 


such
financial statements in the Ordinary Course of Business, or (B) waive any
material benefits of, modify in any adverse respect, fail to enforce, or
consent to any matter with respect to which its consent is required under, any
confidentiality, standstill or similar agreements to which the Company or any
of its Subsidiaries is a party;


 


(m)                               except
in the Ordinary Course of Business, modify, amend or terminate any material
contract or agreement to which the Company or any of its Subsidiaries is party,
or knowingly waive, release or assign any material rights or claims (including
any write-off or other compromise of any accounts receivable of the Company or
any of its Subsidiaries);


 


(n)                                 (A)
except in the Ordinary Course of Business enter into any material contract or
agreement, including, without limitation, any contract for the sale or supply
of goods or products with a term exceeding six months or value exceeding, in any
single instance, US $1,000,000 or (B) except for non-exclusive licenses
entered into in the Ordinary Course of Business, license any material
intellectual property rights to or from any third party;


 


(o)                                 except
as required to comply with applicable law or agreements, plans or arrangements
existing on the date hereof, (A) enter into or adopt any employment or similar
agreement with any person whose annual rate of cash compensation exceeds U.S.
$150,000 per year pursuant to such employment agreement, (B) take any action
with respect to, adopt, enter into, terminate or amend any employment,
severance or similar agreement or benefit plan for the benefit or welfare of
any current or former director, officer, employee or consultant or any
collective bargaining agreement, (C) increase in any material respect the
compensation or fringe benefits of, or pay any bonus to, any director, officer,
employee or consultant (except for annual increases of the salaries of
non-officer employees in the Ordinary Course of Business), (D) amend or
accelerate the payment, right to payment or vesting of any compensation or
benefits, including any outstanding options or restricted stock awards, (E) pay
any material benefit not provided for as of the date of this Agreement under
any benefit plan, (F) grant any awards under any bonus, incentive, performance
or other compensation plan or arrangement or benefit plan, including the grant
of stock options, stock appreciation rights, stock based or stock related
awards, performance units or restricted stock, or the removal of existing
restrictions in any benefit plans or agreements or awards made thereunder,
except for the grant of options to purchase Company Common Stock to new hires,
which grants shall not exceed 100,000 shares in the aggregate net of any shares
of Company Common Stock returned, after the date hereof, to the Company Stock
Plans in accordance with the terms of such Company Stock Plans, and which
options shall have an exercise price equal to the fair market value of the
Company Common Stock on the date of grant (determined in a manner consistent
with the Company’s existing practice for establishing fair market value for
option grants) and which options shall otherwise be upon the Company’s
customary terms, or (G) take any action other than in the Ordinary Course of
Business to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or benefit
plan;


 


(p)                                 make
or rescind any material Tax election, make any material settlement or material
compromise to any Tax liability or make any material amendments to any Tax
return;


 


42

















 


(q)                                 commence
any Offering (as defined in the Company’s Employee Stock Purchase Plan (the
“Company ESPP”) of shares of Company Common Stock pursuant to the Company ESPP
that will not terminate prior to the Effective Time;


 


(r)                                    initiate,
compromise or settle any material litigation or arbitration proceeding (other
than in connection with the enforcement of the Company’s rights against Parent
under this Agreement);


 


(s)                                  open
or close any facility or office greater than 10,000 square feet;


 


(t)                                    fail
to maintain insurance at levels substantially comparable to levels existing as
of the date of this Agreement;


 


(u)                                 fail
to pay accounts payable and other obligations in the Ordinary Course of
Business or accelerate the payment of any accounts receivable other than in the
Ordinary Course of Business; or


 


(v)                                 authorize
any of, or commit or agree, in writing or otherwise, to take any of, the
foregoing actions or any action which would prevent or materially impair the
satisfaction of any conditions in Article VII hereof.


 


The Parent shall not unreasonably delay its
consideration of any consent to a waiver requested by the Company pursuant to
this Section 5.1 (it being understood, however, that the Parent shall be
entitled to act in its sole discretion in granting or withholding such
consent).


 


5.2                                 Covenants of the Parent.  Except as expressly provided herein or set
forth in Section 5.2 of the Parent Disclosure Schedule or as
consented to in writing by the Company, from and after the date of this
Agreement until the earlier of the termination of this Agreement in accordance
with its terms or the Effective Time, the Parent shall, and shall cause each of
its Subsidiaries to, act and carry on its business in the ordinary course in
substantially the same manner as previously conducted, pay its debts and Taxes
and perform its other obligations when due (subject to good faith disputes over
such debts, Taxes or obligations), comply with all applicable laws, rules and
regulations, and use commercially reasonable efforts, consistent with past
practices, to maintain and preserve its and each Subsidiary’s present business organization,
assets and properties, keep available the services of its present officers and
employees and preserve its advantageous business relationships with customers,
strategic partners, suppliers, distributors and others having business dealings
with it.  Without limiting the
generality of the foregoing, and except as set forth in Section 5.2 of the
Parent Disclosure Schedule, from and after the date of this Agreement until the
earlier of the termination of this Agreement in accordance with its terms or
the Effective Time, the Parent shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, do any of the following without the
prior written consent of the Company:


 


(a)                                  (A)
declare, set aside or pay any dividends on, or make any other distributions
(whether in cash, securities or other property) in respect of, any of its share
capital (other than (i) dividends and distributions by a direct or indirect
wholly owned Subsidiary of the Parent to its parent); (B) split, combine
or reclassify any of its share capital or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its


 


43

















 


share
capital or any of its other securities; or (C) purchase, redeem or
otherwise acquire any shares of its share capital or any other of its
securities or any rights, warrants or options to acquire any such shares or
other securities; provided, however, that nothing in this Section 5.2(a)
shall prohibit the Parent from exercising contractual rights of repurchase of
any Parent Ordinary Shares or Parent ADSs under any employee, consultant or
director plan or agreement as in effect on the date hereof);


 


(b)                                 except
as contemplated by this Agreement, amend its Memorandum, Articles of
Association or other comparable charter or organizational documents;


 


(c)                                  enter
into an agreement with respect to any merger, consolidation, liquidation or
business combination involving the disposition of a material amount of the
assets or securities of the Parent and its Subsidiaries, taken as a whole;


 


(d)                                 make
any changes in accounting methods, principles or practices, except insofar as
may have been required by a change in UK GAAP and/or GAAP, or, except as so
required, change any assumption underlying, or method of calculating, any bad
debt, contingency or other reserve;


 


(e)                                  take
any action, following the filing of the Registration Statement that would
require the Parent to include pro forma financial statements in the Registration
Statement pursuant to Article 11 of Regulation S-X under the Securities
Act (other than the pro forma financial statements required to be filed in
connection with the transactions contemplated by this Agreement); or


 


(f)                                    authorize
any of, or commit or agree, in writing or otherwise, to take any of, the
foregoing actions or any action which would or prevent or materially impair the
satisfaction of any conditions in Article VII hereof.


 


The Company shall not unreasonably delay its
consideration of any consent to a waiver requested by the Parent pursuant to
this Section 5.2 (it being understood, however, that the Company shall be
entitled to act in its sole discretion in granting or withholding such
consent).


 


5.3                                 Confidentiality.  The parties acknowledge that the Parent and the Company have
previously executed a confidentiality agreement, dated as of August 19,
2003 (the “Confidentiality Agreement”), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms, except as
expressly modified herein, provided that Section 7, “Stand Still
Provisions,” of the Confidentiality Agreement shall be of no further force and
effect as of the date hereof; provided  further, however,
that in the event this Agreement is terminated: (i) pursuant to
Section 8.1(a) or (ii) pursuant to any other provision of Section 8.1
at a time at which a Company Acquisition Proposal is not pending, and, in
either such case, so long as at the time of such termination the Company is not
in breach of a representation, warranty or covenant set forth in this Agreement
(which breach would cause the conditions set forth in Sections 7.2(a) or 7.2(b)
to not be satisfied), the “Stand Still Provisions” of Section 7 of the
Confidentiality Agreement shall be reinstated and in full force and effect as
of the time of such termination.  Notwithstanding anything herein to the
contrary, any party to this Agreement (and any employee, representative,
shareholder, stockholder or other agent of any party to this Agreement)


 


44

















 


may disclose to any and all Persons, without
limitation of any kind, the tax treatment and tax structure of the proposed
transactions contemplated by this Agreement and all materials of any kind (including
opinions or other tax analyses) that are provided to it relating to such tax
treatment and tax structure; provided, however, that such
disclosure may not be made to the extent such disclosure would reasonably be
expected to violate any applicable federal or state securities laws.  For the purposes of the foregoing sentence:
(a) the “tax treatment” of a transaction means the purported or claimed federal
income tax treatment of the transaction; and (b) the “tax structure” of a
transaction means any fact that may be relevant to understanding the purported
or claimed federal income tax treatment of the transaction.


 


ARTICLE VI



ADDITIONAL AGREEMENTS


 


6.1                                 Company No Solicitation.


 


(a)                                  No
Solicitation or Negotiation.  Except
as set forth in this Section 6.1, the Company shall not, nor shall it (i)
authorize or permit any of its Subsidiaries or (ii) authorize or knowingly
permit any of its or its Subsidiaries’ respective directors, officers,
employees, investment bankers, attorneys, accountants or other advisors, agents
or representatives (such directors, officers, employees, investment bankers,
attorneys, accountants, other advisors and representatives, collectively,
“Representatives”) to, directly or indirectly:


 


(i)                                     solicit,
initiate, encourage or take any other action to facilitate any inquiries or the
making of any proposal or offer that constitutes, or could reasonably be
expected to lead to, any Company Acquisition Proposal, including without
limitation (A) approving any transaction under Section 203 of the DGCL,
(B) approving any person becoming an “interested stockholder” under
Section 203 of the DGCL, or (C) amending or granting any waiver or release
under any standstill or similar agreement with respect to any Company Common
Stock, Parent ADSs or Parent Ordinary Shares, respectively; or


 


(ii)                                  enter
into, continue or otherwise participate in any discussions or negotiations
regarding, furnish to any person or permit any person access to any information
with respect to, assist or participate in any effort or attempt by any person
with respect to, or otherwise cooperate in any way with, any Company
Acquisition Proposal.


 


Notwithstanding
the foregoing, prior to the adoption of this Agreement at the Company
Stockholders Meeting (the “Specified Time”), the Company may, to the extent
required by the fiduciary obligations of the Company Board, as determined in
good faith by the Company Board, after consultation with outside counsel, in
response to a Qualifying Proposal that did not result from a breach by the Company
of this Section 6.1, and subject to compliance with Section 6.1(c),
(x) furnish information with respect to the Company to the person making
such Qualifying Proposal and its Representatives pursuant to a confidentiality
agreement not less restrictive of the other party than the Confidentiality
Agreement and (y) participate in discussions or negotiations with such
person and its Representatives regarding such Qualifying Proposal.


 


45

















 


(b)                                 No
Change in Recommendation; Superior Proposal.  Neither the Company Board, nor any committee thereof, shall:


 


(i)                                     except
as set forth in this Section 6.1, withdraw or modify, or publicly propose
to withdraw or modify, in a manner adverse to the Parent or the Transitory Subsidiary,
the approval or recommendation by the Company Board or any such committee of
this Agreement or the Merger;


 


(ii)                                  cause
or permit the Company to enter into any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement, merger agreement
or similar agreement (an “Alternative Acquisition Agreement”) constituting or
relating to any Company Acquisition Proposal (other than a confidentiality
agreement referred to in Section 6.1(a) entered into in the circumstances
referred to in Section 6.1(a)); or


 


(iii)                               adopt,
approve or recommend, or propose to adopt, approve or recommend, any Company
Acquisition Proposal.


 


Notwithstanding
the foregoing, the Company Board may, in response to a Superior Proposal that
did not result from a breach by the Company of this Section 6.1, withdraw
or modify the recommendation by the Company Board or any committee thereof of
this Agreement and the Merger, if the Company Board determines in good faith
(after consultation with outside counsel) that such actions are required by its
fiduciary obligations, but only at a time that is prior to the Specified Time
and is after the third business day following receipt by the Parent of written
notice advising it that the Company Board desires to withdraw or modify the
recommendation due to the existence of a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. 
Nothing in this Section 6.1 (other than Section 6.1(d)) shall
be deemed to limit the Company’s obligation to call, give notice of, convene
and hold the Company Stockholders Meeting, regardless of whether the Company
Board has withdrawn or modified its recommendation of this Agreement and the
Merger.


 


(c)                                  Notices;
Additional Negotiations.  The
Company shall promptly advise the Parent orally, with written confirmation to
follow promptly (and in any event within 24 hours), of the Company or any of
its officers, directors, investment bankers, financial advisors or attorneys
attaining knowledge of any Company Acquisition Proposal or any request for
nonpublic information in connection with any Company Acquisition Proposal, or
of any inquiry with respect to, or that could reasonably be expected to lead
to, any Company Acquisition Proposal, the material terms and conditions of any
such Company Acquisition Proposal or inquiry and the identity of the person
making any such Company Acquisition Proposal or inquiry.  The Company shall not provide any
information to or participate in discussions or negotiations with the person or
entity making any Qualifying Proposal until three business days after the
Company has first notified the Parent of such Qualifying Proposal as required
by the preceding sentence.  The Company
shall (i) keep the Parent fully informed, on a prompt basis (and in any event
within 24 hours), of the status and any material change to the terms of any
such Company Acquisition Proposal or inquiry, (ii) provide to the Parent as
promptly as practicable after receipt or delivery thereof copies of all
correspondence and other written material sent or provided to the Company from
any third party describing the terms of any Company Acquisition


 


46

















 


Proposal, and (iii) if the Parent shall make a
counterproposal, consider and cause its financial and legal advisors to
negotiate on its behalf in good faith with respect to the terms of such
counterproposal.  Contemporaneously with
providing any information to a third party in connection with any such
Qualifying Proposal, the Company shall furnish a copy of such information to
the Parent.


 


(d)                                 Certain
Permitted Disclosure.  Nothing
contained in this Section 6.1 or in Section 6.6 shall be deemed to
prohibit the Company from taking and disclosing to its stockholders a position
with respect to a tender offer contemplated by Rule 14e-2(a) promulgated under
the Exchange Act if, in the good faith judgment of the Company Board, after
consultation with outside counsel, failure to so disclose would be inconsistent
with its obligations under applicable law; provided,  however,
that, except as set forth in Section 6.1(b), in no event shall the Company
Board or any committee thereof withdraw or modify or propose to withdraw or
modify, in a manner adverse to the Parent or the Transitory Subsidiary, the
approval or recommendation by the Company Board or such committee of the Merger
or this Agreement.


 


(e)                                  Cessation
of Ongoing Discussions.  Except as
expressly provided for in Section 6.1(a), the Company shall, and shall
cause its Subsidiaries and its and their Representatives to, cease immediately
all discussions and negotiations regarding any proposal that constitutes, or
could reasonably be expected to lead to, a Company Acquisition Proposal and,
except for any confidentiality agreements entered into in accordance with
Section 6.1(a), shall not enter into an agreement based upon a Company
Acquisition Proposal.  The Company shall
use commercially reasonable efforts through written communication to have all
copies of all nonpublic information it or its Subsidiaries or its and their
Representatives have distributed on or prior to the date of this Agreement to
other potential purchasers returned to the Company or destroyed as soon as
possible.


 


(f)                                    Definitions.  For purposes of this Agreement:


 


“Company
Acquisition Proposal” means (i) any inquiry, proposal or offer for (A) the
dissolution or liquidation of the Company or any of its Subsidiaries or (B) a
merger, consolidation, tender offer, recapitalization, share exchange or other
business combination involving 15% or more of the Company’s equity securities,
(ii) any proposal for the issuance by the Company of over 15% of its
equity securities or (iii) any proposal or offer to acquire in any manner,
directly or indirectly, over 15% of the equity securities or consolidated total
assets of such party, in each case other than the Distribution and the Merger
contemplated by this Agreement.


 


“Qualifying
Proposal” means a Superior Proposal or a Company Acquisition Proposal that
constitutes or, in the good faith judgment of the Company Board, after
consultation with outside counsel and its independent financial adviser, would
reasonably be expected to result in a Superior Proposal.


 


“Superior
Proposal” means any unsolicited, bona fide written proposal made by a third
party to acquire all or substantially all of the equity securities or assets of
the Company, pursuant to a tender or exchange offer, a merger, a consolidation
or a sale of its assets, (i) on terms which the Company Board determines
in its good faith judgment to be more favorable


 


47

















 


from a financial point of
view to the stockholders of the Company than the transactions contemplated by
this Agreement (after consultation with respect thereto with its independent
financial advisor), taking into account all the terms and conditions of such
proposal and this Agreement (including any proposal by either party to amend
the terms of this Agreement) and (ii) that is reasonably capable of being
completed on the terms proposed, taking into account all financial, regulatory,
legal and other aspects of such proposal; provided, however, that
no Company Acquisition Proposal shall be deemed to be a Superior Proposal if any
financing required to consummate the Company Acquisition Proposal is not
committed.


 


6.2                                 Parent Notices; Additional
Negotiations.  The Parent shall
promptly advise the Company orally, with written confirmation to follow
promptly (and in any event within 24 hours), of Parent attaining knowledge of
any Parent Acquisition Proposal or any request for nonpublic information in
connection with any Parent Acquisition Proposal, or of any inquiry with respect
to, or that could reasonably be expected to lead to, any Parent Acquisition
Proposal, the material terms and conditions of any such Parent Acquisition
Proposal or inquiry and the identity of the person making any such Parent
Acquisition Proposal or inquiry.  The
Parent shall (i) keep the Company fully informed, on a prompt basis, of
the status and details (including any change to the terms) of any such Parent
Acquisition Proposal or inquiry, and (ii) provide to the Company as soon
as practicable after receipt or delivery thereof copies of all correspondence
and other written material sent or provided to the Parent from any third party
in connection with any Parent Acquisition Proposal.  “Parent Acquisition Proposal” means (i) any inquiry,
proposal or offer for (A) the dissolution of the Parent or any of its Subsidiaries,
(B) a merger, consolidation, tender offer, recapitalization, share exchange or
other business combination involving 15% or more of the Parent’s share capital
or (C) a sale of substantial assets of the Parent or any of its Subsidiaries,
(ii) any proposal for the issuance by the Parent or any of its
Subsidiaries of over 15% of its share capital or equity securities, as
applicable, or (iii) any proposal or offer to acquire in any manner,
directly or indirectly, over 15% of the equity securities or consolidated total
assets of such party, in each case other than the Merger contemplated by this
Agreement.


 


6.3                                 Joint Proxy Statement/Prospectus;
Registration Statement; Shareholder Circular; Listing Particulars.


 


(a)                                  Joint
Proxy Statement/Prospectus; Registration Statement.


 


(i)                                     As
promptly as practicable after the execution of this Agreement, the Parent, in
cooperation with the Company, shall prepare and file with the SEC the
Registration Statement, in which the Joint Proxy Statement/Prospectus shall be
included as a prospectus.  Each of the
Parent and the Company shall respond to any comments of the SEC and shall use
its respective commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filings, and the Company shall cause the Joint Proxy
Statement/Prospectus to be mailed to its stockholders at the earliest
practicable time after the Registration Statement is declared effective under
the Securities Act.  Each of the Parent
and the Company shall notify the other promptly upon the receipt of any
comments from the SEC or its staff or any other government officials and of any
request by the SEC or its staff or any other government officials for
amendments or supplements to the Registration Statement, the Joint Proxy
Statement/Prospectus or any filing pursuant to Section 6.3(b) or for
additional information and shall supply the other with copies of all


 


48

















 


correspondence between such party or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement, the Joint Proxy Statement/Prospectus, the Merger or any filing pursuant
to Section 6.3(b).  Each of the
Parent and the Company shall use its commercially reasonable efforts to cause
all documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 6.3 to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder.  Whenever any
event occurs which is required to be set forth in an amendment or supplement to
the Joint Proxy Statement/Prospectus, the Registration Statement or any filing
pursuant to Section 6.3(b), the Parent or the Company, as the case may be,
shall promptly inform the other of such occurrence and cooperate in filing with
the SEC or its staff or any other government officials, and/or mailing to stockholders
of the Company, such amendment or supplement.


 


(ii)                                  The
Parent and the Company shall promptly make all necessary filings with respect
to the Merger under the Securities Act, the Exchange Act, applicable state blue
sky laws and the rules and regulations thereunder.


 


(b)                                 Shareholder
Circular; Listing Particulars.  As
promptly as practicable after the execution of this Agreement, the Parent, in
cooperation with the Company, shall prepare and seek the approval of the UKLA
for (i) a circular to be sent to the Parent shareholders in connection with the
Parent Shareholders Meeting (the “Parent Circular”) containing (A) a notice
convening the Parent Shareholders Meeting, (B) such other information as may be
required by the UKLA and (C) such other information as the Parent and the
Company shall agree to include therein and (ii) listing particulars relating to
the Parent and its Subsidiaries and the Parent Ordinary Shares (together with
any supplement thereto, the “Parent Listing Document” and the Parent Circular
and the Parent Listing Document, together, the “Parent UK Documents”).  The Parent and the Company each agrees, as
to itself and its Subsidiaries, that the Parent UK Documents and any
supplements thereto and any circulars or documents issued to shareholders or
employees of the Parent will contain all particulars relating to the Parent and
the Company required to comply in all material respects with all United Kingdom
statutory and other legal provisions (including, without limitation, the
Companies Act, FSMA and the rules and regulations made thereunder and the rules
and requirements of the UKLA and the LSE) and all such information contained in
the Parent UK Documents will be substantially in accordance with the facts and
will not omit anything material likely to affect the import of such
information.


 


6.4                                 NASDAQ and LSE Quotation.  The Parent and the Company each agree to
continue the quotation of Parent ADSs and Company Common Stock, respectively,
on The NASDAQ Stock Market and the Parent Ordinary Shares on the LSE during the
term of this Agreement.  The Parent, if
required by the rules of The NASDAQ Stock Market, will file with The NASDAQ
Stock Market a Notification Form for Listing Additional Shares with respect to
the Parent ADSs and Parent Ordinary Shares issuable in connection with the
Merger.


 


6.5                                 Access to Information.  Each of the Parent and the Company shall
(and shall cause each of its Subsidiaries to) afford to the other party’s
officers, employees, accountants, counsel and other representatives, reasonable
access, during normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments, personnel and
records and, during such period, each of the Parent and the Company shall (and
shall cause


 


49

















 


their
respective Subsidiaries to) furnish promptly to the other party (a) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal or
state securities laws and (b) all other information concerning its
business, properties, assets and personnel as the other party may reasonably
request.  Each of the Parent and the
Company will hold any such information which is nonpublic in confidence in
accordance with the Confidentiality Agreement. 
No information or knowledge obtained in any investigation pursuant to
this Section or otherwise shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to the
obligations of the parties to consummate the Merger.


 


6.6                                 Stockholders Meetings.


 


(a)                                  The
Company, acting through the Company Board, shall take all actions in accordance
with the DGCL, its Certificate of Incorporation and By-laws and the rules of
The NASDAQ Stock Market to promptly and duly call, give notice of, convene and
hold as promptly as practicable, and within 45 days after the declaration of
the effectiveness of the Registration Statement if practicable, the Company
Stockholders Meeting for the purpose of considering and voting upon the Company
Voting Proposal.  Subject to
Section 6.1(b), (i) the Company Board shall recommend approval and
adoption of the Company Voting Proposal by the stockholders of the Company and
include such recommendation in the Joint Proxy Statement/Prospectus, and (ii)
neither the Company Board nor any committee thereof shall withdraw or modify,
or propose or resolve to withdraw or modify in a manner adverse to the Parent
or the Transitory Subsidiary, the approval or recommendation of the Company
Board or such committee that the Company’s stockholders vote in favor of the
Company Voting Proposal.  Subject to
Section 6.1(b), the Company shall take all action that is both reasonable
and lawful to solicit from its stockholders proxies in favor of the Company
Voting Proposal and shall take all other action necessary or advisable to
secure the vote or consent of the stockholders of the Company required by the
rules of The NASDAQ Stock Market or the DGCL to obtain such approvals.  Notwithstanding anything to the contrary
contained in this Agreement, the Company, after consultation with the Parent,
may adjourn or postpone the Company Stockholders Meeting to the extent
necessary to ensure that any required supplement or amendment to the Joint
Proxy Statement/Prospectus is provided to the Company’s stockholders or, if as
of the time for which the Company Stockholders Meeting is originally scheduled
(as set forth in the Joint Proxy Statement/Prospectus) there are insufficient
shares of Company Common Stock represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of the Company
Stockholders Meeting.


 


(b)                                 The
Parent, acting through the Parent Board, shall take all actions in accordance
with applicable law, its Memorandum and Articles of Association and the rules
of The NASDAQ Stock Market, the UKLA and the LSE to promptly and duly call,
give notice of, convene and hold as promptly as practicable after the declaration
of effectiveness of the Registration Statement, the Parent Shareholders Meeting
for the purpose of considering and voting upon the Parent Voting Proposal.  The Parent Board shall recommend approval
and adoption of the Parent Voting Proposal by the shareholders of the Parent
and include such recommendation in the Joint Proxy Statement/Prospectus and the
Parent UK Documents, and (ii) neither the Parent Board nor any committee
thereof shall withdraw or modify, or propose or resolve to withdraw or modify in
a manner adverse to the Company, the recommendation of the


 


50

















 


Parent
Board or such committee that the Parent’s shareholders vote in favor of the
Parent Voting Proposal.  Notwithstanding
anything to the contrary contained in this Agreement, the Parent, after
consultation with the Company, may adjourn or postpone the Parent Shareholders
Meeting to the extent necessary to ensure that any required supplement or
amendment to the Parent UK Documents is provided to the Parent’s shareholders
or, if as of the time for which the Parent Shareholders Meeting is originally
scheduled (as set forth in the Parent UK Documents) there are insufficient
Parent Ordinary Shares represented (either in person or by proxy) to constitute
a quorum necessary to conduct the business of the Parent Shareholders Meeting.


 


(c)                                  The
Company shall call, give notice of, convene and hold the Company Stockholders
Meeting in accordance with this Section 6.6 and shall submit the Company
Voting Proposal to its stockholders for the purpose of acting upon such
proposal whether or not (i) the Company Board at any time subsequent to the
date hereof determines, in the manner permitted by Section 6.1(b) that the
Company Voting Proposal is no longer advisable or recommends that the
stockholders of the Company reject such proposal, or (ii) any actual, potential
or purported Company Acquisition Proposal or Superior Proposal has been
commenced, disclosed, announced or submitted to the Company.


 


(d)                                 The
Parent shall call, give notice of, convene and hold the Parent Shareholders
Meeting in accordance with this Section 6.6 and shall submit the Parent
Voting Proposal to its shareholders for the purpose of acting upon such
proposal.


 


6.7                                 [Intentionally Omitted]


 


6.8                                 Legal Conditions to the Merger.


 


(a)                                  Subject
to the terms hereof, including Section 6.8(b), the Company and the Parent
shall each use its commercially reasonable efforts to (i) take, or cause to be
taken, all actions, and do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated hereby as promptly
as practicable, (ii) as promptly as practicable, obtain from any Governmental Entity
or any other third party any consents, licenses, permits, waivers, approvals,
authorizations, or orders required to be obtained or made by the Company or the
Parent or any of their Subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, (iii) as promptly as practicable, make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the Securities Act
and the Exchange Act, and any other applicable federal or state securities
laws, (B) the HSR Act and any related governmental request thereunder, (C) any
other applicable law and (D) the UKLA and (iv) execute or deliver any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.  The Company and the Parent shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing
and, if requested, accepting all reasonable additions, deletions or changes
suggested in connection therewith.  The
Company and the Parent shall use their respective commercially reasonable
efforts to furnish to each other all information required for any application
or other filing to be made pursuant to the rules and regulations of any
applicable law (including all


 


51

















 


information
required to be included in the Joint Proxy Statement/Prospectus, the Parent UK
Documents and the Registration Statement) in connection with the transactions
contemplated by this Agreement.  The
Parent and the Company agree that nothing contained in this Section 6.8(a)
shall modify or affect their respective rights and responsibilities under
Section 6.8(b).


 


(b)                                 Subject
to the terms hereof, the Parent and the Company agree, and shall cause each of
their respective Subsidiaries, to cooperate and to use their respective
commercially reasonable efforts to obtain any government clearances or
approvals required for Closing under the HSR Act, the Sherman Act, as amended,
the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and
any other federal, state or foreign law or, regulation or decree designed to
prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively “Antitrust Laws”), to
respond to any government requests for information under any Antitrust Law, and
to contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary, preliminary or
permanent) (an “Antitrust Order”) that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement under any Antitrust Law.  The
parties hereto will consult and cooperate with one another, and consider in
good faith the views of one another, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to any Antitrust Law.   The Parent shall be entitled to direct any
proceedings or negotiations with any Governmental Entity relating to any of the
foregoing, provided that it shall afford the Company a reasonable opportunity
to participate therein.


 


(c)                                  Each
of the Company and the Parent shall give (or shall cause their respective
Subsidiaries to give) any notices to third parties, and use, and cause their
respective Subsidiaries to use, their commercially reasonable efforts to obtain
any third party consents related to or required in connection with the Merger
that are (A) necessary to consummate the transactions contemplated hereby, (B)
disclosed or required to be disclosed in the Company Disclosure
Schedule or the Parent Disclosure Schedule, as the case may be, or (C)
required to prevent the occurrence of an event that may have a Company Material
Adverse Effect or a Parent Material Adverse Effect prior to or after the
Effective Time.


 


6.9                                 Public Disclosure.  Except as may be required by law or stock market regulations, (i)
the press release announcing the execution of this Agreement shall be issued
only in such form as shall be mutually agreed upon by the Company and the
Parent and (ii) the Parent and the Company shall each use its commercially
reasonable efforts to consult with the other party before issuing any other
press release or otherwise making any public statement with respect to the
Merger or this Agreement.


 


6.10                           Section 368(a) Reorganization.  The Parent and the Company shall not take
any action that would, or fail to take any action the omission of which would
be reasonably likely to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.  The parties hereto hereby adopt this
Agreement as a plan of reorganization.


 


6.11                           Affiliate Legends.  Section 6.11 of the Company Disclosure Schedule sets
forth a list of those persons who are, in the Company’s reasonable judgment,
“affiliates” of the


 


52

















 


Company
within the meaning of Rule 145 promulgated under the Securities Act (“Rule 145
Affiliates”).  The Company shall notify
the Parent in writing regarding any change in the identity of its Rule 145
Affiliates prior to the Closing Date. 
The Parent shall be entitled to place appropriate legends on the
certificates representing the Parent Ordinary Shares or Parent ADRs to be
received by Rule 145 Affiliates of the Company pursuant to the Merger
reflecting the restrictions set forth in Rule 145 promulgated under the
Securities Act and to issue appropriate stop transfer instructions to the
transfer agent for Parent Ordinary Shares and Parent ADSs (provided that such
legends or stop transfer instructions shall be removed one year after the
Effective Time, upon the request of any holder of Parent Ordinary Shares or
Parent ADSs issued pursuant to the Merger if such holder is not then a Rule 145
Affiliate of the Parent).


 


6.12                           Listing Applications.  The Parent shall (i) if required by the
rules of The NASDAQ Stock Market, file with The NASDAQ Stock Market a
Notification Form for Listing Additional Shares with respect to the Parent ADSs
issuable in connection with the Merger, and (ii) use its commercially
reasonable efforts to obtain, prior to the Effective Time, approval for
admission of the Parent Ordinary Shares to the Official List of the UKLA and to
trading on the LSE market for listed securities, in the case of the UKLA and
the LSE, subject to allotment and the Parent ADSs, and in the case of The
NASDAQ Stock Market, subject to official notice of issuance.


 


6.13                           Company Stock Plans.


 


(a)                                  At
the Effective Time, each outstanding Company Stock Option under the Company
Stock Plans, whether vested or unvested, shall, as part of the Merger, be
assumed by the Parent and each Company Stock Option shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Company Stock Option immediately prior to the Effective
Time, a number of units equal to the number of shares of Company Common Stock
underlying each such option.  The
exercise price for each such unit shall equal the per share exercise price of
the applicable Company Stock Option.  A
unit shall be comprised of (i) 1.2015 Parent Ordinary Shares and (ii) the Cash
Amount Per Share.  The number of Parent
Ordinary Shares issuable upon each exercise of any Company Stock Option assumed
pursuant to this Section 6.13(a) shall be rounded to the nearest whole
number of Parent Ordinary Shares (with .5 being rounded up to the nearest whole
share).


 


(b)                                 As
soon as practicable after the Effective Time, the Parent shall deliver to the
holders of Company Stock Options an appropriate notice setting forth such
participants’ rights pursuant to the Company Stock Options, as provided in this
Section 6.13.


 


(c)                                  The
Parent shall take all corporate action necessary to reserve for issuance a
sufficient number of Parent Ordinary Shares for delivery upon exercise of the
Company Stock Options assumed in accordance with this Section.  Within ten (10) days after the Effective
Time, the Parent shall file a registration statement on Form S-8 (or any
successor form) or another appropriate form with respect to the Parent Ordinary
Shares subject to such options and shall use its commercially reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.


 


53

















 


(d)                                 The
Company and the Parent acknowledge that the Company ESPP shall continue to
operate in accordance with its terms following the execution of this Agreement,
except as provided below.  The Company
shall not commence any Offering (as defined in the Company ESPP) pursuant to
the Company ESPP that will not terminate prior to the Effective Time.  Effective as of or prior to the Effective
Time, the Company shall cause the Company ESPP to terminate in accordance with
Section 20 of the Company ESPP, and no purchase rights shall be
subsequently granted or exercised under the Company ESPP.  The Company shall take all actions necessary
to ensure that the Company ESPP will not be amended or modified in any respect
after the date hereof, except to effect the terms of this Section 6.13(d).


 


(e)                                  Prior
to the Effective Time, the Company shall take all action necessary to amend all
outstanding Company Stock Options to include the Company Stock Plan under which
such Company Stock Option was issued as an exhibit to and as part of such
Company Stock Option.


 


(f)                                    The
Company shall take all such action, including the adoption of any necessary
resolutions by the Company Board or any appropriate committee thereof,
necessary or appropriate to effect the transactions contemplated by this
Section 6.13.


 


6.14                           Stockholder Litigation.  Until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company shall
give the Parent the opportunity to participate in the defense or settlement of
any stockholder litigation against the Company or the Company Board relating to
this Agreement or any of the transactions contemplated by this Agreement, and
shall not settle any such litigation without the Parent’s prior written
consent, which will not be unreasonably withheld, conditioned or delayed.


 


6.15                           Indemnification.


 


(a)                                  From
and after the Effective Time, the Parent shall, and shall cause the Surviving
Corporation, to the fullest extent permitted by law, for a period of six years
from the Effective Time, to honor all of the Company’s obligations to indemnify
and hold harmless each present and former director and officer of the Company
(the “Indemnified Parties”), against any costs or expenses (including
attorneys’ fees), judgments, fines, losses, claims, damages, liabilities or
amounts paid in settlement incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the extent that such obligations to indemnify and
hold harmless exist on the date of this Agreement.


 


(b)                                 Without
limiting any obligation under 6.15(a), for a period of six years after the
Effective Time, the Parent shall cause the Surviving Corporation to maintain
(to the extent available in the market) in effect a directors’ and officers’ liability
insurance policy covering those persons who are currently covered by the
Company’s directors’ and officers’ liability insurance policy (a complete and
accurate copy of which has been delivered to the Parent prior to the date of
this Agreement) with coverage in amount and scope at least as favorable to such
persons as the Company’s existing coverage; provided, however, that in no event
shall the Parent or the Surviving Corporation be required to expend in excess
of one


 


54

















 


hundred
seventy five percent (175%) of the annual premium currently paid by the Company
for such coverage, and to the extent the annual premium would exceed one
hundred seventy five percent (175%) of such current annual premium, the Parent
or Surviving Corporation shall use all reasonable efforts to be maintained the
maximum amount of coverage available for such one hundred seventy five percent
(175%) of such current annual premium. 
The Company hereby represents that the annual premium currently paid by
the Company for such coverage is US $1,411,618.  The Parent and the Surviving Corporation may meet their
obligations under this Section 6.15 by purchasing a “tail” policy under
the Company’s existing directors’ and officers’ insurance policy which (i) has
an effective term of six years from the Effective Time, (ii) covers only those
persons who are currently covered by the Company’s directors’ and officers’
insurance policy in effect as of the date hereof and only for actions and omissions
occurring on or prior to the Effective Time, and (iii) contains coverage in
amount and scope at least as favorable to the Indemnified Parties as the
Company’s existing directors’ and officers’ insurance policy.


 


(c)                                  The
provisions of this Section 6.15 are intended to be in addition to the
rights otherwise available to the current officers and directors of the Company
by law, charter, statute, by-law or agreement, and shall operate for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.  The
obligations of the Company and Surviving Corporation under this
Section 6.15 shall be binding upon their respective successors and
assigns.


 


6.16                           Notification of Certain Matters.  The Parent shall give notice to the Company,
and the Company shall give notice to the Parent, promptly upon any director or
officer of the Parent or Company (as applicable) becoming aware of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) (i) any representation or
warranty of such party contained in this Agreement that is qualified as to
materiality to be untrue or inaccurate in any respect or (ii) any other
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect, in each case at any time from and
after the date of this Agreement until the Effective Time, or (b) any material
failure of the Parent and the Transitory Subsidiary or the Company, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.  Notwithstanding the above, (i) the delivery
of any notice pursuant to this Section will not limit or otherwise affect
the remedies available hereunder to the party receiving such notice or the
conditions to such party’s obligation to consummate the Merger and (ii) any
breach of a representation or warranty by the Parent or the Company, as
applicable, that does not itself give rise to a failure to satisfy the
conditions set forth in Section 7.2(a) or 7.3(a) of this Agreement, as
applicable, shall not give the non-breaching party the right to terminate this
Agreement pursuant to Section 8(h) or Section 8(i) of this Agreement,
as applicable.


 


6.17                           Exemption from Liability Under
Section 16(b).


 


(a)                                  The
Parent Board, or a committee thereof consisting of non-employee directors (as
such term is defined for purposes of Rule 16b-3(d) under the Exchange Act),
shall adopt a resolution in advance of the Effective Time providing that the
receipt by the Company Insiders of Parent Ordinary Shares represented by Parent
ADSs in exchange for shares of


 


55

















 


Company
Common Stock, and of options to purchase Parent Ordinary Shares upon assumption
and conversion of Company Stock Options, in each case pursuant to the
transactions contemplated hereby and to the extent such securities are listed
in the Section 16 Information, is intended to be exempt pursuant to Rule
16b-3 under the Exchange Act.


 


(b)                                 For
purposes of this Agreement, “Section 16 Information” means information
regarding the Company Insiders and the number of shares of Company Common Stock
or other Company equity securities deemed to be beneficially owned by each such
Company Insider and expected to be exchanged for Parent Ordinary Shares
represented by Parent ADSs, or options to purchase Parent Ordinary Shares, in
each case, in connection with the Merger, which shall be provided by the
Company to the Parent within 10 business days after the date of this Agreement.


 


(c)                                  For
purposes of this Agreement, “Company Insiders” means those officers and
directors of the Company who are subject to the reporting requirements of
Section 16(a) of the Exchange Act as listed in the Section 16
Information.


 


6.18                           Board of Directors of Parent.  The Parent shall take all action to cause
the individuals listed in Schedule 6.18 attached hereto (or, to the extent
any such individual is unable or unwilling to serve, such other designee as the
Company and the Parent shall jointly select) (the “Company Designees”) to be
elected as directors of the Parent.


 


6.19                           Service Credit.  Following the Effective Time, the Parent will give each
Continuing Employee full credit for prior service with the Company or its
Subsidiaries for purposes of (i) eligibility and vesting under any Parent
Employee Benefit Plans and (ii) determination of benefits levels under any
Parent Employee Benefit Plan or policy relating to vacation or severance, in
each case for which the Continuing Employee is otherwise eligible and in which
the Continuing Employee is offered participation, but except where such
crediting would (A) result in a duplication of benefits or (B) otherwise cause
the Parent or its Subsidiaries or any Parent Employee Benefit Plan or trust
relating thereto to accrue or pay for benefits that relate to any time period
prior to the Continuing Employee’s participation in the Parent Employee Benefit
Plan.  For purposes of this Agreement,
(i) “Parent Employee Benefit Plan” means any “employee pension benefit plan”
(as defined in Section 3(2) of ERISA), any “employee welfare benefit plan”
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation and all unexpired severance agreements, written or otherwise, for
the benefit of, or relating to, any current or former employee of the Company
or any of its Subsidiaries or an ERISA Affiliate and (ii) Continuing Employee means
those employees of Parent and employees of the Transitory
Subsidiary as of the Effective Time who shall have been employees of the
Company immediately prior to the Effective Time. 


 


6.20                           Employee Communications.  The Parent and the Company will use reasonable
efforts to consult with each other, and will consider in good faith each
other’s advice, prior to sending any notices or other communication materials
to its employees regarding this


 


56

















 


Agreement, the Merger or the effects thereof on the
employment, compensation or benefits of its employees.


 


6.21                           401(k) Plan. 
If requested by the Parent by written notice no less than five (5) days
prior to the Effective Time, the Company shall terminate each Company Employee
Plan that is intended to comply with Section 401(k) of the Code, effective
as of the day immediately preceding the Closing Date.  If the Parent provides such notice to the Company, the Company
shall provide the Parent with evidence that all such 401(k) plans have been so
terminated pursuant to resolutions of the Company Board.  The form and substance of such resolutions
shall be subject to review and reasonable approval of the Parent.  The Company shall take such other actions in
furtherance of terminating such 401(k) plan as the Parent may reasonably
require.


 


6.22                           Distribution. 
Notwithstanding any other provisions of this Agreement, in the event
that the Parent or the Company determines, in its reasonable judgment after
consultation with outside counsel, the Distribution would constitute a
violation of applicable statutory law, then the Parent or the Company, as the
case may be, shall promptly provide notice thereof to the other party.  The Company and the Parent covenant that
they shall thereafter negotiate in good faith to restructure the transactions
contemplated by this Agreement, such that the Company stockholders shall
receive consideration composed of cash and shares corresponding to the
consideration contemplated by the provisions of this Agreement, in conformity
with applicable law and, provided that the conditions set forth in
Article VII, other than the conditions set forth in Sections 7.1(h) and
7.2(d), which shall be deemed to have been satisfied or waived, shall continue
to be the obligations of the parties hereunder pursuant to such restructuring.


 


6.23                           Transfer Taxes. 
The Company shall pay any transfer Taxes (including, but not limited to,
stamp duties, stamp duty reserve taxes, and other similar taxes) payable in
connection with the Merger and shall be responsible for the preparation and
filing of any required Tax Returns with respect to such Taxes.  At and following the Effective Time, the
Company and Parent shall be jointly and severally liable for all Transfer Taxes
(including, but not limited to, stamp duties, stamp duty reserve tax and other
similar taxes) imposed on the Company and/or Parent in connection with the
issuance of Parent ADRs and the Parent Ordinary Shares to be issued in the
Merger and upon the exercise of Company Stock Options assumed by Parent
pursuant to this Agreement. 
Notwithstanding the foregoing, Parent shall not be liable for the
payment of any amounts which would cause the Merger to not qualify as a
reorganization under Section 368(a) of the Code.


 


ARTICLE VII



CONDITIONS TO MERGER


 


7.1                                 Conditions to Each Party’s
Obligation To Effect the Merger.  The respective obligations of each party to this Agreement to
effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions:


 


(a)                                  Stockholder
Approvals.  The Company Voting
Proposal shall have been approved and adopted at the Company Stockholders
Meeting, at which a quorum is present, by the requisite vote of the
stockholders of the Company under applicable law and the Company’s


 


57

















 


Certificate
of Incorporation and By-laws.  The
Parent Voting Proposal shall have been approved at the Parent Shareholders
Meeting, at which a quorum is present, by the requisite vote of the
shareholders of the Parent under applicable law, the rules of The NASDAQ Stock
Market and the UKLA and the Parent’s Memorandum and Articles of Association.


 


(b)                                 HSR
Act.  The waiting period applicable
to the consummation of the Merger under the HSR Act shall have expired or been
terminated.


 


(c)                                  Governmental
Approvals.  Other than the filing of
the Certificate of Merger, all authorizations, consents, orders or approvals
of, or declarations or filings with, or expirations of waiting periods imposed
by, any Governmental Entity in connection with the Merger and the consummation
of the other transactions contemplated by this Agreement shall have been filed,
been obtained or occurred on terms and conditions which would not reasonably be
likely to have a Parent Material Adverse Effect or a Company Material Adverse
Effect.


 


(d)                                 Registration
Statement; Joint Proxy Statement/Prospectus.  The Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose, and no similar proceeding with respect to the Joint Proxy
Statement/Prospectus, shall have been initiated or threatened in writing by the
SEC or its staff.


 


(e)                                  No
Injunctions.  No Governmental Entity
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any order, executive order, stay, decree, judgment or injunction
(preliminary or permanent) or statute, rule or regulation which is in effect
and which has the effect of making the Distribution or the Merger illegal or
otherwise prohibiting consummation of the Distribution or the Merger or the
other transactions contemplated by this Agreement.


 


(f)                                    NASDAQ,
UKLA and LSE.  The Parent, if required
by the rules of The NASDAQ Stock Market, shall have filed with The NASDAQ Stock
Market a Notification Form for Listing of Additional Shares with respect to the
Parent ADSs issuable in connection with the Merger, the UKLA shall have granted
permission for the admission to the LSE’s market for listed securities and such
listing shall have become effective in accordance with Section 7 of the
Listing Rules, and LSE shall have granted permission for the admission to the
Official List and the LSE, subject only to allotment of the Parent Ordinary
Shares to be issued pursuant to the Merger, and such permission shall not have
been withdrawn prior to the Effective Time.


 


(g)                                 No
Restraints.  There shall not be
instituted or pending any action or proceeding by any Governmental Entity (i)
seeking to restrain, prohibit or otherwise interfere with the ownership or
operation by the Parent or any of its Subsidiaries, of all or any material
portion of the business of the Company and its Subsidiaries, taken as a whole,
or of the Parent and Subsidiaries, take as a whole, or to compel the Parent or
any of its Subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of the Company and its Subsidiaries, taken as
a whole, or of the Parent and its Subsidiaries, taken as a whole, (ii) seeking
to impose or confirm limitations on the ability of the Parent or any of its
Subsidiaries effectively to exercise full rights of ownership of the shares of
Company Common Stock (or shares of stock of the Surviving Corporation)
including the right to vote any such shares on any matters properly


 


58

















 


presented
to stockholders, or (iii) seeking to require divestiture by the Parent or any
of its Subsidiaries of any such shares.


 


(h)                                 Distribution.  Subject to the provisions of
Section 6.22, the payment of the Cash Amount pursuant to the Distribution
shall not constitute a violation of any applicable statutory law.


 


7.2                                 Additional Conditions to
Obligations of the Parent and the Transitory Subsidiary.  The obligations of the Parent and the
Transitory Subsidiary to effect the Merger shall be subject to the satisfaction
on or prior to the Closing Date of each of the following additional conditions,
any of which may be waived, in writing, exclusively by the Parent and the
Transitory Subsidiary:


 


(a)                                  Representations
and Warranties.  The representations
and warranties of the Company set forth in this Agreement shall be true and
correct (i) as of the date of this Agreement and (ii) as of the Closing Date as
though made on and as of the Closing Date (except in each case (x) to the
extent such representations and warranties are specifically made as of a
particular date, in which case such representations and warranties shall be
true and correct as of such date, (y) for changes contemplated by this
Agreement and (z) where the failure to be true and correct (without regard to
any materiality, Company Material Adverse Effect or, in the case of clause (ii)
of this Section 7.2(a), the knowledge qualifications contained therein),
individually or in the aggregate, has not had a Company Material Adverse
Effect); and the Parent shall have received a certificate signed on behalf of
the Company by the chief executive officer and the 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 obligations and
covenants required to be performed by it under this Agreement on or prior to
the Closing Date; and the Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer and the chief financial
officer of the Company to such effect.


 


(c)                                  Tax
Opinion.  The Parent shall have
received a written opinion from Hale and Dorr LLP, counsel to the Parent, to
the effect that the Merger will be treated for United States federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code; provided that if Hale and Dorr LLP does not render such opinion, this
condition shall nonetheless be deemed satisfied if Wilson, Sonsini,
Goodrich& Rosati, Professional Corporation, renders such opinion to the
Parent (it being agreed that the Parent and the Company shall each provide
reasonable cooperation, including making customary representations for a
transaction of this type, to Hale and Dorr LLP or Wilson, Sonsini, Goodrich
& Rosati, Professional Corporation, as the case may be, to enable them to
render such opinion).


 


(d)                                 Distribution.  Subject to the provisions of
Section 6.22, on or prior to the
Closing Date, (i) the Company Board shall have adopted all appropriate
resolutions to effect the Distribution (including the declaration of the
Distribution Record Date), (ii) the Company shall have provided all notices and
made all filings required to be provided or made prior to the Closing in
connection with the Distribution, (iii) the Company shall have deposited the
Cash Amount with EquiServe, and (iv) the Company shall have complied with its obligations
under Section 2.2(j).


 


59

















 


(e)                                  Resignations.  The Parent shall have received copies of the
resignations, effective as of the Effective Time, of each director of the
Company.


 


(f)                                    No
Company Material Adverse Effect. 
Since the date of this Agreement, and except as described in
Section 7.2(f) of the Company Disclosure Schedule, there shall not have
been any change, event, circumstance, development or effect that individually
or in the aggregate has had a Company Material Adverse Effect.


 


7.3                                 Additional Conditions to
Obligations of the Company.  The
obligations of the Company to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
additional conditions, any of which may be waived, in writing, exclusively by
the Company:


 


(a)                                  Representations
and Warranties.  The representations
and warranties of the Parent and the Transitory Subsidiary set forth in this
Agreement shall be true and correct (i) as of the date of this Agreement and
(ii) as of the Closing Date as though made on and as of the Closing Date
(except in each case (x) to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date, (y) for changes
contemplated by this Agreement and (z) where the failure to be true and correct
(without regard to any materiality, Parent Material Adverse Effect or, in the
case of clause (ii) of this Section 7.3(a), knowledge qualifications
contained therein), individually or in the aggregate, has not had, a Parent
Material Adverse Effect); and the Company shall have received a certificate
signed on behalf of the Parent by the chief executive officer and the chief
financial officer of the Parent to such effect.


 


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


 


(c)                                  Tax
Opinion.  The Company shall have
received the opinion of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation, counsel to the Company, to the effect that the Merger will be
treated for United States federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code; provided that if Wilson
Sonsini Goodrich & Rosati, Professional Corporation, does not render such
opinion, this condition shall nonetheless be deemed satisfied if Hale and Dorr
LLP renders such opinion to the Company (it being agreed that the Parent and
the Company shall each provide reasonable cooperation, including making
customary representations for a transaction of this type, to Wilson, Sonsini,
Goodrich & Rosati, Professional Corporation, or Hale and Dorr LLP, as the
case may be, to enable them to render such opinion).


 


(d)                                 No
Parent Material Adverse Effect. 
Since the date of this Agreement, and except as described in
Section 7.3(d) of the Parent Disclosure Schedule, there shall not have
been any change, event, circumstance, development or effect that individually
or in the aggregate has had a Parent Material Adverse Effect.


 


60

















 


(e)                                  Company
Designees.  All corporate action
necessary to effect the appointment of the Company Designees as directors of
the Parent from and after the Effective Time in accordance with
Section 6.17 shall have been taken.


 


ARTICLE VIII



TERMINATION AND AMENDMENT


 


8.1                                 Termination. 
This Agreement may be terminated at any time prior to the Effective Time
(with respect to Sections 8.1(b) through 8.1(i), by written notice by the
terminating party to the other party), whether before or, subject to the terms
hereof, after adoption of this Agreement by the stockholders of the Company,
the shareholders of the Parent or the sole stockholder of the Transitory
Subsidiary:


 


(a)                                  by
mutual written consent of the Parent, the Transitory Subsidiary and the
Company; or


 


(b)                                 by
either the Parent or the Company if the Merger shall not have been consummated
by April 21, 2004,  (the
“Outside Date”) (provided that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been a principal cause of or
resulted in the failure of the Merger to occur on or before the Outside Date);
or


 


(c)                                  by
either the Parent or the Company if a Governmental Entity of competent
jurisdiction shall have issued a nonappealable final order, decree or ruling or
taken any other nonappealable final action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger; or


 


(d)                                 by
either the Parent or the Company if at the Company Stockholders Meeting
(including any adjournment or postponement thereof permitted by this Agreement)
at which a vote on the Company Voting Proposal is taken, the requisite vote of
the stockholders of the Company in favor of the Company Voting Proposal shall
not have been obtained (provided that the right to terminate this Agreement
under this Section 8.1(d) shall not be available to any party seeking
termination if, at such time, such party is in material breach of or has failed
to fulfill any of its material obligations under this Agreement and such breach
or failure has been a principal cause of the inability to obtain the requisite
vote of such stockholders; or


 


(e)                                  by
either the Parent or the Company if at the Parent Shareholders Meeting
(including any adjournment or postponement thereof permitted by this Agreement)
at which a vote on the Parent Voting Proposal is taken, the requisite vote of
the shareholders of the Parent in favor of the Parent Voting Proposal shall not
have been obtained (provided the right to terminate this Agreement under this
Section 8.1(e) shall not be available to any party seeking termination if,
at such time, such party is in material breach of or has failed to fulfill any
of its material obligations under this Agreement and such breach or failure has
been a principal cause of the inability to obtain the requisite vote of such
shareholders; or


 


(f)                                    by
the Parent, if: (i) the Company Board (or any committee thereof) shall have
failed to recommend approval of the Company Voting Proposal in the Joint Proxy


 


61

















 


Statement/Prospectus
or shall have withdrawn or modified its recommendation of the Company Voting
Proposal; (ii) the Company Board (or any committee thereof) shall have failed
to reconfirm its recommendation of the Company Voting Proposal within ten
business days after the Parent requests in writing that the Company Board (or
any committee thereof) do so after of the public announcement of a Company
Acquisition Proposal (or a material amendment thereto); (iii) the Company Board
(or any committee thereof) shall have approved or recommended to the
stockholders of the Company a Company Acquisition Proposal (other than the
Merger); (iv) a tender offer or exchange offer for outstanding shares of
Company Common Stock shall have been commenced (other than by the Parent or an
Affiliate of the Parent) and the Company Board (or any committee thereof)
recommends that the stockholders of the Company tender their shares in such
tender or exchange offer or, within 10 business days after the commencement of
such tender or exchange offer, the Company Board fails to recommend against
acceptance of such offer; or (v) the Company shall have materially breached its
obligations under Sections 6.1 or 6.6; provided, that if the Company sends a
notice of its intention to terminate this Agreement pursuant to
Section 8.1(i), the sending of such notice in and of itself shall not be
deemed to be a breach or default by the Company that would permit Parent to
terminate this Agreement pursuant to clause (i) of this Section 8.1(f); or


 


(g)                                 by
the Company, if: (i) the Parent shall have materially breached its obligations
under Sections 6.2 or 6.6; or (ii) for any reason the Parent shall have failed
to hold the Parent Shareholders Meeting and submit the Parent Voting Proposal
to the Parent’s shareholders by the date which is five business days prior to
the Outside Date; or


 


(h)                                 by
the Parent, if there has been a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, which breach or failure to perform (i) would
cause the conditions set forth in Sections 7.2(a) or 7.2(b) not to be
satisfied, and (ii) if curable, shall not have been cured within 20 days
following receipt by the Company of written notice of such breach or failure to
perform from the Parent; or


 


(i)                                     by
the Company, if there has been a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Parent or
the Transitory Subsidiary set forth in this Agreement, which breach or failure
to perform (i) would cause the conditions set forth in Sections 7.3(a) or
7.3(b) not to be satisfied, and (ii) if curable, shall not have been cured
within 20 days following receipt by the Parent of written notice of such breach
or failure to perform from the Company.


 


8.2                                 Effect of Termination.  In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall immediately
become void and there shall be no liability or obligation on the part of the
Parent, the Company, the Transitory Subsidiary or their respective officers,
directors, stockholders or Affiliates; provided that (i) any such termination
shall not relieve any party from liability for any willful breach of this
Agreement (which includes, without limitation, the making of any representation
or warranty by a party in this Agreement that the party knew was not true and
accurate when made) and (ii) the provisions of Sections 3.25, 5.3 and 8.3 and
Article IX of this Agreement and the Confidentiality Agreement, as amended
hereby, shall remain in full force and effect and survive any termination of
this Agreement.


 


62

















 


8.3                                 Fees and Expenses.


 


(a)                                  Except
as set forth in this Section 8.3, all fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such fees and expenses, whether or not the
Merger is consummated; provided however, that the Company and the Parent shall
share equally (i) the filing fee of the Parent’s pre-merger notification report
under the HSR Act and (ii) all fees and expenses, other than accountants’ and
attorneys’ fees, incurred with respect to the printing, filing and mailing of
the Joint Proxy Statement/Prospectus (including any related preliminary
materials), the Parent UK Documents and the Registration Statement and any
amendments or supplements thereto.


 


(b)                                 The
Company shall pay the Parent a termination fee of US $7,000,000 in the
event of the termination of this Agreement:


 


(i)                                     by
the Parent pursuant to Section 8.1(b) or Section 8.1(d), in each
case, if, at the time of such termination, the Company is in willful breach of
any of its obligations under Article V or Article VI of this
Agreement and such breach has been the principal cause of the inability to
consummate the Merger or the failure to obtain the requisite vote of the
stockholders of the Company in favor of the Company Voting Proposal;


 


(ii)                                  by
the Parent pursuant to Section 8.1(f); or


 


(iii)                               by
the Parent or the Company pursuant to Section 8.1(d) if (A) at or prior to
the time of such failure, there shall have been publicly announced a Company
Acquisition Proposal which shall not have been absolutely and unconditionally
withdrawn and abandoned and (B) on or before the date 12 months following the
date of such termination of this Agreement, the Company enters into an
Alternative Acquisition Agreement or consummates an Alternative Acquisition
Proposal; provided, however, that if, at the time of termination, there is
pending a Company Acquisition Proposal that does not involve a liquidation or
dissolution of the Company, the Company shall be permitted to be undertake a
complete liquidation or dissolution in lieu of such Company Acquisition
Proposal and, under such circumstances, the Company shall not be obligated to
make any payment of a termination fee to the Parent under this
Section 8.3(b); provided, however, that if a Company Acquisition Proposal
and any liquidation or dissolution are a part of a series of related
transactions, the Company shall be obligated to pay the termination fee
provided for hereunder to the Parent. 
For the purposes of this Section 8.3(b) only, all references in the
definition of “Company Acquisition Proposal” to “15%” shall be deemed to be
references to “30%.”


 


Any fee due under this Section 8.3(b) shall be
paid by wire transfer of same-day funds within one business day after (I) the
date of termination of this Agreement, in the case of a payment pursuant to
clause (i) or (ii) above, or (II) the earlier of execution of an Alternative
Acquisition Agreement or consummation of an Alternative Acquisition Proposal in
the case of a payment pursuant to clause (iii) above.


 


(c)                                  The
Company acknowledges that the agreements contained in this Section 8.3 are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the Parent would not enter into this Agreement.  If the Company fails to


 


63

















 


promptly pay any expense reimbursement or fee due
hereunder, the Company shall pay the costs and expenses (including legal fees
and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with interest
on the amount of any unpaid fee at the publicly announced prime rate of Fleet
Bank, N.A. plus five percent per annum, compounded quarterly, from the date
such expense reimbursement or fee was required to be paid.  Payment of the fees and expenses described
in this Section 8.3 shall not be in lieu of damages incurred in the event
of a breach of this Agreement described in clause (i) of Section 8.2.


 


8.4                                 Amendment. 
This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger by the
stockholders of any party, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval.  This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.


 


8.5                                 Extension; Waiver.  At any time prior to the Effective Time, the parties hereto, by
action taken or authorized by their respective Boards of Directors, may, to the
extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions contained herein. 
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.  Such extension or
waiver shall not be deemed to apply to any time for performance, inaccuracy in
any representation or warranty, or noncompliance with any agreement or
condition, as the case may be, other than that which is specified in the
extension or waiver.  The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.


 


ARTICLE IX



MISCELLANEOUS


 


9.1                                 Nonsurvival of Representations
and Warranties.  The
respective representations and warranties of the Company, the Parent and the
Transitory Subsidiary contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall expire with, and be terminated and
extinguished upon, the Effective Time. 
This Section 9.1 shall have no effect upon any other obligations of
the parties hereto, whether to be performed before or after the consummation of
the Merger.


 


9.2                                 Notices.  All
notices and other communications hereunder shall be in writing and shall be
deemed duly delivered (i) four business days after being sent by registered or
certified mail, return receipt requested, postage prepaid, (ii) one business
day after being sent for next business day delivery, fees prepaid, via a
reputable nationwide overnight courier service, or (iii) on the date of
confirmation of receipt (or, the first business day following such receipt if
the date of such receipt is not a business day) of transmission by facsimile in
each case to the intended recipient as set forth below:


 


64

















 


	
  (a)

  	
  if to the Parent or the Transitory Subsidiary, to

  
	
   

  	
   

  
	
   

  	
  Bookham Technology plc

  
	
   

  	
  90 Milton Park

  
	
   

  	
  Abingdon, Oxfordshire

  
	
   

  	
  OX14 4RY

  
	
   

  	
  United Kingdom

  
	
   

  	
  Attention: 
  Philip Davis, Esq., General Counsel

  
	
   

  	
  Facsimile: 
  011 44-1235-827201

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Hale and Dorr LLP

  
	
   

  	
  60 State Street

  
	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
  Attention: 
  John A. Burgess

  
	
   

  	
  Attention: 
  Hal J. Leibowitz

  
	
   

  	
  Facsimile: 
  (617) 526-5000

  
	
   

  	
   

  
	
  (b)

  	
  if to the Company, to

  
	
   

  	
   

  
	
   

  	
  New Focus, Inc.

  
	
   

  	
  2854 Junction Avenue

  
	
   

  	
  San Jose,
  California  95134-1902

  
	
   

  	
  Attention: 
  Nicola Pignati, Chairman and Chief Executive Officer

  
	
   

  	
  Facsimile: 
  (408) 904-5026

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Wilson Sonsini Goodrich & Rosati

  
	
   

  	
  Professional Corporation

  
	
   

  	
  650 Page Mill Road

  
	
   

  	
  Palo Alto, California 94304

  
	
   

  	
  Attention: 
  David J. Segre

  
	
   

  	
  Attention: 
  Steve L. Camahort

  
	
   

  	
  Facsimile: 
  (650) 493-6811

  



 


Any party to this Agreement may give any notice or
other communication hereunder using any other means (including personal
delivery, messenger service, telecopy, telex, ordinary mail or electronic
mail), but no such notice or other communication shall be deemed to have been
duly given unless and until it actually is received by the party for whom it is
intended.  Any party to this Agreement
may change the address to which notices and other communications hereunder are
to be delivered by giving the other parties to this Agreement notice in the
manner herein set forth.


 


9.3                                 Entire Agreement.  This Agreement (including the Schedules and Exhibits hereto and
the documents and instruments referred to herein that are to be delivered at
the Closing as well as the Company Stockholder Agreements and the Parent
Shareholder Agreements)


 


65

















 


constitutes
the entire agreement among the parties to this Agreement and supersedes any
prior understandings, agreements or representations by or among the parties
hereto, or any of them, written or oral, with respect to the subject matter
hereof; provided that the Confidentiality Agreement shall remain in effect in
accordance with its terms.


 


9.4                                 No Third Party Beneficiaries.  Except as provided in Section 6.15,
this Agreement is not intended, and shall not be deemed, to confer any rights
or remedies upon any person other than the parties hereto and their respective
successors and permitted assigns, to create any agreement of employment with
any person or to otherwise create any third-party beneficiary hereto.


 


9.5                                 Assignment. 
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement may be assigned or delegated, in whole or in part, by
operation of law or otherwise by any of the parties hereto without the prior
written consent of the other parties, and any such assignment without such
prior written consent shall be null and void, except that the Parent and/or the
Transitory Subsidiary may assign this Agreement to any direct or indirect
wholly owned Subsidiary of the Parent without consent of the Company (and the
parties hereto shall execute and deliver any amendment to this Agreement
necessary to effect such assignment), provided that the Parent and/or the
Transitory Subsidiary, as the case may be, shall remain liable for all of its
obligations under this Agreement. 
Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the parties hereto and their
respective successors and permitted assigns.


 


9.6                                 Severability.  Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. 
If the final judgment of a court of competent jurisdiction declares that
any term or provision hereof is invalid or unenforceable, the parties hereto
agree that the court making such determination shall have the power to limit
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.  In the
event such court does not exercise the power granted to it in the prior
sentence, the parties hereto agree to replace such invalid or unenforceable
term or provision with a valid and enforceable term or provision that will
achieve, to the extent possible, the economic, business and other purposes of
such invalid or unenforceable term.


 


9.7                                 Counterparts and Signature.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.  This
Agreement may be executed and delivered by facsimile transmission.


 


9.8                                 Interpretation.  When reference is made in this Agreement to an Article or a
Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. 
The table of contents, table of defined terms and headings contained in
this


 


66

















 


Agreement
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement. 
The language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party.  Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural, and vice versa.  Any
reference to any federal, state, local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. 
Whenever the words “include”, “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limitation”.  No summary of this Agreement prepared by any
party shall affect the meaning or interpretation of this Agreement.


 


9.9                                 Governing Law. 
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware without giving effect to any choice or
conflict of law provision or rule (whether of the State of Delaware or any
other jurisdiction) that would cause the application of laws of any
jurisdictions other than those of the State of Delaware.


 


9.10                           Remedies. 
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.  The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. 
It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in addition
to any other remedy to which they are entitled at law or in equity.


 


9.11                           Submission to Jurisdiction.  Each of the parties to this Agreement
(a) consents to submit itself to the personal jurisdiction of any state or
federal court sitting in the State of Delaware in any action or proceeding
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that all claims in respect of
such action or proceeding may be heard and determined in any such court, (c)
agrees that it shall not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, and (d) agrees
not to bring any action or proceeding arising out of or relating to this
Agreement or any of the transaction contemplated by this Agreement in any other
court.  Each of the parties hereto
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety or other security that might
be required of any other party with respect thereto.  Any party hereto may make service on another party by sending or
delivering a copy of the process to the party to be served at the address and
in the manner provided for the giving of notices in Section 9.2.  Nothing in this Section 9.11, however,
shall affect the right of any party to serve legal process in any other manner
permitted by law.


 


67

















 


9.12                           Waiver of Jury Trial.  Each of the Parent, the Transitory
Subsidiary and the Company hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the transactions
contemplated hereby or the actions of the Parent, the Transitory Subsidiary or
the Company in the negotiation, administration, performance and enforcement of
this Agreement.


 


[Remainder of Page
Intentionally Left Blank]


 


68

















 


IN WITNESS WHEREOF, the Parent, the Transitory
Subsidiary and the Company have caused this Agreement to be signed by their
respective officers thereunto duly authorized as of the date first written
above.


 


	
   

  	
  BOOKHAM
  TECHNOLOGY PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Andrew Rickman

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Dr.
  Andrew Rickman

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
  BUDAPEST
  ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Philip Davis

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Philip
  Davis

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Incorporator

  	
   

  
	
   

  	
   

  
	
   

  	
  NEW
  FOCUS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nicola Pignati

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Pres.
  and CEO

  	
   

  
						



 


69

















 


Schedule A


 


Company Stockholder Agreements


 


Nicola
Pignati


 


Peter
Bordui


 


John
Dexheimer


 


Winston
Fu


 


Don G.
Hallacy


 


Timothy
Day


 


William
L. Potts, Jr.


 

















 


Schedule B


 


Andrew
Rickman


 


David
Simpson


 


Robert
Rickman


 


Giorgio
Anania


 

















 


Schedule 6.18


 


Nicola
Pignati


 


Peter
Bordui