<PAGE>   1
                                                                    EXHIBIT 10.9


                                    AGREEMENT


                                   dated as of


                                October 13, 1999


                                  by and among


                            SYNAPTICS, INCORPORATED,


                                       and


                          THE PRINCIPAL SHAREHOLDERS OF
                            ABSOLUTE SENSORS LIMITED










<PAGE>   2


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
<S>                                                                             <C>
TERMS OF THE OFFER..........................................................     2

   1.1   Issue of Synaptics' Stock and Cash Consideration...................     2
   1.10  Taking of Necessary Action; Further Action.........................     3

SECTION 2 - CLOSING.........................................................     3

   2.1   Closing Date.......................................................     3
   2.2   Actions at the Closing.............................................     3
   2.3   Payment............................................................     4
   2.4   Purchase of Common Stock...........................................     4

SECTION 3 - SECURITIES LAW COMPLIANCE.......................................     5

   3.1   Securities Act Exemption...........................................     5
   3.2   Stock Restrictions.................................................     5
   3.3   Corporate Securities Law...........................................     6

REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS
REGARDING THE COMPANY.......................................................     6

   4.1   Organization Standing and Power; Subsidiaries......................     6
   4.2   Articles of Association............................................     7
   4.3   Capital Structure..................................................     7
   4.4   Authority..........................................................     8
   4.5   No Conflicts; Required Filings and Consents........................     8
   4.6   Financial Statements...............................................     9
   4.7   Absence of Undisclosed Liabilities.................................     9
   4.8   Absence of Certain Changes.........................................     9
   4.9   Litigation.........................................................    11
   4.10  Restrictions on Business Activities................................    11
   4.11  Permits; Company Products; Regulation..............................    12
   4.12  Title to Property..................................................    13
   4.13  Intellectual Property..............................................    15
   4.14  Environmental Matters..............................................    17
   4.15  Taxes..............................................................    19
   4.16  Employees..........................................................    29
   4.17  Certain Agreements Affected by the purchase of the Shares
          by Offeror .......................................................    31
   4.18  Pensions...........................................................    31
   4.19  Material Contracts.................................................    33
   4.20  Interested Party Transactions......................................    35
   4.21  Insurance..........................................................    35
   4.22  Compliance With Laws...............................................    36
   4.23  Minute Books.......................................................    36
   4.24  Complete Copies of Materials.......................................    36
   4.25  Brokers' and Finders' Fees.........................................    36
</TABLE>


                                       i
<PAGE>   3

<TABLE>
<S>                                                                             <C>
   4.26  Year 2000..........................................................    36
   4.27  Inventory..........................................................    37
   4.28  Accounts Receivable................................................    37
   4.29  Customers and Suppliers............................................    38
   4.30  Third Party Consents...............................................    38
   4.31  No Commitments Regarding Future Products...........................    38
   4.32  Representations Complete...........................................    38

REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS
REGARDING THEIR SHAREHOLDER STATUS..........................................    39

   5.1   Power, Authorization and Validity..................................    39
   5.2   Title to Stock.....................................................    39
   5.3   No Violation.......................................................    40
   5.4   Acknowledgment.....................................................    40

SECTION 6 - REPRESENTATIONS AND WARRANTIES OF OFFEROR.......................    40

   6.1   Organization, Standing and Power...................................    40
   6.2   Capital Structure..................................................    41
   6.3   Authority..........................................................    41
   6.4   No Conflict; Required Filings and Consents.........................    41
   6.6   Absence of Certain Changes.........................................    42
   6.7   Litigation.........................................................    42
   6.8   Governmental Authorization.........................................    43
   6.9   Compliance With Laws...............................................    43

SECTION 7 - CONDITIONS TO CLOSING...........................................    43

   7.1   Conditions to Obligations of Each Party............................    43
   7.2   Additional Conditions to Obligations of the Principal Shareholders.    44
   7.3   Additional Conditions to the Obligations of Offeror................    45

SECTION 8 - ESCROW AND INDEMNIFICATION......................................    47

   8.1   Survival of Representations and Warranties.........................    47
   8.2   Escrow Fund........................................................    47
   8.3   Indemnification....................................................    47
   8.4   Damages Threshold..................................................    48
   8.5   Escrow Period......................................................    49
   8.6   Distributions; Voting..............................................    49
   8.7   Method of Asserting Claims.........................................    49
   8.8   Stockholders' Representative; Power of Attorney....................    50

SECTION 9 - TERMINATION; SURVIVAL AND EFFECT OF TERMINATION.................    50

   9.1   Termination........................................................    50

</TABLE>


                                       ii
<PAGE>   4

<TABLE>
<S>                                                                             <C>
   9.2   Survival...........................................................    50

COVENANTS OF THE PRINCIPAL SHAREHOLDERS.....................................    51

   10.1  Conduct of Business of the Company.................................    51
   10.2  No Solicitation....................................................    54
   10.3  Access; Confidentiality............................................    55
   10.4  Public Announcements...............................................    55
   10.7  Cooperation........................................................    56
   10.6  Employees of the Business..........................................    56
   10.8  Notification of Claims.............................................    56
   10.9  Further Acts.......................................................    56

SECTION 11 - COVENANTS OF OFFEROR...........................................    56

   11.1  Blue Sky Laws......................................................    56
   11.2  Conduct of Business of Offeror.....................................    57

SECTION 12 - MISCELLANEOUS..................................................    57

   12.1  Survival of Warranties.............................................    57
   12.2  Notices............................................................    57
   12.3  Interpretation.....................................................    58
   12.4  Counterparts.......................................................    58
   12.5  Entire Agreement; Nonassignability; Parties in Interest............    58
   12.6  Binding Effect and Assignment......................................    59
   12.7  Severability.......................................................    59
   12.8  Remedies Cumulative................................................    59
   12.9  Governing Law......................................................    59
   12.10 Rules of Construction..............................................    59
   12.11 Waiver of Restrictions.............................................    59
   12.12 Amendments and Waivers.............................................    59
</TABLE>


                                      iii
<PAGE>   5

                                    AGREEMENT


THIS AGREEMENT (this "Agreement") is made and entered into as of the 13th day of
October, 1999 (the "Effective Date"), by and among Synaptics, Incorporated, a
California corporation ("Synaptics" or "Offeror"), and certain principal
shareholders of Absolute Sensors Limited, a corporation incorporated under the
laws of England (the "Company"), listed on Exhibit A (each individually, a
"Principal Shareholder" and collectively, the "Principal Shareholders"). The
Offeror and Principal Shareholders are collectively referred to as the
"Parties."

                                    RECITALS

1.    The Company is in the business of the design, manufacturing, marketing and
      sale of pen input solutions for portable information devices such as
      computers, personal digital assistants and telephones incorporating
      inductive sensing technology known as Spiral technology and similar
      technology.

2.    The Principal Shareholders own the number of outstanding Ordinary Shares
      of the Company listed beside their names on Exhibit A. All of the
      remaining outstanding shares of the Company's capital stock and securities
      convertible into or exercisable for shares of the Company's capital stock
      are also listed on Exhibit A and are owned or will be owned at the Closing
      Date by the shareholders and option holders listed on Exhibit A. These
      shareholders, together with the Principal Shareholders, are defined as the
      "Shareholders" under this Agreement.

3.    Offeror wishes to offer (the "Offer") to purchase from all Shareholders
      all of the outstanding Ordinary Shares of the Company held by them as of
      the Closing on the terms and conditions set forth in the general offer
      memorandum referred to in Section 10.3 below and attached to this
      Agreement as Exhibit B (the "Offer Document").

4.    The Principal Shareholders wish to undertake to accept the Offer in
      respect of all of the outstanding Ordinary Shares of the Company held by
      them as of the Closing on the terms and conditions set forth in the Offer
      Document.

5.    The Offer does not extend to any securities convertible into or
      exercisable for shares of the Company's capital stock and all such
      securities shall have been terminated as of the Closing.

6.    The Parties intend that the transactions contemplated hereby and by the
      Offer Document will not constitute a plan of reorganization under the
      provisions of Section 368(a) of the U.S. Internal Revenue Code of 1986, as
      amended (the "Code") as it is intended that the transactions will
      constitute a taxable stock purchase for U.S. tax purposes.

7.    Offeror intends to make an election under Section 338(g) of the Code and
      similar provisions of applicable state laws.

<PAGE>   6


                                    AGREEMENT

In consideration of the mutual promises, agreements, warranties and provisions
contained in this Agreement, the Parties agree as follows:

                                   SECTION 1

TERMS OF THE OFFER.

1.1   ISSUE OF SYNAPTICS' STOCK AND CASH CONSIDERATION. Subject to the terms and
      conditions of this Agreement, Offeror agrees to issue the Offer Document
      forthwith pursuant to when it will offer to purchase ("the Purchase") at
      the Closing (as defined below), all of the Ordinary Shares of the Company
      outstanding as of the Closing (the "Shares") (which Shares shall
      constitute all of the outstanding capital stock of the Company as of the
      Closing) for an aggregate purchase price (assuming that the Offer is
      accepted in respect of all of the Shares) of (a) $1,450,000 in cash
      denominated in U.S. Dollars (the "Cash Consideration") and (b) 832,000
      shares of Synaptics' Common Stock (subject to adjustment to reflect fully
      the effect of any stock split, reverse split or stock dividend and subject
      to increase as a result of Section 1.4 below) (the "Synaptics' Stock").
      Subject to the terms and conditions of this Agreement, the Principal
      Shareholders agree forthwith to accept the Offer in respect of all of the
      Ordinary Shares of the Company held by them as of the Closing for the Cash
      Consideration Per Share and Synaptics' Stock Per Share set forth in
      Section 1.2 below.

1.2   SYNAPTICS' STOCK AND CASH CONSIDERATION PER SHARE. Subject to the terms
      and conditions of this Agreement, each Shareholder will be entitled to
      receive at the Closing, and at such later times as specified in this
      Agreement, (i) that portion of the Cash Consideration payable at the
      relevant time, rounded to the nearest cent, equal to the Cash
      Consideration divided by the aggregate number of Shares outstanding as of
      the Closing (the "Cash Consideration Per Share"), and (ii) that number of
      shares of Synaptics' Stock deliverable at the relevant time equal to the
      total number of shares of Synaptics' Stock divided by the aggregate number
      of Shares outstanding as of the Closing (the "Synaptics' Stock Per Share")
      and multiplied in each case by the number of Shares in respect of which
      the relevant Shareholder has accepted the Offer.

1.3   TERMINATION OF OPTIONS. It is a condition of the Offeror's obligation to
      effect the Purchase that effective immediately prior to the Closing and
      contingent upon consummation of the Purchase, all options, warrants and
      other rights to purchase shares of the Company's capital stock that have
      not been exercised as of the Closing (other than those granted to
      Competitive Technologies, Inc.) and obligations to issue shares or options
      to employees under any bonus scheme of the Company shall terminate without
      any action on the part of the holder thereof. In addition, as of the
      Closing, the outstanding capital stock of the Company shall consist solely
      of Ordinary Shares held by the Shareholders.

1.4   FRACTIONAL SHARES. No fraction of a share of Synaptics' Stock will be
      issued to a Shareholder under this Agreement. Instead each Shareholder
      shall receive such number of shares of Synaptics' Stock determined by
      aggregating all fractional shares



                                      -2-
<PAGE>   7

      of Synaptics' Stock to which the Shareholder would otherwise be entitled,
      and then rounding up to the nearest whole share.

1.5   TAKING OF NECESSARY ACTION; FURTHER ACTION. If at any time after the date
      of this Agreement, any further action is necessary or desirable to carry
      out the purposes of this Agreement and to vest the Offeror with full
      right, title and possession to all assets, property, rights, privileges,
      powers and franchises of the Company as of the Closing, each Principal
      Shareholder shall take all such lawful and necessary action, so long as
      such action is not inconsistent with this Agreement and so long as the
      .Principal Shareholder has the power to take such action.

1.6   ACCEPTANCE OF OFFER. The Principal Shareholders hereby undertake to accept
      the Offer in respect of all of the outstanding Ordinary Shares of the
      Company held by them as of the Closing on the terms and conditions set
      forth in the Offer Document.

                                   SECTION 2


      CLOSING

2.1   CLOSING DATE. Unless this Agreement is earlier terminated pursuant to
      Section 9, the closing of the purchase pursuant to the Offer (the
      "Closing") shall be held at the offices of Venture Law Group, 2800 Sand
      Hill Road, Menlo Park, CA 94025 at 4:00 p.m. California time on the date
      upon which the Offer becomes or is declared unconditional in all respects,
      unless another time and place is agreed upon between the Principal
      Shareholders' Representative and the Offeror orally or in writing, such
      time and date being referred to herein as the "Closing Date."

2.2   ACTIONS AT THE CLOSING. At the Closing, the Principal Shareholders and
      Offeror shall take such actions and execute and deliver such agreements
      and other instruments and documents as necessary or appropriate to effect
      the transactions contemplated by this Agreement in accordance with its
      terms, including without limitation the following:

      (a)   The Offer shall have become or been declared unconditional pursuant
            to the terms of the Offer Document;

      (b)   Each of the Principal Shareholders shall procure that The Generics
            Group AG will deliver to Offeror a duly executed Deed of Tax
            Covenant in the form attached hereto as Exhibit C (the "Deed of Tax
            Covenant");

      (c)   The Principal Shareholders will deliver an updated Balance Sheet of
            the Company in a form reasonably acceptable to Offeror dated as of a
            date as close as reasonably practicable to the Closing Date;

      (d)   Offeror, certain of the Principal Shareholders of the Company and
            certain other entities listed on Exhibit A to the Agreement shall
            enter into a Deed of Non-Competition in the form attached hereto as
            Exhibit D (the "Deed of Non-Competition");

      (e)   The Principal Shareholders shall cause a board meeting of the
            Company to be held at which:

                                      -3-
<PAGE>   8

            (i)   the transfers of the Shares which have been acceded to the
                  Offeror will be approved for registration (subject to their
                  being duly stamped, which shall be at the cost of the
                  Offeror);

            (ii)  resignation letters of all directors (except for Ian Collins
                  and David Ely) and the secretary of the Company will be
                  tendered and accepted so as to take effect at the close of the
                  meeting;

            (iii) all persons nominated by the Offeror (in the case of directors
                  subject to any maximum number imposed by the relevant articles
                  of association) will be appointed directors and secretary;

            (iv)  all existing instructions and authorities to bankers will be
                  revoked and will be replaced with alternative instructions,
                  mandates and authorities in such form as the Offeror may
                  require;

            (v)   the accounting reference date will be changed to June 30; and

            (vi)  Ernst & Young will be appointed auditors.

      (f)   The Principal Shareholders shall procure delivery to the Offeror's
            UK Counsel, CMS Cameron McKenna, of the Company's statutory books.

2.3   PAYMENT OF CASH CONSIDERATION. The payment of the Cash Consideration set
      forth below shall be allocated among the Shareholders pursuant to the
      formula set forth in Section 1.2 above (and subject to Section 12.13):

      (a)   An aggregate of $450,000 of the Cash Consideration shall be paid to
            the Shareholders at the Closing; and

      (b)   An aggregate of $1,000,000 of the Cash Consideration shall be paid
            to the Shareholders on the six month anniversary of the Closing
            Date.

2.4   ISSUANCE OF SYNAPTICS' STOCK. The issuance of shares of Synaptics' Stock
      set forth below Shall be allocated among the Shareholders pursuant to the
      formula set forth in Section 1.2 above:

      (a)   An aggregate of 632,000 shares of Synaptics' Stock (subject to
            adjustment to reflect fully the effect of any stock split, reverse
            split or stock dividend and subject to increase as a result of
            Section 1.4 above) shall be issued to the Shareholders at the
            Closing; and

      (b)   Subject to the conditions set forth below, at the times specified
            below after the Closing, an aggregate of up to 200,000 shares of
            Synaptics' Stock (subject to adjustment to reflect fully the effect
            of any stock split, reverse split or stock dividend and subject to
            increase as a result of Section 1.4 above) shall be delivered
            (subject to the Escrow provisions provided below and in Section 8)
            to the Shareholders in accordance with the following formula: For
            each Company product sold for the PDA/Windows CE/mobile
            communications market over the twenty-four (24) month period
            following the Closing Date which incorporates Spiral technology, as
            determined by Offeror in good faith


                                      -4-
<PAGE>   9
            (the Principal Shareholders Representative having the right, upon
            reasonable notice to Offeror, to review the determination by Offeror
            and to examine such books and records of Offeror as shall be
            reasonably necessary to conduct such review), the Shareholders will
            in the aggregate be entitled to one share of Synaptics' Stock, up to
            a maximum of 200,000 shares (subject to adjustment to reflect fully
            the effect of any stock split, reverse split or stock dividend);
            provided, however that the Offeror will not be required to deliver
            shares of Synaptics' Stock more frequently than once during each six
            (6) month period following the Closing. Notwithstanding the
            foregoing, until the Escrow Termination Date, all shares of
            Synaptics' Stock that each Principal Shareholder is entitled to
            receive under this Section 2.4(b) shall be deposited by Offeror into
            the Escrow Fund. Synaptics shall have the right at any time to waive
            the conditions set forth in this Section 2.4(b) and issue to the
            Shareholders all remaining Shares which have not already been issued
            to the Shareholders under this Section 2.4(b) and to deposit all
            Shares to be issued under this Section 2.4(b) to the Principal
            Shareholders into the Escrow Fund prior to the Escrow Termination
            Date.

                                   SECTION 3

      SECURITIES LAW COMPLIANCE

3.1   SECURITIES ACT EXEMPTION. The Synaptics' Stock to be issued pursuant to
      the Offer shall not be registered under the Securities Act of 1933, as
      amended ("Securities Act"), and is being issued in reliance upon the
      exemption contained in Regulation S of the Securities Act, or such other
      exemptions as may be available, and in reliance upon the representations
      and warranties of the Shareholders contained in the Offer Document.

3.2   STOCK RESTRICTIONS. The certificates representing the shares of Synaptics'
      Stock issued pursuant to the Offer shall bear a restrictive legend or
      legends (and stop transfer orders shall be placed against the transfer
      thereof with Offeror's transfer agent), stating substantially as follows:

      (a)   "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
            OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
            HYPOTHECATED EXCEPT (i) IN COMPLIANCE WITH REGULATION S UNDER THE
            ACT, (ii) PURSUANT TO A REGISTRATION STATEMENT IN EFFECT WITH
            RESPECT TO THE SECURITIES UNDER SUCH ACT OR (iii) PURSUANT TO AN
            AVAILABLE EXEMPTION UNDER SUCH ACT AND, IF REQUESTED BY THE COMPANY,
            AFTER DELIVERY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
            THAT SUCH TRANSACTION IS SO EXEMPT. HEDGING TRANSACTIONS INVOLVING
            THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
            ACT."

      (b)   Any legend required by the securities laws of any state.

                                      -5-
<PAGE>   10

3.3   CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT
      OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
      CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH
      SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
      THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF
      SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR
      25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
      THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
      OBTAINED, UNLESS THE SALE IS SO EXEMPT.

                                   SECTION 4

      REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS REGARDING THE
      COMPANY

      In this Agreement, any reference to any event, change, condition or effect
      being "material" with respect to any entity or group of entities means any
      material event, change, condition or effect related to the condition
      (financial or otherwise), properties, assets (including intangible
      assets), liabilities, business, operations, results of operations or
      prospects of such entity or group of entities. In this Agreement, any
      reference to a "Material Adverse Effect" with respect to any entity or
      group of entities means any event, change or effect that, when taken
      individually or together with all other adverse changes and effects, is or
      is reasonably likely to be materially adverse to the condition (financial
      or otherwise), properties, assets, liabilities, business, operations,
      results of or prospects of such entity and its subsidiaries, taken as a
      whole, or to prevent or materially delay consummation of the transactions
      contemplated under this Agreement or otherwise to prevent such entity and
      its subsidiaries from performing their obligations under this Agreement.

      In this Agreement, any reference to a party's "knowledge" means such
      party's actual knowledge after due and diligent inquiry of officers,
      directors and other employees of such party reasonably believed to have
      knowledge of such matters.

      Except as disclosed in a document of the same date as this Agreement and
      delivered by the Principal Shareholders to Offeror prior to the execution
      and delivery of this Agreement and referring to the representations and
      warranties in this Agreement (the "Company Disclosure Schedule"), each
      Principal Shareholder in consideration of the Offeror agreeing to make the
      Offer and issue the Offer Document hereby jointly and severally represents
      and warrants to Offeror as follows:

4.1   ORGANIZATION STANDING AND POWER; SUBSIDIARIES. The Company is a
      corporation duly organized, validly existing and in good standing under
      the laws of England, and each subsidiary of the Company, if any, (each a
      "Subsidiary") is a corporation duly organized, validly existing and in
      good standing under the laws of its jurisdiction of organization. Each of
      the Company and each Subsidiary has the requisite corporate power and
      authority and all necessary government approvals to own, lease and operate
      its properties and to carry on its business as now being conducted and as
      proposed to be conducted, except where the failure to have such power,
      authority and


                                      -6-
<PAGE>   11

      governmental approvals would not, individually or in the aggregate, have a
      Material Adverse Effect on the Company. Each of the Company and each
      Subsidiary is duly qualified or licensed as a foreign corporation to do
      business, and is in good standing, in each jurisdiction where the
      character of the properties owned, leased or operated by it or the nature
      of its business makes such qualification or licensing necessary, except
      for such failures to be so qualified or licensed and in good standing that
      would not, individually or in the aggregate, have a Material Adverse
      Effect on the Company. A true and complete list of all the Subsidiaries,
      together with the jurisdiction of incorporation of each Subsidiary, is set
      forth in Section 4.1 of the Company Disclosure Schedule. The Company is
      the owner of all outstanding shares of capital stock of each Subsidiary
      and all such shares are duly authorized, validly issued, fully paid and
      nonassessable. All of the outstanding shares of capital stock of each
      Subsidiary are owned by the Company free and clear of all liens, charges,
      claims or encumbrances or rights of others. There are no outstanding
      subscriptions, options, warrants, puts, calls, rights, exchangeable or
      convertible securities or other commitments or agreements of any character
      relating to the issued or unissued capital stock or other securities of
      any Subsidiary, or otherwise obligating the Company or any Subsidiary to
      issue, transfer, sell, purchase, redeem or otherwise acquire any such
      securities. Except as set forth in the Company Disclosure Schedule, the
      Company does not directly or indirectly own any equity or similar interest
      in, or any interest convertible into or exchangeable or exercisable for,
      any equity or similar interest in, any corporation, partnership, limited
      liability company, joint venture or other business association or entity.

4.2   ARTICLES OF ASSOCIATION. The Principal Shareholders have delivered a true
      and correct copy of the Memorandum and Articles of Association and all
      other charter documents, as applicable, of the Company and each
      Subsidiary, each as amended to date, to Offeror. Neither the Company nor
      any Subsidiary is in violation of any of the provisions of its Memorandum
      or Articles of Association or equivalent organizational documents.

4.3   CAPITAL STRUCTURE. The authorized capital stock of the Company consists of
      2,000,000 Ordinary Shares, of which there were issued and outstanding as
      of the Effective Date 739,276 Ordinary Shares. There are no other
      outstanding shares of capital stock or voting securities and no
      outstanding commitments to issue any shares of capital stock or voting
      securities other than pursuant to the exercise of options outstanding as
      of the Effective Date to purchase Ordinary Shares under the Company's S01
      and SO2 Share Option Scheme (the "Company Stock Option Plan"). All
      outstanding shares of the Company's capital stock are duly authorized,
      validly issued, fully paid and non-assessable and are free of any liens or
      encumbrances other than any liens or encumbrances created by or imposed
      upon the holders thereof, and are not subject to preemptive rights or
      rights of first refusal created by statute, the Articles of Association of
      the Company or any agreement to which the Company is a party or by which
      it is bound. All outstanding Ordinary Shares and options to purchase
      Ordinary Shares of the Company were issued in compliance with all
      applicable UK and U.S. federal and state securities laws. As of the close
      of business on the Effective Date, options to purchase 130,858 Ordinary
      Shares pursuant to the Company Stock Option Plan were outstanding. Section
      4.3 of the Company Disclosure Schedule sets forth the number of
      outstanding options and all other rights



                                      -7-
<PAGE>   12

      to acquire shares of the Company's capital stock pursuant to the Company
      Stock Option Plan or otherwise and the exercise price therefor. Except (i)
      for the rights created pursuant to this Agreement, (ii) for the Company's
      right to repurchase any unvested shares under the Company Stock Option
      Plan and (iii) as set forth in this Section 4.3 and Section 4.3 of the
      Company Disclosure Schedule, there are no options, warrants, calls,
      rights, commitments, agreements or arrangements of any character to which
      the Company or any Subsidiary is a party or by which the Company or any
      Subsidiary is bound relating to the issued or unissued capital stock of
      the Company or any Subsidiary or obligating the Company or any Subsidiary
      to issue, deliver, sell, repurchase or redeem, or cause to be issued,
      delivered, sold, repurchased or redeemed, any shares of capital stock of
      the Company or any Subsidiary or obligating the Company or any Subsidiary
      to grant, extend, accelerate the vesting of, change the price of, or
      otherwise amend or enter into any such option, warrant, call, right,
      commitment or agreement. There are no contracts, commitments or agreements
      relating to voting, purchase or sale of the Company's capital stock (i)
      between or among the Company and any of its shareholders and (ii) to the
      actual knowledge (having made no independent inquiry) of the Principal
      Shareholders', between or among any of the Company's shareholders. The
      terms of all outstanding stock options of the Company provide, or will
      provide, as of the Closing, that such options shall terminate effective
      immediately prior to the Closing Date. True and complete copies of all
      agreements and instruments relating to or issued under the Company Stock
      Option Plan have been made available to Offeror and such agreements and
      instruments have not been amended, modified or supplemented, and there are
      no agreements to amend, modify or supplement such agreements or
      instruments in any case from the form made available to Offeror, except
      that Offeror understands such agreements will be amended to provide that
      the options to purchase the Company's Ordinary Shares shall terminate upon
      the Closing without any further action of the option holder.

4.4   AUTHORITY.  [INTENTIONALLY OMITTED].

4.5   NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.

      (a)   The execution and delivery of this Agreement by the Principal
            Shareholders does not, and the consummation of the transactions
            contemplated hereby and by the Offer Document will not, conflict
            with, or result in any violation of, or default under (with or
            without notice or lapse of time, or both), or give rise to a right
            of termination, cancellation or acceleration of any obligation or
            loss of any benefit under (i) any provision of the Articles of
            Association of the Company or its Subsidiaries, as amended, or (ii)
            any material mortgage, indenture, lease, contract or other agreement
            or instrument, permit, concession, franchise, license, judgment,
            order, decree, statute, law, ordinance, role or regulation
            applicable to the Company or any Subsidiary or any of their
            properties or assets.

      (b)   No consent, approval, order or authorization of, or registration,
            declaration or filing with, any court, administrative agency or
            commission or other governmental authority or instrumentality
            ("Governmental Entity") is required by or with respect to the
            Company or any Subsidiary in connection with the


                                      -8-
<PAGE>   13

            execution and delivery of this Agreement or the consummation of the
            transactions contemplated hereby or by the Offer Document, except
            for (i) such consents, approvals, orders, authorizations,
            registrations, declarations and filings as may be required under the
            Securities Exchange Act of 1934, as amended (the "Exchange Act"),
            the Securities Act of 1933, as amended (the "Securities Act"),
            applicable state securities laws and the securities laws of any
            foreign country; (ii) such other consents, authorizations, filings,
            approvals and registrations which, if not obtained or made, would
            not have a Material Adverse Effect on the Company and would not
            prevent, or materially alter or delay any of the transactions
            contemplated by this Agreement.

4.6   FINANCIAL STATEMENTS. Section 4.6 of the Company Disclosure Schedule
      includes a true, correct and complete copy of the Company's audited
      financial statements for the fiscal year ended December 31, 1998, (the
      "Audited Financial Statements") and its unaudited financial statements
      (balance sheet, profit and loss account and statement of cash flows) on a
      consolidated basis as at, and for the nine month period ended September
      30, 1999 (the "Unaudited Financial Statements") (collectively, the
      "Financial Statements"). The Audited Financial Statements have been
      prepared in accordance with the SSAPs, the legal principles set out in
      Schedules 4 and 4A CA 85, rulings and abstracts of the Urgent Issues Task
      Force of the Accounting Standards Board Limited and guidelines,
      conventions, rules and procedures of accounting practice in the United
      Kingdom which are regarded as permissible by the Accounting Standards
      Board Limited ("UK GAAP") applied on a consistent basis throughout the
      periods indicated and with each other. The Audited Financial Statements
      accurately set out and describe the financial condition and operating
      results of the Company and its consolidated Subsidiaries as of the dates,
      and for the periods, indicated therein, subject to normal year-end audit
      adjustments. The Unaudited Financial Statements have been prepared on the
      same basis as the Audited Financial Statements and using the same
      accounting policies as were used in the preparation of the Audited
      Financial Statements and show a materially accurate view of the assets and
      liabilities and trading position of the Company. The Company has
      maintained a standard system of accounting established and administered in
      accordance with UK GAAP.

4.7   ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any Subsidiary
      has material obligations or liabilities of any nature (matured or matured,
      fixed or contingent) in excess of $25,000 individually or in the aggregate
      other than (i) those set forth or adequately provided for in the Balance
      Sheet for the period ended September 30, 1999 (the "Company Balance
      Sheet"), and (ii) those incurred in the ordinary course of business since
      the Company Balance Sheet Date and consistent with past practice.

4.8   ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 4.8 of the
      Company Disclosure Schedule, since September 30, 1999 (the "Company
      Balance Sheet Date") there has not been, occurred or arisen any:

      (a)   transaction by the Company or any Subsidiary except in the ordinary
            course of business as conducted on that date and consistent with
            past practices;

      (b)   amendments or changes to the Articles of Association of the Company,
            except as required under this Agreement;



                                      -9-
<PAGE>   14
      (c)   capital expenditure or commitment by the Company or any Subsidiary,
            in any individual amount or in the aggregate exceeding $25,000;

      (d)   destruction of, damage to, or loss of any assets (including, without
            limitation, intangible assets), business or customer of the Company
            or any Subsidiary (whether or not covered by insurance) which would
            constitute a Material Adverse Effect;

      (e)   labor trouble or claim of wrongful dismissal or other unlawful labor
            practice or action;

      (f)   change in accounting methods or practices (including any change in
            depreciation or amortization policies or rates, any change in
            policies in making or reversing accruals) by the Company;

      (g)   revaluation by the Company or any Subsidiary of any of their
            respective assets;

      (h)   declaration, setting aside, or payment of a dividend or other
            distribution in respect to the capital stock of the Company, or any
            direct or indirect redemption, purchase or other acquisition by the
            Company of any of its capital stock, except repurchases of the
            Company Common Stock from terminated Company employees or
            consultants at the original per share purchase price of such shares;

      (i)   sale, lease, license or other disposition of any of the assets or
            properties of the Company or any Subsidiary, except in the ordinary
            course of business and not in excess of $25,000, in the aggregate;

      (j)   termination or material amendment of any material contract,
            agreement or license (including any distribution agreement) to which
            the Company or any Subsidiary is a party or by which it is bound;

      (k)   loan by the Company or any Subsidiary to any person or entity, or
            guaranty by the Company or any Subsidiary of any loan, except for
            (i) travel or similar advances made to employees in connection with
            their employment duties in the ordinary course of business,
            consistent with past practices and (ii) trade payables not in excess
            of $25,000 in the aggregate and in the ordinary course of business,
            consistent with past practices;

      (l)   waiver or release of any right or claim of the Company or any
            Subsidiary, including any write-off or other compromise of any
            account receivable of the Company or any Subsidiary, in excess of
            $25,000 in the aggregate;

      (m)   commencement or notice or threat of commencement of any lawsuit or
            proceeding against or, to the Company's directors' or the Principal
            Shareholders' knowledge, investigation of the Company or any
            Subsidiary or their respective affairs;

      (n)   notice of any claim of ownership by a third party of the Company's
            or any Subsidiary's Intellectual Property (as defined in Section
            4.13 below) or of

                                      -10-
<PAGE>   15

            infringement by the Company or any Subsidiary of any third party's
            Intellectual Property rights;

      (o)   issuance or sale by the Company or any Subsidiary of any of its
            shares of capital stock, or securities exchangeable, convertible or
            exercisable therefor, or of any other of its securities;

      (p)   change in pricing or royalties set or charged by the Company or any
            Subsidiary to its customers or licensees or in pricing or royalties
            set or charged by persons who have licensed Intellectual Property to
            the Company or any Subsidiary;

      (q)   any event or condition of any character that has or could reasonably
            be expected to have a Material Adverse Effect on the Company; or

      (r)   agreement by the Company, any Subsidiary or any officer or employee
            of either on behalf of such entity to do any of the things described
            in the preceding clauses (a) through (q) (other than negotiations
            with Offeror and its representatives regarding the transactions
            contemplated by this Agreement).

4.9   LITIGATION. There is no private or governmental action, suit, proceeding,
      claim, arbitration or investigation pending before any agency, court or
      tribunal, foreign or domestic, or, to Principal Shareholders' knowledge,
      threatened against the Company or any Subsidiary or any of their
      respective properties or any of their respective officers or directors (in
      their capacities as such). There is no judgment, decree or order against
      the Company or any Subsidiary or, to the Principal Shareholders'
      knowledge, any of their respective directors or officers (in their
      capacities as such), including any judgment, decree or order that could
      prevent, enjoin, or materially alter or delay any of the transactions
      contemplated by this Agreement. All litigation to which the Company is a
      party (or, to the knowledge of the Principal Shareholders, threatened to
      become a party) is disclosed in the Company Disclosure Schedule.

4.10  RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement, judgment,
      injunction, order or decree binding upon the Company or any Subsidiary
      which has or could reasonably be expected to have the effect of
      prohibiting or materially impairing any current or future business
      practice of the Company or any Subsidiary, any acquisition of property by
      the Company or any Subsidiary or the overall conduct of business by the
      Company or any Subsidiary as currently conducted or as proposed to be
      conducted by the Company or by any Subsidiary. Neither the Company nor any
      Subsidiary has entered into any agreement under which the Company or any
      Subsidiary is restricted from selling, licensing or otherwise distributing
      any of its products to any class of customers, in any geographic area,
      during any period of time or in any segment of the market.

4.11  PERMITS; COMPANY PRODUCTS; REGULATION.

      (a)   Each of the Company and each Subsidiary is in possession of all
            franchises, grants, authorizations, licenses, permits, easements,
            variances, exceptions, consents, certificates, approvals and orders
            necessary for the Company or that Subsidiary, to own, lease and
            operate its properties or to carry on its business as it is now
            being conducted (the "Company Authorizations") and no


                                      -11-
<PAGE>   16

            suspension or cancellation of any Company Authorization is pending
            or, to the Principal Shareholders' knowledge, threatened, except
            where the failure to have, or the suspension or cancellation of, any
            Company Authorization would not have a Material Adverse Effect on
            the Company. Neither the Company nor any Subsidiary is in conflict
            with, or in default or violation of, (i) any laws applicable to the
            Company or any Subsidiary or by which any property or asset of the
            Company or any Subsidiary is bound or affected, (ii) any Company
            Authorization or (iii) any note, bond, mortgage, indenture,
            contract, agreement, lease, license, permit, franchise or other
            instrument or obligation to which the Company or any Subsidiary is a
            party or by which the Company or any Subsidiary or any property or
            asset of the Company or any Subsidiary is bound or affected, except
            for any such conflict, default or violation that would not,
            individually or in the aggregate have a Material Adverse Effect on
            the Company.

      (b)   Except as would not have a Material Adverse Effect on the Company,
            there have been no written notices, citations or decisions by any
            governmental or regulatory body that any product produced,
            manufactured, marketed or distributed at any time by the Company or
            any Subsidiary (the "Products") is defective or fails to meet any
            applicable standards promulgated by any such governmental or
            regulatory body. To the knowledge of the Principal Shareholders, the
            Company has complied in all material respects with the laws,
            regulations, policies, procedures and specifications with respect to
            the design, manufacture, labeling, testing and inspection of the
            Products. Except as disclosed in Section 4.11(b) of the Company
            Disclosure Schedule, there have been no recalls, field notifications
            or seizures ordered or, to the Principal Shareholders' knowledge,
            threatened by any such governmental or regulatory body with respect
            to any of the Products.

      (c)   The Company has obtained, in all countries where either the Company
            or a Subsidiary is marketing or has marketed its Products, all
            applicable licenses, registrations, approvals, clearances and
            authorizations required by local, state or federal agencies in such
            countries regulating the safety, effectiveness and market clearance
            of the Products currently or previously marketed by the Company or
            any Subsidiary in such countries, except for any such failures as
            would not, individually or in the aggregate, have a Material Adverse
            Effect on the Company. The Principal Shareholders have identified
            and made available for examination by Offeror all information
            relating to regulation of its Products, including licenses,
            registrations, approvals, permits, device listing, inspections, the
            Company's recalls and product actions, audits and the Company's
            ongoing field tests. The Principal Shareholders have identified in
            writing to Offeror all international locations where regulatory
            information and documents are kept.

4.12  TITLE TO PROPERTY.

      (a)   The Company and each Subsidiary has good and marketable title to all
            of its respective properties, interests in properties and assets,
            real and personal, reflected in the Company Balance Sheet or
            acquired after the Company




                                      -12-
<PAGE>   17

            Balance Sheet Date (except properties, interests in properties and
            assets sold or otherwise disposed of since the Company Balance Sheet
            Date in the ordinary course of business), or with respect to leased
            properties and assets, valid leasehold interests in, free and clear
            of all mortgages, liens, pledges, charges or encumbrances of any
            kind or character, except (i) the lien of current taxes not yet due
            and payable, (ii) such imperfections of title, liens and easements
            as do not and will not materially detract from or interfere with the
            use of the properties subject thereto or affected thereby, or
            otherwise materially impair business operations involving such
            properties and (iii) liens securing debt which is reflected on the
            Company Balance Sheet. The plants, property and equipment of the
            Company and Subsidiaries that are used in the operations of their
            businesses are in good operating condition and repair. All
            properties used in the operations of the Company and its
            Subsidiaries are reflected in the Company Balance Sheet to the
            extent UK GAAP requires the same to be reflected.

      (b)   Section 4.12(b) of the Company Disclosure Schedule also sets forth a
            true, correct and complete list of all equipment, plant and
            machinery (including fixed plant and machinery) (the "Equipment")
            owned or leased by the Company and its Subsidiaries, and such
            Equipment is, taken as a whole, (i) adequate for the conduct of the
            Company's business, consistent with its past practice and (ii) in
            good operating condition (except for ordinary wear and tear).

      (c)   The Company has no liability (whether actual, contingent or
            otherwise) as tenant, assignee, guarantor, covenantor or otherwise
            arising from or relating to any estate, interest or right in any
            land other than the real properties of which short particulars are
            set out in Section 4.12(c) of the Company Disclosure Schedule (the
            "Properties," and "Property" shall be construed accordingly). The
            Company has a good and marketable title to each Property for the
            estate or interest set out in Section 4.12(c) of the Company
            Disclosure Schedule, free from any mortgages or charges, any
            agreements for sale or lease, options or rights of pre-emption and
            any covenants, restrictions, stipulations, easements or other
            encumbrances which materially adversely affect the use, enjoyment or
            value of the Property. Any leases, underleases, tenancies, licenses
            or other agreements or arrangements giving rise to rights of
            occupation to which any Property is subject (the "Letting
            Documents") are referred to in Section 4.12(c) of the Company
            Disclosure Schedule. Otherwise the Company is in actual occupation
            of each of the Properties on an exclusive basis and, except by
            virtue of the Letting Documents, no person, other than the Company,
            has any right (actual or contingent) to possession, occupation or
            use of or interest in the Properties. The documents of title
            relating to each Property consist of original documents or properly
            examined abstracts, all of which are in the possession of the
            Company or are unconditionally held to its order. Where necessary
            all title deeds are fully stamped with ad valorem stamp duty and a
            produced document stamp.

      (d)   Complete and accurate copies of all Leases and Letting Documents
            have been delivered to the Offeror and the Company has not committed
            any breach


                                      -13-
<PAGE>   18

            thereof. The Company has complied in all material respects with all
            laws, regulations, restrictions, covenants and obligations
            (including all covenants binding the Company contained in any Lease
            or Letting Document) relating to the Property, the Company has not
            received any notice or allegation of any breach of such laws,
            regulations, restrictions, covenants or obligations from any person
            and there are no circumstances likely to give rise to the service of
            any such notice or allegation.

      (e)   There are appurtenant to the Property all rights and easements
            necessary for the use and enjoyment of the Property or (if there are
            no such rights and easements) none are required. There are adequate
            facilities and all necessary consents for the supply of all usual
            services to and the discharge of effluent from the Property. The
            Company has not had occasion to make any claim or complaint in
            relation to any neighboring property or its use or occupation and
            there are no disputes, claims, actions, demands or complaints which
            are outstanding or which are expected by the Company in relation to
            any Property and no notices materially affecting the Property have
            been given or received. The Property is not subject to any outgoings
            other than the uniform business rate or water rates (and sums due
            under any Lease including rent, insurance and service charge) and
            all such payments have been made to date.

      (f)   The current use of each Property is as set out in Section 4.12(c) of
            the Company Disclosure Schedule and is a lawful use under the Town
            and Country Planning Act 1990, the Planning (Listed Buildings and
            Conservation Areas) Act 1990, the Planning (Hazardous Substances)
            Act 1990, the Planning (Consequential Provisions) Act 1990 and the
            Planning and Compensation Act 1991 and all other statutes regulating
            the development, design, use and control of property, and is being
            and has been carried out in accordance with valid planning
            permissions. No enforcement proceedings have been commenced or
            notices served and no such proceedings or notices have been
            proposed.

      (g)   No planning permission contains unusual or otherwise unduly onerous
            conditions, is the subject of an existing challenge as to its
            validity or has been issued within the six months immediately before
            the date of this Agreement. There is no outstanding order, notice or
            other requirement of any local or other authority affecting the
            Property or involving expenditure in compliance with it nor any
            circumstances which may result in any such order or notice being
            made or served. All buildings and structures on the Properties are
            in good and substantial repair and condition. No buildings or
            structures have been constructed or extensions or major alternations
            carried out within the last six years.

      (h)   In relation to each Property where the Company's tenure is leasehold
            (i) any consents required for the grant of or under the covenants
            contained in the Lease have been obtained; (ii) the last installment
            of rent was paid to and was accepted by the landlord or its agents
            without qualification; (iii) All steps in rent reviews have been
            duly taken and no rent reviews are or should be currently under
            negotiation or the subject of a reference to an expert or arbitrator
            or the courts and, where appropriate, evidence of the agreement or

                                      -14-
<PAGE>   19

            determination of the current rent has been placed with the documents
            of title; (iv) Sections 24 to 28 Landlord and Tenant Act 1954 have
            not been excluded in relation to the tenancy created by the Lease.

      (i)   In relation to each Property which is subject to Letting Documents
            (i) any consents required for the grant of or under the covenants
            contained in the Letting Documents have been obtained; (ii) all rent
            and additional rent, service charges or other payments under the
            Letting Documents have been paid to date and there is no subsisting
            breach of the covenants contained in the Letting Documents; (iii)
            the Property is not subject to any tenancy which is being continued
            after the contractual expiry date; (iv) in respect of every Letting
            Document which is not a new tenancy as defined in section 28 LTCA,
            the present tenant and each of its predecessors in title and any
            surety for any of them has given a covenant to the Company to
            observe and perform the obligations of the tenant throughout the
            term and no such persons have been released or are or may be
            entitled to be released.

4.13  INTELLECTUAL PROPERTY.

      (a)   The Company and each of its Subsidiaries own, or are licensed or
            otherwise possess legally enforceable rights to use all patents,
            patent rights, trademarks, trademark rights, trade names, trade name
            rights, service marks, copyrights, and any applications for any of
            the foregoing, mask works, mask work rights, net lists, schematics,
            industrial models, inventions, technology, know-how, trade secrets,
            inventory, ideas, algorithms, processes, computer software programs
            or applications (in both source code and object code form), and
            tangible or intangible proprietary information or material
            ("Intellectual Property") that are used or proposed to be used in
            the business of the Company or any Subsidiary as currently conducted
            or as proposed to be conducted by the Company or any Subsidiary.

      (b)   Section 4.13 of the Company Disclosure Schedule lists (i) all
            patents and patent applications and all registered and unregistered
            trademarks, trade names and service marks, copyrights, and mask work
            rights, included in the Intellectual Property, including the
            jurisdictions in which each such Intellectual Property right has
            been issued or registered or in which any application for such
            issuance and registration has been filed, all of which Intellectual
            Property has been validly assigned to the Company by Scientific
            Generics, Ltd., (ii) all licenses, sublicenses and other agreements
            to which the Company or any Subsidiary is a party and pursuant to
            which any person is authorized to use any Intellectual Property, and
            (iii) all licenses, sublicenses and other agreements as to which the
            Company or any Subsidiary is a party and pursuant to which the
            Company or any Subsidiary is authorized to use any third party
            patents, trademarks or copyrights, including software ("Third Party
            Intellectual Property Rights") which are incorporated in, are, or
            form a part of any products of the Company or any Subsidiary that
            are, individually or in the aggregate, material to the business of
            the Company or any Subsidiary. Neither the Company nor any
            Subsidiary is in violation of any license, sublicense or agreement
            described in Section 4.13 of the Company Disclosure Schedule.

                                      -15-
<PAGE>   20

            The execution and delivery of this Agreement by the Company and the
            consummation of the transactions contemplated hereby, will neither
            cause the Company or any Subsidiary to be in violation or default
            under any such license, sublicense or agreement, nor entitle any
            other party to any such license, sublicense or agreement to
            terminate or modify such license, sublicense or agreement. Except as
            set forth in Section 4.13 of the Company Disclosure Schedule, the
            Company is the sole and exclusive owner or licensee of, with all
            right, title and interest in and to (free and clear of any liens),
            the Intellectual Property, and has sole and exclusive rights (and is
            not contractually obligated to pay any compensation to any third
            party in respect thereof) to the use thereof or the material covered
            thereby in connection with the services or products in respect of
            which Intellectual Property is being used.

      (c)   So far as the Principal Shareholders are aware, there is no material
            unauthorized use, disclosure, infringement or misappropriation of
            any Intellectual Property rights of the Company or any Subsidiary,
            any trade secret material to the Company or any Subsidiary or any
            Intellectual Property right of any third party to the extent
            licensed by or through the Company or any Subsidiary, by any third
            party, including any employee or former employee of the Company or
            any Subsidiary. Neither the Company nor any Subsidiary has entered
            into any agreement to indemnify any other person against any charge
            of infringement of any Intellectual Property, other than
            indemnification provisions contained in purchase orders arising in
            the ordinary course of business.

      (d)   All patents, registered trademarks, service marks and copyrights
            held by the Company or any Subsidiary are valid and existing and so
            far as the Principal Shareholders are aware, there is no assertion
            or claim (or basis therefor) challenging the validity of any
            Intellectual Property of the Company or any Subsidiary. The Company
            has not been sued in any suit, action or proceeding which involves a
            claim of infringement of any patents, trademarks, service marks,
            copyrights or violation of any trade secret or other proprietary
            right of any third party. So far as the Principal Shareholders are
            aware, neither the conduct of the business of the Company and each
            Subsidiary as currently conducted or contemplated nor the
            manufacture, sale, licensing or use of any of the products of the
            Company or any Subsidiary as now manufactured, sold or licensed or
            used, nor the use in any way of the Intellectual Property in the
            manufacture, use, sale or licensing by the Company or any Subsidiary
            of any products currently proposed, infringes on or will infringe or
            conflict with, in any way, any license, trademark, trademark right,
            trade name, trade name right, patent, patent right, industrial
            model, invention, service mark or copyright of any third party. All
            registered trademarks, service marks and copyrights held by the
            Company are valid and subsisting. So far as the Principal
            Shareholders are aware, no third party is challenging the ownership
            by the Company or any Subsidiary, or validity or effectiveness of,
            any of the Intellectual Property. Neither the Company nor any
            Subsidiary has brought any action, suit or proceeding for
            infringement of Intellectual Property or breach of any license or
            agreement involving Intellectual Property against any third party.
            There are no pending, or to the best of Principal Shareholders'
            knowledge, threatened


                                      -16-
<PAGE>   21
            interference, re-examinations, oppositions or nullities involving
            any patents, patent rights or applications therefor of the Company
            or any Subsidiary, except such as may have been commenced by the
            Company or any Subsidiary. There is no breach or violation of or
            threatened or actual loss of rights by the Company under any
            licenses to which the Company is a party.

      (e)   The Company has secured valid written assignments from all
            consultants and employees who contributed to the creation or
            development of Intellectual Property of the rights to such
            contributions that the Company does not already own by operation of
            law.

      (f)   The Company has taken all reasonable steps to protect and preserve
            the confidentiality of all Intellectual Property not otherwise
            protected by patents, patent applications or copyright
            ("Confidential Information"). Each of the Company and its
            Subsidiaries has a policy requiring each of its employees and
            contractors to execute proprietary information and confidentiality
            agreements substantially in the Company's standard forms and all
            current and former employees and contractors of the Company and each
            Subsidiary have executed such an agreement. All use, disclosure or
            appropriation of Confidential Information owned by the Company or a
            Subsidiary to a third party has been pursuant to the terms of a
            written agreement between the Company or the applicable Subsidiary
            and such third party. All use, disclosure or appropriation of
            Confidential Information not owned by the Company or a Subsidiary
            has been pursuant to the terms of a written agreement between the
            Company or a Subsidiary and the owner of such Confidential
            Information, or is otherwise lawful.

4.14  ENVIRONMENTAL MATTERS.

      (a)   The following terms shall be defined as follows:

            (i)   "ENVIRONMENTAL AND SAFETY LAWS" shall mean any and all laws,
                  whether civil, criminal or administrative (including, without
                  limitation, European Community or European Union regulations,
                  directives, decisions and recommendations, statutes and
                  subordinate legislation; regulations, orders and ordinances;
                  leases or licenses or other agreements (including agreements
                  of the nature referred to at paragraph 44 of Chapter IV of the
                  draft statutory Guidance to Part IIA of the Environment
                  Protection Act 1990) which are binding on the Company; permits
                  and licenses required to be issued; codes of practice,
                  circulars, guidance notes and the like, common law, local laws
                  and bye-laws; and judgments, notice, orders, directions,
                  instructions or awards of any person having legal and/or
                  regulatory authority or any court of law or tribunal in any
                  jurisdiction), as each may be amended from time to time, that
                  are intended to assure the protection of the environment, or
                  that classify, regulate, call for the remediation of, require
                  reporting with respect to, or list or define air, water,
                  groundwater, solid waste, hazardous or toxic substances,
                  materials, wastes, pollutants or contaminants; which regulate
                  the manufacture, handling, transport, use, treatment, storage
                  or disposal of Hazardous Materials (as defined



                                      -17-
<PAGE>   22


                  below) or materials containing Hazardous Materials; or which
                  are intended to assure the protection, safety and good health
                  of employees, workers or other persons, including the public
                  in each case if and to the extent that they are legally
                  binding on the Company.

            (ii)   "HAZARDOUS MATERIALS" shall mean any toxic or hazardous
                   substance, material or waste or any pollutant or contaminant,
                   or infectious or radioactive substance or material, including
                   without limitation, those substances, materials and wastes
                   defined in or regulated under any Environmental and Safety
                   Laws; petroleum or petroleum products including crude oil or
                   any fractions thereof; natural gas, synthetic gas, or any
                   mixtures thereof; radon; asbestos; or any other pollutant or
                   contaminant.

            (iii)  "PROPERTY" shall mean all real property leased or owned by
                   the Company or its Subsidiaries either currently or in the
                   past.

            (iv)   "FACILITIES" shall mean all buildings and improvements on the
                   Property of the Company or its Subsidiaries.

      (b)   The Company represents and warrants as follows: (i) no methylene
            chloride or asbestos is contained in or has been used at or released
            from the Facilities; (ii) all Hazardous Materials and wastes have
            been disposed of in accordance with all Environmental and Safety
            Laws; and (iii) the Company and its Subsidiaries have received no
            notice (verbal or written) of any noncompliance of the Facilities or
            of its past or present operations with Environmental and Safety
            Laws; (iv) no notices, administrative actions or suits are pending
            or threatened relating to Hazardous Materials or a violation of any
            Environmental and Safety Laws; (v) there has not been in the past,
            and there is not now, any contamination, disposal, spilling,
            dumping, incineration, discharge, storage, treatment or handling of
            Hazardous Materials on, under or migrating to or from the Facilities
            or Property (including without limitation, soils and surface and
            ground waters); (vi) there have not been in the past, and are not
            now, any underground tanks or underground improvements at, on or
            under the Property including without limitation, treatment or
            storage tanks, sumps, or water, gas or oil wells; (vii) there are no
            polychlorinated biphenyls ("PCBs") deposited, stored, disposed of or
            located on the Property or Facilities or ---- any equipment on the
            Property containing PCBs at levels in excess of 50 parts per
            million; (viii) there is no formaldehyde on the Property or in the
            Facilities, nor any insulating material containing urea formaldehyde
            in the Facilities; (ix) the Facilities and the Company's and its
            Subsidiaries uses and activities therein have at all times complied
            with all Environmental and Safety Laws; (x) the Company and its
            Subsidiaries have all the permits and licenses required to be issued
            and are in full compliance with the terms and conditions of those
            permits; and (xi) neither the Company nor any of its Subsidiaries is
            liable for any off-site contamination nor under any Environmental
            and Safety Laws.

4.15  TAXES.

      (a)   The following terms shall be defined as follows:

                                      -18-
<PAGE>   23

      (i)   "TAXATION" or "TAX" shall mean all forms of taxation including any
            charge, tax, duty, levy, impost, withholding or liability wherever
            chargeable imposed for support of national, state, federal,
            municipal or local government or any other person and whether of the
            UK or any other jurisdiction; and any penalty, fine, surcharge,
            interest, charges or costs payable in connection with any taxation
            within (a) above;

      (ii)  "TAXATION AUTHORITY" shall mean the Inland Revenue, Customs &
            Excise, the Department of Social Security and any other governmental
            or other authority whatsoever competent to impose any Taxation,
            whether in the United Kingdom or elsewhere;

      (iii) "TAXATION STATUTE" means any directive, statute, enactment, law, or
            regulation or similar measure, wheresoever enacted or issued, coming
            into force or entered into providing for or imposing any Taxation
            and shall include orders, regulations, instruments, bye-laws or
            other subordinate legislation made under the relevant statute or
            statutory provision and any such measure which amends, extends,
            consolidates or replaces, or which has been amended, extended,
            consolidated or replaced by, any such measure; and

      (iv)  "ACCOUNTS DATE" means December 31, 1998.

(b)   GENERAL.

      (i)   All notices, returns, computations and registrations of the Company
            for the purposes of Taxation have been made punctually on a proper
            basis and are correct and none of them is, or is likely to be, the
            subject of any dispute with any Taxation Authority. All information
            supplied by the Company for the purposes of Taxation was when
            supplied and remains complete and accurate in all material respects.
            All Taxation which the Company is liable to pay prior to Closing has
            been or will be so paid prior to Closing. The Company has not within
            the period of six years ending on the date of this Agreement paid or
            become liable to pay any penalty, fine, surcharge or interest
            charged by virtue of the provisions of the Taxes Management Act (the
            "TMA") or any other Taxation Statute.

      (ii)  All income tax deductible and payable under the PAYE system and/or
            any other Taxation Statute has, so far as is required to be
            deducted, been deducted from all payments made or treated as made by
            the Company and all mounts due to be paid to the Inland Revenue
            prior to the date of this Agreement have been so paid, including all
            Tax chargeable on benefits provided for directors, employees or
            former employees of the Company or any persons required to be
            treated as such. All deductions and payments required to be made
            under any Taxation Statute in respect of national insurance and
            social security contributions (including employer's contributions)
            have been so made. All payments by the Company to any person which
            ought to have been made under deduction of Tax have been so made and
            the Company (if required by law to do so) has accounted to the
            Inland Revenue for the Tax so deducted. Proper



                                      -19-
<PAGE>   24

                  records have been maintained in respect of all such deductions
                  and payments and all applicable regulations have been complied
                  with. Section 4.15(b)(ii) of the Company Disclosure Schedule
                  contains details so far as they affect the Company of all
                  current dispensations agreed with the Inland Revenue in
                  relation to PAYE and all notifications given by the Inland
                  Revenue under section 166 the Income and Corporation Taxes Act
                  1988 (the "TA 88").

            (iii)  The Company has not been subject to any visit, audit,
                   investigation, discovery or access order by any Taxation
                   Authority and there are no circumstances existing which make
                   it likely that a visit, audit, investigation, discovery or
                   access order will be made. The Company is and always has been
                   resident for Taxation purposes only in the jurisdiction in
                   which it is incorporated.

            (iv)   Full provision or reserve has been made in the Accounts for
                   all Taxation assessed or liable to be assessed on the Company
                   or for which it is accountable in respect of income, profits
                   or gains earned, accrued or received or deemed to be earned,
                   accrued or received on or before the Accounts Date, including
                   distributions made down to such date or provided for in the
                   Financial Statements and proper provision has been made in
                   the Financial Statements for deferred Taxation in accordance
                   with generally accepted accounting principles.

            (v)    The amount of Taxation chargeable on the Company during any
                   accounting period ending on or within the six years before
                   the Accounts Date has not depended on any concessions,
                   agreements or other formal or informal arrangements with any
                   Taxation Authority. The Company has not entered into or been
                   a party to any scheme or arrangement of which the main
                   purpose, or one of the main purposes, was the avoidance of or
                   the reduction in or the deferral of a liability to Taxation.

            (vi)   The Company has not without the prior consent of the Treasury
                   carried out or agreed to carry out any transaction under
                   section 765 TA 88 which would be unlawful in the absence of
                   such consent and has, where relevant, complied with the
                   requirements of section 765A(2) TA 88 (supply of information
                   on movement of capital within the EU) and any regulations
                   made or notice given under that provision. All particulars
                   furnished to any Taxation Authority in connection with an
                   application for clearance or consent by the Company or on its
                   behalf or affecting the Company has been made and obtained on
                   the basis of full and accurate disclosure to the relevant
                   Taxation Authority of all relevant material facts and
                   considerations; and any transaction for which clearance or
                   consent was obtained has been carried into effect only in
                   accordance with the terms of the relevant clearance or
                   consent.

            (vii)  The Company has sufficient records relating to past events to
                   permit accurate calculation of the Taxation liability or
                   relief which would arise upon a disposal or realisation on
                   closing of each asset owned by the Company at the Accounts
                   Date or acquired by the Company since that


                                      -20-
<PAGE>   25

                  date but before Closing. The Company has duly submitted all
                  claims and disclaimers the making of which has been assumed
                  for the purposes of the Financial Statements. Section
                  4.15(a)(vii) of the Company Disclosure Schedule contains full
                  particulars of all matters relating to Taxation in respect of
                  which the Company is or at Closing will be entitled (a) to
                  make any claim (including a supplementary claim), disclaimer
                  or election for relief under any Taxation Statute; (b) to
                  appeal against any assessment or determination relating to
                  Taxation; (c) to apply for a postponement of Taxation. No
                  shares or securities have been issued by the Company to which
                  the provisions of section 140A or 140D TA 88 have been or
                  could be applied.

(c)   CORPORATION TAX.

      (i)   If each of the capital assets of the Company was disposed of on the
            date of this Agreement for a consideration equal to the book value
            of that asset in, or adopted for the purposes of, the Financial
            Statements or, in the case of assets acquired since the Accounts
            Date, equal to the consideration given upon its acquisition, no
            liability to corporation tax on chargeable gains or balancing
            charges under the Capital Allowance Act 1990 (the "CAA") would
            arise and for the purpose of determining the liability to
            corporation tax on chargeable gains there shall be disregarded any
            relief and allowances available to the Company other than amounts
            falling to be deducted under section 38 Taxation of Chargeable Gains
            Act 1992 (the "TCGA").

      (ii)  All expenditure which the Company has incurred or may incur under
            any subsisting commitment on the provision of machinery, plant or
            buildings has qualified or will qualify (if not deductible as a
            trading expense for trade carried on by the Company) for
            writing-down allowances or industrial building allowances (as the
            case may be) under CAA and where appropriate notices have been given
            to the Inland Revenue under section 118 Finance Act 1994.

      (iii) The Company has not made any claim for capital allowances in respect
            of any asset which is leased to or from or hired to or from the
            Company and no election affecting the Company has been made or
            agreed to be under sections 53 or 55 CAA in respect of such assets.
            The Company is not a lessee under a lease to which the provisions of
            Schedule 12 FA 1997 apply or could apply. The Company has not made
            any election under section 37 CAA nor is it taken to have made such
            an election under section 37(8)(c) CAA. The Company does not own and
            has not owned a long life asset (within the meaning of section 38A
            CAA) in respect of which any claim for capital allowances would be
            subject to the provisions of section 38E-38G CAA. None of the assets
            of the Company expenditure on which has qualified for a capital
            allowance under Part I CAA has at any time been used otherwise than
            as an industrial building or structure.

                                      -21-
<PAGE>   26

      (iv)  No distribution within the meaning of sections 209, 210 and 211 TA
            88 has been made (or will be deemed to have been made) by the
            Company after 5th April, 1965 except dividends shown in its audited
            accounts and the Company is not bound to make any such distribution.
            No elections have been made pursuant to section 246A TA 88 in
            respect of any dividends and nor has the Company made a distribution
            to which the provisions of paragraph 2 of Schedule 7 FA 1997 have
            been, or could be, applied. The Company has not received a dividend
            in respect of which the payer has made an election under section
            246A TA 88 nor a distribution to which the provisions of paragraph 2
            of Schedule 7 FA 1997 have been, or could be, applied.

      (v)   The Company has not any time after 6th April, 1965 repaid, redeemed
            or repurchased or agreed to repay, redeem or repurchase or granted
            an option under which it may become liable to purchase any shares of
            any class of its issued share capital nor has the Company after that
            date capitalised or agreed to capitalise in the form of shares or
            debentures any profits or reserves of any class or description or
            otherwise issued or agreed to issue any share capital other than for
            the receipt of new consideration (within the meaning of Part VI TA
            88) or passed or agreed to pass any resolution to do so. The Company
            has not been engaged in nor been a party to any of the transactions
            set out in sections 213 to 218 inclusive TA 88 nor has it made or
            received a chargeable payment as defined in section 218(1) TA 88. No
            securities (within the meaning of section 254(1) TA 88) issued by
            the Company and remaining in issue at the date of this Agreement
            were issued in such circumstances that the interest payable thereon
            falls to be treated as a distribution under either sections
            209(2)(d), 209(2)(da) or 209(2)(e) TA 88, nor has the Company agreed
            to issue such securities in such circumstances. The Company has not
            received any capital distribution to which the provisions of section
            189 TCGA could apply.

      (vi)  The Company has not entered into any transaction to which the
            provisions of section 779 or 780 TA 88 have been or could be
            applied. The Company has not since 31st March, 1982 received any
            foreign loan interest in respect of which double taxation relief
            will or may be restricted under section 798 TA 88. No rents,
            interest, annual payments or other sums of an income nature paid or
            payable by the Company or which the Company is under an existing
            obligation to pay in the future are or may be wholly or partially
            disallowable as deductions, management expenses or charges in
            computing profits for the purposes of corporation tax by reason of
            the provisions of sections 74, 79, 125, 338, 339, 779 to 784
            inclusive, 787 or 788 TA 88 or any other statutory provision or
            otherwise. No rent is or has been payable by the Company to which
            the provisions of sections 33A and 33B TA 88 could have applied
            prior to their ceasing to have effect. No claim has been made by the
            Company under sections 584, 585 or 723 TA 88 or under section 279
            TCGA. The Company has not made or agreed to make any payment to or
            provided or agreed to provide any benefit for any director or former



                                      -22-
<PAGE>   27

                  director, officer or employee of the Company, whether as
                  compensation for loss of office, termination of employment or
                  otherwise, which is not allowable as a deduction in
                  calculating the profits of the Company for Taxation purposes
                  whether up to or after the Accounts Date.

            (vii)  Intentionally deleted.

            (viii) The Company is not a party to any transaction or arrangement
                   under which it may be required to pay for any asset or any
                   services or facilities of any kind an amount which is in
                   excess of the market value of that asset or those services or
                   facilities, neither is or was the Company a party to any
                   transaction or arrangement to which the provisions of section
                   770A and Schedule 28AA TA 88 may apply and nor will the
                   Company receive any payment for an asset or any services or
                   facilities of any kind that it has supplied or provided or is
                   liable to supply or provide which is less than the market
                   value of that asset or those services or facilities. The
                   Company has not disposed of or acquired any asset in
                   circumstances falling within section 17 or 19 TCGA nor given
                   or agreed to give any consideration to which section
                   128(1)(2) TCGA could apply. No allowable loss has accrued to
                   the Company to which section 18(3) TCGA will apply.

            (ix)   The Company is not owed a debt, other than a debt on a
                   security, on the disposal or satisfaction of which a
                   liability to corporation tax on chargeable gains will arise
                   by reason of section 251 TCGA. No claim for relief has been
                   allowed to the Company pursuant to sections 253 and 254 TCGA
                   in respect of any loan and no chargeable gain has or is
                   likely to arise pursuant to section 253 (5), (6), (7) or (8)
                   or section 254 (9) or (10) TCGA. The Company has not acquired
                   benefits under any policy of assurance otherwise than as the
                   original holder of legal and beneficial title.

            (x)    No claim or election affecting the Company has been made (or
                   assumed to be made) under sections 140, 140C or 187 TCGA. No
                   allowable loss which might accrue on the disposal by the
                   Company of any share in or security of any company is likely
                   to be reduced by virtue of the provisions of sections 176 and
                   177 TCGA. The Company has not been a party to any scheme or
                   arrangement whereby the value of an asset has been materially
                   reduced as set out in sections 30-34 TCGA. No asset owned by
                   the Company is subject to a deemed disposal and
                   re-acquisition under Schedule 2 TCGA so as to restrict the
                   extent to which the gain or loss over the period of ownership
                   may be apportioned by reference to straightline growth.

            (xi)   The Company has made no claim under any of the following (a)
                   section 280 TCGA (tax on chargeable gains payable by
                   installments); (b) section 24(2) TCGA (assets of negligible
                   value); (c) section 242(2) TCGA (small part disposals of
                   land); or (d) section 139 FAA 1993 (deferral of unrealized
                   exchange gains).

                                      -23-
<PAGE>   28

            (xii)  The Company has not received any assets by way of gift as
                   mentioned in section 282 TCGA and the Company has not held,
                   and does not hold, shares in a company to which section 125
                   TCGA could apply.

            (xiii) There has not accrued or arisen any income, profit or gain in
                   respect of which the Company may be liable to corporation tax
                   by virtue of the provisions of section 13 TCGA or Chapter IV
                   of Part XVII TA 88. The Company has not been served with a
                   notice in respect of the unpaid corporation tax liability of
                   any company pursuant to section 191 TCGA.

            (xiv)  No notice of the making of a direction under section 747 TA
                   88 has been received by the Company and no circumstances
                   exist which would entitle the Inland Revenue to make such a
                   direction or to apportion any profits of a controlled foreign
                   company to the Company pursuant to section 752 TA 88. The
                   Company has not been a party to any transaction or
                   arrangement whereby it is or may in future become liable for
                   Taxation under or by virtue of section 42A TA 88 or
                   regulations made under that Act or under section 126 FA 1995.

            (xv)   No scheme registered under Chapter III of Part V TA 88
                   applies to the Company or any of its employees and no
                   application for registration of a scheme so applying has been
                   made. The Company has not received a payment out of funds
                   held for the purposes of an exempt approved scheme in respect
                   of which an amount is recoverable by the Inland Revenue under
                   section 601 TA 88.

            (xvi)  Section 14.5(c)(xvi) of the Company Disclosure Schedule
                   contains full particulars of all claims and elections made
                   (or assumed to be made) under sections 23, 152-162 or 165,
                   175, 247, 248 TCGA insofar as they could affect the
                   chargeable gain or allowable loss which would arise in the
                   event of a disposal by the Company of any of its assets, and
                   indicate which assets (if any) so affected would not on a
                   disposal give rise to relief under Schedule 4 TCGA. Section
                   4.15(c)(xvi) of the Company Disclosure Schedule contains full
                   particulars of elections made under (a) Regulation 10 The
                   Exchange Gains and Losses (Alternative Method of Calculation
                   of Gain or Loss) Regulations 1994 and whether or not such
                   elections have been varied; and (b) Regulations 3 or 4 The
                   Local Currency Elections Regulations 1994 and such election
                   is still valid.

            (xvii) All interests, discounts and premiums payable by the Company
                   in respect of its loan relationships (within the meaning of
                   section 81 Finance Act 1996) are eligible to be brought into
                   account by the Company as a debit for the purposes of Chapter
                   II of Part IV Finance Act 1996 at the time and to the extent
                   that such debits are recognized in the statutory accounts of
                   the Company. Section 14.5(c)(xvii) of the Company Disclosure
                   Schedule contains full particulars of any debtor relationship
                   (within the meaning of section 103 Finance Act 1996) of the
                   Company which relates to a relevant discounted security
                   (within the meaning of paragraph 3 of Schedule 13 Finance Act
                   1996) to which paragraph 17 or 18 of Schedule


                                      -24-
<PAGE>   29

                  9 Finance Act 1996 applies. Section 14.5(c)(xvii) of the
                  Company has not been a party to a loan relationship which had
                  an unallowable purpose (within the meaning of paragraph 13 of
                  Schedule 9 Finance Act 1996). The Company Disclosure Schedules
                  contains full particulars of: (a) any loan relationships to
                  which the Company is a party to which paragraph 8 of Schedule
                  15 Finance Act 1996 has applied or will apply on the
                  occurrence of a relevant event (within the meaning of
                  paragraph 8(2) of Schedule 15 Finance Act 1996); (b) the
                  amount of any deemed chargeable gain or deemed allowable loss
                  that has arisen or will arise on the occurrence of such
                  relevant event; and (c) any election made pursuant to
                  paragraph 9 of Schedule 15 Finance Act 1996. The Company has
                  not entered into any transaction to which paragraph 11 of
                  Schedule 9 Finance Act 1996 applies.

(d)   CORPORATION TAX - GROUPS OF COMPANIES.

      (i)   Section 4.15(d)(i) of the Company Disclosure Schedule contains full
            particulars of all arrangements and agreements relating to group
            relief (as defined by section 402 TA 88) to which the Company is or
            has been a party and all claims by the Company for group relief were
            when made and are now valid and have been or will be allowed by way
            of relief from corporation tax. The Company has not made nor is
            liable to make any payment under any arrangement or agreement save
            in consideration for the surrender of group relief allowable to the
            Company by way of relief from corporation tax. The Company has
            received all payments due to it under any arrangement or agreement
            for any surrender of group relief made by it and the payments are
            not liable to be refunded in whole or in part; (d) no such payment
            exceeds or could exceed the amount permitted by section 402(6) TA
            88; and (e) no arrangements such as are specified in section
            410(1)-(6) TA 88 exist or existed for any period of account in
            respect of which a surrender has been made or purports to have been
            made.

      (ii)  Section 4.15(d)(iii) of the Company Disclosure Schedule contains
            full particulars of all arrangements and agreements to which the
            Company is or has been a party relating to the surrender of advance
            corporation tax made or received by the Company under section 240 TA
            88 and (a) the Company has not paid nor is liable to pay for the
            benefit of any advance corporation tax which is or may become
            incapable of set-off against the Company's liability to corporation
            tax; (b) the Company has received all payments due to it under any
            arrangement or agreement for any surrender of advance corporation
            tax made by it and the payments are not liable to be refunded in
            whole or in part; (c) no such payment exceeds or could exceed the
            amount permitted by section 240(8) TA 88; and (d) no arrangements
            such as are specified in section 240(11) TA 88 whereby any person
            could obtain control of the Company exist or existed for any period
            in respect of which a claim under section 240 TA 88 has been made or
            purports to have been made.

                                      -25-
<PAGE>   30

      (iii) Section 4.15(d)(iii) of the Company Disclosure Schedule contains
            full particulars of all arrangements and agreements relating to the
            transfer of tax refunds to which the Company is or has been a party
            and (a) all claims by the Company for the transfer of tax refunds
            were when made and are now valid and have been or will be allowed by
            way of discharging the liability of the Company to pay any
            corporation tax; (b) the Company has not made nor is liable to make
            any payment under any arrangement or agreement save in consideration
            for the transfer of tax refunds allowable to the Company by way of
            discharge from liability to corporation tax and equivalent to the
            Taxation for which the Company would have been liable but for the
            transfer; (c) the Company has received all payments due to it under
            any such arrangement or agreement or transfer of tax refunds made by
            it and the payments are not liable to be refunded in whole or in
            part; (d) no such payment exceeds or could exceed the amount
            permitted by section 102(7) Finance Act 1989; and (e) no
            arrangements such as specified in section 410(1)-(6) TA 88 exist or
            existed for any period in respect of which a claim under section 102
            FA 1989 has been made or purports to have been made.

      (iv)  No tax has been or may be assessed on the Company pursuant to
            section 190 TCGA in respect of any chargeable gain accrued prior to
            the date of this Agreement and the Company has not at any time
            within the period of six years ending with the date of this
            Agreement transferred any asset other than trading stock including
            without limitation any transfer by way of share exchange within
            section 135 TCGA to any company which at the time of disposal was a
            member of the same group as defined in section 170 TCGA. The
            execution or completion of this Agreement or any other event since
            the Accounts Date will not result in any chargeable asset being
            deemed to have been disposed of and re-acquired by the Company for
            Taxation purposes pursuant to section 178 or 179 TCGA or as a result
            of any other Event since the Accounts Date.

      (v)   Section 4.15(d)(v) of the Company Disclosure Schedule contains full
            particulars of all elections made by the Company under section 247
            TA 88 and all such elections are now in force and the Company has
            not paid any dividend without advance corporation tax or made any
            payment without deduction of income tax in the circumstances
            specified in section 247(6) TA 88 and no assessment has been made on
            the Company in respect of advance corporation tax which ought to
            have been paid or income tax which ought to have been deducted. The
            Company has no capital losses the set-off of which are or may be
            restricted by section 177A and Schedule 7A TCGA.

(e)   CLOSE COMPANIES. The Company has at all times been a close company within
      the meaning of sections 414 and 415 TA 88. The Company has not in any
      accounting period beginning after 31st March, 1989 been a close
      investment-holding company as defined in section 13A TA 88. No
      distribution within


                                      -26-
<PAGE>   31

            section 418 TA 88 has ever been made by the Company. Any loans or
            advances made or agreed to be made by the Company within sections
            419 and 420 or 422 TA 88 have been disclosed and the Company has not
            released or written off or agreed to release or write off the whole
            or any part of any such loans or advances.

(f)         INHERITANCE TAX. The Company has made no transfers of value within
            sections 94 and 202 ITA nor has the Company received a transfer of
            value such that liability might arise under section 199 ITA nor has
            the Company been party to associated operations in relation to a
            transfer of value as defined by section 268 ITA. There is no
            unsatisfied liability to inheritance tax attached to or attributable
            to the Shares or any asset of the Company and none of them is
            subject to an Inland Revenue charge as mentioned in section 237 and
            238 ITA. No asset owned by the Company nor the Shares are liable to
            be subject to any sale, mortgage or charge by virtue of section 212
            ITA.

(g)   VAT.


      (i)   The Company is a taxable person duly registered for the purposes of
            value added tax ("VAT"). The Company has complied with all statutory
            provisions, rules, regulations, orders and directions in respect of
            VAT, has promptly submitted accurate returns, and the Company
            maintains full and accurate VAT records, has never been subject to
            any interest, forfeiture, surcharge or penalty nor been given any
            notice under sections 59 or 64 Value Added Tax Act ("VATA") nor been
            given a warning within section 76(2) VATA nor has the Company been
            required to give security under paragraph 4 of Schedule 11 VATA. VAT
            has been duly paid or provision has been made in the Accounts for
            all amounts of VAT for which the Company is liable.

      (ii)  All supplies made by the Company are taxable supplies and the
            Company has not been and will not be denied full credit for all
            input tax by reason of the operation of sections 25 and 26 VATA and
            regulations made thereunder or for any other reasons and no VAT paid
            by the Company is not input tax as defined in section 24 VATA and
            regulations made thereunder.

      (iii) The Company is not and has not been for VAT purposes a member of any
            group of companies other than the Group and no act or transaction
            has been effected in consequence of which the Company is or may be
            held liable for any VAT arising from supplies made by another
            company and no direction has been given nor will be given by H M
            Customs & Excise under Schedule 9A VATA as a result of which the
            Company would be treated for the purposes of VAT as a member of a
            group.

      (iv)  The Company has not been or agreed to be party to any transaction or
            arrangement in relation to which a direction has been or could be
            made under paragraph 1 of Schedule 6, VATA or to which paragraph
            2(3A) of Schedule 10 VATA applied. The Company is not and has not
            agreed to become liable for VAT by virtue of section 47 and 48 VATA.

                                      -27-
<PAGE>   32

      (v)   The Company or its relevant associate for the purposes of paragraph
            3(7) of Schedule 10 VATA has exercised the election to waive
            exemption from VAT (pursuant to paragraph 2 of Schedule 10 VATA)
            only in respect of those Properties listed (as having been the
            subject of such an election) in the Company Disclosure Schedule and
            (a) neither the Company nor its relevant associate has any intention
            or obligation to exercise such an election in respect of any other
            of the Properties; (b) all things necessary for the election to have
            effect have been done and in particular any notification and
            information required by paragraph 3(6) of Schedule 10 VATA has been
            given and any permission required by paragraph 3(9) of Schedule 10
            VATA has been properly obtained; (c) a copy of the notification and
            of any permission obtained from H M Customs & Excise in connection
            with the election has been disclosed to the Company; (d) no election
            has or will be disapplied or rendered ineffective by virtue of the
            application of the provisions of paragraph 2 (3AA) of Schedule 10
            VATA; (e) in no case has the Company charged VAT, whether on rents
            or otherwise, which is not properly chargeable; and (f) the Company
            has not agreed to refrain from making an election in relation to any
            of the Properties.

      (vi)  The Company does not own and has not at any time within the period
            of ten years preceding the date of this Agreement owned any assets
            which are capital items subject to the Capital Goods Scheme under
            Part XV of the VAT Regulations 1995. The Company has not made any
            claim for bad debt relief under section 36 VATA and details of any
            claim it could make have been disclosed. The Company has not entered
            into any self billing arrangement in respect of supplies made by any
            other person nor has it at any time agreed to allow any such person
            to make out VAT invoices in respect of supplies made by the Company.

(h)   STAMP DUTY. All stampable documents wheresoever executed (other than those
      which have ceased to have any legal effect) to which the Company is a
      party have been duly stamped or stamped with a particular stamp denoting
      that no stamp duty is chargeable. Since the Accounts Date there have been
      and are no circumstances or transactions to which the Company is or has
      been a party such that a liability to stamp duty or any penalty in respect
      of such duty will arise on the Company. Since the Accounts Date the
      Company has not incurred any liability to or been accountable for any
      stamp duty reserve tax and there has been no agreement within section
      87(1) FA 1986 which could lead to the Company incurring such a liability
      or becoming so accountable.

4.16  EMPLOYEES.

      (a)   The particulars shown in Section 4.16(a) of the Company Disclosure
            Schedule are true and complete and show in respect of each director,
            officer and employee of the Company his date of birth, the date on
            which he commenced continuous employment with the Company for the
            purposes of Employment Rights Act 1996 (the "ERA") and all
            remuneration payable and other benefits



                                      -28-
<PAGE>   33

            provided or which the Company is bound to provide (whether now or in
            the future) to each such person and include full particulars of all
            remuneration arrangements (particularly profit sharing, incentive
            and bonus arrangements to which the Company is a party whether
            legally binding or not) and each director, officer and employee of
            the Company is listed there. The Company is not a party to any
            agreement or arrangement with or commitment to any trade unions or
            staff association nor are any of its employees members of any trades
            union or staff association.

      (b)   There is no contract of service in force between the Company and any
            of its directors, officers or employees which is not terminable by
            the Company without compensation (other than any compensation
            payable under Parts X and XI ERA) on one month's notice given at any
            time or otherwise in accordance with section 86 ERA. There are no
            consultancy or management services agreements in existence between
            the Company and any other person, firm or company, and there are no
            agreements or other arrangements (binding or otherwise) between the
            Company or any employers' or trade association of which the Company
            is a member and any Trade Union. There are no outstanding pay
            negotiations with any employees or Trade Unions.

      (c)   There are no amounts owing to present or former directors, officers
            or employees of the Company other than not more than one month's
            arrears of remuneration accrued or due or for reimbursement of
            business expenses incurred within a period of three months preceding
            the date of this Agreement and no moneys or benefits other than in
            respect of remuneration or emoluments of employment are payable to
            or for the benefit of any present or former director, officer or
            employee of the Company, nor any dependant of any present or former
            director, officer or employee of the Company.

      (d)   Save to the extent (if any) to which provision or allowance has been
            made in the Company Balance Sheet or as set forth in Section 4.16(c)
            of the Company's Disclosure Schedule (i) no liability has been
            incurred or is anticipated by the Company for breach of any contract
            of employment or for services or for severance payments or for
            redundancy payments or protective awards or for compensation for
            unfair dismissal or for failure to comply with any order for the
            reinstatement or re-engagement of any employee or for sex or race
            discrimination or for any other liability accruing from the
            termination or variation of any contract of employment or for
            services; (ii) no gratuitous payment has been made or promised by
            the Company in connection with the actual or proposed termination,
            suspension or variation of any contract of employment or for
            services of any present or former director, officer or any dependant
            of any present or former director, officer or employee of the
            Company; and (iii) the Company has not made or agreed to make any
            payment to or provided or agreed to provide any benefit for any
            present or former director, officer or employee of the Company.

      (e)   The Company has in relation to each of its employees (and so far as
            relevant to each of its former employees) complied with (a) all
            obligations imposed on it by all relevant statutes, regulations and
            codes of conduct and practice affecting



                                      -29-
<PAGE>   34

            its employment of any persons and all relevant orders and awards
            made thereunder and has maintained current, adequate and suitable
            records regarding the service, terms and conditions of employment of
            each of its employees; and (b) all collective agreements,
            recognition agreements and customs and practices for the time being
            affecting its employees or their conditions of service.

      (f)   The Company is not in breach of any of the following provisions of
            the following Acts or of any regulations made under any of such
            Acts: section 21 Children and Young Persons Act 1933; sections 14,
            59, 71 and 72 Shops Act 1950; section 155 Factories Act 1961;
            section 33 Health and Safety at Work etc. Act 1974. There is no
            liability or claim against the Company outstanding or anticipated
            under the Equal Pay Act 1970, the Sex Discrimination Acts 1975 and
            1986, the Race Relations Act 1976, the ERA, the Transfer of
            Undertakings (Protection of Employment) Regulations 1981 ("TUPE"),
            the Social Security and Housing Benefits Act 1982, the Social
            Security Contributions and Benefits Act 1992, Trade Union and Labour
            Relations (Consolidation) Act 1992 ("TULRCA") or the Trade Union
            Reform and Employment Rights Act 1993. Within a period of one year
            preceding the date of this Agreement, the Company has not given
            notice of any redundancies to the Secretary of State or started
            consultations with any independent trade union under the provisions
            of Part IV TULRCA or under TUPE nor has the Company failed to comply
            with any such obligation under Part IV TULRCA.

      (g)   No present director, officer or employee of the Company has given or
            received notice terminating his employment except as expressly
            contemplated under this Agreement and Completion of this Agreement
            will not entitle any employee to terminate his employment or trigger
            any entitlement to a severance payment or liquidated damages.
            Furthermore, the Principal Shareholders are not aware that either
            Ian Collins or David Ely intend to terminate their employment
            relationship with the Company. The Company has complied with all
            recommendations made by the Advisory Conciliation and Arbitration
            Service and with all awards and declarations made by the Central
            Arbitration Committee in respect of its employees.

      (h)   Other than the Company Stock Option Plan, the Company does not have
            in existence nor is it proposing to introduce, and none of its
            directors, officers or employees participates in (whether or not
            established by the Company), any employee share trust, share
            incentive scheme, share option scheme or profit sharing scheme for
            the benefit of all or any of its present or former directors,
            officers or employees or the dependants of any of such persons or
            any scheme under which any present or former director, officer or
            employee of the Company is entitled to a commission or remuneration
            of any other sort calculated by reference to the whole or part of
            the turnover, profits or sales of the Company including any profit
            related pay scheme established under Chapter III, Part VTA 88.

      (i)   No dispute exists or can reasonably be anticipated between the
            Company and a material number or category of its employees or any
            Trade Union(s) and so far


                                      -30-
<PAGE>   35


            as the Principal Shareholders are aware there are no wage or other
            claims outstanding against the Company by any person who is now or
            has been a director, officer or employee of the Company. The Company
            has not had during the last three years any strike, work stoppages,
            slow-down or work-to-rule by its employees or lock-out, nor, so far
            as the Principal Shareholders are aware, is any anticipated, which
            has caused, or is likely to cause, the Company to be materially
            incapable of carrying on its business in the normal and ordinary
            course.

      (j)   The Company has not been a party to any relevant transfer as defined
            in TUPE nor has the Company failed to comply with any duty to inform
            and consult any Trade Union under the said regulations within the
            period of one year preceding the date of this Agreement.

4.17  CERTAIN AGREEMENTS AFFECTED BY THE PURCHASE OF THE SHARES BY OFFEROR.
      Neither the execution and delivery of this Agreement nor the consummation
      of the transaction contemplated hereby will (i) result in any payment
      (including, without limitation, severance, unemployment compensation,
      golden parachute, bonus or otherwise) becoming due to any director or
      employee of the Company or any of its Subsidiaries, (ii) materially
      increase any benefits otherwise payable by the Company or (iii) result in
      the acceleration of the time of payment or vesting of any such benefits.

4.18  PENSIONS.

      (a)   "PENSION SCHEMES" shall mean agreements or arrangements (whether
            legally enforceable or not) for the payment of any pensions,
            allowances, lump sums or other like benefits on retirement for the
            benefit of any present or former director, officer or employee of
            the Company or of any of the Subsidiaries or for the benefit of the
            dependants of any such persons;

      (b)   GENERAL. True and complete copies of the following have been
            delivered to the Offeror in relation to each Pension Scheme: Trust
            deeds and rules and all other deeds; Booklets currently in force and
            any subsequent announcements to scheme members; Latest finalized
            actuarial valuation together with any subsequent valuation in draft
            and any subsequent written actuarial advice not included in such
            valuations; Details of members, pensioners and deferred pensioners
            (including dates of birth, sex, entry and current salary and
            pensionable salary and name of employer); Details of contributions
            by members and the employer in the last three years; List of
            investments; and investment agreements; Scheme accounts and trustee
            reports for the last three years; Evidence of Inland Revenue
            approval; contracting-out certificate (if applicable); SSAP 24
            disclosures in the employer's accounts for the last three years;
            Insurance policies and certificates and details of premiums paid;
            Details of ex-gratia pensions and any discretionary increases in
            benefits given in the last three years; Details of arrangements for
            the selection of trustees in accordance with sections 16 to 21
            Pensions Act 1995 including copies of notices to members; Statement
            of investment principles prepared in accordance with section 35
            Pensions Act 1995; Any correspondence with the Occupational Pensions
            Regulatory Authority in relation to the Pension




                                      -31-
<PAGE>   36

            Scheme; and all letters or agreements for the appointment of
            professional advisers pursuant to section 47 Pensions Act 1995; Any
            actuarial certificates pursuant to section 67 Pensions Act 1995.

      (c)   In relation to each Pension Scheme no power to augment benefits has
            been exercised; no discretion has been exercised to admit an
            employee to membership of the pension scheme who would not otherwise
            be eligible; no discretion has been exercised to provide a benefit
            which would not otherwise be provided; all benefits (other than a
            refund of contributions with interest where appropriate) payable
            under the pension scheme on the death of a member while in an
            employment to which the pension scheme relates or during a period of
            sickness or disability of a member are fully insured by a policy
            with an insurance company of good repute. Each member has been
            covered for insurance by the insurance company at its normal rates
            and on its normal terms for persons in good health and all premiums
            payable have been paid; there are no contributions to the Pension
            Scheme which are due but unpaid and have remained unpaid for more
            than one month and in any event contributions have been paid which
            are at least equal to and by the due date specified in any schedule
            of contributions or payments applicable under section 58 or 87
            Pensions Act 1995; no take-over protection provision will be
            triggered by Completion; no payment has been made out of the Pension
            Scheme to any participating employer; no amendment has been made in
            contravention of section 67 of the Pensions Act 1995; each Pension
            Scheme of the Company is sufficiently funded on an ongoing basis
            using the assumptions used in the last actuarial valuation to secure
            at least the benefits accrued to Completion (other than those which
            are insured) and in addition is sufficiently funded to meet the
            minimum funding requirement as defined in section 56 Pensions Act
            1995; other than benefits payable on death as disclosed, each
            Pension Scheme of the Company provides only money purchase benefits
            within the meaning of section 181 Pension Schemes Act 1993.

      (d)   Each Pension Scheme (i) is either approved by the Board of Inland
            Revenue for the purposes of Chapter I of Part XIV TA 88 or is a
            scheme under which the benefits provided or to be provided are
            consistent with the approval of the scheme by the Board of Inland
            Revenue for such purposes and is a scheme in respect of which an
            application for such approval has been made and has not been
            withdrawn or refused and the Board of Inland Revenue have not given
            notice to the applicant that they believe the application has been
            dropped; (ii) is established under irrevocable trusts; (iii) has
            been administered in accordance with the preservation requirements
            under the Pension Schemes Act 1993, the equal access requirements of
            that Act, the contracting-out requirements of that Act (where
            applicable), the Pensions Act 1995, and all other applicable laws
            (including Article 119 of the Treaty of Rome), regulations and
            requirements of any competent governmental body or regulatory
            authority and the trusts and rules of the Pension Scheme; (iv) has
            not been the subject of any report of wrongdoing or irregularities
            to the Occupational Pensions Regulatory Authority nor, so far as the
            Principal Shareholders are aware, are there any circumstances which
            would justify such a report; (v) is a scheme in respect of which all
            actuarial, consultancy, legal

                                      -32-
<PAGE>   37

            and other fees, charges or expenses have been paid and for which no
            services have been provided for which an account or invoice has not
            been rendered; and (vi) has no investment in employer-related assets
            as defined in section 40 Pensions Act 1995.

      (e)   No claim has been threatened or made or litigation commenced against
            the trustees or administrator of any Pension Scheme or against the
            Company or any other person whom the Company is or may be liable to
            indemnify or compensate in respect of any matter arising out of or
            in connection with any Pension Scheme. So far as the Principal
            Shareholders are aware, there are no circumstances which may give
            rise to any such claim or litigation. There are no unresolved
            disputes under the Pension Scheme's internal dispute resolution
            procedure.

4.19  MATERIAL CONTRACTS.

      (a)   Subsections (i) through (ix) of Section 4.19(a) of the Company
            Disclosure Schedule contain the names, parties and dates of all
            contracts and agreements to which the Company or any Subsidiary is a
            party and that are material to the business, results of operations,
            or condition (financial or otherwise), of the Company and the
            Subsidiaries taken as a whole (such contracts, agreements and
            arrangements as are required to be set forth in Section 4.19(a) of
            the Company Disclosure Schedule being referred to herein
            collectively as the "Material Contracts"). "Material Contracts"
            shall include, without limitation, the following and shall be
            categorized in the Company Disclosure Schedule as follows:

            (i)   each contract and agreement (other than routine purchase
                  orders and pricing quotes in the ordinary course of business
                  covering a period of less than one year) for the purchase of
                  inventory, spare parts, other materials or personal property
                  with any supplier or for the furnishing of services to the
                  Company or any Subsidiary under the terms of which the Company
                  or any Subsidiary: (A) paid or otherwise gave consideration of
                  more than $25,000 in the aggregate during the calendar year
                  ended December 31, 1998, (B) is likely to pay or otherwise
                  give consideration of more than $25,000 in the aggregate
                  during the calendar year ended December 31, 1999, (C) is
                  likely to pay or otherwise give consideration of more than
                  $25,000 in the aggregate over the remaining term of such
                  contract, or (D) cannot be canceled by the Company or such
                  Subsidiary without penalty or further payment of less than
                  $25,000;

            (ii)  each customer contract and agreement (other than routine
                  purchase orders, pricing quotes with open acceptance and other
                  tender bids, in each case, entered into in the ordinary course
                  of business and covering a period of less than one year) to
                  which the Company or any Subsidiary is a party which (A)
                  involved consideration of more than $25,000 in the aggregate
                  during the calendar year ended December 31, 1998, (B) is
                  likely to involve consideration of more than $25,000 in the
                  aggregate during the calendar year ended December 31, 1999,
                  (C) is


                                      -33-
<PAGE>   38


                  likely to involve consideration of more than $25,000 in the
                  aggregate over the remaining term of the contract, or (D)
                  cannot be canceled by the Company or such Subsidiary without
                  penalty or further payment of less than $25,000;

            (iii) (A) all distributor, manufacturer's representative, broker,
                  franchise, agency and dealer contracts and agreements to which
                  the Company or any Subsidiary is a party (specifying on a
                  matrix, in the case of distributor agreements, the name of the
                  distributor, product, territory, termination date and
                  exclusivity provisions) and (B) all sales promotion, market
                  research, marketing and advertising contracts and agreements
                  to which the Company or any Subsidiary is a party which: (1)
                  involved consideration of more than $25,000 in the aggregate
                  during the calendar year ended December 31, 1998 or (2) are
                  likely to involve consideration of more than $25,000 in the
                  aggregate during the calendar year ended December 31, 1999 or
                  (3) are likely to involve consideration of more than $25,000
                  in the aggregate over the remaining term of the contract;

            (iv)  all management contracts with independent contractors or
                  consultants (or similar arrangements) to which the Company or
                  any Subsidiary is a party and which (A) involved consideration
                  or more than $25,000 in the aggregate during the calendar year
                  ended December 31, 1998, (B) are likely to involve
                  consideration of more than 25,000 in the aggregate during the
                  calendar year ended December 31, 1999, or (C) are likely to
                  involve consideration of more than $25,000 in the aggregate
                  over the remaining term of the contract;

            (v)   all contracts and agreements (excluding routine checking
                  account overdraft agreements involving petty cash amounts)
                  under which the Company or any Subsidiary has created,
                  incurred, assumed or guaranteed (or may create, incur, assume
                  or guarantee) indebtedness or under which the Company or any
                  Subsidiary has imposed (or may impose) a security interest or
                  lien on any of their respective assets, whether tangible or
                  intangible, to secure indebtedness;

            (vi)  all contracts and agreements that limit the ability of the
                  Company or any Subsidiary or, after the Closing Date, Offeror
                  or any of its affiliates, to compete in any line of business
                  or with any person or in any geographic area or during any
                  period of time, or to solicit any customer or client;

            (vii) all contracts and agreements between or among the Company or
                  any Subsidiary, on the one hand, and any affiliate of the
                  Company (other than a wholly owned subsidiary), on the other
                  hand;

            (viii)all contracts and agreements to which the Company or any
                  Subsidiary is a party under which it has agreed to supply
                  products to a customer at specified prices, whether directly
                  or through a specific distributor, manufacturer's
                  representative or dealer; and



                                      -34-
<PAGE>   39

            (ix)  all other contracts or agreements (A) which are material to
                  the Company and its Subsidiaries or the conduct of their
                  respective businesses or (B) the absence of which would have a
                  Material Adverse Effect on the Company or (C) which are
                  believed by the Company to be of unique value even though not
                  material to the business of the Company.

      (b)   Except as would not, individually or in the aggregate, have a
            Material Adverse Effect on the Company, each Material Contract, is a
            legal, valid and binding agreement, and none of the Material
            Contracts has been canceled by the other party; the Company and the
            Subsidiaries are not in receipt of any claim of default under any
            such agreement; and none of the Company or any of the Subsidiaries
            anticipates any termination of or change to, or receipt of a
            proposal with respect to, any such agreement as a result of the
            purchase of the Shares by Offeror or otherwise. The Company has
            furnished Offeror with true and complete copies of all such
            agreements together with all amendments, waivers or other changes
            thereto.

4.20  INTERESTED PARTY TRANSACTIONS. Neither the Company nor any Subsidiary is
      indebted to any director, officer, employee or agent of the Company or any
      Subsidiary (except for amounts due as normal salaries and bonuses and in
      reimbursement of ordinary expenses), and no such person is indebted to the
      Company or any Subsidiary.

4.21  INSURANCE. The Company and each of its Subsidiaries have policies of
      insurance and bonds of the type and in the amounts customarily carried by
      persons conducting businesses or owning assets similar to those of the
      Company and its Subsidiaries. There is no material claim pending under any
      of such policies or bonds as to which coverage has been questioned, denied
      or disputed by the underwriters of such policies or bonds. All premiums
      due and payable under all such policies and bonds have been paid and the
      Company and its Subsidiaries are otherwise in compliance with the terms of
      such policies and bonds. The Principal Shareholders have no knowledge of
      any threatened termination of, or material premium increase with respect
      to, any of such policies.

4.22  COMPLIANCE WITH LAWS. Each of the Company and each of its Subsidiaries has
      complied with, is not in violation of, and has not received any notices of
      violation with respect to, any federal, state, local or foreign statute,
      law or regulation with respect to the conduct of its business, or the
      ownership or operation of its business, except for such violations or
      failures to comply as could not reasonably be expected to have a Material
      Adverse Effect on the Company.

4.23  STATUTORY BOOKS; MINUTE BOOKS; STATUTORY RETURNS. The statutory books
      (including all registers and minute books) of the Company have been
      properly kept and contain an accurate and complete record of the matters
      which should be dealt with in those books, and no notice or allegation
      that any of them is incorrect or should be rectified has been received.
      The Company has complied with the provisions of the Companies Acts (as
      defined in CA 85) and the Companies Act 1989 and all returns, particulars,
      resolutions and other documents required to be filed with or delivered to
      the Registrar of Companies or to any other authority whatsoever by the
      Company have


                                      -35-
<PAGE>   40

      been correctly and properly prepared and so filed or delivered. The minute
      books of the Company and its Subsidiaries made available to Offeror
      contain a complete and accurate record of the matters that they should
      deal with.

4.24  COMPLETE COPIES OF MATERIALS. The Company has delivered or made available
      true and complete copies of each document which has been requested by
      Offeror or its counsel in connection with their legal and accounting
      review of the Company and its Subsidiaries.

4.25  BROKERS' AND FINDERS' FEES. The Company has not incurred, nor will it
      incur, directly or indirectly, any liability for brokerage or finders'
      fees or agents' commissions or investment bankers' fees or any similar
      charges in connection with this Agreement or any transaction contemplated
      hereby.

4.26  YEAR 2000.

      (a)   "MILLENNIUM-COMPLIANT" in relation to any hardware and/or software
            shall mean that its operation, functionality and performance will
            not (before, during or after 2000) be adversely affected by reason
            of any date information or any change of such information, and that
            (i) no value for current date will cause any interruption in the
            operation of the hardware and/or software; (ii) all manipulations of
            time-related data will produce the correct results for all valid
            date values within the application domain; (iii) date-based
            functionality will behave consistently and correctly for all dates
            before, during and alter 2000; (iv) in all interfaces and data
            storage the correct century is specified (explicitly or by
            unambiguous algorithms or inferencing rules) without human
            intervention; (v) where any date information is represented without
            a century, the correct century is unambiguous for all manipulations
            involving that information; and (vi) 2000 is recognized as a leap
            year.

            "MILLENNIUM-COMPLIANCE FAILURE" shall mean the failure of any
            hardware and/or software to be Millennium-compliant (whether in some
            only or in all respects).

      (b)   The hardware and/or software used by the Company are
            Millennium-compliant and neither such hardware and/or software nor
            any services relating to hardware and/or software owned or used by
            the Company or to any other aspect of the Company data processing or
            data transfer requirements will be affected by any
            Millennium-compliance failure. The Company has established a project
            ("the Year 2000 Project") for investigating and addressing the
            potential adverse effects on the Company's business of any
            Millennium-compliance failure (including in relation to any hardware
            and/or software belonging to or used by the Company's clients,
            customers, trading partners and suppliers). The methodology and key
            personnel of the Year 2000 Project, together with a summary of the
            material findings and actions of the Year 2000 Project to date
            (including any financial provision or reserve made in relation to
            such findings) have been set out in Section 4.26 of the Company
            Disclosure Schedule. The Company has diligently pursued such
            methodology, and the summary discloses a tree and fair view of the
            Company's readiness for any Millennium-compliance failure.

                                      -36-
<PAGE>   41

4.27  INVENTORY. The inventories shown on the Company Balance Sheet or
      thereafter acquired by the Company consist of items of a quantity and
      quality usable or salable in the ordinary course of business. Since the
      Company Balance Sheet Date, the Company has continued to replenish
      inventories in a normal and customary manner consistent with past
      practices. The Company has not received written or oral notice that it
      will experience in the foreseeable future any difficulty in obtaining, in
      the desired quantity and quality and at a reasonable price and upon
      reasonable terms and conditions, the raw materials, supplies or component
      products required for the manufacture, assembly or production of its
      products. The values at which inventories are carried reflect the
      inventory valuation policy of the Company, which is Consistent with its
      past practice and in accordance with UK GAAP applied on a consistent
      basis. Since January 1, 1999 due provision has been made on the books of
      the Company in the ordinary course of business consistent with past
      practices to provide for all slow-moving, obsolete, or unusable
      inventories at their estimated useful scrap values and such inventory
      reserves are adequate to provide for such slow-moving, obsolete or
      unusable inventory and inventory shrinkage.

4.28  ACCOUNTS RECEIVABLE.

      (a)   The Principal Shareholders have made available to Offeror a list of
            all accounts receivable of the Company and each Subsidiary reflected
            on the Company Balance Sheet ("Accounts Receivable") along with a
            range of days elapsed since invoice.

      (b)   All Accounts Receivable of the Company and its Subsidiaries arose in
            the ordinary course of business and are carried at values determined
            in accordance with UK GAAP consistently applied. No person has any
            lien on any of such Accounts Receivable and no request or agreement
            for deduction or discount has been made with respect to any of such
            Accounts Receivable.

4.29  CUSTOMERS AND SUPPLIERS. As of the date hereof, no customer which
      individually accounted for more than 10% of the Company's gross revenues
      during the 12 month period preceding the date hereof, and no supplier of
      the Company, has canceled or otherwise terminated, or made any written
      threat to the Company to cancel or otherwise terminate its relationship
      with the Company, or has at any time on or after August 31, 1999 decreased
      materially its services or supplies to the Company in the case of any such
      supplier, or its usage of the services or products of the Company in the
      case of such customer, and to the Principal Shareholder's knowledge, no
      such supplier or customer intends to cancel or otherwise terminate its
      relationship with the Company or to decrease materially its services or
      supplies to the company or its usage of the services or products of the
      Company, as the case may be. To the Principal Shareholder's knowledge,
      from and after the date hereof, no customer which individually accounted
      for more than 10% of the Company's gross revenues during the 12 month
      period preceding the Effective Date intends to cancel or otherwise
      terminate its relationship with the Company or to decrease materially its
      usage of the services or products of the Company. The Company has not
      knowingly breached, so as to provide a benefit to the Company that was not
      intended by the parties, any


                                      -37-
<PAGE>   42

      agreement with, or engaged in any fraudulent conduct with respect to, any
      customer or supplier of the Company.

4.30  THIRD PARTY CONSENTS. No consent or approval is needed from any third
      party in order to effect the purchase of the Shares by Offeror, this
      Agreement or any of the transactions contemplated hereby.

4.31  NO COMMITMENTS REGARDING FUTURE PRODUCTS. The Company has made no sales to
      customers that are contingent upon providing future enhancements of
      existing products, to add features not presently available on existing
      products or to otherwise enhance the performance of its existing products
      (other than beta or similar arrangements pursuant to which the Company's
      customers from time to time test or evaluate products). The products the
      Company has delivered to customers substantially comply with published
      specifications for such products and the Company has not received material
      complaints from customers about its products that remain unresolved.
      Section 4.31 of the Company Disclosure Schedule accurately sets forth a
      complete list of products in development (exclusive of mere enhancements
      to and additional features for existing products).

4.32  REPRESENTATIONS COMPLETE. None of the representations or warranties made
      by the Principal Shareholders in this Agreement or in any attachment
      hereto, including the Company Disclosure Schedule, when all such documents
      are read together in their entirety, contains any untrue statement of a
      material fact, or omits to state any material fact necessary in order to
      make the statements contained herein or therein, in the light of the
      circumstances under which they were made, not misleading in each case so
      as to have a Material Adverse Effect on the Company. Offeror hereby
      confirms that as of the Effective Date it is not aware of any breach of
      any warranty so as to give rise to a warranty claim under this Agreement.

                                   SECTION 5

      REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
      SHAREHOLDERS REGARDING THEIR SHAREHOLDER STATUS

      Each Principal Shareholder in consideration of the Offeror agreeing to
      make the Offer and issue the Offer Document hereby represents and warrants
      to Offeror, as to himself, herself or itself, as the case may be, as
      follows:

5.1   POWER, AUTHORIZATION AND VALIDITY. The Principal Shareholder has all
      requisite legal and, to the extent applicable, corporate power, and
      authority to enter into and perform its obligations under this Agreement
      and to consummate the transactions contemplated hereby and by the Offer
      Document. The execution, delivery and performance of this Agreement and
      the consummation of the transactions contemplated hereby and by the Offer
      Document have been duly and validly approved and authorized by all
      necessary action, including, if applicable, corporate action, by or on
      behalf of such Principal Shareholder. This Agreement has been duly
      executed and delivered by such Principal Shareholder and constitutes a
      valid and binding obligation of the Principal Shareholder, subject to the
      laws of general application relating to bankruptcy, insolvency and the
      relief of debtors and rules of law governing specific performance,
      injunctive relief and equitable remedies. No consent, approval, order or


                                      -38-
<PAGE>   43

      authorization of, or registration, declaration or filing with, any
      Governmental Entity, is required by or with respect to the Principal
      Shareholder in connection with the execution and delivery of this
      Agreement by the Principal Shareholder or the consummation by the
      Shareholder of the transactions contemplated hereby and by the Offer
      Document.

5.2   TITLE TO STOCK. The Principal Shareholder is the sole owner of the Shares
      or options to purchase the Shares reflected next to such Principal
      Shareholder's name on Exhibit A and has or will have, as of the Closing,
      good, valid and marketable title to such Shares free and clear of all
      restrictions, claims, liens, charges, encumbrances and equities
      whatsoever. The Principal Shareholder represents that he, she or it has or
      will have, as of the Closing, full right, power and authority to sell,
      transfer and deliver the Shares to Offeror, and, upon delivery of the
      certificate or certificates therefor duly endorsed for transfer to Offeror
      and Offeror's payment for and acceptance thereof, will transfer to Offeror
      good, valid and marketable title thereto free and clear of any
      restriction, claim, lien, charge, encumbrance or equity whatsoever. The
      Principal Shareholder is not party to any voting trust, agreement or
      arrangement affecting the exercise of the voting rights of the Shares.
      There is no action, proceeding, claim or, to the Principal Shareholder's
      knowledge, investigation against the Principal Shareholder or the
      Principal Shareholder's assets, properties or, as applicable, any of the
      Principal Shareholder's respective officers or directors, pending or, to
      the Principal Shareholder's knowledge, threatened, at law or in equity, or
      before any court, arbitrator or other tribunal, or before any
      administrative law judge, hearing officer or administrative agency
      relating to or in any other manner impacting upon the Shares held by such
      Principal Shareholder.

5.3   NO VIOLATION. The execution, delivery and performance of this Agreement,
      and the consummation of the Purchase and the other transactions
      contemplated by this Agreement and by the Offer Document do not and will
      not conflict with or result in a violation of the Articles of Association,
      partnership agreement or other applicable charter document of the
      Principal Shareholder, or conflict with, or (with or without notice or
      lapse of time, or both) result in a termination, breach, impairment or
      violation of, or constitute a default or result in the creation or
      imposition of any lien, charge or encumbrance upon any of the Principal
      Shareholder's Shares under, (a) any instrument, indenture, lease, mortgage
      or other agreement or contract to which the Principal Shareholders is a
      party or to which such Principal Shareholder or any of such Principal
      Shareholder's assets or properties may be subject or (b) any federal,
      state, local or foreign judgment, writ, decree, order, ordinance, statute,
      rule or regulation applicable to the Principal Shareholders or the
      Principal Shareholder's assets or properties. The consummation of the
      Purchase and the other transactions contemplated by this Agreement will
      not require the consent of any third person with respect to the rights,
      licenses, franchises, leases or agreements of the Principal Shareholder.

5.4   ACKNOWLEDGMENT. The Principal Shareholder hereby acknowledges that the
      Principal Shareholder has read this Agreement, the Offer Document, the
      Deed of Tax Covenant, the Escrow Agreement and the other documents to be
      delivered in connection with the consummation of the transactions
      contemplated hereby and has made an independent examination of the
      transactions contemplated hereby (including the tax consequences


                                      -39-
<PAGE>   44

      thereof). The Principal Shareholder acknowledges that the Principal
      Shareholder has had an opportunity to consult with and has relied solely
      upon the advice, if any, of the Principal Shareholder's legal counsel,
      financial advisors, or accountants with respect to the transactions
      contemplated hereby to the extent the Principal Shareholder has deemed
      necessary, and has not been advised or directed by Offeror, the Company or
      their respective legal counsel or other advisors in respect of any such
      matters and has not relied on any such parties in connection with this
      Agreement and the transactions contemplated hereby.

                                   SECTION 6

      REPRESENTATIONS AND WARRANTIES OF OFFEROR

      Offeror hereby represents and warrants to the Company and the Principal
      Shareholders as follows:

6.1   ORGANIZATION, STANDING AND POWER. Offeror is a corporation duly organized,
      validly existing and in good standing under the laws of California.
      Offeror has the corporate power to own its properties 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 in each jurisdiction
      in which the failure to be so qualified and in good standing would have a
      Material Adverse Effect on Offeror. Offeror has delivered a true and
      correct copy of its Articles of Incorporation and Bylaws or other charter
      documents, as applicable, each as amended to date, to the Principal
      Shareholders' Representative. Offeror is not in violation of any material
      provisions of its Articles of Incorporation or Bylaws or equivalent
      organizational documents.

6.2   CAPITAL STRUCTURE. The authorized capital stock of Offeror consists of
      25,000,000 shares of Common Stock, no par value, of which 4,782,608 shares
      were issued and outstanding as of the close of business on June 30, 1999
      and 12,000,000 shares of Preferred Stock, no par value, of which 8,170,207
      shares were issued and outstanding as of the close of business on June 30,
      1999, and are convertible into 11,073,439 shares of Common Stock. As of
      the close of business on June 30, 1999, 375,499 shares are subject to
      outstanding, unexercised options under Offeror's 1986 Incentive Stock
      Option Plan and 1986 Supplemental Stock Option Plan, and 1,849,916 shares
      are subject to outstanding, unexercised options under Offeror's 1996 Stock
      Option Plan. There are no other outstanding shares of capital stock or
      voting securities of Offeror other than shares of Offeror Common Stock
      issued after June 30, 1999 upon the exercise of options issued under the
      Offeror Stock Option Plan before or after such date. As of the close of
      business on June 30, 1999, there are warrants outstanding to purchase
      32,000 shares of the Company's Common Stock. Other than as contemplated
      under this Agreement, there are no other options, warrants, calls, rights,
      commitments or agreements of any character to which Offeror is a party or
      by which either of them is bound obligating Offeror to issue, deliver,
      sell, repurchase or redeem, or cause to be issued, delivered, sold,
      repurchased or redeemed, any shares of the capital stock of Offeror or
      obligating Offeror to grant, extend or enter into any such option,
      warrant, call, right, commitment or agreement. The shares of Offeror
      Common Stock to be issued pursuant to the Offer will be duly authorized,
      validly issued, fully paid, and non-assessable.

                                      -40-
<PAGE>   45

6.3   AUTHORITY. Offeror has all requisite corporate power and authority to
      enter into this Agreement and to consummate the transactions contemplated
      hereby. The execution and delivery of this Agreement and the consummation
      of the transactions contemplated hereby have been duly authorized by all
      necessary corporate action on the part of Offeror. This Agreement has been
      duly executed and delivered by Offeror and constitutes the valid and
      binding obligation of Offeror enforceable against the Offeror in
      accordance with its terms, subject to the laws of general application
      relating to bankruptcy, insolvency and the relief of debtors and rules of
      law governing specific performance, injunctive relief and equitable
      remedies.

6.4   NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

      (a)   The execution and delivery of this Agreement do not, and the
            consummation of the transactions contemplated hereby will not,
            conflict with, or result in any violation of, or default under (with
            or without notice or lapse of time, or both), or give rise to a
            right of termination, cancellation or acceleration of any obligation
            or loss of a benefit under (i) any provision of the Articles of
            Incorporation or Bylaws of Offeror, as amended, or (ii) any material
            mortgage, indenture, lease, contract or other agreement or
            instrument, permit, concession, franchise, license, judgment, order,
            decree, statute, law, ordinance, rule or regulation applicable to
            Offeror or its properties or assets.

      (b)   No consent, approval, order or authorization of, or registration,
            declaration or filing with, any Governmental Entity, is required by
            or with respect to Offeror in connection with the execution and
            delivery of this Agreement by Offeror or the consummation by Offeror
            of the transactions contemplated hereby, except for (i) any filings
            as may be required under applicable state securities laws and the
            securities laws of any foreign country, (ii) such filings as may be
            required under the HSR Act, and (iii) consents, authorizations,
            filings, approvals and registrations which, if not obtained or made,
            would not have a Material Adverse Effect on Offeror and would not
            prevent, materially alter or delay any the transactions contemplated
            by this Agreement.

6.5   Offeror has provided to the Principal Shareholders Representative a true,
      correct and complete copy of the Company's draft audited financial
      statements for the fiscal year 30 June 1999 (the "Audited Financial
      Statements"), and its unaudited financial statements (balance sheet,
      statement of operations and statement of cash flows) on a consolidated
      basis as at, and for the three month period ended September 25, 1999 (the
      "Unaudited Financial Statements"). The Audited Financial Statements have
      been prepared in accordance with the relevant accounting standards and
      legal principles and US Generally Accepted Accounting Principles ("US
      GAAP") applied on a consistent basis throughout the periods indicated and
      with each other. The Audited Financial Statements accurately set out and
      describe the financial condition and operating results of Offeror and the
      consolidated subsidiaries of Offeror as of the date, and for the periods
      indicated thereon subject to normal year-end audit adjustments. The
      Unaudited Financial Statements have been prepared on the same basis as the
      Audited Financial Statements and using the same accounting policies as
      were used in the preparation of the Audited Financial Statements and show
      a materially accurate view of the assets and liabilities and trading
      position of Offeror. Offeror has maintained a

                                      -41-
<PAGE>   46


      standard system of accounting established and administered in accordance
      with US GAAP.

6.6   ABSENCE OF CERTAIN CHANGES. Since September 25, 1999 (the "Offeror Balance
      Sheet Date"), Offeror has conducted its business in the ordinary course in
      a manner consistent with past practice and there has not occurred: (i) any
      change, event or condition (whether or not covered by insurance) that has
      resulted in, or might reasonably be expected to result in, a Material
      Adverse Effect to Offeror; (ii) any declaration, setting aside, or payment
      of a dividend or other distribution with respect to the shares of Offeror,
      or any direct or indirect redemption, purchase or other acquisition by
      Offeror of any of its shares of capital stock; (iii) any material
      amendment or change to Offeror's Articles of Incorporation or Bylaws; or
      (iv) any negotiation or agreement by Offeror to do any of the things
      described in the preceding clauses (i) through (iii) (other than
      negotiations with the Company and its representatives regarding the
      transactions contemplated by this Agreement).

6.7   LITIGATION. There is no private or governmental action, suit, proceeding,
      claim, arbitration or investigation pending before any agency, court or
      tribunal, foreign or domestic, or, to the knowledge of Offeror or any of
      its subsidiaries, threatened against Offeror or any of its subsidiaries or
      any of their respective properties or any of their respective officers or
      directors (in their capacities as such) that, individually or in the
      aggregate, could reasonably be expected to have a Material Adverse Effect
      on Offeror. There is no judgment, decree or order against Offeror or any
      of its subsidiaries or, to the knowledge of Offeror or any of its
      subsidiaries, any of their respective directors or officers (in their
      capacities as such) that could prevent, enjoin, or materially alter or
      delay any of the transactions contemplated by this Agreement, or that
      could reasonably be expected to have a Material Adverse Effect on Offeror.

6.8   GOVERNMENTAL AUTHORIZATION. Each of Offeror and its subsidiaries has
      obtained each federal, state, county, local or foreign governmental
      consent, license, permit, grant, or other authorization of a Governmental
      Entity that is required for the operation of Offeror's or any of its
      subsidiaries' business ("Offeror Authorizations"), and all of such Offeror
      Authorizations are in full force and effect, except where the failure to
      obtain or have any of such Offeror Authorizations could not reasonably be
      expected to have a Material Adverse Effect on Offeror.

6.9   COMPLIANCE WITH LAWS. Each of Offeror and each of its subsidiaries has
      complied with, is not in violation of, and has not received any notices of
      violation with respect to, any federal, state, local or foreign statute,
      law or regulation with respect to the conduct of its business, or the
      ownership or operation of its business, except for such violations or
      failures to comply as could not reasonably be expected to have a Material
      Adverse Effect on Offeror.

                                   SECTION 7

                             CONDITIONS TO CLOSING

7.1   CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations under
      this Agreement of each Party hereto shall be subject to the satisfaction
      on or prior to the Closing of each of the following conditions, any of
      which may be waived, in writing,



                                      -42-
<PAGE>   47


            by agreement of Offeror or the Principal Shareholders'
            Representative (defined in Section 8.8 below):

      (a)   CONDITIONS TO OBLIGATIONS OF EACH PARTY. No temporary restraining
            order, preliminary or permanent injunction or other order issued by
            any court of competent jurisdiction or other legal or regulatory
            restraint or prohibition preventing the consummation of the
            transactions contemplated hereby shall be in effect, nor shall any
            proceeding brought by an administrative agency or commission or
            other governmental authority or instrumentality, domestic or
            foreign, seeking any of the foregoing be pending; nor shall there be
            any action taken, or any statute, rule, regulation or order enacted,
            entered, enforced or deemed applicable to the transactions
            contemplated hereby, which makes the consummation of such
            transactions illegal.

      (b)   GOVERNMENTAL APPROVAL. Offeror and each Principal Shareholder shall
            have timely obtained from each Governmental Entity all approvals,
            waivers and consents, if any, necessary for consummation of or in
            connection with the transactions contemplated hereby, including,
            without limitation, such approvals, waivers and consents as may be
            required under the HSR Act, under the Securities Act and under any
            state or foreign securities laws.

7.2   ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE PRINCIPAL SHAREHOLDERS. The
      obligations of the Principal Shareholders under this Agreement shall be
      subject to the satisfaction at or prior to the Closing of each of the
      following conditions, any of which may be waived, in writing, by the
      Principal Shareholders' Representative:

      (a)   REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Each of the
            representations and warranties of Offeror in this Agreement that is
            expressly qualified by a reference to materiality shall be true in
            all respects as so qualified, and each of the representations and
            warranties of Offeror in this Agreement that is not so qualified
            shall be true and correct in all material respects, on and as of the
            Closing as though such representation or warranty had been made on
            and as of the Closing (except that those representations and
            warranties which address matters only as of a particular date shall
            remain true and correct as of such date), and (ii) Offeror shall
            have performed and complied in all material respects with all
            covenants, obligations and conditions of this Agreement required to
            be performed and complied with by Offeror as of the Closing.

      (b)   NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
            material adverse change in the condition (financial or otherwise),
            properties, assets (including intangible assets), liabilities,
            business, operations, results of operations or prospects of Offeror
            and its subsidiaries, taken as a whole.

      (c)   CERTIFICATES OF OFFEROR.

            (i)   COMPLIANCE CERTIFICATE OF OFFEROR. The Principal Shareholders'
                  Representative shall have been provided with a certificate
                  executed on behalf of Offeror by its President or its Chief
                  Financial Officer to the



                                      -43-
<PAGE>   48

                  effect that, as of the Closing, each of the conditions set
                  forth in Section 7.2(a) and (b) above has been satisfied with
                  respect to Offeror.

            (ii)  CERTIFICATE OF SECRETARY OF OFFEROR. The Principal
                  Shareholders' Representative shall have been provided with a
                  certificate executed by the Secretary or Assistant Secretary
                  of Offeror certifying:

                  (A)   Resolutions duly adopted by the Board of Directors of
                        Offeror authorizing the execution of this Agreement and
                        the execution, performance and delivery of all
                        agreements, documents and transactions contemplated
                        hereby; and

                  (B)   the incumbency of the officers of Offeror executing this
                        Agreement and all agreements and documents contemplated
                        hereby.

      (d)   GOOD STANDING. The Principal Shareholders' Representative shall have
            received a certificate or certificates of the Secretary of State of
            the State of California and any applicable franchise tax authority
            of such state, certifying as of a date no greater than three
            business days prior to the Closing that Offeror has filed all
            required reports, paid all required fees and taxes and is, as of
            such date, in good standing and authorized to transact business as a
            domestic corporation.

7.3   ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF OFFEROR. The obligations of
      Offeror under this Agreement shall be subject to the satisfaction at or
      prior to the Closing of each of the following conditions, any of which may
      be waived, in writing, by Offeror:

      (a)   REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Each of the
            representations and warranties of the Principal Shareholders in
            Section 5 of this Agreement that is expressly qualified by a
            reference to materiality shall be true in all respects as so
            qualified, and each of the representations and warranties of the
            Principal Shareholders in Section 5 of this Agreement that is not so
            qualified shall be true and correct in all material respects, on and
            as of the Closing as though such representation or warranty had been
            made on and as of the Closing (except that those representations and
            warranties which address matters only as of a particular date shall
            remain true and correct as of such date), and (ii) the Principal
            Shareholders shall have performed and complied in all material
            respects with or shall have caused or procured the Company to
            perform and comply with all covenants, obligations and conditions of
            this Agreement required to be performed and complied with by them as
            of the Closing.

      (b)   NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
            material adverse change in the condition (financial or otherwise),
            properties, assets (including intangible assets), liabilities,
            business, operations, results of operations or prospects of the
            Company and its subsidiaries, taken as a whole. Without limiting the
            foregoing, a material adverse change shall be deemed to occur if (i)
            the Company's Current Assets (defined as cash, accounts receivables,
            inventories, deposits and prepaids) minus Current Liabilities




                                      -44-
<PAGE>   49

            (defined as trade accounts payable, accrued vacation, bonuses,
            commissions, taxes, current portion of long term liabilities, and
            accrued amounts for goods and services received but not invoiced) as
            of the Closing Date, as determined in good faith by Offeror and the
            Principal Shareholders' Representative, acting together, is less
            than zero minus $80,000; or (ii) either Ian Collins or David Ely
            terminates or has informed the Company or a Principal Shareholder in
            writing or otherwise of his intention to terminate his employment
            relationship with the Company.

      (c)   CERTIFICATES OF THE COMPANY AND THE PRINCIPAL SHAREHOLDERS.

            (i)   COMPLIANCE CERTIFICATE OF THE COMPANY. Offeror shall have been
                  provided with a certificate executed on behalf of a director
                  of the Company to the effect that, as of the Closing, each of
                  the conditions set forth in Section 5.3(b) above has been
                  satisfied.

            (ii)  COMPLIANCE CERTIFICATE OF PRINCIPAL SHAREHOLDERS. Offeror
                  shall have been provided with a certificate executed by each
                  Principal Shareholder to the effect that, as of the Closing,
                  each of the conditions set forth in Section 5.3(a) above has
                  been satisfied.

            (iii) CERTIFICATE OF SECRETARY OF THE COMPANY. Offeror shall have
                  been provided with a certificate executed by the Secretary of
                  the Company certifying the Articles of Association of the
                  Company, as in effect immediately prior to the Closing,
                  including all amendments thereto.

      (d)   THIRD PARTY CONSENTS. Offeror shall have been furnished with
            evidence satisfactory to it that the Company has obtained those
            consents, waivers, approvals or authorizations of those third
            parties whose consent or approval are required in connection with
            this Agreement.

      (e)   INJUNCTIONS OR RESTRAINTS; CONDUCT OF BUSINESS. In addition, no
            temporary restraining order, preliminary or permanent injunction or
            other order issued by any court of competent jurisdiction or other
            legal or regulatory restraint provision limiting or restricting
            Offeror's conduct or operation of the business of the Company and
            its subsidiaries, following the Closing shall be in effect, nor
            shall any proceeding brought by an administrative agency or
            commission or other Governmental Entity, domestic or foreign,
            seeking the foregoing be pending.

      (f)   SHAREHOLDER DOCUMENTS. Offeror shall have received from each
            Shareholder a duly executed and delivered acceptance form in the
            Offer Document, including the Release of Claim, Stock Transfer Form,
            and irrevocable Power of Attorney contained therein, and the
            certificate or certificates representing all of the Shares held by
            such Shareholder or a letter of indemnity reasonably acceptable to
            Offeror, in each case, from Shareholders representing at least 98%
            of the issued share capital of the Company provided that this
            condition shall not be satisfied if more than ten Shareholders do
            not so accept the Offer as of the Closing Date.

                                      -45-
<PAGE>   50
      (g)   ADDITIONAL CONDITIONS. Such additional actions set forth in this
            Agreement that are required to be completed as of the Closing shall
            have been completed, including without limitation the actions set
            forth in Sections 1.3 and 2.2.

      (h)   MIRVO STOCK. Genetics Group AG shall procure that Scientific
            Generics Ltd. shall use best efforts to transfer to the Company 20%
            of the shares of Series A Preferred Stock of Zowie (formerly Mirvo
            Toys, Inc.) held by it as of the Effective Date, which based on
            documentation provided to the Company would be 129,033 shares.

      (i)   NEW ISSUES. No further shares in the Company shall be issued between
            the Effective Date and Closing.

                                   SECTION 8

ESCROW AND INDEMNIFICATION

8.1   SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants to be performed
      prior to the Closing Date, and all representations and warranties in this
      Agreement or in any instrument delivered pursuant to this Agreement shall
      survive the consummation of the Purchase and continue until the two year
      anniversary of the Closing Date (the "Escrow Termination Date"); provided
      that if any claims for indemnification have been asserted with respect to
      any such representations and warranties prior to the Escrow Termination
      Date, the representations and warranties on which any such claims are
      based shall continue in effect until final resolution of any claims. All
      covenants to be performed after the Closing Date shall continue
      indefinitely.

8.2   ESCROW FUND. As soon as practicable after the Closing Date, all shares of
      Synaptics' Stock that each Principal Shareholder is entitled to receive in
      the Purchase pursuant to Section 2.4(b) and subject to the conditions set
      forth in Section 2.4(b) (the "Escrow Shares") shall, without any act of
      any Principal Shareholders, be registered in the name of, and be deposited
      with a financial institution selected by Offeror and reasonably acceptable
      to the Principal Shareholders' Representative as escrow agent (the "Escrow
      Agent"), such deposit to constitute the escrow fund (the "Escrow Fund")
      and to be governed by the terms set forth herein and in the Escrow
      Agreement attached hereto as Exhibit E (the "Escrow Agreement"); provided,
      however, Generics Group AG shall contribute to the Synaptics' Escrow
      additional Synaptics' Stock equal to the number of Escrow Shares Inter
      Ikea Finance SA would have contributed to the Escrow if it were a
      Principal Shareholder under this Agreement. In the event that any Damages
      (as defined below) arise, the Escrow Fund shall be available to compensate
      the Indemnified Persons (defined below) pursuant to the indemnification
      obligations of the Principal Shareholders pursuant to Section 8.3 and in
      accordance with the Escrow Agreement.

8.3   INDEMNIFICATION.

      (a)   INDEMNIFIED DAMAGES. Subject to the limitations set forth in this
            Section 8, from and after the Closing Date, the Principal
            Shareholders shall protect,



                                      -46-
<PAGE>   51


            defend, indemnify and hold harmless Offeror and its affiliates,
            officers, directors, employees, representatives and agents and the
            Company (each an "Indemnified Person" and collectively "Indemnified
            Persons") from and against in the case of Sections 8.3(a)(i) and
            8.3(a)(iii) below, 100% of, and in the case of Section 8.3(a)(ii)
            below, 50% of any and all losses, costs, damages, liabilities, fees
            (including without limitation attorneys' fees) and expenses
            (including amounts required to be paid by the Company or the
            Principal Shareholders as set forth in Section 12.13) (collectively,
            the "Damages"), that any of the Indemnified Persons incurs by reason
            of or in connection with (i) any claim, demand, action or cause of
            action alleging misrepresentation, breach of, or default in
            connection with any of the representations, warranties, covenants,
            indemnities or agreements of the Principal Shareholders contained in
            this Agreement or the Offer Document, including any exhibits or
            schedules attached hereto or thereto which becomes known to Offeror
            during the Escrow Period, (ii) any legal proceedings duly served
            during the Escrow Period upon an Indemnified Person by Wacom, Inc.
            or any members of its group alleging breach or infringement by the
            Company of any patent held by Wacom, Inc. or any members of its
            group as a consequence of an Indemnified Person seeking to exploit
            the Company's technology existing as of the Closing Date, as
            demonstrated by the Company's records as of the Closing Date.
            Damages in each case shall be net of the amount of any insurance
            proceeds and indemnity and contribution actually recovered by
            Offeror and, where applicable, the Offeror shall pursue any claim it
            or the Company may have under any applicable insurance policy or
            against any person from whom such indemnity or contribution may be
            recoverable or (iii) any commission or compensation in the nature of
            a finder's fee for which the Company is responsible as a result of
            the transactions contemplated by this Agreement, including without
            limitation any fees owing under agreements with Beeson Gregory.

      (b)   EXCLUSIVE CONTRACTUAL REMEDY AND LIMITATIONS. Offeror and the
            Principal Shareholders each acknowledge that Damages, if any, would
            relate to unresolved contingencies existing at the Closing Date,
            which if resolved at the Closing Date would have led to a reduction
            in the total consideration Offeror would have agreed to pay in
            connection with the Purchase. Resort to the Escrow Fund shall be the
            exclusive contractual remedy of Offeror for any Damages if the
            Purchase closes. The maximum liability of any Principal Shareholder
            for any breach of a representation, warranty or covenant of the
            Principal Shareholder shall be limited to Escrow Shares in which
            such Principal Shareholder has an interest that are held pursuant to
            the Escrow Agreement; provided, however, that nothing herein shall
            limit the liability of the Principal Shareholders for Damages: (i)
            arising from any breach by such Shareholder of representation,
            warranty or covenant if the Purchase does not close, (ii) in
            connection with any breach by such shareholder of the Offer
            Document, Deed of Tax Covenant, Non-Competition Agreement or Escrow
            Agreement, and (iii) arising from such person's or entity's fraud or
            intentional misrepresentation.

8.4   DAMAGES THRESHOLD. Notwithstanding the foregoing, Offeror may not receive
      any amount of the Escrow Shares from the Escrow Fund unless and until a
      certificate


                                      -47-
<PAGE>   52

      signed by an officer of Offeror (an "Officer's Certificate") identifying
      Damages in the aggregate amount in excess of $100,000 has been delivered
      to the Escrow Agent and such amount is determined pursuant to this Section
      8 and the terms of the Escrow Agreement to be payable, in which case
      Offeror shall receive Escrow Shares equal in value to the full amount of
      such Damages without deduction; provided, however, any amounts required to
      be paid by the Principal Shareholders as set forth in Sections 8.3(a)(ii),
      8.3(a)(iii) or 12.13 shall not be subject to the above $100,000 threshold
      and may be paid, at Offeror's option, out of the Escrow Shares. In
      determining the amount of any Damages attributable to a breach, any
      materiality standard contained in a representation, warranty or covenant
      of Offeror shall be disregarded.

8.5   ESCROW PERIOD. Subject to the following requirements, the Escrow Fund
      shall remain in existence until the Escrow Termination Date (the "Escrow
      Period"). Upon the expiration of the Escrow Period, the Escrow Fund shall
      terminate with respect to all Escrow Shares; provided, however, that the
      number of Escrow Shares, which, in the reasonable judgment of Offeror,
      subject to the objection of the Principal Shareholders' Representative (as
      defined in Section 8.8 below) and the subsequent arbitration of the claim
      in the manner provided in the Escrow Agreement, are necessary to satisfy
      any unsatisfied claims specified in any Officer's Certificate delivered to
      the Escrow Agent prior to the expiration of such Escrow Period with
      respect to facts and circumstances existing on or prior to the Escrow
      Termination Date shall remain in the Escrow Fund (and the Escrow Fund
      shall remain in existence) until such claims have been resolved. As soon
      as all such claims have been resolved, the Escrow Agent shall deliver to
      the Principal Shareholders all Escrow Shares and other property remaining
      in the Escrow Fund and not required to satisfy such claims. Deliveries of
      Escrow Shares to the Principal Shareholders pursuant to this Section 8.5
      and the Escrow Agreement shall be made in proportion to their respective
      original contributions to the Escrow Fund.

8.6   DISTRIBUTIONS; VOTING.

      (a)   Any shares of Synaptics' Stock or other equity securities issued or
            distributed by Offeror (including shares issued upon a stock split)
            ("New Shares") in respect of the Escrow Shares that have not been
            released from the Escrow Fund shall be added to the Escrow Fund and
            become a part thereof. When and if cash dividends on Escrow Shares
            in the Escrow Fund shall be declared and paid, they shall be
            retained in escrow pending final distribution of the Escrow Fund and
            will not be immediately distributed to the beneficial owners of the
            Escrow Shares. Such dividends will become part of the Escrow Fund
            and will be available to satisfy Damages. Offeror shall pay any
            taxes on such dividends out of the Escrow Fund.

      (b)   Each Principal Shareholder shall have voting rights with respect to
            that number of Escrow Shares contributed to the Escrow Fund on
            behalf of such Principal Shareholder (and on any voting securities
            added to the Escrow Fund in respect of such Escrow Shares) so long
            as such Escrow Shares or other voting securities are held in the
            Escrow Fund. As the record holder of such shares, the Escrow Agent
            shall vote such shares in accordance with the instructions of the
            Principal Shareholders having the beneficial interest therein and
            shall promptly deliver copies of all proxy solicitation materials to
            such


                                      -48-
<PAGE>   53

            Principal Shareholders. Offeror shall show the Synaptics' Stock
            contributed to the Escrow Fund as issued and outstanding on its
            balance sheet.

8.7   METHOD OF ASSERTING CLAIMS. All claims for indemnification by any
      Indemnified Person pursuant to this Section 8 shall be made in accordance
      with the provisions of the Escrow Agreement.

8.8   REPRESENTATIVE OF THE PRINCIPAL SHAREHOLDERS; POWER OF ATTORNEY. The
      Director of Finance of Generics Group Ltd., currently Martin Frost, shall
      be appointed as agent and attorney-in-fact (the "Principal Shareholders'
      Representative") for each Principal Shareholder for and on behalf of the
      Principal Shareholders, to give and receive notices and communications on
      behalf of the Principal Shareholders, to enter into and perform the Escrow
      Agreement, to authorize delivery to Offeror of Escrow Shares or other
      property from the Escrow Fund in satisfaction of claims by Offeror or any
      other Indemnified Person, to object to such deliveries, to agree to,
      negotiate, enter into settlements and compromises of, and demand
      arbitration and comply with orders of courts and awards of arbitrators
      with respect to such claims, and to take all actions necessary or
      appropriate in the judgment of Principal Shareholders' Representative for
      the accomplishment of the foregoing.

                                   SECTION 9

TERMINATION; SURVIVAL AND EFFECT OF TERMINATION

9.1   TERMINATION. Notwithstanding anything herein to the contrary, this
      Agreement may be terminated and the transactions contemplated hereby
      abandoned at any time prior to the Closing Date:

      (a)   By mutual written consent of Offeror and the Principal Shareholders'
            Representative;

      (b)   By Offeror, if any of the conditions set forth in Sections 7.1 and
            7.3 shall have become reasonably incapable of fulfillment prior to
            October 31, 1999, through no fault of Offeror, and such condition(s)
            shall not have been waived in writing by Offeror;

      (c)   By the Principal Shareholders' Representative, if any of the
            conditions set forth in Sections 7.1 and 7.2 shall have become
            reasonably incapable of fulfillment prior to October 31, 1999,
            through no fault of the Principal Shareholders, and such
            condition(s) shall not have been waived in writing by the Principal
            Shareholders' Representative;

      (d)   By either Offeror or the Principal Shareholders' Representative if
            (i) the other (Offeror on the one hand or any Principal Shareholder
            on the other) has breached this Agreement in any material respect,
            or (ii) the Closing does not occur on or before October 31, 1999
            (unless such date is extended by the mutual agreement of Offeror and
            a majority in interest of the Shareholders), but only if the failure
            to consummate such transaction on or before such date did not result
            from the failure by the party(ies) seeking such termination to
            fulfill any condition set forth in Section 7 which is a condition
            precedent to the


                                      -49-
<PAGE>   54

      obligation of the other under this Agreement to consummate the
      transactions contemplated hereby.

9.2   SURVIVAL. If this Agreement is terminated prior to Closing and the
      transactions contemplated hereby are not consummated as described above,
      this Agreement shall become void and of no further force and effect,
      except for the provisions of Section 9 (relating to termination); Section
      10.5 (relating only to the obligations of confidentiality and not those
      regarding access of information); Section 10.6 (relating to disclosure,
      except that the first sentence regarding access to records shall be of no
      further force and effect); and Section 12 (relating to certain
      miscellaneous provisions).

                                   SECTION 10

COVENANTS OF THE PRINCIPAL SHAREHOLDERS

10.1  CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
      this Agreement and continuing until the earlier of the termination of this
      Agreement or the Closing Date, the Principal Shareholders shall cause or
      procure the Company (except to the extent expressly contemplated by this
      Agreement or as consented to in writing by Offeror), to carry on its and
      its Subsidiaries' business in the usual, regular and ordinary course in
      substantially the same manner as heretofore conducted, to pay and to cause
      its Subsidiaries to pay debts and Taxes when due subject (i) to good faith
      disputes over such debts or Taxes and (ii) to Offeror's consent to the
      filing of material tax returns if applicable, to pay or perform other
      obligations when due, and to use best efforts consistent with past
      practice and policies to preserve intact its and its Subsidiaries' present
      business organization, keep available the services of its and its
      Subsidiaries' present officers and key employees and preserve its and its
      Subsidiaries' relationships with customers, suppliers, distributors,
      licensors, licensees, and others having business dealings with it or its
      Subsidiaries, to the end that its and its Subsidiaries' goodwill and
      ongoing businesses shall be unimpaired at the Closing Date. The Principal
      Shareholders shall cause or procure the Company to promptly notify Offeror
      of any event or occurrence not in the ordinary course of its or its
      Subsidiaries' business, and of any event which could have a Material
      Adverse Effect. Without limiting the foregoing, except as expressly
      contemplated by this Agreement, the Principal Shareholders shall cause or
      procure the Company or any of its Subsidiaries to not do, allow or permit
      any of thc following, without the prior written consent of Offeror:

      (a)   CHARTER DOCUMENTS. Cause or permit any amendments to the Memorandum
            or Articles of Association, except as permitted under this
            Agreement;

      (b)   ISSUANCE OF SECURITIES. Issue, deliver or sell or authorize or
            propose the issuance, delivery or sale of, or purchase or propose
            the purchase of, any shares of its capital stock or securities
            convertible into, or subscriptions, rights, warrants or options to
            acquire, or other agreements or commitments of any character
            obligating it to issue any such shares or other convertible
            securities, other than the issuance of shares of its Ordinary Shares
            pursuant to the exercise of stock options, warrants or other rights
            therefor outstanding as of the date of this Agreement and the
            issuance of shares of its Ordinary Shares as provided in Section
            10.2 below;



                                      -50-
<PAGE>   55

      (c)   DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any dividends on
            or make any other distributions (whether in cash, stock or property)
            in respect of any of its capital stock, or 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 repurchase, redeem
            or otherwise acquire, directly or indirectly, any shares of its
            capital stock;

      (d)   STOCK OPTION PLANS, ETC. Authorize cash payments in exchange for any
            options or other rights granted under any of the Company's stock
            plans.

      (e)   MATERIAL CONTRACTS. Enter into any material contract or commitment,
            or violate, amend or otherwise modify or waive any of the terms of
            any of its material contracts, other than in the ordinary course of
            business consistent with past practice;

      (f)   INTELLECTUAL PROPERTY. Transfer to any person or entity any rights
            to its Intellectual Property other than in the ordinary course of
            business consistent with past practice;

      (g)   EXCLUSIVE RIGHTS. Enter into or amend any agreements pursuant to
            which any other party is granted exclusive marketing or other
            exclusive rights of any type or scope with respect to any of its
            products or technology;

      (h)   DISPOSITIONS. Sell, lease, license or otherwise dispose of or
            encumber any of its properties or assets which are material,
            individually or in the aggregate, to its and its Subsidiaries'
            business, taken as a whole, except in the ordinary course of
            business consistent with past practice;

      (i)   INDEBTEDNESS. Incur any indebtedness for borrowed money or guarantee
            any such indebtedness or issue or sell any debt securities or
            guarantee any debt securities of others;

      (j)   AGREEMENTS. Enter into any agreement in which the obligation of the
            Company exceeds $50,000 or which shall not terminate or be subject
            to termination for convenience within 180 days following execution
            of such agreement or any agreement not in the ordinary course of
            business and consistent with past practice;

      (k)   PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an amount in
            excess of $25,000 in any one case or $50,000 in the aggregate, any
            claim, liability or obligation (absolute, accrued, asserted or
            unasserted, contingent or otherwise) arising other than in the
            ordinary course of business, other than the payment, discharge or
            satisfaction of liabilities reflected or reserved against in the
            Company Financial Statements;

      (l)   CAPITAL EXPENDITURES. Make any capital expenditures, capital
            additions or capital improvements except in the ordinary course of
            business and consistent with past practice and not exceeding $50,000
            in the aggregate;


                                      -51-
<PAGE>   56

      (m)   INSURANCE. Materially reduce the amount of any material insurance
            coverage provided by existing insurance policies;

      (n)   TERMINATION OR WAIVER. Terminate or waive any right of substantial
            value, other than in the ordinary course of business;

      (o)   EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Adopt or amend any
            employee benefit or stock purchase or option plan, or hire any new
            director level or officer level employee (except that it may hire a
            replacement for any current director level or officer level employee
            if it first provides Offeror advance notice regarding such hiring
            decision), pay any special bonus or special remuneration to any
            employee or director, or increase the salaries or wage rates of its
            employees;

      (p)   SEVERANCE ARRANGEMENT. Grant any severance or termination pay (i) to
            any director or officer or (ii) to any other employee except (A)
            payments made pursuant to standard written agreements outstanding on
            the date hereof or (B) payments made in the ordinary course of
            business in accordance with its standard past practice not exceeding
            $50,000 in the aggregate;

      (q)   LAWSUITS. Commence a lawsuit other than (i) for the routine
            collection of bills, (ii) in such cases where it in good faith
            determines that failure to commence suit would result in the
            material impairment of a valuable aspect of its business, provided
            that it consults with Offeror prior to the filing of such a suit, or
            (iii) for a breach of this Agreement;

      (r)   ACQUISITIONS. Acquire or agree to acquire by merging or
            consolidating with, or by purchasing a substantial portion of the
            assets of, or by any other manner, any business or any corporation,
            partnership, association or other business organization or division
            thereof, or otherwise acquire or agree to acquire any assets which
            are material, individually or in the aggregate, to its and its
            Subsidiaries' business, taken as a whole;

      (s)   TAXES. Other than in the ordinary course of business, make or change
            any material election in respect of Taxes, adopt or change any
            accounting method in respect of Taxes, file any material tax return
            or any amendment to a material tax return, enter into any closing
            agreement, settle any claim or assessment in respect of Taxes, or
            consent to any extension or waiver of the limitation period
            applicable to any claim or assessment in respect of Taxes;

      (t)   NOTICES. Fail to give any notices or other information required to
            be given to the employees of the Company, any collective bargaining
            unit representing any group of employees of the Company, and any
            applicable government authority under applicable law in connection
            with the transactions provided for in this Agreement;

      (u)   REVALUATION. Revalue any of its assets, including without limitation
            writing down the value of inventory or writing off notes or accounts
            receivable other than in the ordinary course of business; or

                                      -52-
<PAGE>   57

      (v)   OTHER. Take, or agree in writing or otherwise to take, any of the
            actions described in Sections 10.1(a) through (u) above.

10.2  CASH CONTRIBUTIONS BY GENERICS GROUP AG AND OFFEROR. In order to ensure
      the obligations of the Principal Shareholders under Section 10.1 above and
      to ensure that as of the Closing Date the Company's Current Assets (as
      defined in Section 7.3(b)) minus Current Liabilities (as defined in
      Section 7.3(b) are no less than zero minus $80,000, Generics Group AG
      shall make capital contributions to the Company to fund (I) all
      liabilities (including legal fees and expenses of the Company and the
      Shareholders in connection with this Agreement and the Offer Document,
      which shall be the sole responsibility of the Company and the Shareholders
      pursuant to Section 12.13) incurred by the Company through September 22,
      1999 and (ii) for liabilities incurred by the Company after September 22,
      1999, all liabilities incurred by the Company (including legal fees and
      expenses of the Company and the Shareholders in connection with this
      Agreement and the Offer Document) except liabilities to be assumed by
      Offeror in the Closing as set forth below. Offeror hereby assumes fifty
      percent (50%) of normal business expenses (as determined by Offeror in
      good faith) incurred by the Company after September 22, 1999 and before 1
      October 1999 and thereafter all such normal business expenses; provided,
      however Offeror shall (subject to the following proviso of this Section
      10.2) have no obligations under this Section 10.2 if the Purchase does not
      occur and Offeror's obligations under this Section 10.2 shall in no event
      (except as set forth below) exceed $80,000; provided further, however, if
      the Purchase does not occur because the conditions in Section 7.3(f) are
      not fulfilled through no fault of a Principal Shareholder, Offeror's
      obligations under this Section 10.2 shall remain, but instead shall not
      exceed $160,000. Generics Group AG shall be issued additional Ordinary
      Shares of the Company prior to the Closing at a price not to exceed 7.60
      pounds sterling per Share in consideration of capital contributions made
      pursuant to this Section 10.2.

10.3  TRANSACTIONS WITH SHAREHOLDERS. The Principal Shareholders shall use their
      best efforts and cooperate with Offeror to enable the Offeror to issue a
      general offer memorandum, in the form attached as Exhibit B to the
      Shareholders for the purpose of procuring executed acceptances of the
      Offer and all documents contemplated thereby, by the other Shareholders
      prior to the Closing. The Principal Shareholders shall indemnify and hold
      harmless the Indemnified Parties for all Damages incurred as a result of
      or in connection with any and all claims by any Shareholders based upon or
      resulting from information provided to such Shareholder that has not been
      provided by Offeror in connection with the sale of the Shares by such
      Shareholder to the Offeror under this Agreement.

10.4  NO SOLICITATION. The Principal Shareholders will not, directly or
      indirectly, (i) take any action to solicit, initiate, entertain or
      encourage any Takeover Proposal (defined below) or (ii) engage in
      negotiations with, or disclose any nonpublic information relating to the
      Company or any of it Subsidiaries to, or afford access to the properties,
      books or records of the Company or any of its Subsidiaries to, any person
      that has advised the Company that it may be considering making, or that
      has made, a Takeover Proposal. The Principal Shareholders will promptly
      notify Offeror after receipt of any Takeover Proposal or any notice that
      any person is considering making a Takeover Proposal or any request for
      nonpublic information relating to the Company or any of


                                      -53-
<PAGE>   58

      its Subsidiaries or for access to the properties, books or records of the
      Company or any of its Subsidiaries by any person that has advised the
      Company that it may be considering making, or that has made, a Takeover
      Proposal and will keep Offeror fully informed of the status and details of
      any such Takeover Proposal notice or request. For purposes of this
      Agreement, "Takeover Proposal" means any offer or proposal for, or any
      indication of interest in, a Purchase or other business combination
      involving the Company or any of its Subsidiaries or the acquisition of any
      significant equity interest in, or a significant portion of the assets of,
      the Company or any of its Subsidiaries, other than the transactions
      contemplated by this Agreement.

10.5  ACCESS; CONFIDENTIALITY. The Principal Shareholders shall cause or procure
      the Company to make available all books, records, facilities, employees,
      non-employee agents (such as patent and regulatory counsel) and
      information necessary for Offeror to evaluate the business, operations,
      properties and financial condition of the Company. Offeror shall keep
      confidential and shall not make use of any information treated by the
      other party as confidential (including, without limitation, the existence
      of this Agreement), obtained from the other party concerning the assets,
      properties, business or operations of the other party other than to legal
      counsel, consultants, financial advisors, key employees, lenders and
      investment bankers where such disclosure is related to the performance of
      obligations under this Agreement or the consummation of the transactions
      contemplated under this Agreement (all of whom shall be similarly bound by
      the provisions of this Section 10.3), except as may be required to be
      disclosed by applicable law. Notwithstanding the foregoing, the foregoing
      confidentiality restrictions shall not apply to any information which (a)
      becomes generally available to the public through no fault of the
      receiving party or its employees, agents or representatives; (b) is
      independently developed by the receiving party without benefit of the
      above-described information (and such independent development is
      substantiated in writing), or rightfully received from another source on a
      non-confidential basis; (c) when such disclosure is required by a court or
      governmental authority or is otherwise required or permitted by law
      (including, without limitation, filings required or permitted to be made
      with the SEC or any other governmental or regulatory agency) or is
      necessary to establish rights under this Agreement or any agreement
      contemplated hereby(and the disclosing party has taken all reasonable
      efforts to limit the scope of such disclosure and to protect the
      confidential nature of the information disclosed).

10.6  PUBLIC ANNOUNCEMENTS. All parties hereto agree that Offeror will be
      responsible for any press release or publication with respect to the
      existence of this Agreement or the transactions contemplated hereby and
      further agree to cooperate in good faith with respect to any such press
      release or public statement, and, except as may be required by law,
      further agree not to issue any such press release or public statement
      without the prior written consent of Offeror (in the case of a publication
      proposed by the Company and/or a Shareholder). Offeror agrees to provide
      any such press release or public statement to the Principal Shareholder
      Representative in advance of publication and provide the Principal
      Shareholder Representative a reasonable opportunity to review and approve
      such publication.

10.7  COOPERATION. Each Party hereto will fully cooperate with the other
      parties, their counsel and accountants in connection with any steps
      required to be taken as part of


                                      -54-
<PAGE>   59


      its obligations under this Agreement. Each party will use reasonable
      efforts to cause all conditions to this Agreement to be satisfied as
      promptly as possible and to obtain all consents and approvals necessary
      for the due and punctual performance of this Agreement and for the
      satisfaction of the conditions hereof. No party will undertake any course
      of action inconsistent with this Agreement or which would make any
      representations, warranties or agreements made by such party in this
      Agreement untrue or any conditions precedent to this Agreement unable to
      be satisfied at or prior to the Closing. Principal Shareholders will use
      their best efforts and cause or procure the Company to assist Offeror (at
      Offeror's cost) as may be necessary to comply with the securities and blue
      sky laws of all jurisdictions that are applicable in connection with the
      issuance of Synaptics' Stock pursuant hereto.

10.8  EMPLOYEES OF THE BUSINESS. Between the date of this Agreement and the
      Closing Date, the Principal Shareholders shall cooperate with Offeror to
      enable it to determine the employment terms of Company employees after the
      Closing Date, including allowing Offeror, if reasonably acceptable to the
      Principal Shareholders' Representative, to discuss directly with employees
      of the Company their employment with Offeror after the Closing Date.

10.9  NOTIFICATION OF CLAIMS. From the date of this Agreement to and including
      the Closing Date, the Principal Shareholders shall and shall cause or
      procure the Company to promptly notify Offeror in writing of the
      commencement or threat of any claims, litigation or proceedings against or
      affecting the Company of which the Company and/or the Principal
      Shareholders have knowledge.

10.10 FURTHER ACTS. After the Closing Date, each party hereto, at the request of
      and without any further cost or expense to the other parties will take any
      further actions necessary or desirable to carry out the purposes of this
      Agreement and to vest in Offeror the full benefit of the rights, powers
      and remedies conferred upon the Offeror or this Agreement. In addition,
      without in any way limiting the generality of the foregoing, and, to the
      extent required, the Principal Shareholders hereby agree to procure
      Scientific Generics Ltd. to take any and all further actions necessary or
      desirable to carry out the assignment to the Company of all Intellectual
      Property.

                                   SECTION 11

COVENANTS OF OFFEROR

11.1  BLUE SKY LAWS. Offeror shall take such steps as may be necessary to comply
      with the securities and Blue Sky Laws of all jurisdictions which are
      applicable to the issuance of the Synaptics' Stock pursuant hereto.

11.2  CONDUCT OF BUSINESS OF OFFEROR. During the period from the date of this
      Agreement and continuing until the earlier of the termination of this
      Agreement or the Closing Date, Offeror agrees (except to the extent that
      the Principal Shareholders'


                                      -55-
<PAGE>   60


      Representative shall otherwise consent in writing) that Offeror shall
      promptly notify the Principal Shareholders' Representative of any event or
      occurrence or emergency that is not in the ordinary course of business of
      Offeror and that is material and adverse to the business of Offeror.

                                   SECTION 12

MISCELLANEOUS

12.1  SURVIVAL OF WARRANTIES. The representations, warranties and agreements set
      forth in this Agreement or in any instrument delivered pursuant to this
      Agreement (excluding the Offer Document, Deed of Tax Covenant and the Deed
      of Non-Competition) shall survive the Closing and (except to the extent
      that survival is necessary to effectuate the intent of such provisions,
      including the provisions of Section 8) shall terminate on the second
      anniversary of the Closing Date. The representations, warrants and
      agreements set forth in the Offer Document, Deed of Tax Covenant and Deed
      of Non-Competition shall survive in perpetuity, except as otherwise set
      forth in such agreements or deeds.

12.2  NOTICES. Any notice required or permitted by this Agreement shall be in
      writing and shall be deemed sufficient upon receipt, when delivered
      personally or by courier, overnight delivery service or confirmed
      facsimile, or forty-eight (48) hours after being deposited in the regular
      mail as certified or registered mail (airmail if sent internationally)
      with postage prepaid, if such notice is addressed to the party to be
      notified at such party's address or facsimile number as set forth below,
      or as subsequently modified by written notice,

(a)   if to Offeror, to:

                        Synaptics, Incorporated
                        2702 Orchard Parkway
                        San Jose, CA 95134
                        Attention: Francis Lee
                        Facsimile No.: (408) 434-9819
                        Telephone No.: (408) 434-0110

                        with a copy to:
                        Venture Law Group
                        2800 Sand Hill Road
                        Menlo Park, CA 94025
                        Attention: John V. Bautista
                        Facsimile No.: (650) 233-8386
                        Telephone No.: (650) 854-4488

                                      -56-
<PAGE>   61

     (b)   if to the Company, to:

                        Absolute Sensors Limited
                        Harston Mill, Harston
                        Cambridge, CB2 5NH UK
                        Attention: Managing Director
                        Facsimile No.: 01223-875201
                        Telephone No.: 01223-875200

     (c)   if to the Principal Shareholders' Representative, to:

                        Director of Finance for the Generics Group Ltd.
                        The Generics Group Ltd.
                        Harston Mill, Harston
                        Cambridge, CB2 5NH UK
                        Facsimile No.: 01223-875201
                        Telephone No.: 01223-875200

                        with a copy to:
                        The Generics Group Ltd.
                        Harston Mill, Harston
                        Cambridge, CB2 5NH UK
                        Attention: Managing Director
                        Facsimile No.: 01223-875201
                        Telephone No.: 01223-875200

12.3  INTERPRETATION. When a reference is made in this Agreement to Exhibits,
      such reference shall be to an Exhibit to this Agreement unless otherwise
      indicated. The words "include," "includes" and "including" when used
      herein shall be deemed in each case to be followed by the words "without
      limitation." The phrase "made available" in this Agreement shall mean that
      the information referred to has been made available if requested by the
      party to whom such information is to be made available. The phrases "the
      date of this Agreement," "the date hereof," and terms of similar import,
      unless the context otherwise requires, shall be deemed to refer to the
      Effective Date. The table of contents and headings contained in this
      Agreement are for reference purposes only and shall not affect in any way
      the meaning or interpretation of this Agreement.

12.4  COUNTERPARTS. This Agreement may be executed in two or more counterparts,
      each of which shall be deemed an original and all of which together shall
      constitute one instrument.

12.5  ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This Agreement
      and the documents referred to herein are the product of all of the parties
      hereto, and constitute the entire agreement between such parties
      pertaining to the subject matter hereof and thereof, and merge all prior
      negotiations and drafts of the parties with regard to the transactions
      contemplated herein and therein. Any and all other written or oral
      agreements existing between the parties hereto regarding such transactions
      are expressly cancelled and are not intended to confer upon any other
      person any rights or remedies hereunder.

                                      -57-
<PAGE>   62


12.6  BINDING EFFECT AND ASSIGNMENT. This Agreement and all of the provisions
      hereof shall be binding upon and inure to the benefit of the Parties
      hereto and their respective successors and permitted assigns; provided,
      however, that except as otherwise specifically provided herein, neither
      this Agreement nor any of the rights, interests or obligations of the
      parties hereto may be assigned by operation of law or otherwise by a Party
      hereto without the prior written consent of the other Parties hereto.

12.7  SEVERABILITY. If one or more provisions of this Agreement are held to be
      unenforceable under applicable law, the parties agree to renegotiate such
      provision in good faith, in order to maintain the economic position
      enjoyed by each party as close as possible to that under the provision
      rendered unenforceable. In the event that the parties cannot reach a
      mutually agreeable and enforceable replacement for such provision, then
      (i) such provision shall be excluded from this Agreement, (ii) the balance
      of the Agreement shall be interpreted as if such provision were so
      excluded and (iii) the balance of the Agreement shall be enforceable in
      accordance with its terms.

12.8  REMEDIES CUMULATIVE. 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.

12.9  GOVERNING LAW. This Agreement and all acts and transactions pursuant
      hereto and the rights and obligations of the parties hereto shall be
      governed, construed and interpreted in accordance with the laws of the
      State of California, without giving effect to principles of conflicts of
      law. Each of the parties hereto irrevocably consents to the exclusive
      jurisdiction and venue of any court within Santa Clara County, State of
      California, in connection with any matter based upon or arising out of
      this Agreement or the matters contemplated herein, agrees that process may
      be served upon them in any manner authorized by the laws of the State of
      California for such persons and waives and covenants not to assert or
      plead any objection which they might otherwise have to such jurisdiction,
      venue and such process.

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

12.11 WAIVER OF RESTRICTIONS. Principal Shareholders shall procure that all
      other shareholders of the Company waive any restrictions on transfer
      applicable to their shares with respect to the transfers pursuant to the
      Offer.

12.12 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended or
      waived only with the written consent of the Parties or their respective
      successors and assigns. Any amendment or waiver effected in accordance
      with this Section 12.11 shall be binding upon the parties and their
      respective successors and assigns.

                                      -58-
<PAGE>   63

12.13 FEES. The Principal Shareholders (as to each such Shareholder, jointly and
      severally) agree to pay the fees and expenses of their legal counsel,
      financial advisors and other agents incurred in connection with the
      negotiation, execution and carrying out of their obligations under this
      Agreement. The Offeror shall pay fifty per cent of the fees of the
      financial advisor retained by the Company in connection with the approval
      by its directors of the Offer Document if the Purchase does not occur
      through no fault of the Company or the Principal Shareholders; and
      provided further however that Offeror shall in no event be required to pay
      in excess of L15,000 hereunder. Fees and expenses of the Principal
      Shareholders and the Company invoiced to the Company will be deducted by
      Offeror from the Cash Consideration or the Escrow Shares to which the
      Principal Shareholders are entitled, at Offeror's sole election.



                                      -59-
<PAGE>   64

The parties have duly executed this Stock Purchase Agreement as of the date
first above written.

SYNAPTICS INCORPORATED



Name:    Francis Lee
     -------------------------------

By:      /s/ Francis Lee
   ---------------------------------

Title    President
     -------------------------------



THE GENERICS GROUP AG



Name:    Gordon Malcolm Edge              Name:    Martin John Frost
     -------------------------------           -------------------------------

By:      /s/ Gordon Malcolm Edge          By:      /s/ M J Frost
   ---------------------------------         ---------------------------------

Title    Director                         Title    Director
     -------------------------------           -------------------------------



DAVID ELY



Name:    David Ely
     -------------------------------

Signature: /s/ David Ely
          --------------------------



IAN COLLINS



Name:      Ian Collins
     -------------------------------

Signature: /s/ Ian Collins
          --------------------------



PRINCIPAL SHAREHOLDERS'
REPRESENTATIVE



Name:       Martin John Frost
     -------------------------------

Signature:  /s/ M J Frost
          --------------------------





                                      -60-