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AGREEMENT AND PLAN OF REORGANIZATION

This Agreement and Plan of Reorganization ("Agreement") ismade and entered into as of January 12, 2000, by and among:  **AppliedMaterials, Inc**., a Delaware corporation ("Parent");**Boston Acquisition Sub, Inc**., a Nevada corporation and a whollyowned subsidiary of Parent ("Merger Sub"); and **Etec Systems,Inc.**, a Nevada corporation (the "Company").  Certaincapitalized terms used in this Agreement are defined in Exhibit A.**Recitals
A.	Parent, Merger Sub and the Company intend to effect a mergerof Merger Sub into the Company in accordance with this Agreement and theapplicable provisions of Chapter 92A of the Nevada Revised Statutes (the"Merger").  Upon consummation of the Merger, Merger Sub will cease toexist, and the Company will become a wholly owned subsidiary of Parent.**B.	It is intended that the Merger qualify as a tax-freereorganization within the meaning of Section 368(a) of the Internal Revenue Codeof 1986, as amended (the "Code").  For financial reporting purposes,it is intended that the Merger be accounted for as a "pooling ofinterests."**C.	The respective boards of directors of Parent, MergerSub and the Company have approved this Agreement and approved the Merger.**D.	In order to induce Parent to enter into this Agreementand to consummate the Merger, concurrently with the execution of this Agreementthe Company is entering into a stock option agreement with Parent (the"Stock Option Agreement"), pursuant to which the Company has grantedto Parent an option, exercisable under the circumstances specified therein, topurchase shares of Company Common Stock.**Agreement
The parties to this Agreement, intending to be legally bound, agreeas follows:**Section 1.     Description of Transaction1.1     Merger of Merger Sub into the Company.  Upon the terms andsubject to the conditions set forth in this Agreement, at the Effective Time (asdefined in Section 1.3), Merger Sub shall be merged with and into the Company,and the separate existence of Merger Sub shall cease.  The Company will continueas the surviving corporation in the Merger (the "SurvivingCorporation").**1.2     Effect of the Merger.  The Merger shall have the effectsset forth in this Agreement and in the applicable provisions of Chapter 92A ofthe Nevada Revised Statutes.**1.3     Closing; Effective Time.  The consummation of thetransactions contemplated by this Agreement (the "Closing") shall takeplace at the offices of Cooley Godward llp, Five Palo Alto Square, 3000 ElCamino Real, Palo Alto, California, at 10:00 a.m. on a date to be designated byParent (the "Closing Date"), which shall be no later than the fifthbusiness day after the satisfaction or waiver of the last to be satisfied orwaived of the conditions set forth in Sections 6 and 7 (other than thoseconditions that by their nature are to be satisfied at the Closing, but subjectto the satisfaction or waiver of such conditions).  Subject to the provisions ofthis Agreement, articles of merger satisfying the applicable requirements ofChapter 92A of the Nevada Revised Statutes shall be duly executed by the Companyand Merger Sub and, simultaneously with or as soon as practicable following theClosing, delivered to the Nevada Secretary of State for filing.  The Mergershall become effective at the time such articles of merger are filed with theNevada Secretary of State or at such later time as may be specified in sucharticles of merger (the "Effective Time").**1.4     Articles of Incorporation and Bylaws; Directors andOfficers.  Unless otherwise determined by Parent prior to the EffectiveTime:the Articles of Incorporation of the Surviving Corporation shall beamended and restated immediately after the Effective Time to conform to ExhibitB;

the Bylaws of the Surviving Corporation shall be amended and restated asof the Effective Time to conform to the Bylaws of Merger Sub as in effectimmediately prior to the Effective Time; and

the directors and officers of the Surviving Corporation immediately afterthe Effective Time shall be the respective individuals who are directors andofficers of Merger Sub immediately prior to the Effective Time.
**1.5     Conversion of Shares.At the Effective Time, by virtue of the Merger and without any furtheraction on the part of Parent, Merger Sub, the Company or any stockholder of theCompany:
any shares of Company Common Stock then held by the Company or any whollyowned Subsidiary of the Company (or held in the Company's treasury) (togetherwith any associated Rights, as defined in Section 2.3) shall be canceled andretired and shall cease to exist, and no consideration shall be delivered inexchange therefor;

any shares of Company Common Stock then held by Parent, Merger Sub or anyother wholly owned Subsidiary of Parent (together with any associated Rights)shall be canceled and retired and shall cease to exist, and no considerationshall be delivered in exchange therefor;

except as provided in clauses "(i)" and "(ii)" aboveand subject to Sections 1.5(b), 1.5(c) and 1.5(d), each share of Company CommonStock then outstanding (together with any associated Rights) shall be convertedinto the right to receive 0.649 of a share of Parent Common Stock; and

each share of the common stock, no par value, of Merger Sub thenoutstanding shall be converted into one share of common stock of the SurvivingCorporation.

The fraction of a share of Parent Common Stock specified in clause"(iii)" of the preceding sentence (as such fraction may be adjusted inaccordance with Section 1.5(b)) is referred to as the "ExchangeRatio."
If, between the date of this Agreement and the Effective Time, theoutstanding shares of Company Common Stock or Parent Common Stock are changedinto a different number or class of shares by reason of any stock split,division or subdivision of shares, stock dividend, reverse stock split,reclassification, recapitalization or other similar transaction, then theExchange Ratio shall be appropriately adjusted.

If any shares of Company Common Stock outstanding immediately prior tothe Effective Time are unvested or are subject to a repurchase option, risk offorfeiture or other condition under any applicable restricted stock purchaseagreement or other agreement with the Company or under which the Company has anyrights, then the shares of Parent Common Stock issued in exchange for suchshares of Company Common Stock will also be unvested and subject to the samerepurchase option, risk of forfeiture or other condition, and the certificatesrepresenting such shares of Parent Common Stock may accordingly be marked withappropriate legends.  The Company shall take all action that may be necessary toensure that, from and after the Effective Time, Parent is entitled to exerciseany such repurchase option or other right set forth in any such restricted stockpurchase agreement or other agreement.

No fractional shares of Parent Common Stock shall be issued in connectionwith the Merger, and no certificates or scrip for any such fractional sharesshall be issued.  Any holder of Company Common Stock who would otherwise beentitled to receive a fraction of a share of Parent Common Stock (afteraggregating all fractional shares of Parent Common Stock issuable to suchholder) shall, in lieu of such fraction of a share and upon surrender of suchholder's Company Stock Certificate(s) (as defined in Section 1.6), be paid incash the dollar amount (rounded to the nearest whole cent), without interest,determined by multiplying such fraction by the closing price of a share ofParent Common Stock on the Nasdaq National Market on the date the Merger becomeseffective.
**1.6     Closing of the Company's Transfer Books.  At theEffective Time: (a) all shares of Company Common Stock outstanding immediatelyprior to the Effective Time shall automatically be canceled and retired andshall cease to exist, and all holders of certificates representing shares ofCompany Common Stock that were outstanding immediately prior to the EffectiveTime shall cease to have any rights as stockholders of the Company; and (b) thestock transfer books of the Company shall be closed with respect to all sharesof Company Common Stock outstanding immediately prior to the Effective Time.  Nofurther transfer of any such shares of Company Common Stock shall be made onsuch stock transfer books after the Effective Time.  If, after the EffectiveTime, a valid certificate previously representing any shares of Company CommonStock (a "Company Stock Certificate") is presented to the ExchangeAgent (as defined in Section 1.7) or to the Surviving Corporation or Parent,such Company Stock Certificate shall be canceled and shall be exchanged asprovided in Section 1.7.**1.7     Exchange of Certificates.On or prior to the Closing Date, Parent shall select a reputable bank ortrust company to act as exchange agent in the Merger (the "ExchangeAgent").  Promptly after the Effective Time, Parent shall deposit with theExchange Agent (i) certificates representing the shares of Parent Common Stockissuable pursuant to this Section 1, and (ii) cash sufficient to make paymentsin lieu of fractional shares in accordance with Section 1.5(d).  The shares ofParent Common Stock and cash amounts so deposited with the Exchange Agent,together with any dividends or distributions received by the Exchange Agent withrespect to such shares, are referred to collectively as the "ExchangeFund."

As soon as reasonably practicable after the Effective Time, the ExchangeAgent will mail to the record holders of Company Stock Certificates (i) a letterof transmittal in customary form and containing such provisions as Parent mayreasonably specify (including a provision confirming that delivery of CompanyStock Certificates shall be effected, and risk of loss and title to CompanyStock Certificates shall pass, only upon delivery of such Company StockCertificates to the Exchange Agent), and (ii) instructions for use in effectingthe surrender of Company Stock Certificates in exchange for certificatesrepresenting Parent Common Stock.  Upon surrender of a Company Stock Certificateto the Exchange Agent for exchange, together with a duly executed letter oftransmittal and such other documents as may be reasonably required by theExchange Agent or Parent, (1) the holder of such Company Stock Certificate shallbe entitled to receive in exchange therefor a certificate representing thenumber of whole shares of Parent Common Stock that such holder has the right toreceive pursuant to the provisions of Section 1.5 (and cash in lieu of anyfractional share of Parent Common Stock), and (2) the Company Stock Certificateso surrendered shall be canceled.  Until surrendered as contemplated by thisSection 1.7(b), each Company Stock Certificate shall be deemed, from and afterthe Effective Time, to represent only the right to receive shares of ParentCommon Stock (and cash in lieu of any fractional share of Parent Common Stock)as contemplated by this Section 1.  If any Company Stock Certificate shall havebeen lost, stolen or destroyed, Parent may, in its discretion and as a conditionprecedent to the issuance of any certificate representing Parent Common Stock,require the owner of such lost, stolen or destroyed Company Stock Certificate toprovide an appropriate affidavit and to deliver a bond (in such sum as Parentmay reasonably direct) as indemnity against any claim that may be made againstthe Exchange Agent, Parent or the Surviving Corporation with respect to suchCompany Stock Certificate.

Notwithstanding anything to the contrary contained in this Agreement, noshares of Parent Common Stock (or certificates therefor) shall be issued inexchange for any Company Stock Certificate to any Person who may be an"affiliate" (as that term is used in Rule 145 under the SecuritiesAct) of the Company until such Person shall have delivered to Parent a dulyexecuted Affiliate Agreement as contemplated by Section 5.10.

No dividends or other distributions declared or made with respect toParent Common Stock with a record date after the Effective Time shall be paid tothe holder of any unsurrendered Company Stock Certificate with respect to theshares of Parent Common Stock that such holder has the right to receive in theMerger until such holder surrenders such Company Stock Certificate in accordancewith this Section 1.7 (at which time such holder shall be entitled, subject tothe effect of applicable escheat or similar laws, to receive all such dividendsand distributions, without interest).

Any portion of the Exchange Fund that remains undistributed to holders ofCompany Stock Certificates as of the date 180 days after the date on which theMerger becomes effective shall be delivered to Parent upon demand, and anyholders of Company Stock Certificates who have not theretofore surrendered theirCompany Stock Certificates in accordance with this Section 1.7 shall thereafterlook only to Parent for satisfaction of their claims for Parent Common Stock,cash in lieu of fractional shares of Parent Common Stock and any dividends ordistributions with respect to Parent Common Stock.

Each of the Exchange Agent, Parent and the Surviving Corporation shall beentitled to deduct and withhold from any consideration payable or otherwisedeliverable pursuant to this Agreement to any holder or former holder of CompanyCommon Stock such amounts as may be required to be deducted or withheldtherefrom under the Code or any provision of state, local or foreign tax law orunder any other applicable Legal Requirement.  To the extent such amounts are sodeducted or withheld, such amounts shall be treated for all purposes under thisAgreement as having been paid to the Person to whom such amounts would otherwisehave been paid.

Neither Parent nor the Surviving Corporation shall be liable to anyholder or former holder of Company Common Stock or to any other Person withrespect to any shares of Parent Common Stock (or dividends or distributions withrespect thereto), or for any cash amounts, delivered to any public officialpursuant to any applicable abandoned property law, escheat law or similar LegalRequirement. 
**1.8     Tax Consequences.  For federal income tax purposes, theMerger is intended to constitute a reorganization within the meaning of Section368 of the Code.  The parties to this Agreement hereby adopt this Agreement as a"plan of reorganization" within the meaning of Sections 1.368-2(g) and1.368-3(a) of the United States Treasury Regulations.**1.9     Accounting Consequences.  For financial reportingpurposes, the Merger is intended to be accounted for as a "pooling ofinterests."**1.10     Further Action.  If, at any time after the EffectiveTime, any further action is determined by Parent to be necessary or desirable tocarry out the purposes of this Agreement or to vest the Surviving Corporationwith full right, title and possession of and to all rights and property ofMerger Sub and the Company, the officers and directors of the SurvivingCorporation and Parent shall be fully authorized (in the name of Merger Sub, inthe name of the Company and otherwise) to take such action.
**Section 2.     Representations and Warranties of the Company
The Company represents and warrants to Parent and Merger Sub asfollows:
2.1     Due Organization; Subsidiaries; Qualification to doBusiness.The Company has no Subsidiaries, except for the corporations identifiedin Part 2.1(a)(i) of the Company Disclosure Schedule; and neither the Companynor any of the other corporations identified in Part 2.1(a)(i) of the CompanyDisclosure Schedule owns any capital stock of, or any equity interest of anynature in, any other Entity, other than the Entities identified in Part2.1(a)(ii) of the Company Disclosure Schedule.  (The Company and each of itsSubsidiaries are referred to collectively in this Agreement as the"Acquired Corporations.")  None of the Acquired Corporations hasagreed or is obligated to make, or is bound by any Contract under which it maybecome obligated to make, any future investment in or capital contribution toany other Entity.  None of the Acquired Corporations has, at any time, been ageneral partner of any general partnership, limited partnership or otherEntity.

Each of the Acquired Corporations is a corporation duly organized,validly existing and in good standing under the laws of the jurisdiction of itsincorporation and has all necessary power and authority:  (i) to conduct itsbusiness in the manner in which its business is currently being conducted; (ii)to own and use its assets in the manner in which its assets are currently ownedand used; and (iii) to perform its obligations under all Contracts by which itis bound. 

Except as set forth in Part 2.1(c) of the Company Disclosure Schedule,each of the Acquired Corporations is qualified to do business as a foreigncorporation, and is in good standing, under the laws of all jurisdictions wherethe nature of its business requires such qualification, except in suchjurisdictions where the failure to be so qualified or in good standing has nothad and would not reasonably be expected to have a Material Adverse Effect onthe Acquired Corporations.
**2.2     Articles of Incorporation and Bylaws.  Except as setforth in Part 2.2 of the Company Disclosure Schedule, the Company has deliveredto Parent accurate and complete copies of the articles or certificate ofincorporation, bylaws and other charter and organizational documents of therespective Acquired Corporations, including all amendments thereto.**2.3     Capitalization; Rights to Acquire Stock.The authorized capital stock of the Company consists of:  (i)60,000,000 shares of Company Common Stock, of which 21,595,915 shares have beenissued and were outstanding as of January 5, 2000 and of which 1,005,000 shareswere held in the Company's treasury as of January 5, 2000; and (ii) 10,000,000shares of Preferred Stock, $.01 par value per share, of which no shares havebeen issued or are outstanding.  Except as set forth in Part 2.3(a)(i) of theCompany Disclosure Schedule, the Company does not hold any shares of its capitalstock in its treasury.  All of the outstanding shares of Company Common Stockhave been duly authorized and validly issued, and are fully paid andnonassessable. There are no shares of Company Common Stock held by any of theother Acquired Corporations.  Except as set forth in Part 2.3(a)(ii) of theCompany Disclosure Schedule: (i) none of the outstanding shares of CompanyCommon Stock is entitled or subject to any preemptive right, right ofparticipation, right of maintenance or any similar right; (ii) none of theoutstanding shares of Company Common Stock is subject to any right of firstrefusal in favor of the Company; and (iii) there is no Acquired CorporationContract relating to the voting or registration of, or restricting any Personfrom purchasing, selling, pledging or otherwise disposing of (or granting anyoption or similar right with respect to), any shares of Company Common Stock.None of the Acquired Corporations is under any obligation, or is bound by anyContract pursuant to which it may become obligated, to repurchase, redeem orotherwise acquire any outstanding shares of Company Common Stock.

As of January 4, 2000: (i) 215,960 shares of Company Preferred Stock,designated as Series A Participating Preferred Stock, are reserved for futureissuance upon exercise of the rights (the "Rights") issued pursuant tothe Rights Agreement, dated as of  January 15, 1997, between the Company andBank of Boston, as Rights Agent (the "Company Rights Agreement"); (ii)30,727 shares of Company Common Stock are subject to issuance pursuant to stockoptions granted and outstanding under the Company's 1990 Stock Plan; (iii) 6shares of Company Common Stock are subject to issuance pursuant to stock optionsgranted and outstanding under the Company's 1990 Executive Stock Plan; (iv)49,069 shares of Company Common Stock are subject to issuance pursuant to stockoptions granted and outstanding under the Company's 1994 Employee Stock OptionPlan; (v) 84,000 shares of Company Common Stock are subject to issuance pursuantto stock options granted and outstanding under the Company's 1995 Directors'Stock Option Plan; (vi) 3,085,129 shares of Company Common Stock are subject toissuance pursuant to stock options granted and outstanding under the Company's1995 Omnibus Incentive Plan; (vii) 288,807 shares of Company Common Stock arereserved for future issuance pursuant to the Company's 1995 Employee StockPurchase Plan (the "ESPP"); and (viii) 75,000 shares of Company CommonStock are reserved for future issuance pursuant to the Company Warrants.  (Stockoptions granted by the Company (whether pursuant to the Company's stock optionplans or otherwise) are referred to in this Agreement as "CompanyOptions.")   Part 2.3(b) of the Company Disclosure Schedule sets forth thefollowing information with respect to each Company Option outstanding as of thedate of this Agreement: (i) the particular plan (if any) pursuant to which suchCompany Option was granted; (ii) the name of the optionee; (iii) the number ofshares of Company Common Stock subject to such Company Option; (iv) the exerciseprice of such Company Option; (v) the date on which such Company Option wasgranted; (vi) the applicable vesting schedule, and the extent to which suchCompany Option is vested and exercisable as of the date of this Agreement; and(vii) the date on which such Company Option expires.  The Company has deliveredto Parent accurate and complete copies of all stock option plans pursuant towhich the Company has ever granted stock options, and the forms of all stockoption agreements evidencing such options.  The Company has delivered to Parentaccurate and complete copies of the Company Warrants.  The exercise price of theCompany Warrants is $20 per share.

Except as set forth in Part 2.3(b) of the Company Disclosure Schedule,there is no: (i) outstanding subscription, option, call, warrant or right(whether or not currently exercisable) to acquire any shares of the capitalstock or other securities of any of the Acquired Corporations; (ii) outstandingsecurity, instrument or obligation that is or may become convertible into orexchangeable for any shares of the capital stock or other securities of any ofthe Acquired Corporations; (iii) stockholder rights plan or similar plancommonly referred to as a "poison pill" (other than the Company RightsAgreement) or Contract under which any of the Acquired Corporations is or maybecome obligated to sell or otherwise issue any shares of its capital stock orany other securities; or (iv) condition or circumstance that, to the best of theknowledge of the Company, may give rise to or provide a basis for the assertionof a claim by any Person to the effect that such Person is entitled to acquireor receive any shares of capital stock or other securities of any of theAcquired Corporations.  

All outstanding shares of Company Common Stock, all outstanding CompanyOptions, all outstanding Company Warrants and all outstanding shares of capitalstock of each Subsidiary of the Company have been issued and granted incompliance with (i) all applicable securities laws and other applicable LegalRequirements, and (ii) all requirements set forth in applicable Contracts.

All of the outstanding shares of capital stock of each of the Company'sSubsidiaries have been duly authorized and validly issued, are fully paid andnonassessable and are owned beneficially and of record by the Company, free andclear of any Encumbrances.
**2.4     SEC Filings; Financial Statements.The Company has delivered or made available (through the SECEDGAR system or otherwise) to Parent accurate and complete copies of allregistration statements, proxy statements and other statements, reports,schedules, forms and other documents filed by the Company with the SEC sinceJuly 31, 1998, and all amendments thereto (the "Company SECDocuments").  All statements, reports, schedules, forms and other documentsrequired to have been filed by the Company with the SEC have been so filed on atimely basis.  As of the time it was filed with the SEC (or, if amended orsuperseded by a filing prior to the date of this Agreement, then on the date ofsuch filing):  (i) each of the Company SEC Documents complied in all materialrespects with the applicable requirements of the Securities Act or the ExchangeAct (as the case may be); and (ii) none of the Company SEC Documents containedany untrue statement of a material fact or omitted to state a material factrequired to be stated therein or necessary in order to make the statementstherein, in the light of the circumstances under which they were made, notmisleading.

The consolidated financial statements (including any related notes)contained in the Company SEC Documents:  (i) complied as to form in all materialrespects with the published rules and regulations of the SEC applicable thereto;(ii) were prepared in accordance with U.S. generally accepted accountingprinciples applied on a consistent basis throughout the periods covered (exceptas may be indicated in the notes to such financial statements or, in the case ofunaudited statements, as permitted by Form 10-Q of the SEC, and except that theunaudited financial statements may not contain footnotes and are subject tonormal and recurring year-end adjustments that will not, individually or in theaggregate, be material in amount), and (iii) fairly present the consolidatedfinancial position of the Company and its consolidated subsidiaries as of therespective dates thereof and the consolidated results of operations and cashflows of the Company and its consolidated subsidiaries for the periods coveredthereby.  

The Company has reviewed and assessed the recoverability of all of theintangible assets and long-lived assets of the Acquired Corporations grouped byproduct group, using reasonable and supportable assumptions and projectionsreflecting current business conditions and operating plans.  As and whenappropriate, the Company has recorded a reduction in the carrying amount ofthese assets in accordance with U.S. generally accepted accounting principlesapplied on a consistent basis.
**2.5     Absence of Changes.  Except as set forth in Part 2.5 ofthe Company Disclosure Schedule, between October 31, 1999 and the date of thisAgreement:there has not been any material adverse change in the business,condition, capitalization, assets, liabilities, operations or financialperformance of the Acquired Corporations taken as a whole, and no event hasoccurred or circumstance has arisen that, in combination with any other eventsor circumstances, could reasonably be expected to have a Material Adverse Effecton the Acquired Corporations;

there has not been any material loss, damage or destruction to, or anymaterial interruption in the use of, any of the assets of any of the AcquiredCorporations (whether or not covered by insurance) that has had or couldreasonably be expected to have a Material Adverse Effect on the AcquiredCorporations;

none of the Acquired Corporations has (i) declared, accrued, set aside orpaid any dividend or made any other distribution in respect of any shares ofcapital stock, or (ii) repurchased, redeemed or otherwise reacquired any sharesof capital stock or other securities;

none of the Acquired Corporations has sold, issued or granted, orauthorized the issuance of, (i) any capital stock or other security (except forCompany Common Stock issued upon the valid exercise of outstanding CompanyOptions), (ii) any option, warrant or right to acquire any capital stock or anyother security (except for Company Options identified in Part 2.3(b) of theCompany Disclosure Schedule), or (iii) any instrument convertible into orexchangeable for any capital stock or other security;

the Company has not amended or waived any of its rights under, orpermitted the acceleration of vesting under, (i) any provision of any of theCompany's stock option plans, (ii) any provision of any Contract evidencing anyoutstanding Company Option, or (iii) any restricted stock purchaseagreement;

there has been no amendment to the articles or certificate ofincorporation, bylaws or other charter or organizational documents of any of theAcquired Corporations, and none of the Acquired Corporations has effected orbeen a party to any merger, consolidation, share exchange, business combination,recapitalization, reclassification of shares, stock split, reverse stock splitor similar transaction;

none of the Acquired Corporations has received any Acquisition Proposal;

none of the Acquired Corporations has formed any Subsidiary or acquiredany equity interest or other interest in any other Entity;

none of the Acquired Corporations has made any capital expenditure which,when added to all other capital expenditures made on behalf of the AcquiredCorporations between October 31, 1999 and the date of this Agreement, exceeds$8,000,000 in the aggregate;

except in the ordinary course of business and consistent with pastpractices, none of the Acquired Corporations has (i) entered into or permittedany of the assets owned or used by it to become bound by any Material Contract(as defined in Section 2.10), or (ii) amended or terminated, or waived anymaterial right or remedy under, any Material Contract;

none of the Acquired Corporations has (i) acquired, leased or licensedany material right or other material asset from any other Person, (ii) sold orotherwise disposed of, or leased or licensed, any material right or othermaterial asset to any other Person, or (iii) waived or relinquished any right,except for rights or other assets acquired, leased, licensed or disposed of inthe ordinary course of business and consistent with past practices;

none of the Acquired Corporations has written off as uncollectible, orestablished any extraordinary reserve with respect to, any account receivable orother indebtedness;

none of the Acquired Corporations has made any pledge of any of itsassets or otherwise permitted any of its assets to become subject to anyEncumbrance, except for pledges of immaterial assets made in the ordinary courseof business and consistent with past practices;

none of the Acquired Corporations has (i) lent money to any Person, or(ii) incurred or guaranteed any indebtedness for borrowed money;

none of the Acquired Corporations has (i) adopted, established orentered into any Company Employee Plan (as defined in Section 2.17) or anyEmployee Agreement (as defined in Section 2.17), (ii) caused or permitted anyCompany Employee Plan or Employee Agreement to be amended in any materialrespect, or (iii) paid any bonus or made any profit-sharing or similarpayment to, or materially increased the amount of the wages, salary,commissions, fringe benefits or other compensation or remuneration payable to,any of its directors, officers or employees;

none of the Acquired Corporations has changed any of its methods ofaccounting or accounting practices in any material respect;

none of the Acquired Corporations has made any material Taxelection;

none of the Acquired Corporations has commenced or settled any LegalProceeding;

none of the Acquired Corporations has entered into any materialtransaction or taken any other material action that has had, or could reasonablybe expected to have, a Material Adverse Effect on the Acquired Corporations;

none of the Acquired Corporations has entered into any materialtransaction or taken any other material action outside the ordinary course ofbusiness or inconsistent with past practices; and

none of the Acquired Corporations has agreed or committed to take any ofthe actions referred to in clauses "(c)" through "(t)"above.
**2.6     Title to Assets.  The Acquired Corporations own, andhave good and valid title to, all assets purported to be owned by them,including: (i) all assets reflected on the Unaudited Interim Balance Sheet(except for inventory sold or otherwise disposed of in the ordinary course ofbusiness since the date of the Unaudited Interim Balance Sheet); and (ii) allother assets reflected in the books and records of the Acquired Corporations asbeing owned by the Acquired Corporations.  All of said assets are owned by theAcquired Corporations free and clear of any Encumbrances, except for (1) anylien for current taxes not yet due and payable, (2) minor liens that have arisenin the ordinary course of business and that do not (in any case or in theaggregate) materially detract from the value of the assets subject thereto ormaterially impair the operations of any of the Acquired Corporations, and (3)liens described in Part 2.6 of the Company Disclosure Schedule.**2.7     Receivables; Customers; Inventories.Except as set forth in Part 2.7 of the Company Disclosure Schedule, allexisting accounts receivable of the Acquired Corporations (including thoseaccounts receivable reflected on the Unaudited Interim Balance Sheet that havenot yet been collected and those accounts receivable that have arisen sinceOctober 31, 1999 and have not yet been collected) (a) represent validobligations of customers of the Acquired Corporations arising from bona fidetransactions entered into in the ordinary course of business, and (b) arecurrent and, to the best of the Company's knowledge, will be collected in full,without any counterclaim or set off (net of an allowance for doubtful accountsnot to exceed $2,000,000 in the aggregate).  Part 2.7 of the Company DisclosureSchedule accurately identifies, and provides an accurate and complete breakdownof the revenues received from, each customer or other Person that accounted for(i) more than $1,000,000 of the consolidated gross revenues of the AcquiredCorporations in the fiscal year ended July 31, 1999, or (ii) more than$1,000,000 of the consolidated gross revenues of the Acquired Corporations inthe fiscal quarter ended October 31, 1999.  The Company has not received anynotice or other communication (in writing or otherwise), and has not receivedany other information, indicating that any customer or other Person identifiedin Part 2.7 of the Company Disclosure Schedule may cease dealing with theCompany.  Between July 31, 1998 and the date of this Agreement, no customer orpotential customer of any of the Acquired Corporations has canceled any orderfor any of the SPG products of any of the Acquired Corporations or indicated ina writing delivered to any of the Acquired Corporations that it intends tocancel or is considering canceling any such order (it being understood that themere rescheduling of an order will not be deemed to constitute a cancellation ofsuch order).

The Company has recorded all of the Acquired Corporations' inventories atthe lower of cost or market, with cost being determined under the first-in,first-out method.  The Company has reviewed all of the Acquired Corporations'inventories by product group and by product line and has assessed the need forexcess, obsolete and slow-moving reserves, using reasonable and supportableassumptions and projections reflecting current business conditions and operatingplans.  The Company updates the computation of such reserves on an interim basisand has adjusted such reserves on a timely basis in accordance with U.S.generally accepted accounting principles applied on a consistentbasis.
**2.8     Real Property; Equipment; Leaseholds.  All materialitems of equipment and other tangible assets owned by or leased to the AcquiredCorporations are adequate for the uses to which they are being put, are in goodand safe condition and repair (ordinary wear and tear excepted) and are adequatefor the conduct of the business of the Acquired Corporations in the manner inwhich such business is currently being conducted.  None of the AcquiredCorporations own any real property or any interest in real property, except for:(i) the leaseholds created under the real property leases identified in Part2.8(i) of the Company Disclosure Schedule; and (ii) the land described in Part2.8(ii) of the Company Disclosure Schedule to which the Company has good andmarketable fee title and which is owned by the Company free and clear of anyEncumbrances, except for the Encumbrances identified in Part 2.8(ii) of theCompany Disclosure Schedule.**2.9     Proprietary Assets.Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,with respect to each Proprietary Asset owned by the Acquired Corporations andregistered with any Governmental Body or for which an application has been filedwith any Governmental Body, (i) a brief description of such Proprietary Asset,and (ii) the names of the jurisdictions covered by the applicable registrationor application.  Part 2.9(a)(ii) of the Company Disclosure Schedule identifiesand provides a brief description of all other Proprietary Assets owned by theAcquired Corporations that are material to the business of the AcquiredCorporations.  Part 2.9(a)(iii) of the Company Disclosure Schedule identifiesand provides a brief description of, and identifies any ongoing royalty orpayment obligations in excess of $10,000 with respect to, each Proprietary Assetthat is licensed or otherwise made available to the Acquired Corporations by anyPerson and is material to the business of the Acquired Corporations (except forany Proprietary Asset that is licensed to the Acquired Corporations under anythird party software license generally available to the public), and identifiesthe Contract under which such Proprietary Asset is being licensed or otherwisemade available to such Acquired Corporation.  The Acquired Corporations havegood and valid title to all of the Acquired Corporation Proprietary Assetsidentified or required to be identified in Parts 2.9(a)(i) and 2.9(a)(ii) of theCompany Disclosure Schedule, free and clear of all Encumbrances, except for (i)any lien for current taxes not yet due and payable, and (ii) minor liens thathave arisen in the ordinary course of business and that do not (individually orin the aggregate) materially detract from the value of the assets subjectthereto or materially impair the operations of any of the Acquired Corporations.The Acquired Corporations have a valid right to use, license and otherwiseexploit all Proprietary Assets identified in Part 2.9(a)(iii) of the CompanyDisclosure Schedule.  Except as set forth in Part 2.9(a)(iv) of the CompanyDisclosure Schedule, none of the Acquired Corporations has developed jointlywith any other Person any Acquired Corporation Proprietary Asset that ismaterial to the business of the Acquired Corporations with respect to which suchother Person has any rights.  Except as set forth in Part 2.9(a)(v) of theCompany Disclosure Schedule, there is no Acquired Corporation Contract (with theexception of end user license agreements in the form previously delivered by theCompany to Parent or non-exclusive licenses to use the Company's data fileformat for integrated circuit design data) pursuant to which any Person has anyright (whether or not currently exercisable) to use, license or otherwiseexploit any Acquired Corporation Proprietary Asset.  Part 2.9(a)(vi) of theCompany Disclosure Schedule contains an accurate and complete list of eachPerson to whom the Company's data file formats for integrated circuit designdata has been provided since the first shipment of the Company's MEBES 5000product.

The Acquired Corporations have taken reasonable measures and precautionsto protect and maintain the confidentiality, secrecy and value of all materialAcquired Corporation Proprietary Assets (except Acquired Corporation ProprietaryAssets whose value would be unimpaired by disclosure).  Without limiting thegenerality of the foregoing, except as set forth in Part 2.9(b) of the CompanyDisclosure Schedule, (i) all current and former employees of the AcquiredCorporations who are or were involved in, or who have contributed to, thecreation or development of any material Acquired Corporation Proprietary Assethave executed and delivered to the Acquired Corporations an agreement(containing no exceptions to or exclusions from the scope of its coverage) thatis substantially identical to the form of Confidential Information and InventionAssignment Agreement previously delivered by the Company to Parent, and (ii) allcurrent and former consultants and independent contractors to the AcquiredCorporations who are or were involved in, or who have contributed to, thecreation or development of any material Acquired Corporation Proprietary Assethave executed and delivered to the Company an agreement (containing noexceptions to or exclusions from the scope of its coverage) that issubstantially identical to the form of Consultant Confidential Information andInvention Assignment Agreement previously delivered to Parent.  No current orformer employee, officer, director, stockholder, consultant or independentcontractor has any right, claim or interest in or with respect to any AcquiredCorporation Proprietary Asset.

Except as set forth in Part 2.9(c) of the Company Disclosure Schedule, tothe best of the knowledge of the Company: (i) all patents, trademarks, servicemarks and copyrights held by any of the Acquired Corporations are valid,enforceable and subsisting; (ii) none of the Acquired Corporation ProprietaryAssets and no Proprietary Asset that is currently being developed by any of theAcquired Corporations (either by itself or with any other Person) infringes,misappropriates or conflicts with any Proprietary Asset owned or used by anyother Person; (iii) none of the products that are or have been designed,created, developed, assembled, manufactured or sold by any of the AcquiredCorporations is infringing, misappropriating or making any unlawful orunauthorized use of any Proprietary Asset owned or used by any other Person, andnone of such products has at any time infringed, misappropriated or made anyunlawful or unauthorized use of, and none of the Acquired Corporations hasreceived any notice or other communication (in writing or otherwise) of anyactual, alleged, possible or potential infringement, misappropriation orunlawful or unauthorized use of, any Proprietary Asset owned or used by anyother Person; and (iv) no other Person is infringing, misappropriating or makingany unlawful or unauthorized use of, and no Proprietary Asset owned or used byany other Person infringes or conflicts with, any material Acquired CorporationProprietary Asset.

To the best of the knowledge of the Company, the Acquired CorporationProprietary Assets constitute all the Proprietary Assets necessary to enable theAcquired Corporations to conduct their business in the manner in which suchbusiness has been and is being conducted.  Except as set forth in Part 2.9(d) ofthe Company Disclosure Schedule, none of the Acquired Corporations has (i)licensed any of the material Acquired Corporation Proprietary Assets to anyPerson (other than Parent) on an exclusive basis, or (ii) entered into anycovenant not to compete or Contract limiting its ability to exploit fully anymaterial Acquired Corporation Proprietary Assets or to transact business in anymarket or geographical area or with any Person.

Except as set forth in Part 2.9(e)(i) of the Company Disclosure Schedule,since July 31, 1995 (and, to the best of the Company's knowledge, sinceinception) none of the Acquired Corporations has disclosed or delivered to anyPerson, or permitted the disclosure or delivery to any escrow agent or otherPerson of, any Acquired Corporation Source Code or deposited into escrow anyother Acquired Corporation Proprietary Asset.  No event has occurred, and nocircumstance or condition exists, that (with or without notice or lapse of time)will, or could reasonably be expected to, result in the disclosure or deliveryto any Person of any Acquired Corporation Source Code or the release from anyescrow of any other Acquired Corporation Proprietary Asset.  Part 2.9(e)(ii) ofthe Company Disclosure Schedule identifies each Contract pursuant to which theCompany has deposited or is required to deposit with an escrowholder or anyother Person any Acquired Corporation Source Code, and further describes whetherthe execution of this Agreement or the consummation of any of the transactionscontemplated hereby could reasonably be expected to result in the release ordisclosure of any Acquired Corporation Source Code.

To the best of the knowledge of the Company, except as set forth in Part2.9(f)(i) of the Company Disclosure Schedule, each computer, computer programand other item of software (whether installed on a computer or on any otherpiece of equipment, including firmware) that is owned or used by any of theAcquired Corporations for their internal business operations is Year 2000Compliant.  To the best of the knowledge of the Company, except as set forth inPart 2.9(f)(ii) of the Company Disclosure Schedule, each computer program andother item of software that has been designed, developed, sold, licensed orotherwise made available to any Person by any of the Acquired Corporations isYear 2000 Compliant.  To the best of the knowledge of the Company, except as setforth in Part 2.9(f)(iii) of the Company Disclosure Schedule, each of theAcquired Corporations has conducted sufficient Year 2000 compliance testing foreach computer, computer program and item of software referred to in thepreceding two sentences to be able to determine whether such computer, computerprogram and item of software is Year 2000 Compliant.  For purposes of thisSection 2.9, a computer, computer program or other item of software shall bedeemed to be "Year 2000 Compliant" only if (i) the functions,calculations and other computing processes of such computer, program or softwareperform in a consistent and correct manner without interruption regardless ofthe date on which such functions, calculations and processes are actuallyperformed and regardless of the date input to the applicable computer system(whether before, on or after January 1, 2000); (ii) such computer, program orsoftware accepts, calculates, compares, sorts, extracts, sequences and otherwiseprocesses date inputs and date values, and returns and displays date values, ina consistent and correct manner regardless of the dates used (whether before, onor after January 1, 2000); (iii) such computer, program or software accepts andresponds to year input in a manner that resolves any ambiguities as to centuryin a defined, predetermined and appropriate manner; (iv) such computer, programor software stores and displays date information in ways that are unambiguous asto the determination of the century; and (v) such computer, program or softwaredetermines leap years in accordance with the following standard: (A) if dividingthe year by 4 yields an integer, it is a leap year, except for years ending in00, but (B) a year ending in 00 is a leap year if dividing it by 400 yields aninteger.

Except with respect to demonstration or trial copies, to the best of theknowledge of the Company, no product, system, program or software moduledesigned, developed, sold, licensed or otherwise made available by any of theAcquired Corporations to any Person contains any "back door,""time bomb," "Trojan horse," "worm," "dropdead device," "virus" or other software routines or hardwarecomponents designed to permit unauthorized access or to disable or erasesoftware, hardware or data without the consent of the user.
**2.10     Contracts.Part 2.10 of the Company Disclosure Schedule identifies each AcquiredCorporation Contract that constitutes a "Material Contract," otherthan any Acquired Corporation Contract of the type referred to in clause"(i)" of the following sentence with an employee, consultant ordirector resident outside the United States.  (For purposes of this Agreement,each of the following shall be deemed to constitute a "MaterialContract":
any Contract (A) relating to the employment of, or the performance ofservices by, any employee or consultant, or (B) pursuant to which any of theAcquired Corporations is or may become obligated to make any severance,termination or similar payment to any current or former employee or director, or(C) pursuant to which any of the Acquired Corporations is or may becomeobligated to make any bonus or similar payment (other than payments constitutingbase salary or commissions) in excess of $25,000 to any current or formeremployee or director; 

any Contract (A) relating to the acquisition, transfer, development,sharing or license of any Proprietary Asset (except for any Contract pursuant towhich (1) any Proprietary Asset is licensed to the Acquired Corporations underany third party software license generally available to the public, or (2) anyProprietary Asset is licensed by any of the Acquired Corporations to any Personon a non-exclusive basis), or (B) of the type required to be listed on theCompany Disclosure Schedule pursuant to Section 2.9;

any Contract that contemplates or provides for the sale or license to anyPerson of any product of the Semiconductor Products Group of any of the AcquiredCorporations to the extent that such Contract was entered into since January 1,1999 or relates to any product not yet shipped;

any Contract pursuant to which any of the Acquired Corporations isrequired to provide maintenance or similar services if the Contract containspayment terms, warranty, indemnification, limitation of liability or similarprovisions, or provisions obligating any of the Acquired Corporations to developor provide any new technology or product or any upgrade or enhancement to anyexisting technology or product, that deviate in any material respect from thestandard form of maintenance Contract attached to Part 2.10(a) of the CompanyDisclosure Schedule;

any Contract pursuant to which any Person is the sole-source supplier ofany component or subassembly of any product of any of the AcquiredCorporations;

any Contract that provides for indemnification of any officer, director,employee or agent;

any Contract imposing any restriction on the right or ability of anyAcquired Corporation (A) to compete with any other Person, (B) to acquire anyproduct or other asset or any services from any other Person, (C) to solicit,hire or retain any Person as an employee, consultant or independent contractor,(D) to develop, sell, supply, distribute, offer, support or service any productor any technology or other asset to or for any other Person, (E) to performservices for any other Person, or (F) to transact business or deal in any othermanner with any other Person;

any Contract (other than the Rights Agreement and Contracts evidencingCompany Options and Company Warrants) (A) relating to the acquisition, issuance,voting, registration, sale or transfer of any securities, (B) providing anyPerson with any preemptive right, right of participation, right of maintenanceor similar right with respect to any securities, or (C) providing any of theAcquired Corporations with any right of first refusal with respect to, or rightto repurchase or redeem, any securities; 

any Contract incorporating or relating to any guaranty, any warranty orany indemnity or similar obligation, except for Contracts substantiallyidentical to the standard forms of end-user licenses previously delivered by theCompany to Parent;

any Contract relating to any currency hedging;

any Contract (A) with any competitor of Parent (engaged in thedevelopment or production of semiconductor or flatpanel manufacturing, testing,metrology or inspection equipment) that imposes any confidentiality obligationon any of the Acquired Corporations or on such competitor or (B) containing"standstill" or similar provisions;

any Contract (A) to which any Governmental Body is a party or under whichany Governmental Body has any rights or obligations, or (B) directly orindirectly benefiting any Governmental Body (including any subcontract or otherContract between any Acquired Corporation and any contractor or subcontractor toany Governmental Body);

any Contract requiring that any of the Acquired Corporations give anynotice or provide any information to any Person prior to considering oraccepting any Acquisition Proposal or similar proposal, or prior to enteringinto any discussions, agreement, arrangement or understanding relating to anyAcquisition Transaction or similar transaction;

any Contract that has a term of more than one year and that may not beterminated by an Acquired Corporation (without penalty) within 120 days afterthe delivery of a termination notice by such Acquired Corporation; 

any Contract (other than (A) Contracts providing for the sale of productsby the Acquired Corporations to any Person, the licensing of software by theAcquired Corporations to any Person or the purchase of inventory by the AcquiredCorporations in the ordinary course of business, and (B) Contracts listed underany other subsection of this Section 2.10(a)) that contemplates or involves thepayment or delivery of cash or other consideration in an amount or having avalue in excess of $500,000 in the aggregate, or contemplates or involves theperformance of services having a value in excess of $500,000 in theaggregate;

any Contract that could reasonably be expected to have a material effecton (A) the business, condition, capitalization, assets, liabilities, operations,financial performance or prospects of any of the Acquired Corporations or (B)the ability of the Company to perform any of its obligations under, or toconsummate any of the transactions contemplated by, this Agreement or the StockOption Agreement; and

any other Contract, if a breach of such Contract could reasonably beexpected to have a Material Adverse Effect on the AcquiredCorporations.)

The Company has delivered to Parent an accurate and complete copy of eachAcquired Corporation Contract that constitutes a Material Contract.
Each Acquired Corporation Contract that constitutes a Material Contractis valid and in full force and effect, and is enforceable in accordance with itsterms, subject to (i) laws of general application relating to bankruptcy,insolvency and the relief of debtors, and (ii) rules of law governing specificperformance, injunctive relief and other equitable remedies.

Except as set forth in Part 2.10(c) of the Company DisclosureSchedule: (i) none of the Acquired Corporations has violated or breached, orcommitted any default under, any Acquired Corporation Contract, except forviolations, breaches and defaults that have not had and would not reasonably beexpected to have a Material Adverse Effect on the Acquired Corporations; and, tothe best of the knowledge of the Company, no other Person has violated orbreached, or committed any default under, any Acquired Corporation Contract,except for violations, breaches and defaults that have not had and would notreasonably be expected to have a Material Adverse Effect on the AcquiredCorporations; (ii) to the best of the knowledge of the Company, no event hasoccurred, and no circumstance or condition exists, that (with or without noticeor lapse of time) will, or would reasonably be expected to, (A) result in aviolation or breach of any of the provisions of any Acquired CorporationContract, (B) give any Person the right to declare a default or exerciseany remedy under any Acquired Corporation Contract, (C) give any Person theright to receive or require a rebate, chargeback, penalty or change in deliveryschedule under any Acquired Corporation Contract, (D) give any Person theright to accelerate the maturity or performance of any Acquired CorporationContract, (E) result in the disclosure, release or delivery of any AcquiredCorporation Source Code, or (F) give any Person the right to cancel, terminateor modify any Acquired Corporation Contract, except in each such case fordefaults, acceleration rights, termination rights and other rights that have nothad and would not reasonably be expected to have a Material Adverse Effect onthe Acquired Corporations; and (iii) since January 1, 1998, none of the AcquiredCorporations has received any notice or other communication regarding any actualor possible violation or breach of, or default under, any Acquired CorporationContract, except in each such case for defaults, acceleration rights,termination rights and other rights that have not had and would not reasonablybe expected to have a Material Adverse Effect on the Acquired Corporations.

The Company has received payment in full of all fees payable to theCompany under that certain SEMATECH Equipment Development Agreement dated July31, 1997 between SEMATECH, Inc. ("SEMATECH") and the Company (the"SEMATECH Agreement") other than the fees allocated to milestones 10Aand 10B, which are as follows: $1,250,000 for milestone 10A; and $2,000,000 formilestone 10B.  The Company has delivered to SEMATECH all deliverables and hascompleted all work necessary for the successful completion of milestone 10A.The Company is negotiating an amendment to the SEMATECH Agreement, which theCompany intends to have provide for additional payments to the Company of atleast $3,250,000 in the aggregate.

No royalties or other payments are owed to International BusinessMachines Corporation ("IBM") by any of the Acquired Corporationspursuant to that certain Patent License Agreement dated as of March 1, 1990between IBM and the Company.  None of the Acquired Corporations has received anynotice or other communication from IBM concerning any such royalties or otherpayments, and the Company has no reason to believe that any such royalties orother payments will become due or owing to IBM as a result of the manufacture,use or sale of any of the past or present products of any of the AcquiredCorporations.
**2.11     Sale of Products; Performance of ServicesExcept as set forth in Part 2.11(a) of the Company DisclosureSchedule, to the best of the knowledge of the Company, each product, system,program, Proprietary Asset or other asset designed, developed, manufactured,assembled, sold, installed, repaired, licensed or otherwise made available byany of the Acquired Corporations to any Person: (i) conformed and complied inall material respects with the terms and requirements of any applicable warrantyor other Contract and with all applicable Legal Requirements; and (ii) was freeof any bug, virus, design defect or other defect or deficiency at the time itwas sold or otherwise made available, other than any immaterial bug or similardefect that would not adversely affect in any material respect such product,system, program, Proprietary Asset or other asset (or the operation orperformance thereof). 

To the best of the knowledge of the Company, all installation services,programming services, repair services, maintenance services, support services,training services, upgrade services and other services that have been performedby the Acquired Corporations were performed properly and in conformity with theterms and requirements of all applicable warranties and other Contracts and withall applicable Legal Requirements.

Except as set forth in Part 2.11(c) of the Company Disclosure Schedule,to the best of the knowledge of the Company, since January 1, 1998, no customeror other Person has asserted or threatened to assert any claim against any ofthe Acquired Corporations (i) under or based upon any warranty provided byor on behalf of any of the Acquired Corporations, or (ii)  based upon anyservices performed by any of the Acquired Corporations.
**2.12     Liabilities.  None of the Acquired Corporations has anyaccrued, contingent or other liabilities of any nature, either matured orunmatured, except for: (a) liabilities identified as such in the"liabilities" column of the Unaudited Interim Balance Sheet; (b)normal and recurring current liabilities that have been incurred by the AcquiredCorporations since October 31, 1999 in the ordinary course of business andconsistent with past practices; and (c) liabilities described in Part 2.12 ofthe Company Disclosure Schedule.**2.13     Compliance with Legal Requirements. To the best of theknowledge of the Company, each of the Acquired Corporations is, and has at alltimes since January 1, 1998 been, in compliance with all applicable LegalRequirements, except where the failure to comply with such Legal Requirementshas not had and would not reasonably be expected to have a Material AdverseEffect on the Acquired Corporations.  Since January 1, 1996, none of theAcquired Corporations has received any notice or other communication from anyGovernmental Body or other Person regarding any actual or possible violation of,or failure to comply with, any Legal Requirement (other than communications thatdid not give rise or relate to allegations of violations or wrongdoing).**2.14     Certain Business Practices.  None of the AcquiredCorporations, and (to the best of the knowledge of the Company) no director,officer, agent or employee of any of the Acquired Corporations, has (i) used anyfunds for unlawful contributions, gifts, entertainment or other unlawfulexpenses relating to political activity, (ii) made any unlawful payment toforeign or domestic government officials or employees or to foreign or domesticpolitical parties or campaigns or violated any provision of the Foreign CorruptPractices Act of 1977, as amended, or (iii) made any other unlawfulpayment.**2.15     Governmental Authorizations.The Acquired Corporations hold all Governmental Authorizations necessaryto enable the Acquired Corporations to conduct their respective businesses inthe manner in which such businesses are currently being conducted, except wherethe failure to hold such Governmental Authorizations has not had and would notreasonably be expected to have a Material Adverse Effect on the AcquiredCorporations.  All such Governmental Authorizations are valid and in full forceand effect.  Each Acquired Corporation is, and at all times since January 1,1998 has been, in substantial compliance with the terms and requirements of suchGovernmental Authorizations, except where the failure to be in compliance withthe terms and requirements of such Governmental Authorizations has not had andwould not reasonably be expected to have a Material Adverse Effect on theAcquired Corporations.  Since January 1, 1998, none of the Acquired Corporationshas received any notice or other communication from any Governmental Bodyregarding (a) any actual or possible violation of or failure to comply with anyterm or requirement of any material Governmental Authorization, or (b) anyactual or possible revocation, withdrawal, suspension, cancellation, terminationor modification of any material Governmental Authorization.

Part 2.15(b) of the Company Disclosure Schedule describes the terms ofeach grant, incentive or subsidy provided or made available to or for thebenefit of any of the Acquired Corporations by any U.S. or foreign GovernmentalBody or otherwise.  Each of the Acquired Corporations is in full compliance withall of the terms and requirements of each grant, incentive and subsidyidentified or required to be identified in Part 2.15(b) of the CompanyDisclosure Schedule.  Neither the execution, delivery or performance of thisAgreement, nor the consummation of the Merger or any of the other transactionscontemplated by this Agreement, will (with or without notice or lapse of time)give any Person the right to revoke, withdraw, suspend, cancel, terminate ormodify any grant, incentive or subsidy identified or required to be identifiedin Part 2.15(b) of the Company Disclosure Schedule.
**2.16     Tax Matters.Each of the Tax Returns required to be filed by or on behalf of therespective Acquired Corporations with any Governmental Body with respect to anytaxable period ending on or before the Closing Date (the "AcquiredCorporation Returns") (i) has been or will be filed on or before theapplicable due date (including any extensions of such due date), and(ii) has been, or will be when filed, prepared in all material respects incompliance with all applicable Legal Requirements.  All amounts shown on theAcquired Corporation Returns to be due on or before the Closing Date have beenor will be paid on or before the Closing Date. 

The Unaudited Interim Balance Sheet fully accrues all actual andcontingent liabilities for Taxes with respect to all periods through October 31,1999 in accordance with generally accepted accounting principles.  The Companywill establish, in the ordinary course of business and consistent with its pastpractices, reserves adequate for the payment of all Taxes for the period fromOctober 31, 1999 through the Closing Date.  

Except as set forth in Part 2.16(c) of the Company Disclosure Schedule,no U.S. federal income tax return of any of the Acquired Corporation has everbeen, and since January 1, 1996, no other Acquired Corporation Return has been,examined or audited by any Governmental Body.  No extension or waiver of thelimitation period applicable to any of the Acquired Corporation Returns has beengranted (by the Company or any other Person), and no such extension or waiverhas been requested from any Acquired Corporation.

No claim or Legal Proceeding is pending or, to the best of the knowledgeof the Company, has been threatened against or with respect to any AcquiredCorporation in respect of any material Tax.  There are no unsatisfiedliabilities for material Taxes (including liabilities for interest, additions totax and penalties thereon and related expenses) with respect to any notice ofdeficiency or similar document received by any Acquired Corporation with respectto any material Tax (other than liabilities for Taxes asserted under any suchnotice of deficiency or similar document which are being contested in good faithby the Acquired Corporations and with respect to which adequate reserves forpayment have been established on the Unaudited Interim Balance Sheet).  Thereare no liens for material Taxes upon any of the assets of any of the AcquiredCorporations except liens for current Taxes not yet due and payable.  None ofthe Acquired Corporations has entered into or become bound by any agreement orconsent pursuant to Section 341(f) of the Code (or any comparable provisionof state or foreign Tax laws).  None of the Acquired Corporations has been, andnone of the Acquired Corporations will be, required to include any adjustment intaxable income for any tax period (or portion thereof) pursuant toSection 481 or 263A of the Code (or any comparable provision of state orforeign Tax laws) as a result of transactions or events occurring, or accountingmethods employed, prior to the Closing.

There is no agreement, plan, arrangement or other Contract covering anyemployee or independent contractor or former employee or independent contractorof any of the Acquired Corporations that, considered individually or consideredcollectively with any other such Contracts, will, or could reasonably beexpected to, give rise directly or indirectly to the payment of any amount thatwould not be deductible pursuant to Section 280G or Section 162(m) ofthe Code (or any comparable provision under state or foreign Tax laws).  None ofthe Acquired Corporations is, or has ever been, a party to or bound by any taxindemnity agreement, tax sharing agreement, tax allocation agreement or similarContract.
**2.17     Employee and Labor Matters; BenefitPlans.
Definitions.
  With the exception of the definition of"Affiliate" set forth in Section 2.17(a)(i) below (which shall apply onlyto this Section 2.17), for purposes of this Agreement:
"Affiliate" shall mean any Person required to be treated as asingle employer with any of the Acquired Corporations within the meaning ofSection 414(b), (c), (m) or (o) of the Code and the regulations issuedthereunder;

"Company Employee Plan" shall mean any plan, program, policy,practice, contract, agreement or other arrangement providing for compensation,severance, termination pay, deferred compensation, performance awards, stock orstock-related awards, fringe benefits or other employee benefits or remunerationof any kind, whether written or unwritten and whether funded or unfunded,including each "employee benefit plan," within the meaning of Section 3(3)of ERISA, which is or has been maintained, contributed to or required to becontributed to by any of the Acquired Corporations or any Affiliate for thebenefit of any Employee, or with respect to which any of the AcquiredCorporations or any Affiliate has or may have any liability or obligation;

"COBRA" shall mean the Consolidated Omnibus BudgetReconciliation Act of 1985, as amended;

"DOL" shall mean the Department of Labor;

"Employee" shall mean any current or former employee,consultant or director of or to any of the Acquired Corporations or anyAffiliate;

"Employee Agreement" shall mean any executive, management,employment, severance, consulting, relocation, repatriation, expatriation,visas, work permit or other Contract between any of the Acquired Corporations orany Affiliate and any Employee;

"ERISA" shall mean the Employee Retirement Income Security Actof 1974, as amended;

"FMLA" shall mean the Family Medical Leave Act of 1993, asamended;

"International Employee Plan"  shall mean any Company EmployeePlan or Employee Agreement that has been adopted, maintained or entered into byany of the Acquired Corporations or any Affiliate, whether informally orformally, or with respect to which any of the Acquired Corporations or anyAffiliate may have any liability
,
 for the benefit of Employeeswho perform services outside the United States;

"IRS" shall mean the Internal Revenue Service;

"Multiemployer Plan" shall mean any Pension Plan that is a"multiemployer plan," as defined in Section 3(37) of ERISA; 

"Pension Plan" shall mean each Company Employee Plan that is an"employee pension benefit plan" within the meaning of Section 3(2) ofERISA; and

"United States Company Employee Plan" shall mean any CompanyEmployee Plan or Employee Agreement that has been adopted, maintained or enteredinto by any of the Acquired Corporations or any Affiliate, whether informally orformally, or with respect to which any of the Acquired Corporations or anyAffiliate may have any liability, for the benefit of Employees who performservices within the United States ("United StatesEmployees").
**Schedule.
  Part 2.17(b) of the Company DisclosureSchedule contains an accurate and complete list of all United States CompanyEmployee Plans and Employee Agreements.  None of the Acquired Corporations hasany plan, commitment or obligation to adopt, establish or enter into any newUnited States Company Employee Plan or Employee Agreement or to modify anyCompany Employee Plan or Employee Agreement (except to the extent required bylaw or to conform any such United States Company Employee Plan or EmployeeAgreement to the requirements of any applicable law, in each case as previouslydisclosed to Parent in writing, or as required by this Agreement).
**Documents.  
The Company has provided to Parent:(i) accurate and complete copies of all documents embodying each UnitedStates Company Employee Plan and each United States Employee Agreement,including all amendments thereto and all related trust documents; (ii) themost recent annual actuarial valuations, if any, prepared for each United StatesCompany Employee Plan; (iii) the three most recent annual reports (FormSeries 5500 and all schedules and financial statements attached thereto),if any, required under ERISA or the Code in connection with each United StatesCompany Employee Plan; (iv) for each United States Company Employee Planthat is funded, the most recent annual and periodic accounting of CompanyEmployee Plan assets; (v) the most recent summary plan description togetherwith each summary of material modifications thereto, if any, required underERISA with respect to each United States Company Employee Plan; (vi) the mostrecent IRS determination, opinion, notification and advisory letters withrespect to each United States Company Employee Plan, and all applications andcorrespondence to or from the IRS or the DOL with respect to any such letter;(vii) all material written Contracts relating to each United States CompanyEmployee Plan, including administrative service agreements, group annuitycontracts and group insurance contracts; (viii) all communications materialto any Employee relating to any United States Company Employee Plan or anyproposed United States Company Employee Plan, in each case relating to anyamendments, terminations, establishments, increases or decreases in benefits,acceleration of payments or vesting schedules or other events which could resultin any liability to any of the Acquired Corporations; (ix) all correspondence toor from any Governmental Body relating to any United States Company EmployeePlan; (x) all COBRA forms and forms of related notices (or such forms and formsof notices as may be required under any comparable Legal Requirement relating toany Company Employee Plan); (xi) all policies pertaining to fiduciary liabilityinsurance covering the fiduciaries for each Company Employee Plan; (xii) thethree most recent plan years discrimination tests for each Company EmployeePlan; and (xiii) all registration statements, annual reports (Form 11-K and allattachments thereto) and prospectuses prepared in connection with each CompanyEmployee Plan.
**Employee Plan Compliance.
  Except as set forth inPart 2.17(d) of the Company Disclosure Schedule: (i) each of theAcquired Corporations has performed in all material respects all obligationsrequired to be performed by it under each Employee Company Plan, and none of theAcquired Corporations is in default or violation of, or has any knowledge of anydefault or violation by any other party to, any Company Employee Plan, and eachCompany Employee Plan has been established and maintained in all materialrespects in accordance with its terms and in compliance with all applicableLegal Requirements, including ERISA and the Code; (ii) each Company EmployeePlan intended to qualify under Section 401(a) of the Code and each trustintended to qualify under Section 501(a) of the Code has either received afavorable determination, opinion, notification or advisory letter from the IRSas to its qualified status under the Code, including all amendments to the Codeeffected by the Tax Reform Act of 1986 and subsequent legislation, or hasremaining a period of time under applicable Treasury regulations or IRSpronouncements in which to apply for such a letter and make any amendmentsnecessary to obtain a favorable determination as to its qualified status;(iii) no "prohibited transaction," within the meaning of Section 4975of the Code or Sections 406 and 407 of ERISA, and not otherwise exemptunder Section 4975 of the Code or Section 408 of ERISA (or any administrativeclass exemption issued thereunder), has occurred with respect to any CompanyEmployee Plan; (iv) there is no Legal Proceeding or claim pending, or, tothe best of the knowledge of the Company, threatened or reasonably anticipated(other than routine claims for benefits) against any Company Employee Plan oragainst the assets of any Company Employee Plan; (v) each Company EmployeePlan (other than any stock option plan or statutorily required internationalpension plan) can be amended, terminated or otherwise discontinued after theEffective Time, without material liability to Parent, any of the AcquiredCorporations or any Affiliate (other than ordinary administration expenses);(vi) there are no audits, inquiries or proceedings pending or, to the best ofthe knowledge of the Company, threatened by the IRS or DOL with respect to anyCompany Employee Plan; and (vii) none of the Acquired Corporations, and noAffiliate, is subject to any penalty or tax with respect to any Company EmployeePlan under Section 502(i) of ERISA or Sections 4975 through 4980 ofthe Code.
**Pension Plan.
  None of the Acquired Corporations, and noAffiliate, has ever maintained, established, sponsored, participated in orcontributed to any Pension Plan which is subject to Title IV of ERISA orSection 412 of the Code.
**Multiemployer and Multiple Employer Plans.
  At no timehas any of the Acquired Corporations or any Affiliate contributed to or beenobligated to contribute to any Multiemployer Plan.  None of the AcquiredCorporations, and no Affiliate, has at any time ever maintained, established,sponsored, participated in or contributed to any multiple employer plan, asdescribed in Section 413(c) of the Code.
**No Post-Employment Obligations.
  Except as set forth inPart 2.17(g) of the Company Disclosure Schedule, no United States CompanyEmployee Plan provides, or reflects or represents any liability to provide,retiree health benefits to any Person for any reason, except as may be requiredby COBRA or any other applicable statute, and, to the best of the knowledge ofthe Company, none of the Acquired Corporations has ever represented, promised orcontracted (whether in oral or written form) to any United States Employee(either individually or to Employees as a group) or any other Person that suchEmployee or other Person would be provided with retiree health benefits, exceptto the extent required by statute.
**Health Care Compliance.
  None of the AcquiredCorporations, and no Affiliate, has, prior to the Effective Time and in anymaterial respect, violated any of the health care continuation requirements ofCOBRA, the requirements of FMLA, the requirements of the Health InsurancePortability and Accountability Act of 1996, the requirements of the Women'sHealth and Cancer Rights Act of 1998, the requirements of the Newborns' andMothers' Health Protection Act of 1996, or any amendment to any such act, or anysimilar provisions of state law applicable to any Employee.
**Effect of Transaction.
Except as set forth in Part 2.17(i) of the CompanyDisclosure Schedule, neither the execution or delivery of this Agreement nor theconsummation of any of the transactions contemplated hereby will (either aloneor upon the occurrence of any additional or subsequent events) constitute anevent under any Company Employee Plan, Employee Agreement, trust or loan thatmay result in any payment (whether of severance pay or otherwise), acceleration,forgiveness of indebtedness, vesting, distribution, increase in benefits orobligation to fund benefits with respect to any Employee.

Except as set forth in Part 2.17(i) of the Company DisclosureSchedule, no payment or benefit that may be made by any of the AcquiredCorporations or any Affiliate with respect to any Employee will be characterizedas a "parachute payment," within the meaning of Section 280G(b)(2) of theCode.
**Employment Matters.
  Each of the Acquired Corporations:(i) to the best of the knowledge of the Company, is in compliance in allmaterial respects with all applicable foreign, federal, state and local LegalRequirements respecting employment, employment practices, terms and conditionsof employment and wages and hours with respect to Employees; and (ii) haswithheld and reported all amounts required by any Legal Requirement or Contractto be withheld and reported with respect to wages, salaries and other paymentsto Employees.  None of the Acquired Corporations is liable for any arrears ofwages or any Taxes or any penalty for failure to comply with any of theforegoing; or is liable for any payment to any trust or other fund governedby or maintained by or on behalf of any Governmental Body with respect tounemployment compensation benefits, social security or other benefits orobligations for Employees (other than routine payments to be made in the normalcourse of business and consistent with past practice).  Except as set forth inPart 2.17(j) of the Company Disclosure Schedule, there is no pending, threatenedor reasonably anticipated Legal Proceeding or claim against any of the AcquiredCorporations under any worker's compensation policy or long-term disabilitypolicy.
**Labor.  
No work stoppage or labor strike against any ofthe Acquired Corporations is pending,  threatened or reasonably anticipated.None of the Acquired Corporations has any knowledge of any activities orproceedings of any labor union to organize any Employees.  Except as set forthin Part 2.17(k) of the Company Disclosure Schedule, there is no LegalProceeding, claim, labor dispute or grievance pending, or, to the best of theknowledge of the Company, threatened or reasonably anticipated relating to anylabor, safety or discrimination matters involving any Employee, includingcharges of unfair labor practices or discrimination complaints, which, ifadversely determined, would, individually or in the aggregate, result in anymaterial liability to any of the Acquired Corporations.  None of the AcquiredCorporations has engaged in any unfair labor practices within the meaning of theNational Labor Relations Act.  Except as set forth in Part 2.17(k) of theCompany Disclosure Schedule, none of the Acquired Corporations is or has been aparty to, or bound by, any collective bargaining agreement or union contractwith respect to Employees, and no collective bargaining agreement is beingnegotiated by or on behalf of any of the Acquired Corporations.
**International Employee Plans.
  Without limiting anythingcontained in this Section 2.17 or elsewhere in this Agreement, except as setforth in Part 2.17(l) of the Company Disclosure Schedule:  (i) there are noprovisions contained in, and there are no facts or circumstances relating to,any International Employee Plan that have resulted or could result, individuallyor in the aggregate, in (A) any accrued, contingent or other liability to any ofthe Acquired Corporations in excess of the liabilities historically incurred bythe Acquired Corporations pursuant to such International Employee Plan andreflected in the financial statements contained in the Company SEC Documentsfiled by the Company with the SEC prior to the date of this Agreement, otherthan immaterial liabilities, or (B) any material adverse effect on the businessor operations of any of the Acquired Corporations; (ii) no InternationalEmployee Plan has any unfunded or underfunded liabilities that as of theEffective Time will not be completely offset by assets held by suchInternational Employee Plan or by insurance already in force, and (iii) exceptfor any law that is currently in effect, no condition exists that would preventParent from amending, terminating or otherwise discontinuing any InternationalEmployee Plan at any time or for any reason (or for no reason); 
provided,however,
 that options or other rights that have already been granted andbenefits that have already accrued or vested may not be unilaterally terminatedor amended by Parent or the Company.
**Employees.
  Part 2.17(m) of the Company DisclosureSchedule contains an accurate and complete list of all salaried and otheremployees (including all temporary employees) of each of the AcquiredCorporations as of the date of this Agreement, and correctly reflects, in allmaterial respects, their salaries, and, with respect to United States employeesonly, any other cash compensation payable to them (including compensationpayable pursuant to bonus, deferred compensation or commission arrangements),their dates of employment and their positions.  All of the United Statesemployees of the Acquired Corporations are "at will" employees. TheCompany has accrued, on an interim basis, the pro rata amounts due under itsvarious employee annual incentive programs based on the Company's assessment ofthe probability that the various annual incentives will be met.  The accrual bythe Company of these amounts is in accordance with U.S. generally acceptedaccounting principles applied on a consistent basis.
**Disabled Employees.
  Part 2.17(n) of the CompanyDisclosure Schedule identifies each employee of any of the Acquired Corporationswho is not fully available to perform work because of disability or other leaveand sets forth the basis of such disability or leave and the anticipated date ofreturn to full service.
**Consulting Services.
  Part 2.17(o) of the CompanyDisclosure Schedule identifies each Person who is providing, or who is a partyto a Contract providing for the performance of, consulting services or otherservices as an independent contractor to any of the Acquired Corporations.
**Labor Relations.
  Each of the Acquired Corporations hasgood labor relations, and, as of the date of this Agreement, the Company doesnot have any knowledge of any facts indicating that any of the employees of anyof the Acquired Corporations intends to terminate his or her employment with theAcquired Corporation with which such employee is employed.
**2.18     Environmental Matters.  Each of the AcquiredCorporations (i) is in compliance in all material respects with all applicableEnvironmental Laws, and (ii) possesses all permits and other GovernmentalAuthorizations required under applicable Environmental Laws, and is incompliance with the terms and conditions thereof.  Except as set forth in Part2.18 of the Company Disclosure Schedule, none of the Acquired Corporations hasreceived any notice or other communication (in writing or otherwise), whetherfrom a Governmental Body, citizens group, Employee or otherwise, that allegesthat any of the Acquired Corporations is not in compliance with anyEnvironmental Law, and, to the best of the knowledge of the Company, there areno circumstances that may prevent or interfere with the compliance by any of theAcquired Corporations with any Environmental Law in the future. Except as setforth in Part 2.18 of the Company Disclosure Schedule, to the best of theknowledge of the Company, (a) all property that is leased to, controlled by orused by any of the Acquired Corporations, and all surface water, groundwater andsoil associated with or adjacent to such property, is free of any materialenvironmental contamination of any nature, (b) none of the property leased to,controlled by or used by any of the Acquired Corporations contains anyunderground storage tanks, asbestos, equipment using PCBs, underground injectionwells, and (c) none of the property leased to, controlled by or used by any ofthe Acquired Corporations contains any septic tanks in which process wastewateror any Materials of Environmental Concern have been disposed of.  No AcquiredCorporation has ever sent or transported, or arranged to send or transport, anyMaterials of Environmental Concern to a site that, pursuant to any applicableEnvironmental Law, (i) has been placed on the "National PrioritiesList" of hazardous waste sites or any similar state list, (ii) is otherwisedesignated or identified as a potential site for remediation, cleanup, closureor other environmental remedial activity, or (iii) is subject to a LegalRequirement to take "removal" or "remedial" action asdetailed in any applicable Environmental Law or to make payment for the cost ofcleaning up any site.  (For purposes of this Section 2.18: (A)"Environmental Law" means any federal, state, local or foreign LegalRequirement relating to pollution or protection of human health or theenvironment (including ambient air, surface water, ground water, land surface orsubsurface strata), including any law or regulation relating to emissions,discharges, releases or threatened releases of Materials of EnvironmentalConcern, or otherwise relating to the manufacture, processing, distribution,use, treatment, storage, disposal, transport or handling of Materials ofEnvironmental Concern; and (B) "Materials of Environmental Concern"include chemicals, pollutants, contaminants, wastes, toxic substances, petroleumand petroleum products and any other substance that is now or hereafterregulated by any Environmental Law or that is otherwise a danger to health,reproduction or the environment.)**2.19     Insurance.  The Company has delivered to Parent a copyof all material insurance policies and all material self insurance programs andarrangements relating to the business, assets and operations of the AcquiredCorporations.  Each of such insurance policies is in full force and effect.Since January 1, 1998, none of the Acquired Corporations has received any noticeor other communication regarding any actual or possible (a) cancellation orinvalidation of any insurance policy, (b) refusal of any coverage or rejectionof any material claim under any insurance policy, or (c) material adjustment inthe amount of the premiums payable with respect to any insurance policy.  Exceptas set forth in Part 2.19 of the Company Disclosure Schedule, there is nopending workers' compensation or other claim under or based upon any insurancepolicy of any of the Acquired Corporations.  The total dollar amount of thepremium paid by the Company for the two-year period ending August 22, 2000 withrespect to the Existing Policy (as defined in Section 5.6) is $537,250.The Company also obtained an extension of the Existing Policy until August 22,2001, for an additional premium of $322,350.**2.20     Transactions with Affiliates.  Except as set forth inthe Company SEC Documents filed prior to the date of this Agreement, between thedate of the Company's last proxy statement filed with the SEC and the date ofthis Agreement, no event has occurred that would be required to be reported bythe Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.  Part2.20 of the Company Disclosure Schedule identifies each Person who is (or whomay be deemed to be) an "affiliate" (as that term is used in Rule 145under the Securities Act) of the Company as of the date of this Agreement.**2.21     Legal Proceedings; Orders.Except as set forth in Part 2.21(a) of the Company Disclosure Schedule,there is no pending Legal Proceeding, and (to the best of the knowledge of theCompany) no Person has threatened to commence any Legal Proceeding:  (i) thatinvolves any of the Acquired Corporations or any of the assets owned or used byany of the Acquired Corporations; or (ii) that challenges, or that may have theeffect of preventing, delaying, making illegal or otherwise interfering with,the Merger or any of the other transactions contemplated by this Agreement.  Tothe best of the knowledge of the Company, no event has occurred, and no claim,dispute or other condition or circumstance exists that could reasonably beexpected to, give rise to or serve as a basis for the commencement of any suchLegal Proceeding.  

There is no material order, writ, injunction, judgment or decree to whichany of the Acquired Corporations, or any of the assets owned or used by any ofthe Acquired Corporations, is subject.  To the best of the knowledge of theCompany, no officer or key employee of any of the Acquired Corporations issubject to any order, writ, injunction, judgment or decree that prohibits suchofficer or other employee from engaging in or continuing any conduct, activityor practice relating to the business of any of the AcquiredCorporations.
**2.22     Authority; Inapplicability of Anti-takeover Statutes; BindingNature of Agreement.  The Company has the absolute and unrestrictedright, power and authority to enter into and to perform its obligations underthis Agreement and the Stock Option Agreement.  The board of directors of theCompany (at a meeting duly called and held) has (a)  unanimously determinedthat the Merger is advisable and fair and in the best interests of the Companyand its stockholders, (b) unanimously authorized and approved the execution,delivery and performance of this Agreement and the Stock Option Agreement by theCompany and unanimously approved the Merger, (c)  unanimously recommendedthe approval of this Agreement by the holders of Company Common Stock anddirected that this Agreement and the Merger be submitted for consideration bythe Company's stockholders at the Company Stockholders' Meeting (as defined inSection 5.2), and (d) to the extent necessary, adopted a resolution havingthe effect of causing the Company not to be subject to any state takeover law orsimilar Legal Requirement that might otherwise apply to the Merger or any of theother transactions contemplated by this Agreement.  This Agreement and the StockOption Agreement constitute the legal, valid and binding obligations of theCompany, enforceable against the Company in accordance with their terms, subjectto (i) laws of general application relating to bankruptcy, insolvency and therelief of debtors, and (ii) rules of law governing specific performance,injunctive relief and other equitable remedies.  Prior to the execution of thosecertain Voting Agreements of even date herewith (the "VotingAgreements") between Parent and each of the Persons identified in Part 2.22of the Company Disclosure Schedule, the Board of Directors of the Companyapproved said Voting Agreements and the transactions contemplated thereby.  Nostate takeover statute or similar Legal Requirement applies or purports to applyto the Merger, this Agreement or any of the transactions contemplatedhereby.**2.23     Inapplicability of Section 2115 of California CorporationsCode.   The Company is not subject to Section 2115 of the CaliforniaCorporations Code.**2.24     No Discussions.  None of the Acquired Corporations, andno Representative of any of the Acquired Corporations, is engaged, directly orindirectly, in any discussions or negotiations with any other Person relating toany Acquisition Proposal.**2.25     Accounting Matters.  As of the date of this Agreement,to the best of the knowledge of the Company, neither the Company nor anyaffiliate (as that term is used in Rule 145 under the Securities Act) of any ofthe Acquired Corporations has taken or agreed to take, or plans to take, anyaction that the Company believes could prevent Parent from accounting for theMerger as a "pooling of interests."**2.26     Vote Required.  The affirmative vote of the holders of amajority of the shares of Company Common Stock outstanding on the record datefor the Company Stockholders' Meeting (the "Required Company StockholderVote") is the only vote of the holders of any class or series of theCompany's capital stock necessary to approve this Agreement, the Merger and theother transactions contemplated by this Agreement.**2.27     Non-Contravention; Consents.  Except as set forth inPart 2.27 of the Company Disclosure Schedule, neither (1) the execution,delivery or performance of this Agreement or the Stock Option Agreement, nor (2)the consummation by the Company of the Merger or any of the other transactionscontemplated by this Agreement or the Stock Option Agreement, will directly orindirectly (with or without notice or lapse of time):contravene, conflict with or result in a violation of (i) any of theprovisions of the articles or certificate of incorporation, bylaws or othercharter or organizational documents of any of the Acquired Corporations, or(ii) any resolution adopted by the stockholders, the board of directors orany committee of the board of directors of any of the AcquiredCorporations;

contravene, conflict with or result in a violation of, or give anyGovernmental Body or other Person the right to challenge the Merger or any ofthe other transactions contemplated by this Agreement or to exercise any remedyor obtain any relief under, any Legal Requirement or any order, writ,injunction, judgment or decree to which any of the Acquired Corporations, or anyof the assets owned or used by any of the Acquired Corporations, issubject;

contravene, conflict with or result in a violation of any of the terms orrequirements of, or give any Governmental Body the right to revoke, withdraw,suspend, cancel, terminate or modify, any Governmental Authorization that isheld by any of the Acquired Corporations or that otherwise relates to thebusiness of any of the Acquired Corporations or to any of the assets owned orused by any of the Acquired Corporations;

contravene, conflict with or result in a violation or breach of, orresult in a default under, any provision of any Acquired Corporation Contractthat constitutes a Material Contract, or give any Person the right to(i) declare a default or exercise any remedy under any such AcquiredCorporation Contract, (ii) a rebate, chargeback, penalty or change in deliveryschedule under any such Acquired Corporation Contract, (iii) accelerate thematurity or performance of any such Acquired Corporation Contract, or(iv) cancel, terminate or modify any term of such Acquired CorporationContract;

result in the imposition or creation of any Encumbrance upon or withrespect to any asset owned or used by any of the Acquired Corporations (exceptfor minor liens that will not, in any case or in the aggregate, materiallydetract from the value of the assets subject thereto or materially impair theoperations of any of the Acquired Corporations); or

result in, or increase the likelihood of, the disclosure or delivery toany escrowholder or other Person of any Acquired Corporation Source Code, or thetransfer of any material asset of any of the Acquired Corporations to anyPerson.

Except as may be required by the Exchange Act, Chapter 92A of the NevadaRevised Statutes, the HSR Act, any foreign antitrust law or regulation and theNASD Bylaws (as they relate to the Form S-4 Registration Statement and theProspectus/Proxy Statement), none of the Acquired Corporations was, is or willbe required to make any filing with or give any notice to, or to obtain anyConsent from, any Person in connection with (x) the execution, delivery orperformance of this Agreement or the Stock Option Agreement by the Company, or(y) the consummation by the Company of the Merger or any of the othertransactions contemplated by this Agreement or the Stock Option Agreement.**2.28     Fairness Opinion.  The Company's board of directors hasreceived the opinion of Goldman, Sachs & Co., financial advisor to theCompany, dated the date of this Agreement, to the effect that the considerationto be received by the stockholders of the Company in the Merger is fair to thestockholders of the Company from a financial point of view.  The Company willfurnish an accurate and complete copy of said opinion to Parent.**2.29     Financial Advisor.  Except for Goldman, Sachs & Co.,no broker, finder or investment banker is entitled to any brokerage, finder's orother fee or commission in connection with the Merger or any of the othertransactions contemplated by this Agreement based upon arrangements made by oron behalf of any of the Acquired Corporations.  The total of all fees,commissions and other amounts that have been paid by the Company to Goldman,Sachs & Co. and all fees, commissions and other amounts that may becomepayable to Goldman, Sachs & Co. by the Company if the Merger is consummatedwill not exceed the amounts specified in the letter agreement between Goldman,Sachs & Co. and the Company that was executed on behalf of the Company onOctober 12, 1999.  The Company has furnished to Parent an accurate and completecopy of said letter agreement, and there are no other agreements under which anyfees, commissions or other amounts have been paid or may become payable, orunder which the Company may have or incur any indemnification or otherobligation, to Goldman, Sachs & Co. or any of its affiliates.  Except forGoldman, Sachs & Co., Wilson Sonsini Goodrich & Rosati, P.C. andPricewaterhouseCoopers llp, no Person is or may become entitled to receive anyfee or other amount from any of the Acquired Corporations for professionalservices performed or to be performed in connection with the Merger or any ofthe other transactions contemplated by this Agreement.**2.30     Company Rights Agreement. The Company has amended theCompany Rights Agreement to provide that neither Parent nor Merger Sub, nor anyaffiliate of Parent or Merger Sub, shall be deemed to be an Acquiring Person (asdefined in the Company Rights Agreement), that neither a Distribution Date (asdefined in the Company Rights Agreement) nor a Shares Acquisition Date (asdefined in the Company Rights Agreement) shall be deemed to occur, and that theRights will not separate from the Company Common Stock, as a result of theexecution, delivery or performance of this Agreement, the Stock Option Agreementor the Voting Agreements or the consummation of the Merger or any of the othertransactions contemplated hereby or thereby, and that none of the Company,Parent, Merger Sub or the Surviving Corporation, nor any of their respectiveaffiliates, shall have any obligations under the Company Rights Agreement to anyholder (or former holder) of Rights as of or following the Effective Time.**2.31     Full Disclosure.This Agreement (including the Company Disclosure Schedule) does not, andthe certificate referred to in Section 6.6(e) will not, (i) contain anyrepresentation, warranty or information that is false or misleading with respectto any material fact, or (ii) omit to state any material fact necessary in orderto make the representations, warranties and information contained and to becontained herein and therein (in the light of the circumstances under which suchrepresentations, warranties and information were or will be made or provided)not false or misleading.

None of the information supplied or to be supplied by or on behalf of theCompany for inclusion or incorporation by reference in the Form S-4 RegistrationStatement will, at the time the Form S-4 Registration Statement is filed withthe SEC or at the time it becomes effective under the Securities Act, containany untrue statement of a material fact or omit to state any material factrequired to be stated therein or necessary in order to make the statementstherein, in the light of the circumstances under which they are made, notmisleading.  None of the information supplied or to be supplied by or on behalfof the Company for inclusion or incorporation by reference in theProspectus/Proxy Statement will, at the time the Prospectus/Proxy Statement ismailed to the stockholders of the Company or at the time of the CompanyStockholders' Meeting (or any adjournment or postponement thereof), contain anyuntrue statement of a material fact or omit to state any material fact requiredto be stated therein or necessary in order to make the statements therein, inthe light of the circumstances under which they are made, not misleading.  TheProspectus/Proxy Statement will comply as to form in all material respects withthe provisions of the Exchange Act and the rules and regulations promulgated bythe SEC thereunder.  
**Section 3.     Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub represent and warrant to the Company asfollows:
3.1     Due Organization; Subsidiaries. Parent is a corporationduly organized, validly existing and in good standing under the laws of theState of Delaware.  Merger Sub is a corporation duly organized, validly existingand in good standing under the laws of the State of Nevada.  Each of Parent andMerger Sub has all necessary power and authority:  (a) to conduct its businessin the manner in which its business is currently being conducted; (b) to own anduse its assets in the manner in which its assets are currently owned and used;and (c) to perform its obligations under all Contracts by which it is bound.Parent is qualified to do business as a foreign corporation, and is in goodstanding, under the laws of all jurisdictions where the nature of its businessrequires such qualification, except in such jurisdictions where the failure tobe so qualified or in good standing has not had and would not reasonably beexpected to have a Material Adverse Effect on Parent.  Parent has delivered ormade available to the Company accurate and complete copies of the certificate ofincorporation and bylaws of Parent, including all amendments thereto.**3.2     Capitalization.  As of the date of this Agreement, theauthorized capital stock of Parent consists of 1,100,000,000 shares of ParentCommon Stock and 1,000,000 shares of preferred stock of Parent.  As of January7, 2000, 385,950,130 shares of Parent Common Stock were issued and outstanding(excluding treasury shares).  As of the date of this Agreement, no shares ofpreferred stock of Parent are outstanding.  All of the outstanding shares ofParent Common Stock have been duly authorized and validly issued, and are fullypaid and nonassessable.**3.3     SEC Filings; Financial Statements.Parent has delivered or made available to the Company accurate andcomplete copies (excluding copies of exhibits) of each report, registrationstatement and definitive proxy statement filed by Parent with the SEC sinceJanuary 1, 1999 (the "Parent SEC Documents").  All statements,reports, schedules, forms and other documents required to have been filed byParent with the SEC have been so filed on a timely basis.  As of the time it wasfiled with the SEC (or, if amended or superseded by a filing prior to the dateof this Agreement, then on the date of such filing):  (i) each of the Parent SECDocuments complied in all material respects with the applicable requirements ofthe Securities Act or the Exchange Act (as the case may be); and (ii) none ofthe Parent SEC Documents contained any untrue statement of a material fact oromitted to state a material fact required to be stated therein or necessary inorder to make the statements therein, in the light of the circumstances underwhich they were made, not misleading.

The consolidated financial statements contained in the Parent SECDocuments:  (i) complied as to form in all material respects with the publishedrules and regulations of the SEC applicable thereto; (ii) were prepared inaccordance with generally accepted accounting principles applied on a consistentbasis throughout the periods covered (except as may be indicated in the notes tosuch financial statements and, in the case of unaudited statements, as permittedby Form 10-Q of the SEC, and except that unaudited financial statements may notcontain footnotes and are subject to normal and recurring year-end auditadjustments which will not, individually or in the aggregate, be material inamount); and (iii) fairly present the consolidated financial position of Parentand its consolidated subsidiaries as of the respective dates thereof and theconsolidated results of operations of Parent and its consolidated subsidiariesfor the periods covered thereby.
**3.4     Absence of Changes.  Between October 31, 1999 and thedate of this Agreement, there has not been any event that has had a MaterialAdverse Effect on Parent.**3.5     Authority; Binding Nature of Agreement.  Parent andMerger Sub have the absolute and unrestricted right, power and authority toperform their obligations under this Agreement; and the execution, delivery andperformance by Parent and Merger Sub of this Agreement have been duly authorizedby all necessary action on the part of Parent and Merger Sub and theirrespective boards of directors.  This Agreement constitutes the legal, valid andbinding obligation of Parent and Merger Sub, enforceable against them inaccordance with its terms, subject to (i) laws of general application relatingto bankruptcy, insolvency and the relief of debtors, and (ii) rules of lawgoverning specific performance, injunctive relief and other equitableremedies.**3.6     No Vote Required.  No vote of the holders of ParentCommon Stock is required to authorize the Merger.**3.7     Non-Contravention; Consents.  Neither the execution anddelivery of this Agreement by Parent and Merger Sub nor the consummation byParent and Merger Sub of the Merger will (a) conflict with or result in anybreach of any provision of the certificate of incorporation or bylaws of Parentor the articles of incorporation or bylaws of Merger Sub, (b) result in adefault by Parent or Merger Sub under any Contract to which Parent or Merger Subis a party, except for any default that has not had and will not have a MaterialAdverse Effect on Parent, or (c) result in a violation by Parent or Merger Subof any order, writ, injunction, judgment or decree to which Parent or Merger Subis subject, except for any violation that has not had and will not have aMaterial Adverse Effect on Parent.  Except as may be required by the SecuritiesAct, the Exchange Act, state securities or "blue sky" laws, Chapter92A of the Nevada Revised Statutes, the HSR Act, any foreign antitrust law orregulation and the NASD Bylaws (as they relate to the S-4 Registration Statementand the Prospectus/Proxy Statement), Parent is not and will not be required tomake any filing with or give any notice to, or to obtain any Consent from, anyPerson in connection with the execution, delivery or performance of thisAgreement or the consummation of the Merger.**3.8     Valid Issuance.  The Parent Common Stock to be issued inthe Merger and to be issued upon exercise of the assumed Company Options and anyassumed Company Warrants will, when issued in accordance with the provisions ofthis Agreement, be validly issued, fully paid and nonassessable.**3.9     Accounting Matters.  As of the date of this Agreement,to the best of the knowledge of Parent, neither Parent nor any of its affiliateshas taken or agreed to, or plans to, take any action that would prevent Parentfrom accounting for the Merger as a "pooling of interests."**3.10     Disclosure.  None of the information to be supplied byor on behalf of Parent for inclusion in the Form S-4 Registration Statementwill, at the time the Form S-4 Registration Statement becomes effective underthe Securities Act, contain any untrue statement of a material fact or omit tostate any material fact required to be stated therein or necessary in order tomake the statements therein, in the light of the circumstances under which theyare made, not misleading.  None of the information to be supplied by or onbehalf of Parent for inclusion in the Prospectus/Proxy Statement will, at thetime the Prospectus/Proxy Statement is mailed to the stockholders of the Companyor at the time of the Company Stockholders' Meeting (or any adjournment orpostponement thereof), contain any untrue statement of a material fact or omitto state any material fact required to be stated therein or necessary in orderto make the statements therein, in the light of the circumstances under whichthey are made, not misleading.  The Prospectus/Proxy Statement will comply as toform in all material respects with the provisions of the Exchange Act and therules and regulations promulgated by the SEC thereunder, except that norepresentation or warranty is made by Parent with respect to statements made orincorporated by reference therein based on information supplied by the Companyfor inclusion or incorporation by reference in the Prospectus/ProxyStatement.**Section 4.     Certain Covenants of the Company4.1     Access and Investigation.  During the period from the date ofthis Agreement through the Effective Time (the "Pre-Closing Period"),the Company shall, and shall cause the respective Representatives of theAcquired Corporations to: (a) provide Parent and Parent's Representatives withreasonable access to the Acquired Corporations' Representatives, personnel andassets and to all existing books, records, Tax Returns, work papers and otherdocuments and information relating to the Acquired Corporations; and (b) provideParent and Parent's Representatives with such copies of the existing books,records, Tax Returns, work papers and other documents and information relatingto the Acquired Corporations, and with such additional financial, operating andother data and information regarding the Acquired Corporations, as Parent mayreasonably request.  Without limiting the generality of the foregoing, duringthe Pre-Closing Period, the Company shall promptly provide Parent with copiesof:
all material operating and financial reports prepared by the Company andits Subsidiaries for the Company's senior management, including (A) copies ofthe unaudited monthly consolidated balance sheets of the Acquired Corporationsand the related unaudited monthly consolidated statements of operations,statements of stockholders' equity and statements of cash flows and (B) copiesof any sales forecasts, marketing plans, development plans, discount reports,write-off reports, hiring reports and capital expenditure reports prepared forthe Company's senior management;

any written materials or communications sent by or on behalf of theCompany to its stockholders;

any material notice, document or other communication sent by or on behalfof any of the Acquired Corporations to any party to any Acquired CorporationContract or sent to any of the Acquired Corporations by any party to anyAcquired Corporation Contract (other than any communication that relates solelyto routine commercial transactions between the Company and the other party toany such Acquired Corporation Contract and that is of the type sent in theordinary course of business and consistent with past practices); 

any notice, report or other document filed with or sent to anyGovernmental Body in connection with the Merger or any of the other transactionscontemplated by this Agreement; and

any material notice, report or other document received by any of theAcquired Corporations from any Governmental Body.
**4.2     Operation of the Company's Business.During the Pre-Closing Period:  (i) the Company shall ensure that each ofthe Acquired Corporations conducts its business and operations (A) in theordinary course and in accordance with past practices and (B) in compliance withall applicable Legal Requirements and the requirements of all AcquiredCorporation Contracts that constitute Material Contracts; (ii) the Company shalluse all reasonable efforts to ensure that each of the Acquired Corporationspreserves intact its current business organization, keeps available the servicesof its current officers and employees and maintains its relations and goodwillwith all suppliers, customers, landlords, creditors, licensors, licensees,employees and other Persons having business relationships with the respectiveAcquired Corporations; (iii) the Company shall keep in full force all insurancepolicies referred to in Section 2.19; (iv) the Company shall provide allnotices, assurances and support required by any Acquired Corporation Contractrelating to any Proprietary Asset in order to ensure that no condition undersuch Acquired Corporation Contract occurs that could result in, or couldincrease the likelihood of, (A) any transfer or disclosure by any AcquiredCorporation of any Acquired Corporation Source Code, or (B) a release from anyescrow of any Acquired Corporation Source Code that has been deposited or isrequired to be deposited in escrow under the terms of such Acquired CorporationContract; (v) the Company shall promptly notify Parent of (A) any notice orother communication from any Person alleging that the Consent of such Person isor may be required in connection with the transactions contemplated by thisAgreement, and (B) any Legal Proceeding commenced, or, to the best of itsknowledge threatened against, relating to or involving or otherwise affectingany of the Acquired Corporations that relates to the consummation of thetransactions contemplated by this Agreement; and (vi) the Company shall (to theextent requested by Parent) cause its officers and the officers of itsSubsidiaries to report regularly to Parent concerning the status of theCompany's business.

During the Pre-Closing Period, the Company shall not (without the priorwritten consent of Parent), and shall not permit any of the other AcquiredCorporations to:
declare, accrue, set aside or pay any dividend or make any otherdistribution in respect of any shares of capital stock, or repurchase, redeem orotherwise reacquire any shares of capital stock or other securities;

sell, issue, grant or authorize the issuance or grant of (A) anycapital stock or other security, (B) any option, call, warrant or right toacquire any capital stock or other security, or (C) any instrument convertibleinto or exchangeable for any capital stock or other security (except that (1)the Company may issue shares of Company Common Stock (x) upon the valid exerciseof Company Options and Company Warrants outstanding as of the date of thisAgreement, and (y) pursuant to the ESPP, and (2) the Company may, in theordinary course of business and consistent with past practices, grant to newly-hired employees of the Company below the rank of Vice President nonqualifiedoptions (having an exercise price equal to the fair market value of the CompanyCommon Stock covered by such options determined as of the time of the grant ofsuch options) under its stock option plans to purchase no more than a total of150,000 shares of Company Common Stock in the aggregate for all suchemployees;

amend or waive any of its rights under, or accelerate the vesting under,any provision of any of the Company's stock option plans, any provision of anyagreement evidencing any outstanding stock option or warrant or any restrictedstock purchase agreement, or otherwise modify any of the terms of anyoutstanding option, warrant or other security or any related Contract;

amend or permit the adoption of any amendment to its articles ofincorporation or bylaws or other charter or organizational documents, or effector become a party to any merger, consolidation, share exchange, businesscombination, recapitalization, reclassification of shares, stock split, reversestock split, consolidation of shares or similar transaction;

form any Subsidiary or acquire any equity interest or other interest inany other Entity;

make any capital expenditure (except that the Acquired Corporations maymake capital expenditures that, when added to all other capital expendituresmade on behalf of the Acquired Corporations during the Pre-Closing Period, donot exceed $20,000,000 in the aggregate);

enter into or become bound by, or permit any of the assets owned or usedby it to become bound by, any Material Contract, or amend or terminate, or waiveor exercise any material right or remedy under, any Material Contract, otherthan in the ordinary course of business consistent with past practices;

acquire, lease or license any right or other asset from any other Personor sell or otherwise dispose of, or lease or license, any right or other assetto any other Person (except in each case for immaterial assets acquired, leased,licensed or disposed of by the Company in the ordinary course of business andconsistent with past practices and licenses of software owned by the AcquiredCorporations to third parties entered into in the ordinary course of businessconsistent with past practices), or waive or relinquish any material right;

lend money to any Person, or incur or guarantee any indebtedness (exceptthat the Company may make routine borrowings in the ordinary course of businessunder its current line of credit with ABN AMRO);

establish, adopt or amend any employee benefit plan, pay any bonus ormake any profit-sharing or similar payment to, or increase the amount of thewages, salary, commissions, fringe benefits or other compensation orremuneration payable to, any of its directors, officers or employees (exceptthat the Company (A) may make routine, reasonable salary increases in connectionwith the Company's customary employee review process, and (B) may make customarybonus payments and profit sharing payments consistent with past practicespayable in accordance with existing bonus and profit sharing plans referred toin Part 2.17(a) of the Company Disclosure Schedule);

hire any employee at the level of Vice President or above or with anannual base salary in excess of $200,000, or promote any employee except inorder to fill a position vacated after the date of this Agreement;

change any of its pricing policies, product return policies, productmaintenance polices, service policies, product modification or upgrade policies,personnel policies or other business policies, or any of its methods ofaccounting or accounting practices in any material respect;

take or permit to be taken any action that the Company believes wouldpreclude Parent from accounting for the merger as a "pooling ofinterests" for accounting purposes;

make any Tax election;

commence or settle any Legal Proceeding;

enter into any material transaction or take any other material actionoutside the ordinary course of business or inconsistent with past practices;or

agree or commit to take any of the actions described inclauses "(i)" through "(xvi)" of this Section4.2(b).

During the Pre-Closing Period, the Company shall promptly notify Parentin writing of:  (i) the discovery by the Company of any event, condition, factor circumstance that occurred or existed on or prior to the date of thisAgreement and that caused or constitutes a material inaccuracy in anyrepresentation or warranty made by the Company in this Agreement; (ii) anyevent, condition, fact or circumstance that occurs, arises or exists after thedate of this Agreement and that would cause or constitute a material inaccuracyin any representation or warranty made by the Company in this Agreement if(A) such representation or warranty had been made as of the time of theoccurrence, existence or discovery of such event, condition, fact orcircumstance, or (B) such event, condition, fact or circumstance hadoccurred, arisen or existed on or prior to the date of this Agreement; (iii) anymaterial breach of any covenant or obligation of the Company contained in thisAgreement; and (iv) any event, condition, fact or circumstance that would makethe timely satisfaction of any of the conditions set forth in Section 6 orSection 7 impossible or unlikely or that has had or could reasonably beexpected to have a Material Adverse Effect on the Acquired Corporations.Without limiting the generality of the foregoing, the Company shall promptlyadvise Parent in writing of any Legal Proceeding or material claim threatened,commenced or asserted against or with respect to any of the AcquiredCorporations.  No notification given to Parent pursuant to this Section 4.2(c)shall limit or otherwise affect any of the representations, warranties,covenants or obligations of the Company contained in this Agreement.
**4.3     No Solicitation.The Company shall not directly or indirectly, and shall not authorize orpermit any of the other Acquired Corporations or any Representative of any ofthe Acquired Corporations directly or indirectly to, (i) solicit, initiate,encourage, induce or facilitate the making, submission or announcement of anyAcquisition Proposal (including by amending, or granting any waiver under, theCompany Rights Agreement) or take any action that could reasonably be expectedto lead to an Acquisition Proposal, (ii) furnish any information regarding anyof the Acquired Corporations to any Person in connection with or in response toan Acquisition Proposal or an inquiry or indication of interest that could leadto an Acquisition Proposal, (iii) engage in discussions or negotiations with anyPerson with respect to any Acquisition Proposal, (iv)  approve, endorse orrecommend any Acquisition Proposal or (v) enter into any letter of intent orsimilar document or any Contract contemplating or otherwise relating to anyAcquisition Transaction; 
provided, however,
 that prior to the approval ofthis Agreement by the Required Company Stockholder Vote, this Section 4.3(a)shall not prohibit the Company from furnishing nonpublic information regardingthe Acquired Corporations to, or entering into discussions or negotiations with,any Person in response to a Superior Offer that is submitted to the Company bysuch Person (and not withdrawn) if (1) neither the Company nor anyRepresentative of any of the Acquired Corporations shall have violated any ofthe restrictions set forth in this Section 4.3, (2) the board of directors ofthe Company concludes in good faith, after having taken into account the adviceof its outside legal counsel, that such action is required in order for theboard of directors of the Company to comply with its fiduciary obligations tothe Company's stockholders under applicable law, (3) at least two business daysprior to furnishing any such nonpublic information to, or entering intodiscussions or negotiations with, such Person, the Company gives Parent writtennotice of the identity of such Person and of the Company's intention to furnishnonpublic information to, or enter into discussions or negotiations with, suchPerson, and the Company receives from such Person an executed confidentialityagreement in substantially the same form as that certain Agreement ConcerningFuture Discussions dated September 8, 1999 between the Company and Parent (the"Confidentiality Agreement"), and (4) prior to furnishing any suchnonpublic information to such Person, the Company furnishes such nonpublicinformation to Parent (to the extent such nonpublic information has not beenpreviously furnished by the Company to Parent).  The parties agree that forpurposes of the preceding sentence (but for no other purpose), an offer that isconditioned on completion of due diligence shall be deemed to constitute a"Superior Offer" if such offer otherwise meets the definition of"Superior Offer" set forth in Exhibit A.  Without limiting thegenerality of the first sentence of this Section 4.3(a), the Companyacknowledges and agrees that any violation of any of the restrictions set forthin the first sentence of this Section 4.3(a) by any Representative of any of theAcquired Corporations, whether or not such Representative is purporting to acton behalf of any of the Acquired Corporations, shall be deemed to constitute abreach of this Section 4.3 by the Company.

The Company shall promptly (and in no event later than one business dayafter receipt of any Acquisition Proposal, any inquiry or indication of interestthat could reasonably be expected to lead to an Acquisition Proposal or anyrequest for nonpublic information) advise Parent orally and in writing of anyAcquisition Proposal, any inquiry or indication of interest that couldreasonably be expected to lead to an Acquisition Proposal or any request fornonpublic information relating to any of the Acquired Corporations (includingthe identity of the Person making or submitting such Acquisition Proposal,inquiry, indication of interest or request, and the terms thereof) that is madeor submitted by any Person during the Pre-Closing Period.  The Company shallthereafter promptly notify Parent of any material change in the terms or statusof any such Acquisition Proposal, inquiry, indication of interest orrequest.

The Company shall immediately cease and cause to be terminated anyexisting discussions with any Person that relate to any AcquisitionProposal.

The Company agrees not to release or permit the release of any Personfrom, or to waive or permit the waiver of any provision of, any confidentiality,"standstill" or similar agreement to which any of the AcquiredCorporations is a party, and will use its best efforts to enforce or cause to beenforced each such agreement at the request of Parent.  The Company also willpromptly request each Person that has executed, within 12 months prior to thedate of this Agreement, a confidentiality agreement in connection with itsconsideration of a possible Acquisition Transaction or equity investment toreturn all confidential information heretofore furnished to such Person by or onbehalf of any of the Acquired Corporations.
**Section 5.     Additional Covenants of the Parties5.1     Registration Statement; Prospectus/ProxyStatement.As promptly as practicable after the date of this Agreement, Parent andthe Company shall prepare and cause to be filed with the SEC theProspectus/Proxy Statement and Parent shall prepare and cause to be filed withthe SEC the Form S-4 Registration Statement, in which the Prospectus/ProxyStatement will be included as a prospectus; 
provided, however
, thatnotwithstanding anything to the contrary contained in this Section 5.1(a), if(and to the extent) Parent so elects:  (i) the Prospectus/Proxy Statement shallinitially be filed with the SEC on a confidential basis as a proxy statement ofthe Company under Section 14 of the Exchange Act; (ii) until such time as Parenthas determined that it is reasonably likely that the SEC will promptly declarethe Form S-4 Registration Statement effective under the Securities Act, allamendments to the Prospectus/Proxy Statement shall be filed with the SEC on aconfidential basis as amendments to the proxy statement of the Company underSection 14 of the Exchange Act; and (iii) Parent shall not be obligated to filethe Form S-4 Registration Statement with the SEC until such time as Parent hasdetermined that it is reasonably likely that the SEC will promptly declare theForm S-4 Registration Statement effective under the Securities Act.  Each ofParent and the Company shall use all reasonable efforts to cause the Form S-4Registration Statement and the Prospectus/Proxy Statement to comply with therules and regulations promulgated by the SEC, to respond promptly to anycomments of the SEC or its staff and to have the Form S-4 Registration Statementdeclared effective under the Securities Act as promptly as practicable after itis filed with the SEC.  The Company will use all reasonable efforts to cause theProspectus/Proxy Statement to be mailed to the Company's stockholders aspromptly as practicable after the Form S-4 Registration Statement is declaredeffective under the Securities Act.  The Company shall promptly furnish toParent all information concerning the Acquired Corporations and the Company'sstockholders that may be required or reasonably requested in connection with anyaction contemplated by this Section 5.1.  If any event relating to any of theAcquired Corporations occurs, or if the Company becomes aware of anyinformation, that should be disclosed in an amendment or supplement to the FormS-4 Registration Statement or the Prospectus/Proxy Statement, then the Companyshall promptly inform Parent thereof and shall cooperate with Parent in filingsuch amendment or supplement with the SEC and, if appropriate, in mailing suchamendment or supplement to the stockholders of the Company.  

Prior to the Effective Time, Parent shall use reasonable efforts toobtain all regulatory approvals needed to ensure that the Parent Common Stock tobe issued in the Merger will be registered or qualified under the securities lawof every jurisdiction of the United States in which any registered holder ofCompany Common Stock has an address of record on the record date for determiningthe stockholders entitled to notice of and to vote at the Company Stockholders'Meeting; 
provided, however,
 that Parent shall not be required (i) toqualify to do business as a foreign corporation in any jurisdiction in which itis not now qualified or (ii) to file a general consent to service of process inany jurisdiction.
**5.2     Company Stockholders' Meeting.The Company shall take all action necessary under all applicable LegalRequirements to call, give notice of and hold a meeting of the holders ofCompany Common Stock to vote on the approval of this Agreement (the"Company Stockholders' Meeting").  The Company Stockholders' Meetingshall be held (on a date selected by the Company in consultation with Parent) aspromptly as practicable after the Form S-4 Registration Statement is declaredeffective under the Securities Act.  The Company shall ensure that all proxiessolicited in connection with the Company Stockholders' Meeting are solicited incompliance with all applicable Legal Requirements.  

Subject to Section 5.2(c): (i) the Prospectus/Proxy Statement shallinclude a statement to the effect that the board of directors of the Companyrecommends that the Company's stockholders vote to approve this Agreement at theCompany Stockholders' Meeting (the recommendation of the Company's board ofdirectors that the Company's stockholders vote to approve this Agreement beingreferred to as the "Company Board Recommendation"); and (ii) theCompany Board Recommendation shall not be withdrawn or modified in a manneradverse to Parent, and no resolution by the board of directors of the Company orany committee thereof to withdraw the Company Board Recommendation or modify theCompany Board Recommendation in a manner adverse to Parent shall be adopted orproposed.

Notwithstanding anything to the contrary contained in Section 5.2(b), atany time prior to the approval of this Agreement by the Required CompanyStockholder Vote, the Company Board Recommendation may be withdrawn or modifiedin a manner adverse to Parent if: (i) an unsolicited, bona fide written offer topurchase all of the outstanding shares of Company Common Stock is made to theCompany and is not withdrawn; (ii) the Company provides Parent with at least twobusiness days' prior notice of any meeting of the Company's board of directorsat which such board of directors will consider and determine whether such offeris a Superior Offer; (iii) the Company's board of directors determines in goodfaith (based upon the advice of an independent financial advisor of nationallyrecognized reputation) that such offer constitutes a Superior Offer; (iv) theCompany's board of directors determines in good faith, based upon the advice ofthe Company's outside counsel, that, in light of such Superior Offer, thewithdrawal or modification of the Company Board Recommendation is required inorder for the Company's board of directors to comply with its fiduciaryobligations to the Company's stockholders under applicable law; (v) the CompanyBoard Recommendation is not withdrawn or modified in a manner adverse to Parentat any time within two business days after Parent receives written notice fromthe Company confirming that the Company's board of directors has determined thatsuch offer is a Superior Offer; and (vi) neither the Company nor any of itsRepresentatives shall have violated any of the restrictions set forth in Section4.3 in any material respect.

Subject to any applicable requirements of Nevada law, the Company'sobligation to call, give notice of and hold the Company Stockholders' Meeting inaccordance with Section 5.2(a) shall not be limited or otherwise affected by thecommencement, disclosure, announcement or submission of any Superior Offer orother Acquisition Proposal, or by any withdrawal or modification of the CompanyBoard Recommendation.
**5.3     Regulatory Approvals.  Each party shall use allreasonable efforts to file, as soon as practicable after the date of thisAgreement, all notices, reports and other documents required to be filed by suchparty with any Governmental Body with respect to the Merger and the othertransactions contemplated by this Agreement, and to submit promptly anyadditional information requested by any such Governmental Body.  Withoutlimiting the generality of the foregoing, the Company and Parent shall, promptlyafter the date of this Agreement, prepare and file the notifications requiredunder the HSR Act and any applicable foreign antitrust laws or regulations inconnection with the Merger.  The Company and Parent shall respond as promptly aspracticable to (i) any inquiries or requests received from the Federal TradeCommission or the Department of Justice for additional information ordocumentation and (ii) any inquiries or requests received from any stateattorney general, foreign antitrust authority or other Governmental Body inconnection with antitrust or related matters.  Each of the Company and Parentshall (1) give the other party prompt notice of the commencement or threat ofcommencement of any Legal Proceeding by or before any Governmental Body withrespect to the Merger or any of the other transactions contemplated by thisAgreement, (2) keep the other party informed as to the status of any such LegalProceeding or threat, and (3) promptly inform the other party of anycommunication to or from the Federal Trade Commission, the Department of Justiceor any other Governmental Body regarding the Merger.  Except as may beprohibited by any Governmental Body or by any Legal Requirement, the Company andParent will consult and cooperate with one another, and will consider in goodfaith the views of one another, in connection with any analysis, appearance,presentation, memorandum, brief, argument, opinion or proposal made or submittedin connection with any Legal Proceeding under or relating to the HSR Act or anyother foreign, federal or state antitrust or fair trade law.  In addition,except as may be prohibited by any Governmental Body or by any LegalRequirement, in connection with any Legal Proceeding under or relating to theHSR Act or any other foreign, federal or state antitrust or fair trade law orany other similar Legal Proceeding, each of the Company and Parent will permitauthorized Representatives of the other party to be present at each meeting orconference relating to any such Legal Proceeding and to have access to and beconsulted in connection with any document, opinion or proposal made or submittedto any Governmental Body in connection with any such Legal Proceeding.  At therequest of Parent, the Company shall agree to divest, sell, dispose of, holdseparate or otherwise take or commit to take any action that limits its freedomof action with respect to its or its Subsidiaries' ability to retain any of thebusinesses, product lines or assets of the Company or any of its Subsidiaries,provided that any such action is conditioned upon the consummation of theMerger.**5.4     Stock Options and Warrants; ESPP.Subject to Section 5.4(b), at the Effective Time, all rights with respectto Company Common Stock under each Company Option (other than options under theESPP) and Company Warrant then outstanding shall be converted into and becomerights with respect to Parent Common Stock, and Parent shall assume each suchCompany Option (other than options under the ESPP) and Company Warrant inaccordance with the terms (as in effect as of the date of this Agreement) of thestock option plan under which it was issued, if applicable, and the terms of thestock option or warrant agreement by which it is evidenced.  From and after theEffective Time, (i) each Company Option and Company Warrant assumed by Parentmay be exercised solely for shares of Parent Common Stock, (ii) the number ofshares of Parent Common Stock subject to each such Company Option and CompanyWarrant shall be equal to the number of shares of Company Common Stock subjectto such Company Option or Company Warrant immediately prior to the EffectiveTime multiplied by the Exchange Ratio, rounding down to the nearest whole share,(iii) the per share exercise price under each such Company Option and CompanyWarrant shall be adjusted by dividing the per share exercise price under suchCompany Option or Company Warrant by the Exchange Ratio and rounding up to thenearest cent and (iv) any restriction on the exercise of any such Company Optionor Company Warrant shall continue in full force and effect and the term,exercisability, vesting schedule and other provisions of such Company Option orCompany Warrant shall otherwise remain unchanged; 
provided, however,
 thateach Company Option and Company Warrant assumed by Parent in accordance withthis Section 5.4(a) shall, in accordance with its terms, be subject to furtheradjustment as appropriate to reflect any stock split, stock dividend, reversestock split, reclassification, recapitalization or other similar transactionsubsequent to the Effective Time.  Parent shall file with the SEC, no later thanten business days after the date on which the Merger becomes effective, aregistration statement on Form S-8 relating to the shares of Parent Common Stockissuable with respect to the Company Options assumed by Parent in accordancewith this Section 5.4(a). 

Notwithstanding anything to the contrary contained in this Section 5.4,in lieu of assuming outstanding Company Options or Company Warrants inaccordance with Section 5.4(a), Parent may, at its election, cause suchoutstanding Company Options or Company Warrants to be replaced by issuingreplacement stock options or warrants in substitution therefor having theexercise price, and being exercisable for the number of shares, calculated inaccordance with Section 5.4(a) and having other terms no more or less favorableto the optionee or warrantholder than the options or warrants that they arereplacing.  If Parent issues replacement stock options in accordance with thisSection 5.4(b), then Parent shall file with the SEC, no later than ten businessdays after the date on which the Merger becomes effective, a registrationstatement on Form S-8 relating to the shares of Parent Common Stock issuablewith respect to such replacement stock options.

Prior to the Effective Time, the Company shall take all action that maybe necessary (under the plans pursuant to which Company Options are outstandingand otherwise) to effectuate the provisions of this Section 5.4 and to ensurethat, from and after the Effective Time, holders of Company Options have norights with respect thereto other than those specifically provided in thisSection 5.4. 

As of the Effective Time, the ESPP shall be terminated.  The rights ofparticipants in the ESPP with respect to any offering period then underway underthe ESPP shall be determined by treating the last business day prior to theEffective Time as the last day of such offering period and by making such otherpro rata adjustments as may be necessary to reflect the shortened offeringperiod but otherwise treating such shortened offering period as a fullyeffective and completed offering period for all purposes under the ESPP.  Priorto the Effective Time, the Company shall take all actions (including, ifappropriate, amending the terms of the ESPP) that are necessary to give effectto the transactions contemplated by this Section 5.4(d).
**5.5     Employee Benefits.  Parent agrees that all employees ofthe Acquired Corporations who continue employment with Parent, the SurvivingCorporation or any Subsidiary of the Surviving Corporation after the EffectiveTime ("Continuing Employees") shall be eligible to continue toparticipate in the Surviving Corporation's health and/or welfare benefit plans;*provided, however*, that (a) nothing in this Section 5.5 or elsewhere inthis Agreement shall limit the right of Parent or the Surviving Corporation toamend or terminate any such health and/or welfare benefit plan at any time, and(b) if Parent or the Surviving Corporation terminates any such health and/orwelfare benefit plan, then, subject to any appropriate transition period, theContinuing Employees shall be eligible to participate in Parent's health,vacation and other non-equity based employee benefit plans, to substantially thesame extent as similarly situated employees of Parent.  The Continuing Employeesshall be given, to the extent consistent with Parent's benefit plans and withapplicable law, service credit under Parent's benefit plans, for purposes ofeligibility and vesting, equal to the service credit currently provided to suchContinuing Employees under comparable Company Employee Plans.  Nothing in thisSection 5.5 or elsewhere in this Agreement shall be construed to create a rightin any employee to employment with Parent, the Surviving Corporation or anySubsidiary of the Surviving Corporation and, subject to any other bindingagreement between an employee and Parent, the Surviving Corporation or anySubsidiary of the Surviving Corporation, the employment of each ContinuingEmployee shall be "at will" employment. The Company agrees to take (orcause to be taken) all actions necessary or appropriate to terminate, effectiveimmediately prior to the Effective Time, any employee benefit plan sponsored byany of the Acquired Corporations (or in which any of the Acquired Corporationsparticipates) that contains a cash or deferred arrangement intended to qualifyunder Section 401(k) of the Code.**5.6     Indemnification of Officers andDirectors.All rights to indemnification existing in favor of those Persons who aredirectors and officers of the Company as of the date of this Agreement (the"Indemnified Persons") for acts and omissions occurring prior to theEffective Time, as provided in the Company's bylaws (as in effect as of the dateof this Agreement) and as provided in the indemnification agreements between theCompany and said Indemnified Persons (as in effect as of the date of thisAgreement) in the forms disclosed by the Company to Parent prior to the date ofthis Agreement, shall survive the Merger and shall be observed by the SurvivingCorporation to the fullest extent available under Nevada law.  Parent agrees toguarantee and stand behind the Company's commitments under said indemnificationagreements.

From the Effective Time until the sixth anniversary of the EffectiveTime, the Surviving Corporation shall maintain in effect, for the benefit of theIndemnified Persons with respect to acts or omissions occurring prior to theEffective Time, the existing policy of directors' and officers' liabilityinsurance maintained by the Company as of the date of this Agreement in the formdisclosed by the Company to Parent prior to the date of this Agreement (the"Existing Policy"); 
provided, however,
 that (i) the SurvivingCorporation may substitute for the Existing Policy a policy or policies ofcomparable coverage, and (ii) the Surviving Corporation shall not be required topay annual premiums for the Existing Policy (or for any substitute policies) inexcess of $475,000 in the aggregate.  In the event any future annual premiumsfor the Existing Policy (or any substitute policies) exceed $475,000 in theaggregate, the Surviving Corporation shall be entitled to reduce the amount ofcoverage of the Existing Policy (or any substitute policies) to the amount ofcoverage that can be obtained for a premium equal to $475,000.
**5.7     Pooling of Interests.  Each of the Company and Parentagrees (and the Company agrees to cause the Acquired Corporations) (a) not totake any action during the Pre-Closing Period that, to the best of the knowledgeof the Company or to the actual knowledge of the officers of Parent, as the casemay be, would adversely affect the ability of Parent to account for the Mergeras a "pooling of interests," and (b) to use all reasonable efforts toattempt to ensure that none of its "affiliates" (as that term is usedin Rule 145 under the Securities Act) takes any action that could adverselyaffect the ability of Parent to account for the Merger as a "pooling ofinterests."  Each of the Company and Parent agrees to provide toPricewaterhouseCoopers llp such letters as shall be reasonably requested byPricewaterhouseCoopers llp in connection with the letters referred to inSections 6.6(c) and 6.6(d).  Parent shall cause its "affiliates" (asthat term is used in Rule 145 under the Securities Act) not to sell shares ofParent Common Stock prior to the Closing in contravention of applicable"pooling of interests" accounting rules.**5.8     Additional Agreements.Subject to Section 5.8(b), Parent and the Company shall use allreasonable efforts to take, or cause to be taken, all actions necessary toconsummate the Merger and make effective the other transactions contemplated bythis Agreement.  Without limiting the generality of the foregoing, but subjectto Section 5.8(b), each party to this Agreement (i) shall make all filings (ifany) and give all notices (if any) required to be made and given by such partyin connection with the Merger and the other transactions contemplated by thisAgreement, (ii) shall use all reasonable efforts to obtain each Consent (if any)required to be obtained (pursuant to any applicable Legal Requirement orContract, or otherwise) by such party in connection with the Merger or any ofthe other transactions contemplated by this Agreement, and (iii) shall use allreasonable efforts to lift any restraint, injunction or other legal bar to theMerger.  The Company shall promptly deliver to Parent a copy of each such filingmade, each such notice given and each such Consent obtained by the Companyduring the Pre-Closing Period.

Notwithstanding anything to the contrary contained in this Agreement,Parent shall not have any obligation under this Agreement: (i) to dispose of ortransfer or cause any of its Subsidiaries to dispose of or transfer any assets,or to commit to cause any of the Acquired Corporations to dispose of any assets;(ii) to discontinue or cause any of its Subsidiaries to discontinue offering anyproduct or service, or to commit to cause any of the Acquired Corporations todiscontinue offering any product or service; (iii) to license or otherwise makeavailable, or cause any of its Subsidiaries to license or otherwise makeavailable, to any Person, any technology, software or other Proprietary Asset,or to commit to cause any of the Acquired Corporations to license or otherwisemake available to any Person any technology, software or other ProprietaryAsset; (iv) to hold separate or cause any of its Subsidiaries to hold separateany assets or operations (either before or after the Closing Date), or to committo cause any of the Acquired Corporations to hold separate any assets oroperations; (v) to make or cause any of its Subsidiaries to make any commitment(to any Governmental Body or otherwise) regarding its future operations or thefuture operations of any of the Acquired Corporations; or (vi) to contest anyLegal Proceeding relating to the Merger if Parent determines in good faith thatcontesting such Legal Proceeding might not be advisable.
**5.9     Disclosure.  Except in the situation where the CompanyBoard Recommendation has been withdrawn or modified in a manner adverse toParent in accordance with Section 5.2(c), Parent and the Company shallconsult with each other and attempt to agree upon the language of any pressrelease or other public statement with respect to the Merger or any of the othertransactions contemplated by this Agreement; *provided, however,* thateither party may make such disclosure as is required by applicable law.**5.10     Affiliate Agreements.  The Company shall use allreasonable efforts to cause each Person identified in Part 2.20 of the CompanyDisclosure Schedule and each other Person who is or becomes (or may be deemed tobe) an "affiliate" (as that term is used in Rule 145 under theSecurities Act) of the Company to execute and deliver to Parent, prior to thedate of the mailing of the Prospectus/Proxy Statement to the Company'sstockholders, an Affiliate Agreement in the form previously approved by Parent.Shares of Parent Common Stock and shares of Company Common Stock beneficiallyowned by each "affiliate" of the Company who has not provided a signed AffiliateAgreement in accordance with this Section 5.10 shall not be transferable duringany period prior to or after the Effective Time if, as a result of the transferof any such shares during any such period, taking into account the nature,extent and timing of the transfer and similar transfers by all other"affiliates" of Parent and the Company, the transfer may, in the reasonablejudgment of the independent accountants to Parent, prevent Parent fromaccounting for the Merger as a "pooling of interests" in accordancewith generally accepted accounting principles, Accounting Principles BoardOpinion No. 16 and all published rules, regulations and policies of the SEC.Neither Parent nor the Company shall register, or allow its transfer agent toregister, on its books any transfer of any shares of Parent Common Stock orCompany Common Stock of any "affiliate" of the Company who has notprovided a signed Affiliate Agreement in accordance with this Section 5.10.**5.11     Tax Matters.  At or prior to the filing of the Form S-4Registration Statement, the Company and Parent shall execute and deliver toCooley Godward llp and to Wilson Sonsini Goodrich & Rosati, P.C. taxrepresentation letters in customary form.  To the extent requested by Parent orthe Company, Parent, Merger Sub and the Company shall each confirm to CooleyGodward llp and to Wilson Sonsini Goodrich & Rosati, P.C. the accuracy andcompleteness as of the Effective Time of the tax representation lettersdelivered pursuant to the immediately preceding sentence.  Parent and theCompany shall use all reasonable efforts prior to the Effective Time to causethe Merger to qualify as a tax free reorganization under Section 368(a)(1) ofthe Code.  Following delivery of the tax representation letters pursuant to thefirst sentence of this Section 5.11, each of Parent and the Company shall useits reasonable efforts to cause Cooley Godward llp and Wilson Sonsini Goodrich& Rosati, P.C., respectively, to deliver to it a tax opinion satisfying therequirements of Item 601 of Regulation S-K promulgated under the Securities Act.In rendering such opinions, each of such counsel shall be entitled to rely onthe tax representation letters referred to in this Section 5.11.**5.12     Letter of the Company's Accountants.  The Company shalluse all reasonable efforts to cause to be delivered to Parent a letter ofPricewaterhouseCoopers llp, dated no more than two business days before the dateon which the Form S-4 Registration Statement becomes effective (and reasonablysatisfactory in form and substance to Parent), that is customary in scope andsubstance for letters delivered by independent public accountants in connectionwith registration statements similar to the Form S-4 RegistrationStatement.**5.13     Listing.  Parent shall use reasonable efforts to causethe shares of Parent Common Stock being issued in the Merger and issuable uponthe exercise of  assumed Company Options and assumed Company Warrants to beapproved for listing (subject to notice of issuance) on the Nasdaq NationalMarket.**5.14     Resignation of Officers and Directors.  The Companyshall use all reasonable efforts to obtain and deliver to Parent at or prior tothe Closing the resignation of each officer and director of each of the AcquiredCorporations.**5.15     Acknowledgments of Officers.  The Company shall usereasonable efforts to cause each officer of the Company of the rank of VicePresident or above to execute and deliver to the Company and Parent, at or priorto the Closing, a written acknowledgment in the form previously agreed to byParent (clarifying the terms of vesting acceleration of such officer'soutstanding options).**Section 6. Conditions Precedent to Obligations of Parent and Merger Sub
The obligations of Parent and Merger Sub to effect the Merger andotherwise consummate the transactions contemplated by this Agreement are subjectto the satisfaction, at or prior to the Closing, of each of the followingconditions:
6.1     Accuracy of Representations.The representations and warranties of the Company contained in thisAgreement shall have been accurate in all respects as of the date of thisAgreement, except that any inaccuracies in such representations and warrantieswill be disregarded if the circumstances giving rise to all such inaccuracies(considered collectively) do not constitute, and would not reasonably beexpected to have, a Material Adverse Effect on the Acquired Corporations;
provided, however
, that, for purposes of determining the accuracy of suchrepresentations and warranties, (i) all "Material Adverse Effect"qualifications and other materiality qualifications contained in suchrepresentations and warranties shall be disregarded and (ii) any update of ormodification to the Company Disclosure Schedule made or purported to have beenmade after the date of this Agreement shall be disregarded.

The representations and warranties of the Company contained in thisAgreement shall be accurate in all respects as of the Closing Date as if made onand as of the Closing Date, except that any inaccuracies in such representationsand warranties will be disregarded if the circumstances giving rise to all suchinaccuracies (considered collectively) do not constitute, and would notreasonably be expected to have, a Material Adverse Effect on the AcquiredCorporations; 
provided, however
, that, for purposes of determining theaccuracy of such representations and warranties, (i) all "Material AdverseEffect" qualifications and other materiality qualifications contained insuch representations and warranties shall be disregarded and (ii) any update ofor modification to the Company Disclosure Schedule made or purported to havebeen made after the date of this Agreement shall be disregarded.
**6.2     Performance of Covenants.  The covenants and obligationsthat the Company is required to comply with or to perform at or prior to theClosing shall have been complied with and performed in all materialrespects.**6.3     Effectiveness of Registration Statement.  The Form S-4Registration Statement shall have become effective in accordance with theprovisions of the Securities Act, and no stop order shall have been issued, andno proceeding for that purpose shall have been initiated or be threatened, bythe SEC with respect to the Form S-4 Registration Statement.**6.4     Stockholder Approval.  This Agreement shall have beenduly approved by the Required Company Stockholder Vote.**6.5     Consents. Each Consent that constitutes a SpecifiedConsent shall have been obtained and shall be in full force and effect. (Forpurposes of this Agreement, a Consent shall be deemed to constitute a"Specified Consent" if either:  (a) such Consent relates to a realestate lease or a Material Contract (other than the leases and contractsidentified on Schedule 6.5), and the failure to obtain such Consent couldreasonably be expected to have an adverse effect on any of the AcquiredCorporations or on Parent; or (b) the failure to obtain such Consent (consideredtogether with the failure to obtain all other Consents that are not obtained ator prior to the Closing) could reasonably be expected to have a Material AdverseEffect on the Acquired Corporations or on Parent.)**6.6     Agreements and Documents.  Parent and the Company shallhave received the following agreements and documents, each of which shall be infull force and effect:Affiliate Agreements in the form previously approved by Parent, executedby each Person who could reasonably be deemed to be an "affiliate" (asthat term is used in Rule 145 under the Securities Act) of the Company;

a letter from PricewaterhouseCoopers llp, dated as of the Closing Dateand addressed to Parent, reasonably satisfactory in form and substance toParent, updating the letter referred to in Section 5.12;

a letter from PricewaterhouseCoopers llp, dated as of the Closing Dateand addressed to Parent and the Company, reasonably satisfactory in form andsubstance to Parent and PricewaterhouseCoopers llp, to the effect that, afterreasonable investigation, PricewaterhouseCoopers llp is not aware of any factconcerning the Company that could preclude Parent from accounting for the Mergeras a "pooling of interests" in accordance with generally acceptedaccounting principles, Accounting Principles Board Opinion No. 16 and allpublished rules, regulations and policies of the SEC; 

a letter from PricewaterhouseCoopers llp, dated as of the Closing Dateand addressed to Parent, reasonably satisfactory in form and substance toParent, to the effect that PricewaterhouseCoopers llp concurs with Parent'smanagement's conclusion that Parent may account for the Merger as a"pooling of interests" in accordance with generally acceptedaccounting principles, Accounting Principles Board Opinion No. 16 and allpublished rules, regulations and policies of the SEC;

a certificate executed on behalf of the Company by its Chief ExecutiveOfficer confirming that the conditions set forth in Sections 6.1, 6.2, 6.4, 6.5,6.7, 6.8, 6.11, 6.12 and 6.13 have been duly satisfied; and

the written resignations of all officers and directors of each of theAcquired Corporations, effective as of the Effective Time.
**6.7     Employees.Stephen Cooper shall not have ceased to be employed by the Company (otherthan by reason of his death or disability), and shall not have provided oral orwritten notice to the Company or Parent to the effect that he intends toterminate his employment with the Company or to decline to accept employmentwith Parent.

No more than one of the individuals identified on Schedule 6.7 shall haveceased to be employed by the Company (other than by reason of his death ordisability), or shall have provided oral or written notice to the Company orParent to the effect that he intends to terminate his employment with theCompany or to decline to accept employment with Parent.
**6.8     No Material Adverse Effect.  Since the date of thisAgreement, there shall not have occurred any Material Adverse Effect on theAcquired Corporations, and no event shall have occurred or circumstance shallexist that, in combination with any other events or circumstances, couldreasonably be expected to have a Material Adverse Effect on the AcquiredCorporations.**6.9     HSR Act.  The waiting period applicable to theconsummation of the Merger under the HSR Act shall have expired or beenterminated, and there shall not be in effect any voluntary agreement betweenParent and the Federal Trade Commission or the Department of Justice pursuant towhich Parent has agreed not consummate the Merger for any period of time; anysimilar waiting period under any applicable foreign antitrust law or regulationshall have expired or been terminated; and any Consent required under anyapplicable foreign antitrust law or regulation shall have been obtained.**6.10     Listing.  The shares of Parent Common Stock to be issuedin the Merger shall have been approved for listing (subject to notice ofissuance) on the Nasdaq National Market.**6.11     No Restraints.  No temporary restraining order,preliminary or permanent injunction or other order preventing the consummationof the Merger shall have been issued by any court of competent jurisdiction andremain in effect, and there shall not be any Legal Requirement enacted or deemedapplicable to the Merger that makes consummation of the Merger illegal.**6.12     No Governmental Litigation.  There shall not be pendingor threatened any Legal Proceeding in which a Governmental Body is or isthreatened to become a party or is otherwise involved: (a) challenging orseeking to restrain or prohibit the consummation of the Merger or any of theother transactions contemplated by this Agreement; (b) relating to the Mergerand seeking to obtain from Parent or any of its Subsidiaries any damages orother relief that may be material to Parent; (c) seeking to prohibit or limit inany material respect Parent's ability to vote, receive dividends with respect toor otherwise exercise ownership rights with respect to the stock of theSurviving Corporation; (d) that would materially and adversely affect the rightof Parent, the Surviving Corporation or any Subsidiary of Parent to own theassets or operate the business of the Acquired Corporations; or (e) seeking tocompel Parent or the Company, or any Subsidiary of Parent or the Company, todispose of or hold separate any material assets as a result of the Merger or anyof the other transactions contemplated by this Agreement.**6.13     No Other Litigation.  There shall not be pending anyLegal Proceeding that could reasonably be expected to have a Material AdverseEffect on the Acquired Corporations or on Parent:  (a) challenging or seeking torestrain or prohibit the consummation of the Merger or any of the othertransactions contemplated by this Agreement; (b) relating to the Merger andseeking to obtain from Parent or any of its Subsidiaries, or any of the AcquiredCorporations, any damages or other relief that may be material to Parent; (c)seeking to prohibit or limit in any material respect Parent's ability to vote,receive dividends with respect to or otherwise exercise ownership rights withrespect to the stock of any of the Acquired Corporations; (d) that would affectadversely the right of Parent or any of the Acquired Corporations to own theassets or operate the business of the Acquired Corporations; or (e) seeking tocompel Parent or the Company, or any Subsidiary of Parent or the Company, todispose of or hold separate any material assets as a result of the Merger or anyof the other transactions contemplated by this Agreement (it being understoodthat any Legal Proceeding commenced by a stockholder of the Company against theCompany or its directors, officers or professional advisors as a result of theannouncement of the Merger shall be disregarded for purposes of determiningwhether the condition set forth in this Section 6.13 has beensatisfied).**Section 7.     Conditions Precedent to Obligation of theCompany
The obligation of the Company to effect the Merger and otherwiseconsummate the transactions contemplated by this Agreement is subject to thesatisfaction, at or prior to the Closing, of the following conditions:
7.1     Accuracy of Representations.The representations and warranties of Parent and Merger Sub contained inthis Agreement shall have been accurate in all respects as of the date of thisAgreement, except that any inaccuracies in such representations and warrantieswill be disregarded if the circumstances giving rise to all such inaccuracies(considered collectively) do not constitute, and would not reasonably beexpected to have, a Material Adverse Effect on Parent; 
provided, however
,that, for purposes of determining the accuracy of such representations andwarranties, all "Material Adverse Effect" qualifications and othermateriality qualifications contained in such representations and warrantiesshall be disregarded.

The representations and warranties of Parent and Merger Sub contained inthis Agreement shall be accurate in all respects as of the Closing Date as ifmade on and as of the Closing Date, except that any inaccuracies in suchrepresentations and warranties will be disregarded if the circumstances givingrise to all such inaccuracies (considered collectively) do not constitute, andwould not reasonably be expected to have, a Material Adverse Effect on Parent;
provided, however
, that, for purposes of determining the accuracy of suchrepresentations and warranties, all "Material Adverse Effect"qualifications and other materiality qualifications contained in suchrepresentations and warranties shall be disregarded.
**7.2     Performance of Covenants.  The covenants and obligationsthat Parent and Merger Sub are required to comply with or to perform at or priorto the Closing shall have been complied with and performed in all materialrespects.**7.3     Effectiveness of Registration Statement.  The Form S-4Registration Statement shall have become effective in accordance with theprovisions of the Securities Act, and no stop order shall have been issued, andno proceeding for that purpose shall have been initiated or be threatened, bythe SEC with respect to the Form S-4 Registration Statement.**7.4     Stockholder Approval.  This Agreement shall have beenduly approved by the Required Company Stockholder Vote.**7.5     Documents.  The Company shall have received thefollowing documents:a legal opinion of Wilson Sonsini Goodrich & Rosati, P.C., dated asof the Closing Date, to the effect that the Merger will constitute areorganization within the meaning of Section 368 of the Code (it beingunderstood that, in rendering such opinion, (i) Wilson Sonsini Goodrich &Rosati, P.C. may rely upon the tax representation letters referred to in Section5.11, and (ii) if Wilson Sonsini Goodrich & Rosati, P.C. does not rendersuch opinion or withdraws or modifies such opinion, this condition shallnonetheless be deemed to be satisfied if Cooley Godward llp renders suchopinion); and

a certificate executed on behalf of Parent by an executive officer ofParent confirming that the conditions set forth in Sections 7.1 and 7.2 havebeen duly satisfied.
**7.6     HSR Act.  The waiting period applicable to theconsummation of the Merger under the HSR Act shall have expired or beenterminated.**7.7     Listing.  The shares of Parent Common Stock to be issuedin the Merger shall have been approved for listing (subject to notice ofissuance) on the Nasdaq National Market.**7.8     No Restraints.  No temporary restraining order,preliminary or permanent injunction or other order preventing the consummationof the Merger by the Company shall have been issued by any court of competentjurisdiction and remain in effect, and there shall not be any Legal Requirementenacted or deemed applicable to the Merger that makes consummation of the Mergerby the Company illegal.**Section 8.     Termination8.1     Termination.  This Agreement may be terminated prior to theEffective Time (whether before or after approval of the Merger by the RequiredCompany Stockholder Vote):by mutual written consent of Parent and the Company;

by either Parent or the Company if the Merger shall not have beenconsummated by August 31, 2000 (unless the failure to consummate the Merger isattributable to a failure on the part of the party seeking to terminate thisAgreement to perform any material obligation required to be performed by suchparty at or prior to the Effective Time); 

by either Parent or the Company if a court of competent jurisdiction orother Governmental Body shall have issued a final and nonappealable order,decree or ruling, or shall have taken any other action, having the effect ofpermanently restraining, enjoining or otherwise prohibiting the Merger;

by either Parent or the Company if (i) the Company Stockholders' Meeting(including any adjournments and postponements thereof) shall have been held andcompleted and the Company's stockholders shall have taken a final vote on aproposal to approve this Agreement, and (ii) this Agreement shall not have beenapproved at such meeting by the Required Company Stockholder Vote (and shall nothave been approved at any adjournment or postponement thereof); 
provided,however,
 that (A) a party shall not be permitted to terminate this Agreementpursuant to this Section 8.1(d) if the failure to obtain such stockholderapproval is attributable to a failure on the part of such party to perform anymaterial obligation required to be performed by such party at or prior to theEffective Time, and (B) the Company shall not be permitted to terminate thisAgreement pursuant to this Section 8.1(d) unless the Company shall have paid toParent any fee required to be paid to Parent pursuant to Section 8.3(c);

by Parent (at any time prior to the approval of this Agreement by theRequired Company Stockholder Vote) if a Triggering Event shall haveoccurred;

by Parent if (i) any of the Company's representations and warrantiescontained in this Agreement shall be inaccurate as of the date of this Agreementsuch that the condition set forth in Section 6.1(a) would not be satisfied, (ii)any of the Company's representations and warranties contained in this Agreementshall have become inaccurate
as of a date subsequent to thedate of this Agreement (as if made on such subsequent date) such that thecondition set forth in Section 6.1(b) would not be satisfied (it beingunderstood that, for purposes of determining the accuracy of suchrepresentations and warranties as of a date subsequent to the date of thisAgreement, (A) all "Material Adverse Effect" qualifications andother materiality qualifications contained in such representations andwarranties shall be disregarded and (B) any update of or modification tothe Company Disclosure Schedule made or purported to have been made after thedate of this Agreement shall be disregarded), or (iii) any of the Company'scovenants contained in this Agreement shall have been breached such that thecondition set forth in Section 6.2 would not be satisfied; 
provided,however
, that if an inaccuracy in the Company's representations andwarranties or a breach of a covenant by the Company is curable by the Companyand the Company is continuing to exercise all reasonable efforts to cure suchinaccuracy or breach, then Parent may not terminate this Agreement under thisSection 8.1(f) on account of such inaccuracy or breach; or 

by the Company if (i) any of Parent's representations and warrantiescontained in this Agreement shall be inaccurate as of the date of this Agreementsuch that the condition set forth in Section 7.1(a) would not be satisfied, (ii)any of Parent's representations and warranties contained in this Agreement shallhave become inaccurate as of a date subsequent to the date of this Agreement (asif made on such subsequent date) such that the condition set forth in Section7.1(b) would not be satisfied (it being understood that, for purposes ofdetermining the accuracy of such representations and warranties as of a datesubsequent to the date of this Agreement, all "Material AdverseEffect" qualifications and other materiality qualifications contained insuch representations and warranties shall be disregarded), or (iii) if any ofParent's covenants contained in this Agreement shall have been breached suchthat the condition set forth in Section 7.2 would not be satisfied; 
provided,however,
 that if an inaccuracy in Parent's representations and warranties ora breach of a covenant by Parent is curable by Parent and Parent is continuingto exercise all reasonable efforts to cure such inaccuracy or breach, then theCompany may not terminate this Agreement under this Section 8.1(g) onaccount of such inaccuracy or breach.
**8.2     Effect of Termination.  In the event of the terminationof this Agreement as provided in Section 8.1, this Agreement shall be of nofurther force or effect; *provided, however,* that (i) this Section 8.2,Section 8.3 and Section 9 (and the Confidentiality Agreement) shall survive thetermination of this Agreement and shall remain in full force and effect, and(ii) the termination of this Agreement shall not relieve any party from anyliability for any breach of any representation, warranty or covenant containedin this Agreement.**8.3     Expenses; Termination Fees.Except as set forth in this Section 8.3, all fees and expenses incurredin connection with this Agreement and the transactions contemplated by thisAgreement shall be paid by the party incurring such fees and expenses, whetheror not the Merger is consummated; 
provided, however,
 that Parent and theCompany shall share equally all fees and expenses, other than attorneys' fees,incurred in connection with (i) the filing, printing and mailing of the Form S-4Registration Statement and the Prospectus/Proxy Statement and any amendments orsupplements thereto and (ii) the filing by the parties hereto of the premergernotification and report forms relating to the Merger under the HSR Act and thefiling of any notice or other document under any applicable foreign antitrustlaw or regulation.

If this Agreement is terminated by Parent pursuant to Section 8.1(e),then the Company shall pay to Parent, in cash, within seven business days aftersuch termination, a nonrefundable fee in the amount of $54,000,000.

If (i) this Agreement is terminated by Parent or the Company pursuant toSection 8.1(d), (ii) at or prior to the time of such termination an AcquisitionProposal shall have been disclosed, announced, commenced, submitted or made, and(iii) within 270 days after such termination, an Acquisition Transaction isconsummated or any of the Acquired Corporations enters into a Contractcontemplating an Acquisition Transaction, the Company shall pay to Parent, incash, at or prior to the consummation of such Acquisition Transaction or theentering into of such Contract, whichever is earlier, a nonrefundable fee in theamount of $54,000,000 (it being understood that, solely for purposes of thisSection 8.3(c), all references to "15%" in the definition of"Acquisition Transaction" shall be deemed to refer instead to"35%").
**Section 9.     Miscellaneous Provisions9.1     Amendment.  This Agreement may be amended with the approval ofthe respective boards of directors of the Company and Parent at any time(whether before or after the approval of this Agreement by the stockholders ofthe Company); *provided, however,* that after approval of this Agreement bythe Company's stockholders, no amendment shall be made which by law requiresfurther approval of the stockholders of the Company without the further approvalof such stockholders.  This Agreement may not be amended except by an instrumentin writing signed on behalf of each of the parties hereto.**9.2 Waiver.No failure on the part of any party to exercise any power, right,privilege or remedy under this Agreement, and no delay on the part of any partyin exercising any power, right, privilege or remedy under this Agreement, shalloperate as a waiver of such power, right, privilege or remedy; and no single orpartial exercise of any such power, right, privilege or remedy shall precludeany other or further exercise thereof or of any other power, right, privilege orremedy.  

No party shall be deemed to have waived any claim arising out of thisAgreement, or any power, right, privilege or remedy under this Agreement, unlessthe waiver of such claim, power, right, privilege or remedy is expressly setforth in a written instrument duly executed and delivered on behalf of suchparty; and any such waiver shall not be applicable or have any effect except inthe specific instance in which it is given.
**9.3     No Survival of Representations and Warranties.  None ofthe representations and warranties contained in this Agreement or in anycertificate delivered pursuant to this Agreement shall survive the Merger.**9.4     Entire Agreement; Counterparts.  This Agreement and theStock Option Agreement constitute the entire agreement and supersede all prioragreements and understandings, both written and oral, among or between any ofthe parties with respect to the subject matter hereof and thereof; *provided,however*, that, subject to the next sentence, the Confidentiality Agreementshall not be superseded and shall remain in full force and effect.Notwithstanding anything to the contrary contained in this Agreement or in theConfidentiality Agreement, Section 6 of the Confidentiality Agreement, and the"standstill" provisions contained therein, shall be deemed to haveterminated as of the date of this Agreement and shall be of no further force oreffect; *provided, however,* that if this Agreement is validly terminatedprior to September 8, 2000, then the "standstill" provisions ofSection 6 of the Confidentiality Agreement shall thereupon be reinstated andshall remain in effect until September 8, 2000.  This Agreement may be executedin several counterparts, each of which shall be deemed an original and all ofwhich shall constitute one and the same instrument**9.5     Applicable Law; Jurisdiction. This Agreement shall begoverned by, and construed in accordance with, the laws of the State of Nevada,regardless of the laws that might otherwise govern under applicable principlesof conflicts of laws thereof.  In any action between any of the parties arisingout of or relating to this Agreement or any of the transactions contemplated bythis Agreement: (a) each of the parties irrevocably and unconditionallyconsents and submits to the jurisdiction and venue of the state and federalcourts located in the States of California and Nevada; (b) each of the partiesirrevocably waives the right to trial by jury; and (c) each of the partiesirrevocably consents to service of process by first class certified mail, returnreceipt requested, postage prepaid, to the address at which such party is toreceive notice in accordance with Section 9.9.**9.6     Disclosure Schedule.  The Company Disclosure Scheduleshall be arranged in separate parts corresponding to the numbered and letteredsections contained in Section 2, and the information disclosed in any numberedor lettered part shall be deemed to relate to and to qualify only the particularrepresentation or warranty set forth in the corresponding numbered or letteredsection in Section 2, and shall not be deemed to relate to or to qualify anyother representation or warranty.**9.7     Attorneys' Fees.  In any action at law or suit in equityto enforce this Agreement or the rights of any of the parties hereunder, theprevailing party in such action or suit shall be entitled to receive areasonable sum for its attorneys' fees and all other reasonable costs andexpenses incurred in such action or suit.**9.8     Assignability.  This Agreement shall be binding upon,and shall be enforceable by and inure solely to the benefit of, the partieshereto and their respective successors and assigns; *provided, however,*that neither this Agreement nor any of the Company's rights hereunder may beassigned by the Company without the prior written consent of Parent, and anyattempted assignment of this Agreement or any of such rights by the Companywithout such consent shall be void and of no effect. Nothing in this Agreement,express or implied, is intended to or shall confer upon any Person (other than(i) the Indemnified Persons, who shall be deemed to be third-party beneficiariesof Section 5.6, and (ii) the parties hereto) any right, benefit or remedy of anynature whatsoever under or by reason of this Agreement.**9.9     Notices.  Any notice or other communication required orpermitted to be delivered to any party under this Agreement shall be in writingand shall be deemed properly delivered, given and received (a) when delivered byhand or by courier or express delivery service or by facsimile, or (b) twobusiness days after sent by registered mail, to the address or facsimiletelephone number set forth beneath the name of such party below (or to suchother address or facsimile telephone number as such party shall have specifiedin a written notice given to the other parties hereto):
if to Parent or Merger Sub:
Applied Materials, Inc.3050 BowersSanta Clara, CA  95054Attention:  Joseph J. SweeneyMail Stop: 2061Facsimile:  (408) 563-4635andAttention:  Alexander MeyerMail Stop: 1954Facsimile:  (408) 986-7260
if to the Company:Etec Systems, Inc.****************************************************************************************************************************************************************************************************************************************************

**