AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

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ROPER INDUSTRIES, INC | RPR ACQUISITION SUBSIDIARY, INC | Surviving Corporation | Zetec, Inc

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Washington Date: 1/15/2003
Law Firm: Powell Goldstein;Riddell Williams;Garvey Schubert

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

RPR ACQUISITION SUBSIDIARY, INC.,

ROPER INDUSTRIES, INC.,

and

ZETEC, INC.

dated as of July 31, 2002

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TABLE OF CONTENTS

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Page

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1. DEFINITIONS ........................................................................ 1

2. MERGER ............................................................................. 9

(a) Inventory Count ......................................................... 9

(b) Merger .................................................................. 9

(d) Effect of Merger ........................................................ 10

(e) Payment of Aggregate Consideration ...................................... 10

(f) Surrender of Certificates ............................................... 11

(g) The Closing ............................................................. 11

(h) Deliveries at the Closing ............................................... 11

(i) Satisfaction of Denton Note ............................................. 12

(j) Minimum Net Working Capital Adjustment .................................. 12

3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND THE COMPANY ................. 14

(a) Organization of the Company and its Subsidiary .......................... 14

(b) Authorization of Transaction ............................................ 14

(d) Title to Company Shares ................................................. 15

(e) Capitalization; Company Shares .......................................... 15

(f) Redemption .............................................................. 15

(g) Shareholder Debt ........................................................ 16

(h) Company Equity Securities ............................................... 16

(a) Financial Statements .................................................... 16

(b) Events Subsequent to December 31, 2001 .................................. 17

(d) Legal Compliance ........................................................ 19

(e) Tax Matters ............................................................. 19

(f) Real Property ........................................................... 21

(g) Intellectual Property ................................................... 21

(h) Software ................................................................ 24

(i) No Infringement ......................................................... 25

(j) Tangible Assets ......................................................... 26

(k) Inventory ............................................................... 26

(l) Contracts ............................................................... 26

(m) Notes and Accounts Receivable ........................................... 28

(n) Powers of Attorney ...................................................... 28

(o) Insurance ............................................................... 28

(p) Litigation .............................................................. 28

(q) Product Warranty ........................................................ 29

(r) Product Liability ....................................................... 29

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(s) Employees ............................................................... 29

(t) Employee Benefits ....................................................... 30

(u) Guaranties .............................................................. 32

(v) Environment, Health, and Safety ......................................... 33

(w) Certain Business Relationships with the Company and its Subsidiary ...... 33

(x) Brokers ................................................................. 33

(y) Disclosure .............................................................. 33

(z) Knowledge Group ......................................................... 34

4. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE BUYER ......................... 34

(a) Organization of the Parent and the Buyer ................................ 34

(b) Authorization of Transaction ............................................ 34

(d) Broker's Fees ........................................................... 35

(e) Disclosure .............................................................. 35

(f) Financial Capability .................................................... 35

(g) Reliance ................................................................ 35

5. CONDITIONS TO OBLIGATION TO CLOSE .................................................. 35

(a) Conditions to Obligation of Parent and Buyer ............................ 35

(b) Conditions to Obligation of the Company ................................. 37

6. PRE-CLOSING COVENANTS .............................................................. 38

(a) Access and Investigation ................................................ 38

(b) Operation of the Businesses of the Company and its Subsidiary ........... 39

(d) No Merger or Solicitation ............................................... 41

(e) Accounting and Securities Matters ....................................... 41

(f) Pre-Closing Funding of Pension Plan ..................................... 42

7. POST-CLOSING COVENANTS ............................................................. 42

(a) General ................................................................. 42

(b) Litigation Support ...................................................... 42

(d) Tax Matters ............................................................. 43

(e) Company Charter Provisions .............................................. 44

8. REMEDIES FOR BREACHES OF THIS AGREEMENT ............................................ 44

(a) Survival of Representations and Warranties .............................. 44

(b) Indemnification Provisions Relating to Section 3.A Representations

for Benefit of the Parent and the Surviving Corporation ................. 44

and Covenants for Benefit of the Parent and the Surviving Corporation ... 45

(d) Escrow .................................................................. 46

(e) Indemnification Provisions for Benefit of the Stockholders .............. 46

(f) Matters Involving Third Parties ......................................... 47

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(g) Determination of Adverse Consequences ................................... 48

(h) Post-Closing ............................................................ 48

9. TERMINATION ........................................................................ 48

(a) Termination Events ...................................................... 48

(b) Effect of Termination ................................................... 49

10. MISCELLANEOUS ...................................................................... 49

(a) Press Releases and Public Announcements ................................. 49

(b) No Third-Party Beneficiaries ............................................ 49

(d) Succession and Assignment ............................................... 49

(e) Counterparts ............................................................ 49

(f) Headings ................................................................ 50

(g) Notices ................................................................. 50

(h) Governing Law ........................................................... 51

(i) Amendments and Waivers .................................................. 51

(j) Severability ............................................................ 51

(k) Expenses ................................................................ 51

(l) Construction ............................................................ 52

(m) Incorporation of Exhibits and Schedules ................................. 52

(n) Specific Performance .................................................... 52

(o) Submission to Jurisdiction .............................................. 52

(p) Arbitration ............................................................. 53

</TABLE>

Table of Exhibits:

Exhibit A--Form of Escrow, Release, and Indemnification Agreement

Exhibit B--Required Consents

Exhibit C--Clyde Denton Consent, Termination, and Release Agreement

Exhibit D--Form of Noncompetition and Assignment of Inventions Agreement

Exhibit E--Form of Opinion of Riddell Williams P.S.

Exhibit F--Form of Opinion of Powell, Goldstein, Frazer & Murphy LLP

<PAGE>

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this "Agreement") is entered into on

_______, 2002, by and among RPR ACQUISITION SUBSIDIARY, INC., a Delaware

corporation (the "Buyer"), ROPER INDUSTRIES, INC., a Delaware corporation and

parent of Buyer ("Parent"), and ZETEC, INC., a Washington corporation (the

"Company"). The Buyer, Parent, and the Company are referred to collectively

herein as the "Parties". As a condition to closing, the Stockholders shall

approve this Agreement pursuant to the provisions of the Escrow, Release, and

Indemnification Agreement.

The Company, through itself and its wholly-owned subsidiary, Zetec Foreign

Sales Corporation, is in the business of the design, manufacture, and assembly

of eddy current instruments, software, probes, and accessories, and providing

field, application, product support, and training services in eddy current

testing and technology.

This Agreement contemplates a transaction in which the Buyer shall merge

with the Company, with the Company being the surviving corporation, and in

connection therewith, the Stockholders will receive consideration in the form of

cash.

Now, therefore, in consideration of the premises and the mutual promises

herein made, and in consideration of the representations, warranties, and

covenants herein contained, the Parties agree as follows:

1. DEFINITIONS.

"Adverse Consequences" means all actions, suits, proceedings, hearings,

investigations, charges, complaints, claims, demands, injunctions, judgments,

orders, decrees, rulings, damages, penalties, fines, costs, amounts paid in

settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees,

including court costs and reasonable attorneys' fees and expenses.

"Affiliated Group" means any affiliated group within the meaning of Code

Section 1504(a) (or any similar group defined under a similar provision of

state, local, or foreign law).

"Aggregate Consideration" has the meaning set forth in Section 2(d)(i)

below.

"Applicable Rate" means the corporate base rate of interest announced from

time to time by Bank One, NA.

"Business" means the business conducted by the Company and its Subsidiary

prior to and as of the Closing Date, which is the business of the design,

manufacture, and assembly of eddy current instruments, software, probes, and

accessories, and providing field, application, product support, and training

services in eddy current testing and technology.

"Buyer" has the meaning set forth in the preface above.

"Buyer's Advisors" has the meaning set forth in Section 6(a)(i) below.

<PAGE>

"Capital Expenditures Budget" has the meaning set forth in Section

3.B(b)(v) below.

"Certificates" has the meaning set forth in Section 2(f) below.

"Closing" has the meaning set forth in Section 2(g) below.

"Closing Date" has the meaning set forth in Section 2(g) below.

"Closing Date Balance Sheet" has the meaning set forth in Section

2(j)(iii) below.

"COBRA" has the meaning set forth in Section 3.B(t)(x) below.

"Code" means the Internal Revenue Code of 1986, as amended.

"Company" has the meaning set forth in the preface above.

"Company Disclosure Schedule" has the meaning set forth in Section 3.A

below.

"Company Plans" has the meaning set forth in Section 3.B(t)(ii) below.

"Company Shares" means the shares of the common stock, par value $0.01 per

share, of the Company.

"Compensation Memo" has the meaning set forth in Section 3.B(b)(xv) below.

"Confidential Information" means: (a) confidential data and confidential

information relating to the business of any Party (the "Protected Party") which

is or has been disclosed to another Party (the "Recipient") or of which the

Recipient became aware as a consequence of or through its relationship with the

Protected Party and which has value to the Protected Party and is not generally

known to its competitors and which is designated by the Protected Party as

confidential or otherwise restricted; and (b) information of the Protected

Party, without regard to form, including, but not limited to, Intellectual

Property, technical or nontechnical data, algorithms, formulas, patents,

compilations, programs, devices, methods, techniques, drawings, processes,

financial data, financial plans, product or service plans or lists of customers

or suppliers which is not commonly known or available to the public and which

information (i) derives economic value from not being generally known to, and

not being readily ascertainable by proper means by, other Persons who can obtain

economic value from its disclosure or use, and (ii) is the subject of efforts

that are reasonable under the circumstances to maintain its secrecy.

Notwithstanding anything to the contrary contained herein, Confidential

Information shall not include any data or information that (v) has been

voluntarily disclosed to the public by the Protected Party, (w) has been

independently developed and disclosed to the public by others, (x) otherwise

enters the public domain through lawful means, (y) was already known by

Recipient prior to such disclosure (as evidenced by written documentation) or

was lawfully and rightfully disclosed to Recipient by another Person, or (z)

that is required to be disclosed by law or order without the availability of

applicable protective orders or treatment.

"Delaware Act" means the General Corporation Law of the State of Delaware,

as amended.

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"Denton Agreements" means each of (i) that certain Stock Redemption

Agreement by and among Clyde Denton, the Company, and the then-existing

stockholders of the Company and their respective spouses, dated as of January

29, 1997; (ii) that certain Promissory Note in the original principal amount of

thirty nine million two hundred sixty thousand and six hundred thirty five

dollars ($39,260,635.00), dated as of January 29, 1997, by the Company in favor

of Clyde Denton; (iii) that certain Guaranty Agreement by the then-existing

stockholders of the Company and their respective spouses, in favor of Clyde

Denton, dated as of January 29, 1997; (iv) that certain Pledge Agreement by the

Company and the then-existing stockholders of the Company and their respective

spouses, in favor of Clyde Denton, dated as of January 29, 1997; (v) that

certain Notice and Instructions to Pledgeholder, by and among the Company, the

then-existing stockholders of the Company and their respective spouses, Clyde

Denton, and Garvey, Schubert & Barer, dated as of January 29, 1997; (vi) that

certain Release and Indemnification Agreement by the Company, the then-existing

stockholders of the Company and their respective Spouses, in favor of Clyde

Denton, dated as of January 29, 1997; and (vii) the Shareholder Agreement.

"Denton Note" means that certain Promissory Note in the original principal

amount of thirty nine million two hundred sixty thousand and six hundred thirty

five dollars ($39,260,635.00), dated as of January 29, 1997, by the Company in

favor of Clyde Denton, as secured pursuant to (i) that certain Guaranty

Agreement by the then-existing stockholders of the Company and their respective

spouses, in favor of Clyde Denton, dated as of January 29, 1997, and (ii) that

certain Pledge Agreement by the Company and the then-existing stockholders of

the Company and their respective spouses in favor of Clyde Denton, dated as of

January 29, 1997.

"Denton Payoff" has the meaning set forth in Section 2(i) below.

"Effective Date" means the date specified in the Articles of Merger as the

effective date of the consummation of the Merger, as set forth in Section 2.

"Employee Benefit Plan" means any (i) nonqualified deferred compensation

or retirement plan or arrangement, including any Employee Pension Benefit Plan

(as defined in ERISA Section 3(2)), (ii) qualified defined contribution

retirement plan or arrangement, including any Employee Pension Benefit Plan,

(iii) qualified defined benefit retirement plan or arrangement, including any

Employee Pension Benefit Plan (including any Multiemployer Plan), (iv) employee

welfare benefit plan, including any Employee Welfare Benefit Plan (as defined in

ERISA Section 3(1)), (v) fringe benefit plan or program, and (vi) each

employment, severance, salary continuation or other contract, incentive plan,

insurance plan arrangement, bonus plan and any equity plan or arrangement

without regard to whether such plan, arrangement, program or contract exists

under US or any similar non-US law, rule or regulation.

"Environmental, Health, and Safety Laws" means the Comprehensive

Environmental Response, Compensation and Liability Act of 1980, the Resource

Conservation and Recovery Act of 1976, and the Occupational Safety and Health

Act of 1970, each as amended, together with all other US and non-US laws

(including rules, regulations, state law rulings, codes, plans, permits,

injunctions, judgments, orders, decrees, rulings, and charges thereunder) of

federal, state, local and foreign governments (and all agencies thereof)

concerning pollution or protection of the environment, natural resources, public

health and safety, or employee health and safety,

<PAGE>

including, but not limited to, laws relating to emissions, discharges, releases,

or threatened releases of Hazardous Substances in ambient air, surface water,

drinking water, wetlands, ground water, or lands or otherwise relating to the

manufacture, processing, distribution, use, treatment, storage, disposal,

recycling, transport, or handling of pollutants, contaminants, or chemical,

industrial, hazardous, or toxic materials or wastes.

"ERISA" means the Employee Retirement Income Security Act of 1974, as

amended.

"Escrow Fund" shall have the meaning defined in the Escrow Agreement.

"Escrow Agent" means SunTrust Bank, N.A.

"Escrow Agreement" means the Escrow, Release, and Indemnification

Agreement dated the Closing Date, entered into among the Parent, the Buyer, the

Company, the Stockholders, the respective spouses of the Stockholders, and the

Escrow Agent with respect to the indemnification obligations of the Stockholders

and the Company under Section 8 of this Agreement, and pursuant to which the

Stockholders and their respective spouses will agree to be bound by the terms of

this Agreement, the form of which is set forth as Exhibit A.

"Extremely Hazardous Substance" has the meaning set forth in Section 302

of the Emergency Planning and Community Right-to-Know Act of 1986, as amended,

and any counterpart or similar non-US law.

"Fiduciary" has the meaning set forth in ERISA Section 3(21).

"Final Adjustment Schedule" has the meaning set forth in Section 2(j)(iii)

below.

"Financial Statements" has the meaning set forth in Section 3.B(a) below.

"Founders" shall mean each of Edward McKee, Alfred Lucero and Lloyd Lamb.

"GAAP" means United States generally accepted accounting principles as in

effect as of the date hereof.

"Hazardous Substance" means any substance regulated under or defined by

Environmental, Health, and Safety Laws, including, but not limited to, any

pollutant, contaminant, hazardous substance, hazardous constituent, hazardous

waste, special waste, solid waste, industrial waste, petroleum derived substance

or waste, or toxic substance.

"Indebtedness" means (i) all indebtedness for borrowed money or for the

deferred purchase price of property, including the current portion of such

indebtedness, and (ii) all obligations evidenced by notes, bonds, debentures or

similar instruments.

"Indemnified Party" has the meaning set forth in Section 8(f)(i) below.

"Indemnifying Party" has the meaning set forth in Section 8(f)(i) below.

"Intellectual Property" means, with respect to the Company and the

Business:

<PAGE>

(a) all inventions (whether patentable or unpatentable and whether

or not reduced to practice), all improvements thereto, and all US and non-US

patents, patent applications, and patent disclosures, together with all

reissuances, continuations, divisionals, continuations-in-part, revisions,

extensions, and reexaminations thereof;

(b) all US and non-US trademarks, service marks, trade dress, logos,

trade names and corporate names, together with all translations, adaptations,

derivations, and combinations thereof and including all goodwill associated

therewith, and all applications, registrations, and renewals in connection

therewith;

applications, registrations, and renewals in connection therewith;

(d) all mask works and all applications, registrations, and renewals

in connection therewith;

(e) all trade secrets and confidential business information

(including without limitation ideas, research and development, know-how,

formulas, compositions, manufacturing and production processes and techniques,

technical data, designs, drawings, specifications, customer and supplier lists,

pricing and cost information, and business and marketing plans and proposals);

(f) all other proprietary rights;

(g) all Owned Software and all Licensed Software;

(h) all right, title, and interest in and to the name "Zetec";

(i) all right, title, and interest in and to the world wide web

internet domain name "www.zetec.com", and each other world wide web internet

domain name owned by the Company, and each other world wide web internet domain

name used in the Business; and

(j) with respect to each of the foregoing, all copies and tangible

embodiments thereof (in whatever form or medium).

"Inventory Count" has the meaning set forth in Section 2(a) below.

"Knowledge of the Company" means the actual knowledge as of the date of

this Agreement of the Stockholders listed in Section 3.B(z) of the Company

Disclosure Schedule, together with such knowledge as they would reasonably be

expected to have as a result of their positions with the Company.

"Leased Real Property" has the meaning set forth in Section 3.B(f)(ii)

below.

"Liability" means any liability (whether known or unknown, whether

asserted or unasserted, whether absolute or contingent, whether accrued or

unaccrued, whether liquidated or unliquidated, and whether due or to become

due), including any liability for Taxes.

<PAGE>

"Licensed Software" has the meaning set forth in Section 3.B(h)(i) below.

"Lucero Compensation Agreement" means that certain Compensation Agreement

by and between the Company and Alfred Lucero dated as of January 29, 1997.

"Marlow Agreement" means that certain Consulting Agreement between Zetec,

Inc. and Richard E. Marlow dated October 1, 1998.

"McKee Compensation Agreement" means that certain Compensation Agreement

by and between the Company and Edward McKee dated as of January 29, 1997.

"Merger" has the meaning set forth in Section 2(b) below.

"Merger Consideration" has the meaning set forth in Section 2(d)(i) below.

"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).

"Net Working Capital" means the excess of total current assets, including

without limitation cash, accounts receivable, net inventories (calculated in a

first-in, first-out basis), prepaid expenses, and other current assets, less

total current liabilities (including without limitation accounts payable),

year-to-date accruals of the type included in the Company's 2001 audited

financial statements (including but not limited to Liability for claims under

the Company's self-insurance arrangements, accrued employee bonus payments,

accrued benefits and accrued profit sharing payments), accrued liabilities, and

deferred rent expense (but excluding liabilities to the extent reflected in

amounts payable under Section 2(e)(ii) of this Agreement), in each case

determined in accordance with GAAP. To the extent that the Denton Payoff exceeds

thirty million three hundred thousand dollars ($30,300,000.00), such excess

shall be a reduction in Net Working Capital, and to the extent that the Denton

Payoff is less than thirty million three hundred thousand dollars

($30,300,000.00), such amount shall be an increase in Net Working Capital. All

accounting entries will be made regardless of their amount and all detected

errors and omissions will be corrected regardless of their materiality.

"Noncompetition and Assignment of Inventions Agreement" shall mean those

Noncompetition and Assignment of Inventions Agreements, the form of which is

attached hereto as Exhibit D.

"Ordinary Course of Business" means the ordinary course of business

consistent with past custom and practice (including with respect to quantity and

frequency).

"Owned Software" has the meaning set forth in Section 3.B(h)(i) below.

"Party" has the meaning set forth in the preface above.

"Person" means an individual, a partnership, a corporation, an

association, a joint stock company, a trust, a joint venture, an unincorporated

organization, or a governmental entity (or any department, agency, or political

subdivision thereof).

"Process Agent" has the meaning set forth in Section 10(o) below.

<PAGE>

"Product Warranty Claims" means claims of the customers of the Company and

its Subsidiary and/or users made at any time following Closing in the Ordinary

Course of Business with respect to products sold, manufactured, leased or

delivered by the Company and its Subsidiary on or prior to the Closing Date,

which (i) are based solely on the Company's written product warranties disclosed

to Buyer, or with respect to Probes, consistent with the Ordinary Course of

Business, and (ii) are only for repair or replacement remedies.

"Prohibited Transaction" has the meaning set forth in Section

3.B(t)(ix)(B) below.

"Purchase Price Adjustment" has the meaning set forth in Section 2(j)(i)

below.

"Redemptions" has the meaning set forth in Section 3.A(f) below.

"Related Person" means with respect to a particular individual: (a) each

other member of such individual's Family; (b) any Person that is directly or

indirectly controlled by such individual or one or more members of such

individual's Family; (c) any Person in which such individual or members of such

individual's Family hold (individually or in the aggregate) a Material Interest;

and (d) any Person with respect to which such individual or one or more members

of such individual's Family serves as a director, manager, officer, partner,

executor, or trustee (or in a similar capacity). With respect to a specified

Person other than an individual: (A) any Person that directly or indirectly

controls, is directly or indirectly controlled by, or is directly or indirectly

under common control with such specified Person; (B) any Person that holds a

Material Interest in such specified Person; (C) each Person that serves as a

director, manager, officer, partner, executor, or trustee of such specified

Person (or in a similar capacity); (D) any Person in which such specified Person

holds a Material Interest; (E) any Person with respect to which such specified

Person serves as a general partner or a trustee (or in a similar capacity); and

(F) any Related Person of any individual described in clause (B) or (C).

For purposes of this definition, (a) the "Family" of an individual

includes (i) the individual, (ii) the individual's spouse, (iii) any other

natural person who is related to the individual or the individual's spouse

within the second degree, and (iv) any other natural person who resides with

such individual, and (b) "Material Interest" means direct or indirect beneficial

ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934,

as amended) of voting securities or other voting interests representing at least

10% of the outstanding voting power of a Person or equity securities or other

equity interests representing at least 10% of the outstanding equity securities

or equity interests in a Person.

"Requisite Shareholder Vote" has the meaning set forth in Section 3.A(b)

below.

"R&W Insurance Policy" means that certain Representations and Warranties

Insurance Policy by Gulf Underwriters Insurance Company in the form previously

approved by the Parties, to be issued at Closing in favor of the Parent, the

subsidiaries and affiliates of the Parent, the Company, the Surviving

Corporation, and each of their respective current and former officers and

directors.

"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,

or other security interest, other than (a) mechanic's, materialmen's, and

similar liens incurred in the Ordinary Course of Business not yet due and

payable, (b) liens for Taxes not yet due and

<PAGE>

payable, (c) purchase money liens and liens securing rental payments under

capital lease arrangements, and (d) other liens arising in the Ordinary Course

of Business and not incurred in connection with the borrowing of money.

"Severally" means each Stockholder is liable alone for his or her own

share of a claim, proportionate to that Stockholder's percentage ownership of

the Company Shares as reflected in Section 3.A(e) of the Company Disclosure

Schedule.

"Shareholder Agreement" means that certain Shareholder Agreement by and

among the Company and the then-existing stockholders of the Company and their

respective spouses, dated as of January 29, 1997, as amended.

"Software" has the meaning set forth in Section 3.B(h)(i) below.

"Stockholder Representatives" means the individuals (and their successors)

specified in the Escrow, Release, and Indemnification Agreement as the

Stockholder Representatives, who have been appointed by the Stockholders for the

purpose of acting on behalf of the Stockholders with respect to the transactions

contemplated by this Agreement, including without limitation acting as transfer

agent for the Company Shares, administering the Aggregate Consideration, as

adjusted, as set forth in Section 2 below, and making decisions with respect to

indemnity claims and amendments to this Agreement, the Escrow, Release, and

Indemnification Agreement, or any ancillary agreements.

"Stockholders" means each of Michael Collins, an individual resident of

the State of Washington; Gregory Colvin, an individual resident of the State of

Washington; James Cox, an individual resident of the State of Washington; Dan

Dahl, an individual resident of the State of Washington; Neal Farenbaugh, an

individual resident of the State of Washington; Charles Handy, an individual

resident of the State of Washington; Douglas Handy, an individual resident of

the State of Washington; Howard E. Houserman, an individual resident of the

State of Washington; Scott Hower, an individual resident of the State of

Washington; Robert Jones, an individual resident of the State of Washington;

Becky Lichtenhagen, an individual resident of the State of Washington; Alfred L.

Lucero, an individual resident of the State of Washington; Edward Owens McKee,

an individual resident of the State of Washington; Thomas O'Dell, an individual

resident of the State of Washington; Beth A. Taylor, an individual resident of

the State of Washington; Michael Trask, an individual resident of the State of

Washington; Robert Vollmer, an individual resident of the State of Washington;

Stephen H. Von Fuchs, an individual resident of the State of Washington; and

Richard Warlick, an individual resident of the State of Washington.

"Subsidiary" means any corporation, limited partnership, limited liability

company, or other entity with respect to which a specified Person (or a

Subsidiary thereof) owns a majority of the common stock, units or other equity

interests or has the power to vote or direct the voting of sufficient securities

to elect a majority of the directors, and means specifically, with respect to

the Company, Zetec Foreign Sales Corporation, a corporation organized under the

laws of Barbados.

"Surviving Corporation" has the meaning set forth in Section 2(b) below.

<PAGE>

"Takeover Proposal" means any written inquiry, proposal or offer from any

Person relating to (A) any direct or indirect acquisition or purchase of (i) the

assets of the Company or its Subsidiary outside of the Ordinary Course of

Business, or (ii) any securities of the Company or its Subsidiary, or (B) any

merger, consolidation, business combination, recapitalization, liquidation,

dissolution or similar transaction involving the Company or its Subsidiary

(other than the transactions contemplated by this Agreement).

"Tax" means any federal, state, local, or foreign income, built-in gains

(within the meaning of Code Section 1374 or any comparable foreign, state or

local provisions), gross receipts, excess net passive income (within the meaning

of Code Section 1375 or any comparable foreign, state or local provisions),

license, payroll, employment, excise, severance, stamp, occupation, premium,

windfall profits, environmental (including taxes under Code Section 59A),

customs duties, capital stock, franchise, profits, withholding, social security

(or similar), unemployment, disability, real property, personal property, sales,

use, transfer, registration, value added, alternative or add-on minimum,

retailer's occupation taxes and other taxes commonly understood to be sales or

use taxes, estimated, or other tax of any kind whatsoever, including any

interest, penalty, or addition thereto, whether disputed or not.

"Tax Return" means any return, declaration, report, claim for refund, or

information return or statement relating to Taxes, including any schedule or

attachment thereto, and including any amendment thereof.

"Third Party Claim" has the meaning set forth in Section 8(f)(i) below.

"Undisclosed Liabilities" has the meaning set forth in Section 3.B(c)

below.

"Washington Act" means the Washington Business Corporation Act, as

amended.

2. MERGER.

(a) Inventory Count.

Not earlier than three (3) days prior to the Closing Date, the

Company, at its expense, shall conduct a physical inventory count of the

inventory of the Company and its Subsidiary (the "Inventory Count"), which

Inventory Count shall be completed prior to the Closing. The Parent and the

Buyer shall have the right to observe the Inventory Count.

(b) Merger.

At the Effective Date and subject to the terms and conditions of

this Agreement, Buyer shall be merged with and into the Company (the "Merger"),

in accordance with the relevant provisions of the Washington Act and the

Delaware Act, the separate corporate existence of the Buyer shall cease and the

Company shall continue as the surviving corporation (the "Surviving

Corporation"). The Merger shall otherwise have the effect set forth in the

Washington Act.

<PAGE>

At the Closing, the Parties shall cause articles of merger to be

delivered to the Secretary of State of Washington and the Secretary of State of

Delaware executed in accordance with relevant provisions of the Washington Act

and the Delaware Act for filing thereby. Each such articles of merger shall

specify that the merger shall be effective as of the Effective Date, and that

the Articles of Incorporation of the Company shall be amended and restated in

its entirety to effect the replacement of the terms of the Articles of

Incorporation of the Company with those of the Certificate of Incorporation of

the Buyer, and such Amended and Restated Articles of Incorporation of the

Company shall be the Articles of Incorporation of the Surviving Corporation;

provided, however, that the name of the Surviving Corporation shall be Zetec,

Inc. The bylaws of the Buyer as in effect immediately prior to the Closing Date,

shall be the bylaws of the Surviving Corporation. As of Closing, the officers

and directors of the Surviving Corporation shall be as set forth on Section 2(c)

of the Company Disclosure Schedule, in each case, until their respective

successors are duly elected and qualified. Upon request of the Surviving

Corporation, the directors and officers of the Zetec Foreign Sales Corporation

will resign.

(d) Effect of Merger.

At the Closing, by virtue of the Merger and without any action on

the part of the holders thereof:

(i) all of the Company Shares shall be canceled and converted

into, and represent the right to receive in the manner provided in

Section 2(e) below, the aggregate of Twenty Five Million Eight

Hundred Ninety-Four Thousand Three Hundred Forty-Five Dollars

($25,894,345.00) (the "Aggregate Consideration, subject to

post-Closing adjustment as provided in Section 2(j) below (the net

amount referred to as the "Merger Consideration");

(ii) each share of capital stock of the Company that is held

in the treasury of the Company, if any, shall be cancelled and

retired and cease to exist and no consideration shall be issued in

exchange therefor; and

(iii) each issued and outstanding share of capital stock of

Buyer shall be converted into and become one fully paid and

non-assessable share of capital stock of the Surviving Corporation.

(e) Payment of Aggregate Consideration.

At the Closing Date, the Aggregate Consideration shall be paid and

allocated as follows:

(i) Five Million Eight Hundred Thousand Dollars

($5,800,000.00) shall be paid to the Escrow Agent, to be held and

disbursed as provided in Section 8 below and the Escrow Agreement;

<PAGE>

(ii) Six Hundred Thousand Dollars ($600,000.00), which

represents the fees and expenses of the Stockholders' advisors, as

contemplated in Section 10(k) of this Agreement, shall be paid as

directed by the Stockholder Representatives;

(iii) the balance of the Aggregate Consideration shall be paid

to such accounts as may be designated in writing to the Buyer by the

Stockholder Representatives at least two business days prior to the

Closing Date, by wire transfer or other immediately available funds,

which amount shall be paid to the Stockholders pro rata based upon

the number of Company Shares held by each Stockholder as set forth

in Section 3.A(e) of the Company Disclosure Schedule.

(f) Surrender of Certificates.

Pursuant to the Escrow Agreement, the Stockholders shall appoint the

Stockholder Representatives as transfer agent for the purpose of surrendering

certificates representing the Company Shares for each Stockholder's portion of

the Aggregate Consideration, as set forth in Section 2(e) above. At the Closing,

each Stockholder shall deliver an executed assignment separate from certificate,

in a form reasonably satisfactory to the Parent, together with those original

certificates that immediately prior to the Closing represented the Company

Shares held by the Stockholders, or a duly executed affidavit of lost

certificate and indemnity for any Certificate which has been lost, stolen,

seized or destroyed (the "Certificates"), to Parent. Upon the surrender of

Certificates to Parent, the Stockholders shall be entitled to receive in

exchange therefor the Aggregate Consideration in accordance with Section

2(e)(iii) and the Certificates so surrendered shall be forthwith cancelled.

(g) The Closing.

The closing of the transactions contemplated by this Agreement (the

"Closing") shall take place at the offices of Riddell Williams P.S. at 10:00

a.m., on July 31, 2002, to be effective as of the commencement of business on

August 1, 2002, or such other date and time, or in such other manner, as the

Parties may agree (the "Closing Date").

(h) Deliveries at the Closing.

At the Closing, the Company and the Stockholders will deliver to the

Parent and the Buyer the various certificates, instruments, and documents

referred to in Section 5(a) below; (ii) the Parent and the Buyer will deliver to

the Company and the Stockholder Representatives the various certificates,

instruments, and documents referred to in Section 5(b) below; (iii) the Company

and the Stockholders will execute, acknowledge (if appropriate), and deliver to

the Parent and the Buyer such documents as the Parent, the Buyer and their

counsel may reasonably request; (iv) the Buyer will execute, acknowledge (if

appropriate), and deliver to the Company such documents as the Company and the

Stockholder Representatives and their counsel reasonably may request; and (v)

the Buyer will deliver to the Stockholders, and others specified in Section

2(e), the Aggregate Consideration.

<PAGE>

(i) Satisfaction of Denton Note.

Prior to the Closing, the Company shall obtain from Clyde Denton a

payoff letter, indicating the amount of principal and accrued interest unpaid as

of the Closing Date in respect to the Denton Note, which payoff letter shall

indicate that upon wire transfer of such amount to an account designated by

Denton, the Denton Note shall be paid and satisfied fully and all obligations

under the Denton Agreements shall be terminated and satisfied (the "Denton

Payoff"). During the Closing: the Parties shall deliver the documents and

instruments described in Paragraph (b) above; the Parent shall make a capital

contribution to the Surviving Corporation in an amount equal to the Denton

Payoff; and the Surviving Corporation shall pay the amount of the Denton Payoff

to Clyde Denton.

(j) Minimum Net Working Capital Adjustment.

(i) The Aggregate Consideration shall be increased or reduced,

as the case may be, on a dollar-for-dollar basis to the extent that

the Net Working Capital of the Company as of the close of business

on the Closing Date is greater or less than Twelve Million Five

Hundred Thousand Dollars ($12,500,000.00). Any decrease or increase

in the Aggregate Consideration pursuant to this Section 2(j) shall

be referred to as a "Purchase Price Adjustment".

(ii) As part of the calculation of Net Working Capital, the

Company shall be credited with any funds received as a result of any

refund from the purchase or extension of any insurance policies that

are terminated on or after Closing. The Company will endeavor in

good faith to complete an inventory count and valuation as of June

30, 2002 and the Parent will reasonably cooperate in an effort to

agree with the Company prior to the Closing with respect to a

valuation methodology and range in accordance with GAAP that would

be applicable to the inventory count and valuation as of June 30,

2002, and to the inventory count and valuation that will occur as of

the Closing Date in connection with the Closing Date Balance Sheet

and the Final Adjustment Schedule. Failure to agree on a valuation

methodology and range prior to Closing shall in no event delay the

Closing or give rise to a claim of breach of this Agreement.

(iii) No later than forty five (45) days after the Closing

Date, the Parent shall deliver to the Stockholder Representatives

(i) a balance sheet and a statement of operations of the Company for

the period ended as of the close of business on the Closing Date,

prepared in accordance with GAAP (the "Closing Date Balance Sheet"),

and (ii) a separate statement calculating Net Working Capital of the

Company as of the close of business on the Closing Date, based on

the Closing Date Balance Sheet, showing any calculations with

respect to any necessary Purchase Price Adjustment, prepared in

accordance with GAAP (the "Final Adjustment Schedule"). The

Stockholder Representatives shall have the right to examine and make

copies of the work papers and such other documents that are

generated or reviewed by the Parent in connection with the

preparation of the Closing Date Balance Sheet and the Final

Adjustment Schedule.

<PAGE>

(iv) The Stockholder Representatives shall, within forty-five

(45) days following their receipt of the Closing Date Balance Sheet

and the Final Adjustment Schedule, accept or reject the Purchase

Price Adjustment submitted by the Parent. If the Stockholder

Representatives disagree with such calculation, they shall give

written notice to the Parent of such disagreement and any reason

therefor within such forty-five (45) day period. Should the

Stockholder Representatives fail to notify the Parent of a

disagreement within such forty-five (45) day period, the

Stockholders shall be deemed to agree with the Parent's calculation.

Any disagreement with respect to the determination of any Purchase

Price Adjustment shall be resolved in the manner set forth in

Section 10(p) below, except that the arbitrator shall be a certified

public accountant at Ernst & Young, selected by the manager of the

Seattle office of that firm. The arbitrator shall issue its report

as to the Net Working Capital as of the close of business on the

Closing Date, and the determination of the Purchase Price Adjustment

reflected in the Final Adjustment Schedule within sixty (60) days

after such dispute is referred to such arbitrator. The Stockholder

Representatives (on behalf of the Stockholders) on the one hand, and

the Parent on the other hand, shall bear all costs and expenses

incurred by it in connection with such arbitration, except that (1)

the costs and expenses of the Stockholder Representatives shall be

paid from the Escrow Fund, and (2) the fees and expenses of the

arbitrator hereunder shall be borne by the Stockholder

Representatives (on behalf of the Stockholders) and the Parent in

such proportion as such arbitrator shall determine based on the

relative merit of the position of the parties. This provision for

arbitration shall be specifically enforceable by the Parties and the

decision of such arbitrator in accordance with the provisions hereof

shall be final and binding with respect to the matters so arbitrated

and there shall be no right of appeal therefrom.

(v) If, based on the Final Adjustment Schedule as finally

determined pursuant to this Section 2(j), (i) the Net Working

Capital of the Company as of the close of business on the Closing

Date is less than Twelve Million Five Hundred Thousand Dollars

($12,500,000.00), the Stockholders Severally, coordinated by the

Stockholder Representatives, shall pay and deliver to the Parent an

amount equal to such deficit, or (ii) the Net Working Capital of the

Company as of the close of business on the Closing Date is greater

than Twelve Million Five Hundred Thousand Dollars ($12,500,000.00),

the Parent shall pay to the Stockholders, by and through the

Stockholder Representatives, an amount equal to such excess for

distribution to the Stockholders in accordance with the percentages

specified in Section 3.A(e) of the Company Disclosure Schedule,

after payment or reserves for payment of fees and expenses of

Stockholder Advisors. Final amounts due hereunder shall be paid no

later than five (5) business days following the Stockholder

Representatives' agreement with the Parent's calculation of the

Purchase Price Adjustment, or in the event of a disagreement,

following the resolution of such disagreement by written agreement

of the Parent and the Stockholder Representatives, or the

determination of the Arbitrator pursuant to Section 2(j)(iii) above.

<PAGE>

3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND THE COMPANY.

A. Fundamental Representations of the Stockholders. The Stockholders

Severally represent and warrant to the Parent and the Buyer that the statements

contained in this Section 3.A (the "Section 3.A Representations") are true,

correct and complete as of the date hereof, and will be true, correct and

complete as of the Closing Date, except: as specified to the contrary in the

corresponding paragraph of the disclosure schedule prepared by the Company

accompanying this Agreement and initialed by the Stockholder Representatives and

the Buyer (the "Company Disclosure Schedule"). The Company Disclosure Schedule

will be arranged in paragraphs corresponding to the lettered and numbered

paragraphs contained in this Section 3.A.

(a) Organization of the Company and its Subsidiary.

(i) The Company is a corporation duly organized, validly

existing, and in good standing under the laws of the State of

Washington and is duly qualified to conduct business in the

jurisdictions set forth on Section 3.A(a)(i) of the Company

Disclosure Schedule.

(ii) Zetec Foreign Sales Corporation is a Subsidiary of the

Company, and is a corporation duly organized, validly existing, and

in good standing under the laws of Barbados. The Company is the sole

record and beneficial owner of the capital stock of Zetec Foreign

Sales Corporation. Zetec Foreign Sales Corporation has nominal

assets, no liabilities and has not engaged in any business activity

since January of 2001.

(b) Authorization of Transaction.

The Board of Directors of the Company has approved this Agreement

and recommended its approval by the Stockholders. The Company has the full power

and authority to execute and deliver this Agreement and to perform its

obligations hereunder, subject to obtaining the approval of the stockholders by

the affirmative vote of at least two-thirds (66 2/3%) of the issued and

outstanding shares of the Company's stock at a shareholders meeting to be held

prior to the Closing (the "Requisite Stockholder Vote"), and the satisfaction of

or waiver of each of the Conditions to Closing, including the execution of the

Escrow Agreement by each of the Stockholders prior to Closing. Each Stockholder

has the full legal capacity and authority to enter into and carry out the

transactions contemplated by this Agreement. This Agreement constitutes the

valid and legally binding obligation of the Company, enforceable in accordance

with its terms and conditions.

(i) Neither the execution and the delivery of this Agreement,

nor the consummation of the transactions contemplated hereby, will

violate any constitution, statute, law, regulation, rule,

injunction, judgment, order, decree, ruling, charge, or other

restriction of any government, governmental agency, or court to

which the Company, its Subsidiary, or the Stockholders is subject or

any

<PAGE>

provision of the articles of incorporation or the bylaws of the

Company or its Subsidiary.

(ii) No Stockholder or other Person has notified any member of

the Board of Directors of the Company of any intention to exercise

any of his or her right to dissent to the Merger or any of the other

transactions contemplated by this Agreement under the Washington

Act.

(iii) Neither the Company, its Subsidiary, nor the

Stockholders need to give any notice to, make any filing with, or

obtain any authorization, consent, or approval of any governmental

agency in order for the Parties to consummate the transactions

contemplated by this Agreement or the merger to be effective, except

that the parties have mutually agreed that no filing under the Hart

Scott Rodino Antitrust Improvements Act of 1976, as amended (15 USC

ss.18a) is required in this transaction.

(d) Title to Company Shares.

The Stockholders have good title to the Company Shares. Upon the

payment of the Denton Note pursuant to Section 2(i) and the termination of the

Shareholder Agreement pursuant to the Escrow Agreement, both of which will occur

as a condition to Closing, the Stockholders will have the right to convey the

Company Shares to the Buyer. Upon the transfer of the Company Shares to the

Buyer, the Stockholders will have conveyed, good title and interest in and to

the Company Shares free and clear of all Security Interests.

(e) Capitalization; Company Shares.

Section 3.A(e) of the Company Disclosure Schedule sets forth the

number of authorized, issued, and outstanding equity securities of each of the

Company and its Subsidiary, and indicates the record legal owners of such

securities. The equity securities of each of the Company and its Subsidiary set

forth on Section 3.A(e) of the Company Disclosure Schedule constitute all of the

issued and outstanding capital stock of the Company and its Subsidiary, are

validly issued, fully paid and non-assessable and owned, legally and of record,

by the stockholders set forth on Section 3.A(e) of the Company Disclosure

Schedule, and none of such equity securities are subject to, nor have any been

issued in violation of, pre-emptive, rights of first offer, or similar rights,

whether arising under the articles of incorporation or bylaws of the Company, or

by contract.

(f) Redemption.

The Company has previously redeemed shares from certain of its

former shareholders listed on the Company Disclosure Schedule (the

"Redemptions"). Each of those Redemptions was valid and effective to fully

redeem the Company Shares previously held by the former shareholders, none of

whom currently hold any Company Shares.

<PAGE>

(g) Shareholder Debt.

Except for the Denton Note, neither the Company nor its Subsidiary

is the maker or obligor in respect to any Indebtedness owed to any current or

former stockholder or other equity interest holder of the Company or its

Subsidiary. Except for amounts due under the Denton Note, none of the Company,

or any of the current officers or directors of the Company, have any Liabilities

or obligations to Clyde Denton relating to the business of the Company.

(h) Company Equity Securities.

All issuances, sales and repurchases by the Company of equity

interests in the Company and its Subsidiary have been effected in compliance

with all applicable laws, including, without limitation, applicable federal and

state securities laws. The Stock Ledgers and other corporate records of the

Company dated January 29, 1997 or later contain a complete and correct record of

all issuances and transfers of equity interests in the Company. No options,

warrants, conversion or other rights, agreements, commitments, arrangements or

understandings of any kind obligating the Company and its Subsidiary, contingent

or otherwise, to issue or sell any shares of its common stock or any securities

convertible into or exchangeable for any such shares or any other securities,

are outstanding, and no authorizations therefor have been given. The Company has

no Liability arising out of the issuance, sale, transfer or redemption of shares

of capital stock of the Company.

B. Representations of the Company. The Company hereby represents and

warrants that the statements contained in this Section 3.B (the "Section 3.B

Representations") are true, correct and complete as of the date hereof, and will

be true, correct, and complete as of the Closing Date, except (1) as specified

to the contrary in the corresponding paragraph of the Company Disclosure

Schedule, or (2) as specified in any Updated Disclosure provided in accordance

with Section 3.C below.

(a) Financial Statements.

Attached as Section 3.B(a) of the Company Disclosure Schedule are

audited consolidated balance sheets and related consolidated statements of

income and retained earnings, comprehensive income and cash flow of the Company

and its Subsidiary as of December 31, 2001, and unaudited interim consolidated

balance sheets and related consolidated statements of income and retained

earnings, comprehensive income and cash flow of the Company and its Subsidiary

through May 31, 2002 (the "Financial Statements").

(i) Each of the Financial Statements is true, correct,

complete and consistent with the books and records of the Company.

Each of the Financial Statements has been prepared in conformity

with GAAP and, to the extent in compliance with GAAP, on a

consistent basis throughout the periods covered thereby and presents

fairly the financial condition and results of operations and cash

flows of the Company and its Subsidiary at the dates and for the

periods specified, subject, in the case of unaudited financial

statements, to the absence of notes and the absence of normal

recurring year-end adjustments and procedures (none of which are

inconsistent with past practice). At closing, the Company will

<PAGE>

have no Indebtedness, except: the Denton Note, and the obligations

reflected in Section 3.B(a)(i) of the Company Disclosure Schedule.

(ii) Neither the Company nor its Subsidiary have any debt,

liability or obligation of the type required by GAAP to be reflected

on the Financial Statements that is not reflected or reserved

against in the Financial Statements. Accounts payable reflected in

the Financial Statements have arisen from bona fide transactions.

All debts, liabilities and obligations of the Company and its

Subsidiary incurred after the date of the Financial Statements were

incurred in the Ordinary Course of Business, arose from bona fide

transactions, and are usual and normal in amount both individually

and in the aggregate. Neither the Company nor its Subsidiary are

directly or indirectly liable to or obligated to provide funds in

respect of or to guaranty or assume any obligation of any person

except to the extent reflected and fully reserved against in the

Financial Statements.

(b) Events Subsequent to December 31, 2001.

Since December 31, 2001, there has not been any material adverse

change in the business, financial condition, operations, or results of

operations of the Company. Without limiting the generality of the foregoing,

since that date, the Company:

(i) has not sold, leased, transferred, or assigned any of its

assets, tangible or intangible, except for sales of inventory in the

Ordinary Course of Business;

(ii) has not entered into any agreement, contract, lease, or

license (or series of related agreements, contracts, leases, and

licenses) either involving more than $500,000, or outside the

Ordinary Course of Business, or modified any such agreement,

contract, lease or license, the modification of which involves more

than $500,000 or is outside the Ordinary Course of Business;

(iii) has not and, to the Knowledge of the Company, no party

has accelerated, terminated or canceled any agreement, contract,

lease, or license (or series of related agreements, contracts,

leases, and licenses) involving more than $250,000 to which the

Company is a party or by which it is bound;

(iv) has not imposed or permitted any Security Interest upon

any of its assets, tangible or intangible;

(v) has not made any capital expenditure in excess of the

Company's "Capital Expenditures Budget", which is attached to the

Company Disclosure Schedule;

(vi) has not made any capital investment in, any loan to, or

any acquisition of the securities of, any other Person;

(vii) has not issued any note, bond, or other debt security or

created, incurred, assumed, or guaranteed any Indebtedness;

<PAGE>

(viii) has not delayed or postponed the payment of accounts

payable or other Liabilities outside of the Ordinary Course of

Business;

(ix) has not canceled, compromised, waived, or released any

right or claim (or series of related rights and claims) outside the

Ordinary Course of Business;

(x) has not granted any license or sublicense of any rights

under or with respect to any Intellectual Property outside the

Ordinary Course of Business;

(xi) has not changed or authorized any change in its articles

of incorporation, bylaws, or similar charter documents;

(xii) has not experienced any material damage, destruction, or

loss (whether or not covered by insurance) to its property;

(xiii) has not made any loan to, or entered into any other

transaction with, any of its directors, officers, and employees;

(xiv) has not entered into any employment contract or

collective bargaining agreement, written or oral, or modified the

terms of any existing such contract or agreement;

(xv) has not granted any increase in the compensation of any

of its directors, officers, and employees, except as described in

that certain Memorandum from Howard Houserman to Thomas O'Grady

dated July 8, 2002 (the "Compensation Memo");

(xvi) has not adopted, amended, modified or terminated any

bonus, profit-sharing incentive, severance, or other plan, contract,

or commitment for the benefit of any of its directors, officers, and

employees (or taken any such action with respect to any other

Employee Benefit Plan), except as described in the Compensation

Memo;

(xvii) has not made any other change in employment terms for

any of its directors, officers, and employees, except as described

in the Compensation Memo;

(xviii) has not made or pledged to make any charitable or

other capital contribution outside the Ordinary Course of Business;

(xix) has not declared or paid any dividend or other

distribution, whether in cash or other property; and

(xx) has not entered into a commitment to do any of the

foregoing.

<PAGE>

Neither the Company nor its Subsidiary have any Liability arising

from a fact or circumstance that is not the subject of a representation or

warranty contained in Section 3.B of this Agreement,, except for: (i)

Liabilities set forth on the face of the Financial Statements; (ii) Liabilities

which have arisen after the date of the Financial Statements in the Ordinary

Course of Business; and (iii) Liabilities set forth on Section 3.B(c) of the

Company Disclosure Schedule ("Undisclosed Liabilities").

(d) Legal Compliance.

The Company and its Subsidiary have complied with all applicable

laws (including rules, regulations, codes, injunctions, judgments, orders,

decrees, rulings, and charges thereunder) of federal, state, local, and foreign

governments (and all agencies or instrumentality thereof), the failure to comply

with which, individually or in the aggregate, will result in Adverse

Consequences in excess of Two Hundred Thousand Dollars ($200,000). To the

Knowledge of the Company, no action, suit, proceeding, hearing, investigation,

charge, complaint, claim, demand, audit or notice has been filed or commenced

against the Company and its Subsidiary alleging or relating to any failure so to

comply. The Company and its Subsidiary have duly filed all reports and returns

required to be filed by it with governmental authorities and obtained all

governmental permits and licenses and other governmental consents which are

required in connection with the businesses and operations of the Company and its

Subsidiary; all of such permits, licenses and consents are in full force and

effect, and no proceedings for the suspension or cancellation of any of them are

pending or threatened, except where any of the above would not have a material

adverse effect on the Company and its Subsidiary. The Company and its Subsidiary

is not and has not been threatened with being suspended or debarred from

contracting with any federal, state, or local government.

(e) Tax Matters.

(i) From its inception until April 1, 1988, the Company was a

C Corporation within the meaning of the Code for tax purposes. From

that date until January 29, 1997, the Comp

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