AGREEMENT AND PLAN OF MERGER BY AND AMONG YDI WIRELESS, INC. T-REX ACQUISITION CORPORATION AND TERABEAM CORPORATION

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Title: AGREEMENT AND PLAN OF MERGER BY AND AMONG YDI WIRELESS, INC. T-REX ACQUISITION CORPORATION AND TERABEAM CORPORATION
Governing Law: Washington Date: 4/16/2004
Industry: Communications Equipment Sector: Technology

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

YDI WIRELESS, INC.

T-REX ACQUISITION CORPORATION

AND

TERABEAM CORPORATION

DATED AS OF APRIL 14, 2004

<PAGE>

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered

into as of April 14, 2004 among YDI WIRELESS, INC., a Delaware corporation

("Parent"), T-REX ACQUISITION CORPORATION, a Washington corporation and a wholly

owned subsidiary of Parent ("Merger Sub"), and TERABEAM CORPORATION, a

Washington corporation (the "Company").

RECITALS

A. Upon the terms and subject to the conditions of this Agreement and in

accordance with the Washington Business Corporation Act (the "Washington

Corporate Law"), Parent and the Company will enter into a business combination

transaction pursuant to which Merger Sub will merge with and into the Company

(the "Merger").

B. The Board of Directors of each of the Company, Parent, and Merger Sub

(i) has determined that the Merger is in the best interests of each company and

their respective stockholders and (ii) has approved this Agreement, the Merger,

and the other transactions contemplated by this Agreement.

C. The Company, Parent, and Merger Sub desire to make certain

representations and warranties and other agreements in connection with the

Merger.

D. The parties intend, by executing this Agreement, to adopt a plan of

reorganization within the meaning of Section 368 of the Internal Revenue Code of

1986, as amended (the "Code").

NOW, THEREFORE, in consideration of the covenants, promises and

representations set forth herein, and for other good and valuable consideration,

the receipt and sufficiency of which are hereby acknowledged, the parties agree

as follows:

ARTICLE I

THE MERGER

1.1 The Merger. At the Effective Time (as defined in Section 1.2)

and subject to and upon the terms and conditions of this Agreement and the

applicable provisions of the Washington Corporate Law, Merger Sub shall be

merged with and into the Company, the separate corporate existence of Merger Sub

shall cease, and the Company shall continue as the surviving corporation. The

Company as the surviving corporation after the Merger is hereinafter sometimes

referred to as the "Surviving Corporation." At the Effective Time, the purpose

of the Surviving Corporation shall be to conduct and engage in all lawful

activities and business to the maximum extent permitted by the Washington

Corporate Law.

<PAGE>

1.2 Effective Time. Subject to the provisions of this Agreement, the

parties hereto shall cause the Merger to be consummated by filing Articles of

Merger (the "Articles of Merger") with the Secretary of State of the State of

Washington in accordance with the relevant provisions of the Washington

Corporate Law (the time of such filing or such subsequent date or time as the

parties shall agree and specify in the Articles of Merger being the "Effective

Time") as soon as practicable on or after the Closing Date (as herein defined).

The closing of the Merger (the "Closing") shall take place at the offices of the

Parent at a time and date to be specified by the parties, which shall be no

later than the second business day after the satisfaction or waiver of the

conditions set forth in Section 6.1 or at such other time, date, and location as

the parties hereto agree (the "Closing Date").

1.3 Effect of the Merger. At the Effective Time, the effect of the

Merger shall be as provided in this Agreement and the applicable provisions of

the Washington Corporate Law. Without limiting the generality of the foregoing,

and subject thereto, at the Effective Time, all the property, rights,

privileges, powers, and franchises of the Company and Merger Sub shall vest in

the Surviving Corporation, and all debts, liabilities, and duties of the Company

and Merger Sub shall become the debts, liabilities, and duties of the Surviving

Corporation.

1.4 Articles of Incorporation; By-laws.

(a) Unless otherwise determined by Parent prior to the

Effective Time, at the Effective Time, the Articles of Incorporation of Merger

Sub, as in effect immediately prior to the Effective Time, shall be the Articles

of Incorporation of the Surviving Corporation until thereafter amended as

provided by law and such Articles of Incorporation; provided, however, that

Article 1 of the Articles of Incorporation of the Surviving Corporation shall be

amended to read as follows: "The name of the corporation is Terabeam

Corporation." At the Effective Time, the authorized capital stock of the

Surviving Corporation shall be 3,000 shares of common stock, no par value per

share.

(b) The By-laws of Merger Sub, as in effect immediately prior

to the Effective Time, shall be the By-laws of the Surviving Corporation until

thereafter amended.

1.5 Directors and Officers. The directors of Merger Sub shall be the

initial directors of the Surviving Corporation, until their respective

successors are duly elected or appointed and qualified. The officers of Merger

Sub shall be the initial officers of the Surviving Corporation, until their

respective successors are duly elected or appointed and qualified.

1.6 Effect on Capital Stock. At the Effective Time, by virtue of the

Merger and without any action on the part of Merger Sub, the Company, or the

holders of any of the following securities:

(a) Conversion of Company Common Stock. Each share of Company

Voting Stock and of Company Nonvoting Stock (as those terms are defined in

Section 2.2(a)) issued and outstanding immediately prior to the Effective Time

(other than any shares of Company Common Stock (as defined in Section 2.2(a)) to

be canceled pursuant to Section 1.6(b) and Company Dissenting Shares (as defined

in Section 1.6(c) below)) will be canceled and extinguished and be automatically

converted (subject to Sections 1.6(f) and (g)) into the right to

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receive either: (i) 0.220 shares of common stock, par value $0.01 per share, of

Parent (the "Parent Common Stock") if the Volume-Weighted Average Price of the

Parent Common Stock over the twenty (20) consecutive trading days ending three

(3) trading days prior to the Closing Date (the "Measurement Period") is equal

to, or less than, $5.40 per share (as adjusted for stock splits, combinations,

recapitalizations and the like); or (ii) 0.200 shares of Parent Common Stock if

the Volume-Weighted Average Price of the Parent Common Stock over the

Measurement Period is above $5.40 per share (as adjusted for stock splits,

combinations, recapitalizations and the like) (in either case, the "Exchange

Ratio"), together with cash in lieu of fractional shares pursuant to Section

1.6(g) below (collectively, the "Merger Consideration"), and the right to

receive a certificate therefor, upon surrender of the certificate representing

such share of Company Common Stock in the manner provided in Section 1.7 (or in

the case of a lost, stolen, or destroyed certificate, upon delivery of an

affidavit (and bond, if required) in the manner provided in Section 1.9).

Certificates representing shares of Parent Common Stock issued in connection

with the Merger shall be issued in accordance with Section 1.7 below. For

purposes of this Agreement, the "Volume-Weighted Average Price" of Parent Common

Stock shall be equal to the sum of "X" for each trading day during the

Measurement Period (each such day, a "Subject Day") as calculated using the

following formula:

X = ((Y +Z) / 2) * (A/B)

where X = the weighted average price component for the Subject Day

(rounded to the nearest penny).

Y = the highest sale price of Parent Common Stock on the Subject

Day as reported by the OTC Bulletin Board

(http://www.otcbb.com).

Z = the lowest sale price of Parent Common Stock on the Subject

Day as reported by the OTC Bulletin Board.

A = the total number of shares of Parent Common Stock traded on

the Subject Day as reported by the OTC Bulletin Board.

B = the total number of shares of Parent Common Stock traded

during the Measurement Period as reported by the OTC Bulletin

Board.

(b) Cancellation of Company-Owned Stock. Each share of Company

Common Stock owned by any direct or indirect wholly owned subsidiary of the

Company immediately prior to the Effective Time shall be canceled and

extinguished without any conversion thereof.

Agreement to the contrary, shares of Company Common Stock that have not been

voted for adoption of this Agreement and with respect to which appraisal rights

shall have been properly perfected in accordance with Chapter 23B.13 of the

Washington Corporate Law (the "Company Dissenting Shares") shall not be

converted into the right to receive the Merger Consideration in accordance with

this Agreement, at or after the Effective Time, unless and until the holder of

such Company Dissenting Shares withdraws its demand for such appraisal in

accordance with the Washington

<PAGE>

Corporate Law or becomes ineligible for such appraisal. If a holder of Company

Dissenting Shares shall withdraw its demand for such appraisal in accordance

with the Washington Corporate Law or shall become ineligible for such appraisal,

then, as of the later of the Effective Time or the occurrence of such event,

such holder's Company Dissenting Shares shall cease to be Company Dissenting

Shares and shall be deemed to have converted as of the Effective Time into the

right to receive the Merger Consideration into which its Company Common Stock

would otherwise have converted as of the Effective Time pursuant to this

Agreement. The Company shall give prompt notice to Parent of any demands

received by the Company for appraisal of any shares of capital stock of the

Company, and Parent shall have the right to participate in all negotiations,

proceedings, and settlements with respect to such demands. Before the Effective

Time, the Company shall not, without the prior written consent of Parent, which

consent shall not be unreasonably withheld, make any payment with respect to, or

settle or offer to settle, any such demands or agree to do any of the foregoing.

(d) Stock Options and Warrants. All options and warrants to

purchase Company Common Stock outstanding immediately prior to the Effective

Time shall be treated in accordance with Section 5.11 hereof.

(e) Capital Stock of Merger Sub. Each share of Common Stock,

par value $.01 per share, of Merger Sub issued and outstanding immediately prior

to the Effective Time shall be converted into and exchanged for one validly

issued, fully paid, and nonassessable share of Common Stock, par value $.01 per

share, of the Surviving Corporation. Each stock certificate of Merger Sub

evidencing ownership of any such shares shall continue to evidence ownership of

such shares of capital stock of the Surviving Corporation.

(f) Adjustments to Exchange Ratio. If between the date hereof

and the Effective Time, the outstanding shares of Parent Common Stock or Company

Common Stock shall be changed into a different number of shares by reason of any

reclassification, recapitalization, reorganization, split-up, combination or

exchange of shares, or if any dividend payable in stock or other securities

shall be declared thereon with a record date within such period, the Exchange

Ratio shall be adjusted accordingly to provide to the holders of Company Common

Stock the same economic benefit as was contemplated by this Agreement prior to

such reclassification, recapitalization, reorganization, split-up, combination,

exchange, or dividend. For the purposes of avoiding any ambiguity, any

conversions of Company Nonvoting Stock into Company Voting Stock shall not

affect the Exchange Ratio.

(g) Fractional Shares. No fraction of a share of Parent Common

Stock will be issued by virtue of the Merger, but in lieu thereof each holder of

shares of Company Common Stock who would otherwise be entitled to a fraction of

a share of Parent Common Stock (after aggregating all fractional shares of

Parent Common Stock to be received by such holder) shall receive from Parent,

without interest, an amount of cash (rounded to the nearest whole cent) equal to

the product of (i) such fraction, multiplied by (ii) the Volume-Weighted Average

Price of the Parent Common Stock over the Measurement Period.

1.7 Surrender of Certificates.

<PAGE>

(a) Exchange Agent. Registrar and Transfer Company, or another

similar institution selected by Parent, shall act as the exchange agent (the

"Exchange Agent") in the Merger.

(b) Parent to Provide Common Stock. Promptly after the

Effective Time, Parent shall make available to the Exchange Agent for exchange

in accordance with this Article I, through such reasonable procedures as Parent

may adopt, the shares of Parent Common Stock issuable pursuant to Section 1.6 in

exchange for outstanding shares of Company Common Stock and cash in an amount

sufficient for payment in lieu of fractional shares pursuant to Section 1.6(g).

the Surviving Corporation shall cause to be mailed to each holder of record of a

certificate or certificates (the "Certificates") which immediately prior to the

Effective Time represented outstanding shares of Company Common Stock whose

shares were converted into the right to receive shares of Parent Common Stock

and cash in lieu of fractional shares pursuant to Section 1.6, (i) a letter of

transmittal (which shall specify that delivery shall be effected, and risk of

loss and title to the Certificates shall pass, only upon delivery of the

Certificates to the Exchange Agent and shall be in such form and have such other

provisions as Parent may reasonably specify) and (ii) instructions for use in

effecting the surrender of the Certificates in exchange for certificates

representing shares of Parent Common Stock and cash in lieu of fractional

shares. Upon surrender of a Certificate for cancellation to the Exchange Agent

or to such other agent or agents as may be appointed by Parent, together with

such letter of transmittal, duly completed and validly executed in accordance

with the instructions thereto, the holder of such Certificate shall be entitled

to receive in exchange therefor a certificate representing the number of whole

shares of Parent Common Stock and cash in lieu of fractional shares which such

holder has the right to receive pursuant to Section 1.6, and the Certificate so

surrendered shall forthwith be canceled. Until so surrendered, each outstanding

Certificate that, prior to the Effective Time, represented shares of Company

Common Stock will be deemed from and after the Effective Time, for all corporate

purposes other than the payment of dividends, to evidence the right to receive

the number of full shares of Parent Common Stock into which such shares of

Company Common Stock shall have been so converted and the right to receive a

certificate representing shares of Parent Common Stock and an amount in cash in

lieu of the issuance of any fractional shares in accordance with Section 1.6.

(d) Distributions With Respect to Unexchanged Shares. No

dividends or other distributions declared or made after the date of this

Agreement with respect to Parent Common Stock with a record date after the

Effective Time will be paid to the holder of any unsurrendered Certificate with

respect to the shares of Parent Common Stock represented thereby until the

holder of record of such Certificate shall surrender such Certificate. Subject

to applicable law, following surrender of any such Certificate, there shall be

paid to the record holder of the certificates representing whole shares of

Parent Common Stock issued in exchange therefor, without interest, at the time

of such surrender, the amount of dividends or other distributions with a record

date after the Effective Time payable with respect to such whole shares of

Parent Common Stock.

<PAGE>

(e) Transfers of Ownership. If any certificate for shares of

Parent Common Stock is to be issued in a name other than that in which the

certificate surrendered in exchange therefor is registered, it will be a

condition of the issuance thereof that the certificate so surrendered will be

properly endorsed and otherwise in proper form for transfer and that the person

requesting such exchange will have paid to Parent or any agent designated by it

any transfer or other taxes required by reason of the issuance of a certificate

for shares of Parent Common Stock in any name other than that of the registered

holder of the certificate surrendered, or established to the satisfaction of

Parent or any agent designated by it that such tax has been paid or is not

payable.

(f) No Liability. Notwithstanding anything to the contrary in

this Section 1.7, none of the Exchange Agent, the Surviving Corporation, or any

party hereto shall be liable to a holder of shares of Parent Common Stock or

Company Common Stock for any amount properly paid to a public official pursuant

to the requirements of any applicable abandoned property, escheat or similar

law.

1.8 No Further Ownership Rights in Company Common Stock. All

shares of Parent Common Stock issued upon the surrender for exchange of shares

of Company Common Stock in accordance with the terms hereof (including any cash

paid in respect thereof) shall be deemed to have been issued in full

satisfaction of all rights pertaining to such shares of Company Common Stock,

and, after the Effective Time, there shall be no further registration of

transfers on the records of the Surviving Corporation of shares of Company

Common Stock which were outstanding immediately prior to the Effective Time. If,

after the Effective Time, Certificates are presented to the Surviving

Corporation for any reason, they shall be canceled and exchanged as provided in

this Article I.

1.9 Lost, Stolen, or Destroyed Certificates. In the event any

certificates evidencing shares of Company Common Stock shall have been lost,

stolen, or destroyed, the Exchange Agent shall, upon the making of an affidavit

of that fact by the holder thereof, issue in exchange for such shares of Company

Common Stock such shares of Parent Common Stock and cash in lieu of fractional

shares as may be required pursuant to Section 1.6; provided, however, that

Parent may, in its discretion and as a condition precedent to the issuance

thereof, require the owner of such lost, stolen, or destroyed certificates to

deliver an affidavit of lost certificate and indemnity agreement on such terms

as it may reasonably specify and, if required by the Exchange Agent, a bond in

such sum as the Exchange Agent may reasonably specify as indemnity against any

claim that may be made against Parent, the Surviving Corporation, or the

Exchange Agent with respect to the certificates alleged to have been lost,

stolen, or destroyed.

1.10 Tax Consequences. It is intended by the parties hereto that the

Merger shall constitute a reorganization within the meaning of Section 368 of

the Code.

1.11 Taking of Necessary Actions; Further Action. If, at any time

after the Effective Time, any other action is necessary or desirable to carry

out the purposes of this Agreement and to vest the Surviving Corporation with

full right, title, and possession to all assets, property, rights, privileges,

powers, and franchises of the Company and Merger Sub, the officers and directors

of the Company and Merger Sub are fully authorized in the name of their

<PAGE>

respective corporations or otherwise to take, and will take, all such lawful and

necessary action, so long as such action is consistent with this Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Merger Sub, subject to

the exceptions specifically disclosed in the disclosure letter supplied by the

Company to Parent (the "Company Letter") and dated as of the date hereof, as

follows:

2.1 Organization of the Company. The Company is a corporation duly

organized and validly existing under the laws of the jurisdiction of its

incorporation, has the corporate power to own, lease, and operate its property

and to carry on its business as now being conducted, and is duly qualified to do

business and in good standing as a foreign corporation in each jurisdiction in

which the failure to be so qualified would have a Material Adverse Effect (as

defined below) on the Company. The Company does not own any subsidiaries and

does not directly or indirectly own any equity or similar interest in, or any

interest convertible into or exchangeable or exercisable for any interest in,

any corporation, partnership, joint venture, or other business association or

entity other than the securities of any publicly traded entity held for

investment only and constituting less than 5% of the outstanding capital stock

of any such entity. For purposes of this Agreement, the term "subsidiary" means

any Person (other than a natural person) of which the Company or Parent, as the

case may be, owns, either directly or indirectly, a majority of the total

combined voting power of all classes of equity thereof having general voting

power under ordinary circumstances to elect a majority of the board of directors

or its equivalent. The Company has made available to counsel for Parent a true

and correct copy of the Articles of Incorporation and By-laws of the Company and

similar governing instruments of its material subsidiaries, each as amended to

date. For purposes of this Agreement, "Material Adverse Effect" shall mean a

material adverse effect on the business, properties, assets (including

intangible assets), financial condition, or results of operations of a Person

(as defined below), taken as a whole, but shall not include any of the foregoing

arising out of, related to, or otherwise by virtue of (a) conditions affecting

the economy or the financial markets generally (except to the extent that such

conditions have a disproportionate adverse effect on such Person compared to

other companies similarly situated as to size, financial strength, and/or other

relevant factors), (b) the announcement of or pendency of any of the

transactions contemplated by this Agreement, (c) events, circumstances, or

conditions generally affecting the industry in which such Person operates

(except to the extent that such events, circumstances, or conditions have a

disproportionate adverse effect on such Person compared to other companies

similarly situated as to size, financial strength, and/or other relevant

factors), (d) any change in law or generally accepted accounting principles, (e)

as to Parent, any change in the market price or trading volume of the securities

of such Person (provided, that if such change in market price or trading volume

is caused by an underlying cause or effect which would otherwise constitute a

Material Adverse Effect, such underlying cause or effect shall nonetheless

continue to constitute and qualify hereunder as a Material Adverse Effect), or

(f) as to the Company, any action, effect, circumstance, change or condition

resulting from, or directly or indirectly connected with or related to, the Cost

Reduction Plan (as defined in Section 4.1 below). For purposes of this

<PAGE>

Agreement, "Person" shall mean any natural person, corporation, general

partnership, limited partnership, limited liability company, proprietorship, or

other business organization.

2.2 Company Capital Structure

(a) The authorized capital stock of the Company consists of

300,000,000 shares of Common Stock, no par value per share, with voting rights

("Company Voting Stock"), 50,000,000 shares of Common Stock, no par value,

without voting rights ("Company Nonvoting Stock" and, together with the Company

Voting Stock, the "Company Common Stock"), and 100,000,000 shares of preferred

stock. As of April 8, 2004, 47,006,125 shares of Company Voting Stock were

issued and outstanding, no shares of Company Nonvoting Stock were issued and

outstanding, and no shares of preferred stock were issued or outstanding. All

such shares have been duly authorized, and all such issued and outstanding

shares have been validly issued, are fully paid and nonassessable, and are free

of any liens or encumbrances other than any liens or encumbrances created by or

imposed upon the holders thereof. Since December 31, 2003, there have been no

changes in the capital structure of the Company other than issuances of Company

Common Stock upon the exercise of outstanding options and warrants. The Company

has provided to Parent a true and correct list of all holders of shares of

Company Common Stock as of April 8, 2004, showing the stockholder's name,

address, type of Company Common Stock held, and number of shares held.

(b) As of April 8, 2004, (i) the Company had reserved

3,558,593 shares of Company Voting Stock for issuance upon exercise of warrants,

16,555,881 shares of Company Voting Stock for issuance upon exercise of stock

options, and 28,427,730 shares of Company Nonvoting Stock for issuance upon

exercise of stock options, (ii) there were warrants outstanding to purchase

3,558,593 shares of Company Voting Stock, (iii) there were options outstanding

to purchase 16,555,881 shares of Company Voting Stock, and (iv) there were

options outstanding to purchase 28,427,730 shares of Company Nonvoting Stock.

All of the options were issued pursuant to the Company Stock Option Plans (as

defined in Section 5.11 below). All shares of Company Common Stock subject to

issuance as aforesaid have been duly authorized and, upon issuance on the terms

and conditions specified in the instruments pursuant to which they are issuable,

will be validly issued, fully paid, and nonassessable. Since December 31, 2003,

there have been no amendments of any Company stock options or warrants. The

Company has provided to Parent a true and correct list of all holders of

warrants or options to buy shares of Company Common Stock as of April 8, 2004,

showing the security holder's name, address, type of Company Common Stock that

may be purchased, number of warrants or options held, exercise price of the

warrants or options, and expiration date of the warrants or options.

options, and warrants, both currently outstanding and formerly outstanding, were

validly issued in transactions exempt from the registration requirements of the

Securities Act of 1933, as amended (the "Securities Act") and in accordance with

any applicable state securities laws.

(d) The Company has provided to Parent copies of (i) all proxy

statements relating to the Company's meetings of stockholders (whether annual or

special) held since January 1, 2000, (ii) all information statements relating to

stockholder actions since January 1, 2000, (iii) all other reports, letters,

notices, and other documents relating to the

<PAGE>

purchase, sale, or repurchase of Company securities provided to the Company's

stockholders, option holders, or warrant holders since January 1, 2000, and (iv)

all amendments and supplements to all such proxy statements, information

statements, and other documents. As of their respective dates, the materials

described in clauses (i) through (iv) above (y) were prepared in material

compliance with all requirements of law and regulations applicable to such

materials and (z) did not at the time they were provided to Company security

holders contain any untrue statement of a material fact or omit to state a

material fact required to be stated therein or necessary in order to make the

statements therein, in the light of the circumstances under which they were

made, not misleading.

2.3 Obligations With Respect to Capital Stock.

(a) Except as set forth in Section 2.2, there are no equity

securities of any class of the Company, or any security convertible or

exchangeable into or exercisable for such equity securities, issued, reserved

for issuance, or outstanding. Except as set forth in Section 2.2, there are no

options, warrants, equity securities, calls, rights, commitments, or agreements

of any character to which the Company is a party or by which it is bound

obligating the Company to issue, deliver, or sell, or cause to be issued,

delivered, or sold, additional shares of capital stock of the Company or

obligating the Company to grant, extend, accelerate the vesting of, or enter

into any such option, warrant, equity security, call, right, commitment, or

agreement.

(b) There are no registration rights, and there is no voting

trust, proxy, rights agreement, "poison pill" anti-takeover plan or other

agreement or understanding to which the Company is a party or by which it is

bound with respect to any security of any class of the Company or with respect

to any security, partnership interest, or similar ownership interest of any

class of any of its subsidiaries. The execution and delivery of this Agreement

by the Company, the performance by the Company of its obligations hereunder, and

consummation by the Company of the transactions contemplated by this Agreement

will not, alone or together with any other event, nor has any event occurred

that would, (i) entitle any Person to any payment under or for any security,

option, warrant, call, right, commitment, or agreement of the Company or (ii)

result in an acceleration of vesting, a change in post-service exercisability

period, or an adjustment to the exercise price or number of shares issuable upon

exercise of any security, option, warrant, call, right, commitment, or agreement

of the Company.

2.4 Authority.

(a) The Company has all requisite corporate power and

authority to enter into this Agreement and to consummate the transactions

contemplated hereby. The execution and delivery of this Agreement and the

consummation of the transactions contemplated hereby have been duly authorized

by all necessary corporate action on the part of the Company, subject only to

the approval of the Merger by the vote of the holders of at least two-thirds

(2/3) of the Company Voting Stock issued and outstanding on the record date for

the Company Stockholders' Meeting. This Agreement has been duly executed and

delivered by the Company and constitutes the valid and binding obligation of the

Company, enforceable against the Company in accordance with its terms, except as

enforceability may be limited by bankruptcy and other similar laws and general

principles of equity. The execution and delivery

<PAGE>

of this Agreement by the Company does not, and the consummation of the

transactions contemplated hereby will not, conflict with, or result in any

violation of, or default under (with or without notice or lapse of time, or

both), or give rise to a right of termination, cancellation or acceleration of

any obligation or loss of any benefit under (i) any provision of the Articles of

Incorporation or By-laws of the Company or (ii) any material mortgage,

indenture, lease, contract or other agreement, or any material permit,

concession, franchise, license, judgment, order, decree, statute, law,

ordinance, rule or regulation applicable to the Company or its properties or

assets.

(b) No consent, approval, order or authorization of, or

registration, declaration or filing with, any court, administrative agency or

commission or other governmental authority or instrumentality ("Governmental

Entity"), is required by or with respect to the Company in connection with the

execution and delivery of this Agreement by the Company or the consummation by

the Company of the transactions contemplated hereby, except for (i) the filing

of the Articles of Merger with the Washington Secretary of State, (ii) the

filing of the Permit Application, the Hearing Notice, and the Information

Statement (as those terms are defined in Section 5.1 below) with the California

Commissioner (as defined in Section 5.1 below), (iii) filings and other items

that may be required in connection with the Hart-Scott-Rodino Antitrust

Improvements Act of 1976, as amended (the "HSR Act"), (iv) such other consents,

approvals, orders, authorizations, registrations, declarations and filings as

may be required under applicable federal and state securities laws and the laws

of any foreign country, and (v) such other consents, authorizations, filings,

approvals and registrations which, if not obtained or made, would not have a

Material Adverse Effect on the Company.

2.5 SEC Filings; Company Financial Statements.

(a) The Company has never had any securities registered under

the Securities Act. The Company has never been subject to the periodic reporting

and other requirements of the Securities Exchange Act of 1934, as amended (the

"Exchange Act") and regulations promulgated pursuant thereto. The Company has

not ever filed, or been obligated or required to file, any forms, reports, or

other documents with the Securities and Exchange Commission (the "SEC").

(b) The Company has furnished Parent with copies of its

audited consolidated financial statements for the fiscal years ended December

31, 2000, 2001, and 2002 and with copies of its unaudited consolidated financial

statements for the fiscal year ended December 31, 2003 (collectively, including

in each case any related notes thereto, the "Company Financial Statements").

Each of the Company Financial Statements (i) was prepared in accordance with

United States generally accepted accounting principles ("GAAP") applied on a

consistent basis throughout the periods involved (except as may be indicated in

the notes thereto) and (ii) fairly presented the financial position of the

Company at and as of the respective dates thereof and the results of its

operations, cash flows, and changes in stockholders' equity (if presented) for

the periods indicated. The unaudited balance sheet of the Company as of December

31, 2003 provided by the Company to Parent is hereinafter referred to as the

"Company Balance Sheet."

<PAGE>

2.6 Absence of Certain Changes or Events. Except with respect to the

actions contemplated by this Agreement, since the date of the Company Balance

Sheet, the Company has conducted its business only in the ordinary course and in

a manner consistent with past practice and, since such date, there has not been

(a) any Material Adverse Effect on the Company or any development that

reasonably would be expected to have a Material Adverse Effect on the Company,

(b) any material liability (direct or contingent) which did not arise in the

ordinary course of business, or (c) any other action or event that would have

required the consent of Parent pursuant to Section 4.1 had such action or event

occurred after the date of this Agreement.

2.7 Taxes.

(a) Definition of Taxes. For the purposes of this Agreement,

"Tax" or "Taxes" refers to any and all federal, state, local and foreign taxes,

assessments and other government charges, duties, impositions and liabilities

relating to taxes, including taxes based upon or measured by gross receipts, net

operating losses, income, profits, sales, use and occupation, and value added,

ad valorem, transfer, franchise, withholding, payroll, recapture, employment,

excise and property taxes, together with all interest, penalties and additions

imposed with respect to such amounts and any obligations under any agreements or

arrangements with any other person with respect to such amounts and including

any liability for taxes of a predecessor entity.

(b) Tax Returns and Audits.

(i) Each of the Company and its subsidiaries has timely

filed all federal, state, local and foreign returns, estimates, information

statements and reports ("Returns") relating to Taxes required to be filed by the

Company and each of its subsidiaries, except such Returns which are not material

to the Company. All such Returns were correct and complete in all material

respects. Each of the Company and its subsidiaries has paid all Taxes due and

owing by the Company and its subsidiaries (whether or not shown on any Tax

Return). The Company is not currently the beneficiary of any extension of time

within which to file any Return.

(ii) Except as is not material to the Company, the

Company will have withheld as of the Effective Time with respect to its

employees all income Taxes, FICA, FUTA, and other Taxes required to be withheld.

(iii) Except as is not material to the Company, neither

the Company nor any of its subsidiaries has been delinquent in the payment of

any Tax nor is there any Tax deficiency outstanding, proposed or assessed

against the Company or any of its subsidiaries, nor has the Company or any of

its subsidiaries executed any waiver of any statute of limitations on or

extending the period for the assessment or collection of any Tax.

(iv) Except as is not material to the Company, no audit

or other examination of any Return of the Company or any of its subsidiaries is

presently in progress, nor has the Company been notified of any request for such

an audit or other examination.

<PAGE>

(v) The Company does not have any liability for unpaid

Taxes which have not been accrued for or reserved against on the Company Balance

Sheet in accordance with GAAP, whether asserted or unasserted, contingent or

otherwise, which is material to the Company, except liability for unpaid Taxes

which have accrued since the date of the Company Balance Sheet in the ordinary

course of business.

(vi) None of the Company's assets is treated as

"tax-exempt use property" within the meaning of Section 168(h) of the Code.

(vii) There is no contract, agreement, plan or

arrangement, including but not limited to the provisions of this Agreement,

covering any employee or former employee of the Company or any of its

subsidiaries that, individually or collectively, could give rise to the payment

of any amount for which a deduction will be disallowed by reason of Sections

280G, 404 or 162(b) through (o) of the Code.

(viii) Neither the Company nor any of its subsidiaries

has filed any consent agreement under Section 341(f) of the Code or agreed to

have Section 341(f)(2) of the Code apply to any disposition of a subsection (f)

asset (as defined in Section 341(f)(4) of the Code) owned by the Company or any

of its subsidiaries.

(ix) The Company is not, and has not been at any time, a

"United States real property holding corporation" within the meaning of Section

897(c)(2) of the Code.

(x) The Company is not a party to any tax allocation or

sharing agreement. None of the Company and its subsidiaries (A) has been a

member of an Affiliated Group (within the meaning of Section 1504(a) of the

Code, or any similar group defined under a similar provision of state, local, or

foreign law) filing a consolidated federal Return (other than a group the common

parent of which was the Company) or (B) has any liability for the taxes of any

person (other than any of the Company and its subsidiaries) under Treas. Reg.

ss.1.1502-6 (or any similar provision of state, local, or foreign law), as a

transferee or successor, by contract, or otherwise.

(xi) The Company has furnished Parent with a list of all

federal, state, local, and foreign Tax Returns filed with respect to the Company

and its subsidiaries for taxable periods ended on or after January 1, 2000,

which list indicates those Tax Returns that have been audited. The Company has

delivered to Parent correct and complete copies of all federal income Tax

Returns, examination reports, and statements of deficiencies assessed against,

or agreed to by the Company and its subsidiaries since January 1, 2000.

(xii) To the Company's knowledge, the Company will not

be required to include any item of income in, or exclude any item of deduction

from, taxable income for any taxable period (or portion thereof) ending after

the Closing Date as a result of any (A) change in method of accounting for a

taxable period ending on or prior to the Closing Date; (B) "closing agreement"

as described in Code ss. 7121 (or any corresponding or similar provision of

state, local or foreign income Tax law) executed on or prior to the Closing

Date; (C) intercompany transactions or any excess loss account described in

Treasury Regulations under

<PAGE>

Code ss. 1502 (or any corresponding or similar provision of state, local or

foreign income Tax law); (D) installment sale or open transaction disposition

made on or prior to the Closing Date; or (E) prepaid amount received on or prior

to the Closing Date.

2.8 Absence of Liens and Encumbrances. The Company has good and

valid title to, or, in the case of leased properties and assets, valid leasehold

interests in, all of its material tangible properties and assets, real, personal

and mixed, used in its business, free and clear of any liens or encumbrances

except as reflected in the Company Financial Statements and except for liens for

taxes not yet due and payable and such imperfections of title and encumbrances,

if any, which are not material in character, amount, or extent, and which do not

materially detract from the value, or materially interfere with the present use,

of the property subject thereto or affected thereby.

2.9 Intellectual Property.

(a) The Company, directly or indirectly, owns, or is licensed

or otherwise possesses legally enforceable rights to use, all patents,

trademarks, trade names, service marks, copyrights, and any applications

therefor, maskworks, net lists, schematics, technology, know-how, computer

software programs or applications (in both source code and object code form),

and tangible or intangible proprietary information or material (excluding

Commercial Software as defined in Paragraph (c) below) that are material to the

business of the Company as currently conducted or as proposed to be conducted by

the Company (the "Company Intellectual Property Rights").

(b) The Company is not in violation of any license,

sublicense, or agreement related directly to the Company Intellectual Property

Rights except such violations as do not materially impair the Company's rights

under such license, sublicense, or agreement. The execution and delivery of this

Agreement by the Company, and the consummation of the transactions contemplated

hereby, will neither cause the Company to be in violation or default under any

such license, sublicense, or agreement, nor entitle any other party to any such

license, sublicense, or agreement to terminate or modify such license,

sublicense, or agreement except such violations or defaults as do not materially

impair the Company's rights under such license, sublicense, or agreement. No

material claims with respect to the Company Intellectual Property Rights have

been asserted or, to the knowledge of the Company, are threatened by any Person

nor, to the knowledge of the Company, are there any valid grounds for any bona

fide material claims (i) to the effect that the manufacture, sale, licensing, or

use of any of the products of the Company as now manufactured, sold, licensed,

or used or proposed for manufacture, sale, licensing, or use by the Company

infringes on any copyright, patent, trade mark, service mark, or trade secret,

(ii) against the use by the Company of any trademarks, service marks, trade

names, trade secrets, copyrights, patents, technology, know-how, or computer

software programs and applications used in the Company's business as currently

conducted or as proposed to be conducted, or (iii) challenging the ownership by

the Company, validity, or effectiveness of any of the Company Intellectual

Property Rights. All material registered trademarks, service marks, and

copyrights held by the Company are valid and subsisting. To the knowledge of the

Company, there is no material unauthorized use, infringement, or

misappropriation of any of the Company Intellectual Property Rights by any third

party, including any employee or former employee of the Company. No Company

Intellectual Property Right owned by the Company or

<PAGE>

product of the Company, or, to the knowledge of the Company, Company

Intellectual Property Right licensed by the Company is subject to any

outstanding decree, order, judgment, or stipulation restricting in any manner

the licensing thereof by the Company.

available software programs generally available to the public through retail

dealers in computer software which have been licensed to the Company (or, in the

case of Section 3.9, to Parent) pursuant to end-user licenses and which are used

in the Company's business (or in Parent's business in the case of Section 3.9)

but are in no way a component of or incorporated in or specifically required to

develop or support any of the Company's (or of Parent's in the case of Section

3.9) products and related trademarks, technology and know-how.

2.10 Agreements, Contracts and Commitments. The Company does not

have, nor is it a party to or bound by:

(a) any collective bargaining agreements;

(b) any bonus, deferred compensation, incentive compensation,

pension, profit-sharing or retirement plans, or any other employee benefit plans

or arrangements;

commitment with any officer or director-level employee, not terminable by the

Company on thirty days' notice without liability, except to the extent general

principles of wrongful termination law may limit the Company's ability to

terminate employees at will;

(d) any agreement or plan, including, without limitation, any

stock option plan, stock appreciation right plan or stock purchase plan, any of

the benefits of which will be increased, or the vesting of benefits of which

will be accelerated, by the occurrence of any of the transactions contemplated

by this Agreement or the value of any of the benefits of which will be

calculated on the basis of any of the transactions contemplated by this

Agreement;

(e) any agreement, contract or commitment (excluding real and

personal property leases) which involves payment by the Company of $100,000 or

more (excluding amounts which are already owing by the Company at the date of

the Company Balance Sheet) and is not cancelable without penalty within thirty

(30) days;

(f) any agreement under which the Company is restricted from

selling, licensing, or otherwise distributing any of its products to any class

of customers, in any geographic area, during any period of time, or in any

segment of the market; or

(g) any agreement under which the Company is restricted from

entering into any line of business, introducing any products, undertaking any

activities, or competing with any other person or entity in any line of

business, in any geographic area, during any period of time, or in any segment

of the market.

2.11 No Default. The Company has not breached in any material

respect, or received in writing any claim or threat that it has breached in any

material respect, any of the

<PAGE>

terms or conditions of any (i) agreement, contract or commitment that was or is

material to the business of the Company or (ii) any agreement under which the

Company licenses from a third party any Company Intellectual Property Rights

included in the Company's products in such a manner as would permit any other

party to cancel or terminate the same or would permit any other party to seek

material damages from the Company thereunder. Each of the agreements, contracts

and commitments referred to in clauses (i) and (ii) above that has not expired

or been terminated in accordance with its terms is in full force and effect and,

except as otherwise disclosed, is not subject to any material default thereunder

of which the Company is aware by any party obligated to the Company pursuant

thereto.

2.12 Governmental Authorization. The Company holds all permits,

licenses, variances, exemptions, orders and approvals of all Governmental

Entities which are material to the operation of the Company's business as

currently conducted (the "Company Permits"). The Company is in material

compliance with the terms of the Company Permits. The business of the Company is

not being conducted in violation of any law, ordinance or regulation of any

Governmental Entity, except for violations or possible violations which

individually or in the aggregate would not have a Material Adverse Effect on the

Company. As of the date of this Agreement, no investigation or review by any

Governmental Entity with respect to the Company is pending or, to the knowledge

of the Company, threatened, nor to the knowledge of the Company, has any

Governmental Entity indicated an intention to conduct the same, other than, in

each case, those the outcome of which would not have a Material Adverse Effect

on the Company.

2.13 Litigation. There is no action, suit, proceeding, claim,

arbitration or investigation pending, or as to which the Company has received

any notice of assertion nor, to the Company's knowledge, is there a reasonable

basis to expect such notice of assertion against the Company or any of its

subsidiaries which it is reasonable to expect that, if determined adversely to

the Company, would have a Material Adverse Effect on the Company.

2.14 Environmental Matters. Neither the Company nor any of its

subsidiaries has been or is currently in material violation of any applicable

statute, law or regulation relating to the environment or occupational health

and safety ("Environmental and Occupational Laws"). The Company has all permits

and other governmental authorizations currently required by all applicable

statutes, laws or regulations relating to the environment or occupational health

and safety necessary for the conduct of its business. Neither the Company nor

any of its subsidiaries has received any communication from a Governmental

Entity, or any written communication from any Person other than a Governmental

Entity, that alleges that it is not in full compliance with Environmental or

Occupational Laws, except for matters alleging items which would not have a

Material Adverse Effect on the Company. There is no claim of a violation of

Environmental and Occupational Laws pending or, to the knowledge of the Company,

threatened against the Company, except for matters alleging items which would

not have a Material Adverse Effect on the Company.

2.15 Brokers' and Finders' Fees. Except for fees payable to Perseus

Group pursuant to the engagement letter between the Company and Perseus, a copy

of which has been provided to Parent, the Company has not incurred, nor will it

incur, directly or indirectly, any

<PAGE>

liability for brokerage or finders' fees or agents' commissions or any similar

charges in connection with this Agreement, the Merger, or any transaction

contemplated hereby.

2.16 Labor Matters. There are no pending or, to the Company's

knowledge, threatened material claims against the Company under any workers'

compensation plan or policy or for long-term disability. The Company has

complied in all material respects with all applicable provisions of the

Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and has no

material obligations with respect to any former employees or qualifying

beneficiaries thereunder.

2.17 Employee Benefit Plans.

(a) The Company has made available to Parent (i) accurate and

complete copies of all Benefit Plan documents and all other material documents

relating thereto, including (if applicable) all summary plan descriptions,

summary annual reports and insurance contracts, (ii) accurate and complete

detailed summaries of all unwritten Benefit Plans, (iii) accurate and complete

copies of the most recent financial statements and actuarial reports with

respect to all Benefit Plans for which financial statements or actuarial reports

are required or have been prepared, and (iv) accurate and complete copies of all

annual reports for all Benefit Plans (for which annual reports are required)

prepared within the last three years. "Benefit Plans" means all employee benefit

plans within the meaning of Section 3(3) of the Employee Retirement Income

Security Act of 1974, as amended ("ERISA"), and any related or separate

contracts, plans, trusts, programs, policies, agreements, practices, or other

arrangements, in each case whether formal or informal, that provide benefits of

economic value to any present or former employee of the Company (or, in the case

of Section 3.17, Parent) or present or former beneficiary, dependent or assignee

of any such employee or former employee.

(b) All Benefit Plans of the Company conform (and at all times

have conformed) in all material respects to, and are being administered and

operated (and have at all time been administered and operated) in material

compliance with, the requirements of ERISA, the Code and all other applicable

laws or governmental regulations. All returns, reports and disclosure statements

required to be made under ERISA and the Code with respect to all Benefit Plans

have been timely filed or delivered. There have not been any "prohibited

transactions," as such term is defined in Section 4975 of the Code or Section

406 of ERISA involving any of the Benefit Plans, that could subject the Company

to any material penalty or tax imposed under the Code or ERISA.

401(a) of the Code and each trust intended to qualify under Section 501(a) of

the Code has either (i) applied for, prior to the expiration of the requisite

remedial amendment period under applicable Treasury Regulations or IRS

pronouncements, but has not yet received a response; (ii) obtained a favorable

determination, notification, advisory and/or opinion letter, as applicable, on

which the employer is entitled to rely, as to its qualified status from the IRS

since January 1, 2000; or (iii) still has a remaining period of time to apply

for such a determination letter from the IRS and to make any amendments

necessary to obtain a favorable determination and nothing has occurred since the

date of the most recent determination that could reasonably be expected to cause

any such Benefit Plan or trust to fail to qualify under Section 401(a) or 501(a)

of the Code.

<PAGE>

(d) The Company does not sponsor, nor has it ever sponsored, a

defined benefit plan subject to Title IV of ERISA, nor has it ever had any

obligation to contribute to any multiemployer plan (as defined in Section 3(37)

of ERISA). The Company does not have any material liability with respect to any

employee benefit plan (as defined in Section 3(3) of ERISA) other than with

respect to the Benefit Plans. For purposes of this Section 2.17, the term "the

Company" shall include any corporation that is a member of any controlled group

of corporations (as defined in Section 414(b) of the Code) that includes the

Company, any trade or business (whether or not incorporated) that is under

common control (as defined in Section 414(c) of the Code) with the Company, any

organization (whether or not incorporated) that is a member of an affiliated

service group (as defined in Section 414(m) of the Code) that includes the

Company and any other entity required to be aggregated with the Company pursuant

to the regulations issued under Section 414(o) of the Code.

(e) There are no pending or, to the knowledge of the Company,

threatened claims by or on behalf of any Benefit Plans, or by or on behalf of

any individual participants or beneficiaries of any Benefit Plans, alleging any

breach of fiduciary duty on the part of the Company or any of its officers,

directors or employees under ERISA or any other applicable regulations, or

claiming benefit payments (other than those made in the ordinary operation of

such plans), nor is there, to the knowledge of the Company, any basis for such

claim, except in any such case as reasonably would not be expected to have a

Material Adverse Effect on the Company. The Benefit Plans are not the subject of

any pending (or to the knowledge of the Company, any threatened) investigation

or audit by the Internal Revenue Service, the Department of Labor or the Pension

Benefit Guaranty Corporation ("PBGC").

(f) The Company has timely made all required contributions

under the Benefit Plans.

(g) With respect to any Benefit Plan that is an employee

welfare benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare

Plan"), (i) each Welfare Plan for which contributions are claimed by the Company

as deductions under any provision of the Code is in material compliance with all

applicable requirements pertaining to such deduction, (ii) with respect to any

welfare benefit fund (within the meaning of Section 419 of the Code) related to

a Welfare Plan, there is no disqualified benefit (within the meaning of Section

4976(b) of the Code) that would result in the imposition of a tax under Section

4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within

the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every

case has complied, with all of the applicable material requirements of Section

4980B of the Code, ERISA, Title XXII of the Public Health Service Act and the

Social Security Act, and (iv) all Welfare Plans may be amended or terminated at

any time on or after the Closing Date. No Benefit Plan provides any health, life

or other welfare coverage to employees of the Company beyond termination of

their employment with the Company by reason or retirement or otherwise, other

than coverage as may be required under Section 4980B of the Code or Part 6 of

ERISA, or under the continuation of coverage provisions of the laws of any state

or locality.

2.18 Compliance With Laws. Each of the Company and its subsidiaries

has complied in all material respects with, is not in material violation of, and

has not received any notices of violation with respect to, any federal, state or

local statute, law or regulation with

<PAGE>

respect to the conduct of its business, or the ownership or operation of its

business, except in any such case as reasonably would not be expected to have a

Material Adverse Effect on the Company.

2.19 Information Statement, Permit Application, and Hearing Notice.

The written information supplied by the Company for inclusion in the Permit

Application shall not, at the time the Permit Application is filed with the

California Commissioner, contain any untrue statement of a material fact or omit

to state any material fact required to be stated therein or necessary in order

to make the statements therein, in light of the circumstances under which they

are made, not misleading. Subject to the accuracy of Parent's representations

and warranties in Section 3.19 below, each of the Hearing Notice to be sent to

securityholders of the Company in connection with the Hearing (as defined in

Section 5.1) and the Information Statement to be sent to the stockholders of the

Company in connection with the meeting of the Company's stockholders to consider

the Merger (the "Company Stockholders' Meeting") shall not, on the date it is

filed with the California Commissioner, on the date it is first mailed to the

Company's stockholders, at the time of the Company Stockholders' Meeting, or at

the Effective Time (in each case as supplemented or amended through such time),

contain any untrue statement of a material fact or omit to state any material

fact required to be stated therein or necessary in order to make the statements

therein, in light of the circumstances under which they are made, not false or

misleading; or omit to state any material fact necessary to correct any

statement in any earlier communication with respect to the solicitation of

proxies for the Company Stockholders' Meeting which has become false or

misleading. If at any time prior to the Effective Time any information relating

to the Company or any of its affiliates, officers, or directors shall be

discovered by the Company which is required to be set forth in an amendment or

supplement to the Permit Application, the Information Statement, and/or the

Hearing Notice, the Company shall promptly inform Parent. Notwithstanding the

foregoing, the Company makes no representation or warranty with respect to any

information supplied by Parent or Merger Sub which is contained in the Permit

Application, the Information Statement, and/or the Hearing Notice.

2.20 Board Approval. On or prior to the date of this Agreement, the

Board of Directors of the Company, by resolutions duly adopted by unanimous

approval of those voting at a meeting duly called and held and not subsequently

rescinded or modified in any way, has duly (a) determined that this Agreement

and the Merger are fair and in the best interests of the Company and its

stockholders, (b) approved this Agreement and the Merger and determined that the

execution, delivery and performance of this Agreement is desirable, and (c)

recommended that the stockholders of the Company approve and adopt this

Agreement and directed that this Agreement and the transactions contemplated

hereby be submitted for consideration by the Company's stockholders at the

Company Stockholders' Meeting.

2.21 Fairness Opinion. The Company has received a written opinion

from Perseus Group dated on or about the date hereof, that the Exchange Ratio is

fair to the Company's stockholders from a financial point of view and has

delivered to Parent a copy of such opinion.

2.22 Antitakeover Laws Not Applicable. No "fair price," "business

combination," "moratorium," "control share acquisition" or other form of

antitakeover statute or

<PAGE>

regulation (a "Takeover Statute"), including Chapter 23B.19 of the Washington

Corporate Law, is or will be applicable (as to the Company) to the execution,

delivery, or performance of this Agreement or the consummation of the Merger or

the other transactions contemplated by this Agreement.

2.23 Full Disclosure. Neither this Agreement nor any written

statement, report, or other document furnished by the Company pursuant to this

Agreement or in connection with the transactions contemplated hereby with

respect to the Company, taken as a whole, contains any untrue statement of a

material fact or omits to state a material fact necessary in order to make the

statements contained herein or therein, in light of the circumstances under

which they are made, not false or misleading.

2.24 FIRPTA. The Company Common Stock is not a "U.S. Real Property

Interest" as defined in Treasury Regulation Section 1.897-2(h)(2).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub represent and warrant to the Company, subject to the

exceptions specifically disclosed in the disclosure letter supplied by Parent to

the Company (the "Parent Letter") and dated as of the date hereof, as follows:

3.1 Organization of Parent and Merger Sub. Each of Parent, its

material subsidiaries, and Merger Sub is a corporation duly organized, validly

existing, and in good standing under the laws of the jurisdiction of its

incorporation, has the corporate power to own, lease, and operate its property

and to carry on its business as now being conducted, and is duly qualified to do

business and in good standing as a foreign corporation in each jurisdiction in

which the failure to be so qualified would have a Material Adverse Effect on

Parent. Except as set forth in the Parent SEC Reports (as defined below in

Section 3.5) filed with the SEC prior to the date of this Agreement, Parent

owns, directly or indirectly through one or more subsidiaries, 100% of the

capital stock of each of its subsidiaries and does not directly or indirectly

own any equity or similar interest in, or any interest convertible into or

exchangeable or exercisable for any interest in, any corporation, partnership,

joint venture, or other business association or entity other than the securities

of any publicly-traded entity held for investment only and constituting less

than 5% of the outstanding capital stock of any such entity. Parent has made

available to counsel for the Company a true and correct copy of the Certificate

of Incorporation and By-laws of Parent and the Articles of Incorporation and

By-laws of Merger Sub, and similar governing instruments of its material

subsidiaries, each as amended to date.

3.2 Capital Structure.

(a) The authorized capital stock of Parent consists of

100,000,000 shares of Parent Common Stock and 4,500,000 shares of Preferred

Stock, $.01 par value. As of April 8, 2004, 14,263,488 shares of Parent Common

Stock were issued and outstanding and no shares of preferred stock of Parent

were issued or outstanding. The authorized capital stock of Merger Sub consists

of 3,000 shares of Common Stock, $.01 par value, 100 shares of which, as

<PAGE>

of the date hereof, are issued and outstanding and are held by Parent. All such

shares have been duly authorized, and all such issued and outstanding shares

have been validly issued, are fully paid and nonassessable, and are free of any

liens or encumbrances other than any liens or encumbrances created by or imposed

upon the holders thereof. Since December 31, 2003, there have been no changes in

the capital structure of Parent other than issuances of Parent Common Stock upon

the exercise of outstanding options and warrants.

(b) As of April 8, 2004, (i) Parent had reserved 389,626

shares of Parent Common Stock for issuance upon exercise of warrants and

1,309,750 shares of Parent Common Stock for issuance upon exercise of stock

options, (ii) there were warrants outstanding to purchase 389,626 shares of

Parent Common Stock, and (iii) there were options outstanding to purchase

866,246 shares of Parent Common Stock. All of the outstanding options were

issued pursuant to Parent's 1986 Stock Plan, 1987 Stock Plan, 1996 Stock Plan,

1997 Stock Plan, 1999 Stock Plan, 2001 Nonqualified Stock Option Plan, or 2002

Stock Incentive Plan (collectively, the "Parent Stock Option Plan"). All shares

of Parent Common Stock subject to issuance as aforesaid have been duly

authorized and, upon issuance on the terms and conditions specified in the

instruments pursuant to which they are issuable, will be validly issued, fully

paid, and nonassessable. Since December 31, 2003, there have been no amendments

of any Parent stock options or warrants.

the Merger will, upon issuance, be duly authorized, validly issued, fully paid,

and non-assessable.

3.3 Obligations With Respect to Capital Stock.

(a) Except as set forth in Section 3.2, there are no equity

securities of any class of Parent, or any security convertible or exchangeable

into or exercisable for such equity securities, issued, reserved for issuance,

or outstanding. Except for securities Parent owns, directly or indirectly

through one or more subsidiaries, there are no equity securities of any class of

any subsidiary of Parent, or any security convertible or exchangeable into or

exercisable for such equity securities, issued, reserved for issuance, or

outstanding. Except as set forth in Section 3.2, there are no options, warrants,

equity securities, calls, rights, commitments, or agreements of any character to

which Parent or any of its subsidiaries is a party or by which it is bound

obligating Parent or any of its subsidiaries to issue, deliver, or sell, or

cause to be issued, delivered, or sold, additional shares of capital stock of

Parent or any of its subsidiaries or obligating Parent or any of its

subsidiaries to grant, extend, accelerate the vesting of or enter into any such

option, warrant, equity security, call, right, commitment, or agreement.

(b) Except as contemplated by this Agreement, there are no

registration rights, and there is no voting trust, proxy, rights agreement,

"poison pill" anti-takeover plan, or other agreement or understanding to which

Parent or any of its subsidiaries is a party or by which it or any of its

subsidiaries is bound with respect to any security of any class of Parent or

with respect to any security, partnership interest, or similar ownership

interest of any class of any of its subsidiaries. The execution and delivery of

this Agreement by Parent and Merger Sub, the performance by Parent and Merger

Sub of their obligations hereunder, and consummation by Parent and Merger Sub of

the transactions contemplated by this Agreement will not, alone or together with

any other event, nor has any event occurred that would, (i) entitle

<PAGE>

any Person to any payment under or for any security, option, warrant, call,

right, commitment, or agreement of Parent or Merger Sub or (ii) result in an

acceleration of vesting, a change in post-service exercisability period, or an

adjustment to the exercise price or number of shares issuable upon exercise of

any security, option, warrant, call, right, commitment, or agreement of Parent

or Merger Sub.

3.4 Authority.

(a) Parent and Merger Sub have all requisite corporate power

and authority to enter into this Agreement and to consummate the transactions

contemplated hereby. The execution and delivery of this Agreement and the

consummation of the transactions contemplated hereby have been duly authorized

by all necessary corporate action on the part of Parent and Merger Sub. This

Agreement has been duly executed and delivered by Parent and Merger Sub and

constitutes the valid and binding obligations of Parent and Merger Sub,

enforceable against Parent and Merger Sub in accordance with its terms, except

as enforceability may be limited by bankruptcy and other similar laws and

general principles of equity. The execution and delivery of this Agreement by

Parent and Merger Sub does not, and the consummation of the transactions

contemplated hereby by Parent and Merger Sub will not, conflict with, or result

in any violation of, or default under (with or without notice or lapse of time,

or both), or give rise to a right of termination, cancellation, or acceleration

of any obligation or loss of any benefit under (i) any provision of the

Certificate of Incorporation or By-laws of Parent, the Articles of Incorporation

or By-laws of Merger Sub, or similar governing instruments of any of its

subsidiaries or (ii) any material mortgage, indenture, lease, contract, or other

agreement, or any material permit, concession, franchise, license, judgment,

order, decree, statute, law, ordinance, rule, or regulation applicable to Parent

or its properties or assets.

(b) No consent, approval, order, or authorization of, or

registration, declaration, or filing with, any Governmental Entity is required

by or with respect to Parent and Merger Sub in connection with the execution and

delivery of this Agreement by Parent and Merger Sub or the consummation by

Parent and Merger Sub of the transactions contemplated hereby, except for (i)

the filing of the Articles of Merger with the Washington Secretary of State,

(ii) the filing of the Permit Application, the Hearing Notice, and the

Information Statements with the California Commissioner, (iii) the filing of a

Form 8-K with the SEC, (iv) filings and other items that may be required in

connection with the HSR Act, (v) such other consents, approvals, orders,

authorizations, registrations, declarations and filings as may be required under

applicable federal and state securities laws and the laws of any foreign

country, and (vi) such other consents, authorizations, filings, approvals, and

registrations which, if not obtained or made, would not have a Material Adverse

Effect on Parent.

3.5 SEC Filings, Parent Financial Statements.

(a) Parent has filed all forms, reports, and documents

required to be filed with the SEC since January 1, 2000 and has made available

to the Company, in the form filed with the SEC, (i) its Annual Reports on Form

10-K for the fiscal years ended December 31, 2000, 2001, 2002, and 2003, (ii)

all proxy statements relating to Parent's meetings of stockholders (whether

annual or special) held since January 1, 2000, (iii) all information statements

relating to stockholder actions since January 1, 2000, (iv) all other reports or

<PAGE>

registration statements filed by Parent with the SEC since January 1, 2000, and

(v) all amendments and supplements to all such reports, proxy statements,

information statements, and registration statements filed by Parent with the

SEC; and Parent will make available to the Company in the form filed with the

SEC, as soon as practicable, its Quarterly Report on Form 10-Q for the period

ended March 31, 2004. All such required forms, reports and documents (including

those enumerated in clauses (i) through

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