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                          AGREEMENT AND PLAN OF MERGER
                                  BY AND AMONG

                              SIGMA CIRCUITS, INC.

                                       and

                             T MERGER SUB (OR), INC.

                                       and

                           PRAEGITZER INDUSTRIES, INC.

                              with the Guarantee of

                             TYCO INTERNATIONAL LTD.

                         ------------------------------


                          Dated as of October 26, 1999



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                                TABLE OF CONTENTS

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                                                     ARTICLE I
                                              TENDER OFFER AND MERGER

1.1      The Offer..............................................................................................  7
1.2      Company Action.........................................................................................  8
1.3      Directors.............................................................................................. 10
1.4      The Merger............................................................................................. 11
1.5      Effective Time......................................................................................... 11
1.6      Conversion of Common Shares............................................................................ 11
1.7      Dissenting Shares...................................................................................... 12
1.8      Surrender of Common Shares............................................................................. 12
1.9      Options, Warrants and Employee Stock Purchase Plan..................................................... 14
1.10     Articles of Incorporation and Bylaws................................................................... 15
1.11     Directors and Officers................................................................................. 15
1.12     Other Effects of Merger................................................................................ 15
1.13     Proxy Statement........................................................................................ 15
1.14     Additional Actions..................................................................................... 16
1.15     Merger Without Meeting of Shareholders................................................................. 16
1.16     Lost, Stolen or Destroyed Certificates................................................................. 16
1.17     Material Adverse Effect................................................................................ 17

                                                    ARTICLE II
                                   REPRESENTATIONS AND WARRANTIES OF THE COMPANY

2.1      Organization and Good Standing......................................................................... 18
2.2      Capitalization......................................................................................... 18
2.3      Subsidiaries........................................................................................... 19
2.4      Authorization; Binding Agreement....................................................................... 19
2.5      Governmental Approvals................................................................................. 20
2.6      No Violations.......................................................................................... 20
2.7      Securities Filings..................................................................................... 20
2.8      Company Financial Statements........................................................................... 21
2.9      Absence of Certain Changes or Events................................................................... 21
2.10     No Undisclosed Liabilities............................................................................. 22
2.11     Compliance with Laws................................................................................... 22
2.12     Permits................................................................................................ 22
2.13     Litigation............................................................................................. 22
2.14     Contracts.............................................................................................. 22
2.15     Employee Benefit Plans................................................................................. 23
2.16     Taxes and Returns...................................................................................... 26
2.17     Intellectual Property.................................................................................. 28
2.18     Disclosure Documents................................................................................... 29
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2.19     Labor Matters.......................................................................................... 29
2.20     Limitation on Business Conduct......................................................................... 30
2.21     Title to Property...................................................................................... 30
2.22     Owned and Leased Premises.............................................................................. 30
2.23     Environmental Matters.................................................................................. 30
2.24     Insurance.............................................................................................. 32
2.25     Product Liability and Recalls.......................................................................... 32
2.26     Customers.............................................................................................. 33
2.27     Interested Party Transactions.......................................................................... 33
2.28     Finders and Investment Bankers......................................................................... 33
2.29     Fairness Opinion....................................................................................... 33
2.30     Takeover Statutes...................................................................................... 33
2.31     Full Disclosure........................................................................................ 33
2.32     Year 2000.............................................................................................. 34
2.33     Rights Agreements...................................................................................... 34
2.34     Absence of Certain Payments............................................................................ 34

                                                    ARTICLE III
                              REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

3.1      Organization and Good Standing......................................................................... 35
3.2      Authorization; Binding Agreement....................................................................... 35
3.3      Governmental Approvals................................................................................. 35
3.4      No Violations.......................................................................................... 36
3.5      Disclosure Documents................................................................................... 36
3.6      Finders and Investment Bankers......................................................................... 36
3.7      Financing Arrangements................................................................................. 37
3.8      No Prior Activities.................................................................................... 37

                                                    ARTICLE IV
                                        ADDITIONAL COVENANTS OF THE COMPANY

4.1      Conduct of Business of the Company and the Company Subsidiaries........................................ 37
4.2      Notification of Certain Matters........................................................................ 40
4.3      Access and Information................................................................................. 40
4.4      Shareholder Approval................................................................................... 40
4.5      Reasonable Best Efforts................................................................................ 41
4.6      Public Announcements................................................................................... 41
4.7      Compliance............................................................................................. 41
4.8      No Solicitation........................................................................................ 41
4.9      SEC and Shareholder Filings............................................................................ 44
4.10     Takeover Statutes...................................................................................... 44
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4.11     Company Options and Stock Purchase Plan ............................................................... 44

                                                     ARTICLE V
                                   ADDITIONAL COVENANTS OF PURCHASER AND PARENT

5.1      Reasonable Best Efforts................................................................................ 44
5.2      Public Announcements................................................................................... 45
5.3      Compliance............................................................................................. 45
5.4      Employee Benefit Plans................................................................................. 45
5.5      Indemnification........................................................................................ 46
5.6      Voting of Common Shares................................................................................ 46
5.7      Guarantee of Parent.................................................................................... 46

                                                    ARTICLE VI
                                                 MERGER CONDITIONS

6.1      Offer.................................................................................................. 47
6.2      Shareholder Approval................................................................................... 47
6.3      No Injunction or Action................................................................................ 47
6.4      Governmental Approvals................................................................................. 47

                                                    ARTICLE VII
                                            TERMINATION AND ABANDONMENT

7.1      Termination............................................................................................ 47
7.2      Effect of Termination and Abandonment.................................................................. 49

                                                   ARTICLE VIII
                                                   MISCELLANEOUS

8.1      Confidentiality........................................................................................ 50
8.2      Amendment and Modification............................................................................. 51
8.3      Waiver of Compliance; Consents......................................................................... 51
8.4      Survival............................................................................................... 51
8.5      Notices................................................................................................ 51
8.6      Binding Effect; Assignment............................................................................. 52
8.7      Expenses............................................................................................... 52
8.8      Governing Law.......................................................................................... 53
8.9      Counterparts........................................................................................... 54
8.10     Interpretation......................................................................................... 54
8.11     Entire Agreement....................................................................................... 54
8.12     Severability........................................................................................... 54
8.13     Specific Performance................................................................................... 55
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8.14     Third Parties.......................................................................................... 55
8.15     Disclosure Letter...................................................................................... 55
8.16     Jurisdiction........................................................................................... 55
8.17     Waiver of Jury Trial................................................................................... 55

                  GUARANTEE..................................................................................... 58
                  GLOSSARY OF DEFINED TERMS..................................................................... 59
                  ANNEX I.......................................................................................A-1
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                          AGREEMENT AND PLAN OF MERGER

         This Agreement and Plan of Merger (this "AGREEMENT") is made and
entered into as of October 26, 1999, by and among Sigma Circuits, Inc.,
("PARENT"), a Delaware company and an indirect subsidiary of Tyco International
Ltd., a Bermuda company ("GUARANTOR"), T Merger Sub (OR), Inc., an Oregon
corporation and a direct wholly owned subsidiary of Parent ("PURCHASER"), and
Praegitzer Industries, Inc., an Oregon corporation (the "COMPANY").

                              W I T N E S S E T H:

                  WHEREAS, the respective Boards of Directors of the Company,
Purchaser and Parent have approved the acquisition by Purchaser of the Company;
and

                  WHEREAS, in furtherance thereof, it is proposed that Purchaser
will make a cash tender offer (the "OFFER") to acquire all of the issued and
outstanding shares of common stock of the Company ("COMMON SHARES"), for $5.50
per share, or such higher price as may be paid in the Offer (the "PER SHARE
AMOUNT"), subject to any applicable withholding, net to the seller in cash
without interest; and

                  WHEREAS, also in furtherance of such acquisition, the
respective Boards of Directors of the Company, Purchaser and Parent have each
approved the merger (the "MERGER") of Purchaser with and into the Company
following the Offer in accordance with the laws of the State of Oregon; and

                  WHEREAS, concurrently with the execution of this Agreement and
as an inducement to Parent to enter into this Agreement, Parent, Purchaser and
the majority shareholder of the Company are entering into a Shareholder's
Agreement pursuant to which such holder has, among other things, agreed to
tender all of his Common Shares in the Offer, upon the terms and subject to the
conditions set forth in the Shareholder's Agreement; and

                  WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition to the Company's willingness to enter into this
Agreement, Guarantor has agreed fully and unconditionally to guarantee the
representations, warranties, covenants, agreements and other obligations of
Parent and Purchaser in this Agreement (the "GUARANTEE"); and

                  WHEREAS, the Board of Directors of the Company has approved
and resolved to recommend acceptance of the Offer and the Merger to the holders
of Common Shares and has determined that the consideration to be paid for each
Share in the Offer and the Merger is fair to and in the best interest of the
holders of Common Shares and to recommend that the holders of such Common Shares
accept the Offer and that the holders of Common Shares approve this Agreement
and the transactions contemplated hereby; and

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                  WHEREAS, the Company, Purchaser and Parent desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the transactions contemplated hereby;

                  NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:

                                    ARTICLE I
                             TENDER OFFER AND MERGER

                  1.1 THE OFFER. (a) Provided that this Agreement shall not have
been terminated in accordance with SECTION 7.1 hereof and that none of the
events set forth in ANNEX I hereto shall have occurred and be existing,
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"SECURITIES EXCHANGE ACT")) the Offer as promptly as practicable, but in no
event later than five business days following the first public announcement of
the Offer, and shall use reasonable best efforts to consummate the Offer. The
obligation of Purchaser to accept for payment any Common Shares tendered shall
be subject to the satisfaction of only those conditions set forth in ANNEX I
hereto. The Per Share Amount payable in the Offer shall be net to each seller in
cash, subject to reduction only for any applicable withholding or stock transfer
taxes payable by such seller. The Company agrees that no Common Shares held by
the Company or any Company Subsidiaries (as defined below) will be tendered
pursuant to the Offer.

                  (b) Without the prior written consent of the Company,
Purchaser shall not (i) decrease the Per Share Amount or change the form of
consideration payable in the Offer, (ii) decrease the number of Common Shares
sought in the Offer, (iii) amend or waive satisfaction of the Minimum Condition
(as defined in ANNEX I hereto) or (iv) impose additional conditions to the Offer
or amend any other term of the Offer in any manner adverse to the holders of the
Common Shares. The Offer shall initially expire twenty (20) business days after
the date of its commencement, unless this Agreement is terminated in accordance
with SECTION 7.1 hereof, in which case the Offer (whether or not previously
extended in accordance with the terms hereof) shall expire on such date of
termination. Purchaser agrees that it shall not terminate or withdraw the Offer
or extend the expiration date of the Offer unless at the expiration date of the
Offer the conditions to the Offer described in ANNEX I hereto shall not have
been satisfied or earlier waived. Notwithstanding the foregoing, Purchaser may,
without the consent of the Company, extend the Offer at any time, and from time
to time, (i) if at the then scheduled expiration date of the Offer any of the
conditions to Purchaser's obligation to accept for payment and pay for Common
Shares shall not have been satisfied or waived, until such time as such
conditions are satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or its staff applicable to the Offer; or (iii) if all conditions to
Purchaser's

                                       -7-


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obligation to accept for payment and pay for Common Shares are satisfied or
waived but the number of Common Shares tendered is less than 90% of the then
outstanding number of Common Shares, for an aggregate period of not more than
ten (10) business days (for all such extensions) beyond the latest expiration
date that would be permitted under clause (i) or (ii) of this sentence.

                  (c) The Offer shall be made by means of an offer to purchase
(the "OFFER TO PURCHASE") having only the conditions set forth in ANNEX I
hereto. As soon as practicable on the date the Offer is commenced, Purchaser
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (together
with all amendments and supplements thereto, the "SCHEDULE 14D-1") with respect
to the Offer that will comply in all material respects with the provisions of,
and satisfy in all material respects the requirements of, such Schedule 14D-1
and all applicable federal securities laws and will contain (including as an
exhibit) or incorporate by reference the Offer to Purchase and forms of the
related letter of transmittal and summary advertisement (which documents,
together with any supplements or amendments thereto, and any other SEC schedule
or form which is filed in connection with the Offer and related transactions,
are referred to collectively herein as the "OFFER DOCUMENTS"). Each of Parent,
Purchaser and the Company agrees promptly to correct any information provided by
it for use in the Schedule 14D-1 or the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect and to supplement the information provided by it specifically for use in
the Schedule 14D-1 or the Offer Documents to include any information that shall
become necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and Purchaser further
agrees to take all steps necessary to cause the Schedule 14D-1, as so corrected
or supplemented, to be filed with the SEC and the Offer Documents, as so
corrected or supplemented, to be disseminated to holders of Common Shares, in
each case as and to the extent required by applicable federal securities laws.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on any Offer Documents before they are filed with the SEC, and
Parent and Purchaser shall consider any such comments in good faith.

                  (d) Upon the terms and subject to the conditions of the Offer,
Purchaser shall accept for payment and pay for Common Shares as soon as
permitted under the terms of the Offer and applicable law.

                  1.2 COMPANY ACTION. (a) The Company hereby approves and
consents to the Offer and represents and warrants that the Board of Directors of
the Company, at a meeting duly called and held on October 25, 1999, at which all
of the Directors was present, duly approved and adopted this Agreement and the
transactions contemplated hereby, including the Offer and the Merger,
recommended that shareholders of the Company accept the Offer, tender their
Common Shares pursuant to the Offer and approve this Agreement and the
transactions contemplated hereby, including the Merger, and determined that this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, are fair

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to and in the best interests of the shareholders of the Company. The Company
hereby consents to the inclusion in the Offer Documents of such recommendation
of the Board of Directors of the Company. The Company represents that its Board
of Directors has received the written opinion (the "FAIRNESS OPINION") of Adams,
Harkness & Hill, Inc. (the "FINANCIAL ADVISOR") that the proposed consideration
to be received by the holders of Common Shares pursuant to the Offer and the
Merger is fair to such holders from a financial point of view. The Company has
been authorized by the Financial Advisor to permit, subject to the prior review
and consent by the Financial Advisor (such consent not to be unreasonably
withheld), the inclusion of the Fairness Opinion (or a reference thereto) in the
Offer Documents, the Schedule 14D-9 (as hereinafter defined) and the Proxy
Statement (as hereinafter defined).

                  (b) The Company shall file with the SEC, as promptly as
practicable after the filing by Parent of the Schedule 14D-1 with respect to the
Offer, a Tender Offer Solicitation/ Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "SCHEDULE 14D-9") that
will comply in all material respects with the provisions of all applicable
federal securities laws. The Company shall mail such Schedule 14D-9 to the
shareholders of the Company as promptly as practicable after the commencement of
the Offer. The Schedule 14D-9 and the Offer Documents shall contain the
recommendations of the Board of Directors of the Company described in SECTION
1.2(a) hereof. The Company agrees promptly to correct the Schedule 14D-9 if and
to the extent that it shall become false or misleading in any material respect
(and each of Parent and Purchaser, with respect to written information supplied
by it specifically for use in the Schedule 14D-9, shall promptly notify the
Company of any required corrections of such information and cooperate with the
Company with respect to correcting such information) and to supplement the
information contained in the Schedule 14D-9 to include any information that
shall become necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Company shall
take all steps necessary to cause the Schedule 14D-9 as so corrected or
supplemented to be filed with the SEC and disseminated to holders of Common
Shares to the extent required by applicable federal securities laws. Purchaser
and its counsel shall be given a reasonable opportunity to review and comment on
the Schedule 14D-9 before it is filed with the SEC, and the Company shall
consider any such comments in good faith.

                  (c) In connection with the Offer, the Company shall promptly
upon execution of this Agreement furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Common Shares and
security position listings of Common Shares held in stock depositories, each as
of a recent date, and shall promptly furnish Purchaser with such additional
information reasonably available to the Company, including updated lists of
shareholders, mailing labels and security position listings, and such other
information and assistance as Purchaser or its agents may reasonably request for
the purpose of communicating the Offer to the record and beneficial holders of
Common Shares. Subject to the requirements of applicable law and except as
necessary to disseminate the Offer Documents and otherwise for the purpose of
effecting the transactions contemplated hereby,


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Parent and Purchaser shall hold in confidence the materials furnished pursuant
to this SECTION 1.2(c), use such information only in connection with the Offer,
the Merger and the other transactions contemplated by this Agreement and, if
this Agreement is terminated, as promptly as practicable return to the Company
such materials and all copies thereof in the possession of Parent and Purchaser.

                  1.3 DIRECTORS. Promptly upon the purchase by Parent of Common
Shares pursuant to the Offer (and provided that the Minimum Condition has been
satisfied), Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company as
will give Parent, subject to compliance with Section 14(f) of the Securities
Exchange Act, representation on the Board of Directors of the Company equal to
at least that number of directors which equals the product of the total number
of directors on the Board of Directors of the Company (giving effect to the
directors appointed or elected pursuant to this sentence and including current
directors serving as officers of the Company) multiplied by the percentage that
the aggregate number of Common Shares beneficially owned by Parent or any
affiliate of Parent (including for purposes of this SECTION 1.3 such Common
Shares as are accepted for payment pursuant to the Offer, but excluding Common
Shares held by the Company) bears to the number of Common Shares outstanding. At
such time, if requested by Parent, the Company will also cause each committee of
the Board of Directors of the Company to include persons designated by Parent
constituting the same percentage of each such committee as Parent's designees
are of the Board of Directors of the Company. The Company shall, upon request by
Parent, promptly increase the size of the Board of Directors of the Company or
exercise reasonable best efforts to secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors of the Company in accordance with the terms of this SECTION
1.3 and to cause Parent's designees so to be elected; PROVIDED, HOWEVER, that,
in the event that Parent's designees are appointed or elected to the Board of
Directors of the Company, until the Effective Time (as hereinafter defined) the
Board of Directors of the Company shall have at least two directors who are
directors on the date hereof, one of whom will be Robert Praegitzer and one of
whom will be a director who is neither an officer of the Company nor a designee,
shareholder, affiliate or associate (within the meaning of the federal
securities laws) of Guarantor (such directors, the "INDEPENDENT DIRECTORS").
Subject to applicable law, the Company shall promptly take all action necessary
pursuant to Section 14(f) of the Securities Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under this SECTION
1.3 and shall include in the Schedule 14D-9 mailed to shareholders promptly
after the commencement of the Offer (or in an amendment thereof or an
information statement pursuant to Rule 14f-1 if Parent has not theretofore
designated directors) such information with respect to the Company and its
officers and directors as is required under Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this SECTION 1.3. Parent will supply the
Company, and be solely responsible for, any information with respect to itself
and its nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1. Notwithstanding anything in this Agreement to the
contrary, subsequent to the designation of the directors by Parent referred to
in the first sentence of this

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Section 1.3 and prior to the Effective Time, the unanimous vote of the
Independent Directors shall be required to (i) amend or terminate this Agreement
on behalf of the Company, (ii) exercise or waive any of the Company's rights or
remedies hereunder, (iii) extend the time for performance of Parent's
obligations hereunder, (iv) take any other action by the Company in connection
with this Agreement required to be taken by the Board of Directors of the
Company or (v) amend the Company's Second Amended and Restated Articles of
Incorporation or the Company's Bylaws, each as in effect on the date of this
Agreement.

                  1.4 THE MERGER. Upon the terms and subject to the conditions
of this Agreement, the Merger shall be consummated in accordance with the Oregon
Business Corporation Act (the "OREGON CODE"). At the Effective Time (as defined
in SECTION 1.5 hereof), upon the terms and subject to the conditions of this
Agreement, Purchaser shall be merged with and into the Company in accordance
with the Oregon Code and the separate existence of Purchaser shall thereupon
cease, and the Company, as the surviving corporation in the Merger (the
"SURVIVING CORPORATION"), shall continue its corporate existence under the laws
of the State of Oregon as an indirect subsidiary of Parent. The parties shall
prepare and execute articles of merger (the "ARTICLES OF MERGER") that comply in
all respects with the requirements of the Oregon Code and with the provisions of
this Agreement.

                  1.5 EFFECTIVE TIME. The Merger shall become effective at the
time of the filing of the Articles of Merger with the Secretary of State of
Oregon in accordance with the applicable provisions of the Oregon Code or at
such later time as may be specified in the Articles of Merger. As soon as
practicable after all of the conditions set forth in ARTICLE VI of this
Agreement have been satisfied or waived by the party or parties entitled to the
benefit of the same, the parties hereto shall cause the Merger to become
effective. Parent and the Company shall mutually determine the time of such
filing and the place where the closing of the Merger (the "CLOSING") shall
occur. The time when the Merger shall become effective is herein referred to as
the "EFFECTIVE TIME," and the date on which the Effective Time occurs is herein
referred to as the "CLOSING DATE."

                  1.6 CONVERSION OF COMMON SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holder of any of the securities specified below:

                  (a) Each Common Share issued and outstanding immediately
before the Effective Time (other than any Dissenting Shares (as hereinafter
defined) and Common Shares to be canceled pursuant to SECTION 1.6(b)) shall be
canceled and extinguished and be converted into the right to receive the Per
Share Amount in cash payable to the holder thereof, without interest, upon
surrender of the certificate representing such Common Share in accordance with
SECTION 1.8 hereof. From and after the Effective Time, the holders of
certificates evidencing ownership of Common Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such Common
Shares except as otherwise provided for herein or by applicable Law (as defined
below).

                                      -11-


<PAGE>


                  (b) Each Common Share owned by Guarantor, Parent, Purchaser or
any direct or indirect wholly owned subsidiary of Guarantor immediately before
the Effective Time shall be canceled and extinguished, and no payment or other
consideration shall be made with respect thereto.

                  (c) The shares of Purchaser common stock outstanding
immediately prior to the Merger shall be converted into 1,000 shares of the
common stock of the Surviving Corporation (the "SURVIVING CORPORATION COMMON
STOCK"), which shares of the Surviving Corporation Common Stock shall constitute
all of the issued and outstanding capital stock of the Surviving Corporation and
shall be owned by Parent.

                  1.7 DISSENTING SHARES. (a) Notwithstanding any provision of
this Agreement to the contrary, any Common Shares issued and outstanding
immediately prior to the Effective Time and held by a holder who has demanded
and perfected his demand for appraisal of his Common Shares in accordance with
the Oregon Code (including but not limited to Sections 60.561 - 60.581 thereof),
and as of the Effective Time has neither effectively withdrawn nor lost his
right to such appraisal ("DISSENTING SHARES"), shall not be converted into or
represent a right to receive cash pursuant to SECTION 1.6 hereof, but the holder
thereof shall be entitled to only such rights as are granted by the Oregon Code.

                  (b) Notwithstanding the provisions of SECTION 1.7(a) hereof,
if any holder of Common Shares who demands appraisal of his Common Shares under
the Oregon Code shall effectively withdraw or lose (through failure to perfect
or otherwise) his right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever occurs later, such holder's Common Shares
shall automatically be converted into and represent only the right to receive
cash as provided in SECTION 1.6 hereof, without interest thereon, upon surrender
of the certificate or certificates representing such Common Shares.

                  (c) The Company shall give Purchaser (i) prompt notice of any
written demands for appraisal or payment of the fair value of any Common Shares,
withdrawals of such demands and any other instruments served pursuant to the
Oregon Code received by the Company after the date hereof and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the Oregon Code. The Company shall not voluntarily make any
payment with respect to any demands for appraisal and shall not, except with the
prior written consent of Purchaser, settle or offer to settle any such demands.

                  1.8 SURRENDER OF COMMON SHARES. (a) Prior to the Effective
Time, Purchaser shall appoint ChaseMellon Shareholder Services, L.L.C. or such
other commercial bank or trust company designated by Purchaser and reasonably
acceptable to the Company to act as exchange agent hereunder (the "EXCHANGE
AGENT") for the payment of the Per Share Amount upon surrender of certificates
representing the Common Shares. All of the fees and


                                      -12-


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expenses of the Exchange Agent shall be borne by Purchaser.

                  (b) Parent shall cause the Surviving Corporation to provide
the Exchange Agent with cash in amounts necessary to pay for all of the Common
Shares pursuant to SECTION 1.8(c) hereof when and as such amounts are needed by
the Exchange Agent.

                  (c) On the Closing Date, Purchaser shall instruct the Exchange
Agent to mail to each holder of record of a certificate representing any Common
Shares canceled upon the Merger pursuant to SECTIONS 1.6(a) hereof, within five
business days of receiving from the Company a list of such holders of record,
(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. Each holder
of a certificate or certificates representing any Common Shares canceled upon
the Merger pursuant to SECTIONS 1.6(a) hereof may thereafter surrender such
certificate or certificates to the Exchange Agent, as agent for such holder, to
effect the surrender of such certificate or certificates on such holder's behalf
for a period ending one year after the Effective Time. Upon the surrender of
certificates representing the Common Shares, Parent shall cause the Exchange
Agent to pay the holder of such certificates in exchange therefor cash in an
amount equal to the Per Share Amount multiplied by the number of Common Shares
represented by such certificate. Until so surrendered, each such certificate
(other than certificates representing Dissenting Shares) shall represent solely
the right to receive the aggregate Per Share Amount relating thereto.

                  (d) If payment of cash in respect of canceled Common Shares is
to be made to a person other than the person in whose name a surrendered
certificate or instrument is registered, it shall be a condition to such payment
that the certificate or instrument so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the person requesting
such payment shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of Parent or the Exchange Agent that such tax either has been paid
or is not payable.

                  (e) At the Effective Time, the stock transfer books of the
Company shall be closed, and no transfer of Common Shares shall be made
thereafter, other than transfers of Common Shares that have occurred prior to
the Effective Time. In the event that, after the Effective Time, certificates
are presented to the Surviving Corporation, they shall be canceled and exchanged
for cash as provided in SECTIONS 1.6(a).

                  (f) The Per Share Amount paid in the Merger shall be net to
the holder of Common Shares in cash, and without interest thereon subject to
reduction only for any applicable withholding or stock transfer taxes payable by
such holder.

                                      -13-


<PAGE>


                  (g) Promptly following the date which is one year after the
Effective Time, the Exchange Agent shall deliver to Parent all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a certificate representing Common Shares (other than
certificates representing Dissenting Shares and certificates representing Common
Shares held directly or indirectly by Purchaser, Parent or Guarantor) may
surrender such certificate to the Surviving Corporation and (subject to any
applicable abandoned property, escheat or similar law) receive in consideration
therefor the aggregate Per Share Amount relating thereto, without any interest
thereon.

                  (h) None of the Company, Parent, Purchaser, Guarantor, the
Surviving Corporation or the Exchange Agent shall be liable to any holder of
Common Shares for any cash delivered to a public official pursuant to any
abandoned property, escheat or similar law, rule, regulation, statute, order,
judgment or decree.

                  1.9 OPTIONS, WARRANTS AND EMPLOYEE STOCK PURCHASE PLAN. (a)
Each option outstanding immediately prior to the Effective Time to purchase
Common Shares (a "COMPANY OPTION") under the Company's 1995 Stock Incentive Plan
or any other stock option plan or agreement of the Company, whether or not then
vested or exercisable, shall constitute the right to receive an amount in cash
equal to the positive difference, if any, between the Per Share Amount and the
exercise price of the Company Option multiplied by the number of Common Shares
for which the Company Option was exercisable immediately prior to the Effective
Time, subject to reduction only for any applicable withholding taxes. The
Company shall provide a period of at least 30 days prior to the Effective Time
during which Company Options may be exercised to the extent exercisable at the
Effective Time and, upon the expiration of such period, all unexercised Company
Options shall immediately terminate. The Company may, in its sole discretion,
permit holders of Company Options that are not exercisable before the Effective
Time to exchange such options for cash as described in the first sentence of
this Section 1.9(a). In lieu of exercising Company Options as described in this
Section 1.9(a), the holders shall be given the right, and the Company shall
encourage the holders of Company Options to exercise such right, to exchange
such options for cash as described in the first sentence of this Section 1.9(a).
In no event will any Company Options be exercisable after the Effective Time,
except to receive cash as provided in the first sentence of this Section 1.9(a).

                  (b) Each of the warrants of the Company, dated November 17,
1995, to purchase Common Shares at a price of $12.00 per share, subject to
adjustment (the "COMPANY WARRANTS"), shall be exercisable, from and after the
Effective Time, for an amount of cash equal to the Per Share Amount multiplied
by the number of Common Shares for which such warrant was exercisable
immediately prior to the Effective Time. Except as aforesaid, the exercise of
any Company Warrant shall remain subject to all terms and conditions provided in
the applicable Company Warrant and/or Warrant Agreement. Each of the Company and
Parent shall take all action necessary to provide that, upon consummation

                                      -14-


<PAGE>


of the Merger, all Company Warrants outstanding immediately prior to the
Effective Time shall be exercisable for a cash amount as aforesaid.

                  (c) The Company shall take such action as is necessary to
cause the ending date of the then current offering period under the Company's
employee stock purchase plan (the "COMPANY STOCK PURCHASE PLAN") to be prior to
the Effective Time and to terminate such plan as of the Effective Time.

                  1.10 ARTICLES OF INCORPORATION AND BYLAWS. Subject to SECTION
5.5 hereof, unless otherwise determined by Parent prior to the Effective Time,
at and after the Effective Time (a) the Second Amended and Restated Articles of
Incorporation of the Company, 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 the Oregon Code and such Articles of
Incorporation; PROVIDED, HOWEVER, that (i) Article II shall be amended and
restated in its entirety to provide that the capital stock of the Surviving
Corporation shall consist solely of 1,000 shares of common stock; and (b) the
Bylaws of the Surviving Corporation shall be the Bylaws of Purchaser in effect
at the Effective Time (subject to any subsequent amendments).

                  1.11 DIRECTORS AND OFFICERS. At and after the Effective Time,
the directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their successors are duly elected or
appointed and qualified.

                  1.12 OTHER EFFECTS OF MERGER. The Merger shall have all
further effects as specified in the applicable provisions of the Oregon Code.

                  1.13 PROXY STATEMENT. (a) Following the consummation of the
Offer and if required by the Securities Exchange Act because of action by the
Company's shareholders necessary in order to consummate the Merger, the Company
shall prepare and file with the SEC and, when cleared by the SEC, shall mail to
shareholders, a proxy statement in connection with a meeting of the Company's
shareholders to vote upon the adoption of this Agreement and the Merger and the
transactions contemplated hereby and thereby (the "COMPANY PROPOSALS"), or an
information statement, as appropriate, satisfying all requirements of the
Securities Exchange Act (such proxy or information statement in the form mailed
by the Company to its shareholders, together with any and all amendments or
supplements thereto, is herein referred to as the "PROXY STATEMENT").

                  (b) Parent will furnish the Company with such information
concerning Parent and its subsidiaries as is necessary in order to cause the
Proxy Statement, insofar as it relates to Parent and its subsidiaries, to comply
with applicable Law. Parent agrees promptly to advise the Company if, at any
time prior to the meeting of shareholders of the Company

                                      -15-


<PAGE>


referenced herein, any Parent Information (as defined below) in the Proxy
Statement is or becomes incorrect or incomplete in any material respect and to
provide the Company with the information needed to correct such inaccuracy or
omission. Parent will furnish the Company with such supplemental information as
may be necessary in order to cause the Proxy Statement, insofar as it relates to
Guarantor and its subsidiaries, to comply with applicable Law after the mailing
thereof to the shareholders of the Company.

                  (c) The Company and Parent agree to cooperate in making any
preliminary filings of the Proxy Statement with the SEC, as promptly as
practicable, pursuant to Rule 14a-6 or Rule 14c-5, as applicable, under the
Securities Exchange Act.

                  (d) The Company shall provide Parent for its review a copy of
the Proxy Statement prior to each filing thereof, with reasonable time and
opportunity for such review. Parent authorizes the Company to utilize in the
Proxy Statement the information concerning Parent and its subsidiaries provided
to the Company in connection with, or contained in, the Proxy Statement.

                  1.14 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Purchaser or the Company or otherwise to carry
out this Agreement, the officers and directors of the Company and Purchaser
shall be authorized to execute and deliver, in the name and on behalf of
Purchaser or the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Purchaser or the
Company, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.

                  1.15 MERGER WITHOUT MEETING OF SHAREHOLDERS. Notwithstanding
the foregoing provisions of this ARTICLE I, in the event that Purchaser, or any
other direct or indirect subsidiary of Parent, shall acquire at least 90 percent
of the outstanding Common Shares, the parties hereto agree to take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a meeting of shareholders
of the Company, in accordance with Section 60.491 of the Oregon Code.

                  1.16 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates representing shares of Common Shares shall have been lost, stolen
or destroyed, the Exchange Agent shall make such payment in exchange for such
lost, stolen or destroyed certificates upon the making of an affidavit of that
fact by the holder thereof; PROVIDED, HOWEVER, that Parent may, in its
discretion and as a condition precedent to the issuance

                                      -16-


<PAGE>


thereof, require the owner of such lost, stolen or destroyed certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.

                  1.17 MATERIAL ADVERSE EFFECT. (a) When used in connection with
the Company or any Company Subsidiaries (as defined below) or Parent, Guarantor
or any of their respective subsidiaries, as the case may be, the term "MATERIAL
ADVERSE EFFECT" means any change, effect or circumstance that, individually or
when taken together with all other similar changes, effects or circumstances
that have occurred during the period relevant to the determination of such
Material Adverse Effect, is or is reasonably likely to be materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Company and any Company Subsidiaries or Parent,
Guarantor and their respective subsidiaries, as the case may be, in each case
taken as a whole; PROVIDED, HOWEVER, that effects of changes that are applicable
to or arise on account of (A) any changes in economic, regulatory, or political
conditions generally, (B) the United States securities markets, (C) this
Agreement or the transactions contemplated by this Agreement and (D) the effect
of the public announcement of the transactions contemplated hereby, including
any effect on customers or employees of the Company, shall be excluded from the
definition of "Material Adverse Effect" and from any determination as to whether
a Material Adverse Effect has occurred or may occur.

                  (b) The failure of a representation or warranty to be true and
correct, either individually or together with the failure of other
representations or warranties to be true and correct, shall be deemed to have a
Material Adverse Effect if (x) the business, assets (including intangible
assets), financial condition, results of operations, or prospects of the Company
and its subsidiaries or Parent or Guarantor and their subsidiaries, as the case
may be, in each case taken as a whole, are or would reasonably be expected to be
materially worse than if such representation or warranty had been true and
correct, (y) in the case of the Company, such representation or warranty
materially misstates the capitalization of the Company and/or its subsidiaries
or (z) the failure of such representation or warranty to be true and correct
materially and adversely affects the ability of the Company or Parent, as the
case may be, to timely consummate the transactions contemplated by this
Agreement.

                                   ARTICLE II
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  The Company represents and warrants to Parent and Purchaser
that, except as set forth in the correspondingly numbered Sections of the
letter, dated the date hereof, from the Company to Parent (the "COMPANY
DISCLOSURE LETTER"):

                                      -17-


<PAGE>


                  2.1 ORGANIZATION AND GOOD STANDING. The Company and each of
the Company Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company and
each of the Company Subsidiaries is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not reasonably be
expected to have a Material Adverse Effect. The Company has heretofore made
available to Parent accurate and complete copies of the Articles of
Incorporation and Bylaws, as currently in effect, of the Company. For purposes
of this Agreement, the term "COMPANY SUBSIDIARY" shall mean any "subsidiary" (as
such term is defined in Rule 1-02 of Regulation S-X of the SEC) of the Company.

                  2.2 CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (A) 50,000,000 Common Shares and (B)
500,000 shares of preferred stock (the "PREFERRED SHARES"). As of October 22,
1999, (i) 13,129,751 Common Shares were issued and outstanding, (ii) no shares
of Preferred Shares were issued and outstanding, (iii) 1,809,550 Common Shares
were reserved for future issuance pursuant to outstanding Company Options, of
which 752,431 shares are or will be exercisable before March 1, 2000 and 546,750
shares become exercisable on or after that date at prices below $5.50 per share,
(iv) no Common Shares were reserved for future issuance pursuant to the Company
Stock Purchase Plan, (v) 46,333 shares of Common Shares were reserved for future
issuance upon exercise of Company Warrants, (vi) 1,743,559 Common Shares were
reserved for future issuance upon exercise of the conversion rights contained in
that certain Deferral Loan and Lease Modification Agreement dated as of October
12, 1999 among the Company and the lenders and lessors named therein (the
"Deferral Agreement") (as of the date of this Agreement the Company has received
no notice of intent to exercise such conversion rights) and (vii) 1,381,382
Common Shares reserved for issuance upon the conversion of the Company's 9%
Convertible Subordinated Notes due December 29, 2008 (the "NOTES"). No material
change in the capitalization of the Company has occurred between October 22,
1999 and the date hereof. No other capital stock of the Company is authorized or
issued. All issued and outstanding Common Shares are duly authorized, validly
issued, fully paid and non-assessable. Except as set forth in the Company
Securities Filings (as hereinafter defined) filed prior to the date of this
Agreement or as otherwise contemplated by this Agreement, as of the date hereof,
there are no outstanding rights, subscriptions, warrants, puts, calls,
unsatisfied preemptive rights, options or other agreements of any kind relating
to any of the outstanding, authorized but unissued shares of the capital stock
or any other security of the Company, and there is no authorized or outstanding
security of any kind convertible into or exchangeable for any such capital stock
or other security. Except as disclosed in the Company Securities Filings filed
prior to the date of this Agreement, there are no obligations, contingent or
other, of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of Common Shares or the capital stock of any
Company

                                      -18-


<PAGE>


Subsidiary or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such Company Subsidiary or any other
entity.

                  2.3 SUBSIDIARIES. Section 2.3 of the Company Disclosure Letter
sets forth the name and jurisdiction of incorporation of each Company
Subsidiary, each of which is wholly owned by the Company except as otherwise
indicated in said Section 2.3 of the Company Disclosure Letter. Except as set
forth in Section 2.3 of the Company Disclosure Letter, all of the capital stock
and other interests of the Company Subsidiaries so held by the Company are owned
by it or a Company Subsidiary as indicated in said Section 2.3 of the Company
Disclosure Letter, free and clear of any claim, lien, encumbrance or security
interest with respect thereto. All of the outstanding shares of capital stock of
each of the Company Subsidiaries directly or indirectly held by the Company are
duly authorized, validly issued, fully paid and non-assessable and were issued
free of preemptive rights and in compliance with applicable Laws. No equity
securities or other interests of any of the Company Subsidiaries are or may
become required to be issued or purchased by reason of any options, warrants,
rights to subscribe to, puts, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any capital stock of any Company Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Company
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares. Except as
set forth in the Company Securities Filings filed prior to the date of this
Agreement or Section 2.3 of the Company Disclosure Letter, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity, with respect to which interest the Company has invested
or is required to invest $50,000 or more, excluding securities in any publicly
traded company held for investment by the Company and comprising less than five
percent of the outstanding stock of such company.

                  2.4 AUTHORIZATION; BINDING AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, including, but not limited to, the Merger, have been duly and validly
authorized by the Company's Board of Directors, and no other corporate
proceedings on the part of the Company or any Company Subsidiary are necessary
to authorize the execution and delivery of this Agreement or to consummate the
transactions contemplated hereby (other than adoption of this Agreement by the
holders of Common Shares with voting power equal to a majority of the voting
power of all outstanding Common Shares, if required, in accordance with the
Oregon Code). This Agreement has been duly and validly executed and delivered by
the Company and constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that enforceability thereof may be limited by applicable

                                      -19-


<PAGE>


bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity regarding
the availability of remedies (the "ENFORCEABILITY EXCEPTIONS").

                  2.5 GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("CONSENT") any nation
or government, any state or other political subdivision thereof or any entity,
authority or body exercising executive, legislative, judicial or regulatory
functions of or pertaining to government, including, without limitation, any
governmental or regulatory authority, agency, department, board, commission or
instrumentality, any court, tribunal or arbitrator and any self-regulatory
organization ("GOVERNMENTAL AUTHORITY"), on the part of the Company or any of
the Company Subsidiaries is required in connection with the execution or
delivery by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby other than (i) the filing of the Articles
of Merger with the Secretary of State of Oregon in accordance with the Oregon
Code, (ii) filings with the SEC, (iii) filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR ACT"), (iv) filings pursuant to the rules and
regulations of The NASDAQ Stock Market ("NASDAQ") and (v) those Consents that,
if they were not obtained or made, would not reasonably be expected to have a
Material Adverse Effect.

                  2.6 NO VIOLATIONS. Except as set forth in Section 2.6 of the
Company Disclosure Letter, the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by the
Company with any of the provisions hereof will not (i) conflict with or result
in any breach of any provision of the Second Amended and Restated Articles of
Incorporation or Bylaws of the Company or similar documents of any of the
Company Subsidiaries, (ii) require any Consent under or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of, any Company Material
Contract (as defined below ), (iii) result in the creation or imposition of any
lien or encumbrance of any kind upon any of the assets of the Company or any
Company Subsidiary or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in SECTION 2.5 hereof, violate any applicable provision
of any statute, law, rule or regulation or any order, decision, injunction,
judgment, award or decree ("LAW") to which the Company or any Company Subsidiary
or its assets or properties are subject, except, in the case of each of clauses
(ii), (iii) and (iv) above, for any deviations from the foregoing which would
not reasonably be expected to have a Material Adverse Effect.

                  2.7 SECURITIES FILINGS. The Company has made available to
Parent true and complete copies of (i) its Annual Report on Form 10-K and 10-K/A
for the Fiscal Year ended June 30, 1999, as filed with the SEC, (ii) its proxy
statements relating to all of the meetings of shareholders (whether annual or
special) of the Company since July 1, 1996 as filed with

                                      -20-

<PAGE>


the SEC, and (iii) all other reports, statements and registration statements and
amendments thereto (including, without limitation, Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, in each case as
amended) filed by the Company with the SEC since July 1, 1996. The reports and
statements set forth in clauses (i) through (iii) above, and those subsequently
provided or required to be provided pursuant to this SECTION 2.7, are referred
to collectively herein as the "COMPANY SECURITIES FILINGS." Except as set forth
in Section 2.7 of the Company Disclosure Letter, as of their respective dates,
or as of the date of the last amendment thereof, if amended after filing, the
Company Securities Filings (i) were prepared in all material respects in
accordance with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") and the rules and regulations promulgated thereunder, or the
Securities Exchange Act, as the case may be, and none of the Company Securities
Filings contained or, as to the Company Securities Filings subsequent to the
date hereof, will contain, any untrue statement of a material fact or omitted
or, as to the Company Securities Filings subsequent to the date hereof, will
omit, to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

                  2.8 COMPANY FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited interim financial statements of the Company
included in the Company Securities Filings (the "COMPANY FINANCIAL STATEMENTS")
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and present fairly, in all material respects, the financial
position of the Company and the Company Subsidiaries as at the dates thereof and
the results of their operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end audit adjustments, any other adjustments described therein and the fact
that certain information and notes have been condensed or omitted in accordance
with the Securities Exchange Act.

                  2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Company Securities Filings filed prior to the date of this Agreement or
Section 2.9 of the Company Disclosure Letter, from June 30, 1999, through the
date of this Agreement, there has not been: (i) any event that has had or would
reasonably be expected to have a Material Adverse Effect; (ii) any declaration,
payment or setting aside for payment of any dividend or other distribution or
any redemption or other acquisition of any shares of capital stock or securities
of the Company by the Company; (iii) any material damage or loss to any material
asset or property, whether or not covered by insurance; (iv) any change by the
Company in accounting principles or practices; (v) any material revaluation by
the Company of any of its assets, including writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary course of
business; (vi) any sale of a material amount of property of the Company, except
in the ordinary course of business; or (vii) any other action or event,
involving an amount exceeding $250,000, that would have required the consent of
Parent pursuant to SECTION 4.1 hereof had such action or event occurred after
the date of this Agreement.

                                      -21-

<PAGE>


                  2.10 NO UNDISCLOSED LIABILITIES. Except as set forth in the
Company Securities Filings filed prior to the date of this Agreement or Section
2.10 of the Company Disclosure Letter, neither the Company nor any Company
Subsidiary has any liabilities (absolute, accrued, contingent or other), except
liabilities (a) adequately provided for in the Company's audited balance sheet
(including any related notes thereto) for the fiscal year ended June 30, 1999
included in the Company's 1999 Annual Report on Form 10-K and 10-K/A (the "1999
BALANCE SHEET"), (b) incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected on the
1999 Balance Sheet, (c) incurred since June 30, 1999 in the ordinary course of
business consistent with past practice, (d) incurred in connection with this
Agreement or (e) which would not reasonably be expected to have a Material
Adverse Effect.

                  2.11 COMPLIANCE WITH LAWS. Except as set forth in Section 2.11
of the Company Disclosure Letter, the business of the Company and each of the
Company Subsidiaries has been operated in compliance with all Laws applicable
thereto, except for any non-compliance which would not reasonably be expected to
have a Material Adverse Effect.

                  2.12 PERMITS. Except as set forth in Section 2.12 of the
Company Disclosure Letter, (i) the Company and the Company Subsidiaries have all
permits, certificates, licenses, approvals and other authorizations from
Governmental Authorities required in connection with the operation of their
respective businesses (collectively, "COMPANY PERMITS"), (ii) neither the
Company nor any Company Subsidiary is in violation of any Company Permit and
(iii) no proceedings are pending or, to the knowledge of the Company,
threatened, to revoke or limit any Company Permit, except, in the case of each
of clauses (i), (ii) and (iii) above, those the absence or violation of which
would not reasonably be expected to have a Material Adverse Effect.

                  2.13 LITIGATION. Except as disclosed in the Company Securities
Filings filed prior to the date of this Agreement or Section 2.13 of the Company
Disclosure Letter, there is no suit, action or proceeding ("LITIGATION") pending
or, to the knowledge of the Company, threatened against the Company or any of
the Company Subsidiaries which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any Governmental Authority
outstanding against the Company or any Company Subsidiary which, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect.

                  2.14 CONTRACTS. Section 2.14 of the Company Disclosure Letter
includes, as of the date hereof, a list of the Company's material contracts (the
"COMPANY MATERIAL CONTRACTS") which includes (i) all loan agreements,
indentures, mortgages, pledges, conditional sale or title retention agreements,
security agreements, guaranties, standby letters of credit, equipment leases or
lease purchase agreements, each in an amount equal to or exceeding $250,000 to
which the Company or any Company subsidiary is a party or by which

                                      -22-

<PAGE>


any of them is bound; (ii) all contracts, agreements, commitments or other
understandings or arrangements other than those addressed in Section 2.15 to
which the Company or any of its subsidiaries is a party or by which any of them
or any of their respective properties or assets are bound or affected, but
excluding contracts, agreements, commitments or other understandings or
arrangements entered into in the ordinary course of business and involving, in
the case of any such contact, agreement, commitment, or other understanding or
arrangement, individual payments or receipts by the Company or any Company
Subsidiary of less than $250,000 over the term of such contract, commitment,
agreement, or other understanding or arrangement; and (iii) all agreements which
are required to be filed as "material contracts" with the SEC pursuant to the
requirements of the Securities Exchange Act but have not been so filed with the
SEC. The Company is not a party to any agreements to acquire in the future the
stock or substantially all the assets of another person. Except as disclosed in
Section 2.14 of the Company Disclosure Letter or in the Company Securities
Filings filed prior to the date of this Agreement, all such Company Material
Contracts are valid and binding and are in full force and effect and enforceable
against the Company or such Company Subsidiary in accordance with their
respective terms, subject to the Enforceability Exceptions, and neither the
Company nor any Company Subsidiary is in violation or breach of or default under
any such Company Material Contract, except where the failure to be in full force
and effect or where such violation or breach would not reasonably be expected to
have a Material Adverse Effect. To the knowledge of the Company, no party (other
than the Company or Company Subsidiaries) is in default, violation or breach of
any Company Material Contract where such violation or breach would reasonably be
expected to have a Material Adverse Effect.

                  2.15 EMPLOYEE BENEFIT PLANS. (a) Section 2.15(a) of the
Company Disclosure Letter lists all employee pension benefit plans (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), all employee welfare benefit plans (as defined in Section
3(1) of ERISA) and all other bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any employment,
executive compensation or severance agreements, written or otherwise, as
amended, modified or supplemented, for the benefit of, or relating to, any
former or current employee, officer or consultant who is an individual or an
individual doing business in a corporate form (or any of their beneficiaries) of
the Company or any other entity (whether or not incorporated) or which is under
common control with the Company (an "ERISA AFFILIATE") within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "CODE") or Section 4001(a)(14) or
(b) of ERISA, or any Company Subsidiary, with respect to which the Company has
or could have any current (actual or contingent) material liability (together
for purposes of this SECTION 2.15, the "EMPLOYEE PLANS"). Prior to the date of
this Agreement, the Company has provided or made available to Parent copies of
(i) each such written Employee Plan (or a written description of any Employee
Plan which is not written) and all related trust agreements, insurance and other
contracts (including policies), summary plan descriptions, summaries of

                                      -23-

<PAGE>


material modifications and any material communications to plan participants,
(ii) the three most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Employee Plan required to
make such a filing, and (iii) the most recent favorable determination letters
issued for each Employee Plan and related trust which is intended to qualify
under Section 401(a) of the Code (and, if an application for such determination
is pending, a copy of the application for such determination).

                  (b) (i) None of the Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person (other than in
accordance with Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA), and none of the Employee Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA; (ii) to the knowledge of the Company, no
"party in interest" or "disqualified person" (as defined in Section 3(14) of
ERISA and Section 4975 of the Code) has at any time engaged in a transaction
with respect to any Employee Plan which could subject the Company or any ERISA
Affiliate, directly or indirectly, to a tax, penalty or other liability for
prohibited transactions under ERISA or Section 4975 of the Code, except for any
such tax, penalty or liability that would not reasonably be expected to result
in a Material Adverse Effect; (iii) to the knowledge of the Company, no
fiduciary of any Employee Plan has breached any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA, except where such
breach would not reasonably be expected to result in a Material Adverse Effect;
(iv) all Employee Plans have been established and maintained substantially in
accordance with their terms and have operated in compliance with the
requirements prescribed by any and all statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the Department of Labor, the Internal Revenue Service (the "IRS") or the
Secretary of the Treasury), except where failure to do so would not reasonably
be expected to result in a Material Adverse Effect; and the Company and each
Company Subsidiary have performed all obligations required to be performed by
them under, are not in default under or in violation of any Employee Plan except
where failure to do so would not reasonably be expected to result in a Material
Adverse Effect, and have no knowledge of any default or violation by any other
party to, any of the Employee Plans; (v) each Employee Plan which is subject to
Parts 1, 2 and 4 of Subtitle B of ERISA is the subject of a favorable
determination letter from the IRS, and to the knowledge of the Company nothing
has occurred which mayreasonably be expected to impair such determination; (vi)
all contributions required to be made with respect to any Employee Plan pursuant
to the terms of the Employee Plan have been made on or before their due dates
except for any failure to make contributions that would not reasonably be
expected to result in a Material Adverse Effect; (vii) no facts exist or have
existed under which the Company or any ERISA Affiliate could incur any liability
under Title IV of ERISA; and (viii) there are no complaints, charges or claims
against the Company pending or to the Company's knowledge threatened to be
brought by or filed with any governmental authority based on, arising out of, in
connection with or otherwise relating to the classification of any individual by
the Company as an independent contractor or "leased employee" (within the
meaning of section 414(n) of the Code) rather than as an employee.

                                      -24-

<PAGE>


                  (c) Section 2.15(c) of the Company Disclosure Letter sets
forth a true and complete list of each current or former employee, officer or
director of the Company or any Company Subsidiary who holds (i) any option to
purchase Common Shares as of the date hereof, together with the number of shares
of Common Shares subject to such option, the option price of such option (to the
extent determined as of the date hereof), whether such option is intended to
qualify as an incentive stock option within the meaning of Section 422(b) of the
Code (an "ISO"), and the expiration date of such option; (ii) any shares of
Common Shares that are restricted as a result of an agreement with or stock plan
of the Company; and (iii) any other right, directly or indirectly, to receive
Common Shares, except as otherwise disclosed in Section 2.15 of the Company
Disclosure Letter, together with the number of shares of Company Stock subject
to such right. Section 2.15(c) of the Company Disclosure Letter also sets forth
the total number of any such ISOs and any such nonqualified options and other
such rights.

                  (d) Unless otherwise disclosed in Section 2.15(a) of the
Company Disclosure Letter, Section 2.15(d) of the Company Disclosure Letter sets
forth a true and complete list of (i) all employment agreements with officers of
the Company or any of the Company Subsidiaries; (ii) all agreements with
consultants who are individuals obligating the Company or any of the Company
Subsidiaries to make annual cash payments in an amount exceeding $250,000; (iii)
all agreements which individually or in the aggregate are or could be material
with respect to the services of independent contractors or leased employees who
are individuals or individuals doing business in a corporate form whether or not
they participate in any of the Employee Plans; (iv) all officers of the Company
or any of the Company Subsidiaries who have executed a non-competition agreement
with the Company or any of the Company Subsidiaries; (v) all severance
agreements, programs and policies of the Company or any of the Company
Subsidiaries with or relating to its employees, in each case with outstanding
commitments exceeding $250,000, excluding programs and policies required to be
maintained by law; and (vi) all plans, programs, agreements and other
arrangements of the Company which contain change in control provisions.

                  (e) (i) Except as set forth in Section 2.15(e) of the Company
Disclosure Letter, no Employee Plan is an employee stock ownership plan (within
the meaning of Section 4975(e)(7) of the Code) or otherwise invests in Company
Stock; and (ii) the consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable in respect of any employee except as otherwise provided in
SECTION 1.9 hereof or disclosed in Section 2.15(e) of the Company Disclosure
Letter or except where such increase or acceleration would not reasonably be
expected to result in a Material Adverse Effect. The Company will take all
actions within its control to ensure that all actions required to be taken by a
fiduciary of any Employee Plan in order to effectuate the transaction
contemplated by this Agreement shall comply with the terms of such Plan, ERISA
and other applicable laws. The Company will take all actions

                                      -25-

<PAGE>


within its control to ensure that all actions required to be taken by a 
trustee of any Employee Plan that owns Company Stock shall have been duly 
authorized by the appropriate fiduciaries of such Plan and shall comply with 
the terms of such Plan, ERISA and other applicable laws.

                  (f) Except as set forth in Section 2.15(f) of the Company
Disclosure Letter, the Company maintains no Employee Plan covering non-U.S.
employees.

                  (g) The Company has fiduciary liability insurance of at least
$500,000 in effect covering the fiduciaries of the Employee Plans (including the
Company) with respect to whom the Company may have liability.

                  2.16 TAXES AND RETURNS. (a) The Company and each of the
Company Subsidiaries has timely filed, or caused to be timely filed, all
material Tax Returns (as hereinafter defined) required to be filed by it, and
all such tax returns are true, complete and correct in all material respects,
and has timely paid, collected or withheld, or caused to be paid, collected or
withheld, all material amounts of Taxes (as hereinafter defined) required to be
paid, collected or withheld, other than such Taxes for which adequate reserves
in the Company Financial Statements have been established and which are being
contested in good faith. Except as set forth in Section 2.16 of the Company
Disclosure Letter, there are no material claims or assessments pending against
the Company or any of the Company Subsidiaries for any alleged deficiency in any
Tax, and the Company has not been notified in writing of any proposed Tax claims
or assessments against the Company or any of the Company Subsidiaries (other
than in each case, claims or assessments for which adequate reserves in the
Company Financial Statements have been established and which are being contested
in good faith or claims or assessments which are immaterial in amount). Neither
the Company nor any of the Company Subsidiaries has executed any waivers or
extensions of any applicable statute of limitations to assess any material
amount of Taxes. There are no outstanding requests by the Company or any of the
Company Subsidiaries for any extension of time within which to file any material
Tax Return or within which to pay any material amounts of Taxes shown to be due
on any Tax Return. The statute of limitations period for assessment of federal
income taxes has not expired for any taxable year from the taxable year
ended June 30, 1996, the Company's first taxable year as a C corporation. To the
best knowledge of the Company, there are no liens for material amounts of Taxes
on the assets of the Company or any of the Company Subsidiaries except for
statutory liens for current Taxes not yet due and payable. There are no
outstanding powers of attorney enabling any party to represent the Company or
any of the Company Subsidiaries with respect to Tax matters.

                  (b) For purposes of this Agreement, the term "TAX" shall mean
any federal, state, local, foreign or provincial income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll,
alternative or add-on minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty imposed by any
Governmental Authority. The term "TAX RETURN" shall mean a report, return or
other

                                      -26-

<PAGE>


information (including any attached schedules or any amendments to such report,
return or other information) required to be supplied to or filed with a
governmental entity with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.

                  (c) Except as set forth in Section 2.16 of the Company
Disclosure Letter, (i) neither the Company nor any of the Company Subsidiaries
has been a member of an affiliated group within the meaning of Section 1504 of
the Code or filed or been included in a combined, consolidated or unitary Tax
Return, other than of the Company and the Company Subsidiaries; (ii) other than
with respect to the Company and the Company Subsidiaries, neither the Company
nor any of the Company Subsidiaries is currently liable for Taxes of any other
person, or is currently under any contractual obligation to indemnify any person
with respect to Taxes (except for customary agreements to indemnify lenders or
securityholders in respect of taxes other than income taxes), or is a party to
any tax sharing agreement or any other agreement providing for payments by the
Company or any of the Company Subsidiaries with respect to Taxes; (iii) neither
the Company nor any of the Company Subsidiaries is a party to any joint venture,
partnership or other arrangement or contract which could be treated as a
partnership for federal income tax purposes; (iv) neither the Company nor any of
the Company Subsidiaries has entered into any sale leaseback or any leveraged
lease transaction that fails to satisfy the requirements of Revenue Procedure
75-21 (or similar provisions of foreign law); (v) neither the Company nor any of
the Company Subsidiaries has agreed or is required, as a result of a change in
method of accounting or otherwise, to include any adjustment under Section 481
of the Code (or any corresponding provision of state, local or foreign law) in
taxable income; (vi) neither the Company nor any of the Company Subsidiaries is
a party to any agreement, contract, arrangement or plan that would result
(taking into account the transactions contemplated by this Agreement),
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code; (vii) the prices for
any property or services (or for the use of property) provided by the Company or
any of the Company Subsidiaries to any other subsidiary or to the Company have
been arm's length prices, determined using a method permitted by the Treasury
Regulations under Section 482 of the Code; (viii) neither the Company nor any of
the Company Subsidiaries is liable with respect to any indebtedness the interest
of which is not deductible for applicable federal, foreign, state or local
income tax purposes; (ix) neither the Company nor any of the Company
Subsidiaries is a "consenting corporation" under Section 341(f) of the Code or
any corresponding provision of state, local or foreign law; (x) the Company and
each Company Subsidiary have complied with all applicable laws, rules, and
regulations relating to the withholding and payment of Taxes except where the
amount of taxes involved is not material; and (xi) none of the assets owned by
the Company or any of the Company Subsidiaries is property that is required to
be treated as owned by any other person pursuant to Section 168(g)(8) of the
Internal Revenue Code of 1954, as amended, as in effect immediately prior to the
enactment of the Tax Reform Act of 1986, or is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.

                                      -27-

<PAGE>


                  (d) The amount of net operating losses (as defined in Section
172 of the Code) of the Company and the Company Subsidiaries as of the end of
the fiscal year ended June 30, 1999 is as set forth in the Company's financial
statements for such year.

                  2.17 INTELLECTUAL PROPERTY. (a) Section 2.17(a) of the Company
Disclosure Letter sets forth a list of (i) all patents and patent applications
owned by the Company and/or each of the Company Subsidiaries worldwide; (ii) all
trademark and service mark registrations and all trademark and service mark
applications, material common law trademarks, material trade dress and material
slogans, and all trade names owned by the Company and/or each of its
subsidiaries worldwide; (iii) all copyright registrations and copyright
applications owned by the Company and/or each of the Company Subsidiaries
worldwide; and (iv) all licenses in which the Company and/or any of the Company
Subsidiaries is (A) a licensor with respect to any of the patents, trademarks,
service marks, trade names or copyrights listed in Section 2.17 of the Company
Disclosure Letter which are material to the Company or (B) a licensee of any
other person's patents, trade names, trademarks, service marks or copyrights
material to the Company except for any licenses of software programs that are
commercially available "off the shelf."

                  (b) The Company or the Company Subsidiaries own, or are
licensed or otherwise possess legal enforceable rights to use, all patents,
trademarks, trade names, service marks, trade dress, slogans, copyrights and any
applications therefor, technology, know-how, trade secrets, computer software
programs or applications, domain names and tangible or intangible proprietary
information or materials that are used in the respective businesses of the
Company and the Company Subsidiaries as currently conducted (the "COMPANY
INTELLECTUAL PROPERTY RIGHTS"), except for any such failures to own, be licensed
or possess that would not reasonably be expected to have a Material Adverse
Effect.

                  (c) Except as disclosed in Section 2.17(c) of the Company
Disclosure Letter, the Company and/or each Company Subsidiary has made all
necessary filings and recordations for the patents, patent applications,
trademark and service mark registrations, trademark and service mark
applications, copyright registrations and copyright applications set forth in
Section 2.17(a) of the Company Disclosure Letter, except where the failure to
make such filings or recordations would not reasonably be expected to have a
Material Adverse Effect. There are not currently pending, and to the Knowledge
of the Company there are no valid grounds for, any bona fide claims (i) that the
business of the Company or any of the Company Subsidiaries infringes on any
copyright, patent, trademark, service mark or trade secret; (ii) against the use
by the Company or any of the Company Subsidiaries of any trademarks, trade
names, trade secrets, copyrights, patents, technology, know-how or computer
software programs and applications used in the business of the Company or any of
the Company Subsidiaries as currently conducted or as proposed to be conducted;
(iii) challenging the ownership, validity or effectiveness of any of the Company
Intellectual Property Rights; or (iv) challenging the license or legally
enforceable right to use of any third-party patents, trademarks, service marks
and copyrights by the Company or any of the

                                      -28-

<PAGE>

Company Subsidiaries, except, in the case of each of clauses (i), (ii), (iii)
and (iv) above, for matters that, if determined adversely to the Company, would
not reasonably be expected to have a Material Adverse Effect.

                  (d) Except as set forth in the Company Securities Filings
filed prior to the date of this Agreement or Section 2.17 of the Company
Disclosure Letter, to the Knowledge of the Company, there is no material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party, including any employee or former
employee of the Company or any of the Company Subsidiaries.

                  (e) KNOWLEDGE OF THE COMPANY DEFINED. For purposes of this
Section 2.17, the parties acknowledge and agree that the phrase "to the
Knowledge of the Company": (i) will be limited to the knowledge of the officers
and employees of the Company identified in Paragraph 2.17(e) of the Company
Disclosure Letter and (ii) will not be deemed to impose any obligation on the
Company to conduct a patent, trademark or copyright search.

                  2.18 DISCLOSURE DOCUMENTS. The Proxy Statement will comply in
all material respects with the applicable requirements of the Securities
Exchange Act except that no representation or warranty is being made by the
Company with respect to the Parent Information included in the Proxy Statement.
The Proxy Statement will not, at the time the Proxy Statement is filed with the
SEC or first sent to shareholders or at the time of the Company's shareholders'
meeting, 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 were made,
not misleading except that no representation or warranty is being made by the
Company with respect to the Parent Information (as defined below) included in
the Proxy Statement. The Schedule 14D-9 will comply in all material respects
with the Securities Exchange Act except that no representation or warranty is
being made by the Company with respect to the Parent Information included in the
Schedule 14D-9. Neither the Schedule 14D-9 nor any of the information relating
to the Company or its affiliates provided by or on behalf of the Company
specifically for inclusion in the Schedule 14D-1 or the Offer Documents will, at
the respective times the Schedule 14D-9, the Schedule 14D-1 and the Offer
Documents are filed with the SEC and are first published, sent or given to
shareholders of the Company, 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 made therein, in light of the circumstances under
which they were made, not misleading.

                  2.19 LABOR MATTERS. Except as set forth in the Company
Securities Filings filed prior to the date of this Agreement or Section 2.19 of
the Company Disclosure Letter, (i) there are no controversies pending or, to the
knowledge of the Company or any of the Company Subsidiaries, threatened, between
the Company or any of the Company Subsidiaries and any of their respective
employees, which controversies would reasonably be expected to have a Material
Adverse Effect; (ii) neither the Company nor any of the Company

                                      -29-

<PAGE>


Subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or the Company
Subsidiaries, nor, as of the date of this Agreement, does the Company or any of
the Company Subsidiaries know of any activities or proceedings of any labor
union to organize any such employees; and (iii) neither the Company nor any of
the Company Subsidiaries has any knowledge of any strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any employees of
the Company or any of the Company Subsidiaries which would reasonably be
expected to have a Material Adverse Effect.

                  2.20 LIMITATION ON BUSINESS CONDUCT. Except as set forth in
the Company Securities Filings filed prior to the date of this Agreement,
neither the Company nor any of the Company Subsidiaries is a party to, or has
any obligation under, any contract or agreement, written or oral, which contains
any covenants currently or prospectively limiting in any material respect the
freedom of the Company or any of the Company Subsidiaries to engage in any line
of business or to compete with any entity.

                  2.21 TITLE TO PROPERTY. Except as set forth in the Company
Securities Filings filed prior to the date of this Agreement or Section 2.21 of
the Company Disclosure Letter, each of the Company and each of the Company
Subsidiaries owns the properties and assets that it purports to own free and
clear of all liens, charges, mortgages, security interests or encumbrances of
any kind ("LIENS"), except for Liens which arise in the ordinary course of
business and do not materially impair the Company's or the Company Subsidiaries'
ownership or use of such properties or assets, Liens for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
reserves have been established in accordance with GAAP and Liens securing
obligations under the Company's credit agreements, loan agreements and equipment
leases (the "CREDIT AGREEMENTS"). Except as set forth in Schedule 2.21 of the
Company Disclosure Letter, with respect to the property and assets it leases,
the Company, the Company Subsidiaries, and to the best of the Company's
knowledge each of the other parties thereto, is in material compliance with such
leases, and the Company or the Company Subsidiaries, as the case may be, hold a
valid leasehold interest free of any Liens, except those referred to above. The
rights, properties and assets presently owned, leased or licensed by the Company
and the Company Subsidiaries include all rights, properties and assets necessary
to permit the Company and the Company Subsidiaries to conduct their business in
all material respects in the same manner as their businesses have been conducted
prior to the date hereof.

                  2.22 OWNED AND LEASED PREMISES. Each of the buildings,
structures and premises leased by the Company or any of the Company Subsidiaries
is in reasonably good repair and operating condition, except as would not
reasonably be expected to have a Material Adverse Effect.

                  2.23 ENVIRONMENTAL MATTERS. Except as set forth in the Company
Securities Filings filed prior to the date of this Agreement or Section 2.23 of
the Company Disclosure

                                      -30-

<PAGE>

Letter:

                  (a) The Company and the Company Subsidiaries are in material
compliance with the Environmental Laws (as defined below), which compliance
includes the possession by the Company and the Company Subsidiaries of all
material permits and governmental authorizations required under applicable
Environmental Laws, and compliance in all material respects with the terms and
conditions thereof, except in each case where such non-compliance would not
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of the Company Subsidiaries has received any communication (written or
oral), whether from a governmental authority, citizens group, employee or
otherwise, that alleges that the Company or any of the Company Subsidiaries is
not in such material compliance, and there are no circumstances that may prevent
or interfere with such compliance in the future, except where such
non-compliance would not reasonably be expected to have a Material Adverse
Effect.

                  (b) There are no Environmental Claims (as defined below),
including claims based on "arranger liability," pending or, to the best
knowledge of the Company, threatened against the Company or any of the Company
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries has retained
or assumed either contractually or by operation of law, except for such
Environmental Claims that would not reasonably be expected to have a Material
Adverse Effect.

                  (c) To the knowledge of the Company, there are no past or
present actions, inactions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge, presence or disposal of
any Material of Environmental Concern (as hereinafter defined), that would form
the basis of any Environmental Claim against the Company or any of the Company
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries have retained
or assumed either contractually or by operation of law, except for such
Environmental Claims that would not reasonably be expected to have a Material
Adverse Effect.

                  (d) The Company is in compliance in all material respects with
Environmental Laws as they relate to (i) any on-site or off-site locations where
the Company or any of the Company Subsidiaries has stored, disposed or arranged
for the disposal of Materials of Environmental Concern for itself (but not on
behalf of others) or (ii) any underground storage tanks located on property
owned or leased by the Company or any of the Company Subsidiaries. To the
knowledge of Company, there is no asbestos contained in or forming part of any
building, building component, structure or office space owned or leased by the
Company or any of the Company Subsidiaries. To the knowledge of Company, no
polychlorinated biphenyls (PCB's) or PCB-containing items are used or stored at
any property owned or leased by the Company or any of the Company Subsidiaries.

                                      -31-

<PAGE>

                  (e) For purposes of this Agreement:

                  (i) "ENVIRONMENTAL CLAIM" means any written claim, action,
         cause of action, investigation or notice by any person or entity
         alleging potential liability (including potential liability for
         investigatory costs, cleanup costs, governmental response costs,
         natural resources damages, property damages, personal injuries, or
         penalties) arising out of, based on or resulting from (x) the presence,
         or release into the environment, of any Material of Environmental
         Concern at any location, whether or not owned or operated by the
         Company or any of the Company Subsidiaries, or (y) circumstances
         forming the basis of any violation, or alleged violation, of any
         Environmental Law.

                  (ii) "ENVIRONMENTAL LAWS" means all Federal, state, local and
         foreign laws or regulations relating to pollution or protection of
         human health and the environment (including ambient air, surface water,
         ground water, land surface or sub-surface strata), including laws and
         regulations relating to emissions, discharges, releases or threatened
         releases of Materials of Environmental Concern, or otherwise relating
         to the manufacture, processing, distribution, use, treatment, storage,
         disposal, transport or handling of Materials of Environmental Concern.

                  (iii) "MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals,
         pollutants, contaminants, hazardous materials, hazardous substances and
         hazardous wastes, toxic substances, petroleum and petroleum products
         that are regulated under the Environmental Laws.

                  2.24 INSURANCE. The Company maintains insurance that provides
adequate coverage for normal risks incident to the business of the Company and
the Company Subsidiaries and their respective properties and assets and in
character and amount comparable to that carried by persons engaged in similar
businesses. The insurance polices maintained by the Company are with reputable
insurance carriers and have no premium delinquencies.

                  2.25 PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
the Company SEC Filings filed prior to the date of this Agreement or Section
2.25 of the Company Disclosure Letter, to the Company's knowledge, there is no
claim, pending or overtly threatened, against the Company or any Company
Subsidiaries for injury to person or property of employees or any third parties
suffered as a result of the sale of any product or performance of any service by
the Company or any Company Subsidiaries, including claims arising out of the
defective or unsafe nature of its products or services, which would reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.

                  (b) Except as disclosed in the Company SEC Filings filed prior
to the date of this Agreement or Section 2.25 of the Company Disclosure Letter,
there is no pending or, to the knowledge of the Company, overtly threatened
recall or investigation of any product 



                                      -32-
<PAGE>

sold by the Company or any Company Subsidiaries, which recall or investigation
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.

                  2.26 CUSTOMERS. Section 2.26 of the Company Disclosure Letter
sets forth a list of the Company's ten (10) largest customers (detailed, in the
case of government agencies, by separate government agency) in terms of gross
sales for the fiscal year ended June 30, 1999. Except as set forth in Section
2.26 of the Company Disclosure Letter, since June 30, 1999, there have not been
any changes in the business relationships of the Company with any of the
customers named therein that would constitute a Material Adverse Effect. Except
as set forth in Section 2.26 of the Company Disclosure Letter, no customer of
the Company accounted for more than 5% of the revenues of the Company and the
Company Subsidiaries, taken as whole, for the fiscal year ended June 30, 1999.

                  2.27 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 2.27 of the Company Disclosure Letter or in the Company Securities
Filings filed prior to the date of this Agreement, since the date of the
Company's proxy statement dated October 25, 1999, no event has occurred that
would be required to be reported pursuant to Item 404 of Regulation S-K
promulgated by the SEC.

                  2.28 FINDERS AND INVESTMENT BANKERS. Neither the Company nor
any of its officers or directors has employed any broker, finder or financial
advisor or otherwise incurred any liability for any brokerage fees, commissions,
or financial advisors' or finders' fees in connection with the transactions
contemplated hereby, other than pursuant to agreements with McDonald
Investments, Inc. and Adams, Harkness & Hill, Inc., the terms of which have been
disclosed to Parent.

                  2.29 FAIRNESS OPINION. The Company's Board of Directors has
received from the Financial Advisor a written opinion addressed to it for
inclusion in the Schedule 14D-9 and the Proxy Statement to the effect that the
consideration to be received by the shareholders of the Company pursuant to each
of the Offer and the Merger is fair to the Company's shareholders from a
financial point of view.

                  2.30 TAKEOVER STATUTES. Assuming Parent and its "associates"
and "affiliates" (as defined in Section 60.825 of the Oregon Code) collectively
beneficially own and have beneficially owned at all times during the three-year
period prior to the date hereof less than fifteen percent (15%) of the Company
Stock outstanding, Sections 60.825 - 60.845 of the Oregon Code is, and shall be,
inapplicable to the acquisition of Common Shares pursuant to the Offer and the
Merger.

                  2.31 FULL DISCLOSURE. No statement contained in any
certificate or schedule, including, without limitation, the Company Disclosure
Letter, furnished or to be furnished by the Company or the Company Subsidiaries
to Parent or Purchaser in, or pursuant to the provisions of, this Agreement
contains or shall contain any untrue statement of a material fact 



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or omits or will omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.

                  2.32 YEAR 2000. Except as would not reasonably be expected to
have a Material Adverse Effect on the Company:

                  (a) None of the computer software, computer firmware, computer
hardware (whether general or special purpose) or other similar or related items
of automated, computerized or software systems that are used or relied on by
Company or by any of the Company Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will generate incorrect
data or will produce incorrect results that are caused by processing, providing
or receiving (i) date-related data from, into and between the twentieth and
twenty-first centuries or (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries.

                  (b) None of the products and services sold, licensed,
rendered, or otherwise provided by the Company or by any of the Company
Subsidiaries in the conduct of their respective businesses will malfunction,
will cease to function, will generate incorrect data or will produce incorrect
results that are caused by processing, providing or receiving (i) date-related
data from, into and between the twentieth and twenty-first centuries or (ii)
date-related data in connection with any valid date in the twentieth and
twenty-first centuries.

                  (c) Neither the Company nor any of the Company Subsidiaries
has made any other representations or warranties regarding the ability of any
product or service sold, licensed, rendered, or otherwise provided by the
Company or by any of the Company Subsidiaries in the conduct of their respective
businesses to operate without malfunction, to operate without ceasing to
function, to generate correct data or to produce correct results when
processing, providing or receiving (i) date-related data from, into and between
the twentieth and twenty-first centuries and (ii) date-related data in
connection with any valid date in the twentieth and twenty-first centuries.

                  2.33 RIGHTS AGREEMENTS. There are no "rights agreements",
"poison pills" or similar defensive installments, arrangements or agreements
that would prevent or interfere with the consummation of the transactions
contemplated by this Agreement.

                  2.34 ABSENCE OF CERTAIN PAYMENTS. None of the Company, any
Company Subsidiaries or any of their respective affiliates, officers, directors,
employees or agents or other people acting on behalf of any of them have (i)
engaged in any activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation, decree, directive or
order of any other country and (ii) without limiting the generality of the
preceding clause (i), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
None of the Company, the Company Subsidiaries or any of 



                                      -34-
<PAGE>

their respective affiliates, directors, officers, employees or agents of other
persons acting on behalf of any of them, has accepted or received any unlawful
contributions, payments, gifts or expenditures.

                                   ARTICLE III
             REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

                  Parent and Purchaser jointly and severally represent and
warrant to the Company that:

                  3.1 ORGANIZATION AND GOOD STANDING. Each of Guarantor, Parent
and Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.

                  3.2 AUTHORIZATION; BINDING AGREEMENT. Parent, Purchaser and
Guarantor have all requisite corporate power and authority to execute and
deliver this Agreement or the Guarantee, as the case may be, and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Guarantee and the consummation of the transactions
contemplated hereby and thereby, including, but not limited to, the Merger, have
been duly and validly authorized by the respective Boards of Directors of
Parent, Purchaser and Guarantor, as appropriate, and no other corporate
proceedings on the part of Parent, Purchaser, Guarantor or any other subsidiary
of Guarantor are necessary to authorize the execution and delivery of this
Agreement or the Guarantee, as applicable, or to consummate the transactions
contemplated hereby and thereby (other than the requisite approval by the sole
shareholder of Purchaser of this Agreement and the Merger). This Agreement has
been duly and validly executed and delivered by each of Parent and Purchaser and
constitutes the legal, valid and binding agreement of Parent and Purchaser,
enforceable against each of Parent and Purchaser in accordance with its terms,
subject to the Enforceability Exceptions. The Guarantee has been duly and
validly executed and delivered by Guarantor, and constitutes the legal, valid
and binding agreement of Guarantor enforceable against Guarantor in accordance
with its terms, subject to the Enforceability Exceptions.

                  3.3 GOVERNMENTAL APPROVALS. No Consent from or with any
Governmental Authority on the part of Parent, Purchaser or Guarantor is required
in connection with the execution or delivery by Parent, Purchaser and Guarantor
of this Agreement or the Guarantee, as the case may be, or the consummation by
Parent, Purchaser and Guarantor of the transactions contemplated hereby or
thereby other than (i) the filing of the Articles of Merger with the Secre