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                                                                     EXHIBIT-4.2

                      INDEMNIFICATION AND ESCROW AGREEMENT

        THIS INDEMNIFICATION AND ESCROW AGREEMENT (this "Agreement") is dated as
of August ___, 1998, by and among Data Dimensions, Inc., a Delaware corporation
("Parent"), DS Acquisition Corporation, a Washington corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), ST Labs, Inc., a Washington
corporation (the "Company"), Robert Arnold, Jr. and Tye Minckler (referred to
collectively as the "Principal Shareholders" and individually as a "Principal
Shareholder"), ChaseMellon Shareholder Services, Inc. (the "Escrow Agent") and
Tye Minckler (the "Indemnification Representative"). Except as otherwise defined
herein, capitalized terms have the same meaning ascribed to them in the
Agreement and Plan of Reorganization entered into as of July ___, 1998 by and
among Parent, Merger Sub, the Company and the Principal Shareholders (the
"Merger Agreement").

                                    RECITALS:

        WHEREAS, the execution and delivery of this Agreement is a condition to
each party's execution and performance of the Merger Agreement;

        WHEREAS, pursuant to Section 1.8.2 of the Merger Agreement, shares of
Parent Common Stock representing approximately ten percent (10%) of the
aggregate number of Exchange Shares shall be delivered on behalf of the Company
Shareholders to the Escrow Agent, to be held by the Escrow Agent upon the terms
and conditions set forth herein as security for potential Losses (as defined in
Section 1.1(a) hereof) incurred by the Parent Parties; and

        WHEREAS, pursuant to Section 1.8.2 of the Merger Agreement, Tye Minckler
has been duly appointed as Indemnification Representative.

        NOW, THEREFORE, in consideration of the premises and agreements set
forth below, the parties agree as follows:

                                   ARTICLE I
                                 INDEMNIFICATION

        1.1 Indemnity Obligations. Subject to the terms and conditions of this
Agreement, the indemnity obligation of the Company Shareholders, the Principal
Shareholders and Parent shall be as follows:

        (a) Indemnity by Company Shareholders. The Company Shareholders shall
indemnify and hold harmless Parent and its officers, directors and affiliates
(including the Surviving Corporation) (collectively, the "Parent Parties") from
and against any claims, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorney fees and expenses, and expenses of investigation
and defense (hereinafter individually a "Loss" and collectively "Losses") which
any Parent Party may suffer, sustain or become subject to by reason of or
resulting from (i) any breach by the Principal Shareholders or the Company of
any covenant or agreement set forth in the Merger Agreement or any instrument
delivered pursuant to the Merger Agreement or (ii) any inaccuracy in any
representation or warranty of the Company or the Principal Shareholders
contained in the Merger Agreement or any other 


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instrument delivered pursuant to the Merger Agreement (each as modified by the
Company Disclosure Schedule).

        (b) Indemnity by Principal Shareholders. The Principal Shareholders
shall jointly and severally indemnify and hold harmless the Parent Parties from
and against all Losses which any Parent Party may suffer, sustain, or become
subject to by reason of or resulting from any inaccuracy in the representations
and warranties contained in Sections 2.2, 2.4, 2.8 and 2.26 of the Merger
Agreement (each as modified by the Company Disclosure Schedule); provided,
however, that the Principal Shareholders shall have no obligation to the Parent
Parties under this Section 1.1(b) until the first to occur of (i) the Escrow
Termination Date (as defined in Section 1.3(a) hereof), or (ii) the date all
Indemnification Escrow Shares have been delivered to Parent in satisfaction of
other Indemnification Claims (as defined in Section 1.1(d) hereof). The
obligation of the Principal Shareholders under this Section 1.1(b) is in
addition to their respective obligations under Section 1.1(a).

        (c) Indemnity by Parent. Parent shall indemnify and hold harmless the
Company Shareholders from and against all Losses which the Company Shareholders
may suffer, sustain, or become subject to by reason of or resulting from (i) any
breach by the Parent or Merger Sub of any covenant or agreement set forth in the
Merger Agreement or any instrument delivered pursuant to the Merger Agreement,
or (ii) any inaccuracy in a representation or warranty of Merger Sub or Parent
contained in the Merger Agreement or any other instrument delivered pursuant to
the Merger Agreement (each as modified by the parent Disclosure Schedule).

        (d) Definitions. The assertion that a party has suffered a Loss is
hereinafter referred to as an "Indemnification Claim", the party seeking
indemnification is hereinafter referred to as an "Indemnified Party", and the
person from whom indemnification is sought is hereinafter referred to as an
"Indemnifying Party".

        1.2 Limitations. The indemnification provided for in Section 1.1 hereof
shall be subject to the following limitations.

        (a) Limit on Company Shareholders' Indemnity. Except as provided in
Section 1.2(b) hereof, the Company Shareholders' total liability for
indemnification under Section 1.1(a) shall be limited to the Indemnification
Escrow Shares and the Company Shareholders shall not be liable for any Loss for
which a Notice of Claim (as defined in Section 1.3(a)) has not been given on or
prior to the Escrow Termination Date (as defined in Section 1.3(a)). In
addition, the Company Shareholders shall not be liable for indemnification of
any Parent Party under Section 1.1(a) unless the aggregate amount of all Losses
incurred by all Parent Parties and otherwise subject to Section 1.1(a) exceeds
$50,000 (the "Parent Threshold").

        (b) Limit on Principal Shareholders' Indemnity. The Principal
Shareholders' total liability for indemnification under Section 1.1(b) shall not
exceed One Million Dollars ($1,000,000); such amount is in addition to and shall
be determined exclusive of the Principal Shareholders' aggregate Percentage
Interest (as defined in Section 2.2 hereof) in any Indemnification Escrow Shares
delivered to Parent hereunder. The Principal Shareholders shall not be liable
for indemnification of any Parent Party under Section 1.1(b) unless the
aggregate amount of all Losses incurred by all Parent Parties (including Losses
for which indemnity is 


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obtained under Section 1.1(a)) exceeds $25,000 (the "Principal Shareholder
Threshold"). In addition, the Principal Shareholders shall not be liable for any
Loss for which a Notice of Claim has not been given on or prior to the five-year
anniversary of the Effective Time.

        (c) Limit on Parent Indemnity. Parent's total liability for
indemnification under Section 1.1(c) shall not exceed One Million Dollars
($1,000,000) and Parent shall not be liable for any Loss for which a Notice of
Claim has not been given on or prior to the one-year anniversary of the
Effective Time. In addition, Parent shall not be liable for indemnification of
the Company Shareholders under Section 1.1(c) unless the aggregate amount of all
Losses incurred by the Company Shareholders and otherwise subject to Section
1.1(c) exceeds $50,000 (the "Company Threshold").

        1.3 Parent Party Claims.

        (a) Delivery of Notice of Claim. At any time after obtaining knowledge
of any facts, claim or demand which has given rise to, or could reasonably give
rise to, an Indemnification Claim under Section 1.1(a) or 1.1(b), Parent may
give written notice of such Indemnification Claim ("Notice of Claim") to the
Indemnifying Party. Parent shall give the Notice of Claim to the Indemnification
Representative and the Escrow Agent if the Notice of Claim is given prior to
5:00 p.m., Pacific time, on the one-year anniversary of the Effective Time (the
"Escrow Termination Date"). Parent shall deliver the Notice of Claim to the
Principal Shareholders if the Notice of Claim is given after the earlier to
occur of (x) the Escrow Termination Date or (y) the date all Indemnification
Escrow Shares have been delivered to Parent in satisfaction of other
Indemnification Claims. A Notice of Claim shall be given by Parent whether or
not the Parent Threshold has been reached. In the case of a Claim seeking
indemnification under Section 1.1(a), the Notice of Claim must be given on or
prior to the Escrow Termination Date. In the case of a Claim seeking
indemnification under Section 1.1(b), the Notice of Claim must be given on or
prior to the five-year anniversary of the Effective Time.

        (b) Form of Notice. The Notice of Claim shall set forth the amount of
the Loss suffered, or which may be suffered, by the Parent Party and in the case
of a Notice of Claim seeking indemnity from the Principal Shareholders, the
amount to be paid by the Principal Shareholders.

        (c) Distribution of Escrow Shares. Upon receipt of a Notice of Claim at
any time after the Parent Threshold has been reached and prior to the Escrow
Termination Date, the Escrow Agent shall, subject to the provisions of Section
1.3(d) hereof, deliver to Parent, as promptly as practicable after expiration of
the forty-five (45) day notice period set forth in Section 1.3(d) below, a
number of Indemnification Escrow Shares equal to the quotient of the amount of
the Loss set forth in the Notice of Claim divided by the Parent Average Closing
Price (rounded up to the nearest whole share).

        (d) Objections. The Indemnification Representative shall have forty-five
(45) days from the date a Notice of Claim is given within which to object, by
written notice of objection given to Parent and the Escrow Agent, to any
Indemnification Claim (a "Challenged Claim"). If notice of objection to any such
claim is not provided by the Indemnification Representative within such 45-day
period, Parent shall give written notice to the Escrow Agent and the


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Indemnification Representative confirming that no such notice has been received,
whereupon the validity and stated amount of the claim and, if the Parent
Threshold has been met, the number of Indemnification Escrow Shares to be
delivered will be deemed to have been accepted (such claims being referred to
herein as "Accepted Claims"). If a notice of objection is provided, the
Indemnification Representative and Parent shall have sixty (60) days in which
they shall attempt to agree on the rights of both parties. If the
Indemnification Representative and Parent shall so agree, a memorandum setting
forth such agreement shall be prepared and furnished to the Escrow Agent who
shall be entitled to rely upon such memorandum. If after 60 days no agreement is
reached, the Indemnification Representative and Parent shall submit the matter
of a Challenged Claim to arbitration in accordance with Article VI hereof. If a
Notice of Claim sets forth a claim or demand asserted by a third party (a "Third
Party Claim"), the provisions of Section 1.5(b) shall also apply.

        (e) Claims Against Principal Shareholders. A Principal Shareholder shall
have forty-five (45) days from the date a Notice of Claim is given within which
to object, by written notice to Parent, to any Indemnification Claim (a
"Principal Shareholder Challenged Claim"). If notice of objection to any such
claim is not provided by a Principal Shareholder, the validity and stated amount
of the claim will be deemed to have been accepted and, if the Principal
Shareholder Threshold has been met, payment in the amount of the Loss set forth
in the Notice of Claim shall be delivered to Parent not later than five (5) days
after the expiration of such 45 day period. The parties shall submit the matter
of a Principal Shareholder Challenged Claim to arbitration in accordance with
Article VI hereof. If a Notice of Claim sets forth a Third Party Claim, the
provisions of Section 1.5(b) shall also apply.

        1.4 Company Shareholder Claims.

        (a) At any time after obtaining knowledge of any facts, claim or demand
which has given rise to, or could reasonably give rise to, an Indemnification
Claim under Section 1.1(c), the Indemnification Representative may deliver a
Notice of Claim to Parent. The Indemnification Representative shall give a
Notice of Claim whether or not the Company Threshold has been reached. The
Notice of Claim must be given on or prior to the Escrow Termination Date, and
shall set forth the amount of the Loss suffered, or which may be suffered, by
the Company Shareholders.

        (b) Upon receipt of a Notice of Claim, Parent shall, subject to the
provisions of Section 1.4(c), pay the Indemnification Representative in
immediately available funds within five (5) days of the expiration of the
forty-five (45) day notice period described in Section 1.4(c) an amount equal to
the Loss set forth in the Notice of Claim.

        (c) Parent shall have forty-five (45) days from the date a Notice of
Claim is given within which to object, by written notice to the Indemnification
Representative, to any Indemnification Claim (a "Parent Challenged Claim"). If
Parent does not provide notice of objection to any such claim, the validity and
stated amount of the claim will be deemed to have been accepted and payment in
the amount of the Loss set forth in the Notice of Claim shall be delivered to
the Indemnification Representative not later than five (5) days after the
expiration of such 45 day period. The parties shall submit the matter of a
Parent Challenged Claim to arbitration in accordance with Article VI hereof. If
a Notice of Claim sets forth a Third Party 


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Claim, the provisions of Section 1.5(b) shall also apply.

        1.5 Procedural Matters.

        (a) Notice Delivery. So long as the Notice of Claim is given by the
Indemnified Party in accordance with Section 1.3(a) or 1.4(a), no failure or
delay by the Indemnified Party in the giving of a Notice of Claim shall reduce
or otherwise affect the Indemnified Party's right to indemnification hereunder.
Notice of Claim shall be deemed to be given as of:

                (x) the second business day after the date of the postmark on
        the registered or certified mail (postage prepaid, return receipt
        requested) containing the Notice of Claim; or

                (y) if the Notice of Claim is personally delivered, the date of
        such personal delivery.

        (b) Third Party Claims. In the event of a Third Party Claim, the
Indemnifying Party shall have the right, but not the obligation, exercisable by
written notice to the Indemnified Party within ten (10) days of the date of the
Notice of Claim concerning the commencement or assertion of any Third Party
Claim, to participate in the defense of such Third Party Claim. The Indemnified
Party shall not settle such Third Party Claim without the prior written consent
of the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, the Indemnified Party shall have the
right to pay or settle any Third Party Claim at any time, provided that in such
event it waives any right to indemnification therefor by the Indemnifying Party.
Within ten (10) days of the date a court of competent jurisdiction or arbitrator
shall determine that the Indemnified Party is liable for all or a portion of the
monetary liability arising out of any Third Party Claim or a settlement is
reached, the Indemnifying Party shall pay such claim as if such claim had been
accepted in accordance with the other provisions hereof unless an appeal is made
in accordance with the next sentence. If the Indemnifying Party desires to
appeal from an adverse judgment, then the Indemnifying Party shall post and pay
the cost of the security or bond required to stay execution of the judgment
pending appeal. Upon the payment in full by the Indemnifying Party of such
amounts, the Indemnifying Party shall succeed to the rights of such Indemnified
Party, to the extent not waived in settlement, against the third party who made
such Third Party Claim. The Indemnifying Party and Indemnified Party shall
submit disputes regarding any payments due under this Section 1.5(b) to
arbitration in accordance with Article VI. The Indemnifying Party and the
Indemnified Party shall cooperate in the defense or prosecution of any Third
Party Claim and shall furnish or cause to be furnished such records, information
and testimony, and attend such conferences, discovery proceedings, hearings,
trials or appeals, as may be requested in connection therewith.

                                   ARTICLE II
                             ESTABLISHMENT OF ESCROW

        2.1 Escrow Shares. On this date, Parent has executed and delivered to
the Escrow Agent a stock certificate in negotiable form representing the
Indemnification Escrow Shares. The Escrow Agent acknowledges receipt of the
Indemnification Escrow Shares and agrees to hold 


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and disburse the Indemnification Escrow Shares for the benefit of Parent and the
Company Shareholders in accordance with the provisions of this Agreement.

        2.2 Shareholder Percentage Interests. Attached as Schedule I hereto is a
schedule showing for each Company Shareholder (i) the respective percentage
interest (the "Percentage Interest") of each such Company Shareholder in the
Indemnification Escrow Shares, and (ii) the corresponding aggregate maximum
number of Indemnification Escrow Shares issuable to each Shareholder, subject to
the adjustments provided herein.

        2.3 Delivery of IRS Form W-9. Upon the request of the Escrow Agent, each
Company Shareholder will deliver to the Escrow Agent such Shareholder's current
IRS Form W-8 or 9. Company and Parent will use its reasonable efforts to assist
the Escrow Agent in obtaining such IRS Forms W-8 or 9 from the Company
Shareholders.

        2.4 Escrow Termination Procedures.

        (a) On the Escrow Termination Date, Parent and the Indemnification
Representative shall prepare, execute and deliver to the Escrow Agent a
certificate instructing the Escrow Agent as to the number of Indemnification
Escrow Shares, if any, to be retained in escrow following the Escrow Termination
Date. Such number shall be equal to the quotient of the dollar amount of all
Challenged Claims and pending Indemnification Claims which have not been finally
determined (collectively, "Pending Claims") divided by the Parent Average
Closing Price (rounded up to the nearest whole share). The "dollar amount" of
any Pending Claim shall be calculated assuming the maximum possible exposure set
forth in the Notice of Claim; provided, however, that, with respect to a Pending
Claim for which legal action has not been taken against the Indemnified Party
within two years following the Notice of Claim (the "Period"), then the dollar
amount of such Pending Claim shall be as agreed upon by Parent and the
Indemnification Representative, and if they cannot agree within ninety (90) days
of the end of the Period, then such dollar amount shall be determined by
arbitration in accordance with Article VI hereof. The Escrow Agent shall retain
in escrow after the Escrow Termination Date the number of Indemnification Escrow
Shares as are set forth in such certificate of Parent and Indemnification
Representative.

        (b) As promptly as practicable after the Escrow Termination Date, the
Escrow Agent shall deliver to the Company Shareholders the balance of the
Indemnification Escrow Shares not delivered to the Parent Parties or retained in
escrow pursuant to Section 2.4(a). Each Company Shareholder shall receive his or
her Percentage Interest of such distribution.

        (c) Indemnification Escrow Shares that are not distributed to the
Company Shareholders on the Escrow Termination Date because they have been
retained pursuant to Section 2.4(a) shall be distributed as follows: Upon
receipt by the Escrow Agent of a certificate of Parent and Indemnification
Representative setting forth the amount of the final distribution to Parent and
confirming that all Pending Claims have been finally determined, the balance of
all Indemnification Escrow Shares shall be delivered to the Company Shareholders
in accordance with Section 2.4(b).


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                                  ARTICLE III
                         VOTING RIGHTS AND DISTRIBUTIONS

        3.1 Voting Rights; Distributions. Unless and until the Indemnification
Escrow Shares are delivered to Parent pursuant to this Agreement, Parent shall
cause its stock transfer agent to register such shares in the respective names
of the Company Shareholders in accordance with their respective Percentage
Interests, who shall be entitled to vote their respective Indemnification Escrow
Shares. All cash dividends or distributions of assets declared by Parent with
respect to its Common Stock prior to the Escrow Termination Date shall be
payable directly to the Company Shareholders as if each had received all of the
shares of Parent Common Stock deliverable to such shareholder at the Effective
Time of the Merger and no shares had been placed into escrow under this
Agreement (subject to reduction to reflect the delivery of Indemnification
Escrow Shares to Parent under this Agreement).

        3.2 Additional Shares. All shares of Parent Common Stock relating to
Indemnification Escrow Shares still held by the Escrow Agent under this
Agreement and resulting from conversion, stock dividend, stock split,
reclassification, recapitalization or corporate reorganization of Parent, shall
be delivered to the Escrow Agent when deliverable to holders of other
outstanding shares of Parent Common Stock, shall be allocated according to the
Percentage Interest of each Company Shareholder and shall constitute additional
Indemnification Escrow Shares.

        3.3 Interest in Escrow Shares. The interest of the Company Shareholders
in the Indemnification Escrow Shares (until released to them hereunder) is
nonassignable and shall be transferable only by operation of law.

                                   ARTICLE IV
                       THE INDEMNIFICATION REPRESENTATIVE

        4.1 Appointment and Replacement. As long as there are shares held in
escrow pursuant to this Agreement, the Company Shareholders, and each of them,
will be represented by the Indemnification Representative who is empowered to
give any and all notices and instructions and take any and all action for and on
behalf of the Company Shareholders, and each of them, under this Agreement. The
Company Shareholders will have the right to remove the Indemnification
Representative and, upon such removal or, in the event of the Indemnification
Representative's death or resignation, to appoint as the new Indemnification
Representative any Company Shareholder at any time and from time to time during
the period when any shares are held in escrow, by a vote of Company Shareholders
holding a majority interest in the Indemnification Escrow Shares held in escrow
at such time evidenced by a writing executed by such majority Company
Shareholders. The appointment of a new Indemnification Representative will be of
no force or effect whatsoever upon Parent or the Escrow Agent or otherwise under
this Agreement until three days after the later of the dates when Parent or the
Escrow Agent is deemed to have received written notice of such appointment,
which notice must include at least: (i) the identity and address of the new
Indemnification Representative and a statement that such Indemnification
Representative has been appointed by a vote of Company Shareholders holding a
majority interest in the Indemnification Escrow Shares then held in escrow; (ii)
the duly acknowledged signatures of each of the Company Shareholders voting for


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the new Indemnification Representative; and (iii) a statement that any
non-signing Company Shareholder has been notified in writing of the appointment
of the new Indemnification Representative. Parent and the Escrow Agent will be
entitled to rely on any notice received in such form without conducting an
investigation of the contents thereof.

        4.2 Right to Rely. Any action taken by, or notice or instruction
received from, the Indemnification Representative will be deemed to be action
by, or notice or instruction from, each and all of the Company Shareholders.
Parent may and the Escrow Agent will disregard any notice or instruction
received from any Company Shareholder other than the then-acting Indemnification
Representative with regard to this Agreement prior to the Escrow Termination
Date.

        4.3 Conduct of Indemnification Representative. The Indemnification
Representative shall not suffer any liability or Loss for any act performed or
omitted to be performed by him or her under this Agreement in the absence of
gross negligence or willful misconduct. The Indemnification Representative may
consult with counsel in connection with his or her duties hereunder and shall be
fully protected by any act taken, suffered, permitted, or omitted in good faith
in accordance with the advice of counsel. The Indemnification Representative
shall not be responsible for the sufficiency or accuracy of the form, execution,
validity or genuineness of documents or securities now or hereafter deposited
hereunder, or of any endorsement thereof or for any lack of endorsement thereon,
or for any description therein, nor shall he or she be responsible or liable in
any respect on account of the identity, authority or rights of the persons
executing or delivering or purporting to execute or deliver any such document,
security or endorsement, and the Indemnification Representative shall be fully
protected in relying upon any written notice, demand, certificate or document
which he or she in good faith believes to be genuine.

        4.4 Retention of Experts; Expenses. The Indemnification Representative
shall be entitled to employ such legal counsel and other experts as he or she
may deem necessary to advise him or her properly with respect to his or her
rights and obligations hereunder and to evaluate Indemnification Claims and to
pursue challenges to Indemnification Claims or to defend Third Party Claims. The
reasonable expenses and fees of such counsel and experts, and any reasonable,
documented out of pocket expenses which the Indemnification Representative
incurs hereunder in relation to evaluating, challenging or contesting claims,
shall be reimbursed by the Company Shareholders.

                                   ARTICLE V
                                  ESCROW AGENT

        5.1 Appointment. Parent, the Company, the Principal Shareholders and the
Indemnification Representative hereby appoint ChaseMellon Shareholder Services
L.L.C. ("ChaseMellon") to act as the Escrow Agent and ChaseMellon accepts such
appointment. Parent shall promptly notify Escrow Agent as to the date of the
Effective Time.

        5.2 Compensation and Expenses. The Escrow Agent shall be entitled to
reasonable compensation for all services rendered and expenses incurred by it in
the performance of its obligations hereunder. The Escrow Agent shall be entitled
to employ such legal counsel and 


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other experts as it may deem necessary to properly advise it in connection with
its obligations hereunder, may rely on the advice of such counsel, shall not be
liable for any action taken or omitted to be taken in reliance thereon, and may
pay them reasonable compensation therefor. The Escrow Agent and such legal
counsel's and other expert's fees and expenses shall be borne by Parent.

        5.3 Liability. The Escrow Agent shall not be liable for any diminution
of value of the Indemnification Escrow Shares. The Escrow Agent shall have no
authority to sell or otherwise dispose of or encumber the Indemnification Escrow
Shares except as expressly provided herein. The duties of the Escrow Agent are
purely ministerial in nature, and the Escrow Agent shall not incur any liability
in the performance of its duties hereunder whatsoever, except for willful
misconduct or gross negligence.

        5.4 Instructions. Notwithstanding any other provisions herein contained,
the Escrow Agent may at all times act upon and in accordance with the joint
written instructions of Parent and the Indemnification Representative. The
Escrow Agent shall not be liable for any act done or omitted by it in accordance
with such instructions or pursuant to the advice of counsel of its selection.

        5.5 Duties. The duties and responsibilities of the Escrow Agent shall be
limited to those expressly set forth in this Agreement and instructions given to
the Escrow Agent pursuant to this Agreement, and the Escrow Agent shall neither
be subject to, have any liability under, nor obligated to recognize, any other
agreement between any or all of the parties hereto even though reference thereto
may be made herein; provided, however, with the written consent of the Escrow
Agent, this Agreement may be amended at any time by an instrument in writing
signed by Parent and the Indemnification Representative. The Escrow Agent shall
advise Parent and the Indemnification Representative from time to time, upon
written request, as to (i) the number of Indemnification Escrow Shares
represented by the certificate held by the Escrow Agent, and (ii) the number of
Indemnification Escrow Shares distributed by the Escrow Agent to the Company
Shareholders. The Escrow Agent shall have the right to perform any of its duties
hereunder through agents, custodians or nominees.

        5.6 Documents. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder, or of any
endorsement thereof, or for any lack of endorsement thereon, or for any
description therein, nor shall it be responsible or liable in any respect on
account of the identity, authority or rights of the persons executing or
delivering or purporting to execute or deliver any such document, security or
endorsement of this Agreement, and the Escrow Agent shall be fully protected in
relying upon any written notice, demand, certificate or document which it in
good faith believes to be signed by the proper party, person or entity.

        5.7 Right to Rely. The Escrow Agent is authorized, in its sole
discretion, to disregard any and all notices or instructions given by any of the
parties hereto or by any other person, firm or corporation, except only such
notices or instructions as are herein expressly provided for in this Agreement
and orders or process of any court entered or issued with or without
jurisdiction. If any property subject hereto is at any time attached, garnished
or levied upon under any court order, or in case the payment, assignment,
transfer, conveyance or delivery 


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of any such property shall be stayed or enjoined by any court order, or in case
any order, judgment or decree shall be made or entered by any court affecting
such property or any part thereof, then and in any of such events, the Escrow
Agent is authorized, in its sole discretion, to rely upon and comply with any
such order, writ, judgment or decree which the Escrow Agent is advised by legal
counsel of its own choosing is binding upon it; and if the Escrow Agent complies
with any such order, writ, judgment or decree, it shall not be liable to any of
the parties hereto or to any other person, firm or corporation by reason of such
compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated.

        5.8 Resignation. The Escrow Agent may resign by giving twenty (20) days
advance written notice to Parent and the Indemnification Representative and
thereafter shall deliver the Indemnification Escrow Shares to such substitute
escrow agent as Parent and the Indemnification Representative shall jointly
direct in writing. If such direction to deliver to a substitute escrow agent is
not received by the Escrow Agent within twenty (20) days after mailing such
notice of resignation, it is unconditionally and irrevocably authorized,
directed and empowered to file an interplea motion and deliver all items held by
it to a court of competent jurisdiction.

        5.9 Indemnity. In consideration of its acceptance of the appointment as
the Escrow Agent, the Parent agrees to indemnify and hold the Escrow Agent
harmless as to and against any loss, liability or expense incurred by it to any
person, firm or corporation by reason of its having accepted the same or in
carrying out any of the terms hereof (except as such liability may arise out of
or be based upon the gross negligence or willful misconduct of the Escrow
Agent), and to reimburse the Escrow Agent for all its reasonable expenses,
including, among other things, counsel fees and court costs, incurred by reason
of its position hereunder or actions taken pursuant hereto. The indemnity of
this paragraph shall survive the resignation or substitution of the Escrow Agent
or the termination of this Escrow Agreement.

        5.10 Termination. The obligations of the Escrow Agent shall terminate
upon the disbursement of all of the Indemnification Escrow Shares.
Notwithstanding any termination of this Escrow Agreement, the provisions of
Section 5.2 and Section 5.9 hereof shall survive such termination and remain in
full force and effect.

                                   ARTICLE VI
                               DISPUTE RESOLUTION

        6.1 Submission of Disputes. Except as provided in Section 6.3, all
disputes related to the obligations of all or any of the parties hereto under
the provisions of this Agreement shall be submitted to, and settled by,
arbitration in Seattle, Washington, in accordance with the Commercial Rules of
the American Arbitration Association. The dispute shall be submitted to one
arbitrator agreed to by the Indemnified Party and the Indemnifying Party. If the
Indemnified Party and the Indemnifying Party cannot agree on one arbitrator, one
arbitrator will be selected by each party, with the two selected arbitrators
then selecting a third arbitrator.

        6.2 Fees, Expenses and Awards. The fees and expenses of the arbitration
or arbitrators shall be paid by the Indemnifying Party unless the
indemnification obligation is reduced to less than 80% of the amount in the
related Notice of Claim and in such event the fees 


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<PAGE>   11
and expenses shall be shared one-half by Indemnified Party and one-half by the
Indemnifying Party. Any arbitration award may be entered in and enforced by any
court having jurisdiction thereover and the parties hereby consent and commit
themselves to the jurisdiction of the courts of the State of Washington for the
purposes of the enforcement of any arbitration award.

        6.3 Disputes as to Duties of Escrow Agent. Any dispute which may arise
with respect to the duties of the Escrow Agent hereunder shall be settled by the
mutual agreement of the parties concerned. The Escrow Agent shall be under no
duty to institute or defend any proceeding unless the subject of such proceeding
is part of its duties hereunder. In the event adverse claims or demands are made
upon any of the Indemnification Escrow Shares, or in the event that the Escrow
Agent, in good faith, is in doubt as to what action it should take hereunder,
the Escrow Agent may, at its option, file a suit as interpleader in a court of
appropriate jurisdiction, or refuse to comply with any claims or demands on it,
or refuse to take any other action hereunder, so long as such dispute shall
continue or such doubt shall exist. The Escrow Agent shall be entitled to
continue so to refrain from acting until (i) the rights of all parties have been
fully and finally adjudicated by a court of appropriate jurisdiction, or (ii)
all differences and doubt shall have been resolved by agreement among all of the
interested persons, and the Escrow Agent shall have been notified thereof in
writing signed by all such persons. The rights of the Escrow Agent under this
Section 6.3 are cumulative of all other rights which it may have by law or
otherwise.

                                  ARTICLE VII
                                  MISCELLANEOUS

        7.1 Notices. All notices and other communications hereunder will be in
writing and will be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as will be specified by like notice):


                                       11


<PAGE>   12
If to Parent or Merger Sub, to:

                   Data Dimensions, Inc.
                   One Bellevue Center, Suite 2100
                   411 - 108th Avenue NE
                   Bellevue, Washington  98004
                   Attention: Legal Department
                   Facsimile: 425-688-1099

With a copy to:

                   Garvey, Schubert & Barer
                   1191 Second Avenue, #1800
                   Seattle, Washington  98101-2939
                   Attention: Bruce A. Robertson
                   Facsimile: 206-464-0125

If to the Company, to:

                   ST Labs, Inc.
                   Sterling Plaza, 3rd Floor
                   3535 - 128th Avenue S.E.
                   Bellevue, Washington  98006
                   Attention: Tye V. Minckler
                   Facsimile: 425-974-0150

With a copy to:

                   Summit Law Group, PLLC
                   1501 Westlake Avenue North, Suite 300
                   Seattle, Washington  98109
                   Attention: Karen A. Andersen
                   Facsimile: 206-281-9882

If to the Principal Shareholders, to each of:

                   Robert Arnold, Jr.
                   1912 Shelton Court N.E.
                   Renton, WA  98056
                   Facsimile: 425-204-7759
and

                   Tye V. Minckler
                   10209 N.E. 29th Place
                   Bellevue, WA  98004
                   Facsimile: 425-974-0174


                                       12


<PAGE>   13
If to the Indemnification Representative:

                   Tye V. Minckler
                   10209 N.E. 29th Place
                   Bellevue, WA  98004
                   Facsimile: 425-974-0174

If to the Escrow Agent:

                   ChaseMellon Shareholder Services L.L.C.
                   520 Pike Street, Suite 1220
                   Seattle, Washington  98101
                   Attention:  Joseph S. Campbell
                   Facsimile: 206-674-3059


With a copy to:

                   ChaseMellon Shareholder Services, L.L.C.
                   85 Challenger Road
                   Ridgefield Park, NJ   07660
                   Attention:  General Counsel
                   Facsimile:  201-296-4004


or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of changes of address shall
only be effective upon receipt.

        7.2 Headings. The descriptive headings in this Agreement have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provision hereof.

        7.3 Entire Agreement; Assignment. This Agreement and the Merger
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and thereof. This Agreement shall not be
assigned by operation of law or otherwise.

        7.4 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.

        7.5 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect, provided that enforcement of such other provisions in the absence of the
invalid or unenforceable provisions does not deprive either the Company or
Parent of the benefit of the bargain.


                                       13


<PAGE>   14
        7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and same Agreement.

        7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof;
provided, that the rights and duties of the Escrow Agent shall be governed by
the laws of the State of New York.

        IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Principal
Shareholders, the Indemnification Representative and the Escrow Agent have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, and their respective seals to be affixed hereto, as of the date
first written above.

                         DATA DIMENSIONS, INC.



                         By:_________________________________________
                         Title:______________________________________




                         DS ACQUISITION CORPORATION



                         By:_________________________________________
                         Title:______________________________________


                         ST LABS, INC.


                         By:_________________________________________
                         Title:______________________________________


                         ____________________________________________
                         ROBERT ARNOLD, JR.


                         ____________________________________________
                         TYE MINCKLER
                         Personally, and as Indemnification Representative


                                       14


<PAGE>   15
                         CHASEMELLON SHAREHOLDER SERVICES L.L.C.


                         By:_________________________________________
                         Title:______________________________________


                                       15


<PAGE>   16
                                 SPOUSAL CONSENT


        The undersigned are the spouses of the Principal Shareholders. Each of
the undersigned acknowledges that she has read and clearly understands the
provisions of this Agreement, and hereby expressly approves of and agrees to be
bound by the provisions of this Agreement in its entirety, including but not
limited to, those provisions relating to the indemnification of the Parent
Parties pursuant to Sections 1.1(a) and 1.1(b) hereto.

Date: ___________________________________________       ______________________
                                                       [______________________]

Date:____________________________________________       ______________________
                                                       [______________________]



                                       16