Document:

<PAGE>

                                 Exhibit 10.40

                           LOAN AND SECURITY AGREEMENT

                  THIS LOAN AND SECURITY AGREEMENT is made between HEMAGEN
DIAGNOSTICS, INC., a Delaware corporation (sometimes referred to as "Hemagen"),
REAGENTS APPLICATIONS, INC., a Delaware corporation (sometimes referred to as
"Reagents") (Hemagen and Reagents are hereafter individually and collectively
referred to as the "Borrower"), and BAY NATIONAL BANK, a national banking
association (the "Bank").

                               W I T N E S S E T H

                   NOW, THEREFORE, in consideration of the premises, the
covenants and agreements of the parties hereinafter set forth, and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

                  As used in this Loan and Security Agreement, the following
terms shall have the meanings set forth as definitions, unless the specific
context clearly requires a different meaning, and all terms defined in this
Article, or elsewhere in this Loan and Security Agreement, shall be capitalized
throughout this Loan and Security Agreement. Terms defined in the Maryland
version of the Uniform Commercial Code shall have the meanings ascribed to them
therein, and all financial terms not otherwise defined shall have those meanings
as determined under generally accepted accounting principles, consistently
applied ("GAAP"). The plural use of any defined term shall include the singular,
and the singular use of any defined term shall include the plural.

                  SECTION 1.1. ACCOUNTS, CHATTEL PAPER, DEPOSIT ACCOUNTS,
DOCUMENTS, EQUIPMENT, GENERAL INTANGIBLES, INSTRUMENTS, INVENTORY, INVESTMENT
PROPERTY, LETTER-OF-CREDIT RIGHTS AND SUPPORTING OBLIGATIONS. The terms
"Accounts," "Chattel Paper," "Deposit Accounts," "Documents," "Equipment,"
"General Intangibles" (including payment intangibles), "Instruments" (including
promissory notes), "Investment Property," "Letter-of-Credit Rights," "Inventory"
and "Supporting Obligations" shall have the same respective meanings as are
given to those terms in the Maryland Uniform Commercial Code-Secured
Transactions, Title 9, Commercial Law Article, Annotated Code of Maryland, as
amended.

                  SECTION 1.2. ADVANCE. The term "Advance" shall mean each
credit to the Operating Account made by the Bank based on a request from
Borrower as provided in
<PAGE>
Section 2.1.3 herein, or any extension of credit under the Line of Credit as
herein provided, regardless of whether Borrower has made a specific request
therefor.

                  SECTION 1.3. AFFILIATE. The term "Affiliate" or "Affiliates"
shall mean any Subsidiary of the Borrower, or any corporation, partnership,
limited liability company or other Person which directly or indirectly controls,
is controlled by, or under direct or indirect common control with, such Person.
"Control" as used herein means the power to direct the management and policies
of the subject Person.

                   SECTION 1.4. AGREEMENT. The term "Agreement" shall mean this
Loan and Security Agreement, and all amendments, extensions, or modifications by
the parties hereto from time to time, together with all attachments and exhibits
hereto or thereto.

                  SECTION 1.5. BORROWING BASE CERTIFICATE. The term "Borrowing
Base Certificate" shall mean that report or reports to be delivered pursuant to
Section 6.18 by the Borrower to the Bank, at such intervals as the Bank may from
time to time reasonably determine, but in no event less than monthly,
identifying in form and detail satisfactory to the Bank the amount of Inventory
and Receivables, the Inventory and Receivables claimed to be Eligible Inventory
and Eligible Receivables, respectively, the aging of Receivables, and such other
information as the Bank may from time to time require. Each such Borrowing Base
Certificate shall be certified to be true and accurate in all material respects
as of the time of preparation by the president or chief financial officer of the
Borrower.

                  SECTION 1.6. CHANGE IN CONTROL. The term "Change in Control"
shall mean, at any time, (i) any Person or "group" (within the meaning of Rules
13d-3 and 13-d-5 under the Exchange Act of 1934) (a) shall have acquired
beneficial ownership of a majority on a fully diluted basis of the voting and/or
economic interest in Hemagen or (b) shall have obtained the power (whether or
not exercised) to elect a majority of the members of the board of directors (or
similar governing body) of Hemagen; (ii) Hemagen shall cease to beneficially own
and control 100% on a fully diluted basis of the economic and voting interest in
the Equity Securities of Reagents; (iii) the sale or other disposition of all or
substantially all of the assets of Reagents or of all or substantially all of
the Equity Securities thereof or (iv) the majority of the seats (other than
vacant seats) on the board of directors (or similar governing body) of Hemagen
cease to be occupied by Persons who either (a) were members of the board of
directors of Hemagen as of the close of business on the Closing Date or (b) were
nominated for election by the board of directors of Hemagen, a majority of whom
were directors as of the close of business on the Closing Date or whose election
or nomination for election was previously approved by a majority of such
directors. As used herein, "Equity Securities" shall mean all common stock
issued as of the Closing Date and all securities issued as of the Closing Date
which are convertible into, or exercisable for, common stock.

                                       2
<PAGE>
                  SECTION 1.7. CHANGE IN KEY PERSONNEL. The term "Change in Key
Personnel" shall mean the appointment of a president or chief financial officer
of Hemagen other than William P. Hales and Deborah F. Ricci, respectfully, or a
material change in the duties of the persons holding such offices, whether such
appointment occurs as a result of resignation, termination of employment (for
any reason), death, incapacity, or for any other reason, except for temporary
appointments occasioned by medical or maternity reasons. In the event of death
or incapacity, a Change in Key Personnel shall occur sixty (60) days thereafter
if a successor reasonably acceptable to the Bank has not been appointed.

                  SECTION  1.8. CLOSING DATE. The term "Closing Date" shall
mean the date on which the conditions set forth in Section 4.1 are satisfied and
the initial Loan is made.

                  SECTION 1.9. COLLATERAL. The term "Collateral" shall mean all
of the tangible and intangible property with respect to which the Borrower has
assigned or granted a security interest or lien to the Bank pursuant to the
terms of this Agreement or any of the other Loan Documents.

                  SECTION 1.10. CURRENT RATIO. The term "Current Ratio" shall
mean the ratio of Current Assets to Current Liabilities. As used herein,
"Current Assets" means the sum of cash, marketable securities, Receivables,
Inventory, prepaid expenses, and other current assets (subject to reserves for
bad debts and obsolescence, respectively, established from time to time in
accordance with GAAP), on a consolidated basis; and "Current Liabilities" means
the sum of all accounts payable, accrued taxes payable, Deferred Revenue, other
current liabilities determined according to GAAP and applied on a consistent
basis and the current portion of long-term liabilities.

                  SECTION 1.11. CUSTOMER. The term "Customer" or "Customers"
shall mean the person or persons to or for whom the Borrower has sold, leased or
licensed goods, performed services and who is an account debtor or are account
debtors of the Borrower as a result thereof, or which otherwise has a payment
obligation owing to the Borrower.

                  SECTION 1.11A. DEFERRED REVENUE. "Deferred Revenue" shall
mean booked future revenue for which services remain to be performed and for
which there is no cash payment obligation.

                  SECTION 1.12. ELIGIBLE INVENTORY. The term "Eligible
Inventory" shall mean all Inventory which is not work in process or has not been
deemed ineligible by the Bank because of age, obsolescence, its slow moving
character or for any other reason as determined by the Bank in its reasonable
discretion.

                                       3
<PAGE>
                  SECTION 1.13. ELIGIBLE RECEIVABLES. The term "Eligible
Receivables" shall mean those Receivables which arise from goods sold, leased or
licensed, or from services performed, in the ordinary course of business to or
for Customers other than any Affiliate, and as to which: (a) the delivery of the
goods or the performance of the services has been completed, or the licensing of
property is in effect and no material defaults exist which would jeopardize
Borrower's right to payment thereon, (b) no return, rejection, repossession, or
termination has occurred; (c) the representations and warranties contained in
the Agreement as to Receivables are and continue to be true and accurate; (d) no
more than sixty (60) days have elapsed from the due date so long as such
accounts were due thirty (30) days from billing or invoice date; (e) no
bankruptcy or insolvency proceedings or payment moratoriums of any kind apply;
and (f) the Bank has not, in the Bank's good faith judgment, deemed as
unsatisfactory for any reason. Eligible Receivables shall not include
inter-company Receivables, contra accounts, foreign accounts, finance charges or
the Receivables of any Customer if 50% or more of the account balance of any
such Customer is in excess of ninety (90) days from invoice or billing date.

                  SECTION 1.14. ENVIRONMENTAL LAWS. The term "Environmental
Laws" shall mean the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601, et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Clean Water Act (33
U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.) and the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), as such laws
may be amended or otherwise modified from time to time, and any other present or
future federal, state, local or foreign statute, ordinance, rule, regulation,
order, judgment, decree, permit, license or other binding determination of any
governmental authority imposing liability or establishing standards of conduct
for protection of the environment.

                  SECTION 1.15. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.

                  SECTION 1.16. EVENT OF DEFAULT. The term "Event of Default"
shall mean the events constituting defaults under this Agreement as set forth in
Article VIII of the Agreement.

                  SECTION 1.17. INDEBTEDNESS. The term "Indebtedness" shall
mean all items of indebtedness, obligation or liability, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, joint or several,
including, but not limited to: (a) all indebtedness guaranteed, directly or
indirectly, in any manner, or endorsed (other than for collection or deposit in
the ordinary course of business) or discounted with recourse; (b) all
indebtedness in effect guaranteed, directly or indirectly, through agreements,
contingent or otherwise: (1) to purchase such indebtedness; or (2) to purchase,
sell or

                                       4
<PAGE>
lease (as lessee or lessor) property, products, materials, or supplies or to
purchase or sell services, primarily for the purpose of enabling the debtor to
make payment of such indebtedness or to assure the owner of the indebtedness
against loss; or (3) to supply funds to or in any other manner invest in the
debtor; (c) all indebtedness secured by (or for which the holder of such
indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance upon property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed; and (d) all indebtedness incurred
as the lessee of goods or under leases that, in accordance with GAAP should not
be reflected as leases on the balance sheet of the lessee.

                  SECTION 1.18. INVENTORY. The term "Inventory" shall mean goods
held by the Borrower for sale, lease, license or furnished or to be furnished
under contracts of service and goods which are raw materials, work in process or
materials used or consumed in Borrowers' business.

                  SECTION 1.19. LAWS. The term "Laws" shall mean all ordinances,
statutes, rules, regulations, orders, injunctions, writs or decrees of any
government or political subdivision or agency thereof, or any court or similar
authority established by any thereof.

                  SECTION 1.20. LINE OF CREDIT. The term "Line of Credit" shall
mean those Advances, readvances and other credit accommodations provided under
this Agreement, and evidenced by the Line of Credit Note, made from time to time
in accordance with the terms of this Agreement.

                  SECTION 1.21. LINE OF CREDIT NOTE. The term "Line of Credit
Note" shall mean the Promissory Note of even date executed by the Borrower, as
obligor, in the principal sum of One Million Dollars ($1,000,000) and payable to
the order of the Bank.

                  SECTION 1.22. LIQUIDATION COSTS. The term "Liquidation Costs"
shall mean any and all costs and expenses (including reasonable attorneys' fees
and legal expenses) which are incurred by or on behalf of the Bank (a) to
enforce payment of any of the Obligations, (b) to enforce payment of any
Receivable following the occurrence of an Event of Default, whether as against a
Customer, the Borrower or any surety of any Customer or of any of the
Obligations, (c) in the prosecution or defense of any action growing out of or
connected with the Collateral or any of the Bank's rights therein or thereto,
and (d) in connection with the custody or preservation of the Collateral
following the occurrence of an Event of Default, and the preparation for sale,
sale or other disposition of any Collateral.

                  SECTION 1.23. LOAN. The term "Loan" or "Loans" shall mean,
separately or collectively, the Line of Credit, including future advances and
readvances, and any

                                       5
<PAGE>
other Obligation for the payment or repayment of money by the Borrower to the
Bank, whether now existing or hereafter arising.

                  SECTION 1.24. LOAN DOCUMENTS. The term "Loan Documents" shall
mean all documents executed by the Borrower or any Subsidiary in connection with
the Loans, including, but not limited to, this Agreement, the Line of Credit
Note, appropriate financing statements and continuation statements, assignments
of property rights or interests, or any amendments or modifications thereof or
thereto.

                  SECTION 1.25. MATERIAL ADVERSE EFFECT. The term "Material
Adverse Effect" shall mean a material adverse effect on any of the following:
(i) the operations, business, assets, properties, or condition (financial or
otherwise) of Borrower (either individually, or taken as a whole), (ii) the
ability of the Borrower to perform its obligations under the Loan Documents to
which it is a party (either individually or taken as a whole), (iii) the
legality, validity or enforceability of this Agreement or any other Loan
Document, (iv) the rights and remedies of the Bank under any Loan Document, (v)
the validity, perfection or priority of a lien or security interest in favor of
the Bank as to any part of the Collateral or (vi) the value of any material part
of the Collateral.

                  SECTION 1.26. OBLIGATIONS. The terms "Obligation" or
"Obligations" shall mean any obligation of payment or performance by the
Borrower owing to the Bank, including: (a) any and all sums due to the Bank
under the Loan or otherwise under the terms of this Agreement, the Line of
Credit Note and the Loan Documents; (b) any and all sums advanced by the Bank to
preserve or protect the Collateral and the value of the Collateral or to
preserve, protect, or perfect the Bank's security interest in the Collateral;
(c) in the event of any proceeding to enforce the collection of the Obligations
or any of them, after default, and/or upon demand, the reasonable expenses of
retaking, holding, preparing for sale, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Bank of the Bank's rights
in the event of default, together with reasonable attorneys' fees, expenses of
collection, and court costs as provided in the Loan Documents; and (d) any other
Indebtedness or liability of the Borrower to the Bank, whether direct or
indirect, joint or several, absolute or contingent, now existing or hereafter
arising.

                  SECTION 1.27. OPERATING ACCOUNT. The term "Operating Account"
shall mean the commercial checking account to be established and maintained by
Hemagen with the Bank and to be utilized as the means of making Advances under
the Line of Credit.

                                       6
<PAGE>
                  SECTION 1.28. PERMITTED LIENS. The term "Permitted Liens"
shall mean:

                           (a) Liens for taxes, assessments, or similar charges
incurred in the ordinary course of business that are not yet due and payable;

                           (b) Liens of mechanics, materialmen, warehousemen,
carriers, or other like liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable;

                           (c) Liens or security interests in favor of the Bank;

                           (d) Existing liens disclosed in Schedule "A" attached
hereto and incorporated herein;

                           (e) Subsequently arising liens approved in writing by
the Bank; and

                           (f) Purchase money security interests in Equipment
acquired from vendors so long as the aggregate cost of all Equipment acquired in
any one fiscal year which is subject to a vendor purchase money security
interest does not exceed the sum of $250,000.

                  SECTION 1.29. PERSON. The term "Person" shall mean any
individual, corporation, partnership, association, limited liability company,
limited liability partnership, joint-stock company, trust, unincorporated
organization, joint venture, court, or government or political subdivision or
agency thereof.

                  SECTION 1.30. PRIME RATE. The term "Prime Rate" shall mean the
prime rate (or the highest of such prime rate if there is a range of such rates)
as published from time to time in the Money Rates column of the Wall Street
Journal (the "Index"). If the Index shall remain unpublished for more than
thirty (30) days or shall cease to exist, then the Bank shall have the right, in
its sole discretion, to select a comparable rate of interest consistent with
similar rates charged to other customers of the Bank whose interest is based
upon the "Prime Rate."

                  SECTION 1.31. RECEIVABLES. As used herein, the term
"Receivables" shall mean all of the Borrower's Accounts, Instruments, Documents,
Chattel Paper, rents, promissory notes, notes receivable, General Intangibles,
Letter-of-Credit Rights, Supporting Obligations and chooses in action, or any
other right to payment, now existing or hereafter created or arising, and all
cash and non-cash proceeds and products thereof, and all rights thereto
including rights in rejected, returned or repossessed goods, arising from the
sale of or providing of Inventory, goods, or services by the Borrower.

                                       7
<PAGE>
                  SECTION 1.32. RECORDS. The term "Records" shall mean
correspondence, memoranda, tapes, discs, papers, books and other documents or
transcribed information of any type, whether expressed in ordinary or machine
language, maintained by the Borrower in connection with the Collateral or its
business operations.

                  SECTION 1.33. SUBSIDIARY. The term "Subsidiary" shall mean
any subsidiary of the Borrower, or any corporation, partnership, limited
liability company or other Person of which fifty percent (50%) or more of the
legal or beneficial ownership interests are held, directly or indirectly, by a
Borrower, whether now owned or hereafter existing or acquired, and their
successors.

                  SECTION 1.34. SUBORDINATED DEBT. The term "Subordinated Debt"
shall mean any and all indebtedness and liabilities of any Borrower which have
been subordinated as to collection, enforcement rights and/or lien priority by
written agreement, or by the express written terms of the subordinated
indebtedness instruments, to the principal and interest of the Loan amount owned
by the Borrower to the Bank. Subordinated Debt shall specifically include
outstanding subordinated convertible notes, with warrants to purchase common
stock, issued on or about May 22, 2000 in the aggregate principal amount of Six
Million Three Hundred Fifteen Thousand Dollars ($6,315,000), due April 17, 2005
(the "Subordinated Convertible Notes").

                  SECTION 1.35. SUBORDINATED DEBT NOTEHOLDERS. The term
"Subordinated Debt Noteholders" shall mean those Persons now holding
Subordinated Convertible Notes which or who are identified on Schedule "B"
attached hereto along with the current mailing address of such Person and the
portion of the aggregate principal indebtedness owing to such Person pursuant to
the foregoing Subordinated Convertible Notes.

                  SECTION 1.36. TANGIBLE NET WORTH. The term "Tangible Net
Worth" shall mean the consolidated amount of Borrowers' and their Subsidiaries'
total assets, exclusive of goodwill, trademarks, patents, licenses and such
other assets as Bank may determine from time to time are properly classified as
intangible assets in accordance with GAAP, less consolidated Total Liabilities
plus Subordinated Debt.

                  SECTION 1.37. TOTAL LIABILITIES. The term "Total Liabilities"
shall mean all liabilities on a consolidated basis of Borrower and its
Subsidiaries for borrowed money or, without duplication, any other Indebtedness
due from a Borrower to any Person, including an Affiliate, determined in
accordance with GAAP.

                  SECTION 1.38. TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO.
The term "Total Liabilities to Tangible Net Worth Ratio" shall mean the ratio of
consolidated Total Liabilities, less Subordinated Debt and Deferred Revenue, to
consolidated Tangible Net Worth.

                                       8
<PAGE>
                                   ARTICLE II
                         TERMS AND PURPOSE OF THE LOANS

                  SECTION 2.1. THE LINE OF CREDIT. The Bank, subject to all of
the terms and conditions of this Agreement, may extend to the Borrower, from
time to time, such Advances and readvances under the Line of Credit in a maximum
aggregate principal amount at any time outstanding not to exceed the lesser of
(a) the sum of (i) 80% of Eligible Receivables, plus (ii) the lesser of Three
Hundred Thousand Dollars ($300,000) or thirty percent (30%) of Eligible
Inventory, or (b) One Million Dollars ($1,000,000) (the "Advance Rate"). The
following specific terms and conditions shall apply to the Line of Credit:

                           SECTION 2.1.1. PURPOSE OF THE LINE OF CREDIT. The
proceeds of the Line of Credit shall be used by the Borrower to fund general
working capital needs, including but not limited to budgeted capital
expenditures, and direct expenses attributable to the consolidation of
Borrower's office and manufacturing operations.

                           SECTION 2.1.2. INTEREST RATE; LINE OF CREDIT NOTE.
Advances under the Line of Credit shall bear interest at a floating annual rate
of interest equal to the interest rate obtained by adding three-quarters of one
percentage point (0.75%) to the Prime Rate in effect from time to time. Changes
in the applicable interest rate will be made as of the occurrence of changes in
the Prime Rate. The Line of Credit shall be evidenced by, and shall be repaid
with interest in accordance with, the provisions of the Line of Credit Note
which shall be duly executed and delivered by the Borrower and be payable to the
order of the Bank on the date hereof, the terms and conditions of which are
incorporated herein by reference. The date and amounts of each Advance made by
the Bank and each payment made by the Borrower shall be recorded by the Bank on
the books and records of the Bank, but any failure to record such dates or
amounts shall not relieve the Borrower of its obligation of repayment hereunder
or under the Line of Credit Note.

                           SECTION 2.1.3. ADVANCES UNDER THE LINE OF CREDIT.
Subject to compliance by the Borrower with all of the terms and conditions of
this Agreement, the continued satisfactory financial condition of the Borrower,
the satisfaction of all conditions precedent to the making of Advances hereunder
and the non-existence of any default or any event, circumstance, act or omission
which with the giving of notice, the passage of time, or both, would constitute
an Event of Default hereunder, the Bank shall make Advances to the Borrower or
for the Borrower's account from time to time in such amounts as the Borrower may
request (subject to the Advance Rate and all reductions, reservations,
adjustments or modifications as herein provided). Advances

                                       9
<PAGE>
under the Line of Credit shall be made upon the request of Borrower, which
request may be written and shall be made by any person authorized from time to
time by the Borrower. Each request for an Advance shall be in the form of
Exhibit "A" attached hereto. The Bank shall credit such Advances to the
Operating Account. The Borrower agrees that no request for an Advance under the
Line of Credit shall be made which, if honored or paid, would cause the
aggregate amount of Advances made and outstanding to exceed the maximum
principal amount available under the Advance Rate. Without implying any
obligation to do so, if the Bank issues any letter of credit for the account of
the Borrower, the aggregate amount of all such letter of credit obligations
shall be reserved against the Line of Credit so long as such obligations remain
outstanding. Letters of credit shall only be issued upon terms acceptable to the
Bank, in its sole discretion, and shall constitute an Obligation hereunder
secured by the Collateral. In no event shall the Bank be obligated to make any
Advance if an Event of Default hereunder shall have occurred unless and until
such Event of Default shall be cured (if the Borrower is given the right to cure
the applicable Event of Default hereunder), or if such Advance would cause the
total amount of Advances made to or for the Borrower and outstanding under this
Agreement to exceed the maximum principal amount available under the Advance
Rate. Notwithstanding the foregoing, any Advance made, from time to time, which
exceeds principal availability as herein described, or which may be made during
the period an Event of Default has occurred, is occurring, or may occur, shall
constitute an Obligation the repayment of which shall be the liability of the
Borrower and secured by the Collateral.

                           SECTION 2.1.4. REPAYMENT OF THE LINE OF CREDIT. The
Borrower shall repay to the order of the Bank all principal, accrued interest,
and all other Obligations due under the Line of Credit when due. The Borrower
shall pay to the Bank, on the first day of each month during which a principal
balance is outstanding under the Line of Credit, accrued interest on the
outstanding and unpaid principal balance of the Line of Credit. Interest shall
be payable monthly following preparation by the Bank of an interest statement
showing interest due through the end of the monthly payment period. In the event
interest for the final days of any period is estimated, the Borrower's account
shall be debited or credited, as the case may be, to reflect actual interest due
through the end of such period. Upon the request of the Borrower, the Bank shall
automatically debit the Borrower's Operating Account on the due date of, and in
the amount of, the interest shown to be due on each monthly statement. The
Borrower shall pay to the Bank the entire outstanding and unpaid principal
balance under the Line of Credit, together with accrued interest thereon and any
fees or charges payable pursuant to the Loan Documents, on March 31, 2004, the
final and absolute due date, or earlier upon acceleration as provided herein and
in the Line of Credit Note.

                           SECTION 2.1.5. PREPAYMENT OF THE LINE OF CREDIT. The
Borrower (a) may prepay the Line of Credit in whole or part at any time and from
time to time

                                       10
<PAGE>
without penalty or additional interest, and (b) shall prepay all or any portion
of principal Advances which exceed the maximum principal then available as
computed under the Advance Rate. The Line of Credit may be reduced, from time to
time, to a zero balance without affecting the continuing validity of this
Agreement or the continuing security interest and lien of the Bank in and to the
Collateral.

                  SECTION 2.2. LOAN COMMITMENT FEE. The Borrower shall pay unto
the Bank a loan commitment fee in the amount of $2,500. Such fee shall be
payable on the Closing Date.

                  SECTION 2.3. CROSS-COLLATERALIZATION. All Collateral shall
secure all Loans and Obligations, in equal order of priority, and a default on
any Obligation or Loan shall be a default as to all Obligations, unless
expressly waived by the Bank.

                  SECTION 2.4. JOINT AND SEVERAL LIABILITY. The Obligations due
hereunder shall be the joint and several liability of each Borrower.

                                   ARTICLE III
                             SECURITY FOR THE LOANS

                  The repayment of the Loans, the satisfaction of the
Obligations, and the full, complete and absolute performance by the Borrower of
each of the terms and conditions of the Loan Documents and all other
Obligations, direct or indirect, owing to the Bank shall be secured by, and the
Borrower hereby grants to the Bank a continuing security interest in, the
following:

                  SECTION 3.1. GRANT OF SECURITY INTEREST. The Borrower hereby
assigns to the Bank all of the Borrower's right, title, and interest in and to,
and grants to the Bank a continuing lien security interest in and to all of its
personal property assets, including, without limitation, the following tangible
and intangible assets in which it has an interest, wherever located, whether now
owned or hereafter acquired by the Borrower, together with all substitutions
therefor, and replacements and renewals thereof:

                           (a)      Accounts (including all Receivables);

                           (b)      Chattel Paper;

                           (c)      Documents;

                           (d)      Equipment;

                           (e)      General Intangibles;

                           (f)      Instruments;

                           (g)      Inventory;

                           (h)      Goods;

                           (i)      Deposit Accounts;

                           (j)      Letter-of-Credit Rights;

                                       11
<PAGE>
                           (k)      Supporting Obligations;

                           (l)      Fixtures; and

                           (m)      All Records relating to or pertaining to any
                                    of the above.

The Borrower hereby assigns, transfers and sets over to the Bank all of the
Borrower's right, title and interest in and to, and grants to the Bank a
continuing security interest in all amounts that may be owing at any time and
from time to time by the Bank to the Borrower in any capacity, including, but
not limited to, any balance or share belonging to the Borrower of any deposit
account or other account with the Bank, which security interest shall be
independent of and in addition to any right of set-off which the Bank may have.
It is the intention of the parties that this Agreement shall constitute control
of such Collateral, as that term is used in the Maryland Uniform Commercial Code
- Secured Transactions, Title 9, Commercial Law Article, Annotated Code of
Maryland, as amended.

                  SECTION 3.2. PATENTS, TRADEMARKS. The Borrower hereby grants,
assigns, conveys and transfers to the Bank as collateral security all patents,
trademarks and service marks, as set forth in Schedule "C" attached hereto, and
as hereafter may be prosecuted and obtained. Such assignments shall be evidenced
by assignment instruments acceptable to the Bank and its counsel executed by the
Borrower which shall be recorded and indexed among the records of the United
States Patent and Trademark Office.

                  SECTION 3.3. PROCEEDS AND PRODUCTS. The Bank's security
interests provided for herein shall apply to the proceeds, including but not
limited to insurance proceeds, and the products of the Collateral.

                  SECTION 3.4. PRIORITY OF SECURITY INTERESTS. After giving
effect to the express terms of the Subordinated Convertible Notes, each of the
security interests granted or conveyed by the Borrower to the Bank pursuant to
this Agreement at the time of any disbursement hereunder shall be a first
priority lien security interest in the Collateral, subject only to any Permitted
Lien.

                  SECTION 3.5. FUTURE ADVANCES. The security interests and liens
granted or conveyed by the Borrower shall secure all current and all future
Advances made by the Bank to the extent such current and future Advances
constitute Obligations, and the Bank may advance or readvance upon repayment by
the Borrower of all or any portion of the sums loaned to the Borrower and any
such advancement or readvancement shall be fully secured by the security
interests and liens created by this Agreement or any of the other Loan
Documents.

                  SECTION 3.6 COLLATERAL SECURES ALL OBLIGATIONS. The Collateral
shall secure all principal, interest, and other sums due under the Line of
Credit Note, and all

                                       12
<PAGE>
other Obligations, Liquidation Costs or sums due or arising hereunder of
whatever kind or character.

                                   ARTICLE IV
                              CONDITIONS PRECEDENT

                  All duties and obligations of the Bank hereunder are
specifically subject to the full satisfaction of the conditions precedent set
forth in this Article IV as follows:

                  SECTION 4.1. REQUIRED DOCUMENTS. The Borrower shall deliver to
the Bank prior to or at the Closing Date the following:

                           (a)      A certified (as of the date of the closing)
copy of resolutions of the Borrower (i) authorizing the execution, delivery and
performance of the Loan Documents, and (ii) stating the incumbency and
containing the signatures of the officers of the Borrower executing the Loan
Documents;

                           (b)      A Certificate of Good Standing, as of a
current date, issued by the Delaware Secretary of State, evidencing the good
standing of the Borrower, certificates from other state agencies that the
Borrower has qualified as a foreign corporation in any such other state or
jurisdiction;

                           (c)      A certified copy of the Articles of
Incorporation and Bylaws of the Borrower, including all amendments thereto;

                           (d)      Proof of current insurance coverages
required by this Agreement, including delivery of certificates, policies and/or
true photocopies of policies as the Bank may direct, which designate the Bank as
sole loss payee for all losses with respect to Inventory, Equipment and other
tangible personal property;

                           (e)      Duly executed Line of Credit Note;

                           (f)      Duly executed Financing Statements(s) in
form suitable for recordation;

                           (g)      An opinion of counsel for the Borrower as to
the due execution and enforceability of the Loan Documents, and such other
matters as the Bank and Bank's counsel may reasonably determine;

                           (h)      Assignments of Patents, Trademarks or
Copyrights or other similar intangible property in form recordable with the
United States Patent and Trademark Office;

                                       13
<PAGE>
                           (i)      Duly executed Landlord's Waivers; and

                           (j)      Such other requirements as are set forth in
this Agreement or in the Loan Documents, or as the Bank may reasonably require.

                  SECTION 4.2. SATISFACTION OF TERMS. At the time of each
Advance, readvance or other credit extended hereunder, the Borrower shall have
complied with all of the terms and conditions hereof, all representations and
warranties shall be true and accurate as of such date, and no Event of Default
shall have occurred and be continuing.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

                  To induce the Bank to make the Loans and enter into the
Agreement, the Borrower makes the following representations and warranties and
acknowledges the Bank's justifiable reliance thereon and the Bank's full right
to so rely as of the date hereof and at the time of each Advance under the Line
of Credit. Unless otherwise provided, the representations and warranties shall
be deemed made by each Borrower with respect to its property and business
operations and affairs.

                  SECTION 5.1. ACCURACY AND COMPLETENESS OF INFORMATION. All
information, documents, reports, statements, financial statements, and data
submitted by or on behalf of the Borrower or any Subsidiary in connection with
the Loan, or in support thereof, are true, accurate, and complete in all
material respects and contain no knowingly false, incomplete or misleading
statements, nor omit to state any matter the omission of which could be
misleading.

                  SECTION 5.2. NON-EXISTENCE OF DEFAULTS, ETC. Except to the
extent disclosed in writing to the Bank by the Borrower as of the date hereof,
neither the Borrower nor any Subsidiary is in default with respect to any of its
existing Indebtedness, and the making and performance of this Agreement and the
Loan Documents will not immediately, or with the passage of time, the giving of
notice, or both: (a) violate the charter or bylaw provisions of the Borrower or
any Subsidiary, violate any Laws which would impair the Collateral or the Bank's
lien and security interest therein or result in a default under any contract,
agreement, or instrument to which the Borrower or any Subsidiary is a party or
by which the Borrower or any Subsidiary or its property is bound; or (b) result
in the creation or imposition of any security interest in, or lien or
encumbrance upon, any of the assets of the Borrower or any Subsidiary, except in
favor of the Bank.

                                       14
<PAGE>
                  SECTION 5.3. LITIGATION. Except to the extent disclosed in
Schedule "D" as of the date hereof there is no action, suit, investigation, or
proceeding pending or, to the knowledge of the Borrower, threatened against the
Borrower or any Subsidiary.

                  SECTION 5.4. LIABILITIES OR ADVERSE CHANGES. Neither the
Borrower nor any Subsidiary has any direct or contingent liability or
Indebtedness known to the Borrower and not previously disclosed to the Bank, nor
does the Borrower know of any matter which could have a Material Adverse Effect.

                  SECTION 5.5. TITLE TO COLLATERAL. The Borrower has good and
marketable title to all of the existing Collateral except as specifically
identified in Schedule "E" hereto and will have good and marketable title to all
of the Collateral hereafter acquired. The Bank's liens described herein shall
constitute first priority lien security interests, subject in priority only to
any lien or security interest of the Bank granted by the Borrower in the same
Collateral in connection with another loan transaction, any other Loan Document,
or any other Permitted Lien.

                  SECTION 5.6. USE OF LOAN PROCEEDS. The Borrower shall use the
proceeds of the Loans only for the purposes represented to the Bank as set forth
in this Agreement.

                  SECTION 5.7. CORPORATE STATUS. Each Borrower is a corporation
validly organized and incorporated under the Laws of the State of Delaware. The
Borrower is qualified as a foreign corporation to conduct business in the states
identified in Schedule "F" attached hereto. The Borrower has the power to own
its properties, conduct its business and affairs, and enter into the Loans and
perform the Obligations. The Borrower's entry into the Loans with the Bank has
been validly and effectively approved by its Board of Directors and shareholders
as may be required by its charter, bylaws, or applicable Law. All copies of the
charter, bylaws, and corporate resolutions, as the case may be, of the Borrower
and any Subsidiary certified to the Bank on the Closing Date are true, accurate,
and complete and no action has been taken in diminution or abrogation thereof.
The Borrower has not changed its name, been the surviving corporation in a
merger, acquired any business, or changed the location of its chief executive
office within the last five (5) years, except as disclosed in Exhibit "G". The
Borrower does not use, and has not for the last five (5) years used, any trade
name, nor has Borrower conducted business under any name other than its
corporate name.

                  SECTION 5.8. VALIDITY, BINDING NATURE, AND ENFORCEABILITY OF
THE LOAN DOCUMENTS. The Loan Documents executed by the Borrower are the valid
and binding obligations of the Borrower, fully enforceable against the Borrower
in accordance with their terms.

                                       15
<PAGE>
                  SECTION 5.9. DEFAULTS UNDER LOAN DOCUMENT. There is not
currently existing any action, event, or condition which would constitute an
Event of Default on the part of the Borrower under this Agreement under any
other Loan Document, and no action, event or condition has occurred and is
continuing to occur which, with the giving of notice or the passage of time, or
both, would constitute a default by the Borrower under any provision of this
Agreement or under any other Loan Document.

                  SECTION 5.10. TAXES. Except as set forth in Schedule G-1, the
Borrower and all Subsidiaries: (a) have each filed all federal, state and local
tax returns and other reports which are required by Law to be filed prior to the
date hereof; (b) have each paid or caused to be paid all taxes, assessments and
other governmental charges that are due and payable prior to the date hereof,
except where the same are being contested in good faith by appropriate
proceedings with adequate reserves therefor having been set aside; and (c) have
each made adequate provision for the payment of such taxes, assessments or other
charges accruing but not yet payable. The Borrower has no knowledge of any
deficiency or additional assessment in a materially important amount in
connection with any taxes, assessments or charges not provided for on the
Borrower's books of account or reflected in the Borrower's financial statements.

                  SECTION 5.11. ERISA. All "Defined Benefit Pension Plans," as
that term is defined in ERISA, of the Borrower meet, as of the date hereof, the
minimum funding standards of Section 302 of ERISA, as amended, and no
"Reportable Event" or "Prohibited Transaction," as those terms are defined in
ERISA, has occurred with respect to any such pension plan, and no notice of any
violation of ERISA or rules and regulations promulgated thereunder has been
received by Borrower, or is known to Borrower, with respect to any other
retirement or welfare benefit plan subject to ERISA which is maintained or
sponsored by the Borrower.

                  SECTION 5.12. COMPLIANCE WITH LAWS. Except as otherwise
disclosed to the Bank, or except to the extent that the failure to comply would
not have a Material Adverse Effect, the Borrower has complied with all
applicable Laws with respect to: (a) any restrictions, specifications, or other
requirements pertaining to products that the Borrower sells, leases or licenses,
or to the services it performs; (b) the conduct of its business; and (c) the
use, maintenance, and operation of the real and personal properties owned or
leased by it in the conduct of its business. The Borrower has complied, and
shall continue to comply, with all laws, ordinances, rules, regulations,
guidelines, orders and decrees in regard to product safety, plant safety, and
the disposal of toxic wastes and hazardous substances.

                  SECTION 5.13. ACCURACY OF REPRESENTATIONS AND WARRANTIES. No
representation or warranty by the Borrower contained herein contains any untrue
statement of material fact or omits to state a material fact necessary to make
such

                                       16
<PAGE>
representation or warranty not misleading in light of the circumstances
under which it was made.

                  SECTION 5.14. CONSENTS, APPROVALS, AND AUTHORIZATIONS. Each
consent, approval or authorization of, or filing, registration or qualification
with, any Person which is required to be obtained or effected by the Borrower in
connection with the execution and delivery of this Agreement and the Loan
Documents, or the undertaking or performance of any obligation hereunder or
thereunder, has been duly obtained or effected.

                  SECTION 5.15. TITLE TO ASSETS OTHER THAN COLLATERAL. The
Borrower has good and marketable title to all of its assets, subject to no
security interest, encumbrance, lien, or claim of any Person other than the
Bank, except for the interests of lessors under operating leases wherein the
Borrower is the lessee.

                  SECTION 5.16. COPYRIGHTS, PATENTS, TRADEMARKS, LICENSES, ETC.
The Borrower owns or is licensed or otherwise has the right to use all of the
patents, trademarks, service marks, tradenames, copyrights, contractual
franchises, authorizations, and other rights if the failure to so own or be
licensed or otherwise have the right to use the same could have a Material
Adverse Effect. No slogan or other advertising device, product, process, method,
substance, part, or other material now employed or now contemplated to be
employed by the Borrower infringes on any rights held by any other Person.
Except as specifically disclosed in Schedule "H", no claim or litigation
regarding any of the foregoing is pending or, to the Borrower's knowledge,
threatened, and no patent, invention, device, application, principle, or any
statute, law, rule, regulation, standard, or code is pending or proposed that,
in either case, could reasonably be expected to have a Material Adverse Effect.

                  SECTION 5.17. PLACE OF BUSINESS. The Borrower's chief
executive office, principal place of business, and only place of business where
its Records relating to Receivables are kept, is located at 9033 Red Branch
Road, Columbia, Maryland 21045. The Borrower also occupies space as a lessee and
maintains Equipment and Inventory at the locations set forth in Schedule "I"
attached hereto and incorporated herein.

                   SECTION 5.18. AFFILIATES AND SUBSIDIARIES. As of the date
hereof, Hemagen has no Subsidiaries other than Reagents, and Reagents has no
Subsidiaries except as disclosed in Schedule "J" attached hereto. Schedule "J"
also sets forth an accurate and complete list of the respective jurisdictions of
incorporation or organization and qualification and the percentage of capital
stock owned by Borrower or other Subsidiaries. All of the issued and outstanding
shares of capital stock of such Subsidiaries have been duly authorized and
issued and are fully paid and nonassessable.

                                       17
<PAGE>
                  SECTION 5.19. MATERIAL CONTRACTS AND COMMITMENTS. Except as
disclosed in Schedule "K" (a) the Borrower is not in default under any binding
material contract or commitment of any kind (such as requirements contracts,
contracts for future purchase or delivery of goods and lease or sales
agreements); (b) all parties to any material contract or commitment binding upon
the Borrower have complied with the provisions of such contracts and
commitments; and (c) no Customer is in default under any material contract or
commitment which is binding upon the Borrower and no event has occurred which,
but for the giving of notice or the passage of time, or both, would constitute a
default thereunder. As used in this Section 5.19, the term "material contract or
commitment" shall mean any contract or commitment for a consideration in excess
of Two Hundred Fifty Thousand Dollars ($250,000).

                  SECTION 5.20. FINANCIAL STATEMENTS. The financial statements,
copies of which have heretofore been furnished to the Bank, are complete and
correct and present fairly in accordance with GAAP the financial condition of
the Borrower and its consolidated Subsidiaries at such dates and the
consolidated and consolidating results of their operations and changes in
financial position for the fiscal periods then ended.

                  SECTION 5.21. INVESTMENT COMPANY ACT. The Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.

                  SECTION 5.22. FEDERAL RESERVE BOARD REGULATIONS. Neither the
Borrower nor any of its Subsidiaries is engaged or will engage, principally or
as one of its important activities, in the business of obtaining or extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of such terms under Regulation U. No part of the
proceeds of any Loan issued hereunder will be used for "purchasing" or
"carrying" "margin stock" as so defined or for any purpose that violates, or
that would be inconsistent with, the provisions of the Regulations of the Board
of Governors of the Federal Reserve System, including Regulations U, T and X.

                  SECTION 5.23. SECURITIES ACTS. The Borrower has not issued any
unregistered securities in violation of the registration requirements of Section
5 of the Securities Act of 1933, as amended, or any other law, and is not
violating any rule, regulation, or requirement under the Securities Act of 1933,
as amended, or the Securities and Exchange Act of 1934, as amended. The Borrower
is not required to qualify an indenture under the Trust Indenture Act of 1939,
as amended, in connection with its execution and delivery of the Line of Credit
Note.

                  SECTION 5.24. HAZARDOUS MATERIALS, ENVIRONMENTAL LAWS. Neither
the Borrower nor any Subsidiary has: (i) caused or permitted hazardous materials
to be placed, held, located, or disposed of in, on, under, or about the former
or present business locations or any parts thereof, nor have such locations ever
been used (whether

                                       18
<PAGE>
by the Borrower or, to the knowledge of the Borrower, by any other Person) for
activities involving, directly or indirectly, the use, generation, treatment,
storage, or disposal of any hazardous materials; (ii) caused or permitted to be
incorporated into or utilized in the construction of any improvements located at
such business locations any chemical, material, or substance to which exposure
is prohibited, limited, or regulated by any Environmental Laws or which, even if
not so regulated, is known to pose a hazard (either in its present form or if
disturbed or removed) to the health and safety of the occupants of, or of
property adjacent to such business locations; or (iii) discovered any occurrence
or condition at such business locations or any property adjacent to or in the
vicinity thereof that could cause any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability, or use of such
property under any Environmental Laws. The Borrower is not aware, after diligent
inquiry, of any breach or material violations of any Environmental Laws in the
past or current conduct of its business and operations.

                  SECTION 5.25. SOLVENCY. The Borrower, both before and after
the funding of any Loan hereunder, is solvent, has assets having a fair market
value in excess of the amount required to pay its probable liabilities on its
existing Indebtedness as they become absolute and matured, and has and will
have, until the Obligations have been paid and performed in full, access to
adequate capital for the conduct of its business and the ability to pay its
Indebtedness from time to time incurred in connection therewith, as such
Indebtedness matures.

                  SECTION 5.26. REPRESENTATIONS AS TO RECEIVABLES. As to each
and every Receivable:

                  (a)  The Receivable is genuine and bona fide and arises from
                       the sale, lease or license of goods or the performance of
                       services by Borrower;

                  (b)  The Customer owing the Receivable is indebted to Borrower
                       in the full face amount of the Receivable;

                  (c)  The Customer has authority to enter into the transaction
                       giving rise to the Receivable;

                  (d)  The Receivable has not been previously assigned or
                       encumbered or charged by a lien or security interest,
                       except any Permitted Lien;

                  (e)  The Borrower is the sole owner of the Receivable and has
                       the full right and absolute authority to assign the
                       Receivable;

                  (f)  The Receivable is a valid and binding obligation of the
                       Customer, fully enforceable according to its terms, and
                       is not subject to any offset

                                       19
<PAGE>
                       (other than unapplied credits approved by the Borrower),
                       counterclaim, or other defense on the part of such
                       Customer or to any claim on the part of such Customer
                       denying liability thereunder in whole or in part;

                  (g)  The Receivable is not, nor will it become, contingent
                       upon the fulfillment or performance by Borrower of any
                       contract or condition whatsoever;

                  (h)  No agreement has been made, nor will be made, with any
                       Customer for any reduction, discount, or return of goods
                       (other than returns of leased goods), except as may be
                       customarily given by Borrower in the ordinary course of
                       business such as for prompt payment by the Customer;

                  (i)  The stated due date of the Receivable is correct; and

                  (j)  The Receivable is not evidenced by any Instrument or
                       Chattel Paper, unless the same be duly endorsed and
                       delivered to the Bank (but without implying any intention
                       or commitment for the Bank to make Advances on
                       Instruments or Chattel Paper).

                  SECTION 5.27. REPRESENTATIONS AS TO INVENTORY. As to each and
every item of Inventory, the Borrower represents that:

                  (a)  Substantially all Inventory is, and shall remain at all
                       times, Inventory of good and merchantable quality and fit
                       for the particular purpose for which it was intended;

                  (b)  All sales of Inventory shall be made only in the ordinary
                       course of business; and

                  (c)  The Bank's security interest in the Inventory shall be in
                       a lien priority position such that there shall be no
                       other liens, encumbrances or security interests at any
                       time upon the Inventory except Permitted Liens.

                                   ARTICLE VI
                              AFFIRMATIVE COVENANTS

                  The Borrower covenants and agrees, during the term of this
Agreement and while any Obligations are outstanding and unpaid, to do and
perform the following:

                                       20
<PAGE>
                  SECTION 6.1. PAYMENTS. All Obligations shall be paid in full
when and as due, time being of the essence.

                  SECTION 6.2. PERFORMANCE. All Obligations shall be fully and
completely performed, when and as required, time being of the essence.

                  SECTION 6.3. PROTECTION OF SECURITY. Except as otherwise
provided in this Agreement, the value of the Collateral shall at all times be
protected and preserved, ordinary wear and tear excepted.

                  SECTION 6.4. INSURANCE. The Borrower shall obtain and maintain
the following insurance coverages:

                           SECTION 6.4.1. CASUALTY INSURANCE. The Borrower shall
obtain and maintain, and the Borrower shall cause its Subsidiaries to obtain and
maintain, during the term of the Loan for all of their respective assets and
properties, both real, personal, and mixed, including but not limited to the
Collateral, fire and extended coverage casualty insurance. Such insurance shall
be written in amounts reasonably satisfactory to the Bank and sufficient to
prevent any co-insurance liability (which amount shall be the full insurable
value of their respective assets and properties unless the Bank in writing
agrees to a lesser amount) naming the Bank as first mortgagee and sole loss
payee with respect to the tangible personal property Collateral (except for any
Equipment in which a lender holds a purchase money security interest) with an
insurance company and upon policy forms which are acceptable to and approved by
the Bank. The Bank, on request, shall be supplied with a certificate of
insurance and/or duplicate originals or copies of the aforementioned insurance
policies and paid receipts evidencing payment of the premiums due on the same.
The aforementioned policies shall be endorsed so as to make them noncancellable
unless thirty (30) days prior notice of cancellation is provided to the Bank.
The Borrower shall give the Bank prompt notice of any loss covered by such
casualty insurance. The Borrower shall have the sole right to adjust any loss
covered by an insurance policy and to receive the proceeds if the claim is equal
to or less than One Hundred Thousand Dollars ($1000,000). If the claim is in
excess of One Hundred Thousand Dollars ($100,000), the Bank shall have the right
to join the Borrower in adjusting any such loss. All monies received as payment
for a loss covered by an insurance policy paid over to the Bank (i.e., claims in
excess of One Hundred Thousand Dollars ($100,000)) shall be applied to the
replacement of the damaged or destroyed assets or properties, unless an Event of
Default shall have occurred and be continuing in which event, at the Bank's
option, such insurance proceeds shall be applied to the payment of amounts due
under the Loan. Any election to apply insurance proceeds to the Loan shall be
made by the Bank in its sole discretion. The Borrower may not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained above unless the Bank is

                                       21
<PAGE>
included thereon with losses payable to the Bank as above provided. The Borrower
shall immediately notify the Bank whenever any such separate insurance is taken
out and shall promptly deliver to the Bank the policy or policies of such
insurance.

                           SECTION 6.4.2. LIABILITY AND WORKERS' COMPENSATION
INSURANCE. The Borrower shall obtain and maintain, and the Borrower shall cause
its Subsidiaries to obtain and maintain, during the term of the Loan public
liability and property damage insurance in such amounts, with insurance
companies, and upon policy forms reasonably acceptable to and approved by the
Bank. The Borrower shall obtain and maintain during the term of the Loan,
workers' compensation insurance, in such amounts, with insurance companies, and
in forms reasonably acceptable to and approved by the Bank. The Borrower, on
request, shall supply the Bank with copies of the liability and workers'
compensation insurance policies and receipts evidencing the payment of premiums
due thereon or, alternatively, certificates from the insurance companies
certifying to the existence of policies, summarizing the terms of the policies,
and indicating the payment of premiums due thereon.

                  SECTION 6.5. COLLECTION OF ACCOUNTS; SALE OF INVENTORY.
Subject to Section 9.2, the Borrower shall collect Receivables. The Borrower
shall sell Inventory only in the ordinary course of business unless prior
written consent to the contrary is obtained from the Bank.

                  SECTION 6.6. MAINTENANCE OF EXISTENCE. The Borrower shall
take all necessary actions to preserve its existence, franchises and good
standing in its state of incorporation and in any other state where qualified as
a foreign corporation, and shall comply with all present and future Laws
applicable in the operation and conduct of business, and all material agreements
to which it is subject. The Borrower shall not change its place of
incorporation.

                  SECTION 6.7. NOTICE OF LITIGATION AND PROCEEDINGS. The
Borrower shall give immediate notice to the Bank of: (a) any litigation or
proceeding in which Borrower or any Subsidiary is a party if an adverse decision
therein would require it to pay more than Fifty Thousand Dollars ($50,000) or
deliver assets the value of which equals or exceeds such sum (whether or not the
claim is considered to be covered by insurance); and (b) the institution of any
other suit or proceeding which might have a Material Adverse Effect on the
Collateral, the Borrower's operations, financial condition, property, or
business.

                  SECTION 6.8. PAYMENT OF INDEBTEDNESS TO THIRD PERSONS. The
Borrower shall pay when and as due, or within applicable grace periods, all
Indebtedness due third Persons, except when the amount thereof is being
contested in good faith by appropriate proceedings and with adequate reserves
therefor being set aside by the Borrower.

                                       22
<PAGE>
                  SECTION 6.9. NOTICE OF CHANGE OF BUSINESS LOCATION. The
Borrower shall notify the Bank thirty (30) days in advance of: (a) any change in
the location of its existing offices or places of business; (b) the
establishment of any new, or the discontinuance of any existing, place of
business; and (c) any change in or addition to the location of the place where
the Inventory, Equipment or Records are kept.

                  SECTION 6.10. PENSION PLANS. The Borrower shall: (a) fund all
of its defined benefit pension plans in accordance with, and in amounts not less
than required by, the minimum funding standards of Section 302 of ERISA, as
amended; (b) furnish the Bank promptly, upon request, with copies of all reports
or other statements filed with the United States Department of Labor or the
Internal Revenue Service with respect to all retirement plans; and (c) promptly
advise the Bank of the occurrence of any Reportable Event or Prohibited
Transaction with respect to any such plan.

                  SECTION 6.11. MAINTENANCE OF ASSETS AND PROPERTIES. The
Borrower shall maintain its assets and property, real, personal, and mixed, in
good condition and repair, normal wear and tear excepted, and shall pay and
discharge or cause to be paid and discharged when due, the cost of repairs to or
maintenance of the same, and shall pay or cause to be paid all rental or
mortgage payments due on any real estate used or owned by the Borrower.

                  SECTION 6.12. PAYMENT OF TAXES. The Borrower shall pay when
and as due, without interest or penalty, and shall cause its Subsidiaries to pay
when and as due, without interest or penalty, all taxes, assessments and charges
or levies imposed upon it or on any of its property or which it is required to
withhold and payover to any taxing authority or which it must pay on its income,
except where contested in good faith by appropriate proceedings with adequate
reserves therefor having been set aside by it. The Borrower shall pay all such
taxes, assessments, charges or levies forthwith whenever foreclosure on any lien
that attaches (or security therefor) appears imminent.

                  SECTION 6.13. FURTHER ASSURANCES AND POWER OF ATTORNEY. The
Borrower agrees to execute such other and further documents, including, without
limitation, promissory notes, security agreements, agreements, financing
statements, continuation statements, and the like as may from time to time in
the sole opinion of the Bank or the Bank's counsel be deemed necessary, proper,
or convenient, to perfect, confirm, establish, reestablish, continue, or
complete the security interest in the Collateral and the purposes and intentions
of this Agreement, it being the intention of the Borrower to hereby provide a
full and absolute warranty of further assurance to the Bank. The Borrower
expressly authorizes the Bank to file financing statements, continuation
statements or other instruments without the signature of the Borrower. Upon the
written request of the Bank that the Borrower execute any such document and the
failure of the Borrower to so execute any such document within five (5) days, or
at any

                                       23
<PAGE>
time and from time to time upon the occurrence and during the continuance of any
Event of Default, as the case may be, the Borrower hereby irrevocably and
automatically appoints the Bank as the Borrower's attorney-in-fact to execute
any such document in the Borrower's name and on the Borrower's behalf and such
power of attorney shall constitute a power of attorney coupled with an interest
and be irrevocable.

                  SECTION 6.14. ADVANCEMENTS. If the Borrower should fail to
perform any of the affirmative covenants contained in this Article or to protect
or preserve its assets and properties to the extent required by this Agreement,
or if the Borrower should fail to protect or preserve the Collateral to the
extent required by this Agreement or the status and priority of the security
interest of the Bank in the Collateral, the Bank may make Advances to perform
the same on behalf of the Borrower. All sums so advanced shall be deemed to be
an Advance made pursuant to the Line of Credit and immediately upon advancement
become secured by the security interests created by this Agreement, and subject
to the terms and provisions of this Agreement and all of the applicable Loan
Documents, and shall become part of the principal amount owed to the Bank with
interest to be assessed at the applicable rate thereon. The Borrower shall repay
on demand all sums so advanced on the Borrower's behalf, plus any reasonable
expenses or costs incurred by the Bank, including reasonable attorney's fees,
with interest thereon at the highest rate provided for in the applicable Loan
Documents from the date of advancement. The provisions of this Section shall not
be construed to prevent the institution of the rights and remedies of the Bank
upon the occurrence of an Event of Default by the Borrower. The contrary
notwithstanding, the authorization contained in this Section shall impose no
duty or obligation on the Bank to perform any action or make any Advance on
behalf of the Borrower and is for the sole benefit and protection of the Bank.

                  SECTION 6.15. PROTECT AND PRESERVE INTELLECTUAL PROPERTY. The
Borrower shall take all actions necessary to preserve and protect its U.S. and
foreign patents, trademarks, service marks, and proprietary trade secrets and
know-how including, for example, paying patent maintenance fees when due,
renewing registered trademarks and service marks, and preventing piracy of trade
secrets, and shall take reasonable steps to expand its intellectual property
portfolio by securing the confidentiality thereof and/or the timely prosecution
of trademark, service mark and patent applications, including continuations
thereof. Borrower shall protect its intellectual property from infringement and
misuse by others, and shall pursue all claims for improper use by all reasonably
practical means to safeguard such intellectual property for its own benefit,
including timely opposition of potentially infringing trademark applications and
appropriate litigation. Borrower shall likewise preserve and protect
intellectual property licensed from any third party, and shall require third
party licensees of Borrower's intellectual property to do the same.

                                       24
<PAGE>
                  SECTION 6.16. COLLECTION OF RECEIVABLES BY THE BORROWER.
Unless the Borrower's authority to collect the Receivables has been terminated
by the Bank as provided in this Agreement, the Borrower, at the Borrower's sole
expense, shall collect, when and as due, all sums due on the Receivables. The
Borrower shall take such action in collecting the Receivables as the Bank may
reasonably request, or in the absence of such request, as the Borrower may deem
advisable. Upon the request of the Bank, the Borrower shall execute a lockbox
agreement with the Bank and the Borrower shall continue to have all Receivables
directed to the Bank for deposit in the Operating Account or such other account
designated by the Bank.

                  SECTION 6.17. NOTICE TO BANK OF EVENTS AFFECTING COLLATERAL;
BORROWER'S RIGHT TO COMPROMISE RECEIVABLES; RETURNED OR REPOSSESSED GOODS. The
Borrower, immediately upon learning thereof, shall report to the Bank any
material: (a) reclamation, return or repossession of goods; (b) claim(s) or
dispute(s) asserted by any Customer or other obligor; and (c) matters affecting
the value, enforceability or collectibility of any Receivable. Without limiting
the generality of the foregoing, each matter referred to above which involves a
return of goods or claim in excess of One Hundred Thousand Dollars ($100,000)
shall be generally deemed to be material. The Borrower shall not, without the
Bank's consent, such consent not to be unreasonably withheld, materially
compromise or adjust any of the Receivables (or extend the time for payment
thereof) other than in the ordinary course of business, or grant any additional
discounts, allowances or credits thereon, provided that the Borrower may grant,
in the ordinary course of business, to any party obligated on any of the
Receivables, any rebate, refund, or adjustment to which such party may be
entitled, and may accept, in connection therewith, the return of goods, the sale
or lease of which shall have given rise to such Receivable.

                  SECTION 6.18. CONFIRMATION AS TO AND DOCUMENTATION OF
COLLATERAL. The Borrower shall provide the Bank with a Borrowing Base
Certificate within twenty (20) days after the close of each fiscal month, or at
intervals and in such additional detail as the Bank may from time to time
require, reflecting the status of, and changes in, Eligible Inventory or
Eligible Receivables (including an aging of all Receivables). Further, the
Borrower shall provide the Bank upon reasonable request from time to time with:
(a) copies of Customers' invoices or billing statements; (b) information related
to transactions giving rise to licensing fees or other remuneration for the use
of tangible or intangible property; (c) evidence of shipment or delivery of
goods or merchandise to or performance of services for Customers; and (d) such
further schedules and information as the Bank may require, all at Borrower's
expense. The items to be provided under this Section are to be in form
reasonably satisfactory to the Bank and shall be delivered to the Bank from time
to time solely for the Bank's convenience in maintaining its records of the
Collateral. The Borrower's failure to deliver any of such items to the Bank
shall not affect, terminate, modify or otherwise limit the Bank's security
interest in the Collateral.

                                       25
<PAGE>
                  SECTION 6.19. MAINTAIN RECORDS AND MAKE AVAILABLE TO BANK FOR
INSPECTION. The Borrower shall maintain Records pertaining to the Collateral,
and the conduct and operation of its business, in such detail, form and scope as
the Bank shall reasonably require. During normal business hours, and upon
reasonable notice to Borrower, the Bank and its duly authorized representatives
shall have full access to, and the right to audit, check, inspect and make
abstracts and copies from, such Records. The Bank shall have the right to
confirm and verify all Receivables and do whatever the Bank may deem reasonably
necessary to protect the Bank's interests. The Bank or the Bank's agents may
enter upon any of the Borrower's premises with prior notice during normal
business hours and from time to time for the purpose of inspecting the
Collateral and any and all such Records. Notwithstanding the foregoing, upon the
occurrence of an Event of Default, the Bank may enter the business premises and
inspect, audit, review, examine and/or take possession of and remove any or all
such Records, or copies thereof, provided, however, in the absence of fraud such
Records or copies thereof shall be at all times reasonably available to the
Borrower.

                  SECTION 6.20. MONTHLY AGING REPORT. The Borrower shall furnish
to the Bank, within twenty (20) days following the end of each month during the
term of the Loan, an accounts payable report and aging in form reasonably
acceptable to the Bank.

                  SECTION 6.21. BANK AUDITS. The Bank may conduct audits at the
Borrower's place or places of business, including audits as to the Receivables,
Inventory and any other Collateral, and the Borrower's Records. Except following
the occurrence of an Event of Default, such audits shall be conducted during
normal business hours with prior notice to the Borrower. The Borrower shall pay
(or reimburse) the Bank for the actual cost and expense of such audits.

                  SECTION 6.22. FINANCIAL STATEMENTS; CERTIFICATION AS TO EVENTS
OF DEFAULT. The Borrower shall furnish the Bank:

                  (a)      Within forty-five (45) days after the last day of
each fiscal quarter, consolidated and consolidating statements of income and
cash flow statements for such fiscal quarter and balance sheets as of the end of
such fiscal quarter of the Borrower and its Subsidiaries, accompanied in each
case by a certificate of the chief financial officer of the Borrower stating
that such financial statements are presented fairly in accordance with GAAP.

                  (b)      Within one hundred twenty (120) days after the last
day of each fiscal year of the Borrower, consolidated and consolidating
statements of income and cash flow statements for such year and balance sheets
as of the end of such year presented fairly in accordance with GAAP and
accompanied by an unqualified report of a firm of independent certified public
accountants acceptable to the Bank and

                                       26
<PAGE>
including therewith a copy of the management letter from such certified public
accountants. The Bank shall have the right, from time to time, to discuss the
affairs of the Borrower and any Subsidiary directly with the independent
certified public accountant (subject to any applicable rules of the Securities
and Exchange Commission as to confidentiality), and this Agreement shall
constitute an irrevocable direction and authorization to such certified public
accountant to discuss such affairs with the Bank, and to provide the Bank with
such information and documentation as the Bank may reasonably require.

                  (c)      Within ten (10) days of filing, the Borrower shall
cause to be delivered to the Bank a true and correct copy of its federal income
tax return prepared by its independent certified public accountant, and true and
correct copies of federal income tax returns filed by any Subsidiary.

                  (d)      Promptly after sending, filing, or publishing the
same, copies of all proxy statements, financial statements, and reports that the
Borrower sends to its public stockholders or Subordinated Debt Noteholders, and
copies of all regular and periodic reports and all registration statements that
the Borrower files with the Securities and Exchange Commission and copies of all
press releases issued by Borrower.

                  (e)      Within thirty (30) days after the end of each of the
Borrower's fiscal years, a copy of the Borrower's projections for operations for
the next fiscal year, such projections to be in form and detail satisfactory to
the Bank.

                  (f)      Not later than forty-five (45) days after the end of
each fiscal quarter, a certificate of the president or chief financial officer
of the Borrower stating that no Event of Default has occurred and is continuing,
or if to the contrary, a statement as to the nature thereof and the action that
the Borrower proposes to take with respect thereto, together with a certificate
of such officer setting forth calculations certified to be true, complete, and
correct showing compliance with the financial covenants stated in Sections 6.24
through 6.26 as of the end of such fiscal quarter.

                  (g)      Promptly with such additional financial and other
information as the Bank may from time to time reasonably request.

                  SECTION 6.23. MAINTENANCE OF EQUIPMENT. The Borrower
covenants to maintain and preserve all Equipment in a state of good and
efficient working order, normal wear and tear excepted.

                  SECTION 6.24. MINIMUM TANGIBLE NET WORTH. The Borrower shall
at all times maintain a minimum Tangible Net Worth of at least Four Million
Dollars ($4,000,000).

                                       27
<PAGE>
                  SECTION 6.25. MINIMUM CURRENT RATIO. The Borrower shall at all
times maintain a minimum Current Ratio of at least two to one (2.0:1.0).

                  SECTION 6.26. TOTAL LIABILITIES TO TANGIBLE NET WORTH. The
Borrower shall at all times maintain a Total Liabilities to Tangible Net Worth
Ratio of not more than one-half to one (0.5:1.0).

                  SECTION 6.27. INDEMNIFICATION. The Borrower shall indemnify,
defend, and hold harmless the Bank and each of its officers and other employees,
representatives, and agents (each, an "Indemnified Party") from and against any
and all claims, obligations, penalties, actions, suits, judgments, reasonable
costs and disbursements, losses, liabilities, and damages (including, without
limitation, reasonable attorneys' fees) of any kind whatsoever (collectively and
severally, "Claims") that may at any time be imposed on, assessed against, or
incurred by such Indemnified Party in anyway relating to or arising out of the
Loan Documents or the transactions contemplated thereby or any action reasonably
taken or omitted to be taken by such Indemnified Party in connection with the
foregoing; provided, however, that the Borrower shall not be liable for any
portion of any Claims arising out of or resulting from the gross negligence or
willful misconduct of such Indemnified Party.

                  SECTION 6.28. BANK ACCOUNTS. The Borrower shall maintain all
of its deposit banking accounts with the Bank during the term of this Agreement
(excepting approved local accounts), and shall deposit all cash collections and
the cash proceeds of Receivables in such accounts.

                                   ARTICLE VII
                               NEGATIVE COVENANTS

                  Each Borrower covenants and agrees during the term of this
Agreement and while any Obligations are outstanding and unpaid not to do or to
permit to be done or to occur any of the acts or happenings set forth below,
without the prior written consent of the Bank.

                  SECTION 7.1. CHANGE OF NAME, MERGER, SALE OF STOCK ETC. The
Borrower shall not change its corporate name or enter into any merger,
consolidation, reorganization or recapitalization without the prior written
consent of the Bank.

                  SECTION 7.2. CHANGE STATE OF INCORPORATION. The Borrower shall
not incorporate, reincorporate or take any action to change its place of
organization or incorporation from the State of Delaware.

                                       28
<PAGE>
                  SECTION 7.3. SALE OR TRANSFER OF ASSETS. The Borrower shall
not sell, transfer, lease, license or otherwise dispose of all or (except in the
ordinary course of business) any material part of the Collateral or its assets.

                  SECTION 7.4. ENCUMBRANCE OF ASSETS. Excepting Permitted
Liens, the Borrower shall not mortgage, pledge, grant or permit to exist a
security interest in or lien upon any of its assets of any kind, whether now
owned or hereafter acquired.

                  SECTION 7.5. GUARANTEES. The Borrower shall not become liable,
directly or indirectly, as guarantor or otherwise for any obligation of any
other Person, except for the endorsement of checks, drafts, instruments or
commercial paper for deposit or collection in the ordinary course of business.

                  SECTION 7.6. INDEBTEDNESS. The Borrower shall not incur,
create, assume, or permit to exist any Indebtedness except: (a) the Loan; (b)
existing Indebtedness previously disclosed to the Bank; (c) unsecured trade
Indebtedness incurred in the ordinary course of business; and (d) secured
Indebtedness arising from purchase money security interest financing of
Equipment as permitted under this Agreement.

                  SECTION 7.7. INVESTMENTS. Without the prior written consent
of the Bank, the Borrower will not form any subsidiary or make any investment in
or make any loan in the nature of any investment to any Person, including
without limitation any Subsidiary or Affiliate, including, without limitation,
Hemagen Diagnosticos Comercio, Importacao e Exportacao, Ltd., a Brazilian
limited liability company, but excluding any transfers between Hemagen and
Reagents or vice versa.

                  SECTION 7.8 LEASES. The Borrower shall not become or be
liable as lessee with respect to any lease of any property, real, personal or
mixed, except for leases in existence on the date hereof or previously disclosed
to Bank in writing and renewals or extensions thereof with normal rent
adjustments, except for (a) such leases as at any time may be entered into by
Borrower with respect to motor vehicle equipment, standard office equipment and
material handling equipment with an aggregate annual rental cost of $85,000 or
less, (b) real estate leases with a term of six (6) months or less, (c) real
estate leases which when aggregated with all other real estate leases result in
basic monthly rents not exceeding $40,000, and (d) real estate leases approved
by the Bank, such approval not to be unreasonably withheld.

                  SECTION 7.9. LOANS. The Borrower will not make any loan or
advance to any Person, including without limitation any Affiliate, or any
partner, officer or employee of the Borrower or any Affiliate, except for
temporary advances to officers and employees of the Borrower in the ordinary
course of business.

                                       29
<PAGE>
                  SECTION 7.10. ACQUISITION OF STOCK OR ASSETS OF THIRD PERSON.
Without the prior written consent of the Bank, the Borrower will not acquire any
stock or equity interests in, or all or substantially all of the assets of, any
Person.

                  SECTION 7.11. DIVIDENDS AND DISTRIBUTIONS. The Borrower shall
not declare and pay dividends nor make other distributions on outstanding
capital stock without the prior written consent of the Bank.

                  SECTION 7.12. OBLIGATIONS TO SUBORDINATED DEBT NOTEHOLDERS.
The Borrower shall not change, amend, modify or alter the terms of any note
instruments evidencing the obligations owing to the Subordinated Debt
Noteholders.

                  SECTION 7.13. ASSIGNMENT OF THIS AGREEMENT. The Borrower may
not assign or attempt to assign this Agreement.

                  SECTION 7.14. EXCEPTION TO NEGATIVE COVENANTS. Notwithstanding
the prohibitions set forth above in this Article VII, the Borrower shall be
permitted to enter into unsecured acquisitions of assets or stock (or equity
interests) of a third-party entity which (a) consist of, or convey ownership of,
a business enterprise or product line similar, related to or complementary to
products now sold by Borrower; (b) in any one instance is for a fixed purchase
price not exceeding $200,000; and (c) which purchase price, when aggregated with
other acquisitions under this Section 7.14 during the preceding twelve (12)
months, will not exceed $500,000.

                                  ARTICLE VIII
                                EVENTS OF DEFAULT

                  The occurrence of any of the following events or circumstances
and the expiration of any applicable cure or grace period shall constitute
"Events of Default" hereunder and shall entitle the Bank to exercise the Bank's
rights and remedies under Article IX hereof:

                  SECTION 8.1. FAILURE TO PAY. The failure by the Borrower to
pay any Obligation, which failure shall not be cured or discharged within a
period of five (5) days after the same becomes due and payable.

                  SECTION 8.2. FAILURE TO PERFORM. The failure of the Borrower
to perform or observe any Obligation (which failure is not specifically
enumerated in this Article VIII as an Event of Default).

                  SECTION 8.3. FAILURE OF WARRANTY OR REPRESENTATION TO BE
TRUE. The failure of any representation or warranty provided in this Agreement
to be true and

                                       30
<PAGE>
accurate in all material respects, and to continue to be true and accurate in
all material respects at all times while any of the Obligations remain
outstanding or unsatisfied.

                   SECTION 8.4. FAILURE TO PERFORM COLLATERAL COVENANTS. The
failure by the Borrower to perform or observe any covenant or agreement with
respect to the Collateral.

                  SECTION 8.5. FAILURE TO PERFORM AFFIRMATIVE COVENANTS. The
failure by the Borrower to perform or observe any affirmative covenant provided
in this Agreement, other than one otherwise specifically enumerated in this
Article VIII as an Event of Default.

                  SECTION 8.6. FAILURE TO SATISFY FINANCIAL COVENANTS. A
failure to satisfy any financial covenant set forth in Sections 6.24 through
6.26, inclusive, as of the end of each fiscal quarter; provided, however, such
failure shall not be deemed an Event of Default until (a) thirty (30) days have
elapsed from the date the Borrower's quarterly compliance certificate required
under Section 6.22(f) is delivered or due to the Bank; or (b) the Bank's written
notice to Borrower declaring such non-compliance an Event of Default, whichever
occurs first. During the thirty (30) day period provided in (a) above, the Bank,
in its discretion, may waive compliance of the violated covenant for the
preceding quarterly period, modify or alter the covenant requirement or impose
new covenants for future quarters, limit or restrict Advances, or elect to
exercise its remedy under (b) above.

                  SECTION 8.7. VIOLATION OF NEGATIVE COVENANTS. A violation by
the Borrower of any of the negative covenants provided in this Agreement, other
than one otherwise specifically enumerated in this Article VIII as an Event of
Default.

                  SECTION 8.8. DEFAULT UNDER LOAN DOCUMENTS. A breach of or
default by the Borrower under the terms, covenants, and conditions set forth in
any other Loan Document, which is not cured within any applicable cure or grace
period.

                  SECTION 8.9. CROSS-DEFAULT. A breach of, default by, or
demand for payment by the Borrower under the terms, covenants, or conditions of
any present or future agreements, loans, guarantees, or other transactions of
the Borrower or any Subsidiary with the Bank (but without implying any duty to
make any future loan or financial accommodation not presently contemplated in
this Agreement), regardless of whether such a default is declared thereunder by
the Bank, which is not cured within any applicable cure or grace period.

                  SECTION 8.10. JUDGMENTS. The Borrower shall suffer final
judgments for payment of money aggregating in excess of Fifty Thousand Dollars
($50,000) in any one fiscal year, and shall not discharge the same within a
period of thirty (30) days unless,

                                       31
<PAGE>
pending further proceedings, the Borrower posts a supersedeas bond or execution
has been effectively stayed.

                  SECTION 8.11. LEVY BY SECURED CREDITOR. A secured or judgment
creditor of the Borrower shall obtain possession of any of the Collateral by any
means, including, but without limitation, levy, distraint, replevin or
self-help.

                  SECTION 8.12. FAILURE TO PAY DEBTS TO THIRD PERSONS. Excepting
Subordinated Debt owing to the Subordinated Debt Noteholders, the Borrower or
any Subsidiary shall fail to pay any Indebtedness of any material nature due any
third-party and such failure shall continue beyond any applicable grace period,
or the Borrower or any Subsidiary shall suffer to exist any other event of
default under any agreement binding upon the Borrower or Subsidiary regardless
of whether default is actually declared thereunder, and such other event of
default shall continue beyond any applicable grace period.

                  SECTION 8.13 DEFAULT OR FAILURE TO PAY SUBORDINATED DEBT. A
default in the payment when due of any amounts owing to the Subordinated Debt
Noteholders.

                  SECTION 8.14. INVOLUNTARY BANKRUPTCY. The commencement of a
proceeding before a court having jurisdiction against or with respect to the
Borrower in an involuntary case under the federal bankruptcy laws or any state
insolvency or similar laws seeking: (a) the liquidation of the Borrower; (b) a
reorganization of the Borrower or the Borrower's business and affairs, or (c)
the appointment of a receiver, liquidator, assignee, custodian, trustee, or
similar official for the Borrower or any of the Borrower's property including,
but not limited to, the Collateral.

                  SECTION 8.15. VOLUNTARY BANKRUPTCY. The commencement by the
Borrower of a voluntary case under the federal bankruptcy laws or any state
insolvency or similar laws or the consent by the Borrower to the appointment for
taking possession by a receiver, liquidator, assignee, custodian, trustee, or
similar official for the Borrower or any of the Borrower's property including,
but not limited to, the Collateral, or the making by the Borrower of any
assignment for the benefit of creditors or the failure by the Borrower generally
to pay its debts as they become due either as to the amount of such debts or the
number of such debts.

                  SECTION 8.16. MATERIAL ADVERSE CHANGE. Any change shall occur
in the financial condition, business operations or otherwise, of the Borrower
which could have a Material Adverse Effect as determined in the sole discretion
of the Bank in good faith.

                  SECTION 8.17. IMPAIRMENT OF COLLATERAL. Any event or series of
events shall occur which the Bank deems, in good faith and in its sole
discretion, to impair the

                                       32
<PAGE>
Collateral or other security for the Loan or otherwise threaten the value
thereof, or which has a Material Adverse Effect on the prospects of repayment of
the Loan.

                  SECTION 8.18. CHANGE IN CONTROL, CHANGE IN KEY PERSONNEL. A
Change in Control or Change in Key Personnel shall occur.

                  SECTION 8.19. CURE. Notwithstanding anything above contained
in this Article VIII, the Borrower shall have fifteen (15) days to cure any
Event of Default specified in Sections 8.2 through 8.5, and 8.7 through 8.12, so
long as such Event of Default is susceptible to cure. During any cure period,
the Bank may make or withhold Advances in its sole discretion. Such cure period
may, in the Bank's sole discretion, be extended if such cure is diligently being
pursued and such continuing Event of Default does not substantially impair the
prospects of repayment of the Loan. Nothing herein contained shall limit the
continuing obligation of the Borrower to notify the Bank of any Event of Default
and the Borrower's actions to cure such default within the periods above stated.

         Upon the occurrence of an Event of Default described in Section 8.13,
8.14 or 8.15, all Obligations hereunder and under the Line of Credit Note shall
immediately accelerate and be due and payable, in full, without further action
or notice by the Bank. Except as provided in Section 8.6 and in the immediately
preceding sentence, upon the occurrence of any other Event of Default which is
not cured within the applicable cure period, if any, or waived, the Bank shall
have no further obligation to make any additional Advances under the Line of
Credit Note, and the Bank, in its sole discretion, may thereupon accelerate all
Obligations and declare all Obligations immediately due and payable, in full.

                                   ARTICLE IX
                      RIGHTS AND REMEDIES ON THE OCCURRENCE
                             OF AN EVENT OF DEFAULT

                  SECTION 9.1. RIGHTS AND REMEDIES. In addition to all other
rights and remedies provided by Law and the Loan Documents, the Bank, on the
occurrence of any Event of Default, and the expiration of any grace or cure
period, if any, may:

                           (a)      Refuse to make further Advances or
readvances on the Line of Credit;

                           (b)      Accelerate and call due and/or demand the
immediate payment of the unpaid principal balance of the Loan, and all accrued
interest and other sums due as of the date of default;

                           (c)      Impose any default rate of interest;

                                       33
<PAGE>
                           (d)      Foreclose any security interest, lien,
assignment, or pledge created by any Loan Document or this Agreement;

                           (e)      Confess judgment or file suit against the
Borrower on the Line of Credit Note;

                           (f)      File suit against the Borrower on this
Agreement, or any other Loan Document;

                           (g)      Seek specific performance or injunctive
relief to enforce performance of the undertakings, duties, and agreements
provided in the Loan Documents, whether or not a remedy at law exists or is
adequate;

                           (h)      Exercise any rights of a secured creditor
under the Maryland Uniform Commercial Code-Secured Transactions, Title 9,
Commercial Law Article, Annotated Code of Maryland, as amended, including the
right to take possession of the Collateral without the use of judicial process
and the right to require the Borrower to assemble the Collateral at such place
as the Bank may specify; or

                           (i)      Set-off any amounts in any account or
represented by any certificate with the Bank in the name of the Borrower or in
which the Borrower has an interest.

                  SECTION 9.2. COLLECTION OF RECEIVABLES BY BANK. The Bank, at
any time or from time to time following the occurrence of an Event of Default
which is a continuing Event of Default, may terminate the Borrower's authority
to collect the Receivables and may exercise any or all of the rights contained
in this Section. Upon such a termination of the Borrower's authority, the Bank
shall have the right to send notice of assignment or notice of the Bank's
security interest to any and all Customers or any third party holding or
otherwise concerned with any of the Collateral, and thereafter the Bank shall
have the sole right to collect the Receivables and take possession of the
Collateral and Records relating thereto. All of the Bank's reasonable collection
expenses shall be charged to the Borrower's account and added to the
Obligations. If the Bank is collecting the Receivables as provided, the Bank
shall have the right to receive, indorse, assign and deliver in the Bank's name
or the Borrower's name any and all checks, drafts and other instruments for the
payment of money relating to the Receivables, and the Borrower hereby waives
notice of presentment, protest and nonpayment of any instrument so indorsed. If
the Bank is collecting the Receivables directly as above provided, the Borrower
hereby constitutes and appoints the Bank or the Bank's designee as the
Borrowers' attorney-in-fact with power with respect to the Receivables: (a) to
indorse the Borrower's name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment of Collateral

                                       34
<PAGE>
that may come into the Bank's possession; (b) to sign the Borrower's name on any
invoice relating to any of the Receivables, drafts against Customers,
assignments and verifications of Receivables and notices to Customers; (c) to
send verifications of Receivables to any Customer; (d) to notify the Post Office
authorities to change the address for delivery of mail addressed to the
Borrower; (e) to receive, open and dispose of all mail addressed to the
Borrower; and (f) to do all other acts and things necessary, proper, or
convenient to carry out the terms, conditions, purposes and intent of this
Agreement. All good faith acts of the Bank as such attorney or designee are
hereby ratified and approved, and such attorney or designee shall not be liable
for any acts of omission or commission other than acts of willful misconduct,
nor for any error of judgment or mistake of fact or law exercised in accordance
with this Agreement. The power of attorney hereby granted, being coupled with an
interest, is irrevocable while any of the Obligations remain unpaid. The Bank
may, without notice to or consent from the Borrower, sue upon or otherwise
collect, extend the time of payment of or compromise or settle for cash, credit
or otherwise upon any terms, any of the Receivables or any securities,
instruments or insurance applicable thereto or release any obligor thereon. The
Bank is authorized and empowered to accept the return of the goods represented
by any of the Receivables, without notice to or consent by the Borrower, all
without discharging or in any way affecting the Borrower's liability hereunder.
The Bank does not, by anything herein or in any assignment or otherwise, assume
any of the Borrower's obligations under any contract or agreement assigned to
the Bank, and the Bank shall not be responsible in any way for the performance
by the Borrower of any of the terms and conditions thereof, except for acts of
willful misconduct or gross negligence.

                  SECTION 9.3. SALE OF COLLATERAL. In addition to any other
remedy provided herein, upon the occurrence of any Event of Default, and the
expiration of any grace or cure period, if any, the Bank may immediately,
without advertisement, sell in a commercially reasonable manner at public or
private sale or otherwise realize upon, in Baltimore, Maryland, or elsewhere,
the whole or any part of the Collateral, or any interest which the Borrower may
have therein. After deducting from the proceeds of sale or other disposition of
the Collateral all reasonable expenses, including all reasonable expenses for
legal services, the Bank shall apply such proceeds toward the satisfaction of
the Obligations in any order or manner as the Bank may determine. Any remainder
of the proceeds after satisfaction in full of the Obligations shall be
distributed as required by applicable Law. Written notice of any sale or other
disposition shall be given to the Borrower at least ten (10) days before the
time of any intended public sale or of the time after which any intended private
sale or other disposition of the Collateral is to be made, which the Borrower
hereby agrees shall be reasonable notice of such sale or other disposition. The
Borrower agrees to assemble, or to cause to be assembled, at the Borrower's own
expense, the Collateral at such place or places as the Bank shall designate. At
any such sale or other disposition, the Bank may, to the extent permissible
under applicable Law, purchase the whole or any part of the Collateral, free

                                       35
<PAGE>
from any right of redemption on the part of the Borrower, which right is hereby
waived and released. The Borrower waives the right, if any, to have the
Collateral marshaled upon a sale. Without limiting the generality of any of the
rights and remedies conferred upon the Bank under this Section, the Bank may, to
the full extent permitted by applicable law: (a) peacefully enter upon the
premises of the Borrower, exclude therefrom the Borrower or any entity connected
therewith, and take immediate possession of the Collateral, either personally or
by means of a receiver appointed by a court of competent jurisdiction, using all
necessary force to do so; (b) at the Bank's option, use, operate, manage, and
control the Collateral in any lawful manner (but without any obligation to
continue the business operations of the Borrower); (c) collect and receive all
rents, income, revenue, earnings, issues, and profits therefrom; and (d)
maintain, preserve, alter or remove the Collateral as the Bank may determine in
the Bank's discretion. The Borrower and all Guarantors shall indemnify and save
harmless the Bank for any action or inaction taken in connection therewith,
except for acts or omissions of gross negligence or willful misconduct.

                  SECTION 9.4. ATTORNEYS' FEES AND EXPENSES. The Borrower shall
pay all attorneys' fees and expenses which the Bank may incur as a result or in
consequence of the happening of an Event of Default, even if the Event of
Default is cured and the Loan is placed in good standing.

                  SECTION 9.5. REMEDIES CUMULATIVE. The rights and remedies
provided in this Agreement or in the Loan Documents or under applicable Law
shall be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other rights or remedies in addition to, or as an
alternative of, such right or remedy.

                  SECTION 9.6. NOTICE OF DEFAULT. Except as otherwise
specifically provided in this Agreement, the Bank shall have no duty or
obligation to provide the Borrower with a notice of the existence of an Event of
Default upon the occurrence of an Event of Default or before exercising the
Bank's rights and remedies in consequence of the happening of the Event of
Default, nor shall the Bank be required to give any period of time for the
Borrower to cure a default. The Bank may, however, in the Bank's sole and
absolute discretion, give such a notice to evidence the existence of the Event
of Default and if the Bank, in the Bank's sole and absolute discretion, gives
the Borrower a period of time to cure the default in the notice thereof, the
Borrower shall have such period of time to cure the default before the Bank
exercises the Bank's rights and remedies in consequence of the default. The
failure or forbearance of the Bank to exercise the Bank's rights and remedies
upon the happening of an Event of Default shall not be a waiver of the default
or an excusing of the default by the Bank, and if the default shall continue to
exist, the Borrower authorizes the Bank to exercise at any time the Bank's
rights and remedies in consequence of the default. If, however, the Borrower
cures the default within any applicable cure period to the Bank's full and
complete satisfaction before the

                                       36
<PAGE>
Bank has exercised the Bank's rights and remedies, the Bank shall no longer have
the right to exercise the Bank's rights and remedies in consequence of the
default. If, however, the Bank has already exercised the Bank's rights and
remedies and the Borrower cures the default which authorized the exercise of the
rights and remedies by the Bank, but after any applicable cure period, the Bank,
in the Bank's sole and absolute discretion, may either accept the default as
cured, reinstate the subject Loan in good standing, cease to exercise the Bank's
rights and remedies, and deal with the Borrower as though a default had not
occurred, or continue to exercise the Bank's rights and remedies and refuse to
recognize or accept the default as having been cured.

                  SECTION 9.7. PROOF OF SUMS DUE ON LOANS. In any action or
proceeding brought by the Bank to collect the sums owed on the Loan, an
affidavit made under oath by an officer of the Bank setting forth the unpaid
balance of principal, and any accrued interest, default interest, and late
charges owed on the Loan shall be presumed correct in the absence of manifest
error, and shall be admissible in evidence for the purpose of establishing the
truth of what it asserts.

                  SECTION 9.8. OBLIGATIONS OF THE BORROWER HEREUNDER
UNCONDITIONAL. The payment and performance of the Obligations shall be the
absolute and unconditional duty and obligation of the Borrower, and shall be
independent of any defense or any right of set-off, recoupment or counterclaim
which the Borrower might otherwise have against the Bank and the Borrower shall
pay absolutely net the payments of the principal and interest to be made on
account of the Loan and all other payments required hereunder, free of any
deductions and without abatement, diminution or set-off other than those herein
expressly provided, and until such time as the Obligations have been fully paid
and performed, the Borrower: (a) will not suspend or discontinue any payments
provided for herein or in the Line of Credit Note; (b) will perform and observe
all of the Borrowers' other covenants and agreements contained in the Loan
Documents, including without limitation, making all payments required to be made
to the Bank; and (c) will not terminate or attempt to terminate the Loan
Documents for any cause.

                                    ARTICLE X
                          GENERAL CONDITIONS AND TERMS

                  SECTION 10.1. LOAN COSTS. The Loans and all transactions
relating thereto and provided for herein shall be made at no cost to the Bank
and all fees including, without limitation, the Bank's reasonable counsel fees,
title insurance premiums, recordation costs, costs of documentary stamps,
photocopying expense, appraisals, lien searches, travel expenses for the Bank's
agents, employees, and counsel, and all other reasonable expenses shall be paid
by the Borrower, whether incurred prior to or after closing, such that the
subject transactions shall be cost free to the Bank.

                                       37
<PAGE>
                  SECTION 10.2. INCORPORATION. The terms and conditions of the
Loan Documents are incorporated by reference and made a part hereof as if fully
set forth herein. In the event of any inconsistencies between this Agreement and
any other Loan Document, such inconsistencies shall be construed, interpreted,
and resolved so as to benefit the Bank, independent of whether this Agreement or
another Loan Document controls, and the Bank's election of which interpretation
or construction is for the Bank's benefit shall govern.

                  SECTION 10.3. WAIVERS. The Bank may at any time or from time
to time waive all or any rights under this Agreement or any other Loan Document,
but any waiver or indulgence by the Bank at any time or from time to time shall
not constitute, unless specifically so expressed by the Bank in writing (except
to the extent an express waiver need not be in writing under the provisions of
another Section of this Agreement), a future waiver of performance or exact
performance by the Borrower.

                  SECTION 10.4. NO THIRD PARTY BENEFICIARY RIGHTS. No person not
a party to this Agreement shall have any benefit hereunder nor have third party
beneficiary rights as a result of this Agreement or any other Loan Documents,
nor shall any party be entitled to rely on any actions or inactions of the Bank
or the Bank's agents, all of which are done for the sole benefit and protection
of the Bank.

                  SECTION 10.5. CONTINUING OBLIGATION OF BORROWER. The terms,
conditions, and covenants set forth herein and in the Loan Documents shall
survive closing and shall constitute a continuing obligation of the Borrower
during the course of the transaction contemplated herein. The obligations of the
Borrower under this Agreement shall remain in effect so long as any Obligation
is outstanding, unpaid or unsatisfied between the Borrower or a Guarantor and
the Bank.

                  SECTION 10.6. BINDING OBLIGATION. This Agreement shall be
binding upon and inure to the benefit of the Borrower and its successors and
permitted assigns, and the Bank and its successors and assigns.

                  SECTION 10.7. NOTICES. Any notice required or permitted by or
in connection with this Agreement or any other Loan Document shall be in writing
and made by hand delivery, by certified mail, return receipt requested, postage
prepaid, or by overnight courier for next business day delivery, addressed to
the Bank or the Borrower at the appropriate address set forth below or to such
other address as may be hereafter specified by written notice by the Bank or the
Borrower, and shall be considered given as of the date of hand delivery, as of
three (3) days after the date of mailing, or the date specified for delivery
with an overnight courier service, independent of the date of actual delivery,
as the case may be:

                                       38
<PAGE>
                  If to the Bank:

                           BAY NATIONAL BANK
                           Suite 325 - 2328 West Joppa Road
                           Lutherville, Maryland  21093
                           Attn: Warren F. Boutilier
                                 Senior Director, Client Services
                                 (410) 427-3709

                  If to the Borrower:

                           HEMAGEN DIAGNOSTICS, INC.
                           9033 Red Branch Road
                           Columbia, Maryland 21045
                           Attn: William P. Hales
                                 President & CEO
                                 (443) 367-5500

Notice to Hemagen shall constitute notice to Reagents, and vice versa.

                  SECTION 10.8. FINAL AGREEMENT. This Agreement and the Loan
Documents contain the final and entire agreement and understanding of the
parties, and any terms and conditions not set forth in this Agreement or the
Loan Documents are not a part of this Agreement and the understanding of the
parties hereto.

                  SECTION 10.9. EXTENSIONS. The payment of the Obligations
hereunder may be extended, from time to time, without impairing or otherwise
affecting the liability of the Borrower, any indorser, guarantor or other party
liable hereunder or under any Loan Document, or the continuing security interest
in the Collateral provided herein. This Agreement shall terminate only upon
written notice from the Bank.

                  SECTION  10.10. AMENDMENT. This Agreement may be amended or
altered only in writing signed by the party to be bound by the amendment or
alteration.

                  SECTION 10.11. TIME. Time is of the essence of this Agreement.

                  SECTION 10.12. CHOICE OF LAW. The laws of the State of
Maryland, exclusive of its conflict of laws rules, shall govern the rights and
obligations of the parties to this Agreement and all other Loan Documents, and
the interpretation and construction and enforceability thereof and any and all
issues relating to the transactions contemplated herein. The Borrower consents
to the jurisdiction of, and agrees that venue shall be proper in the Circuit
Court for any County of Maryland or

                                       39
<PAGE>
Baltimore City if suit is filed by the Bank to enforce or construe the Loan
Documents. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY SUIT, ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THE LOANS, THIS
AGREEMENT OR THE LOAN DOCUMENTS.

                  SECTION 10.13. DISCLOSURE. The Bank may disclose financial
information concerning the Borrower to any other financial institution which may
share or participate in the Loan. Except as above provided, the Bank shall
maintain the confidentiality of all financial and trade proprietary information
of Borrower in accordance with applicable state and federal Laws.

                  SECTION 10.14. NUMBER, GENDER, AND CAPTIONS. As used herein,
the singular shall include the plural and the plural may refer to only the
singular. The use of any gender shall be applicable to all genders. The captions
contained herein are for purposes of convenience only and are not a part of this
Agreement.

                  SECTION 10.15. AGENT. Reagents Applications, Inc. hereby
appoints Hemagen Diagnostics, Inc. its exclusive agent to act for and on its
behalf in requesting Advances, receiving notices, accepting service of process,
and in taking any and all other actions in connection with this Agreement, the
Loan and the Line of Credit Note.

[REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       40
<PAGE>
The Bank shall have no duty or obligation to see to the use or applications of
Advances as between either Borrower.

                  IN WITNESS WHEREOF, the Bank and the Borrower execute and seal
this Agreement on this 26th day of September, 2002, with the specific intention
that this Agreement constitute a document under seal.

WITNESS/ATTEST:                     THE BANK:

                                    BAY NATIONAL BANK

___________________________         By: _____________________________ (SEAL)
                                        Warren F. Boutilier
                                        Senior Director, Client Services

                                    THE BORROWER:

                                    HEMAGEN DIAGNOSTICS, INC.

____________________________        By: ____________________________ (SEAL)
                                        William P. Hales
                                        President & CEO

                                    REAGENTS APPLICATIONS, INC.

____________________________        By: ____________________________ (SEAL)
                                        William P. Hales
                                        President

                                       41
<PAGE>
STATE OF MARYLAND, CITY/COUNTY OF _________________, to wit:

                  I HEREBY CERTIFY, that on this 26th day of September, 2002,
before me, the undersigned Notary Public, personally appeared Warren F.
Boutilier, who acknowledged himself to be the Senior Director, Client Services
of Bay National Bank, a national banking association, known to me (or
satisfactorily proved) to be the person who executed the aforegoing Loan and
Security Agreement, and acknowledged that he, being authorized so to do,
executed the same for the purposes therein contained as the duly authorized
Senior Director, Client Services of Bay National Bank, by signing the name of
Bay National Bank by himself as Senior Director, Client Services.

                  IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                             _______________________________
                                             Notary Public
My Commission Expires:
_________________________

STATE OF MARYLAND, CITY/COUNTY OF _________________, to wit:

                  I HEREBY CERTIFY, that on this 26th day of September, 2002,
before me, the undersigned Notary Public, personally appeared William P. Hales
who acknowledged himself to be the President & CEO of HEMAGEN DIAGNOSTICS, INC.,
a Delaware corporation, known to me (or satisfactorily proved) to be the person
who executed the aforegoing Loan and Security Agreement, and acknowledged that
he, being authorized so to do, executed the same for the purposes therein
contained as the duly authorized President & CEO of Hemagen Diagnostics, Inc. by
signing the name of Hemagen Diagnostics, Inc., by himself as President & CEO.

                  IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                             _______________________________
                                             Notary Public
My Commission Expires:
_________________________

                                       42
<PAGE>
STATE OF MARYLAND, CITY/COUNTY OF _____________________, to wit:

                  I HEREBY CERTIFY, that on this 26th day of September, 2002,
before me, the undersigned Notary Public, personally appeared William P. Hales
who acknowledged himself to be the President of REAGENTS APPLICATIONS, INC., a
Delaware corporation, known to me (or satisfactorily proved) to be the person
who executed the aforegoing Loan and Security Agreement, and acknowledged that
he, being authorized so to do, executed the same for the purposes therein
contained as the duly authorized President of Reagents Applications, Inc. by
signing the name of Reagents Applications, Inc., by himself as President.

                  IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                             _______________________________
                                             Notary Public
My Commission Expires:
_________________________

                                       43
<PAGE>
                              SCHEDULES AND EXHIBIT

<TABLE>
<S>                           <C>
Schedule "A" (1.28.(d))       Existing Liens

Schedule "B" (1.34.)          Subordinated Debt Holders

Schedule "C" (3.2.)           Federally Registered Patents, Trademarks

Schedule "D" (5.3.)           Litigation

Schedule "E" (5.5.)           Title to Collateral

Schedule "F" (5.7.)           States of Incorporation, Qualification

Schedule "G" (5.7.)           Name Changes, Acquisitions, Change of Business Locations

Schedule "G-1" (5.10.)        Taxes

Schedule "H" (5.16.)          Claims as to Intellectual Property

Schedule "I" (5.17.)          Business Locations

Schedule "J" (5.18.)          Subsidiaries

Schedule "K" (5.19.)          Material Contracts in Default

Exhibit "A" (2.1.3.)          Request for Advance
</TABLE>
<PAGE>
                                   EXHIBIT "A"

                               REQUEST FOR ADVANCE

TO:             Bay National Bank
                Attn:  Warren F. Boutilier
                       Senior Director, Client Services

FROM:           Hemagen Diagnostics, Inc. ("Borrower")

DATE:           ____________________

RE:             Loan and Security Agreement dated September 26, 2002 between
                Borrower, Reagents Applications, Inc. and Bay National Bank (the
                "Loan Agreement").

         Pursuant to Section 2.1.3. of the Loan Agreement, a request for an
         Advance is requested.

         (i)     Amount of principal requested:                  $______________

         (ii)    Date Advance to be deposited in                 _______________
                  Borrower's Operating Account

         (iii)   Purpose of Advance                _____________________________
                                                   _____________________________
                                                   _____________________________
                                                   _____________________________

         The undersigned certifies to Bay National Bank that no Event of Default
has occurred and is continuing (or would have occurred with the giving of notice
or passage of time, or both) under the Loan Agreement or other Loan Documents.
All capitalized terms used herein which are defined in the Loan Agreement shall
have the same meanings herein.

                                             HEMAGEN DIAGNOSITCS, INC.

                                             By:__________________________(SEAL)
                                                Name:_____________________
                                                Title:____________________<PAGE>
                            STOCK PURCHASE AGREEMENT

                                     BETWEEN

                      HONEYWELL ELECTRONIC MATERIALS, INC.

                                       AND

                             TTM TECHNOLOGIES, INC.

                          DATED AS OF DECEMBER 24, 2002

                                                                    CONFIDENTIAL
<PAGE>
                             TABLE OF CONTENTS PAGE

<TABLE>
<S>                                                                                                                        <C>
1. Purchase and Sale of the Shares...............................................................................           1

2. Definitions...................................................................................................           1
    2.1. Adjustment Amount.......................................................................................           1
    2.2. Affiliate...............................................................................................           1
    2.3. Affiliated Group........................................................................................           1
    2.4. Agreement...............................................................................................           1
    2.5. Ancillary Documents.....................................................................................           1
    2.6. Balance Sheet...........................................................................................           1
    2.7. Balance Sheet Date......................................................................................           2
    2.8. Banked Liability........................................................................................           2
    2.9. Benefit Plans...........................................................................................           2
    2.10. Benefit Transition Date................................................................................           2
    2.11. Business Day...........................................................................................           2
    2.12. Buyer..................................................................................................           2
    2.13. Buyer Disclosure Schedule..............................................................................           2
    2.14. Buyer's 401(k) Plans...................................................................................           2
    2.15. Chippewa Falls Property................................................................................           2
    2.16. Cisco..................................................................................................           3
    2.17. Cisco Settlement Agreement.............................................................................           3
    2.18. Claims.................................................................................................           3
    2.19. Closing................................................................................................           3
    2.20. Closing Date...........................................................................................           3
    2.21. Closing Date Net Working Capital.......................................................................           3
    2.22. Code...................................................................................................           3
    2.23. Company................................................................................................           3
    2.24. Company Property.......................................................................................           3
    2.25. Common Stock...........................................................................................           3
    2.26. Confidentiality Agreement..............................................................................           3
    2.27. Contracts..............................................................................................           3
    2.28. Cross License and Transfer Agreement...................................................................           3
    2.29. Employees..............................................................................................           3
    2.30. Employee Sales Bonus...................................................................................           4
    2.31. Environmental Claim....................................................................................           4
    2.32. Environmental Laws.....................................................................................           4
    2.33. Environmental Permits..................................................................................           4
    2.34. ERISA..................................................................................................           4
    2.35. ERISA Affiliate........................................................................................           4
    2.36. Financial Statements...................................................................................           4
    2.37. Former Employees.......................................................................................           4
    2.38. Governmental Authority.................................................................................           4
</TABLE>

                                       i

                                                                    CONFIDENTIAL
<PAGE>
<TABLE>
<S>                                                                                                                        <C>
    2.39. Guaranty Agreement.....................................................................................           4
    2.40. GUST...................................................................................................           4
    2.41. HIPI...................................................................................................           4
    2.42. Honeywell..............................................................................................           4
    2.43. Indemnified Party......................................................................................           4
    2.44. Indemnifying Party.....................................................................................           5
    2.45. Leased Property........................................................................................           5
    2.46. Leave Employees........................................................................................           5
    2.47. Liens..................................................................................................           5
    2.48. Material Adverse Effect................................................................................           5
    2.49. Owned Property.........................................................................................           5
    2.50. PBGC...................................................................................................           5
    2.51. Permitted Liens........................................................................................           5
    2.52. Person.................................................................................................           5
    2.53. Pre-Closing Dividend...................................................................................           5
    2.54. Purchase Price.........................................................................................           5
    2.55. Records................................................................................................           6
    2.56. Rights.................................................................................................           6
    2.57. Savings Plan Commencement Date.........................................................................           6
    2.58. Seller.................................................................................................           6
    2.59. Seller Disclosure Schedule.............................................................................           6
    2.60. Seller's 401(k) Plan...................................................................................           6
    2.61. Seller's knowledge.....................................................................................           6
    2.62. Shares.................................................................................................           6
    2.63. Specified Liabilities..................................................................................           6
    2.64. Straddle Period........................................................................................           7
    2.65. Subsidiary.............................................................................................           7
    2.66. Tax or Taxes...........................................................................................           7
    2.67. Tax Claim..............................................................................................           7
    2.68. Tax Losses.............................................................................................           7
    2.69. Tax Return.............................................................................................           7
    2.70. Third Party Claim......................................................................................           7
    2.71. Transferred Employees..................................................................................           7
    2.72. Transition Services Agreement..........................................................................           7
    2.73. WARN Act...............................................................................................           7
    2.74. Working Capital Requirement............................................................................           8

3. Closing.......................................................................................................           8
    3.1. Transactions at Closing.................................................................................           8

4. Conditions to Closing.........................................................................................           9
    4.1. Buyer's Obligation......................................................................................           9
    4.2. Seller's Obligation.....................................................................................          10

5. Representations and Warranties of Seller......................................................................          11
    5.1. Authority...............................................................................................          11
</TABLE>

                                       ii

                                                                    CONFIDENTIAL
<PAGE>
<TABLE>
<S>                                                                                                                        <C>
    5.2. Shares..................................................................................................          12
    5.3. Organization and Standing of the Company................................................................          12
    5.4. Capital Stock...........................................................................................          13
    5.5. Equity Interests........................................................................................          13
    5.6. Financial Statements....................................................................................          13
    5.7. Transactions with Affiliates............................................................................          14
    5.8. Taxes...................................................................................................          14
    5.9. Assets Other than Real Property Interests...............................................................          15
    5.10. Title to Real Property.................................................................................          15
    5.11. Intellectual Property..................................................................................          16
    5.12. Contracts..............................................................................................          17
    5.13. Litigation; Decrees....................................................................................          18
    5.14. Insurance..............................................................................................          18
    5.15. Employee Benefits......................................................................................          18
    5.16. Absence of Changes or Events...........................................................................          21
    5.17. Compliance with Applicable Laws........................................................................          22
    5.18. Employee and Labor Relations...........................................................................          23
    5.19. Licenses; Permits......................................................................................          23
    5.20. Corporate Name.........................................................................................          23
    5.21. Intercompany Accounts..................................................................................          23
    5.22. Suppliers and Customers................................................................................          24

6. Covenants of Seller...........................................................................................          24
    6.1. Access..................................................................................................          24
    6.2. Ordinary Conduct........................................................................................          24
    6.3. Insurance...............................................................................................          25
    6.4. Resignations............................................................................................          25
    6.5. Other Transactions......................................................................................          25

7. Representations and Warranties of Buyer.......................................................................          26
    7.1. Authority...............................................................................................          26
    7.2. Securities Act of 1933..................................................................................          27
    7.3. Actions and Proceedings, etc............................................................................          27
    7.4. Finders' Fees...........................................................................................          27
    7.5. No Knowledge of Material Adverse Events.................................................................          27
    7.6. No Plans to Terminate Employees.........................................................................          27

8. Covenants of Buyer............................................................................................          27
    8.1. Confidentiality.........................................................................................          28
    8.2. No Additional Representations...........................................................................          28
    8.3. Change of Name; No Use of Logo..........................................................................          28
    8.4. PriceWaterhouse Coopers.................................................................................          28
    8.5. Phase II................................................................................................          28
    8.6. Deed Restriction........................................................................................          29

9. Mutual Covenants..............................................................................................          29
    9.1. Publicity...............................................................................................          29
</TABLE>

                                       iii

                                                                    CONFIDENTIAL
<PAGE>
<TABLE>
<S>                                                                                                                        <C>
    9.2. Best Efforts; Further Assurances........................................................................          29
    9.3. Records.................................................................................................          29
    9.4. Cisco...................................................................................................          30

10. Employee and Related Matters.................................................................................          31
    10.1. Employment.............................................................................................          31
    10.2. Severance Protection...................................................................................          32
    10.3. Cooperation............................................................................................          32
    10.4. Savings Plan...........................................................................................          32
    10.5. Employee Welfare Plans.................................................................................          32
    10.6. Severance and WARN Act Liability.......................................................................          33
    10.7. Health Care Continuation Coverage......................................................................          33
    10.8. Worker's Compensation..................................................................................          34
    10.9. No Assumption of Plans.................................................................................          34

11. Indemnification..............................................................................................          34
    11.1. Indemnification by Seller..............................................................................          34
    11.2. Indemnification by Buyer...............................................................................          35
    11.3. Losses Net of Insurance, etc...........................................................................          36
    11.4. Termination of Indemnification.........................................................................          36
    11.5. Procedures Relating to Indemnification (Other than for Tax Claims).....................................          36
    11.6. Procedures Relating to Indemnification of Tax Claims...................................................          37
    11.7. Procedures Relating to Indemnification of Environmental Claims. .......................................          38

12. Tax Matters..................................................................................................          41
    12.1. Returns................................................................................................          41
    12.2. Cooperation............................................................................................          42
    12.3. Refunds................................................................................................          42
    12.4. Tax Sharing............................................................................................          43

13. Assignment...................................................................................................          43

14. No Third-Party Beneficiaries.................................................................................          43

15. Termination..................................................................................................          43
    15.1. Events.................................................................................................          43
    15.2. Notice.................................................................................................          44
    15.3. Surviving Provisions...................................................................................          44

16. Survival of Representations..................................................................................          44

17. Expenses.....................................................................................................          44

18. Attorney Fees................................................................................................          44

19. Amendments...................................................................................................          45

20. Notices......................................................................................................          45

21. Interpretation...............................................................................................          45

22. Counterparts.................................................................................................          45
</TABLE>

                                       iv

                                                                    CONFIDENTIAL
<PAGE>
<TABLE>
<S>                                                                                                                        <C>
23. Entire Agreement.............................................................................................          45

24. Fees.........................................................................................................          46

25. Severability.................................................................................................          46

26. Consent to Jurisdiction......................................................................................          46

27. GOVERNING LAW................................................................................................          46

28. Confidentiality Agreements with Third Parties................................................................          47

29. Seller Disclosure Schedules..................................................................................          47

EXHIBITS:

A        Guaranty Agreement
B        Transition Services Agreement
C        Cross License and Transfer Agreement
D        Deed Restriction
</TABLE>

                                        v

                                                                    CONFIDENTIAL
<PAGE>
                            STOCK PURCHASE AGREEMENT

         STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of December 24
2002, between TTM Technologies, Inc., a Washington corporation ("Buyer"), and
Honeywell Electronic Materials, Inc., a Washington corporation ("Seller").

                                   WITNESSETH:

WHEREAS, Seller is the record and beneficial owner of the Shares and desires to
sell the Shares to Buyer, and Buyer desires to purchase the Shares from Seller,
upon terms and subject to the conditions hereinafter set forth; and

WHEREAS, as an inducement to Buyer to purchase the Shares, Honeywell
International Inc., a Delaware corporation ("Honeywell"), the ultimate parent
corporation of Seller, has agreed to enter into a Guaranty Agreement of even
date herewith with Buyer in form and substance as set forth in Exhibit A hereto
(the "Guaranty Agreement"); The parties hereto agree as follows:

         1. PURCHASE AND SALE OF THE SHARES. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees
to purchase from Seller, the Shares at Closing. The purchase price for the
Shares (the "Purchase Price") is $1.00 in cash.

         2. DEFINITIONS.

                  2.1. "ADJUSTMENT AMOUNT" has the meaning found in Section
         3.1.3 below.

                  2.2. "AFFILIATE" means, as to any specified Person, any other
         Person, which, directly or indirectly, at the time such determination
         is being made, controls, is controlled by or is under common control
         with, such specified Person.

                  2.3. "AFFILIATED GROUP" has the meaning found in Section 5.8
         below.

                  2.4. "AGREEMENT" has the meaning found in the preamble, above.

                  2.5. "ANCILLARY DOCUMENTS" means, collectively, (1) the Seller
         Disclosure Schedule; (2) the Buyer Disclosure Schedule; (3) the
         Guaranty Agreement; (4) the Transition Services Agreement; (5) the
         Cross License and Transfer Agreement; (6) the certificate delivered by
         Seller pursuant to Section 4.1.1 below; (7) the certificate delivered
         by Buyer pursuant to Section 4.2.1 below; and (8) the Deed Restriction.

                  2.6. "BALANCE SHEET" has the meaning found in Section 5.6.1
         below.

                                                                    CONFIDENTIAL
<PAGE>
                  2.7. "BALANCE SHEET DATE" has the meaning found in Section
         5.6.1 below.

                  2.8. "BANKED LIABILITY" has the meaning found in Section 2.65
         below.

                  2.9. "BENEFIT PLANS" means employee benefit plans (as defined
         in Section 3(3) of ERISA), programs and arrangements providing
         disability benefits, supplemental unemployment benefits, vacation
         benefits, severance benefits, retirement benefits, life, health,
         retiree life, retiree health, accident benefits (including, any
         "voluntary employees' beneficiary association" as defined in Section
         501(c)(9) of the Code providing for the same or other benefits), or
         providing for bonuses, profit-sharing bonuses, stock options, stock
         purchases, restricted stock, stock appreciation rights or other forms
         of incentive compensation, maintained or contributed to or sponsored
         by, or with respect to which any liability may be imposed upon, the
         Company with respect to any Employees or Former Employees (or their
         spouses, dependents or beneficiaries), whether or not such plans,
         programs and arrangements are written or oral.

                  2.10. "BENEFIT TRANSITION DATE" means (1) the Closing Date; or
         (2) such later date as defined and agreed to in the Transition Services
         Agreement for each specific administrative service or Benefit Plan.

                  2.11. "BUSINESS DAY" means any day on which banks located in
         New York, New York are open for the purpose of conducting commercial
         banking business.

                  2.12. "BUYER" has the meaning found in the preamble, above.

                  2.13. "BUYER DISCLOSURE SCHEDULE" means the disclosure
         schedule of Buyer delivered to Seller simultaneously with the execution
         and delivery hereof.

                  2.14. "BUYER'S 401(K) PLANS" has the meaning found in Section
         10.4 below.

                  2.15. "CHANGE IN CONTROL" shall mean, with respect to Buyer or
         the Company, either (i) the sale or transfer of all or substantially
         all of the Buyer's or the Company's assets to any Person or group (as
         defined in Section 12(d)(3) of the Exchange Act), of Persons (other
         than a Subsidiary), (ii) the acquisition of the Buyer or the Company by
         another Person by means of any transaction or series of related
         transactions (including, without limitation, any reorganizations,
         merger or consolidations, whether of the Buyer or the Company with or
         into any other Person or Persons, but excluding (x) any merger effected
         exclusively for changing the domicile of the Buyer or the Company or
         (y) any consolidation or merger following which holders of equity
         securities outstanding immediately prior to such merger or
         consolidation hold more than fifty percent (50%) of the equity
         securities of the entity surviving such consolidation or merger or an
         entity

                                       2

                                                                    CONFIDENTIAL
<PAGE>
         controlling such surviving entity after such consolidation or merger);
         or (iii) a transaction or series of transactions in which a Person or
         group of Persons acquires beneficial ownership (as determined in
         accordance with Rule 13d-3 of the Exchange Act) of more than fifty
         percent (50%) of the voting power of the Buyer.

                  2.16. "CHIPPEWA FALLS PROPERTY" has the meaning found in
         Section 8.6 below.

                  2.17. "CISCO" has the meaning found in Section 9.4 below.

                  2.18. "CISCO SETTLEMENT AGREEMENT" has the meaning found in
         Section 9.4 below.

                  2.19. "CLAIMS" means lawsuits, claims, proceedings,
         investigations or orders issued by any Governmental Authority.

                  2.20. "CLOSING" has the meaning found in Section 3 below.

                  2.21. "CLOSING DATE" has the meaning found in Section 3 below.

                  2.22. "CLOSING DATE NET WORKING CAPITAL" means, as of the
         Closing Date, the Company's accounts receivable plus inventory
         (assuming the net value of maintenance spares is zero) minus the
         Company's accounts payable as calculated in accordance with the
         management accounts maintained in the ordinary course prior to the
         Closing Date.

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

                  2.24. "COMPANY" means Honeywell Advanced Circuits, Inc., a
         Minnesota corporation.

                  2.25. "COMPANY PROPERTY" has the meaning found in Section 5.10
         below.

                  2.26. "COMMON STOCK" means the common stock, par value $.10
         per share, of the Company.

                  2.27. "CONFIDENTIALITY AGREEMENT" means the Mutual
         Nondisclosure Agreement, dated April 29, 2002, by and between Buyer and
         Honeywell.

                  2.28. "CONTRACTS" has the meaning found in Section 5.12 below.

                  2.29. "CROSS LICENSE AND TRANSFER AGREEMENT" has the meaning
         found in Section 4.1.6 below.

                  2.30. "EMPLOYEES" has the meaning found in Section 10 below.

                                       3

                                                                    CONFIDENTIAL
<PAGE>
                  2.31. "EMPLOYEE SALES BONUS" has the meaning found in Section
         2.65 below.

                  2.32. "ENVIRONMENTAL CLAIM" has the meaning found in Section
         11.7.1 below.

                  2.33. "ENVIRONMENTAL LAWS" means Federal, state, local or
         foreign statutes, laws, ordinances, rules, orders and regulations
         relating to the protection of the environment, as currently in effect.

                  2.34. "ENVIRONMENTAL PERMITS" means licenses, permits,
         authorizations and approvals required under Environmental Laws.

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

                  2.36. "ERISA AFFILIATE" has the meaning found in Section
         5.15.4 below.

                  2.37. "EXCHANGE ACT" shall mean the Securities Exchange Act of
         1934.

                  2.38. "FINANCIAL STATEMENTS" has the meaning found in Section
         5.6.1 below.

                  2.39. "FORMER EMPLOYEES" has the meaning found in Section 10
         below.

                  2.40. "GOVERNMENTAL AUTHORITY" means any court, government
         (Federal, state or local), department, commission, board, agency,
         bureau, official or other regulatory, administrative or governmental
         authority, domestic or foreign.

                  2.41. "GUARANTY AGREEMENT" has the meaning found in the
         preamble above.

                  2.42. "GUST" as described and used in Section 5.15.10 below,
         means, collectively, (1) the General Agreement on Tariffs and Trade, as
         amended; (2) the Uniformed Services Employment and Reemployment Rights
         Act, as amended; (3) the Small Business Job Protection Act, as amended;
         and (4) the Tax Reform Act of 1997, as amended.

                  2.43. "HIPI" has the meaning found in Section 4.1.6 below.

                  2.44. "HONEYWELL" has the meaning found in the preamble above.

                  2.45. "INDEMNIFIED PARTY" has the meaning found in Section
         11.5 below.

                                       4

                                                                    CONFIDENTIAL
<PAGE>
                  2.46. "INDEMNIFYING PARTY" has the meaning found in Section
         11.5 below.

                  2.47. "LEASED PROPERTY" has the meaning found in Section 5.10
         below.

                  2.48. "LEAVE EMPLOYEES" has the meaning found in Section 10.1
         below.

                  2.49. "LIENS" means liens, claims, encumbrances, security
         interests, options, charges and restrictions of any kind.

                  2.50. "MATERIAL ADVERSE EFFECT" means an adverse effect on the
         business, assets or results of operation of the Company taken as a
         whole, excluding (1) any effect generally applicable to the economy or
         the industry in which the Company conducts its business or (2) changes
         in the Company's employee population arising from or related to this
         Agreement or the transactions contemplated today.

                  2.51. "OWNED PROPERTY" has the meaning found in Section 5.10
         below.

                  2.52. "PBGC" means the Pension Benefit Guaranty Corporation.

                  2.53. "PERMITTED LIENS" means (1) Liens disclosed in Section
         5.9 of the Seller Disclosure Schedule; (2) Liens disclosed on the
         Balance Sheet and Liens arising in the ordinary course since the
         Balance Sheet Date; (3) mechanics', carriers', workmen's, repairmen's
         or other like Liens arising or incurred in the ordinary course of
         business; (4) Liens arising under original purchase price conditional
         sales contracts and equipment leases with third parties entered into in
         the ordinary course of business; (5) Liens for Taxes which are not due
         and payable or which may thereafter be paid without penalty; and (6)
         other Liens which would not have a Material Adverse Effect.

                  2.54. "PERSON" means an individual, corporation, partnership,
         limited liability company, association, trust or other entity or
         organization, including a government or political subdivision or an
         agency or instrumentality thereof.

                  2.55. "PRE-CLOSING DIVIDEND" means a dividend that may be paid
         by the Company to Seller on or before Closing consisting of (1) cash
         equal to the Company's cash balance; plus (2) the Company's 12.375%
         ownership interest in American Tax Credit Corporate Fund, L.P.; plus
         (3) those assets of the Company, including without limitation owned
         real property, leased real property and equipment which are described
         in Section 2.55 of the Seller Disclosure Schedule.

                  2.56. "PURCHASE PRICE" has the meaning found in Section 1
         above.

                                       5

                                                                    CONFIDENTIAL
<PAGE>
                  2.57. "RECORDS" means agreements, documents, books, records
         and files.

                  2.58. "RIGHTS" means patents, patent rights, trademarks,
         trademark rights, trade names, trade name rights, copyright
         registrations, know-how and other proprietary information.

                  2.59. "SAVINGS PLAN COMMENCEMENT DATE" has the meaning found
         in Section 10.4 below.

                  2.60. "SELLER" has the meaning found in the preamble above.

                  2.61. "SELLER DISCLOSURE SCHEDULE" means the disclosure
         schedule of Seller delivered to Buyer simultaneously with the execution
         and delivery hereof.

                  2.62. "SELLER'S 401(K) PLAN" has the meaning found in Section
         10.4 below.

                  2.63. "SELLER'S KNOWLEDGE" has the meaning found in Section 21
         below.

                  2.64. "SHARES" means 100 shares of Common Stock.

                  2.65. "SPECIFIED LIABILITIES" means:

                  (1) (a) all liabilities for income Taxes of the Company for
         any period ending on or prior to the Closing Date, and (b) all
         liabilities of the Company as a result of the applicability of Treas.
         Reg. Section 1.1502-6 or otherwise for Taxes of the Seller, the Company
         or any other corporation that is now or was affiliated with the Seller
         or the Company on or prior to the Closing Date;

                  (2) all liabilities and obligations of the Company and its
         affiliates existing on or prior to the Closing Date (whether accrued,
         absolute, contingent, known, unknown or otherwise, and whether or not
         of a nature required to be reflected or reserved against in a balance
         sheet prepared in accordance with generally accepted accounting
         principles) except (a) the liabilities reflected on the Balance Sheet,
         other than accruals for (A) "banked" vacation time owed to employees of
         the Company in the amount set forth in account #25412 of the Company's
         balance sheet as of the Closing Date ("Banked Liability") and (B) sales
         bonuses to the extent earned on or prior to December 31, 2002
         ("Employee Sales Bonus"), it being understood the liabilities described
         in the foregoing clauses (A) and (B) will remain the obligations of
         Seller and the Seller will pay such liabilities on a timely basis, (b)
         trade payables and accrued expenses incurred by the Company in the
         ordinary course of business since the Balance Sheet Date, (c) executory
         contract obligations under (i) agreements listed on the Seller
         Disclosure Schedule, and (ii) Company agreements not required to be
         listed on

                                       6

                                                                    CONFIDENTIAL
<PAGE>
         the Seller Disclosure Schedule, and (d) the liabilities expressly set
         forth in Section 2.65 of the Seller Disclosure Schedule; and

                  (c) any liability arising under or relating to the leases for
         the properties located at 1632 Terrace Drive, Roseville, Minnesota and
         560 - 16th Avenue So., Hopkins, Minnesota, it being understood that the
         Seller will use reasonable efforts to have such leases assigned to the
         Seller as promptly as practicable after the Closing Date;

it being expressly acknowledged and agreed that Specified Liabilities will
include all liabilities of the Company accrued on or prior to Closing under or
with respect to (1) the Company's Benefit Plans; (2) violations of law; (3)
product liability claims pertaining to products manufactured prior to the
Closing Date; (4) defaults taking place before the Closing Date under Company
agreements; (5) obligations owed to Affiliates of the Company; and (6) Company
litigation or similar proceedings pending or threatened as of the Closing Date,
in each case whether or not described on the Seller Disclosure Schedule.

                  2.66. "STRADDLE PERIOD" has the meaning found in Section 11.6
         below.

                  2.67. "SUBSIDIARY" means any entity of which securities or
         other ownership interests having ordinary voting power to elect a
         majority of the board of directors or other persons performing similar
         functions are at the time directly or indirectly owned by the Company.

                  2.68. "TAX" or "Taxes" means all Federal, state, local and
         foreign taxes and assessments, including all interest, penalties and
         additions imposed with respect to such amounts.

                  2.69. "TAX CLAIM" has the meaning found in Section 11.6 below.

                  2.70. "TAX LOSSES" has the meaning found in Section 11.1
         below.

                  2.71. "TAX RETURN" means any return, declaration, report,
         claim for refund or information return or statement relating to Taxes,
         including any schedule or attachment thereto and including any
         amendment thereof.

                  2.72. "THIRD PARTY CLAIM" has the meaning found in Section
         11.5 below.

                  2.73. "TRANSFERRED EMPLOYEES" has the meaning found in Section
         10.1 below.

                  2.74. "TRANSITION SERVICES AGREEMENT" has the meaning found in
         Section 4.1.5 below.

                  2.75. "WARN ACT" means the Worker Adjustment and Retraining
         Notification Act, as amended.

                                       7

                                                                    CONFIDENTIAL
<PAGE>
                  2.76. "WORKING CAPITAL REQUIREMENT" means $13,900,000.

         3. CLOSING. The completion ("Closing") of the purchase and sale of the
Shares hereunder will take place at the offices of the Company, 234 Cashman
Drive, Chippewa Falls, Wisconsin, as soon as possible, but in no event later
than December 26, 2002, after satisfaction of the conditions set forth in
Section 4.1 below, or at such other time or place as Buyer and Seller may agree
(the "Closing Date").

                  3.1. TRANSACTIONS AT CLOSING. At Closing:

                           3.1.1. CASH. Buyer will deliver to Seller $1.00 in
                  cash.

                           3.1.2. CERTIFICATES. Seller will deliver to Buyer one
                  or more certificates for the Shares, duly endorsed or
                  accompanied by stock powers duly endorsed or accompanied by
                  stock powers duly endorsed in blank, with any required
                  transfer stamps affixed thereto.

                           3.1.3. CLOSING DATE NET WORKING CAPITAL ADJUSTMENT.
                  As soon as reasonably practicable and not more than thirty
                  (30) days following the Closing Date, Buyer shall cause to be
                  prepared and delivered to Seller a calculation of the Closing
                  Date Net Working Capital. Upon delivery of the calculation of
                  the Closing Date Net Working Capital, the Buyer will provide
                  Seller access to Buyer's records to the extent reasonably
                  related to Buyer's evaluation of the calculation of the
                  Closing Date Net Working Capital. If the Seller is in
                  agreement with the Buyer's calculation of the Closing Date Net
                  Working Capital and the Closing Date Net Working Capital is
                  less than the Working Capital Requirement (the amount of such
                  difference, the "Adjustment Amount"), the Seller will, as
                  promptly as practicable, pay to Buyer an amount of cash equal
                  to the Adjustment Amount. In the event of any disagreement
                  regarding the Closing Date Net Working Capital, Buyer and
                  Seller will use commercially reasonable efforts for period of
                  twenty (20) days (or such longer period as they may mutually
                  agree) to resolve any disagreements with respect to the
                  calculation of the Closing Date Net Working Capital. If, at
                  the end of such period, they are unable to resolve such
                  disagreements, then an independent accounting firm of
                  recognized national standing mutually selected by the Buyer
                  and Seller shall resolve any remaining disagreements within
                  thirty (30) days after such accounting firm is engaged by the
                  Buyer and Seller. Once the auditor has made a determination
                  regarding the calculation of the Closing Date Net Working
                  Capital, the Seller will, as promptly as practicable, pay to
                  Buyer in cash the Adjustment Amount, if any. Buyer hereby
                  waives any right to disagree or object to the reserve for
                  doubtful accounts and excess inventory maintained by Seller as
                  of the Closing Date. For purposes of the preceding sentence,
                  Buyer agrees and acknowledges that the amount of

                                       8

                                                                    CONFIDENTIAL
<PAGE>
                  the reserve for doubtful accounts and excess inventory
                  maintained by Seller as of the Closing Date is equal to
                  $311,519 and $4,583,430, respectively.

         4. CONDITIONS TO CLOSING.

                  4.1. BUYER'S OBLIGATION. The obligation of Buyer to purchase
         and pay for the Shares is subject to the satisfaction (or waiver by
         Buyer) at Closing of the following conditions:

                           4.1.1. REPRESENTATIONS AND WARRANTIES. The
                  representations and warranties of Seller made in this
                  Agreement, qualified as to materiality, will be true and
                  correct at Closing, and those not so qualified will be true
                  and correct in all material respects at Closing, in each case
                  as though made on and as of the Closing Date, and Seller will
                  have performed or complied in all material respects with all
                  obligations and covenants required by this Agreement to be
                  performed or complied with by Seller by Closing; and Seller
                  will have delivered to Buyer a certificate dated the Closing
                  Date and signed by an authorized officer of Seller confirming
                  the foregoing.

                           4.1.2. NO ACTION. No action, suit or other proceeding
                  by any Person will be pending or threatened which seeks to
                  restrain or prohibit the purchase and sale of the Shares, the
                  Closing or the consummation of the transactions contemplated
                  hereby or seeking material damages against Buyer or the
                  Company as a result of the consummation of such transactions.

                           4.1.3. NO ORDER. No injunction or order of any court
                  or administrative agency of competent jurisdiction will be in
                  effect at Closing that restrains or prohibits the purchase and
                  sale of the Shares.

                           4.1.4. GUARANTY AGREEMENT. Honeywell will have
                  delivered an executed Guaranty Agreement.

                           4.1.5. TRANSITION SERVICES AGREEMENT. Seller will
                  have delivered an executed agreement covering transitional
                  services to be provided by or to Buyer, the Company and/or
                  their Affiliates after Closing, substantially in the form of
                  Exhibit B (the "Transition Services Agreement").

                           4.1.6. CROSS LICENSE AND TRANSFER AGREEMENT. Seller
                  will have delivered an executed agreement in respect of (1)
                  the transfer of certain intellectual property from the Company
                  to Honeywell Intellectual Properties, Inc. ("HIPI"); (2) the
                  license of certain intellectual property by HIPI to the
                  Company; and (3) the license of certain intellectual property

                                       9

                                                                    CONFIDENTIAL
<PAGE>
                  by the Company to HIPI, substantially in the form of Exhibit C
                  (the "Cross License and Transfer Agreement").

                           4.1.7. CORPORATE DOCUMENTS. Buyer will have received
                  all documents it may reasonably request relating to the
                  existence of Seller, the Company and the authority of Seller
                  for this Agreement, all in form and substance reasonably
                  satisfactory to Buyer.

                           4.1.8. CONSENTS. Buyer will have received written
                  evidence, in form and substance reasonably satisfactory to
                  Buyer, of the consents described in Section 4.1.8 of the
                  Seller Disclosure Schedule.

                           4.1.9. FINANCIAL STATEMENTS. Buyer will have received
                  the Financial Statements and the consent of PriceWaterhouse
                  Coopers to include the Financial Statements in Buyer's current
                  report on Form 8-K; provided, however, that Buyer shall be
                  deemed to have waived this condition if Buyer's failure to
                  receive such consent is due to its failure to pay any amounts
                  due to PriceWaterhouse Coopers (subject to a maximum amount of
                  Ten Thousand Dollars ($10,000)), pursuant to Section 8.4
                  below.

                           4.1.10. MATERIAL ADVERSE EFFECT. Since the Balance
                  Sheet Date and up to and including the Closing, there will not
                  have been any event, circumstance, change or effect that,
                  individually or in the aggregate, had or could reasonably be
                  expected to have a Material Adverse Effect.

                  4.2. SELLER'S OBLIGATION. The obligation of Seller to sell and
         deliver the Shares to Buyer is subject to the satisfaction (or waiver
         by Seller) at Closing of the following conditions:

                           4.2.1. REPRESENTATIONS AND WARRANTIES. The
                  representations and warranties of Buyer made in this
                  Agreement, qualified as to materiality, will be true and
                  correct at Closing, and those not so qualified will be true
                  and correct in all material respects at Closing, in each case
                  as though made on and as of the Closing Date, and Buyer will
                  have performed or complied in all material respects with all
                  obligations and covenants required by this Agreement to be
                  performed or complied with by Buyer by Closing; and Buyer will
                  have delivered to Seller a certificate dated the Closing Date
                  and signed by an authorized officer of Buyer confirming the
                  foregoing.

                           4.2.2. NO ACTION. No action, suit or other proceeding
                  by any Person will be pending or threatened which seeks to
                  restrain or prohibit the purchase and sale of the Shares, the
                  Closing or the consummation of the transactions contemplated
                  hereby or seeking material damages

                                       10

                                                                    CONFIDENTIAL
<PAGE>
                  against Seller or the Company as a result of the consummation
                  of such transactions.

                           4.2.3. NO ORDER. No injunction or order of any court
                  or administrative agency or instrumentality will be in effect
                  at Closing that restrains or prohibits the purchase and sale
                  of the Shares.

                           4.2.4. GUARANTY AGREEMENT. Buyer will have delivered
                  an executed Guaranty Agreement.

                           4.2.5. TRANSITION SERVICES AGREEMENT. Buyer will have
                  delivered an executed Transition Services Agreement.

                           4.2.6. CROSS LICENSE AND TRANSFER AGREEMENT. Buyer
                  will have delivered an executed Cross License and Transfer
                  Agreement.

                           4.2.7. CORPORATE DOCUMENTS. Seller will have received
                  all documents it may reasonably request relating to the
                  existence of Buyer and the authority of Buyer for this
                  Agreement, all in form and substance reasonably satisfactory
                  to Seller.

         5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to Buyer that the following statements are true and correct:

                  5.1. AUTHORITY. Seller is a corporation duly organized and
         validly existing under the laws of Washington. Seller has all requisite
         corporate power and authority to enter into this Agreement and each of
         the Ancillary Agreements and to consummate the transactions
         contemplated hereby and thereby. All corporate acts and other
         proceedings required to be taken by Seller to authorize the execution,
         delivery and performance of this Agreement and each of the Ancillary
         Agreements and the consummation of the transactions contemplated hereby
         and thereby have been duly and properly taken. This Agreement has been
         duly executed and delivered by Seller and constitutes, and each of the
         Ancillary Agreements when executed will constitute, a valid and binding
         obligation of Seller, enforceable against Seller in accordance with its
         terms. Except as set forth in Section 5.1 of the Seller Disclosure
         Schedule, the execution and delivery of this Agreement and each of the
         Ancillary Agreements does not, and the consummation of the transactions
         contemplated hereby and thereby and compliance with the terms hereof
         and thereof will not, conflict with, or result in any violation of or
         default (with or without notice or lapse of time, or both) under, or
         give rise to a right of termination, cancellation or acceleration of
         any obligation or to loss of a material benefit under, or result in the
         creation of any Lien upon any of the properties or assets of the
         Company (including without limitation any Rights of the Company) under,
         any provision of (1) the Washington Business Corporation Act; (2) the
         certificate of incorporation or by-

                                       11

                                                                    CONFIDENTIAL
<PAGE>
         laws or comparable organizational documents of Seller or the Company;
         (3) any material note, bond, mortgage, indenture, deed of trust,
         license (including with out limitation any license agreement pertaining
         to Rights), lease, contract, commitment, agreement or arrangement to
         which Seller or the Company is a party or by which any of their
         respective properties or assets are bound; or (4) any judgment, order
         or decree, or material statute, law, ordinance, rule or regulation
         applicable to Seller or to the Company or to the property or assets of
         Seller or of the Company; other than, in the case of clause (3) above,
         any such conflicts, violations, defaults, rights, losses or Liens that,
         individually or in the aggregate, would not have a Material Adverse
         Effect. Except as set forth in Section 5.1 of the Seller Disclosure
         Schedule, no material consent, approval, license, permit, order or
         authorization of, or registration, declaration or filing with, any
         Governmental Authority, is required to be obtained or made by or with
         respect to Seller or the Company in connection with the execution and
         delivery of this Agreement or the consummation of the transactions
         contemplated hereby, other than (a) compliance with and filings under
         the competition laws of any jurisdiction outside of the United States,
         if applicable; (b) compliance with and filings under various state
         environmental laws; and (c) those that may be required solely by reason
         of Buyer's (as opposed to any other third party's) participation in the
         transactions contemplated hereby.

                  5.2. SHARES. Seller has good and valid title to the Shares
         free and clear of any Liens. Assuming Buyer has the requisite power and
         authority to be the lawful owner of the Shares, upon delivery to Buyer
         at Closing of certificates representing the Shares, duly endorsed for
         transfer to, and upon Seller's receipt of the Purchase Price, good and
         valid title to the Shares will pass to Buyer, free and clear of any
         Liens other than those arising from acts of Buyer or its Affiliates.
         Other than this Agreement, the Shares are not subject to any voting
         trust agreement or other contract, agreement, arrangement, commitment
         or understanding, including any such agreement, arrangement, commitment
         or understanding restricting or otherwise relating to the voting,
         dividend rights or disposition of the Shares.

                  5.3. ORGANIZATION AND STANDING OF THE COMPANY. The Company is
         a corporation duly organized and validly existing under the laws of the
         state of Minnesota. The Company has full corporate power and authority
         and possesses all governmental franchises, licenses, permits,
         authorizations and approvals necessary to enable it to use its
         corporate name and to own, lease or otherwise hold its properties and
         assets and to carry on its businesses as presently conducted, except
         such franchises, licenses, permits, authorizations and approvals the
         lack of which, individually or in the aggregate, would not have a
         Material Adverse Effect. The Company is duly qualified and in good
         standing to do business in each jurisdiction in which the nature of its
         business or the ownership, leasing or holding of its properties makes
         such qualification necessary, except such jurisdictions where the
         failure so to qualify, individually or

                                       12

                                                                    CONFIDENTIAL
<PAGE>
         in the aggregate, would not have a Material Adverse Effect. Seller has
         made available to Buyer true and complete copies of its certificate of
         incorporation and by-laws, each as in effect on the date hereof, of the
         Company.

                  5.4. CAPITAL STOCK. The authorized capital stock of the
         Company consists of 10,000,000 shares of Common Stock, of which 100,
         constituting the Shares, are duly authorized and validly issued and
         outstanding, fully paid and nonassessable. Seller is the registered
         holder of the Shares. The Shares have not been issued in violation of,
         and none of the Shares is subject to, any preemptive or subscription
         rights. Except as set forth above, there are no shares of capital stock
         or other equity securities of the Company outstanding. There are no
         outstanding warrants, options, agreements, convertible or exchangeable
         securities or other commitments (other than this Agreement) pursuant to
         which Seller nor the Company is or may become obligated to issue, sell,
         purchase, return or redeem any shares of capital stock or other
         securities of the Company, and there are not any equity securities of
         the Company reserved for issuance for any purpose. The Company does not
         have any Subsidiaries.

                  5.5. EQUITY INTERESTS. The Company does not directly or
         indirectly own any capital stock of or other equity interests in any
         corporation, partnership or other entity.

                  5.6. FINANCIAL STATEMENTS.

                           5.6.1. PREPARATION. Section 5.6 of the Seller
                  Disclosure Schedule sets forth the audited balance sheets of
                  the Company as of September 30, 2002 (the "Balance Sheet"; the
                  "Balance Sheet Date") and December 31, 2001, respectively, and
                  the related audited statements of income, shareholders' equity
                  and cash flows for the nine-month period ended September 30,
                  2002 and the twelve-month periods ended December 31, 2001 and
                  December 31, 2000, together with the notes to such financial
                  statements (such financial statements and notes, collectively,
                  the "Financial Statements"). The Financial Statements have
                  been prepared in conformity with U.S. generally-accepted
                  accounting principles consistently applied and on that basis
                  fairly present in all material respects the financial
                  condition and the results of operations of the Company as of
                  and for the periods indicated.

                           5.6.2. UNDISCLOSED LIABILITIES. To Seller's
                  knowledge, the Company does not have any material liabilities
                  or obligations of any nature (whether accrued, absolute,
                  contingent, unasserted or otherwise), except (1) to the extent
                  disclosed, reflected or reserved against in the Balance Sheet
                  and the notes thereto; (2) for items disclosed in the Seller
                  Disclosure Schedule; (3) for liabilities and obligations
                  incurred in the ordinary course of business consistent with
                  past practice since the Balance

                                       13

                                                                    CONFIDENTIAL
<PAGE>
                  Sheet Date and not in violation of this Agreement; (4) for
                  Taxes; and (5) other liabilities which do not, individually or
                  in the aggregate, have a Material Adverse Effect.

                  5.7. TRANSACTIONS WITH AFFILIATES. Except as set forth in the
         notes to the Financial Statements or Sections 5.7 or 5.21 of the Seller
         Disclosure Schedule, the Company does not have any outstanding contract
         or agreement with Seller or any of its Affiliates that will continue in
         effect subsequent to Closing.

                  5.8. TAXES. The Company, and any affiliated group, within the
         meaning of Section 1504 of the Code, of which the Company is or has
         been a member (an "Affiliated Group"), has filed or caused to be filed
         in a timely manner (within any applicable extension periods) all
         material Tax returns, reports and forms required to be filed by the
         Code or by applicable state, local or foreign tax laws. As of the time
         of filing, such returns, reports and forms were accurate and complete
         in all material respects. All Taxes shown to be due on such returns,
         reports and forms have been timely paid in full or will be timely paid
         in full by the due date thereof. No material tax liens have been filed
         and no material claims are being asserted in writing with respect to
         any Taxes.

                           5.8.1. WITHHOLDS. The Company has withheld and paid
                  all Taxes required to have been withheld and paid in
                  connection with amounts paid or owing to any employee,
                  independent contractor, creditor, stockholder or other third
                  party.

                           5.8.2. AFFILIATED GROUPS. Except for the Affiliated
                  Group of which the Seller is a member, the Company (1) has not
                  been a member of an Affiliated Group filing a consolidated
                  Federal income Tax Return; and (2) has no liability for the
                  Taxes of any Person under Treasury Regulation section 1.1502-6
                  (or any similar provision of state, local or foreign law), as
                  a transferee or successor, by contract or otherwise.

                           5.8.3. PERIOD SHIFT. The Company will not be required
                  to include in a taxable period ending after the Closing Date
                  taxable income attributable to income that accrued in a prior
                  taxable period but was not recognized in any prior taxable
                  period as a result of the installment method of accounting,
                  the completed contract method of accounting, the long-term
                  contract method of accounting, the cash method of accounting
                  or Section 481 of the Code or any comparable provision of
                  state, local or foreign tax law.

                           5.8.4. TAX PARTNERSHIPS. Except as set forth in
                  Section 5.8.4 of the Seller Disclosure Schedule, the Company
                  is not a party to any joint

                                       14

                                                                    CONFIDENTIAL
<PAGE>
                  venture, partnership or other arrangement or contract that
                  could be treated as a partnership for Federal income tax
                  purposes.

                           5.8.5. LEVERAGED LEASE TRANSACTIONS. Except as set
                  forth in Section 5.8.5 of the Seller Disclosure Schedule, the
                  Company has not entered into any sale leaseback or leveraged
                  lease transaction that fails to satisfy the requirements of
                  Revenue Procedure 75-21 (or similar provisions of foreign law)
                  or any safe harbor lease transaction.

                           5.8.6. SECTION 338. Neither the Seller nor the
                  Company has taken any action or will take any action that
                  could result in a deemed election under Section 338 of the
                  Code with respect to the Company.

                           5.8.7. REAL PROPERTY HOLDING CORPORATION. The Company
                  has never been a real property holding corporation within the
                  meaning of Section 897(c) of the Code.

                           5.8.8. TAX BASIS IN ASSETS. Section 5.8.8 of the
                  Seller Disclosure Schedule sets forth, as of the most recent
                  date practicable, the basis of the Company in its assets and
                  the amount of any net operating loss, net operating loss
                  carryover, net capital loss, net capital loss carryover, tax
                  credits and tax credit carryovers.

                  5.9. ASSETS OTHER THAN REAL PROPERTY INTERESTS. The Company
         has good and valid title or a valid leasehold interest to all material
         assets reflected on the Balance Sheet or thereafter acquired, except
         those since sold or otherwise disposed of in the ordinary course of
         business consistent with past practice, in each case free and clear of
         all Liens except Permitted Liens. All the material tangible personal
         property of the Company has been maintained in all material respects in
         accordance with past practice of the Company. This Section 5.9 does not
         relate to real property or interests in real property, such items being
         the subject of Section 5.10 below.

                  5.10. TITLE TO REAL PROPERTY. Section 5.10 of the Seller
         Disclosure Schedule sets forth a complete list of all real property and
         interests in real property owned in fee by the Company (individually,
         an "Owned Property"). Section 5.10 of the Seller Disclosure Schedule
         also sets forth a complete list of all real property and interests in
         real property leased by the Company (individually, a "Leased
         Property"). The Company has (1) good and insurable fee title to all
         Owned Property; and (2) valid leasehold estates in all Leased Property
         (an Owned Property or Leased Property being sometimes referred to
         herein individually as a "Company Property" and collectively as
         "Company Properties"), in each case free and clear of all Liens,
         mortgages, easements, covenants, rights-of-

                                       15

                                                                    CONFIDENTIAL
<PAGE>
         way, zoning restrictions and other similar restrictions of any nature
         whatsoever, except (a) Permitted Liens; (b) (i) easements, covenants,
         rights-of-way, zoning restrictions and other similar restrictions of
         record, and (ii) any conditions that may be shown by a current,
         accurate survey or physical inspection of any Company Property, none of
         which items set forth in clauses (b)(i) and (b)(ii), individually or in
         the aggregate, materially impair the continued use and operation of the
         Company Property to which they relate in the business of the Company,
         taken as a whole, as currently conducted; and (c) (i) zoning, building
         and other similar restrictions, (ii) Liens or mortgages that have been
         placed by any developer, landlord or other third party on property over
         which the Company has easement rights or on any Leased Property and
         subordination or similar agreements relating thereto, and (iii)
         unrecorded easements, covenants, rights-of-way, or other similar
         restrictions, none of which items set forth in clauses (c)(i), (c)(ii)
         and (c)(iii), individually or in the aggregate, materially impair the
         continued use and operation of the Company Property to which they
         relate in the business of the Company, taken as a whole, as currently
         conducted.

                  5.11. INTELLECTUAL PROPERTY. Section 5.11 of the Seller
         Disclosure Schedule sets forth a true and complete list of all patents,
         trademarks (registered or unregistered), trade names, copyright
         registrations, mask work registrations and applications therefor now
         used or presently proposed to be used in the conduct of the business of
         the Company, excluding computer software which is widely available.
         Except as set forth in such section, (1) the Company, to Seller's
         knowledge, owns all right, title and interest in and to, free and clear
         of all encumbrances, or possess adequate licenses or other valid rights
         to use, all Rights necessary to the conduct of its business as
         presently being conducted, except where the failure to have such
         licenses or rights would not have a Material Adverse Effect; (2) the
         Company has not licensed any Rights to any third party except pursuant
         to (a) the Cross License and Transfer Agreement, and (b) that certain
         License and Co-Development Agreement, dated effective as of May 22,
         2002, between the Company, Honeywell Intellectual Properties Inc. and
         Samsung Electro-Mechanics Co., Ltd.; (3) the validity of such Rights
         and the title thereto of the Company has not been questioned in any
         litigation to which the Company is a party, nor is any such litigation
         threatened, nor have any claims to such effect been made to the
         Company; (4) to Seller's knowledge, the conduct of the business of the
         Company as now conducted does not and will not conflict with Rights of
         others in any way which is material; and (5) no proceedings are pending
         against the Company nor, to Seller's knowledge, are any proceedings
         threatened against the Company alleging any violation of Rights of any
         third party. Seller does not know of (a) any use that has heretofore
         been or is now being made of any Rights owned by the Company, except by
         the Company or by an entity duly licensed by it to use the same; or (b)
         any material infringement of any Right owned by or licensed by or to
         the Company. Closing and the consummation of the transactions
         contemplated hereby will not alter or impair the rights and interests
         of the Company in any of the items listed in Section 5.11 of the Seller
         Disclosure Schedule.

                                       16

                                                                    CONFIDENTIAL

<PAGE>

                  5.12. CONTRACTS. Except as described in Section 5.12 of the
         Seller Disclosure Schedule, the Company is not a party to or bound by
         any:

                  (1) employment agreement or employment contract that has, or
         could reasonably be expected to have, an aggregate future liability in
         excess of $100,000;

                  (2) collective bargaining agreement or other contract with any
         labor union covering Employees;

                  (3) covenant not to compete;

                  (4) agreement or contract with any officer or director of the
         Company or any other Employee or Former Employee (other than employment
         agreements covered by clause (1) above);

                  (5) lease or similar agreement under which the Company is a
         lessor or sublessor of, or makes available for use by any third party,
         any Owned Property or Leased Property;

                  (6) (a) continuing contract for the future purchase of
         materials, supplies or equipment (other than purchase contracts and
         orders for inventory in the ordinary course of business consistent with
         past practice), (b) management, service, consulting or other similar
         type of contract, or (c) advertising agreement or contract, in any such
         case which has, or could reasonably be expected to have, an aggregate
         future liability in excess of $100,000;

                  (7) material license or other agreement relating in whole or
         in part to patents, trademarks, trade names, service marks or
         copyrights (including any license or other agreement under which the
         Company has the right to use any of the same owned or held by a third
         party);

                  (8) agreement or contract under which the Company has borrowed
         or loaned any money or issued any note, bond, indenture or other
         evidence of indebtedness or directly or indirectly guaranteed
         (including without limitation through so-called take-or-pay or keep
         well agreements) indebtedness, liabilities or obligations of others
         (other than endorsements for the purpose of collection in the ordinary
         course of business), or any other note, bond, indenture or other
         evidence of indebtedness, except as set forth in Sections 5.7 and 5.21
         of the Seller Disclosure Schedule;

                  (9) agreement or contract under which any other Person has
         directly or indirectly guaranteed indebtedness, liabilities or
         obligations of the Company (other than endorsements for the purpose of
         collection in the ordinary course of business);

                  (10) mortgage, pledge, security agreement, deed of trust or
         other document granting a Lien (including without limitation Liens upon
         any Company Property or any properties acquired under conditional
         sales, capital leases or other title retention or security devices
         other than any original purchase price

                                       17
<PAGE>
         conditional sales contracts or equipment leases entered into in the
         ordinary course of business); or

                  (11) other agreement, contract, lease, license, commitment or
         instrument (a) to which the Company is a party, (b) by or to which it,
         its assets or its business is bound or subject, and (c) which has an
         aggregate future liability in excess of $100,000.

Each agreement, contract, lease, license, commitment or instrument of the
Company described in Section 5.12 of the Seller Disclosure Schedule
(collectively, the "Contracts") is valid, binding and in full force and effect
and is enforceable by the Company in accordance with its terms, subject to
applicable bankruptcy, reorganization, fraudulent transfer, moratorium,
insolvency and other similar laws affecting creditors' rights generally from
time to time in effect and to general principles of equity (whether considered
in a proceeding in equity or at law). Each of Seller and the Company has
performed all material obligations required to be performed by them to date
under the Contracts and they are not (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder and, to Seller's knowledge, no other party to any of the Contracts is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder.

                  5.13. LITIGATION; DECREES. Except as listed in Section 5.13 to
         the Seller Disclosure Schedule, there is no action, suit, investigation
         or proceeding against, or to the knowledge of Seller, threatened
         against or affecting, Seller or the Company or any of their respective
         properties before any court or arbitrator or any governmental body,
         agency or official which is reasonably likely to have a Material
         Adverse Effect or which in any manner challenges or seeks to prevent,
         enjoin, alter or materially delay the transactions contemplated by this
         Agreement.

                  5.14. INSURANCE. Seller or the Company maintains policies of
         fire and casualty, liability and other forms of insurance in such
         amounts, with such deductibles and against such risks and losses as
         are, in Seller's judgment, reasonable for the business and assets of
         the Company and will continue such insurance in effect through Closing.
         The insurance policies currently maintained with respect to the Company
         are listed in Section 5.14 of the Seller Disclosure Schedule.

                  5.15. EMPLOYEE BENEFITS.

                        5.15.1. PLANS. Section 5.15.1 of the Seller Disclosure
            Schedule lists all Benefit Plans. Seller has made available to Buyer
            a complete and accurate copy of each material document prepared in
            connection with each Benefit Plan including (1) a copy of each trust
            or other funding arrangement; (2) the most recently distributed
            summary plan description and summary of material modifications; (3)
            the most recently filed IRS

                                       18
<PAGE>
            Form 5500; (4) the most recently received IRS determination letter
            for each Benefit Plan which is an employee pension benefit plan as
            defined in Section 3(2) of ERISA; and (5) the most recently prepared
            actuarial report and financial statements.

                        5.15.2. MODIFICATIONS. Neither the Seller nor the
            Company has made any legally binding commitment to amend or to
            modify any Benefit Plan in any material respect or to create any
            additional Benefit Plans.

                        5.15.3. COMPLIANCE. The Benefit Plans comply in all
            material respects with, and have been administered in accordance
            with, applicable requirements of ERISA, the Code and other
            applicable law, regulations and rulings.

                        5.15.4. PBGC LIABILITY. No liability to the PBGC, or to
            any other Person under Title IV of ERISA or under the Code, has been
            incurred, or is reasonably expected to be incurred, by Seller or any
            entity that is or has been at any time aggregated with the Seller
            within the meaning of Section 414(b) or 414(c) of the Code or
            Section 4001(a)(14) or 4001(b)(1) of ERISA (an "ERISA Affiliate")
            with respect to any Benefit Plan other than premium payments
            pursuant to Sections 4006 and 4007 of ERISA.

                        5.15.5. PENALTIES. To Seller's knowledge, there has been
            no transaction with respect to any Benefit Plan which has or could
            result in the imposition of any tax or penalty imposed by ERISA or
            the Code, including without limitation any tax imposed under Section
            4975 of the Code or Part 5 Subtitle B of Title I of ERISA. To
            Seller's knowledge, neither Seller nor any ERISA Affiliate has
            engaged in, nor is a successor or parent corporation to an entity
            that has engaged in, a transaction described in Section 4069 of
            ERISA. There has been no "reportable event" (as defined in Section
            4043(c) of ERISA and the PBGC regulations under such section) with
            respect to any Benefit Plan. Seller has not made any filing with the
            PBGC, and no proceeding has been commenced or threatened by the
            PBGC, to terminate any Benefit Plan. No condition exists and no
            event has occurred that could constitute grounds for the termination
            of any Benefit Plan by the PBGC. To Seller's knowledge, neither
            Seller nor any ERISA Affiliate has at any time (1) ceased operations
            at a facility so as to become subject to the provisions of Section
            4062(e) of ERISA; (2) withdrawn as a substantial employer so as to
            become subject to the provisions of Section 4063 of ERISA; or (3)
            ceased making contributions on or before the Closing Date to any
            Benefit Plan subject to Section 4064(a) of ERISA to which Seller or
            ERISA Affiliates have made contributions during the six years prior
            to the Closing Date.

                                       19
<PAGE>
                        5.15.6. MULTI-EMPLOYER PLANS. None of the Benefit Plans
            is a multi-employer plan within the meaning of Section 3(37)(A) of
            ERISA.

                        5.15.7. GROUP HEALTH PLANS. Each Benefit Plan which is a
            group health plan (as such term is defined in Section 607 of ERISA)
            complies with and has complied in all material respects with the
            applicable requirements of Part 6 Subtitle B of Title I of ERISA.

                        5.15.8. COMPLAINTS. No suit, action, litigation, claim,
            complaint, charge, proceeding, hearing, investigation or demand
            (excluding claims for benefits incurred in the ordinary course of
            plan activities) has been or is expected to be brought against or
            with respect to any Benefit Plans, and to Seller's knowledge there
            are no facts or circumstances which could give rise to or which
            could be expected to give rise to any such suit, action, litigation,
            claim, complaint, charge, proceeding, hearing, investigation or
            demand.

                        5.15.9. PAYMENTS. All payments, premiums, reimbursements
            or accruals relating to each Benefit Plan, for all periods ending
            prior to or as of the Closing Date, whether or not yet due, will
            have been timely made or properly accrued as of the Closing Date by
            the Company. All required or recommended contributions relating to
            each Benefit Plan that is subject to the funding requirements of
            Section 412 of the Code and Section 302 of ERISA, and for all
            periods ending prior to or as of the Closing Date (including periods
            from the first day of the then-current plan year to the Closing Date
            and including all quarterly contributions required in accordance
            with Section 412(m) of the Code), will have been timely made or
            properly accrued as of the Closing Date by the Company. No Benefit
            Plan has incurred any "accumulated funding deficiency," as such term
            is defined in such Section 412 of the Code and Section 302 of ERISA,
            whether or not waived.

                        5.15.10. QUALIFICATION. Each of the Benefit Plans which
            is intended to be "qualified" within the meaning of Section 401 of
            the Code has received a favorable determination letter from the IRS
            and has or will, within the applicable remedial amendment period, be
            amended to comply with the applicable Federal laws, known by the
            acronym "GUST" (as defined in Section 2.42 above), and submitted to
            the IRS for a favorable determination letter with respect to such
            GUST changes, and no events have occurred and no conditions exist
            which would reasonably be expected to result in the revocation of
            any such determination letter or could adversely affect the
            tax-qualified status of any such Benefit Plan.

                        5.15.11. CHANGE IN CONTROL. No Benefit Plan obligates
            the Company to pay separation, severance, termination or other
            benefits or

                                       20
<PAGE>
            compensation as a result of, or that are contingent upon, any
            transaction contemplated by this Agreement or the occurrence of a
            "change in control," which payment would constitute a "parachute
            payment," as such term is defined in Section 280G of the Code.

                        5.15.12. COMPANY LIABILITY. Except as set forth Section
            5.15.12 of the Seller Disclosure Schedule, the Company has no
            liability or potential liability with respect to any welfare benefit
            plan providing medical, health or life insurance or other
            welfare-type benefits for current or future retired or terminated
            Employees or Former Employees (or their spouses or dependents),
            other than in accordance with COBRA.

                        5.15.13. CONTRIBUTIONS. Neither the Company, Seller nor
            any ERISA Affiliate contributes to, has any obligation to contribute
            to or has any liability (including any withdrawal liability (within
            the meaning of Subtitle E of Title IV of ERISA)) under or with
            respect to any multi-employer plan (as defined in Section 3(37)(A)
            of ERISA).

                        5.15.14. UNDERFUNDED PLANS. No Benefit Plan which is a
            defined benefit plan under Section 401(a) of the Code has been,
            during the five years preceding the Closing Date, transferred in an
            underfunded state out of the "controlled group of companies" (within
            the meaning of Section 414 of the Code) of which Seller or an ERISA
            Affiliate are members or were members during such five-year period.

                  5.16. ABSENCE OF CHANGES OR EVENTS. Except as disclosed in
         Section 5.16 of the Seller Disclosure Schedule, since the Balance Sheet
         Date, the business of the Company has been conducted in the ordinary
         course consistent with past practices and there has not been:

                  (1) any event, occurrence or development which has had a
         Material Adverse Effect;

                  (2) any repurchase, redemption or other acquisition by the
         Company of any outstanding shares of capital stock or other securities
         of the Company;

                  (3) any amendment of any material term of any outstanding
         security of the Company;

                  (4) any incurrence, assumption or guaranty by the Company of
         any indebtedness for borrowed money other than in the ordinary course
         of business consistent with past practices;

                  (5) any making of any loan, advance or capital contributions
         to or investment in any Person other than loans, advances or capital
         contributions to or investments made in the ordinary course of business
         consistent with past practices;

                                       21
<PAGE>
                  (6) any transaction or commitment made, or any contract or
         agreement entered into, by the Company relating to its assets or
         business, in either case, material to the Company taken as a whole,
         other than transactions and commitments in the ordinary course of
         business consistent with past practices and those contemplated by this
         Agreement;

                  (7) any material change in any method of accounting or
         accounting practice by the Company except for any such change required
         by reason of a concurrent change in generally accepted accounting
         principles; or

                  (8) any of the following, entered into with, granted to or
         payable to any officer or director of the Company or any other Employee
         or Former Employee, in each case other than in the ordinary course of
         business consistent with past practices, (a) employment, deferred
         compensation, severance, retirement or other similar agreement (or any
         amendment to any such existing agreement), (b) grant of any severance
         or termination pay, or (c) change in compensation or other benefits
         pursuant to any severance or retirement plans or policies thereof.

                  5.17. COMPLIANCE WITH APPLICABLE LAWS.

                        5.17.1. ENVIRONMENTAL LAWS AND ENVIRONMENTAL PERMITS. To
            Seller's knowledge, except as set forth in Section 5.17.1 of the
            Seller Disclosure Schedule:

                  (1) no written notice, request for information, order,
         complaint or penalty has been received, and there are no judicial,
         administrative or other actions , suits or proceedings pending or
         threatened which allege a violation of any Environment Law, in each
         case relating to the Company and arising out of any Environmental Law;
         and

                  (2) the Company has all Environmental Permits necessary for
         its operations to comply with all applicable Environmental Laws and is
         in compliance with the terms of such permits and with all other
         applicable Environmental Laws, except where failure to have an
         Environmental Permit or to be in such compliance would not have a
         Material Adverse Effect.

                        5.17.2. OTHER THAN ENVIRONMENTAL LAWS OR ENVIRONMENTAL
            PERMITS. To Seller's knowledge, except as set forth in Section
            5.17.2 of the Seller Disclosure Schedule, the Company is in
            compliance with all applicable statutes, laws, ordinances, rules,
            orders and regulations of any Governmental Authority (other than
            Environmental Laws, which are exclusively the subject of Section
            5.17.1 above), except where noncompliance, individually or in the
            aggregate, would not have a Material Adverse Effect. Seller has not
            received any written or, to its knowledge, oral communication from a
            Governmental Authority that alleges that the Company is not in
            compliance, in all material respects, with all Federal, state, local
            or foreign laws, ordinances, rules and regulations.

                                       22
<PAGE>
                  5.18. EMPLOYEE AND LABOR RELATIONS. Section 5.18 of the Seller
         Disclosure Letter lists the following information for all Employees:
         (1) name; (2) job title; (3) status as a full-time or part-time
         employee; (4) base salary or wage rate; and (5) 2001 bonus. Section
         5.18 of the Seller Disclosure Letter also lists all individuals who
         perform services for the Company as an independent contractor or as a
         leased employee and the services they perform. To Seller's knowledge,
         (a) there is no labor strike, dispute, or work stoppage or lockout
         actually pending or threatened against or affecting the Company and
         during the past two years there has not been any such action; (b) no
         union organizational campaign is in progress with respect to any
         Employees, and no question concerning representation exists respecting
         such Employees; (c) there is no unfair labor practice charge or
         complaint against the Company pending, or, to Seller's knowledge,
         threatened, before the National Labor Relations Board; (d) there is no
         pending or threatened grievance that, if adversely decided, would have
         an adverse effect exceeding $500,000; and (e) (i) no charges with
         respect to or relating to the Company are pending before the Equal
         Employment Opportunity Commission or any state or local agency
         responsible for the prevention of unlawful employment practices that,
         if adversely decided, would have an adverse effect exceeding $500,000,
         and (ii) none of Seller nor the Company has received notice of the
         intent of any Federal, state or local agency responsible for the
         enforcement of labor or employment laws to conduct an investigation
         with respect to or relating to the Company and no such investigation is
         in progress.

                  5.19. LICENSES; PERMITS. Section 5.19 of the Seller Disclosure
         Schedule sets forth a true and complete list of all material licenses,
         permits and authorizations issued or granted to the Company by local,
         state or Federal governmental authorities or agencies. The Company
         validly holds all material licenses, permits or authorizations of the
         Company, and the Company has complied with all material requirements in
         connection therewith.

                  5.20. CORPORATE NAME. Except as set forth in Section 5.20 of
         the Seller Disclosure Schedule, to Seller's knowledge, the Company has
         the exclusive right to use its name as the name of a corporation in any
         jurisdiction in which it does business, and has not received any notice
         of conflict with respect to the rights of others regarding its
         corporate name. No Person, firm or corporation or other business
         association is, to Seller's knowledge, presently authorized by Seller
         or the Company to use the name of the Company. Seller has heretofore
         delivered to Buyer copies of any documents in the possession of Seller
         granting authorization of the type referred to in the previous
         sentence.

                  5.21. INTERCOMPANY ACCOUNTS. Section 5.21 of the Seller
         Disclosure Schedule contains a complete list of all intercompany
         balances as of the Balance Sheet Date between Seller and its
         Affiliates, on the one hand, and the Company on the other hand. Since
         the Balance Sheet Date there has not been any accrual

                                       23
<PAGE>
         of liability by the Company to Seller or any of its Affiliates or other
         transaction between the Company and Seller and any of its Affiliates,
         except in the ordinary course of business consistent with past practice
         or as provided in Section 5.21 of the Seller Disclosure Schedule.

                  5.22. SUPPLIERS AND CUSTOMERS. Section 5.22 of the Seller
         Disclosure Schedule sets forth (1) the ten principal suppliers of the
         Company during the fiscal year ended December 31, 2001 and the nine
         months ended September 30, 2002, together with the dollar amount of
         goods purchased by the Company from each such supplier during each such
         period; and (2) the ten principal customers of the Company during the
         fiscal year ended December 31, 2001 and the nine months ended September
         30, 2002, together with the dollar amount of goods and/or services sold
         by the Company to each such customer during each such period. Except as
         otherwise set forth in Section 5.22 of the Seller Disclosure Schedule,
         the Company maintains good relations with all suppliers and customers
         listed or required to be listed in Section 5.22 of the Seller
         Disclosure Schedule as well as with governments, partners, financing
         sources and other parties with whom the Company has significant
         relations, and no such party has canceled, terminated or made any
         threat to the Company to cancel or otherwise terminate its relationship
         with the Company or to materially decrease its services or supplies to
         the Company or its direct or indirect purchase or usage of the products
         or services of the Company.

                  5.23. CLAIMS AGAINST COMPANY. To the Seller's knowledge,
         Seller is not aware of any potential claims or causes of action against
         the Company for any Company conduct that occurred prior to the Closing
         Date.

         6. COVENANTS OF SELLER. Seller covenants and agrees as follows:

                  6.1. ACCESS. Prior to Closing, Seller will cause the Company
         to give Buyer and its representatives, employees, counsel and
         accountants reasonable access, during normal business hours and upon
         reasonable notice, to the personnel, books and records of the Company;
         provided that, such access does not unreasonably disrupt the normal
         operations of the Company.

                  6.2. ORDINARY CONDUCT. Except as otherwise permitted by the
         terms of this Agreement (which permission includes without limitation
         the distribution of the Pre-Closing Dividend; it being Seller's
         intention to remove the Company's cash balance on or before to
         Closing), from the date hereof to Closing, Seller will cause the
         business of the Company to be conducted in the ordinary course in
         substantially the same manner as presently conducted and will make all
         reasonable efforts consistent with past practices to preserve its
         relationships with customers, suppliers and others with whom the
         Company deals. In addition, except as otherwise permitted by the terms
         of this Agreement or as contemplated by Section 6.2 of the Seller
         Disclosure Schedule, Seller will not

                                       24
<PAGE>
         permit the Company to do any of the following without the prior written
         consent of Buyer:

                  (1) adopt or propose any change in its certificate of
         incorporation or bylaws;

                  (2) merge or consolidate with any other Person or acquire a
         material amount of assets from any other Person;

                  (3) sell, lease, license or otherwise dispose of any material
         assets or property except (a) pursuant to existing contracts or
         commitments, or (b) otherwise in the ordinary course consistent with
         past practice;

                  (4) except for the Pre-Closing Dividend, declare, set aside or
         pay any dividends, or make any distributions or other payments in
         respect of its equity securities, or repurchase, redeem or otherwise
         acquire any such securities;

                  (5) enter into, amend or terminate any material agreement;

                  (6) accelerate collection of any notes or accounts receivable
         in advance of their regular due dates or the dates when they would have
         been collected in the ordinary course of business consistent with past
         practices;

                  (7) delay payment of any accrued expense, trade payable or
         other liability beyond its due date or the date when such liability
         would have been paid in the ordinary course of business consistent with
         past practices; or

                  (8) agree to do any of the foregoing.

Seller will not take, and will not permit the Company to take any action that
would make any representation or warranty of Seller hereunder inaccurate in any
material respect at the Closing Date.

                  6.3. INSURANCE. Seller will keep, or cause to be kept, all
         insurance policies set forth in Section 5.14 of the Seller Disclosure
         Schedule, or suitable replacements therefor, in full force and effect
         through the close of business on the Closing Date.

                  6.4. RESIGNATIONS. On the Closing Date, Seller will cause to
         be delivered to Buyer duly signed resignations, effective immediately
         after the Closing Date, of all directors of the Company and will take
         such other action as is necessary to accomplish the foregoing.

                  6.5. OTHER TRANSACTIONS. Prior to Closing, none of Seller, the
         Company nor any other Affiliate of Seller will, nor will they permit
         any of their respective officers, directors, stockholders or other
         representatives to, directly or indirectly, encourage, solicit,
         initiate or participate in discussions or negotiations with, or provide
         any information or assistance to, any corporation, partnership, person
         or other entity or group (other than Buyer and its representatives)
         concerning any

                                       25
<PAGE>
         merger, sale of securities, sale of substantial assets or similar
         transaction involving the Company.

                  6.6. CISCO SETTLEMENT AGREEMENT. On or prior to December 31,
         2002, the Seller covenants and agrees to pay Cisco Fifteen Million
         Dollars ($15,000,000) under the Cisco Settlement Agreement.

         7. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller that the following statements are true and correct:

                  7.1. AUTHORITY. Buyer is a corporation duly organized, validly
         existing and in good standing under the laws of Washington. Buyer has
         all requisite corporate power and authority to enter into this
         Agreement and each of the Ancillary Agreements to which it is a
         signatory and to consummate the transactions contemplated hereby and
         thereby. All corporate acts and other proceedings required to be taken
         by Buyer to authorize the execution, delivery and performance of this
         Agreement and each of the Ancillary Agreements to which it is a
         signatory and the consummation of the transactions contemplated hereby
         and thereby have been duly and properly taken. This Agreement has been
         duly executed and delivered by Buyer and constitutes, and each of the
         Ancillary Agreements to which Buyer is a signatory when executed will
         constitute, a valid and binding obligation of Buyer, enforceable
         against Buyer in accordance with its terms. The execution and delivery
         of this Agreement and each of the Ancillary Agreements to which it is a
         signatory does not, and the consummation of the transactions
         contemplated hereby and thereby and compliance with the terms hereof
         and thereof will not, conflict with, or result in any violation of or
         default (with or without notice or lapse of time, or both) under, or
         give rise to a right of termination, cancellation or acceleration of
         any obligation or to loss of a material benefit under, or result in the
         creation of any Lien upon any of the properties or assets of Buyer or
         any of its subsidiaries under, any provision of (1) the Washington
         Business Corporations Act; (2) the certificate of incorporation or
         by-laws or comparable organizational documents of Buyer or any of its
         subsidiaries; (3) any material note, bond, mortgage, indenture, deed of
         trust, license, lease, contract, commitment, agreement or arrangement
         to which Buyer or any of its subsidiaries is a party or by which any of
         their respective properties or assets are bound; or (4) any judgment,
         order, or decree, or material statute, law, ordinance, rule or
         regulation applicable to Buyer, any of its subsidiaries or their
         respective properties or assets, other than, in the case of clause (3)
         above, any such conflicts, violations, defaults, rights, losses or
         Liens that, individually or in the aggregate, would not have a material
         adverse effect. No material consent, approval, license, permit order or
         authorization of, or registration, declaration or filing with, any
         Governmental Authority is required to be obtained or made by or with
         respect to Buyer in connection with the execution and delivery of this
         Agreement or the consummation by Buyer of the transactions contemplated
         hereby, other than (a)

                                       26
<PAGE>
         compliance with and filings under the competition laws of jurisdictions
         outside of the United States, if applicable; and (b) compliance with
         and filings under Section 13(a) or 15(d), as the case may be, of the
         Securities Exchange Act of 1934, as amended.

                  7.2. SECURITIES ACT OF 1933. The Shares purchased by Buyer
         pursuant to this Agreement are being acquired for investment only and
         not with a view to any public distribution or resale thereof, and Buyer
         will not offer to sell or otherwise dispose of the Shares so acquired
         by it in violation of any of the registration requirements of the
         Securities Act of 1933, as amended, or of any state "Blue Sky" law.
         Buyer (either alone or together with its advisers) has sufficient
         knowledge and experience in financial and business matters so as to be
         capable of evaluating the merits and risks of its investment in the
         Shares and its capable of bearing the economic risks of such
         investment.

                  7.3. ACTIONS AND PROCEEDINGS, ETC. There are no (1)
         outstanding judgments, orders, writs, injunctions or decrees of any
         Governmental Authority against Buyer which have a material adverse
         effect on the ability of Buyer to consummate the transactions
         contemplated hereby; or (2) actions, suits, claims or legal,
         administrative or arbitration proceedings or investigations pending or,
         to Buyer's knowledge, threatened, against Buyer, which are likely to
         have a material adverse effect on the ability of Buyer to consummate
         the transactions contemplated hereby.

                  7.4. FINDERS' FEES. Except for T.C. Management, L.L.C., T.C.
         Management IV, L.L.C. and Brockway Moran & Partners Management, L.P.,
         whose fees will be paid by Buyer, there is no investment banker,
         broker, finder or other intermediary which has been retained by or is
         authorized to act on behalf of Buyer who might be entitled to any fee
         or commission from Seller or any of its Affiliates upon consummation of
         the transactions contemplated by this Agreement.

                  7.5. NO KNOWLEDGE OF MATERIAL ADVERSE EVENTS. Buyer has no
         knowledge of any circumstance, change or effect that has arisen or
         occurred on or subsequent to the Balance Sheet, and has not otherwise
         become aware of any circumstance, change or effect subsequent to the
         Balance Sheet, that, individually or in the aggregate, had or could
         reasonably be expected to have a Material Adverse Effect.

                  7.6. NO PLANS TO TERMINATE EMPLOYEES. Buyer does not currently
         intend, nor does it presently have any plans, to terminate the
         employment of any Transferred Employee after the Closing Date.

         8. COVENANTS OF BUYER. Buyer covenants and agrees as follows:

                                       27
<PAGE>
                  8.1. CONFIDENTIALITY. Buyer acknowledges that the information
         being provided to it by Seller is subject to the Confidentiality
         Agreement, the terms of which are incorporated herein by reference.
         Effective upon, and only upon, Closing, the Confidentiality Agreement
         will terminate, except to the extent that information provided
         thereunder relates to Seller or other members of Seller's corporate
         group other than the Company.

                  8.2. NO ADDITIONAL REPRESENTATIONS. Buyer acknowledges that
         none of Seller, the Company or any other person has made any
         representation or warranty, express or implied, as to the accuracy or
         completeness of any information regarding the Company except as
         expressly set forth in this Agreement or the Seller Disclosure
         Schedule, and none of Seller, the Company, or any other person will
         have or be subject to any liability to Buyer or any other person
         resulting from the distribution to Buyer, or Buyer's use of, any such
         information (including, without limiting the generality of the
         foregoing, the information furnished to Buyer under cover of the letter
         from Salomon Smith Barney Inc. to Buyer dated May 15, 2002).

                  8.3. CHANGE OF NAME; NO USE OF LOGO. Within 60 days after the
         Closing Date, Buyer will cause the Company to (1) change all their
         respective corporate and trade names to the extent required such that
         they no longer contain references to "Honeywell," "AlliedSignal" or
         "Johnson Matthey"; and (2) cease all use of logo trademarks (or any
         logo or symbol similar thereto) belonging to Seller or Johnson Matthey;
         provided that, inventory and supplies existing at Closing may be
         shipped or consumed, respectively, for 180 days after the Closing Date;
         and provided further that, following the Closing Date, the Company will
         be permitted to use or continue to use corporate and trade names using
         the phrase "Advanced Circuits," except in combination with trade names
         and trademarks the use of which is otherwise prohibited under this
         Section 8.3.

                  8.4. PRICEWATERHOUSE COOPERS. Buyer agrees to pay, up to a
         maximum amount of Ten Thousand Dollars ($10,000), all of the fees,
         costs and expenses necessary to obtain the consent of PriceWaterhouse
         Coopers to include any financial statements of the Company that have
         been audited, compiled or reviewed by PriceWaterhouse Coopers, and any
         report of PriceWaterhouse Coopers related thereto, in any filing made
         by Buyer with the SEC, and will pay such fees, costs and expenses to
         either PriceWaterhouse Coopers or to Seller, as requested by Seller.

                  8.5. PHASE II. From and after the Closing Date, Buyer agrees
         to cause the Company to afford to Seller and its representatives such
         access to the Company's real property located in Chippewa Falls,
         Wisconsin and to the facilities located thereon and the books and
         records related thereto to allow Seller to conduct, or have conducted,
         a Phase II environmental assessment on such real property and Buyer
         agrees to cause the Company to offer such other cooperation

                                       28
<PAGE>
         and assistance as is reasonably necessary to allow Seller to conduct,
         or have conducted, such Phase II environmental assessment. All costs
         related to the Phase II environmental assessment shall be borne by
         Seller. In conducting, or having conducted, such Phase II environmental
         assessment, Seller shall use commercially reasonable efforts to
         minimize the disruption to Company's business and will, to the extent
         practicable, notify Buyer of any testing plans prior to implementation
         and work with Buyer to resolve any reasonable objections Buyer may
         raise with respect thereto.

                  8.6. DEED RESTRICTION. Promptly after the Closing but in any
         event prior to January 31, 2003, Buyer, at Buyer's sole cost and
         expense, agrees to record with the Chippewa County, WI recorder's
         office or other appropriate office having jurisdiction over the
         Chippewa Falls Property (as hereinafter defined) the Land Use
         Restriction in form and substance as set forth on Exhibit D hereto with
         respect to the property located at 850 Industrial Boulevard, Chippewa
         Falls, WI and 234 Cashman Drive, Chippewa Falls, WI (collectively, the
         "Chippewa Falls Property"), which Land Use Restriction shall run with
         the land and bind Buyer and all future owners of the Chippewa Falls
         Property. Buyer shall furnish evidence to Seller of such recordation
         promptly after such recordation is made.

         9. MUTUAL COVENANTS. Each of Seller and Buyer covenants and agrees as
follows:

                  9.1. PUBLICITY. Notwithstanding the Confidentiality Agreement,
         Seller and Buyer agree that, from the date hereof through the Closing
         Date, neither party may make any public release or announcement
         concerning the execution of this Agreement or the transactions
         contemplated hereby except (1) with the written consent of the other
         party; or (2) as such release or announcement may be required by law or
         the rules or regulations of any United States or foreign securities
         exchange, in which case the party required to make the release or
         announcement, subject thereto, will allow the other party reasonable
         time to comment on such release or announcement in advance of such
         issuance.

                  9.2. BEST EFFORTS; FURTHER ASSURANCES. Subject to the terms
         and conditions of this Agreement, Buyer and Seller will use their best
         efforts to take, or cause to be taken, all actions and to do, or cause
         to be done, all things necessary or desirable under applicable laws and
         regulations to consummate the transactions contemplated by this
         Agreement. Seller and Buyer agree, and Seller, prior to Closing, and
         Buyer, after Closing, agree to cause the Company, to execute and
         deliver such other documents, certificates, agreement and other
         writings and to take such other actions as may be necessary or
         desirable in order to consummate or implement expeditiously the
         transactions contemplated by this Agreement.

                  9.3. RECORDS.

                                       29
<PAGE>
                        9.3.1. REPORTS; ACCESS TO BOOKS AND RECORDS. After
            Closing, Buyer will permit Seller to have reasonable access to and
            the right to make copies of the Company's books, records and files
            for any reasonable purpose of Seller, such as for use in litigation,
            financial reporting, tax return preparation, or tax compliance
            matters. In addition, Buyer will make available to Seller, upon
            Seller's reasonable request, personnel of the Company who are
            familiar with any such matter requested. Buyer agrees to use all
            reasonable commercial efforts to preserve and keep all of the books,
            records and files of the Business included in the Assets for a
            period of not less than five years after the Closing Date, or for
            any longer period as may be required (1) by any Governmental
            Authority; (2) by any Law; or (3) as may reasonably be requested by
            Seller in connection with any ongoing litigation, suit or
            proceeding.

                        9.3.2. COOPERATION IN LITIGATION. Buyer and Seller will
            reasonably cooperate with each other at the requesting party's
            expense in the prosecution or defense of any claim, litigation or
            other proceeding arising from their respective conduct of the
            business of the Company and involving one or more third parties. The
            party requesting such cooperation will pay the reasonable
            out-of-pocket expenses incurred in providing such cooperation
            (including reasonable legal fees and disbursements) by the party
            providing such cooperation and by its officers, directors, employees
            and agents. Until the five (5) year anniversary of the Closing Date,
            prior to disposing of any such information, Buyer will give Seller a
            reasonable opportunity to segregate, remove or copy such books,
            records and files as Seller may select.

                  9.4. CISCO. Seller shall be responsible for twenty-five
         percent (25%) (the "Seller Retained Portion") and Buyer shall be
         responsible for seventy-five percent (75%) of the net sales rebates
         that are due Cisco Systems, Inc. ("Cisco") under the settlement
         agreement between Cisco and the Company dated December 6, 2002 (the
         "Cisco Settlement Agreement"). Notwithstanding the foregoing, the
         Company shall pay directly to Cisco all amounts that are owed to Cisco
         under the Cisco Settlement Agreement (including the Seller Retained
         Portion). At the end of each fiscal quarter during the year commencing
         on the Closing Date, the Company shall send to Seller an invoice for
         the Seller Retained Portion during such fiscal quarter together with
         documentation setting forth the calculation in reasonable detail of all
         rebate payments made pursuant to the Cisco Settlement Agreement,
         including the Seller Retained Portion, and evidence that all such
         payments were made in accordance with the Cisco Settlement Agreement.
         Seller shall pay such invoice at the time of the Seller's next check
         run, but in no event no later than fourteen (14) days of receipt of
         both the invoice and such evidence.

                                       30
<PAGE>
         10. EMPLOYEE AND RELATED MATTERS. This Section 10 contains the
covenants and agreements of the parties with respect to (1) the status of
employment of the employees of the Company as of the Closing Date ("Employees");
and (2) the employee benefits and employee benefit plans provided or covering
such Employees and former employees of the Company who terminated employment
with, or who retired from, the Company prior to Closing ("Former Employees").

                  10.1. EMPLOYMENT. Effective as of the Closing Date, Buyer will
         cause the Company to continue the employment of all salaried and hourly
         Employees who are designated on the records of the Company as of the
         Closing Date as employees (other than those employees, if any, that
         have been notified by the Company that their employment with the
         Company will terminate on a date after the Closing Date), including any
         employees who are on vacation leave, leave of absence and sick leave
         ("Transferred Employees"); provided that, no provision of this
         Agreement will (1) alter the status of Transferred Employees on or
         after the Closing Date as "employees-at-will"; (2) obligate Buyer or
         any of its Affiliates to continue the employment of any Transferred
         Employee; or (3) impair, deny or limit the right of Buyer or any of its
         Affiliates to terminate the employment of any Transferred Employee at
         any time. Prior to the Closing Date, Seller will cause the Company to
         transfer to Seller or an Affiliate of Seller the employment of
         individuals who are then employed by the Company but are on short-term
         or long-term disability leave ("Leave Employees") as well as those
         employees of the Company that have been terminated by the Company or to
         whom a notification of termination has been delivered, in either case,
         on or prior to the Closing Date. Buyer shall cause the Company to offer
         employment to any Leave Employee receiving short-term disability
         benefits on the Closing Date to the extent the Leave Employee notifies
         the Company that he or she wishes to return to work. Buyer shall cause
         the Company to offer employment to any Leave Employee receiving
         long-term disability benefits on the Closing Date to the extent (i) the
         Leave Employee is released to work by the Employee's physician, and
         (ii) required by applicable law. Any Leave Employee who is offered
         employment consistent with the foregoing and accepts such offer of
         employment shall become a Transferred Employee when employment with the
         Company commences; provided, however, nothing contained herein shall
         limit the Company's ability to thereafter terminate the Leave
         Employee's employment in accordance with applicable law. For a period
         of six (6) months after the Closing Date, or for the duration of a
         Transferred Employee's employment with the Company, if less, Buyer will
         cause the Company to maintain the base salary or wage rate of each
         Transferred Employee at the same level as in existence on the day prior
         to the Closing Date. On and after the Closing Date, Buyer will comply
         at its expense with all employment laws with respect to Transferred
         Employees, including the Family and Medical Leave Act, the Americans
         with Disabilities Act and Federal or state laws concerning military
         leave.

                                       31
<PAGE>
                  10.2. SEVERANCE PROTECTION. Seller will be responsible for,
         and will timely pay, any and all severance benefits that are owed to
         employees of the Company who have been terminated by the Company (or
         notified of such termination) prior to the Closing Date. From and after
         the Closing Date, Transferred Employees will be entitled to the benefit
         of such severance plan or policy, if any, as Buyer may have in effect
         from time to time; provided that, service with the Company and with
         Buyer will be taken into account in computing the amount of such
         benefit. To the extent any Transferred Employee is terminated by the
         Company, other than for cause, within nine (9) months after the Closing
         Date, such Transferred Employee will be entitled to severance benefits
         in an amount not less than the cash severance benefit that the
         Transferred Employee would have received from the Company had the
         Seller's severance plan (as in effect on the day prior to the Closing
         Date) been in effect on such date of termination, subject to the
         Company's right to receive a standard release of all employment related
         claims in consideration for such benefits.

                  10.3. COOPERATION. Seller agrees to use reasonable efforts to
         facilitate the transition of Transferred Employees to employment with
         Buyer or any of its Affiliates as of the Closing Date.

                  10.4. SAVINGS PLAN. Effective as of the Closing Date or as
         soon as practicable thereafter (the "Savings Plan Commencement Date"),
         but in no event later than March 15, 2003, Buyer will establish or
         otherwise maintain one or more tax-qualified defined contribution
         savings plans ("Buyer's 401(k) Plans") which will (1) permit immediate
         participation as of the Savings Plan Commencement Date for all
         Transferred Employees; (2) credit all service with the Company that was
         credited under Seller's savings plan ("Seller's 401(k) Plan") for
         purposes of the eligibility and vesting requirements of the Buyer's
         401(k) Plans; and (3) provide for tax-deferred contributions by
         Transferred Employees pursuant to Section 401(k) of the Code.
         Transferred Employees will be eligible to effect a direct rollover (as
         described in Section 401(a)(31) of the Code) of all or a portion of any
         such Transferred Employee's balance (including outstanding loan
         balances) under Seller's 401(k) Plan (subject to the terms and
         conditions of Seller's 401(k) Plan) to Buyer's 401(k) Plan; provided
         that, any such direct rollover will be subject to the terms and
         conditions of Buyer's 401(k) Plan applicable to rollover contributions
         and shall be conditioned upon the Buyer being reasonably satisfied that
         Seller's 401(k) Plan is a qualified plan under Section 401(a) of the
         Code and has been administered in compliance with said Code.

                  10.5. EMPLOYEE WELFARE PLANS.

                        10.5.1. BENEFITS. Except as otherwise provided in the
            Transition Services Agreement, Buyer or its Affiliates will, not
            later than the Benefit Transition Date, provide the Transferred
            Employees and their beneficiaries

                                       32
<PAGE>
            with medical and life insurance plans and programs that are
            comparable to the medical and life insurance plans and programs
            being provided by Buyer to its similarly situated employees on the
            day prior to the Closing or as such plans and programs may be
            amended or revised by Buyer in the ordinary course from time to
            time. Buyer or its Affiliates will, not later than the Closing Date,
            provide the Transferred Employees and their beneficiaries with
            disability, severance, vacation and other welfare benefit plans and
            programs that are comparable, in the aggregate, to the welfare
            benefits being provided by Buyer to its similarly situated employees
            the day prior to the Closing or as such plans and programs may be
            amended or revised by Buyer in the advisory course from time to
            time.

                        10.5.2. TERMS. Any plans or programs established or
            maintained by Buyer to provide medical and life insurance,
            disability, severance, vacation, cafeteria, flexible spending,
            dependent care and other welfare benefits in respect of the
            Transferred Employees will credit all service with the Company for
            purposes of eligibility, participation and benefit entitlement, in
            accordance with applicable law.

                        10.5.3. MEDICAL CLAIMS. Except as otherwise provided in
            the Transition Services Agreement, Seller will be responsible for,
            and will timely pay, all medical claims incurred by any Transferred
            Employee before the Closing Date under any Benefit Plan, and Buyer
            will be responsible for, and will timely pay, any medical claim
            incurred by any Transferred Employee on or after the Closing Date
            under any health plan maintained by Buyer.

                        10.5.4. SHORT-TERM AND LONG-TERM DISABILITY. Except as
            otherwise provided in the Transition Services Agreement, Seller will
            be responsible for, and will timely pay, all short-term and
            long-term disability benefits which are owed to any Transferred
            Employee before the Closing Date under any Benefit Plan and which
            can be satisfied through insurance. Buyer will be responsible for,
            and will timely pay, any short-term and long-term disability
            benefits owed to any Transferred Employee on or after the Closing
            Date under any health or disability plan maintained by Buyer.

                  10.6. SEVERANCE AND WARN ACT LIABILITY. Buyer agrees to cause
         the Company to pay and be responsible for all liability, cost, expense
         and sanctions resulting from any failure to comply with the WARN Act,
         and the regulations thereunder, in connection with events which occur
         on or after the Closing Date.

                  10.7. HEALTH CARE CONTINUATION COVERAGE. Seller will be
         responsible for any continuation of group health coverage required
         under Section 4980B of the Code or Sections 601-608 of ERISA with
         respect to any employee of

                                       33
<PAGE>
         Company or any "qualified beneficiary" (as defined in Section 4980B of
         the Code) of any such employee who incurs a "qualifying event" (as
         defined in Section 4980B of the Code) on or before to Closing. Buyer
         will cause the Company to be responsible for any continuation of group
         health coverage required under Section 4980B of the Code or Sections
         601-608 of ERISA with respect to any Transferred Employee or any
         "qualified beneficiary" (as defined in Section 4980B of the Code) of
         any such employee who incurs a "qualifying event" (as defined in
         Section 4980B of the Code) after Closing.

                  10.8. WORKER'S COMPENSATION. Buyer will be responsible for the
         administration and the financial obligation of all worker's
         compensation claims with respect to Transferred Employees arising out
         of or relating to occurrences on or after the Closing Date and the
         Seller will be responsible for the administration and the financial
         obligation of all worker's compensation claims arising out of or
         relating to occurrences before the Closing Date.

                  10.9. NO ASSUMPTION OF PLANS. Neither Buyer nor its Affiliates
         will assume or be responsible for any liabilities or obligations under
         any Benefit Plan, and Seller will remain solely responsible for all
         liabilities and obligations under all Benefit Plans. Seller will cause
         the Company to withdraw from or otherwise terminate its participation
         in each Benefit Plan, with such withdrawal of participation effective
         no later than the Benefit Transition Date.

         11. INDEMNIFICATION.

                  11.1. INDEMNIFICATION BY SELLER. Seller will indemnify Buyer,
         its Affiliates (including, after the Closing Date, the Company) and
         each of their respective officers, directors, employees and agents
         against, and hold them harmless from, any loss, liability, claim,
         damage or expense (including reasonable legal fees and expenses)
         suffered or incurred by any such indemnified party to the extent
         arising from (1) any breach of any representation or warranty of Seller
         contained in this Agreement or in any Ancillary Document; (2) any
         breach of any covenant of Seller contained in this Agreement requiring
         performance after the Closing Date (including without limitation Tax
         covenants contained in Section 12.1 below), which breach continues for
         ten Business Days after notice thereof has been furnished by Buyer to
         Seller; (3) subject to Section 11.7.7 below, any liability of the
         Company under any Environmental Law resulting from hazardous waste or
         other environmental contaminants existing, prior to Closing, on or
         under any real property owned or leased by the Company; or (4) any and
         all Specified Liabilities; provided that, except (a) as provided under
         clause (1) of the definition of Specified Liabilities found in Section
         2.65 above, and for the representation contained in Section 5.8 above
         (collectively, "Tax Losses"), (b) for the Banked Liability, (c) for any
         covenant of the Seller contained in this Agreement, (d) for the
         litigation matters disclosed in Section 5.13 to the Seller Disclosure
         Schedule, (e) the September 4, 2002 effluent silver

                                       34
<PAGE>
         excursion referred to on Schedule 5.17.1 to the Seller Disclosure
         Schedule, (f) any Environmental Claim relating to any properties other
         than the Chippewa Falls Facility, (g) any liabilities arising under (1)
         the Request for Quotation/ Purchase Order P069189 between the Company
         and HBS Equipment Corporation and (2) Packaging Research Center
         Membership Agreement between Johnson Matthey Electronics, Inc. and
         Georgia Tech Research Corporation (both of which are disclosed in
         Section 5.12 to the Seller Disclosure Schedule) and (h) any liabilities
         arising under those leases referenced in clause (3) of the definition
         of Specified Liabilities found in Section 2.65 above, Seller will not
         have any liability under this Agreement unless the aggregate of all
         losses, liabilities, claims, damages and expenses relating thereto for
         which Seller would, but for this proviso, be liable exceeds on a
         cumulative basis an amount equal to Three Hundred Thousand Dollars
         ($300,000) and then, with respect to clause (1) of this Section 11.1,
         only to the extent of such excess and subject to a maximum liability of
         $5,000,000.

Buyer acknowledges and agrees that, from and after Closing, its sole and
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement (other than claims of fraud) will be pursuant to the
indemnification provisions set forth in Section 11. In furtherance of the
foregoing, Buyer hereby waives, and releases and discharges Seller and its
Affiliates in respect of, from and after Closing, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
(other than claims of, or causes of action arising from, fraud) it or the
Company may have against Seller, its Affiliates, directors, officers, employees,
agents or assigns relating to the subject matter of this Agreement or the
ownership prior to Closing of the Company by Seller or its Affiliates or the
Company's operations and activities, and arising under or based upon any
Federal, state, local or foreign statute, law, ordinance, rule or regulation.

                  11.2. INDEMNIFICATION BY BUYER. Buyer will indemnify, and will
         cause the Company to indemnify, Seller, its Affiliates and each of
         their respective officers, directors, employees and agents against, and
         hold them harmless from, any loss, liability, claim, damage or expense
         (including reasonable legal fees and expenses) suffered or incurred by
         any such indemnified party to the extent arising from (1) any breach of
         any representation or warranty of Buyer contained in this Agreement or
         in any Ancillary Document; or (2) any breach of any covenant of Buyer
         contained in this Agreement requiring performance after the Closing
         Date, which breach continues for ten Business Days after notice thereof
         has been furnished by Seller to Buyer or (3) any violation of any
         Environmental Law relating to the Chippewa Falls Facility that a court
         of competent jurisdiction determines was caused by the Buyer after the
         Closing Date; provided that, Buyer will not have any liability under
         clause (1) above unless the aggregate of all losses, liabilities,
         claims, damages and expenses relating thereto for which Buyer would,
         but for this proviso, be liable exceeds on a cumulative basis an amount
         equal to Four Hundred Thousand Dollars ($400,000) and then only to the
         extent of such excess and subject to a maximum Buyer liability of
         $5,000,000.

                                       35
<PAGE>
                  11.3. LOSSES NET OF INSURANCE, ETC. The amount of any loss,
         liability, claim, damage, expense or Tax for which indemnification is
         provided under Section 11 will be net of any amounts recovered or
         recoverable by the indemnified party under insurance policies with
         respect to such loss, liability, claim, damage, expense or Tax and will
         be (1) increased to take account of any net Tax cost incurred by the
         indemnified party arising from the receipt of indemnity payments
         hereunder (grossed up for such increase); and (2) reduced to take
         account of any net Tax benefit realized by the indemnified party
         arising from the incurrence or payment of any such loss, liability,
         claim, damage, expense or Tax. In computing the amount of any such Tax
         cost or Tax benefit, the indemnified party will be deemed to recognize
         all other items of income, gain, loss, deduction or credit before
         recognizing any item arising from the receipt of any indemnity payment
         hereunder or the incurrence or payment of any indemnified loss,
         liability, claim, damage, expense or Tax. Any indemnity payment under
         this Agreement will be treated as an adjustment to the Purchase Price
         for Tax purposes, unless a final determination (which will include the
         execution of a Form 870 or successor form) with respect to the
         indemnified party or any of its Affiliates causes any such payment not
         to be treated as an adjustment to the Purchase Price for United States
         Federal income Tax purposes.

                  11.4. TERMINATION OF INDEMNIFICATION. The obligations to
         indemnify and hold harmless a party hereto pursuant to clause (1) of
         Section 11.1 above and clause (1) of Section 11.2 above will terminate
         when the applicable representation or warranty terminates pursuant to
         Section 16 below; provided that, such obligations to indemnify and hold
         harmless will not terminate with respect to any item as to which the
         person to be indemnified or the related party hereto will have, before
         the expiration of the applicable period, previously made a claim by
         delivering a notice (stating in reasonable detail the basis of such
         claim) to the indemnifying party.

                  11.5. PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR
         TAX CLAIMS). In order for a party (the "Indemnified Party") to be
         entitled to any indemnification provided for under this Agreement
         (other than in respect of a Tax Claim) in respect of, arising out of or
         involving a claim or demand made by any person, firm, Governmental
         Authority or corporation against the Indemnified Party (a "Third Party
         Claim"), the Indemnified Party must notify the other party (the
         "Indemnifying Party") in writing, and in reasonable detail, of the
         Third Party Claim within ten Business Days after receipt by such
         Indemnified Party of written notice of the Third Party Claim; provided
         that, failure to give such notification will not affect the
         indemnification provided hereunder except to the extent the
         Indemnifying Party will have been actually prejudiced as a result of
         such failure (except that the Indemnifying Party will not be liable for
         any expenses incurred during the period in which the Indemnified Party
         failed to give such notice). Thereafter, the Indemnified Party will
         deliver to the Indemnifying Party, within five Business Days after the
         Indemnified Party's receipt thereof, copies of all

                                       36
<PAGE>
         notices and documents (including court papers) received by the
         Indemnified Party relating to the Third Party Claim.

If a Third Party Claim is made against an Indemnified Party, the Indemnifying
Party will be entitled to participate in the defense thereof and, if it so
chooses, to assume the defense thereof with counsel selected by the Indemnifying
Party and reasonably satisfactory to the Indemnified Party. Should the
Indemnifying Party so elect to assume the defense of a Third Party Claim, the
Indemnifying Party will not be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof. If the Indemnifying Party assumes such defense, the Indemnified
Party will have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party, it being understood that the Indemnifying Party will control
such defense. The Indemnifying Party will be liable for the fees and expenses of
counsel employed by the Indemnified Party for any period during which the
Indemnifying Party has not assumed the defense thereof (other than during any
period in which the Indemnified Party will have failed to give notice of the
Third Party Claim as provided above). If the Indemnifying Party chooses to
defend or prosecute any Third Party Claim, all the parties hereto will cooperate
in the defense or prosecution thereof. Such cooperation will include the
retention and (upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information that are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. Whether or not the Indemnifying Party will have assumed the defense
of a Third Party Claim, the Indemnified Party will not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Indemnifying Party's prior written consent (which consent will not be
unreasonably withheld). All Tax Claims will be governed by Section 11.6 below.

                  11.6. PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS. If
         a claim is made by any taxing authority, which, if successful, might
         result in an indemnity payment to Buyer or one of its Affiliates
         pursuant to Section 11.5 above, Buyer will promptly notify Seller in
         writing of such claim (a "Tax Claim"). If notice of a Tax Claim is not
         given to Seller within a sufficient period of time to allow Seller to
         effectively contest such Tax Claim, or in reasonable detail to apprise
         Seller of the nature of the Tax Claim, in each case taking into account
         the facts and circumstances with respect to such Tax Claim, Seller will
         not be liable to Buyer or any of its Affiliates to the extent that
         Seller's position is actually prejudiced as a result thereof.

With respect to any Tax Claim (other than a Tax Claim relating solely to Taxes
of the Company for any taxable period that includes (but does not end on) the
Closing Date (a "Straddle Period"), Seller will control all proceedings taken in
connection with such Tax Claim (including without limitation selection of
counsel) and, without limiting the foregoing, may in its sole discretion pursue
or forego any and all administrative appeals,

                                       37
<PAGE>
proceedings, hearings and conferences with any taxing authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and sue for
a refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner. Buyer will control all proceedings taken in
connection with any Tax Claim relating solely to Taxes of the Company for a
Straddle Period. Buyer, the Company, and each of their respective Affiliates
will cooperate with Seller in contesting any Tax Claim, which cooperation will
include, without limitation, the retention and (upon Seller's request) the
provision to Seller of records and information that are reasonably relevant to
such Tax Claim, and making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided hereunder
or to testify at proceedings relating to such Tax Claim.

         In no case will Buyer or the Company settle or otherwise compromise any
Tax Claim without Seller's prior written consent. In no case will the Seller be
entitled to settle or to contest any claim relating to Taxes if the settlement
of, or an adverse judgment with respect to, the claim would be likely, in the
good faith judgment of the Indemnified Party, to cause the liability for any Tax
of the Indemnified Party or of any Affiliate of the Indemnified Party for any
taxable period ending after the Closing Date to increase (including without
limitation by making any election or taking any action having the effect of
making any election, by deferring the inclusion of any amount in income or by
accelerating the deduction of any amount or the claiming of any credit) or to
take a position that, if applied to any taxable period ending after the Closing
Date, would be adverse to the interest of the Indemnified Party or any Affiliate
of the Indemnified Party.

                  11.7. PROCEDURES RELATING TO INDEMNIFICATION OF ENVIRONMENTAL
         CLAIMS.

                        11.7.1. NOTICE. Buyer will promptly notify Seller in
            writing in the event that Buyer becomes aware of facts or
            circumstances indicating that Seller is in breach of Section 5.17.1
            above or may otherwise be or become liable to Buyer by virtue of the
            presence of hazardous wastes or other environmental contaminants on
            or under any real property owned or leased by the Company or with
            respect to any substance which has been produced, stored or
            processed by any third party for or on behalf of the Company (an
            "Environmental Claim"). Seller will promptly notify Buyer in writing
            in the event that Seller becomes aware of facts or circumstances
            indicating that Seller is in breach of Section 5.17.1 above or may
            otherwise be or become liable to Buyer by virtue of an Environmental
            Claim.

                        11.7.2. RIGHT TO REMEDY. Seller has the right, upon at
            least thirty (30) days prior written notice to Buyer and subject to
            the provisos below, to assume exclusive control of the resolution
            and remedy of any Environmental Claim, including without limitation
            (1) investigating the

                                       38
<PAGE>
            matter, obtaining tests, reports, and surveys necessary to define
            and delineate the extent of any contamination; (2) subject to
            Section 11.7.5 below, contacting Governmental Authorities, making
            reports to such authorities, submitting remediation plans to such
            authorities, negotiating with such authorities or other third
            parties and otherwise dealing with such authorities; (3) preparing
            the work plan for any investigation or remediation; and (4)
            conducting or directing any such investigation or remediation.
            Seller's election to assume control of the resolution and remedy of
            any Environmental Claim shall conclusively establish for purposes of
            this Agreement that such Environmental Claim, to the extent relating
            to periods prior to the Closing Date, is within the scope of and
            subject to indemnification by Seller under Section 11.1(3) of this
            Agreement. Buyer agrees neither to: (a) enter into negotiations or
            settlements with any Governmental Authority or third parties; nor
            (b) at any time, take or offer to any Governmental Authority or
            third party any position inconsistent with reasonable positions
            taken or offered by Seller; provided that that Buyer shall have the
            right to (A) receive copies of all correspondence between Seller and
            Governmental Authorities relating to Environmental Claims and (B)
            advance notice of and the right to participate in any meeting with
            Governmental Authorities relating to Environmental Claims and
            provided further that Seller shall not, without the prior written
            approval of Buyer, which such approval shall not be unreasonably
            withheld or delayed, enter into any settlement, agreement, consent
            decree, order, remediation plan or deed restriction or similar land
            use restriction involving an Environmental Claim.

                        11.7.3. COOPERATION. Buyer and Seller will cooperate in
            good faith and make available to each other such information as is
            reasonably necessary to carry out the purposes of this Section 11.7.
            Buyer will provide any and all reasonable assistance in securing any
            permits or approvals (including without limitation by holding in its
            name any such permit where necessary or appropriate) reasonably
            required to perform any investigatory or remedial activities;
            provided that, reasonable, out of pocket expenses incurred by Buyer
            in performing such assistance will be reimbursed by Seller. Buyer
            will provide Seller with, or cause Seller to be provided with,
            reasonable access (without charge) to relevant documents and records
            and to the real property of the Company in order to perform any
            remediation, investigation, assessment, sampling, monitoring,
            treatment, removal, cleanup or other action required to fulfill
            Seller's obligations under this Agreement. Seller agrees that any
            access to the Company's premises necessary to carry out the purposes
            of this Section 11.7 will only be at hours and for periods agreed to
            by Buyer in its reasonable discretion and that such access will not
            unduly interfere with the Company's business activities conducted at
            such premises.

                                       39
<PAGE>
                        11.7.4. SATISFACTION OF OBLIGATION. Seller will be
            deemed to have satisfied its obligations under this Agreement with
            respect to any Environmental Claim when (i) the result meets or
            exceeds the least stringent standards provided by Environmental Laws
            (including any lesser standards, such as deed or land use
            restrictions, institutional controls or other lesser standards
            resulting from any site-specific risk assessments), based on the use
            of the property on the Closing Date and applicable Environmental
            Laws as in effect on the Closing Date (or, at Seller's option, as in
            effect on the date the relevant action is concluded) and (ii) with
            respect to any Environmental Claim initiated by any Governmental
            Authority, upon receipt of a "no further action" letter, site
            cleanup rehabilitation order or the functional equivalent from the
            Governmental Authorities with competent jurisdiction with respect to
            such Environmental Claim. Subject to Section 11.7.2, Buyer will
            fully cooperate with Seller by accepting and filing any necessary
            deed restrictions and by otherwise cooperating with Seller in the
            implementation of any remedial activities, to the extent such
            activities do not materially interfere with normal business
            activities conducted at the Company facilities.

                        11.7.5. DISCLOSURE. Each party will keep the other party
            reasonably informed regarding any investigatory or remediation
            activities with respect to Environmental Claims and will provide the
            other party with copies of all material monitoring, sampling and
            other data relating to such matters. Seller shall provide Buyer, or
            cause Buyer to be provided with, true and correct copies (without
            charge) of all relevant documents and records which Seller obtains
            or prepares in order to perform any remediation, investigation,
            assessment, sampling, monitoring, treatment, removal, cleanup or
            other action required to fulfill Seller's obligations under this
            Agreement (including by way of illustration and not limitation any
            Phase I Environmental Reports and any Phase II Environmental Reports
            (collectively, the "Reports"). Neither party will notify any
            Governmental Authority or third party of the existence or substance
            of facts and circumstances giving rise to an Environmental Claim
            except as required by law or the Buyer's written code of conduct
            applicable to all real property owned or used by the Buyer. If a
            party believes it is necessary or appropriate, pursuant to a law or
            such code of conduct, to disclose any such information, that party
            will first promptly notify the other party of such requirement and
            the content and timing of any disclosure that it proposes to make.
            Unless Buyer determines that to do so violates a law or the Buyer's
            code of conduct, Buyer will follow the reasonable directions of
            Seller in disclosing such information.

                        11.7.6. INVESTIGATIONS. Buyer will not engage in, permit
            or cause any subsurface investigations at or adjacent to the Company
            Property, including sampling of soil or groundwater, except (1) in
            the

                                       40
<PAGE>
            ordinary course in connection with construction activities
            (including by way of illustration and not limitation obtaining any
            construction financing for any such construction activities or
            entering into any construction contracts wherein Reports are
            required with respect to any such construction activities by the
            Company) by Buyer at the Company Property; (2) in connection with
            the release of any hazardous material regulated by Environmental Law
            when in the Buyer's reasonable judgement such release requires any
            Reports in order to ensure that such release does not cause or has
            not caused an Environmental Claim; (3) in connection with any sale,
            transfer, leasing, mortgaging or recording of other encumbrances,
            pledges or hypothecation of any of the Company Property or Change of
            Control (collectively, a "Transfer") in the event the Company or
            Buyer is required in connection with any such Transfer by any third
            party to obtain any Reports; (4) in connection with any pending or
            threatened claims of injury to person (each, a "Personal Injury
            Claim") by any officer, director, employee, agent or invitee of
            Company or Buyer (each, a "Company Affected Person") or the
            reasonable belief by Buyer that any such Company Affected Person may
            have a Personal Injury Claim; (5) as may be recommended in a Phase 1
            Environmental Report with respect to the Company Property, upon the
            written consent of Honeywell, such consent not to be unreasonably
            withheld; or (6) as required by any Governmental Authority pursuant
            to Environmental Laws to the extent that such requirement is not
            attributable to a request or notification by Buyer not required by
            Environmental Laws.

                        11.7.7. BUYER BREACH. Buyer's breach of Section 11.7.6,
            as determined by a court of competent jurisdiction, will relieve
            Seller, to the extent of the losses, liabilities, claims or expenses
            suffered or incurred by such breach, of its obligation to indemnify
            Buyer for any Environmental Claim if and to the extent that such
            breach is materially prejudicial to Seller's ability to remediate
            such Environmental Claim.

         12. TAX MATTERS.

                  12.1. RETURNS. For any Straddle Period of the Company, Buyer
         will timely prepare and file with the appropriate authorities all Tax
         returns, reports and forms required to be filed and will pay all Taxes
         due with respect to such returns, reports and forms. For any taxable
         period of the Company that ends on or before the Closing Date, Seller
         will timely prepare and file with the appropriate authorities all Tax
         returns, reports and forms required to be filed, and will pay all Taxes
         due with respect to such taxable periods (whether or not shown as due
         on such returns, reports and forms and regardless of whether or when
         such returns, reports and forms were or are filed).

                                       41
<PAGE>
                  12.2. COOPERATION. Seller, the Company, and Buyer will
         reasonably cooperate, and will cause their respective Affiliates,
         officers, employees, agents, auditors and representatives reasonably to
         cooperate, in preparing and filing all returns, reports and forms
         relating to Taxes, including maintaining and making available to each
         other all records necessary in connection with Taxes and in resolving
         all disputes and audits with respect to all taxable periods relating to
         Taxes. Buyer and Seller recognize that Seller and its Affiliates will
         need access, from time to time, after the Closing Date, to certain
         accounting and Tax records and information held by the Company to the
         extent such records and information pertain to events occurring prior
         to the Closing Date; therefore, Buyer agrees, and agrees to cause the
         Company, (1) to use its best efforts to properly retain and maintain
         such records until such time as Seller agrees that such retention and
         maintenance is no longer necessary; and (2) to allow Seller and its
         agents and representatives (and agents or representatives of any of its
         Affiliates), at times and dates mutually acceptable to the parties, to
         inspect, review and make copies of such records as Seller may deem
         necessary or appropriate from time to time, such activities to be
         conducted during normal business hours and at Seller's expense. Buyer
         will, at its own cost and expense, fully and accurately complete and
         submit any tax data packages required by Seller within the time period
         established by the Seller's tax department consistent with past
         practices.

                  12.3. REFUNDS. Any refunds or credits of Taxes of the Company
         for any taxable period ending on or before the Closing Date will be for
         the account of Seller. Any other refunds or credits of Taxes of the
         Company will be for the account of Buyer. Buyer will, if Seller so
         requests and at Seller's expense, cause the Company to file for and
         obtain any refunds or credits to which Seller is entitled under this
         Section 12.3; provided that, Seller will not be entitled to cause the
         Company to file a claim for refund if such claim would be likely, in
         the good faith judgment of the Buyer, to cause the liability for Tax of
         the Company, the Buyer or any Affiliate of the Buyer for any taxable
         period ending after the Closing Date to increase or, if applied to any
         taxable period ending after the Closing Date, would be adverse to the
         interest of the Company, the Buyer or any Affiliate of the Buyer. Buyer
         will permit Seller to control the prosecution of any such refund claim
         and, where deemed appropriate by Seller, will cause the Company to
         authorize by appropriate powers of attorney such persons as Seller will
         designate to represent the Company with respect to such refund claim.
         Buyer will cause the Company to forward to Seller any such refund
         within ten days after the refund is received (or reimburse Seller for
         any such credit within ten days after the credit is allowed or applied
         against other Tax liability). Notwithstanding the foregoing, the
         control of the prosecution of a claim for refund of Taxes paid pursuant
         to a deficiency assessed subsequent to the Closing Date as a result of
         an audit will be governed by the provisions of Section 11.6 above.

                                       42
<PAGE>
                  12.4. TAX SHARING. Seller will cause the provisions of any Tax
         sharing agreement to which the Company is a party to be terminated on
         or before the Closing Date.

         13. ASSIGNMENT. This Agreement and the rights and obligations hereunder
will not be assignable or transferable by Buyer or Seller (including by
operation of law in connection with a merger, or sale of substantially all of
the assets or stock, of Buyer or Seller) without the prior written consent of
the other party hereto; provided that, Buyer may, upon written notification to
Seller delivered thirty (30) days prior to such assignment (to the extent such
advance notice is permitted by applicable law and to the extent practicable),
assign its rights hereunder upon the occurrence of a Change of Control,
provided, however, that no assignment of Honeywell's indemnification obligations
in respect of the Chippewa Falls Property or any Environmental Claim related
thereto shall be valid or binding against Honeywell or any of its Affiliates
unless (x) Buyer has complied with the provisions of Section 8.6 and (y) the
assignee (A) agrees to be bound by the provisions of Sections 11.1 through 11.7
(inclusive) in a writing satisfactory to Honeywell in its reasonable discretion
to which Honeywell is a party, and (B) uses the Chippewa Falls Property
exclusively for industrial purposes; provided further that, no assignment or
grant of a security interest will limit or affect the assignor's obligations
hereunder.

         14. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied will give or be construed to give to any person or entity,
other than the parties hereto and permitted assigns, any legal or equitable
rights hereunder.

         15. TERMINATION.

                  15.1. EVENTS. Anything contained herein to the contrary
         notwithstanding, this Agreement may be terminated and the transactions
         contemplated hereby abandoned at any time prior to the Closing Date:

                  (1) by mutual written consent of Seller and Buyer;

                  (2) by Seller if any of the conditions set forth in Section
         4.2 above will have become incapable of fulfillment, and will not have
         been waived by Seller;

                  (3) by Buyer if any of the conditions set forth in Section 4.1
         above will have become incapable of fulfillment, and will not have been
         waived by Buyer; or

                  (4) by either party hereto if Closing does not occur on or
         before 5:00 p.m. on December 26, 2002;

provided that, the party seeking termination pursuant to clause (2), (3) or (4)
above is not in breach of any of its representations, warranties, covenants or
agreements contained in this Agreement.

                                       43
<PAGE>
                  15.2. NOTICE. In the event of termination by Seller or Buyer
         pursuant to Section 15, written notice thereof will forthwith be given
         to the other party and the transactions contemplated by this Agreement
         will be terminated without further action by either party. If the
         transactions contemplated by this Agreement are terminated as provided
         herein:

                  (1) Buyer will return all documents and other material
         received from Seller, the Company relating to the transactions
         contemplated hereby, whether so obtained before or after the execution
         hereof, to Seller; and

                  (2) all confidential information received by Buyer with
         respect to the business of the Company will be treated in accordance
         with the Confidentiality Agreement, which will remain in full force and
         effect notwithstanding the termination of this Agreement.

                  15.3. SURVIVING PROVISIONS. If this Agreement is terminated
         and the transactions contemplated hereby are abandoned as described in
         Section 15, this Agreement will become void and of no further force and
         effect, except for the provisions of (1) Section 8.1 above relating to
         the obligation of Buyer to keep confidential certain information and
         data obtained by it from Seller; (2) Section 17 below relating to
         certain expenses; (3) Section 9.1 above relating to publicity; (4)
         Section 24 below relating to finder's fees and broker's fees; (5)
         Section 26 below relating to consent to jurisdiction; (6) Section 27
         below relating to governing law; and (7) Section 15. Nothing in Section
         15 will be deemed to release either party from any liability for any
         breach by such party of the terms and provisions of this Agreement or
         to impair the right of either party to compel specific performance by
         the other party of its obligations under this Agreement.

         16. SURVIVAL OF REPRESENTATIONS. The representations and warranties in
this Agreement (other than representations and warranties relating to Taxes and
employee benefit plans) and in any Ancillary Document will survive Closing
solely for purposes of Sections 11.1 and 11.2 above and will terminate at the
close of business eighteen months following the Closing Date. Representations
and warranties relating to Taxes and employee benefit plans will survive until
15 days after the expiration of the applicable statute of limitations (giving
effect to any extension thereof).

         17. EXPENSES. Whether or not the transactions contemplated hereby are
consummated, each party will pay all of the costs and expenses it incurs in
connection with this Agreement and the transactions contemplated hereby.

         18. ATTORNEY FEES. Should any litigation be commenced concerning this
Agreement or the rights and duties of any party with respect to it, the party
prevailing will be entitled, in addition to such other relief as may be granted,
to a reasonable sum for such party's attorney fees and expenses determined by
the court in such litigation or in a separate action brought for that purpose.

                                       44
<PAGE>
         19. AMENDMENTS. No amendment to this Agreement will be effective unless
it will be in writing and signed by both parties hereto.

         20. NOTICES. All notices or other communications required or permitted
to be given hereunder will be in writing and will be delivered by hand or
telecopy, or sent, postage prepaid, by registered, certified or express mail, or
reputable overnight courier service and will be deemed given when so delivered
by hand or telecopied, or if mailed, three Business Days after mailing (one
Business Day in the case of express mail or overnight courier service), as
follows:

<TABLE>
To Buyer:                                            To Seller:
<S>                                                  <C>
TTM Technologies, Inc.                               Honeywell International Inc.
17550 N.E. 67th Court                                Attention: President, Specialty Materials
Redmond, Washington 98052                            101 Columbia Road
Attention: Kenton K. Alder, President                Morristown, New Jersey 07962
FAX: +1 (714) 241-1668                               FAX: +1 (973) 455-6840

with a copy to:                                      with a copy to:

Greenburg Traurig, LLP                               Honeywell International Inc.
2375 East Camelback Road, Suite 700                  Attention: Senior Vice President and
Phoenix, Arizona 85016                                          General Counsel
Attention: Michael L. Kaplan, Esq.                   101 Columbia Road
FAX: +1 (602) 445-8615                               Morristown, New Jersey 07962
                                                     FAX: +1 (973) 455-4749
</TABLE>

         21. INTERPRETATION. The headings contained in this Agreement and in the
table of contents to this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this Agreement. References
herein to sections are to Sections of this Agreement unless the context
otherwise requires. The phrase, "to Seller's knowledge" and similar phrases
refers to the actual knowledge of Dean Vlasak, Mark Kinning, Paul Cress, Bob
Walther, Tom Zwiefelhofer, Brian Moynihan, Mark Moncuso and Carl Baranowski
following reasonable inquiry.

         22. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement, and
will become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.

         23. ENTIRE AGREEMENT. This Agreement and the Confidentiality Agreement
contain the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter.

         24. FEES. Seller hereby represents and warrants that (1) the only
broker or finder that has acted for Seller in connection with this Agreement or
the transactions

                                       45
<PAGE>
contemplated hereby or that may be entitled to any brokerage fee, finder's fee
or commission in respect thereof is Salomon Smith Barney Inc.; and (2) Seller
will pay all fees or commissions which may be payable to Salomon Smith Barney
Inc. Buyer hereby represents and warrants that (1) the only brokers or finders
that have acted for Buyer in connection with this Agreement or the transactions
contemplated hereby or that may be entitled to any brokerage fee, finder's fee
or commission in respect thereof are T.C. Management, L.L.C., T.C. Management
IV, L.L.C. and Brockway Moran & Partners Management, L.P.; and (2) Buyer will
pay all fees or commissions which may be payable to T.C. Management, L.L.C.,
T.C. Management IV, L.L.C. and Brockway Moran & Partners Management, L.P.

         25. SEVERABILITY. If any provision of this Agreement or the application
of any such provision to any person or circumstance will be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability will not affect any other
provision hereof.

         26. CONSENT TO JURISDICTION. Each of Buyer and Seller irrevocably
submits to the jurisdiction of (1) the Supreme Court of the State of New York,
New York County; and (2) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
Buyer and Seller agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the Southern District of
New York or, if, for jurisdictional reasons, such suit, action or other
proceeding may not be brought in such court, in the Supreme Court of the State
of New York, New York County. Each of Buyer and Seller further agrees that
service of any process, summons, notice or document by United States registered
mail to such party's respective address in the United States set forth above
will be effective service of process for any action, suit or proceeding in New
York with respect to any matters to which it has submitted to jurisdiction as
set forth above in the immediately preceding sentence. Each of Buyer and Seller
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the Supreme Court of the State of New York, New York
County; or (b) the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

         27. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED IN
ACCORDANCE WITH AND ENFORCED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.

         28. CONFIDENTIALITY AGREEMENTS WITH THIRD PARTIES. Seller hereby
assigns to Buyer, or will cause its Affiliates to assign to Buyer, all rights of
Seller under any

                                       46
<PAGE>
confidentiality agreements between Seller and third parties relating to
potential transactions regarding the Company.

         29. SELLER DISCLOSURE SCHEDULES. The parties acknowledge and agree that
(1) the Seller Disclosure Schedule may include certain items and information
solely for informational purposes for the convenience of Buyer; (2) the
disclosure by Seller of any matter in the Seller Disclosure Schedule will not be
deemed to constitute an acknowledgement by Seller that the matter is required to
be disclosed by the terms of this Agreement or that the matter is material; (3)
the disclosure by Seller of any matter in the Seller Disclosure Schedule will
not be deemed or interpreted to broaden or otherwise amplify the Seller's
representations and warranties or covenants contained in this Agreement, and
nothing in the Seller Disclosure Schedule will influence the construction or
interpretation of any of the representations and warranties contained in this
Agreement. If any section of the Seller Disclosure Schedule discloses an item or
information in such a way as to make its relevance and the scope of modification
to the disclosure required by another Section readily apparent, the matter will
be deemed to have been disclosed in such other Section, notwithstanding the
omission of an appropriate cross-reference to such other Section.

                            (continued on next page)

                                       47
<PAGE>
         IN WITNESS WHEREOF, the parties have caused this Stock Purchase
Agreement to be duly executed as of the date first written above.

<TABLE>
<CAPTION>
SELLER:                                              BUYER:
------                                               -----
<S>                                                  <C>
HONEYWELL ELECTRONIC MATERIALS, INC.                 TTM TECHNOLOGIES, INC.

Signed: /s/ James V. Gelly                           Signed: /s/ Kent Alder
       -------------------------------------                -------------------------------------

Printed name:                                        Printed name: Kenton K. Alder
             -------------------------------                      -------------------------------

Title:                                               Title: Chief Executive Officer
      --------------------------------------               ---------------------------------------

Date:                                                Date: December 24, 2002
     ----------------------------------------              ---------------------------------------
</TABLE>

                                       48

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00046-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00046-of-00352.parquet"}]]