Document:

Form 8-K HTML--Exhibit 10.1

AGREEMENT
AND PLAN OF MERGER

        THIS
AGREEMENT AND PLAN OF MERGER (this “Agreement”), made and entered as
of this 30 day of March, 2001, is by and among AVERT, INC., a Colorado
corporation (“Acquiror”), ADVANTAGE ASSESSMENT, INC., a Florida
corporation (the “Company”), and NANCY E. NORRIS, CHRISTOPHER M.
SMITH, CHRISTIAN R. BAILEY, and D. SCOTT OTHOSON (collectively, the
“Shareholders”).

RECITALS

        WHEREAS,
the Shareholders collectively own and, at the Closing, will own all of the
shares of stock of the Company issued and outstanding as of the Closing (the
“Shares”) and each agrees to vote in favor of the Merger (as defined
below); 

        WHEREAS,
in the conduct of its business the Company utilizes a certain assessment
technology (the “Assessment Technology”) pursuant to a License and
Settlement Agreement dated as of October 31, 2000 (the “License”); 

        WHEREAS,
the respective Boards of Directors of Acquiror and the Company have each
approved the merger (the “Merger”) of the Company with and into the
Acquiror in accordance with the applicable statutes of the States of Florida and
Colorado. 

        NOW,
THEREFORE, in consideration of the premises, terms and conditions and the mutual
covenants herein contained herein, the receipt and adequacy of which being
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows: 

DEFINITIONS

        As
used in this Agreement, the following terms shall have the following meanings:

        “Accredited
Investor” shall have the meaning given to such term in Rule 501 of the
Securities Act of 1933, as amended.

        “Accrued
Vacation Pay” means the obligation of the Company to its employees for accrued
vacation pay through the Closing Date.

        “Acquiror
” has the meaning set forth in the first paragraph of this Agreement.

        “Affiliate”
has the meaning given to such term in the Securities Act of 1933, as amended. 

        “Assessment
Technology” has the meaning set forth in the third paragraph of this
Agreement. 

        “Assets”
means collectively all of the Company's business, assets, properties and rights
used or useful by the Company in conducting its business.

        “Avert
Shares” has the meaning set forth in Section 2.7.

        “Closing”
has the meaning set forth in Section 2.11.

        “Closing
Adjustment Certificate” has the meaning set forth in Section 2.7. 

        “Closing
Date” has the meaning set forth in Section 2.11.

        “Code”
means the Internal Revenue Code of 1986, as amended.

        “Consideration”
has the meaning set forth in Section 2.7.

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        “Contract”
means any contract, mortgage, deed of trust, bond, indenture, lease, license,
permit, note, certificate, option, warrant, right or other instrument, document,
obligation or agreement, whether written or oral. 

        “DeMinimis
Agreements” means (i) Contracts that are not Material Agreements
because those Contracts involve payments of less than $1,000 individually over
the life of such Contracts and less than $10,000 in the aggregate for all such
Contracts over the life of such Contracts. 

        “Effective
Time” has the meaning set forth in Section 2.2.

        “Encumbrances”
means, collectively, all debts, claims, liabilities, obligations, taxes, liens,
mortgages, security interests and other encumbrances of any kind, character or
description, whether accrued, absolute, contingent or otherwise (and whether or
not reflected or reserved against in the balance sheets, books of account and
records of the Company). 

        “Environmental
Law” means any applicable federal, state, or local law, statute,
standard, ordinance, rule, regulation, code, license, permit, authorization,
approval, and any consent order, administrative or judicial order, judgment,
decree, injunction, or settlement agreement between the Company and a
governmental entity relating to the protection, preservation or restoration of
the environment (including, without limitation, air, water, land, plant and
animal life or any other natural resource). 

        “Environmental
Permit” means any permit, license, approval, consent or other
authorization required by any applicable Environmental Law. 

        “GAAP”
means generally accepted accounting principles in the United States of America
as in effect from time to time set forth in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession, which are
applicable to the circumstances as of the date of determination. 

        “Hazardous
Substance” means any substance or material, whether solid, liquid or
gas, listed, defined, designated or classified as hazardous, toxic, radioactive
or dangerous, or otherwise regulated, under any Environmental Law, whether by
type or by quantity; Hazardous Substance includes, without limitation, any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous
waste, special waste, industrial substance or petroleum or any derivative or
by-product thereof, radon, radioactive material, asbestos, asbestos-containing
material, urea formaldehyde foam installation, lead and polychlorinated biphenyl
classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated
under any Environmental Law.

        “Improvements”
means all buildings, structures, and fixtures, and other improvements now or
hereafter actually or constructively attached to the Real Estate, and all
modifications, additions, restorations or replacements of the whole or any part
thereof.

        “Indemnifiable
Damages” means any and all liabilities in respect of losses, suits,
proceedings, demands, judgments, damages, expenses and costs (including, without
limitation, reasonable counsel fees and costs and expenses) incurred in the
investigation, defense or settlement of any claims covered by the
indemnification set forth in this Agreement, other than special, incidental,
punitive or consequential damages. 

        “Indemnitee”
has the meaning set forth in Section 7.4.

        “Indemnitor”
has the meaning set forth in Section 7.4.

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        “Independent
Accountant” shall mean an accountant chosen by both the Acquiror and
the Shareholders, provided that if the Acquiror and the Shareholders cannot
agree on an accountant to serve as the Independent Accountant, the Acquiror
shall choose an accountant and the Shareholders shall choose an accountant, and
both accountants so chosen shall choose a third accountant to serve as the
Independent Accountant. 

        “Intellectual
Property” has the meaning set forth in Section 4.22.

        “Material
Adverse Effect” means any effect that is or is reasonably likely to be
materially adverse to the Assets, the business of the Company or the results of
operations or financial condition of the Company. 

        “Material
Agreement” means any Contract of any nature to which the Company is a
party, or by which the Company or any of its properties are bound, which (i) by
its terms obligates the Company to pay more than $1,000, (ii) in the aggregate
with all such Contracts obligates the Company to pay more than $10,000, or (iii)
restricts or prohibits the Company or any Affiliate of the Company from engaging
n any business anywhere in the world. 

        “Merger”
has the meaning set forth in the fourth paragraph of this Agreement. 

        “Permitted
Encumbrances” means (a) materialmen’s, mechanic’s,
carriers’, or other like liens arising in the ordinary course of business,
or deposits to obtain the release of such liens, securing obligations
aggregating less than $15,000, (b) liens for current taxes not yet due and
payable; (c) imperfections of title that do not interfere with the use or
detract from the value of such property; (d) liens to be released at or prior to
Closing; and (e) in the case of the Real Estate owned or real property leased by
the Company, (i) such leases for real property, (ii) municipal and zoning
ordinances, (iii) such rights of way as do not interfere with the use or detract
from the value of the property, (iv) standard (printed) title insurance
exceptions and (v) easements for public utilities, recorded building and use
restrictions and covenants which do not materially interfere with the present
use of or materially detract from the value of the property, and other minor
encumbrances. 

        “Person”
means an individual, corporation, limited liability company, partnership, sole
proprietorship, association, joint venture, joint stock company, trust,
incorporated organization, or governmental agency or other entity. 

        “Plans”
has the meaning set forth in Section 4.18.

        “Real
Estate” means each parcel of real property owned by the Company at the
date hereof together with any other parcels of real property acquired by the
Company between the date hereof and the Closing Date. 

        “Required
Consents” means those approvals and consents set forth on Schedule 3.3
separately designated as consents required for Closing. 

        “Resolution
Period” has the meaning set forth in Section 2.7.

        “Shares”
has the meaning set forth in the second paragraph of this Agreement. 

        “Shareholders”
has the meaning set forth in the first paragraph of this Agreement. 

    
    “Subsidiaries” means, with respect to
any Person, any Affiliate directly or indirectly controlled by such Person.

    
    “Surviving Corporation” has the meaning
set forth in Section 2.1.

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        “Tax”
and “Taxes” means all federal, state, local, foreign or other
taxing authority gross income, gross receipts, gains, profits, net income,
franchise, sales, use, ad valorem, property, value added, recording, business
license, possessory interest, payroll, withholding, excise, severance, transfer,
employment, alternative or add-on minimum, stamp, occupation, premium,
environmental or windfall profits taxes, and other taxes, charges, fees, levies,
imposts, customs, duties, licenses or other assessments, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any governmental authority.

        “Tax
Return” means any return, report, statement, information statement and
the like required to be filed with any governmental authority with respect to
Taxes. 

        “Third
Party” means any Person other than the Company, Acquiror, Shareholders
or any Affiliate of Acquiror. 

        “Unaudited
Financial Statements” has the meaning set forth in Section 4.6.

        The
plural of any term defined in the singular, and the singular of any term defined
in the plural, shall have a meaning correlative to such defined term. 

ARTICLE II

THE MERGER

        2.1
The Merger. Subject to the terms and conditions set forth in this
Agreement, and in accordance with Florida and Colorado law at the Effective
Time, the Company shall be merged with and into the Acquiror. Immediately
following the Merger, the separate corporate existence of the Company shall
cease and the Acquiror as the surviving corporation (the “Surviving
Corporation”) shall continue to exist under and be governed by the laws of
the State of Colorado. 

        2.2
Effective Time. As soon as practicable after the satisfaction of all of
the conditions precedent to the obligations of all parties set forth herein, the
parties shall cause the Merger to be consummated by causing certificates or
articles of merger (collectively, the “Articles of Merger”) with
respect to the Merger to be executed, filed and recorded in accordance with the
relevant provisions of Florida and Colorado law. The Merger shall become
effective at the later of the time of the filing with the Secretary of State of
the State of Florida or the filing with the Secretary of State of the State of
Colorado (the “Effective Time”). 

        2.3
Effects of the Merger. The Merger shall have the effect set forth in
Section 607.1106 of the Florida Business Corporation Act and Section 7-90-203 of
the Colorado Business Corporation Act. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all of the properties,
assets, rights, privileges, and powers of the Acquiror and the Company, shall
vest in the Surviving Corporation and all debts, liabilities and duties of the
Acquiror and the Company shall become the debts, liabilities and duties of the
Surviving Corporation in the same manner as if the Surviving Corporation had
itself incurred them. 

        2.4
Certificate of Incorporation and Bylaws of the Surviving Corporation. The
Articles of Incorporation of the Acquiror, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation, until thereafter amended in accordance with the provisions thereof
and applicable law. The Bylaws of the Acquiror in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation until amended in accordance
with the provisions thereof and applicable law. 

        2.5
Directors. The directors of the Acquiror immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and shall
hold office until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal. 

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        2.6
Officers. The officers of the Acquiror immediately prior to the Effective
Time shall be the officers of the Surviving Corporation and shall hold office
until their respective successors are duly elected and qualified, or their
earlier death, resignation or removal. 

        2.7
Consideration for the Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the Shareholders, the Shares shall
be converted into the right to receive (i) One Million Dollars ($1,000,000), of
which $150,000 has been previously advanced to the Company pursuant to a
Preliminary Term Sheet between the Company and Acquiror dated October 18, 2000,
and shall be credited against the $1,000,000, and 45,000 shares of unregistered
common stock, no par value, of Acquiror (the “Avert Shares”) (the cash
portion of the consideration and the Avert Shares are hereinafter collectively
referred to as the “Consideration”). The Shares owned by the
Shareholders who are Accredited Investors shall be converted into the right to
receive the Avert Shares and a portion of the cash consideration, as set forth
on Schedule 2.9. The Shares owned by the Shareholders who are not Accredited
Investors shall be converted into the right to receive a portion of the cash
consideration, as set forth on Schedule 2.9. The cash portion of the
Consideration shall be adjusted downward by an amount equal to (i) the amount,
if any, by which the Company’s liability to customers for prepaid services
exceeds $200,000, and (ii) any other liabilities of the Company existing on the
Closing Date other than the liabilities pursuant to the equipment leases
itemized on Schedule 2.7(A) attached hereto. 

        The
Company shall deliver to Acquiror, not less than three (3) business days prior
to the Closing a certificate (the “Closing Adjustment Certificate”)
signed by an executive officer of the Company, which shall set forth the
Company’s reasonable good faith estimates of the respective amount of the
adjustments set forth in this Section 2.7, as of the Effective Time. The Closing
Adjustment Certificate shall be in form and substance reasonably acceptable to
Acquiror, and the Company shall therewith deliver to Acquiror a copy of such
supporting evidence as shall be appropriate hereunder and as Acquiror may
reasonably request. The Acquiror and the Shareholders shall jointly determine
the adjustments at Closing required by this Section 2.7, with a final adjustment
and reconciliation within sixty (60) days after the Closing Date or within such
other period as may be mutually agreed upon by the parties hereto. The Acquiror
shall deliver to the Shareholders a proposed schedule of final adjustments as
promptly as practicable, but in no event later than 60 days after Closing. The
Shareholders must, within 30 days after receipt of the proposed schedule of
final adjustments, give written notice to the Acquiror specifying in reasonable
detail the Shareholders’ objections, if any, with respect thereto. With
respect to any disputed amounts, the parties shall meet in person and negotiate
in good faith during the ten day period (the “Resolution Period”)
after the date of the Acquiror’s receipt of Notice to resolve such
disputes. If the parties are unable to resolve all such disputes within the
Resolution Period, then within five days after the expiration of the Resolution
Period, all unresolved disputes shall be submitted to the Independent Accountant
who shall be engaged to provide a final and conclusive resolution of all
unresolved disputes within 15 business days after such engagement. The
determination of the Independent Accountant shall be final, binding and
conclusive on the parties hereto, and the fees and expenses of the Independent
Accountant shall be borne by the party that the Independent Accountant
determines to be the nonprevailing party or, in the discretion of the
Independent Accountant, may be split between the Acquiror, on the one hand, and
the Shareholders, on the other. 

        The
Acquiror shall hold back a portion of the cash consideration due and payable to
the Shareholders who are Accredited Investors at Closing equal to $150,000 (the
“Holdback”), pending the final determination of the cash portion of
the consideration. If the cash consideration, as finally determined, is greater
than the estimated cash consideration determined at the Closing Date, the
Acquiror shall pay the Holdback, plus the difference, to the Shareholders who
are Accredited Investors within five days of the final determination. To the
extent that the cash consideration, as finally determined, is less than the
estimated cash consideration determined at the Closing Date, the Acquiror shall
pay the Holdback, less the difference, to the Shareholders who are Accredited
Investors within five days of the final determination. 

        The
cash portion of the Consideration, less the amounts previously advanced and the
Holdback, shall be payable at the Closing to the Shareholders by the wire
transfer of federal funds to the accounts set forth on Schedule 2.7 (B). 

Page E-5

        2.8
Conversion of Shares. The Shares, when converted at the Effective Time
into the right to receive the Consideration as provided in Section 2.7, shall no
longer be outstanding and shall automatically be canceled and retired and each
Shareholder as holder of a certificate representing shares of common stock of
the Company shall cease to have any rights with respect thereto, except the
right to receive the Consideration. 

        2.9
Allocation  among  Shareholders. The  Consideration  shall be  allocated  among  and paid to the
Shareholders as set forth on Schedule 2.9 attached hereto.

        2.10
Intentionally Omitted.

        2.11
Closing Date. A closing of the transactions contemplated by this
Agreement (the “Closing”) shall take place at the offices of Baker
& Hostetler, LLP within 5 days of the satisfaction of all conditions
precedent contained herein, or at such other time and place as the parties may
mutually agree (the “Closing Date”). 

        2.12
Closing Date Deliveries. 

        
        (a)
The Company's and the Shareholder's Obligations. On the Closing Date, the
Company and the Shareholders shall deliver to Acquiror each of the following in
form and substance reasonably satisfactory to Acquiror:

	 	 	 	(1)	
The Articles of Merger executed by the Company.

	 	 	 	(2)	
A good standing certificate for the Company from the Secretary of State of the
State of Florida.

	 	 	 	(3)	
A corporate opinion of counsel for the Company in the form of Exhibit 2.12(A)(3)
attached hereto.

	 	 	 	(4)	
Certificates of the Company and the Shareholders that all of the representations
and warranties of the Company contained herein are true and correct in all
material respects as of the Closing Date (except to the extent that any such
representation or warranty relates by its express terms solely to a prior date,
in which event such representation or warranty was true and correct as of such
date) and that the Company and each Shareholder shall have, or have caused to be
performed all covenants, agreements and conditions contained herein to be
performed and observed by the Company and each Shareholder on or before the
Closing Date.

	 	 	 	(5)	
A certificate of the Secretary of the Company certifying resolutions duly
adopted by the Company’s Board of Directors authorizing the execution,
delivery and performance of this Agreement on the Company’s part and
certifying that such resolutions are then in full force and effect.

	 	 	 	(6)	
Each Shareholder who is an Accredited Investor, shall have executed and
delivered an Investment Representation Letter in the form attached hereto as
Exhibit 2.12(A)(6).

	 	 	 	(7)	
Each Shareholder shall deliver the certificates which immediately prior to the
Effective Time represent the Shares.

Page E-6

	 	 	 	(8)	
Each Shareholder shall deliver a release to the Company of all rights and claims
of such Shareholder against the Company.

        (9)
Such other documents and certificates of officers as reasonably may be required
by Acquiror to consummate this Agreement and the transactions contemplated
herein. 

        (10)
Each Shareholders shall deliver to the Company a written consent approving the
Merger Agreement, the merger and all related transactions. 

        
        (b)
Acquiror's Obligations. On the Closing Date, Acquiror shall deliver to
the Company and/or the Shareholders each of the following in form and substance
reasonably satisfactory to them:

	 	 	 	(1)	
A certificate of an officer of Acquiror that (a) all of the representations and
warranties of Acquiror contained herein are true and correct in all material
respects as of the Closing Date (except to the extent that any such
representation or warranty relates by its express terms solely to a prior date,
in which event such representation or warranty was true and correct as of such
date), and (b) Acquiror shall have, or have caused to be performed all
covenants, agreements and conditions contained herein to be performed and
observed by Acquiror at or before the Closing Date.

	 	 	 	(2)	
A certificate of the Secretary of Acquiror certifying resolutions duly adopted
by Acquiror’s part and certifying that such resolutions are then in full
force and effect, and certifying to the signature of those persons authorized to
execute this Agreement and any other document contemplated hereby on behalf of
Acquiror.

	 	 	 	(3)	
The Articles of Merger executed by the Acquiror.

	 	 	 	(4)	
A certificate of good standing issued by the Secretary of State of the State of
Colorado as to Acquiror.

	 	 	 	(5)	
A corporate opinion of counsel for the Acquiror substantially in the form of
Exhibit 2.12 (B)(5) attached hereto.

	 	 	 	(6)	
Such other documents as reasonably may be required by the Company to consummate
this Agreement and the transactions contemplated herein.

	 	 	 	(7)	
Cash payments to each of the Shareholders in the amounts set forth on Schedule
2.9 by wire transfer of federal funds to the accounts designated for each
Shareholder on Schedule 2.7(B).

	 	 	 	(8)	
Share certificates representing the Avert Shares that each Shareholder who is an
Accredited Investor is entitled to as set forth in Schedule 2.9.

	 	 	 	(9)	
An employment agreement to Chris Smith in the form of Exhibit 2.12(B)(9)
attached hereto.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS

        Each
Shareholder hereby, severally and not jointly, represents and warrants (as of
the date of this Agreement, except where a prior or future date is indicated) as
follows, and acknowledges that Acquiror is relying on such representations and
warranties in connection with the purchase of the Shares: 

        3.1
Title to the Shares.

        Such
Shareholder owns, beneficially and of record, all of the Shares identified
opposite such Shareholder’s name on Schedule 3.1, free and clear of all
liens and encumbrances other than any liens or encumbrances that will be
terminated or otherwise released prior to the Closing. 

        3.2
Enforceability of Agreement.

        This
Agreement has been duly and validly executed and delivered by such Shareholder
and constitutes a legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium and other
similar laws or principles affecting the rights of creditors generally and
except for limitations imposed by general principles of equity. 

        3.3
No Conflict; Required Filings and Consents.

        Except
as set forth on Schedule 3.3 hereto, the execution and delivery of this
Agreement by such Shareholder does not, and the performance by such Shareholder
of its obligations under this Agreement will not, (i) assuming receipt of
consents described in Schedule 3.3 or 4.3 hereto, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to such Shareholder
or by which any property or asset of such Shareholder is bound or affected or
(ii) result in any breach or violation of, or constitute any default (or an
event which with notice or lapse of time or both would become a default) under,
or give rise to any right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, any Contract to which such
Shareholder is a party or by which such Shareholder or any property or asset of
such Shareholder is bound, except as would not impair such Shareholder’s
ability to perform its obligations under this Agreement. 

        3.4
Brokers' Fees.

        Neither
such Shareholder nor anyone authorized to act on his or its behalf has retained
any broker, finder or agent or agreed to pay any brokerage fee, finder’s
fee or commission with respect to the transactions contemplated by this
Agreement. 

        3.5
Compliance with Laws.

        To
the best of such Shareholder’s knowledge, the Company has complied and is
in compliance with all laws, regulations, orders, writs, judgments, injunctions
and decrees of all applicable jurisdictions and governmental authorities,
departments, commissions, boards, bureaus, agencies and instrumentalities. 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        As
an inducement to Acquiror to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company hereby represents and warrants (as
of the date of this Agreement, except where a prior or future date is indicated)
to Acquiror as follows: 

        4.1
Organization and Qualification; Subsidiaries.

        The
Company is a corporation duly organized, validly existing and/or in good
standing under the laws of the State of Florida. The Company has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted. The Company is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary. The Company has no
Subsidiaries. 

Page E-8

        4.2
Organizational Documents.

        The
Company has heretofore delivered to Acquiror a complete and correct copy of each
of the certificate of incorporation and bylaws of Company, or equivalent
organizational documents, each as amended to date. Such organizational documents
are in full force and effect and constitute all of the organizational documents
relating to the Company. The Company is not in violation of any provision of its
certificate of incorporation, bylaws or equivalent organizational documents, as
applicable. 

        4.3
Effect of Agreement.

        All
approvals and consents required under (i) any of the contracts or agreements
which the Company is subject to, and (ii) any applicable government regulations,
in any such case, in order for the consummation of the sale of the Shares to
Acquiror pursuant to this Agreement are listed in Schedule 4.3 hereto. Other
than as set forth on Schedule 4.3, the execution and delivery of this Agreement
by Shareholders and the Company does not, and the performance of this Agreement
by Shareholders and the Company will not, require the Company to obtain or make
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority, except for applicable requirements,
if any, of federal or state securities or “blue sky” laws. 

        Subject
to obtaining the requisite approvals and consents listed in Schedule 3.3 hereto,
neither the execution, delivery and performance by Shareholders and the Company
of this Agreement nor the consummation of the transactions contemplated hereby,
alone or in conjunction with any other event (such as a voluntary or involuntary
termination of employment), will (i) conflict with, or result in a breach of the
terms of, or constitute a default under, or a violation of, or give rise to any
termination right under, amendment or extension of, or a loss of any benefit
under, any contract or agreement which the Company is a party, (ii) result in
the violation of any law, rule, regulation, order, writ, judgment, decree,
determination or award presently in effect or having applicability to the
Company, (iii) conflict with or violate the certificate of incorporation or
by-laws of the Company, or (iv) result in any payment becoming due to any
employee, former employee, officer, director, or consultant, or any of their
dependents; (v) increase any benefits otherwise payable under any employee
benefit plan; or (vi) result in the acceleration of the time of payment or
vesting of any benefits under any employee benefit plan. 

        4.4
Capitalization.

        The
Shares, as identified on Schedule 3.1 hereto, constitute all the issued and
outstanding shares of the Company. The Company does not own all or part of any
other companies. There are no (i) options, warrants or other rights or contracts
obligating the Company to issue or sell any shares of capital stock of, or other
equity interests in the Company or to pay cash in lieu thereof, (ii) equity
equivalents, stock appreciation rights, performance shares, interests in the
ownership or earnings of the Company or other similar rights issued by the
Company or (iii) outstanding obligations of the Company to purchase, redeem or
otherwise acquire any equity interest therein. 

        4.5
Authority Relative to this Agreement.

        The
Company has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium and similar laws or principles affecting the rights of creditors
generally and except for limitations imposed by general principles of equity. 

        4.6
Financial Statements.

        Attached
hereto as Schedule 4.6 are copies of (i) the Company’s unaudited Balance
Sheet at December 31, 2000 and related Statement of Operations and Statement of
Changes in Financial Position of the Company for its fiscal year then ended,
which have been prepared by the Company’s independent certified public
accountant (the “Unaudited Financial Statements”) and (ii) monthly
compiled statements of operations, together with month-end balance sheets, for
the months of January and February, 2001 (the “Monthly Financial
Statements”). The Unaudited Financial Statements and Monthly Financial
Statements (i) were prepared in conformity with GAAP consistently applied, and
(ii) present fairly the financial position of the Company at the dates indicated
and the results of operations of the Company and changes in financial position
for the periods indicated. 

Page E-9

        4.7
Undisclosed Liabilities.

        The
Company does not have any material liabilities or obligations, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, and the
Company does not know of any basis for any claim against the Company for any
such liabilities or obligations, except (i) to the extent set forth in this
Agreement or in the Schedules hereto, including the Audited Financial Statements
attached hereto, (ii) liabilities to its customers in the ordinary course of
business in connection with prepaid services as set forth by customer on
Schedule 4.7 attached hereto. 

        4.8
Tax Returns and Audits.

        (a)
The Company has timely filed all material federal, state, local and foreign tax
returns required to be filed by it through the date hereof and shall timely file
all tax returns required to be filed at or before the Closing. Such reports and
returns are and will be true, correct and complete in all material respects. The
Company has paid and discharged all taxes due from it, other than such taxes
that are being contested in good faith by appropriate proceedings and are
adequately reserved as shown in the audited balance sheet of such entity dated
December 31, 2000. Neither the Internal Revenue Service (the “IRS”)
nor any other taxing authority or agency, domestic or foreign, is now asserting
or, to the knowledge of the Company, threatening to assert against the Company
any material deficiency or material claim for additional taxes. Moreover, the
Company does not have knowledge of any facts on the basis of which taxing
authorities could assert material deficiencies or material claims described in
the preceding sentence. The Company has withheld or collected and paid over to
the appropriate governmental authorities or is properly holding for such payment
all taxes required by law to be withheld or collected. The Company does not have
any liability for the taxes pursuant to Section 1.1502-6 of the Treasury
Regulations promulgated under the Code or comparable provisions of any taxing
authority in respect of a consolidated or combined Tax Return. There are no
liens for Taxes upon the assets of the Company other than (i) liens for current
taxes not yet due and payable, (ii) liens for taxes that are being contested in
good faith by appropriate proceedings and (iii) other liens, which, in the
aggregate, are not material. 

        (b)
The Company filed with the Internal Revenue Service a valid S corporation
election on May 18th 1998 and such S corporation election remained
valid through December 31, 1999. The Corporation incurred no tax liability from
May 18th 1998 through December 31, 1999. 

        4.9
Material Agreements and Obligations.

        (a)
Schedule 4.9 hereto lists the Material Agreements. Except for those Contracts
listed on the Schedules hereto, and the DeMinimis Agreements, the Company is not
a party to any written or oral contract that is not cancelable without penalty
upon thirty (30) days’ notice or less, including any: 

	 	
(i)
bonus, incentive, pension, profit sharing, retirement, hospitalization,
insurance, or other plan providing for deferred or other compensation to
employees, or any other employee benefit or “fringe benefit” plan,
including, without limitation, vacation, sick leave, medical or other insurance
plans or any union collective bargaining or any other contract with any labor
union.

	 	
(ii)
employment contract for any Person on a full-time, part-time, consulting or
other basis.

	 	
(iii)
agreement or indenture relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a lien on any asset or group of assets of the
Company.

	 	
(iv)
guarantee of any obligation.

	 	
(v)
lease or agreement under which it is lessee or lessor, or holds or operates any
property, real or personal, owned by any other party, except for any lease under
which the aggregate annual rental payments do not exceed $1,000.

Page E-10

	 	
(vi)
Contract or group of related Contracts with the same party or any group of
affiliated parties which requires or may in the future require aggregate
consideration by or to the Company in excess of $1,000 individually over the
life of such Contracts and less than $10,000 in the aggregate for all such
Contracts over the life of such Contracts.

	 	
(vii)
Contract in effect between the Company and any Shareholder (or an Affiliate
thereof) or any of the officers, directors or Affiliates of the Company.

	 	
(viii)
obligations of the Company to make payments to any Shareholder (or an Affiliate
thereof) or any Affiliate of the Company.

	 	
(ix)
loans by the Company to any Shareholder (or any Affiliate thereof) or any of the
officers, directors or Affiliates of the Company.

        (b)
The Company has performed all obligations required to be performed by it and is
not in material default under, or in material breach of, or in receipt of any
claim of material default under, any Material Agreement; and the Company does
not have any knowledge of any material breach by the other parties to any
Material Agreement. 

        (c)
There is no term or provision of any Contract not included on the Schedules
hereto to which the Company is a party or by which it or any of its properties
is bound that would have a Material Adverse Effect. There is no term or
provision of any federal or state judgment, decree or order applicable to or
binding upon any member of the Company, the enforcement of which would have a
Material Adverse Effect. 

        4.10
Employees.

        (a)
The Company is not aware that any officer, executive employee or any group of
employees of the Company has or have any plans to terminate his, her or their
employment with the Company. the Company has complied in all material respects
with all applicable laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other taxes, and except as set
forth in Schedule 4.10 hereto, the Company has not received any notice of any
claim at the date of this Agreement and during the preceding three years that it
has not complied in any material respect with any laws relating to the
employment of employees or that it is liable for any arrearages of wages or any
taxes or penalties for failure to comply with any laws. The Company does not
have written policies and/or employee handbooks or manuals except those set
forth in Schedule 4.10. The Accrued Vacation Pay for the Company’s
employees is set forth by employee on Schedule 4.10. 

        (b)
Except as set forth in Schedule 4.10 hereto, the Company is not, and during the
12 months prior to the date of this Agreement the Company has not been, involved
in any labor discussion with any unit or group seeking to become the bargaining
unit for any of its employees. Except as set forth in Schedule 4.10 hereto, the
Company is not a party to any collective bargaining agreement and there are no
unfair labor practice or arbitration proceedings pending with respect to the
Company or, to the knowledge that the Company, threatened and there are no facts
or circumstances known to the Company that could reasonably be expected to give
rise to such a claim. To the knowledge of the Company, there are no
organizational efforts presently underway or threatened involving any employees
of the Company or any of the employees performing work for the Company but
provided by an outside employment agency, if any. Within the last 12 months,
there has been no work stoppage, strike or other consorted activity by any
employees of the Company. 

        (c)
Except as set forth in the Schedule 4.10 and as to those employees (if any)
represented by a labor organization, all employees of the Company are employed
at-will. Except as set forth in Schedule 4.10, completion of the
transactions contemplated by this Agreement will not result in any payment or
increased payment becoming due from the Company to any officer, director, or
employee of, or consultant to, the Company. 

        (d)
The Company is not a party to any agreement for the provision of labor from any
outside agency except as set forth in Schedule 4.10. To the knowledge of
the Company, at the date of this Agreement and during the preceding three years,
there have been no claims by employees of such outside agencies, if any, with
regard to employees assigned to work for the Company, and no claims by any
governmental agency with regard to such employees except as set forth in
Schedule 4.10. 

        4.11
Absence of Certain Developments.

        Except
as set forth on Schedule 4.11 hereto, and except for the transactions
contemplated by this Agreement, the Company has not, insofar as the Assets are
concerned, since December 31, 2000: 

	 	
(i)
borrowed any amount or incurred or become subject to any liabilities (absolute
or contingent) except liabilities incurred in the ordinary course of business;

Page E-11

	 	
(ii)
mortgaged or pledged any of its assets, tangible or intangible, or subjected
them to any lien, charge or other encumbrance, except Permitted Encumbrances and
liens securing indebtedness to be retired on or prior to the Closing Date;

	 	
(iii)
sold, assigned or transferred any of its tangible assets, except in the ordinary
course of business, or canceled any debts or claims;

	 	
(iv)
suffered any substantial losses other than consistent with recent operating
history;

	 	
(v)
except in the ordinary course of business, waived or released any material right
or claim;

	 	
(vi)
made any changes in employee compensation or personnel policies, including the
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, option, stock purchase or other Plan (as
hereinafter defined), declared, paid or committed to pay a bonus or

	 	
additional salary or compensation to any Person, or made any other increase in
the compensation payable to or to become payable to any executive officers of
the Company, except in the ordinary course of business and consistent with past
practices;

	 	
(vii) entered into any other transaction other than in the ordinary course of
business;

	 	
(viii)
amended or terminated any Contract listed in any Schedule hereto, except in the
ordinary course of business and except for Contracts that have expired by their
own terms;

	 	
(ix)
suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;

	 	
(x)
has suffered a Material Adverse Effect, or has had any event or events occur
that, individually or in the aggregate, are reasonably likely to result in a
Material Adverse Effect;

	 	
(xii)
materially changed any of its accounting principles or practices, or revalued
any Assets for financial reporting, property tax or other purposes; or

	 	
(xiii)
entered into any Contract or understanding to do any of the foregoing.

        4.12
Real Property.

        Schedule
4.12 hereto contains a legal description of each parcel of Real Estate owned by
the Company together with a description of the type of use of each such parcel.
The Company has furnished to Acquiror a copy of any title insurance policy or
other evidence of title issued with respect to each owned parcel of Real Estate
owned by the Company. Except for any Permitted Encumbrances, the Company is the
sole owner (both legal and equitable) of, and has good and marketable title in
fee simple absolute to, each parcel of Real Estate listed on Schedule 4.12 and
all buildings, structures and Improvements thereon, and the unfettered right to
occupy the leased property free and clear of any options to lease or purchase.
The location and use of each parcel of real property leased by the Company is
identified on Schedule 4.9. The Real Estate and all of the real property leased
by the Company complies and is operated in material compliance with all
applicable laws. There are no defects in the physical condition of the Real
Estate or the Improvements located on the Real Estate, which could impair or
prevent the current or proposed use thereof by the Company. The Company has not
received any notice from any governmental body (a) requiring it to make any
material repairs or changes to the Real Estate or the Improvements located on
the Real Estate or (b) giving notice of any material governmental actions
pending. There is no action, proceeding or litigation pending (or, to the best
knowledge of the Company, contemplated or threatened): (i) to take all or any
portion of the Real Estate, or any interest therein, by eminent domain; or (ii)
to modify the zoning of, or other governmental rules or restrictions applicable
to, the Real Estate or the use or development thereof in any manner which could
impair or prevent the current or proposed use thereof by the Company. There are
no contracts or other obligations outstanding for the sale, exchange or transfer
of any of the Real Estate. 

        4.13
Title to Assets; Personal Property.

        The
Company is the sole owner (both legal and equitable) of and has good and
marketable title to the Assets constituting personal property, tangible and
intangible, free and clear of all mortgages, liens, security interests, charges,
claims, restrictions and other encumbrances of every kind other than with
respect to the liens securing the Company’s indebtedness and the Permitted
Encumbrances. The material items of machinery, equipment and other tangible
assets included in the Assets are in satisfactory operating condition,
reasonable wear and tear excepted, and conform, in all material respects, to all
applicable ordinances, rules, regulations and technical standards, and all
applicable building, zoning and other laws. 

Page E-12

        4.14
Compliance with Laws.

        The
operations of the Company’s business has been, and is being, conducted in
material compliance with all applicable laws, rules, regulations and other
requirements of all federal, state, county or local governmental authorities or
agencies. 

        4.15
Transactions.

        Except
as disclosed on Schedule 4.15 hereto, since December 31, 2000, the Company has
not entered into any transaction outside the ordinary course of its business,
and there has not been any material change in the manner in which the Company
conducts its business. Since December 31, 2000 there has not been any Material
Adverse Effect. 

        4.16
Litigation and Legal Proceedings.

        Set
forth on Schedule 4.16 hereto is a complete and accurate list and description of
all suits, claims, actions and administrative, arbitration or other similar
proceedings relating to the Company (including proceedings concerning labor
disputes or grievances, civil rights discrimination cases and affirmative action
proceedings) and all governmental investigations pending or, to the knowledge of
the Company, threatened, to which the Company is a party, or against its
properties or business, and each judgment, order, injunction, decree or award
relating to the Company or the Assets (whether rendered by a court or
administrative agency, or by arbitration pursuant to a grievance or other
procedure) to which the Company is a party that is unsatisfied or requires
continuing compliance therewith. To the Company’s knowledge, there are no
facts or circumstances that would give rise to any material claims against the
Company or the Assets. 

        4.17
Brokers' Fees.

        The
Company has not employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders’ fees in connection with the
transactions contemplated by this Agreement. 

        4.18
Plans; ERISA.

        (a)
Existence of Plans. For purposes of this Agreement, the term
“Plans” shall mean (i) all “employee benefit plans” (as
such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), of which the Company, or
any member of the same controlled group as the Company within the meaning of
Section 4001(a)(14) of ERISA (an “ERISA Affiliate”) is or ever
was a sponsor or participating employer or as to which the Company or any of
their ERISA Affiliates makes contributions or is required to make contributions,
and (ii) any similar employment, severance or other arrangement or policy
of the Company or any of its ERISA Affiliates (whether written or oral)
providing for health, life, vision or dental insurance coverage (including
self-insured arrangements), workers’ compensation, disability benefits,
supplemental unemployment benefits, vacation benefits or retirement benefits,
fringe benefits, or for profit sharing, deferred compensation, bonuses, stock
options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits. Except as disclosed on
Schedule 4.18, neither the Company nor any of its respective ERISA Affiliates
maintains or sponsors (or ever maintained or sponsored), or makes or is required
to make contributions to, any Plans. None of the Plans is or was a
“multi-employer plan,” as defined in Section 3(37) of ERISA. None
of the Plans is or was a “defined benefit pension plan” within the
meaning of Section 3(35) of ERISA. None of the Plans provides or provided
post-retirement medical or health benefits. None of the Plans is or was a
“welfare benefit fund,” as defined in Section 419(e) of the Code,
or an organization described in Sections 501(c)(9) or 501(c)(20) of the
Code. Neither the Company nor any ERISA Affiliate is or was a party to any
collective bargaining agreement. Except as disclosed on Schedule 4.18, neither
the Company nor any ERISA Affiliate has announced or otherwise made any
commitment to create or amend any Plan. Notwithstanding any statement or
indication in this Agreement to the contrary, except as disclosed on Schedule
4.18, there are no Plans which the Company will not be able to terminate
immediately after the Closing in accordance with their terms and ERISA. The
Company has made available to Acquiror true and complete copies of:
(i) each of the Plans and any related funding agreements thereto (including
insurance contracts) including all amendments, all of which are legally valid
and binding and in full force and effect and there are no defaults thereunder,
(ii) the currently effective Summary Plan Description pertaining to each of
the Plans, as applicable, (iii) the three (3) most recent annual reports
for each of the Plans (including all related schedules), (iv) the most recent
Internal Revenue Service determination or opinion letter, as applicable, for
each Plan which is intended to constitute a qualified plan under
Section 401 of the Code and each amendment to each of the foregoing
documents, and (v) for each unfunded Plan, financial statements which shall
fairly present the financial condition and the results of operations of such
Plan in accordance with GAAP, consistently applied, as of such dates. 

Page E-13

        (b)
Penalties. To the Company’s knowledge, neither the Company nor any
of its respective ERISA Affiliates is subject to any material liability, tax or
penalty whatsoever to any Person or agency whomsoever as a result of engaging in
a prohibited transaction under ERISA or the Code, and neither the Company nor
any of its respective ERISA Affiliates has any knowledge of any circumstances
which reasonably might result in any material liability, tax or penalty,
including but not limited to, a penalty under Section 502 of ERISA, as a
result of a breach of any duty under ERISA or under other applicable laws. Each
Plan which is required to comply with the provisions of Sections 4980B and
4980C of the Code, or with the requirements referred to in Section 4980D of
the Code, has complied in all material respects. No event has occurred which
could subject any Plan to tax under Section 511 of the Code. 

        (c)
Qualification. Each of the Plans which is intended to be a qualified plan
under Section 401(a) of the Code has received a favorable determination or
opinion letter from the Internal Revenue Service, and has been operated in all
material respects in accordance with its terms and with the provisions of the
Code. All of the Plans have been administered and maintained in substantial
compliance with ERISA, the Code and all other applicable laws. All contributions
required to be made to each of the Plans under the terms of that Plan, ERISA,
the Code or any other applicable laws have been timely made. Each Plan intended
to meet the requirements for tax-favored treatment under Subchapter B of Chapter
1 of the Code meet such requirements. Except as set forth in Schedule 4.18, the
Company has not made any payments, are not obligated to make any payments, and
are not parties to any Contract or Plan that under certain circumstances,
considered either individually or in the aggregate, could require it to make any
payments, that are not deductible as a result of the provisions set forth in
Section 280G of the Code or the treasury regulations thereunder or would
result in an excise tax to the recipient of any such payment under
Section 4999 of the Code. The Audited Financial Statements and the
Unaudited Financial Statements properly reflect all amounts required to be
accrued as liabilities to date under each of the Plans. Except as disclosed on
Schedule 4.18, or as a result of the employment agreement required by
Section 2.12(B)(a), the execution and performance of this Agreement will not
(i) result in any obligation or liability (with respect to accrued benefits
or otherwise) of the Company or Acquiror to any Plan, or any present or former
employee of the Company, (ii) be a trigger event under any Plan that will
result in any payment (whether of severance pay or otherwise) becoming due to
any present or former employee, officer, director, shareholder, contractor, or
consultant, or any of their dependents, or (iii) accelerate the time of
payment or vesting, or increase the amount, of compensation due to any employee,
officer, director, shareholder, contractor, or consultant of the Company. With
respect to any insurance policy which provides, or has provided, funding for
benefits under any Plan, (I) there is and will be no liability of the
Company or Acquiror in the nature of a retroactive or retrospective rate
adjustment, loss sharing arrangement, or actual or contingent liability as of
the Closing Date, nor would there be any such liability if such insurance policy
were terminated as of the Closing Date, and (II) no insurance company
issuing any such policy is in receivership, conservatorship, bankruptcy,
liquidation, or similar proceeding, and, to the knowledge of the Company, no
such proceedings with respect to any insurer are imminent. 

        (d)
Litigation. Other than routine claims for benefits under the Plans, there
are no pending, or, to the best knowledge of the Company, threatened,
investigations, proceedings, claims, lawsuits, disputes, actions, audits or
controversies involving the Plans, or the fiduciaries, administrators, or
trustees of any of the Plans or the Company, any Subsidiary or any of their
respective ERISA Affiliates as the employer or sponsor under any Plan, with any
of the IRS, the Department of Labor, the PBGC, any participant in or beneficiary
of any Plan or any other Person whomsoever. The Company knows of no reasonable
basis for any such claim, lawsuit, dispute, action or controversy. 

        4.19
Insurance, Surety Bonds, Damages.

        Set
forth on Schedule 4.19 hereto is a correct list of all insurance policies and
surety bonds of the Company now in effect, including the names of the insureds
and their addresses. The premiums on such insurance policies and bonds have been
currently paid, and such policies and bonds are valid, outstanding and
enforceable, in full force and effect and insure against risks and liabilities
and provide for coverage to the extent and in a manner required of or deemed
reasonably appropriate and sufficient by the Company. The Company will maintain
coverage of similar kinds and amounts and will pay the premium for such coverage
through the Closing Date. 

Page E-14

        4.20
Environmental Laws.

        Except
as set forth in Schedule 4.20: (i) the Company is in material compliance with
all Environmental Laws; (ii) the Company has not received any order, directions
or notices relating to any release or threatened release of any Hazardous
Substance, or alleging a violation of any Environmental Law and no government
agency has submitted to the Company any request for information pursuant to any
Environmental Law; (iii) to the best of the Company’s knowledge, there are
no material Environmental Permits required under any Environmental Law in
connection with the conduct of the Company’s business; and (iv) there has
been no generation, use, treatment, disposal, or actual or threatened release of
any Hazardous Substance by the Company or, to the Company’s knowledge
(without any obligation of further investigation), by any other party at, in,
under, or about any of the real property currently or formerly owned, leased,
occupied or used by Company. Except as set forth on Schedule 4.20, the Company
has not received any notification pursuant to any Environmental Laws that: (i)
any work, repairs, construction or capital expenditures are required to be made
in respect of any of the Assets as a condition of continued compliance with any
Environmental Laws; or (ii) any currently held material Environmental Permit is
about to be made subject to materially different limitations or conditions, or
is about to be revoked, withdrawn or terminated. The Company has provided
Acquiror with complete and correct copies of all studies, reports or surveys in
the possession of the Company relating to the presence or alleged presence of
Hazardous Substances at, on or affecting the Real Estate or leased or occupied
real property. 

        4.21
No Other Commitment to Sell.

        Neither
the Company nor any of the Assets is directly or indirectly subject in any
manner to any written or oral commitment or any arrangement for the sale,
transfer, assignment, or disposition thereof, in whole or in part, except (i) as
provided in the general security provisions of any of the Company’s debt
instruments, (ii) the sale of any Asset in the ordinary course of business which
has been or will be replaced by the Company on or before the Closing Date with a
replacement Asset of equal or greater value, or (iii) as otherwise set forth in
Schedule 4.21 hereto. 

        4.22
Trademarks, Patents and Copyrights.

        The
Company owns or possesses adequate licenses or other valid rights, title and
interest to use all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets, applications
for trademarks and for service marks, know-how, inventions, software, manuals,
logos and other proprietary rights and information, including, without
limitation, the Assessment Technology (collectively, “Intellectual
Property”) used or held for use in connection with the business of the
Company as currently conducted or as contemplated to be conducted. Except as set
forth on Schedule 4.22, the Company is the sole and exclusive owner of all
right, title and interest in and to all Intellectual Property free and clear of
all liens, claims, charges, equities, rights of use, encumbrances and
restrictions whatsoever. None of Intellectual Property is registered with any
governmental or regulatory authority except as set forth on Schedule 4.22. 

        Other
than the Intellectual Property listed on Schedule 4.22, no patent, invention,
trade secret, process, proprietary right, proprietary knowledge, know how,
computer software, trademark, name, service mark, trade name, copyright, mark,
symbol, logos, franchise, permit license, sublicense or other such right is
necessary for the operation of the business of the Company as the same is
currently conducted. The business of the Company as conducted prior to the Time
of Closing, the sale by Sellers, and ownership by Buyer of any of the Assets,
was not, is not and will not be in contravention of any trade name, service
mark, patent, trademark, copyright or other proprietary right, including,
without limitation, the License, of any third party. 

        Except
as set forth in Schedule 4.22, none of the Intellectual Property: has been
hypothecated, sold, assigned or licensed by the Company or to the best knowledge
of each Seller and the Company, any other person, corporation, firm or other
legal entity; infringe upon or violate the rights of any person, firm,
corporation, or other legal entity; are subject to challenge, claims of
infringement, unfair competition or other claims; or are being infringed upon or
violated by any person, firm, corporation or other legal entity. Except as set
forth in Schedule 4.22: neither any Seller nor the Company has given any
indemnification against patent, trademark or copyright infringement as to any
equipment, materials, products, services or supplies which any Seller or the
Company produces, uses, licenses or sells; no product, process, method or
operation presently sold, licensed, offered, engaged in or employed by the
Company infringes upon any rights of any other person, firm, corporation or
other legal entity; there is not pending or threatened any claim or litigation
against any Seller or the Company contesting the right of any Seller or the
Company to sell, license, offer, engage in or employ any such product, process,
method, or operation; and there is not, to the best knowledge of each Seller and
the Company, pending, proposed or threatened, any patent, copyright, trade name,
trademark, service mark, invention, device, application or principle which would
adversely affect in a material fashion the future operation by Buyer of the
Company’s business after the Closing on substantially the same basis as
said business was theretofore operated. 

Page E-15

        The
Assessment Technology contains, includes and performs to the technical and
functional specifications set forth on Schedule 4.22.

        4.23
Bank Accounts.

        A
complete list of each bank account maintained by Company, including safe deposit
boxes maintained by Company, the account balances and the names of the persons
authorized to draw down upon or have access thereto is set forth on Schedule
4.23. 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF ACQUIROR

        As
an inducement to Shareholders to enter into this Agreement and to consummate the
transactions contemplated hereby, Acquiror hereby represents (as of the date of
this Agreement) and warrants as follows: 

        5.1
Organization.

        Acquiror
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Colorado and has the power and authority to own and use
its properties and to transact the business in which it is engaged. 

        5.2
Authority Relative to this Agreement.

        Acquiror
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Acquiror and the consummation by Acquiror of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of Acquiror are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Acquiror and,
assuming the due authorization, execution and delivery by the other parties
hereto, constitutes a legal, valid and binding obligation of Acquiror,
enforceable against Acquiror in accordance with its terms. 

        5.3
No Conflict; Required Filings and Consents.

        The
execution and delivery of this Agreement and all other instruments or documents
executed by Acquiror in connection herewith and the consummation of the
transactions contemplated hereby will not (i) conflict with or violate the
certificate of incorporation, or bylaws of Acquiror, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Acquiror or by which any property or asset of Acquiror is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, any Contract to
which Acquiror is a party or by which Acquiror or any property or asset of
Acquiror is bound except, in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences that would not
prevent or delay consummation of the Closing, or otherwise prevent Acquiror from
performing its obligations under this Agreement. 

        The
execution and delivery of this Agreement by Acquiror does not, and the
performance of this Agreement by Acquiror will not, require Acquiror to obtain
or make any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental authority, except (i) for applicable
requirements, if any, of (A) federal or state securities or “blue sky”
laws, and (B) state and local governmental authorities, (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Closing
or otherwise prevent Acquiror from performing its obligations under this
Agreement. 

Page E-16

        5.4
Litigation.

        There
is no claim, action or proceeding pending or threatened against Acquiror of
which Acquiror has received notice, which if determined adversely would prevent
or delay the consummation of the transactions contemplated by this Agreement,
and no judgment, order or decree has been entered nor any such liability
incurred having such effect. 

        5.5
Finders' and Brokers' Fees.

        No
broker, finder or investment banker is entitled to any brokerage, finder’s
or other fee or commission in connection with the transaction provided for in
this Agreement based upon arrangements made by or on behalf of Acquiror. 

ARTICLE VI

CONDITIONS TO CLOSING

        6.1
Conditions to Acquiror's Obligations. The obligations of the Acquiror under this
Agreement are subject, at the option of the Acquiror, to the fulfillment of each
of the following conditions as of the Closing:

        
        (a) Accuracy of Representations
and Compliance with Agreement. All representations and warranties of
Shareholders and the Company contained in this Agreement shall be true and
accurate, in all material respects, as of the Closing, and Shareholders and the
Company shall have performed and complied with, in all material respects, all of
their respective obligations under this Agreement.

        
        (b) Threatened or Pending
Proceedings. No proceedings shall have been initiated or threatened by any
person or governmental agency or instrumentality seeking to enjoin or otherwise
restrain the consummation of the transactions contemplated hereby.

        
        (c) No Law Prohibiting
Consummation. At the Closing Date, there shall exist no applicable law, rule,
regulation, order, judgment or injunction the effect of which is to prohibit
consummation of the transactions contemplated by this Agreement.

        
        (d) Delivery of Documents.
Shareholders shall have delivered to the Acquiror the documents set forth in
Section 2.12 hereof.

        6.2
Conditions to Obligations of Shareholders and the Company. The
obligations of Shareholders and the Company under this Agreement are subject, at
the option of Shareholders and the Company, to the fulfillment of each of the
following conditions as of the Closing: 

        
        (a) Accuracy of Representations
and Compliance with Agreement. All representations and warranties of Acquiror
contained in this Agreement shall be true and accurate, in all material
respects, as of the Closing, and Acquiror shall have performed and complied
with, in all material respects, all of its obligations under this Agreement and
there shall be no uncured default of Acquiror under any term of this
Agreement.

        
        (b) Receipt of Purchase Price.
Shareholders shall have received the Consideration as provided in Section 2.7
hereof.

        
        (c) Threatened or Pending
Proceedings. No proceedings shall have been initiated or threatened by any
person or governmental agency or instrumentality seeking to enjoin or otherwise
restrain the consummation of the transactions contemplated hereby.

Page E-17

        
        (d) Delivery of Documents.
Acquiror shall have delivered the documents set forth in Section 2.12(b) to
Shareholders.

ARTICLE VII

INDEMNIFICATION

        7.1
Indemnification by Shareholders with Respect to the Company.

        From
and after the Closing, Shareholders shall jointly and severally indemnify
Acquiror against and hold it harmless from any and all Indemnifiable Damages
which Acquiror may suffer or incur by reason of the Company’s breach of any
of the Company’s representations and warranties contained in this Agreement
or any document, certificate or agreement delivered pursuant hereto; or (ii) the
company’s breach of any of the Company’s covenants or agreements
contained in this Agreement or any document, certificate or agreement delivered
by the Company pursuant hereto. However, notwithstanding anything contained in
this Agreement to the contrary, if Acquiror makes any claim for damages,
Acquiror will use reasonable efforts to mitigate the amount and nature thereof
in accordance with customary industry maintenance procedures. 

        7.2
Indemnification by Shareholders for Shareholder Breaches.

        From
and after the Closing each Shareholder shall indemnify Acquiror against and hold
it harmless from any and all Indemnifiable Damages which Acquiror may suffer or
incur by reason of (i) inaccuracy of any of the representations or warranties of
such Shareholder contained in Article III of this Agreement; or (ii) such
Shareholder’s breach of any of its covenants or agreements contained in
this Agreement or any document, certificate or agreement delivered by such
Shareholder pursuant hereto. Notwithstanding anything contained in this Section
7.2 to the contrary, if there is a claim for damages, Acquiror will use
commercially reasonable efforts to mitigate the amount and nature of such
damages in accordance with customary industry maintenance procedures. 

        7.3
Indemnification by Acquiror.

        From
and after the Closing, Acquiror will indemnify Shareholders against and hold
them harmless from any and all Indemnifiable Damages which any of the
Shareholders may suffer or incur by reason of (i) Acquiror’s breach of any
of Acquiror’s representations and warranties contained in this Agreement or
any document, certificate or agreement delivered pursuant hereto; or (ii)
Acquiror’s breach of any of Acquiror’s covenants, or agreements
contained in this Agreement or any document, certificate or agreement delivered
pursuant hereto; or (iii) any liability for claims made by Third Parties against
any of the Shareholders arising out of the operation of the Company’s
business by Acquiror after the Closing Date. Without limiting the generality of
the foregoing, with respect to the measurement of Indemnifiable Damages,
Shareholders shall have the right to be put in the same financial position as
they would have been in had Acquiror not breached the respective representation,
warranty, covenant or agreement. 

        7.4
Notice and Right to Defend Third Party Claims.

        Promptly
upon receipt of notice of any claim, demand or assessment made by any Third
Party or the commencement of any suit, action or proceeding brought by any Third
Party in respect of which indemnity may be sought under any provision of Article
VII hereof, the party seeking indemnification (the “Indemnitee”) will
give written notice thereof to the party from whom indemnification is sought
(the “Indemnitor”) promptly and in any event within sufficient time to
enable the Indemnitor to respond to such claim, demand, or assessment or answer
or otherwise plead in such suit, action or proceeding. The failure or omission
of such Indemnitee to so notify promptly the Indemnitor of any such Third Party
claim, demand, assessment, suit, action or proceeding shall not relieve such
Indemnitor from any liability which it may have to such Indemnitee in connection
therewith, on account of any indemnity agreement contained in Article VII
hereof, except to the extent that the Indemnitor shall have been actually
prejudiced thereby. In case any Third Party claim, demand or assessment shall be
asserted or Third Party suit, action or proceeding commenced against an
Indemnitee, and such Indemnitee shall notify the Indemnitor of the commencement
thereof, the Indemnitor shall be entitled to participate therein, and, to the
extent that it may wish, to assume the defense, conduct or settlement thereof,
with counsel reasonably satisfactory to the Indemnitee by providing the
Indemnitee with written notice within 10 business days after the
Indemnitor’s receipt of the Indemnitee’s notice of the claim, demand,
assessment, suit, action or proceeding. After notice from the Indemnitor to the
Indemnitee of its election so to assume the defense, conduct or settlement
thereof within such 10-business day period, the Indemnitor will not be liable to
the Indemnitee for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense, conduct or settlement thereof. The
Indemnitee, at Indemnitor’s cost and expense, will cooperate with the
Indemnitor in connection with any such claim, and make personnel, books and
records relevant to the claim available to the Indemnitor. Neither party shall
settle such claim, demand, assessment, suit, action or proceeding without the
consent of the other party, which shall not be unreasonably withheld provided
that in no event shall either party be obligated to consent to any settlement
which (i) arises from or is part of any criminal action, suit or proceeding,
(ii) contains a stipulation to, confession of judgment with respect to, or
admission or acknowledgment of, any liability or wrongdoing on the part of such
party, (iii) provides for injunctive relief, or other relief or finding other
than money damages, which is binding on such party, or (iv) does not
contain an unconditional release of such party. 

Page E-18

ARTICLE
VIII

SECURITIES LAW MATTERS

        The
parties agree as follows with respect to the sale or other disposition after the
Closing Date of the Avert Shares:

        8.1
Disposition of Shares. Each Shareholder who will receive Avert Shares
pursuant to Section 2.7 hereof, represents and warrants that the Avert Shares
being acquired by him hereunder are being acquired and will be acquired for his
own account and will not be sold or otherwise disposed of, except (a) pursuant
to an exemption from the registration requirements under the Securities Act, or
(b) pursuant to an effective registration statement filed by Acquiror with the
SEC under the Securities Act. 

        8.2
Legends. The certificates representing the Avert Shares shall bear the
following legend (or such similar legend used by Acquiror at the Closing): 

	 	
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO, OR (b) IN
ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

Acquiror may place stop
transfer orders with its transfer agent with respect to such certificates in
accordance with federal securities laws.

ARTICLE IX

MISCELLANEOUS PROVISIONS

        9.1
Nature and Survival of Representations and Warranties. All
representations and warranties made by the parties hereto shall survive the
Closing, except to the extent waived in writing by the party to whom such
representation and warranty was made, and notwithstanding any investigation
heretofore or hereafter made by or on behalf of such party. 

Page E-19

        9.2
Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any and all prior discussions, agreements and
understandings of every and any nature among the parties hereto, other than as
set forth in this Agreement or any agreement or writing supplied in conjunction
herewith, or as may be, on or after the date hereof, set forth in writing and
signed by the party to be bound thereby. 

        9.3
Assignment. No party may assign any of its rights or delegate any of its duties
under this Agreement without the consent of the other parties.

        9.4
Governing Law. This Agreement shall be governed by and construed in accordance
with the laws and judicial decisions of the State of Colorado.

        9.5
Headings. The headings of the sections of this Agreement have been
inserted solely for the convenience of reference only for the parties hereto and
shall not be deemed to be a part of this Agreement nor shall such be used to
construe any of the terms or provisions hereof. 

        9.6
Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by registered
or certified U.S. Mail with postage prepaid, return receipt requested, on the
first attempted delivery date to the following addresses: 

	 	
If to the Company:

Advantage Assessment, Inc.

With a copy to:

If to Shareholders:

	 	
Christopher M. Smith

1195 Gulf Breeze Parkway

Gulf Breeze, Florida 32561

Christian R. Bailey

2905 Davenport Drive

Owens Cross Roads, Alabama 35763

D. Scott Othoson

108 W. Cross Street

Galena, Maryland 21635

Nancy E. Norris

343 Deerpoint Drive

Gulf Breeze, Florida 43561

If to Acquiror:

Avert, Inc.

301 Remington Street

Fort Collins, Colorado 80524

Attention: Dean Suposs

Telecopy: 970-221-1526

Page E-20

	 	
With a copy to:

Thomas H. Maxfield, Esq.

Baker & Hostetler LLP

303 East 17th Avenue, Suite 1100

Denver, Colorado  80203

Telecopy: 303-861-2307

        or
to such other addresses as any respective party shall specify by written notice
to the other parties hereto. 

        9.7
Expenses. Whether or not the transactions contemplated by this Agreement
are consummated, each party hereto shall bear his or its own fees and expenses
incurred in the negotiation, preparation and execution of and Closing pursuant
to this Agreement. 

        9.8
Severability. If one or more of the provisions contained in this
Agreement shall be declared to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. 

        9.9
Counterparts. This Agreement may be executed in one or more counterparts and
each executed copy shall constitute an original. 

	 	
IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.

                                                     ACQUIROR:

                                                     AVERT, INC.

                                                     By: _____________________
                                                     Name: ___________________

                                                     Title:____________________

                                                     COMPANY:

                                                     ADVANTAGE ASSESSMENT, INC.
                                                     By: ______________________
                                                     Name:____________________

                                                     Title:_____________________

                                                     SHAREHOLDERS:

                                                     Christopher M. Smith

                                                     Nancy E. Norris

                                                     Christian R. Bailey

                                                     D. Scott Othoson

Page E-21

INDEX TO
EXHIBITS

Exhibit 2.12(A)(3)                  Company's Opinion of Counsel
Exhibit 2.12(A)(6)                  Investment Representation Letter
Exhibit 2.12(B)(5)                  Acquiror's Opinion of Counsel
Exhibit 2.12(B)(9)                  Smith Employment Agreement

                               INDEX OF SCHEDULES
                               ------------------

Schedule                   Title
--------                   -----

2.7(A)                       Equipment Lease Liabilities
2.7(B)                       Shareholders' Accounts
2.9                          Allocation among Shareholders
3.1                          Shares
3.3                          Shareholders' Required Consents
4.3                          Company Required Consents
4.6                          Financial Statements
4.7                          Prepaid Services
4.9                          Material Agreements
4.10                         Employment Matters
4.11                         Absence of Certain Developments
4.12                         Real Estate
4.15                         Transactions Outside of Ordinary Course of Business
4.16                         Litigation
4.18                         Employee Benefit Plans
4.19                         Insurance Policies
4.20                         Noncompliance with Environmental Laws
4.21                         Sale Commitments
4.22                         Intellectual Property

Page E-22

Exhibit 2.12(A)(3)
                                                   E-2.2(A)(3)-1

        
______________, 2001

Avert, Inc.

301 Remington Street

Fort Collins, Colorado 80524

        Re:
Agreement and Plan of Merger dated as of [ ], 2001 (the "Agreement") among
Avert, Inc. (the "Company"), Advantage Assessment, Inc. ("Advantage"), and the
Shareholders listed on the signature pages of the Agreement (collectively, the
"Shareholders"); 

Gentlemen and Ladies: 

        We
are furnishing this opinion pursuant to Section 2.12(a)(3) of the Agreement.
Capitalized terms used herein and not defined shall have the meanings set forth
in the Agreement. 

EXAMINATION

        We
have acted as counsel to Advantage in connection with the Agreement and the
merger of Advantage with and into the Company in accordance with the applicable
statutes of the States of Florida and Colorado (the “Merger”)
contemplated thereby. For purposes of this opinion we have examined and relied
upon the following: 

        A.
The executed Agreement and the schedules and exhibits attached thereto;

        B.
The Articles of Incorporation of Advantage, certified by the Florida Secretary
of State as of a recent date (the "Articles"); 

        C.
The Bylaws of Advantage, certified by an officer of Advantage (the "Bylaws");

        D.
Copies of certain resolutions adopted by the Board of Directors of Advantage
authorizing the execution and delivery of the Agreement; 

        E.
Certificates as to the incumbency and signatures of officers of Advantage
authorized to execute documents on behalf of Advantage; 

        F.
Certificate of the Secretary of State of Florida as to the good standing of
Advantage, dated [        ] (the "Good
Standing Certificate"); and 

        G.
The Officers' Certificate (as defined below) attached hereto as Annex A.

        We
specifically advise you, with your consent, that we have not been requested to
review, nor have we reviewed, any other documents in connection with the
transactions contemplated by the Agreement. 

        Further,
we advise you that we have not been retained or engaged to perform, nor have we
performed, any independent investigation of the existence of orders or decrees
to which Advantage may be a party or to which any of its assets or property may
be subject, or by which Advantage or any of its assets or property may be bound,
nor have we been retained or engaged to perform, or performed, any independent
review or investigation as to the existence of any claims, litigation, action,
suits, proceedings, investigations or inquiries, administrative or judicial,
pending or threatened, against or relating to Advantage or its assets or
property. The opinions expressed herein are limited by the scope of our review. 

E-2.2(A)(3)-1

ASSUMPTIONS

        For
purposes of this opinion, we assume the following: 

        A.
The genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity with
the original documents of all documents submitted to us as certified,
photostatic or reproduced copies and the authenticity of such; 

        B.
All representations, warranties, covenants and conditions set forth in the
Agreement and all other agreements required thereby are accurate as to factual
matters, and all terms, conditions and covenants set forth therein have been
complied with, as of the date hereof; 

        C.
The authenticity and accuracy of all matters set forth in the Officers'
Certificate and all other oral or written certifications and statements of fact
upon which we are relying; and 

        D.
The due authorization, execution and delivery of the Agreement and other
agreements of the Company, Advantage, and the Shareholders required thereby by
such parties, and that all such agreements, including the Agreement, are the
legal, valid and binding obligations of such party enforceable against each in
accordance with their respective terms. 

OPINION 

        Based
upon and subject to the foregoing and the qualifications set forth at the end of
this opinion, we are of the opinion that: 

		1.	
Advantage is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida.

		2.	
Advantage has all requisite corporate power and authority to execute, deliver
and perform, as of the Closing Date, the Agreement and all other agreements of
Advantage required thereby.

		3.	
The execution, delivery and performance by Advantage, as of the Closing Date, of
the Agreement, and of each other agreement of Advantage required thereby will
not violate the Articles or Bylaws and will not violate, result in a breach of,
or constitute a default under, any material lease, mortgage, contract,
agreement, instrument, law, rule, regulation, judgment, order or decree known to
us to which Advantage is a party or to which it or any of its properties or
assets may be bound.

		4.	
The Agreement and each other agreement of Advantage required thereby have been
duly executed and delivered by Advantage and each constitutes a valid and
binding obligation of Advantage, enforceable against it in accordance with their
respective terms.

		5.	
To our knowledge, there is no litigation or other proceeding before any court or
administrative agency pending or threatened against Advantage which questions
the validity of, or which would prevent consummation of the transactions
contemplated by, the Agreement or such other agreements of Advantage required
thereby.

		6.	
All outstanding shares of Advantage’s common stock are duly and validly
authorized and issued, fully paid and nonassessable and have not been issued in
violation of any preemptive right of any stockholders; and, to our knowledge,
there is no existing option, warrant, right, call subscription or other
agreement or commitment obligating Advantage to issue or sell, or to purchase or
redeem, any shares of its capital stock other than as stated in the Agreement.

E-2.2(A)(3)-2

		7.	
To our knowledge, no consent, approval, authorization or order of any court or
governmental agency or body, which has not been obtained is required on behalf
of Advantage for consummation of the transactions contemplated by this
Agreement.

		8.	
Advantage has complied with the shareholder dissenter rights under Florida law.

QUALIFICATIONS 

        A.
Our opinion set forth in paragraph 1 above as to the existence and/or good
standing of Advantage under the laws of the State of Florida is based solely
upon the Good Standing Certificate. 

        B.
Our opinion as to the enforceability of the Agreement, as set forth in paragraph
4 above, is subject to the qualifications that (1) enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer, and other similar laws, now or hereafter in effect, and by
the effect of general principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law), and (2) the remedies of
specific performance and injunctive relief and other forms of equitable relief
are subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. 

        C.
In all instances, to the extent that any opinion herein is stated to be “to
our knowledge,” we have relied, with your consent, solely on a certificate
of one or more officers of Advantage (the “Officers’
Certificate”) and on the absence of contrary knowledge by those attorneys
presently practicing with our firm who have given substantive attention to the
transaction contemplated by the Agreement, but we have otherwise neither
investigated nor attempted to verify any of such matters. A form of the
Officers’ Certificate is attached hereto as Annex A. 

        D.
We express no opinion in any provision of the Agreement or other agreements of
Advantage required thereby that waive or purport to waive rights of Advantage.

        E.
To the extent that any document listed above as examined by us refers to another
document not listed above as examined by us, we express no opinion as to such
other document or the effect thereof on the opinions expressed herein. 

        F.
This opinion is based solely upon existing laws, rules and regulations.

        G.
The opinion is limited to the matters stated herein and no opinion is implied or
may be inferred beyond the matters expressly stated. 

        H.
This opinion is being furnished to you for your own use. No other use or
distribution may be made without our prior written consent. 

        I.
This opinion is given as of the date hereof, and we specifically disclaim any
duty or obligation to advise you of any future changes in the foregoing or to
otherwise update the opinions expressed herein. 

        J.
We express no opinion as to any laws other than the laws of the United States of
America and the laws of the State of Florida. 

                                            Very truly yours,

                                            MOORE, HILL & WESTMORELAND, P.A.

                                            J. LOFTON WESTMORELAND
JLW:jap

E-2.2(A)(3)-3

Exhibit 2.12(A)(6)
E-2.2(A)(6)-1 

FORM OF

INVESTMENT REPRESENTATION LETTER

March __, 2001 

Avert, Inc.

301 Remington Street

Fort Collins, Colorado 80524 

        This
letter is being submitted to Avert, Inc. ("Avert") in connection with and as a
condition to Avert's closing of the transactions contemplated by the Agreement
and Plan of Merger among Avert, Advantage Assessment, Inc., Nancy E. Norris,
Christopher M. Smith, Christian R. Bailey and D. Scott Othoson. Capitalized
terms not defined herein shall have the meaning given them in the Memorandum (as
defined below). 

   1.
Representations and Warranties.

        Each
of the undersigned hereby represents and warrants to Avert that the following
statements are true: 

		a.	
Each of the undersigned has been furnished a copy of the Memorandum, dated March
__, 2001 (the “Memorandum”) containing a copy of Avert’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2000, and
all other reports filed by Avert with the Securities and Exchange Commission
since January 1, 2001 (collectively, the “Reports”) and has
carefully reviewed the Memorandum and the Reports, including, but not limited
to, the statements in the Memorandum relating to the lack of free
transferability of the Avert Common Stock to be issued by Avert as consideration
for the Merger.

		b.	
Each of the undersigned has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of an
investment in Avert vis-a-vis the Avert Common Stock to be issued by Avert as
partial consideration for the Merger.

		c.	
Each of the undersigned has had an opportunity to ask questions of Avert and its
management concerning Avert, the businesses of Avert and the Avert Common Stock
and, if asked, all such questions have been answered to the full satisfaction of
the undersigned.

		d.	
Each of the undersigned understands that Avert has not registered the offer or
sale of the Avert Common Stock under the Securities Act of 1933, as amended (the
“Act”), in reliance upon an exemption therefrom under
Section 4(2) of the Act and the provisions of Regulation D promulgated
thereunder. Each of the undersigned therefore acknowledges that in no event may
he sell or otherwise transfer the Avert Common Stock without registration under
the Act (see paragraph (f) below).

		e.	
Each of the undersigned (i) has adequate means of providing for his current
needs and possible personal contingencies, (ii) has no need for liquidity in
this investment, (iii) is able to bear the economic risks of an investment in
the Avert Common Stock for an indefinite period of time, and (iv) at the present
time, could afford a complete loss of such investment.

		f.	
Each of the undersigned represents that he will acquire the Avert Common Stock
for his own account, with no intention to distribute or offer to distribute the
same to others without registration under the Act or pursuant to an exemption
from registration under the Act, and understands that the issuance by Avert of
the Avert Common Stock will be predicated upon the undersigned’s lack of
such intention.

		g.	
Each of the undersigned understands that neither the Securities and Exchange
Commission nor the securities commissioner of any state has received or reviewed
any documents relative to an investment in Avert, or has made any finding or
determination relating to the fairness of an investment in Avert.

E-2.2(A)(6)-1

		h.	
Each of the undersigned acknowledges that stop transfer instructions will be
placed with Avert’s transfer agent to restrict the resale, pledge,
hypothecation or other transfer of the Avert Common Stock. 

		i.	
Each of the undersigned acknowledges that Avert is under no obligation to
register the Avert Common Stock for sale under the Act or to assist the
undersigned in complying with any exemption from registration under the Act, or
any state securities laws.

		j.	
Each of the undersigned is an accredited investor within the meaning of Rule
501(a) of Regulation D promulgated by the SEC under the Act.

		k.	
Each of the undersigned understands and acknowledges that the foregoing
representations and warranties will be relied upon by Avert in connection with
the issuance of the Avert Common Stock.

   2.
Indemnification.

        Each
of the undersigned agrees to indemnify and hold harmless Avert, the officers,
directors and affiliates of Avert and each other person, if any, who controls
Avert, within the meaning of Section 15 of the Act, against any and all
loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all expenses reasonably incurred in investigating, preparing
or defending against any litigation commenced or threatened or any claim
whatsoever) arising out of or based upon any false representation or warranty or
failure by the undersigned to comply with any covenant or agreement made by each
of the undersigned herein. 

        3.
Survival. 

        All
representations, warranties and covenants contained in this letter shall survive
the closing of the Merger. 

                             Very truly yours,

                             Name:
                                  ---------------------------------------

                             Name:
                                  ---------------------------------------

I, _______________, do
hereby certify that I am an accredited investor within the meaning of Rule
501(a) of Regulation D promulgated by the SEC under the Act because (initial all
that apply): 

		_____	
I have had individual income (exclusive of any income earned by my spouse) of
more than $200,000 in each of the two most recent years and I reasonably expect
to have an individual income in excess of $200,000 for the current year.

		_____	
I currently have had joint income with my spouse in excess of $300,000 in each
of the two most recent years and I reasonably expect to have joint income with
my spouse in excess of $300,000 for the current year.

		_____	
I currently have an individual net worth, or my spouse and I have a joint net
worth, in excess of $1,000,000. For purposes of this item, net worth means the
excess of total assets at fair market value, including home and personal
property, over total liabilities.

E-2.2(A)(6)-2

_____________________________________________

I, _______________, do
hereby certify that I am an accredited investor within the meaning of Rule
501(a) of Regulation D promulgated by the SEC under the Act because (initial all
that apply): 

		_____	
I have had individual income (exclusive of any income earned by my spouse) of
more than $200,000 in each of the two most recent years and I reasonably expect
to have an individual income in excess of $200,000 for the current year.

		_____	
I currently have had joint income with my spouse in excess of $300,000 in each
of the two most recent years and I reasonably expect to have joint income with
my spouse in excess of $300,000 for the current year.

		_____	
I currently have an individual net worth, or my spouse and I have a joint net
worth, in excess of $1,000,000. For purposes of this item, net worth means the
excess of total assets at fair market value, including home and personal
property, over total liabilities.

_________________________________________________________

E-2.2(A)(6)-3

Exhibit 2.12(B)(5) 

        
______________, 2001 

Advantage Assessment, Inc. 
>
[        ]

        Re:
Agreement and Plan of Merger dated as of [ ], 2001 (the "Agreement") among
Avert, Inc. (the "Company"), Advantage Assessment, Inc. ("Advantage"), and the
Shareholders listed on the signature pages of the Agreement (collectively, the
"Shareholders"); 

Gentlemen and Ladies: 

        We
have acted as counsel to the Company in connection with the Agreement and the
merger of Advantage with and into the Company (the “Merger”). We are
furnishing this opinion pursuant to Section 2.12(b)(5) of the Agreement.
Capitalized terms used herein and not defined shall have the meanings set forth
in the Agreement. 

EXAMINATION

        For
purposes of this opinion we have examined and relied upon the following: 

        A.
The executed Agreement and the schedules and exhibits attached thereto;

        B.
The Articles of Incorporation of the Company, certified by the Colorado
Secretary of State as of a recent date (the "Articles"); 

        C.
The Bylaws of the Company, certified by an officer of the Company (the
"Bylaws"); 

        D.
Copies of certain resolutions adopted by the Board of Directors of the of the
Company authorizing the execution and delivery of the Agreement; 

        E.
Certificates as to the incumbency and signatures of officers of the Company
authorized to execute documents on behalf of the Company; 

        F.
Certificate of the Secretary of State of Colorado as to the good standing of the
Company, dated [ ] (the "Good Standing Certificate"); and 

        G.
The Officers' Certificate (as defined below) attached hereto as Annex A.

        We
specifically advise you, with your consent, that we have not been requested to
review, nor have we reviewed, any other documents in connection with the
transactions contemplated by the Agreement. 

E-2.2(B)(5)-1

        Further,
we advise you that we have not been retained or engaged to perform, nor have we
performed, any independent investigation of the existence of orders or decrees
to which the Company may be a party or to which any of its assets or property
may be subject, or by which the Company or any of its assets or property may be
bound, nor have we been retained or engaged to perform, or performed, any
independent review or investigation as to the existence of any claims,
litigation, action, suits, proceedings, investigations or inquiries,
administrative or judicial, pending or threatened, against or relating to the
Company or its assets or property. The opinions expressed herein are limited by
the scope of our review. 

ASSUMPTIONS

        Fo
r purposes of this opinion, we assume the following: 

        A.
The genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity with
the original documents of all documents submitted to us as certified,
photostatic or reproduced copies and the authenticity of such; 

        B.
All representations, warranties, covenants and conditions set forth in the
Agreement are accurate as to factual matters, and all terms, conditions and
covenants set forth therein have been complied with, as of the date hereof;

         C.
The authenticity and accuracy of all matters set forth in the Officers'
Certificate and all other oral or written certifications and statements of fact
upon which we are relying; and 

        D.
The due authorization, execution and delivery of the Agreement by each party
thereto other than the Company and that the Agreement is a legal, valid, and
binding agreement against each such other party, enforceable against each such
party in accordance with its terms. 

OPINION

        Based
upon and subject to the foregoing and the qualifications set forth at the end of
this opinion, we are of the opinion that: 

        1.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Colorado. 

        2.
The Company has all requisite corporate power and authority to execute, deliver
and perform, as of the Closing Date, the Agreement. 

        3.
The execution, delivery and performance by the Company of the Agreement will not
violate the Articles or the Bylaws. 

        4.
The Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, enforceable
against it in accordance its terms. 

        5.
To our knowledge, there is no litigation or other proceeding before any court or
administrative agency pending or threatened against the Company which questions
the validity of, or which would prevent consummation of the transactions
contemplated by, the Agreement. 

        6.
The Shares to be issued pursuant to the Agreement, when so issued, will be duly
authorized, validly issued and outstanding, fully paid and nonassessable. 

E-2.2(B)(5)-2

QUALIFICATIONS

        A.
Our opinion set forth in paragraph 1 above as to the existence and/or good
standing of the Company under the laws of the State of Colorado is based solely
upon the Good Standing Certificate. 

        B.
Our opinion as to the enforceability of the Agreement, as set forth in paragraph
4 above, is subject to the qualifications that (1) enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer, and other similar laws, now or hereafter in effect, and by
the effect of general principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law), and (2) the remedies of
specific performance and injunctive relief and other forms of equitable relief
are subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. 

        C.
In all instances, to the extent that any opinion herein is stated to be “to
our knowledge,” we have relied, with your consent, solely on a certificate
of one or more officers of the Company (the “Officers’
Certificate”) and on the absence of contrary knowledge by those attorneys
presently practicing with our firm who have given substantive attention to the
transaction contemplated by the Agreement, but we have otherwise neither
investigated nor attempted to verify any of such matters. A form of the
Officers’ Certificate is attached hereto as Annex A. 

        D.
We express no opinion in any provision of the Agreement that waives or purport
to waive rights of the Company. 

        E.
To the extent that any document listed above as examined by us refers to another
document not listed above as examined by us, we express no opinion as to such
other document or the effect thereof on the opinions expressed herein. 

        F.
This opinion is based solely upon existing laws, rules and regulations.

        G.
The opinion is limited to the matters stated herein and no opinion is implied or
may be inferred beyond the matters expressly stated. 

        H.
This opinion is being furnished to you for your own use. No other use or
distribution may be made without our prior written consent. 

        I.
This opinion is given as of the date hereof, and we specifically disclaim any
duty or obligation to advise you of any future changes in the foregoing or to
otherwise update the opinions expressed herein. 

        J.
We express no opinion as to any laws other than the laws of the United States of
America and the laws of the State of Colorado. 

                                         Very truly yours,

                                         BAKER & HOSTETLER LLP

E-2.2(B)(5)-3

EMPLOYMENT AGREEMENT

        This
EMPLOYMENT AGREEMENT between Avert, Inc., a Colorado corporation (the
“Company”), and Christopher M. Smith (the “Executive”) is
made this ___ day of March, 2001. 

        WHEREAS,
the Company desires to employ the Executive in the areas of product development
and sales support; 

        WHEREAS,
the Executive desires to be employed by the Company in such capacities; and

        WHEREAS,
the Company and the Executive desire to set forth in writing the terms and
conditions of their agreements and understandings. 

        NOW,
THEREFORE, in consideration of the foregoing, of the mutual promises herein
contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows: 

        1.
Employment. The Company shall employ the Executive in the areas of
product development and sales support and the Executive hereby accepts and
agrees to serve the Company in the capacities described herein, during the term
of this Agreement in accordance with the terms and conditions hereinafter set
forth. 

        2.
Term of Employment. The term of this Agreement shall be a one (1) year
period commencing on March __, 2001 and terminating on the first anniversary of
such date, provided, however, that such term shall be automatically extended for
successive one (1) year periods unless either party shall have served written
notice upon the other at least thirty (30) days prior to the first anniversary
of the commencement of employment and each anniversary of this Agreement in each
succeeding year. 

        3.
Duties and Responsibilities. 

		a.	
The Executive shall be responsible for product development and sales support and
shall report to Jerry Thurber or his designee.

		b.	
During the term of this Agreement, excluding periods of illness, injury or other
disability, the Executive shall devote his full time and attention to rendering
his services in the duties and responsibilities set forth by the Company. The
Executive hereby accepts such employment and agrees that he will, during the
continuance hereof, devote his full time and attention and best talents and
abilities to the duties of employment hereby accepted by him.

E-2.2(B)(9)-1

        4.
Compensation and Benefits. During the term of this Agreement, the Company
shall pay to the Executive, and Executive shall accept from the Company, as full
compensation for Executive's services hereunder, compensation as follows:

	 	 	a.	
Base Salary. The Executive shall be paid a base annual compensation of
$60,000, which amount shall be increased to $96,000 as of the first day of any
month in the event that the monthly assessment revenue for the previous month
exceeds $125,000. The base annual compensation shall be paid in 26 equal
payments (hereinafter referred to as the “Base Monthly Payments”). As
used herein, “assessment revenue” shall mean all revenue derived from
the assessment testing system based on the tests that were purchased or
developed by the Company using the accrual accounting method. In determining the
monthly assessment revenue, any customer prepayments shall be accrued ratably
over the time period for which the services will be provided to the customer.
Past accruals up to the time of closing, do not count in these computations.

	 	 	b.	
Bonus Payments. The Executive shall be entitled to a monthly bonus
payment during the term of this Agreement beginning with all sales after the
date of closing equal to ten percent (10%) of the monthly assessment revenue for
the prior month. Notwithstanding anything herein to the contrary, the monthly
bonus payments provided in this paragraph 4(b) shall terminate upon the earlier
of (i) the time that aggregate bonus payments provided hereunder exceed
$2,000,000, or (ii) the third anniversary of the commencement date of
Executive’s employment pursuant hereto.

	 	 	c.	
Other Benefits. During the term of this Agreement, the Executive shall be
entitled to participate in each pension, profit sharing, other tax-qualified
plan or non-qualified plan, insurance, health, disability, major medical
insurance or other arrangement the Company may adopt for the general benefit of
its eligible employees or executive employees to the extent permitted by law and
to the extent the Executive is otherwise entitled to participate based upon his
age, service, compensation, job classification, and any other factors
determining eligibility to participate under each such plan.

        5.
Reimbursement of Expenses. The Company shall reimburse the Executive for
all approved expenses necessarily incurred by him in connection with the
performance of his duties hereunder during the term of this Agreement, upon
presentation of the Avert expense report indicating the amount and business
purpose and supported by appropriate documentation, subject, however, to the
Company’s written employee reimbursement policies and procedures relating
to business related expenses as in effect from time to time. 

        6.
Covenant of Non-Competition. The Executive covenants and agrees that for
such period as he shall be employed by the Company and, in the event this
Agreement is terminated by the Company and the Executive pursuant to Section
7(a) hereof or by the Company pursuant to Section 7(f), for a period of three
(3) years after such termination, he will not, without the prior written consent
of the Company, either directly or indirectly, whether as principal or as agent,
officer, director, employee, consultant, stockholder, investor (other than as a
holder of not more than five percent (5%) of any class of securities traded on a
national or regional stock exchange) or otherwise, alone or in association with
any other person, firm, corporation, or other business organization, carry on,
or be engaged, concerned or take part in, or render like services to, or own any
interest or share in earnings of any person, firm, corporation, or other
business organization which is engaged in the provision of the same or similar
services to those provided by the Company in the United States. In the event of
a breach or threatened breach by the Executive of the provisions of this
Section 6, the Company shall be entitled, in addition to any remedy
hereunder or under any applicable law, to an injunction restraining the
Executive from breaching the provisions hereof. If, at the time of enforcement
of this Section 6 a court shall hold that the duration, scope or area
restrictions stated herein are unreasonable under circumstances then existing,
the parties agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area and
that the court shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law. Executive agrees that
the restrictions contained in this Section 6 are reasonable. 

E-2.2(B)(9)-2

        7.
Termination. This Agreement shall terminate in accordance with the
provisions of this Section 7. 

	 	 	a.	
Mutual Agreement. This Agreement shall terminate upon written agreement
of the Executive and the Company.

	 	 	c.	
Notice by Either Party. In addition to termination pursuant to the notice
described in Section 2 and pursuant to Sections 7(d) or 7(f) this Agreement may
be terminated by the Executive or the Company at any time upon written notice.

	 	 	c.	
Death. This Agreement shall terminate automatically upon the death of the
Executive, such termination to be effective on the date of the Executive's
death.

	 	 	d.	
Disability. This Agreement shall terminate automatically in the event the
Executive is unable to substantially perform the duties hereunder by reason of
disability or incapacity due to physical or mental illness, for a period in
excess of one (1) consecutive month in any twelve (12) month period or two (2)
months in the aggregate in any twenty-four (24) month period. The term of
employment may be terminated by the Company pursuant to this paragraph only if
the Executive does not return to work within and for a continuous period of at
least thirty (30) days after a notice of termination has been provided to the
Executive by the Company.

	 	 	e.	
Good Reason. The Executive shall have the right to terminate this
Agreement at any time for "Good Reason." For purposes of this Agreement, "Good
Reason" shall mean the occurrence, without the express written consent of the
Executive, of any of the following circumstances:

			i.	
the assignment to the Executive of any duties which the Executive reasonably
considers to be inconsistent with his position, duties, and responsibilities, or
any other action by the Company which results in a material diminution or
material adverse change in such position, duties or responsibilities;

			ii.	
any reduction in the Executive's Base Monthly Payments as in effect on the date
hereof or as the same may be increased from time to time during the term of this
Agreement;

			iii.	
any failure by the Company to include the Executive in any benefit plan or
arrangement, as set forth in Section 4(c) hereof, maintained by the Company from
time to time;

			iv.	
any relocation of the Executive to any office or location outside the greater
Pensacola, Florida metropolitan area;

			v.	
the failure to pay the Executive any payment described in Section 4(b) hereof in
accordance with the terms thereof;

			vi.	
any material breach of this Agreement by the Company, other than an isolated
failure not occurring in bad faith which is cured within five (5) days after
receipt by the Company of written notice thereof by the Executive; and

			vii.	
any purported termination of the Executive's employment by the Company which is
not effected in accordance with the notice provisions under this Agreement.

E-2.2(B)(9)-3

	 	 	f.	
Cause. The Company shall have the right to terminate this Agreement at
any time for “cause.” For purposes of this Agreement,
“cause” shall mean (i) fraud, misappropriation or embezzlement
involving property of the Company or any of its divisions, subsidiaries or
affiliates; (ii) conviction of the Executive of a felony; (iii) gross
misconduct unless (where such misconduct is in the reasonable opinion of the
Company capable of cure) such misconduct is cured within fifteen (15) days after
the Executive receives written notice of such misconduct; or (iv) the
willful and continued failure by the Executive substantially to perform his
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or as a result of a termination by him for Good
Reason) after a written demand for substantial performance is delivered to him
by the Company, which demand specifically identifies the manner in which the
Company believes that he has not substantially performed his duties; provided,
however, that in the event the Executive is terminated for “cause,”
the Executive shall have ten (10) days to appeal such determination.

	 	 	g.	
Expiration Without Renewal. This Agreement may be terminated pursuant to
Section 2 hereof.

        8.
Compensation Upon Termination. 

	 	 	a.	
Termination For Cause. In the event this Agreement is terminated by the
Company for "cause," the Executive (or his beneficiary in the event of his
death) shall be entitled to any Base Monthly Payments, and other vested
compensation earned or accrued but not paid to the Executive prior to the
termination of this Agreement.

	 	 	b.	
Termination by Written Agreement. In the event that this Agreement is
terminated by the parties pursuant to a written agreement, the Executive shall
be entitled to receive the compensation specified in any written agreement
between the parties regarding the Executive's termination of employment.

	 	 	c.	
Termination by the Executive. In the event the Executive terminates this
Agreement by providing the notice pursuant to Section 7(b) hereof, the Executive
shall not be entitled to any compensation for any period after termination;
provided, however, that the Executive shall be entitled to any Base Monthly
Payments, and other bonus payments earned or accrued but not paid to the
Executive prior to the termination of this Agreement.

	 	 	d.	
Termination by the Company. In the event the Company terminates this
Agreement, except for cause under Section 7(f), by providing the notice pursuant
to Section 7(b) hereof or the Agreement is terminated by reason of the
Executive’s death or disability, the Executive (or in the case of
Executive’s death, his estate) shall be entitled to the continuation of the
Executive’s Base Monthly Payments and bonus payments in effect at the time
of the termination of this Agreement for the remainder of the term of this
Agreement. In the event the Company terminates this Agreement by providing
notice pursuant to Section 7(f), the Executive shall be entitled to any Base
Monthly Payments, and other bonus payments earned or accrued but not paid to the
Executive prior to the termination of this Agreement.

	 	 	e.	
Termination for Good Reason. In the event the Executive terminates this
Agreement for Good Reason, the Executive shall be entitled to the benefits
provided under Section 8(d) hereof.

	 	 	f.	
Expiration Without Renewal. In the event this Agreement is terminated
pursuant to Section 2 hereof, the Executive shall not be entitled to any
compensation for any period after termination; provided, however, that the
Executive shall be entitled to any Base Monthly Payments and other vested
compensation earned or accrued but not paid to the Executive prior to the
termination of this Agreement.

E-2.2(B)(9)-4

        9.
Assignment. This Agreement shall inure to the benefit and be binding upon
the parties and their respective legal representatives, heirs, permitted
successors and permitted assigns. Notwithstanding the foregoing, this Agreement
shall not be assignable by the Executive. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or the assets of the Company to
assume expressly and to agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. 

        10.
Arbitration. In the event that any dispute arises between the parties
with respect to any provision of this Agreement, such dispute shall be settled
and determined by arbitration, to be conducted in accordance with and subject to
the then current rules of the American Arbitration Association. 

        11.
Governing Law. This Agreement shall be governed by, and construed and
interpreted under the laws of the State of Colorado, without regard to its
conflict of laws provisions. 

        12.
Notices. All notices required or permitted to be given pursuant to this
Agreement shall be in writing and shall be deemed to have been delivered upon
the earlier of personal delivery, or upon first attempted delivery by the United
Postal Service or the overnight carrier if sent by certified mail, return
receipt requested, postage prepaid or by recognized overnight carrier addressed:
(i) in the case of the Company, at its principal office and (ii) in
the case of the Executive, at the last known residence as shown on the
Company’s records. 

        13.
Non-Waiver. A delay or failure by either party to enforce any provision
of this Agreement shall not constitute a waiver of that or any other provision.

        14.
Severability. In the event that any provision of this Agreement shall be
held to be invalid, illegal or unenforceable, it shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein, unless to do
so would cause this Agreement to fail of its essential purpose. 

        15.
Entire Agreement. This Agreement constitutes the entire understanding and
agreement between the Company and the Executive with respect to the terms and
conditions of the Executive’s employment during the term of employment and
supersedes all previous agreements and arrangements (if any), oral or written,
relating to the employment of the Executive (which shall be deemed to have been
terminated by mutual consent). Except as set forth herein, there are no other
agreements, conditions, or representations, oral or written, express or implied
with regard thereto. 

        16.
Amendment of Agreement. This Agreement may be amended only in writing
duly executed by the Company and the Executive. 

        17.
Headings. The Section headings herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be deemed to
limit or affect any of the provisions herein. 

        IN
WITNESS WHEREOF, the parties have duty executed this Agreement as of the date
first above written. 

                          COMPANY:
                          --------

                          AVERT, INC.

                          By:  _____________________________________

                          Its: ______________________________________

                          EXECUTIVE:
                          ---------

                          ________________________________________
                          Christopher M. Smith

E-2.2(B)(9)-5<PAGE>

                                                                    EXHIBIT 4.35

================================================================================

                               WARRANT AGREEMENT

                                 BY AND AMONG

                     PACIFIC AEROSPACE & ELECTRONICS, INC.

                                      AND

                           FIRST ALBANY CORPORATION

                                 April 9, 2001

================================================================================
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<C>              <S>                                                                                      <C>
ARTICLE I  DEFINITIONS....................................................................................  1
Section 1.1.     Definitions..............................................................................  1

ARTICLE II  ISSUANCE, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES......................................  3
Section 2.1.     Warrants to be Issued....................................................................  3
Section 2.2.     Form of Warrant Certificates.............................................................  3
Section 2.3.     Execution of Warrant Certificates........................................................  3
Section 2.4.     Transfer and Exchange of Warrant Certificates............................................  3
Section 2.5.     Lost, Stolen, Mutilated or Destroyed Warrant Certificates................................  4

ARTICLE III  EXERCISE PRICE AND EXERCISE OF WARRANTS......................................................  4
Section 3.1.     Exercise Price...........................................................................  4
Section 3.2.     Registration of Warrant Shares...........................................................  5
Section 3.3.     Exercise of Warrants.....................................................................  5
Section 3.4.     Issuance of Warrant Shares...............................................................  6
Section 3.5.     Certificates for Unexercised Warrants....................................................  6
Section 3.6.     Reservation of Warrant Shares............................................................  6
Section 3.7.     No Impairment............................................................................  6

ARTICLE IV  ADJUSTMENTS, NOTICE PROVISIONS AND ISSUANCE OF ADDITIONAL SECURITIES..........................  7
Section 4.1.     Adjustment of Exercise Price.............................................................  7
Section 4.2.     No Adjustments to Exercise Price.........................................................  8
Section 4.3.     Adjustment of Number of Shares...........................................................  8
Section 4.4.     Reorganizations..........................................................................  9
Section 4.5.     Verification of Computations.............................................................  9
Section 4.6.     Exercise Price Less Than Par Value.......................................................  9
Section 4.7.     Notice of Certain Actions................................................................ 10
Section 4.8.     Certificate of Adjustments............................................................... 10
Section 4.9.     Warrant Certificate Amendments........................................................... 10
Section 4.10.    Fractional Shares........................................................................ 11

ARTICLE V  SPLIT UP, COMBINATION, EXCHANGE, TRANSFER AND CANCELLATION OF WARRANT CERTIFICATES............. 11
Section 5.1.     Split Up, Combination, Exchange and Transfer of Warrant Certificates..................... 11
Section 5.2.     Cancellation of Warrant Certificates..................................................... 11

ARTICLE VI HOLDER REPRESENTATION AND WARRANTIES........................................................... 11
Section 6.1.     Purchase for Investment.................................................................. 11

ARTICLE VII  MISCELLANEOUS................................................................................ 12
Section 7.1.     Changes to Agreement..................................................................... 12
Section 7.2.     Assignment............................................................................... 12
</TABLE>

                                      ii
<PAGE>

<TABLE>
<C>              <S>                                                                                      <C>
Section 7.3.     Successor to Company..................................................................... 12
Section 7.4.     Notices.................................................................................. 12
Section 7.5.     Governing Law............................................................................ 13
Section 7.6.     Standing................................................................................. 13
Section 7.7.     Headings................................................................................. 13
Section 7.8.     Counterparts............................................................................. 13
Section 7.9.     Availability of the Agreement............................................................ 13
Section 7.10.    Entire Agreement......................................................................... 13
Section 7.11.    Rights of Warrant Holders................................................................ 13

EXHIBIT A Form of Warrant Certificate.....................................................................  1

Form of Election To Purchase..............................................................................  3

Assignment................................................................................................  4
</TABLE>

                                      iii
<PAGE>

                               WARRANT AGREEMENT

     THIS WARRANT AGREEMENT (the "Agreement"), dated as of April 9, 2001, is
entered into by and among Pacific Aerospace & Electronics, Inc., a Washington
corporation (the "Company"), and First Albany Corporation (the "Holder" and
collectively with its permitted transferees, the "Holders"). This Agreement is
made in connection with the engagement letter dated January 23, 2001 between the
Company and the Holder, as amended by that certain letter agreement dated
February 5, 2001 between the Company and the Holder (collectively, the
"Engagement Letter").

     WITNESSETH THAT:

     WHEREAS, the Company and its domestic subsidiaries entered into a Loan
Agreement on March 1, 2001 with DDJ Capital Management, LLC, as agent, and the
Lenders listed therein, whereby the Company received a loan in the aggregate
principal amount of $13,841,488 (the "Transaction");

     WHEREAS, in consideration for its services as placement agent in connection
with the Transaction, the Company has agreed to pay to the Holder a cash fee as
set forth in the Engagement Letter and to grant to Holder warrants to purchase
Common Stock of the Company as set forth herein;

     WHEREAS, the Company proposes to issue and deliver Warrant Certificates
evidencing Warrants (each, as defined herein) to acquire up to an aggregate of
694,074 shares of the Company's Common Stock, subject to adjustment from time to
time as set forth herein (the Common Stock issuable upon exercise of the
Warrants being referred to herein as the "Warrant Shares"); and

     WHEREAS, the Company desires to enter into this Agreement to set forth the
terms and conditions of the Warrants and the rights of the holders thereof.

     NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

     Section 1.1.  Definitions.  As used in this Agreement, the following terms
shall have the following respective meanings (all terms defined herein in the
singular are to have the correlative meanings when used in the plural and vice
versa):

     "Closing Price" means, for any date, the last sale price reported in the
Wall Street Journal or other trade publication regular way or, in case no such
reported sale takes place on such date, the average of the last reported bid and
asked prices regular way, in either case on the principal national securities
exchange on which the Common Stock is listed if that is the principal market for
the Common Stock or, if not listed on any national securities exchange or if
such national

<PAGE>

securities exchange is not the principal market for the Common Stock, the
average of the closing high bid and low asked prices as reported by The Nasdaq
Stock Market, Inc. or its successor, if any, or if the Common Stock is not so
reported, as furnished by the National Quotation Bureau, Inc., or if such firm
is not then engaged in the business of reporting such prices, as furnished by
any similar firm then engaged in such business and selected by the Company or,
if there is no such firm, as furnished by any NASD member selected by the
Company.

     "Common Stock" means the Common Stock of the Company, par value $.001 per
share.

     "Date of Exercise" means, with respect to any Warrant, the date on which a
Warrant to be exercised has been received by the Company (in accordance with
Section 7.4 hereof).

     "Expiration Date" means April 9, 2006.

     "Officers' Certificate" means a certificate signed by any two of the
Chairman of the Board, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Secretary or an Assistant Secretary of the Company.

     "Person" means any natural person, corporation, partnership, trust, joint
venture, limited liability company, or any other entity or organization.

     "Restricted Securities" means the Warrants issued on the date hereof and
any Warrant Shares which have been issued or are issuable upon the exercise of
such Warrants until such time as any such Restricted Securities (i) have been
sold pursuant to an effective registration statement under the Securities Act,
(ii) are distributed to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act or (iii) have been otherwise
transferred without registration under the Act pursuant to an exemption from the
registration requirements of the Securities Act.

     "Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor statute, and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder.

     "Trading Days" means, with respect to the Common Stock (i) if the Common
Stock is quoted on the National Market System of the Nasdaq Stock Market, Inc.
or any similar system of automated dissemination of quotations of securities
prices, days on which trades may be made on such system or (ii) if the Common
Stock is listed or admitted for trading on any national securities exchange,
days on which such national securities exchange is open for business.

     "Warrant Certificates" means the certificates representing the Warrants.

     "Warrant Shares" means the shares of Common Stock issuable upon the
exercise of any Warrant.

     "Warrants" means the Warrants exercisable for shares of Common Stock issued
pursuant to this Agreement.

                                       2
<PAGE>

                                  ARTICLE II

           ISSUANCE, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES

     Section 2.1.  Warrants to be Issued.  The Company will issue Warrants to
purchase up to an aggregate of 692,074 fully paid and nonassessable shares of
the Company's Common Stock, subject to the terms hereof, at the Exercise Price
(as defined in Section 3.1), subject to adjustment pursuant to the provisions of
Article IV hereof.

     Section 2.2.  Form of Warrant Certificates.  The Warrant Certificates shall
be issued substantially in the form of Exhibit A attached hereto. In addition,
the Warrant Certificates may have such letters, numbers or other marks of
identification or designation and such legends, summaries, or endorsements
stamped, printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as, in any particular case, may be required to comply with any law or with
any rule or regulation of any regulatory authority or agency, or to conform to
customary usage. Each Warrant shall evidence the right, subject to the
provisions of this Agreement and of the Warrant Certificate, to purchase such
number of shares of Common Stock of the Company as set forth in the Warrant
Certificate at the Exercise Price (as defined in Section 3.1), subject to
adjustment pursuant to the provisions of Article IV hereof.

     Section 2.3.  Execution of Warrant Certificates.  The Warrant Certificates
shall be executed on behalf of the Company by its Chairman or President or any
Vice President and attested to by its Secretary or Assistant Secretary, either
manually or by facsimile signature printed thereon. In case any authorized
officer of the Company who shall have signed any of the Warrant Certificates
shall cease to be such officer of the Company either before or after delivery
thereof by the Company to the holder thereof, the signature of such person on
such Warrant Certificates shall be valid nevertheless, and such Warrant
Certificates shall have the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such officer of the
Company.

     Section 2.4.  Transfer and Exchange of Warrant Certificates.

          (a)  Warrant Certificates evidencing Restricted Securities and only
such Warrant Certificates will bear a legend in substantially the following
form:

     NEITHER THE ISSUANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
     THE ISSUANCE OF ANY SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
     ACT") OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES
     MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO (i) A REGISTRATION
     STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES
     ACT AND THE RULES AND REGULATIONS THEREUNDER OR (ii) AN EXEMPTION FROM THE
     REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
     SECURITIES LAWS.

                                       3
<PAGE>

          (b)  Neither the Warrant Certificates nor the Warrants represented
thereby may be transferred to any person other than an officer, director or
employee of the initial Holder.

          (c)  Prior to or concurrently with the transfer or exchange of any
Warrant Shares (other than pursuant to an effective registration statement under
the Securities Act), the transferor of such Warrant Shares shall, upon request
of the Company, deliver to the Company an opinion of counsel, in substance
reasonably satisfactory to the Company, to the effect that such Warrant Shares
to be issued upon such transfer or exchange will be issued in compliance with
applicable Securities laws and/or may be so issued without the foregoing legend.
Notwithstanding the foregoing, it shall be understood that no opinion of counsel
shall be required for transfers to officers, directors or employees of the
initial Holder.

          (d)  No Restricted Security shall be transferred, unless such transfer
is in compliance with all applicable securities laws (including, without
limitation, the Securities Act and any applicable state securities laws).

          (e)  Subject to paragraph (a) and (b) above, the Company shall
register the transfer of all or any whole number of Warrants covered by any
outstanding Warrant Certificate upon surrender to the Company of Warrant
Certificates accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Company, duly executed by the Warrant holder or his
attorney duly authorized in writing. Upon any such registration of transfer, a
new Warrant Certificate shall be issued to the transferee and the Company shall
promptly cancel the surrendered Warrant Certificate. Warrant Certificates may be
exchanged at the option of the holder thereof, upon surrender, properly endorsed
by the holder, to the Company, with written instructions, for other Warrant
Certificates representing in the aggregate a like number of Warrants.

     Section 2.5.  Lost, Stolen, Mutilated or Destroyed Warrant Certificates.
If any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Warrant Certificate, or in lieu of or in
substitution for a lost, stolen or destroyed Warrant Certificate, a substitute
Warrant Certificate, but only upon receipt of evidence of such loss, theft or
destruction of such Warrant Certificate, and of the ownership thereof. Any such
new Warrant Certificate shall constitute an original contractual obligation of
the Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant Certificate shall be at any time enforceable by anyone.

                                  ARTICLE III

                    EXERCISE PRICE AND EXERCISE OF WARRANTS

     Section 3.1.  Exercise Price.  Each Warrant Certificate shall, when signed
by the Chairman or President or any Vice President and attested to by the
Secretary or Assistant Secretary of the Company, entitle the holder thereof
subject to the provisions thereof and of this Agreement, to purchase from the
Company at any time after the date hereof and before 5:00 p.m., New York time,
on the Expiration Date, such number of shares of Common Stock of the Company as
set forth in the Warrant Certificate for each of the Warrants specified therein,
at a purchase price of $.4062 per share (the "Exercise Price") or such adjusted
number of shares at

                                       4
<PAGE>

such adjusted exercise price as may be established from time to time pursuant to
the provisions of Article IV hereof, payable in full in accordance with Section
3.3 hereof, at the time of exercise of the Warrant. Except as the context
otherwise requires, the term "Exercise Price" as used in this Agreement shall
mean the purchase price of one Warrant Share pursuant to the Warrant
Certificates reflecting all appropriate adjustments made in accordance with the
provisions of Article IV hereof.

     Section 3.2.  Registration of Warrant Shares.  The Company shall secure the
effective registration of the Warrant Shares under the Securities Act and
applicable state laws and maintain such registration or qualification in effect,
all on the same terms set forth in the Registrations Rights Agreement between
the Company and DDJ Capital Management, LLC, and the other parties thereto dated
as of March 1, 2001 (other than Section 2 thereof, which requires that a
registration statement be filed within 30 days after the date of that
agreement). Promptly after a registration statement under the Securities Act
covering the Warrant Shares has become effective, the Company shall cause notice
thereof together with copies of the prospectus covering the Warrant Shares to be
mailed to each holder of a Warrant Certificate.

     Section 3.3.  Exercise of Warrants.

          (a)  Warrants may be exercised by surrendering the Warrant Certificate
evidencing such Warrants to the Company with the Election to Purchase form
attached to the Warrant Certificate duly completed and executed by the holder
thereof or his attorney duly authorized in writing (the "Exercise Notice"),
accompanied by payment in full, as set forth below, of the Exercise Price for
each share of Common Stock as to which Warrants are exercised. Such Exercise
Price shall be paid in full by (i) cash or a certified check or a wire transfer
in same day funds in an amount equal to the then applicable Exercise Price
multiplied by the number of Warrant Shares then being purchased, (ii) delivery
to the Company of that number of shares of Common Stock, duly endorsed, having
an aggregate Fair Market Value (as defined in Section 4.1(d)) equal to the then
applicable Exercise Price multiplied by the number of Warrant Shares then being
purchased or (iii) by any combination of (i) and (ii). In the alternative, the
holder of a Warrant Certificate may exercise its right to purchase some or all
of the Warrant Shares subject to such Warrant Certificate, on a net basis, such
that, without the exchange of any funds, such holder receives that number of
Warrant Shares subscribed to pursuant to such Warrant Certificate less that
number of shares of Common Stock having an aggregate Fair Market Value at the
Date of Exercise equal to the aggregate Exercise Price that would otherwise have
been paid by such holder for the number of Warrant Shares subscribed to pursuant
to such Warrant Certificate. A Warrant holder may exercise all or any number of
whole Warrants represented by a Warrant Certificate.

          (b)  A Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of the due surrender for exercise of
the Warrant Certificate and payment to the Company of the Exercise Price. Each
Person in whose name any such certificate for shares of Common Stock is issued
shall for all purposes be deemed to have become the holder of record of such
shares at the close of business on the date on which the Warrant Certificate was
duly surrendered to the Company and payment of the Exercise Price was made to
the Company, irrespective of the date of delivery of such share certificate,
except that, if the date

                                       5
<PAGE>

of such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open (whether before or after the Expiration Date in
such case).

     Section 3.4.  Issuance of Warrant Shares.  As soon as practicable and no
later than five (5) business days after the Date of Exercise of any Warrants,
the Company shall issue, or cause its transfer agent to issue, a certificate or
certificates for the number of full Warrant Shares to which the holder is
entitled, registered in accordance with the instructions set forth in the
Election to Purchase, together with cash, as provided in Section 4.10 hereof, in
respect of any fractional share. All Warrant Shares issued upon the exercise of
any Warrants shall be validly authorized and issued, fully paid and non-
assessable, free of preemptive rights and free from all taxes, liens, security
interests and charges created by the Company in respect of the issuance thereof.
Each person in whose name any such certificate for Warrant Shares is issued
shall for all purposes be deemed to have become the holder of record of the
Common Stock represented thereby on the Date of Exercise of the Warrants
resulting in the issuance of such shares, irrespective of the date of issuance
or delivery of such certificate for Warrant Shares.

     Section 3.5.  Certificates for Unexercised Warrants.  In the event that
fewer than all of the Warrants represented by a Warrant Certificate are
exercised, the Company shall execute and mail, by first-class mail, within ten
(10) days of the Date of Exercise, to the holder of such Warrant Certificate, or
such other Person as shall be designated in the Election to Purchase, a new
Warrant Certificate representing the number of Warrants not exercised.

     Section 3.6.  Reservation of Warrant Shares.  The Company shall at all
times reserve and keep available for issuance upon the exercise of Warrants a
number of its authorized but unissued shares or treasury shares, or both, of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants.

     Section 3.7.  No Impairment.  The Company shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, stock split, stock dividend or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate to protect the rights of the Warrant holder against
impairment. Without limiting the generality of the foregoing, the Company will
(a) not increase the par value of any Warrant Shares receivable upon the
exercise of the Warrants above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate to assure that the par value of the Common Stock is
at all times equal to or less than the Exercise Price (including without
limitation approving and submitting to the stockholders of the Company for
approval an amendment to the Company's Bylaws to reduce such par value), (c)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable Warrant
Shares upon the exercise of any Warrant, and (d) use its best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under the Warrants.

                                       6
<PAGE>

                                  ARTICLE IV

                  ADJUSTMENTS, NOTICE PROVISIONS AND ISSUANCE
                           OF ADDITIONAL SECURITIES

     Section 4.1.  Adjustment of Exercise Price.  Subject to the provisions of
this Article IV, the Exercise Price in effect from time to time shall be subject
to adjustment, as follows:

          (a)  In case the Company shall (i) declare a dividend or make a
distribution on the outstanding shares of Common Stock in shares of Common Stock
or any class thereof, (ii) subdivide or reclassify the outstanding shares of
Common Stock or any class thereof into a greater number of shares, or (iii)
combine or reclassify the outstanding shares of its Common Stock into a smaller
number of shares, the Exercise Price in effect immediately after the record date
for such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately before such dividend, distribution,
subdivision, combination or reclassification, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately after such
dividend, distribution, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event specified above shall
occur.

          (b)  In case the Company shall fix a record date for the issuance of
rights, options, warrants or convertible or exchangeable securities to all
holders of its Common Stock entitling them (for a period expiring within forty-
five (45) days after such record date) to subscribe for or purchase shares of
its Common Stock at a price per share less than the Fair Market Value on such
record date the Exercise Price shall be adjusted immediately thereafter so that
it shall equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on such record date plus the number
of shares of Common Stock which the aggregate offering price of the total number
of shares of Common Stock so offered would purchase at the Fair Market Value per
share, and of which the denominator shall be the number of shares of Common
Stock outstanding on such record date plus the number of additional shares of
Common Stock offered for subscription or purchase. Such adjustment shall be made
successively whenever such a record date is fixed. To the extent that any such
rights, options, warrants or convertible or exchangeable securities are not so
issued or expire unexercised, the Exercise Price then in effect shall be
readjusted to the Exercise Price which would then be in effect if such unissued
or unexercised rights, options, warrants or convertible or exchangeable
securities had not been issuable.

          (c)  In case the Company shall fix a record date for the making of a
distribution to all holders of shares of Common Stock of (i) shares of any class
other than Common Stock or (ii) evidences of its indebtedness or (iii) assets
(excluding cash dividends or distributions (other than extraordinary cash
dividends or distributions), and dividends or distributions referred to in
Section 4.1(a) hereof) or (iv) rights, options, warrants or convertible or
exchangeable securities (excluding those rights, options, warrants or
convertible or exchangeable securities referred to in Section 4.1(b) hereof),
then in each such case the Exercise

                                       7
<PAGE>

Price in effect immediately thereafter shall be determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, of which the
numerator shall be the total number of shares of Common Stock outstanding on
such record date multiplied by the Fair Market Value per share on such record
date, less the aggregate fair market value as determined in good faith by the
Board of Directors of the Company of said shares or evidences of indebtedness or
assets or rights, options, warrants or convertible or exchangeable securities so
distributed, and of which the denominator shall be the total number of shares of
Common Stock outstanding on such record date multiplied by such Fair Market
Value per share. Such adjustment shall be made successively whenever such a
record date is fixed. In the event that such distribution is not so made, the
Exercise Price then in effect shall be readjusted to the Exercise Price which
would then be in effect if such record date had not been fixed.

          (d)  For the purpose of any computation under Section 4.1(b) or 4.1(c)
hereof, the "Fair Market Value" per share at any date (the "Computation Date")
shall be as follows: (i) if the Common Stock is listed on a national securities
exchange or quoted on a national quotation system, the Current Market Price,
which shall be deemed to be the average of the Closing Prices of the Common
Stock for the five (5) Trading Days immediately preceding the Computation Date;
provided, however, that if there shall have occurred prior to the Computation
Date any event described in Section 4.1(a), 4.1(b) or 4.1(c) which shall have
become effective with respect to market transactions at any time (the "Market-
Effect Date") on or after the beginning of such 5-day period, the Closing Price
for each Trading Day preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction the numerator of which is the Exercise Price as in effect immediately
prior to the Computation Date and the denominator of which is the Exercise Price
as in effect immediately prior to the Market-Effect Date, it being understood
that the purpose of this proviso is to ensure that the effect of such event on
the market price of the Common Stock shall, as nearly as possible, be eliminated
in order that the distortion in the calculation of the Fair Market Value may be
minimized and it being understood that if the Exercise Price may not be adjusted
due to the provisions of Section 4.6, for purposes of the calculation above, the
Exercise Price shall be deemed the Exercise Price as if it had been adjusted or
(ii) there is no public market for Common Stock, the fair market value per share
of Common Stock as determined in good faith by the Company's Board of Directors.

     Section 4.2.  No Adjustments to Exercise Price.  No adjustment in the
Exercise Price in accordance with the provisions of Section 4.1(a), 4.1(b) or
4.1(c) hereof need be made unless such adjustment would amount to a change of at
least .5% in such Exercise Price of the Warrant Certificates; provided, however,
that the amount by which any adjustment is not made by reason of the provisions
of this Section 4.2 shall be carried forward and taken into account at the time
of any subsequent adjustment in the Exercise Price.

     Section 4.3.  Adjustment of Number of Shares.  Upon each adjustment of the
Exercise Price pursuant to Section 4.1(a), 4.1(b) or 4.1(c) hereof, each Warrant
shall thereupon evidence the right to purchase that number of Warrant Shares
(calculated to the nearest hundredth of a share) obtained by multiplying the
number of Warrant Shares purchasable immediately prior to such adjustment upon
exercise of the Warrant by the Exercise Price in effect immediately prior to
such adjustment and dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment. In the event that the Exercise Price
may not be adjusted due

                                       8
<PAGE>

to the provisions of Section 4.6 hereof, the number of Warrant Shares
purchasable upon the exercise of each Warrant shall be adjusted hereunder as if
the Exercise Price had been so adjusted.

     Section 4.4.  Reorganizations.  In case of any capital reorganization,
other than in the cases referred to in Section 4.1 hereof, or the consolidation
or merger of the Company with or into another corporation (other than a merger
or consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of Common Stock into shares
of other stock or other securities or property), or the sale or conveyance of
the property of the Company as an entirety or substantially as an entirety
(collectively such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of Warrant Shares theretofore deliverable) the number of shares of
stock or other securities or property to which a holder of the number of Warrant
Shares which would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if such Warrant was
fully exercisable and had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, shall be made
in the application of the provisions herein set forth with respect to the rights
and interests of Warrant holders so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of Warrants. Any such
adjustment shall be made by and set forth in a supplemental agreement prepared
by the Company or any successor thereto, between the Company, or any successor
thereto, and shall for all purposes hereof conclusively be deemed to be an
appropriate adjustment. The Company shall not effect any such Reorganization
unless upon or prior to the consummation thereof the successor corporation, (or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer), shall assume by written instrument the
obligation to deliver to the holder of any Warrant Certificate such shares of
stock, securities, cash or other property as such holder shall be entitled to
purchase in accordance with the foregoing provisions.

     Section 4.5.  Verification of Computations.  The Company shall, if
requested by a Holder of a majority of the outstanding Warrants, select a firm
of independent public accountants, which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to each holder of Warrants

     Section 4.6.  Exercise Price Less Than Par Value.  The Exercise Price shall
not be adjusted below the par value per share of the Common Stock for the
purpose of making any adjustment as may be required pursuant to this Article IV.

                                       9
<PAGE>

     Section 4.7.  Notice of Certain Actions.  In the event the Company shall:

          (a)  declare any dividend payable in stock to the holders of the
Common Stock or make any other distribution in property other than cash to the
holders of the Common Stock;

          (b)  offer to the holders of the Common Stock rights to subscribe for
or purchase any shares of any class of stock or any other rights or options; or

          (c)  effect any reclassification of the Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of securities or other
property is made to holders of Common Stock), or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company;

then, in each such case, the Company shall mail notice of such proposed action
to each holder of Warrants at least ten (10) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed. Such notice shall be mailed in the case of any action covered by
paragraph (a) or (b) of this Section 4.7, at least ten (10) days prior to the
record date for determining holders of the Common Stock for purposes of
receiving such payment or offer, and in the case of any action covered by
paragraph (c) of this Section 4.7, at least ten (10) days prior to the earlier
of the date upon which such action is to take place or any record date to
determine holders of Common Stock entitled to receive such securities or other
property.

     Section 4.8.  Certificate of Adjustments.  Whenever any adjustment is to be
made pursuant to this Article IV, the Company shall prepare an Officers'
Certificate setting forth such adjustment to be mailed to each transfer agent
for the Common Stock and to each holder of a Warrant Certificate at least five
(5) days prior thereto, such notice to include in reasonable detail (i) the
events precipitating the adjustment, (ii) the computation of any adjustments,
and (iii) the Exercise Price and the number of Warrant Shares or the securities
or other property purchasable upon exercise of each Warrant after giving effect
to such adjustment.

     Section 4.9.  Warrant Certificate Amendments.  Irrespective of any
adjustments pursuant to this Article IV, Warrant Certificates theretofore or
thereafter issued need not be amended or replaced, but certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments;
provided the Company may, at its option, issue new Warrant Certificates
evidencing Warrants in such form as may be approved by its Board of Directors to
reflect any adjustment in the Exercise Price and number of Warrant Shares
purchasable under the Warrant Certificates and deliver the same to the holders
thereof in substitution for existing Warrant Certificates.

                                       10
<PAGE>

     Section 4.10.  Fractional Shares.  The Company shall not be required upon
the exercise of any Warrant to issue fractional Warrant Shares which may result
from adjustments in accordance with this Article IV to the Exercise Price or
number of Warrant Shares purchasable under each Warrant or otherwise. If more
than one Warrant is exercised at one time by the same holder, the number of full
Warrant Shares which shall be deliverable shall be computed based on the number
of shares deliverable in exchange for the aggregate number of Warrants
exercised. With respect to any final fraction of a Warrant Share called for upon
the exercise of any Warrant or Warrants, the Company shall pay a cash adjustment
to the holders of the Warrants in respect of such final fraction in an amount
equal to the same fraction of the Closing Price of a Warrant Share, as
determined by the Company on the basis of the Closing Price per share of Common
Stock on the business day next preceding the date of such exercise. The holder
of each Warrant Certificate, by his acceptance of the Warrant Certificate, shall
expressly waive any right to receive any fractional Warrant Share upon exercise
of the Warrants. All calculations under this Section 4.10 shall be made to the
nearest hundredth of a share.

                                   ARTICLE V

                 SPLIT UP, COMBINATION, EXCHANGE, TRANSFER AND
                     CANCELLATION OF WARRANT CERTIFICATES

     Section 5.1.  Split Up, Combination, Exchange and Transfer of Warrant
Certificates.  Subject to Article II hereof, Warrant Certificates, subject to
the provisions of Section 5.2, may be split up, combined or exchanged for other
Warrant Certificates of the same type representing a like aggregate number of
Warrants or may be transferred in whole or in part. Any holder desiring to split
up, combine or exchange a Warrant Certificate or Warrant Certificates shall make
such request in writing delivered to the Company and shall surrender the Warrant
Certificate or Warrant Certificates so to be split up, combined or exchanged.
Upon any such surrender for split up, combination, exchange or transfer, the
Company shall execute and deliver to the person entitled thereto a Warrant
Certificate or Certificates, as the case may be, as so requested.

     Section 5.2.  Cancellation of Warrant Certificates.  Any Warrant
Certificate surrendered upon the exercise of Warrants or for split up,
combination, exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided in Section 3.5 hereof in case of the exercise of less than all of
the Warrants evidenced by a Warrant Certificate or in Section 5.1 in case of a
split up, combination, exchange or transfer, no Warrant Certificate shall be
issued hereunder in lieu of such cancelled Warrant Certificate.

                                  ARTICLE VI

                     HOLDER REPRESENTATION AND WARRANTIES

     Section 6.1.  Purchase for Investment.  The Holder is (a) acquiring the
Warrants and the Warrant Shares for Holder's own account and not with a view to
the distribution thereof in violation of the securities laws of the United
States or any state thereof, provided that the disposition of Holder's property
shall at all times be within Holder's control, and (b) is an "accredited
investor" as defined in Rule 501 (a) of Regulation D under the Securities Act
and

                                      11
<PAGE>

able to evaluate the merits and risks of the investment. Holder understands that
the Warrants and the Warrant Shares have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or in an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required by law.

                                  ARTICLE VII

                                 MISCELLANEOUS

     Section 7.1.  Changes to Agreement.  The Company, when authorized by its
Board of Directors, may amend or supplement this Agreement with the written
consent of the Holder or Holders of a majority of the outstanding Warrants.

     Section 7.2.  Assignment.  All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of their respective successors and assigns.

     Section 7.3.  Successor to Company.  The Company will not merge or
consolidate with or into any other corporation or sell or otherwise transfer its
property, assets and business substantially as an entirety to a successor
corporation, unless the corporation resulting from such merger, consolidation,
sale or transfer (if not the Company) shall expressly assume, by supplemental
agreement satisfactory in form and substance to the Holders and delivered to the
Holders, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company.

     Section 7.4.  Notices.  All notices and other communications provided for
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by facsimile or overnight courier,
addressed as follows:

          If to the Company, to:

                  Pacific Aerospace & Electronics, Inc.
                  430 Olds Station Road
                  Wenatchee, WA 98801
                  Attn: President
                  Fax: (509) 667-9696

          With copies to:

                  Pacific Aerospace & Electronics, Inc.
                  110 Main Street, Suite 100
                  Edmonds, WA 98020
                  Attn:  General Counsel
                  Fax: (425) 774-0103

                                       12
<PAGE>

                  Milbank, Tweed, Hadley & McCloy LLP
                  601 South Figueroa Street, 30th Floor
                  Los Angeles, CA 90017
                  Attn: Kenneth J. Baronsky, Esq.
                  Fax: (213) 629-5063

If to the Holder, if addressed to such Holder at the address set forth on the
signature page hereto.

Failure to file any certificate or notice or to mail any notice, or any defect
in any certificate or notice pursuant to this Agreement shall not affect in any
way the rights of any holder of a Warrant Certificate or the legality or
validity of any adjustment made pursuant to Section 4.1 hereof, or any
transaction giving rise to any such adjustment, or the legality or validity of
any action taken or to be taken by the Company.

     Section 7.5.  Governing Law.  This Agreement and each Warrant Certificate
issued hereunder shall be governed by the laws of the State of New York without
regard to principles of conflicts of laws thereof.

     Section 7.6.  Standing.  Nothing in this Agreement expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holder of the Warrant Certificates any right, remedy or claim
under or by reason of this Agreement or of any covenant, condition, stipulation,
promise or agreement contained herein; and all covenants, conditions,
stipulations, promises and agreements contained in this Agreement shall be for
the sole and exclusive benefit of the Company and their successors, and the
Holder of the Warrant Certificates.

     Section 7.7.  Headings.  The descriptive headings of the articles and
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

     Section 7.8.  Counterparts.  This Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.

     Section 7.9.  Availability of the Agreement.  The Company shall keep copies
of this Agreement available for inspection by holders of Warrants during normal
business hours. Copies of this Agreement may be obtained upon written request
addressed to the Company at the address set forth in Section 7.4 hereof.

     Section 7.10.  Entire Agreement.  This Agreement, including the Exhibits
referred to herein and the other writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings.

     Section 7.11.  Rights of Warrant Holders.  No Warrant Certificate shall
entitle the holder thereof to any of the rights of a stockholder of the Company,
including, without limitation, the

                                       13
<PAGE>

right to vote, to receive dividends and other distributions, to receive any
notice of, or to attend, meetings of stockholders or any other proceedings of
the Company.

     IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the
parties as of the day and year first above written.

PACIFIC AEROSPACE & ELECTRONICS, INC.,
a Washington corporation

By:      /s/  Donald A. Wright
         -----------------------------------------
Name:    Donald A. Wright
Title:   President and Chief Executive Officer

HOLDER:

FIRST ALBANY CORPORATION

By:      /s/ Frank Lunn
         -----------------------------------------
Name:    Frank Lunn
Title:   Senior Vice President

Notice Address:
First Albany Corporation
FAC/Equities
One Penn Plaza, 42nd Floor
New York, NY 10119-4000
Attn: Frank P. Lunn III
Phone: (212) 273-7140
Fax: (212) 273-7320

                                       14
<PAGE>

                                   EXHIBIT A

                                    Form of
                              Warrant Certificate

 NEITHER THE ISSUANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
 ISSUANCE OF ANY SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR PURSUANT
  TO THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT BE SOLD OR
   TRANSFERRED EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT IN EFFECT WITH
     RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT AND THE RULES AND
 REGULATIONS THEREUNDER OR (ii) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
        OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

No. FAC- _______                                                   April 9, 2001

                        Certificate for _________Shares

                       NOT EXERCISABLE AFTER 5:00 P.M.,
                        New York TIME, ON April 9, 2006

                     PACIFIC AEROSPACE & ELECTRONICS, INC.

                   COMMON STOCK PURCHASE WARRANT CERTIFICATE

     THIS CERTIFIES that _____________________ or its assigns is the holder of
this Warrant which represents the right to purchase [____________] fully paid
and non-assessable shares of Common Stock, par value $.001 per share (the
"Common Stock"), of Pacific Aerospace & Electronics, Inc., a Washington
corporation (the "Company"), at an initial exercise price (the "Exercise Price")
equal to $.4062 per share, at the times provided in the Warrant Agreement (as
hereinafter defined), by surrendering this Warrant Certificate, with the
Election to Purchase attached hereto duly executed and by paying in full the
Exercise Price. Payment of the Exercise Price may be made at the option of the
holder hereof by (i) cash, certified check or a wire transfer in same day funds
in an amount equal to the then applicable Exercise Price multiplied by the
number of Warrant Shares then being purchased, (ii) delivery to the Company of
that number of shares of Common Stock, duly endorsed, having an aggregate Fair
Market Value equal to the then applicable Exercise Price multiplied by the
number of Warrant Shares then being purchased or (iii) by any combination of (i)
and (ii). In the alternative, the holder of a Warrant Certificate may exercise
its right to purchase some or all of the Warrant Shares subject to such Warrant
Certificate, on a net basis, such that, without the exchange of any funds, such
holder receives that number of Warrant Shares subscribed to pursuant to such
Warrant Certificate less that number of shares of Common Stock having an
aggregate Fair Market Value at the Date of Exercise equal to the aggregate
Exercise Price that would otherwise have been paid by such holder for the number
of Warrant Shares subscribed to pursuant to such Warrant Certificate.

     No Warrant may be exercised after 5:00 P.M., New York time, on April 9,
2006, (the "Expiration Date"). All Warrants evidenced hereby shall thereafter
become void, subject to the terms of the Warrant Agreement.

     Prior to the Expiration Date, subject to any applicable laws, rules or
regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate and in accordance
with the terms of the Warrant Agreement, the holder shall be entitled to
transfer this Warrant Certificate, in whole or in part, upon surrender of this
Warrant Certificate to the Company with the Assignment on the reverse hereof.
Upon any such transfer, a new Warrant Certificate or Warrant Certificates
representing the same aggregate number of Warrants will be issued in accordance
with instructions in the form of assignment.

     Upon the exercise of less than all of the Warrants evidenced by this
Warrant Certificate, there shall be issued to the holder a new Warrant
Certificate in respect of the Warrants not exercised.
<PAGE>

     Prior to the Expiration Date, the holder shall be entitled to exchange this
Warrant Certificate, with or without other Warrant Certificates, for another
Warrant Certificate or Warrant Certificates for the same aggregate number of
Warrants, upon surrender of this Warrant Certificate to the Company as set forth
in the Warrant Agreement. Upon certain events provided for in the Warrant
Agreement, the Exercise Price and the number of shares of Common Stock issuable
upon the exercise of each Warrant are required to be adjusted. No fractional
shares will be issued upon the exercise of Warrants. As to any final fraction of
a share which the holder of one or more Warrant Certificates, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay the cash value thereof
determined as provided in the Warrant Agreement.

     This Warrant Certificate is issued under and in accordance with the Warrant
Agreement dated as of April 9, 2001 between the Company and the holder and is
subject to the terms and provisions contained in said Warrant Agreement, to all
of which terms and provisions the holder consents by acceptance hereof. All
capitalized terms not defined herein shall have the meaning set forth in the
Warrant Agreement.

     This Warrant Certificate shall not entitle the holder to any of the rights
of a stockholder of the Company, including, without limitation, the right to
vote, to receive dividends and other distributions, or to attend or receive any
notice of meetings of stockholders or any other proceedings of the Company.

     IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its facsimile Corporate Seal.

                                      PACIFIC AEROSPACE & ELECTRONICS, INC.

                                   By:
                                           -------------------------------------
                                   Name:   Donald A. Wright
                                   Title:  President and Chief Financial Officer

                                   Attest:

                                   By:
                                           -------------------------------------
                                   Name:   Sheryl A. Symonds
                                   Title:  Secretary
<PAGE>

                         Form of Election To Purchase

     The undersigned hereby irrevocably elects to exercise this Warrant with
respect to [________________] shares of Common Stock represented by this Warrant
Certificate and to purchase such shares of Common Stock issuable upon the
exercise of said Warrant, and requests that Certificates for such shares be
issued and delivered as follows:

ISSUE TO:_______________________________________________________________________
                                             (NAME)

________________________________________________________________________________
                         (ADDRESS, INCLUDING ZIP CODE)

________________________________________________________________________________
                         (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)

DELIVER TO: ____________________________________________________________________
                                              (NAME)

at _____________________________________________________________________________
                              (ADDRESS, INCLUDING ZIP CODE)

     If the number of shares hereby purchased is less than all the shares
represented by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full shares not exercised be
issued and delivered as set forth above.

     In full payment of the exercise price with respect to the shares purchased
and transfer taxes, if any, the undersigned hereby tenders payment of $______ by
(i) $_______ in cash, certified check or wire transfer in same day funds, (ii)
surrender to the Company of certificate no(s) ____________ representing ______
shares of Common Stock, (iii) a combination of (i) an (ii) or (iv) purchasing
the shares on a net basis such that the number of shares of Common Stock
otherwise receivable by the holder pursuant to the Warrants exercised shall be
reduced by the number of shares of Common Stock having an aggregate Fair Market
Value equal to the exercise price with respect to the number of shares
purchased.

Date:_________________, _____         __________________________________________
                                      Signature

                                      (Signature must conform in all respects to
                                      name of holder as specified on the face of
                                      the Warrant Certificate.)

                                      PLEASE INSERT SOCIAL SECURITY OR TAX I.D.
                                      NUMBER OF HOLDER

                                      __________________________________________
<PAGE>

                                  Assignment

     FOR VALUE RECEIVED, the undersigned hereby irrevocably sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
shares set forth below:

     Name of Assignee               Address                   No. of Shares

and does hereby irrevocably constitute and appoint ___________________________,
Attorney, to make such transfer on the books of Pacific Aerospace & Electronics,
Inc. maintained for that purpose, with full power of substitution in the
premises.

Date:_________________, _____                ___________________________________
                                             Signature

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