Document:

Exhibit 10.14

EXECUTION VERSION

ASSET PURCHASE AGREEMENT

DATED AS OF

FEBRUARY 3, 2005

BY AND BETWEEN

GENERAL DYNAMICS OTS (AEROSPACE), INC.

AND

ASTRONICS ACQUISITION CORP.

TABLE OF CONTENTS

	DESCRIPTION 	
    PAGE

	 	 	 	 
	ARTICLE I -
    DEFINITIONS 	1
	 	Section 1.1 	Definitions
    	1
	 	Section 1.2 	Construction.
    	7
	 	 	 	 
	ARTICLE II -
    PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
    	7
	 	Section 2.1	Purchase of Assets and Assumption
    of Liabilities 	7
	 	Section 2.2 	Purchased and Excluded Assets.
    	7
	 	Section 2.3 	Assumed and Excluded Liabilities.
    	10
	 	 	 	 
	ARTICLE III -
    PURCHASE PRICE AND CLOSING 	11
	 	Section 3.1 	Closing
    	11
	 	Section 3.2 	Purchase Price
    	11
	 	Section 3.3 	Allocation of Purchase Price.
    	11
	 	Section 3.4 	Earnout.
    	12
	 	 	 	 
	ARTICLE IV -
    REPRESENTATIONS AND WARRANTIES OF SELLER 
    	14
	 	Section 4.1 	Organization
    	14
	 	Section 4.2 	Authorization of Transaction
    	14
	 	Section 4.3 	Noncontravention; Consents.
    	14
	 	Section 4.4 	Financial Statements.
    	15
	 	Section 4.5	 Accounts Receivable
    	15
	 	Section 4.6 	Absence of Certain Changes or
    Events Subsequent to Balance Sheet 	15
	 	Section 4.7 	Tax Matters.
    	16
	 	Section 4.8 	Material Contracts.
    	16
	 	Section 4.9 	Government Contracts.
    	17
	 	Section 4.10 	Title to and Sufficiency of
    Purchased Assets 	18
	 	Section 4.11 	Real Property.
    	18
	 	Section 4.12 	
    Permits 	18
	 	Section 4.13 	
    Intellectual Property.
    	19
	 	Section 4.14 	
    Litigation 
    	19
	 	Section 4.15 	
    Employees and Employee Benefits.
    	19
	 	Section 4.16 	
    Environmental Matters.
    	20
	 	Section 4.17 	
    Legal Compliance
    	21
	 	Section 4.18 	
    Affiliate Transactions
    	21
	 	Section 4.19 	
    Brokers' Fees 
    	21
	 	Section 4.20 	
    Suppliers; Customers
    	21
	 	Section 4.21 	
    Product Warranty
    	21
	 	Section 4.22 	
    Export Control Regulations
    	21
	 	Section 4.23 	
    LIMITATION ON WARRANTIES
    	21
	 	 	 	 
	ARTICLE V - REPRESENTATIONS AND
    WARRANTIES OF BUYER 	22
	 	Section 5.1 	
    Organization 
    	22
	 	Section 5.2 	
    Authorization of Transaction
    	22
	 	Section 5.3 	
    Noncontravention; Consents.
    	22
	 	Section 5.4 	
    Litigation 
    	23
	 	Section 5.5 	
    Brokers' Fees. 
    	23
	 	Section 5.6 	
    LIMITATION ON THE SELLER'S WARRANTIES
    	23

i

	ARTICLE VI - COVENANTS
    	23
	 	Section 6.1 	
    General 	23
	 	Section 6.2 	
    Post-Closing Consents; Nonassignable Contracts
    	24
	 	Section 6.3 	
    Novation of Government Contracts
    	24
	 	Section 6.4 	
    Litigation Support
    	25
	 	Section 6.5 	
    Pro-rations 
    	26
	 	Section 6.6 	
    Agreements Regarding Tax Matters.
    	26
	 	Section 6.7 	
    Records and Documents
    	27
	 	Section 6.8 	
    Intellectual Property; Use of Excluded Names.
    	27
	 	Section 6.9 	
    Non-Competition; Non-Solicitation.
    	28
	 	Section 6.10 	
    Remittance of Receivables
    	29
	 	 	 	 
	ARTICLE VII - EMPLOYEE MATTERS
    	29
	 	Section 7.1 	
    Employment 
    	29
	 	Section 7.2 	
    Employee Benefit Matters.
    	29
	 	Section 7.3 	
    Defined Contribution Plans
    	30
	 	Section 7.4 	
    Compliance with WARN
    	30
	 	 	 	 
	ARTICLE IX - CLOSING CONDITIONS
    	30
	 	Section 8.1 	
    Closing Deliveries of the Seller
    	30
	 	Section 8.2 	
    Closing Deliveries of the Buyer
    	31
	 	 	 	 
	ARTICLE VIII - REMEDIES
    	32
	 	Section 9.1 	
    Survival 	32
	 	Section 9.2 	
    Indemnification by the Seller.
    	32
	 	Section 9.3 	
    Indemnification by the Buyer.
    	33
	 	Section 9.4 	
    Procedures for Indemnification.
    	33
	 	Section 9.5 	
    Certain Limitations
    	34
	 	Section 9.6 	
    Certain Benefits
    	34
	 	Section 9.7 	
    Treatment of Indemnity Payments
    	35
	 	Section 9.8 	
    Exclusive Remedy
    	35
	 	Section 9.9 	
    Mitigation 
    	35
	 	 	 	 
	ARTICLE IX - MISCELLANEOUS
    	35
	 	Section 10.1 	
    Notices 	35
	 	Section 10.2 	
    Expenses; No Offset
    	36
	 	Section 10.3 	
    Disclosure Schedules
    	36
	 	Section 10.4 	
    Bulk Sales or Transfer Laws
    	36
	 	Section 10.5 	
    Assignment; Successors and Assigns
    	36
	 	Section 10.6 	
    Amendment; Waiver
    	36
	 	Section 10.7 	
    Severability; Specific Performance
    	36
	 	Section 10.8 	
    Counterparts 
    	37
	 	Section 10.9 	
    Descriptive Headings
    	37
	 	Section 10.10 	
    No Third-Party Beneficiaries
    	37
	 	Section 10.11 	
    Entire Agreement
    	37
	 	Section 10.12 	
    Exhibits and Schedules
    	37
	 	Section 10.13 	
    Governing Law 
    	37
	 	Section 10.14 	
    Independence of Warranties and Representations
    	37

ii

 

	
    EXHIBITS:

	 
	Exhibit A	Bill of Sale and Assignment and Assumption
    Agreement
	Exhibit B	Assignment of Patents
	Exhibit C	Assignment of Trademarks
	Exhibit D	Assignment and Assumption of Leases
	Exhibit E	Transition Services Agreement
	Exhibit F	Associate Contractor Agreement
	 
	
    DISCLOSURE SCHEDULES:

	 
	Schedule 1.1	Seller's Knowledge 
	Schedule 2.2(a)(v)	Intellectual Property
	Schedule 2.2(a)(ix)	Prepaid Expenses
	Schedule 2.2(b)	Excluded Assets
	Schedule 4.3	Noncontravention; Consents
	Schedule 4.4	Financial Statements
	Schedule 4.5	Accounts Receivable
	Schedule 4.6	Absence of Certain Changes or Events Subsequent
    to Balance Sheet
	Schedule 4.7	Tax Matters
	Schedule 4.8	Material Contracts
	Schedule 4.9	Government Contracts
	Schedule 4.10	Title to and Sufficiency of Purchased Assets
	Schedule 4.11	Leased Real Property
	Schedule 4.12	Permits
	Schedule 4.13	Intellectual Property
	Schedule 4.14	Litigation
	Schedule 4.15	Employees and Employee Benefits
	Schedule 4.16	Environmental Matters
	Schedule 4.17	Legal Compliance
	Schedule 4.18	Affiliate Transactions
	Schedule 4.19	Brokers' Fees
	Schedule 4.20	Suppliers; Customers
	Schedule 4.21	Product Warranty
	Schedule 4.22	Export Control Regulations
	Schedule 7.1	Employees

iii

ASSET PURCHASE AGREEMENT

        This ASSET PURCHASE AGREEMENT (this "Agreement")
dated as of February 3, 2005 is made by and between General Dynamics OTS
(Aerospace), Inc., a Washington corporation (the "Seller"), and 
Astronics Acquisition Corp., a Washington corporation (the "Buyer").

        WHEREAS, the Seller's business located at its facility in Redmond,
Washington, is engaged directly in the design, manufacture, sale, distribution
and service of products for (i) power generation, distribution and control for
airborne applications (known as the Seller's "Airborne Power and Control" or "APC"
business) and (ii) aircraft cabin power and in-flight applications (known as the
Seller's "Cabin Electronics" or "CE" business) (the "Business").

        WHEREAS, this Agreement contemplates a transaction in which the Buyer will
acquire substantially all of the assets of the Business and assume substantially
all of the liabilities of the Business on the terms and subject to the
conditions set forth in this Agreement.

        NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the value,
receipt and sufficiency of which are acknowledged, the Parties hereby agree as
follows:

        ARTICLE I

        DEFINITIONS

      
    
  

        Section 1.1    
Definitions. For purposes of this Agreement, the following terms have the meanings
set forth below:

        "Affiliates" has the meaning set forth in
Rule l2b-2 of the regulations promulgated under the Securities Exchange Act of
1934, as amended.

        "Agreement" has the meaning set forth in the Preamble.

        "Allocation Statement" has the meaning set forth in Section 3.3(a).

        "Ancillary Documents" means the Bill of Sale and Assignment and
Assumption Agreement, the Assignment of Patents, the Assignment of Trademarks,
the Assignment and Assumption of Leases, the Transition Services Agreement, the
Confidentiality Agreement, the Letter Agreement and each certificate and other
document to be delivered pursuant to Article VIII.

        "Apportioned Obligations" means any Tax relating to any Purchased
Asset (including any additional Tax determined subsequent to the Closing Date),
and all rents, utilities, and other periodic charges with respect to the Leased
Real Property, that are due or become due without acceleration for any Straddle
Period.

        "Arbiter" has the meaning set forth in Section 3.4(c).

        "Assignment of Patents" has the meaning set forth
in Section 8.1(b).

 

        "Assignment and Assumption of Leases" has the meaning set forth in 
Section 8.1(d).

        "Assignment of Trademarks" has the meaning set
forth in Section 8.1(c).

        "Associate Contractor Agreement" has the meaning set forth in 
Section 8.1(g).

        "Assumed Liabilities" has the meaning set forth in Section 2.3(a).

        "Balance Sheet" has the meaning set forth in Section 4.4(a).

        "Basket Amount" has the meaning set forth in Section 9.2(b).

        "Bill of Sale and Assignment and Assumption Agreement" has the meaning
set forth in Section 8.1(a).

        "Books and Records" means all books, records,
ledgers, files, documents, correspondence, lists, plats, specifications,
surveys, drawings, advertising and promotional materials, studies, reports and
other materials (in whatever form or medium) which exclusively relate to the
Business.

        "Business" has the meaning set forth in the Preamble.

        "Buyer" has the meaning set forth in the Preamble.

        "Buyer Claims" has the meaning set forth in Section 9.2(a).

        "Buyer Employee Benefit Plans" has the meaning set forth in 
Section 7.2(a).

        "Buyer Indemnified Party" has the meaning set forth in 
Section 9.2(a).

        "Buyer Guarantee" has the meaning set forth in Section 5.2.

        "Buyer Guarantor" means Astronics Corporation, a New York corporation.

        "Buyer Material Adverse Effect" has the meaning set forth in 
Section 5.1.

        "Ceiling Amount" has the meaning set forth in Section 9.2(b).

        "Claims" has the meaning set forth in Section 9.3(a).

        "Closing Date" has the meaning set forth in Section 3.1.

        "Closing" has the meaning set forth in Section 3.1.

        "Change of Control" means any transaction or event which results in
(a) the sale of at least 51% of the capital stock or other ownership interests
of the Buyer to a non-Affiliate of the Buyer or (b) the sale of all or
substantially all of the assets of the Business to a non-Affiliate of the Buyer.

2

        "COBRA" has the meaning set forth in Section 7.2(b).

        "Code" means the Internal Revenue Code of 1986, as amended (together
with all rules and regulations promulgated thereunder).

        "Competing Business" has the meaning set forth in Section 6.9(a).

        "Confidentiality Agreement" means that certain Confidentiality
Agreement dated July 7, 2004, between the Buyer and Banc of America Securities
LLC on behalf of the Seller.

        "Contracts" has the meaning set forth in Section 2.2(a)(iii).

        "Disclosure Schedules" means all of the disclosure schedules
accompanying this Agreement.

        "Earnout" has the meaning set forth in Section 3.4(a).

        "Earnout Period" has the meaning set forth in Section 3.4(a).

        "Earnout Revenues" means, for the period commencing January 1, 2005
and ending December 31, 2005, the sales, net of returns, of the Business
excluding (i) the sales, net of returns, attributable to the "Your Entertainment
System" or "YES!" product line of the Business and (ii) the sales, net of
returns, attributable to sales from the Business to the Seller and its
Affiliates in excess of historic annual amounts.

        "Earnout Statement" has the meaning set forth in Section 3.4(b).

        "Employee Benefit Plan" has the meaning set forth in 
Section 4.15(b).

        "Employee Pension Benefit Plan" has the meaning set forth in 
Section 4.15(b).

        "Employee Welfare Benefit Plan" has the meaning set forth in 
Section 4.15(b).

        "Employees" has the meaning set forth in Section 7.1.

        "Environment" means any water or water vapor, land (including land
surface or subsurface), air, fish, wildlife, biota, and all other natural
resources.

        "Environmental Laws" means any Law with respect to any Hazardous
Materials, drinking water, groundwater, wetlands, landfills, open dumps, storage
tanks, underground storage tanks, solid waste, waste water, storm water run-off,
waste emissions or wells. Without limiting the generality of the foregoing, the
term will encompass each of the following statutes and the regulations
promulgated thereunder, as amended: (a) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, (b) the Resource Conservation
and Recovery Act of 1976, (c) the Hazardous Materials Transportation Act,
(d) the Toxic Substances Control Act, (e) the Clean Water Act, (f) the Clean Air
Act, (g) the Safe Drinking Water Act, (h) the National Environmental Policy Act
of 1969, (i) the Emergency Planning and Community Right-to-Know Act and (j) the
Occupational Safety and Health Act of 1970.

3

        "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (together with all rules and regulations promulgated thereunder).

        "Excluded Assets" has the meaning set forth in Section 2.2(b).

        "Excluded Liabilities" has the meaning set forth in Section 2.3(b).

        "Excluded Names" has the meaning set forth in Section 2.2(b)(vii).

        "Financial Statements" has the meaning set forth in Section 4.4(a).

        "Government Contract" means any Contract between the Seller and any
(a) Governmental Entity or (b) third party relating to a contract between such
third party and any Governmental Entity.

        "Governmental Entity" means the United States, any state or other
political subdivision thereof and any other foreign or domestic entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any government authority,
agency, department, board, commission, court, tribunal or instrumentality of the
United States or any foreign entity, any state of the United States, or any
political subdivision of any of the foregoing.

        "Hazardous Materials" means any wastes, substances, or materials
(whether solids, liquids or gases) that are defined or listed by a Governmental
Entity as hazardous, toxic, pollutants or contaminants, including substances
defined as "hazardous wastes," "hazardous substances," or "toxic substances"
under any Environmental Laws. "Hazardous Materials" includes, but not limited
to, polychlorinated biphenyls (PCBs), asbestos, lead-based paints, and petroleum
and petroleum products (including crude oil or any fraction thereof).

        "Indemnified Party" has the meaning set forth in Section 9.4(a).

        "Indemnifying Party" has the meaning set forth in Section 9.4(a).

        "Initial Purchase Price" has the meaning set forth in Section 3.2.

        "Intellectual Property" has the meaning set forth in 
Section 2.2(a)(v).

        "Interim Financial Statements" has the meaning set forth in 
Section 4.4(a).

        "Inventory" has the meaning set forth in Section 2.2(a)(ii).

        "IRS" means the Internal Revenue Service.

        "Law" means any applicable federal, state, local or foreign 
law, statute, rule, regulation, ordinance, permit, order, writ, injunction,
judgment or decree of any Governmental Entity.

        "Leased Real Property" has the meaning set forth in 
Section 2.2(a)(viii).

        "Letter Agreement" has the meaning set forth in
Section 8.1(i).

4

        "Lien" means any lien, pledge, security interest, charge, claim,
restriction or other encumbrance.

        "Losses" means any losses, damages, penalties, fines, costs and
expenses (including reasonable and documented attorneys' and accountants' and
consultants' fees and disbursements).

        "Material Adverse Effect" means a material adverse effect on the
business, results of operations or condition (financial or otherwise) of the
Business or the Purchased Assets taken as a whole; provided, however, that "Material
Adverse Effect" will not include any of the following: (a) changes or
effects that generally affect the industry in which the Business operates, (b)
changes or effects arising out of, or attributable to, the announcement of the
execution of this Agreement, the consummation of the transactions contemplated
hereby or the identity of the Buyer or (c) effects due to changes in any Laws
affecting the Business.

        "Material Contracts" has the meaning set forth in Section 4.8(a).

        "Novation Agreement" has the meaning set forth in Section 6.3.

        "Parties" means the Seller and the Buyer together, and "Party"
means the Seller or the Buyer individually, as the case may be.

        "Permits" has the meaning set forth in Section 2.2(a)(vi).

        "Permitted Encumbrances" means any (a) mechanics', materialmens' and
similar Liens with respect to amounts not yet due and payable, (b) Liens for
Taxes not yet due and payable or the validity of which is being contested in
good faith by appropriate proceedings, (c) Liens securing rental payments under
capital lease arrangements, (d) Liens encumbering any of the Leased Real
Property, which do not materially interfere with the use of the Leased Real
Property by the Business or the ordinary course of the Business thereon and (e)
such other encumbrances or imperfections in or failure of title which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

        "Person" means an individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization or Governmental Entity.

        "Proceeding" means any action, arbitration, hearing, governmental
investigation, litigation, lawsuit (whether civil, criminal, administrative,
judicial or investigative) commenced, brought, conducted or heard by or before
any Governmental Entity or arbitrator.

        "Purchase Price" has the meaning set forth in Section 3.2.

        "Purchased Assets" has the meaning set forth in Section 2.2(a).

        "Receivables" has the meaning set forth in Section 4.5.

5

        "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, migration, dumping, or
disposing into the Environment.

        "Review Period" has the meaning set forth in Section 3.4(c).

        "Schedule" means a schedule to this Agreement that is contained in the
Disclosure Schedules and incorporated herein pursuant to Section 10.12.

        "Seller" has the meaning set forth in the Preamble.

        "Seller Claims" has the meaning set forth in Section 9.3(a).

        "Seller Employee Benefit Plan" has the meaning set forth in 
Section 4.15(b).

        "Seller Guarantee" has the meaning set forth in Section 4.2.

        "Seller Guarantor" means General Dynamics Ordnance and Tactical
Systems, Inc., a Virginia corporation.

        "Seller Indemnified Parties" has the meaning set forth in 
Section 9.3(a).

        "Seller's Knowledge" means the actual knowledge of the individuals
listed on Schedule 1.1.

        "Specified Consent" has the meaning set forth in Section 6.2(b).

        "Straddle Period" means any Tax year or taxable period beginning on or
before the Closing Date and ending after the Closing Date.

        "Tax" or "Taxes" means a tax or taxes of any kind or nature, or
however denominated, including liability for federal, state, local or foreign
sales, use, transfer, registration, business and occupation, value added,
excise, severance, stamp, premium, windfall profit, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect to the foregoing, including any transferee or
secondary liability for a tax and any liability assumed by agreement or arising
as a result of being or ceasing to be a member of any affiliated group, or being
included or required to be included in any tax return relating thereto;
provided, however, that "Tax" or "Taxes" will not include any
income, gross receipts, franchise, estimated, alternative minimum or add-on
minimum taxes.

        "Tax Returns" means, with respect to any Tax, any information return
for such Tax, and any return, report, statement, declaration, claim for refund
or document filed or required to be filed under the Law for such Tax.

        "Third Party Claim" has the meaning set forth in Section 9.4(a).

        "Transition Services Agreement" has the meaning set forth in 
Section 8.1(e). 

6

        "U.S. Government" means the federal government of the United States
and any agencies, instrumentalities and departments thereof.

        "York Center Premises" means the real property and the improvements
thereon formerly owned by the Seller and formerly known as 11441 Willows Road
N.E., Redmond, Washington.

        Section 1.2 
   
Construction.

        (a) For purposes of this Agreement, whenever the context requires, the
singular number will include the plural, and vice versa, the masculine gender
will include the feminine and neuter genders, the feminine gender will include
the masculine and neuter genders, and the neuter gender will include masculine
and feminine genders.

        (b) As used in this Agreement, the words "include" and "including,"
and variations thereof, will not be deemed to be terms of limitation, but rather
will be deemed to be followed by the words "without limitation."

        (c) Except as otherwise indicated, all references in this Agreement to
"Section," "Article" and "Exhibit" are intended to refer to
the Sections, Articles of, and Exhibits to, this Agreement.

        (d) As used in this Agreement, the terms "hereof," "hereunder,"
"herein" and words of similar import will refer to this Agreement as a whole and
not to any particular provision of this Agreement.

        (e) Each Party hereto has participated in the drafting of this
Agreement, which each Party acknowledges is the result of extensive negotiations
between the parties. Consequently, this Agreement will be interpreted without
reference to any rule or precept of law that states that any ambiguity in a
document be construed against the drafter.

        ARTICLE II

        PURCHASE AND SALE
        OF ASSETS AND ASSUMPTION

        OF LIABILITIES

      
    
  

        Section 2.1     
Purchase of Assets and Assumption of Liabilities. On the terms and subject to the conditions set forth in this Agreement,
the Buyer hereby purchases from the Seller, and the Seller hereby sells,
transfers, assigns, conveys and delivers to the Buyer, the Purchased Assets, and
the Buyer hereby assumes and agrees to pay, discharge and perform when due all
of the Assumed Liabilities.

        Section 2.2     
Purchased and Excluded Assets.

        (a) The "Purchased Assets" are all of the right, title and
interest that the Seller possesses and has the right to transfer in and to the
Books and Records (provided that the Seller will be entitled to retain copies of
any materials it deems reasonably necessary for its human resources, legal or
other business purposes) and all of the assets that, with respect to assets that
constitute or are related to Intellectual Property, are used or held for use
exclusively by the Business, and with respect to all other assets, are used or
held for use primarily by the Business, as it is currently operated (other than
the Excluded Assets), including:

7

	 	
    
         (i)      all accounts and notes receivable and other such claims for
    money due to the Seller arising from the rendering of services or the sale
    of goods or materials primarily by the Business;
	 	 
	 	
    
         (ii)      all raw materials, work in process, spare parts and finished
    goods inventories that relate primarily to the Business wherever located
    (collectively, the "Inventory");
	 	 
	 	
    
         (iii)      all rights and interests in all
    contracts, agreements, purchase orders, licenses, real property leases,
    personal property leases, obligations, commitments, undertakings and pending
    bids or proposals (whether written or oral, express or implied) to which the
    Seller is a party related primarily to the Business (the "Contracts");
	 	 
	 	
    
         (iv)      all machinery, equipment, tools, dies, test equipment,
    computer hardware, furniture, fixtures, leasehold improvements, supplies,
    vehicles, and other tangible personal property wherever located, together
    with any transferable manufacturer or vendor warranties related thereto,
    that are used or held for use primarily by the Business;
	 	 
	 	
    
         (v)      to the extent used or held for use by the Seller exclusively
    for the Business, and in each case to the extent legally assignable, all (A)
    patents, patent applications, trademark registrations and applications,
    copyright registrations and applications and domain names solely to the
    extent set forth on Schedule 2.2(a)(v), (B) unregistered trademarks,
    unregistered trade names, computer software, unregistered copyrights, trade
    secrets, confidential business information (including formulas,
    compositions, inventions, manufacturing and production processes and
    techniques, technical drawings and designs, technical data, customer and
    supplier data, pricing and cost information) and (C) all rights in, relating
    to, or for use or exploitation of, "Airborne Electronic Systems" and "AES",
    and in each case, all associated goodwill, including all rights thereunder,
    remedies against infringement and rights to protection of interests therein
    under the Laws of all jurisdictions (collectively, the "Intellectual
    Property");
	 	 
	 	
    
         (vi)      to the extent legally assignable, all licenses, permits,
    franchises, consents, authorizations, approvals, certificates of authority
    or orders, or any waiver of the foregoing, issued by any Governmental Entity
    primarily with respect to the conduct of the
    Business by the Seller (the "Permits");
	 	 
	 	
    
         (vii)      all rights under or pursuant to warranties, representations
    and guarantees made by suppliers, manufacturers or contractors in connection
    with products or services provided primarily to the Business;
	 	 
	 	
    
         (viii)      all of the Seller's right, title and interest to the
    leasehold interest of the Seller, as lessee, in the real property identified
    on Schedule 4.11 (the "Leased Real Property"); and
	 	 
	 	
    
         (ix)      all prepaid expenses of the Seller relating to the Business,
    including deposits under any Contracts as set forth on Schedule 2.2(a)(ix).

        (b) The Purchased Assets will not include any
assets other than those specifically described in Section 2.2(a) above.
Without limiting the generality of the foregoing sentence and notwithstanding
anything to the contrary contained in Section 2.2(a), the Seller or one
of its  

8

Affiliates will retain all of its right, title and interest in and to,
and will not sell, transfer, assign, convey or deliver to the Buyer, and the
Purchased Assets will not include, the following (collectively, the "Excluded
Assets"):

	 	
    
          (i)      any cash or cash equivalents, including
    any marketable securities or certificates of deposit, or any collected funds
    or items in the process of collection at the Seller's financial institutions
    through and including the Closing Date;
    
	 	 
	 	
    
          
    
    (ii)      
    any rights of the Seller or any of its Affiliates with respect to any Tax
    refund relating to periods ending on or prior to the Closing Date, including
    any ratable portion of a Tax period that includes the Closing Date (as
    pro-rated in the manner provided by Sections 6.5 and 6.6(d)),
    any Tax Returns and records, and any rights under any Tax allocation or
    sharing agreement;
	 	 
	 	
    
          
    
    (iii)      the corporate charter, qualification to conduct business as
    a foreign corporation, arrangements with registered agents relating to
    foreign qualifications, taxpayer and other identification numbers, corporate
    seal, minute books, stock transfer books, blank stock certificates, books
    and records relating to federal, state, local or foreign income, gross
    receipts, franchise, estimated alternative minimum or add-on taxes, and any
    other documents relating to the organization, maintenance and existence of
    the Seller as a corporation;
	 	 
	 	
    
          
    
    (iv)      any property, casualty, workers' compensation or other
    insurance policy or related insurance services contract held by the Seller
    or any of its Affiliates, and any rights of the Seller or any of its
    Affiliates under any such insurance policy or contract;
	 	 
	 	
    
          
    
    (v)      any Seller Employee Benefit Plans and corresponding assets or
    any rights of the Seller or any of its Affiliates in the Seller Employee
    Benefit Plans provided by the Seller to Employees;
	 	 
	 	
    
          
    
    (vi)      any rights of the Seller or the Seller Indemnified Parties
    under this Agreement, any Ancillary Document or any other agreement between
    the Seller and the Buyer;
	 	 
	 	
    
          
    
    (vii)      any rights in, relating to, or for use or exploitation of,
    any trademark, service mark, brand name, certification mark, trade name,
    corporate name, domain name or other indication of source or origin, that
    includes, is based on, relates to or is likely to be confused with the terms
    "General Dynamics," "General Dynamics OTS (Aerospace), Inc.," "Ordnance and
    Tactical Systems," "Advanced Information Systems," "OTS," "AIS" or "GD," or
    any other similar term or derivative thereof (the "Excluded Names");
    and
	 	 
	 	
    
          (viii)      any other assets, rights and properties owned, used or held
    for use by the Seller or any of its Affiliates other than those used or held
    for use primarily by the Business, or as otherwise identified on 
    Schedule 2.2(b).

9

        Section 2.3

Assumed and Excluded Liabilities.

        (a) The "Assumed Liabilities" are all liabilities and
obligations (other than to the extent such liabilities or obligations are
Excluded Liabilities) relating to or arising out of the Business or the
Purchased Assets (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and whether due or
to become due), including:

	 	
    
          (i)      all liabilities and obligations of the Seller to the extent
    relating to or arising out of the Business as of the Closing Date including,
    but not limited to, all liabilities and obligations reflected or reserved
    for on the Balance Sheet and any liabilities and obligations incurred in the
    ordinary course of business since the date of the Balance Sheet, except to
    the extent paid or discharged since the date thereof;
	 	 
	 	
    
          (ii)      all liabilities and obligations arising under or relating to
    the Contracts;
	 	 
	 	
    
          (iii)      all liabilities and obligations to the extent arising out of
    or relating to services provided or products designed, manufactured, sold,
    serviced or repaired in connection with the Business, including all warranty
    and product liabilities relating thereto;
	 	 
	 	
    
          (iv)      all liabilities and obligations arising out of or relating to
    the Employees (including the employment, compensation and termination of
    employment thereof) and any related employee benefits or employee benefits
    plans or programs as provided in Article VII hereof;
	 	 
	 	
    
          (v)      all liabilities and obligations to the extent relating to the
    ownership or operation of the Business or any Purchased Assets, arising out
    of or relating to any event, transaction, condition, practice, Release or
    occurrence, including any liabilities resulting from violations of
    Environmental Laws, in connection with the generation, use, handling,
    presence, treatment, storage, transportation, disposal or Release of any
    Hazardous Materials; and
	 	 
	 	
    
          (vi)      all liabilities and obligations arising after the Closing in
    connection with the conduct or operation of the Business or the use or
    ownership of the Purchased Assets.

        (b) The Buyer will not assume or become responsible for, and will not
be deemed to have assumed or to have become responsible for any liabilities,
debts or obligations of the Seller, whether or not related to the Business,
other than as set forth in Section 2.3(a) (collectively, the "Excluded
Liabilities"), and the Buyer will not be responsible for any liabilities,
debts or obligations of the Seller, whether or not related to Business, relating
to or arising out of any of the following (each of which will also constitute an
Excluded Liability):

	 	
    
          (i)      any liability, debt or obligation to the extent arising out of
    or relating to any Excluded Asset; 
	 	 
	 	
    
          (ii)      any liability, debt or obligation of the Seller with respect
    to Taxes arising in connection with the Business or the Purchased Assets, or
    any of the Ancillary Documents, for any taxable period or ratable portion
    thereof ending on or prior to the Closing Date;

10

	 	 
	 	
    
          (iii)      any liability or obligation of the Seller or its Affiliates
    or predecessors arising out of the ownership or operation of the Business at
    the York Center Premises relating to any event, transaction, condition,
    practice, Release or occurrence at the York Center Premises, including any
    liabilities resulting from violations of Environmental Laws, in connection
    with the generation, use, handling, presence, treatment, storage,
    transportation, disposal or Release of any Hazardous Materials; 
	 	 
	 	
    
          (iv)      any liability, debt or obligation of the Seller arising
    pursuant to the Letter Agreement; and
	 	 
	 	
    
          (v)      any liability, debt or obligation of the Seller arising under
    this Agreement.

        ARTICLE III

        PURCHASE PRICE AND
        CLOSING

      
    
  

        Section 3.1     
Closing. The closing of the transactions contemplated by this Agreement (the "Closing")
will take place simultaneously with the execution of this Agreement at
10:00 a.m. (Eastern Time), on the date hereof (the "Closing Date"), at
the offices of Jenner & Block LLP, One IBM Plaza, Chicago, IL 60611, or at such
other place as the Parties may agree.

        Section 3.2     Purchase Price. Concurrent with the execution of this Agreement, the Buyer will pay and
deliver to the Seller Thirteen Million Dollars ($13,000,000) (the "Initial
Purchase Price"), in cash by wire transfer of immediately available funds to
an account or accounts designated by the Seller. The Initial Purchase Price as
adjusted for any Earnout pursuant to Section 3.4 will be referred to as
the "Purchase Price."

        Section 3.3    
Allocation of Purchase Price.

        (a) Within 180 days after the Closing Date, the Buyer will provide to
the Seller copies of IRS Form 8594 and any required exhibits thereto, prepared
in accordance with Section 1060 of the Code (the "Allocation Statement"),
with the Buyer's proposed allocation of the Purchase Price (and all other capitalizable costs) among the Purchased Assets. 

        (b) The Seller will review the Allocation Statement and, to the extent
the Seller in good faith disagrees with the content of the Allocation Statement,
the Seller will, within 20 days after receipt of the Allocation Statement,
provide written notice to the Buyer (in a manner prescribed in Section 10.1)
of such disagreement or will be deemed to have indicated its concurrence
therewith. The Seller and the Buyer will attempt in good faith to resolve any
such disagreement. If the Seller and the Buyer are unable to reach a good faith
agreement as to the content of the Allocation Statement within 240 days after
the Closing Date, the Seller and the Buyer will each use their own allocation
statement consistent with their own allocation of the Purchase Price.

        (c) If the Buyer and the
Seller agree on the Allocation Statement or any modification thereof, the Buyer
and the Seller will report the allocation of the total consideration among the
Purchased Assets in a manner consistent with such Allocation Statement or
modification and will act in accordance with such Allocation Statement in the
preparation and timely filing of all income tax returns (including filing
Form 8594 with their respective federal income tax returns for the taxable year
that includes the Closing Date and any other forms or statements required by the
Code, the IRS or any applicable state or local taxing authority). Each of the
Buyer and the 

11

Seller agree to promptly provide the other Party with any additional
information and reasonable assistance required to complete Form 8594 or compute
Taxes arising in connection with (or otherwise affected by) the transactions
contemplated hereunder. 

        (d) The Buyer and the Seller will promptly inform one another in
writing of any challenge by any taxing authority to any allocation made pursuant
to this Section 3.3 and agree to consult with and keep one another
informed with respect to the status of, and any discussion, proposal or
submission with respect to, any such challenge.

        Section 3.4     Earnout.

        (a) Subject to the Business achieving
mutually agreed upon financial results during the period from January 1, 2005
through and including December 31, 2005 (the "Earnout Period"), an
additional amount of consideration in the maximum aggregate amount of $4,000,000
(the "Earnout") will become payable to the Seller and will be treated by
the Parties as an adjustment to the Initial Purchase Price. The formula for
calculating the Earnout, subject to the terms and conditions contained herein,
is as follows: 

	 	
    
          (i)      if the Earnout Revenues of the Business are $35,000,000 or
    greater, an Earnout in an amount equal to $4,000,000 will become due and
    payable to the Seller; 
	 	 
	 	
    
          (ii)      if the Earnout Revenues are equal to or greater than
    $34,000,000 but less than $35,000,000, an Earnout in an amount equal to
    $3,000,000 will become due and payable to the Seller;
	 	 
	 	
    
          (iii)      if the Earnout Revenues are equal to or greater than
    $33,000,000 but less than $34,000,000, an Earnout in an amount equal to
    $2,000,000 will become due and payable to the Seller; 
	 	 
	 	
    
          (iv)      if the Earnout Revenues are equal to or greater than
    $32,000,000 but less than $33,000,000, an Earnout in an amount equal to
    $1,000,000 will become due and payable to the Seller; or
	 	 
	 	
    
          (v)      if the Earnout Revenues are less than $32,000,000, no Earnout
    will be due and payable.

        (b) On or prior to February 15, 2006, the Buyer will prepare and
deliver to the Seller a statement setting forth the sales, net of returns, of
the Business for the Earnout Period, together with the adjustments thereto used
in calculating the Earnout Revenues (the "Earnout Statement"). The
Earnout Statement will be derived from the financial statements of the Business
as of and for the year ending December 31, 2004, using accounting principles
consistent with the preparation of the Financial Statements, and prepared in
good faith. 

        (c) For a period of 30 days following delivery of the Earnout
Statement (the "Review Period"), the Buyer will permit the Seller and its
representatives to have access at all reasonable times to all appropriate and
relevant books, records, facilities, personnel and accountants of the Buyer
reasonably necessary for the purpose of reviewing and verifying the Buyer's
determination of the Earnout Statement and the Earnout. If within such 30 days,
the Seller delivers written notice to the Buyer of its objection to the Buyer's
determination of the Earnout 

12

Statement or the Earnout, which notice will specify
in reasonable detail the grounds for objection, the Buyer and the Seller will
attempt in good faith to reach an agreement as to any matters in dispute. If the
Buyer and the Seller fail to agree upon the Earnout Statement or the Earnout
within 10 days after the Seller advises the Buyer of its objections, then, at
the election of either Party, the matters identified in such written notice that
remain in dispute will be finally and conclusively determined by an independent
auditing firm of recognized national standing (the "Arbiter") selected by
the Buyer and the Seller, which firm will not be the regular auditing firm of
the Buyer or the Seller or any of their respective Affiliates. The Buyer and the
Seller will each deliver to the other Party within two business days after
submission to the Arbiter a copy of its written presentation submitted to the
Arbiter setting forth such Party's determination of the Earnout Statement and
the Earnout. The Buyer and the Seller will have two business days following
their respective receipt of the other Party's presentation to provide a written
response to the Arbiter with regard to the other Party's presentation. Promptly,
but not later than 30 days after its acceptance of its appointment, the Arbiter
will determine (based solely on written presentations by the Seller and the
Buyer and not by independent review) only those matters in dispute and will
render a written report as to the disputed matters and the resulting calculation
of the final Earnout Statement and the Earnout, which report will thereupon be
conclusive and binding upon the Parties. The fees and expenses of the Arbiter
will be shared equally by the Buyer and the Seller. If the Seller fails to
notify the Buyer of any disputes in accordance with the aforementioned
procedures, the Earnout Statement and the Earnout reflected thereon will be
conclusive and binding on all Parties upon the expiration of the Review Period.

        (d) Any payment pursuant to this Section 3.4 will be made
within fifteen business days following the final determination of the Earnout
Statement in accordance with this Section 3.4 by wire transfer of
immediately available funds to the account designated in writing by the Seller.

        (e) During the Earnout Period the Buyer will dedicate sufficient
resources and funds to support the level of growth anticipated to be necessary
to achieve the targeted gross revenues. Without limiting the generality of the
foregoing, during the Earnout Period, Buyer will comply with the following
covenants with respect to the conduct of the Business:

	 	
    
          (i)      The Buyer will use commercially reasonable efforts to manage
    and operate the Business, including reasonable product pricing practices,
    lead times and production planning; 
	 	 
	 	
    
          (ii)      The Buyer will account for the Business as a stand-alone
    operation for purposes of preparing the Earnout Statement and calculating
    any Earnout that may become due and payable;
	 	 
	 	
    
          (iii)      The Buyer will not take or fail to take any action for the
    purpose of unfairly or prejudicially affecting the Seller's ability to
    prepare the Earnout Statements consistent with Section 3.4(b) or to
    achieve and receive the Earnout; and
	 	 
	 	
    
          (iv)      The Buyer will not take any action or cause the Business to
    take any action outside of the ordinary course of business that has the
    effect of shifting revenues into or out of any periods in which such
    revenues would otherwise be recognized.

13

        (f) If a Change of Control occurs at any time during the Earnout
Period, the maximum Earnout of $4,000,000 will become immediately due and
payable to the Seller in cash at the time of the Change of Control.

        ARTICLE IV

        REPRESENTATIONS
        AND WARRANTIES OF SELLER

      
    
  

        The Seller represents and warrants as of the date hereof to the Buyer as
follows: 

        Section 4.1 
   
Organization. The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Washington. The Seller is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the ownership or lease of the Purchased
Assets or the conduct of the Business requires such qualification or license,
except where the failure to be so qualified or be so licensed would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Seller has all requisite corporate power and authority to
carry on the Business as currently conducted and to own, lease or use, as the
case may be, the Purchased Assets.

        The Seller Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Virginia.

        Section 4.2     
Authorization of Transaction. The Seller has all requisite corporate power and authority to execute,
deliver and perform this Agreement and each of the Ancillary Documents to which
it is a party. This Agreement constitutes, and such Ancillary Documents when
executed and delivered by the Seller will constitute, a valid and legally
binding obligation of the Seller (assuming that this Agreement and such
Ancillary Documents constitute valid and legally binding obligations of the
other parties thereto), enforceable in accordance with its terms and conditions,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability relating to or affecting creditors' rights, or by general equity
principles, including principles of commercial reasonableness, good faith and
fair dealing.

        The Seller Guarantor has all requisite corporate power and authority to
execute, deliver and perform the Seller Guarantee (the "Seller Guarantee")
attached to, and made a part of, this Agreement. The Seller Guarantee
constitutes a valid and legally binding obligation of the Seller Guarantor,
enforceable in accordance with its terms and conditions, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability relating to or affecting creditors' rights, or by general equity
principles, including principles of commercial reasonableness, good faith and
fair dealing.

        Section 4.3 
   
Noncontravention; Consents.

        (a) Except as set forth on Schedule 4.3, the execution,
delivery and performance by the Seller of this Agreement and the Ancillary
Documents to which it is a party, the consummation by the Seller of the
transactions contemplated hereby and thereby, and the execution by the Seller
Guarantor of the Seller Guarantee do not: (i) violate any Law to which the
Business or the Purchased Assets or the Seller Guarantor or its assets are
subject; (ii) conflict with or result in a breach of any provision of the
articles of incorporation or bylaws of the Seller or of the Seller Guarantor;
(iii) create a breach, default, termination, cancellation or acceleration of any

14

obligation of the Seller or the Business pursuant to any Material Contracts; or
(iv) result in the creation or imposition of any Lien, other than a Permitted
Encumbrance, upon the Purchased Assets, except for any of the foregoing in the
case of clauses (i), (iii) and (iv), that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. 

        (b) Except as set forth on Schedule 4.3 and except for the
novation of Government Contracts, no notices, Permits, consents, approvals,
authorizations, qualifications or orders of Governmental Entities or third
parties are required for the consummation by the Seller of the transactions
contemplated hereby or by the Ancillary Documents to which it is a party, other
than such of the foregoing that, if not obtained or made, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or have a material adverse effect upon the Seller's ability to
consummate the transactions contemplated by, and discharge its obligations
under, this Agreement and the Ancillary Agreements.

        Section 4.4     
Financial Statements.

        (a) Set forth on Schedule 4.4(a) is (i) a copy of the balance
sheet of the Business as of December 31, 2004 (the "Balance Sheet") and
the related statement of income for the twelve-month period then ended
(collectively, the "Interim Financial Statements") and (ii) a copy of the
balance sheet of the Business as of December 31, 2003 and the related statement
of income for the twelve-month period then ended (together with the Interim
Financial Statements, the "Financial Statements"). The Financial
Statements were derived from the books and records of the Seller and present
fairly in all material respects the financial position and the results of
operations of the Business as of the date and for the period indicated therein.

        (b) Except as disclosed, reflected or reserved against on the Balance
Sheet or as set forth on Schedule 4.4(b), the Business does not have any
liabilities or obligations of any nature, whether absolute, accrued, contingent
or otherwise, that would be Assumed Liabilities, other than liabilities and
obligations (i) incurred in the ordinary course of business consistent with past
practice, (ii) disclosed in or contemplated by this Agreement, the Disclosure
Schedules or any Ancillary Document (including the Assumed Liabilities), (iii)
arising from Contracts or (iv) that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

        Section 4.5     Accounts Receivable. Except as described on Schedule 4.5, each of the accounts, notes
and other receivables and amounts owing to the Seller and included in the
Purchased Assets (the "Receivables") (a) represents bona fide arm's
length sales in the ordinary course of business consistent with past practice
and (b) is reflected on the books and records of the Seller and (c) constitutes
a valid claim of the Seller, free and clear of all Liens, other than Permitted
Encumbrances. There is no material right of offset against any of the
Receivables except pursuant to the terms of any Contract.

    Section 4.6     
Absence of Certain Changes or Events Subsequent to
Balance Sheet. Except as set forth on Schedule 4.6, between
the date of the Balance Sheet and the date hereof, (a) there has not been any
change in the financial position, operations or results of operations of the
Business, other than any such changes in the ordinary course of business or that
would not, individually or in the aggregate, 

15

reasonably be expected to have a Material Adverse Effect, (b) the Seller has
conducted the operations of the Business in the ordinary course of business,
consistent with past practice, except for matters that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect,
(c) there has not been any sale or transfer by the Seller of any material
tangible or intangible asset of the Business that would constitute a Purchased
Asset except in the ordinary course of business and (d) the Seller has not made
any increase in the annual compensation of or granted any bonuses payable or to
become payable to any Employee of the Business whose annual compensation exceeds
$100,000 for the fiscal year ending December 31, 2003, other than increases or
bonuses consistent with past practice.

    Section 4.7     
Tax Matters.

        (a) Except as set forth on Schedule 4.7, the Seller (or an
Affiliate of the Seller) has filed all Tax Returns that it was required to file
with respect to the Business within the three year period prior to the date of
this Agreement, and has paid all material Taxes shown thereon as owing.

        (b) There are no Liens upon the Purchased Assets that arose in
connection with any failure (or alleged failure) to pay any Taxes (other than
for current Taxes not yet due and payable) upon the Purchased Assets, except for
Permitted Encumbrances.

        (c) The Seller has not waived any statute of limitations with respect
to Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency with respect to the Business.

        (d) The transactions contemplated by this Agreement are not subject to
Tax withholding pursuant to the provisions of Section 3406 or Subchapter A of
Chapter 3 of the Code or any other provision of Law.

        (e) The Seller is not a Person other than a United States Person
within the meaning of the Code.

        (f) Except as set forth on Schedule 4.7, there is no Proceeding
pending, or, to the Seller's Knowledge, threatened in respect of any Taxes
relating to the Business for which the Seller is or may become liable, nor, to
the Seller's Knowledge, has any deficiency or claim for any Taxes been proposed,
asserted or threatened.

        Section 4.8     
Material Contracts.

        (a) Schedule 4.8 lists all Contracts as of the date of this
Agreement, (i) the performance of which is expected to involve payment or
receipt by the Business of consideration in excess of $100,000 in the 12-month
period immediately following the Closing Date, (ii) pursuant to which the
Business is committed to make a capital expenditure or to purchase a capital
asset in excess of $50,000 which is not contemplated by the Seller's capital
expenditure budget for the Business, (iii) which are material to the Business
and to which an Affiliate of the Seller is a party, (iv) which contain a
non-compete provision or similar covenant restricting the Business from
competing with another Person (provided that license agreements containing field
of use restrictions or other similar provisions will not be considered
agreements restricting competition), (v) for the employment of any individual on
a full-time, consulting, or other basis providing annual compensation in excess
of $100,000, or (vi) that are joint venture, partnership or similar contracts
involving a sharing of profits by the Business (collectively, the

16

"Material
Contracts"). Except as prohibited by Law, by the terms of such Material
Contract or under any confidentiality agreement, the Seller has made available
to the Buyer a correct and complete copy or summary of each Material Contract.

  
(b) (i) Each Material Contract is a valid, binding and enforceable
obligation of the Seller and, to the Seller's Knowledge, of the other party or
parties thereto, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar Laws of general applicability relating to or affecting creditors'
rights, or by general equity principles, including principles of commercial
reasonableness, good faith and fair dealing, and (ii) to the Seller's Knowledge,
each Material Contract is in full force and effect. Except as prohibited by Law,
by the terms of such Material Contract or under any confidentiality agreement,
the Seller has delivered or made available to Buyer a correct and complete copy
of each Material Contract.

  

        (c) Except as set forth on Schedule 4.8, (i) neither the Seller
nor, to the Seller's Knowledge, any other party thereto, is in breach of or
default under any term of any Material Contract or has repudiated any term of
any Material Contract and (ii) to the Seller's Knowledge, no event has occurred
which with notice or lapse of time or both would constitute a breach or default,
under such Material Contract, in each case under subsections (i) and (ii)
herein, except for such breaches, defaults or repudiations that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

        (d) Except as set forth on Schedule 4.8, the Seller has not
received any written notice of termination, cancellation or non-renewal that is
currently in effect with respect to any Material Contract, and to the Seller's
Knowledge, no other party to a Material Contract plans to terminate, cancel or
not renew any such Material Contract.

        Section 4.9     Government Contracts.

        (a) Except as set forth on Schedule 4.9, with respect to each
Government Contract of the Business: 

	 	
    
          (i)      the Seller has complied in all material respects with the
    terms and conditions of such Government Contract (including Laws or
    agreements pertaining thereto);
	 	 
	 	
    
          (ii)      neither the U.S. Government nor any prime contractor,
    subcontractor or other Person has notified the Seller, either in writing or,
    to the Seller's Knowledge, orally that the Seller has breached or violated
    in any material respect any Law, certification, representation, clause,
    provision or requirement pertaining to such Government Contract;
	 	 
	 	
    
          (iii)      no termination for convenience, termination for default,
    cure notice or show cause notice is currently in effect pertaining to such
    Government Contract;
	 	 
	 	
    
          (iv)      no outstanding unresolved material cost of the Seller has
    been disallowed; and
	 	 
	 	
    
          (v)      to the Seller's Knowledge, neither the Seller nor any Employee
    of the Business is under civil, administrative or criminal investigation or
    indictment or has information with respect to any alleged fraudulent or
    criminal activity involving a Government Contract.

17

        (b) Except as set forth on Schedule 4.9, with respect to the
Business there are (i) no outstanding claims against the Seller, either by any
Governmental Entity or by any prime contractor, subcontractor, vendor or other
Person, arising under or relating to any Government Contract and (ii) no
disputes between the Seller and the U.S. Government under the Contract Disputes
Act of 1978, as amended, or any other federal statute or between the Seller and
any prime contractor, subcontractor or vendor arising under or relating to any
Government Contract, except for claims or disputes which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

        (c) Since January 1, 2002, the Seller, acting through the Business,
has not been debarred or suspended from participation in the award of contracts
with the U.S. Government or any other Governmental Entity (excluding for this
purpose ineligibility to bid on certain contracts due to generally applicable
bidding requirements).

        (d) Except as set forth on Schedule 4.9, with respect to the
Business (i) to the Seller's Knowledge, there is not pending any audit or
investigation by a Governmental Entity of the Seller or the Employees with
respect to any alleged irregularity, misstatement or omission arising under or
relating to any Government Contract, nor since January 1, 2002, to the Seller's
Knowledge, has there been any such audit or investigation by a Governmental
Entity of the Seller or the Employees that would reasonably be expected to
result in a material adverse finding with respect thereto; and (ii) since
January 1, 2002, the Seller has not made any voluntary disclosure to the U.S.
Government or any non-U.S. government with respect to any alleged irregularity,
misstatement or omission arising under or relating to a Government Contract. 

        Section 4.10     Title to and Sufficiency of
Purchased Assets. Except as set forth on Schedule 4.10, the Seller has good title
to, or has other legal rights to possess and use all of the material tangible
personal property included in the Purchased Assets, free and clear of all Liens,
except for Permitted Encumbrances. Except for the Excluded Assets or as set
forth on Schedule 4.10, the Purchased Assets include all material
tangible assets necessary to operate the Business in substantially the manner as
presently operated by the Seller.

    Section 4.11     
Real Property. 
Schedule 4.11 lists and describes in reasonable detail all of the
Leased Real Property and lists all real property owned
or leased by the Business since February 1, 2001. With respect to the Leased
Real Property listed on Schedule 4.11, except as set forth on Schedule
4.11: (a) such lease constitutes the entire agreement to which Seller is a
party with respect to the Leased Real Property leased thereunder; (b) Seller has
not assigned, sublet, transferred or conveyed any interest in the leasehold; and
(c) Seller is not in receipt of any notice of default with respect to such
lease. Each such lease is in full force and effect, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights or by general equity principles, including
principles of commercial reasonableness, good faith and fair dealing, and no
event has occurred which with notice would constitute a material breach or
material default under such lease. The Seller enjoys peaceful and undisturbed
possession of the Leased Real Property. To the Seller's Knowledge, there are no
condemnation or eminent domain proceedings pending, contemplated or threatened
against the Seller's interest in the Leased Real Property or any part thereof.

        Section 4.12     
Permits. Schedule 4.12 identifies all
material Permits issued to Seller in connection with the Business and currently
in effect. The Seller is in compliance with all 

18

material Permits that are required by any Governmental Entity to conduct the
Business as presently conducted.

        Section 4.13     
Intellectual Property.

        (a) Schedule 4.13(a) identifies each patent, patent
application, trademark registration and application, copyright registration and
application and domain name that is owned by the Seller and is used or held for
use by the Seller exclusively for the Business, and each material license,
sublicense, agreement or other permission that the Seller has granted to any
third party with respect to any material Intellectual Property owned by the
Seller. Except as set forth on Schedule 4.13(a), the Seller owns or has
the right to use pursuant to license, sublicense, agreement or permission all of
the Intellectual Property listed on Schedule 4.13(a).

        (b) With respect to each item of Intellectual Property listed on 
Schedule 4.13(a): (i) the Seller possesses all right, title and interest in
and to the item, free and clear of any Lien (other than Permitted Encumbrances)
and (ii) the item is not subject to any outstanding injunction, judgment or
court order issued as a result of a court proceeding to which the Seller is a
party or of which the Seller has received written notice within the past 12
months.

        (c) Except as set forth on Schedule 4.13(a), to the Seller's
Knowledge, the Business does not interfere with, infringe upon, misappropriate
or otherwise come into conflict with any intellectual property rights of third
parties, and the Seller has not received, within the past 12 months, any written
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or conflict (including any such claim that the
Seller must license or refrain from using any intellectual property rights of
any third party) which has not been resolved. Except as set forth on Schedule
4.13(a), to the Seller's Knowledge, no third party is currently interfering
with, infringing upon, misappropriating or otherwise coming into conflict with
any Intellectual Property.

        (d) Except with respect to goods manufactured for, or services
provided to, customers pursuant to rights granted by the respective customer,
and except for commercially available off-the-shelf software, Schedule
4.13(c) identifies each material license, sublicense, agreement or other
permission pursuant to which the Business uses any material item of intellectual
property owned by a third party.

        Section 4.14     
Litigation. Except as set forth on Schedule 4.14, there are no material
Proceedings pending or, to the Seller's Knowledge, threatened, (a) against the
Seller relating to the Business or the Purchased Assets or (b) that question the
validity of this Agreement or any of the Ancillary Documents, or any action
taken or to be taken by the Seller in connection with this Agreement or any of
the Ancillary Documents.

        Section 4.15 
   
Employees and Employee Benefits.

        (a) With respect to the Business: (i) there
are no strikes, work stoppages, lockouts or material disputes pending, or to the
Seller's Knowledge, threatened, that involve any Employees, nor has the Seller
experienced a strike, work stoppage or lockout that involves any Employees at
any time during the three (3) years immediately preceding the date of this
Agreement; (ii) the Employees are not currently represented by any labor union;
(iii) to the Seller's Knowledge, no union organization campaign is in progress
with respect to the Employees, and no question 

19

concerning representation exists respecting such Employees; and (iv) the
Seller is not a party to any collective bargaining agreements.

        (b) With respect to the Employees, since January 1, 2002, the Seller
has not received written notice of any violation, fine or penalty issued by the
United States Department of Labor or the Attorney General of the United States
(Immigration and Naturalization Service).

        (c) For purposes of this Agreement, the term "Employee Benefit Plan"
means employee pension benefit plan within the meaning of Section 3(2) of ERISA
(an "Employee Pension Benefit Plan") or an employee welfare benefit plan
within the meaning of Section 3(1) of ERISA (an "Employee Welfare Benefit
Plan"), where no distinction is required by the context in which the term is
used. Schedule 4.15 lists each Employee Benefit Plan, fringe benefit plan
and other incentive compensation or bonus programs that the Seller or any of its
Affiliates maintains with respect to the current or former employees of the
Business or to which the Seller or any of its Affiliates contributes with
respect to the current or former employees of the Business (each a "Seller
Employee Benefit Plan"). 

        (d) Except as set forth on Schedule 4.15, the Seller does not
maintain or contribute nor, to the Seller's Knowledge, has it ever maintained or
contributed or been required to contribute, to any Employee Welfare Benefit Plan
providing medical, health, life insurance or other welfare benefits for retired
or terminated employees (current or future) of the Business, their spouses or
their dependents (other than in accordance with Section 4980B of the Code).

        (e) None of the Seller Employee Benefit Plans are multiemployer plans
within the meaning of Section 3(37)(A) or ERISA.

        (f) Except as set forth on Schedule 4.15, the Seller has not
terminated the employment of any employee of the Business during the ninety (90)
days prior to the date of this Agreement, excluding voluntary resignation and
termination based on good faith belief that there is cause for dismissal.

        (g) The Seller or an Affiliate of the Seller has complied with, and
satisfied, the requirements of Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code, and all applicable regulations thereunder ("COBRA")
with respect to each Seller Employee Benefit Plan that is subject to the
requirements of COBRA. Each Seller Employee Benefit Plan that is a group health
plan, within the meaning of Section 9832(a) of the Code, has complied with and
satisfied the applicable requirements of Sections 9801 and 9802 of the Code.

        Section 4.16     
Environmental Matters.

        (a) Except as set forth on Schedule 4.16, the Business is in
compliance with all Environmental Laws in connection with the operation of the
Business, except for such failures to be in compliance with such Environmental
Laws that would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. 

        (b) Except as set forth on Schedule 4.16, no written notices of
any material violation under any Environmental Law relating to the operations of
the Business have been received by the Seller since January 1, 2002.

20

        (c) There are no Liens (other than Permitted Encumbrances) on the
Purchased Assets based upon any Environmental Law or for costs incurred in
response to any Releases of any Hazardous Materials
from Seller's operation of the Business. 

        Section 4.17     
Legal Compliance. Except as set forth on Schedule 4.17, since January 1, 2002, (a)
the Seller, in connection with the conduct of the Business and the use of the
Purchased Assets, has complied in all material respects with all Laws, (b) the
Purchased Assets are in compliance and have complied in all material respects
with all Laws and (c) no material action, proceeding, investigation, complaint,
demand or notice has been filed or commenced or, to the Seller's Knowledge,
threatened, against the Seller alleging any failure to so comply.

        Section 4.18 Affiliate Transactions. Except as set forth on Schedule 4.18, no Affiliate of the Seller
is presently a party to any Material Contract or material
transaction relating to the Business, including any Contract for any loans,
advances, the employment of, furnishing of services by, rental of its assets
from or to, or otherwise requiring payments to or from, any such Person.
Except as set forth in Schedule 4.18 and other than in the ordinary
course of business, there is no outstanding amount owing (including pursuant to
any advance, note or other indebtedness instrument) from the Seller to any
Affiliate of from any Affiliate to the Seller, in each case in connection with
the Seller's conduct of the Business.

        Section 4.19 
   
Brokers' Fees. Except as set forth on Schedule 4.19, the Seller has no
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.

        Section 4.20
    Suppliers; Customers. Schedule 4.20 sets forth a list of each of (a) the five (5) largest
suppliers and (b) the five (5) largest customers of the Business taken as a
whole based on purchases and revenues, respectively, for the 10 months ended
October 31, 2004.

        Section 4.21
    Product
Warranty. Except as provided pursuant to the terms and conditions of any Contract
(including purchase orders issued in connection with any Contracts), the annual
spare parts catalog issued by the Business or applicable federal acquisition
laws, rules and regulations, the Seller does not provide any warranties in
connection with products sold by the Business. Except as set forth on 
Schedule 4.21, to the Seller's Knowledge, since January 1, 2002, there have
been no material defects in design, materials, manufacture or otherwise in any
products manufactured, distributed or sold by Seller in connection with the
Business.

        Section 4.22     Export Control Regulations. Except as set forth on Schedule 4.22, since January 1, 2002, the
Seller has not made any voluntary written disclosures in connection with the
Business that are currently open for submission to the United States Government
with respect to import and export matters.

    Section 4.23     
LIMITATION ON WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE IV, 
THE SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED,
AT LAW OR IN EQUITY, IN RESPECT OF ANY OF THE PURCHASED ASSETS, THE ASSUMED
LIABILITIES, THE BUSINESS OR OTHERWISE, OR WITH RESPECT TO ANY INFORMATION
PROVIDED TO THE BUYER, INCLUDING WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR USE OR PURPOSE. ALL OTHER REPRESENTATIONS OR WARRANTIES ARE
HEREBY DISCLAIMED. EXCEPT TO THE EXTENT SPECIFICALLY 

21

SET FORTH IN THIS ARTICLE IV, THE SELLER IS SELLING, ASSIGNING AND
TRANSFERRING THE PURCHASED ASSETS TO THE BUYER ON AN "AS-IS, WHERE-IS" BASIS.

        ARTICLE V

        REPRESENTATIONS
        AND WARRANTIES OF BUYER

      
    
  

        The Buyer represents and warrants as of the date hereof to the Seller as
follows:

        Section 5.1    

Organization. The Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Washington. The Buyer is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification or license is required,
except where the failure to so qualify or be so licensed would not, individually
or in the aggregate, reasonably be expected to materially and adversely affect
the Buyer's ability to consummate the transactions contemplated by, and
discharge its obligations under, this Agreement and the Ancillary Documents to
which it is a party (a "Buyer Material Adverse Effect"). The Buyer has
all requisite power and authority to carry on its business as currently
conducted.

        The Buyer Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York.

        Section 5.2    

Authorization of Transaction. The Buyer has all requisite corporate power and authority to execute
and deliver this Agreement and each of the Ancillary Documents to which it is a
party, and to perform its obligations hereunder and thereunder. This Agreement
constitutes, and each of the Ancillary Documents when executed and delivered by
the Buyer constitutes, a valid and legally binding obligation of the Buyer
(assuming that this Agreement and such Ancillary Documents will constitute valid
and legally binding obligations of the other parties thereto), enforceable in
accordance with its terms and conditions, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights or by general equity principles, including
principles of commercial reasonableness, good faith and fair dealing.

        The Buyer Guarantor has all requisite corporate power and authority to
execute, deliver and perform the Guarantee (the "Buyer Guarantee")
attached to, and made a part of, this Agreement. The Buyer Guarantee constitutes
a valid and legally binding obligation of the Buyer Guarantor, enforceable in
accordance with its terms and conditions, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights, or by general equity principles, including
principles of commercial reasonableness, good faith and fair dealing.

        Section 5.3    

Noncontravention; Consents.

        (a) The execution, delivery and performance by the Buyer of this
Agreement and the Ancillary Documents to which it is a party, the consummation
by the Buyer of the transactions contemplated hereby and thereby, and the
execution by the Buyer Guarantor of the Buyer Guarantee do not: (i) violate any
Law to which the Buyer or the Buyer Guarantor or their assets are subject,
(ii) conflict with or result in a breach of any provision of the articles of
incorporation  

22

or bylaws of the Buyer or of the Buyer Guarantor, or (iii) create
a breach, default, termination, cancellation or acceleration of any obligation
under any contract, agreement or binding commitment to which the Buyer or the
Buyer Guarantor is a party or by which the Buyer or the Buyer Guarantor or any
of their assets or properties are bound or subject, except for any of the
foregoing in the case of clauses (i) and (iii), that would not, individually or
in the aggregate, reasonably be expected to have a Buyer Material Adverse
Effect.

        (b) Except for the novation of Government Contracts, no notices,
Permits, consents, approvals, authorizations, qualifications or orders of
Governmental Entities or third parties are required for the consummation by the
Buyer of the transactions contemplated hereby or by the Ancillary Documents,
other than such of the foregoing that, if not obtained or made, would not,
individually or in the aggregate, reasonably be expected to have a Buyer
Material Adverse Effect.

        Section 5.4    

Litigation. There are no legal, administrative, arbitration or other formal
proceedings or governmental investigations pending or, to the Buyer's knowledge,
threatened, that question the validity of this Agreement or any of the Ancillary
Documents, or any action taken or to be taken by the Buyer in connection with
this Agreement or any of the Ancillary Documents, other than such of the
foregoing that would not, individually or in the aggregate, reasonably be
expected to have a Buyer Material Adverse Effect.

        Section 5.5    

Brokers' Fees. Except for the fees and disbursements due and owing by the Buyer to Roger
Williams and Company, which will be paid in full by the Buyer and will not
become a liability or obligation of the Seller, the Buyer has no liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.

        Section 5.6     LIMITATION ON THE SELLER'S
WARRANTIES. THE BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT
SPECIFICALLY SET FORTH IN ARTICLE IV, THE SELLER MAKES NO REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ANY
OF THE PURCHASED ASSETS, THE ASSUMED LIABILITIES, THE BUSINESS OR OTHERWISE, OR
WITH RESPECT TO ANY INFORMATION PROVIDED TO THE BUYER, INCLUDING WITH RESPECT TO
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE, AND THE BUYER IS
PURCHASING THE PURCHASED ASSETS ON AN "AS-IS, WHERE-IS" BASIS.

        ARTICLE VI

        COVENANTS

      
    
  

        The Buyer and the Seller agree to the following with respect to the period
following the Closing:

        Section 6.1    

General. In case at any time after the Closing Date any further action is
reasonably necessary to carry out the purposes of this Agreement, each of the
Parties will take such further actions (including the execution and delivery of
such further instruments and documents) as the other Party reasonably may
request, at the sole cost and expense of the requesting Party (unless otherwise
specified herein).

23

        Section 6.2   

Post-Closing Consents; Nonassignable Contracts. Subject to Section 6.3 below:

        (a) From and after the date hereof, each of the Parties will use
commercially reasonable efforts to obtain any consents, approvals or
authorizations of any third parties that are not obtained prior to the Closing
Date that are required in connection with the authorization, execution and
delivery of this Agreement and the consummation or the transactions contemplated
by this Agreement, provided that neither the Seller nor the Buyer will be
required to make any expenditures or incur any liability in connection with such
activities. The Seller's obligation pursuant to this Section 6.3(a) will
extend for a reasonable period of time not to exceed 60 days.

        (b) Notwithstanding anything to the contrary, to the extent that any
Contract is not capable of being transferred by the Seller to the Buyer pursuant
to this Agreement without the consent of a third party, and such consent is not
obtained prior to Closing, or if such transfer or attempted transfer would
constitute a breach or a violation of the Contract or any Law (each a "Specified
Consent"), nothing in this Agreement will constitute a transfer or an
attempted transfer thereof.

        (c) In the event that any such Specified Consent is not obtained on or
prior to the Closing Date, the Seller will use commercially reasonable efforts
to (i) provide to the Buyer the benefits of the applicable Contract, at the
Buyer's expense, (ii) cooperate in any reasonable and lawful arrangement
designed to provide such benefits to the Buyer, and (iii) enforce at the request
and expense of the Buyer and for the account of the Buyer, any rights of the
Seller arising from any such Contract; provided that the Seller will not be
required to make any expenditures or incur any liability in connection with any
such activities described in clauses (i) through (iii) above.

        (d) To the extent that the Buyer is provided the benefits of any
Contract referred to in Section 6.2(c), the Buyer will perform the
obligations arising under such Contract for the benefit of the Seller and the
other party or parties thereto, except for any obligation under such Contract
that constitutes an Excluded Liability.

        (e) Once a Specified Consent is obtained, (i) the applicable Contract
will be deemed to have been automatically transferred to the Buyer on the terms
set forth in this Agreement, (ii) the obligations pursuant to the applicable
Contract will be deemed to be Assumed Liabilities, and (iii) the rights pursuant
to the applicable Contract will be deemed to be a Purchased Asset.

        (f) The Buyer agrees that the Seller will not have any liability
whatsoever to the Buyer arising out of or relating to the failure to obtain any
consents that may have been or may be required in connection with the
transactions contemplated by this Agreement or because of the default,
acceleration or termination of any Contract as a result thereof. Notwithstanding
anything to the contrary contained herein, the Buyer further agrees that no
representation, warranty, covenant or agreement of the Seller contained herein
will be breached or deemed breached, and no condition of the Buyer will be
deemed not to be satisfied, as a result, directly or indirectly, of the failure
to obtain any consent.

        Section 6.3 Novation of Government Contracts. Notwithstanding Section 6.2 above:

24

        (a) Following the Closing, the Buyer will, in accordance with, and to
the extent required by, the Federal Acquisition Regulation Part 42,
Subpart 42.12, promptly submit in writing to each responsible contracting
officer a request of the U.S. Government or Governmental Entity, as the case may
be, to (i) recognize the Buyer as the successor in interest to all of the
Government Contracts and (ii) if required enter into a novation agreement (the "Novation
Agreement") in substantially the form contemplated by such regulations. The
Buyer and the Seller will each use commercially reasonable efforts to promptly
obtain all consents, approvals and waivers required for the purpose of
processing, entering into and completing the Novation Agreement with regard to
the Government Contracts, including responding to requests for information by
the U.S. Government with regard to such Novation Agreement. The Seller and the
Buyer will each use commercially reasonable efforts to provide all reasonable
information and take all other actions reasonably necessary to execute and
consummate such Novation Agreement.

        (b) In the event that the U.S. Government declines to enter into
a Novation Agreement in accordance with, and to the extent
required by, Federal Acquisition Regulation, Part 42, Subpart 42.12 recognizing
the transfer of the Government Contracts to the Buyer, or until such time as
the U.S. Government recognizes such transfer by entering into a Novation
Agreement, nothing in this Agreement will constitute a transfer, assignment,
attempted transfer or an attempted assignment thereof.

        (c) Until such time as the U.S. Government recognizes the transfer of
the rights and obligations under a Government Contract to the Buyer, in
accordance with, and to the extent required by, the Federal Acquisition
Regulation Part 42, Subpart 42.12, the Seller hereby subcontracts with the Buyer
to perform for and in the place of the Seller any and all operations and provide
any and all goods equipment, services and other performance obligations under
the Government Contracts as of the Closing Date, pursuant to each of their
respective terms and conditions, including any and all amendments, options,
modifications, purchase orders issued thereunder and such other terms and
conditions as may have been duly incorporated in the Government Contracts;
provided that the Seller does not subcontract to the Buyer any Government
Contract for which novation is not required. The Buyer agrees to perform and
discharge each Government Contract in a timely manner and in accordance with Law
and with all of the terms of such Government Contract. In the event that the
U.S. Government declines to provide any required consent to such subcontract, or
that such subcontract would otherwise constitute a violation or breach of the
Government Contract or any Law, the Seller will use its commercially reasonable
efforts to (i) provide to the Buyer, at the Buyer's
expense, the benefits of the applicable Government Contract, (ii) cooperate in
any reasonable and lawful arrangement designed to provide such benefits to the
Buyer, and (iii) enforce at the request and expense of the Buyer for its
account, any rights of the Seller arising from any such Government Contract
(including the right to elect to terminate such Government Contract in
accordance with the terms thereof upon the request of the Buyer).

        Section 6.4    

Litigation Support. In the event and for so long as either Party is actively contesting or
defending against any third party charge, complaint, action, suit, proceeding,
hearing, investigation, claim or demand in connection with any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction involving the Business, the
other Party will reasonably cooperate with the contesting or defending Party and
its counsel in the contest or defense, make available its personnel and provide
such testimony and access to its books and records as may be reasonably
requested in  

25

connection with the contest or defense, at the sole cost and
expense of the contesting or defending Party (unless such contesting or
defending Party is entitled to indemnification therefor under Article IX
in which case, the costs and expense will be borne by the Parties as set forth
in Article IX).

        Section 6.5    

Pro-rations. The Parties agree that any Apportioned Obligations, and any refund,
rebate or similar payment received by the Seller or the Buyer for any Taxes that
are Apportioned Obligations, will be apportioned between the Seller and the
Buyer based upon the number of days in the applicable Straddle Period falling on
or before the Closing Date and the number of days in the applicable Straddle
Period falling after the Closing Date. The Seller will be responsible for the
amount apportioned to days on or before the Closing Date and the Buyer will be
responsible for the amount apportioned to days after the Closing Date. The
Seller will pay Apportioned Obligations that are due and payable on or prior to
the Closing Date, and bill the Buyer for any part of that amount apportioned to
the Buyer. The Buyer will pay Apportioned Obligations that are due and payable
after the Closing Date and bill the Seller for any part of that amount
apportioned to the Seller. Notwithstanding any other provision contained in this
Agreement (including the limitations set forth in Sections 9.2 or 9.3),
any obligation arising out of this Section 6.5 will not be considered a
Loss, subject to any limits of minimum or maximum amounts, measurement of
aggregate amount of Losses or any limit of time.

        Section 6.6    

Agreements Regarding Tax Matters.

        (a) The Seller will prepare and timely file all Tax Returns in respect
of the Purchased Assets for all Tax periods ending on or prior to the Closing
Date. The Buyer will prepare and timely file all other Tax Returns that are
required to be filed in respect of the Purchased Assets.

        (b) The Seller and the Buyer will provide each other with such
assistance and information relating to the Business and the Purchased Assets as
may reasonably be requested in connection with the preparation of any Tax Return
or the performance of any audit, examination or any other Proceeding by any
taxing authority, whether conducted in a judicial or administrative forum, and
will each retain and provide to the other party all records and other
information which may be relevant to any such Tax Return, audit, examination or
any other proceeding. Without limiting the generality of the foregoing, each of
the Buyer and the Seller will retain, for six years after the Closing, copies of
all Tax Returns, supporting work schedules and other records relating to the
Business and the Purchased Assets for taxable periods, or ratable portions of
any taxable periods, ending prior to or including the Closing Date.

        (c) The Seller will exercise exclusive control over the handling,
disposition and settlement of any inquiry, examination, or Proceeding by a
Governmental Entity that could result in a determination with respect to Taxes
due or payable by the Buyer for which the Seller may be liable or against which
the Seller may be required to indemnify the Buyer. The Buyer will notify the
Seller or its Affiliates in writing promptly upon learning of any such inquiry,
examination or Proceeding. The Buyer will cooperate with the Seller, as the
Seller may reasonably request, in any such inquiry, examination or Proceeding.
The Buyer will not extend the statute of limitations for any Tax for which the
Seller may be required to indemnify the Buyer without the Seller's prior written
consent.

        (d) If the Buyer receives a refund with respect to Taxes for which the
Seller is wholly or partially responsible under Section 2.3(b)(ii)
hereof, the Buyer will pay, within 30 days  

26

following the receipt of such Tax
refund, the amount of such Tax refund attributable to the Seller. If the Seller
receives a refund with respect to Taxes for which the Buyer is wholly or
partially responsible under Section 2.3(a)(vi) hereof, the Seller will
pay, within 30 days following the receipt of such Tax refund, the amount of such
Tax refund attributable to the Buyer.

        (e) Neither Party will agree to settle any Tax liability or compromise
any claim with respect to Taxes relating to the business of the Business, which
settlement or compromise may affect the liability for Taxes hereunder (or right
to Tax benefit) of the other Party, without the other Party's consent, which
consent will not be unreasonably withheld or delayed.

        (f) The Buyer will pay all Taxes that are required to be paid in
respect of any transfer, sales, use, recording, value-added or similar Taxes
that may be imposed by reason of the sale, assignment, transfer and delivery of
the Purchased Assets. The Buyer will timely file all Tax Returns required to be
filed in connection with the payment of such Taxes.

        (g) The Buyer and the Seller acknowledge and agree that the Buyer
constitutes a "successor employer" within the meaning of Code Section 3121(a)(1)
and Code Section 3306(b)(1) and the regulations thereunder. Accordingly, the
Buyer agrees to treat all wages paid to the Employees as paid by a successor
employer for all federal and state income tax and employment Tax purposes.

        Section 6.7     Records and Documents. Without limiting the effect of Section 6.6(a), the Parties will
preserve and keep all books and records relating to the Business or the
Purchased Assets for a period of six years following the Closing Date.
After such six-year period, a Party will provide at least 60 days prior written
notice to the other Party of its intent to dispose of any such books and
records, and such other Party will be given the opportunity, at its cost and
expense, to remove and retain all or any part of such books and records as it
may select. During such six-year period, duly authorized representatives of a
Party will, upon reasonable notice, have reasonable access during normal
business hours to examine, inspect and copy such books and records held by the
other Party.

        Section 6.8     Intellectual Property; Use of
Excluded Names.

        (a) From and after the Closing, in the event the Seller discovers that
it or any of its Affiliates used at any time prior to Closing any item of
Intellectual Property which was transferred with the Purchased Assets to Buyer
in connection with the transactions contemplated by this Agreement and the
Ancillary Documents, and the use of such item of Intellectual Property was
inadvertently or mistakenly not licensed back to the Seller or such Affiliate(s)
in connection therewith, the Buyer will cooperate with the Seller or such
Affiliate(s) to execute and deliver an unrestricted, perpetual, royalty-free
sublicensable license sufficient to provide the Seller or such Affiliate(s) with
the unrestricted right to use each such item of Intellectual Property subject to
the restrictions contained in Section 6.9.

        (b) Except as otherwise expressly provided in this Section 6.8,
no interest in or right to use the Excluded Names is being assigned, transferred
or otherwise conveyed to the Buyer pursuant to this Agreement. As promptly as
practicable following the Closing, but in no event later than 60 days after the
Closing Date, the Buyer will stop using the Excluded Names in any form including
by removing, permanently obliterating or covering all Excluded Names that  

27

appear
on any Purchased Asset or Assumed Liability, including all signs, promotional or
advertising literature, labels, stationery, business cards, office forms and
packaging materials. Without limiting the foregoing, in no event will the Buyer
use or display any Excluded Name in any way (i) other than in the same manner
used by the Business immediately prior to the Closing Date, (ii) in connection
with products or services not conforming to the same standard of quality that
existed prior to the Closing Date, or (iii) that could detract from or impair
the goodwill associated with such Excluded Names. Neither the Buyer nor any of
its Affiliates will use any Excluded Name, trademark, service mark, brand name,
certification mark, trade name, corporate name, domain name or other indication
of source or origin that is likely to cause confusion with any of the Excluded
Names or be associated with the Seller or any of its Affiliates after the
Closing Date, except as expressly permitted pursuant to this Section 6.8.

        Section 6.9    

Non-Competition; Non-Solicitation.

        (a) The Seller agrees that, for a period commencing on the Closing
Date and terminating two (2) years after the Closing Date, it will not directly,
or indirectly through any of its Affiliates, engage in any Competing Business
anywhere in the United States. For purposes of this Agreement, "Competing
Business" means the business of the Business as conducted by the Seller
immediately prior to the Closing Date.

        (b) Notwithstanding the provisions of Section 6.9(a), (i) no
Affiliate of the Seller will be prohibited from engaging in any business
currently conducted or proposed to be conducted by such Affiliate or any natural
extensions thereof, (ii) the acquisition (by asset purchase, stock purchase,
merger, consolidation or otherwise) by the Seller or any of its Affiliates of
the stock, business or assets of any Person that at the time of such acquisition
is engaged in the Competing Business, and the continuation of such Competing
Business following such acquisition, will not be prohibited hereunder if the
portion of the revenues of such Person and its subsidiaries on a consolidated
basis for the fiscal year ending prior to the date of such acquisition that are
attributable to the Competing Business by such Person and its subsidiaries
account for less than thirty-five percent (35%) of the revenues of such Person
and its subsidiaries on a consolidated basis for such fiscal year and (iii) the
acquisition of the stock, business or assets of the Seller and/or any of its
Affiliates (by asset purchase, stock purchase, merger, consolidation or
otherwise) by any Person who is not a current Affiliate of the Seller will not
be prohibited hereunder.

        (c) Nothing in this Section 6.9 will restrict or prevent the
Seller or any of its Affiliates from maintaining or undertaking passive
investments in any Person primarily engaged in the Competing Business so long as
the aggregate interest represented by such investments does not exceed five
percent (5%) of any class of the outstanding debt or equity securities of any
such Person.

        (d) For a period commencing on the Closing Date and terminating two
years after the Closing Date, neither Party nor any of their Affiliates will,
directly or indirectly, solicit, hire (or assist or encourage any other Person
to solicit or hire) or otherwise interfere with the employment relationship of
any Person who is employed by the other Party as of the date of this Agreement
or engaged by such Party during the operation of this provision. For the
avoidance of doubt, an employee will not be deemed to have been solicited for
employment solely as a result of a general public advertisement or other such
general solicitation of employment. 

28

        Section 6.10
    
Remittance of Receivables. After the Closing Date, any payment received by the Seller in respect
of the Receivables shall be remitted to the Buyer as soon as reasonably
practicable after the Seller's receipt of such payment.

        ARTICLE VII

        EMPLOYEE MATTERS

      
    
  

        Section 7.1    

Employment. The Buyer will offer to employ each of the employees of the Business
listed on Schedule 7.1 immediately prior to the Closing Date (the "Employees"),
in the same or substantially comparable position with the Buyer as provided by
the Seller as of the Closing Date. For a period ending no earlier December 31,
2005, such Employees accepting the offer of employment with the Buyer will
receive substantially comparable aggregate compensation while they remain
employees of the Buyer. Notwithstanding the foregoing, nothing in this Agreement
will, after the Closing Date, impose on the Buyer any obligation to retain any
Employee in its employment. 

        Section 7.2    

Employee Benefit Matters.

        (a) As of the Closing Date, the Employees will cease participation in
all Seller Employee Benefit Plans and fringe benefit programs. Effective as of
the Closing Date and continuing for a period ending no earlier than December 31,
2005, the Buyer will provide to the Employees through Employee Benefit Plans
provided by the Buyer to its employees (collectively, "Buyer Employee Benefit
Plans") and fringe benefit programs (including, as applicable, sick pay,
incentive compensation or bonus programs, vacation pay and tuition reimbursement
programs), employee benefits which are, in the aggregate, substantially
comparable to the employee benefits provided to the Employees under Seller
Employee Benefit Plans and fringe benefit programs as of the Closing Date. 

        (b) In accordance with Treasury Regulation Section 54.4980B-9 Q&A-7,
as of the Closing Date, the Buyer will assume all liability for providing and
administering all required notices and benefits under the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA") to all Employees of the
Business. The Seller will have no COBRA liability or obligations to such
Employees after the Closing Date. In
addition to the foregoing, the Buyer will assume all accrued vacation
liabilities for paid time off, short-term disability and other vacation and sick
leave of the Employees as of the Closing Date. 

        (c) Effective as of the Closing Date and continuing for a period
ending no earlier than December 31, 2005, the Buyer will provide each Employee
with severance benefits that are substantially comparable to the severance
benefits provided to each such Employee as of the Closing Date.

        (d) Solely for purposes of eligibility and vesting under the Buyer
Employee Benefit Plans and any severance plan or policy of the Buyer, the Buyer
will cause each Employee to be credited with his or her years of service with
the Seller (and any of its Affiliates or any predecessor entities thereof)
before the Closing Date, to the same extent as such Employee was entitled, as of
the Closing Date, to credit for such service under any similar Seller Employee
Benefit Plan or severance plan or policy of the Seller.

29

        (e) The Buyer will provide post-retirement medical and life insurance
benefits with respect to all Employees of the Business and their eligible
dependents and will be responsible for all liabilities with respect to such
benefits whether accrued before, on or after the Closing Date. As of the Closing
Date and continuing for a period ending no earlier than December 31, 2005, the
Buyer will continue such post-retirement and life insurance benefits at the
benefit levels in effect on the Closing Date.

        (f) Following the Closing Date, the Buyer will (i) waive any
pre-existing condition limitation under any Employee Welfare Benefit Plan
maintained by the Buyer in which Employees and their eligible dependents
participate and (ii) provide each Employee with credit for any co-payments and
deductibles incurred by any of them prior to the Closing Date in order to
satisfy any applicable deductible or out-of-pocket requirements under any
Employee Welfare Benefit Plans in which any of the Employees participate after
the Closing Date. 

        (g) As of the Closing Date and subject to Revenue Ruling 2002-32, the
Seller will cause the portion of its flexible reimbursement plan applicable to
the Employees to be segregated into a separate component and all account
balances and salary reduction elections of such Employees in the Seller's
flexible reimbursement plan will be transferred to a flexible reimbursement plan
that the Buyer will cause to be maintained for the duration of the calendar year
in which the Closing Date occurs.

        Section 7.3    
Defined Contribution
Plans. As of the Closing Date, with respect to any Employee Pension Benefit
Plan that is a defined contribution plan intended to be qualified under
Section 401(a) of the Code and is maintained by or for the benefit of any of the
Employees, the Employees will cease to participate in such defined contribution
plan. Within 60 days of the Closing Date, each Employee will be permitted to
elect a distribution of his or her account balance in the Seller's defined
contribution plan and will be permitted to roll over his or her account balances
in the Seller's defined contribution plan (or any portion thereof) to the
Buyer's defined contribution plan, including the ability to rollover any
existing loans under such Seller plan for 90 days after the Closing Date.

        Section 7.4    

Compliance with WARN. With respect to the Employees, the Buyer will have full responsibility
under the Worker Adjustment and Retraining Notification Act of 1988, as amended,
and any other similar statutes or regulations of any jurisdiction relating to
any plant closing or mass layoff. For these purposes, a plant closing or a mass
layoff will be deemed to have been caused by the Buyer if such plant closing or
mass layoff would not have occurred but for the Buyer's failure to employ the
Employees in accordance with the terms of this Agreement and/or the Buyer's
failure to employ Employees thereafter.

        ARTICLE VIII

        CLOSING DELIVERIES

      
    
  

        Section 8.1    
Closing Deliveries of the Seller. At the Closing the Seller will deliver to the Buyer: 

        (a) a duly executed counterpart of the bill of sale and assignment and
assumption agreement in substantially the form attached as Exhibit A (the
"Bill of Sale and Assignment and Assumption Agreement"); 

30

        (b) a duly executed counterpart of the assignment of patents in
substantially the form attached as Exhibit B (the "Assignment of
Patents"); 

        (c) a duly executed counterpart of the assignment of trademarks in
substantially the form attached as Exhibit C (the "Assignment of
Trademarks");

        (d) a duly executed counterpart of the assignment of lease for each of
the real property leases identified in Schedule 4.11 in substantially the
form attached as Exhibit D (the "Assignment and Assumption of Leases");

        (e) a duly executed counterpart of the transition services agreement
in substantially the form attached as Exhibit E (the "Transition
Services Agreement");

        (f) a duly executed counterpart of the associate contractor agreement
in substantially the form attached as Exhibit F (the "Associate
Contractor Agreement").

        (g) a certificate of good standing of the Seller from the Secretary of
State of the State of Washington dated no earlier than ten (10) days prior to
the Closing Date;

        (h) a certificate executed as of the Closing Date by an executive
officer of the Seller certifying that attached thereto are true and correct
copies of action by written consent or resolutions duly adopted by the Seller's
Board of Directors and sole shareholder authorizing and approving the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby;

        (i) a duly executed counterpart of the side letter agreement relating
to indemnification for certain liabilities (the "Letter Agreement");

        (j) such other instruments of sale, transfer, conveyance and
assignment as the Buyer and its counsel may reasonably request to vest in the
Buyer all of the Seller's right, title and interest in and to the Purchased
Assets; and

        (k) all certificates, instruments and other documents required to
effect the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Buyer.

        Section 8.2    
Closing
Deliveries of the Buyer. At the Closing the Buyer will deliver to the
Seller:

        (a) the Purchase Price in cash by wire transfer
of immediately available funds to the account or accounts designated by the
Seller; 

        (b) a duly executed counterpart of the Bill of Sale and Assignment
and Assumption Agreement and such other instruments of assumption as the Seller
and its counsel may reasonably request; 

        (c) a duly executed counterpart of the Assignment of Patents;

        (d) a duly executed counterpart of the Assignment of Trademarks; 

31

        (e) duly executed counterparts of each Assignment and Assumption of
Leases; 

        (f) a duly executed counterpart of the Transition Services Agreement;

        (g) a duly executed counterpart of the Associate Contractor Agreement.

        (h) a certificate of good standing of the Buyer from the Secretary of
State of the State of Washington dated as of a date not earlier than ten (10)
days prior to Closing; 

        (i) a certificate, dated as of the Closing Date, signed by the
Secretary of the Buyer certifying that attached thereto are true and correct
copies of action by written consent or resolutions duly adopted by the Board of
Directors and shareholders of the Buyer that authorize and approve the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby; 

        (j) a duly executed counterpart of the Letter Agreement; and

        (k) all certificates, instruments and other documents required to
effect the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Seller.

        ARTICLE IX

        REMEDIES

      
    
  

        Section 9.1    

Survival. The representations and warranties of the Parties contained in this
Agreement and in the Ancillary Documents will survive until the first
anniversary of the Closing Date except that the representations and warranties
(a) set forth in Section 4.16 and in the first sentence of Section
4.10 will survive until the third anniversary of the Closing Date, (b) set
forth in Section 4.7 will survive until the expiration of the applicable
statute of limitations, and (c) set forth in Section 4.2 and Section
5.2 will survive the Closing Date indefinitely. The covenants or agreements
of the Parties contained in this Agreement and the Ancillary Documents will
survive the Closing indefinitely, except that those covenants and agreements
which by their terms are to be performed or observed for shorter periods will
survive until the expiration of such shorter period. Notwithstanding anything to
the contrary, no claim may be made with respect to any representations or
warranties under this Agreement or any Ancillary Document after the expiration
of the applicable survival period set forth in this Section 9.1.

        Section 9.2    

Indemnification by the Seller.

        (a) Subject to the terms and conditions of this Article IX, the
Seller agrees to reimburse, indemnify and hold harmless the Buyer,
its directors, officers, employees, agents, representatives and its present
and future Affiliates (each, a "Buyer Indemnified Party") from, against
and in respect of any and all Losses incurred by a Buyer Indemnified Party
resulting from, or that exist or arise due to, any of the following
(collectively, "Buyer Claims"):

	 	
    
          (i)      prior to their expiration in accordance with Section 9.1,
    any inaccuracy of any representation or the breach of any warranty made by
    the Seller in this Agreement or contained in any Ancillary Document;

32

	 	 
	 	
    
          (ii)      the non-fulfillment of any covenant or agreement of the
    Seller pursuant to this Agreement or any Ancillary Document (other than with
    respect to the Excluded Liabilities); and
	 	 
	 	
    
          (iii)     any of the Excluded Liabilities.

        (b) Notwithstanding Section 9.2(a), the
obligations of the Seller pursuant to Section 9.2(a)(i) will: (i) not
apply to any Buyer Claims until, and then only to the extent that, the aggregate
amount of all Losses incurred by all Buyer Indemnified Parties exceeds $130,000
(the "Basket Amount"); and (ii) be limited to, and will not exceed,
the aggregate amount of $2,500,000 (the "Ceiling Amount").

        Section 9.3    

Indemnification by the Buyer.

        (a) Subject to the terms
and conditions of this Article IX, the Buyer agrees to reimburse,
indemnify and hold harmless the Seller, its directors, officers, employees,
agents, representatives and its present and future Affiliates (collectively, the
"Seller Indemnified Parties") from, against and in respect of any and all
Losses incurred by a Seller Indemnified Party resulting from, or that exist or
arise due to, any of the following (collectively "Seller Claims," and
together with Buyer Claims, the "Claims"):

	 	
    
          (i)      prior to their expiration in accordance with Section 9.1, any
    inaccuracy of any representation or the breach of any warranty made by the
    Buyer in this Agreement or in any Ancillary Document;
	 	 
	 	
    
          (ii)      the non-fulfillment of any covenant or agreement of the Buyer
    pursuant to this Agreement or any Ancillary Document (other than with
    respect to the Assumed Liabilities); and
	 	 
	 	
    
          (iii)      any of the Assumed Liabilities.

        (b) Notwithstanding Section 9.3(a), the obligations of the
Buyer pursuant to Section 9.3(a)(i) will: (i) not apply to any Seller
Claims until, and then only to the extent that, the aggregate amount of all
Losses incurred by all Seller Indemnified Parties exceeds the Basket Amount; and
(ii) be limited to, and will not exceed, the Ceiling Amount.

        Section 9.4 
   
Procedures for Indemnification.

        (a) No party hereto will be liable for any Claim for indemnification
under this Article IX unless written notice of a Claim for
indemnification is delivered by the party seeking indemnification (the "Indemnified
Party") to the Party from whom indemnification is sought (the "Indemnifying
Party") prior to the expiration of the applicable survival period, if any,
set forth in Section 9.1. If any third party notifies the Indemnified
Party with respect to any matter which may give rise to a Claim for
indemnification (a "Third Party Claim") against the Indemnifying Party
under this Article IX, then the Indemnified Party will notify the
Indemnifying Party promptly thereof in writing and in any event within 15 days
after receiving notice from a third party; provided that no delay on the part of
the Indemnified Party in notifying the Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless the Indemnifying Party
is prejudiced thereby. All notices given pursuant to this Section 9.4
will describe with  

33

reasonable specificity the Third Party Claim and the basis of
the Indemnified Party's Claim for indemnification. Once the Indemnified Party
has given notice of the Third Party Claim to the Indemnifying Party, the
Indemnifying Party will be entitled to participate therein and, to the extent
desired, to assume the defense thereof with counsel of its choice, provided,
however, the Indemnified Party may participate (but not control) such defense
and after notice of its election to assume the defense thereof, the Indemnifying
Party will not be liable to the Indemnified Party for any legal or other
expenses subsequently incurred by the Indemnified Party in connection with the
defense of the Third Party Claim, other than reasonable costs of investigation,
unless the Indemnifying Party does not actually assume the defense thereof
following notice of such election. If the Indemnifying Party does not assume the
defense of such Third Party Claim, the Indemnified Party will have the right to
undertake the defense of such Third Party Claim, by counsel or other
representatives of its own choosing, on behalf of and for the account and risk
of the Indemnifying Party (subject to the limitations on the Indemnifying
Party's obligations to indemnify otherwise set forth in this Article IX
and to the right of the Indemnifying Party to assume the defense of or
opposition to such Third Party Claim at any time prior to settlement, compromise
or final determination thereof).

        (b) Neither the Indemnified Party nor the Indemnifying Party will
consent to the entry or any judgment or enter into any settlement of any Third
Party Claim that might give rise to liability of the other Party under this 
Article IX without such Party's consent, which will not be unreasonably
withheld or delayed. If the Indemnifying Party elects to settle any such Third
Party Claim, and the Indemnified Party refuses to consent to such compromise or
settlement, then the liability of the Indemnifying Party to the Indemnified
Party will be limited to the amount offered by the Indemnifying Party in
compromise or settlement.

        Section 9.5    

Certain Limitations. 

        (a) An Indemnifying Party will not be liable under this Article IX
in respect of a Claim for incidental, special, punitive or consequential damages
of any kind, including consequential damages resulting from business
interruption or lost profits. 

        (b) The obligations of the Indemnifying Party to provide
indemnification under this Article IX will be terminated, modified or
abated as appropriate to the extent that the underlying Claim is based, in whole
or in part, on the negligence, bad faith or willful misconduct of the
Indemnified Party occurring after the Closing Date. 

        Section 9.6    

Certain Benefits. The amount of any indemnification payable under this Article IX
will be net of (a) any Tax benefits that the Indemnified Party receives or is
entitled to by reason of the Claim giving rise to the indemnification payment
and (b) the receipt of any insurance proceeds paid or payable to the Indemnified
Party under any policies of insurance covering the Loss giving rise to the
Claim. The Indemnified Party will use commercially reasonable efforts to collect
any such insurance and will account to the Indemnifying Party therefor. If, at
any time subsequent to the Indemnified Party receiving an indemnity payment for
a Claim under this Article IX, the Indemnified Party receives payment in
respect of the Loss underlying such Claim through recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against another Person, the amount of such
payment, less any costs, expenses or premiums incurred directly in connection
therewith, will promptly be repaid by the Indemnified Party to the Indemnifying
Party. 

34

        Section 9.7    

Treatment of Indemnity Payments. All indemnification payments made pursuant to this Agreement will be
treated by the Parties as adjustments to the Purchase Price.

        Section 9.8    

Exclusive Remedy. Other than as set forth in Section 10.7,
the remedies provided in this Article IX will be the sole and exclusive
remedies of the Parties for all disputes arising out of or relating to this
Agreement or any Ancillary Document, and will supersede and replace all other
rights and remedies that any of the Parties may have under any Law.

        Section 9.9    

Mitigation. Each Party agrees to use commercially reasonable efforts to mitigate any
Loss which forms the basis of a Claim hereunder.

        ARTICLE X

        MISCELLANEOUS

      
    
  

        Section 10.1     Notices. Any notice, request, instruction or other document to be given
hereunder will be in writing and delivered personally or sent by registered or
certified mail, postage prepaid, or by facsimile, according to the instructions
set forth below. Such notices will be deemed given: at the time delivered by
hand, if personally delivered; at the time received if sent by registered or
certified mail; and at the time when confirmation of successful transmission is
received by the sending facsimile machine if sent by facsimile.

	
    If to the Seller:
	
    General Dynamics OTS (Aerospace), Inc.

    c/o
    General Dynamics Corporation

    2941 Fairview Park Drive, Suite 100

    Falls Church, VA 22042-4513

    Attention: David A. Savner

    Facsimile No.: (703) 876-3554

	
     
	
     

	
    With a copy (which will not constitute notice)
    to:
	
    Jenner & Block LLP

    One IBM Plaza

    Chicago, IL 60611-7603

    Attention: John F. Cox 

    Facsimile No.: (312) 840-7396

	
     
	
     

	
    If to the Buyer:
	
    Astronics Acquisition Corp.

    c/o Astronics
    Corporation

    130 Commerce Way

    East Aurora, NY 14052

    Attention: David C. Burney

    Facsimile No.: (716) 805-1286

	
     
	
     

	
    With a copy (which will not constitute notice)
    to:
	
    Hodgson Russ LLP

    One M&T Plaza, Suite 2000

    Buffalo, NY 14203-2391

    Attention: John B. Drenning

    Facsimile No.: (716) 849-0349

or to such other address or to the attention of such other party that the
recipient party has specified by prior written notice to the sending party in
accordance with the preceding.

35

        Section 10.2
    
Expenses; No Offset. Except as expressly provided in this Agreement, each of the Buyer and
the Seller, and their respective Affiliates, will bear its own costs and
expenses (including legal, accounting and investment banking fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby, whether or not such transactions are consummated. Neither Party may make
any offset against amounts due to the other Party pursuant to this Agreement,
the Ancillary Documents or otherwise.

        Section 10.3
    
Disclosure Schedules. The representations and warranties of the Seller set forth in this
Agreement are made and given subject to the disclosures contained in the
Disclosure Schedules. The Seller will not be, nor will it be deemed to be, in
breach of any such representations and warranties (and no claim will lie in
respect thereof) in respect of any such matter so disclosed in the Disclosure
Schedules. Where only brief particulars of a matter are set out or referred to
in the Disclosure Schedules, or a reference is made only to a particular part of
a disclosed document, full particulars of the matter and the full contents of
the document are deemed to be disclosed. Inclusion of information in the
Disclosure Schedules will not be construed as an admission that such information
is material to the business, operations or condition (financial or otherwise) of
the Business or the Purchased Assets, taken as a whole. The specific disclosures
set forth in the Disclosure Schedules have been organized to correspond to
section references in this Agreement to which the disclosure may be most likely
to relate, together with appropriate cross references when disclosure is
applicable to other sections of this Agreement; provided, however, that any
disclosure in the Disclosure Schedules will apply to and will be deemed to be
disclosed for the purposes of this Agreement generally. In the event that there
is any inconsistency between this Agreement and matters disclosed in the
Disclosure Schedules, information contained in the Disclosure Schedules will
prevail and will be deemed to be the relevant disclosure.

        Section 10.4 
   
Bulk Sales or Transfer Laws. The Buyer waives compliance by the Seller with the provisions of any
bulk sales laws that may be applicable to the transactions contemplated by this
Agreement.

        Section 10.5
    
Assignment; Successors and Assigns. Neither this Agreement nor any of the rights, interests or obligations
provided by this Agreement may be assigned by either Party (whether by operation
of Law or otherwise) without the prior written consent of the other Party; 
provided, that either Party may assign their rights, interests and
obligations hereunder to any direct or indirect wholly owned subsidiary; 
provided, further, that if either Party makes any assignment referred
to above, such Party will remain liable under this Agreement. Subject to the
preceding sentence and except as otherwise expressly provided herein, this
Agreement will be binding upon and inure to the benefit of the Parties hereto
and their respective successors and permitted assigns.

        Section 10.6     
Amendment; Waiver. This Agreement may be amended by a written instrument executed and
delivered by the Seller and the Buyer. No agreement extending or waiving any
provision of this Agreement will be valid or binding unless it is in writing and
is executed and delivered by or on behalf of the Party against which it is
sought to be enforced.

        Section 10.7 
   
Severability; Specific Performance. Whenever
possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable Law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable Law, such
provision will be ineffective only to the extent of such prohibition or 

36

invalidity, without invalidating the remainder of this Agreement. Each Party
acknowledges and agrees that the other Party may be irreparably damaged if any
provision of this Agreement is not performed in accordance with its terms or
otherwise is breached. Accordingly, each Party agrees that the other Party may
be entitled, subject to a determination by a court of competent jurisdiction, to
injunctive relief to prevent any such failure of performance or breach and to
enforce specifically this Agreement and any of the terms and provisions hereof.

        Section 10.8     
Counterparts. This Agreement may be executed in two or more counterparts, each of
which will be deemed an original, but all such counterparts taken together will
constitute one and the same Agreement.

        Section 10.9     
Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience
only and will not constitute a part of this Agreement.

        Section 10.10 
   
No Third-Party Beneficiaries. This Agreement will not confer any rights or remedies upon any Person
or entity other than the Parties hereto, their respective successors and
permitted assigns and the Buyer Indemnified Parties and the Seller Indemnified
Parties under Article IX.

        Section 10.11 
   
Entire Agreement. This Agreement and the Ancillary Documents collectively constitute the
entire agreement among the Parties and supersede any prior and contemporaneous
understandings, agreements or representations by or among the parties, written
or oral, that may have related in any way to the subject matter hereof.

        Section 10.12 
   
Exhibits and Schedules. The Exhibits and Disclosure Schedules attached to this Agreement are
made a part of this Agreement as if set forth fully herein.

        Section 10.13 
   
Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE
APPLIED.

        Section 10.14
    
Independence of Warranties and Representations. All representations and warranties hereunder shall be given independent
effect so that if a particular representation or warranty proves to be incorrect
or is breached, the fact that another representation or warranty concerning the
same or similar subject matter is correct or is not breached will not affect the
incorrectness or a breach of such initial representation or warranty.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

37

        IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this
Agreement on the date first written above.

	 	GENERAL DYNAMICS OTS 

                          (AEROSPACE), INC.
	 	 
	 	 
	 	By:
                          
                          	
    /s/ David A. Savner
	 		David A. Savner 
	 		Vice President
	 	 
	 	ASTRONICS ACQUISITION CORP.
	 	 
	 	 
	 	By:
                          
                          	
    /s/ Peter J. Gundermann
	 	 	Name: Peter J. Gundermann
	 	 	Title: President and CEO

GUARANTEE

The undersigned, ("Seller Guarantor"), as an inducement to the Buyer
to enter into and perform this Agreement, hereby unconditionally and irrevocably
guarantees the timely performance and/or timely payment, as the case may be (as,
when and to the extent due), of all covenants and obligations of the Seller
under or by virtue of this Agreement. The obligations of Seller Guarantor under
this Guarantee are independent of the covenants and obligations of the Seller
under this Agreement and a separate action or actions may be brought and
prosecuted against Seller Guarantor to enforce this Guarantee. The undersigned
hereby confirms the representations by the Seller in Sections 4.1, 4.2
and 4.3 of this Agreement only as they relate to the Seller Guarantor.

	Dated: February 3, 2005	GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS,
    Inc., a Virginia corporation
	 	 
	 	 
	 	By:
    
    	/s/
    David A. Savner
	 	 	David A. Savner
	 	 	Vice President

 

GUARANTEE

The undersigned, ("Buyer Guarantor"), as an inducement to the Seller
to enter into and perform this Agreement, hereby unconditionally and irrevocably
guarantees the timely performance and/or timely payment, as the case may be (as,
when and to the extent due), of all covenants and obligations of the Buyer under
or by virtue of this Agreement. The obligations of Buyer Guarantor under this
Guarantee are independent of the covenants and obligations of the Buyer under
this Agreement and a separate action or actions may be brought and prosecuted
against Buyer Guarantor to enforce this Guarantee. The undersigned hereby
confirms the representations by the Buyer in Sections 5.1, 5.2 and
5.3 of this Agreement only as they relate to the Buyer Guarantor.

	Dated: 3 Feb        
         , 2005	ASTRONICS CORPORATION, a New York corporation
    
    
	 	 
	 	 
	 	By	/s/
    Peter J. Gundermann
	 	 	
    Name: Peter J. Gundermann

    
	 	 	
    Title:  President and CEOExhibit 10.15

ASTRONICS CORPORATION

2005 DIRECTOR STOCK OPTION PLAN

 

ARTCILE I

PURPOSE

        The purpose of this 2005 Director Stock Option Plan (the "Plan") is to
advance the interest of ASTRONICS CORPORATION, a New York corporation (the
"Company"), by encouraging the efforts of directors of the Company who are not
employees, by heightening the desire of such persons to continue in their
service and by assisting the Company to compete effectively with other
enterprises for new directors.

ARTCILE II

GRANTING OF OPTIONS

        Subject to the terms and conditions of this Plan, the Company may issue
options ("Options") to purchase up to two hundred thousand (200,000) shares of
its $.01 par value Common Stock ("Shares") to persons eligible to participate
under Section 4.1 below. Two hundred thousand (200,000) of the Company's
authorized but unissued shares of Common Stock are hereby reserved for issuance
under this Plan; provided, however, that treasury shares shall also be available
for issuance under this Plan at the Company's discretion. Any Share subject to
an Option that terminates for any reason other than exercise may be made subject
to a subsequent Option.

ARTCILE III

TERM

3.1     Effective Date.

        This plan shall become effective upon its adoption by the Board of Directors.
The Plan shall be submitted to the shareholders of the Company for their
approval within twelve months of such adoption. No Option shall be exercisable
unless and until the shareholders of the Company have approved the Plan.

3.2     Termination.

        This Plan shall terminate when all of the Shares have been acquired through
exercise of Options unless sooner terminated by the Board of Directors. Any
Option outstanding under this Plan at the time of its termination shall remain
in effect in accordance with its terms and conditions and those of this Plan.

ARTCILE IV

PARTICIPANTS

4.1     Eligible Directors.

        Options may be granted to directors of the Company unless at the time of
grant they are also an executive officer or employee of the Company or any of
its subsidiary corporations. As used in this Plan, "Participant" means a
director of the Company and includes a director's legal representative if he or
she is incompetent or deceased, or any other person who acquires the legal right
to exercise a Participant's Options.

1

 

ARTCILE V

GENERAL TERMS

5.1     Written Agreement.

        Options shall be evidenced by a written Option Agreement that shall contain
such terms and conditions as this Plan requires and such additional provisions
as the Committee, as defined in Section 6.1, may deem necessary or appropriate
in its sole discretion and that do not conflict with the provisions of this
Plan. Each Option Agreement shall be signed by the Participant and an officer of
the Company designated by the Committee. Options granted pursuant to this Plan
need not be identical, but each Option shall be subject to the terms and
conditions set forth in this Plan.

5.2     Time of Grant.

        Options shall be granted only during the thirty (30) day period commencing
one week after a press release announcing quarterly or annual results of
operations of the Company.

5.3     Price.

        The purchase price of the Shares under each Option shall be as determined by
the Committee, but in no event less than the fair market value of the Shares
optioned on the date of granting. "Fair market value" shall be deemed to be:

	 	1.	The closing price on the date of
    grant as reflected in reports of the automated quotation service or national
    securities exchange on which the price of the Shares is reported.
	 	 	 
	 	 	In all cases where the Shares
    are selling ex-dividend on the date of grant, the amount of the dividend
    shall be added to the ex-dividend quotation to determine the fair market
    value of the Shares as of the date of grant; or
	 	 	 
	 	2.	If the fair market value cannot
    be established under the provisions of (1) above, then the "fair market
    value" shall be that value determined in good faith by the Board of
    Directors based on a consideration of the following relevant factors: the
    Company's net worth, prospective earning power, its dividend paying
    capacity, the value of its underlying assets, and any other factors such as
    the goodwill of the business, the economic outlook in the industry, the
    Company's position in the industry and its management, and the value of
    securities of corporation engaged in the same or similar businesses which
    are listed on a national securities exchange. The weight to be accorded by
    comparison or any other evidentiary factors considered by the Board of
    Directors in the determination of value will depend on the particular
    circumstances applying at the time. In every case, the determination of the
    Board of Directors shall be final.

5.4     Payment of Exercise Price;
Taxes.

        5.4.1     The exercise price of each Option shall be paid
in full at the time of exercise by cash or certified check or the exchange of
Shares, or a combination of both such that the sum of (a) the aggregate fair
market value (as of the exercise date) of the Shares exchanged by the
Participant (as determined by the Committee), and (b) the cash paid, equals the
total exercise price of the Option.

        5.4.2     If the exercise of an Option gives rise to an
obligation of the Company to withhold state or federal income or other taxes, or
gives rise to any other tax liability of the Company of any kind, the
Participant shall tender the amount of such tax to the Company along with the
exercise price, unless the incidence of such tax cannot lawfully be placed on
the Participant.

2

5.5     Exercise of Options. 

        Options shall be exercisable as provided in the Option Agreement. Except as
provided in Section 5.6, in no event shall Options be exercised during the six
(6) month period immediately following such grant.

5.6     Duration of Option.

        Each Option shall be exercisable for so long as the Participant is a director
of the Company and, to the extent that the Option is exercisable on the date of
termination of the Participant's directorship, for thirty (30) days thereafter,
but not longer than ten (10) years from the date the Option is granted. Unless
otherwise expressly provided for by the Committee, on the date of termination of
a Participant's directorship, Options granted but not yet exercisable shall
thereupon become exercisable. Nothing in this Plan requires Options to be
exercisable upon grant.

5.7     Death or Disability.

        If a Participant dies or is "permanently and totally disabled" (within the
meaning of section 22(e)(3) of the Internal Revenue Code of 1986, as amended
("Code")) while serving as a director of the Company, the thirty (30) day period
specified in Section 5.6 above shall be one (1) year. 

5.8     Misconduct.

        If a Participant is determined by the Committee to have committed an act of
embezzlement, fraud, dishonesty, deliberate or repeated disregard for the rules
of the Company, unauthorized disclosure of any of the trade secrets or
confidential information of the Company, unfair competition with the Company,
inducement of any customer of the Company to breach a contract with the Company,
inducement of any principal for whom the Company acts as agent to terminate that
agency relationship or any culpable degree of negligence, then neither the
Participant nor the Participant's estate shall be entitled to exercise any
Option after termination of the Participant's directorship, whether or not,
after termination of such directorship, such Participant may receive payment
from the Company for services rendered prior to termination, services for the
day on which termination occurs, or other benefits.

5.9     Transferability of Option.

        Options shall be transferable only by will or the laws of descent and
distribution.

5.10     No Employment Agreement.

        No Option Agreement, nor anything contained in this Plan, shall confer upon
any Participant any right to continue as a director of the Company nor limit in
any way the right of the Company, or the shareholders thereof, to terminate a
Participant's directorship at any time.

5.11     Adjustments to Options.

        Subject to the general limitations of this Plan, the Committee may modify or
extend existing Options. However, without the consent of the Optionee, no
modification may impair the Optionee's rights or increase the Optionee's
obligations under the Plan. No reductions in the purchase price of shares under
Options previously granted may be made except as occasioned by Section 7.1.

5.12     Form of Agreement.

        The Committee shall adopt a form of Option Agreement to be used pursuant to
this Plan and may modify, add to, or delete from the form as it shall deem
appropriate, subject to the provisions set forth herein.

3

ARTCILE VI

ADMINISTRATION AND AMENDMENT OF THE PLAN

6.1     The Committee.

        This Plan shall be administered by a committee ("Committee") of at least two
persons not eligible to participate in the Plan and who are appointed by the
Board of Directors and may or may not be members of the Board. The Board of
Directors shall fill vacancies on the Committee and may from time to time remove
members from, or add members to, the Committee, provided that at all times the
Committee shall have at least two members. The Committee shall act pursuant to
the written consent of a majority of its members or the majority vote of its
members at any meeting thereof.

6.2     Committee Rights and Powers.

        Subject to this Plan and to the supervision of the Board of Directors, the
Committee shall have the authority and discretion: 

	 	(a)	to determine which of the
    Company's directors shall receive Options;
	 	 	 
	 	(b)	to determine when Options shall
    be granted (subject to Section 5.2 above);
	 	 	 
	 	(c)	to determine the terms and
    conditions of Options (which terms and conditions may differ between
    Options);
	 	 	 
	 	(d)	to interpret the Plan; and
	 	 	 
	 	(e)	to take such action as is
    necessary or appropriate to the administration of the Plan.

        All decisions, determinations, and interpretations of the Committee shall be
final and binding on all Participants (subject to review by the Board of
Directors in its sole and absolute discretion).

6.3     Administration.

        The Committee from time to time may adopt rules and regulations for
implementing this Plan, and it may from time to time suspend or terminate this
Plan or make such changes and additions hereto as it may deem desirable, without
further action on the part of the Board of Directors or the shareholders of the
Company; provided, however, that unless the Company's shareholders shall have
first given their approval, then (a) the total number of Shares that may be
purchased under the Plan shall not be increased except as otherwise provided in
this Plan; (b) the description of the persons eligible to receive Options shall
not be changed; and (c) the minimum exercise price shall not be changed. The
suspension, termination or amendment of this Plan shall not, without the consent
of the Participant, alter or impair any rights or obligations under any Options
theretofore granted under this Plan.

ARTCILE VII

ADJUSTMENT OF AND CHANGES IN STOCK

7.1     Changes in Stock; Stock Dividends.

        If the Shares presently
constituted are changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or of another corporation
(whether by reason of merger, consolidation, recapitalization, reclassification,
split-up, combination of shares, or otherwise), or if the number of Shares shall
be increased through the payment of a stock dividend or other distribution, then
notwithstanding any other provision of this Plan, there shall be substituted for
or added to each Share subject to this Plan the number and kind of shares of
stock or other securities into which each outstanding Share shall be entitled,
as the case may be. Outstanding 

4

Options shall also be amended as to price and other terms if necessary to
reflect the foregoing events. If there shall be any other change in the number
or kind of the outstanding Shares, or of any stock or other securities into
which it shall have been exchanged, then if the Committee shall, in its sole
discretion, determine that such change equitably requires an adjustment in any
Option theretofore granted or that may be granted under this Plan, such
adjustment shall be made in accordance with such determination.

7.2     Termination of Business.

        Upon any merger of the Company with another corporation where the Company is
not the surviving corporation, dissolution or liquidation of the Company, sale
of substantially all the property of the Company, or the acquisition of more
than 80% of the voting power of the stock of the Company by another corporation,
then the Company shall have the right, at its option, to do any of the
following:

	 	(a)	provide for the continuance of
    this Plan and all outstanding Options granted hereunder;
	 	 	 
	 	(b)	permit the immediate exercise of
    all outstanding Options not otherwise immediately exercisable;
	 	 	 
	 	(c)	terminate all outstanding
    Options, whether exercisable or not, by paying each holder an amount equal
    to the aggregate current market price of Shares underlying the Options held
    by the holder less the aggregate exercise price of such Shares; or
	 	 	 
	 	(d)	terminate this Plan and all
    Options granted hereunder after giving written notice to all holders of
    exercisable Options informing them of the Company's intention to terminate
    the Options and giving the holders a reasonable opportunity to exercise
    their exercisable Options.

7.3     Fractional Shares.

        No right to purchase fractional Shares shall result from any adjustment in
Options pursuant to this Article VII. In the case of any such adjustment, the
Shares subject to Options of each Participant shall be rounded down to the
nearest whole Share. Notice of any adjustment shall be given by the Company to
each holder of Options that shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.

ARTCILE VIII

BINDING ON HEIRS, SUCCESSORS AND ASSIGNS

        Except as provided in Section 7.2 above, this Plan shall inure to the benefit
of, and be binding upon, each successor to the Company. All obligations imposed
upon the Participants and all rights granted to the Company under this Plan
shall be binding upon each Participant's heirs, legal representatives, and
successors. This Plan and the Option Agreements executed between the Company and
each Participant shall be the sole and exclusive source of any and all rights
that each Participant and his or her heirs, legal representatives, or successors
may have in respect to this Plan or any Options or Shares granted hereunder,
whether to the Participant or to any other person.

ARTCILE IX

TAX STATUS

        Options granted hereunder are not intended to be eligible for favorable tax
treatment under Section 422 of the Code. The Company does not hereby, nor by way
of any Plan, document, or otherwise, attempt to make any representation to any
person, including the Participants, with respect to the tax effect on such
person of the grant or exercise of an Option or the subsequent disposition of
Shares obtained by the exercise of an Option pursuant to this Plan or any other
aspect of this Plan.

5

ARTCILE X

PLAN GOVERNS

        If there is any discrepancy between this Plan and any documents related to
this Plan, including any Option Agreement, this Plan shall govern. Nothing
contained in this Plan shall be construed to constitute, or be evidence of, any
right in favor of any person to receive Options hereunder or any obligation on
the part of the Company to issue Options.

6

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